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Lazydays Holdings(GORV) - 2020 Q2 - Quarterly Report

Filing Information - This is a Quarterly Report (Form 10-Q) for Lazydays Holdings, Inc. for the period ended June 30, 20202 - The registrant is a Delaware corporation, trading under the symbol LAZY on the NASDAQ Capital Market23 - The Company is classified as a Smaller Reporting Company and an Emerging Growth Company4 - As of July 29, 2020, there were 9,592,814 shares of common stock issued and outstanding5 PART I – FINANCIAL INFORMATION Item 1 – Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, cash flows, and key accounting notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 30, 2020 | December 31, 2019 | Change | % Change | | :--------------------------------------- | :-------------- | :------------------ | :------- | :--------- | | Assets | | | | | | Cash | $62,050 | $31,458 | $30,592 | 97.25% | | Receivables, net | $30,815 | $16,025 | $14,790 | 92.29% | | Inventories | $100,280 | $160,864 | $(60,584) | -37.66% | | Total current assets | $196,314 | $211,672 | $(15,358) | -7.26% | | Total assets | $414,722 | $406,636 | $8,086 | 1.99% | | Liabilities & Equity | | | | | | Accounts payable, accrued expenses | $31,553 | $23,855 | $7,698 | 32.27% | | Income taxes payable | $3,444 | $- | $3,444 | - | | Floor plan notes payable, net | $92,256 | $143,949 | $(51,693) | -35.91% | | Total current liabilities | $149,211 | $174,733 | $(25,522) | -14.61% | | Total liabilities | $266,359 | $270,313 | $(3,954) | -1.46% | | Total stockholders' equity | $84,142 | $75,430 | $8,712 | 11.55% | Condensed Consolidated Statements of Income Condensed Consolidated Statements of Income Highlights (Amounts in thousands, except per share data) | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change | % Change | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change | % Change | | :--------------------------------------- | :----------------------------- | :----------------------------- | :------- | :--------- | :----------------------------- | :----------------------------- | :------- | :--------- | | Total revenues | $213,961 | $168,546 | $45,415 | 26.95% | $404,815 | $341,603 | $63,212 | 18.51% | | Income from operations | $12,628 | $6,488 | $6,140 | 94.63% | $19,412 | $12,546 | $6,866 | 54.73% | | Net income | $8,068 | $1,858 | $6,210 | 334.23% | $11,055 | $3,702 | $7,353 | 198.62% | | Net income attributable to common stock | $6,384 | $333 | $6,051 | 1817.12% | $7,727 | $993 | $6,734 | 678.15% | | Basic and diluted income per share | $0.39 | $0.02 | $0.37 | 1850.00% | $0.48 | $0.06 | $0.42 | 700.00% | Condensed Consolidated Statement of Stockholders' Equity Stockholders' Equity Changes (January 1, 2020 - June 30, 2020, Amounts in thousands) | Item | Amount | | :-------------------------------------- | :------- | | Balance at January 1, 2020 | $75,430 | | Stock-based compensation | $1,020 | | Repurchase of Treasury Stock | $(185) | | Dividends on Series A preferred stock | $(3,328) | | Net income | $11,055 | | Balance at June 30, 2020 | $84,142 | - The Company did not declare and pay the dividend on Series A Preferred Stock for the six months ended June 30, 2020, resulting in the amount being added to the carrying value and the dividend rate increasing to 10%110 Condensed Consolidated Statements of Cash Flows Condensed Consolidated Cash Flow Highlights (Six Months Ended June 30, Amounts in thousands) | Cash Flow Activity | 2020 | 2019 | Change | % Change | | :--------------------------------- | :------- | :------- | :------- | :--------- | | Net Cash Provided By Operating Activities | $83,610 | $59,047 | $24,563 | 41.60% | | Net Cash Used In Investing Activities | $(765) | $(5,899) | $5,134 | -87.03% | | Net Cash Used In Financing Activities | $(52,253) | $(49,599) | $(2,654) | 5.35% | | Net Increase In Cash | $30,592 | $3,549 | $27,043 | 761.99% | | Cash - Ending | $62,050 | $30,152 | $31,898 | 105.79% | - Operating cash flow increase was primarily driven by a $71.3 million decrease