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Lazydays Holdings(GORV) - 2020 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents Lazydays Holdings, Inc.'s unaudited condensed consolidated financial statements, encompassing balance sheets, income, equity, and cash flow statements, along with comprehensive accounting notes Item 1 – Financial Statements This section presents Lazydays Holdings, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, equity, cash flows, and detailed notes on accounting policies and financial items Condensed Consolidated Balance Sheets This section presents the company's financial position at specific dates, detailing assets, liabilities, and equity ASSETS (in thousands) | ASSETS (in thousands) | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :---------------------- | :----------------------- | :----------- | | Cash | $81,654 | $31,458 | | Receivables, net | $20,697 | $16,025 | | Inventories | $71,546 | $160,864 | | Total current assets | $176,759 | $211,672 | | Property and equipment, net | $95,337 | $86,876 | | Operating lease assets | $16,283 | $- | | Goodwill | $40,742 | $38,979 | | Total assets | $397,905 | $406,636 | LIABILITIES & EQUITY (in thousands) | LIABILITIES & EQUITY (in thousands) | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :---------------------------------- | :----------------------- | :----------- | | Accounts payable, accrued expenses | $37,373 | $23,855 | | Floor plan notes payable, net | $59,150 | $143,949 | | Long-term debt, current portion | $23,468 | $5,993 | | Total current liabilities | $137,808 | $174,733 | | Total liabilities | $248,707 | $270,313 | | Total stockholders' equity | $94,215 | $75,430 | | Total liabilities and stockholders' equity | $397,905 | $406,636 | - Cash significantly increased from $31.46 million at December 31, 2019, to $81.65 million at September 30, 2020, while inventories decreased from $160.86 million to $71.55 million over the same period. Total current liabilities decreased, primarily driven by a substantial reduction in floor plan notes payable912 Condensed Consolidated Statements of Income This section details the company's financial performance over specific periods, including revenues, costs, and net income Income Statement (in thousands) | Income Statement (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $215,723 | $158,402 | $620,538 | $500,005 | | Total cost applicable to revenue| $166,381 | $127,858 | $485,770 | $397,036 | | Income from operations | $17,532 | $763 | $36,944 | $13,309 | | Income before income tax expense| $15,783 | $(1,545) | $30,674 | $5,441 | | Net income (loss) | $11,599 | $(2,486) | $22,654 | $1,216 | | Net income attributable to common stock and participating securities | $9,854 | $(4,067) | $17,581 | $(3,074) | | Basic and diluted EPS | $0.55 | $(0.41) | $1.00 | $(0.31) | - For the three months ended September 30, 2020, total revenues increased by 36.2% YoY to $215.7 million, and net income significantly improved from a loss of $2.49 million to a profit of $11.60 million. Basic and diluted EPS turned positive at $0.55, compared to $(0.41) in the prior year14 - For the nine months ended September 30, 2020, total revenues increased by 24.1% YoY to $620.5 million, and net income rose substantially from $1.22 million to $22.65 million. Basic and diluted EPS improved to $1.00, up from $(0.31) in the prior year14 Condensed Consolidated Statement of Stockholders' Equity This section outlines changes in the company's equity over time, including common stock, retained earnings, and total equity Stockholders' Equity (in thousands) | Stockholders' Equity (in thousands) | Balance at Jan 1, 2020 | Balance at Sep 30, 2020 | | :---------------------------------- | :--------------------- | :---------------------- | | Common Stock Shares | 8,506,666 | 9,593,150 |\ | Treasury Stock Amount | $(314) | $(499) |\ | Additional Paid-In Capital | $79,186 | $78,931 |\ | Retained Earnings (Accumulated Deficit) | $(3,442) | $15,783 |\ | Total Stockholders' Equity | $75,430 | $94,215 | - Total stockholders' equity increased from $75.43 million at January 1, 2020, to $94.22 million at September 30, 2020, primarily driven by net income of $22.65 million and stock-based compensation, partially offset by dividends on Series A preferred stock and treasury stock repurchases1514 Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flows (in thousands) | Cash Flows (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided By Operating Activities | $141,901 | $66,756 | | Net Cash Used In Investing Activities | $(7,005) | $(10,438) | | Net Cash Used In Financing Activities | $(84,700) | $(49,390) | | Net Increase In Cash | $50,196 | $6,928 | | Cash - Ending | $81,654 | $33,531 | - Net cash provided by operating activities more than doubled to $141.90 million for the nine months ended September 30, 2020, from $66.76 million in the prior year, largely due to a significant decrease in inventories. Net cash used in financing activities increased to $84.70 million, primarily due to net repayments under the M&T bank floor