Juris Pagrabs - Group Treasurer and Director of IR Daryl Adams - President and Chief Executive Officer Matt Long - Interim Chief Financial Officer..

Steve Dyer - Craig-Hallam Mike Shlisky - Seaport Global Steve O’Hara - Sidoti and Company.

Good day and welcome to the Spartan Motors2018 Earnings Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Juris Pagrabs, Group Treasurer and Director of Investor Relations. Please go ahead..

Thank you, Robert, and good morning, everyone, and welcome to the Spartan Motors 2018 second quarter earnings call. I am Juris Pagrabs. And joining me on the call today are Daryl Adams, our President and Chief Executive Officer; and Matt Long, our Interim Chief Financial Officer.

For today's call, we've included a presentation deck, which will be filed with the SEC and is also available on our website at spartanmotors.com. You may download the deck from the Investor Relations section of our website and follow along with our presentation during the call.

Before we start today's call, please turn to Slide 2 of the presentation for our Safe Harbor statement.

You should be aware that certain statements made during today's conference call, which may include management's current outlook, viewpoint, predictions, and projections regarding Spartan Motors and its operations, may be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995.

I caution you that as with any prediction or projection, there are a number of factors that could cause Spartan's actual results to differ materially from projections. All known risks that management believes could materially affect the results are identified in our Forms 10-K and 10-Q filed with the SEC.

However, there may be other risks that we cannot anticipate. Please turn to Slide 3. As of January 1, 2018, the Company adopted the new Revenue Recognition Standard, ASC 606, using the modified retrospective transition method. The adoption had minimal impact to our net income in Q2.

As a result, reported consolidated sales and cost of products sold were higher by $5.7 million and $5.0 million respectively. Consolidated net income net of tax was about $500,000 higher. The adoption reduced reported Q2 consolidated backlog by $37.1 million, reducing both FVS and ER reported backlog by $8.4 million and $28.7 million respectively.

For more details regarding ASC 606, and its impact on the company's financial results, see the company's quarterly report on Form 10-Q for the quarter ended June 30, 2018.

On the call today, Daryl will provide an overview of the second quarter results alongside a business update, and Matt will provide a more detailed review of the quarterly results and our outlook for the remainder of the year before proceeding to the question-and-answer portion of the call.

At this time, I'm pleased to turn the call over to Daryl, for his opening remarks, which begin on Slide 4..

Thank you, Juris. Good morning, everyone. Thank you for joining us on our second quarter conference call. I'd like to start by saying how fairly proud I am of the Spartan team's performance in Q2.

And I think that some significant and cross-industry challenges, our team not only rose the occasion more importantly in minimize the disruption to our customers and our shareholders as you can see that currently in the results.

As you're aware, we're operating in global economic and business climate as recently become incredibly volatile, excluding commodity costs and unfavorable exchange rate for our ER Canadian dealers, chassis and other supplier provided component shortages due to in part both the truck and rail transportation and freight scarcity1 to become daily challenges for companies in our segment.

I share all this with you, and I want to underscore I'm fairly proud, sorry, I'm fairly strong the market forces were to pushing against us this quarter, but again, to tell you that our team now reaching profitability for our shareholders in Q2 of 2018 for the significant accomplishment.

This update will be a bit longer than it's typical for me, but throughout, I'll share a bit more of the back story behind how we're able to accomplish another solid quarter of growth and profit improvements. With that, let's review the quarter. Revenues for the quarter rose 8.4% to $184 million from $170 million a year ago.

The increase in sales was driven by strong growth in FVS and SCV, partially offset by decline in ER. We clearly see higher demand in corresponding sales of Reach vehicles, improved production at our vehicle upfit centers, improved mix and strong luxury motor coach chassis sales.

The second quarter of 2018 net income increased 233% to $3.7 million or $0.11 per share, compared to net income of $1.1 or $0.03 per share a year ago. Gross profit margin improved 280 basis points to 14.3% of sales from 11.5% of sales, which is significant given that we had to overcome $1 million of additional commodity costs.

