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 May 29, 2024, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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Condensed Unaudited Consolidated Statements of Income and Comprehensive Income |
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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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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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31 |
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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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April 30, |
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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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Income tax payable |
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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 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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Six 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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— |
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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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Other expense |
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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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Six 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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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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Changes in operating assets and liabilities, net |
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( |
) |
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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 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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( |
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Net cash used in financing activities |
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( |
) |
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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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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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$ |
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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 loss |
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( |
) |
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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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( |
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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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( |
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Dividends declared on common stock |
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( |
) |
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( |
) |
||||
Balance, January 31, 2023 |
|
$ |
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Sh. |
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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 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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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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( |
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Dividends declared on common stock |
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( |
) |
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( |
) |
||||
Balance, April 30, 2023 |
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$ |
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Sh. |
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$ |
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|
$ |
|
|
$ |
( |
) |
|
$ |
|
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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 a total of
Upon completion of the second of the two Offerings, AIP ceased to beneficially own at least
Related Party Transactions: During the three months ended April 30, 2024 and April 30, 2023, the Company did not incur expenses associated with its former Sponsor, other than in connection with the Offerings and related share repurchase. During the six months ended April 30, 2024 and April 30, 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 April 30, 2024, and April 30, 2023, the Company recognized $
Remaining Performance Obligations
As of April 30, 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 April 30, 2024 and October 31, 2023 was $
8
Note 4. Inventories
Inventories consisted of the following:
|
|
April 30, |
|
|
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:
|
|
April 30, |
|
|
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:
|
|
April 30, |
|
|
October 31, |
|
||
Specialty Vehicles |
|
$ |
|
|
$ |
|
||
Recreational Vehicles |
|
|
|
|
|
|
||
Total goodwill |
|
$ |
|
|
$ |
|
||
The change in the net carrying value of goodwill consisted of the following:
|
|
Six 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:
|
|
April 30, 2024 |
|
|||||||||||||
|
|
Weighted- |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Finite-lived Customer Relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Indefinite-lived trade names |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
October 31, 2023 |
|
|||||||||||||
|
|
Weighted- |
|
|
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:
|
|
Six Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Impairment (Note 8) |
|
|
( |
) |
|
|
— |
|
Divestiture (Note 7) |
|
|
( |
) |
|
|
|
|
Balance at end of period |
|
$ |
|
|
$ |
|
||
Amortization expense was $
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 received cash consideration of $
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 $
10
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 six months ended April 30, 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:
|
|
Six Months Ended |
|
|
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:
|
|
April 30, |
|
|
October 31, |
|
||
ABL facility |
|
$ |
|
|
$ |
|
||
ABL Facility
On April 13, 2021, the Company entered into a $
The following table summarizes the gross borrowing and gross payments under the Company's 2021 ABL Facility:
|
|
Six 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.
11
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 the special cash dividend, which was declared in the first quarter of fiscal year 2024 and paid in the second quarter of fiscal year 2024, from the definition of Fixed Charges.
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 April 30, 2024. As of April 30, 2024, the Company’s availability under the 2021 ABL Facility was $
The fair value of the 2021 ABL Facility approximated the book value on April 30, 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:
|
|
Six Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Warranty provisions |
|
|
|
|
|
|
||
Settlements made |
|
|
( |
) |
|
|
( |
) |
Change in liability of pre-existing warranties |
|
|
( |
) |
|
|
— |
|
Divestiture (Note 7) |
|
|
( |
) |
|
|
— |
|
Balance at end of period |
|
$ |
|
|
$ |
|
||
Accrued warranty is classified in the Company’s condensed unaudited consolidated balance sheets as follows:
|
|
April 30, |
|
|
October 31, |
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total warranty liability |
|
$ |
|
|
$ |
|
||
12
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.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Basic weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive performance stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The table below represents shares excluded from the calculation of diluted weighted-average shares outstanding because they would have been anti-dilutive:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Anti-dilutive shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 12. Income Taxes
For interim financial reporting, the Company estimates its annual effective tax rate based on the projected income for its entire fiscal year and records a provision or benefit for income taxes on a quarterly basis based on the estimated annual effective income tax rate, adjusted for any discrete tax items.
The Company recorded income tax expense of $
The Company recorded income tax expense of $
The Company periodically evaluates its valuation allowance requirements as facts and circumstances change and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s effective income tax rate.
The Company’s liability for unrecognized tax benefits, including interest and penalties, was $
The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of April 30, 2024, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates and/or from its historical income tax provisions and income tax liabilities and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments related to income tax examinations.
13
Note 13. Commitments and Contingencies
The Company is, from time to time, party to various legal proceedings, including product and general liability claims, arising out of the ordinary course of business. Assessments of legal proceedings can involve complex judgments about future events that may rely on estimates and assumptions. When assessing whether to record a liability related to legal proceedings, the Company adheres to the requirements of ASC 450, Contingencies, and other applicable guidance as necessary, and records liabilities in those instances where it can reasonably estimate the amount of the loss and when the loss is probable. When a range exists that is reasonably estimable and the loss is probable, the Company records an accrual in its financial statements equal to the most likely estimate of the loss, or the low end of the range, if there is no one best estimate. Additionally, these claims are generally covered by third-party insurance, which for some insurance policies are subject to a retention for which the Company is responsible.