plan19207209 NOTE 1 – Business Organization and Nature of Operations This note describes the company's formation, operational structure, and the nature of its recreational vehicle dealership business - Lazydays Holdings, Inc. was formed on October 24, 2017, and consummated a business combination (Mergers) on March 15, 2018, with Lazydays RV becoming a wholly-owned subsidiary23 - Lazydays RV operates recreational vehicle dealerships in eight locations across Florida, Colorado, Arizona, Tennessee, and Minnesota, and a dedicated service center near Houston, Texas, which opened in February 202024 - The company sells and services new and pre-owned RVs, related parts and accessories, and offers ancillary services like campground and restaurant facilities, as well as arranging financing and extended service contracts through third parties24 NOTE 2 – Significant Accounting Policies This note outlines the key accounting principles and estimation methods used in preparing the financial statements - The financial statements are prepared in accordance with GAAP and SEC rules, using estimates for valuations of acquired assets, goodwill, intangible assets, inventory write-downs, doubtful accounts, and stock-based compensation2528 - Revenue is recognized when control of goods or services is transferred to customers, with vehicle sales recognized at delivery and title transfer, and parts/services recognized upon delivery or customer approval3132 Revenue Disaggregation (in thousands) | Revenue Disaggregation (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | New vehicle revenue | $130,297 | $86,814 | $362,139 | $278,860 | | Preowned vehicle revenue | $64,255 | $52,047 | $191,106 | $161,681 | | Parts, accessories, and related services | $9,470 | $8,813 | $29,400 | $26,319 | | Finance and insurance revenue | $11,073 | $9,253 | $35,108 | $28,505 | | Campground, rental, and other revenue | $628 | $1,475 | $2,785 | $4,640 | | Total | $215,723 | $158,402 | $620,538 | $500,005 | - The company adopted the new lease standard (ASC 842) on January 1, 2020, recognizing operating lease assets and liabilities of approximately $17.8 million each, with no material impact on the income statement or cash flows5859 - The company completed the acquisition of Total Value Recreation Vehicles of Indiana, Inc. on October 6, 2020, which included a cash payment, assumption of floorplan debt, and acquisition of an adjoining land parcel64 NOTE 3 – Business Combination This note details the company's recent acquisitions, including the assets acquired and their financial contributions - The Company completed the acquisition of Korges Enterprises, Inc. (Phoenix, AZ) on May 19, 2020, for cash and assumed floorplan debt, and Alliance Coach Inc. on August 1, 2019, for cash and a note payable6667 Net Assets Acquired (in thousands) | Net Assets Acquired (in thousands) | 2020 (Korges) | 2019 (Alliance) | | :--------------------------------- | :------------ | :-------------- | | Inventories | $10,742 | $12,171 | | 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 | $181 | $2,252 | - Acquisitions contributed $27.72 million in revenue and $1.88 million in net income before taxes for the three months ended September 30, 2020, and $61.41 million in revenue and $4.08 million in net income before taxes for the nine months ended September 30, 202070 NOTE 4 – Inventories This note provides a breakdown of the company's inventory composition and changes over time Inventories (in thousands) | Inventories (in thousands) | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :------------------------- | :----------------------- | :----------- | | New recreational vehicles | $50,587 | $124,096 | | Pre-owned recreational vehicles | $19,060 | $36,639 | | Parts, accessories and other | $4,138 | $3,848 | | Total | $71,546 | $160,864 | - Total inventories decreased significantly from $160.86 million at December 31, 2019, to $71.55 million at September 30, 2020, primarily driven by a reduction in new recreational vehicle inventory74 NOTE 5 – Accounts Payable, Accrued Expenses and Other Current Liabilities This note details the composition of the company's current liabilities, including accounts payable and various accrued expenses Current Liabilities (in thousands) | Current Liabilities (in thousands) | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--------------------------------- | :----------------------- | :----------- | | Accounts payable | $15,465 | $11,231 | | Other accrued expenses | $7,419 | $3,392 | | Customer deposits | $3,693 | $2,267 | | Accrued compensation | $4,744 | $2,388 | | Accrued charge-backs | $5,989 | $4,221 | | Accrued interest | $63 | $356 | | Total | $37,373 | $23,855 | - Total accounts payable, accrued expenses, and other current liabilities increased by $13.52 million to $37.37 million at September 30, 2020, from $23.86 million at December 31, 2019, with notable increases in accounts payable, other accrued expenses, customer deposits, and accrued compensation75 NOTE 6 – Leases This note describes the company's lease accounting policies and the financial impact of