in inventories in 2020, compared to a $49.0 million decrease in 2019199 - Investing activities in 2020 included $4.9 million from a sale-leaseback in Nashville, offset by $3.0 million in property and equipment purchases and $2.7 million for acquisitions200 - Financing activities in 2020 were mainly net repayments of $63.1 million on the M&T Floor Plan Line of Credit, partially offset by $5.0 million from a new M&T mortgage and $8.7 million from PPP loans201 Notes to Condensed Consolidated Financial Statements Note 1 – Business Organization and Nature of Operations - Lazydays Holdings, Inc. was formed on October 24, 2017, and consummated mergers on March 15, 2018, to become a public company23 - Operates recreational vehicle (RV) dealerships in eight locations across Florida, Colorado, Arizona, Tennessee, and Minnesota, plus a dedicated service center near Houston, Texas24 - Sells new and pre-owned RVs, related parts and accessories, and offers ancillary services such as overnight campground and restaurant facilities, financing, and extended service contracts24 Note 2 – Significant Accounting Policies - Financial statements are prepared in accordance with GAAP and SEC rules, with all necessary adjustments included25 - The Company adopted ASC 606 (Revenue Recognition) at the beginning of Q1 2019 using the modified retrospective method, identifying no customer contracts requiring different recognition30 Disaggregation of Revenue (Amounts in thousands) | Revenue Type | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | New vehicle revenue | $129,398 | $94,234 | $231,842 | $192,046 | | Preowned vehicle revenue | $62,107 | $54,812 | $126,851 | $109,634 | | Parts, accessories, and related services | $9,165 | $8,731 | $19,930 | $17,506 | | Finance and insurance revenue | $12,763 | $9,537 | $24,035 | $19,252 | | Campground, rental, and other revenue | $528 | $1,232 | $2,157 | $3,165 | | Total revenues | $213,961 | $168,546 | $404,815 | $341,603 | - Inventories are recorded at the lower of cost or net realizable value using the last-in, first-out (LIFO) method36 - The Company adopted the new lease standard (ASC 842) on January 1, 2020, recognizing approximately $17.8 million in operating lease assets and liabilities, with no material impact on income or cash flow statements5758 - The magnitude and duration of the COVID-19 pandemic and its impact on the Company's operations and liquidity are uncertain as of the report date51 Note 3 – Business Combination - The Company acquired Alliance Coach Inc. on August 1, 2019, and Korges Enterprises, Inc. (Phoenix, AZ) on May 19, 2020, accounting for both as business combinations6364 Net Assets Acquired in Business Combinations (Amounts in thousands) | Item | 2020 | 2019 | | :------------------------------------------ | :------- | :------- | | Inventories | $10,742 | $12,171 | | Accounts receivable and prepaid expenses | $905 | $53 | | Property and equipment | $202 | $77 | | Intangible assets | $2,760 | $2,630 | | Total assets acquired | $14,609 | $14,931 | | Total liabilities assumed | $12,041 | $11,677 | | Net assets acquired | $2,568 | $3,254 | - Goodwill recognized from these transactions was $181 thousand in 2020 and $2,252 thousand in 201966 - Acquisitions contributed approximately $19.7 million in revenue and $1.456 million in net income (pre-tax) for Q2 2020, and $33.69 million in revenue and $2.197 million in net income (pre-tax) for H1 202067 Note 4 – Inventories Inventory Composition (Amounts in thousands) | Inventory Type | June 30, 2020 | December 31, 2019 | | :-------------------------- | :-------------- | :------------------ | | New recreational vehicles | $72,386 | $124,096 | | Pre-owned recreational vehicles | $27,591 | $36,639 | | Parts, accessories and other | $3,973 | $3,848 | | Less: excess of current cost over LIFO | $(3,670) | $(3,719) | | Total Inventories | $100,280 | $160,864 | Note 5 – Accounts Payable, Accrued Expenses and Other Current Liabilities Accounts Payable, Accrued Expenses and Other Current Liabilities (Amounts in