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8-K - FORM 8-K - REV Group, Inc.d544535d8k.htm

Exhibit 99.1

 

LOGO

March 7, 2018

NEWS RELEASE

FOR IMMEDIATE RELEASE

REV GROUP, INC. REPORTS FISCAL 2018 FIRST QUARTER RESULTS

 

    Net sales growth of 16 percent compared to the prior year1 period reflects increases across each of the Company’s reportable business segments

 

    First quarter net income of $9.4 million, an increase of 171 percent compared to the prior year

 

    First quarter Adjusted Net Income2 of $9.7 million or $0.15 per share, an increase of 72 percent compared to the prior year

 

    First quarter Adjusted EBITDA2 of $21.3 million, an increase of 0.9 percent compared to the prior year

 

    Entered large and fast growing towables RV segment through the acquisition of Lance Camper, completed in January 2018

 

    Formed strategic alliance with Daimler AG for the sale and service of its Setra product line in North America

 

    Reaffirms full year fiscal 2018 outlook for net sales of $2.4 to $2.7 billion and Adjusted EBITDA of $200 to $220 million

 

    Updates full year fiscal 2018 net income outlook to a range of $90 to $110 million and Adjusted Net Income to a range of $110 to $125 million

Milwaukee, Wis.—(BUSINESS WIRE) — REV Group, Inc. (NYSE: REVG) today reported results for the three months ended January 31, 2018 (“first quarter 2018”). Consolidated net sales in the first quarter 2018 were $514.9 million, an increase of 16.2 percent over the three months ended January 28, 2017 (“first quarter 2017”). This increase reflects sales growth in each of the Company’s reported operating segments which was partially driven by the impact of acquisitions.

“Fiscal year 2018 is off to a good start as we saw continued growth across most of our product categories and we remain on track to meet our full year objectives,” said Tim Sullivan, CEO REV Group, Inc. “We continue to remain highly focused on the execution of our commercial, product and operating strategies to improve profitability as we work towards our long-term goal of an enterprise-wide EBITDA margin in excess of 10 percent. Additionally, we continued to execute on our disciplined capital allocation strategy with the acquisition of Lance Camper this quarter, which enables our entry into the large and fast growing towables RV market. With a strong backlog of $1.24 billion we expect to continue to see improving operating leverage in the business and thus expect earnings growth to exceed sales growth in fiscal year 2018.”

The Company’s first quarter 2018 net income was $9.4 million, or $0.14 per diluted share compared to a net loss of $13.3 million, or $0.26 per diluted share in the first quarter of 2017. First quarter 2018 net income improved as a result of higher earnings from operations, the benefit of acquisitions, lower interest expense, and the favorable impact of recently enacted U.S. tax reform. Adjusted Net Income for the first quarter 2018 was $9.7 million, or $0.15 per diluted share, which grew 72.0 percent compared to $5.7 million, or $0.11 per diluted share, in the first quarter 2017.

Adjusted EBITDA in the first quarter 2018 was $21.3 million, representing growth of 0.9 percent over Adjusted EBITDA of $21.1 million in the first quarter 2017. Adjusted EBITDA performance during the quarter benefited from higher net sales and earnings from certain business segments as well as the impact of acquisitions.

 

 

1 REV Group, Inc. changed its fiscal year end from the last Saturday to the last calendar day in October of each year. In addition, starting in fiscal 2018, the Company’s fiscal quarters will end on the last day of January, April, July and October.

2 REV Group, Inc. Adjusted Net Income and Adjusted EBITDA are non-GAAP measures that are reconciled to their nearest GAAP measure later in this release. Note: These figures do not include the impact of acquisitions before their acquisition dates

 

1


REV Group Segment Highlights

Fire & Emergency Segment

Fire & Emergency (“F&E”) segment net sales were $215.3 million for the first quarter 2018, an increase of $29.9 million, or 16.1 percent, from $185.4 million for the first quarter 2017. The increase in net sales of F&E was driven by results from the Ferrara acquisition completed in April 2017, as well as increased unit volumes. F&E backlog at the end of the first quarter 2018 was up 5.4 percent to $622.3 million compared to $590.3 million at the end of fiscal year 2017.

F&E Adjusted EBITDA3 was $18.2 million in the first quarter 2018, which represented growth of 8.7 percent compared to $16.7 million in the first quarter 2017. The increase in F&E Adjusted EBITDA was driven by higher unit volumes and the impact of the Ferrara acquisition. First quarter 2018 F&E Adjusted EBITDA margin was 8.4 percent of net sales compared to 9.0 percent in the first quarter 2017. This decrease was due to the timing and mix of shipments in the quarter.

