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)
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(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:
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Trading Symbol |
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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 June 5, 2023, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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3 |
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Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) |
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5 |
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Condensed Unaudited Consolidated Statements of Shareholders’ Equity |
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Notes to Condensed Unaudited Consolidated Financial Statements |
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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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29 |
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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, 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.
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.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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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 (loss) 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 Operations and Comprehensive Income (Loss)
(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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2023 |
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2022 |
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2023 |
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2022 |
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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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Research and development costs |
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Amortization of intangible assets |
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Restructuring costs |
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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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Loss on investment in China JV |
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— |
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— |
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Loss on sale of business |
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Income (loss) before provision (benefit) for income taxes |
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( |
) |
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( |
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Provision (benefit) for income taxes |
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( |
) |
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( |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Other comprehensive income (loss), net of tax |
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— |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Net income (loss) 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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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Dividends declared per common share |
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$ |
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$ |
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$ |
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$ |
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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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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance costs |
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Stock-based compensation expense |
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Deferred income taxes |
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Gain on sale of assets |
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( |
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( |
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Loss on investment in China JV |
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— |
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Loss on sale of business |
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Changes in operating assets and liabilities, net |
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( |
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Net cash provided by operating activities |
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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 assets |
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Proceeds from sale of China JV |
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— |
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Proceeds from sale of a business |
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— |
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Net cash used in investing activities |
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( |
) |
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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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( |
) |
Net cash used in financing activities |
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( |
) |
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( |
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Net decrease in cash and cash equivalents |
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( |
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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 (received) 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, 2022 |
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$ |
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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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( |
) |
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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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Issuance of restricted stock awards, net of forfeitures and employee tax withholdings on vested awards |
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— |
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( |
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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, 2023 |
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$ |
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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 stock units, net of employee tax withholdings |
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— |
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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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( |
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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, 2023 |
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$ |
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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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(Loss) Income |
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Equity |
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Balance, October 31, 2021 |
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$ |
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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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Exercise of common stock options |
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— |
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— |
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— |
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Vesting of restricted and performance stock units, net of employee tax withholdings |
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— |
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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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( |
) |
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( |
) |
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Other comprehensive income, net of tax |
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Repurchase and retirement of common stock |
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— |
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( |
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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, 2022 |
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$ |
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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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Other comprehensive income, net of tax |
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||||||
Repurchase and retirement of common stock |
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— |
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( |
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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, 2022 |
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
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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, 2022. 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
Related Party Transactions: During the three months ended April 30, 2023 and April 30, 2022, the Company did
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 vehicles through its direct sales force or dealer network. The Company also generates revenue through separate contracts that relate to the sale of after-market 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 Income (Loss) 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, and (iii) has been separated from our inventory, is ready for physical transfer to the customer, and when 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.
7
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 contract liabilities when the Company transfers control of the promised good or service. During the three months ended April 30, 2023, and April 30, 2022, the Company recognized $
Remaining Performance Obligations
As of April 30, 2023, the Company had unsatisfied performance obligations for non-cancellable contracts with an original duration greater than one year totaling $
Note 3. Leases
The Company leases certain administrative and production facilities and equipment under long-term, non-cancellable operating lease agreements. The Company determines if an arrangement is or contains a lease at contract inception and recognizes a ROU asset and a lease liability based on the present value of fixed, and certain index-based lease payments at the lease commencement date. Variable payments are excluded from the present value of lease payments and are recognized in the period in which the payment is made. Lease agreements may include options to extend or terminate the lease or purchase the underlying asset. In situations where the Company is reasonably certain to exercise such options, they are considered in determining the lease term and the associated option payments, or exercise price in the case of an option to purchase, are included in the measurement of the lease liabilities and ROU assets. The Company’s leases generally do not include restrictive financial or other covenants, or residual value guarantees. The Company generally uses its incremental borrowing rate as the discount rate for measuring its lease liabilities, as the Company cannot determine the interest rate implicit in the lease because it does not have access to certain lessor specific information. Lease expense is recognized on a straight-line basis over the lease term. The Company does not have significant finance leases.
