FinanceLooker

Excrept from filing document 2024-10-31

The aggregate market value of the voting and non voting common equity held by non affiliates of the Registrant was approximately 1 1 billion based on the last reported sale price of such securities as of April 30 2024 the last business day of the Registrant s most recently completed second fiscal quarter
This Annual Report on Form 10 K may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 Forward looking statements can be identified by words such as anticipate believe estimate expect guidance intend may outlook plan predict project target potential will would could should continue contemplate aim strive goal seek forecast and other similar expressions although not all forward looking statements contain these identifying words Investors are cautioned that forward looking statements are inherently uncertain A number of factors could cause actual results to differ materially from these statements including but not limited to
Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from those projected or suggested is contained in Item 1A of Part I of this report We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained in this Annual Report on Form 10 K or to reflect any changes in expectations after the date of this report or any change in events conditions or circumstances on which any statement is based
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None of the information provided on our website in our press releases public conference calls and webcasts or through social media channels is incorporated into or deemed to be a part of this Annual Report on Form 10 K or in any other report or document we file with the SEC and any references to our website or our social media channels are intended to be inactive textual references only
Effective January 31 2024 the Company combined its Fire Emergency segment and Commercial segment into a new segment the Specialty Vehicles segment Additionally the Recreation segment was renamed Recreational Vehicles With this change the Company s businesses are aligned in two reportable segments Specialty Vehicles and Recreational Vehicles
REV Group companies are leading designers manufacturers and distributors of specialty vehicles and related aftermarket parts and services We serve a diversified customer base primarily in the United States through our two segments We provide customized vehicle solutions for applications including essential needs for public services ambulances and fire apparatus commercial infrastructure terminal trucks and industrial sweepers and consumer leisure recreational vehicles Our diverse portfolio is made up of well established principal vehicle brands including many of the most recognizable names within their industry
The specialty vehicle market is a complex and attractive market characterized by i numerous niche markets ii highly customized vehicle configurations addressing unique customer applications and iii specialized customer bases and distribution channels both dealer and direct We believe the specialty vehicle market has historically been serviced by niche companies which has created an opportunity for market leadership by efficient producers with the ability to scale resources We believe that our focus on manufacturing best practices and operational improvements supply chain management and product innovation strengthen our market position and ability to compete which provides an opportunity for market growth and margin expansion
Our products are sold to municipalities government agencies private contractors consumers and industrial and commercial end users We have a diverse customer base with our top 10 customers representing approximately 21 of our net sales in fiscal year 2024 with no single customer representing more than 5 of our net sales over the same period We believe our diverse end markets are favorably exposed to multiple secular growth drivers such as municipal spending overall population growth a growing aged population the increasing popularity of outdoor and active lifestyles technological advances and the replacement of existing in service vehicles including legislated replacements
Our business model utilizes our scale to drive profitable organic and acquisitive growth We seek to gain market share by delivering high quality products with customized attributes tailored to our customers product specifications while simultaneously reducing costs and managing delivery lead times We aim to achieve this by standardizing and optimizing certain processes across our segments via our proprietary REV Drive Business System and in areas including procurement engineering and product development and lean manufacturing We believe our manufacturing and service network consisting of 17 primary manufacturing facilities 3 Regional Technical Centers RTCs and 3 aftermarket parts warehouses provides us with a competitive advantage through the sharing of best practices manufacturing flexibility based on relative facility utilization levels access to geographically diverse labor pools lower delivery costs economies of scale customer service capabilities and a complementary distribution system Our business consists primarily of design engineering technology application integration and assembly activities which require relatively low levels of maintenance capital expenditures Furthermore our broad presence across the specialty vehicle market and large manufacturing and distribution network are important differentiators in our potential to grow through acquisitions We believe we have the opportunity to grow and enhance the earnings profile of acquired businesses by expanding access to sales distribution channels consolidating acquired businesses into our existing operations and by introducing the REV Drive Business System and scale into newly acquired businesses to drive profitable growth
To enhance our market leading positions we enhance organic growth with iterative product development and new product launches across our two segments Product development is primarily designed to provide our customers with high quality products that have varied and unique feature sets and product capabilities at attractive price points In addition to product development our businesses are continuously adapting and customizing our vehicles to meet individual customers needs and applications In our Recreational Vehicles segment specifically our new model design cycle follows similar timelines as the automotive industry whereby new models and configurations are introduced or upgraded annually
Our management team has significant experience in highly specialized industrial manufacturing and aftermarket parts and services businesses We continue to focus on initiatives to accelerate growth and improve our profitability These initiatives include reviewing our product portfolio improving brand management developing new products strengthening distribution leveraging a centralized enterprise wide procurement strategy growing aftermarket products improving production processes within our facilities driving down total cost of quality implementing value based pricing strategies and reducing fixed costs
Upon completion of the second of the two Offerings AIP ceased to beneficially own at least 15 of the Company s outstanding shares of common stock in the aggregate As a result under the terms of the Amended and Restated Shareholders Agreement dated as of February 1 2017 as amended AIP no longer has significant influence over the Company including control over decisions that require the approval of stockholders and no longer has the right to nominate any directors to the Board of Directors of the Company Each of the board members previously nominated by AIP resigned from the Board of Directors of the Company effective upon the completion of the second of the two Offerings AIP is no longer considered a sponsor affiliate or related party of the Company
We sell new specialty vehicles which we design engineer and assemble in our production facilities Our aftermarket business consists of parts sales and service We believe the majority of our new vehicle sales represent the replacement of in service vehicles which are past their useful life with additional sales derived from fleet expansions new customers and new product introductions
Our Specialty Vehicles segment sells i fire apparatus equipment under the Emergency One E ONE Kovatch Mobile Equipment KME and Ferrara brands and Spartan Emergency Response Spartan ER which consists of the Spartan Emergency Response Smeal Spartan Fire Chassis and Ladder Tower brands ii ambulances under the American Emergency Vehicles AEV Horton Emergency Vehicles Horton Leader Emergency Vehicles Leader Road Rescue and Wheeled Coach brands and iii terminal trucks and sweepers under the Capacity and Laymor brands respectively We believe we have one of the industry s broadest portfolios of products including Type I ambulances aluminum body mounted on a heavy truck style chassis Type II ambulances van conversion ambulance Type III ambulances aluminum body mounted on a van style chassis pumpers fire apparatus on a custom or commercial chassis with a water pump and water tank to extinguish fires aerial trucks fire apparatus with stainless steel or aluminum ladders tanker trucks rescues aircraft rescue firefighting ARFF custom cabs chassis terminal trucks specialized vehicles which move freight in warehouses intermodal yards distribution and fulfillment centers and ports sweepers three and four wheel versions used in road construction activities and other vehicles Each of our individual brands is distinctly positioned and targets certain price and feature points in the market such that dealers often carry and customers often buy more than one product type from our Specialty Vehicles segment brands
Custom manufacture of emergency response cabs and chassis which are sold to both related and third party custom fire apparatus OEM s and tailored to customer specifications based on such factors as application terrain street configuration and the nature of the community state or country in which the fire truck will be utilized
Our Recreational Vehicles segment serves the recreational vehicles RV market through the following principal brands American Coach Fleetwood RV Holiday Rambler Renegade RV Midwest Automotive Designs and Lance Camper We believe our brand portfolio contains some of the longest standing and most recognized brands in the RV industry Our products in the Recreational Vehicles segment include Class A motorized RVs motorhomes built on a heavy duty chassis with either diesel or gas engine configurations Class C and Super C motorized RVs motorhomes built on a van or commercial truck chassis Class B RVs motorhomes built out within a van chassis and high end luxury van conversions and towable travel trailers and truck campers The Recreational Vehicles segment also includes Goldshield Fiberglass which produces a wide range of custom molded fiberglass products for the Fleetwood family of brands other RV manufacturers and broader industrial markets
A Class C motorized RV is equipped with a kitchen dining area featuring a refrigerator freezer a propane range sometimes with an oven a microwave oven and a table with seating It also has a lavatory with a bath shower one or more sleeping areas and additional seating towards the front An air conditioner water heater furnace and outside canopy are also typically included
Class B includes motorized RVs and luxury vans which have a broad appeal due to their versatility and ease of driving Motorized RVs are typically used for shorter overnight trips older couples no longer wanting to drive a large coach families involved in sports and tailgating Luxury vans are typically used for business purposes university and professional sports team transportation limousine services and even larger families in need of space for a primary driving vehicle
Fire and ambulance products are primarily used by municipalities and private contractors to provide essential services such as fire suppression emergency rescue response disaster relief aircraft rescue and firefighting and patient transport Nearly all fire apparatus and ambulances are customized in some form however they share many common production and component attributes such as similar manufacturing and engineering processes raw materials aluminum lights wire harnesses paint and coatings Demand is driven primarily by the replacement of in service fleets as well as by factors such as a growing aged population and a growing overall population with longer life expectancy driving increased patient transportation and emergency response needs new real estate developments urbanization and taller buildings requiring more aerial vehicles international airport growth requiring Federal Aviation Administration specified ARFF vehicles rising municipal funding levels and the increasing use of emergency vehicles for non critical care transport Local tax revenues are an important source of funding for fire and ambulance purchases for emergency departments in addition to Federal grant money and other state and locally raised funding
Terminal truck and sweeper products are primarily used to move freight in warehouses intermodal yards distribution and fulfillment centers and ports and in road construction activities respectively Terminal truck demand is driven by replacement of in service fleets growth in trade and the increased use of intermodal freight services and warehouses We anticipate that ongoing growth in global trade will result in higher future intermodal freight traffic growth Sweeper demand is also driven by replacement of in service fleets by contractors and rental companies as well as growth in infrastructure and construction spending
The RV industry includes various types and configurations of both motorized and towable RVs of which we currently manufacture and sell Class A Class B Class C and Class Super C motorized RVs travel trailers truck campers Motorized RVs are self contained units built on motor vehicle chassis with their own lighting plumbing heating cooking refrigeration sewage holding and water storage facilities Class A RVs are generally constructed on purpose built chassis for recreation travel complete with engine and drivetrain components We then build the vehicle body and design fabricate and install the living area and driver s compartment of these motorized RVs Class B RVs are built on a consumer van chassis with the entire living area contained within the van frame Class C RVs are built on standard van chassis which include an engine drivetrain and a finished cab section In Class Cs we design fabricate and install the living area to connect to the driver s compartment and the cab section Super Class C RVs are heavy duty Class C motorhomes built on a commercial truck chassis that can be used in conjunction with other outdoor or sporting activities because of a larger towing capacity We also design and manufacture a portfolio of towable travel trailers and truck campers These trailers and campers are comprised of a self contained living area with their own heating lighting plumbing cooking refrigeration sleeping and bathroom facilities but excluding a motor vehicle chassis These products require the RV owner to utilize a motor vehicle to pull or carry them between destinations
RVs are a consumer leisure purchase and therefore factors that drive demand include consumer wealth including the value of primary housing residences and the stock market level consumer confidence cost and availability of financing and levels of disposable income We believe end customers tend to be brand loyal and repeat buyers who make decisions based on brand quality product configuration primarily floorplan design features and product styling service availability and experience and price In any given year the macro demand drivers of an aging population and popularity of travel will be impacted by the shorter term cyclical demand swings for RVs that are caused by changes in consumer sentiment due to factors that include consumer wealth confidence and the cost and availability of financing
Our end markets include the municipal market vehicles for essential services such as emergency response firefighting and patient transportation the consumer market vehicles for transportation and leisure needs the industrial commercial markets vehicles for construction projects and global port and intermodal transportation applications and the private contractor market privately owned fleets that provide transportation services
Our top 10 customers combined accounted for approximately 21 of our net sales for fiscal year 2024 with no customer representing more than 5 of our net sales in the same period We and our predecessor and acquired companies have operated in our businesses for many years and many of our brands have been trusted names in the marketplace for decades As a result we benefit from many long term customer relationships
A Market Leader Across Both of Our Segments with a Large Installed Base We believe we are a market leader in each of the specialty vehicle and recreational vehicle markets We believe we are the largest manufacturer by unit volume of fire and ambulance vehicles in the United States and a leading producer of terminal trucks and sweepers Within our Recreational Vehicles segment we are one of the top producers of Class A diesel and gas motorized RVs We are also a leader in high end Class B and Super C RVs under the Midwest Automotive Designs and Renegade RV brands respectively We also believe we have one of the highest quality travel trailer and truck camper product lines under the Lance brand name
We estimate that the replacement value of our installed base of approximately 164 000 vehicles across our segments is approximately 41 3 billion which we believe is a significant competitive advantage for both replacement unit sales and aftermarket parts as brand familiarity drives customer loyalty and fleet owners frequently seek to standardize their in service fleets through repeat purchases of existing brands and product configurations For example one of the largest municipal fire departments in the United States has the vast majority of its fleet of ambulances standardized on REV branded product configuration and feature sets that satisfy this customer s unique specifications and standards
Broad Product Portfolio and Well Recognized Brands Our product portfolio is comprised of high quality vehicles sold under well established principal vehicle brands that in many instances pioneered their market segments For example we believe the first Type I ambulance was developed and sold by Horton We believe our portfolio is comprised of complementary product offerings in adjacent markets and enables us to attract and retain top dealers who in many instances sell multiple REV brands in their territories Our vehicle platforms are highly customizable and can meet nearly all product specifications demanded by our customers In each of the markets that we serve we believe our brands are among the most recognized in the industry representing performance quality reliability durability technological leadership and superior customer service
Centralized Sourcing We utilize a centralized sourcing model that includes a dedicated team of procurement professionals to complement our segment sourcing teams so that we can coordinate and leverage our purchases across a diverse supplier base Our centralized sourcing model leverages our growing scale within our markets to achieve more competitive pricing and to help ensure availability
Selling into Attractive Growing End Markets Each of our segments serves end markets that are supported by what we believe to be favorable long term demographic economic and secular trends We believe that the growing aged population in the United States will increase demand for our products as older demographics are a key demand driver for products such as ambulances and RVs In the Specialty Vehicles segment specific to fire and ambulance products increasing legislated changes requiring useful life replacement cycles will create a source of recurring demand for our products as in service vehicles achieve mileage or age limits We believe demand for our fire and ambulance products will grow with increasing state and local government spending Though our net sales for all the specialty vehicles we manufacture are primarily derived from sales in North America similar positive market dynamics exist in other parts of the world providing an opportunity for future global growth in each of our segments Only approximately 1 of our net sales in fiscal year 2024 were from sales to customers outside of North America
Unique Scale and Business Model Many of our products contain similar purchased components such as chassis engines lighting wiring and other commodities which increases our leverage with and relevance to key suppliers as compared to many of our competitors Additionally the operational processes across our different products are based on common elements such as chassis preparation and production body fabrication product assembly and painting which allow us to develop best practices across our manufacturing footprint and implement those processes to drive operational efficiency Our platform also allows us to leverage the combined engineering resources and product development resources from our broad network to bring new products features and customer specific customization to market Our business model makes us more desirable to our distribution channel partners as we provide them with a full line of products to address our mutual customers needs across a wider variety of price and product feature elements which gives dealers the opportunity to sell to a larger customer base and grow their sales and earnings