thousands) | Liability Type | June 30, 2020 | December 31, 2019 | | :------------------------------------------ | :-------------- | :------------------ | | Accounts payable | $13,768 | $11,231 | | Other accrued expenses | $5,227 | $3,392 | | Customer deposits | $3,723 | $2,267 | | Accrued compensation | $3,552 | $2,388 | | Accrued charge-backs | $5,150 | $4,221 | | Accrued interest | $133 | $356 | | Total | $31,553 | $23,855 | Note 6 – Leases - The Company leases property and equipment primarily under operating leases, with renewal terms extending up to 20 years7475 - As of June 30, 2020, the weighted-average remaining lease term for operating leases was 6.5 years, and the weighted-average discount rate was 5.0%77 Maturities of Lease Liabilities (As of June 30, 2020, Amounts in thousands) | Maturity Date | Operating Leases | | :---------------------------------- | :--------------- | | Remaining six months ending Dec 31, 2020 | $2,288 | | 2021 | $4,305 | | 2022 | $3,940 | | 2023 | $3,812 | | 2024 | $3,091 | | Thereafter | $7,018 | | Total lease payments | $24,454 | | Less: Imputed Interest | $3,674 | | Present value of lease liabilities | $20,780 | - On May 19, 2020, a new finance lease for the Korges acquisition property resulted in a $4.015 million right-of-use asset and offsetting financing liability77 - On March 10, 2020, the Company agreed to sell land for $4.921 million and entered into a lease agreement for the property, with payments commencing upon construction completion (expected Q4 2020)79 Note 7 – Debt - The Company has a $200 million Senior Secured Credit Facility with M&T Bank, maturing March 15, 2021, comprising a Floor Plan Facility ($175M), a Term Loan ($20M), and a Revolving Credit Facility ($5M)80 - On March 6, 2020, a Third Amendment added a mortgage loan credit facility for up to $6.136 million for a Houston property, with a balance of $5.006 million as of June 30, 202082 - A Fourth Amendment on April 15, 2020, suspended scheduled principal payments on term and mortgage loans and floor plan curtailment payments from April 15 to June 15, 2020, due to the COVID-19 pandemic83 M&T Floor Plan Line of Credit (Amounts in thousands) | Item | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :-------------- | :------------------ | | Floor plan notes payable, gross | $92,398 | $144,133 | | Debt discount | $(142) | $(184) | | Floor plan notes payable, net | $92,256 | $143,949 | - As of June 30, 2020, $14.2 million was outstanding under the M&T Term Loan (interest rate 2.6875%), and there were no outstanding borrowings under the M&T Revolver8788 - Subsidiaries received PPP Loans totaling approximately $8.7 million in April/May 2020, bearing 1.0% interest, maturing in April/May 2022, with potential for forgiveness based on qualifying expenses89 Note 8 – Income Taxes Income Tax Expense and Effective Tax Rates | Period | Income Tax Expense (in thousands) | Effective Tax Rate | | :-------------------------------- | :------------------------------ | :----------------- | | 3 Months Ended June 30, 2020 | $2,536 | 25% | | 3 Months Ended June 30, 2019 | $2,099 | 53% | | 6 Months Ended June 30, 2020 | $3,836 | 27% | | 6 Months Ended June 30, 2019 | $3,284 | 47% | - Effective tax rates differ from the federal statutory rate of 21% primarily due to local and state income tax rates and the non-deductibility of stock-based compensation expense92 Note 9 – Commitments and Contingencies - Employment agreements for the CEO and CFO include base salaries ($540k and $325k, respectively), annual cash bonuses (100% and 75% target), and stock option grants9395 - Senior management temporarily reduced salaries by 25% in April 2020 due to COVID-19, resuming normal salaries in late May 202096 - Non-employee directors receive annual cash compensation for board and committee service97 - The Company is involved in ordinary course legal proceedings, not expected to have a material adverse effect, but outcomes are uncertain98 Note 10 – Preferred Stock - Issued 600,000 shares of Series A Preferred Stock