During the three and six months ended April 30, 2023, the Company recognized total operating lease costs of $
As of April 30, 2023, future minimum operating lease payments due under ASC 842 are summarized by fiscal year in the table below:
Remaining six months of fiscal year 2023 |
|
$ |
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|
2024 |
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|
|
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2025 |
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|
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2026 |
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|
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2027 |
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|
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Thereafter |
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|
|
|
Total undiscounted lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
As of April 30, 2023, the weighted average remaining lease term and the weighted average discount rate for operating leases was
As of April 30, 2022, the weighted average remaining lease term and the weighted average discount rate for operating leases was
8
Note 4. Inventories
Inventories consisted of the following:
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April 30, |
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October 31, |
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||
Chassis |
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$ |
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$ |
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||
Raw materials & parts |
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Work in process |
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Finished products |
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Less: reserves |
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( |
) |
|
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( |
) |
Total inventories, net |
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$ |
|
|
$ |
|
||
Note 5. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
|
|
April 30, |
|
|
October 31, |
|
||
Land & land improvements |
|
$ |
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$ |
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||
Buildings & improvements |
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Machinery & equipment |
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Rental & used vehicles |
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Computer hardware & software |
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Office furniture & fixtures |
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Construction in process |
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||
Less: accumulated depreciation |
|
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( |
) |
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|
( |
) |
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, |
|
||
Fire & Emergency |
|
$ |
|
|
$ |
|
||
Commercial |
|
|
|
|
|
|
||
Recreation |
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|
|
|
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|
||
Total goodwill |
|
$ |
|
|
$ |
|
||
There was
Intangible assets (excluding goodwill) consisted of the following:
|
|
April 30, 2023 |
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|||||||||||||
|
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Weighted- |
|
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Gross |
|
|
Accumulated |
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Net |
|
||||
Finite-lived Customer Relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Indefinite-lived trade names |
|
|
|
|
|
|
|
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— |
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|
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|
|||
Total intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
9
|
|
October 31, 2022 |
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|||||||||||||
|
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Weighted- |
|
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Gross |
|
|
Accumulated |
|
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Net |
|
||||
Finite-lived Customer Relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Indefinite-lived trade names |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Amortization expense was $
Note 7. Divestiture Activities
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
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 $
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 F&E segment facilities within the United States.
The Company incurred certain restructuring and other related charges in connection with the decision to relocate its existing KME production facilities. For the three and six months ended April 30, 2023, the Company did
The pre-tax restructuring costs, by category and segment, are summarized below:
|
|
Employee Severance and Termination Benefits |
|
|
Contract |
|
|
Three Months Ended |
|
|||
Fire & Emergency |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Employee Severance and Termination Benefits |
|
|
Contract |
|
|
Six Months Ended |
|
|||
Fire & Emergency |
|
$ |
|
|
$ |
|
|
$ |
|
|||
As of October 31, 2022, this restructuring activity was substantially complete.
10
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 $
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.
The ABL Facility matures on
All revolving loans under the 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 ABL Facility have a first priority security interest in substantially all personal property assets and certain real property assets of the Company. The 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 ABL Agreement.
The ABL Agreement contains customary representations and warranties, affirmative and negative covenants, subject in certain cases to customary limitations, exceptions and exclusions. The ABL Agreement also contains certain customary events of default. The occurrence of an event of default under the ABL Agreement could result in the termination of the commitments under the ABL Facility and the acceleration of all outstanding borrowings under it. The Agreement requires the Company to maintain a minimum fixed charge coverage ratio of
The Company was in compliance with all financial covenants under the ABL Agreement as of April 30, 2023. As of April 30, 2023, the Company’s availability under the ABL Facility was $
The fair value of the ABL Facility approximated the book value on April 30, 2023 and October 31, 2022.
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.
11
Changes in the Company’s warranty liability consisted of the following:
|
|
Six Months Ended |
|
|||||
|
|
2023 |
|
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2022 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Warranty provisions |
|
|
|
|
|
|
||
Settlements made |
|
|
( |
) |
|
|
( |
) |
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 |
|
$ |
|
|
$ |
|
||
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. 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 outstanding stock options, performance stock units and restricted stock units and awards.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
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2023 |
|
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2022 |
|
|
2023 |
|
|
2022 |
|
||||
Basic weighted-average common shares outstanding |
|
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|
|
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|
|
|
|
|
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|
||||
Dilutive stock options |
|
|
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|
||||
Dilutive restricted stock awards |
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|
||||
Dilutive restricted stock units |
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|
||||
Dilutive performance stock units |
|
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|
|
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|
||||
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 |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
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 (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 $
12
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, 2023, 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.
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 ordinary course of business. Many legal proceedings involve highly complex issues which are subject to substantial uncertainties. 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 as an accrual in its financial statements the most likely estimate of the loss, or the low end of the range, if there is no one best estimate. The Company either discloses the amount of a possible loss or range of loss in excess of established accruals if estimable, or states that such an estimate cannot be made. Additionally, these claims are generally covered by third-party insurance, which for some insurance policies is 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 $
13
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
Guarantee Arrangements: The Company is party to multiple agreements whereby it guarantees indebtedness of others, including losses under loss pool agreements. The Company estimated that its maximum loss exposure under these contracts was $
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. The settlement agreement provides for a one-time cash payment of $
Note 14. Business Segment Information
The Company is organized into
Fire & Emergency: This segment includes Emergency One, KME, Ferrara, Spartan Emergency Response, American Emergency Vehicles, Leader Emergency Vehicles, Horton Emergency Vehicles and REV Group Orlando. These business units 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.
Commercial: This segment includes Collins Bus, ENC, Capacity and LayMor. Collins Bus manufactures, markets and distributes school buses, normally referred to as Type A school buses. ENC manufactures, markets and distributes municipal transit buses, primarily used for public transportation. Capacity manufactures, markets and distributes trucks used in terminal type operations, i.e., rail yards, warehouses, rail terminals and shipping terminals/ports. LayMor manufactures, markets and distributes industrial sweepers for both the commercial and rental markets.
14
Recreation: 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. 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, which is one of Goldshield’s primary customers.