Improvement reflects higher reach orders in luxury motor coach volumes through ER pricing, increased upfit volume and continued operational and organizational improvement. A strong performance during the quarter was incurred by the strength of our team and an ongoing commitment to drive operational and organizational improvements and profitability.

Even more impressive was that we're able to achieve these higher results in the face of increasing commodity costs, supply constraints, and transportation and freight challenges. One quick story I’ll share with you is around the cross industry driver deficit that’s really delaying transportation.

In our case, interrupting our regular scheduled commercial chassis supply. Nearing production interruption, our FVS location quickly sends drivers for chassis supplier to pick up the chassis in order to maintain the schedule and eliminate any further risk of interruptions to the customers.

Is this level of dedication and selflessness has allowed us to continue to push the boundaries of what’s possible in a face of a diverse market conditions. We should be thinking outside the box.

We continue to benefit from the efforts we’ve made to grow our business by delivering on quality and durability and bringing innovation across markets to our vehicles. This focus has enabled us to win new business with major global e-commerce vendor. Now, please turn to Slide 5.

I'll provide an update on a few business highlights and developments starting with FVS. Last mile continues to be a significant major growth opportunity for us as retail, grocery and e-commerce delivery business continues to expand as noted by recent articles, referring to an increased competition in the delivery space.

As we’ve indicated in the past, we’ve been working closely with some of the largest and most innovative e-commerce retailers to provide them with a solution base upfit products. I’m pleased to report that that work is paid off.

As we have secured a new upfit order with a global leader in e-commerce operating branded leased vehicles to deliver their packages.

Unfortunately, I cannot share the specifics of the agreement, but I can tell you how honored we are to be at the forefront in providing vehicle solutions to help our customers meet the consumer markets aggressive demand for last mile deliveries.

As a result, we’ve established an interim manufacturing facility in Northern Charleston, South Carolina to fulfill the order. This grants us access to Mercedes ship-thru program. This new location will complement our existing upfit facilities in Kansas City in Mexico that support primarily before transit guide for massive vehicles.

We expect to transfer production to a permanent facility sometime later this year. In addition to that win, and resulting factory facility expansion, the biggest development over the past year was the $214 million USPS contract for 2,141 vehicles placed in October of 2017.

I’m pleased to report that we produced our first units in April, achieved our desired capacity in June and we’re well on our way to achieve an $80 million and targeted 2018 revenues.

In addition to the 2,900 vehicles, including 1,400 Reach units we mentioned last quarter, we have received several fleet orders for major customers, which include [Indiscernible] and a large linen and laundry company. I'll mention more about later.

What's exciting is that our work driven design approach, a clear differentiator in the industry of full of catalogue sales, continues to drive long lasting business relationships across multiple vehicle platforms.

I mentioned, I’d come back for a quick story about a long time, large client in linen and laundry space and their growing relationship with Spartan and our Utilimaster brand. This Michigan based company supplies nearly a million customers across North America.

I am proud to say that this saying long time customer does not only expand their product portfolio with us, recently placing an order for cargo vans, walk-in vans and truck bodies, but there we’ve also just secured a 5-year exclusive supply agreement with the company.

In addition to market expansion in and linen and laundry within industry large growth opportunities in refrigerated vehicles, I mentioned on our call last quarter that we are making strategic investments in expanding our refrigeration technology capabilities to best support the growing market for home delivery of groceries, medicines and other fresh foods.

To that end, we have recently received a new refrigeration order for 96 walk-in vans from a national food distributor. We expect accelerated growth in this segment over the coming months and years.

And lastly for FVS, we’re working on all fronts to establish new EV technology relationships to meet increased customer demand for electric powered fleet vehicles, as the market shifts to include sustainability and mileage improvement strategies. Please turn to Slide 6, I'll continue with emergency response.

Again, I'd like to thank the Spartan team and our – as our ER business achieved a fourth consecutive quarter profitability. Considering where we were just two years ago, this run rate is exceptional.

