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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended April 30, 2024

OR

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

Commission File Number: 001-37999

 

REV Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

26-3013415

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

245 South Executive Drive, Suite 100

Brookfield, WI

53005

(Address of principal executive offices)

(Zip Code)

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

 

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

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock ($0.001 Par Value)

REVG

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Small reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of May 29, 2024, the registrant had 51,914,477 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

Page

Cautionary Statement About Forward-Looking Statements

 

2

Website and Social Media Disclosure

 

2

PART I.

FINANCIAL INFORMATION

 

3

Item 1.

Financial Statements

 

3

Condensed Unaudited Consolidated Balance Sheets

 

3

Condensed Unaudited Consolidated Statements of Income and Comprehensive Income

 

4

Condensed Unaudited Consolidated Statements of Cash Flows

 

5

Condensed Unaudited Consolidated Statements of Shareholders’ Equity

 

6

Notes to Condensed Unaudited Consolidated Financial Statements

 

7

Item 2.

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

 

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

28

Item 4.

Controls and Procedures

 

28

PART II.

OTHER INFORMATION

 

28

Item 1.

Legal Proceedings

 

28

Item 1A.

Risk Factors

 

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

Item 6.

Exhibits

 

30

Signatures

 

31

 

 

Cautionary Statement About Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “aim” and other similar expressions, although not all forward-looking statements contain these identifying words. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increases in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis and other key component parts, sales order cancelations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, and integration of operations relating to mergers and acquisitions activities. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”). We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this Form 10-Q or to reflect any changes in expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based.

Website and Social Media Disclosure

We use our website (www.revgroup.com) and corporate social media accounts including X (previously known as Twitter) account (@revgroupinc), LinkedIn account (@rev-group-inc), Facebook account (@REVGroupInc), YouTube (@REVGroupInc), and Instagram account (@revgroupinc) as routine channels of distribution for company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Securities and Exchange Commission (“SEC”) Regulation FD. Accordingly, investors should monitor our website and our corporate social media accounts in addition to following press releases, SEC filings and public conference calls and webcasts. Additionally, we provide notifications of news or announcements as part of our investor relations website (https://investors.revgroup.com/). Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.

None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social media channels is incorporated into, or deemed to be a part of, this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our website or our social media channels are intended to be inactive textual references only.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(Dollars in millions, except share amounts)

 

 

 

 

 

 

(Audited)

 

 

 

April 30,
2024

 

 

October 31,
2023

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

38.2

 

 

$

21.3

 

Accounts receivable, net

 

 

210.6

 

 

 

226.5

 

Inventories, net

 

 

630.4

 

 

 

657.7

 

Other current assets

 

 

26.0

 

 

 

27.7

 

Total current assets

 

 

905.2

 

 

 

933.2

 

Property, plant and equipment, net

 

 

150.1

 

 

 

159.5

 

Goodwill

 

 

137.7

 

 

 

157.3

 

Intangible assets, net

 

 

98.3

 

 

 

115.7

 

Right of use assets

 

 

32.7

 

 

 

37.0

 

Other long-term assets

 

 

6.4

 

 

 

7.7

 

Total assets

 

$

1,330.4

 

 

$

1,410.4

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

190.2

 

 

$

208.3

 

Short-term customer advances

 

 

176.9

 

 

 

214.5

 

Income tax payable

 

 

35.5

 

 

 

11.8

 

Short-term accrued warranty

 

 

15.8

 

 

 

23.4

 

Short-term lease obligations

 

 

6.8

 

 

 

7.4

 

Other current liabilities

 

 

93.3

 

 

 

91.8

 

Total current liabilities

 

 

518.5

 

 

 

557.2

 

Long-term debt

 

 

220.0

 

 

 

150.0

 

Long-term customer advances

 

 

149.9

 

 

 

142.9

 

Deferred income taxes

 

 

9.9

 

 

 

8.2

 

Long-term lease obligations

 

 

26.6

 

 

 

30.0

 

Other long-term liabilities

 

 

25.8

 

 

 

24.1

 

Total liabilities

 

 

950.7

 

 

 

912.4

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock ($.001 par value, 605,000,000 shares authorized; 51,914,477
   and
59,505,829 shares issued and outstanding, respectively)

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

314.5

 

 

 

445.0

 

Retained earnings

 

 

65.1

 

 

 

52.7

 

Accumulated other comprehensive income

 

 

 

 

 

0.2

 

Total shareholders' equity

 

 

