SHYFT GROUP, INC. - Quarter Report: 2013 March (Form 10-Q)

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FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2013.
	OR
□	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from                                               to

Michigan (State or Other Jurisdiction of Incorporation or Organization)		38-2078923 (I.R.S. Employer Identification No.)
1541 Reynolds Road Charlotte, Michigan (Address of Principal Executive Offices)		48813 (Zip Code)

Yes

X

No

Yes

X

No

Large accelerated filer	o		Accelerated filer	x
Non-accelerated filer	o		Smaller Reporting Company	o

Yes

No

X

Class	Outstanding at April 30, 2013
Common stock, $.01 par value	34,110,988 shares

 

 

 

			Page
FORWARD-LOOKING STATEMENTS			3
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Condensed Consolidated Balance Sheets – March 31, 2013 (Unaudited) and December 31, 2012	4
		Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2013 and 2012 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2013 and 2012 (Unaudited)	6
		Condensed Consolidated Statement of Shareholders’ Equity – Three Months Ended March 31, 2013 (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	25
	Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
	Item 1A.	Risk Factors	26
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
	Item 6.	Exhibits	27
SIGNATURES			28
EXHIBIT INDEX			29

·	Changes in economic conditions, including changes in interest rates, credit availability, financial market performance and the Company’s industries can have adverse effects on its earnings and financial condition, as well as its customers, dealers and suppliers.  In particular, the Company could be adversely affected by the economic impact to its supply base, including those members of the supply base that support the automobile industry.
·	Changes in relationships with major customers and suppliers could significantly affect the Company’s revenues and profits.
·	Constrained government budgets may have a negative effect on the Company’s business and its operations.
·	The integration of businesses or assets we have acquired or may acquire in the future involves challenges that could disrupt our business and harm our financial condition.
·	When we introduce new products, we may incur expenses that we did not anticipate, such as start-up and recall expenses, resulting in reduced earnings.
·	Amendments of the laws and regulations governing our businesses, or the promulgation of new laws and regulations, could have a material impact on the Company’s operations.
·	We source components from a variety of domestic and global suppliers who may be subject to disruptions from natural or man-made causes.  Disruptions in our supply of components could have a material and adverse impact on our results of operations or financial position.
·	Changes in the markets we serve may, from time to time, require us to re-configure our production lines or re-locate production of products between buildings or to new locations in order to maximize the efficient utilization of our production capacity.  Costs incurred to effect these re-configurations may exceed our estimates and efficiencies gained may be less than anticipated.

 

Item 1.

Financial Statements

		March 31, 2013 (Unaudited)				December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents		$	16,617			$	21,748
Accounts receivable, less allowance of $1,014 and $1,021			40,309				47,139
Inventories			77,685				67,591
Deferred income tax assets			6,291				6,291
Income taxes receivable			4,349				3,011
Assets held for sale			716				716
Other current assets			5,227				6,027
Total current assets			151,194				152,523
Property, plant and equipment, net			58,734				59,122
Goodwill			20,815				20,815
Intangible assets, net			10,813				11,052
Other assets			1,868				1,639
TOTAL ASSETS		$	243,424			$	245,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	23,295			$	23,000
Accrued warranty			7,765				6,062
Accrued customer rebates			1,477				2,299
Accrued compensation and related taxes			5,806				7,748
Deposits from customers			10,482				6,386
Other current liabilities and accrued expenses			6,472				8,113
Current portion of long-term debt			98				82
Total current liabilities			55,395				53,690
Other non-current liabilities			3,382				3,071
Long-term debt, less current portion			5,270				5,207
Deferred income tax liabilities			4,454				4,454
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)			-				-
Common stock, $0.01 par value; 40,000 shares authorized; 33,842 and 33,862 outstanding			338				339
Additional paid in capital			73,322				72,873
Retained earnings			101,263				105,517
Total shareholders' equity			174,923				178,729
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	243,424			$	245,151

 

 

 

(Unaudited)

		Three Months Ended March 31,
		2013				2012
Sales		$	96,136			$	118,812
Cost of products sold			89,789				101,453
Restructuring charge			-				3,615
Gross profit			6,347				13,744
Operating expenses:
Research and development			2,801				3,775
Selling, general and administrative			10,374				11,596
Restructuring charge			-				1,793
Total operating expenses			13,175				17,164
Operating loss			(6,828	)			(3,420	)
Other income (expense):
Interest expense			(70	)			(91	)
Interest and other income			146				207
Total other income (expense)			76				116
Loss before taxes			(6,752	)			(3,304	)
Taxes			( 2,498	)			(1,289	)
Net loss		$	(4,254	)		$	(2,015	)
Basic and Diluted net loss per share		$	(0.13	)		$	(0.06	)
Basic and Diluted weighted average common shares outstanding			33,381				33,019

