Aug 9, 2017   SOURCE: BusinessWire

ASV Holdings, Inc. Reports Second Quarter 2017 Results

ASV Holdings, Inc. (Nasdaq: ASV), a leading provider of rubber-tracked compact track loaders and wheeled skid steer loaders in the compact construction equipment market, today announced Second Quarter 2017 results.

For the three months ended June 30, 2017, the Company reported Net Sales of $34.2 million and Net Income of $1.8 million or $0.20 per share compared to Net Sales of $27.3 million and Net Income of 0.8 million or $0.10 per share for the three months ended June 30, 2016.

Second Quarter 2017 Highlights

  • $34.2 million in Net Sales represented a year-over-year increase of 25.6% over $27.3 million in the second quarter of 2016.
  • Machine sales revenues increased 27% to $22.0 million, led by a 111% increase in new machine sales through ASV's growing distribution network.
  • Net income increased $1.1 million to $1.8 million or $0.20 per share, compared to the $0.8 million or $0.10 per share in the same period in 2016.
  • Adjusted net income of $0.9 million or $0.10 per share, adjusted for a one-time tax benefit from the conversion to a corporation, more than tripled as compared to 2016 2nd quarter adjusted net income (pro forma, C corporation basis) of $0.2 million or $0.03 per share.
  • Adjusted EBITDA* of $3.4 million or 9.9% of sales compared to the second quarter 2016 (pro forma C corporation basis) of $2.8 million or 10.3% of sales.
  • Working capital reduction of $2.2 million from December 31, 2016.
  • Completed IPO on May 17, 2017 with net proceeds to the Company of $10.4 million used to reduce overall indebtedness.

*The Glossary at the end of this press release contains further details regarding reconciliation to GAAP items and Adjusted items.

Chairman and Chief Executive Officer, Andrew Rooke commented, “The financial performance we achieved in this quarter, our first as a public company, demonstrates good progress in the relaunching of ASV as an independent Company, and we believe there is ample opportunity for further gains in dealer expansion, product development, and sales and margins. As a result of the increasing distribution of ASV-branded machines from our new dealer development program and the market success of our recently launched and improved ASV products, we reported year-over-year revenue growth of 25.6% led by machine sales growth of 27%, and Adjusted EBITDA of $3.4 million, or 9.9% of sales and cash flow from operations of $4.8 million in the quarter. We added to our North American dealer locations in the quarter, taking the total added this year to thirty five, and expect to achieve our target of adding between 80-110 dealer locations this year. This rapid growth of our network not only helps grow our sales and the ASV brand awareness, but will be critical to the effective level of support provided to our customers as we continue our planned expansion in North America.”

Missi How, Chief Financial Officer, commented, “We were pleased with our good progress on several key strategic financial metrics this quarter. Net proceeds from the IPO along with strong cash generation for the quarter reduced our net debt by $15 million to $27.4 million, strengthening our balance sheet and taking our leverage to 2.9x trailing adjusted EBITDA. The reduction in net debt combined with our refinancing in December 2016 also contributed to a $0.5 million year over year reduction in interest expense. The reduction in working capital was led by a 13% decrease in inventory during the period, driven by continued enhancements to our material planning to more closely align with our production plan. This helped us to finish the quarter with net working capital to annualized last quarter’s sales of 21.1%, a 6.6% improvement over first quarter.”

Conference Call:

Management will host a conference call at 4:30 PM Eastern Time today to discuss the results with the investment community. Anyone interested in participating in the call should dial 877-604-9665 if calling within the United States or 719-325-4891 if calling internationally. A replay will be available until 11:59 PM ET August 16, 2017 which can be accessed by dialing 844-512-2921 if calling within the United States or 412-317-6671 if calling internationally. Please use passcode 1815517 to access this replay. The call will additionally be broadcast live and archived for 90 days over the internet with accompanying slides, accessible at the investor relations portion of the Company's corporate website, www.ASVI.com in the “Investors” section.

About ASV Holdings, Inc.

ASV Holdings, Inc. is a designer and manufacturer of compact construction equipment. Its patented Posi-Track rubber tracked, multi-level suspension undercarriage system provides a competitive market differentiator for its Compact Track Loader (CTL) product line with brand attributes of power, performance and serviceability. It’s wheeled Skid Steer Loaders (SSLs) also share the common brand attributes. Equipment is sold through an independent dealer network throughout North America, Australia, and New Zealand. The company also sells OEM equipment and aftermarket parts. ASV owns and operates a 238,000 square-foot production facility in Grand Rapids, MN.

