REV Group(REVG) - 2021 Q2 - Quarterly Report

Cautionary Statement About Forward-Looking Statements Forward-looking statements are inherently uncertain and subject to various factors that could cause actual results to differ materially - Forward-looking statements are identified by words such as "anticipate," "believe," "estimate," "expect," "intend," and are inherently uncertain[9] - Factors that could cause actual results to differ materially include increases in interest rates, availability of credit, low consumer confidence, labor availability, increased material and component costs, supply chain disruptions, global tensions, and the overall impact of the COVID-19 pandemic[9] Website and Social Media Disclosure The company uses its website and Twitter for routine information distribution and SEC compliance, with content not incorporated into this report - The company uses its website (www.revgroup.com) and corporate Twitter account (@revgroupinc) as routine channels for distributing company information, including material non-public information, and for complying with SEC Regulation FD[11] - Information provided on the company's website or social media channels is not incorporated into, or deemed part of, this Quarterly Report on Form 10-Q[12] PART I. FINANCIAL INFORMATION This section presents the company's comprehensive financial information, including statements, notes, and management's discussion and analysis Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income (loss), cash flows, and shareholders' equity, along with detailed notes explaining accounting policies, significant transactions, and financial statement line items Condensed Unaudited Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time | Metric | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Total Assets | 1,292.9 | 1,312.3 | (19.4) | | Total Liabilities | 794.1 | 840.0 | (45.9) | | Total Shareholders' Equity | 498.8 | 472.3 | 26.5 | | Cash and cash equivalents | 7.7 | 11.4 | (3.7) | | Inventories, net | 532.9 | 537.2 | (4.3) | | Long-term debt, less current maturities | 306.0 | 340.5 | (34.5) | Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) This section details the company's revenues, expenses, and net income (loss) over specific periods, reflecting operational performance | Metric | April 30, 2021 ($ millions) | April 30, 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------------ | :--------- | | Net sales | 643.6 | 547.0 | 96.6 | 17.7% | | Gross profit | 87.4 | 52.4 | 35.0 | 66.8% | | Operating income (loss) | 34.7 | (13.5) | 48.2 | N/A | | Net income (loss) | 20.6 | (7.6) | 28.2 | 371.1% | | Basic EPS | 0.32 | (0.12) | 0.44 | N/A | | Diluted EPS | 0.31 | (0.12) | 0.43 | N/A | | Metric | April 30, 2021 ($ millions) | April 30, 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------------ | :--------- | | Net sales | 1,197.6 | 1,079.1 | 118.5 | 11.0% | | Gross profit | 149.1 | 99.8 | 49.3 | 49.4% | | Operating income (loss) | 44.4 | (17.9) | 62.3 | N/A | | Net income (loss) | 20.6 | (16.7) | 37.3 | 223.4% | | Basic EPS | 0.32 | (0.27) | 0.59 | N/A | | Diluted EPS | 0.32 | (0.27) | 0.59 | N/A | Condensed Unaudited Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric | April 30, 2021 ($ millions) | April 30, 2020 ($ millions) | Change ($ millions) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Net cash provided by operating activities | 37.1 | 22.0 | 15.1 | | Net cash provided by (used in) investing activities | 3.3 | (58.5) | 61.8 | | Net cash (used in) provided by financing activities | (44.1) | 54.7 | (98.8) | | Net (decrease) increase in cash and cash equivalents | (3.7) | 18.2 | (21.9) | | Cash and cash equivalents, end of period | 7.7 | 21.5 | (13.8) | Condensed Unaudited Consolidated Statements of Shareholders' Equity This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and retained earnings | Metric | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Common Stock | 0.1 | 0.1 | 0.0 | | Additional Paid-in Capital | 502.2 | 496.1 | 6.1 | | Retained Deficit | (0.5) | (21.1) | 20.6 | | Accumulated Other Comprehensive Loss | (3.0) | (2.8) | (0.2) | | Total Shareholders' Equity | 498.8 | 472.3 | 26.5 | - Net income of $20.6 million contributed to the increase in retained deficit from $(21.1) million to $(0.5) million for the six months ended April 30, 2021[19] Notes to Condensed Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Basis of