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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37999

 

REV Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

26-3013415

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

245 South Executive Drive, Suite 100

Brookfield, WI

53005

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (414) 290-0190

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock ($0.001 Par Value)

REVG

New York Stock Exchange

 

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.    Yes      No  ☐

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).    Yes  ☒    No  ☐

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

Accelerated filer

Non-accelerated filer

Small reporting company

Emerging growth company

 

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 March 7, 2022, the registrant had 62,941,894 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 


 

 

Table of Contents

 

 

 

 

Page

Cautionary Statement About Forward-Looking Statements

 

3

Website and Social Media Disclosure

 

3

PART I.

FINANCIAL INFORMATION

 

4

Item 1.

Financial Statements

 

4

 

Condensed Unaudited Consolidated Balance Sheets

 

4

 

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss

 

5

 

Condensed Unaudited Consolidated Statements of Cash Flows

 

6

 

Condensed Unaudited Consolidated Statements of Shareholders’ Equity

 

7

 

Notes to Condensed Unaudited Consolidated Financial Statements

 

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4.

Controls and Procedures

 

30

PART II.

OTHER INFORMATION

 

30

Item 1.

Legal Proceedings

 

30

Item 1A.

Risk Factors

 

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

Item 6.

Exhibits

 

31

Signatures

 

32

 

 

2


 

 

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, and include our segment net sales and other expectations described under “Overview” below, 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 cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to mergers and acquisitions activities and the overall impact of the novel coronavirus, known as "COVID-19", pandemic on the Company’s business, results of operations and financial condition. 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, except as required by law.

Website and Social Media Disclosure

We use our website (www.revgroup.com) and corporate Twitter account (@revgroupinc) as routine channels of distribution of 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 SEC Regulation FD. Accordingly, investors should monitor our website and our corporate Twitter account 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. 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.

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(Dollars in millions, except share amounts)

 

 

 

 

 

 

 

 

(Audited)

 

 

 

January 31,

2022

 

 

October 31,

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13.9

 

 

$

13.3

 

Accounts receivable, net

 

 

249.8

 

 

 

213.3

 

Inventories, net

 

 

527.6

 

 

 

481.7

 

Other current assets

 

 

25.6

 

 

 

52.7

 

Total current assets

 

 

816.9

 

 

 

761.0

 

Property, plant and equipment, net

 

 

154.9

 

 

 

157.6

 

Goodwill

 

 

157.3

 

 

 

157.3

 

Intangible assets, net

 

 

123.9

 

 

 

126.3

 

Right of use assets

 

 

22.4

 

 

 

19.1

 

Other long-term assets

 

 

16.9

 

 

 

17.0

 

Total assets

 

$

1,292.3

 

 

$

1,238.3

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

137.1

 

 

$

116.2

 

Customer advances

 

 

252.7

 

 

 

210.6

 

Accrued warranty

 

 

21.7

 

 

 

22.3

 

Short-term lease obligations

 

 

7.9

 

 

 

7.1

 

Other current liabilities

 

 

66.0

 

 

 

80.8

 

Total current liabilities

 

 

485.4

 

 

 

437.0

 

Long-term debt

 

 

256.0

 

 

 

215.0

 

Deferred income taxes

 

 

23.1

 

 

 

21.4

 

Long-term lease obligations

 

 

15.5

 

 

 

12.8

 

Other long-term liabilities

 

 

24.2

 

 

 

33.3

 

Total liabilities

 

 

804.2

 

 

 

719.5

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

Preferred stock ($.001 par value, 95,000,000 shares authorized; none issued or outstanding)

 

 

 

 

 

 

Common stock ($.001 par value, 605,000,000 shares authorized; 63,124,016

   and 64,584,291 shares issued and outstanding, respectively)

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

475.3

 

 

 

502.1

 

Retained earnings

 

 

12.7

 

 

 

16.7

 

Accumulated other comprehensive loss

 

 

 

 

 

(0.1

)

Total shareholders' equity

 

 