Forward-Looking Statements

This release contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “intends” or “continue,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Forward-looking statements in this release include, without limitation: (1) projections of revenue, earnings, capital structure and other financial items, (2) statements of our plans and objectives, (3) statements regarding the capabilities and capacities of our business operations, (4) statements of expected future economic conditions and the effect on us and on dealers or OEM customers, (5) expected benefits of our cost reduction measures, and (6) assumptions underlying statements regarding us or our business.

Our actual results may differ from information contained in these forward looking-statements for many reasons, including those described in the section entitled “Risk Factors” in our Registration Statement on Form S-1 (SEC File No. 333-216912), which was filed in connection with our initial public offering and is available on our EDGAR page at www.sec.gov. These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in the Registration Statement on Form S-1. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, after the date of this release, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

We obtained the industry, market and competitive position data in this release from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the market definitions we use are appropriate, neither such research nor these definitions have been verified by any independent source.

We from time to time refer to various non-GAAP financial measures in this release. We believe that this information is useful to understanding our operating results by excluding certain items that may not be indicative of our core operating results and business outlook. Reference to these non-GAAP financial measures should not be considered as a substitute for, or superior to, results that are presented in a manner consistent with GAAP. Rather, the non-GAAP financial information should be considered in addition to results that are presented in a manner consistent with GAAP. A reconciliation of non-GAAP financial measures referred to in this release is provided in the tables at the conclusion of this release.

ASV Holdings, Inc.
Condensed Statements of Income
(In thousands, except par value and per share data)
 
  For the Three Months Ended June 30,   For the Six Months Ended June 30,
2017   2016 2017   2016
Unaudited Unaudited Unaudited Unaudited
Net sales $ 34,240 $ 27,271 $ 62,250 $ 55,741
 
Cost of goods sold   28,940   22,537   52,590   46,902
 
Gross profit 5,300 4,734 9,660 8,839
 
Research and development costs 521 453 1,058 1,045
Selling, general and administrative expense   2,770   2,224   5,483   4,710
 
Operating income 2,009 2,057 3,119 3,084
 
Other income (expense)
Interest expense (887 ) (1,283 ) (1,765 ) (2,557 )
Other income (expense)   1   (4 )   1   (16 )
 
Total other expense   (886 )   (1,287 )   (1,764 )   (2,573 )
 
Income before taxes 1,123 770 1,355 511
 
Income tax benefit   (629 )   -   (629 )   -
 
Net income $ 1,752 $ 770 $ 1,984 $ 511
 
Earnings per share:
Basic net income per share $ 0.20 $ 0.10 $ 0.24 $ 0.06
Diluted net income per share $ 0.20 $ 0.10 $ 0.24 $ 0.06
 
Weighted average common shares outstanding:
Basic weighted average common shares outstanding 8,870 8,000 8,435 8,000
Diluted weighted average common shares outstanding 8,870 8,000 8,435 8,000
 
Pro forma (C corporation basis):
Pro forma tax expense $ 404 $ 277 $ 488 $ 184
Pro forma net income $ 719 $ 493 $ 867 $ 327
 
Pro forma earnings per share:
Basic net income per share $ 0.08 $ 0.06 $ 0.10 $ 0.04
Diluted net income per share $ 0.08 $ 0.06 $ 0.10 $ 0.04
 
ASV Holdings, Inc.
Condensed Balance Sheets
(In thousands, except par value)
 
  June 30,     December 31,
2017 2016
Unaudited Unaudited
ASSETS
CURRENT ASSETS
Cash $ 5 $ 572
Cash - restricted — 535
Trade receivables, net 17,799 13,603
Receivables from affiliates 92 1,413
Inventory 24,777 30,896
Prepaid expenses and other   824   537
 
Total current assets 43,497 47,556
 
NON-CURRENT ASSETS
Property, plant and equipment, net 14,488 15,402
Intangible assets, net 24,551 25,824
Goodwill 30,579 30,579
Deferred financing costs - revolving loan facility 336 371
Deferred tax asset   926   -
 
Total assets $ 114,377 $ 119,732
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable - current portion $ 2,150 $ 3,000
Trade accounts payable 12,867 11,976
Payables to affiliates 1,504 2,298
Accrued compensation and benefits 1,077 1,073
Accrued warranties 1,866 1,870
Accrued product liability- short term 887 2,125
Accrued other 1,120 1,312
Income taxes payable   296   —
 