for $60 million in March 2018, ranking senior to all outstanding stock99100 - Series A Preferred Stock accrues dividends at an initial rate of 8% per annum, compounded quarterly, increasing to 11% if senior indebtedness leverage ratio exceeds 2.25x EBITDA101 - The Company's board did not declare a dividend payment of $1.684 million for the six months ended June 30, 2020, leading to the dividend rate increasing to 10%110 - Holders have conversion rights (initial price $10.0625/share), redemption rights (after 9th anniversary), and the right to designate two board members100102104 - Five-year warrants to purchase 596,273 common shares at an exercise price of $11.50 per share were issued in conjunction with the Series A Preferred Stock105 Note 11 – Stockholders' Equity - The 2018 Long-Term Incentive Equity Plan (amended in 2019) reserves up to 18% of fully diluted common stock for awards, with 424,557 shares available as of June 30, 2020112 - The 2019 Employee Stock Purchase Plan (ESPP) reserved 900,000 shares, allowing participants to purchase shares at a discount114 Warrants Outstanding (As of June 30, 2020) | Item | Shares Underlying Warrants | Weighted Average Exercise Price | | :-------------------------------- | :------------------------- | :------------------------------ | | Warrants outstanding January 1, 2020 | 4,677,458 | $11.50 | | Warrants outstanding June 30, 2020 | 4,677,458 | $11.50 | - Excludes 1,339,499 perpetual non-redeemable prefunded warrants with an exercise price of $0.01 per share115 Stock Option Activity (As of June 30, 2020) | Item | Shares Underlying Options | Weighted Average Exercise Price | | :-------------------------------- | :------------------------ | :------------------------------ | | Options outstanding at January 1, 2020 | 3,798,818 | $10.63 | | Granted | 380,000 | $8.26 | | Cancelled or terminated | (178,809) | $(10.47) | | Options outstanding at June 30, 2020 | 4,000,009 | $10.41 | - Total unrecorded compensation cost related to all non-vested awards was $1.699 million as of June 30, 2020, expected to be amortized over approximately 2.62 years127 Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of financial condition and operational results for Q2 and H1 2020, covering revenue, KPIs, COVID-19 impact, liquidity, and capital resources Forward Looking Statements - Statements in this report, other than historical facts, are forward-looking and involve risks, uncertainties, and assumptions that could cause actual results to differ materially128 - Key risk factors include availability of financing, dependence on manufacturers, supply chain disruptions, general economic conditions, competition, expansion risks, inventory management, seasonality, debt obligations, LIBOR uncertainty, natural disasters, third-party provider relationships, fuel prices, employee retention, lease agreements, regulatory compliance, intellectual property, IT systems, wage levels, product liability, litigation, and the significant adverse impact of the COVID-19 pandemic129130131 Business Overview - Lazydays Holdings, Inc. operates RV dealerships, offering RV sales, repair, services, financing, insurance, parts, accessories, and camping facilities under the 'The RV Authority®' brand136 - Operates the world's largest RV dealership in Tampa, Florida, and other locations in Florida, Arizona, Minnesota, Tennessee, Colorado, and a service center in Texas137 - Features over 3,000 new and pre-owned RVs, more than 400 service bays, and two on-site campgrounds137 Recent Developments - On March 10, 2020, the Company agreed to sell land for approximately $5 million and entered into a lease agreement for the property140 - On May 19, 2020, completed the acquisition of Korges Enterprises, Inc. (Desert Autoplex RV) in Phoenix, Arizona, for approximately $4 million cash and assumption of $11.6 million floorplan debt141 - COVID-19 initially impacted demand in late March and April 2020, leading to workforce reduction (25%), temporary senior management salary cuts, suspension of pay increases