379.7

 

 

 

498.0

 

Total liabilities and shareholders' equity

 

$

1,330.4

 

 

$

1,410.4

 

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

3


 

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Income and Comprehensive Income

(Dollars in millions, except per share amounts)

 

 

 

Three Months Ended
April 30,

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net sales

 

$

616.9

 

 

$

681.2

 

 

$

1,202.9

 

 

$

1,264.7

 

Cost of sales

 

 

539.6

 

 

 

598.7

 

 

 

1,062.7

 

 

 

1,124.3

 

Gross profit

 

 

77.3

 

 

 

82.5

 

 

 

140.2

 

 

 

140.4

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

50.1

 

 

 

52.5

 

 

 

105.5

 

 

 

120.3

 

Amortization of intangible assets

 

 

0.6

 

 

 

1.0

 

 

 

1.2

 

 

 

2.4

 

Restructuring

 

 

3.7

 

 

 

 

 

 

4.5

 

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

12.6

 

 

 

 

Total operating expenses

 

 

54.4

 

 

 

53.5

 

 

 

123.8

 

 

 

122.7

 

Operating income

 

 

22.9

 

 

 

29.0

 

 

 

16.4

 

 

 

17.7

 

Interest expense, net

 

 

6.5

 

 

 

7.4

 

 

 

13.4

 

 

 

14.5

 

(Gain) Loss on sale of business

 

 

(1.5

)

 

 

1.1

 

 

 

(259.0

)

 

 

1.1

 

Other expense

 

 

 

 

 

0.5

 

 

 

 

 

 

0.7

 

Income before provision for income taxes

 

 

17.9

 

 

 

20.0

 

 

 

262.0

 

 

 

1.4

 

Provision for income taxes

 

 

2.7

 

 

 

5.8

 

 

 

64.1

 

 

 

0.7

 

Net income

 

$

15.2

 

 

$

14.2

 

 

$

197.9

 

 

$

0.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

(0.2

)

 

 

(0.5

)

Comprehensive income

 

$

15.2

 

 

$

14.2

 

 

$

197.7

 

 

$

0.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

$

0.24

 

 

$

3.53

 

 

$

0.01

 

Diluted

 

 

0.28

 

 

 

0.24

 

 

 

3.49

 

 

 

0.01

 

Dividends declared per common share

 

 

0.05

 

 

 

0.05

 

 

 

3.10

 

 

 

0.10

 

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

4


 

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(Dollars in millions)

 

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

197.9

 

 

$

0.7

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

13.0

 

 

 

13.4

 

Stock-based compensation expense

 

 

5.9

 

 

 

7.5

 

Deferred income taxes

 

 

1.7

 

 

 

0.7

 

Impairment charges

 

 

12.6

 

 

 

 

(Gain) Loss on sale of business

 

 

(259.0

)

 

 

1.1

 

Other non-cash adjustments

 

 

0.9

 

 

 

1.1

 

Changes in operating assets and liabilities, net

 

 

(2.6

)

 

 

(16.3

)

Net cash (used in) provided by operating activities

 

 

(29.6

)

 

 

8.2

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(16.4

)

 

 

(10.6

)

Proceeds from sale of business

 

 

318.2

 

 

 

0.6

 

Other investing activities

 

 

0.1

 

 

 

1.1

 

Net cash provided by (used in) investing activities

 

 

301.9

 

 

 

(8.9

)

Cash flows from financing activities:

 

 

 

 

 

 

Net proceeds from borrowings on revolving credit facility

 

 

70.0

 

 

 

 

Payment of dividends

 

 

(185.5

)

 

 

(6.1

)

Repurchase and retirement of common stock

 

 

(126.1

)

 

 

 

Other financing activities

 

 

(13.8

)

 

 

(4.6

)

Net cash used in financing activities

 

 

(255.4

)

 

 

(10.7

)

Net increase (decrease) in cash and cash equivalents

 

 

16.9

 

 

 

(11.4

)

Cash and cash equivalents, beginning of period

 

 

21.3

 

 

 

20.4

 

Cash and cash equivalents, end of period

 

$

38.2

 

 

$

9.0

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

Interest

 

$

11.3

 

 

$

12.4

 

Income taxes, net of refunds

 

$

42.5

 

 

$

0.6

 

 

 

See Notes to Condensed Unaudited Consolidated Financial Statements.