 

 

 

		Three Months Ended March 31,
		2013				2012
Cash flows from operating activities:
Net loss		$	(4,254	)		$	(2,015	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			2,038				2,392
(Gain) loss on disposal and impairment of assets			(17	)			4,594
Expense from changes in fair value of contingent consideration			61				407
Tax expense related to stock incentive plan transactions			13				6
Stock based compensation related to stock awards			269				453
Decrease (increase) in operating assets:
Accounts receivable			6,830				(3,099	)
Inventories			(10,094	)			8,254
Income taxes receivable			(1,338	)			(1,524	)
Other assets			800				(303	)
Increase (decrease) in operating liabilities:
Accounts payable			295				903
Accrued warranty			1,703				51
Accrued customer rebates			(822	)			(453	)
Accrued compensation and related taxes			(1,942	)			146
Deposits from customers			4,096				(1,035	)
Other current liabilities and accrued expenses			(1,680	)			(8	)
Taxes on income			47				58
Total adjustments			259				10,842
Net cash provided by (used in) operating activities			(3,995	)			8,827
Cash flows from investing activities:
Purchases of property, plant and equipment			(1,421	)			(1,115	)
Proceeds from sale of property, plant and equipment			27				1
Net cash used in investing activities			(1,394	)			(1,114	)
Cash flows from financing activities:
Proceeds from long-term debt			86				-
Payments on long-term debt			(7	)			(14	)
Net proceeds from the exercise, vesting or cancellation of stock incentive awards			192				71
Cash paid related to tax impact of stock incentive plan transactions			(13	)			(6	)
Net cash provided by financing activities			258				51
Net increase (decrease) in cash and cash equivalents			(5,131	)			7,764
Cash and cash equivalents at beginning of period			21,748				31,677
Cash and cash equivalents at end of period		$	16,617			$	39,441

 

		Number of Shares				Common Stock				Additional Paid In Capital				Retained Earnings				Total Shareholders' Equity
Balance at December 31, 2012			33,862			$	339			$	72,873			$	105,517			$	178,729
Issuance of common stock and the tax impact of stock incentive plan transactions			74				1				178				-				179
Issuance of restricted stock, net of cancellation			(94	)			(2	)			2				-				-
Stock based compensation expense related to restricted stock			-				-				269				-				269
Net loss			-				-				-				(4,254	)			(4,254	)
Balance at March 31, 2013			33,842			$	338			$	73,322			$	101,263			$	174,923

 

 

 

 

 

 

 

Inventories are summarized as follows:

		March 31, 2013				December 31, 2012
Finished goods		$	15,657			$	15,276
Work in process			20,523				11,967
Raw materials and purchased components			44,596				43,404
Reserve for slow-moving inventory			(3,091	)			(3,056	)
		$	77,685			$	67,591

 

		March 31, 2013				December 31, 2012
Note payable to Prudential Investment Management, Inc.     Principal due December 1, 2016 with quarterly interest only payments of $68 at 5.46%. Unsecured debt. (1)		$	5,000			$	5,000
Line of credit revolver (2)			--				--
Capital lease obligations			368				289
Total debt			5,368				5,289
Less current portion of long-term debt			(98	)			(82	)
Total long-term debt		$	5,270			$	5,207

(1)

The Company has a private shelf agreement with Prudential Investment Management, Inc., which allows the Company to borrow up to $45,000 to be issued in $5,000 minimum increments.  The interest rate is determined based on applicable rates at the time of issuance.  The Company had $5,000 of private placement notes outstanding at March 31, 2013 and December 31, 2012 with Prudential Investment Management, Inc.