Commercial Segment

Commercial segment net sales for the first quarter 2018 were $132.2 million, an increase of 1.5 percent compared to the first quarter 2017. This increase was the result of higher unit sales in all segment product categories, excluding school bus. School bus sales were down versus the prior year quarter due to lower contractor unit sales. Commercial backlog at the end of the first quarter was $337.8 million, a decrease of 7.8 percent compared to $366.4 million at the end of fiscal year 2017.

Commercial segment Adjusted EBITDA was $4.5 million in the first quarter 2018 compared to $8.2 million in the first quarter 2017. Adjusted EBITDA margin was 3.4 percent of net sales in the first quarter 2018 compared to 6.3 percent in the first quarter 2017. The decrease was primarily due to a shift in the timing of transit bus shipment as well as lower school bus sales in the quarter.

During the first quarter 2018, REV formed a strategic alliance with Daimler AG’s Setra bus division to expand REVs product offerings in the luxury motorcoach segment. Beginning in our second quarter of 2018, the Company will become Daimler’s exclusive distribution partner for its Setra motor coach brand in North America. In addition, starting in July 2018, the Company will also be exclusively responsible for Setra’s North American after-sales parts and service.

Recreation Segment

The Recreation segment grew net sales to $167.2 million in the first quarter 2018, representing an increase of $40.5 million, or 32.0 percent, from the first quarter 2017. Recreation segment sales growth was the result of strength in its end markets as well as sales from acquired companies. Recreation segment backlog at the end of the first quarter 2018 was $281.8 million, an increase of 94.6 percent from $144.8 million at the end of fiscal year 2017. This significant increase in backlog was positively impacted by the acquired backlog in the Lance Camper business.

Recreation segment Adjusted EBITDA grew 194.0 percent in the first quarter 2018 to $8.2 million, compared to $2.8 million in the first quarter 2017. Adjusted EBITDA margin in the first quarter 2018 grew 270 basis points to 4.9 percent of net sales compared to 2.2 percent in the first quarter 2017. The expansion in profitability is attributable to higher unit volumes, stronger product mix and the continued benefit from ongoing operating initiatives in addition to the results from acquired companies.

At the end of the first quarter 2018, the Company acquired Lance Camper Manufacturing Corporation (“Lance”). Lance adds a premium portfolio of truck campers, towable campers and toy haulers to REV’s existing suite of motorized offerings and gives the Recreation segment access to the higher volume and rapidly growing towables RV

 

3 Segment Adjusted EBITDA is a non-GAAP measure that is explained and reconciled to its nearest GAAP metric later in this release.

 

2


market segment. Lance has the number one selling truck camper in the U.S. and has won the National RV Dealer Association’s prestigious Quality Circle Award 16 years running.

Working Capital, Liquidity and Capital Allocation

Net working capital4 for the Company at January 31, 2018 was $389.3 million compared to $299.7 million at the end of fiscal year 2017. The increase in working capital was primarily due to the normal seasonal increase in inventory compared to the end of fiscal year 2017, as well as the timing of cash disbursements and the impact of the Lance acquisition. Cash and equivalents totaled $12.7 million at January 31, 2018. Total debt at January 31, 2018 was $372.3 million (net of deferred financing costs) and as a result, the Company had $143.4 million available under its ABL revolving credit facility, which was amended to increase its borrowing capacity to $450 million in December 2017. Capital expenditures in the first quarter 2018 were $13.6 million compared to $18.1 million in the prior year quarter.

Fiscal 2018 Full Year Outlook

Mr. Sullivan concluded, “First quarter results were in-line with our expectations and our view of end market demand and macro conditions remains consistent with prior expectations. Therefore, we are reaffirming our prior guidance and are still expecting full fiscal year 2018 revenues of $2.4 to $2.7 billion and Adjusted EBITDA of $200 to $220 million. Based on first quarter results, we are updating our expectation of full fiscal year 2018 net income to be in the range of $90 to $110 million and Adjusted Net Income to be in the range of $110 to $125 million.”

Quarterly Dividend

Our board of directors declared a quarterly dividend for our first quarter of fiscal 2018, payable on May 31, 2018, to holders of record on April 30, 2018, in the amount of $0.05 per share of common stock, which equates to a rate of $0.20 per share of common stock on an annualized basis.