Business Model Produces Attractive Financial Characteristics Our core production processes are design engineering component integration and assembly in nature creating a business model that includes a variable cost structure low required levels of maintenance capital expenditures as a percentage of net sales structural ability to drive attractive levels of return on invested capital and strong revenue visibility in certain product categories with longer backlogs Based on our long term historical results of operations we estimate that across both of our segments approximately 80 of our cost of goods sold is comprised of direct materials including chassis and direct labor which are typically variable in nature Because these costs are associated with the specific production of our vehicles in each period they are typically adjusted within a given period based on production levels in that period Our remaining cost of goods sold is comprised of certain indirect labor and overhead costs which are fixed or semi variable in nature because these costs are not linked to specific vehicle volumes in a given period The time required to adjust these levels of spending is longer and management decisions regarding these costs are typically made based on longer term trends and forecasts In addition our selling general and administrative expenses are primarily comprised of salaried payroll expenses which we structure around the level of demand in our markets and based on each business sales distribution characteristics Finally certain of our businesses carry a relatively long duration backlog which enables strong visibility into future net sales Where this backlog visibility exists we are able to more effectively plan and predict our sales and production activity
Experienced Consolidator with Proven Ability to Integrate Acquisitions We have completed acquisitions across our Specialty Vehicles and Recreational Vehicles segments and continue to actively consider future potential acquisitions that complement and expand our current product portfolio Our scale and plant network strong end market positions extensive distribution networks and access to low cost capital position us favorably to continue to grow and enhance value through strategic acquisitions The specialty vehicle market is highly fragmented with a large number of smaller producers within our existing markets as well as in new markets where we believe there would be synergies with REV We believe all these attributes position REV as an acquirer of choice in the specialty vehicles market
Drive Margin Expansion Through Controllable Operational Initiatives We are focused on driving operational improvement initiatives across the organization to increase net income cash flow and Adjusted Net Income and Adjusted EBITDA as defined in Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations over the long term We believe we have an enterprise wide culture focused on continuous improvement implementing measurable performance targets and sharing of best practices across the entire organization We leverage our REV Drive Business System to standardize and optimize processes across our segments in procurement engineering and product development and lean manufacturing We continuously strive to identify and act on additional profitability improvement initiatives in many of our business units
Develop Innovative New Customer Offerings Due to the specific customer requirements for our products we are continually enhancing and customizing our product offerings by introducing new features to enhance customer utility across a variety of price points We seek to expand our addressable market by developing innovative products and services that extend our market leading combination of features performance quality and price to new customer bases new markets or new segments of existing markets We believe our process of constant innovation will not only help us increase net sales but also achieve lower costs and generate higher margins as our new products are frequently designed to leverage existing procurement relationships and for ease of manufacturability
Enhance Sales and Distribution Model We believe that we are an attractive specialty vehicle OEM partner for dealers due to the breadth and quality of our product offerings our brand recognition our ability to produce products at varied price and feature points as well as our aftermarket support capabilities We intend to continue to leverage this strength to enhance our distribution network through selectively adding dealers in new territories strengthening dealers in our existing network and expanding our direct sales and service capabilities in targeted markets Our goal is to partner with the leading dealers in each market and to provide the necessary resources to ensure our partner dealers can best position REV products to compete successfully within their regions We will also continue to optimize our go to market channel strategy e g distribution or direct sale based on the specific market dynamics and customer composition by region We have historically focused on customers within the United States however we believe there is demand internationally for our products and may seek to expand our distribution globally
Accelerate Aftermarket Growth Our end users large in service fleets create strong demand for aftermarket parts in order to keep vehicles running and to support their residual value We have ecommerce capabilities to provide our customers with real time data on parts availability and pricing for each of the vehicles we manufacturer
Pursue Value Enhancing Acquisitions We seek to pursue acquisitions which enhance our existing market positions facilitate our entry to new product categories and or markets and achieve our targeted financial returns Given our leadership positions within our markets and our existing facility service and distribution network we believe we have many inherent advantages in making acquisitions and have demonstrated the ability to identify execute and integrate acquisitions while realizing synergies We will seek acquisitions of companies with strong brands and complementary products and distribution networks that align well with our strategies and provide synergies with our existing business In addition we will target acquisitions which further diversify or broaden our product offerings and geographic reach and simultaneously produce attractive financial returns
We distribute our brands either through our direct sales force or our well established dealer network Whether we sell directly to the customer or through a dealer depends largely on the product line the customer base and applicable regulations We provide our direct sales force representatives and dealers with training on the operation and specifications of our products We strive to keep our direct sales force representatives and dealers up to date on our product offerings and new features as well as market trends We believe our scale enables us to dedicate certain sales and marketing efforts to particular products customers or geographic regions which we believe enables us to develop expertise valued by our customers
As one of the leaders in each of our main markets we believe our distribution network consists of many of the leading dealers within each segment We believe our extensive dealer network has the ability to meet the needs of end customers with high to low value added products such as vehicles equipment components and parts and services at a variety of price points and order sizes As a result most of our dealers have sold our products for over a decade and are serving a well established installed base of end customers creating cost advantages and strong positions due to customer loyalty We also periodically assist our dealers in composing bid packages for larger opportunities that involve our product lines We continue to grow and enhance our distribution network into underserved areas In addition we evaluate export opportunities from time to time in select international markets through our direct sales force and our established international dealerships and agents
Our fire apparatus business partners with a combination of independent dealer networks and a direct sales force to sell our products in the North American market Additionally we sell Spartan cab chassis to OEM manufacturers Dealers hold a strong position in their assigned territories providing us with a significant competitive advantage Brands in the fire segment participate in the Government Services Agency GSA Schedules Program and Defense Logistics Agency DLA troop support
We sell our ambulances through internal direct sales personnel as well as a select group of independent dealers in North America Our direct sales force is responsible for sales to key accounts that operate in multiple states or require a direct OEM relationship to service their business Independent dealers provide full coverage of the U S domestic market and provide both sales and service to our customers We believe our dealers hold strong positions in their assigned territories providing us with a significant competitive advantage In addition we participate in GSA Schedules Program and we export to most of the international markets that participate in this program These include countries in the Middle East Latin America and the Caribbean basin
The LayMor brand is principally marketed in both commercial and rental markets through manufacturer s representatives and distributors who are supported by our internal sales efforts with key customers such as national equipment rental companies and government agencies Our direct sales personnel work directly with national customers to ensure that LayMor equipment meets customers specifications and is qualified for sale throughout their national network
We sell our RV products through a national independent dealer network with internal sales personnel responsible for direct distribution engagement with these dealers RV purchases are sensitive to wholesale and retail financing consumer confidence and disposable income making them discretionary products Additionally many buyers of RVs are brand loyal repeat purchasers who make decisions based on brand product configuration primarily floor plan design features and product styling service and price
We currently operate 17 manufacturing facilities across the United States with approximately 4 1 million square feet of manufacturing service and warehouse space Our products within each of our segments and across the enterprise share a centralized sourcing model and employ certain common engineering and manufacturing processes Through our manufacturing infrastructure we leverage our capabilities and scale in procurement new product development design assembly and painting processes We also leverage best practices in quality control and worker safety across our segments
We strive to instill a manufacturing culture of continuous improvement through our proprietary REV Business System and other initiatives Many of our direct labor employees are taught lean manufacturing principles or other operational best practices to improve the efficiency of their production processes and enhance their employment experience The commonality and scale of the REV Drive Business System across all of our factories in the areas of chassis production preparation product assembly and flow processes and body and apparatus design and manufacturing allows us to share efficiency and operational best practices across our segments
We believe our engineering research and development R D capabilities are essential to ensure we remain competitive in the markets in which we operate We continue to engage in new product development enhancement and testing to improve both existing products and the development of new vehicles and components
Virtually all of our vehicle sales require some level of custom engineering to meet customer specifications and evolving industry standards In the Specialty Vehicles segment engineering and development activities include the design and production of customized equipment to meet the specific needs and applications of our customers In the Recreational Vehicles segment overall design floorplan layout functionality and amenities require frequent updating to address changes in consumer preferences and to enhance our existing product offerings
In fiscal year 2024 we purchased approximately 1 5 billion of chassis direct materials and other components from outside suppliers The largest component of these purchases was for vehicle chassis representing approximately 26 of the total purchase amount These chassis are sourced from major automotive manufacturers including Ford Freightliner General Motors Mercedes and other original equipment manufacturers OEMs These OEMs provide us with standardized mass produced chassis models which we then convert for our customers under approved authorized converter agreements with the OEMs We have tailored our products and processes to the specifications of these OEM agreements and have built customer expectations and planning around these designs Therefore we are reliant on a consistent supply of chassis and the maintenance of our status as approved converters in order to maintain our sales
We also purchase and utilize other materials in our production processes including steel and aluminum in our apparatus and passenger compartment manufacturing engines and drivetrain transmissions axles components for our manufactured chassis in the RV fire apparatus and terminal truck businesses lighting packages for our emergency products and HVAC systems and parts seats and seatbelts doors lifts electrical switches and components hydraulic components and miscellaneous hardware We also purchase materials that contain or are composed of certain raw or base materials such as paint fiberglass parts and chassis body components wood and wood parts brass and certain petroleum based resins such as plastic
We utilize a centralized sourcing model that includes a dedicated team of procurement professionals to complement our segment sourcing teams so that we can coordinate and leverage our purchases across a diverse supplier base Our centralized sourcing model leverages our scale within our markets to achieve competitive pricing and ensure availability
We strive to maintain strong and collaborative relationships with our suppliers and believe that the sources for these production process inputs are well established generally available across world markets and are in sufficient quantity other than certain chassis such that we would expect to avoid material disruptions to our businesses if we encountered an interruption from one of our key suppliers
Patents and other proprietary rights are important to our business and can provide us with a competitive advantage We also rely on trade secrets design and manufacturing know how continuing technological innovations and licensing opportunities to maintain and improve our competitive position We periodically review third party proprietary rights including patents and patent applications in an effort to avoid infringement on third party proprietary rights and protect our own identify licensing or partnership opportunities and monitor the intellectual property claims of others
We own a portfolio of intellectual property including patents confidential technical information and technological expertise in manufacturing specialty vehicles We also own registered trademarks in the United States for certain trade names and important products Due to the markets in which we operate we believe that our trade names are the most valuable component of our intellectual property We believe that our intellectual property rights confidentiality procedures and contractual provisions are adequate for our business and have an active program to maintain these rights Our well respected and widely recognized proprietary trade names include E ONE KME Ferrara Spartan Smeal Ladder Tower Company Wheeled Coach Road Rescue AEV Horton Leader Capacity LayMor Fleetwood RV Monaco American Coach Holiday Rambler Renegade Midwest Automotive Designs Goldshield and Lance Camper
While we consider our patents trademarks and other intellectual property to be valued assets we do not believe that our competitive position is dependent primarily on our patents or trademarks or that our operations are dependent upon any single patent or group of related patents to manufacture our products
Our ongoing operations are subject to a wide range of federal state local and foreign environmental health and safety laws and regulations These laws and regulations relate to water discharges air emissions the generation storage handling use release disposal and transportation of hazardous materials and wastes environmental cleanup the health and safety of our employees and the fuel economy and emissions of the vehicles we manufacture Certain of our operations require environmental health and safety permits or other approvals from governmental authorities and certain of these permits and approvals are subject to expiration denial revocation or modification under various circumstances Compliance with these laws regulations permits and approvals is a significant factor in our business We have expended resources both financial and managerial to comply with environmental laws and worker safety laws and maintain procedures designed to foster and ensure compliance and we are committed to protecting our employees and the environment We believe that our policies practices and procedures are properly designed to prevent unreasonable risk of environmental damage and the consequent financial liability to the Company However our failure to comply with applicable environmental health and safety laws and regulations or permit or approval requirements could result in substantial liabilities or civil or criminal fines or penalties or enforcement actions including regulatory or judicial orders enjoining or curtailing operations or requiring remedial or corrective measures installation of pollution control equipment or other actions as well as business disruptions which could have a material adverse effect on our business financial condition and operating results
In addition we may be responsible under environmental laws and regulations for the investigation remediation and monitoring as well as associated costs expenses and third party damages including tort liability and natural resource damages relating to past or present releases of hazardous substances on or from our properties or the properties of our predecessor companies or third party sites to which we or our predecessor companies have sent hazardous waste for disposal or treatment Liability under these laws may be imposed without regard to fault and may be joint and several
The markets in which we participate are highly competitive We compete with both divisions of large diversified companies as well as private and public companies We believe that through this growth we are developing a relatively scaled business across both of our segments which creates a competitive advantage against a large number of our competitors and makes us more relevant compared to our larger competitors We believe that we have been able to effectively compete on the basis of product quality and reliability total cost of ownership breadth of product offerings manufacturing capability and flexibility client specific customization price technical capability product innovation and customer service The combination of our products aftermarket support and large installed base of vehicles provides us with a competitive advantage across our end markets
In the Specialty Vehicles segment our competition includes Pierce Manufacturing Oshkosh Corp Rosenbauer International Demers Braun Crestline FWD Seagrave Life Line Emergency Vehicles TICO and Cargotec among others In the Recreational Vehicles segment our competition includes Thor Industries Inc Winnebago Industries Inc and Forest River Inc among others
In a typical year our operating results are impacted by seasonality Historically the slowest sales volume quarter has been the first fiscal quarter when the purchasing seasons for vehicles such as RVs are the lowest due to the colder weather and the relatively long time until the summer vacation season Our first fiscal quarter also has fewer working days to complete and ship units due to the number of holidays and related vacation taken by employees Sales of our products have typically been higher in the second third and fourth fiscal quarters with the fourth fiscal quarter typically being the strongest due to better weather the vacation season buying habits of RV dealers and end users and timing of government and municipal customer fiscal years Our quarterly results of operations cash flows and liquidity are likely to be impacted by these seasonal patterns Sales and earnings for other vehicles that we produce such as essential emergency vehicles are less seasonal but fluctuations in sales of these vehicles can also be impacted by timing surrounding the fiscal years of municipalities and commercial customers as well as the timing and amounts of multi unit orders
We believe our success depends on the strength of our workforce We employ approximately 5 500 employees excluding temporary workers and contractors approximately 75 of whom work in production roles REV s leadership team and Chief Human Resources Officer CHRO are responsible for developing and executing our human capital strategy This includes the acquisition development and retention of talent to deliver on the Company s strategy as well as the design of employee compensation and benefits programs The CHRO and the Chief Executive Officer CEO regularly update our board of directors on the operation and status of these human capital activities Key areas of focus include