Market Risks:
|
|
April 30, |
|
|
October 31, |
|
||
Performance, bid and specialty bonds |
|
$ |
|
|
$ |
|
||
Open standby letters of credit |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Chassis Contingent Liabilities: The Company obtains certain vehicle chassis from automobile manufacturers under converter pool agreements. These agreements generally provide that the manufacturer will supply chassis at the Company’s various production facilities under the terms and conditions set forth in the agreement. The manufacturer does not transfer the certificate of origin to the Company upon delivery. Accordingly, the chassis are not owned by the Company when delivered, and therefore, are excluded from the Company’s inventory. Upon being put into production, the Company owns the inventory and becomes obligated to pay the manufacturer for the chassis. Chassis are typically placed into production within 90 to 120 days of delivery to the Company. If the chassis are not placed into production within this timeframe, the Company generally purchases the chassis and records inventory, or the Company is obligated to begin paying an interest charge on this inventory until purchased. Such agreements are customary in the industries in which the Company operates and the Company’s exposure to loss under such agreements is limited by the value of the vehicle chassis that would be resold to mitigate any losses. The Company’s contingent liability under such agreements was $
From time to time, the Company’s customers may provide their own vehicle chassis, at their sole discretion, in connection with specific vehicle orders. These vehicle chassis are stored at the Company’s various production facilities until the related value-added work is completed and the finished unit is shipped back to the customer. The customer does not transfer the vehicle chassis certificate of origin to the Company. Accordingly, such chassis are not owned by the Company when delivered or throughout the production process, and are, therefore, excluded from the Company’s inventory. The Company’s maximum contingent liability related to these vehicle chassis was $
Repurchase Commitments: The Company has repurchase agreements with certain lending institutions. The repurchase commitments are on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer or other customer, generally not exceeding
14
Guarantee Arrangements: The Company is party to multiple agreements whereby it guaranteed an aggregate of $
Other Matters:
Krystal Bus: In January 2023, the Company agreed, in principle, to settle a claim brought by a plaintiff who was injured as a passenger in an accident involving a shuttle bus that was manufactured by Krystal Bus prior to the Company’s acquisition of certain assets related to that business. The Company did not admit to any liability on the merits of the claim, but deemed a settlement to be in its best interest based on the facts and circumstances of the claim, as they developed in the first quarter of fiscal year 2023. As a result, the Company recorded a loss of $
Note 14. Business Segment Information
During the first fiscal quarter of 2024, the Company formed the Specialty Vehicles Segment by combining the Fire & Emergency and Commercial segment businesses. Additionally, the Recreation segment was renamed Recreational Vehicles. As a result, the Company is now organized into
Specialty Vehicles: This segment includes Emergency One (“E-ONE”), Kovatch Mobile Equipment (“KME”), Ferrara, Spartan Emergency Response (“Spartan ER”), American Emergency Vehicles (“AEV”), Leader Emergency Vehicles (“Leader”), Horton Emergency Vehicles (“Horton”), REV Group Orlando, ENC, Capacity and LayMor. These businesses manufacture, market and distribute commercial and custom fire and emergency vehicles primarily for fire departments, airports, other governmental units, contractors, hospitals and other care providers in the United States and other countries, municipal transit buses primarily used for public transportation, trucks used in terminal type operations, i.e., rail yards, warehouses, rail terminals and shipping terminals/ports, and industrial sweepers for both the commercial and rental markets.
Recreational Vehicles: This segment includes REV Recreation Group, Renegade, Midwest, Lance and Goldshield Fiberglass, Inc., and their respective manufacturing facilities, service and parts divisions. REV Recreation Group primarily manufactures, markets and distributes Class A RVs in both gas and diesel models, and also distributes Class B and Class C RVs. Renegade primarily manufactures, markets and distributes Class C and “Super C” RVs. Midwest manufactures, markets and distributes Class B RVs and luxury vans. Lance manufactures, markets and distributes truck campers and towable campers. Goldshield manufactures, markets and distributes fiberglass reinforced molded parts to a diverse cross section of original equipment manufacturers and other commercial and industrial customers, including various components for REV Recreation Group’s Fleetwood family of brands.
For purposes of measuring financial performance of its business segments, the Company does not allocate to individual business segments costs or items that are of a corporate nature. The caption “Corporate, Other & Elims” includes corporate expenses, results of insignificant operations, intersegment eliminations and income and expense not allocated to reportable segments.
Total assets of the business segments exclude general corporate assets, which principally consist of cash and cash equivalents, certain property, plant and equipment and certain other assets pertaining to corporate and other centralized activities.
Intersegment sales generally include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed and agreed-upon pricing which is intended to be reflective of the contribution made by the supplying business segment. All intersegment transactions have been eliminated in consolidation.
15
Selected financial information of the Company’s segments is as follows:
|
|
Three Months Ended April 30, 2024 |
|
|||||||||||||
|
|
Specialty Vehicles |
|
|
Recreational |
|
|
Corporate, |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|||
|
|
Three Months Ended April 30, 2023 |
|
|||||||||||||
|
|
Specialty Vehicles |
|
|
Recreational |
|
|
Corporate, |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|||
|
|
Six Months Ended April 30, 2024 |
|
|||||||||||||
|
|
Specialty Vehicles |
|
|
Recreational Vehicles |
|
|
Corporate, |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|||
|
|
Six Months Ended April 30, 2023 |
|
|||||||||||||
|
|
Specialty Vehicles |
|
|
Recreational Vehicles |
|
|
Corporate, |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|||
In considering the financial performance of the business, the chief operating decision maker analyzes the primary financial performance measure of Adjusted EBITDA. Adjusted EBITDA is defined as net income or loss for the relevant period before depreciation and amortization, interest expense, and income taxes, as adjusted for items management believes are not indicative of the Company’s ongoing operating performance. Adjusted EBITDA is not a measure defined by U.S. GAAP but is computed using amounts that are determined in accordance with U.S. GAAP. A reconciliation of this performance measure to net income is included below.
The Company believes Adjusted EBITDA is useful to investors and used by management for measuring profitability because the measure excludes the impact of certain items which management believes have less bearing on the Company’s core operating performance, and allows for a more meaningful comparison of operating fundamentals between companies within its industries by eliminating the impact of capital structure and taxation differences between the companies. Additionally, Adjusted EBITDA is used by management to measure and report the Company’s financial performance to the Company’s Board of Directors, assists in providing a meaningful analysis of the Company’s operating performance and is used as a measurement in incentive compensation for management.
16
Provided below is a reconciliation of segment Adjusted EBITDA to Net income:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Specialty Vehicles Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Recreational Vehicles Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate and Other Adjusted EBITDA |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Provision for income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transaction expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Sponsor expense reimbursement |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Restructuring |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Restructuring related charges |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Impairment charges |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Stock-based compensation expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Legal matters |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain (Loss) on sale of business |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other items |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 15. Shareholders' Equity
On June 1, 2023, the Company’s Board of Directors approved a new share repurchase program that allowed the repurchase of up to $
On February 16, 2024 the Company paid the previously declared special cash dividend equal to $
On February 20, 2024, the Company closed the first of the Offerings, which included the sale of
On March 15, 2024, the Company closed the second of the Offerings, which included the sale of
The Company did not sell any shares of common stock and did not receive any proceeds from the Offerings. The Company incurred approximately $
Note 16. Subsequent Events
On May 30, 2024, the Company’s Board of Directors declared a quarterly cash dividend in the amount of $
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This management’s discussion and analysis should be read in conjunction with the Condensed Unaudited Consolidated Financial Statements contained in this Form 10-Q as well as the Management’s Discussion and Analysis and Risk Factors and audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K filed on December 13, 2023.