Total current liabilities 21,767 23,654
 
NON-CURRENT LIABILITIES
Revolving loan facility 9,417 15,605
Note payable - long term, net 16,190 26,265
Accrued product liability- long term 321 —
Other long term liabilities   723   773
 
Total liabilities 48,418 66,297
 
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 5,000 authorized, none outstanding at June 30, 2017 and December 31, 2016, respectively - -
Common stock, $0.001 par value, 50,000 authorized, 9,800 and 8,000 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 10 -
Additional paid-in capital 65,317 54,787
Retained earnings (accumulated deficit)   632   (1,352 )
 
TOTAL STOCKHOLDERS' EQUITY   65,959   53,435
 
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 114,377 $ 119,732
 
ASV Holdings, Inc.
Condensed Statements of Cash Flows
(In thousands)
 
  For the Six Months Ended June 30,
2017   2016
Unaudited Unaudited
OPERATING ACTIVITIES
Net income $ 1,984 $ 511
Adjustments to reconcile to net income to net cash
provided by operating activities:
Depreciation 1,161 1,022
Amortization 1,273 1,273
Share-based compensation 135 —
Deferred income tax (benefit) (926 ) —
Loss on sale of fixed assets 46 17
Amortization of deferred finance cost 112 290
Loss on debt extinguishment 83 —
Bad debt expense 1 44
Inventory reserves 293 107
Changes in operating assets and liabilities
Trade receivables (4,197 ) 35
Net trade receivables/payables from affiliates 527 (590 )
Inventory 5,715 (882 )
Prepaid expenses (287 ) (210 )
Trade accounts payable 891 (815 )
Accrued expenses (1,431 ) (377 )
Tax payable 297 —
Other long-term liabilities   271   (49 )
 
Net cash provided by operating activities   5,948   376
 
INVESTING ACTIVITIES
Decrease in restricted cash 535 —
Purchase of property and equipment   (182 )   (202 )
 
Net cash provided by (used in) investing activities   353   (202 )
 
FINANCING ACTIVITIES
Principal payments on term debt (1,288 ) (5,000 )
Debt issuance costs incurred (9 ) (108 )
Members equity contribution — 5,000
Proceeds from issuance of common stock, net of offering costs 10,405 —
Net payments on debt (10,405 ) —
Net payments on revolving credit facilities   (5,571 )   (65 )
 
Net cash used in financing activities   (6,868 )   (173 )
 
NET CHANGE IN CASH   (567 )   1
 
Cash at beginning of period   572   3
 
Cash at end of period $ 5 $ 4

Supplemental Information

Cautionary Statement Regarding Non-GAAP Measures

This release contains references to “EBITDA” and “Adjusted EBITDA.” EBITDA is defined for the purposes of this release as net income or loss before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA less the gain or loss related to non-recurring events. Management believes that EBITDA and Adjusted EBITDA are useful supplemental measures of our operating performance and provide meaningful measures of overall corporate performance exclusive of our capital structure and the method and timing of expenditures associated with building and placing our products. EBITDA is also presented because management believes that it is frequently used by investment analysts, investors and other interested parties as a measure of financial performance. Adjusted EBITDA is also presented because management believes that it provides a measure of our recurring core business.

However, EBITDA and Adjusted EBITDA are not recognized earnings measures under generally accepted accounting principles of the United States (“U.S. GAAP”) and do not have a standardized meaning prescribed by U.S. GAAP. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and Adjusted EBITDA should not be construed as alternatives to net income or loss or other income statement data (which are determined in accordance with U.S. GAAP) as an indicator of our performance or as a measure of liquidity and cash flows. Management’s method of calculating EBITDA and Adjusted EBITDA may differ materially from the method used by other companies and accordingly, may not be comparable to similarly titled measures used by other companies.