5


 

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Shareholders’ Equity

(Dollars in millions, except share amounts)

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Shareholders'

 

 

 

Amount

 

# Shares

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, October 31, 2023

 

$

0.1

 

 

59,505,829

 Sh.

 

$

445.0

 

 

$

52.7

 

 

$

0.2

 

 

$

498.0

 

Net income

 

 

 

 

 

 

 

 

 

 

182.7

 

 

 

 

 

 

182.7

 

Stock-based compensation expense

 

 

 

 

 

 

 

2.9

 

 

 

 

 

 

 

 

 

2.9

 

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

 

 

 

 

255,651

 Sh.

 

 

(2.0

)

 

 

 

 

 

 

 

 

(2.0

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

 

 

(0.2

)

Issuances of restricted stock awards, net of employee tax withholdings on vested awards

 

 

 

 

14,233

 Sh.

 

 

(2.9

)

 

 

 

 

 

 

 

 

(2.9

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

(182.4

)

 

 

 

 

 

(182.4

)

Balance, January 31, 2024

 

$

0.1

 

 

59,775,713

 Sh.

 

$

443.0

 

 

$

53.0

 

 

$

 

 

$

496.1

 

Net income

 

 

 

 

 

 

 

 

 

 

15.2

 

 

 

 

 

 

15.2

 

Stock-based compensation expense

 

 

 

 

 

 

 

3.0

 

 

 

 

 

 

 

 

 

3.0

 

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

 

 

 

 

115,232

 Sh.

 

 

(1.8

)

 

 

 

 

 

 

 

 

(1.8

)

Issuances of restricted stock awards

 

 

 

 

23,532

 Sh.

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase and retirement of common stock, including fees and excise taxes

 

 

 

 

(8,000,000

 Sh.)

 

 

(129.7

)

 

 

 

 

 

 

 

 

(129.7

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

(3.1

)

 

 

 

 

 

(3.1

)

Balance, April 30, 2024

 

$

0.1

 

 

51,914,477

 Sh.

 

$

314.5

 

 

$

65.1

 

 

$

 

 

$

379.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Shareholders'

 

 

 

Amount

 

# Shares

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance, October 31, 2022

 

$

0.1

 

 

59,323,534

 Sh.

 

$

436.4

 

 

$

19.5

 

 

$

0.3

 

 

$

456.3

 

Net loss

 

 

 

 

 

 

 

 

 

 

(13.5

)

 

 

 

 

 

(13.5

)

Stock-based compensation expense

 

 

 

 

 

 

 

5.9

 

 

 

 

 

 

 

 

 

5.9

 

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

 

 

 

 

214,746

 Sh.

 

 

(1.3

)

 

 

 

 

 

 

 

 

(1.3

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.5

)

 

 

(0.5

)

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

 

 

 

 

(23,243

 Sh.)

 

 

(3.1

)

 

 

 

 

 

 

 

 

(3.1

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

(3.1

)

 

 

 

 

 

(3.1

)

Balance, January 31, 2023

 

$

0.1

 

 

59,515,037

 Sh.

 

$

437.9

 

 

$

2.9

 

 

$

(0.2

)

 

$

440.7

 

Net income

 

 

 

 

 

 

 

 

 

 

14.2

 

 

 

 

 

 

14.2

 

Stock-based compensation expense

 

 

 

 

 

 

 

1.6

 

 

 

 

 

 

 

 

 

1.6

 

Vesting of restricted stock units, net of employee tax withholdings

 

 

 

 

9,321

 Sh.

 

 

(0.1

)

 

 

 

 

 

 

 

 

(0.1

)

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

 

 

 

 

(120,519

 Sh.)

 

 

(0.1

)

 

 

 

 

 

 

 

 

(0.1

)

Dividends declared on common stock

 

 

 

 

 

 

 

 

 

 

(3.0

)

 

 

 

 

 

(3.0

)

Balance, April 30, 2023

 

$

0.1

 

 

59,403,839

 Sh.

 

$

439.3

 

 

$

14.1

 

 

$

(0.2

)

 

$

453.3

 


See Notes to Condensed Unaudited Consolidated Financial Statements.

6


 

REV Group, Inc. and Subsidiaries

Notes to the Condensed Unaudited Consolidated Financial Statements

(All tabular amounts presented in millions, except share and per share amounts)

 

Note 1. Basis of Presentation

The Condensed Unaudited Consolidated Financial Statements include the accounts of REV Group, Inc. (“REV” or “the Company”) and all its subsidiaries. In the opinion of management, the accompanying Condensed Unaudited Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These Condensed Unaudited Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of the Company for the fiscal year ended October 31, 2023. The interim results are not necessarily indicative of results for the full year.

