UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
☒ |
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Non-accelerated filer |
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Small reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 28, 2024, the registrant had
Table of Contents
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PART I. |
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3 |
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Item 1. |
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3 |
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3 |
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Condensed Unaudited Consolidated Statements of Income and Comprehensive Income |
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4 |
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5 |
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Condensed Unaudited Consolidated Statements of Shareholders’ Equity |
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Notes to Condensed Unaudited Consolidated Financial Statements |
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7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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18 |
Item 3. |
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28 |
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Item 4. |
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28 |
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PART II. |
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28 |
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Item 1. |
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28 |
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Item 1A. |
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28 |
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Item 2. |
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28 |
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Item 6. |
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29 |
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30 |
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Cautionary Statement About Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “aim” and other similar expressions, although not all forward-looking statements contain these identifying words. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increases in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis and other key component parts, sales order cancelations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, and integration of operations relating to mergers and acquisitions activities. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”). We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this Form 10-Q or to reflect any changes in expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based.
We use our website (www.revgroup.com) and corporate social media accounts including X (previously known as Twitter) account (@revgroupinc), LinkedIn account (@rev-group-inc), Facebook account (@REVGroupInc), YouTube (@REVGroupInc), and Instagram account (@revgroupinc) as routine channels of distribution for company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Securities and Exchange Commission (“SEC”) Regulation FD. Accordingly, investors should monitor our website and our corporate social media accounts in addition to following press releases, SEC filings and public conference calls and webcasts. Additionally, we provide notifications of news or announcements as part of our investor relations website (https://investors.revgroup.com/). Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.
None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social media channels is incorporated into, or deemed to be a part of, this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our website or our social media channels are intended to be inactive textual references only.
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
REV Group, Inc. and Subsidiaries
Condensed Unaudited Consolidated Balance Sheets
(Dollars in millions, except share amounts)
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(Audited) |
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July 31, |
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October 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangible assets, net |
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Right of use assets |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Short-term customer advances |
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Short-term accrued warranty |
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Short-term lease obligations |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term customer advances |
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Deferred income taxes |
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Long-term lease obligations |
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Other long-term liabilities |
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Total liabilities |
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Shareholders' Equity: |
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Preferred stock ($ |
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Common stock ($ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income |
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— |
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Total REV's shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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See Notes to Condensed Unaudited Consolidated Financial Statements.
3
REV Group, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Income and Comprehensive Income
(Dollars in millions, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Amortization of intangible assets |
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Restructuring |
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— |
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— |
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Impairment charges |
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— |
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— |
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Total operating expenses |
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Operating income |
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Interest expense, net |
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(Gain) Loss on sale of business |
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( |
) |
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— |
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( |
) |
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Other expense |
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— |
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— |
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— |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive loss, net of tax |
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— |
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— |
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( |
) |
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( |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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Net income per common share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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Dividends declared per common share |
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See Notes to Condensed Unaudited Consolidated Financial Statements.
4
REV Group, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Cash Flows
(Dollars in millions)
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Nine Months Ended |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Deferred income taxes |
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( |
) |
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Impairment charges |
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— |
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(Gain) Loss on sale of business |
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( |
) |
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Other non-cash adjustments |
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( |
) |
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Changes in operating assets and liabilities, net |
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) |
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Net cash (used in) provided by operating activities |
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( |
) |
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Cash flows from investing activities: |
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Purchase of property, plant and equipment |
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( |
) |
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( |
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Proceeds from sale of business |
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Other investing activities |
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Net cash provided by (used in) investing activities |
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( |
) |
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Cash flows from financing activities: |
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Net proceeds (payments) from borrowings on revolving credit facility |
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( |
) |
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Payment of dividends |
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( |
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( |
) |
Repurchase and retirement of common stock |
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( |
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Other financing activities |
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( |
) |
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( |
) |
Net cash used in financing activities |
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( |
) |
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( |
) |
Net increase (decrease) in cash and cash equivalents |
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( |
) |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid for: |
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Interest |
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$ |
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$ |
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Income taxes, net of refunds |
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$ |
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$ |
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See Notes to Condensed Unaudited Consolidated Financial Statements.