Presentation This note describes the accounting principles, ownership structure, and recent accounting standard adoptions relevant to the financial statements - American Industrial Partners (AIP) indirectly owns approximately 52.2% of REV Group's voting equity as of April 30, 2021[22] - The Company reimbursed expenses of its primary equity holder in the amount of $0.2 million for the six months ended April 30, 2021, and $0.1 million for the same period in 2020[23] - The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), on November 1, 2020, with no material impact on its consolidated financial statements[24] - ASU 2019-12, Income Taxes (Topic 740), will be adopted as of November 1, 2021, and the Company is currently evaluating its impact[25] Note 2. Revenue Recognition This note explains the company's policies for recognizing revenue from the sale of specialty vehicles and aftermarket parts and services - The Company's primary revenue is generated from the manufacture and sale of specialty vehicles and aftermarket parts and services, mainly in the United States and Canada[26][27] - Revenue is typically recognized at a point-in-time when control is transferred, generally upon product shipment or customer pickup from manufacturing facilities[27] | Period | Revenue Recognized from Customer Advances ($ millions) | | :----- | :--------------------------------------------------- | | 2021 | 85.1 | | 2020 | 80.6 | Note 3. Leases This note provides details on the company's operating lease costs, cash payments, and future undiscounted lease payment obligations | Period | Operating Lease Costs ($ millions) | Cash Paid for Lease Liabilities ($ millions) | | :----- | :--------------------------------- | :------------------------------------------- | | 2021 | 4.7 | 4.8 | | 2020 | 4.8 | 4.5 | | Fiscal Year | Undiscounted Lease Payments ($ millions) | | :---------- | :--------------------------------------- | | Remaining 2021 | 4.6 | | 2022 | 7.8 | | 2023 | 4.9 | | 2024 | 3.0 | | 2025 | 1.1 | | Thereafter | 2.4 | | Total Undiscounted | 23.8 | | Less: Imputed Interest | (2.2) | | Total Lease Liabilities | 21.6 | - As of April 30, 2021, the weighted average remaining lease term for operating leases was 4.3 years, and the weighted average discount rate was 5.0%[30] Note 4. Acquisition This note details the acquisition of Spartan Emergency Response, including its purchase price, financial impact, and strategic rationale - On February 1, 2020, the Company acquired Spartan Emergency Response (Spartan ER) for an initial purchase price of $54.8 million, later adjusted to $47.3 million[32][33] - The acquisition resulted in a cumulative gain of $8.2 million, after immaterial measurement period adjustments[34][35] - Spartan ER is reported as part of the Fire & Emergency segment, increasing the Company's market share and access to new municipalities[32] Note 5. Inventories This note provides a breakdown of the company's inventory components, including chassis, raw materials, work in process, and finished products | Category | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------------- | :-------------------------- | :-------------------------- | :------------------ | | Chassis | 50.8 | 61.1 | (10.3) | | Raw materials & parts | 197.9 | 195.6 | 2.3 | | Work in process | 246.1 | 230.3 | 15.8 | | Finished products | 53.4 | 70.0 | (16.6) | | Total Inventories, net | 532.9 | 537.2 | (4.3) | Note 6. Property, Plant and Equipment This note details the composition of the company's property, plant, and equipment, including land, buildings, machinery, and construction in process | Category | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Land & land improvements | 18.9 | 27.0 | (8.1) | | Buildings & improvements | 103.8 | 103.9 | (0.1) | | Machinery & equipment | 87.6 | 90.8 | (3.2) | | Rental & used vehicles | 2.6 | 4.9 | (2.3) | | Computer hardware & software | 56.9 | 51.9 | 5.0 | | Office furniture & fixtures | 4.4 | 5.1 | (0.7) | | Construction in process | 7.1 | 8.1 | (1.0) | | Total PP&E, net | 154.5 | 168.4 | (13.9) | | Period | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :----- | :---------------- | :---------------- | :------------------ | :--------- | | Three Months | 5.5 | 7.5 | (2.0) | (26.7%) | | Six Months | 11.6 | 14.3 | (2.7) | (18.9%) | Note 7. Goodwill and Intangible Assets This note presents the breakdown of goodwill by segment and the composition of