Overview
REV Group companies are leading designers, manufacturers and distributors of specialty vehicles and related aftermarket parts and services. We serve a diversified customer base, primarily in the United States, through two segments: Specialty Vehicles and Recreational Vehicles. We provide customized vehicle solutions for applications, including essential needs for public services (ambulances, fire apparatus, and transit buses), commercial infrastructure (terminal trucks and industrial sweepers) and consumer leisure (recreational vehicles). Our diverse portfolio is made up of well-established principal vehicle brands, including many of the most recognizable names within their industry. Several of our brands pioneered their specialty vehicle product categories and date back more than 50 years.
Segments
We serve a diversified customer base primarily in the United States and Canada through the following segments:
Specialty Vehicles – The Specialty Vehicles segment includes E-ONE, KME, Ferrara, Spartan ER, AEV, Horton, Leader, REV Group Orlando, ENC, Capacity, and LayMor. These businesses manufacture, market and distribute commercial and custom fire and emergency vehicles primarily for fire departments, airports, other governmental units, contractors, hospitals and other care providers in the United States and other countries, municipal transit buses primarily used for public transportation, trucks used in terminal type operations, i.e., rail yards, warehouses, rail terminals and shipping terminals/ports and industrial sweepers for both the commercial and rental markets.
Recreational Vehicles – Our Recreational Vehicles segment serves the RV market through the following principal brands: American Coach, Fleetwood RV, Holiday Rambler, Renegade RV, Midwest Automotive Designs and Lance Camper. We believe our brand portfolio contains some of the longest standing, most recognized brands in the RV industry. Under these brands, REV provides a variety of highly recognized motorized and towable RV models such as: American Eagle, Bounder, Discovery LXE, Renegade Verona, Renegade XL, among others. Our products in the Recreational Vehicles segment include Class A motorized RVs (motorhomes built on a heavy-duty chassis with either diesel or gas engine configurations), Class C and “Super C” motorized RVs (motorhomes built on a van or commercial truck chassis), Class B RVs (motorhomes built out within a van chassis and high-end luxury van conversions), and towable travel trailers and truck campers. The Recreational Vehicles segment also includes Goldshield Fiberglass, which produces a wide range of custom molded fiberglass products for the Fleetwood family of brands, RV, and broader industrial markets.
Factors Affecting Our Performance
The primary factors affecting our results of operations include:
General Economic Conditions
Our business is impacted by the U.S. economic environment, employment levels, consumer confidence, municipal spending, municipal tax receipts, changes in interest rates and stability in securities markets around the world, among other factors. In particular, changes in the U.S. economic climate can impact demand in key end markets. In addition, we are susceptible to supply chain disruptions resulting from the impact of tariffs and global macro-economic factors which can have a dramatic effect, either directly or indirectly, on the availability, lead-times and costs associated with raw materials and parts.
RV purchases are discretionary in nature and therefore sensitive to the cost and availability of financing, consumer confidence, unemployment levels, levels of disposable income and changing levels of consumer home equity, among other factors. RV markets are affected by general U.S. and global economic conditions, which create risks that future economic downturns will reduce consumer demand and negatively impact our sales.
While less economically sensitive than the Recreational Vehicles segment, the Specialty Vehicles segment is also impacted by the overall economic environment. For example, local tax revenues are an important source of funding for fire and emergency response departments, and these products are typically a larger cost item for municipalities and their service life is relatively long, making the purchase more deferrable, which can result in reduced demand for our products. Volatility in tax revenues or availability of funds via budgetary appropriation can have a negative impact on the demand for these products.
18
Seasonality
In a typical year, our operating results are impacted by seasonality. Historically, the slowest sales volume quarter has been the first fiscal quarter when the purchasing seasons for vehicles, such as RVs, are the lowest due to the colder weather and the relatively long time until the summer vacation season. Our first fiscal quarter also has less working days to complete and ship units due to the number of holidays and related vacation taken by employees. Sales of our products have typically been higher in the second, third and fourth fiscal quarters (with the fourth fiscal quarter typically being the strongest) due to better weather, the vacation season, buying habits of RV dealers and end-users, and timing of government/municipal customer fiscal years. Our quarterly results of operations, cash flows, and liquidity are likely to be impacted by these seasonal patterns. Sales and earnings for other vehicles that we produce, such as essential emergency vehicles, are less seasonal, but fluctuations in sales of these vehicles can also be impacted by timing surrounding the fiscal years of municipalities and commercial customers, as well as the timing and amounts of multi-unit orders.
Impact of Acquisitions and Divestitures
We actively evaluate opportunities to improve and expand our business through targeted acquisitions that are consistent with our strategy. We also may dispose of certain components of our business that no longer fit within our overall strategy. Historically, a significant component of our growth has been through acquisitions of businesses. We typically incur upfront costs as we integrate acquired businesses and implement our operating philosophy at newly acquired companies, including consolidation of supplies and materials purchases, improvements to production processes, and other restructuring initiatives. The benefits of these integration efforts and divestiture activities may not positively impact our financial results until subsequent periods, if at all.
In the first quarter of fiscal year 2024, we sold Collins, and in the second quarter of fiscal year 2024 we sold certain assets of Fire RTC. Refer to Note 7, Divestiture Activities, of the Notes to the Condensed Unaudited Consolidated Financial Statements for further details.