REV Group Inc is a corporation organized under the laws of the state of Delaware Our principal executive offices are located at 245 South Executive Drive Suite 100 Brookfield Wisconsin 53005 Our telephone number at that address is 414 290 0190 We make our Annual Reports on Form 10 K Quarterly Reports on Form 10 Q Current Reports on Form 8 K and amendments to those reports available through our website as soon as reasonably practicable after we file such material with or furnish it to the SEC Our website address is www revgroup com The information on or that can be accessed through our website is not part of this Annual Report on Form 10 K and you should not rely on any such information in making the decision whether to purchase shares of our common stock
Investing in shares of our common stock involves a degree of risk The following is a cautionary discussion of risks uncertainties and assumptions that we believe are material to our business Investors should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10 K including our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10 K before deciding to invest in shares of our common stock If any of the following risks actually occurs our business prospects operating results and financial condition could suffer materially the trading price of shares of our common stock could decline and investors could lose all or part of their investment It is impossible to predict or identify all such factors and as a result investors should not consider the following factors to be a complete discussion of risks uncertainties and assumptions Additional risks and uncertainties including those not presently known to us or that we currently believe to be immaterial may also adversely affect our business
Our business is impacted by the U S economic environment employment levels consumer confidence changes in interest rates and instability in securities markets around the world among other factors In particular changes in the U S economic climate could result in reduced demand in key end markets RV purchases are generally viewed as discretionary in nature and are therefore sensitive to wholesale and retail financing consumer confidence unemployment levels disposable income and changing levels of consumer home equity For example the 2008 recession caused consumers to reduce their discretionary spending which negatively affected our sales volumes for RVs Terminal truck sales volumes are also impacted by economic conditions global trade changes in supply chain management and industrial output as these factors impact our end market customers for these products which include shipping ports trucking distribution hubs and rail terminal operators RV and terminal truck sales are affected by U S and global general economic conditions which create risks that future economic downturns will reduce consumer demand and negatively impact our sales
While less economically sensitive than the Recreational Vehicles segment and our terminal truck business the fire and ambulance businesses in our Specialty Vehicles segment are also impacted by the overall economic environment Local tax revenues are an important source of funding for fire and ambulance purchases by emergency response departments For example reduced municipal tax revenues resulting from the 2008 recession may have led to a decline in these markets As fire and ambulance vehicles are typically a larger cost item for municipalities and because their service life is very long their purchase is more deferrable This can result in cyclicality in certain of our end markets which in turn may result in fluctuations in our sales and results of operations
A decrease in employment levels consumer confidence or the cost or availability of financing or other adverse economic events could negatively affect the demand for our products Any decline in overall customer demand in markets in which we operate could have a material adverse effect on our operating performance
Although we do not have operations outside the United States we may experience indirect impacts to our operations such as supply chain disruptions due to our relationships with suppliers in other countries where economic or political instability exists as well as potential inflation in the cost of energy raw materials or other supplies The potentially destabilizing effects of the global conflicts or the potential for a larger conflict could have other adverse effects on our business For example the conflicts in Russia and Ukraine which started in 2022 as well as conflicts in Israel and the Middle East which started in 2023 have resulted in significant volatility and disruptions to the global markets It is not possible to predict the short or long term implications of these conflicts which could include but are not limited to further sanctions uncertainty about economic and political stability increases in inflation rates and energy prices supply chain challenges and adverse effects on currency exchange rates and financial markets These conflicts could lead to an increased threat of cyber attacks including increased risk of data breach and other threats from ransomware destructive malware distributed denial of service attacks as well as fraud spam and fake accounts or other illegal activity conducted generally by bad actors seeking to take advantage of us our partners or end customers against U S companies These increased threats could pose risks to the security of our information technology systems our network and our product offerings and or service offerings for our products as well as the confidentiality availability and integrity of our data
Our sales and our manufacturing processes depend on the supply of manufactured vehicle chassis and other critical components such as engines transmissions wire harnesses and axles from major auto manufacturers and other suppliers including Allison Transmission Cummins Daimler Truck North America Ford General Motors Meritor Mercedes Benz and Navistar among others For the standardized mass produced chassis models we convert the chassis for our customers under approved authorized converter agreements with the OEMs We have tailored our products and processes to the specifications of these OEM agreements and have built customer expectations and planning around these designs We are reliant on a consistent supply of chassis and the maintenance of our status as authorized converters in order to maintain our sales If these manufacturers experience production delays if the quality or design of their chassis changes if these manufacturers implement recalls or if these manufacturers change or discontinue the specific type of chassis they manufacture we could incur significant costs or disruptions to our business which could have a material adverse effect on our net sales financial condition profitability and or cash flows At various times we may carry increased inventory to protect against these concerns which may negatively impact our results of operations
We purchase a significant number of components from domestic suppliers To the extent tariffs increase the price of imported products the industry may move more component orders to domestic suppliers which could strain the capacity of our suppliers putting the normal uninterrupted supply of components at risk In addition our suppliers may experience operational delays or disruptions including as a result of the outbreak of epidemics or other public health crises which could in turn affect our manufacturing processes and sales Additionally certain important components that we use in our vehicles such as engines and transmissions are produced by a limited number of qualified suppliers or we may have a single supplier sourcing a specific component and any disruption in their supply of such components to us would have a negative impact on our business
Volatility in the financial markets generally and in the truck and automotive sectors in particular could impact the financial viability of certain of our key third party suppliers or could cause them to exit certain business lines or change the terms on which they are willing to provide products For example during the electronic chip shortages in 2022 many vehicle manufacturers including Ford and General Motors idled factories and reduced their output of vehicle chassis During 2018 and 2019 many of our suppliers encountered production issues and delivery delays due to factors which included a vendor factory fire new plant location inefficiencies unplanned work stoppages and indirect impacts from the implementation of tariffs A recurrence of any of these events or another similar development could lead to difficulties in meeting our customers demands and reduce our overall sales volume Further any changes in quality or design capacity limitations shortages of raw materials or other problems could result in shortages or delays in the supply of vehicle chassis or components to us For example in 2023 the United Auto Workers Union announced targeted strikes impacting certain auto manufacturers from which we purchase chassis While the targeted strikes did not cause a disruption to our business a similar or more prolonged labor dispute could have an adverse impact on our ability to procure the components necessary to produce and maintain sales volumes Our business operating results and financial condition could suffer if our suppliers reduce output or make changes to chassis models that are unpopular with our customers or are incompatible with our current product designs or production process
We operate in a highly competitive environment in each of the markets we serve and we face competition in each of our product segments from numerous competitors We compete principally on the basis of customer loyalty and repeat buyers client specific customization product quality and reliability breadth of product offering manufacturing capability and flexibility technical capability product innovation customer service after sales support delivery times and price Certain of our competitors are smaller companies which may have lower operating costs and greater operational flexibility and may focus on regional markets where they have competitive advantages of proximity and relationships with local municipalities or other regional customers Other of our competitors are large well established companies with capacity financial and other resources that may be in excess of ours Additionally companies that are not currently competitors but that are involved in the specialty vehicle market such as a supplier that operate in other specialty vehicle market segments than us or that operate in an adjacent market such as a producer of mainstream cars and trucks could choose to enter the specialty vehicle market
Our profitability is sensitive to changes in the balance between supply and demand in the specialty vehicle market Competitors having lower operating costs or labor costs than we do will have a competitive advantage over us with respect to products that are particularly price sensitive New manufacturing facilities may be built or idle production lines may be activated Additionally imbalances in the regional supply and demand for our products could result in increased competition in the markets in which we compete
Our manufacturing processes consume significant amounts of raw materials the costs of which are subject to worldwide supply and demand factors as well as other factors beyond our control including continuing inflation Raw material price fluctuations may adversely affect our results We purchase directly and indirectly through component purchases significant amounts of aluminum steel plastics and other resins brass wood and fiberglass products as well as other commodity sensitive raw materials annually In particular in past years steel and aluminum prices have experienced volatility which has been unforeseen and unexpected Further tariffs enacted or proposed by the U S government or retaliatory tariffs could further increase the price of components imported from international suppliers and lift prices of certain commodities generally regardless of origin Although we at times purchase steel aluminum and other raw materials in advance in order to provide certainty regarding portions of our pricing and supply for the majority of our raw material purchases we do not typically enter into any fixed price contracts and may not be able to accurately anticipate future raw material prices for those inputs including the impacts of inflation Commodity pricing has fluctuated significantly over the past few years and may continue to do so in the future Such fluctuations could have a material effect on our results of operations balance sheets and cash flows and impact the comparability of our results between financial periods
We rely extensively on information technology systems in order to conduct business including some that are managed by third party service providers These systems include but are not limited to programs and processes relating to internal and external communications ordering and managing materials from suppliers converting materials to finished products shipping products to customers processing transactions summarizing and reporting results of operations and complying with regulatory legal or tax requirements Due to our reliance on our information systems we have established various levels of security as well as backup and disaster recovery procedures However these backup and disaster recovery procedures may not function as intended Additionally these information technology systems could be damaged or cease to function properly due to the poor performance or failure of third party service providers catastrophic events power outages network outages failed upgrades or other similar events If our business continuity plans do not effectively resolve such issues on a timely basis we may suffer interruptions in conducting our business which may adversely impact our operating results
Periodically we also need to upgrade our information technology systems or adopt new technologies If such a new system or technology does not function properly or otherwise exposes us to increased cybersecurity breaches and failures or if such a system is not implemented effectively it could affect our ability to report accurate timely and consistent financial results our ability to purchase raw materials or other supplies from and pay our suppliers and or our ability to deliver products to customers on a timely basis and to collect our receivables from them
Further if the information technology systems networks or service providers we rely upon fail to function properly or cause operational outages or aberrations or if we or one of our third party providers suffer significant unavailability of key operations or inadvertent disclosure of lack of integrity of or loss of our sensitive business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling security incidents or employee error or malfeasance and our business continuity plans do not effectively address these failures on a timely basis we may be exposed to reputational competitive operational financial and business harm as well as litigation and regulatory action The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results
Further our systems and networks as well as those of our dealers customers suppliers service providers and banks may become the target of advanced cyber attacks or information security breaches which will pose a risk to the security of our services systems networks and supply chain as well as to the confidentiality availability and integrity of data of our Company employees customers or consumers as well as disrupt our operations or damage our facilities or those of third parties We assess potential threats and vulnerabilities and make investments seeking to address them including ongoing monitoring and updating of networks and systems increasing specialized information security skills deploying employee security training and updating security policies for our Company and our third party providers However because the techniques tools and tactics used in cyber attacks frequently change and may be difficult to detect for periods of time we may face difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after such an attack As a result a cyber attack could negatively impact our net sales and increase our operating and capital costs In addition our employees frequently access our suppliers and customers systems and we may be liable if our employees are the source of any breaches in these third party systems It could also damage our reputation with customers and consumers and diminish the strength and reputation of our brands or require us to pay monetary penalties
We rely on our information technology systems and networks in connection with many of our business activities Some of these networks and systems are managed by third party service providers and are not under our direct control Our operations routinely involve receiving storing processing and transmitting sensitive information pertaining to our business customers dealers suppliers employees and other sensitive matters including wire transfer instructions
As with most companies we have experienced cyber attacks attempts to breach our systems and other similar incidents none of which have been material Any future cyber incidents could however materially disrupt operational systems result in loss of trade secrets or other proprietary or competitively sensitive information or money compromise personally identifiable information regarding customers or employees and jeopardize the security of our facilities A cyber incident could be caused by malicious outsiders using sophisticated methods to circumvent firewalls encryption and other security defenses Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target we may be unable to anticipate these techniques or to implement adequate preventative measures
Information technology security threats including security breaches computer malware and other cyber attacks are increasing in both frequency and sophistication and could create financial liability subject us to legal or regulatory sanctions or damage our reputation with customers dealers suppliers and other stakeholders The costs associated with maintaining robust information security mechanisms and controls are also increasing and are likely to increase further in the future We continuously seek to maintain a robust program of information security and controls but the impact of a material information technology event could have a material adverse effect on our competitive position reputation results of operations financial condition and cash flows
We rely to a significant extent on our independent dealer networks to sell our products to end customers We estimate that approximately 74 of our product revenue is distributed through a system of independent authorized dealers many of whom also sell products from competing manufacturers Our business is therefore affected by our ability to establish new relationships and maintain relationships with existing dealers The geographic coverage of our dealers and their individual business conditions can affect the ability of our dealers to sell our products to customers In a number of markets there is a lack of exclusivity with dealers which may decrease our bargaining leverage In addition recent consolidation of dealers as well as the growth of larger multi location dealers may result in increased bargaining power on the part of dealers which could have a material adverse effect on our business
Our dealer agreements are typically for a multi year term however we can provide no assurance that we will be able to renew our dealer agreements on favorable terms or at all at their scheduled expiration dates Some of our dealer agreements include guarantees which could have a negative impact on the financial performance of our Company if we are required to fulfill them In addition laws in many of the states in which we operate make it difficult for us to terminate or not renew dealer agreements which may make it difficult for us to optimize our dealer network No dealer or customer represented more than 5 of our annual revenue for fiscal year 2024 but there may continue to be consolidation and changes in the dealership landscape over time If one or more of our significant dealers chooses to not renew a contract with us or to re negotiate an agreement under advantageous terms our sales and results of operations could be adversely affected
Our business is also affected by the availability and terms of financing to dealers and retail purchasers Many of our dealers finance their purchases of inventory with financing provided by lending institutions A decrease in the availability of financing more restrictive lending practices or an increase in the cost of such wholesale financing can prevent dealers from carrying adequate levels of inventory which limits product offerings available to the end customer and could lead to reduced sales of our products A small number of financial institutions provide the majority of our dealers total financed vehicles outstanding in a floor plan financing program at any point in time Substantial increases in interest rates and decreases in the general availability of credit have in the past had an adverse impact upon our business and results of operations and may do so again in the future Further a decrease in availability of consumer credit resulting from unfavorable economic conditions or an increase in the cost of consumer credit may cause consumers to reduce discretionary spending which could in turn reduce demand for our products and negatively affect our sales and profitability