For the trailing 12 months ended June 30, 2018, compared to the 12 months ended June 30, 2017, we saw revenues increased 7% to $268 million, gross profit increased 152% and gross margin improved 7 percentage points to 11.8%. Adjusted EBITDA improved 207%, to $6.6 million, or 2.5% of sales from a loss of $6.2 million or negative 2.5% of sales.

This 5-point improvement in adjusted EBITDA was driven by significant operational and organizational improvements, lower warranty expense, price increases, product optimization and dealer rationalization. This spread a modest downturn in the market demand for fire apparatus according to FAMA data.

Spartan product sales alongside Ladder Tower and UST sister brands continued to be well received in the marketplace. As I mentioned at the outset of the call, ahead with against us were tremendous this quarter.

You see us continue to implement margin improvement initiatives that will help us achieve the EBITDA margin goal of 6% to 8% for ER, we share with you at the offset of the year. To that end, here are a couple of initiatives undergoing in order to get us there.

We've recently increased our ergo manufacturing capacity alongside implementing a new order to ship process. This process will take 80 days out of the ordering process. Now I'll love to get most needed trucks to the customer's hands faster.

We can optimize our plant footprint, a recently consolidated tanker tender manufacturing, formally located in Delavan, Wisconsin with our brand and our fire apparatus manufacturing operations. We also are in the process to moving production of all S-180 from Charlotte to the brand in Kansas.

In so doing all Spartan comfort manufacturing operations will be under one roof where we can maximize both commodity and labor efficiencies. We work diligently alongside our dealers to revoke territory conflicts and make our products easier for them to sale in key markets across North America.

Please turn to Slide 7 now to continue especially chassis and vehicle segment.

In the SCV segment, our momentum continues to build across chassis platforms as we capture a greater share of the luxury motor coach category, regarding measurable and sustainable growth, by introducing new market responsive chassis platforms, leading technology transfers initiatives as we borrow proven automotive technology and innovate for RVs, and by placing a hyper focus on after the sale support and vehicle service and in doing so creating customers provide.

Last quarter you heard me referred to our newest class A Diesel chassis, the K1-360, the 360 horsepower 37-foot chassis first launch under the 2019 model year Jayco Embark marked our first entry into the sub-40 foot motorhome market as well as our first chassis supply agreement with Jayco.

I'm pleased to share that Spartan's K1-360 chassis now also rise under long time exclusive Spartan Chassis OEM Entegra Coaches Reatta.

Entegra's 2019 Reatta was unveiled at last month's FMCA International Convention in Gillette, Wyoming, and was highlighted as providing the coach with best-in-class ride and handling in a smaller format in a more accessible price point.

Firm's ability to penetrate and win in this new market segment, grants us access to both younger buyers as well as RV owners wishing to step down into a more nimble coach size without sacrificing the quality, durability and innovation they've come to expect from Spartan.

Also new this quarter, Newmar, and another Spartan Chassis to the 2018 lineup featured on a Ventana coach. Spartan's K2-400 gives the firm Newmar owners a tag excel option or increase maneuverability in a tighter turner radius as compared to the competition.

We've gone the extra mile alongside our partners at Newmar and offered our joined customers, the industry's best 5-year 75,000 mile transferable warranty. New OEMs, new product platforms and technology adoption is proved positive that our focus and innovation on the customer experience and after sales support is paying off.

With that, I'll turn the call over to Matt to discuss Spartan's financial results for the second quarter as well as our outlook for 2018..

Thanks, Daryl. Please turn to Slide 9. As Daryl mentioned, the operational and organizational improvements we've made over the past two years has provided a solid foundation continue to grow profitable long-term growth for Spartan orders as evidenced in our second quarter results.

Second quarter adjusted EBITDA increased 79.6% to $8.9 million from $4.9 million. Adjusted EBITDA margin improved 190 basis points to 4.8% of sales from 2.9% of sales a year ago. Adjusted net income increased 82.6% to $4.3 million from $2.4 million in the second quarter of 2017. While adjusted EPS grow 71.4% to $0.12 per share from $0.07 per share.

The strong growth in adjusted net income reflects a continued solid operational performance of all three segments. Our backlog at June 30, 2018, remains strong and ended at $524.1 million of a solid 40.6% from $372.8 million at June 30, 2017. That reflects the addition of the USPS order as well as continued strength in all three segments.