Results of Operations
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
($ in millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net sales |
|
$ |
616.9 |
|
|
$ |
681.2 |
|
|
$ |
1,202.9 |
|
|
$ |
1,264.7 |
|
Gross profit |
|
|
77.3 |
|
|
|
82.5 |
|
|
|
140.2 |
|
|
|
140.4 |
|
Selling, general and administrative |
|
|
50.1 |
|
|
|
52.5 |
|
|
|
105.5 |
|
|
|
120.3 |
|
Restructuring |
|
|
3.7 |
|
|
|
— |
|
|
|
4.5 |
|
|
|
— |
|
Impairment charges |
|
|
— |
|
|
|
— |
|
|
|
12.6 |
|
|
|
— |
|
(Gain) Loss on sale of business |
|
|
(1.5 |
) |
|
|
1.1 |
|
|
|
(259.0 |
) |
|
|
1.1 |
|
Provision for income taxes |
|
|
2.7 |
|
|
|
5.8 |
|
|
|
64.1 |
|
|
|
0.7 |
|
Net income |
|
|
15.2 |
|
|
|
14.2 |
|
|
|
197.9 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.29 |
|
|
$ |
0.24 |
|
|
$ |
3.53 |
|
|
$ |
0.01 |
|
Diluted |
|
|
0.28 |
|
|
|
0.24 |
|
|
|
3.49 |
|
|
|
0.01 |
|
Dividends declared per common share |
|
|
0.05 |
|
|
|
0.05 |
|
|
|
3.10 |
|
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
37.5 |
|
|
$ |
41.9 |
|
|
$ |
68.0 |
|
|
$ |
63.2 |
|
Adjusted Net Income |
|
|
20.9 |
|
|
|
20.8 |
|
|
|
35.6 |
|
|
|
27.9 |
|
19
Net Sales |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Net sales |
|
$ |
616.9 |
|
|
|
-9.4 |
% |
|
$ |
681.2 |
|
|
$ |
1,202.9 |
|
|
|
-4.9 |
% |
|
$ |
1,264.7 |
|
Net Sales: Consolidated net sales decreased $64.3 million for the three months ended April 30, 2024 compared to the prior year quarter. Net sales for the three months ended April 30, 2023 included $46.9 million attributable to Collins, which was divested on January 26, 2024. Excluding the impact of the Collins divestiture, net sales decreased $17.4 million, or 2.7% compared to the prior year quarter. The decrease in net sales is primarily due to lower net sales in the Recreational Vehicles segment, partially offset by higher net sales within the Specialty Vehicles segment. The decrease within the Recreational Vehicles segment was primarily due to lower unit shipments and increased discounting, partially offset by price realization. The increase within the Specialty Vehicles segment, excluding the impact of the Collins divestiture, was primarily due to price realization and increased shipments of fire apparatus and ambulance units, partially offset by lower shipments of terminal trucks.
Consolidated net sales decreased $61.8 million for the six months ended April 30, 2024 compared to the prior year period. Excluding the impact of the Collins divestiture, net sales decreased $14.9 million, or 1.2%, for the six months ended April 30, 2024 compared to the prior year period. The decrease in net sales is primarily due to lower net sales in the Recreational Vehicles segment, partially offset by higher net sales within the Specialty Vehicles segment. The decrease within the Recreational Vehicles segment was primarily due to lower unit shipments and increased discounting, partially offset by price realization. The increase within the Specialty Vehicles segment, excluding the impact of the Collins divestiture, was primarily due to price realization and increased shipments of fire apparatus and ambulance units, partially offset by lower shipments of terminal trucks.
Gross Profit |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Gross profit |
|
$ |
77.3 |
|
|
|
-6.3 |
% |
|
$ |
82.5 |
|
|
$ |
140.2 |
|
|
|
-0.1 |
% |
|
$ |
140.4 |
|
% of net sales |
|
|
12.5 |
% |
|
|
|
|
|
12.1 |
% |
|
|
11.7 |
% |
|
|
|
|
|
11.1 |
% |
||
Gross Profit: Consolidated gross profit decreased $5.2 million for the three months ended April 30, 2024 compared to the prior year quarter. Gross profit for the three months ended April 30, 2023 included $11.7 million attributable to Collins. Excluding the impact of the Collins divestiture, gross profit increased $6.5 million, or 9.2% compared to the prior year quarter. The increase in gross profit was primarily attributable to higher net sales and gross margin in the Specialty Vehicles segment, partially offset by lower net sales and gross margin within the Recreational Vehicles segment.
Consolidated gross profit decreased $0.2 million for the six months ended April 30, 2024 compared to the prior year period. Excluding the impact of the Collins divestiture, gross profit increased $11.5 million, or 8.9%, for the six months ended April 30 2024 compared to the prior year period. The increase in gross profit was primarily attributable to higher net sales and gross margin in the Specialty Vehicles segment, partially offset by lower net sales and gross margin within the Recreational Vehicles segment.
Selling, General and Administrative |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Selling, general and administrative |
|
$ |
50.1 |
|
|
|
-4.6 |
% |
|
$ |
52.5 |
|
|
$ |
105.5 |
|
|
|
-12.3 |
% |
|
$ |
120.3 |
|
Selling, General and Administrative: Consolidated selling, general and administrative (“SG&A”) costs decreased $2.4 million for the three months ended April 30, 2024 compared to the prior year quarter. The decrease in SG&A costs for the three months ended April 30, 2024 was primarily due to lower legal and personnel costs and SG&A attributable to Collins, partially offset by higher share-based compensation and transaction expenses related to capital market transactions.
Consolidated SG&A costs decreased $14.8 million for the six months ended April 30, 2024 compared to the prior year period. The decrease in SG&A costs for the six months ended April 30, 2024 was primarily due to a decrease in legal costs associated with the legal case described in Note 13, Commitments and Contingencies of the Notes to the Condensed Unaudited Consolidated Financial Statements and a decrease in SG&A attributable to Collins, partially offset by higher transaction expenses related to the divestiture and capital market transactions.
20
Restructuring |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Restructuring |
|
$ |
3.7 |
|
|
|
100.0 |
% |
|
$ |
— |
|
|
$ |
4.5 |
|
|
|
100.0 |
% |
|
$ |
— |
|
Restructuring: Consolidated restructuring costs were $3.7 million for the three months ended April 30, 2024 and $4.5 million for the six months ended April 30, 2024. These restructuring costs were due to costs associated with the discontinuation of manufacturing operations at the Company's ENC facility, as announced in the first quarter of fiscal year 2024.
Impairment Charges |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||
(in millions) |
|
2024 |
|
|
Change |
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
|||||
Impairment charges |
|
$ |
— |
|
|
N/M |
|
$ |
— |
|
|
$ |
12.6 |
|
|
|
100.0 |
% |
|
$ |
— |
|
Impairment Charges: Consolidated impairment charges were $12.6 million for the six months ended April 30, 2024. These impairment charges were primarily related to the discontinuation of manufacturing operations at the Company's ENC facility, as announced in the first quarter of fiscal year 2024.
