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Lazydays Holdings(GORV) - 2020 Q4 - Annual Report

PART I This section details Lazydays Holdings, Inc.'s business operations, market position, associated risks, property holdings, and legal and safety disclosures Item 1. Business Lazydays Holdings, Inc. operates RV dealerships, providing comprehensive sales, service, and financing, with significant expansion and a strong market presence - Lazydays Holdings, Inc. operates RV dealerships, providing a comprehensive portfolio of products and services for RV owners and outdoor enthusiasts, including RV sales, parts, services, financing, and camping facilities14 - The company completed three acquisitions in 2020: Korges Enterprises, Inc. (Phoenix, AZ) in May, Total Value Recreational Vehicles of Indiana, Inc. (Elkhart, IN) in October, and Camp-Land, Inc. (Burns Harbor, IN) in December181920 - Lazydays is known nationally as 'The RV Authority', a registered trademark, and operates one of the world's largest RV dealerships in Tampa, Florida, with additional locations across key RV markets in the U.S141522 - The company's growth strategy includes expanding its customer base through targeted marketing, acquiring independent dealers, and establishing new greenfield dealership and service locations414243 - New vehicles from Tiffin Motorhomes, Thor Industries, Inc., Winnebago Industries, Inc., and Forest River, Inc. represented 94.7% of new vehicle sales in 202031 - The company's operations generally experience modestly higher volumes of vehicle sales in the first half of each year due to consumer buying trends and favorable warm climates in Florida and Arizona during winter months, and in northern locations during spring93 Item 1A. Risk Factors The company faces substantial risks from the COVID-19 pandemic, financing availability, supply chain dependencies, regulatory compliance, and the cyclical nature of the RV market - The COVID-19 pandemic caused significant early declines in revenue but saw a rebound in sales from May to December 2020, driven by increased consumer demand for outdoor activities, though future sales growth is uncertain and could still negatively impact liquidity and operations99101103 - The company's business is highly dependent on the availability of wholesale financing for inventory and consumer credit for RV purchases, where a decrease in financing availability or an increase in costs could adversely affect sales and operations104105 - Reliance on key manufacturers (Tiffin Motorhomes, Thor Industries, Winnebago Industries, Forest River, Inc.) for new RV inventory means any issues with these suppliers could disrupt product availability and impact financial performance108 - Expansion through acquisitions or new locations presents risks such as integration difficulties, unfamiliarity with new markets, and challenges in securing permits, personnel, and product lines113114115 - The RV industry is cyclical and seasonal, influenced by economic conditions, consumer confidence, discretionary spending, fuel prices, and interest rates, leading to potential fluctuations in sales and operating results129130 - The company's credit facility contains restrictive covenants and requires maintaining specified financial ratios; failure to comply could lead to an event of default and acceleration of debt148149150 - The company is subject to extensive federal, state, and local regulations covering RV sales, financing, marketing, environmental, health, safety, and insurance activities, with non-compliance potentially leading to fines or operational disruptions81156158 Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported191 Item 2. Properties The company primarily leases its 11 dealership properties under long-term 'triple net' agreements, covering taxes, insurance, and maintenance - The company leases 7 of its 11 operational real properties, with owned properties in Tucson, Arizona, Houston, Texas, and Indiana192 - Lease agreements generally feature fixed monthly rentals with annual escalation clauses and renewal terms of 5 or 20 years, structured as 'triple net' leases where the company pays real estate taxes, insurance, and maintenance192 Leased Dealership Locations Overview | Location | Acres | Square Feet | Term (Years) | Initial Expiration | | :------- | :---- | :---------- | :----------- | :----------------- | | FL | 126 | 384,000 | 20 | 2035 | | FL | 6 | 3,600 | 5 | 2022 | | FL | 30 | 66,650 | 5 | 2024 | | CO | 28 | 129,300 | 5 | 2025 | | CO | 11 | 14,150 | 5 | 2025 | | CO | 6 | 18,699 | 5 | 2025 | | MN | 20 | 68,101 | 20 | 2038 | | TN | 22 | 68,544 | 10 | 2028 | | AZ | 10 | 18,211 | 10 | 2030 | Item 3. Legal Proceedings The company is involved in various legal proceedings that arise in the ordinary course of business but does not anticipate that their ultimate resolution will have a material adverse effect on its financial condition or operations - The company is a party to multiple legal proceedings in the ordinary course of business195 - Management does not believe the ultimate resolution of these matters will have a material adverse effect on the company's business, results of operations, financial condition, or cash flows195 Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report - No mine safety disclosures were reported196 PART II This section details the company's market for common equity, selected financial data, management's discussion