In addition we assist dealers and retail customers with arranging their financing with third parties for purchases of our products Although we currently assume contingent obligations associated with these finance arrangements and receive only a minimal arrangement fee we could be materially adversely affected in the future if third party financers were unable to provide this financing to our customers and our dealers were unable to obtain alternate financing at least until our customers were able to find a replacement financing source Third party financers face a number of business economic and financial risks that could impair their access to capital and negatively affect their ability to provide financing solutions for our dealers and customers Because third party financers serve as an important source of financing options for dealers and customers an impairment of their ability to provide such financial services could negatively affect our future sales and therefore our profitability and financial condition In addition we could be liable for repurchase of the products under these contingent obligations and while losses would be limited by the resale value of the products these losses could negatively affect our profitability and financial condition
Our continued success depends in part on our ability to identify attract motivate train and retain qualified personnel in key functions and geographic areas including the members of our senior management team In particular we are dependent on our ability to identify attract motivate train and retain qualified engineers and skilled labor with the requisite education background and industry experience to assist in the development enhancement introduction and manufacture of our products and technology solutions
Failure to attract train and retain qualified personnel whether as a result of an insufficient number of qualified local residents or the allocation of inadequate resources to training integration and retention could impair our ability to execute our business strategy and could have an adverse effect on our business prospects Our success also depends to a large extent upon our ability to attract and retain key executives and other key employees as well as the existence of a succession plan for these employees These employees have extensive experience in our markets and are familiar with our business systems and processes The loss of the services of one or more of these key employees could have an adverse effect at least in the short to medium term on significant aspects of our business including the ability to manage our business effectively and the successful execution of our strategies if transitions according to our succession plans are not successful If certain of these employees decide to leave us we could incur disruptions to the completion of certain initiatives and we could incur significant costs in hiring training developing and retaining their replacements if our succession plans are not adequate
While we believe our employee relations are generally positive we cannot be assured that our relations with our workforce will remain positive A deterioration in these relations could have an adverse effect on our business In addition we conduct a large portion of our business in highly competitive labor markets If we are unable to recruit and retain a sufficient workforce or if the costs to do so increase our business may be materially adversely affected
From time to time union organizers actively work to organize employees at some of our facilities If union representation is implemented at such sites and we are unable to agree with the union on reasonable employment terms including wages benefits and work rules we could experience a significant disruption of our operations and incur higher ongoing labor costs Further if a location does experience organizing activity our management and other personnel need to divert attention from operational and other business matters to devote substantial time to address such activity
Meeting or exceeding many government mandated safety standards is costly and often technologically challenging Government safety standards require manufacturers to remedy defects related to motor vehicle safety through safety recall campaigns and a manufacturer is obligated to recall vehicles if it determines that they do not comply with relevant safety standards Should we or government safety regulators determine that a safety or other defect or noncompliance exists with respect to certain of our vehicles there could be a delay in the launch of a new model recalls of existing models or a significant increase in warranty claims the costs of which could be substantial Any actual or perceived defect or other quality issue in our products could be costly to address and could also lead to potential liability or reputational damage Additionally the vehicles we manufacture for sale are subject to strict contractually established specifications using complex manufacturing processes If we fail to meet the contractual requirements for a vehicle or a part we may be subject to warranty costs to repair or replace the part itself and additional costs related to the investigation and inspection of non complying parts These potential warranty and repair and replacement costs are generally not covered by our insurance We establish warranty reserves that represent our estimate of the costs we expect to incur to fulfill our warranty obligations We base our estimate for warranty reserves on our historical experience and other related assumptions If actual results materially differ from these estimates our results of operations could be materially affected
In addition we may not be able to enforce warranties and extended warranties received or purchased from our suppliers if such suppliers refuse to honor such warranties or go out of business Also a customer may choose to pursue remedies directly under its contract with us over enforcing such supplier warranties In such a case we may not be able to recover our losses from the supplier
We typically have a backlog due to the nature of our production and sales process and our financial results are affected if any backlog order is deferred or canceled Orders from our dealers and end customers are evidenced by a contract or firm purchase order or in the case of the Recreational Vehicles segment a reserved production slot These orders are reported in our backlog at aggregate selling prices net of discounts or allowances Orders included in the Recreational Vehicles segment backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty When a binding sale contract has been signed with a customer the purchase price of the vehicle is included in the backlog until it is completed shipped and the revenue is recognized When we sign a contract giving a potential purchaser an option to purchase a vehicle which only becomes binding on a non refundable payment or a subsequent firm purchase order we do not include the purchase price of the vehicle in backlog until the non refundable payment has been made or the subsequent purchase order is formalized and the contract is a binding purchase contract A customer may default on a purchase contract that has become binding and we may not be able to convert sales contract backlog into sales As a result our estimates of backlog for some of our contracts could be affected by variables beyond our control and may not be entirely realized if at all In addition given the nature of our customers and our markets there is a risk that some amount of our backlog may not be fully realized in the future Failure to realize sales from our existing or future backlog could negatively impact our financial results
From time to time we enter into large multi year contracts with federal and local government bodies Due to the size of the contracts there are often stringent approval processes that must be completed before the contract is finalized As a result until these contracts are finalized there can be no assurance regarding the timing of our commencing work on any such contract or the ultimate revenue that we may recognize under any such contract At any time a portion of our backlog can include orders placed by federal state and municipal government bodies There is no certainty that these customers will have adequate tax revenues or will allocate available funds to the purchase of our vehicles in the future In addition future governmental tax revenues may be negatively impacted as a result of general economic conditions and therefore may result in lower future vehicle order rates than expected or experienced in prior periods resulting in lower backlogs
In addition as a result of firm purchase orders from our customers we enter into agreements to produce and sell vehicles at a specified price with certain adjustments for changes and options based upon our estimation of the cost to produce and the timing of delivery Due to the nature of these product cost estimates and the fluctuations in input costs and availability we may underestimate the costs of production and therefore overestimate the profitability in our backlog As a result the actual profitability on those sales in the future may differ materially from our initial estimates when we recorded the firm purchase order in backlog
Our ability to meet customer delivery schedules is dependent on a number of factors including but not limited to access to components and raw materials an adequate and capable workforce assembling engineering expertise for certain projects and sufficient manufacturing capacity The availability of these factors may in some cases be subject to conditions outside of our control A failure to deliver in accordance with our performance obligations may result in financial penalties under certain of our contracts and damage to existing customer relationships damage to our reputation and a loss of future bidding opportunities which could cause the loss of future business and could negatively impact our financial performance
If some of our facilities are shut down they may experience prolonged startup periods regardless of the reason for the shutdown Those startup periods could range from several days to several weeks or longer depending on the reason for the shutdown and other factors Any prolonged disruption in operations at any of our facilities could cause a significant loss of production and adversely affect our results of operations and negatively impact our customers and dealers Further a catastrophic event could result in the loss of the use of all or a portion of one of our manufacturing facilities Although we carry property and business interruption insurance our coverage may not be adequate to compensate us for all losses that may occur Any of these events individually or in the aggregate could have a material adverse effect on our business financial condition and operating results
Our business depends upon continued federal state and local government expenditures on certain Specialty Vehicles products These expenditures have not remained constant over time Current government spending levels on programs that we support may not be sustainable as a result of changes in government leadership policies or priorities A significant portion of our sales are subject to risks specific to doing business with the U S government and municipalities including but not limited to
These or other factors could cause government agencies and departments to delay or reduce their purchases or deliveries under contracts exercise their right to terminate contracts or not exercise options to renew contracts any of which could cause us to lose sales A significant decline in overall government spending or a shift in expenditures away from agencies or programs that we support could cause a material decline in our sales and harm our financial results
Gasoline or diesel fuel is required for the operation of most of our vehicles and we cannot provide assurance that the supply of these petroleum products will continue uninterrupted or that the price of or tax on these petroleum products will not significantly increase High fuel costs generally drive greater demand for better fuel economy and substantial increases in the price of fuel have had a material adverse effect on the specialty vehicle industry as a whole in the past and could have a material adverse effect on our business in the future Fluctuations in fuel prices have also historically negatively impacted consumer confidence
Recently more attention is being directed towards publicly traded companies regarding environmental social and governance ESG matters A failure or perceived failure to achieve stated goals respond to regulatory requirements or meet investor or customer expectations related to ESG concerns could cause harm to our business and reputation For example the majority of our products are powered by gasoline and diesel engines or are required to be towed or carried by gasoline or diesel powered vehicles Government media or activist pressure to limit emissions could negatively impact consumers perceptions of our products which could have a material adverse effect on our business and the actions taken by governments and other actors to reduce emissions could impose costs that could materially affect our results of operation and financial condition Additionally while we strive to create an inclusive culture and a diverse workforce management team and board of directors where everyone feels valued and respected a failure or perceived failure to properly address inclusivity and diversity matters could result in reputational harm reduced sales or an inability to attract and retain a talented workforce Organizations that provide information to investors on corporate governance and other matters have developed rating systems for evaluating companies on their approach to ESG Unfavorable ESG ratings and related reporting requirements may lead to negative investor sentiment which could have a negative impact on our stock price
We have experienced and expect to continue to experience variability in sales production and net income including historically as a result of cycles of growth and contraction in consumer demand in our Recreational Vehicles segment This cyclicity has an impact on the comparability of our quarterly results Moreover weak macroeconomic conditions can adversely affect demand for certain of our products and lead to an overall aging of product fleets beyond a typical replacement cycle During economic downturns that would result in lower demand of our vehicles we may find it necessary to reduce production line rates and employee headcount An economic downturn may reduce and in the past has reduced demand in both of our segments resulting in lower sales volumes lower prices and decreased operating profits or losses Additionally our business is subject to seasonal and other fluctuations In particular we have historically experienced higher sales during the third quarter and fourth quarter versus the first quarter and second quarter during each fiscal year This seasonality is caused primarily by the consumer buying habits for RVs municipal spending and budget cycles the impact of travel and construction in the summer months as well as how certain seasonal months aggregate into our fiscal quarters which are different than calendar quarters For example our first fiscal quarter has less working days to complete and ship units due to the number of holidays and related vacation taken by employees Dealer demand and buying patterns may also impact the timing of shipments from one quarter to another In addition severe weather conditions in some geographic areas may delay the timing of shipments from one quarter to another Consequently the results for any annual or quarterly prior period may not be indicative of results for any future annual or quarterly period
Our brands are integral to our business as well as to the implementation of our strategies for expanding our business and we rely on proprietary intellectual property including numerous registered trademarks as well as licensed intellectual property for the manufacture and competitiveness of our products However we may be unable to prevent third parties from using our intellectual property without our authorization To the extent we cannot protect our intellectual property unauthorized use and misuse of our intellectual property could cause significant damage to our brands and reputation interfere with our ability to effectively represent our Company to our customers contractors suppliers and or licensees and increase litigation costs which could harm our competitive position and have a material adverse effect on our business financial condition and results of operations In addition a claim or finding that we are infringing on the intellectual property of others could require changes to our products negatively impact our operations harm our reputation or otherwise have a material adverse effect on our business financial condition or results of operations
Maintaining enhancing promoting and positioning our brands particularly in new markets where we have limited brand recognition will depend largely on the success of our marketing and merchandising efforts and our ability to provide high quality services warranty plans products and resources and a consistent high quality customer experience Our brands could be adversely affected if we fail to achieve these objectives if we fail to comply with laws and regulations if we are subject to publicized litigation or if our public image or reputation were to be tarnished by negative publicity Some of these risks may be beyond our ability to control such as the effects of negative publicity regarding our suppliers or third party providers of services or negative publicity related to members of management Any of these events could hurt our image resulting in reduced demand for our products and a decrease in net sales
Further maintaining enhancing promoting and positioning our brands images may require us to make substantial investments in marketing and employee training which could adversely affect our cash flow and which may ultimately be unsuccessful These factors could have a material adverse effect on our business financial condition and results of operations
Our ability to remain competitive depends heavily on our ability to provide a continuing and timely introduction of innovative product offerings We cannot be certain that historical customer preferences for our products will remain unchanged For example most of our vehicles require gasoline or diesel fuel which have historically experienced sharp price increases that in turn increase demand for vehicles with better fuel economy In addition there is growing customer and regulatory preferences for alternative fuel vehicles We believe that the introduction of new product features designs and models will be critical to the future success of our operations as technological advancements are made and alternative fuels are developed However we may not be able to meet customer demands including for alternative energy vehicles or competitors may better meet those demands or be able to do so at a lower cost
To successfully execute our long term strategy we must continue to develop new product lines and adapt our existing product lines to consumer preferences including product lines that have historically been outside of our core businesses such as electric vehicles and other specialty vehicles that minimize emissions The process of designing and developing new technology products and services is complex costly and uncertain and requires extensive capital investment and the ability to retain and recruit talent For example many vehicle manufacturers foresee electric vehicle sales becoming an increasingly important to their businesses and we may not have the expertise to successfully address these competitive pressures on a costly basis or at all Accordingly if we do not accurately predict prepare for and respond to new kinds of technological innovations market developments and changing customer needs competition from other companies could make our specialty vehicles less desirable in the marketplace
Managing frequent product introductions and transitions poses inherent risks and additional costs Delays in the introduction or market acceptance of new product features designs or models could have a material adverse effect on our business Products may not be accepted for a number of reasons including changes in customer preferences or our failure to properly gauge customer preferences Further we cannot be certain that new product introductions will not reduce sales from existing models and adversely affect our results of operations In addition we cannot provide assurance that any of these new product features designs or models will be introduced to the market in a timely manner or that they will be successful when introduced Any of the foregoing factors could have a material adverse effect on our business financial condition and operating results
Acquisitions have been and may continue to be a significant component of our growth strategy From time to time we seek to identify and complete acquisitions We may continue making strategic acquisitions in the future Our previous or future acquisitions and the related strategies may not be successful or may not generate the financial benefits that we expected we would achieve at the time of acquisition In addition there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or that we will be able to finance future acquisitions Acquisitions involve special risks including without limitation the potential assumption of unanticipated liabilities and contingencies difficulty in assimilating the operations and personnel of the acquired businesses disruption of our existing business dissipation of our limited management resources and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership While we believe that strategic acquisitions can improve our competitiveness and profitability these activities could have a material adverse effect on our business financial condition and operating results