(Gain) Loss on sale of business |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
2023 |
|
|
2024 |
|
|
Change |
|
2023 |
|
||||
(Gain) Loss on sale of business |
|
$ |
(1.5 |
) |
|
N/M |
|
$ |
1.1 |
|
|
$ |
(259.0 |
) |
|
N/M |
|
$ |
1.1 |
|
(Gain) Loss on Sale of Business: Consolidated gain on sale of business was $1.5 million for the three months ended April 30, 2024. The gain on sale of business was due to the sale of the Fire RTC business in the second quarter of fiscal year 2024. The loss on sale of business was due to the sale of non-core businesses within the Specialty Vehicles segment in the second quarter of fiscal year 2023.
Consolidated gain on sale of business was $259.0 million for the six months ended April 30, 2024. The gain on sale of business was due to the sale of the Collins and Fire RTC businesses in the first half of fiscal year 2024. The loss on sale of business was due to the sale of non-core businesses within the Specialty Vehicles segment in the second quarter of fiscal year 2023.
Provision for income taxes |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
2023 |
|
|||||
Provision for income taxes |
|
$ |
2.7 |
|
|
|
-53.4 |
% |
|
$ |
5.8 |
|
|
$ |
64.1 |
|
|
N/M |
|
$ |
0.7 |
|
Income Taxes: Consolidated income tax expense was $2.7 million for the three months ended April 30, 2024, or 15.1% of pre-tax income, compared to $5.8 million of expense, or 29.0% of pre-tax income, for the three months ended April 30, 2023. Income tax expense for the three months ended April 30, 2024 was favorably impacted by $1.2 million of net discrete tax benefit, primarily related to the conclusion of an IRS examination. Income tax expense for the three months ended April 30, 2023 were unfavorably impacted by $0.6 million of net discrete tax expense related to the results of an IRS examination.
Consolidated income tax expense was $64.1 million for the six months ended April 30, 2024, or 24.5% of pre-tax income, compared to $0.7 million of expense, or 50.0% of pretax income, for the six months ended April 30, 2023. Income tax expense for the six months ended April 30, 2024 was unfavorably impacted by $62.2 million of net discrete tax expense, primarily related to gain on sale of Collins. Income tax expense for the six months ended April 30, 2023 was unfavorably impacted by $0.6 million of net discrete tax expense related to the results of an IRS examination.
Net income |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
2023 |
|
|||||
Net income |
|
$ |
15.2 |
|
|
|
7.0 |
% |
|
$ |
14.2 |
|
|
$ |
197.9 |
|
|
N/M |
|
$ |
0.7 |
|
Net income: Consolidated net income increased $1.0 million for the three months ended April 30, 2024 compared to the prior year quarter primarily due to the factors detailed above.
Consolidated net income increased $197.2 million for the six months ended April 30, 2024 compared to the prior year period primarily due to the factors detailed above.
21
Adjusted EBITDA |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Adjusted EBITDA |
|
$ |
37.5 |
|
|
|
-10.5 |
% |
|
$ |
41.9 |
|
|
$ |
68.0 |
|
|
|
7.6 |
% |
|
$ |
63.2 |
|
Consolidated Adjusted EBITDA decreased $4.4 million for the three months ended April 30, 2024 compared to the prior year quarter. Adjusted EBITDA for the three months ended April 30, 2023 included $10.2 million attributable to Collins. Excluding the impact of the Collins divestiture, Adjusted EBITDA increased $5.8 million, or 18.3% compared to the prior year quarter. The increase is primarily due to an increase in Adjusted EBITDA in the Specialty Vehicles segment, partially offset by a decrease in Adjusted EBITDA in the Recreational Vehicles segment.
Consolidated Adjusted EBITDA increased $4.8 million for the six months ended April 30, 2024 compared to the prior year period. Excluding the impact of the Collins divestiture, Adjusted EBITDA increased $15.0 million, or 28.3%, for the six months ended April 30, 2024 compared to the prior year period. The increase is primarily due to an increase in Adjusted EBITDA in the Specialty Vehicles segment, partially offset by a decrease in Adjusted EBITDA in the Recreational Vehicles segment.
Adjusted Net Income |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Adjusted Net Income |
|
$ |
20.9 |
|
|
|
0.5 |
% |
|
$ |
20.8 |
|
|
$ |
35.6 |
|
|
|
27.6 |
% |
|
$ |
27.9 |
|
Consolidated Adjusted Net Income increased $0.1 million for the three months ended April 30, 2024 compared to the prior year quarter, primarily due to an increase in Adjusted Net Income in the Specialty Vehicles segment, partially offset by a decrease in Adjusted Net Income in the Recreational Vehicles segment.
Consolidated Adjusted Net Income increased $7.7 million for the six months ended April 30, 2024 compared to the prior year period, primarily due to an increase in Adjusted Net Income in the Specialty Vehicles segment, partially offset by a decrease in Adjusted Net Income in the Recreational Vehicles segment.
Refer to Adjusted EBITDA and Adjusted Net Income section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q for a reconciliation of Net income to Adjusted EBITDA and Adjusted Net Income.
Specialty Vehicles Segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Net sales |
|
$ |
437.4 |
|
|
|
2.9 |
% |
|
$ |
425.0 |
|
|
$ |
854.6 |
|
|
|
9.1 |
% |
|
$ |
783.0 |
|
Adjusted EBITDA |
|
|
33.8 |
|
|
|
66.5 |
% |
|
|
20.3 |
|
|
|
60.0 |
|
|
|
134.4 |
% |
|
|
25.6 |
|
Adjusted EBITDA % of net sales |
|
|
7.7 |
% |
|
|
|
|
|
4.8 |
% |
|
|
7.0 |
% |
|
|
|
|
|
3.3 |
% |
||
Specialty Vehicles segment net sales increased $12.4 million for the three months ended April 30, 2024 compared to the prior year quarter. Net sales for the three months ended April 30, 2023 included $46.9 million attributable to Collins. Excluding the impact of the Collins divestiture, net sales increased $59.3 million, or 15.7% compared to the prior year quarter. The increase in net sales was primarily due to price realization and increased shipments of fire apparatus and ambulance units, partially offset by lower shipments of terminal trucks.
Specialty Vehicles segment net sales increased $71.6 million for the six months ended April 30, 2024 compared to the prior year period. Excluding the impact of the Collins divestiture, net sales increased $118.5 million, or 16.1%, for the six months ended April 30, 2024 compared to the prior year period. The increase in net sales was primarily due to price realization and increased shipments of fire apparatus and ambulance units, partially offset by lower shipments of terminal trucks.
