Sandy Bugbee - VP, Treasurer, IR Tim Sullivan - President and CEO Dean Nolden - CFO.

Jamie Cooke - Credit Suisse Andy Casey - Wells Fargo Securities Ben Burud - Goldman Sachs Mig Dobre - Robert W. Baird Nicole DeBlase - Deutsche Bank Charley Brady - SunTrust Robinson Humphrey Courtney Yakavonis - Morgan Stanley.

Greetings, and welcome to the REV Group’s First Quarter 2018 Earnings. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sandy Bugbee. Thank you.

You may begin..

Good morning, and thanks for joining us. Last night, we issued our first quarter 2018 results. A copy of the release is available on our website at investors.revgroup.com.

Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of non-GAAP to GAAP financial measures that we will use during this call, and it’s also available on our website. Please refer now to slide 2 of that presentation.

Our remarks and answers will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements.

These risks include, among others, matters that we have described in our Form 8-K filed last night with the SEC and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

All references on this call to a quarter or a year are to our fiscal quarter or fiscal year unless otherwise stated. Joining me on the call today are our President and CEO, Tim Sullivan; as well as our CFO, Dean Nolden. I will now turn the call over to Tim..

Thank you, Sandy. And welcome to everyone on the call. Thank you for your interest in REV Group, before I begin my review of the quarter, I like to thank everyone who joined us and the more than 1,400 dealers at our Dealer Summit Investor Day event in Orlando in January. We showcased in more than 50 Rev Vehicles across our entire portfolio.

We discussed our parts and international strategies in greater detail. And we provided a sneak preview of our 2019 RV lineup of products. We receive great feedback on the event from dealers, customers and various stakeholders.

It would encourage anyone who might be new to our story to refer to the Investor Day presentation materials, which are still available on our website. Now let's review our first quarter 2018 financial results were in line with our expectations. We're on track to meet our full-year plan.

Net sales grew 16% and we experienced sales growth in each of our reporting segments. Our 2017 acquisitions continue to perform well, and we're implementing operational initiatives that will help us meet our objective of driving earnings growth that outperforms sales growth in 2018.

All three of our segments, Fire and Emergency, Commercial and Recreation have favorable outlooks with continued strength of demand in their end markets, and strong backlogs, We mentioned on our last call the November introduction of the Chrysler Pacifica hybrid rear entry mobility van and during the Rev summit in January E-One introduced their new Titan ARFF, adding two new products in the quarter.

The Titan has been designed to allow us to compete on the global stage for airport opportunities which represents a large and attractive end market. I am pleased to advise that we have already booked our first significant sale of this product with a sale of nine units to a customer in Peru. We had two transformational transactions in the quarter.

In addition to the Chery JV consummated the first week in December that we announced in our last call. We signed a collaboration agreement in late December with Daimler in Germany to distribute the Setra motor coach in the US market. Setra is the leading European motor coach brand.

Other collaborative efforts are contemplated with the new Daimler agreement. Also in early January, we acquired Lance Campers Manufacturing Corporation.

Lance adds a premium portfolio truck campers, towable campers and toy haulers to our existing suite of motorized offerings and gives the recreational segment access to the higher volume and rapidly-growing towables RV markets.

Lance has the number one selling truck camper in the US and has won the National RV Dealer Association's prestigious Quality Circle Award 16 years running. We're in the early days of integration process right now but the addition of Lance is a great complement to our existing product portfolio.

And we expect it to continue to long-term sales growth and profitability improvement. Slide 6 shows our outlook for the remainder of the year. Our full year revenue and adjusted EBITDA outlook remains unchanged, but we've revised our expectations for net income and adjusted net income to reflect the first quarter results.

We expect full year 2018 revenues to be from $2.4 billion to $2.7 billion, and adjusted EBITDA from $200 million to $220 million, and we now expect fiscal 2018 net income to be in the range of to $90 million to $110 million, and adjusted net income to be in the range of a $110 million to $125 million.