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 office 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.
Selected financial information of the Company’s segments is as follows:
|
|
Three Months Ended April 30, 2023 |
|
|||||||||||||||||
|
|
Fire & |
|
|
Commercial |
|
|
Recreation |
|
|
Corporate, |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
||||
|
|
Three Months Ended April 30, 2022 |
|
|||||||||||||||||
|
|
Fire & |
|
|
Commercial |
|
|
Recreation |
|
|
Corporate, |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Adjusted EBITDA |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|||
|
|
Six Months Ended April 30, 2023 |
|
|||||||||||||||||
|
|
Fire & |
|
|
Commercial |
|
|
Recreation |
|
|
Corporate, |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
||||
|
|
Six Months Ended April 30, 2022 |
|
|||||||||||||||||
|
|
Fire & |
|
|
Commercial |
|
|
Recreation |
|
|
Corporate, |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Adjusted EBITDA |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|||
15
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 (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 (loss) 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.
Provided below is a reconciliation of segment Adjusted EBITDA to net income (loss):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Fire & Emergency Adjusted EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Commercial Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recreation Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate and Other Adjusted EBITDA |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
(Provision) benefit for income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Transaction expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Sponsor expense reimbursement |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Restructuring costs |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Restructuring related charges |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Legal matters |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on sale of business |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other items |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Note 15. Stock Repurchase Program
On September 2, 2021, the Company’s Board of Directors approved the authorization of a new share repurchase program that allowed the repurchase of up to $
During the three and six months ended April 30, 2023, the Company did
Note 16. Subsequent Events
Quarterly Dividend
On June 1, 2023, the Company’s Board of Directors declared a quarterly cash dividend in the amount of $
Share Repurchases
On June 1, 2023, the company’s Board of Directors approved the repurchase of up to $
16
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 and risk factors 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 14, 2022.
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 three segments: Fire and Emergency (“F&E”), Commercial, and Recreation. We provide customized vehicle solutions for applications, including essential needs for public services (ambulances, fire apparatus, school buses, 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. We believe that we hold the first, second and third market share positions, and approximately 91% of our net sales during the second quarter of fiscal year 2023 came from products where we believe we hold such share position.
Segments
We serve a diversified customer base primarily in the United States and Canada through the following segments:
Fire & Emergency – The F&E segment sells fire apparatus equipment under the Emergency One (“E-ONE”), Kovatch Mobile Equipment (“KME”), Ferrara, and Spartan Emergency Response (“Spartan ER”) which consists of Spartan Emergency Response, Smeal, Spartan Fire Chassis, and Ladder Tower brands, and ambulances under the American Emergency Vehicles (“AEV”), Horton Emergency Vehicles (“Horton”), Leader Emergency Vehicles (“Leader”), Road Rescue and Wheeled Coach brands. We believe we are the largest manufacturer by unit volume of fire and emergency vehicles in the United States and have one of the industry’s broadest portfolios of products including Type I ambulances (aluminum body mounted on a heavy truck-style chassis), Type II ambulances (van conversion ambulance), Type III ambulances (aluminum body mounted on a van-style chassis), pumpers (fire apparatus on a custom or commercial chassis with a water pump and water tank to extinguish fires), ladder trucks (fire apparatus with stainless steel or aluminum ladders), tanker trucks and rescue, aircraft rescue firefighting (“ARFF”), custom cabs & chassis and other vehicles. Each of our individual brands is distinctly positioned and targets certain price and feature points in the market such that dealers often carry, and customers often buy more than one REV Fire & Emergency product line.
Commercial – Our Commercial segment serves the bus market through the Collins Bus, Magellan and ENC brands. We serve the terminal truck market through the Capacity brand and the sweeper market through the LayMor brand. Our products in the Commercial segment include transit buses (large municipal buses where we build our own chassis and body), Type A school buses (small school bus built on commercial chassis), sweepers (three- and four-wheel versions used in road construction activities), and terminal trucks (specialized vehicles which move freight in warehouses, intermodal yards, distribution and fulfillment centers and ports). Within each market, we produce many customized configurations to address the diverse needs of our customers.
Recreation – Our Recreation segment serves the RV market through the following principal brands: American Coach, Fleetwood RV, Holiday Rambler, Renegade RV, Midwest Automotive Designs and Lance. 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, Pace Arrow, Discovery LXE, Renegade Verona, and Renegade XL, among others. Our products in the Recreation 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 commercial truck or van 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 Recreation segment also includes Goldshield Fiberglass, which produces a wide range of custom molded fiberglass products for the heavy-duty truck, RV and broader industrial markets.
17
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, inflationary pressures, employment levels, consumer confidence, municipal spending, municipal tax receipts, changes in interest rates, and instability 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 changes in interest rates, the 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 further reduce consumer demand and negatively impact our sales.
While less economically sensitive than the Recreation segment, the Fire & Emergency segment and the Commercial segment are also impacted by the overall economic environment. Local tax revenues are an important source of funding for fire and emergency response departments. Fire and emergency products and buses 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. In addition to commercial demand, local, state and federal tax revenues can be an important source of funding for many of our bus products including Type A school buses and transit buses. Volatility in tax revenues or availability of funds via budgetary appropriation can have a negative impact on the demand for these products.