Equity Sponsor Exit: Prior to the second quarter of fiscal year 2024, the Company’s largest equity holder was comprised of (i) American Industrial Partners Capital Fund IV, LP, (ii) American Industrial Partners Capital Fund IV (Parallel), LP and (iii) AIP/CHC Holdings, LLC, which the Company collectively refers to as “AIP” or “Sponsor”.

During the second quarter of fiscal year 2024, the Company completed two underwritten public offerings (the “Offerings”) in which a total of 25,795,191 shares of common stock previously held by AIP were sold. Refer to Note 15, Shareholders’ Equity, for additional information related to these offerings.

Upon completion of the second of the two Offerings, AIP ceased to beneficially own at least 15% of the Company’s outstanding shares of common stock, in the aggregate. As a result, under the terms of the Amended and Restated Shareholders Agreement, dated as of February 1, 2017 (as amended), AIP no longer has significant influence over the Company, including control over decisions that require the approval of stockholders, and no longer has the right to nominate any directors to the board of directors of the Company. Each of the board members previously nominated by AIP resigned from the Board of Directors of the Company, effective upon the completion of the second of the two Offerings. AIP is no longer considered a sponsor or related party of the Company.

Related Party Transactions: During the three months ended April 30, 2024 and April 30, 2023, the Company did not incur expenses associated with its former Sponsor, other than in connection with the Offerings and related share repurchase. During the six months ended April 30, 2024 and April 30, 2023, the Company reimbursed expenses of its former Sponsor of $0.2 million. These expenses are included in Selling, general and administrative expenses in the Company’s Condensed Unaudited Consolidated Statements of Income and Comprehensive Income. Refer to Note 15, Shareholders’ Equity, for additional information related to the share repurchase.

Reclassifications: Certain reclassifications have been made to the prior period financial statements to conform with the fiscal year 2024 presentation and improve comparability between periods. These reclassifications had no effect on the reported results of operations.

Recent Accounting Pronouncements

Accounting Pronouncement - Adopted

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04 “Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. The amendments in this ASU require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022. We adopted ASU 2022-04 in the first quarter of fiscal year 2024 and have indicated the impact of ASU 2022-04 to our consolidated financial statements. Refer to Note 3, Supply Chain Finance Program, for further details.

Accounting Pronouncements - To Be Adopted

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted. We expect to adopt ASU 2023-07 in fiscal year 2025 and are currently evaluating the impact of ASU 2023-07 on our consolidated financial statements.

7


 

Note 2. Revenue Recognition

Substantially all of the Company’s revenue is recognized from contracts with customers with product shipment destinations in the United States and Canada. The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. The Company determines the transaction price for each contract at inception based on the consideration that it expects to receive for the goods and services promised under the contract. The transaction price excludes sales and usage-based taxes collected and certain “pass-through” amounts collected on behalf of third parties. The Company has elected to expense incremental costs to obtain a contract when the amortization period of the related asset is expected to be less than one year.

The Company’s primary source of revenue is generated from the manufacture and sale of specialty and recreational vehicles through its direct sales force and dealer network. The Company also generates revenue through separate contracts that relate to the sale of aftermarket parts and services. Revenue is typically recognized at a point-in-time, when control is transferred, which generally occurs when the product has been shipped to the customer or when it has been picked-up from the Company’s manufacturing facilities. Shipping and handling costs that occur after the transfer of control are fulfillment costs that are recorded in Cost of sales in the Condensed Unaudited Consolidated Statements of Income and Comprehensive Income when incurred or when the related product revenue is recognized, whichever is earlier. Periodically, certain customers may request bill and hold transactions according to the terms in the contract. In such cases, revenue is not recognized until after control has transferred which is generally when the customer has requested such transaction and has been notified that the product (i) has been completed according to customer specifications, (ii) has passed our quality control inspections, (iii) has been separated from our inventory and is ready for physical transfer to the customer, and (iv) the Company cannot use the product or redirect the product to another customer. Warranty obligations associated with the sale of a unit are assurance-type warranties that are a guarantee of the unit’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.