and analysis, and internal controls Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants are publicly traded, with no cash dividends planned and a stock repurchase program expired in 2020 - Common stock is listed on the Nasdaq Capital Market (LAZY); warrants are quoted on the OTC Pink marketplace (LAZYW)198 - The company has not paid cash dividends on common stock and does not plan to in the foreseeable future, with future policy dependent on operations, capital requirements, and credit facility restrictions202 - In 2020, the company issued 1,038,040 shares of common stock through cashless exercises of pre-funded warrants and 5,755 shares through cashless exercise of a PIPE Investment warrant, exempt from registration under Section 3(a)(9) of the Securities Act203204205206 Warrants High and Low Sales Prices (2018-2020) | Period* | High | Low | | :------------- | :----- | :----- | | 2020 | | | | Fourth Quarter | $3.50 | $1.95 | | Third Quarter | $2.70 | $0.50 | | Second Quarter | $0.50 | $0.04 | | First Quarter | $0.13 | $0.04 | | 2019 | | | | Fourth Quarter | $0.11 | $0.10 | | Third Quarter | $0.09 | $0.09 | | Second Quarter | $0.11 | $0.07 | | First Quarter | $0.45 | $0.30 | | 2018 | | | | Fourth Quarter | $1.00 | $0.40 | | Third Quarter | $1.60 | $1.15 | | Second Quarter | $1.85 | $0.80 | | First Quarter | - | - | - The stock repurchase program, authorizing up to $4.0 million in common stock repurchases, expired on December 31, 2020, with no shares purchased during the fourth quarter of 2020208 Item 6. Selected Financial Data The company has elected scaled disclosure requirements for smaller reporting companies, thus this item is not applicable - Information requested by this Item is not applicable as the Company has elected scaled disclosure requirements available to smaller reporting companies209 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Lazydays' financial performance, liquidity, and capital resources, highlighting 2020 revenue growth, COVID-19 impacts, and key accounting policies Forward Looking Statements This subsection outlines forward-looking statements and the inherent risks and uncertainties that could impact future financial performance - The report contains forward-looking statements regarding future financial position, business strategy, costs, and management objectives, which are subject to risks and uncertainties211 - Key cautionary statements include the ultimate effect of COVID-19, availability of financing, fuel prices, manufacturer well-being, supply arrangement changes, economic conditions, customer attraction/retention, competition, expansion risks, brand strength, inventory management, sales fluctuations, business cyclicality/seasonality, local market conditions, debt obligations, capital availability, natural disasters, third-party relationships, regulatory compliance, IT systems, product liability, risk management, asset impairment, and capital stock related risks212213215 Business Overview This subsection provides a high-level overview of the company's business model and primary revenue streams Revenue Contribution by Category (2019-2020) | Revenue Category | 2020 | 2019 | | :--------------------- | :-------- | :-------- | | New vehicle revenue | 58.7% | 54.8% | | Preowned vehicle revenue | 30.6% | 33.2% | | Other | 10.7% | 12.0% | | Total | 100.0% | 100.0% | - New and pre-owned RV sales consistently accounted for approximately 88-89% of total revenues in 2019 and 2020216 Key Performance Indicators This subsection analyzes key financial metrics including gross profit, SG&A efficiency, and Adjusted EBITDA, demonstrating performance improvements Gross Profit and Gross Margin (2019-2020) | Metric | 2020 | 2019 | | :----------- | :----------- | :----------- | | Gross Profit | $179.0 million | $132.2 million | | Gross Margin | 21.9% | 20.5% | - Gross profit increased by 35.4% in 2020, and gross margin improved from 20.5% to 21.9%, primarily due to growth in all business lines and the ability to maintain higher margins during tight inventory and supply conditions218245 SG&A as a Percentage of Gross Profit (2019-2020) | Metric | 2020 | 2019 | | :------------------------------- | :---- | :---- | | SG&A as a percentage of Gross Profit | 65.8% | 78.0% | - SG&A as a percentage of gross profit decreased from 78.0% in 2019 to 65.8% in 2020, reflecting gross profit growth exceeding SG&A cost growth, improved fixed cost operating leverage, and overhead cost reductions221 Adjusted EBITDA (2019-2020) | Metric | 2020 | 2019 | | :------------- | :------------ | :------------ | | Adjusted EBITDA | $58,953 thousand | $27,915 thousand | Adjusted EBITDA Margin (2019-2020) | Metric | 2020 | 2019 | | :----------------- | :---- | :---- | | Adjusted EBITDA Margin | 7.2% | 4.3% | COVID-19 Developments This subsection details the company's strategic responses to the COVID-19 pandemic, including cost-saving measures and liquidity management - In response to the COVID-19 pandemic, the company implemented cost-saving measures in April 2020, including a 25% workforce reduction, temporary salary cuts for senior management, suspension of 2020 pay increases and 401k match, and delay of non-critical capital projects227228234 - The company negotiated temporary suspensions of principal and interest payments on term and mortgage loans (April 15 - June 15, 2020) and floorplan curtailment payments (April 1 - June 15, 2020) with lenders229 - Received $8.7 