A decrease in employment levels, consumer confidence or the availability of financing, or other adverse economic events, or the failure of actual demand for our products to meet our estimates, could negatively affect the demand for our products. Any decline in overall customer demand in markets in which we operate could have a material adverse effect on our operating performance.
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 school buses, RVs and sweepers are the lowest due to the colder weather and the relatively long time until the summer vacation season, and the fact that the school year is underway with municipalities and school bus contractors utilizing their existing fleets to transport student populations. 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, timing of government/municipal customer fiscal years, and the beginning of a new school year. 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 and commercial bus fleets, 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. We are also impacted by the change in production days in a given quarter. Historically, our first fiscal quarter includes the lowest number of production days.
Impact of Acquisitions
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.
We recognize acquired assets and liabilities at fair value. This includes the recognition of identified intangible assets and goodwill which, in the case of definite-life intangible assets, are then amortized over their expected useful lives, which typically results in an increase in amortization expense. In addition, assets acquired and liabilities assumed generally include tangible assets as well as contingent assets and liabilities.
18
Results of Operations
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
($ in millions) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net sales |
|
$ |
681.2 |
|
|
$ |
576.3 |
|
|
$ |
1,264.7 |
|
|
$ |
1,113.3 |
|
Gross profit |
|
|
82.5 |
|
|
|
57.1 |
|
|
|
140.4 |
|
|
|
112.9 |
|
Selling, general and administrative |
|
|
51.2 |
|
|
|
50.5 |
|
|
|
118.1 |
|
|
|
98.1 |
|
Restructuring |
|
|
— |
|
|
|
2.9 |
|
|
|
— |
|
|
|
6.6 |
|
Provision (benefit) for income taxes |
|
|
5.8 |
|
|
|
(0.4 |
) |
|
|
0.7 |
|
|
|
(2.2 |
) |
Net income (loss) |
|
|
14.2 |
|
|
|
(2.3 |
) |
|
|
0.7 |
|
|
|
(3.0 |
) |
Net income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.24 |
|
|
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
Diluted |
|
$ |
0.24 |
|
|
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
Dividends declared per common share |
|
$ |
0.05 |
|
|
$ |
0.05 |
|
|
$ |
0.10 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
41.9 |
|
|
$ |
23.8 |
|
|
$ |
63.2 |
|
|
$ |
42.1 |
|
Adjusted Net Income |
|
$ |
20.8 |
|
|
$ |
10.6 |
|
|
$ |
27.9 |
|
|
$ |
18.6 |
|
Net Sales |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Net sales |
|
$ |
681.2 |
|
|
|
18.2 |
% |
|
$ |
576.3 |
|
|
$ |
1,264.7 |
|
|
|
13.6 |
% |
|
$ |
1,113.3 |
|
Net Sales: Consolidated net sales increased $104.9 million for the three months ended April 30, 2023 compared to the prior year quarter, primarily due to an increase in net sales, including price realization, within all three segments. The increase within the F&E segment was due to increased shipments of fire apparatus and ambulance units, a favorable mix of ambulance units, and price realization. The increase within the Commercial segment was primarily due to higher shipments of school buses, municipal transit buses, terminal trucks and street sweepers, and price realization. The increase within the Recreation segment was primarily due to increased unit shipments and price realization.
Consolidated net sales increased $151.4 million for the six months ended April 30, 2023 compared to the prior year period, primarily due to increased net sales within all three segments. The increase within the F&E segment was primarily due to increased shipments of fire apparatus and ambulance units, a favorable mix of ambulance units, and price realization. The increase within the Commercial segment in net sales was primarily due to increased shipments of school buses, terminal trucks and street sweepers, and price realization. The increase within the Recreation segment was primarily due to increased unit shipments, and price realization.
Gross Profit |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Gross profit |
|
$ |
82.5 |
|
|
|
44.5 |
% |
|
$ |
57.1 |
|
|
$ |
140.4 |
|
|
|
24.4 |
% |
|
$ |
112.9 |
|
% of net sales |
|
|
12.1 |
% |
|
|
|
|
|
9.9 |
% |
|
|
11.1 |
% |
|
|
|
|
|
10.1 |
% |
||
Gross Profit: Consolidated gross profit increased $25.4 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase in gross profit was primarily attributable to higher net sales and gross margin within the F&E and Commercial segments, partially offset by lower gross margin in the Recreation segment and inflationary pressures across all segments.
Consolidated gross profit increased $27.5 million for the six months ended April 30, 2023 compared to the prior year period. The increase in gross profit was primarily attributable to higher net sales within the F&E, Commercial and Recreation segments, partially offset by supply chain constraints within certain segments and inflationary pressures across all segments.
19
Selling, General and Administrative |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Selling, general and administrative |
|
$ |
51.2 |
|
|
|
1.4 |
% |
|
$ |
50.5 |
|
|
$ |
118.1 |
|
|
|
20.4 |
% |
|
$ |
98.1 |
|
Selling, General and Administrative: Consolidated selling, general and administrative (“SG&A”) costs increased $0.7 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase in SG&A costs for the three months ended April 30, 2023 was primarily due to an increase in severance related costs and incentive compensation, partially offset by structural cost reductions.