intangible assets, including finite-lived and indefinite-lived assets | Segment | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | | :-------------- | :-------------------------- | :-------------------------- | | Fire & Emergency | 88.6 | 88.6 | | Commercial | 26.2 | 26.2 | | Recreation | 42.5 | 42.5 | | Total Goodwill | 157.3 | 157.3 | | Category | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Finite-lived intangible assets | 23.7 | 28.7 | (5.0) | | Indefinite-lived trade names | 107.4 | 107.4 | 0.0 | | Total Intangible Assets, net | 131.1 | 136.1 | (5.0) | | Period | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :----- | :---------------- | :---------------- | :------------------ | :--------- | | Three Months | 2.5 | 3.4 | (0.9) | (26.5%) | | Six Months | 5.1 | 7.4 | (2.3) | (31.1%) | Note 8. Divestiture Activities This note outlines the company's divestiture of its shuttle bus businesses and the decision to divest its REV Brazil business, including associated financial impacts - The Company completed the sale of its shuttle bus businesses on May 8, 2020, for approximately $49.0 million in cash, resulting in a loss of $8.8 million[41] - In the first quarter of fiscal year 2021, the Company decided to divest its REV Brazil business, resulting in a loss of $3.8 million on business held for sale[42] | Category | Amount ($ millions) | | :-------------------------- | :------------------ | | Property, plant and equipment, net | 0.8 | | Inventories, net | 2.1 | | Accounts receivable, net | 5.7 | | Accounts payable | 4.3 | | Other current and long-term liabilities | 4.5 | Note 9. Long-Term Debt This note details the company's long-term debt, including the new ABL facility, refinancing activities, and compliance with financial covenants - On April 13, 2021, the Company entered into a new $550.0 million revolving credit agreement (2021 ABL Facility) maturing on April 13, 2026[45][46] - The 2021 ABL Facility refinanced the 2017 ABL Facility and Term Loan, involving a $303.4 million repayment of existing principal and a $1.4 million loss on early extinguishment of debt[45] - As of April 30, 2021, the Company was in compliance with all financial covenants under the 2021 ABL Agreement, with $223.1 million available[50] | Debt Instrument | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------- | :-------------------------- | :-------------------------- | :------------------ | | 2021 ABL facility | 306.0 | — | 306.0 | | 2017 ABL facility | — | 175.0 | (175.0) | | Term Loan | — | 167.2 | (167.2) | | Total Long-term debt, less current maturities | 306.0 | 340.5 | (34.5) | Note 10. Warranties This note provides an analysis of the company's warranty liability, including provisions, settlements, and adjustments - The Company's total warranty liability increased from $37.0 million at October 31, 2020, to $38.2 million at April 30, 2021[58][59] | Metric | 2021 ($ millions) | 2020 ($ millions) | | :-------------------------------- | :---------------- | :---------------- | | Balance at beginning of period | 37.0 | 22.6 | | Warranty provisions | 16.7 | 14.8 | | Settlements made | (16.7) | (14.0) | | Warranties for prior year acquisition | 1.2 | — | | Warranties for current year acquisition | — | 10.2 | | Divestiture adjustments | — | (0.6) | | Changes in liability of pre-existing warranties | — | (0.6) | | Balance at end of period | 38.2 | 32.4 | Note 11. Earnings Per Share This note details the calculation of basic and diluted earnings per share, including the weighted-average common shares outstanding and dilutive securities | Metric | April 30, 2021 | April 30, 2020 | | :-------------------------------------- | :------------- | :------------- | | Basic weighted-average common shares outstanding | 63,730,382 | 62,941,904 | | Dilutive stock options | 89,115 | — | | Dilutive restricted stock awards | 347,630 | — | | Dilutive restricted stock units | 455,164 | — | | Dilutive performance stock units | 373,900 | — | | Diluted weighted-average common shares outstanding | 64,996,191 | 62,941,904 | - For the six months ended April 30, 2021, diluted EPS was $0.32, consistent with basic EPS, reflecting the dilutive effect of outstanding stock options, performance stock units, and restricted stock units[16][60] Note 12. Income Taxes This note provides information on the company's income tax expense (benefit), pre-tax income (loss), and effective tax rates, along with