million in loans under the Paycheck Protection Program (PPP Loans), with an application for loan forgiveness submitted229 - Sales of new and pre-owned vehicles significantly improved starting May 2020, attributed to increased consumer demand for outdoor, socially distanced travel and leisure activities231 Results of Operations This subsection provides a detailed analysis of the company's financial results, including revenue, expenses, and net income for the period Summary Financial Data (in thousands) | Metric | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :------------------------------------------------ | :---------------------- | :---------------------- | | Revenues | | | | New and pre-owned vehicles | $729,872 | $567,058 | | Other | $87,238 | $77,854 | | Total revenue | $817,110 | $644,912 | | Cost of revenues (excluding depreciation and amortization expense) | | | | New and pre-owned vehicles | $616,047 | $490,676 | | Adjustments to LIFO reserve | ($93) | $2,445 | | Other | $22,174 | $19,612 | | Total cost of revenues | $638,128 | $512,733 | | Gross profit | $178,982 | $132,179 | | Transaction costs | $935 | $865 | | Depreciation and amortization expense | $11,262 | $10,813 | | Stock-based compensation expense | $1,566 | $4,864 | | Selling, general, and administrative expenses | $117,681 | $103,509 | | Income from operations | $47,538 | $12,128 | | Other income/expenses | | |\ | (Loss) gain on sale of property and equipment | ($7) | $11 | | Interest expense | ($8,047) | ($10,328) | | Total other expense | ($8,054) | ($10,317) | | Income before income tax expense | $39,484 | $1,811 | | Income tax expense | ($10,364) | ($1,097) | | Net income | $29,120 | $714 | - Total revenue increased by $172.2 million (26.7%) to $817.1 million in 2020, driven by favorable RV industry trends due to COVID-19's impact on consumer lifestyles236 - New vehicle sales revenue increased by $126.4 million (35.8%) to $479.6 million, due to a rise in units sold (4,652 to 6,151) and a slight increase in average unit selling price ($75,500 to $76,400)238 - Pre-owned vehicle sales revenue increased by $36.5 million (17.1%) to $250.3 million, with units sold increasing (2,939 to 3,869) but average unit selling price decreasing ($65,500 to $60,700) due to mix239 - Other revenue, including parts, accessories, services, and finance/insurance, increased by $9.3 million (11.9%) to $87.2 million, primarily due to higher RV unit sales and increased penetration rates on finance and insurance products241243247 - Campground and other revenue decreased by $2.0 million (37.2%) due to the discontinuance of RV rentals in 2019244 - SG&A expenses increased by 13.7% to $117.7 million, mainly due to overhead from new acquisitions and increased performance wages, partially offset by cost reduction actions in April 2020248 - Interest expense decreased by $2.3 million to $8.0 million, driven by more favorable interest rates, lower floorplan balances, and the use of an interest reduction equity account250 - Income tax expense rose to $10.4 million in 2020 from $1.1 million in 2019, reflecting the significant increase in income before taxes251 Non-GAAP Financial Measures This subsection defines and reconciles non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, used for performance evaluation - The company uses non-GAAP financial measures like EBITDA and Adjusted EBITDA to evaluate financial performance, understand underlying operating results, and for planning purposes, as they reflect operating drivers and capacity to fund capital expenditures223224 - Adjusted EBITDA is defined as net income (loss) excluding depreciation and amortization, non-floor plan interest expense, amortization of intangible assets, income tax expense, stock-based compensation, transaction costs, LIFO adjustments, severance costs, other one-time charges, and gain (loss) on sale of property and equipment224255 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | 2020 | 2019 | | :------------------------------------------------ | :------------ | :------------ | | Net income | $29,120 | $714 | | Interest expense, net | $8,047 | $10,328 | | Depreciation and amortization of property and equipment | $6,682 | $6,848 | | Amortization of intangible assets | $4,580 | $3,965 | | Income tax expense | $10,364 | $1,097 | | Subtotal EBITDA | $58,793 | $22,952 | | Floor plan interest | ($2,255) | ($4,412) | | LIFO adjustment | ($93) | $2,445 | | Transaction costs | $935 | $865 | | Loss (gain) on sale of property and equipment | $7 | ($11) | | Impairment of retired rental units | - | $439 | | Severance costs/Other | - | $773 | | Stock-based compensation | $1,566 | $4,864 | | Adjusted EBITDA | $58,953 | $27,915 | Liquidity and Capital Resources This subsection assesses the company's cash flow, working capital, and debt facilities, outlining its financial flexibility and future liquidity Cash Flow Summary (in thousands) | Cash Flow Category | 2020 | 2019 | | :-------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $111,067 | $38,922 | | Net cash used in investing activities | ($30,324) | ($19,406) | | Net cash used in financing activities | ($48,689) | ($14,661) | | Net increase in cash | $32,054 | $4,855 | - Net cash from operating activities significantly increased to $111.1 million in 2020 from $38.9 million in 2019, primarily due to higher net income and a $63.4 million decrease in inventory (excluding acquisitions)263 - Net