Specialty Vehicles segment Adjusted EBITDA increased $13.5 million for the three months ended April 30, 2024 compared to the prior year quarter. Adjusted EBITDA for the three months ended April 30, 2023 included $10.2 million attributable to Collins. Excluding the impact of the Collins divestiture, Adjusted EBITDA increased $23.7 million, or 234.7% compared to the prior year quarter. The increase was primarily related to price realization and higher sales volume of fire apparatus and ambulance units, partially offset by inflationary pressures and lower sales volume of terminal trucks.
22
Specialty Vehicles segment Adjusted EBITDA increased $34.4 million for the six months ended April 30, 2024 compared to the prior year period. Excluding the impact of the Collins divestiture, Adjusted EBITDA increased $44.6 million, or 289.6%, for the six months ended April 30, 2024 compared to the prior year period. The increase was primarily related to price realization and higher sales volume of fire apparatus and ambulance units, partially offset by inflationary pressures and lower sales volume of terminal trucks.
Recreational Vehicles segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
2024 |
|
|
Change |
|
|
2023 |
|
|
2024 |
|
|
Change |
|
|
2023 |
|
||||||
Net sales |
|
$ |
179.7 |
|
|
|
-30.0 |
% |
|
$ |
256.6 |
|
|
$ |
349.1 |
|
|
|
-27.7 |
% |
|
$ |
482.6 |
|
Adjusted EBITDA |
|
|
12.1 |
|
|
|
-58.4 |
% |
|
|
29.1 |
|
|
|
23.7 |
|
|
|
-55.6 |
% |
|
|
53.4 |
|
Adjusted EBITDA % of net sales |
|
|
6.7 |
% |
|
|
|
|
|
11.3 |
% |
|
|
6.8 |
% |
|
|
|
|
|
11.1 |
% |
||
Recreational Vehicles segment net sales decreased $76.9 million for the three months ended April 30, 2024 compared to the prior year quarter. The decrease was primarily due to decreased unit shipments and increased discounting, partially offset by price realization.
Recreational Vehicles segment net sales decreased $133.5 million for the six months ended April 30, 2024 compared to the prior year period. The decrease was primarily due to decreased unit shipments and increased discounting, partially offset by price realization.
Recreational Vehicles segment Adjusted EBITDA decreased $17.0 million for the three months ended April 30, 2024 compared to the prior year quarter. The decrease was primarily due to lower unit shipments, increased discounting, and inflationary pressures, partially offset by price realization and cost reduction actions.
Recreational Vehicles segment Adjusted EBITDA decreased $29.7 million for the six months ended April 30, 2024 compared to the prior year period. The decrease was primarily due to lower unit shipments, increased discounting, and inflationary pressures, partially offset by price realization and cost reduction actions.
Backlog
Backlog represents orders received from dealers or directly from end customers. The following table presents a summary of our backlog by segment:
($ in millions) |
|
April 30, |
|
|
January 31, |
|
|
April 30, |
|
|||
Specialty Vehicles |
|
$ |
4,064.4 |
|
|
$ |
3,864.1 |
|
|
$ |
3,358.5 |
|
Recreational Vehicles |
|
|
274.7 |
|
|
|
376.7 |
|
|
|
495.0 |
|
Total Backlog |
|
$ |
4,339.1 |
|
|
$ |
4,240.8 |
|
|
$ |
3,853.5 |
|
Each of our segments has a backlog of new vehicle orders that generally extends out from six to twenty-four months in duration.
Orders from our dealers and end customers are evidenced by a contract or firm purchase order. These orders are reported in our backlog at the aggregate selling prices, net of discounts or allowances.
As of April 30, 2024, our backlog was $4,339.1 million compared to $3,853.5 million as of April 30, 2023, including $191.5 million related to Collins. The increase in consolidated backlog was due to an increase within the Specialty Vehicles segment, partially offset by a decrease within the Recreational Vehicles segment and the sale of Collins. The increase in Specialty Vehicles segment backlog was primarily the result of continued demand and strong order intake for fire apparatus and ambulance units, along with pricing actions, partially offset by a decrease in backlog related to the sale of Collins, a decrease in backlog related to the wind down of municipal transit operations, increased unit shipments, and lower order intake for terminal truck units. The decrease in Recreational Vehicles segment backlog was primarily the result of lower order intake in certain product categories, unit shipments against backlog, and order cancelations.
23
Liquidity and Capital Resources
General
Our primary requirements for liquidity and capital are working capital, the improvement and expansion of existing manufacturing facilities, debt service payments and general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and borrowings under our ABL credit facility.
We believe that our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy. However, we cannot assure that cash provided by operating activities and borrowings under the current revolving credit facility will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, and if availability under the 2021 ABL Facility is not sufficient due to the size of our borrowing base or other external factors, we may have to obtain additional financing. If additional capital is obtained by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain financial and other covenants that may significantly restrict our operations or may involve higher overall interest rates. We cannot assure that we will be able to obtain refinancing or additional financing on favorable terms or at all.
Cash Flow
The following table shows summary cash flows for the six months ended April 30, 2024 and April 30, 2023:
|
|
Six Months Ended |
|
|||||
($ in millions) |
|
2024 |
|
|
2023 |
|
||
Net cash (used in) provided by operating activities |
|
$ |
(29.6 |
) |
|
$ |
8.2 |
|
Net cash provided by (used in) investing activities |
|
|
301.9 |
|
|
|
(8.9 |
) |
Net cash used in financing activities |
|
|
(255.4 |
) |
|
|
(10.7 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
16.9 |
|
|
$ |
(11.4 |
) |
Net Cash (Used in) Provided by Operating Activities
Net cash used in operating activities for the six months ended April 30, 2024 was $29.6 million and was primarily related to the income tax payments associated with the sale of Collins, timing of accounts payable payments and lower receipts of customer advances. Net cash provided by operating activities for the six months ended April 30, 2023 was $8.2 million and was primarily related to higher receipts of customer advances and the timing of accounts payable payments, partially offset by increase in inventories and receivables, the payment of deferred payroll taxes related to the CARES Act and the payment of a legal settlement.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities for the six months ended April 30, 2024 was $301.9 million and was related to the cash received in connection with the sale of Collins, partially offset by cash paid for capital expenditures. Net cash used in investing activities for the six months ended April 30, 2023 was $8.9 million and was primarily related to the cash paid for capital expenditures during the period.