discrete tax impacts | Period | 2021 ($ millions) | 2020 ($ millions) | Pre-tax Income (Loss) 2021 ($ millions) | Pre-tax Income (Loss) 2020 ($ millions) | Effective Tax Rate 2021 | Effective Tax Rate 2020 | | :----- | :---------------- | :---------------- | :-------------------------------------- | :-------------------------------------- | :---------------------- | :---------------------- | | Three Months | 7.2 | (10.1) | 27.8 | (17.7) | 25.8% | 56.1% (benefit) | | Six Months | 7.2 | (12.7) | 27.8 | (29.4) | 25.9% | 42.5% (benefit) | - Q2 FY2021 income tax expense was favorably impacted by $0.1 million of net discrete tax benefits, primarily from stock-based compensation tax deductions[63] - Q2 FY2020 income tax benefit was favorably impacted by $5.7 million of net discrete tax benefits, primarily from net operating loss carrybacks under the CARES Act and the nontaxable gain on the Spartan ER acquisition[63] Note 13. Commitments and Contingencies This note discloses the company's various commitments and contingent liabilities, including bonds, letters of credit, and legal proceedings | Category | April 30, 2021 ($ millions) | October 31, 2020 ($ millions) | Change ($ millions) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Performance, bid and specialty bonds | 372.9 | 328.6 | 44.3 | | Open standby letters of credit | 20.9 | 11.0 | 9.9 | | Total | 393.8 | 339.6 | 54.2 | - Chassis contingent liability decreased from $40.4 million at October 31, 2020, to $20.8 million at April 30, 2021[70] - A class settlement for consolidated federal and state putative securities class actions was stipulated on May 19, 2021, with the settlement payment expected to be fully covered by the Company's insurers[76] Note 14. Business Segment Information This note provides financial data by business segment, including net sales and Adjusted EBITDA, reflecting performance across Fire & Emergency, Commercial, and Recreation divisions - The Company is organized into three reportable segments: Fire & Emergency, Commercial, and Recreation, based on management's operating decisions, capital allocation, and performance measurement[78] | Segment | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------- | :---------------- | :---------------- | :------------------ | :--------- | | Fire & Emergency | 307.6 | 289.3 | 18.3 | 6.3% | | Commercial | 98.4 | 143.2 | (44.8) | (31.3%) | | Recreation | 237.9 | 114.0 | 123.9 | 108.7% | | Consolidated | 643.6 | 547.0 | 96.6 | 17.7% | | Segment | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------- | :---------------- | :---------------- | :------------------ | :--------- | | Fire & Emergency | 21.7 | 10.2 | 11.5 | 112.7% | | Commercial | 8.3 | 8.0 | 0.3 | 3.8% | | Recreation | 25.1 | (1.1) | 26.2 | 2381.8% | | Consolidated | 45.5 | 7.6 | 37.9 | 498.7% | Note 15. Subsequent Event This note discloses a significant event occurring after the reporting period, specifically the reinstatement of a quarterly cash dividend - On June 3, 2021, the Board of Directors reinstated a quarterly cash dividend of $0.05 per share of common stock, payable on July 15, 2021, to shareholders of record on June 30, 2021[87] 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 results of operations, discussing key performance drivers, segment performance, liquidity, and capital resources. It highlights significant improvements in net sales, gross profit, and a shift from net loss to net income, driven by higher sales volumes, price realization, and productivity initiatives, despite divestitures and ongoing COVID-19 impacts Overview This section provides a high-level description of REV Group's business, its market position, and operational segments - REV Group is a leading designer, manufacturer, and distributor of specialty vehicles and related aftermarket parts and services, primarily serving a diversified customer base in the United States[90] - The company operates through three segments: Fire & Emergency, Commercial, and Recreation, providing customized vehicle solutions for public services, commercial infrastructure, and consumer leisure[90] - Approximately 89% of net sales during the second quarter of fiscal year 2021 came from products where the company believes it holds a first, second, or third market share position[90] Factors Affecting Our Performance This section discusses external and internal factors influencing the company's financial performance, including