Consolidated SG&A costs increased $20.0 million for the six months ended April 30, 2023 compared to the prior year period. The increase in SG&A costs for the six months ended April 30, 2023 was primarily due to an increase in legal costs associated with the legal case described in Note 13, Commitments and Contingencies of the Notes to the Condensed Unaudited Consolidated Financial Statements, and higher share-based compensation and severance related costs.
Restructuring |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Restructuring |
|
$ |
— |
|
|
|
-100.0 |
% |
|
$ |
2.9 |
|
|
$ |
— |
|
|
|
-100.0 |
% |
|
$ |
6.6 |
|
Restructuring: Consolidated restructuring costs decreased $2.9 million for the three months ended April 30, 2023 compared to the prior year quarter. Restructuring costs for the three months ended April 30, 2022 were related to the transition of KME branded fire apparatus production to other REV fire group facilities within the F&E segment. Refer to Note 8, Restructuring and Other Related Charges, of the Notes to the Condensed Unaudited Consolidated Financial Statements.
Consolidated restructuring costs decreased $6.6 million for the six months ended April 30, 2023 compared to the prior year period. Restructuring costs for the six months ended April 30, 2023 were related to the transition of KME branded fire apparatus production to other REV fire group facilities within the F&E segment. Refer to Note 8, Restructuring and Other Related Charges, of the Notes to Condensed Unaudited Consolidated Financial Statements.
Provision (benefit) for income taxes |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Provision (benefit) for income taxes |
|
$ |
5.8 |
|
|
|
1550.0 |
% |
|
$ |
(0.4 |
) |
|
$ |
0.7 |
|
|
|
131.8 |
% |
|
$ |
(2.2 |
) |
Provision (benefit) for Income Taxes: Consolidated income tax expense was $5.8 million for the three months ended April 30, 2023, or 29.0% of pre-tax income, compared to $0.4 million of benefit, or 14.8% of pre-tax loss, for the three months ended April 30, 2022. Income tax expenses 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. Income tax benefit for the three months ended April 30, 2022 was unfavorably impacted by $0.3 million of net discrete tax expense related to the loss of a tax attribute.
Consolidated income tax expense of $0.7 million for the six months ended April 30, 2023, or 50% of pre-tax income, compared to $2.2 million of benefit, or 42.3% of pretax loss, for the six months ended April 30, 2022. Income tax expenses for the six 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. Income tax benefit for the six months ended April 30, 2022 was favorably impacted by $0.9 million of net discrete tax benefit related primarily to stock-based compensation tax deductions.
Net income (loss) |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Net income (loss) |
|
$ |
14.2 |
|
|
|
717.4 |
% |
|
$ |
(2.3 |
) |
|
$ |
0.7 |
|
|
|
123.3 |
% |
|
$ |
(3.0 |
) |
Net income (loss): Consolidated net income increased $16.5 million for the three months ended April 30, 2023 compared to the prior year quarter primarily due to the factors detailed above.
Consolidated net income increased 3.7 million for the six months ended April 30, 2023 compared to the prior year period primarily due to the factors detailed above.
20
Adjusted EBITDA |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Adjusted EBITDA |
|
$ |
41.9 |
|
|
|
76.1 |
% |
|
$ |
23.8 |
|
|
$ |
63.2 |
|
|
|
50.1 |
% |
|
$ |
42.1 |
|
Consolidated Adjusted EBITDA increased $18.1 million for the three months ended April 30, 2023 compared to the prior year quarter, primarily due to an increase in Adjusted EBITDA in all three segments.
Consolidated Adjusted EBITDA increased $21.1 million for the six months ended April 30, 2023 compared to the prior year period, primarily due to an increase in Adjusted EBITDA across all segments.
Refer to Adjusted EBITDA and Adjusted Net Income section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q for a reconciliation of Net Income to Adjusted EBITDA and Adjusted Net Income.
Adjusted Net Income |
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Adjusted Net Income |
|
$ |
20.8 |
|
|
|
96.2 |
% |
|
$ |
10.6 |
|
|
$ |
27.9 |
|
|
|
50.0 |
% |
|
$ |
18.6 |
|
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 (Loss) to Adjusted EBITDA and Adjusted Net Income.
Fire & Emergency Segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Net sales |
|
$ |
283.1 |
|
|
|
15.6 |
% |
|
$ |
245.0 |
|
|
$ |
512.4 |
|
|
|
6.2 |
% |
|
$ |
482.4 |
|
Adjusted EBITDA |
|
|
9.6 |
|
|
|
536.4 |
% |
|
|
(2.2 |
) |
|
|
7.6 |
|
|
|
2000.0 |
% |
|
|
(0.4 |
) |
Adjusted EBITDA % of net sales |
|
|
3.4 |
% |
|
|
|
|
|
-0.9 |
% |
|
|
1.5 |
% |
|
|
|
|
|
-0.1 |
% |
||
F&E segment net sales increased $38.1 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase in net sales was primarily due to increased shipments of fire apparatus and ambulance units, a favorable mix of ambulance units, and price realization, partially offset by an unfavorable mix of fire apparatus.