Contract Assets and Contract Liabilities

The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, and payment is usually received shortly after billing. Payments for certain contracts are received in advance of satisfying the related performance obligations. Such payments are recorded as Customer advances in the Company’s Condensed Unaudited Consolidated Balance Sheets. The Company reduces the customer advance balances when the Company transfers control of the promised good or service. During the three months ended April 30, 2024, and April 30, 2023, the Company recognized $44.2 million and $44.6 million, respectively, of revenue that was included in the customer advance balances of $357.4 million and $332.8 million as of October 31, 2023 and October 31, 2022, respectively. During the six months ended April 30, 2024 and April 30, 2023, the Company recognized $93.0 million and $82.2 million, respectively, of revenue that was included in the customer advance balances of $357.4 million and $332.8 million as of October 31, 2023 and October 31, 2022, respectively. The Company’s payment terms do not include a significant financing component outside of the Specialty Vehicles segment. Within the Specialty Vehicles segment, customers earn interest on customer advances at a rate determined at contract inception. The Company incurred interest charges on customer advances during the three months ended April 30, 2024 and April 30, 2023 of $2.2 million and $2.2 million, respectively. The Company incurred interest charges on customer advances during the six months ended April 30, 2024, and April 30, 2023 of $4.5 million and $4.1 million, respectively. The interest charges were recorded in Interest expense in the Condensed Unaudited Consolidated Statements of Income and Comprehensive Income. The Company does not have significant contract assets.

Remaining Performance Obligations

As of April 30, 2024, the Company had unsatisfied performance obligations for non-cancelable contracts with an original duration greater than one year totaling $3,063.9 million, of which $1,231.8 million is expected to be satisfied and recognized in revenue in the next twelve months and $1,832.1 million is expected to be satisfied and recognized in revenue thereafter.

Note 3. Supply Chain Finance Program

The Company has an unsecured agreement with a third-party financial institution to facilitate a supply chain finance (“SCF”) program. The SCF program allows qualifying suppliers to sell their receivables due from the Company, on an invoice level at the selection of the supplier, to the financial institution and negotiate their outstanding receivable arrangements and associated fees directly with the financial institution. The Company is not party to the agreements between the supplier and the financial institution. The supplier invoices that have been confirmed as valid under the program require payment in full by the Company within 120 days of the invoice date.

All outstanding amounts related to suppliers participating in the SCF program are confirmed with the third-party financial institution and are recorded in Accounts payable in the Condensed Unaudited Consolidated Balance Sheets. The Company’s outstanding obligation under the SCF program as of April 30, 2024 and October 31, 2023 was $12.9 million and $13.1 million, respectively.

8


 

Note 4. Inventories

Inventories consisted of the following:

 

 

April 30,
2024

 

 

October 31,
2023

 

Chassis

 

$

109.1

 

 

$

122.2

 

Raw materials & parts

 

 

205.6

 

 

 

224.3

 

Work in process

 

 

256.0

 

 

 

274.1

 

Finished products

 

 

67.9

 

 

 

46.8

 

 

 

638.6

 

 

 

667.4

 

Less: reserves

 

 

(8.2

)

 

 

(9.7

)

Total inventories, net

 

$

630.4

 

 

$

657.7

 

 

Note 5. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

 

 

April 30,
2024

 

 

October 31,
2023

 

Land & land improvements

 

$

20.7

 

 

$

19.2

 

Buildings & improvements

 

 

109.7

 

 

 

111.7

 

Machinery & equipment

 

 

104.6

 

 

 

107.2

 

Computer hardware & software

 

 

67.8

 

 

 

65.0

 

Office furniture & fixtures

 

 

6.1

 

 

 

5.5

 

Construction in process

 

 

5.8

 

 

 

16.4

 

 

 

314.7

 

 

 

325.0

 

Less: accumulated depreciation

 

 

(164.6

)

 

 

(165.5

)

Total property, plant and equipment, net

 

$

150.1

 

 

$

159.5

 

Depreciation expense was $5.9 million and $5.5 million for the three months ended April 30, 2024 and April 30, 2023, respectively, and $11.8 million and $11.0 million for the six months ended April 30, 2024 and April 30, 2023, respectively. In connection with the discontinuation of manufacturing operations at the Company's ElDorado National (California) (“ENC”) facility, the Company recorded impairment charges of property, plant, and equipment of $4.4 million for the six months ended April 30, 2024, which were based on Level 3 inputs as defined by Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. Refer to Note 8, Restructuring and Other Related Charges, for further details.