cash used in investing activities increased to $30.3 million in 2020, mainly for $16.7 million in acquisitions and $18.6 million in property and equipment purchases, partially offset by a $4.9 million sale-leaseback264 - Net cash used in financing activities was $48.7 million in 2020, primarily due to $59.4 million in M&T Floor Plan Line of Credit repayments and $2.3 million in M&T Term Loan repayments, partially offset by new mortgage, PPP loans, and sale-leaseback proceeds265 - As of December 31, 2020, the company had $63.5 million in cash and $29.7 million in working capital, expecting adequate liquidity for the next twelve months through cash from operations and borrowing capacity268 - The M&T Credit Facility, including a $175 million floor plan line of credit, a $20 million term loan, and a $5 million revolver, was extended to mature on June 15, 2021, with the company negotiating a replacement facility270277 M&T Credit Facility Outstanding Balances (as of Dec 31, 2020) | Facility | Outstanding Balance (in millions) | | :------------------------ | :-------------------------------- | | M&T Floor Plan Line of Credit | $105.5 | | M&T Term Loan | $12.8 | | M&T Mortgage | $6.0 | Cyclicality This subsection discusses the RV industry's inherent cyclicality, influenced by economic conditions and consumer behavior - RV vehicle unit sales are historically cyclical, fluctuating with general economic cycles and influenced by consumer confidence, discretionary spending, fuel prices, interest rates, and credit availability279 Seasonality and Effects of Weather This subsection examines the seasonal sales patterns and potential operational impacts from severe weather events - Operations generally see higher vehicle sales volumes in the first half of the year due to consumer buying trends and favorable warm climates in Florida and Arizona during winter, and northern locations during spring281 - Severe weather events, particularly hurricanes in Florida, could damage property and inventory, decrease dealership traffic, and disrupt operations, potentially exceeding insurance coverage282 Critical Accounting Policies and Estimates This subsection details the significant accounting policies and estimates that underpin the company's financial statements - The company's financial statements rely on significant estimates and assumptions, including valuation of net assets in business combinations, goodwill and intangible assets, provision for charge-backs, inventory write-downs, allowance for doubtful accounts, and stock-based compensation283284 - Revenue from vehicle sales is recognized upon delivery, title transfer, and financing completion; revenue from parts, accessories, and services is recognized as delivered or approved; commissions from financing and insurance are recognized at sale, with an allowance for future charge-backs288289290 - The Series A Preferred Stock is classified as temporary equity, net of issuance costs and warrant fair value, with unpaid dividends accumulated within its carrying value291 - Stock-based compensation is recognized as an expense over the employee's service period based on fair value at grant date, and lease accounting was updated in 2020, requiring recognition of operating lease assets and liabilities on the balance sheet292293294 Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company has elected scaled disclosure requirements for smaller reporting companies, thus this item is not applicable - Information requested by this Item is not applicable as the Company has elected scaled disclosure requirements available to smaller reporting companies295 Item 8. Financial Statements and Supplementary Data This section provides audited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes, along with the independent auditor's report Report of Independent Registered Public Accounting Firm This subsection contains the independent auditor's unqualified opinion on the consolidated financial statements, affirming GAAP conformity - Marcum LLP audited the consolidated financial statements for Lazydays Holdings, Inc. and Subsidiaries for the two years ended December 31, 2020, and issued an unqualified opinion, stating the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP299 - The company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2020, using the modified retrospective approach300 - No critical audit matters were identified for the current period audit304 Consolidated Balance Sheets This subsection presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheets (in thousands) | ASSETS | Dec 31, 2020 | Dec 31, 2019 | | :------------------------------------------------ | :----------- | :----------- | | Current assets | | | | Cash | $63,512 | $31,458 | | Receivables, net | $19,464 | $16,025 | | Inventories | $116,267 | $160,864 | | Income tax receivable | $1,898 | $326 | | Prepaid expenses and other | $2,740 | $2,999 | | Total current assets | $203,881 | $211,672 | | Property and equipment, net | $106,320 | $86,876 | | Operating lease assets | $15,472 | - | | Goodwill | $45,095 | $38,979 | | Intangible assets, net | $72,757 | $68,854 | | Other assets | $473 | $255 | | Total assets | $443,998 | $406,636 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities | | | | Accounts payable, accrued expenses and other current liabilities | $38,781 | $23,855 | | Dividends payable | $1,210 | - | | Floor plan notes payable, net of debt discount | $105,399 | $143,949 | | Financing liability, current portion | $1,462 | $936 | | Long-term debt, current portion | $24,161 | $5,993 | | Operating lease liability, current portion | $3,164 | - | | Total current liabilities | $174,177 | $174,733 | | Long term liabilities | | | | Financing liability, non-current portion, net of debt discount | $78,634 | $63,557 | | Long term debt, non-current portion, net of debt discount | $8,445 | $15,573 | | Operating lease liability, non-current portion | $12,056 | - | | Deferred tax liability | $15,091 | $16,450 | | Total liabilities | $288,403 | $270,313 | | Series A Convertible Preferred Stock | $54,983 | $60,893 | | Stockholders' Equity | | | | Additional paid-in capital | $80,072 | $79,186 | | Treasury Stock | ($499) | ($314) | | Retained earnings (accumulated deficit) | $21,039 | ($3,442) | | Total stockholders' equity | $100,612 | $75,430 | | Total liabilities and stockholders' equity | $443,998 | $406,636 | Consolidated Statements of Operations This subsection outlines the company's revenues, expenses, and net income over the reporting periods Consolidated Statements of Operations (in thousands) | Metric | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :------------------------------------------------ | :---------------------- | :---------------------- | | Revenues | | | | New and pre-owned vehicles | $729,872 | $567,058 | | Other | $87,238 | $77,854 | | Total revenues | $817,110 | $644,912 | | Cost applicable to revenues | | | | New and pre-owned vehicles | $615,954 | $493,121 | | Other | $22,174 | $19,612 | | Total cost applicable to revenue | $638,128 | $512,733 | | Transaction costs | $935 | $865 | | Depreciation and amortization | $11,262 | $10,813 | | Stock-based compensation | $1,566 | $4,864 | | Selling, general, and administrative expenses | $117,681 | $103,509 | | Income from operations | $47,538 | $12,128 | | Other income/expenses | | | | (Loss) gain on sale of property and equipment | ($7) | $11 |\ | Interest expense | ($8,047) | ($10,328) | | Total other expense | ($8,054) | ($10,317) | | Income before income tax expense | $39,484 | $1,811 | | Income tax expense | ($10,364) | ($1,097) | | Net income | $29,120 | $714 | | Dividends on Series A Convertible Preferred Stock | ($6,283) | ($5,910) | | Net income (loss) attributable to common stock and participating securities | $22,837 | ($5,196) | | EPS: | | | | Basic and diluted income (loss) per share | $1.56 | ($0.53) | | Weighted average shares outstanding - basic and diluted | 9,809,783 | 9,781,870 | Consolidated Statements of Stockholders' Equity This subsection details changes in the company's equity accounts, including common stock, retained earnings, and treasury stock Consolidated Statement of Stockholders' Equity (in thousands) | Metric | Balance at Jan 1, 2019 | Stock-based compensation | Repurchase of unit purchase options | Repurchase of treasury stock | Shares issued pursuant to ESPP | Dividends on Series A preferred stock | Net income | Balance at Dec 31, 2019 | | :------------------------------------ | :--------------------- | :----------------------- | :---------------------------------- | :--------------------------- | :----------------------------- | :------------------------------------ | :--------- | :---------------------- | | Common Stock Shares | 8,471,608 | - | - | - | 35,058 | - | - | 8,506,666 | | Common Stock Amount | $ - | - | - | - | - | - | - | $ - | | Treasury Stock Shares | - | - | - | 78,000 | - | - | - | 78,000 | | Treasury Stock Amount | - | - | - | ($314) | - | - | - | ($314) | | Additional Paid-In Capital | $80,606 | $4,864 | ($500) | - | $126 | ($5,910) | - | $79,186 | | Retained Earnings (Accumulated Deficit) | ($4,156) | - | - | - | - | - | $714 | ($3,442) | | Total Stockholders' Equity | $76,450 | $4,864 | ($500) | ($314) | $126 | ($5,910) | $714 | $75,430 | | Metric | Balance at Dec 31, 2019 | Stock-based compensation | Repurchase of Treasury Stock | Conversion of pre-funded warrants, warrants and options | Shares issued pursuant to ESPP | Dividends on Series A preferred stock | Net income | Balance at Dec 31, 2020 | | :------------------------------------ | :---------------------- | :----------------------- | :--------------------------- | :-------------------------------------- | :----------------------------- | :------------------------------------ | :--------- | :---------------------- | | Common Stock Shares | 8,506,666 | - | - | 1,107,181 | 42,194 | - | - | 9,656,041 | | Common Stock Amount | $ - | - | - | - | - | - | - | $ - | | Treasury Stock Shares | 78,000 | - | 63,299 | - | - | - | - | 141,299 | | Treasury Stock Amount | ($314) | - | ($185) | - | - | - | - | ($499) | | Additional Paid-In Capital | $79,186 | $1,566 | - | $629 | $335 | ($1,644) | - | $80,072 | | Retained Earnings (Accumulated Deficit) | ($3,442) | - | - | - | - | ($4,639) | $29,120 | $21,039 | | Total Stockholders' Equity | $75,430 | $1,566 | ($185) | $629 | $335 | ($6,283) | $29,120 | $100,612 | Consolidated Statements of Cash Flows This subsection summarizes cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Cash Flow Category | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :-------------------------------------- | :---------------------- | :---------------------- | | Cash Flows From Operating Activities | | | | Net income | $29,120 | $714 | | Adjustments to reconcile net income to net cash provided by operating activities | $15,722 | $13,958 | | Changes in operating assets and liabilities | $66,225 | $24,250 | | Net Cash Provided By Operating Activities | $111,067 | $38,922 | | Cash Flows From Investing Activities | | | | Cash paid for acquisitions | ($16,653) | ($2,568) | | Proceeds from sales of property and equipment | $4,970 | $37 | | Purchases of property and equipment | ($18,641) | ($16,875) | | Net Cash Used In Investing Activities | ($30,324) | ($19,406) | | Cash Flows From Financing Activities | | | | Net repayments under M&T bank floor plan | ($59,442) | ($11,151) | | Borrowings under Houston mortgage with M&T bank and PPP Loans | $14,840 | - | | Repayment of long term debt with M&T bank | ($2,303) | ($2,900) | | Proceeds from financing liability | $12,772 | $3,972 | | Repayments of financing liability | ($1,101) | ($730) | | Payment of dividends on Series A preferred stock | ($10,983) | ($1,210) | | Repurchase of Unit Purchase Options | - | ($500) | | Repurchase of Treasury Stock | ($185) | ($314) | | Proceeds from shares issued pursuant to the Employee Stock Purchase Plan | $335 | $126 | | Proceeds from exercise of stock options | $629 | - | | Repayments of acquisition notes payable | ($3,102) | ($1,930) | | Loan issuance costs | ($149) | ($24) | | Net Cash Used In Financing Activities | ($48,689) | ($14,661) | | Net Increase In Cash | $32,054 | $4,855 | | Cash - Beginning | $31,458 | $26,603 | | Cash - Ending | $63,512 | $31,458 | Supplemental Disclosures of Cash Flow Information (in thousands) | Supplemental Disclosures of Cash Flow Information: | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :------------------------------------------------- | :---------------------- | :---------------------- | | Cash paid during the period for interest | $8,176 | $10,120 | | Cash paid during the period for income taxes net of refunds received | $13,296 | $1,061 | | Non-Cash Investing and Financing Activities | | | | Rental vehicles transferred to inventory, net | - | $2,792 | | Fixed assets purchased with accounts payable | $3,534 | $1,546 | | Accrued dividends on Series A Preferred Stock | $1,210 | $5,910 | | Operating lease assets - ASC 842 adoption | ($17,781) | - | | Operating lease liabilities - ASC 842 adoption | $17,845 | - | | Operating lease assets - new | ($756) | - | | Operating lease liabilities - new | $756 | - | | Notes payable incurred in acquisitions | $1,600 | $3,045 | | Net assets acquired in acquisitions | $12,137 | $5,613 | Notes to Consolidated Financial Statements This subsection provides detailed explanations and disclosures supporting the consolidated financial statements NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS This note details the company's formation, organizational structure, and the nature of its RV dealership operations - Lazydays Holdings, Inc. was formed through the merger of Andina Acquisition Corp. II and Lazy Days' R.V. Center, Inc. on March 15, 2018, becoming a holding company operating RV dealerships320 - The company operates RV dealerships in ten locations across Florida, Colorado, Arizona, Tennessee, Minnesota, and Indiana, plus a dedicated service center near Houston, Texas321 - Services include sales and servicing of new/pre-owned RVs, parts/accessories, extended service contracts, overnight campground/restaurant facilities, and arranging third-party financing and warranties321 NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES This note describes the significant accounting policies and critical estimates used in preparing the financial statements - The consolidated financial statements include Holdings, Lazydays RV, and its wholly-owned subsidiaries, with all significant inter-company accounts and transactions eliminated322 - Key estimates and assumptions include business combination valuations, goodwill and intangible assets, charge-back provisions, inventory write-downs, doubtful accounts, and stock-based compensation323 - Revenue recognition follows ASC 606, recognizing revenue when control of goods/services is transferred; vehicle sales are recognized at delivery, title transfer, and financing completion; parts/services revenue is recognized as delivered or approved; commissions from financing/insurance are recognized at sale, with an allowance for charge-backs326328329332 Disaggregation of Revenue (in thousands) | Revenue Category | 2020 | 2019 | | :------------------------------ | :-------- | :-------- | | New vehicle revenue | $479,611 | $353,228 | | Preowned vehicle revenue | $250,261 | $213,830 | | Parts, accessories, and related services | $38,630 | $35,607 | | Finance and insurance revenue | $45,123 | $36,698 | | Campground, rental, and other revenue | $3,485 | $5,549 | | Total | $817,110 | $644,912 | - Vehicle and parts inventories are recorded at the lower of cost or net realizable value using the LIFO method; property and equipment are depreciated using the straight-line method over estimated useful lives337339 - Goodwill, trade names, and trademarks are not amortized but are evaluated annually for impairment; manufacturer and customer relationships are amortized over 7-12 years341343344 - The company adopted the new lease accounting standard (ASC 842) on January 1, 2020, using the modified-retrospective method, resulting in approximately $17.8 million in operating lease assets and liabilities375376 - Four manufacturers (Thor Industries, Winnebago Industries, Tiffin Motorhomes, and Forest