(2)

The Company’s primary line of credit is a $70,000 unsecured revolving line with Wells Fargo Bank and JPMorgan Chase Bank, expiring on December 16, 2016. Both lending institutions equally share this commitment. This line carries an interest rate of the higher of either (i) the highest of prime rate, the federal funds effective rate plus 0.5%, or the one month adjusted LIBOR plus 1.00%; or (ii) adjusted LIBOR plus margin based upon the Company’s ratio of debt to earnings from time to time.  The Company had no borrowings on this line at March 31, 2013 or December 31, 2012.  General Motors Company (“GM”) has the ability to draw up to $5,000 against the Company’s primary line of credit in relation to chassis supplied to Utilimaster under a chassis bailment inventory program, resulting in net available borrowings of $65,000 at March 31, 2013.  See Note 5, Commitments and Contingent Liabilities for further information about this chassis bailment inventory program.  The applicable borrowing rate including margin was 3.25% at March 31, 2013.

 

 

	2013		$	80
	2014			67
	2015			50
	2016			5,051
	2017			54
	Thereafter			66
			$	5,368

		Emergency Response Vehicles				Delivery and Service Vehicles				Specialty Vehicles				Other				Total
Cost of products sold
Asset impairment		$	-			$	3,372			$	-			$	-			$	3,372
Accrual for severance			64				-				81				-				145
Production relocation costs			-				98				-				-				98
Total cost of products sold			64				3,470				81				-				3,615
General and Administrative
Asset impairment			-				1,153				-				-				1,153
Accrual for severance			164				-				408				21				593
Production relocation costs			-				47				-				-				47
Total general and administrative			164				1,200				408				21				1,793
Total restructuring		$	228			$	4,670			$	489			$	21			$	5,408

 

		Severance
Balance as of Jan 1, 2013		$	630
Accrual for severance			-
Payments and adjustments made in period			(379	)
Balance as of March 31, 2013		$	251

 

 

 

 

 

 

 

		2013				2012
Balance of accrued warranty at January 1		$	6,062			$	5,802
Warranties issued during the period			897				1,287
Cash settlements made during the period			(1,059	)			(918	)
Changes in liability for pre-existing warranties during the period, including expirations			1,865				(318	)
Balance of accrued warranty at March 31		$	7,765			$	5,853

		Three Months Ended March 31,
		2013				2012
Basic weighted average common shares outstanding			33,381				33,019
Effect of dilutive stock options			-				-
Diluted weighted average common shares outstanding			33,381				33,019
Anti-dilutive stock awards:
Restricted stock			517				609
Stock options			32				62
			549				671

 

 

 

		Emergency Response Vehicles				Delivery & Service Vehicles				Specialty Vehicles				Other				Consolidated
Emergency Response Chassis Sales		$	17,403			$	-			$	-			$	-			$	17,403
Emergency Response Body Sales			17,546				-				-				-				17,546
Utilimaster Vehicle Sales			-				26,230				-				-				26,230
Motorhome Chassis Sales			-				-				20,398				-				20,398
Other Specialty Vehicles Sales			-				-				2,018				-				2,018
Aftermarket Parts and Assemblies Sales			-				5,683				6,858				-				12,541
Total Sales		$	34,949			$	31,913			$	29,274			$	-			$	96,136
Depreciation and Amortization Expense		$	372			$	587			$	427			$	652			$	2,038
Operating Income (Loss)		$	(2,562	)		$	(3,970	)		$	1,327			$	(1,623	)		$	(6,828	)
Segment Assets		$	77,601			$	72,414			$	29,677			$	63,732			$	243,424

 

		Emergency Response Vehicles				Delivery & Service Vehicles				Specialty Vehicles				Other				Consolidated
Emergency Response Chassis Sales		$	19,336			$	-			$	-			$	-			$	19,336
Emergency Response Body Sales			14,550				-				-				-				14,550
Utilimaster Vehicle Sales			-				37,114				-				-				37,144
Motorhome Chassis Sales			-				-				18,362				-				18,362
Other Specialty Vehicles Sales			-				-				3,049				-				3,049
Aftermarket Parts and Assemblies Sales			-				21,734				4,667				-				26,401
Total Sales		$	33,886			$	58,848			$	26,078			$	-			$	118,812
Depreciation and Amortization Expense		$	467			$	730			$	519			$	676			$	2,392
Operating Income (Loss)		$	(2,367	)		$	1,327			$	(70	)		$	(2,310	)		$	(3,420	)
Segment Assets		$	65,898			$	73,408			$	24,192			$	83,852			$	247,350

 

 

Item 2.