F&E segment net sales increased $30.0 million for the six months ended April 30, 2023 compared to the prior year period. The increase in net sales was primarily due to increased shipments of fire apparatus and ambulance units, a favorable mix of ambulance units and price realization, partially offset by an unfavorable mix of fire apparatus.
F&E segment Adjusted EBITDA increased $11.8 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase was primarily related to higher sales volume of fire apparatus and ambulance units, a favorable mix of ambulance units, efficiencies related to productivity initiatives, an improved supply chain and labor markets, and price realization, partially offset by an unfavorable mix of fire apparatus, and inflationary pressure.
F&E segment Adjusted EBITDA increased $8.0 million for the six months ended April 30, 2023 compared to the prior year period. The increase was primarily related to higher sales volume of fire apparatus and ambulance units, a favorable mix of ambulance units, and price realization, partially offset by an unfavorable mix of fire apparatus, and inflationary pressure.
21
Commercial Segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Net sales |
|
$ |
141.9 |
|
|
|
56.4 |
% |
|
$ |
90.7 |
|
|
$ |
270.6 |
|
|
|
43.7 |
% |
|
$ |
188.3 |
|
Adjusted EBITDA |
|
|
10.7 |
|
|
|
143.2 |
% |
|
|
4.4 |
|
|
|
18.0 |
|
|
|
47.5 |
% |
|
|
12.2 |
|
Adjusted EBITDA % of net sales |
|
|
7.5 |
% |
|
|
|
|
|
4.9 |
% |
|
|
6.7 |
% |
|
|
|
|
|
6.5 |
% |
||
Commercial segment net sales increased $51.2 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase in net sales was primarily due to higher shipments of school buses, municipal transit buses, terminal trucks and street sweepers, and price realization, partially offset by an unfavorable mix of municipal transit buses.
Commercial segment net sales increased $82.3 million for the six months ended April 30, 2023 compared to the prior year period. The increase in net sales was primarily due to increased shipments of school buses, terminal trucks and street sweepers, and price realization, partially offset by decreased shipments and an unfavorable mix of municipal transit buses.
Commercial segment Adjusted EBITDA increased $6.3 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase was primarily the result of increased shipments of school buses, terminal trucks, and street sweepers, favorable mix of school buses, and price realization, partially offset by an unfavorable mix and supply chain challenges within municipal transit buses, and inflationary pressures.
Commercial segment Adjusted EBITDA increased $5.8 million for the six months ended April 30, 2023 compared to the prior year period. The increase was primarily the result of increased shipments of school buses and terminal trucks, favorable mix of school buses, and price realization, partially offset by an unfavorable mix and supply chain challenges within municipal transit buses, and inflationary pressures.
Recreation Segment
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
($ in millions) |
|
April 30, |
|
|
Change |
|
|
April 30, |
|
|
April 30, |
|
|
Change |
|
|
April 30, |
|
||||||
Net sales |
|
$ |
256.6 |
|
|
|
6.5 |
% |
|
$ |
241.0 |
|
|
$ |
482.6 |
|
|
|
8.8 |
% |
|
$ |
443.6 |
|
Adjusted EBITDA |
|
|
29.1 |
|
|
|
1.4 |
% |
|
|
28.7 |
|
|
|
53.4 |
|
|
|
16.6 |
% |
|
|
45.8 |
|
Adjusted EBITDA % of net sales |
|
|
11.3 |
% |
|
|
|
|
|
11.9 |
% |
|
|
11.1 |
% |
|
|
|
|
|
10.3 |
% |
||
Recreation segment net sales increased $15.6 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase was primarily due to increased unit shipments, and price realization, partially offset by an unfavorable mix of motorized units, and increased discounting.
Recreation segment net sales increased $39.0 million for the six months ended April 30, 2023 compared to the prior year period. The increase was primarily due to increased unit shipments, and price realization, partially offset by an unfavorable mix of motorized units, and increased discounting.
Recreation segment Adjusted EBITDA increased $0.4 million for the three months ended April 30, 2023 compared to the prior year quarter. The increase was primarily due to increased unit shipments, and price realization, partially offset by an unfavorable category mix, inflationary pressure, and increased discounting.
Recreation segment Adjusted EBITDA increased $7.6 million for the six months ended April 30, 2023 compared to the prior year period. The increase was primarily due to increased unit shipments, and price realization, partially offset by inflationary pressure, and increased discounting.
22
Backlog
Backlog represents orders received from dealers or directly from end customers. The following table presents a summary of our backlog by segment:
|
|
|
|
|
|
|
|
|
|
|||
($ in millions) |
|
April 30, |
|
|
January 31, |
|
|
April 30, |
|
|||
Fire & Emergency |
|
$ |
2,857.3 |
|
|
$ |
2,674.3 |
|
|
$ |
1,788.3 |
|
Commercial |
|
|
501.2 |
|
|
|
497.7 |
|
|
|
531.1 |
|
Recreation |
|
|
495.0 |
|
|
|
988.1 |
|
|
|
1,302.7 |
|
Total Backlog |
|
$ |
3,853.5 |
|
|
$ |
4,160.1 |
|
|
$ |
3,622.1 |
|
Each of our three 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 a firm purchase order. These orders are reported in our backlog at the aggregate selling prices, net of discounts or allowances. Backlog is comprised of orders that may be canceled, modified or otherwise changed in the future. As a result, backlog may not be indicative of future operating results.