River, Inc.) accounted for 95.6% of RV purchases in 2020 (26.1%, 25.0%, 24.0%, and 19.5% respectively)366 Geographic Revenue Concentrations (2019-2020) | Location | 2020 | 2019 | | :------- | :--- | :--- | | Florida | 63% | 68% | | Colorado | 14% | 14% | | Arizona | 10% | <10% | NOTE 3 – BUSINESS COMBINATIONS This note provides details on the company's business acquisitions, including acquired assets and goodwill - In 2020, the company acquired Korges Enterprises, Inc. (May), Total Value Recreation Vehicles of Indiana, Inc. (October), and Camp-Land, Inc. (December); in 2019, Alliance Coach Inc. was acquired385386387389 - These acquisitions were accounted for as business combinations using the purchase method, with preliminary allocation of fair value to assets acquired and liabilities assumed390 Net Assets Acquired in Business Combinations (in thousands) | Category | 2020 | 2019 | | :-------------------- | :-------- | :-------- | | Inventories | $18,932 | $12,171 | | Accounts receivable and prepaid expenses | $1,167 | $53 | | Property and equipment | $5,417 | $77 | | Intangible assets | $8,480 | $2,630 | | Total assets acquired | $33,996 | $14,931 | | Accounts payable, accrued expenses and other current liabilities | $1,004 | $243 | | Floor plan notes payable | $20,855 | $11,434 | | Total liabilities assumed | $21,859 | $11,677 | | Net assets acquired | $12,137 | $3,254 | Goodwill from Acquisitions (in thousands) | Metric | 2020 | 2019 | | :------------------ | :------ | :------ | | Total consideration | $18,253 | $5,506 | | Less net assets acquired | $12,137 | $3,254 | | Goodwill | $6,116 | $2,252 | - The 2020 acquisitions contributed approximately $39.5 million in revenue and $2.4 million in pre-tax income; the 2019 acquisitions contributed approximately $91.2 million in revenue and $3.9 million in pre-tax income392 NOTE 4 – RECEIVABLES, NET This note details the composition of net receivables, including contracts in transit and manufacturer receivables Receivables, Net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Contracts in transit and vehicle receivables | $15,995 | $11,544 | | Manufacturer receivables | $2,705 | $3,539 | | Finance and other receivables | $1,423 | $1,324 | | Total receivables | $20,123 | $16,407 | | Less: Allowance for doubtful accounts | ($659) | ($382) | | Net Receivables | $19,464 | $16,025 | - Contracts in transit represent receivables from financial institutions for customer-financed vehicle sales; manufacturer receivables are for incentives and rebates, treated as a reduction of cost of revenues397 NOTE 5 – INVENTORIES This note outlines the valuation method and composition of the company's new and pre-owned RV inventories Inventories (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :---------------------------- | :----------- | :----------- | | New recreational vehicles | $92,434 | $124,096 | | Pre-owned recreational vehicles | $22,967 | $36,639 | | Parts, accessories and other | $4,493 | $3,848 | | Total | $119,894 | $164,583 | | Less: excess of current cost over LIFO | ($3,627) | ($3,719) | | Net Inventories | $116,267 | $160,864 | - Inventories are valued at the lower of cost or net realizable value using the LIFO method, including purchase, reconditioning, dealer-installed accessories, and freight costs337 NOTE 6 – PROPERTY AND EQUIPMENT, NET This note provides a breakdown of property and equipment, net of accumulated depreciation and amortization Property and Equipment, Net (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------------- | :----------- | :----------- | | Land | $25,954 | $22,496 | | Building and improvements including leasehold improvements | $74,767 | $62,206 | | Furniture and equipment | $8,572 | $6,747 | | Company vehicles | $987 | $747 | | Construction in progress | $13,606 | $5,603 | | Total | $123,886 | $97,799 | | Less: Accumulated depreciation and amortization | ($17,566) | ($10,923) | | Net Property and Equipment | $106,320 | $86,876 | Depreciation and Amortization Expense (in thousands) | Expense | 2020 | 2019 | | :------------ | :------ | :------ | | Depreciation | $6,682 | $6,848 | NOTE 7 – INTANGIBLE ASSETS This note details the company's amortizable and non-amortizable intangible assets, including their net values Intangible Assets, Net (in thousands) | Category | Gross Carrying Amount (2020) | Accumulated Amortization (2020) | Net Asset Value (2020) | Gross Carrying Amount (2019) | Accumulated Amortization (2019) | Net Asset Value (2019) | | :---------------------------- | :--------------------------- | :------------------------------ | :--------------------- | :--------------------------- | :------------------------------ | :--------------------- | | Amortizable intangible assets: | | | | | | | | Manufacturer relationships | $43,800 | $8,901 | $34,899 | $35,800 | $5,180 | $30,620 | | Customer relationships | $9,790 | $2,233 | $7,557 | $9,540 | $1,406 | $8,134 | | Non-Compete agreements | $230 | $29 | $201 | - | - | - | | Total Amortizable | $53,820 | $11,163 | $42,657 | $45,340 | $6,586 | $38,754 | | Non-amortizable intangible assets: | | | | | | | | Trade names and trademarks | $30,100 | - | $30,100 | $30,100 | - | $30,100 | | Total Intangible Assets | $83,920 | $11,163 | $72,757 | $75,440 | $6,586 | $68,854 | Amortization Expense (in thousands) | Expense | 2020 | 2019 | | :------------ | :------ | :------ | | Amortization | $4,580 | $3,965 | - As of December 31, 2020, the