This outlook represents adjusted EBITDA growth greater than 30% in fiscal 2018 and puts us on track to achieve our goal of doubling pre-IPO EBITDA and adjusted EBITDA margins of 10% by 2019.

As will be the case every year, we expect to generate the majority of our adjusted EBITDA during the second half of the year with only30% of our full-year adjusted EBITDA expected to occur during the first half of the year. Now I'll turn the call over to Dean to provide some more detailed coverage of our financial performance..

Thanks Tim, and good morning. Please move to Slide 7. As Tim said, our year is off to a good start with sales growth and we're on track to meet our plan for the full year. Quarterly net sales of $514.9 million were up 16.2% over last year.

Recent acquisitions contributed to our sales growth in the quarter, but we also experienced growth across all operating segments with a few exceptions due to sales mix and timing of shipments. Net income grew by one 171% in the first quarter to $9.4 million or $0.14 per diluted share.

Adjusted net income grew by 72% for the quarter to $9.7 million or $0.15 per diluted share. We are pleased with this improvement which was a result of benefits from acquisitions, higher earnings from operations, lower interest expense and the favorable impact of recently enacted US tax reform.

Adjusted EBITDA for the first quarter increased 1% to $21.3 million compared to adjusted EBITDA of $21.1 million in the first quarter of 2017. Adjusted EBITDA performance during the quarter benefited from the result of acquisitions, as well as higher net sales and earnings from certain business segments.

Adjusted EBITDA was also somewhat impacted by one-time expenses pertaining to the transactions Tim mentioned that occurred in the quarter.

We expect the pace of operational leverage to accelerate in fiscal 2018, as we benefit from a full year of the continued improvements made in procurement, operational efficiencies as well as from our increased scale. Let me now turn to page 8, start to discuss the performance of our segments.

Fire and Emergency segment sales increased 16.1% to $215.3 million for the first quarter of2018. Three primary drivers of this increase were higher unit sales, the contribution from our April 2017 acquisition of Ferrara and higher average selling prices.

F&E adjusted EBITDA for the quarter grew 8.7% to $18.2 million driven primarily by material cost reductions, improved manufacturing efficiencies and our recently acquired companies, and the impact of the Ferrara acquisition.

Going forward, we see continued strength in our Fire and Emergency business from continued increasing steady demand in both fire and ambulance markets. As showed on slide 8 in Commercial segment, quarterly sales were up1.5% primarily from higher unit sales and all segments product categories excluding school bus.

Commercial adjusted EBITDA was $3.7 million for the quarter. The decrease is primarily due to lower school bus sales in a shift of the mix of transit bus, unit shipments in the quarter, which tend to skew the numbers significantly due to the dollars involved.

In addition, we incurred some one-time costs during the first quarter to support manufacturing process improvements at one of our shuttle bus facilities.

We believe the end markets and the commercial segment remains strong, and we believe our margins will increase through added scale and improvement in shuttle bus sales growth and a full-year benefit of actions taken in fiscal 2017 and the first quarter of 2018. Turn to Slide 10, quarterly sales in the Recreation segment grew 32% to $167.2 million.

This increase was partially offset by a managed decrease in volume of Class eight units, an increased promotional activity to have older models prior to new model introduction in the second quarter. We exited the quarter with segment backlog of95% to $283 million, up from the end of fiscal year 2017.

This significant increase in backlog was positively impacted by the acquired totals backlog in the Lance camper business. Recreation adjusted EBITDA increased 194% for the quarter to $8.2 million.

The expansion and profitability is attributable to higher unit volumes, product mix and continued benefit from ongoing operating initiatives in addition to the results from acquired companies. . Looking ahead, the end markets for Recreation remain very strong as customer demand across many demographic groups continues to embrace the RV lifestyle.

Now I'll turn to our balance sheets. Total debt at January 31st, 2018 was $372.3 million net of deferred financing costs or39% of total capital. As a result, we had $143 million available under our ABL revolving credit facility, which was amended to increase its borrowing capacity to $250 million in December of 2017.