Conference Call

REV Group, Inc. will host a conference call to discuss its first quarter 2018 results and outlook on March 8th at 11:00 a.m. EDT. A supplemental earnings slide deck will be available tomorrow morning on the REV Group, Inc. investor relations website prior to the call. The call will be webcast simultaneously over the Internet. To access the webcast, listeners can go to http://investors.revgroup.com/investor-events-and-presentations/events at least 15 minutes prior to the event and follow instructions for listening to the webcast. An audio replay of the call and related question and answer session will be available for 12 months at this website.

About REV Group

REV Group, Inc. (NYSE: REVG) is a leading designer, manufacturer and distributor of specialty vehicles and related aftermarket parts and services. We serve a diversified customer base primarily in the United States through three segments: Fire & Emergency, Commercial and Recreation. We provide customized vehicle solutions for applications including: essential needs (ambulances, fire apparatus, school buses, mobility vans and municipal transit buses), industrial and commercial (terminal trucks, cut-away buses and street sweepers) and consumer leisure (recreational vehicles (“RVs”) and luxury buses). Our brand portfolio consists of 30 well-established principal vehicle brands including many of the most recognizable names within our served markets. Several of our brands pioneered their specialty vehicle product categories and date back more than 50 years.

Note Regarding Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that the evaluation of our ongoing operating results may be enhanced by a presentation of Adjusted EBITDA and Adjusted Net Income, which are non-GAAP financial measures. Adjusted

 

4 Net Working capital is defined as current assets (excluding cash) less current liabilities (excluding current portion of long-term debt).

 

3


EBITDA represents net income before interest expense, income taxes, depreciation and amortization as adjusted for certain non-recurring, one-time and other adjustments which we believe are not indicative of our underlying operating performance. Adjusted Net Income represents net income as adjusted for certain after-tax, non-recurring, one-time and other adjustments which we believe are not indicative of our underlying operating performance as well as for the add-back of non-cash intangible asset amortization and stock-based compensation.

The Company believes that the use of Adjusted EBITDA and Adjusted Net Income provide additional meaningful methods of evaluating certain aspects of its operating performance from period to period on a basis that may not be otherwise apparent under GAAP when used in addition to, and not in lieu of, GAAP measures. A reconciliation of Adjusted EBITDA and Adjusted Net Income to the most closely comparable financial measures calculated in accordance with GAAP is included in the financial appendix of this news release.

Forward Looking Statements

This news release contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. This news release includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “strives,” “goal,” “seeks,” “projects,” “intends,” “forecasts,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout this news release and include statements regarding our intentions, beliefs, goals or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which we operate.

Our forward-looking statements are subject to risks and uncertainties, including those highlighted under “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” in the Company’s annual report on Form 10-K, which may cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which only speak as of the date hereof. The Company does not undertake to update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, expect as required by applicable law.

Investors-REVG

Contact

Sandy Bugbee

VP, Treasurer and Investor Relations

Email: investors@revgroup.com

Phone: 1-888-738-4037 (1-888-REVG-037)

 

4


REV GROUP, INC.  
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS  
(Dollars in thousands)  
     January 31,
2018
     October 31,
2017
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 12,743      $ 17,838  

Accounts receivable, net

     224,155        243,242  

Inventories, net

     486,724        452,380  

Other current assets

     14,078        13,372  
  

 

 

    

 

 

 

Total current assets

     737,700        726,832  

Property, plant and equipment, net

     227,609        217,083  

Goodwill

     185,127        133,235  

Intangibles assets, net

     164,743        167,887  

Other long-term assets

     9,357        9,395  
  

 

 

    

 

 

 

Total assets

   $         1,324,536      $         1,254,432  
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 750      $ 750  

Accounts payable

     144,315        217,267  

Customer advances

     107,839        95,774  

Accrued warranty

     23,558        26,047  

Other current liabilities

     59,937        70,241  
  

 

 

    

 

 

 

Total current liabilities

     336,399        410,079  

Long-term debt, less current maturities

     371,527        229,105  

Deferred income taxes

     15,475        22,527  

Other long-term liabilities

     19,576        20,281  
  

 

 

    

 

 

 

Total liabilities

     742,977        681,992  

Commitments and contingencies

     

Shareholders’ equity

     581,559        572,440  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 1,324,536      $ 1,254,432  
  

 

 

    

 

 

 

 

5


REV GROUP, INC.  
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited; dollars in thousands, except shares and per share amounts)  
     Three Months Ended  
     January 31,
2018
    January 28,
2017
 

Net sales

   $ 514,855     $ 442,937  

Cost of sales

     462,303       395,417  
  

 

 

   