5
REV Group, Inc. and Subsidiaries
(Dollars in millions, except share amounts)
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Common Stock |
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Additional Paid-in |
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Retained |
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Accumulated |
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Total |
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Amount |
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# Shares |
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Capital |
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Earnings |
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Income (Loss) |
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Equity |
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Balance, October 31, 2023 |
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$ |
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Sh. |
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$ |
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$ |
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$ |
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$ |
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Net income |
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Stock-based compensation expense |
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Vesting of restricted and performance stock units, net of employee tax withholdings |
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— |
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Sh. |
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( |
) |
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( |
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Other comprehensive loss, net of tax |
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( |
) |
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( |
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Issuances of restricted stock awards, net of employee tax withholdings on vested awards |
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— |
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Sh. |
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( |
) |
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( |
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Dividends declared on common stock |
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( |
) |
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( |
) |
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Balance, January 31, 2024 |
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$ |
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Sh. |
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$ |
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$ |
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$ |
— |
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$ |
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Net income |
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Stock-based compensation expense |
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Vesting of restricted and performance stock units, net of employee tax withholdings |
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— |
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Sh. |
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( |
) |
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( |
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Issuances of restricted stock awards |
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— |
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Sh. |
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— |
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— |
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Repurchase and retirement of common stock, including fees and excise taxes |
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— |
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( |
Sh.) |
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( |
) |
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( |
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Dividends declared on common stock |
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( |
) |
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( |
) |
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Balance, April 30, 2024 |
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$ |
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Sh. |
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$ |
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$ |
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$ |
— |
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$ |
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Net Income |
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Stock-based compensation expense |
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Vesting of performance stock units, net of employee tax withholdings |
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— |
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Sh. |
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( |
) |
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( |
) |
|||
Dividends declared on common stock |
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( |
) |
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( |
) |
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Balance, July 31, 2024 |
|
$ |
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Sh. |
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$ |
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$ |
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$ |
— |
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$ |
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Common Stock |
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Additional Paid-in |
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Retained |
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Accumulated |
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Total |
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Amount |
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# Shares |
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Capital |
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Earnings |
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Income (Loss) |
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Equity |
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||||||
Balance, October 31, 2022 |
|
$ |
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Sh. |
|
$ |
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$ |
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|
$ |
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$ |
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||||||
Net loss |
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( |
) |
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( |
) |
||||
Stock-based compensation expense |
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||||||
Vesting of restricted and performance stock units, net of employee tax withholdings |
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— |
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Sh. |
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( |
) |
|
|
|
|
|
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( |
) |
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Other comprehensive loss, net of tax |
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( |
) |
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( |
) |
||||
Forfeitures of restricted stock awards, net of forfeitures and employee tax withholdings on vested awards |
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— |
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( |
Sh.) |
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( |
) |
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( |
) |
||
Dividends declared on common stock |
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( |
) |
|
|
|
|
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( |
) |
||||
Balance, January 31, 2023 |
|
$ |
|
|
Sh. |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
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||||||
Stock-based compensation expense |
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||||||
Vesting of restricted stock units, net of employee tax withholdings |
|
|
— |
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Sh. |
|
|
( |
) |
|
|
|
|
|
|
|
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( |
) |
|||
Issuance of restricted stock awards, net of forfeitures and employee tax withholdings on vested awards |
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|
— |
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|
( |
Sh.) |
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( |
) |
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( |
) |
||
Dividends declared on common stock |
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( |
) |
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( |
) |
||||
Balance, April 30, 2023 |
|
$ |
|
|
Sh. |
|
$ |
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$ |
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|
$ |
( |
) |
|
$ |
|
|||||
Net Income |
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|
|
|
|
|
|
|
||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Vesting of restricted stock units, net of employee tax withholdings |
|
|
— |
|
|
Sh. |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Forfeitures of restricted stock awards, net of issuances |
|
|
— |
|
|
( |
Sh.) |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Dividends declared on common stock |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Balance, July 31, 2023 |
|
$ |
|
|
Sh. |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See Notes to Condensed Unaudited Consolidated Financial Statements.