As of April 30, 2023, our backlog was $3,853.5 million compared to $3,622.1 million as of April 30, 2022. The increase in consolidated backlog was primarily due to an increase within the F&E segment, partially offset by decreases within Commercial and Recreation segments. The increase in F&E segment backlog was primarily the result of continued demand and strong order intake for fire apparatus and ambulance units, and pricing actions. The decrease in Commercial segment backlog was primarily the result of increased unit production against backlog, and lower orders for school buses, terminal trucks, and municipal transit buses, partially offset by pricing actions. The decrease in Recreation segment backlog was primarily the result of increased unit production against backlog, an expected normalization of order intake and cancellations in certain product categories, partially offset by pricing actions.
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, cash and cash equivalents and borrowings under our ABL credit facility.
We believe that our sources of liquidity and capital will be sufficient to finance our continued operations, including working capital requirements, dividends, share repurchases and growth strategy for at least twelve months. However, we cannot assure you that cash provided by operating activities and borrowings under the current ABL 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 current 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.
Cash Flow
The following table shows summary cash flows for the six months ended April 30, 2023 and April 30, 2022:
|
|
Six Months Ended |
|
|||||
($ in millions) |
|
2023 |
|
|
2022 |
|
||
Net cash provided by operating activities |
|
$ |
8.2 |
|
|
$ |
27.4 |
|
Net cash used in investing activities |
|
|
(8.9 |
) |
|
|
(5.9 |
) |
Net cash used in financing activities |
|
|
(10.7 |
) |
|
|
(28.9 |
) |
Net decrease in cash and cash equivalents |
|
$ |
(11.4 |
) |
|
$ |
(7.4 |
) |
23
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the six months ended April 30, 2023 was $8.2 million and was primarily related to higher customer advances, timing of accounts payable payments, and net income recognized during the period, 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 operating activities for the six months ended April 30, 2022 was $27.4 million and was primarily related to the increase of customer advances and timing of payable payments, partially offset by a decrease in accounts receivable receipts, an increase in inventory, and a net loss recognized during the period.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended April 30, 2023 was $8.9 million and was related to the cash paid for capital expenditures, partially offset by cash received in connection with the sales of certain assets, the sale of a business within the F&E segment and the sale of an investment in the China JV. Net cash used in investing activities for the six months ended April 30, 2022 was $5.9 million and was related to the cash paid for capital expenditures, partially offset by cash received in connection with the sales of certain assets.
Net Cash Used in Financing Activities
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. Net cash used in financing activities for the six months ended April 30, 2022 was $28.9 million, which primarily consisted of share repurchases of $45.9 million, dividends paid of $6.4 million and the payment of taxes on vested share based payment awards and other financing activities of $4.6 million, partially offset by net proceeds from our 2021 ABL Facility for $28.0 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. 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 you that we will declare dividends or have sufficient funds to pay dividends on our common stock in the future. A quarterly cash dividend was declared in the amount of $.05 per share of common stock payable on July 14, 2023, to shareholders of record on June 30, 2023. During the second quarter of fiscal year 2023, we paid cash dividends of $3.0 million. To date during fiscal year 2023, we have paid cash dividends of $6.1 million.
ABL Facility
On April 13, 2021, the Company entered into a $550.0 million revolving credit agreement (the “ABL Facility” or “ABL Agreement”) with a syndicate of lenders. The 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 issuing bank’s discretion), along with certain borrowing base and other customary restrictions as defined in the ABL Agreement. The 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.
We were in compliance with all financial covenants under the ABL Agreement as of April 30, 2023. As of April 30, 2023, the Company’s availability under the ABL Facility was $305.5 million.
Refer to Note 9, Long-Term Debt, of the Notes to the Condensed Unaudited Consolidated Financial Statements for further details.
24
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 for the relevant period before depreciation and amortization, interest expense and income taxes, as adjusted for certain items described below that we believe are not indicative of our ongoing operating performance. Adjusted Net Income is defined as Net Income, 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 our Board of Directors for measuring and reporting our 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 our 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 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 it is an expense 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.