And as Daryl mentioned, the recorded backlog was reduced by $37.1 million with the adoption of ASC 606. Now, let’s take a look at the results by operating segments starting with FVS segment on Slide 10. FVS' reported revenues of $78.4 million compared to $53.5 million, excuse me, last year, an increase of 46.5%.

The revenue increase reflects improved sales mix, our Reach vehicles and upfit volumes. Adjusted EBITDA increased $2.2 million to $8.4 million from $6.2 million a year ago, largely due to sales volume.

Adjusted EBITDA margin decreased 80 basis points to 10.7% of sales from the 11.5% a year ago, which reflects $1 million higher commodity costs and $500,000 of startup costs at the Ephrata truck body plant and unfavorable mix. Backlog remained strong at $313.4 million compared to $131.3 million at June 30, 2017.

Backlog for the second quarter of 2018 includes the impact of $214 million USPS order. Moving on to Slide 11 and ER segment, second quarter 2018 revenue fell to $59.6 million from $80.8 million last year. Included in the prior year sales is $8.3 million revenues that resulted from the timing of revenue relating to the Smeal acquisition.

Excluding these sales, revenue decreased $12.9 million or 17.8% over the prior year, reflecting decreased shipments of complete fire apparatus and custom cab and chassis, partially offset by pricing increases taken in 2017 and 2018 respectively.

Adjusted EBITDA in the second quarter improved $900,000 to a profit of $200,000 or 0.3% of sales from a loss of $700,000 or 0.8% of sales in the prior year. The improvement in adjusted EBITDA reflects operational and organizational improvements and increased pricing partially offset by lower unit volumes in mix.

Our ER backlog was $175.6 million compared to $214.8 million at June 30, 2017, which reflects the $28.7 million reduction from adopting ASC 606 that Daryl mentioned previously. Let’s move on to Slide 12 and the SCV segment.

Revenue was up 32.7% to $47.5 million from $35.8 million, due mainly to a $9 million increase in luxury motor coach chassis sales, driven by new products and increased market share. Adjusted EBITDA increased 57.1% to $4.4 million from adjusted EBITDA of $2.8 million a year ago, driven by increased sales volume and improved operational performance.

Adjusted EBITDA margin increased 150 basis points to 9.2% of sales from 7.7% of sales a year ago. Backlog at the end of the quarter was up 31.5% to $35.1 million compared to $26.7 million a year ago, reflecting continued strong luxury motor coach sales and corresponding Spartan chassis orders. Turning to our balance sheet on Slide 15.

Spartan's balance sheet remains strong. Total liquidity at the end of the quarter was $115 million, reflecting $22 million in cash and $93 million of borrowing capacity, which is more than adequate to support our working capital requirements and acquisition opportunities as they present themselves.

In accordance with ASC 606, we have 46.4 million of contract assets on the balance sheet, representing revenue of the corresponding profit recognized on products in process does not yet invoiced to the customer. Please turn to Slide 14, and I will discuss our outlook for the second half of 2018.

As Daryl mentioned, the team worked considerably hard during the quarter to minimize the challenges that we faced, particularly through cost-cutting measures and operational improvement initiatives. The team rose to vacation protecting the quarter.

We've implemented a proactive procurement process, which identifies trends through daily tracking of commodity prices, which allows us to acts quickly and be proactive in mitigating our exposure to rising commodity prices. Because of this, in really 2018, we implemented following actions.

Switch to domestic sources wherever possible, reducing closure to imported raw materials, pretty broad on known production volumes, we’re closing the suppliers to pre-validate on known orders, pricing on ER production and as well as raw materials at FVS. We consolidated suppliers and we entered into long-term agreements with many of them.

Although we have worked hard to mitigate our exposure, we do expect to see the commodity headwinds experienced in the first half to continue to in the second half and costs being about $3 to $5 million higher than originally planned, when we began the year.