6
REV Group, Inc. and Subsidiaries
Notes to the Condensed Unaudited Consolidated Financial Statements
(All tabular amounts presented in millions, except share and per share amounts)
Note 1. Basis of Presentation
The Condensed Unaudited Consolidated Financial Statements include the accounts of REV Group, Inc. (“REV” or “the Company”) and all its subsidiaries. In the opinion of management, the accompanying Condensed Unaudited Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These Condensed Unaudited Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of the Company for the fiscal year ended October 31, 2023. The interim results are not necessarily indicative of results for the full year.
Equity Sponsor Exit: Prior to the second quarter of fiscal year 2024, the Company’s largest equity holder was comprised of (i) American Industrial Partners Capital Fund IV, LP, (ii) American Industrial Partners Capital Fund IV (Parallel), LP and (iii) AIP/CHC Holdings, LLC, which the Company collectively refers to as “AIP” or “Sponsor”.
During the second quarter of fiscal year 2024, the Company completed two underwritten public offerings (the “Offerings”) in which shares of common stock previously held by AIP were sold. Upon completion of the second of the two Offerings, AIP ceased to beneficially own at least
Related Party Transactions: During the three months ended July 31, 2024 and July 31, 2023, the Company did not incur expenses associated with its former Sponsor. During each of the nine months ended July 31, 2024 and July 31, 2023, the Company reimbursed expenses of its former Sponsor of $
Reclassifications: Certain reclassifications have been made to the prior period financial statements to conform with the fiscal year 2024 presentation and improve comparability between periods. These reclassifications had no effect on the reported results of operations.
Recent Accounting Pronouncements
Accounting Pronouncement - Adopted
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04 “Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. The amendments in this ASU require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for fiscal years beginning after
Accounting Pronouncements - To Be Adopted
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted. We expect to adopt ASU 2023-07 in fiscal year 2025 and are currently evaluating the impact of ASU 2023-07 on our consolidated financial statements.
7
Note 2. Revenue Recognition
Substantially all of the Company’s revenue is recognized from contracts with customers with product shipment destinations in the United States and Canada. The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. The Company determines the transaction price for each contract at inception based on the consideration that it expects to receive for the goods and services promised under the contract. The transaction price excludes sales and usage-based taxes collected and certain “pass-through” amounts collected on behalf of third parties. The Company has elected to expense incremental costs to obtain a contract when the amortization period of the related asset is expected to be less than one year.
The Company’s primary source of revenue is generated from the manufacture and sale of specialty and recreational vehicles through its direct sales force and dealer network. The Company also generates revenue through separate contracts that relate to the sale of aftermarket parts and services. Revenue is typically recognized at a point-in-time, when control is transferred, which generally occurs when the product has been shipped to the customer or when it has been picked-up from the Company’s manufacturing facilities. Shipping and handling costs that occur after the transfer of control are fulfillment costs that are recorded in Cost of sales in the Condensed Unaudited Consolidated Statements of Income and Comprehensive Income when incurred or when the related product revenue is recognized, whichever is earlier. Periodically, certain customers may request bill and hold transactions according to the terms in the contract. In such cases, revenue is not recognized until after control has transferred which is generally when the customer has requested such transaction and has been notified that the product (i) has been completed according to customer specifications, (ii) has passed our quality control inspections, (iii) has been separated from our inventory and is ready for physical transfer to the customer, and (iv) the Company cannot use the product or redirect the product to another customer. Warranty obligations associated with the sale of a unit are assurance-type warranties that are a guarantee of the unit’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.