economic conditions, seasonality, and the impact of the COVID-19 pandemic - The business is impacted by general economic conditions, including employment levels, consumer confidence, municipal spending, municipal tax receipts, and changes in interest rates[95] - RV purchases are discretionary and sensitive to financing availability, consumer confidence, unemployment levels, and disposable income[96] - Operating results are typically seasonal, with the first fiscal quarter being the slowest and the fourth fiscal quarter usually being the strongest, influenced by weather, vacation seasons, and customer buying habits[99] - The COVID-19 pandemic has caused labor disruptions, supply chain delays (e.g., semiconductors, subcomponents), increased raw material prices (e.g., steel, aluminum), and logistics challenges[102][106] - The Recreation segment's backlog significantly increased due to an acceleration in consumer demand for recreation vehicles during the pandemic[105] Results of Operations This section analyzes the company's financial performance, detailing changes in net sales, gross profit, expenses, and net income for the reported periods | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 643.6 | 547.0 | 96.6 | 17.7% | | Gross profit | 87.4 | 52.4 | 35.0 | 66.8% | | SG&A | 48.7 | 58.1 | (9.4) | (16.2%) | | Restructuring | — | 2.9 | (2.9) | (100.0%) | | Net income (loss) | 20.6 | (7.6) | 28.2 | 371.1% | | Basic EPS | 0.32 | (0.12) | 0.44 | N/A | | Diluted EPS | 0.31 | (0.12) | 0.43 | N/A | | Adjusted EBITDA | 45.5 | 7.6 | 37.9 | 498.7% | | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 1,197.6 | 1,079.1 | 118.5 | 11.0% | | Gross profit | 149.1 | 99.8 | 49.3 | 49.4% | | SG&A | 95.8 | 104.1 | (8.3) | (8.0%) | | Restructuring | 1.0 | 3.5 | (2.5) | (71.4%) | | Net income (loss) | 20.6 | (16.7) | 37.3 | 223.4% | | Basic EPS | 0.32 | (0.27) | 0.59 | N/A | | Diluted EPS | 0.32 | (0.27) | 0.59 | N/A | | Adjusted EBITDA | 68.9 | 18.4 | 50.5 | 274.5% | - Gross profit margin increased to 13.6% (Q2 FY2021) from 9.6% (Q2 FY2020) and to 12.4% (six months FY2021) from 9.3% (six months FY2020), driven by greater price realization, lower discounting, and improved operating leverage[111][113] - Consolidated SG&A costs decreased by $9.4 million (three months) and $8.3 million (six months) primarily due to reduced restructuring-related charges, travel, marketing costs, and lower depreciation expense[114][115] - A $1.4 million loss on early extinguishment of debt was recognized in Q2 FY2021 due to the refinancing of the 2017 ABL Facility and Term Loan[118] - A $3.8 million loss on business held for sale was recorded in Q1 FY2021 related to the decision to divest the REV Brazil business[119] Fire & Emergency Segment This section analyzes the financial performance of the Fire & Emergency segment, detailing changes in net sales and Adjusted EBITDA | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 307.6 | 289.3 | 18.3 | 6.3% | | Adjusted EBITDA | 21.7 | 10.2 | 11.5 | 112.7% | | Adjusted EBITDA % of net sales | 7.1% | 3.5% | 3.6 pp | N/A | | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 588.2 | 495.8 | 92.4 | 18.6% | | Adjusted EBITDA | 31.9 | 12.1 | 19.8 | 163.6% | | Adjusted EBITDA % of net sales | 5.4% | 2.4% | 3.0 pp | N/A | - The increase in net sales was primarily due to increased unit shipments of fire apparatus and price realization, partially offset by decreased ambulance unit shipments[132][133] - Adjusted EBITDA increased due to higher sales volume within the fire group and productivity initiatives, including direct labor efficiencies and lower operating expenses[134][135] Commercial Segment This section analyzes the financial performance of the Commercial segment, detailing changes in net sales and Adjusted EBITDA | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 98.4 | 143.2 | (44.8) | (31.3%) | | Adjusted EBITDA | 8.3 | 8.0 | 0.3 | 3.8% | | Adjusted EBITDA % of net sales | 8.4% | 5.6% | 2.8 pp | N/A | | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 181.5 | 301.3 | (119.8) | (39.8%) | | Adjusted EBITDA | 15.5 | 17.9 | (2.4) | (13.4%) | | Adjusted EBITDA % of net sales | 8.5% | 5.9% | 2.6 pp | N/A | - The decrease in net sales was primarily due to the divestiture of shuttle bus businesses and lower shipments of school and municipal transit buses, partially offset by increased shipments of terminal trucks and street