488.1

 

 

 

518.8

 

Total liabilities and shareholders' equity

 

$

1,292.3

 

 

$

1,238.3

 

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

4


 

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss

(Dollars in millions, except per share amounts)

 

 

 

Three Months Ended

January 31,

 

 

 

2022

 

 

2021

 

Net sales

 

$

537.0

 

 

$

554.0

 

Cost of sales

 

 

481.2

 

 

 

492.3

 

Gross profit

 

 

55.8

 

 

 

61.7

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

47.6

 

 

 

47.1

 

Research and development costs

 

 

1.2

 

 

 

1.3

 

Amortization of intangible assets

 

 

2.4

 

 

 

2.6

 

Restructuring

 

 

3.7

 

 

 

1.0

 

Total operating expenses

 

 

54.9

 

 

 

52.0

 

Operating income

 

 

0.9

 

 

 

9.7

 

Interest expense, net

 

 

3.4

 

 

 

5.5

 

Loss on business held for sale

 

 

 

 

 

3.8

 

Loss on acquisition of business

 

 

 

 

 

0.4

 

Loss before benefit for income taxes

 

 

(2.5

)

 

 

 

Benefit for income taxes

 

 

(1.8

)

 

 

 

Net loss

 

$

(0.7

)

 

$

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

 

0.1

 

 

 

 

Comprehensive loss

 

$

(0.6

)

 

$

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

$

 

Diluted

 

$

(0.01

)

 

$

 

Dividends declared per common share

 

$

0.05

 

 

$

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

5


 

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(Dollars in millions)

 

 

 

Three Months Ended

January 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(0.7

)

 

$

 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9.6

 

 

 

8.6

 

Amortization of debt issuance costs

 

 

0.4

 

 

 

0.6

 

Stock-based compensation expense

 

 

2.3

 

 

 

1.9

 

Deferred income taxes

 

 

1.7

 

 

 

1.3

 

Gain on sale of assets

 

 

(0.1

)

 

 

(1.5

)

Loss on business held for sale

 

 

 

 

 

3.8

 

Loss on acquisition of business

 

 

 

 

 

0.4

 

Changes in operating assets and liabilities, net

 

 

(16.9

)

 

 

(13.2

)

Net cash (used in) provided by operating activities

 

 

(3.7

)

 

 

1.9

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(4.5

)

 

 

(2.9

)

Proceeds from sale of assets

 

 

0.1

 

 

 

10.0

 

Net cash (used in) provided by investing activities

 

 

(4.4

)

 

 

7.1

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds (repayments) from borrowings on revolving credit facility

 

 

41.0

 

 

 

(10.0

)

Repayment of long-term debt

 

 

 

 

 

(0.4

)

Payment of dividends

 

 

(3.3

)

 

 

 

Repurchase and retirement of common stock

 

 

(24.4

)

 

 

 

Other financing activities

 

 

(4.6

)

 

 

(0.9

)

Net cash provided by (used in) financing activities

 

 

8.7

 

 

 

(11.3

)

Net increase (decrease) in cash and cash equivalents

 

 

0.6

 

 

 

(2.3

)

Cash and cash equivalents, beginning of period

 

 

13.3

 

 

 

11.4

 

Cash and cash equivalents, end of period

 

$

13.9

 

 

$

9.1

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid (received) for:

 

 

 

 

 

 

 

 

Interest

 

$

2.8

 

 

$

4.7

 

Income taxes, net of refunds

 

$

(16.3

)

 

$

(11.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

 

 

6


 

 

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Shareholders’ Equity

(Dollars in millions, except share amounts)

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Amount

 

 

 

 

# Shares

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance, October 31, 2021

 

$

0.1

 

 

 

 

 

64,584,291 Sh.

 

 

$

502.1

 

 

$

16.7

 

 

$

(0.1

)

 

$

518.8

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.7

)

 

 

 

 

 

 

(0.7

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

2.3

 

 

 

 

 

 

 

 

 

 

 

2.3

 

Exercise of common stock options

 

 

 

 

 

 

 

2,400 Sh.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Vesting of restricted and performance stock units, net of forfeitures and employee tax withholdings

 

 

 

 

 

 

 

274,485 Sh.