We may incur significant costs such as transaction fees professional service fees and other costs related to future acquisitions We may also incur integration costs following the completion of any such acquisitions as we integrate the acquired business with the rest of our Company Although we generally expect that the realization of efficiencies related to the integration of any acquired businesses will offset the incremental transaction and acquisition related costs over time this net financial benefit may not be achieved in the near term or at all
As part of our portfolio management process we review our operations for businesses which may no longer be aligned with our strategic initiatives and long term objectives We continue to review our portfolio and may pursue additional divestitures From time to time we engage in discussions with third parties about potential acquisitions and divestitures of one or more of our businesses that if fully consummated could result in the divestiture of a material amount of assets and contribution to our results of operations Divestitures pose risks and challenges that could negatively impact our business including disputes with buyers or potential impairment charges For example if we decide to sell a business we may be unable to do so on our terms and within our anticipated time frame and even after reaching a definitive agreement to sell a business the sale may be subject to satisfaction of pre closing conditions which may not be satisfied as well as regulatory and governmental approvals which may prevent us from completing a transaction on acceptable terms Further transaction terms typically include representations and warranties by the seller that are supported by indemnification obligations and breaches could require us to indemnify the buyer for certain losses which could result in adverse impact on the expected financial benefit we expected from the divestiture transaction
Our business has meaningful working capital requirements We had 85 0 million of long term debt outstanding as of October 31 2024 Our ability to make required payments of principal and interest on our debt will depend on our future performance which to a certain extent is subject to general economic financial competitive political and other factors some of which are beyond our control Accordingly conditions could arise that could limit our ability to generate sufficient cash flows or to access borrowings to enable us to fund our liquidity needs which could further limit our financial flexibility or impair our ability to obtain alternative financing sufficient to repay our debt at maturity
We believe that our cash on hand together with funds generated by our operations and borrowings under our existing credit facilities will provide us with sufficient liquidity and capital resources to meet our working capital capital expenditures and other operating needs for the foreseeable future Significant assumptions underlie this belief however including among other things assumptions relating to future sales volumes the successful implementation of our business strategies the continuing availability of trade credit from certain key suppliers and that there will be no material adverse developments in our competitive market position business liquidity or capital requirements Any failure to achieve earnings expectations may have an adverse impact on our available liquidity As a result we cannot provide assurance that we will continue to have sufficient liquidity to meet our operating needs In the event that we do not have sufficient liquidity we may be required to seek additional capital reduce or cut back our operating activities capital expenditures or otherwise alter our business strategy If we obtain additional capital by issuing equity the interests of our existing stockholders will be diluted If we incur additional debt the agreements governing that debt may contain significant financial and other covenants that may materially restrict our operations We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all
We have meaningful contingent liabilities with respect to certain items that if realized could have a material adverse effect on our business financial condition and operating results In particular we obtain certain vehicle chassis from automobile manufacturers under converter pool agreements Upon being put into production we become obligated to pay the manufacturer for the chassis Chassis are typically converted and delivered to customers within 90 to 120 days of receipt If the chassis are not converted within this timeframe of delivery we generally purchase the chassis and record it as inventory or we are obligated to begin paying an interest charge on this inventory until purchased We also obtain vehicle chassis directly from our customers in connection with specific vehicle orders These vehicle chassis are stored at the Company s various production facilities until the related value added work is completed and the finished unit is shipped back to the customer The customer does not transfer the vehicle chassis certificate of origin to the Company If damage or theft were to occur to these chassis we would be responsible for related costs incurred to repair or replace the customer provided chassis Further in connection with dealers wholesale floor plan vehicle financing programs we enter into repurchase agreements with certain lending institutions customary in the industries in which we operate which may require us to repurchase previously sold vehicles Although our exposure under these agreements is limited by the expected resale value of the inventory we may repurchase we may receive less than anticipated on such resale and could collect payment on such resale later than originally expected Additionally we are party to multiple agreements whereby we guarantee indebtedness of others including losses under loss pool agreements Also the Company is contingently liable under bid performance and specialty bonds issued by the Company s surety companies and has open standby letters of credit issued by the Company s banks in favor of third parties While we do not expect to experience material losses under these agreements we cannot provide any assurance that these contingent liabilities will not be realized
In addition the restrictive covenants in our 2021 ABL Facility require us to maintain specified financial ratios and other business or financial conditions Our ability to comply with these financial ratios or other covenants may be affected by events beyond our control and our failure to comply with these ratios or other covenants could result in an event of default These covenants may affect our ability to operate and finance our business as we deem appropriate Our inability to meet obligations as they become due or to comply with various financial covenants contained in the instruments governing our current or future indebtedness could constitute an event of default under the instruments governing our indebtedness If there were an event of default under our 2021 ABL Facility or any future instruments governing our indebtedness the holders of the affected indebtedness could declare all of the affected indebtedness immediately due and payable which in turn could cause the acceleration of the maturity of all of our other indebtedness We may not have sufficient funds available or we may not have access to sufficient capital from other sources to repay any accelerated debt Even if we could obtain additional financing the terms of the financing may not be favorable to us In addition substantially all of our assets are subject to liens securing our 2021 ABL Facility If amounts outstanding under our 2021 ABL Facility were accelerated our lenders could foreclose on these liens and we could lose substantially all of our assets Any event of default under the instruments governing our indebtedness could have a material adverse effect on our business financial condition and results of operations
We have a substantial amount of goodwill and other finite and indefinite lived intangible assets on our balance sheet as a result of acquisitions we have completed If we determine goodwill and other intangible assets are impaired we will be required to write down all or a portion of these assets Any write downs would have a negative effect on our results of operations
The method to compute the amount of impairment incorporates quantitative data and qualitative criteria including new information and highly subjective judgments that can dramatically change the determination of the valuation of goodwill and an intangible asset in a very short period of time These determinations are sensitive to minor changes in underlying assumptions as management s assumptions change with more information becoming available The timing and amount of realized losses reported in earnings could vary if management s conclusions were different Any resulting impairment loss could have a material adverse effect on our results of operations for any particular quarterly or annual period
Future dividends on shares of common stock will be at the sole discretion of our Board of Directors We may reduce or discontinue entirely the payment of such dividends at any time Our Board of Directors may take into account general and economic conditions our financial condition and operating results our available cash and current and anticipated cash needs capital requirements contractual legal tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board of Directors may deem relevant In addition our ability to pay dividends is and may be limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur including under the 2021 ABL Facility
Moreover because we are a holding company our ability to pay dividends is dependent upon the financial results and cash flow of our operating subsidiaries and the distribution or other payment of cash to us in the form of dividends or otherwise which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization agreements of our subsidiaries or covenants under any existing and future outstanding indebtedness we or our subsidiaries incur Furthermore Delaware law requires that our Board of Directors determine that we have adequate surplus capital prior to the declaration of dividends While we do not currently believe that these restrictions will impair our ability to pay regular quarterly cash dividends there can be no assurance that we will not need to reduce or eliminate the payment of dividends on our common stock in the future
We are subject to numerous federal state and local regulations governing the manufacture and sale of our products including the provisions of the National Traffic and Motor Vehicle Safety Act NTMVSA and the safety standards for vehicles and components which have been promulgated under the NTMVSA by the Department of Transportation The NTMVSA authorizes the National Highway Traffic Safety Administration to require a manufacturer to recall and repair vehicles which contain certain hazards or defects Sales into foreign countries may be subject to similar regulations Any recalls of our vehicles voluntary or involuntary could have a material adverse effect on our reputation and our business and operating results
In addition we face an inherent risk of exposure to product liability claims if our products or their use results or is alleged to result in personal injury and or property damage If we manufacture or are alleged to have manufactured a defective product or if component failures result in damages we may experience material product liability losses in the future In addition we may incur significant costs to defend product liability claims and reputational damage from such claims even if we are ultimately successful in defending them We are also subject to potential recalls of our products to cure manufacturing defects or in the event of a failure to comply with customers order specifications or applicable regulatory standards and may have to conduct recalls of our products due to defects in components or parts manufactured by suppliers which we purchase and incorporate into our products We may also be required to remedy or retrofit vehicles in the event that an order is not built to a customer s specifications or where a design error has been made or other problems arise The cost and impact to our reputation of significant retrofit and remediation events or product recalls could have a material adverse effect on our business and operating results
We are also subject to federal state and foreign consumer protection and unfair trade practice laws and regulations relating to the sale transportation and marketing of motor vehicles including so called lemon laws In addition certain laws and regulations affect other areas of our operations including labor advertising consumer protection real estate promotions quality of services intellectual property tax import and export duties tariffs anti corruption anti competitive conduct and regulations relating to the sale to government entities Compliance with these laws and others may be onerous and costly at times and may vary from jurisdiction to jurisdiction which further complicates compliance efforts Violations of these laws and regulations could lead to significant penalties including restraints on our export or import privileges monetary fines criminal proceedings and regulatory or other actions that could materially adversely affect our results of operations We have instituted various and comprehensive policies and procedures designed to ensure compliance However we cannot assure that employees contractors vendors or our agents will not violate such laws and regulations or our policies and procedures
Lastly while our non U S operations are limited we are subject to various anti corruption laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business Our activities in less developed countries with potentially more corrupt business environments create the risk of unauthorized payments or offers of payments by one of our employees or agents that could be in violation of various anti corruption laws including the Foreign Corrupt Practices Act FCPA and the U K Bribery Act We have implemented safeguards and policies to discourage these practices by our employees dealers and agents However our existing safeguards and any future improvements may prove to be less than effective and our employees or agents may engage in conduct for which we might be held responsible Violations of the FCPA U K Bribery Act other anti corruption laws export controls or economic sanctions laws may result in severe criminal or civil sanctions and penalties and we may be subject to other liabilities which could have a material adverse effect on our business results of operations and financial condition
Our operations are subject to a variety of federal state local and foreign environmental and workers health and safety laws and regulations concerning among other things water and air discharges noise pollution solid and hazardous waste generation management and disposal remediation of releases of hazardous materials employee health and safety and engine fuel economy and emissions from the vehicles we manufacture Environmental health and safety laws and regulations continue to evolve and we may become subject to increasingly stringent environmental standards in the future which could increase costs of compliance or require us to manufacture with alternative technologies and materials We are required to obtain and maintain environmental health and safety permits and approvals for our facilities and operations Our failure to comply with such laws regulations permits and approvals could result in a negative impact on our operations subject us to increased employee healthcare and workers compensation costs liabilities fines and other penalties or compliance costs and could otherwise have a material adverse effect on our business financial condition and operating results
Environmental remediation laws such as the Comprehensive Environmental Response Compensation and Liability Act CERCLA and state analogues impose liability without regard to fault or to the legality of a party s conduct on certain categories of persons known as potentially responsible parties or PRPs who are considered to have contributed to the release of hazardous substances into the environment Although we are not currently incurring material liabilities pursuant to CERCLA or state analogues in the future we may incur such material liabilities with regard to our or our predecessors current or former facilities adjacent or nearby third party facilities or off site disposal locations
Product compliance laws and regulations impose a variety of environmental requirements including emissions and performance standards on the vehicles we manufacture These laws and regulations govern vehicle fuel efficiency emissions including greenhouse gas emissions noise and safety and are expected to continue to add to the cost of our products and increase the engineering and product development programs of our business For example the EPA began to enforce limits on diesel exhaust emissions initially restricted to nonroad diesel engines in 1996 and stationary diesel engine generator sets in 2006 Implemented in a series of steps called Tier levels these regulations over time have introduced successively more stringent limitations on nitrogen oxides NOx carbon monoxide CO particulate matter PM and non methane hydrocarbons NMHC The current Tier 4 regulations promulgated under the Clean Air Act have imposed increasingly stringent motor vehicle emissions standards on our diesel exhaust emissions beginning with the 2011 model year In addition in August 2011 the EPA and the National Highway Traffic Safety Administration NHTSA issued initial rules on GHG emissions and fuel economy for medium and heavy duty vehicles and engines The emissions standards established required minimum fuel economy and GHG emissions levels for both engines and vehicles beginning in model year 2014 primarily through the increased use of existing technology In August 2016 the EPA and the NHTSA finalized a second phase of GHG emissions reductions to be implemented over time beginning in model year 2021 through model year 2027 with standards for certain trailers beginning in model year 2018 The EPA also finalized a NOx reduction standard to be implemented in model year 2027 and a third phase of GHG emissions reductions to be implemented over time beginning in model year 2027 and later These new EPA standards set lower standards for NOx more stringent standards for fuel economy CO2 and longer emission related warranty requirements California and certain other states including Oregon Washington New York New Jersey and Massachusetts have issued a number of stringent emissions standards in recent years as well as restrictions that could limit our ability to sell recreational vehicles built on certain chassis in those states
These standards as well as other federal and state emissions and other standards applicable to the vehicles we manufacture have increased and will continue to increase costs of development for engines and vehicles and administrative costs arising from implementation of the standards and have impacted in recent years and may continue to impact the cost or availability of certain chassis used in our products In addition regulatory proposals under consideration or those that are proposed in the future may set standards that are difficult to achieve or adversely affect our results of operations due to increased research development or warranty costs or otherwise
In the ordinary course of business we are subject to various claims and litigation Any such claims whether with or without merit could be time consuming and expensive to defend could divert management s attention and resources could result in reputational damage to the Company could result in significant damages or other costs and could otherwise have a material adverse effect on our business financial condition and results of operations
Some of our businesses have in the past and may in the future face claims and litigation regarding accidents involving their products including accidents involving injuries and deaths and the increasing amount of our vehicles on the road may increase our exposure to such matters In accordance with customary practice we maintain insurance against some but not all of these potential claims We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented The levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities Further we may not be able to maintain insurance at commercially acceptable premium levels or at all
For product liability claims arising in recent policy years we have a self insured retention SIR Amounts above this SIR up to a certain dollar amount are covered by our excess insurance policy Currently we maintain this excess liability insurance with outside insurance carriers to minimize our risks related to catastrophic claims in excess of our self insured positions for product liability and personal injury matters Any material change in the aforementioned factors could have an adverse impact on our operating results Any increase in the frequency and size of these claims as compared to our experience in prior years may cause the premium that we are required to pay for insurance to increase significantly and may negatively impact future SIR levels In addition it is possible that we may be found liable for punitive damages which may not be covered by our insurance
If any significant accident judgment claim or other event is not fully insured or indemnified against then in either case that could have a material adverse impact on our business financial condition and results of operations We cannot assure that the outcome of all current or future litigation will not have a material adverse impact on our business or results of operations
Changes in U S federal and state tax laws and rates could adversely affect our results of operations and cash flows It is also possible that changes in overall profitability changes in generally accepted accounting principles in the United States U S GAAP or changes in the valuation of deferred tax assets could adversely affect our future results of operations