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA (in millions)

 
  For the Three Months Ended June 30,   For the Six Months Ended June 30,
2017   2016* 2017   2016*
Net income (loss) $ 1.8 $ 0.8 $ 2.0 $ 0.5
Interest Expense 0.9 1.3 1.8 2.6
Depreciation & Amortization 1.2 1.2 2.4 2.4
Income Tax (Benefit) Expense (0.6) — (0.6) —
EBITDA (1) $ 3.3 $ 3.3 $ 5.6 $ 5.5
% of Sales 9.6 % 12.1 % 9.0 % 9.9 %
EBITDA $ 3.3 $ 3.3 $ 5.6 $ 5.5
Costs of ConExpo trade show (2) — — 0.1 —
Revision to accrual for legal proceeding expenses less legal costs (3) — — (0.2) —
Stock compensation and transaction related compensation costs (4) 0.1 — 0.2 —
Adjusted EBITDA (5) $ 3.4 $ 3.3 $ 5.7 $ 5.5
Adjusted EBITDA as % of net revenues 9.9 % 12.1 % 9.2 % 9.9 %
(1)   EBITDA is defined as income or loss before interest, income taxes, depreciation and amortization. EBITDA is not a recognized measure under U.S. GAAP and does not have a standardized meaning prescribed by U.S. GAAP. Therefore, EBITDA may not be comparable to similar measures presented by other companies. The table above reconciles net income to EBITDA. See “—Cautionary Statements Regarding Non-GAAP Measures” for further information regarding EBITDA.
(2) Costs associated with the 2017 ConExpo trade show. The ConExpo show, which is held every three years, was held in Las Vegas in March of this year. This show is an international gathering place for the construction industries. It is estimated that 130,000 professionals from around the world attended the show.
(3) Revision to accrual for legal proceeding expenses is included in Adjusted EBITDA since it is an adjustment in the period to an accrual established at the formation of the Joint Venture and is not representative of the operating activity in the reported period. This adjustment was due to the settlement of a legal claim lower than the accrued cost.
(4) Stock compensation and transaction related compensation costs.
(5) Adjusted EBITDA is defined as EBITDA less the gain or loss related to non-recurring events. Adjusted EBITDA is not a recognized measure under U.S. GAAP and does not have a standardized meaning prescribed by U.S. GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other companies. The table above reconciles EBITDA to Adjusted EBITDA. See “—Cautionary Statements Regarding Non-GAAP Measures” for further information regarding EBITDA.

* 2017 EBITDA includes approximately $.45 million of public company costs not included in 2016 EBITDA and will be included on a go forward basis.

Reconciliation of GAAP Net Income to Adjusted Net Income (in millions except shares and EPS)

    Three Months Ended
    June 30, 2017   June 30, 2016
Net income as reported   $1.8   $0.8
Tax benefit from conversion to C corporation   (0.9)   --
Debt issuance cost written off on debt repayment from IPO proceeds, net of tax effect at 26.41%  

0.1

 

--

Pro forma adjustment for public company costs

 

--

 

(0.5)

Pro forma (C corporation basis) tax expense   --   (0.1)

Adjusted Net Income

 

$0.9

 

$0.2

Weighted average diluted shares outstanding

 

8,870,000

 

8,000,000

Basic and Diluted earnings per share as reported  

$0.20

 

$0.06

Total EPS Effect   $(0.10)   $(0.03)

Adjusted earnings per share

 

$0.10

 

$0.03

   

Current Ratio is calculated by dividing current assets by current liabilities.

    June 30, 2017   December 31, 2016
Current Assets   $43,497   $47,556
Current Liabilities   $21,767   $23,654
Current Ratio   2.0   2.0

Days Sales Outstanding, (DSO), is calculated by taking the sum of net trade and related party receivables divided by annualized sales per day (sales for the quarter, multiplied by 4, and the sum divided by 365).

Days Payables Outstanding, (DPO), is calculated by taking the sum of net trade and related party payables divided by annualized cost of sales per day (cost of goods sold for the quarter, multiplied by 4, and the sum divided by 365).

Debt net of deferred financing costs is calculated using the Condensed Consolidated Balance Sheet amounts for 1) deferred financing costs – revolving loan facility, 2) note payable – short term, 3) revolving loan facility and 4) note payable – long term net. Debt to Adjusted EBITDA ratio is calculated by dividing total debt at the balance sheet date by trailing twelve month Adjusted EBITDA.

   

June 30, 2017

  December 31, 2016
Note payable – short term   2,150   3,000
Deferred financing costs – revolving loan facility   (336)   (371)
Revolving loan facility   9,417   15,605
Note payable – long term -net   16,190   26,265
Debt   $27,421   $44,499

Inventory turns are calculated by multiplying cost of goods sold for the referenced three month period by 4 and dividing that figure by inventory as at the referenced period.

Working capital is calculated as total current assets less total current liabilities

    June 30, 2017   December 31, 2016
Total Current Assets   $43,497   $47,556
Less: Total Current Liabilities   21,767   23,654
Working Capital   $21,730   $23,902