its operating lease arrangements - The Company adopted a new lease accounting standard on January 1, 2020, recognizing operating lease assets and liabilities on the balance sheet76 - As of September 30, 2020, the weighted-average remaining lease term for operating leases was 5.4 years with a weighted-average discount rate of 5.0%80 Lease Liabilities Maturities (in thousands) | Lease Liabilities Maturities (in thousands) | Operating Leases | | :---------------------------------------- | :--------------- | | Remaining three months ending Dec 31, 2020 | $988 | | 2021 | $3,838 | | 2022 | $3,520 | | 2023 | $3,317 | | 2024 | $2,586 | | Thereafter | $4,118 | | Total lease payments | $18,367 | | Less: Imputed Interest | $2,362 | | Present value of lease liabilities | $16,005 | NOTE 7 – Debt This note provides details on the company's debt instruments, including credit facilities, loans, and their maturity dates - The Company's $200 million Senior Secured Credit Facility with M&T Bank, comprising a Floor Plan Facility, Term Loan, and Revolving Credit Facility, matures on March 15, 202183 - As of September 30, 2020, outstanding balances included $59.3 million under the M&T Floor Plan Line of Credit, $13.5 million under the M&T Term Loan, and $6.1 million on the M&T Mortgage8990221 - In response to COVID-19, the Company received $8.7 million in PPP Loans with a 1.0% interest rate, maturing in April/May 2022, and negotiated temporary suspensions of principal payments on term and mortgage loans from April 15, 2020, through June 15, 20209286 NOTE 8 – Income Taxes This note presents the company's income tax expense and effective tax rates, explaining any significant differences from statutory rates Income Tax Expense (in thousands) | Income Tax Expense (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax expense | $4,184 | $941 | $8,020 | $4,225 | | Effective tax rate | 26% | (61%) | 26% | 77% | - The effective tax rates for the three and nine months ended September 30, 2020, were approximately 26%, differing from the federal statutory rate of 21% primarily due to local and state income taxes and non-deductible stock-based compensation9495 NOTE 9 - Commitments and Contingencies This note outlines the company's contractual commitments, including executive compensation agreements and ongoing legal proceedings - The CEO's employment agreement includes an initial base salary of $540,000 and a target annual cash bonus of 100% of base salary, with severance provisions for termination without cause or resignation for good reason9697 - The CFO's offer letter provides an initial base salary of $325,000, a target annual cash bonus of 75% of base salary, and twelve months of base salary as severance if terminated without cause98 - Senior management temporarily reduced their salaries by 25% from April to late May 2020 due to the COVID-19 pandemic, resuming normal salaries as sales improved99 - The Company is involved in multiple legal proceedings in the ordinary course of business but does not anticipate a material adverse effect on its financial condition101 NOTE 10 – Preferred Stock This note describes the terms and conditions of the company's Series A Convertible Preferred Stock, including dividends and conversion rights - The Company issued 600,000 shares of Series A Convertible Preferred Stock for $60 million in a private placement on March 15, 2018, which ranks senior to common stock and carries an initial 8% annual dividend rate, compounded quarterly102104 - Holders of Series A Preferred Stock have voting rights on an as-converted basis and the right to designate two board members. The stock is convertible at the holder's election at an initial price of $10.0625 per share, with accrued dividends payable in cash or common stock103107 - The Company declared a dividend payment of $10.98 million on Series A Preferred Stock for the nine months ended September 30, 2020, which was paid on October 7, 2020, returning the dividend rate to 8% effective October 1, 2020113 NOTE 11 – Stockholders' Equity This note details the company's capital structure, including authorized shares, equity plans, and stock option activity - The Company is authorized to issue 100 million shares of common stock and 5 million shares of preferred stock. Common stockholders have one vote per share, while Series A Preferred Stockholders vote on an as-converted basis114 - The 2018 Long-Term Incentive Equity Plan reserves up to 18% of fully diluted common stock for awards, with 274,557 shares available as of September 30, 2020115 - The 2019 Employee Stock Purchase Plan (ESPP) reserved 900,000 shares, allowing participants to purchase common stock at a discount, resulting in $14 thousand and $85 thousand in stock-based compensation for the three and nine months ended September 30, 2020, respectively117 Stock Options Activity | Stock Options Activity | Options outstanding at Jan 1, 2020 | Options outstanding at Sep 30, 2020 | | :--------------------- | :--------------------------------- | :---------------------------------- | | Shares Underlying Options | 3,798,818 | 4,143,759 | | Weighted Average Exercise Price | $10.63 | $10.56 | | Weighted Average Remaining Contractual Life | N/A | 2.91 years | | Aggregate Intrinsic Value | N/A | $9,066 | Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting the impact of COVID-19, revenue generation, key performance indicators, liquidity, and debt structure Forward Looking Statements This section outlines the inherent uncertainties and risks that could affect the company's future financial performance and operational outcomes - The Company's business is significantly impacted by the availability of financing for both the company and its customers, general economic conditions, and consumer spending levels131 - Key risks include dependence on manufacturer reputation (Tiffin, Thor, Winnebago, Forest River), potential disruptions in supply arrangements, and the cyclical and seasonal nature of the RV business131132 - The COVID-19 pandemic initially had a significant adverse impact, but increased sales since May 2020 have offset this; however, there's no assurance this growth will continue, and long-term effects could still be negative131 Business Overview This section provides an overview of Lazydays Holdings, Inc.'s business model, operational scope, and market positioning within the recreational vehicle industry - Lazydays Holdings, Inc. operates as a holding company through its subsidiaries, primarily in the recreational vehicle (RV) dealership business, offering RV sales, repair, services, financing, insurance, parts, accessories, and camping facilities136139 - The Company operates dealerships in eight locations (Florida, Colorado, Arizona, Minnesota, Tennessee, Indiana) and a service center in Texas, boasting one of the largest selections of RV brands with over 3,000 new and pre-owned RVs140141 - Lazydays attracts customers through dealership locations and digital/traditional marketing, leveraging CRM tools and analytics to engage and sell products and services to its customer database142143 Recent Developments This section highlights significant recent events, including land sales and strategic acquisitions, impacting the company's operations and financial structure - On March 10, 2020, the Company agreed to sell land for approximately $5 million and entered into a lease agreement for the property, with lease payments commencing upon completion of planned construction144 - The acquisition of Korges Enterprises, Inc. (Desert Autoplex RV) in Phoenix, Arizona, was completed on May 19, 2020, for approximately $4 million in cash and the assumption of $11.6 million in floorplan debt145 - On October 6, 2020, the Company acquired Total Value Recreational Vehicles of Indiana, Inc. (Total Value RV) in Elkhart, Indiana, including related real estate and assumption of floorplan debt146 COVID-19 Developments This section details the company's response to the COVID-19 pandemic, including initial sales declines, cost-saving measures, and subsequent recovery trends - The COVID-19 pandemic caused significant early declines in sales across all revenue categories starting mid-to-late March 2020, leading the Company to implement cost-saving measures147 - Cost-saving actions included a 25% workforce reduction, temporary salary cuts for senior management, suspension of 2020 pay increases and 401k match, and delaying non-critical capital projects148152 - Sales of new and pre-owned vehicles significantly improved starting May 2020, likely due to increased consumer demand for outdoor activities, allowing senior management salaries and 401k match to be reinstated149150211 - The Company secured $8.7 million in PPP Loans and negotiated temporary suspensions of principal and interest payments on term and mortgage loans from April 15 to June 15, 2020, to protect liquidity148 How The Company Generates Revenue This section explains the primary sources of the company's revenue, emphasizing vehicle sales and other ancillary services - The Company generates revenue primarily from sales of new and pre-owned RV units, which accounted for approximately 90% of total revenues for the three and nine months ended September 30, 2020154 - Other revenue streams include RV parts, service and repairs, commissions from third-party financing and insurance products, and campground/food facilities revenue154 Revenue Contribution | Revenue Contribution | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | New vehicles | 60.4% | 54.8% | 58.4% | 55.8% | | Pre-owned vehicles | 29.8% | 32.9% | 30.8% | 32.3% | | Other | 9.8% | 12.3% | 10.8% | 11.9% | Key Performance Indicators This section highlights the key metrics used by management to evaluate the company's operational efficiency and financial health KPI (excluding D&A) | KPI (excluding D&A) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Gross Profit | $49.3 million | $30.5 million | $134.8 million | $103.0 million | | Gross Margin | 22.9% | 19.3% | 21.7% | 20.6% | | SG&A as % of Gross Profit | 58.0% | 83.7% | 65.3% | 74.9% | - Gross profit increased significantly, with gross margin improving from 19.3% to 22.9% for the three months and from 20.6% to 21.7% for