sweepers[137][138] - Adjusted EBITDA was positively impacted by improved profitability and productivity in terminal truck and street sweeper businesses and SG&A reductions, offsetting lower sales volume within the bus group[139][140] Recreation Segment This section analyzes the financial performance of the Recreation segment, detailing changes in net sales and Adjusted EBITDA | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 237.9 | 114.0 | 123.9 | 108.7% | | Adjusted EBITDA | 25.1 | (1.1) | 26.2 | 2381.8% | | Adjusted EBITDA % of net sales | 10.6% | (1.0%) | 11.6 pp | N/A | | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net sales | 428.0 | 280.9 | 147.1 | 52.4% | | Adjusted EBITDA | 40.2 | 5.9 | 34.3 | 581.4% | | Adjusted EBITDA % of net sales | 9.4% | 2.1% | 7.3 pp | N/A | - Net sales growth was primarily due to increased unit sales in all product categories and lower discounting, recovering from COVID-19 related production suspensions in the prior year[141][142] - Adjusted EBITDA improvement was driven by increased sales volume, lower discounting, and productivity initiatives across all businesses[143][144] Backlog This section provides an overview of the company's order backlog by segment, highlighting significant changes and underlying drivers | Segment | April 30, 2021 ($ millions) | April 30, 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------- | :-------------------------- | :-------------------------- | :------------------ | :--------- | | Fire & Emergency | 1,099.0 | 1,111.7 | (12.7) | (1.1%) | | Commercial | 303.1 | 413.2 | (110.1) | (26.7%) | | Recreation | 940.5 | 122.9 | 817.6 | 665.3% | | Total Backlog | 2,342.6 | 1,647.8 | 694.8 | 42.2% | - The significant increase in total backlog was primarily driven by strong order intake across all product categories in the Recreation segment[148] - Fire & Emergency backlog decreased due to increased throughput and lower orders for legacy fire apparatus, partially offset by increased ambulance orders[148] - Commercial backlog decreased due to the shuttle bus divestiture, lower school bus orders (COVID-19 disruptions), and timing of a large municipal transit order[148] Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations, including working capital, debt service, and capital expenditures, and its sources of funding - Primary liquidity requirements include working capital, facility improvements, debt service payments, and general corporate needs, historically met through operating activities, cash, and ABL credit facility borrowings[149] | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | | :-------------------------------------- | :---------------- | :---------------- | :------------------ | | Net cash provided by operating activities | 37.1 | 22.0 | 15.1 | | Net cash provided by (used in) investing activities | 3.3 | (58.5) | 61.8 | | Net cash (used in) provided by financing activities | (44.1) | 54.7 | (98.8) | | Net (decrease) increase in cash and cash equivalents | (3.7) | 18.2 | (21.9) | - Net cash provided by operating activities increased to $37.1 million (six months FY2021) from $22.0 million (six months FY2020), driven by higher net income and a tax refund related to the CARES Act[152] - Net cash used in financing activities was $44.1 million (six months FY2021), primarily due to repaying the 2017 ABL Facility and Term Loan with proceeds from the new 2021 ABL Facility[154] - The Board of Directors reinstated a quarterly cash dividend of $0.05 per share on June 3, 2021, after suspending it in Q2 FY2020[155][156] - The new $550.0 million 2021 ABL Facility matures on April 13, 2026, and had $223.1 million available as of April 30, 2021[157][158] Adjusted EBITDA and Adjusted Net Income This section defines and reconciles non-GAAP financial measures, Adjusted EBITDA and Adjusted Net Income, used by management to assess core operating performance - Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures used by management and the Board of Directors for measuring financial performance and as a basis for incentive compensation[159][160] - These measures exclude non-cash depreciation and amortization, interest expense, income taxes, loss on early extinguishment of debt, stock-based compensation, sponsor expense reimbursement, and other exceptional items to provide a clearer view of core operating performance[161] | Metric | 2021 ($ millions) | 2020 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Adjusted