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

 

 

	·	The CMP 300, developed jointly by Spartan, Fout Bros. and Polybilt, which features an integrated Polyprene body and tank, a first for the emergency response industry.  This innovative construction enables many operational benefits, including larger compartments, the ability to carry more water on-board and a lower center of gravity to improve vehicle stability.
	·	The MPA 65’, a complete apparatus developed by the Spartan/Gimaex joint venture that combines the latest cutting edge technologies into a versatile 65-foot ladder on a single rear axle.  This combination makes the MPA 65’ the first complete pumper-aerial-rescue apparatus that fits the needs and budget for fire and rescue departments around the country.
	·	The introduction of the Spartan Chassis Series 75 Aerial, an easy to maneuver cab and chassis with a mounted 75’aerial ladder and 500 gallon water capacity that offers great overall serviceability and low cost of ownership.  The Series 75 will immediately expand the market opportunity for all of Spartan’s 44 original equipment manufacturer partners.
	·	The first shipments in the third quarter of 2012 of emergency response chassis equipped with our Spartan Advanced Protection System (APS), a pioneering blend of industry-first airbag and safety belt protections that make occupants safer than ever before.  The APS offers eight airbags, including officer and driver knee airbags and a rear side curtain which is larger than any other system on the road, along with a restraint control module deploying advanced motion sensors around the cab perimeter and advanced seat belts with pretensioning and load limiting.
	·	The re-branding of Crimson Fire, Crimson Fire Aerials and Classic Fire under the Spartan ERVTM brand to focus on one brand and leverage the strength of the Spartan name.
	·	The introduction of the Spartan Telstar, a 138 foot telescopic and articulated aerial platform, which supplies an “up, over and down” range of motion to navigate over parapets for roof rescues, clear power lines and trees for access and provide for below-grade rescues.
	·	The recently announced joint venture with Gimaex.  This 50/50 JV will leverage the complementary footprints, capabilities, brands, technologies and product portfolios of both companies, and will encompass technology sharing, joint product development, commercial agreements and additional purchasing leverage, and will enable both companies to amass a true global presence.
	·	The start-up of production at our Utilimaster subsidiary’s new, single-building facility that enables greater manufacturing flexibility and efficiency, higher product quality and lower operating costs.  Operations in  this facility have reduced the distance a vehicle travels during assembly from 2.5 miles at the Wakarusa facilities to less than one-half mile, and eliminates a number of non-value added production steps.

 

 

 

 

 

		Three Months Ended March 31,
		2013				2012
Sales			100.0				100.0
Cost of products sold			93.4				85.4
Restructuring charge			-				3.0
Gross profit			6.6				11.6
Operating expenses:
Research and development			2.9				3.2
Selling, general and administrative			10.8				9.8
Restructuring charge			-				1.5
Operating loss			(7.1	)			(2.9	)
Other income (expense), net			0.1				0.1
Loss before taxes			(7.0	)			(2.8	)
Taxes			(2.6	)			(1.1	)
Net loss			(4.4	)			(1.7	)

 

 

 

Financial Data
(Dollars in thousands)
		Three Months Ended March 31,
		2013								2012
		Amount				%				Amount				%
Sales		$	34,949				100.0	%		$	33,886				100.0	%
Operating loss			(2,562	)			(7.3	)%			(2,367	)			(7.0	)%
Segment assets			77,601								65,898

 

 

Financial Data
(Dollars in thousands)
		Three Months Ended March 31,
		2013								2012
		Amount				%				Amount				%
Sales		$	31,913				100.0	%		$	58,848				100.0	%
Operating Income (loss)			(3,970	)			(12.4	)%			1,327				2.3	%
Segment assets			72,414								73,408

 

 

 

Financial Data
(Dollars in thousands)
		Three Months Ended March 31,
		2013								2012
		Amount				%				Amount				%
Sales		$	29,274				100.0	%		$	26,078				100.0	%
Operating Income (loss)			1,327				4.5	%			(70	)			(0.3	)%
Segment assets			29,677								24,192

 

 

 

 

 

Working Capital (In thousands)
		March 31, 2013				December 31, 2012				Change
Current assets		$	151,194			$	152,523			$	(1,329	)
Current liabilities			55,395				53,690				1,705
Working capital		$	95,799			$	98,833			$	(3,034	)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

 

Item 4.

Controls and Procedures.

 

 

 

 

 

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

Period				Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1	to	January  31			--				--				--				1,000,000
February 1	to	February 28			--				--				--				1,000,000
March 1	to	March 31			22,064				5.44				--				1,000,000
Total					22,064			$	5.44				--				1,000,000