 

 

 

(2.1

)

 

 

 

 

 

 

 

 

 

 

(2.1

)

Issuance of restricted stock awards, net of forfeitures and employee tax withholdings on vested awards

 

 

 

 

 

 

 

 

242,999 Sh.

 

 

 

(2.6

)

 

 

 

 

 

 

 

 

 

 

(2.6

)

Other comprehensive gain, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Repurchase and retirement of common stock

 

 

 

 

 

 

 

(1,980,159 Sh.

)

 

 

(24.4

)

 

 

 

 

 

 

 

 

 

 

(24.4

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.3

)

 

 

 

 

 

 

(3.3

)

Balance, January 31, 2022

 

$

0.1

 

 

 

 

 

63,124,016 Sh.

 

 

$

475.3

 

 

$

12.7

 

 

$

 

 

$

488.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Amount

 

 

 

 

# Shares

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, October 31, 2020

 

$

0.1

 

 

 

 

 

63,403,326 Sh.

 

 

$

496.1

 

 

$

(21.1

)

 

$

(2.8

)

 

$

472.3

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

1.9

 

 

 

 

 

 

 

 

 

 

 

1.9

 

Exercise of common stock options

 

 

 

 

 

 

 

6,000 Sh.

 

 

 

0.2

 

 

 

 

 

 

 

 

 

 

 

0.2

 

Vesting and issuance of restricted stock units and awards, net of forfeitures and employee tax withholdings

 

 

 

 

 

 

 

901,313 Sh.

 

 

 

(1.1

)

 

 

 

 

 

 

 

 

 

 

(1.1

)

Settlement of liability classified award

 

 

 

 

 

 

 

169,142 Sh.

 

 

 

2.0

 

 

 

 

 

 

 

 

 

 

 

2.0

 

Balance, January 31, 2021

 

$

0.1

 

 

 

 

 

64,479,781 Sh.

 

 

$

499.1

 

 

$

(21.1

)

 

$

(2.8

)

 

$

475.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

 

7


 

 

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 unaudited Condensed 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 unaudited Condensed 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 unaudited Condensed 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 year ended October 31, 2021. The interim results are not necessarily indicative of results for the full year.

Equity Sponsor: The Company’s primary equity holders are funds and an investment vehicle associated with AIP CF IV, LLC, which the Company collectively refers to as “American Industrial Partners,” “AIP” or “Sponsor” and which indirectly own approximately 43.7% of REV Group’s voting equity as of January 31, 2022. AIP is an operations and engineering-focused private equity firm headquartered in New York, New York.

Related Party Transactions: During the three months ended January 31, 2022, the Company reimbursed expenses of its primary equity holder of $0.1 million. During the three months ended January 31, 2021, the Company reimbursed expenses of its primary equity holder of $0.2 million. These expenses are included in selling, general and administrative expenses in the Company’s Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss.

Recent Accounting Pronouncements

Accounting Pronouncement Recently Adopted

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), “Simplifying the Accounting for Income Taxes”. The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intra-period tax allocation and calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under U.S. GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company adopted ASU 2019-12 as of November 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements.

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 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 vehicles through its direct sales force or 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 Operations and Comprehensive Loss when incurred or when the related product revenue is recognized, whichever is earlier. Periodically, certain customers request bill and hold transactions. In such cases, revenue is not recognized until

8


 

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, and (iii) has been separated from our inventory and is ready for physical transfer to the 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 when received. The corresponding performance obligations are generally satisfied within one year of the contract inception. During the three months ended January 31, 2022 and January 31, 2021, the Company recognized $31.1 million and $51.4 million, respectively, of revenue that was included in the customer advance balances of $210.6 million and $170.1 million as of October 31, 2021 and October 31, 2020, respectively. The Company’s payment terms do not include a significant financing component and the Company does not have significant contract assets.