 

 

 

Gross profit

     52,552       47,520  

Operating expenses:

    

Selling, general and administrative

     41,034       56,498  

Research and development costs

     1,731       1,198  

Restructuring

     4,052       864  

Amortization of intangible assets

     4,739       2,614  
  

 

 

   

 

 

 

Total operating expenses

     51,556       61,174  
  

 

 

   

 

 

 

Operating income (loss)

     996       (13,654

Interest expense, net

     5,417       7,478  
  

 

 

   

 

 

 

Loss before benefit for income taxes

     (4,421     (21,132

Benefit for income taxes

     (13,842     (7,829
  

 

 

   

 

 

 

Net income (loss)

   $ 9,421     $ (13,303
  

 

 

   

 

 

 

Income (loss) per common share:

    

Basic

   $ 0.15     $ (0.26

Diluted

   $ 0.14     $ (0.26

Dividends declared per common share

   $ 0.05     $  

Adjusted earnings per common share:

    

Basic

   $ 0.15     $ 0.11  

Diluted

   $ 0.15     $ 0.11  

Weighted Average Shares Outstanding:

    

Basic

         64,287,052           51,360,163  

Diluted

     66,496,919       51,360,163  

 

6


REV GROUP, INC.  
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; Dollars in thousands)  
     Three Months Ended  
     January 31,
2018
    January 28,
2017
 

Cash flows from operating activities:

    

Net income (loss)

   $ 9,421     $ (13,303

Adjustments to reconcile net income (loss) to net cash used in operating activities:

    

Depreciation and amortization

     11,017       7,421  

Amortization of debt issuance costs

     441       585  

Amortization of Senior Note discount

           42  

Stock-based compensation expense

     1,750               25,506  

Deferred income taxes

     (10,414     (8,563

Gain on disposal of property, plant and equipment

     (1,647     (205

Changes in operating assets and liabilities, net of effects of business acquisitions:

     (82,978     (45,230
  

 

 

   

 

 

 

Net cash used in operating activities

     (72,410     (33,747

Cash flows from investing activities:

    

Purchase of property, plant and equipment

     (13,594     (18,095

Purchase of rental fleet vehicles

     (5,252     (529

Proceeds from sale of property, plant and equipment

     3,921       919  

Acquisition of businesses, net of cash acquired

     (57,946     (20,581
  

 

 

   

 

 

 

Net cash used in investing activities

     (72,871     (38,286

Cash flows from financing activities:

    

Net proceeds from borrowings under revolving credit facility

     142,313       79,600  

Payment of dividends

     (3,207      

Payment of debt issuance costs

     (369      

Redemption of common stock options including employer payroll taxes

     (982     (3,251

Payments of withholding and employer payroll taxes for vesting of restricted stock

     (133      

Proceeds from exercise of common stock options, net of employer payroll taxes

     2,564        
  

 

 

   

 

 

 

Net cash provided by financing activities

             140,186       76,349  
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (5,095     4,316  

Cash and cash equivalents, beginning of period

     17,838       10,821  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 12,743     $ 15,137  
  

 

 

   

 

 

 

 

7


REV GROUP, INC.  
SEGMENT INFORMATION  
(Unaudited; in thousands)  
     Three Months Ended  
     January 31,
2018
    January 28,
2017
 

Net Sales:

    

Fire & Emergency

   $ 215,252     $ 185,371  

Commercial

     132,239       130,221  

Recreation

     167,247       126,706  

Corporate & Other

     117       639  
  

 

 

   

 

 

 

Total Company Net Sales

   $ 514,855     $ 442,937  
  

 

 

   

 

 

 

Adjusted EBITDA:

            

Fire & Emergency

   $ 18,166     $ 16,713  

Commercial

     4,460       8,174  

Recreation

     8,152       2,773  

Corporate & Other

     (9,476     (6,549
  

 

 

   

 

 

 

Total Company Adjusted EBITDA

   $ 21,302     $ 21,111  
  

 

 

   

 

 

 

Period-End Backlog:

   January 31,
2018
    October 31,
2017
 

Fire & Emergency

   $ 622,316     $ 590,268  

Commercial

     337,754       366,447  

Recreation

     281,813       144,847  

Corporate & Other

     13       27  
  

 

 

   

 

 

 

Total Company Backlog

   $         1,241,896     $         1,101,589  
  

 

 

   

 

 

 

 

8


REV GROUP, INC.  
ADJUSTED EBITDA BY SEGMENT  
(Unaudited; in thousands)  
     Three Months Ended January 31, 2018  
     Fire &
Emergency
     Commercial      Recreation      Corporate &
Other
    Total  