We have also received news that a large upfit add-an order originally expected for the second half of 2018, will be delayed into 2019. However, we do expect the new e-commerce company asset order to be partially offset this delayed add-on order.

As we did in the first half of the year, we will into our considerable effort to great margin improvements to cost-cutting measures coupled with operational and organizational improvement initiatives to offset these cost segments as much as possible.

Based on current macro economic conditions, we are maintaining our current outlook for 2018 as follows.

Revenue to be in the range of $790 million to $850 million, net income of $20.2 million to $22.4 million, adjusted EBITDA of $39 million to $42 million, the effective tax rate of approximately 23%, earnings per share of $0.58 to $0.64, assuming approximately 35.3 million shares outstanding and adjusted EBITDA earnings per share of $0.60 to $0.66.

At this point, let me turn it back to over Daryl, for his closing remarks..

Thanks, Matt. Please turn Slide 15. As I mentioned at the start of the call, the market forces that were against us in Q2, created headwinds throughout the quarter than many companies were unable to overcome.

Proud hasn’t began to describe my feeling, run how the team's diligence, discipline and our Ford side grant to Spartan, the ability to remain not only profitable, but navigate forward on a solid growth trajectory.

Transit monitoring, situational assessments, drug supply based negotiations and an assistance on swift action, both internally and with our suppliers as well as remain in control despite a challenging commodity market.

Continuous operational and organizational improvements, which drive efficiencies, advance our abilities to take costs out of the business. Our more sincere thank you goes to the entire Spartan team for their focused-effort and doing what was necessary to make the quarter a success.

No matter what market influxes we face or what political shifts occur, I have full faith and confidence that we'll meet them head on and continue to do what's right for the business and our shareholders. Operator, we are now ready to take calls..

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Steve Dyer of Craig-Hallam. Please go ahead..

Great. Good morning gentlemen..

Good morning, Steve. .

Good morning, Steve..

I guess to start it overall in the top-line was, I think, a little bit light of expectations maybe not yours, but I guess it concepts on the street that combined with inventory a lot of it appearing to be finished goods being up 24% quarter-over-quarter.

Should we assume that maybe there was a timing delay or a bump for maybe some of the USPS business into Q3 from Q2?.

Good question, Steve. No, a lot of that was chassis constraints that we saw throughout the quarter. And I look as we will make those up, but it's probably going to be out into late Q3 and Q4. So we don't give, the shortage was based on the shortages of transportation and getting chassis into our facilities to build..

Okay. And then I guess just digging into FVS, congratulations on your large new customer doesn't sell like we can get you to name them.

But do you have any sense or can you share with us sort of your expectations for revenue or magnitude over the remainder of the year and then going forward?.

Yes, as one other piece and as that I think I mentioned that we're unable to disclose the details of the order. I do want to say that we are excited about it. We're looking forward to a long-term relationship with them. And the team is currently executing to build the vehicles.

And I think there should be more coming out, maybe through the rest of the year even into the next year.

And what this means for us?.

And then should we assume that most of that overtime will be service out of your New South Carolina facility?.

No. I think there is going to be potentially multiple vehicles that they build on. Obviously, it depends on how they want to grow the vehicles and the quantities they're requiring and what the constraints are at each of the OEMs are supplying the vans. But, again, it's very early and although we're excited to be part of it..

And would you expect revenue there in Q3 or is that Q4 and into next year?.

I think, I'd be in late Q3 to Q4..

Okay. And then you mentioned that another larger upfit order pushed out into next year.

Any sense you are able to share sort of the magnitude about that? Obviously, pretty impressive, you're able to hold guidance kind a just given the combination of that as well as the raw material impact?.

Yes. I think some of that also goes with the pre-buy order in the large linen company that we talked about is portion to get those [indiscernible] maintain. But no, we’re not putting numbers on to the order that moved out into '19. I can tell you it's similar to what we’ve done in the past with that customer..

Okay. One more for me and then I’ll halt back in the queue, just as it relates to raw materials going forward.

Can you remind us sort of your ability to hedge those or sort of whether you’re trying to build it into pricing overtime, or how you -- other than sort of the operational changes that you continue to do, which are great or anything else that you are able to do to sort to mitigate risk there? That’s it for me..