Note 6. Goodwill and Intangible Assets

The table below represents goodwill by segment:

 

 

April 30,
2024

 

 

October 31,
2023

 

Specialty Vehicles

 

$

95.2

 

 

$

114.8

 

Recreational Vehicles

 

 

42.5

 

 

 

42.5

 

Total goodwill

 

$

137.7

 

 

$

157.3

 

The change in the net carrying value of goodwill consisted of the following:

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

Balance at beginning of period

 

$

157.3

 

 

$

157.3

 

Divestitures (Note 7)

 

 

(19.6

)

 

 

 

Balance at end of period

 

$

137.7

 

 

$

157.3

 

 

9


 

Intangible assets (excluding goodwill) consisted of the following:

 

 

April 30, 2024

 

 

 

Weighted-
Average Life

 

 

Gross

 

 

Accumulated
Amortization

 

 

Net

 

Finite-lived Customer Relationships

 

 

8

 

 

$

42.9

 

 

$

(35.9

)

 

$

7.0

 

Indefinite-lived trade names

 

 

 

 

 

91.3

 

 

 

 

 

 

91.3

 

Total intangible assets, net

 

 

 

 

$

134.2

 

 

$

(35.9

)

 

$

98.3

 

 

 

 

October 31, 2023

 

 

 

Weighted-
Average Life

 

 

Gross

 

 

Accumulated
Amortization

 

 

Net

 

Finite-lived Customer Relationships

 

 

8

 

 

$

43.7

 

 

$

(35.4

)

 

$

8.3

 

Indefinite-lived trade names

 

 

 

 

 

107.4

 

 

 

 

 

 

107.4

 

Total intangible assets, net

 

 

 

 

$

151.1

 

 

$

(35.4

)

 

$

115.7

 

The change in the net carrying value of indefinite-lived trade names consisted of the following:

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

Balance at beginning of period

 

$

107.4

 

 

$

107.4

 

Impairment (Note 8)

 

 

(7.2

)

 

 

 

Divestiture (Note 7)

 

 

(8.9

)

 

 

 

Balance at end of period

 

$

91.3

 

 

$

107.4

 

Amortization expense was $0.6 million and $1.0 million for the three months ended April 30, 2024 and April 30, 2023, respectively, and $1.2 million and $2.4 million for the six months ended April 30, 2024 and April 30, 2023, respectively. Estimated future amortization expense of finite-lived intangible assets for the remainder of fiscal year 2024 and each of the five fiscal years succeeding October 31, 2024 is as follows: 2024 (remaining six months) - $1.1 million; 2025 - $1.7 million; 2026 - $1.2 million; 2027 - $1.2 million; 2028 - $1.2 million; 2029 - $0.6 million, at which point all finite-lived intangible assets will be fully amortized. In connection with the discontinuation of manufacturing operations at the Company's ENC facility, the Company recorded an impairment charge of an indefinite-lived trade name of $7.2 million for the six months ended April 30, 2024, which was based on Level 3 inputs, as defined by ASC 820, Fair Value Measurements.

Note 7. Divestiture Activities

On January 26, 2024, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among the Company, Collins Industries, Inc., (“Collins Industries”) an indirect wholly-owned subsidiary of the Company, Collins Bus Corporation, a wholly-owned subsidiary of Collins Industries (“Collins”), Forest River, Inc. and Forest River Bus, LLC (the “Buyer”), pursuant to which Collins Industries agreed to sell all of the issued and outstanding shares of capital stock of Collins to the Buyer. The sale is aimed at optimizing the Company's portfolio of products and to create a more focused operating structure aligned with markets where the Company has a strong presence of industry leading brands. The transactions under the Stock Purchase Agreement closed on January 26, 2024.

In connection with the completion of the sale of Collins, the Company received cash consideration of $308.2 million, inclusive of certain preliminary working capital adjustments, and recorded a gain on sale of $257.5 million, which is included in the Company’s Condensed Unaudited Consolidated Statement of Income and Comprehensive Income for the six months ended April 30, 2024. The Company incurred $5.0 million of transaction costs in connection with this sale, which are included in the Selling, general and administrative expense in the Company’s Condensed Unaudited Consolidated Statement of Income and Comprehensive Income for the six months ended April 30, 2024. Collins was previously reported as part of the Specialty Vehicles segment.

On April 30, 2024, in connection with a strategic review of the product portfolio, the Company entered into an agreement to sell certain assets of the Fire Regional Technical Center (“Fire RTC”) business. In connection with the sale, the Company recorded a gain of $1.5 million, which is included in the Company’s Condensed Unaudited Consolidated Statement of Income and Comprehensive Income for the three and six months ended April 30, 2024. The remaining assets and liabilities of the Fire RTC business are included within the Specialty Vehicles segment.