weighted average remaining amortization period for intangible assets was 8.6 years402 NOTE 8 – FINANCING LIABILITY This note details financing liabilities arising from failed sale-leaseback arrangements and their future payment obligations - The company has financing liabilities from failed sale-leaseback arrangements for land, building, and improvements, with implied interest rates of 7.3% and 7.9%404405 Financing Liabilities, Net of Debt Discount (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :-------------------------------- | :----------- | :----------- | | Financing liability | $80,254 | $64,568 | | Debt discount | ($158) | ($75) | | Financing liability, net of debt discount | $80,096 | $64,493 | | Less: current portion | $1,462 | $936 | | Financing liability, non-current portion | $78,634 | $63,557 | Future Minimum Payments for Financing Liabilities (in thousands) | Years ending December 31, | Principal | Interest | Total Payments | | :------------------------ | :-------- | :------- | :------------- | | 2021 | $1,639 | $5,233 | $6,872 | | 2022 | $1,890 | $5,329 | $7,219 | | 2023 | $2,168 | $5,196 | $7,364 | | 2024 | $2,469 | $5,042 | $7,511 | | 2025 | $2,794 | $4,868 | $7,662 | | Thereafter | $56,513 | $34,792 | $91,305 | | Total | $67,473 | $60,460 | $127,933 | NOTE 9 – ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES This note provides a detailed breakdown of accounts payable, accrued expenses, and other current liabilities Accounts Payable, Accrued Expenses and Other Current Liabilities (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :---------------------------------------------- | :----------- | :----------- | | Accounts payable | $18,077 | $11,231 | | Other accrued expenses | $4,713 | $3,392 | | Customer deposits | $6,002 | $2,267 | | Accrued compensation | $4,311 | $2,388 | | Accrued charge-backs | $5,553 | $4,221 | | Accrued interest | $125 | $356 | | Total | $38,781 | $23,855 | NOTE 10 – LEASES This note outlines the company's lease accounting under ASC 842, including lease assets, liabilities, and maturities - The company adopted the new lease accounting standard (ASC 842) on January 1, 2020, recognizing operating lease assets and liabilities on the balance sheet409 - As of December 31, 2020, the weighted-average remaining lease term for operating leases was 5.2 years, and the weighted-average discount rate was 5.0%413 Maturities of Lease Liabilities (as of Dec 31, 2020, in thousands) | Maturity Date | Operating Leases | | :------------ | :--------------- | | 2021 | $3,838 | | 2022 | $3,520 | | 2023 | $3,317 | | 2024 | $2,586 | | 2025 | $1,939 | | Thereafter | $2,179 | | Total lease payments | $17,379 | | Less: Imputed Interest | $2,159 | | Present value of lease liabilities | $15,220 | - In March 2020, the company sold land for $4.9 million and entered into a lease agreement for a new dealership in Murfreesboro, TN, with lease payments commencing upon construction completion in Q1 2021416 NOTE 11 – DEBT This note details the company's debt obligations, including credit facilities, mortgages, and PPP loans - The company's $200 million Senior Secured Credit Facility with M&T Bank (M&T Facility), including a $175 million floor plan line of credit, a $20 million term loan, and a $5 million revolver, was extended to mature on June 15, 2021417425 - In March 2020, a $6.136 million M&T Mortgage was added for a Houston property, also maturing June 15, 2021419 - In April 2020, principal payments on the M&T Term Loan and Mortgage, and floorplan curtailment payments, were temporarily suspended (April 15 - June 15, 2020) due to COVID-19420 - The company received $8.7 million in PPP Loans in April/May 2020, bearing 1.0% interest, maturing in April/May 2022, and applied for loan forgiveness426 Long-Term Debt (in thousands) | Category | Gross Principal Amount (2020) | Debt Discount (2020) | Total Debt, Net of Debt Discount (2020) | Gross Principal Amount (2019) | Debt Discount (2019) | Total Debt, Net of Debt Discount (2019) | | :-------------------------------- | :---------------------------- | :------------------- | :-------------------------------------- | :---------------------------- | :------------------- | :-------------------------------------- | | Term loan and Mortgage | $18,758 | ($41) | $18,717 | $14,925 | ($47) | $14,878 | | Paycheck Protection Program Loans | $8,704 | - | $8,704 | - | - | - | | Acquisition notes payable | $5,185 | - | $5,185 | $6,688 | - | $6,688 | | Total long-term debt | $32,647 | ($41) | $32,606 | $21,613 | ($47) | $21,566 | | Less: current portion | $24,161 | - | $24,161 | $5,993 | - | $5,993 | | Long term debt, non-current | $8,486 | ($41) | $8,445 | $15,620 | ($47) | $15,573 | Future Maturities of Long Term Debt (in thousands) | Years ending December 31, | Amount | | :------------------------ | :------- | | 2021 | $24,161 | | 2022 | $5,824 | | 2023 | $1,844 | | 2024 | $396 | | 2025 | $422 | | Total | $32,647 | NOTE 12 – INCOME TAXES This note details the company's income tax expense, reconciliation of statutory rates, and deferred tax assets and liabilities Income Tax Expense (in thousands) | Category | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :-------- | :---------------------- | :---------------------- | | Current: | | | | Federal | $9,187 | $2,699 | | State | $2,536 | $664 | | Total Current | $11,723 | $3,363 | | Deferred: | | | | Federal | ($1,177) | ($1,746) | | State | ($182) | ($520)