EBITDA (3 months) | 45.5 | 7.6 | 37.9 | 498.7% | | Adjusted EBITDA (6 months) | 68.9 | 18.4 | 50.5 | 274.5% | | Adjusted Net Income (3 months) | 25.7 | (5.8) | 31.5 | 543.1% | | Adjusted Net Income (6 months) | 34.6 | (8.8) | 43.4 | 493.2% | Off-Balance Sheet Arrangements This section confirms the absence of material off-balance sheet arrangements that could significantly impact the company's financial condition or results of operations - The Company has not created, and is not party to, any special-purpose or off-balance sheet entities for capital raising or debt[166] - There are no off-balance sheet arrangements reasonably likely to have a material current or future effect on the Company's financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, and capital resources[166] Critical Accounting Policies and Estimates This section refers to the company's critical accounting policies and estimates, noting recent accounting standard adoptions and their impact - Critical accounting policies and estimates are disclosed in the Annual Report on Form 10-K for the fiscal year ended October 31, 2020[167] - The Company adopted ASU 2016-13 (Credit Losses) in the first quarter of fiscal year 2021, which did not have a material impact on its consolidated financial statements[167] Recent Accounting Pronouncements This section directs readers to the notes to financial statements for details on the impact of new accounting standards - Refer to Note 1 of the Notes to Condensed Unaudited Consolidated Financial Statements for a discussion of the impact of new accounting standards[168] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the company's exposure to interest rate risk, foreign exchange risk, and commodity price risk since the information provided in its Annual Report on Form 10-K - There have been no material changes in the Company's exposure to interest rate risk, foreign exchange risk, and commodity price risk from the information provided in its Annual Report on Form 10-K filed on January 7, 2021[169] Item 4. Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of April 30, 2021. No material changes in internal control over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were effective as of April 30, 2021, as concluded by management, including the Chief Executive Officer and Chief Financial Officer[170] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended April 30, 2021[171] PART II.OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section refers readers to Note 13, Commitments and Contingencies, for a detailed description of the company's legal proceedings - For a description of the Company's legal proceedings, refer to Note 13, Commitments and Contingencies, in the Notes to Condensed Unaudited Consolidated Financial Statements[172] Item 1A. Risk Factors This section states that there have been no material changes to previously disclosed risk factors, except for an updated discussion on the ongoing and uncertain impact of the COVID-19 pandemic on the company's business, including potential disruptions to demand, supply chain, internal operations, and capital markets - There have been no material changes to the risk factors associated with the business previously disclosed in the Annual Report on Form 10-K, other than an updated discussion on the COVID-19 pandemic[173] - The COVID-19 pandemic continues to impact operations, causing disruptions in demand, supply chain delays (e.g., component shortages), and internal operational challenges (e.g., workforce illness, remote work risks)[173][174][175] - The full nature, extent, and duration of COVID-19's impact are highly uncertain and could severely affect business, results of operations, and financial condition, including potential asset impairment or difficulty raising capital[173][179] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Credit Agreement for the 2021 ABL Facility, certifications by the CEO and CFO, and various Inline XBRL documents - Exhibits include the Credit Agreement for the 2021 ABL Facility, certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act, and various Inline XBRL documents[181] Signatures This section confirms the official signing of the report by the Chief Executive Officer and Chief Financial Officer - The report was signed on June 7, 2021, by Rodney N. Rushing, Chief Executive Officer, and Mark A. Skonieczny, Chief Financial Officer[186]