Contract Assets and Contract Liabilities
The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, and payment is usually received shortly after billing. Payments for certain contracts are received in advance of satisfying the related performance obligations. Such payments are recorded as Customer advances in the Company’s Condensed Unaudited Consolidated Balance Sheets. The Company reduces the customer advance balances when the Company transfers control of the promised good or service. During the three months ended July 31, 2024, and July 31, 2023, the Company recognized $
Remaining Performance Obligations
As of July 31, 2024, the Company had unsatisfied performance obligations for non-cancelable contracts with an original duration greater than one year totaling $
Note 3. Supply Chain Finance Program
The Company has an unsecured agreement with a third-party financial institution to facilitate a supply chain finance (“SCF”) program. The SCF program allows qualifying suppliers to sell their receivables due from the Company, on an invoice level at the selection of the supplier, to the financial institution and negotiate their outstanding receivable arrangements and associated fees directly with the financial institution. The Company is not party to the agreements between the supplier and the financial institution. The supplier invoices that have been confirmed as valid under the program require payment in full by the Company within
All outstanding amounts related to suppliers participating in the SCF program are confirmed with the third-party financial institution and are recorded in in the Condensed Unaudited Consolidated Balance Sheets. The Company’s outstanding obligation under the SCF program as of July 31, 2024 and October 31, 2023 was $
8
Note 4. Inventories
Inventories consisted of the following:
|
|
July 31, |
|
|
October 31, |
|
||
Chassis |
|
$ |
|
|
$ |
|
||
Raw materials & parts |
|
|
|
|
|
|
||
Work in process |
|
|
|
|
|
|
||
Finished products |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: reserves |
|
|
( |
) |
|
|
( |
) |
Total inventories, net |
|
$ |
|
|
$ |
|
||
Note 5. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
|
|
July 31, |
|
|
October 31, |
|
||
Land & land improvements |
|
$ |
|
|
$ |
|
||
Buildings & improvements |
|
|
|
|
|
|
||
Machinery & equipment |
|
|
|
|
|
|
||
Computer hardware & software |
|
|
|
|
|
|
||
Office furniture & fixtures |
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
Note 6. Goodwill and Intangible Assets
The table below represents goodwill by segment:
|
|
July 31, |
|
|
October 31, |
|
||
Specialty Vehicles |
|
$ |
|
|
$ |
|
||
Recreational Vehicles |
|
|
|
|
|
|
||
Total goodwill |
|
$ |
|
|
$ |
|
||
The change in the net carrying value of goodwill consisted of the following:
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Divestitures (Note 7) |
|
|
( |
) |
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
||
9
Intangible assets (excluding goodwill) consisted of the following:
|
|
July 31, 2024 |
|
|||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|||
Finite-lived Customer Relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Indefinite-lived trade names |
|
|
|
|
|
— |
|
|
|
|
||
Total intangible assets, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
October 31, 2023 |
|
|||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|||
Finite-lived Customer Relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Indefinite-lived trade names |
|
|
|
|
|
— |
|
|
|
|
||
Total intangible assets, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The change in the net carrying value of indefinite-lived trade names consisted of the following:
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Impairment charges |
|
|
( |
) |
|
|
— |
|
Divestiture (Note 7) |
|
|
( |
) |
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
||
Amortization expense was $
In connection with the discontinuation of manufacturing operations at the Company's ENC facility, the Company recorded an impairment charge of an indefinite-lived trade name of $
Note 7. Divestiture Activities
On January 26, 2024, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, Collins Industries, Inc., (“Collins Industries”) an indirect wholly-owned subsidiary of the Company, Collins Bus Corporation, a wholly-owned subsidiary of Collins Industries (“Collins”), Forest River, Inc. and Forest River Bus, LLC (the “Buyer”), pursuant to which Collins Industries agreed to sell all of the issued and outstanding shares of capital stock of Collins to the Buyer. The sale is aimed at optimizing the Company's portfolio of products and to create a more focused operating structure aligned with markets where the Company has a strong presence of industry leading brands. The transactions under the Stock Purchase Agreement closed on January 26, 2024.
In connection with the completion of the sale of Collins, the Company initially received cash consideration of $
10
On April 30, 2024, in connection with a strategic review of the product portfolio, the Company entered into an agreement to sell certain assets of the Fire Regional Technical Center (“Fire RTC”) business. In connection with the sale, the Company recorded a gain of $
Note 8. Restructuring and Other Related Charges
On January 29, 2024, the Company announced that it would discontinue manufacturing operations at the Company’s ENC facility in Riverside, California. Management believes the discontinuation of manufacturing at ENC will create a more focused portfolio that provides opportunities for growth, consistent cash generation and improved margin performance. ENC is included within the Specialty Vehicles segment.