Capital expenditures for the quarter were $13.6 million compared to $18.1 million in the first quarter of 2017. We are now projecting that capital expenditures for the year will be in the range of $40 million to $45 million versus our original guidance of approximately $50 million.

From balance sheet standpoint, we still expect to realize improvements in our management of working capital, positive free cash flow and net reduction in fiscal 2018 before the impact of any future acquisitions.

In addition, we have adequate liquidity, low leverage and access to external markets that will be the field to grow for our growth initiatives for the foreseeable future. Lastly, I'd like to update our outlook for a full year effective tax rate based on our first quarter results.

We now expect our full fiscal year effective tax rate to be in the range of 16% to18% including the one-time benefit realized in the first quarter. And we expect our normalized rate for the year excluding this one-time benefit to be in the range of 24% to 26%. I'll now turn the call over to the operator for Q&A..

[Operator Instructions] Thank you. Our first question is from Jamie Cooke from Credit Suisse. Please go ahead..

Hi, good morning.

I guess just question, is there any way you can help us with sort of how do we think about the cadence of earnings throughout the year given the weaker first quarter start which I know you guys had guided to that, but I think people are just trying to get comfortable with how we get to the full year numbers because it implies a pretty significant margin ramp.

So any help there would be great..

Yes. We've talked about that a lot Jamie. I think some of the issues that we're going to have every single year is about30% of our earnings are in Q1 and two, 70% coming in Q3 and four and you saw that last year and you saw that the year before that when we were putting there all the information together for the IPO.

It's the nature of what we are and I think that you got kind of a double whammy. You've got everything that happens between November and January with holiday periods, hunting seasons, vacations, catch up and then you also have kind of the timing of when our orders come in during the year. It is what it is.

I mean it's I think probably the right percentage, I don't see that changing anytime soon is 30:70 split, look at the 30% in the first 2Q's and the rest in the other quarters.

We actually talked about several months ago should we change our fiscal year they kind of spread this thing out a little bit but it is what it and it's going to be that way for a long time I'm afraid..

Okay and I'm sorry just within commercial you called out one-time charges associated with the improvements at the shuttle bus facility.

Can you just help us -- can you just quantify how big that was?.

Yes. Dollars wise what was it? About a million bucks and it was for our Imlay City operations in Michigan. One of the things we're doing with shuttle is trying to really improve our efficiencies, get our costs down the markets; the market price is the market price.

And it's a challenging market for us, but we have to make sure that we do we can to get our costs down and then the quarter was really unusual.

Actually shuttle bus was up, the usual good performers of school bus and transit buses were the ones that kind of let us down the first quarter, it was really a little bit of a soft quarter for school bus, but transit buses if you miss four or five transit buses in a quarter, that's big dollars and that really affected the commercial performance of the quarter.

But we're going to keep pushing on shuttle. We are dedicated to make sure that that thing gets very profitable for us..

Our next question is from Andy Casey from Wells Fargo Securities. Please go ahead..

Good morning, thank you. I got a question back in line with Jamie's question. We're starting to see some lengthening in order to delivery lead times from some year of chassis providers.

First, are you seeing that and then if so does that further impact the timing of how you expect to achieve the updated 2018 goals?.

Its current situation that we hope does not get worse but for instance Mercedes Sprinter chassis have not been EPA approved yet. So there's a bit of delay in receiving those. We do work off a back chassis.

So in the near term, by the near-term I mean our second quarter we are fine, but as you can imagine with our backend loaded plan, we needs a lot of chassis in here in Q3 and Q4. So we got time to react to it, but there's noise with GM also, there's a little bit of noise with Ford.

It's something that we manage in a regular basis, but we've got some time to react and we plan to but right now we don't see that that's going to negatively impact our fiscal year..

Okay, thanks Tim. And then in the context of higher input costs that it could affect some of the component purchases and even some of those chassis purchases.