You’re welcome. I think Matt talked about it. As we track the commodities on a daily basis and we’re really on weekly staff meeting. As we saw things start to move up late last year and earlier this year, we took some actions we went out and secure some capacity with the process has locked at some pricing.

We pre-bought, we do not hedge, as we pre-bought material based on orders we had. And new orders came in for a certain quantity; we would go out. And again, pre-buy the material. So it’s not a silver bullet, it’s a lot of actions by a lot of different people in the organization all working together as one to accomplish what we did in Q2..

The next question comes from Mike Shlisky of Seaport Global. Please go ahead..

I wanted to start off -- just a follow-up on the e-commerce order you had.

Can you maybe tell us if you are only provider on this deal are or you exclusive here? Or others across the country they might be supply to the same ecommerce provider?.

That’s a good question, Mike. And I’m sure it’s not going to be the last one we have regarding the input. Unfortunately, right, we’re unable to share the details. But I think, as I’ve mentioned to people, right, this very large company, very sophisticated organization.

If I was in their shoes, I’d probably have to do force this just because of the where they want to go and how large of accomplishment they have over the next few years to build out their fleet.

But that, our team is focused on the business we have with them executing on it, and making sure that we hit the delivery date in order to continue to win additional orders with them..

I’ll move on from that topic then in that case. I want to ask also about like commodity costs of some of your chassis. If I look at the chart correctly, it looks like some of the major metals like aluminum or actually down year-over-year.

Are these down from the previous quarter as far as the sort of per-ton price is concerned? So I’m a little surprised that there is still going to be headwind entering the rest of the year.

Can you give us a sense as to what extent you can add any pricing that half of the year to help offset if there is still an elevated cost to you?.

Yes, so two points there Mike that's not forget that. Matt mentioned and I mentioned that. The prices are going up, we knew where the selling was. We’ve made a decision to go out and buy tonnage based on orders we had. Some of that, as today’s prices may be elevated, but it’s still business that we thought was the right decision to make for the Company.

We worked through it. And as material prices come back down, obviously, we will see some positive news from that. On the ability for us to ad-in pricing, so it's different at all three of our buyers divisions, but overall, be rest assured wherever we can, we’re taking pricing and adding in the commodity costs.

ER and FVS, both quote orders differently throughout the year in different sizes and different customers. So what we’ll do at that time, we’ll see what the material was on the street and we'll price that in and then we’ll go out and pre-buy it.

So it's not an easy formula, but we wanted to make sure that we would ensure our guidance for the year and do what we could to make sure that we do get pricing put in and buy the best material costs on the street that we can..

And I just want to ask about the ERV business in the backlog there. I know it's down year-over-year even when you take out accounting changes. Could you maybe just give us a sense as to as far and still kind of just walking away from orders that just don’t make sense anymore? I am just trying to focus on what’s profitable.

Is that why it's down? Because it sounds like a lot of your products are in decent demand right now.

And then kind of, perhaps secondly related, given that there’s a margin cadence get better in the back half, could you actually beat last year's margins in the third and fourth quarter?.

Good question. Its -- list of our number of items might that has impacted us. So, compared to second quarter of last year, right, we had Smeal within there for, I think 8 plus million dollars. This year they are down a little bit. And I think some of that was due to the dealer shakeout that we had to make and given the dealers in the regions settled in.

That’s 180 is down a little bit from the number we shift last year. And then it’s some unfavorable mix. We build les areas this quarter versus what we did last quarter, sorry, second quarter of last year. So there is a number of things going on in that business. But, to your first question, yes, we're still only taking profitable orders.

We will not waver with the small decline in the payment data, showing that the market is declining a little bit, and it was about 2%. We’re not going to go out and chase orders just to get revenue. We’ve talked about that since -- in 2015 for sure.

And we are disciplined and it's, obviously, it's not easy for our sales guys to walk away from some business. But it's what we're do and we’re going to continue to manage the business in that way, and stay disciplined in profits and EBITDA versus revenue and pipeline..