The Company has and will incur certain restructuring and other related charges in connection with the decision to discontinue manufacturing at the ENC facility. For the three and nine months ended July 31, 2024, the Company recorded restructuring charges of $
Changes in the Company’s restructuring reserves related to the discontinuation of manufacturing at ENC during fiscal year 2024 were as follows:
|
|
Employee Severance and Termination Benefits |
|
|
Contract Termination and Other Costs |
|
|
Total |
|
|||
Balance at beginning of the period |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Restructuring provision |
|
|
|
|
|
|
|
|
|
|||
Utilized - cash |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 9. Long-Term Debt
The Company was obligated under the following debt instrument:
|
|
July 31, |
|
|
October 31, |
|
||
ABL facility |
|
$ |
|
|
$ |
|
||
ABL Facility
On April 13, 2021, the Company entered into a $
11
The following table summarizes the gross borrowing and gross payments under the Company's 2021 ABL Facility:
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Gross borrowings |
|
$ |
|
|
$ |
|
||
Gross payments |
|
|
|
|
|
|
||
Total net borrowings |
|
$ |
|
|
$ |
( |
) |
|
On November 1, 2022, the Company amended the 2021 ABL Facility to transition from the Eurodollar based benchmark rates to the Secured Overnight Financing Rate ("SOFR"). The transition from the Eurodollar rate to SOFR did not have a material impact on the Company's results of operations.
On February 7, 2024, the Company entered into Amendment No. 2 (the “ABL Facility Amendment”) to the 2021 ABL Facility. The ABL Facility Amendment revised the definition of fixed charges under the 2021 ABL Facility to exclude a special cash dividend, which was declared in the first quarter of fiscal year 2024 and paid in the second quarter of fiscal year 2024.
All revolving loans under the 2021 ABL Facility, as amended, bear interest at rates equal to, at the Company’s option, either a base rate plus an applicable margin, or a SOFR rate plus an applicable margin and credit spread adjustment of
The lenders under the 2021 ABL Facility have a first priority security interest in substantially all personal property assets and certain real property assets of the Company. The 2021 ABL Facility’s borrowing base is comprised of eligible receivables and eligible inventory, plus a fixed asset sublimit of certain eligible real property and eligible equipment, which fixed asset sublimit reduces by quarterly amortization as specified in the 2021 ABL Agreement.
The 2021 ABL Agreement contains customary representations and warranties, affirmative and negative covenants, subject in certain cases to customary limitations, exceptions and exclusions. The 2021 ABL Agreement also contains certain customary events of default. The occurrence of an event of default under the 2021 ABL Agreement could result in the termination of the commitments under the ABL Facility and the acceleration of all outstanding borrowings under it. The 2021 ABL Agreement requires the Company to maintain a minimum fixed charge coverage ratio of
The Company was in compliance with all financial covenants under the 2021 ABL Agreement as of July 31, 2024. As of July 31, 2024, the Company’s availability under the 2021 ABL Facility was $
The fair value of the 2021 ABL Facility approximated the book value on July 31, 2024 and October 31, 2023.
Note 10. Warranties
The Company’s products generally carry explicit warranties that extend from several months to several years, based on terms that are generally accepted in the marketplace. Selected components (such as engines, transmissions, tires, etc.) included in the Company’s end products may include warranties from original equipment manufacturers (“OEM”). These OEM warranties are passed on to the end customer of the Company’s products, and the customer deals directly with the applicable OEM for any issues encountered on those components.
Changes in the Company’s warranty liability consisted of the following:
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Warranty provisions |
|
|
|
|
|
|
||
Settlements made |
|
|
( |
) |
|
|
( |
) |
Divestiture (Note 7) |
|
|
( |
) |
|
|
— |
|
Balance at end of period |
|
$ |
|
|
$ |
|
||
12
Accrued warranty is classified in the Company’s condensed unaudited consolidated balance sheets as follows:
|
|
July 31, |
|
|
October 31, |
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total warranty liability |
|
$ |
|
|
$ |
|
||
Note 11. Earnings Per Share
Basic earnings per common share (“EPS”) is computed by dividing net income or loss by the weighted average number of common shares outstanding, which excludes shares of issued but unvested restricted stock awards. Diluted EPS is computed by dividing net income, if applicable, by the weighted-average number of common shares outstanding assuming dilution. The difference between basic EPS and diluted EPS is the result of the dilutive effect of unvested performance stock units, restricted stock units, and restricted stock awards.