Can you kind of remind us about how you price your products and if you're expecting what appears to be a rising material cost environment to impact your ability to achieve the margin expectations not only this year but next year?.

Yes. Obviously, a top question of everyone in the last few days. Steel and aluminum which obviously are the topics of the day are less than5% of our direct spend. And the vast majority, I mean a very high percentage of what we buy in both steel and aluminum, we get from US suppliers. So our exposure to foreign suppliers of steel or aluminum is very low.

And our actual percentage of our total material cost is very low as well, and the other plus that we do have is we've got aluminum pricing locked in for the remainder of this year, And we've been doing that the last couple of years on aluminum just because we wanted to make sure that we didn't succumb to some volatility there.

The bigger issue is the one that you really address, so that's chassis, we will be extremely diligent on chassis costs as we move through fiscal 2018. That's where we're going to see the issues. The good news is I think are we can stay ahead of those.

We purchased far enough in advance and if you understand how chassis work, it's kind of a -- it's a pool effect that we buy into so we have warnings of any cost adjustments on chassis well in advance of what's happening, but we're going to be diligent. That's where we're going to see it, if we see it anywhere.

And we want to make sure that we stay ahead of that game..

Our next question is from Jerry Ravitch from Goldman Sachs. Please go ahead..

Hi, everyone. This is Ben Burud on for Jerry. I was just hoping you guys could give us an update on yours shuttle platform strategically from a high level.

Just wondering how the industry has been doing with your higher end product? And if you guys are making any strategic decisions to go down market?.

We're definitely going down market, that's not where our strength is. Our strength is building fully crash-tested quality shuttle buses. And that's what we'll continue to do. The markets are strong. I mean that there's not been any pullback in the shuttle bus market whatsoever.

What as I mentioned on previous question, the answer to the previous question is we just have to make sure that we work diligently to get our cost in line to make sure that we can continue to sell to the customers that want to buy a quality shuttle bus. And make the margins that we expect to make.

But we're not making any dramatic changes to our product offerings in that area, with the exception of if we come out with a low floor option, which is what we did recently on school bus that also has an opportunity in commercial bus, in shuttle bus. Those things will continue to do but as far as moving down market we have no intention to do that..

Got it, and then within F&E, I was hoping to get some more color between ambulance and fire mention pricing.

Can you give us some color on how those two are shaping up within the segment?.

Yes. Prices go up every year on both segments, and it's really tied to our material cost increases or labor increases and sort of thing. I think we're very pleased with the disciplines within the fire and emergency markets. I think they're mature markets with the ability to adjust to cost increases as we do have them.

And so that continues and that will continue to go at a pace that makes sense to our end users. They understand when we have price increases why we have those price increases, but it's a very stable mature industry that we that we work in and you can see that obviously from the results as well every quarter..

Got it, and just like maybe get a little bit more granular.

Can you maybe quantify or just give magnitudes of which of the two is seeing stronger pricing? I would just guess with the consolidation we've seen in fire that fire would be probably out growing or outperforming ambulance from a pricing perspective at least?.

No, they're actually pretty comparable and I think we're at that point now where we've got I think the correct pricing levels in the marketplace. So the price and increases you're seeing it fire and emergency are more inflationary related to material and labor.

Where we're seeing advantage from our standpoint though is we have three fire apparatus companies, and we can get sourcing benefits from a larger scale that also helps improve our margins without really doing anything abnormally large on pricing. But pricing is right now more at an inflationary level..

Our next question is Mig Dobre from Robert W. Baird. Please go ahead..

Yes. Good morning, everyone. Tim, I'm still struggling a little bit be honest with you with the earnings progression here, and how we're supposed to be thinking about it. You're talking about a 30/70 split due to seasonality.

If I look back in the last three years, you've typically been around to 35% to 30% of full year earnings or EBITDA that was generated in the front half, and now we're only looking to 30%. So I guess two things.