10


 

Note 8. Restructuring and Other Related Charges

On January 29, 2024, the Company announced that it would discontinue manufacturing operations at the Company’s ENC facility in Riverside, California. Management believes the discontinuation of manufacturing at ENC will create a more focused portfolio that provides opportunities for growth, consistent cash generation and improved margin performance. ENC is included within the Specialty Vehicles segment.

The Company has and will incur certain restructuring and other related charges in connection with the decision to discontinue manufacturing at the ENC facility. For the three and six months ended April 30, 2024, the Company recorded restructuring charges of $3.7 million and $4.5 million, respectively, primarily related to severance and retention costs. The Company expects to incur additional restructuring charges of between $3.0 to $4.0 million associated with employee severance and other termination benefits. For the six months ended April 30, 2024 the Company incurred additional charges related to this activity consisting of $11.6 million of impairment charges related to intangible assets and property, plant, and equipment, $5.8 million of inventory write-offs, and $0.3 million of other costs. The Company currently expects to incur additional restructuring and related charges associated with contract terminations, inventory liquidation, and other costs; however, such costs are not known at this time. The Company currently expects the charges resulting from this restructuring will be incurred during fiscal year 2024.

Changes in the Company’s restructuring reserves related to the discontinuation of manufacturing at ENC during fiscal year 2024 were as follows:
 

 

 

Six Months Ended
April 30, 2024

 

Balance at beginning of the period

 

$

 

Restructuring provision

 

 

4.5

 

Utilized - cash

 

 

(0.9

)

Balance at end of the period

 

$

3.6

 

 

Note 9. Long-Term Debt

The Company was obligated under the following debt instrument:

 

 

April 30,
2024

 

 

October 31,
2023

 

ABL facility

 

$

220.0

 

 

$

150.0

 

ABL Facility

On April 13, 2021, the Company entered into a $550.0 million revolving credit agreement (the “2021 ABL Facility” or “2021 ABL Agreement”) with a syndicate of lenders. The 2021 ABL Facility provides for revolving loans and letters of credit in an aggregate amount of up to $550.0 million. The total credit facility is subject to a $30.0 million sublimit for swing line loans and a $35.0 million sublimit for letters of credit (plus up to an additional $20.0 million of letters of credit at issuing bank’s discretion), along with certain borrowing base and other customary restrictions as defined in the 2021 ABL Agreement. The 2021 ABL Agreement allows for incremental facilities in an aggregate amount of up to $100.0 million, plus the excess, if any, of the borrowing base then in effect over total commitments then in effect. Any such incremental facilities are subject to receiving additional commitments from lenders and certain other customary conditions. The debt issuance costs capitalized in connection with the 2021 ABL Facility less accumulated amortization are included in Other long-term assets in the Company’s Condensed Unaudited Consolidated Balance Sheets. The debt issuance costs are amortized over the life of the debt on a straight-line basis. The 2021 ABL Facility matures on April 13, 2026. The Company may prepay principal, in whole or in part, at any time without penalty.

The following table summarizes the gross borrowing and gross payments under the Company's 2021 ABL Facility:

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

Gross borrowings

 

$

610.0

 

 

$

297.0

 

Gross payments

 

 

540.0

 

 

 

297.0

 

Total net borrowings

 

$

70.0

 

 

$

 

On November 1, 2022, the Company amended the 2021 ABL Facility to transition from the Eurodollar based benchmark rates to the Secured Overnight Financing Rate ("SOFR"). The transition from the Eurodollar rate to SOFR did not have a material impact on the Company's results of operations.

11


 

On February 7, 2024, the Company entered into Amendment No. 2 (the “ABL Facility Amendment”) to the 2021 ABL Facility. The ABL Facility Amendment revised the definition of Fixed Charges under the 2021 ABL Facility to exclude the special cash dividend, which was declared in the first quarter of fiscal year 2024 and paid in the second quarter of fiscal year 2024, from the definition of Fixed Charges.