and 401k match, and delay of non-critical capital projects142145 - Customer demand rebounded in May and June 2020, and senior management resumed normal salaries in late May, with 401k match reinstated in late June142203 - Entered Fourth Amendment to M&T credit agreement on April 16, 2020, suspending principal payments on term and mortgage loans and floor plan curtailment payments from April 15 to June 15, 2020143 - Received approximately $8.7 million in PPP Loans under the CARES Act, bearing 1.0% interest, with potential for forgiveness144 How The Company Generates Revenue - Revenues are primarily derived from sales of new and pre-owned RVs, with other revenue from parts, service, financing, insurance, and campground facilities147 Revenue Contribution by Category | Revenue Category | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | New vehicles | 60.5% | 55.9% | 57.3% | 56.2% | | Pre-owned vehicles | 29.0% | 32.5% | 31.3% | 32.1% | | Other | 10.5% | 11.6% | 11.4% | 11.7% | | Total | 100.0% | 100.0% | 100.0% | 100.0% | - New and pre-owned RV sales consistently accounted for approximately 88-90% of total revenues147 Key Performance Indicators - Gross profit (excluding depreciation and amortization) for Q2 2020 was $44.0 million (20.5% margin), up from $35.5 million (21.0% margin) in Q2 2019. For H1 2020, it was $85.4 million (21.1% margin), up from $72.4 million (21.2% margin) in H1 2019149 - SG&A as a percentage of gross profit (excluding transaction costs, depreciation, amortization, and stock-based compensation) improved to 64.3% in Q2 2020 from 70.9% in Q2 2019, and to 69.5% in H1 2020 from 71.3% in H1 2019, reflecting improved operating leverage and cost reductions152 - Adjusted EBITDA is a key non-GAAP measure used to evaluate financial performance, reflecting operating drivers and capacity to fund capital expenditures and expansion153154156 Results of Operations (Three Months Ended June 30, 2020 vs. 2019) - Total revenue increased by $45.5 million (26.9%) to $214.0 million, driven by new and pre-owned vehicle sales159 - New vehicle revenue increased by $35.2 million (37.3%) due to a rise in units sold (1,312 to 1,845), despite a decrease in average selling price ($71,300 to $69,500)161 - Pre-owned vehicle revenue increased by $7.3 million (13.3%) due to more units sold (780 to 1,105), partially offset by a lower average revenue per unit ($62,900 to $52,700)162 - Other revenue increased by $3.0 million (15.2%) to $22.5 million, primarily due to a $3.3 million (33.8%) increase in finance and insurance revenue from higher penetration rates and per-unit revenue in extended warranty products163164 - Campground and miscellaneous revenue decreased by $0.7 million due to the discontinuance of RV rentals in 2019165 - Gross profit increased by $8.5 million (23.9%) to $44.0 million, with new and pre-owned vehicle gross profit up 31.2% and other gross profit up 13.6%166167168 - SG&A expenses increased by $3.1 million (12.4%) to $28.3 million, due to overhead from new dealerships and increased performance wages, partially offset by a $0.8 million decrease in stock-based compensation169 - Interest expense decreased by $0.5 million to $2.0 million due to more favorable interest rates and an interest reduction equity account170 Results of Operations (Six Months Ended June 30, 2020 vs. 2019) - Total revenue increased by $63.2 million (18.5%) to $404.8 million, driven by new and pre-owned vehicle sales175 - New vehicle revenue increased by $39.8 million (20.7%) due to a rise in units sold (2,529 to 3,212), despite a decrease in average selling price ($75,500 to $71,600)177 - Pre-owned vehicle revenue increased by $17.3 million (15.7%) due to more units sold (1,537 to 2,151), partially offset by a lower average revenue per unit ($64,100 to $55,800)178 - Other revenue increased by $6.2 million (15.5%) to $46.1 million, primarily due to a $4.7 million (24.8%) increase in finance and insurance revenue179180 - Campground and miscellaneous revenue decreased by $1.0 million due to the discontinuance