the nine months ended September 30, 2020, partly due to positive LIFO adjustments156 - SG&A as a percentage of gross profit decreased from 83.7% to 58.0% for the three months and from 74.9% to 65.3% for the nine months, reflecting improved operating leverage from business growth and overhead cost reductions159 - Adjusted EBITDA is a key non-GAAP measure used by management to evaluate financial performance, reflecting operating drivers and capacity to fund capital expenditures, excluding non-recurring items160161163 Results of Operations - Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019 This section analyzes the company's financial performance for the three months ended September 30, 2020, compared to the same period in the prior year Financial Data (in thousands) | Financial Data (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :---------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $215,723 | $158,402 | | New and pre-owned vehicles revenue | $194,552 | $138,861 | | Other revenue | $21,171 | $19,541 | | Gross profit (excluding D&A) | $49,342 | $30,544 | | SG&A expenses | $28,598 | $25,570 | | Income from operations | $17,532 | $763 | | Net income (loss) | $11,599 | $(2,486) | - Total revenue increased by $57.3 million (36.2%) to $215.7 million, driven by a 40.1% increase in new and pre-owned vehicle sales, with new vehicle sales up 50.1% due to higher units sold and average selling price166167168 - Other revenue increased by 8.2% to $21.1 million, primarily from a 19.7% rise in finance and insurance revenue due to higher unit sales, partially offset by the discontinuance of RV rentals170171172 - Gross profit increased by $18.8 million (61.5%) to $49.3 million, with new and pre-owned vehicle gross profit up 112.8% due to increased units sold, higher new unit average selling price, and a $2.3 million decrease in LIFO adjustments173174 - SG&A expenses increased by $3.0 million (11.8%) to $28.6 million, mainly due to overhead from new dealerships/service centers and increased performance wages, partially offset by a $1.1 million decrease in stock-based compensation176 Results of Operations - Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019 This section analyzes the company's financial performance for the nine months ended September 30, 2020, compared to the same period in the prior year Financial Data (in thousands) | Financial Data (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :---------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $620,538 | $500,005 | | New and pre-owned vehicles revenue | $553,245 | $440,541 | | Other revenue | $67,293 | $59,464 | | Gross profit (excluding D&A) | $134,768 | $102,969 | | SG&A expenses | $87,983 | $77,173 | | Income from operations | $36,944 | $13,309 | | Net income | $22,654 | $1,216 | - Total revenue increased by $120.5 million (24.1%) to $620.5 million, driven by a 25.6% increase in new and pre-owned vehicle sales, with new vehicle sales up 29.9% due to higher units sold182183184 - Other revenue increased by 13.2% to $67.3 million, primarily from a 23.2% rise in finance and insurance revenue due to higher unit sales, partially offset by the discontinuance of RV rentals186187188 - Gross profit increased by $31.8 million (30.9%) to $134.8 million, with new and pre-owned vehicle gross profit up 45.8%, partially offset by a $3.0 million decrease in LIFO adjustments189190 - SG&A expenses increased by $10.8 million (14.0%) to $88.0 million, mainly due to overhead from new locations and increased performance wages, partially offset by a $2.7 million decrease in stock-based compensation192 Non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, and provides their reconciliation to GAAP net income - The Company uses non-GAAP financial measures like EBITDA and Adjusted EBITDA to evaluate performance, compare operating results, and for planning purposes, as they reflect core operating drivers195163 - Adjusted EBITDA is defined as net income 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, and gain/loss on sale of property and equipment198 Adjusted EBITDA (in thousands) | Adjusted EBITDA (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $11,599 | $(2,486) | $22,654 | $1,216 | | Subtotal EBITDA | $20,292 | $3,508 | $45,004 | $21,387 | | Adjusted EBITDA | $19,020 | $5,272 | $43,416 | $24,611 | | Adjusted EBITDA margin | 8.7% | 3.3% | 7.0% | 4.9% | - Adjusted EBITDA significantly increased to $19.02 million (8.7% margin) for the three months and $43.42 million (7.0% margin) for the nine months ended September 30, 2020, compared to $5.27 million (3.3% margin) and $24.61 million (4.9% margin) in the prior year periods, respectively202203204205 Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, including sources of liquidity and capital allocation strategies Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $141,901 | $66,756 | | Net cash used in investing activities | $(7,005) | $(10,438) | | Net cash (used in) provided by financing activities | $(84,700) | $(49,390) | | Net increase in cash | $50,196 | $6,928 | - Net cash from operating activities