Can you maybe delineate some of the one-time costs or some of the unique items that impacted Q1 that will go away on a go-forward basis, and then also maybe help us understand why there seems to be a shift in the seasonality of these earnings because even if we're talking about 5% it's still a meaningful number moving from the first half to the second versus at least observed history?.

Yes, it's, yes that's probably the float that you're probably going to see 30- 35. It's not immaterial but it's not huge either I guess.

We did have some unusual things in the first quarter that we somewhat anticipated and budgeted for and that's why we said that we hit our number we did, but we have the obviously the costs of closing out the JV, the costs involved in the in the Daimler situation, those things are not free to accomplish those, we had the costs for the Lance acquisition.

We had some carryover costs from that the acquisition of AutoAbility and what we were doing with some of the things on on-site entry. So it was a tough quarter. I mean but we anticipated that. We had some unusual one-time expenses that went into the quarter that last year we were in the second quarter.

And that's why we kind group Q1, Q2 because they're equally some challenging quarters to make sure that we hit our numbers. But we hit where we thought we were. I think the surprises in the quarter, the two biggest surprises that had the most meaningful impact were not shipping the transit buses that we wanted to.

And that was basically due to a customer that didn't show up to do their inspections. And we can't ship if they don't inspect and sign off on the product. And we lost -- we had to move a handful of large aerials out of Ferrara into Q2. Those two things by themselves can swing EBITDA by a $ 1million to $1.5 in a quarter.

So those were all big challenges in the quarter. And I will tell you that we didn't really anticipate those. We really expected that we would be able to ship to our targets for the quarter. Other than that the additional costs and expenses we had all budgeted those in.

And we actually made a little extra money in some of the other areas to mitigate to some extent the shift and timing of the shipments at Ferrara and ENC.

I think a 5% like I said I don't want to say it's not a significant number, but that in a full year annualized basis probably isn't that big of a deal between first half second half of the year, especially when the purchasing is pretty well set, but not completely cast in concrete..

Well, right I can appreciate that but hopefully you can appreciate my perspective here if I'm looking at your implied guidance, it implies about $42 million of adjusted EBITDA in the second quarter at the midpoint.

So not knowing precisely what the revenue would be in the quarter, I'm guessing here is that the margin would be call it 6.5 to 6.4 or 6.5 something like that.

Essentially this would be the second quarter in a row where we're really not seeing a lot of margin expansion and I get it that we're going to get it in the back half, but I think what we're all trying to understand is getting a level of comfort as to what is it that preventive from happening in the front half, and what changes in a back half to a loss to get there? And that's it for me.

Thank you. ..

Well, first of all, you've got the numbers right, Mig. So it is what it is I guess from that standpoint. It's a challenging story. I think we understand that. It's in many respects it's a leap of faith and the last two years we've demonstrated that the third and fourth quarters are going to do what they're going to do. But it's a challenging story.

I mean the first half to have that differentiation between a first half of the year and a second half a year is highly unusual, incredibly unusual. And it's just the nature of our portfolio today and it's going to stay that way until we do something different.

I think as far as break up the mix at a fourth leg to the stool that may not have a seasonality that we've got with our current portfolio..

Our next question is from Nicole DeBlase from Deutsche Bank. Please go ahead..

Yes, thanks good morning, guys. So I guess my first question is around the recreation backlog. So I know that a lot of or the growth that you saw in the backlog during the quarter came from the acquisitions that you've done.

Could you just talk a little bit about what the backlog would have looked like without acquisitions? Like is it still growing substantially?.

Yes. It's -- that's a hard one, that's the discussion we've been having, we had at our board meeting yesterday. We're really trying to determine what's organic versus inorganic and backlogs a great example of trying to differentiate. We've doubled our backlogs at Midwest and Renegade.

We actually had believe it or not in a short ownership of only a couple of weeks we actually positively affected backlog at Lance. And the question really is what those would have been without RV. And the answer is there would have been something there, but it would have been would they have doubled their backlog, absolutely not.