of RV rentals in 2019181 - Gross profit increased by $13.0 million (18.0%) to $85.4 million, with new and pre-owned vehicle gross profit up 20.7% and other gross profit up 14.1%182183184 - SG&A expenses increased by $7.8 million (15.1%) to $59.4 million, due to overhead from new dealerships and increased performance wages, partially offset by a $1.6 million decrease in stock-based compensation185 - Interest expense decreased by $1.1 million to $4.5 million due to more favorable interest rates and an interest reduction equity account186 Non-GAAP Financial Measures (EBITDA & Adjusted EBITDA) - EBITDA and Adjusted EBITDA are non-GAAP measures used by management and the industry to evaluate financial performance, operating results, and capacity to fund capital expenditures188153154156 EBITDA and Adjusted EBITDA Reconciliation (Three Months Ended June 30, Amounts in thousands) | Metric | 2020 | 2019 | | :------------------------------------------ | :------- | :------- | | Net income | $8,068 | $1,858 | | Interest expense, net | $2,018 | $2,531 | | Depreciation and amortization of property and equipment | $1,624 | $1,687 | | Amortization of intangible assets | $1,047 | $953 | | Income tax expense | $2,536 | $2,099 | | Subtotal EBITDA | $15,293 | $9,128 | | Floor plan interest | $(565) | $(1,049) | | LIFO adjustment | $(239) | $359 | | Transaction costs | $45 | $87 | | Loss on sale of property and equipment | $6 | $- | | Severance costs/Other | $- | $272 | | Stock-based compensation | $340 | $1,112 | | Adjusted EBITDA | $14,880 | $9,909 | EBITDA and Adjusted EBITDA Reconciliation (Six Months Ended June 30, Amounts in thousands) | Metric | 2020 | 2019 | | :------------------------------------------ | :------- | :------- | | Net income | $11,055 | $3,702 | | Interest expense, net | $4,513 | $5,558 | | Depreciation and amortization of property and equipment | $3,213 | $3,428 | | Amortization of intangible assets | $2,095 | $1,907 | | Income tax expense | $3,836 | $3,284 | | Subtotal EBITDA | $24,712 | $17,879 | | Floor plan interest | $(1,595) | $(2,518) | | LIFO adjustment | $435 | $606 | | Transaction costs | $301 | $315 | | Loss on sale of property and equipment | $8 | $2 | | Severance costs/Other | $- | $429 | | Stock-based compensation | $1,020 | $2,626 | | Adjusted EBITDA | $24,881 | $19,339 | Liquidity and Capital Resources Cash Flow Summary Cash Flow Summary (Six Months Ended June 30, Amounts in thousands) | Cash Flow Activity | 2020 | 2019 | | :--------------------------------- | :------- | :------- | | Net cash provided by operating activities | $83,610 | $59,047 | | Net cash used in investing activities | $(765) | $(5,899) | | Net cash used in financing activities | $(52,253) | $(49,599) | | Net increase in cash | $30,592 | $3,549 | Funding Needs and Sources - The Company expects existing cash, M&T Facility funds, PPP Loans, and operating cash flow to be sufficient to fund necessary capital expenditures and operating cash requirements for at least the next twelve months202 - As of June 30, 2020, liquidity included approximately $62.1 million in cash and $47.1 million in working capital204 - Capital expenditures were approximately $3.0 million for H1 2020, down from $5.9 million for H1 2019204 - The Company maintains a floor plan credit facility to finance vehicle inventory and uses internally generated cash flow and borrowings for operations205 M&T Credit Facility - The $200 million M&T Senior Secured Credit Facility, maturing March 15, 2021, includes a $175 million Floor Plan Line of Credit, a $20 million Term Loan, and a $5 million Revolver207 - As of June 30, 2020, $92.4 million was outstanding under the Floor Plan Line of Credit, $14.2 million under the Term Loan, and $5.0 million on the M&T Mortgage212 - The Fourth Amendment (April 16, 2020) temporarily suspended principal payments on term and mortgage loans and floor plan curtailment payments from April 1 to June 15, 2020, due to COVID-19213 Other Financial Considerations - No significant changes in contractual and commercial