Net Cash Used in Financing Activities
Net cash used in financing activities for the six months ended April 30, 2024 was $255.4 million, which primarily consisted of share repurchases of $126.1 million and dividends paid of $185.5 million, partially offset by net proceeds from our 2021 ABL Facility of $70.0 million. Net cash used in financing activities for the six months ended April 30, 2023 was $10.7 million, which primarily consisted of dividends paid of $6.1 million, and payment of payroll taxes on vested share-based compensation awards of $4.6 million.
Dividends
Subject to legally available funds and the discretion of our board of directors, we expect to pay a quarterly cash dividend at the rate of $0.05 per share on our common stock. During the second quarter of fiscal year 2024, we paid a quarterly cash dividend of $3.1 million, in the amount of $0.05 per share of common stock, and additionally paid the previously declared special cash dividend of $178.1 million, in the amount of $3.00 per share of common stock.
Our dividend policy has certain risks and limitations, particularly with respect to liquidity, and we may not pay dividends according to our policy, or at all. We cannot assure that we will declare dividends or have sufficient funds to pay dividends on our common stock in the future.
24
Share Repurchases
During the three and six months ended April 30, 2024 the Company repurchased and retired 8,000,000 shares under the 2023 Share Repurchase Program at a cost of $126.1 million and at a price of approximately $15.76 per share, excluding fees and excise taxes.
ABL Facility
On April 13, 2021, the Company entered into the 2021 ABL Facility, a $550.0 million revolving credit agreement, with a syndicate of lenders. The 2021 ABL Facility provides for revolving loans and letters of credit in an aggregate amount of up to $550.0 million. The total credit facility is subject to a $30.0 million sublimit for swing line loans and a $35.0 million sublimit for letters of credit (plus up to an additional $20.0 million of letters of credit at the issuing bank’s discretion), along with certain borrowing base and other customary restrictions as defined in the 2021 ABL Agreement. The 2021 ABL Agreement allows for incremental facilities in an aggregate amount of up to $100.0 million, plus the excess, if any, of the borrowing base then in effect over total commitments then in effect. Any such incremental facilities are subject to receiving additional commitments from lenders and certain other customary conditions. The ABL Facility matures on April 13, 2026. We may prepay principal, in whole or in part, at any time without penalty.
On November 1, 2022, the Company amended the 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 an 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 the special cash dividend, which was declared in the first quarter of fiscal year 2024 and paid in the second quarter of fiscal year 2024, from the definition of Fixed Charges.
We were in compliance with all financial covenants under the ABL Agreement as of April 30, 2024. As of April 30, 2024, the Company’s availability under the ABL Facility was $280.3 million.
Refer to Note 9, Long-Term Debt, of the Notes to the Condensed Unaudited Consolidated Financial Statements for further details.
Adjusted EBITDA and Adjusted Net Income
In considering the financial performance of the business, management analyzes the primary financial performance measures of Adjusted EBITDA and Adjusted Net Income. Adjusted EBITDA is defined as net income or net loss for the relevant period before depreciation and amortization, interest expense, income taxes, and other items described below that we believe are not indicative of our ongoing operating performance. Adjusted Net Income is defined as net income or net loss, as adjusted for certain items described below that we believe are not indicative of our ongoing operating performance.
We believe Adjusted EBITDA and Adjusted Net Income are useful to investors because these performance measures are used by our management and the Company’s Board of Directors for measuring and reporting the Company’s financial performance and as a measurement in incentive compensation for management. These measures exclude the impact of certain items which we believe have less bearing on our core operating performance because they are items that are not needed or available to the Company’s managers in the daily activities of their businesses. We believe that the core operations of our business are those which can be affected by our management in a particular period through their resource allocation decisions that affect the underlying performance of our operations conducted during that period. We also believe that decisions utilizing Adjusted EBITDA and Adjusted Net Income allow for a more meaningful comparison of operating fundamentals between companies within our markets by eliminating the impact of capital structure and taxation differences between the companies.
To determine Adjusted EBITDA, we adjust net income or net loss for the following items: non-cash depreciation and amortization, interest expense, income taxes and other items as described below. Stock-based compensation expense and sponsor expense reimbursement are excluded from both Adjusted Net Income and Adjusted EBITDA because they represent expenses which cannot be impacted by our business managers. Stock-based compensation expense also reflects a cost which may obscure trends in our underlying vehicle businesses for a given period, due to the timing and nature of the equity awards. We also adjust for exceptional items, which are determined to be those that in management’s judgment are not indicative of our ongoing operating performance and need to be disclosed by virtue of their size, nature or incidence, and include non-cash items and items settled in cash. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.
25
Adjusted EBITDA and Adjusted Net Income have limitations as analytical tools. They are not presentations made in accordance with U.S. GAAP, are not measures of financial condition and should not be considered as an alternative to net income or net loss for the period determined in accordance with U.S. GAAP. The most directly comparable U.S. GAAP measure to Adjusted EBITDA and Adjusted Net Income is net income or net loss for the relevant period. Adjusted EBITDA and Adjusted Net Income are not necessarily comparable to similarly titled measures used by other companies. As a result, this performance measure should not be considered in isolation from, or as a substitute analysis for, our results of operations as determined in accordance with U.S. GAAP. Moreover, such measures do not reflect:
The following table reconciles Net income to Adjusted EBITDA for the periods presented:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
($ in millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
|
$ |
15.2 |
|
|
$ |
14.2 |
|
|
$ |
197.9 |
|
|