In addition we regularly undergo tax audits in various jurisdictions in which we operate Although we believe that our income tax provisions and accruals are reasonable and in accordance with U S GAAP and that we prepare our tax filings in accordance with all applicable tax laws the final determination with respect to any tax audits and any related litigation could be materially different from our historical income tax provisions and accruals The results of a tax audit or litigation could materially affect our operating results and cash flows in the periods for which that determination is made In addition future period net income may be adversely impacted by litigation costs settlements penalties and interest assessments
We are required to make an annual assessment of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes Oxley Act Section 404 of the Sarbanes Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting As a public company we must and do in fact undertake various actions such as implementing internal controls and procedures and hiring accounting staff and internal auditors
Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal controls over financial reporting Our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented designed or operating If we are unable to conclude that we have effective internal control over financial reporting our independent registered public accounting firm is unable to provide us with an unqualified report as required by Section 404 or we are required to restate our financial statements we may fail to meet our public reporting obligations and investors could lose confidence in our reported financial information which could have a negative effect on the trading price of our stock
Our policies procedures controls and oversight to monitor and manage our enterprise risks may not be fully effective in achieving their purpose and may leave us exposed to identified or unidentified risks Past or future misconduct by our employees or vendors could result in violations of law regulatory sanctions and or serious reputational harm or financial harm We monitor our policies procedures and controls however we cannot provide assurance that our policies procedures and controls will be sufficient to prevent all forms of misconduct We review our compensation policies and practices as part of our risk management program but it is possible that our compensation policies could incentivize management and other employees to subject us to inappropriate risk or to engage in misconduct If such inappropriate risks or misconduct occurs it is possible that it could have a material adverse effect on our results of operations and or our financial condition
The Company maintains a cybersecurity risk management program that is led by our Chief Information Officer CIO and our Senior Director of IT Security and Compliance Senior Director of IT Our CIO has over 25 years of experience in information technology and cybersecurity and reports to our President and CEO Our Senior Director of IT has over 20 years of experience in information technology and cybersecurity holds several industry certifications including CISSP and CISA and reports to the CIO The Company s CEO Chief Financial Officer CFO and General Counsel each have over 20 years of experience managing risk at the Company or at similar companies including risks arising from cybersecurity threats
The program is aligned with industry frameworks and controls from the National Institute of Standards and Technology including NIST Cybersecurity Framework v2 0 Leveraging these frameworks and controls allows the Company to identify the fundamental security capabilities and controls necessary to maintain and enhance the program The Company utilizes a wide range of capabilities to maintain and enhance cybersecurity including threat intelligence penetration testing multi factor authentication and endpoint detection and response The Company maintains a cyber incident response plan which is tested periodically The Company maintains a cybersecurity insurance policy which gives us access to expert forensic and legal experts to help manage a major incident or a data breach We have rolled out a formal cybersecurity awareness training program to our entire workforce as part of our annual ethics and compliance training Additionally the Company conducts ongoing phishing and social engineering simulations that are tied to our cybersecurity awareness training program and our workforce is encouraged to report any suspicious activities to our cybersecurity team The Company also has processes in place to oversee and identify risks from cybersecurity associated with the use of third party service providers that could impact our business We review available data related to our third party service providers and assess the appropriateness of our service providers cybersecurity programs and practices to ensure risks are properly mitigated
Assessing identifying and managing cybersecurity related risks are integrated into the Company s overall Enterprise Risk Management ERM program Cybersecurity related risks fall within the scope of risks that the ERM program evaluates to assess top risks to the enterprise Such risks are directly communicated to the Audit Committee on a bi annual basis or more frequently as needed The Audit Committee reports the results of their bi annual meetings to the Board of Directors at the succeeding Board meeting To the extent the ERM process identifies a heightened cybersecurity related risk risk owners are assigned to develop risk mitigation plans which are then tracked to completion We have a formal process to annually assess the feasibility validity and effectiveness of our incident response plans including information technology recovery and business continuity procedures
The Company did not experience a material cybersecurity incident in fiscal year 2024 Any incident assessed as potentially being or becoming material will immediately be escalated for further assessment and reported to designated members of our executive leadership team and if deemed necessary the Board of Directors Additionally we plan to consult with outside counsel as appropriate on our materiality determinations our disclosure requirements and other compliance decisions We also plan to keep our independent public accounting firm informed of such incidents as appropriate While we maintain cybersecurity insurance the costs related to cybersecurity threats or disruptions may not be fully insured Although our business strategy results of operations and financial condition have not been materially affected by risks from cybersecurity threats we cannot provide assurance that they will not be materially affected in the future by such risks or any future material incidents See Item 1A Risk Factors for a discussion of cybersecurity risks applicable to the Company
The Company maintains a formal Information Security Steering Committee comprised of a cross functional group of business leaders This committee meets at least quarterly to discuss performance of the prevention detection and mitigation plans that are being carried out by the Company s information security function as well as the identification of any material new or heightened cybersecurity risks or incidents not already communicated by the CIO and Senior Director of IT
The Board of Directors is responsible for the overall oversight of risk at the Company and has delegated to the Audit Committee the oversight of the risk management strategy specific to cybersecurity Bi annual reports regarding cybersecurity are provided to the Audit Committee by the CIO These reports include information about the prevention detection mitigation and remediation activities related to cybersecurity any updates to internal processes surrounding cybersecurity and any other relevant topics or information that allow the Audit Committee to provide proper oversight into cybersecurity risks Additionally the Board of Directors receives an annual update on cybersecurity from the CIO which includes updates on any material cybersecurity incidents and updates on topics related to cybersecurity both on a broad and company specific level
We maintain corporate office space in Brookfield Wisconsin The locations of the RTCs aftermarket parts warehouses and manufacturing properties that we currently own or lease are listed below We believe that our facilities are suitable and adequate for the purposes for which they are used and are adequately maintained
The Company is from time to time party to various legal proceedings arising out of the ordinary course of business The amount of alleged liability if any from these proceedings cannot be determined with certainty however the Company believes that its ultimate liability if any arising from pending legal proceedings as well as from asserted legal claims and known potential legal claims which are probable of assertion taking into account established accruals for estimated liabilities should not be material to the business financial condition or results of operations Additionally these claims are often covered by third party insurance which for some insurance policies is subject to a retention for which the Company is responsible Actual results could vary among other things due to the uncertainties involved in litigation
As of December 6 2024 there were approximately 63 holders of record of our shares of common stock The actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees This number of holders of record also does not include shareholders whose shares may be held in trust by other entities
Subject to legally available funds and the discretion of our board of directors we may or may not pay a quarterly cash dividend in the future on our common stock During fiscal year 2024 the Company paid cash dividends of 192 0 million which includes a special cash dividend in the amount of 3 00 per share that was paid in February 2024 Our ability to pay dividends is dependent on our ABL Facility and board of directors approval See Item 1A Risk Factors Risks Related to Legal Regulatory and Compliance Matters We cannot assure you that we will continue to declare dividends or have sufficient funds to pay dividends on our common stock
The following graph compares the cumulative total stockholder return on our common stock between October 31 2019 and October 31 2024 based on the market price of our common stock and assumes reinvestment of dividends with the cumulative total return of companies in the Russell 2000 RV Peers and Specialty Vehicle Peers
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10 K Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10 K including information with respect to our plans and strategy for our business and related financing includes forward looking statements that involve risks and uncertainties You should read the Cautionary Statement About Forward Looking Statements and Risk Factors sections of this Annual Report on Form 10 K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward looking statements contained in the following discussion and analysis
REV Group companies are leading designers manufacturers and distributors of specialty vehicles and related aftermarket parts and services We serve a diversified customer base primarily in North America through our two segments We provide customized vehicle solutions for applications including essential needs for public services ambulances and fire apparatus commercial infrastructure terminal trucks and industrial sweepers and consumer leisure recreational vehicles Our diverse portfolio is made up of well established principal vehicle brands including many of the most recognizable names within their industry
Specialty Vehicles Our Specialty Vehicles segment sells i fire apparatus equipment under the E ONE KME and Ferrara brands and Spartan ER which consists of the Spartan Emergency Response Smeal Spartan Fire Chassis and Ladder Tower brands ii ambulances under the AEV Horton Leader Road Rescue and Wheeled Coach brands and iii terminal trucks and sweepers under the Capacity and Laymor brands respectively We believe we have one of the industry s broadest portfolios of products including Type I ambulances aluminum body mounted on a heavy truck style chassis Type II ambulances van conversion ambulance Type III ambulances aluminum body mounted on a van style chassis pumpers fire apparatus on a custom or commercial chassis with a water pump and water tank to extinguish fires aerial trucks fire apparatus with stainless steel or aluminum ladders tanker trucks rescues aircraft rescue firefighting ARFF custom cabs chassis terminal trucks specialized vehicles which move freight in warehouses intermodal yards distribution and fulfillment centers and ports and sweepers three and four wheel versions used in road construction activities Each of our individual brands is distinctly positioned and targets certain price and feature points in the market such that dealers often carry and customers often buy more than one product type from our Specialty Vehicles brands
Recreational Vehicles Our Recreational Vehicles segment serves the RV market through the following principal brands American Coach Fleetwood RV Holiday Rambler Renegade RV Midwest Automotive Designs and Lance Camper We believe our brand portfolio contains some of the longest standing most recognized brands in the RV industry Our products in the Recreational Vehicles segment include Class A motorized RVs motorhomes built on a heavy duty chassis with either diesel or gas engine configurations Class C and Super C motorized RVs motorhomes built on a van or commercial truck chassis Class B RVs motorhomes built out within a van chassis and high end luxury van conversions and towable travel trailers and truck campers The Recreational Vehicles segment also includes Goldshield Fiberglass which produces a wide range of custom molded fiberglass products for the Fleetwood family of brands other RV manufacturers and broader industrial markets
Our business is impacted by the U S economic environment employment levels consumer confidence municipal spending municipal tax receipts changes in interest rates and instability in securities markets around the world among other factors In particular changes in the U S economic climate can impact demand in key end markets In addition we are susceptible to supply chain disruptions resulting from the impact of tariffs and global macro economic factors which can have a dramatic effect either directly or indirectly on the availability lead times and costs associated with raw materials and parts
RV purchases are discretionary in nature and therefore sensitive to the cost and availability of financing consumer confidence unemployment levels levels of disposable income and changing levels of consumer home equity among other factors RV markets are affected by general U S and global economic conditions which create risks that future economic downturns will further reduce consumer demand and negatively impact our sales
While less economically sensitive than the Recreational Vehicles segment the Specialty Vehicles segment is also impacted by the overall economic environment For example local tax revenues are an important source of funding for fire and ambulance purchases from emergency response departments Volatility in tax revenues or availability of funds via budgetary appropriation can have a negative impact on the demand for these products Additionally these products are typically a larger cost item for municipalities and their service life is relatively long making the purchase more deferrable which can result in reduced demand for our products
In a typical year our operating results are impacted by seasonality Historically the slowest sales volume quarter has been the first fiscal quarter when the purchasing seasons for vehicles such as RVs are the lowest due to the colder weather and the relatively long time until the summer vacation season Our first fiscal quarter also has fewer working days to complete and ship units due to the number of holidays and related vacation taken by employees Sales of our products have typically been higher in the second third and fourth fiscal quarters with the fourth fiscal quarter typically being the strongest due to better weather the vacation season buying habits of RV dealers and end users and timing of government and municipal customer fiscal years Our quarterly results of operations cash flows and liquidity are likely to be impacted by these seasonal patterns Sales and earnings for other vehicles that we produce such as essential emergency vehicles are less seasonal but fluctuations in sales of these vehicles can also be impacted by timing surrounding the fiscal years of municipalities and commercial customers as well as the timing and amounts of multi unit orders
We actively evaluate opportunities to improve and expand our business through targeted acquisitions that are consistent with our strategy We also may dispose of certain components of our business that no longer fit within our overall strategy Historically a significant component of our growth has been through acquisitions of businesses We typically incur upfront costs as we integrate acquired businesses and implement our operating philosophy at newly acquired companies including consolidation of supplies and materials purchases improvements to production processes and other restructuring initiatives The benefits of these acquisition integration and divestiture activities may not positively impact our financial results until subsequent periods if at all
In the first quarter of fiscal year 2024 we sold Collins Bus Corporation Collins a wholly owned subsidiary of Collins Industries Inc Collins Industries an indirect wholly owned subsidiary of the Company In the second quarter of fiscal year 2024 we sold certain assets of our Fire Regional Technical Center Fire RTC business In the fourth quarter of fiscal year 2024 we sold ElDorado National California ENC Refer to Note 6 Divestiture Activities of the Notes to the Consolidated Financial Statements for further details
Net Sales Consolidated net sales decreased 257 8 million in fiscal year 2024 compared to the prior year Excluding the impact of Collins which was divested on January 26 2024 net sales decreased 110 8 million or 4 4 compared to the prior year The decrease in net sales excluding the impact of Collins is primarily due to lower net sales in the Recreational Vehicles segment partially offset by higher net sales within the Specialty Vehicles segment The decrease within the Recreational Vehicles segment was primarily due to lower unit shipments and increased discounting The increase within the Specialty Vehicles segment excluding the impact of the Collins divestiture was primarily due to price realization and increased shipments of fire apparatus and ambulance units partially offset by lower shipments of terminal trucks
Consolidated net sales increased 306 4 million in fiscal year 2023 compared to fiscal year 2022 primarily due to an increase in net sales in the Specialty Vehicles segment partially offset by lower net sales in the Recreational Vehicles segment The increase within the Specialty Vehicles segment was due to increased shipments of fire apparatus and ambulance units a favorable mix of ambulance units higher shipments of school buses terminal trucks and street sweepers and price realization partially offset by an unfavorable mix of municipal transit buses The decrease within the Recreational Vehicles segment was primarily due to lower unit shipments an unfavorable mix of motorized units and increased discounting
Gross Profit Consolidated gross profit decreased 18 8 million in fiscal year 2024 compared to the prior year Excluding the impact of the Collins divestiture gross profit increased 18 5 million or 6 6 compared to the prior year The increase in gross profit excluding the impact of Collins was primarily attributable to higher net sales and gross margin in the Specialty Vehicles segment partially offset by lower net sales and gross margin within the Recreational Vehicles segment
Consolidated gross profit increased 68 6 million in fiscal year 2023 compared to fiscal year 2022 The increase in gross profit was primarily attributable to higher net sales and gross margin within the Specialty Vehicles segment partially offset by lower net sales and gross margin in the Recreational Vehicles segment
Selling General and Administrative Consolidated selling general and administrative SG A costs decreased 35 3 million in fiscal year 2024 compared to the prior year primarily due to the non recurrence of legal costs associated with the legal case described in Note 16 Commitments and Contingencies of the Notes to the Consolidated Financial Statements lower personnel and incentive compensation costs and a decrease in SG A attributable to Collins partially offset by higher transaction expenses related to divestiture and capital market transactions
Impairment Charges Consolidated impairment charges were 14 5 million for fiscal year 2024 The impairment charges were primarily related to the impairment of an indefinite lived trade name and certain property plant and equipment due to the discontinuation of manufacturing operations at the Company s ENC facility and the impairment of an indefinite lived trade name within the Recreational Vehicles segment
Provision for income taxes Consolidated income tax provision was 82 8 million or 24 3 of pretax income for fiscal year 2024 The fiscal year 2024 tax provision was favorably impacted by incentives for U S research and stock based compensation tax deductions and was unfavorably impacted by nondeductible expenses