increased to $141.9 million for the nine months ended September 30, 2020, primarily due to a $100.1 million decrease in inventory207 - Net cash used in investing activities decreased to $7.0 million, driven by $4.9 million from a sale-leaseback in Nashville, offset by $9.2 million in capital expenditures and $2.7 million for acquisitions208 - Net cash used in financing activities increased to $84.7 million, mainly due to $96.2 million in net repayments on the M&T Floor Plan Line of Credit, partially offset by $6.1 million from a new M&T mortgage and $8.7 million in PPP loans209 - As of September 30, 2020, the Company had $81.7 million in cash and $39.0 million in working capital, believing these resources, along with the M&T Facility and PPP funds, are sufficient for the next twelve months212210 Critical Accounting Policies and Estimates This section outlines the accounting policies and estimates that require significant judgment and can materially impact the financial statements - The Company prepares financial statements using GAAP, requiring estimates and assumptions for assets, liabilities, revenues, and expenses, including valuations of acquired assets, goodwill, intangible assets, inventory write-downs, doubtful accounts, and stock-based compensation229 - There have been no material changes to critical accounting policies from the 2019 Form 10-K, other than updates to revenue recognition (ASC 606) and lease accounting (ASC 842)230 Item 3 – Quantitative and Qualitative Disclosures about Market Risk This section states that the Company, as a smaller reporting company, has elected scaled disclosure requirements and therefore does not provide quantitative and qualitative disclosures about market risk - The Company, as a smaller reporting company, has elected scaled disclosure requirements and does not provide quantitative and qualitative disclosures about market risk231 Item 4 – Controls and Procedures Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2020. There were no material changes in internal control over financial reporting during the three months ended September 30, 2020 - As of September 30, 2020, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective232 - There were no material changes in internal control over financial reporting during the three months ended September 30, 2020233 PART II – OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and other disclosures Item 1 – Legal Proceedings The Company is involved in various legal proceedings arising in the ordinary course of business and 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 business234 - 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 flows234 Item 1A – Risk Factors This section updates previously disclosed risk factors, focusing on the significant adverse impact of the COVID-19 pandemic and the uncertainty of continued sales growth and long-term business effects - The COVID-19 pandemic had a significant adverse impact on the Company's business, results of operations, and financial condition in the initial months237 - Despite increased sales since May 2020, there is no assurance that such growth will continue, and the long-term effects of COVID-19 could still result in a net negative impact on the business237240 - The Company's operations depend on the continued health and productivity of its employees, and future developments related to the pandemic, including economic downturns, could significantly impact the business241 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds This section reports no stock repurchases were made during the three months ended September 30, 2020, under the $4.0 million stock repurchase program authorized through December 31, 2020 Unregistered Sales of Equity Securities and Use of Proceeds | 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 | | :----- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------- | | July 1, 2020 – Sep 30, 2020 | - | $ - | - | $3,502.00 | - No shares of common stock were repurchased by the Company during the three months ended September 30, 2020243 - As of September 30, 2020, approximately $3.5 million remained available under the $4.0 million stock repurchase program authorized through December 31, 2020243 Item 3 – Defaults Upon Senior Securities The Company reported no defaults upon senior securities - There were no defaults upon senior securities244 Item 4 – Mine Safety Disclosures The Company reported no mine safety disclosures - There were no mine safety disclosures245 Item 5 – Other Information The Company reported no other information - There was no other information to report246 Item 6 – Exhibits This section lists the exhibits filed or furnished with the Form 10-Q, including certifications from the CEO and CFO (Rule 13a-14, 15d-14(a), and 18 U.S.C. Section 1350) and XBRL-related documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Exchange Act, and 18 U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002248 - XBRL Instance Document and Taxonomy Extension documents (Schema, Calculation, Definition, Label, Presentation Linkbase) are filed herewith248