$ |
0.7 |
|
Depreciation and amortization |
|
|
6.5 |
|
|
|
6.5 |
|
|
|
13.0 |
|
|
|
13.4 |
|
Interest expense, net |
|
|
6.5 |
|
|
|
7.4 |
|
|
|
13.4 |
|
|
|
14.5 |
|
Provision for income taxes |
|
|
2.7 |
|
|
|
5.8 |
|
|
|
64.1 |
|
|
|
0.7 |
|
EBITDA |
|
|
30.9 |
|
|
|
33.9 |
|
|
|
288.4 |
|
|
|
29.3 |
|
Transaction expenses(a) |
|
|
1.4 |
|
|
|
0.2 |
|
|
|
6.4 |
|
|
|
0.4 |
|
Sponsor expense reimbursement(b) |
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.2 |
|
Restructuring (c) |
|
|
3.7 |
|
|
|
— |
|
|
|
4.5 |
|
|
|
— |
|
Restructuring related charges(d) |
|
|
— |
|
|
|
3.2 |
|
|
|
6.1 |
|
|
|
8.8 |
|
Impairment charges(e) |
|
|
— |
|
|
|
— |
|
|
|
12.6 |
|
|
|
— |
|
Stock-based compensation expense(f) |
|
|
3.0 |
|
|
|
1.6 |
|
|
|
5.9 |
|
|
|
7.5 |
|
Legal matters(g) |
|
|
— |
|
|
|
1.6 |
|
|
|
2.9 |
|
|
|
15.4 |
|
(Gain) Loss on sale of business(h) |
|
|
(1.5 |
) |
|
|
1.1 |
|
|
|
(259.0 |
) |
|
|
1.1 |
|
Other items (i) |
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
0.5 |
|
Adjusted EBITDA |
|
$ |
37.5 |
|
|
$ |
41.9 |
|
|
$ |
68.0 |
|
|
$ |
63.2 |
|
The following table reconciles Net income to Adjusted Net Income for the periods presented:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
($ in millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
|
$ |
15.2 |
|
|
$ |
14.2 |
|
|
$ |
197.9 |
|
|
$ |
0.7 |
|
Amortization of intangible assets |
|
|
0.6 |
|
|
|
1.0 |
|
|
|
1.2 |
|
|
|
2.4 |
|
Transaction expenses(a) |
|
|
1.4 |
|
|
|
0.2 |
|
|
|
6.4 |
|
|
|
0.4 |
|
Sponsor expense reimbursement(b) |
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.2 |
|
Restructuring (c) |
|
|
3.7 |
|
|
|
— |
|
|
|
4.5 |
|
|
|
— |
|
Restructuring related charges(d) |
|
|
— |
|
|
|
3.2 |
|
|
|
6.1 |
|
|
|
8.8 |
|
Impairment charges(e) |
|
|
— |
|
|
|
— |
|
|
|
12.6 |
|
|
|
— |
|
Stock-based compensation expense(f) |
|
|
3.0 |
|
|
|
1.6 |
|
|
|
5.9 |
|
|
|
7.5 |
|
Legal matters(g) |
|
|
— |
|
|
|
1.6 |
|
|
|
2.9 |
|
|
|
15.4 |
|
(Gain) Loss on sale of business(h) |
|
|
(1.5 |
) |
|
|
1.1 |
|
|
|
(259.0 |
) |
|
|
1.1 |
|
Other items(i) |
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
0.5 |
|
Income tax effect of adjustments(j) |
|
|
(1.5 |
) |
|
|
(2.4 |
) |
|
|
56.9 |
|
|
|
(9.1 |
) |
Adjusted Net Income |
|
$ |
20.9 |
|
|
$ |
20.8 |
|
|
$ |
35.6 |
|
|
$ |
27.9 |
|
26
Off-Balance Sheet Arrangements
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into or disclosed in our consolidated financial statements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures and capital resources. In addition, we do not engage in trading activities involving non-exchange traded contracts. Refer to Note 13, Commitments and Contingencies, of the Notes to Condensed Unaudited Consolidated Financial Statements for additional discussion.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates, assumptions and judgments that affect amounts reported in the consolidated financial statements and accompanying notes. Our disclosures of critical accounting policies are reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.
Recent Accounting Pronouncements
Refer to Note 1 of the Notes to Condensed Unaudited Consolidated Financial Statements for a discussion of the impact on our financial statements of new accounting standards.
27
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in our exposure to interest rate risk, foreign exchange risk and commodity price risk from the information provided in our Annual Report on Form 10-K filed on December 13, 2023.
Item 4. Controls and Procedures.
We maintain “disclosure controls and procedures”, as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2024.
During the quarter ended April 30, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
For a description of our legal proceedings, refer to Note 13, Commitments and Contingencies, of the Notes to Condensed Unaudited Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
Information about our risk factors is disclosed in “Item 1A. Risk Factors”, in our Annual Report on Form 10-K. There have been no material changes in our risk factors from those disclosed in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Common stock repurchases
The following table sets forth information with respect to purchases of common stock made by the Company during the second quarter of fiscal year 2024 (in millions, except share and per share amounts):
Period |
|
Total Number of |
|
|
Average Price |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) |
|
||||
February 1 - February 29, 2024 |
|
|
8,000,000 |
|
|
$ |
15.76 |
|
|
|
8,000,000 |
|
|
$ |
48.9 |
|
March 1 - March 31, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
8,000,000 |
|
|
$ |
48.9 |
|
April 1 - April 30, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
8,000,000 |
|
|
$ |
48.9 |
|
Total |
|
|
8,000,000 |
|
|
|
|
|
|
|
|
|
|
|||
(1) On June 1, 2023, the Company’s Board of Directors approved the authorization of a new share repurchase program that allows the repurchase of up to $175.0 million of the Company’s outstanding common stock. The share repurchase authorization expires in 24 months and gives management the flexibility to determine conditions under which shares may be purchased. During the second quarter of fiscal year 2024, the Company repurchased 8,000,000 shares under this repurchase program at a total cost of $126.1 million, at a price of $15.76 per share, excluding additional fees and taxes associated with the repurchase.
28
Dividend Policy
Subject to legally available funds and the discretion of our board of directors, we may or may not pay a quarterly cash dividend in the future on our common stock. During the second quarter of fiscal year 2024, the Company paid quarterly cash dividends of $3.1 million and the previously announced special cash dividend of $178.1 million. Our ability to pay dividends is dependent on our 2021 ABL Facility and board of directors approval. See our Annual Report on Form 10-K on “Item 1A. Risk Factors—Risks Related to Legal, Regulatory and Compliance Matters—We cannot assure that we will continue to declare dividends or have sufficient funds to pay dividends on our common stock.”
29
Item 6. Exhibits.
Exhibit Number |
|
Description |
10.1+* |
|
Offer Letter, dated March 6, 2024, between the Registrant and Amy Campbell. |
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS* |
|
Inline XBRL Instance Document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (formatted in iXBRL and contained within Exhibit 101) |
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
REV GROUP, INC. |
|
|
|
|
Date: June 5, 2024 |
By: |
/s/ Mark A. Skonieczny |
|
|
Mark A. Skonieczny |
|
|
President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
Date: June 5, 2024 |
By: |
/s/ Amy A. Campbell |
|
|
Amy A. Campbell |
|
|
Chief Financial Officer (Principal Financial Officer) |
|
|
|
Date: June 5, 2024 |
By: |
/s/ Joseph F. LaDue |
|
|
Joseph F. LaDue |
|
|
Chief Accounting Officer (Principal Accounting Officer) |
31