Note 3. Leases

During the three months ended January 31, 2022 and January 31, 2021, the Company recognized total operating lease costs of $2.0 million and $2.3 million, respectively, and paid cash of $2.3 million and $2.4 million, respectively, for amounts included in the measurement of lease liabilities.

At January 31, 2022, future minimum operating lease payments due under ASC 842 are summarized by fiscal year in the table below:

 

Remaining nine months of fiscal year 2022

 

$

6.9

 

2023

 

 

6.0

 

2024

 

 

3.8

 

2025

 

 

2.4

 

2026

 

 

1.3

 

Thereafter

 

 

6.7

 

Total undiscounted lease payments

 

 

27.1

 

Less: imputed interest

 

 

(3.7

)

Total lease liabilities

 

 

23.4

 

 

 

 

 

 

As of January 31, 2022, the weighted average remaining lease term and the weighted average discount rate for operating leases was 5.6 years and 5.1%, respectively.

 

As of January 31, 2021, the weighted average remaining lease term and the weighted average discount rate for operating leases was 4.4 years and 5.0%, respectively.

 

 

 

9


 

 

Note 4. Inventories

Inventories consisted of the following:

 

 

 

January 31,

2022

 

 

October 31,

2021

 

Chassis

 

$

62.7

 

 

$

33.5

 

Raw materials & parts

 

 

206.8

 

 

 

188.0

 

Work in process

 

 

244.4

 

 

 

231.0

 

Finished products

 

 

23.5

 

 

 

39.4

 

 

 

 

537.4

 

 

 

491.9

 

Less: reserves

 

 

(9.8

)

 

 

(10.2

)

Total inventories, net

 

$

527.6

 

 

$

481.7

 

 

Note 5. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

 

 

 

January 31,

2022

 

 

October 31,

2021

 

Land & land improvements

 

$

19.5

 

 

$

19.1

 

Buildings & improvements

 

 

109.0

 

 

 

107.5

 

Machinery & equipment

 

 

91.2

 

 

 

88.6

 

Rental & used vehicles

 

 

2.5

 

 

 

2.5

 

Computer hardware & software

 

 

59.1

 

 

 

58.9

 

Office furniture & fixtures

 

 

4.3

 

 

 

4.3

 

Construction in process

 

 

7.5

 

 

 

7.8

 

 

 

 

293.1

 

 

 

288.7

 

Less: accumulated depreciation

 

 

(138.2

)

 

 

(131.1

)

Total property, plant and equipment, net

 

$

154.9

 

 

$

157.6

 

Depreciation expense was $7.2 million and $6.1 million for the three months ended January 31, 2022, and January 31, 2021, respectively.  

Note 6. Goodwill and Intangible Assets

The table below represents goodwill by segment:

 

 

 

January 31,

2022

 

 

October 31,

2021

 

Fire & Emergency

 

$

88.6

 

 

$

88.6

 

Commercial

 

 

26.2

 

 

 

26.2

 

Recreation

 

 

42.5

 

 

 

42.5

 

Total goodwill

 

$

157.3

 

 

$

157.3

 

 

There was no change in the net carrying value of goodwill for the three months ended January 31, 2022 and January 31, 2021.

 

 

Intangible assets (excluding goodwill) consisted of the following:

 

 

 

January 31, 2022

 

 

 

Weighted-

Average Life

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

Finite-lived Customer Relationships

 

 

8.0

 

 

$

58.4

 

 

$

(41.9

)

 

$

16.5

 

Indefinite-lived trade names

 

 

 

 

 

 

107.4

 

 

 

 

 

 

107.4

 

Total intangible assets, net

 

 

 

 

 

$

165.8

 

 

$

(41.9

)

 

$

123.9

 

10


 

 

 

 

 

October 31, 2021

 

 

 

Weighted-

Average Life

 

 

Gross

 

 

Accumulated

Amortization

 

 

