REV Group(REVG) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the quarter ended January 31, 2019 Item 1. Financial Statements The financial statements for Q1 2019 show net sales of $518.7 million, a net loss of $14.6 million, and total assets of $1,374.6 million, with improved operating cash flow and no material impact from new revenue recognition standards Condensed Unaudited Consolidated Balance Sheets The balance sheet shows total assets of $1,374.6 million and total liabilities of $858.5 million as of January 31, 2019 Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | Jan 31, 2019 | Oct 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $813.6 | $843.1 | | Inventories, net | $529.8 | $514.0 | | Total Assets | $1,374.6 | $1,408.1 | | Total Current Liabilities | $351.1 | $417.2 | | Long-term debt, less current maturities | $470.4 | $420.6 | | Total Liabilities | $858.5 | $875.7 | | Total Shareholders' Equity | $516.1 | $532.4 | Condensed Unaudited Consolidated Statements of Operations The statement of operations reports net sales of $518.7 million and a net loss of $14.6 million for Q1 2019 Consolidated Statement of Operations (in millions, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Sales | $518.7 | $514.9 | | Gross Profit | $46.3 | $52.6 | | Operating (Loss) Income | $(11.2) | $1.0 | | Net (Loss) Income | $(14.6) | $9.4 | | Diluted EPS | $(0.23) | $0.14 | Condensed Unaudited Consolidated Statements of Cash Flows Cash flow from operations improved to a net use of $39.4 million, with a net increase in cash of $1.6 million for Q1 2019 Consolidated Cash Flows (in millions) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(39.4) | $(72.4) | | Net cash used in investing activities | $(7.2) | $(72.9) | | Net cash provided by financing activities | $48.2 | $140.2 | | Net increase (decrease) in cash | $1.6 | $(5.1) | Notes to Condensed Unaudited Consolidated Financial Statements Key notes include the adoption of new revenue recognition standards, the Lance Camper acquisition, debt structure, and ongoing securities class actions - The company adopted the new revenue recognition standard ASU 2014-09 on November 1, 2018, using the modified retrospective approach, with no material impact on financial statements[25] - On January 12, 2018, the company acquired 100% of Lance Camper Mfg. Corp. for $67.3 million, reported within the Recreation segment[33] - Total long-term debt as of January 31, 2019, was $471.7 million, primarily comprising a $350.0 million ABL facility and a $121.7 million Term Loan[46] - The company is defending consolidated federal and state putative securities class actions related to its 2017 IPO and secondary offering, with the outcome and potential loss currently unpredictable[85][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2019 saw consolidated net sales increase to $518.7 million, an operating loss of $11.2 million due to gross profit margin decline, and total backlog growth of 12.0% to $1,390.9 million, with liquidity maintained through the ABL facility Q1 2019 vs Q1 2018 Performance (in millions) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Sales | $518.7 | $514.9 | | Gross Profit | $46.3 | $52.6 | | Operating (Loss) Income | $(11.2) | $1.0 | | Net (Loss) Income | $(14.6) | $9.4 | | Adjusted EBITDA | $12.3 | $21.3 | - Consolidated net sales growth was driven by Commercial and Recreation segments, offset by a $11.2 million decrease in Fire & Emergency due to supply disruptions[109][110] - Gross profit margin decreased to 8.9% from 10.2%, primarily due to lower production volumes and supply chain/labor disruptions in the Fire & Emergency segment[111] Segment Performance Segment performance shows varied results, with Fire & Emergency sales and EBITDA declining, while Commercial and Recreation segments experienced growth Segment Net Sales (in millions) | Segment | Q1 2019 | Q1 2018 | % Change | | :--- | :--- | :--- | :--- | | Fire & Emergency | $204.1 | $215.3 | (5.2)% | | Commercial | $140.7 | $132.2 | 6.4% | | Recreation | $176.3 | $167.3 | 5.4% | Segment Adjusted EBITDA (in millions) | Segment | Q1 2019 | Q1 2018 | % Change | | :--- | :--- | :--- | :--- | | Fire & Emergency | $8.4 | $18.2 | (53.8)% | | Commercial | $5.0 | $4.5 | 11.1% | | Recreation | $9.1 | $8.1 | 12.3% | - Fire & Emergency sales and Adjusted EBITDA significantly declined due to persistent material/chassis supply disruptions and prior-quarter labor issues[116][117] - Recreation sales growth was fueled by the Lance acquisition and increased Class B and Super C RV sales, offsetting Class A motorhome declines[120][121] Backlog Total backlog increased by 12.0% to $1,390.9 million, driven by Fire & Emergency and Commercial segments, despite a decline in Recreation Backlog by Segment (in millions) | Segment | Jan 31, 2019 | Jan 31, 2018 | % Change | | :--- | :--- | :--- | :--- | | Fire & Emergency | $738.2 | $622.3 | 18.6% | | Commercial | $427.5 | $337.8 | 26.6% | | Recreation | $225.2 | $281.8 | (20.1)% | | Total Backlog | $1,390.9 | $1,241.9 | 12.0% | - Recreation backlog decreased due to softer demand for Class A motorhomes, partially offset by growth in Class B and Super C models[124] Liquidity and Capital Resources Net cash used in operating activities improved, with $86.2 million available under the ABL facility, and quarterly cash dividends paid - Net cash used in operating activities improved to $39.4 million from $72.4 million year-over-year, reflecting efficient working capital management[127][128] - As of January 31, 2019, the company had $86.2 million available under its April 2017 ABL Facility[139] - A quarterly cash dividend of $0.05 per share, totaling $3.1 million, was paid in Q1 2019, with no share repurchases during the quarter[131][133] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in exposure to market risks, including interest rate, foreign exchange, and commodity price risks, have occurred since the 2018 Annual Report - No material changes in the company's exposure to interest rate, foreign exchange, or commodity price risks have occurred since the 2018 Annual Report on Form 10-K[150] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of January 31, 2019, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the reporting period end[151][152] - No material changes to internal control over financial reporting occurred during the quarter ended January 31, 2019[152] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and required exhibits Item 1. Legal Proceedings The company is involved in various legal proceedings, including securities class actions, with no expected material adverse effect on financial condition - Legal proceedings are detailed in Note 13, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements[153] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the 2018 Annual Report on Form 10-K - No material changes to risk factors have occurred since the company's 2018 Annual Report on Form 10-K[154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No common stock repurchases occurred under the authorized program during the three months ended January 31, 2019 - No common stock repurchases occurred under the company's buyback program during the three months ended January 31, 2019[155] Item 6. Exhibits Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, along with XBRL data files - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, and XBRL instance and taxonomy documents[157]