Adjusted EBITDA and Adjusted Net Income have limitations as analytical tools. These 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 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, you should not consider this performance measure 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 (Loss) to Adjusted EBITDA for the periods presented:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
($ in millions) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
14.2 |
|
|
$ |
(2.3 |
) |
|
$ |
0.7 |
|
|
$ |
(3.0 |
) |
Depreciation and amortization |
|
|
6.5 |
|
|
|
8.7 |
|
|
|
13.4 |
|
|
|
18.3 |
|
Interest expense, net |
|
|
7.4 |
|
|
|
3.5 |
|
|
|
14.5 |
|
|
|
6.9 |
|
Provision (benefit) for income taxes |
|
|
5.8 |
|
|
|
(0.4 |
) |
|
|
0.7 |
|
|
|
(2.2 |
) |
EBITDA |
|
|
33.9 |
|
|
|
9.5 |
|
|
|
29.3 |
|
|
|
20.0 |
|
Transaction expenses(a) |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.5 |
|
Sponsor expense reimbursement(b) |
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.1 |
|
Restructuring costs(c) |
|
|
— |
|
|
|
2.9 |
|
|
|
— |
|
|
|
6.6 |
|
Restructuring related charges(d) |
|
|
3.2 |
|
|
|
4.4 |
|
|
|
8.8 |
|
|
|
5.1 |
|
Stock-based compensation expense(e) |
|
|
1.6 |
|
|
|
2.2 |
|
|
|
7.5 |
|
|
|
4.5 |
|
Legal matters(f) |
|
|
1.6 |
|
|
|
4.4 |
|
|
|
15.4 |
|
|
|
5.2 |
|
Loss on sale of business(g) |
|
|
1.1 |
|
|
|
0.1 |
|
|
|
1.1 |
|
|
|
0.1 |
|
Other items(h) |
|
|
0.3 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
41.9 |
|
|
$ |
23.8 |
|
|
$ |
63.2 |
|
|
$ |
42.1 |
|
25
The following table reconciles Net Income (Loss) to Adjusted Net Income for the periods presented:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
($ in millions) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
14.2 |
|
|
$ |
(2.3 |
) |
|
$ |
0.7 |
|
|
$ |
(3.0 |
) |
Amortization of intangible assets |
|
|
1.0 |
|
|
|
2.0 |
|
|
|
2.4 |
|
|
|
4.4 |
|
Transaction expenses(a) |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.5 |
|
Sponsor expense reimbursement(b) |
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.1 |
|
Restructuring costs(c) |
|
|
— |
|
|
|
2.9 |
|
|
|
— |
|
|
|
6.6 |
|
Restructuring related charges(d) |
|
|
3.2 |
|
|
|
4.4 |
|
|
|
8.8 |
|
|
|
5.1 |
|
Stock-based compensation expense(e) |
|
|
1.6 |
|
|
|
2.2 |
|
|
|
7.5 |
|
|
|
4.5 |
|
Legal matters(f) |
|
|
1.6 |
|
|
|
4.4 |
|
|
|
15.4 |
|
|
|
5.2 |
|
Loss on sale of business(g) |
|
|
1.1 |
|
|
|
0.1 |
|
|
|
1.1 |
|
|
|
0.1 |
|
Other items(h) |
|
|
0.3 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
Accelerated depreciation on certain property, plant, and equipment (i) |
|
|
— |
|
|
|
0.9 |
|
|
|
— |
|
|
|
2.3 |
|
Income tax effect of adjustments(j) |
|
|
(2.4 |
) |
|
|
(4.3 |
) |
|
|
(9.1 |
) |
|
|
(7.2 |
) |
Adjusted Net Income |
|
$ |
20.8 |
|
|
$ |
10.6 |
|
|
$ |
27.9 |
|
|
$ |
18.6 |
|
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, 2022.
Recent Accounting Pronouncements
There are no new accounting standards that will have a material impact on the Company's Condensed Consolidated Financial Statements
26
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 14, 2022.
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 Interim 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 Interim 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 Interim Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2023.
During the quarter ended April 30, 2023, 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 are no other 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
There were no purchases of common stock made by the Company during the second quarter of fiscal year 2023.
On June 1, 2023, the company’s board of directors approved the repurchase of up to $175.0 million of the company’s outstanding common stock. This new authorization replaces the previous $150.0 million repurchase program (which was terminated by the board of directors in connections with the new authorization) under which approximately $73.7 million of the company’s common stock had been repurchased since its authorization in September 2021. The new share repurchase authorization expires in 24 months and gives management flexibility to determine conditions under which the shares may be purchased.
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 2023, the Company paid cash dividends of $3.0 million. During the fiscal year 2023, the Company paid cash dividends of $6.1 million. Our ability to pay dividends is dependent on our ABL loan 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 you that we will continue to declare dividends or have sufficient funds to pay dividends on our common stock.”
27
Item 6. Exhibits.
Exhibit Number |
|
Description |
10.1 |
|
|
10.2* |
|
Employment Agreement, dated May 17, 2023, between the Registrant and Mark Skonieczny |
10.3* |
|
|
10.4* |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS* |
|
Inline XBRL Instance Document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (formatted in iXBRL and contained within Exhibit 101) |
* Filed herewith.
28
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 8, 2023 |
By: |
/s/ Mark A. Skonieczny |
|
|
Mark A. Skonieczny |
|
|
Chief Executive Officer Interim Chief Financial Officer (Principal Executive and Financial Officer) |
|
|
|
Date: June 8, 2023 |
By: |
/s/ Joseph F. LaDue |
|
|
Joseph F. LaDue |
|
|
Chief Accounting Officer (Principal Accounting Officer) |
29