Net

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

8.0

 

 

$

66.2

 

 

$

(47.3

)

 

$

18.9

 

Non-compete agreements

 

 

5.0

 

 

 

2.0

 

 

 

(2.0

)

 

 

 

 

 

 

 

 

 

 

68.2

 

 

 

(49.3

)

 

 

18.9

 

Indefinite-lived trade names

 

 

 

 

 

 

107.4

 

 

 

 

 

 

107.4

 

Total intangible assets, net

 

 

 

 

 

$

175.6

 

 

$

(49.3

)

 

$

126.3

 

Amortization expense was $2.4 million and $2.5 million for the three months ended January 31, 2022, and January 31, 2021, respectively. As of January 31, 2022, fully amortized intangible assets and the related accumulated amortization related to Customer Relationships and Non-compete agreements were written off.

Note 7. Divestiture Activities

In the first quarter of fiscal year 2021, in connection with a strategic review of the product portfolio, the Company made the decision to divest of its REV Brazil business. The assets and liabilities to be disposed of in connection with this transaction met the held for sale criteria as of January 31, 2021. The carrying value of the net assets held for sale, inclusive of the cumulative translation adjustment balance attributable to this business, was greater than their fair value, less costs to sell, resulting in a loss of $3.8 million, which is included in the Condensed Unaudited Consolidated Statements of Operations and Comprehensive Loss for the three months ended January 31, 2021. The REV Brazil business is reported as part of the Fire & Emergency segment.

The Company previously made an initial investment in its China joint venture, Anhui Chery REV Specialty Vehicle Technology Co., Ltd (“China JV”), in exchange for 10% equity interest in its China JV. The Company recorded this investment under the equity method of accounting. The Company’s investment in the China JV also includes an interest-bearing loan.

During the fourth quarter of fiscal year 2021, the Company made the strategic decision to exit its interests in the China JV and began soliciting offers to sell the investment and settle the loan. In connection with this decision, the Company recorded a loss of $6.2 million, which represents the difference between the carrying value of the investment and loan and the estimated proceeds to be received upon sale and settlement, respectively. This amount was recorded as a non-operating loss within our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended October 31, 2021. The Company expects to complete the sale of the investment during the second quarter of fiscal year 2022.

 

 

 

11


 

 

Note 8. Restructuring and Other Related Charges

In September 2021, the Company announced that it would close its Kovatch Mobile Equipment (“KME”) production facilities located in Nesquehoning, PA and Roanoke, VA and relocate the production to other existing Fire and Emergency (“F&E”) segment facilities within the U.S. The production facilities are being closed to better align our manufacturing footprint, to access our broad operational expertise and resources, enhance quality and improve delivery times by leveraging the advanced manufacturing capabilities that we have throughout the F&E segment. The Company plans to fully shift operations within fiscal year 2022. In the first quarter of fiscal year 2022, the Company recorded restructuring charges of $3.7 million. In the first quarter of fiscal year 2022, the Company incurred additional charges of $2.1 million related to this restructuring action consisting of $1.4 million of accelerated depreciation and $0.7 million of other restructuring related charges.

The Company expects to incur additional restructuring costs between $2.0 to $5.0 million and restructuring related and other charges of $2.0 and $3.0 million related to this activity.

Pre-tax restructuring charges were as follows:

 

 

 

Employee Severance and Termination Benefits

 

 

Contract

termination and other costs

 

 

Asset Impairments

 

 

Three Months Ended

January 31, 2022

 

Fire & Emergency

 

$

2.8

 

 

$

0.9

 

 

$

 

 

$

3.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in the Company’s restructuring reserves related to the initiatives announced during fiscal year 2021 were as follows:

 

 

 

Employee Severance and Termination Benefits

 

 

Contract

termination and other costs

 

 

Asset Impairment

 

 

Total

 

Balance at beginning of the period

 

$

1.0

 

 

$

 

 

$

 

 

$

1.0

 

Restructuring provision

 

 

2.8

 

 

 

0.9