Consolidated income tax provision was 4 6 million or 23 2 of pretax income for fiscal year 2022 The fiscal year 2022 tax provision was favorably impacted by incentives for U S research and stock based compensation tax deductions and was unfavorably impacted by valuation allowances on certain state tax attributes
Consolidated Adjusted EBITDA increased 6 2 million in fiscal year 2024 compared to the prior year Excluding the impact of the Collins divestiture Adjusted EBITDA increased 39 0 million or 31 5 compared to the prior year This increase is primarily due to an increase in Adjusted EBITDA in the Specialty Vehicles segment partially offset by a decrease in Adjusted EBITDA in the Recreational Vehicles segment
Net Sales Specialty Vehicles segment net sales decreased 1 6 million in fiscal year 2024 compared to the prior year Excluding the impact of the Collins divestiture segment net sales increased 145 4 million or 9 2 compared to the prior year The increase in net sales was primarily due to price realization and increased shipments of fire apparatus and ambulance units partially offset by lower shipments of terminal trucks
Specialty Vehicles segment net sales increased 352 4 million in fiscal year 2023 compared to fiscal year 2022 primarily due to increased shipments of fire apparatus ambulance units school buses terminal trucks and street sweepers a favorable mix of ambulance units and price realization partially offset by an unfavorable mix of municipal transit buses
Adjusted EBITDA Specialty Vehicles segment Adjusted EBITDA increased 55 9 million in fiscal year 2024 compared to the prior year Excluding the impact of the Collins divestiture segment Adjusted EBITDA increased 88 7 million or 134 8 compared to the prior year The increase was primarily related to price realization a favorable mix of fire apparatus and increased shipments of fire apparatus and ambulance units partially offset by inflationary pressures and lower shipments of terminal trucks
Specialty Vehicles segment Adjusted EBITDA increased 73 8 million in fiscal year 2023 compared to fiscal year 2022 The increase was primarily related to higher sales volume of fire apparatus ambulance units school buses terminal trucks and street sweepers a favorable mix of ambulance units and school buses and price realization partially offset by an unfavorable mix and supply chain challenges within municipal transit buses and inflationary pressures
Orders from our dealers and end customers are evidenced by a contract or firm purchase order or in the case of the Recreational Vehicles segment and certain orders in our Specialty Vehicles segment a reserved production slot These orders are reported in our backlog at the aggregate selling prices net of discounts or allowances Orders included in the Recreational Vehicles segment backlog and certain orders within the Specialty Vehicles segment backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty As a result this backlog may not necessarily be an accurate measure of future sales
At the end of fiscal year 2024 our backlog was 4 471 3 million compared to 4 461 9 million at the end of fiscal year 2023 which included 220 3 million and 167 5 million related to Collins and ENC respectively Excluding the impact of the Collins and ENC divestitures backlog increased 397 2 million compared to the prior year The increase in consolidated backlog was due to an increase within the Specialty Vehicles segment partially offset by a decrease within the Recreational Vehicles segment The increase in Specialty Vehicles segment backlog was primarily the result of continued demand and order intake for fire apparatus and ambulance units along with pricing actions partially offset by a decrease in backlog related to the wind down of municipal transit operations increased unit shipments and lower order intake for terminal truck units The decrease in Recreational Vehicles segment backlog was primarily the result of lower order intake in certain product categories unit shipments against backlog and order cancelations
Our primary requirements for liquidity and capital are working capital the improvement and expansion of existing manufacturing facilities debt service payments and general corporate needs Historically these cash requirements have been met through cash provided by operating activities and borrowings under our asset based lending ABL credit facility
We believe that our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy However we cannot assure that cash provided by operating activities and borrowings under the current revolving credit facility the 2021 ABL Facility or 2021 ABL Agreement will be sufficient to meet our future needs If we are unable to generate sufficient cash flows from operations in the future and if availability under the 2021 ABL Facility is not sufficient due to the size of our borrowing base or other external factors we may have to obtain additional financing If additional capital is obtained by issuing equity the interests of our existing stockholders will be diluted If we incur additional indebtedness that indebtedness may contain financial and other covenants that may significantly restrict our operations or may involve higher overall interest rates We cannot assure that we will be able to obtain refinancing or additional financing on favorable terms or at all
Net cash provided by operating activities for fiscal year 2024 was 53 4 million compared to 126 5 million for fiscal year 2023 The decrease in cash from operating activities in fiscal year 2024 compared to the prior year was primarily related to higher income tax payments including those associated with the sale of Collins and ENC lower receipts of customer advances and higher accounts payable payments partially offset by higher collections of accounts receivable and lower inventory purchases
Net cash provided by operating activities for fiscal year 2023 was 126 5 million compared to 91 6 million for fiscal year 2022 The increase in cash from operating activities for fiscal year 2023 compared to the prior year was primarily related to higher net income and a more efficient use of inventory as compared to the prior year These increases were partially offset by lower collections of customer advances in fiscal year 2023 as compared to fiscal year 2022 and the timing of accounts receivable receipts
Net cash provided by investing activities for fiscal year 2024 was 348 5 million compared to 29 9 million net cash used in investing activities for fiscal year 2023 The increase in net cash provided by investing activities was related to the cash received in connection with the sale of Collins Fire RTC and ENC
Net cash used in investing activities for fiscal year 2023 was 29 9 million compared to 14 8 million net cash used in investing activities for fiscal year 2022 The increase in net cash used in investing activities was primarily due to increased capital expenditures and a reduction of proceeds from the sale of certain assets compared to fiscal year 2022
Net cash used in financing activities for fiscal year 2023 was 95 7 million compared to 69 7 million for fiscal year 2022 The increase in net cash used in financing activities was primarily due to net repayments made on the 2021 ABL Facility during fiscal year 2023 as compared to net borrowings made on the 2021 ABL Facility during fiscal year 2022 This was partially offset by a decrease in share repurchases in fiscal year 2023 as compared to fiscal year 2022
Our dividend policy has certain risks and limitations particularly with respect to liquidity The dividend payment is at the discretion of our Board of Directors and we may not pay dividends according to our policy or at all We cannot assure that we will declare dividends or have sufficient funds to pay dividends on our common stock in the future
On September 2 2021 the Company s Board of Directors approved a share repurchase program that allowed the repurchase of up to 150 0 million of the Company s outstanding common stock the 2021 Repurchase Program The share repurchase authorization would have expired in 24 months and gave management the flexibility to determine conditions under which shares may be purchased During fiscal year 2022 the Company repurchased and retired 5 803 483 shares under this repurchase program at a total cost of 70 0 million at an average price of 12 03 excluding commissions During fiscal year 2023 the Company did not repurchase any shares under the 2021 Repurchase Program
On June 1 2023 the Company s Board of Directors approved a new share repurchase program that allowed the repurchase of up to 175 0 million of the Company s outstanding common stock the 2023 Repurchase Program The 2023 Repurchase Program replaced the 2021 Repurchase Program The 2023 Repurchase Program expires 24 months after the approval date and gives management flexibility to determine conditions under which the shares may be purchased subject to certain limitations During fiscal year 2023 the Company did not repurchase any shares under the 2023 Repurchase Program During fiscal year 2024 the Company repurchased and retired 8 000 000 shares under the 2023 Repurchase Program at a total cost of 126 1 million and at a price of approximately 15 76 per share The Company incurred approximately 3 6 million in additional fees and excise taxes associated with the repurchase which has been included within the total cost of the share repurchase and recorded directly within equity As of October 31 2024 the approximate dollar value of shares that may yet be purchased under the 2023 Repurchase program is 48 9 million
On December 5 2024 the Company s Board of Directors authorized the Company to repurchase up to 250 0 million of the Company s outstanding common stock the 2024 Repurchase Program The 2024 Repurchase Program replaced the 2023 Repurchase Program Refer to Note 19 Subsequent Events of the Notes to the Consolidated Financial Statements for further details
On April 13 2021 the Company entered into a 550 0 million revolving credit agreement with a syndicate of lenders The 2021 ABL Facility provides for revolving loans and letters of credit in an aggregate amount of up to 550 0 million The total credit facility is subject to a 30 0 million sublimit for swing line loans and a 35 0 million sublimit for letters of credit plus up to an additional 20 0 million of letters of credit at issuing bank s discretion along with certain borrowing base and other customary restrictions as defined in the 2021 ABL Agreement The 2021 ABL Agreement allows for incremental facilities in an aggregate amount of up to 100 0 million plus the excess if any of the borrowing base then in effect over total commitments then in effect Any such incremental facilities are subject to receiving additional commitments from lenders and certain other customary conditions The debt issuance costs capitalized in connection with the 2021 ABL Facility less accumulated amortization are included in Other long term assets in the Company s Consolidated Balance Sheets The debt issuance costs are amortized over the life of the debt on a straight line basis The 2021 ABL Facility matures on April 13 2026 The Company may prepay principal in whole or in part at any time without penalty
On November 1 2022 the Company amended the ABL Facility to transition from the Eurodollar based benchmark rates to the Secured Overnight Financing Rate SOFR The transition from the Eurodollar rate to SOFR did not have a material impact on the Company s results of operations On February 7 2024 the Company entered into an Amendment No 2 the ABL Facility Amendment to the 2021 ABL Facility The ABL Facility Amendment revised the definition of fixed charges under the 2021 ABL Facility to exclude a special cash dividend which was declared and paid during fiscal year 2024
The Company would become subject to compliance with a 1 10 to 1 0 minimum fixed charge coverage ratio financial covenant under the 2021 ABL Agreement if the Company s borrowing base availability falls below 40 0 million or 15 of the borrowing base As of October 31 2024 the Company s outstanding debt under the 2021 ABL Facility was 85 0 million and the Company s availability under the 2021 ABL Facility was 349 6 million
We have not created and are not party to any special purpose or off balance sheet entities for the purpose of raising capital incurring debt or operating our business Other than the items noted in Note 16 Commitments and Contingencies to our 2024 audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10 K we do not have any material off balance sheet arrangements
In considering the financial performance of the business management analyzes the primary financial performance measures of Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA is defined as Net Income for the relevant period before depreciation and amortization interest expense and income taxes as adjusted for certain items described below that we believe are not indicative of our ongoing operating performance Adjusted Net Income is defined as Net Income as adjusted for certain items described below that we believe are not indicative of our ongoing operating performance
We believe Adjusted EBITDA and Adjusted Net Income are useful to investors because these performance measures are used by our management and our Board of Directors for measuring and reporting our financial performance and as a measurement in incentive compensation for management These measures exclude the impact of certain items which we believe have less bearing on our core operating performance because they are items that are not needed or available to our managers in the daily activities of their businesses We believe that the core operations of our business are those which can be affected by our management in a particular period through their resource allocation decisions that affect the underlying performance of our operations conducted during that period We also believe that decisions utilizing Adjusted EBITDA and Adjusted Net Income allow for a more meaningful comparison of operating fundamentals between companies within our markets
To determine Adjusted EBITDA we adjust Net Income for the following items non cash depreciation and amortization interest expense income taxes and other items as described below Stock based compensation expense and sponsor expense reimbursement are excluded from both Adjusted Net Income and Adjusted EBITDA because it is an expense which cannot be impacted by our business managers Stock based compensation expense also reflects a cost which may obscure trends in our underlying vehicle businesses for a given period due to the timing and nature of the equity awards We also adjust for exceptional items which are determined to be those that in management s judgment are not indicative of our ongoing operating performance and need to be disclosed by virtue of their size nature or incidence and include non cash items and items settled in cash In determining whether an event or transaction is exceptional management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence
Adjusted EBITDA and Adjusted Net Income have limitations as analytical tools They are not presentations made in accordance with U S GAAP are not measures of financial condition and should not be considered as an alternative to net income or net loss for the period determined in accordance with U S GAAP The most directly comparable U S GAAP measure to Adjusted EBITDA and Adjusted Net Income is Net Income for the relevant period Adjusted EBITDA and Adjusted Net Income are not necessarily comparable to similarly titled measures used by other companies As a result you should not consider this performance measure in isolation from or as a substitute analysis for our results of operations as determined in accordance with U S GAAP Moreover such measures do not reflect
Our significant accounting policies are described in Note 2 to our 2024 audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10 K The preparation of consolidated financial statements in conformity with U S GAAP requires us to make estimates assumptions and judgments that affect amounts of assets and liabilities reported in our consolidated financial statements the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and reported amounts of revenues and expenses during the year We believe our estimates and assumptions are reasonable however future results could differ from those estimates We consider the following accounting estimates to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements
Goodwill and indefinite lived intangible assets consisting of trade names are not amortized However the Company reviews goodwill and indefinite lived intangible assets for impairment at least annually or more often if an event occurs or circumstances change which indicates that its carrying amount may not exceed its fair value The annual impairment review is performed as of the first day of the fourth quarter of each fiscal year based upon information and estimates available at that time To perform the impairment testing the Company first assesses qualitative factors to determine whether it is more likely than not that the fair values of the Company s reporting units or indefinite lived intangible assets are less than their carrying amounts as a basis for determining whether or not to perform the quantitative impairment test Qualitative testing includes the evaluation of economic conditions financial performance and other factors such as key events when they occur The Company then estimates the fair value of each reporting unit and each indefinite lived intangible asset not meeting the qualitative criteria and compares their fair values to their carrying values
Under the quantitative method the fair value of each reporting unit of the Company is determined by using the income approach and or the market approach The income approach involves discounting management s projections of future interim and terminal cash flows to a present value at a risk adjusted discount rate which corresponds with the Company s and market participant weighted average cost of capital WACC Key assumptions used in the income approach include future sales growth gross margin and operating expenses trends depreciation and amortization expense taxes capital expenditures and changes in working capital Projected future cash flows are based on income forecasts and management s knowledge of the current operating environment and expectations for the Company on a going forward basis The WACC represents a blended cost of equity and debt capital applicable to the Company based on observed market participant rates of return for a group of comparable public companies in the industry utilizes market participant capital structure assumptions by reference to the industry s average debt to total invested capital ratios and is also being adjusted for relative risk premiums specific to each reporting unit tested The terminal residual value is based upon the projected cash flow for the final projected year and is calculated using a capitalization rate based on estimates of growth of the net cash flows based on the Company s estimate of sustainable growth for each financial reporting unit The inputs and assumptions used in the determination of fair value are considered Level 3 inputs within the fair value hierarchy as further described in Note 2 Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements
Under the market approach the Company utilizes multiples of revenue and earnings from other publicly traded companies with comparable operations to determine the fair value of the reporting unit The inputs and assumptions used in the determination of fair value are considered Level 3 inputs within the fair value hierarchy as further described in Note 2 Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements
If the fair value of any reporting unit as calculated using the income approach and or the market approach when applicable is less than its carrying value an impairment charge is recorded for any excess of the reporting unit s carrying value over it s fair value not to exceed the carrying amount of goodwill of that reporting unit
When determining the fair value of indefinite lived trade names the Company uses the relief from royalty RFR method within the income approach The RFR method assumes that an intangible asset is valuable because the owner of the asset avoids the cost of licensing that asset Under the RFR method an estimate is made as to the appropriate royalty income that would be negotiated in an arm s length transaction if the subject intangible asset were licensed from an independent third party The royalty savings are then calculated by multiplying a royalty rate expressed as a percentage of revenues by a determined applicable level of future revenues provided per each trade name as estimated by the Company The royalty rate is based on research of industry and market data related to transactions involving the licensing of comparable intangible assets The resulting future royalty savings are then discounted to their present value equivalent utilizing market participant rates of return adjusted for relative risk premiums specific to each trade name as well as the reporting unit housing it In considering the fair value of trade names the Company also considers relative age consistent use quality expansion possibilities relative profitability relative market potential and how a market participant may employ these intangible assets from a financial and economic point of view
During fiscal year 2024 the Company recorded impairments on an indefinite lived trade name related to the discontinuation of operations at the Company s ENC facility and on an indefinite lived trade name included within the Recreational Vehicles segment The Company performed its annual indefinite lived trade name test using both a quantitative and qualitative approach and did not identify any additional impairments