commitments during the six months ended June 30, 2020214 - No off-balance sheet arrangements as of June 30, 2020215 - Inflation has not had, and is not likely to have, a material impact on the results of operations216 - RV unit sales are cyclical, fluctuating with general economic cycles and influenced by consumer confidence, discretionary spending, fuel prices, interest rates, and credit availability217 - Operations are seasonal, with modestly higher vehicle sales in the first half of each year, particularly in Florida during winter and northern locations during spring218 - Geographic concentration in Florida and Colorado increases exposure to adverse developments related to competition, economic, demographic, and weather changes in these regions50 Critical Accounting Policies and Estimates - Financial statements require management estimates and assumptions affecting reported amounts of assets, liabilities, revenues, and expenses220 - Updates to revenue recognition (ASC 606) and lease accounting (ASC 842) policies are noted, with no other material changes from the 2019 Form 10-K221 Item 3 – Quantitative and Qualitative Disclosures about Market Risk This item is not applicable as the Company has elected scaled disclosure requirements for smaller reporting companies Item 4 – Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective as of June 30, 2020223 - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2020224 PART II – OTHER INFORMATION Item 1 – Legal Proceedings The Company is involved in ordinary course legal proceedings, not expected to materially adversely affect financial condition or operations - The Company is a party to multiple legal proceedings arising in the ordinary course of business225 - 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 flows, though outcomes are uncertain225 Item 1A – Risk Factors Updates risk factors, highlighting the significant adverse impact and ongoing uncertainty of COVID-19, despite recent sales improvements - The COVID-19 pandemic has had a significant adverse impact on the business, results of operations, and financial condition, with initial declines in sales and service capacity228 - Despite significant improvement in sales of new and pre-owned vehicles starting in May 2020, there is no assurance this growth will continue, and sales may ultimately decline229 - The long-term effects of COVID-19 could result in a net negative impact, potentially requiring additional financing and posing risks to liquidity if sales trends reverse228229 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds Details common stock repurchases under a $4.0 million program authorized in November 2019, with activity for early 2020 - The Board of Directors authorized a stock repurchase program of up to $4.0 million of common stock, effective through December 31, 2020230 Stock Repurchase Activity (January 1, 2020 - April 30, 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--------------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------ | | January 1, 2020 - January 31, 2020 | 1,000 | $4.28 | 79,000 | $3,682.00 | | February 1, 2020 - February 29, 2020 | 12,405 | $4.22 | 91,405 | $3,630.00 | | March 1, 2020 - March 31, 2020 | 31,324 | $2.81 | 122,729 | $3,541.00 | | April 1, 2020 - April 30, 2020 | 18,570 | $2.15 | 141,299 | $3,502.00 | Item 3 – Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported231 Item 4 – Mine Safety Disclosures No mine safety disclosures were applicable - No mine safety disclosures were applicable232 Item 5 – Other Information No other information was reported in this section - No other information was reported233 Item 6 – Exhibits Lists exhibits filed with the Form 10-Q, including credit agreement amendments and CEO/CFO certifications - Exhibits include the Third and Fourth Amendments to the Credit Agreement with M&T Bank, and certifications from the CEO and CFO234 Signatures - The report was signed by William P. Murnane (Chief Executive Officer) and Nicholas J. Tomashot (Chief Financial Officer) on July 31, 2020239