And on the margins, can you beat perhaps last year the second half or some other concerns that are on the price costs et cetera?.

Yes, we think, we’ll be at or exceed the performance in the back half for the year..

[Operator instructions] The next question comes from Steve O’Hara of Sidoti and Company. Please go ahead..

Hi good morning..

Good morning..

Good morning, Steve..

Good morning. Just I guess you kind of alluded to it, but you talked about the favorable mix in ER, I guess, in the quarter. And it would appear that the mix is more favorable going forward in the backlog given your expectations around margins in the second half.

Does that correct or is it more volume related?.

It's going to be a combination of both the mix and the volume. And then, obviously, material. And we've taken -- we took pricing both in 2017 and 2018. So just to remind everyone that if we take pricing at any point in time it usually takes somewhere in an area of 300 to 400 days before we see that impact.

So some of the pricing we took in '17, is coming through maybe right now, some of it will be coming in -- we wanted to look in '18, maybe come in later in the year. And then there is some actions right that we took operationally and organizationally that we're going to pick up in the back half as well.

Again, so it's a number of activities and that's what makes me so proud of the team that everyone's working on their planar position if you will, but working together as a team to accomplish that we've accomplished..

Okay.

And then just following up on that, I mean, would the pricing in the delayed to kind of realize it? Do you get the same lag on the way down so you've raised your cost and then commodity cost go down? Is it a faster pace or do you usually get that benefit to kind of make up for what you lost on the way up?.

Let me think about that for a minute.

Hey, will you say it again?.

Yes, sorry. I mean there is a lag on the way as commodity costs rise. You're losing money on the contract that you'd originally priced at x with the commodity cost of x. And then that price goes back down by 10% or something like that.

I mean is that contract, do you get the benefit of that difference in raw material costs going on the way down to make up for kind of what you lost on the way up or is it a faster adjustment on the pricing the way down?.

It will be the same. Because products are between 300-400 day delivery time, here are there maybe a little bit longer. So it obviously it differs by trough, right, and whether it's a pump or aerial or tanker. And so it's -- but in general, if you think about the way up or buying the material as well as aluminum in these vehicles.

And then its way down, we're buying so it takes the same amount of time within regions..

Okay. Now that make sense. And then just, I guess on the motorhome side, I mean the RVA showing, I think, down deliveries in May and June. It sounds like the industry took kind of the full two weeks in July or around July 4th. And I'm wondering just how you're looking there.

I mean, I know it's kind of a different product point -- price point that you're selling into.

I'm just wondering how that looks relative to your business?.

We see that's positive, right. And I appreciate that you understand that we're in the niche market on the large Class A and moved into the 140-foot Class A. So that is an important segment we have broken it out. And you look at it. It doesn’t seem to trend with the overall RV market.

But we still see strong second half or consistent second half for them..

And just maybe lastly, on the order that you had mentioned with the undisclosed customers et cetera, did you say kind of when you start that, when you expect that to start hitting the results? Was that in the second half? And that’s kind of why the guidance was unchanged relative to see other pressure you were facing?.

Yes, there are number of orders, right. First one we had or expected to get got pushed in ’19, dug a bit of hole. This new customer, the e-commerce is going to help, but not total replace, but then we had to replace delay and then the large linen company.

And again, when I say its entire team, right, we have -- when you already got pushed out, we had our sales team out working hard and as they continue to do, right. A little bit more pressure and more focused and they were able to win some of these and continue to fill the pipeline.

And I'm right, if there’s a whole sometimes that the customers are more excited if their get their vehicles faster. So it’s again, a number of factors, but we still feel confident that we can maintain guidance we have for the full year..

This concludes our question-and-answer session. I would like to turn the conference back over to Juris Pagrabs, for any closing remarks..

Thanks everyone for participating. We look forward to keeping you updated on our continued progress. We’ll be at Jefferies conference next week in New York and then in the Seaport Conference at the end of the month in Chicago. So I'm expecting to see many of you there.

With that, I think, our next call is scheduled for the first week of November for our third quarter results. Have a great day. Thank you..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..