All revolving loans under the 2021 ABL Facility, as amended, bear interest at rates equal to, at the Company’s option, either a base rate plus an applicable margin, or a SOFR rate plus an applicable margin and credit spread adjustment of 0.10% for all interest periods. As of April 30, 2024, the interest rate margins are 0.50% for all base rate loans and 1.50% for all SOFR rate loans (with the SOFR rate having a floor of 0.0%), subject to adjustment based on the Company’s fixed charge coverage ratio in accordance with the 2021 ABL Agreement. Interest is payable quarterly for all base rate loans and is payable on the last day of any interest period or every three months for all SOFR rate loans. The weighted-average interest rate on borrowings outstanding under the 2021 ABL Facility was 6.92% as of April 30, 2024. The weighted-average interest rate on borrowings outstanding under the 2021 ABL Facility was 6.93% as of October 31, 2023.

The lenders under the 2021 ABL Facility have a first priority security interest in substantially all personal property assets and certain real property assets of the Company. The 2021 ABL Facility’s borrowing base is comprised of eligible receivables and eligible inventory, plus a fixed asset sublimit of certain eligible real property and eligible equipment, which fixed asset sublimit reduces by quarterly amortization as specified in the 2021 ABL Agreement.

The 2021 ABL Agreement contains customary representations and warranties, affirmative and negative covenants, subject in certain cases to customary limitations, exceptions and exclusions. The 2021 ABL Agreement also contains certain customary events of default. The occurrence of an event of default under the 2021 ABL Agreement could result in the termination of the commitments under the ABL Facility and the acceleration of all outstanding borrowings under it. The 2021 ABL Agreement requires the Company to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 during certain compliance periods as specified in the 2021 ABL Agreement.

The Company was in compliance with all financial covenants under the 2021 ABL Agreement as of April 30, 2024. As of April 30, 2024, the Company’s availability under the 2021 ABL Facility was $280.3 million. As of October 31, 2023, the Company’s availability under the 2021 ABL Facility was $384.1 million.

The fair value of the 2021 ABL Facility approximated the book value on April 30, 2024 and October 31, 2023.

Note 10. Warranties

The Company’s products generally carry explicit warranties that extend from several months to several years, based on terms that are generally accepted in the marketplace. Selected components (such as engines, transmissions, tires, etc.) included in the Company’s end products may include warranties from original equipment manufacturers (“OEM”). These OEM warranties are passed on to the end customer of the Company’s products, and the customer deals directly with the applicable OEM for any issues encountered on those components.

Changes in the Company’s warranty liability consisted of the following:

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

Balance at beginning of period

 

$

39.1

 

 

$

31.9

 

Warranty provisions

 

 

19.1

 

 

 

16.6

 

Settlements made

 

 

(20.0

)

 

 

(15.9

)

Change in liability of pre-existing warranties

 

 

(1.1

)

 

 

 

Divestiture (Note 7)

 

 

(1.1

)

 

 

 

Balance at end of period

 

$

36.0

 

 

$

32.6

 

Accrued warranty is classified in the Company’s condensed unaudited consolidated balance sheets as follows:

 

 

April 30,
2024

 

 

October 31,
2023

 

Current liabilities

 

$

15.8

 

 

$

23.4

 

Other long-term liabilities

 

 

20.2

 

 

 

15.7

 

Total warranty liability

 

$

36.0

 

 

$

39.1

 

 

12


 

Note 11. Earnings Per Share

Basic earnings per common share (“EPS”) is computed by dividing net income or loss by the weighted average number of common shares outstanding, which excludes shares of issued but unvested restricted stock awards. Diluted EPS is computed by dividing net income, if applicable, by the weighted-average number of common shares outstanding assuming dilution. The difference between basic EPS and diluted EPS is the result of the dilutive effect of unvested performance stock units, restricted stock units, and restricted stock awards. The reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding was as follows:

 

 

Three Months Ended
April 30,

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Basic weighted-average common shares outstanding

 

 

53,117,059

 

 

 

58,698,700

 

 

 

56,116,502

 

 

 

58,516,877

 

Dilutive stock options

 

 

 

 

 

1,898

 

 

 

 

 

 

2,146

 

Dilutive restricted stock awards

 

 

150,665

 

 

 

250,151

 

 

 

223,072

 

 

 

310,553

 

Dilutive restricted stock units

 

 

280,471

 

 

 

73,092

 

 

 

318,948

 

 

 

155,634

 

Dilutive performance stock units

 

 

114,015

 

 

 

 

 

 

102,175

 

 

 

 

Diluted weighted-average common shares outstanding

 

 

53,662,210

 

 

 

59,023,841

 

 

 

56,760,697

 

 

 

58,985,210

 

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
April 30,

 

 

Six Months Ended
April 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Anti-dilutive shares

 

 

23,532

 

 

 

870,281