Net Income (loss)

   $         11,557      $ 460      $ 2,845      $ (5,441   $ 9,421  

Depreciation & amortization

     4,522        2,836        2,935        724       11,017  

Interest expense, net

     1,048        645        118        3,606       5,417  

Benefit for income taxes

                          (13,842     (13,842
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA

     17,127        3,941        5,898        (14,953     12,013  

Restructuring costs

     56               2,254        1,742       4,052  

Transaction expenses

     157                      1,398       1,555  

Stock-based compensation expense

                          1,750       1,750  

Non-cash purchase accounting expense

     396        239                     635  

Sponsor expenses

                          195       195  

Legal Settlements

     430        280                     710  

Deferred purchase price payment

                          392       392  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 18,166      $         4,460      $         8,152      $ (9,476   $ 21,302  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     Three Months Ended January 28, 2017  
     Fire &
Emergency
     Commercial      Recreation      Corporate &
Other
    Total  

Net Income (loss)

   $ 12,698      $ 4,563      $ 139      $ (30,703   $ (13,303

Depreciation & amortization

     2,809        1,930        2,157        525       7,421  

Interest expense, net

     1,172        817        42        5,447       7,478  

Provision (benefit) for income taxes

     4                      (7,833     (7,829
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

EBITDA

     16,683        7,310        2,338        (32,564     (6,233

Restructuring costs

            864                     864  

Transaction expenses

                          378       378  

Stock-based compensation expense

                                  25,506               25,506  

Non-cash purchase accounting expense

     30               435              465  

Sponsor expenses

                          131       131  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 16,713      $ 8,174      $ 2,773      $ (6,549   $ 21,111  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

9


REV GROUP, INC.  
ADJUSTED NET INCOME  
(Unaudited; in thousands)  
     Three Months Ended  
     January 31,
2018
    January 28,
2017
 

Net income (loss)

   $ 9,421     $ (13,303

Amortization of Intangible Assets

     4,766       2,614  

Restructuring Costs

                 4,052       864  

Transaction Expenses

     1,555       378  

Stock-based Compensation Expense

     1,750                   25,506  

Non-cash Purchase Accounting Expense

     635       465  

Sponsor Expenses

     195       131  

Legal Settlements

     710        

Deferred Purchase Price Payment

     392        

Impact of Tax Rate Change

     (10,414      

Income Tax Effect of Adjustments

     (3,313     (10,987
  

 

 

   

 

 

 

Adjusted Net Income

   $ 9,749     $ 5,668  
  

 

 

   

 

 

 

 

10


REV GROUP, INC.  
ADJUSTED NET INCOME OUTLOOK RECONCILIATION  
(In thousands)  
     Fiscal Year 2018  
     Low     High  

Net Income

   $ 90,000     $ 110,000  

Amortization of Intangible Assets

     17,500       15,500  

Restructuring Costs

     5,000       4,000  

Transaction Expenses

     2,000       1,600  

Stock-based Compensation Expense

     6,000       5,000  

Non-cash Purchase Accounting Expense

     1,300       1,000  

Legal Settlements

     800       700  

Sponsor Expenses

     900       700  

Deferred Purchase Price Payout

     6,500       6,000  

One-time Benefit of U.S. Tax Reform

     (10,400     (10,400

Income Tax Effect of Adjustments

     (10,100     (8,700
  

 

 

   

 

 

 

Adjusted Net Income

   $         109,500     $         125,400  
  

 

 

   

 

 

 

 

REV GROUP, INC.  
ADJUSTED EBITDA OUTLOOK RECONCILIATION  
(In thousands)  
     Fiscal Year 2018  
     Low      High  

Net Income

   $ 90,000      $ 110,000  

Depreciation and Amortization

     48,000        47,000  

Interest Expense, net

     23,000        21,000  

Income Tax Expense

     16,500        23,000  
  

 

 

    

 

 

 

EBITDA

     177,500        201,000  

Restructuring Costs

     5,000        4,000  

Transaction Expenses

     2,000        1,600  

Stock-based Compensation Expense

     6,000        5,000  

Non-cash Purchase Accounting Expense

     1,300        1,000  

Legal Settlements

     800        700  

Sponsor Expenses

     900        700  

Deferred Purchase Price Payout

     6,500        6,000  
  

 

 

    

 

 

 

Adjusted EBITDA

   $         200,000      $         220,000  
  

 

 

    

 

 

 

 

11