So how much is organic versus inorganic and then when you look at our traditional business, which obviously is purely organic it was up, it was up significantly in the quarter. And that really had to do I think with some of the new products that we introduced back in September.

And some of the orders that we took after the Louisville show the first weekend in December. But we're up across all of RV, we are up significantly in our traditional A business and really these acquisitions really loaded the backlog in nicely as well. They all rolled into the first quarter with a pretty good head of steam.

And we just took it up even higher..

Okay, thanks Tim. And then I guess same segment recreation that was an area where margins looked pretty good this quarter. So I guess can that level of year-over-year improvement be sustained beyond 1Q or was there anything that drove the margin improvement in the first quarter that isn't sustainable in 2Q and beyond/.

Yes, sustainable and improving, how the blocking and tackling particular indicator is starting to pay off. We've really focused on the three areas, and let me just step aside for a minute, say the three areas where we're underperforming on margin our Decatur, our mobility vans and shuttle bus.

And we are absolutely laser focused in those three areas to get those margins up. So not only it is sustainable, we hope it show some improvement as we continue to move through to the end of the year..

Our next question is from Charley Brady from SunTrust Robinson Humphrey. Please go ahead..

Hey, thanks, good morning.

Hey, Tim just to clarify on the delayed shipments Ferrara, the aerials and the transit buses of this lifting to Q2 or beyond?.

No. Q2, the sad part about the story is they literally shipped a couple of days after the end of Q1. So they're gone. They're shipped. They're already in the bank.

So it was really - I always hate to use timing as an excuse but when we have to get sign-off from dealers and customers, we really have to manage that precisely and we missed it, but they're gone..

All right, thanks. And just on fire and emergency. I'm sorry on recreation, you had Renegade and you broke it out the acquisition impact in the Q, Renegades in there for two months incremental and obviously the third months in January is not incremental when you owned.

So just trying to -- if I can back out the other two, I am trying to get an organic growth number in the quarter for recreation, but I obviously don't have the monthly split by Renegade.

Can give us a sense of what the organic number might look like for recreation in the quarter?.

Yes. Well to give you just an example and Renegade since you used it, we effectively doubled the shipments in January from a year ago for Renegade. That's the momentum that we've got built up with that new asset. These new assets that we're picking up are just amazing.

We have probably did not fully appreciate the value of bringing them under the Rev umbrella and what that really meant to us. But Renegade, that the shipments were double, January to January. So that's little kind of the momentum you are going to see going forward..

Our next question comes from Courtney Yakavonis from Morgan Stanley. Please go ahead. ..

I'm just piggybacking on that question just wondering if you could break out the organic growth for us in F&E this quarter..

It's -- we're not trying to be evasive, it's real hard. Primarily due to the fact that where do you do it. I mean where do you start? How do we do we just take E-One as our organic growth or you add Ferrara in there and KME on a basis.

We're really struggling and in again we're not trying to be evasive, we're really trying to figure that out but it's really, really hard to do. Once these things get loaded in, we integrate immediately so the two biggest things that happen with an acquisition are we start getting our sourcing in there immediately.

So and these are meaningful dollars of additional EBITDA. So how much of that would have happened without them joining Rev. Well, we can guess, we can give you an estimate, where would the backlogs be. The fact that they're part of Rev now; it really is one of those things where they've gotten the advantage of being part of a bigger company.

So it's again we're not trying to be evasive, we're just having a hard time getting our hands around it. It all starts to meld into all the numbers that we do have..

So do you have it on a top-line basis not necessarily on the EBITDA basis?.

Yes. It's actually, it's the same thing.

We've spent an hour and a half at the board meeting talking about this subject because the board is asking the same types of questions, and we really -- we're not again, where do you-- where you start where you stop, where does the top line change and how much of that was part of the Rev umbrella versus being separate.

I mean we picked up new business, new accounts at both KEMI and Ferrara that they didn't sell to before, but they have sold to them with or without Rev. I'd argue they probably wouldn't. But they may say they did.

E-One has been steady ship growing organically quarter-over-quarter, year-over-year, all three fire apparatus businesses that we have right now are sold out through the end of our fiscal year. So that's just the demand that we do have. Again, Courtney not trying to be evasive; we had a big discussion about that at the board level yesterday.

And we start to lose track of oh-- we start to guess, we don't want to guess, As we can estimate and even then where do you cut it off, and where do you say that this was because of this or because of that..

Okay fair enough, and then just on the 30%, 70% split, is that applicable to all three segments or would you expect any differences between the three?.

No, there's differences, the buying seasons are a little bit different, but they're --the buying seasons are set and let me give you an example so you can maybe understand that there's effectively three buying seasons for RV.

It's September at the Open House, in Elkhart, it's Louisville and that's in the first week of December and that's just carry over from the Elkhart Open House, and then you've got April ,the new basically the new year introduction for the new coaches across the industry.

And so you've got -- those are the purchasing cycles for RV and so it gets into its own cadence. Fire really starts to happen in a very meaningful way and in the calendar third quarter which is really kind of in our fourth quarter, and it really has to do with when budgets are approved with municipalities.

And then add all the same shows a little bit of a different cadence there. School is very definitive. I mean we're just going into the buying season now for school. And the harder part of school, we're here in March and the orders will start happening in April, and they expect their school buses on the ground by the end of August.

And so that's a very definitive period of time as well. They're all different. Ambulances tends to be a little bit more steady than fire, just for the fact that the expenditures not as large as a fire apparatus.

So that tends to be a little bit more steady but then to there's different budget periods of time and some of the big municipalities make their commitments when they've got their new budgets approved.

The other dynamic not to confuse things but we're really trying to convince municipalities not to buy but to lease versus buying, which was spread that out and maybe help us out with some of the seasonality that we do see with some of these things, including fire trucks.

The only thing about fire those backlogs are quite long because the demand is high. So if the demand wasn't as high as what it was, we could level that off that would be helpful to get out of our 30:70 split.

But you throw all that in the pot and it comes out to 30-35 split as mix in it could be as high as 35 but 30:70 split on any given year and they're all different purchasing cadences that just summarized down to that 30:70 split..

Our next question is from Andy Casey from Wells Fargo Securities. Please go ahead..

Thanks for taking my follow-up. I've got a question on the Q1 $72 million operating cash outflow. Within that it had some unusual very insist on the working capital side, and a big portion that was driven by a $73 million accounts payable outflow.

Can you provide a little bit more color on that and then I'm just wondering if you expect positive operating cash flow in Q2?.

Yes, hi, Andy, this is Dean. The timing of year end change, as you know we change our year end from the last Saturday to the calendar quarter end. So that did impact the timing of payments for accounts payable this year, one time item and that won't reoccur obviously as we go forward.

So that was the primary reason, and regarding second quarter, second quarter still a use of cash, where we're improving on our working capital metrics, but I wouldn't say we're going to have a positive free cash flow or operating cash flow in the second quarter. We generate most if not all of our cash flow in the second half at this point..

Okay, thanks Dean.

Would you expect to take out some short-term debt or do you have enough cash on hand to support your activities in Q2?.

We have plenty of liquidity on our ABL to support our activities in Q2..

This concludes the question-and-answer session. Let's turn the floor back over to management for any closing comments..

Well, thanks again everyone for joining us today. We are where we want to be. We're right on track with our internal plan. We've got the highest backlog this company's seen in our short life. And all of our end markets remain very strong very, very steady very strong with nothing really we think is going to deter those as we move through 2018.

We're on track for our plan. We're on track for our guidance. And we really fully expect to continue to perform and meet that guidance. Thanks again for joining us. I guess we'll be talking to you again in early June. And in the meantime, feel free to call us with any other questions..

This concludes today's teleconference. Thank you again for your participation. You may disconnect your lines at this time..