Provisions for estimated warranty and other related costs are recorded in cost of sales and are periodically adjusted to reflect actual experience The amount of accrued warranty liability reflects management s best estimate of the expected future cost of honoring our obligations under our limited warranty plans The costs of fulfilling our warranty obligations principally involve replacement parts labor and sometimes travel for any field retrofit or recall campaigns Our estimates are based on historical experience the number of units involved and the cost per claim A significant increase in replacement parts labor and travel could have a material adverse impact on our operating results If our warranty reserve were to change by 5 it would not have a material impact on our gross profit for the fiscal year ended October 31 2024
We are exposed to market risk based on fluctuations in market interest rates Our exposure to fluctuating interest rate risk consists of floating rate debt instruments that are indexed to short term benchmark interest rates As of October 31 2024 we had 85 0 million of principal outstanding under our 2021 ABL Facility at an average rate of 6 84 per annum On an annualized basis a 100 basis point increase in our floating interest rates under the 2021 ABL Facility would have increased interest expense by 0 9 million A similar 100 basis point decrease in our floating interest rates would have decreased interest expense by 0 9 million
We are a purchaser of certain commodities including aluminum and raw steel In addition we are a purchaser of components and parts containing various commodities including aluminum fiberglass copper and steel which are integrated into our end products We generally buy these commodities and components based on fixed market prices that are established with the vendor as part of the purchase process Currently purchase contracts generally do not have an indexed price escalation formula to account for economic fluctuations between the contract date and the delivery date Moving forward we may include Raw Material Index movement protocols into supplier pricing agreements where appropriate We are typically unable to pass along increased costs due to economic fluctuations to our customers but have implemented general price increases for our products to offset commodity price increases We rarely use commodity financial instruments to hedge commodity prices We sometimes fix our prices for certain materials over an agreed upon amount of time between three months to twenty four months through contracts with our vendors
We have audited the accompanying consolidated balance sheets of REV Group Inc and its subsidiaries the Company as of October 31 2024 and 2023 the related consolidated statements of income and comprehensive income shareholders equity and cash flows for each of the three years in the period ended October 31 2024 and the related notes to the consolidated financial statements collectively the financial statements In our opinion the financial statements present fairly in all material respects the financial position of the Company as of October 31 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended October 31 2024 in conformity with accounting principles generally accepted in the United States of America
We have also audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of October 31 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 and our report dated December 11 2024 expressed an unqualified opinion on the effectiveness of the Company s internal control over financial reporting
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matters below providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate
As described in Notes 2 and 8 to the consolidated financial statements as of October 31 2024 the Company s consolidated goodwill balance was 137 7 million The Company tests for impairment of goodwill annually as of the first day of the fourth quarter or more frequently if events or circumstances indicate a potential impairment To evaluate goodwill for potential impairment management first assesses qualitatively whether it is necessary to perform a quantitative test For certain reporting units management determined that a quantitative test was appropriate The Company determines the fair value of these reporting units using the market approach with a reconciliation to the market capitalization of the Company To quantitatively measure goodwill impairment the Company compares the fair value of each reporting unit to its carrying value When determining the fair value of each reporting unit management makes significant estimates and assumptions including projected revenue and earnings as well as comparable market data
As described in Notes 2 and 8 to the consolidated financial statements the Company s consolidated indefinite lived trade names balance was 89 4 million as of October 31 2024 Management conducts an impairment analysis annually as of the first day of the fourth quarter or more frequently if events or circumstances indicate that the assets might be impaired An impairment exists when the indefinite lived trade names carrying value exceeds fair value To evaluate indefinite lived trade names for impairment management first considers qualitative factors to determine whether it is more likely than not that impairment exists For certain indefinite lived trade names the Company performed a quantitative test The fair values of these trade names utilized in the quantitative tests are based on the prospective stream of hypothetical after tax royalty cost savings discounted at rates of return appropriate for those assets The assumptions used in management s estimate which have the most significant effect on the estimated fair value of the Company s trade names are the projected revenue growth attributable to the trade names royalty rates and discount rates
Given the significant estimates and assumptions management makes to determine the fair value of trade names quantitatively tested for impairment we identified management s assumptions related to projected revenue growth royalty rates and discount rates as a critical audit matter Auditing the reasonableness of management s estimates and assumptions required a high degree of auditor judgment and an increased extent of effort including the need to involve our fair value specialists
We have audited REV Group Inc s the Company internal control over financial reporting as of October 31 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 In our opinion the Company maintained in all material respects effective internal control over financial reporting as of October 31 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audit also included performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
Nature of Operations REV Group Inc REV or the Company companies are leading designers manufacturers and distributors of specialty vehicles and related aftermarket parts and services serving a diversified customer base primarily in North America Effective January 31 2024 the Company combined its Fire Emergency segment and Commercial segment into a new segment the Specialty Vehicles segment Additionally the Recreation segment was renamed Recreational Vehicles With this change the Company s businesses are aligned in two reportable segments Specialty Vehicles and Recreational Vehicles The Company s Specialty Vehicles business is conducted primarily under the following brands E One Ferrara KME Spartan Emergency Response Smeal Spartan Fire Chassis Ladder Tower AEV Horton Leader Road Rescue Wheeled Coach Capacity and LayMor The Company s Recreational Vehicles business is conducted primarily under the following brands American Coach Fleetwood RV Holiday Rambler Renegade RV Midwest Automotive Designs and Lance Camper
Equity Sponsor Exit Prior to the second quarter of fiscal year 2024 the Company s largest equity holder was comprised of i American Industrial Partners Capital Fund IV LP ii American Industrial Partners Capital Fund IV Parallel LP and iii AIP CHC Holdings LLC which the Company collectively refers to as AIP or Sponsor
Upon completion of the second of the two Offerings AIP ceased to beneficially own at least 15 of the Company s outstanding shares of common stock in the aggregate As a result under the terms of the Amended and Restated Shareholders Agreement dated as of February 1 2017 as amended AIP no longer has significant influence over the Company including control over decisions that require the approval of stockholders and no longer has the right to nominate any directors to the Board of Directors of the Company Each of the board members previously nominated by AIP resigned from the Board of Directors of the Company effective upon the completion of the second of the two Offerings AIP is no longer considered a sponsor or related party of the Company
Related Party Transactions During fiscal years 2024 2023 and 2022 the Company reimbursed its former Sponsor for expenses in the amount of 0 2 million 0 3 million and 0 1 million respectively Additionally the Company repurchased shares and incurred certain expenses in connection with the Offerings All related party expenses are included in Selling general and administrative expenses in the Company s Consolidated Statements of Income and Comprehensive Income There were no other significant related party transactions
Principles of Consolidation The consolidated financial statements include the accounts of REV and all of its subsidiaries and are prepared in accordance with generally accepted accounting principles in the United States U S GAAP All significant intercompany accounts and transactions have been eliminated in consolidation
Use of Estimates The preparation of financial statements in conformity with U S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period Actual results could differ from these estimates
Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents Cash equivalents consist principally of bank deposits and overnight sweep accounts The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution
Under our cash management system book overdraft balances may exist for our disbursement accounts which represent uncleared checks in excess of cash balances in individual bank accounts Such amounts are recorded in Accounts payable in the Consolidated Balance Sheets and are reflected as an operating activity in the Consolidated Statements of Cash Flows As of October 31 2024 and October 31 2023 the Company had net book overdrafts of 17 7 million and 7 0 million respectively
Deposits held with financial institutions may exceed the amount of insurance provided on such deposits These deposits may be redeemed upon demand and are maintained with major financial institutions within the United States As of October 31 2024 and October 31 2023 the Company had 24 3 million and 21 0 million of uninsured cash balances in excess of Federal Depository Insurance Company limits respectively
Accounts Receivable Accounts Receivable consist of amounts billed and due from customers The Company extends credit to customers in the normal course of business and maintains an allowance for uncollectible accounts resulting from the inability or unwillingness of customers to make required payments Management determines the allowance for uncollectible accounts by evaluating individual customer receivables and considering a customer s financial condition credit history the age of accounts receivable and current economic conditions
Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers and their dispersion within North America However the majority of receivables are with dealers and municipalities in the United States The Company continuously monitors credit risk associated with its receivables The Company s top five customers accounted for approximately 14 14 and 12 of its net sales for fiscal years 2024 2023 and 2022 respectively
Inventories Inventories are stated at the lower of aggregate cost or net realizable value Cost is determined using predominantly the first in first out FIFO as well as the weighted average method If inventory costs exceed expected net realizable value due to obsolescence or other factors or quantities on hand are in excess of expected demand the Company records reserves for the difference between the cost and the expected net realizable value These reserves are recorded based on various factors including recent sales history and sales forecasts industry market conditions vehicle model changes and general economic conditions
Property Plant and Equipment Property plant and equipment are recorded at cost except when acquired in a business combination where property plant and equipment are recorded at fair value Depreciation of property plant and equipment is recognized over the estimated useful lives of the respective assets using the straight line method The estimated useful lives are as follows
Expenditures that extend the useful life of existing property plant and equipment are capitalized and depreciated over the remaining useful life of the related asset Expenditures for repairs and maintenance are expensed as incurred When property plant and equipment are retired or sold the cost and related accumulated depreciation is removed from the Company s balance sheet with any gain or loss reflected in operations
Goodwill and Indefinite Lived Intangible Assets Goodwill and Indefinite lived intangible assets consisting of trade names are reviewed for impairment by applying a fair value based test on an annual basis or more frequently if events or circumstances indicate a potential impairment The annual impairment review is performed as of the first day of the fourth quarter of each fiscal year based upon information and estimates available at that time As part of the annual test on both goodwill and indefinite lived intangible assets the Company may utilize a qualitative approach rather than a quantitative approach to determine if an impairment exists considering various factors including industry changes actual results as compared to forecasted results or the timing of a recent acquisition if applicable When the fair value of the reporting unit or trade name is thought to be less than its carrying value a further analysis is performed to measure and recognize the amount of the impairment loss if any Impairment losses limited to the carrying value of the related asset are recorded for the amount by which the carrying amount exceeds fair value
Long Lived Assets Including Definite Lived Intangible Assets Property plant and equipment and intangible assets with definite lives are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable Recoverability of assets to be held and used is measured by comparison of the carrying value of such assets to the undiscounted future cash flows expected to be generated by such assets If the carrying value of an asset exceeds its estimated undiscounted future cash flows an impairment provision is recognized to the extent that the fair value exceed its carrying amount Fair value is determined through various valuation techniques including discounted cash flow models quoted market value and third party independent appraisals as considered necessary
Self Insurance The Company self insures a portion of its workers compensation product liability and medical claims exposure Under these self insurance plans liabilities are recognized for claims incurred including those incurred but not reported We may use third party administrators and actuaries who use historical claims experience state and industry specific development factors and various state statutes to assist in the determination of the accrued liability balance As the Company pays the claims the reserve is released for incurred and reported claims
Revenue Recognition Substantially all of the Company s revenue is recognized from contracts with customers with product shipment destinations in North America The Company accounts for a contract when it has approval and commitment from both parties the rights and payment terms of the parties are identified the contract has commercial substance and collectability of consideration is probable The Company determines the transaction price for each contract at inception based on the consideration that it expects to receive for the goods and services promised under the contract The transaction price excludes sales and usage based taxes collected and certain pass through amounts collected on behalf of third parties The Company has elected to expense incremental costs to obtain a contract when the amortization period of the related asset is expected to be less than one year
The Company s primary source of revenue is generated from the manufacture and sale of specialty vehicles through its direct sales force and dealer network The Company also generates revenue through separate contracts that relate to the sale of aftermarket parts and services Revenue is typically recognized at a point in time when control is transferred which generally occurs when the product has been shipped to the customer or when it has been picked up from the Company s manufacturing facilities Shipping and handling costs that occur after the transfer of control are fulfillment costs that are recorded in Cost of sales in the Consolidated Statements of Income and Comprehensive Income when incurred or when the related product revenue is recognized whichever is earlier Certain customers may request bill and hold transactions according to the terms in the contract In such cases revenue is not recognized until after control has transferred which is generally when the customer has requested such transaction and has been notified that the product i has been completed according to customer specifications ii has passed our quality control inspections iii has been separated from our inventory and is ready for physical transfer to the customer and iv the Company cannot use the product or redirect the product to another customer Warranty obligations associated with the sale of a unit are assurance type warranties that are a guarantee of the unit s intended functionality and therefore do not represent a distinct performance obligation within the context of the contract
The Company is generally entitled to bill its customers upon satisfaction of its performance obligations and payment is usually received shortly after billing Payments for certain contracts are received in advance of satisfying the related performance obligations Such payments are recorded as Customer advances in the Company s Consolidated Balance Sheets The Company reduces the contract liabilities when the Company transfers control of the promised good or service During fiscal year 2024 the Company recognized 166 3 million of revenue that was included in the customer advances balance of 357 4 million as of October 31 2023 During fiscal year 2023 the Company recognized 166 1 million of revenue that was included in the customer advances balance of 332 8 million as of October 31 2022 During fiscal year 2022 the Company recognized 130 0 million of revenue that was included in the customer advances balance of 210 6 million as of October 31 2021 The Company s payment terms do not include a significant financing component outside of the Specialty Vehicles segment Within the Specialty Vehicles segment customers earn interest on customer advances at a rate determined at contract inception Interest charges incurred on customer advances during the years ended October 31 2024 October 31 2023 and October 31 2022 of 10 4 million 8 7 million and 6 9 million respectively were recorded in Interest expense in the Consolidated Statement of Income and Comprehensive Income The Company does not have significant contract assets
As of October 31 2024 the Company had unsatisfied performance obligations for non cancelable contracts with an original duration greater than one year totaling 3 041 7 million of which 1 205 3 million is expected to be satisfied and revenue recognized in fiscal year 2025 and 1 836 4 million is expected to be satisfied and recognized in revenue thereafter
Warranty Provisions for estimated warranty and other related costs are recorded in cost of sales and are periodically adjusted to reflect actual experience The amount of accrued warranty liability reflects management s estimate of the expected future cost of settling the Company s obligations under its warranty programs The costs of fulfilling the Company s warranty obligations primarily consist of replacement parts labor and sometimes travel for any field retrofit or recall campaigns The Company s estimates are based on historical warranty expenditures length of the warranty obligations for units sold and the number of units under warranty If a warranty cost is incurred due to a defect in a purchased material the Company will seek reimbursement from the vendor
Fair Value Measurements The Company s financial instruments not required to be adjusted to fair value on a recurring basis consist principally of cash receivables long term debt and accounts payable The Company believes cash accounts receivable and accounts payable are recorded at amounts that approximate their current market values based on their short term nature
The Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between unrelated market participants at the measurement date The Company utilizes valuation techniques that maximize the use of observable inputs Levels 1 and 2 and minimize the use of unobservable inputs Level 3 within the fair value hierarchy established by the Financial Accounting Standards Board FASB
Income Taxes Deferred income tax assets and liabilities are based on the temporary differences between the financial reporting basis and the income tax basis of the Company s assets and liabilities using currently enacted tax rates and laws Valuation allowances are established to reduce deferred tax assets to the amount ultimately expected to be realized The realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which those temporary differences become deductible for income tax purposes Management considers the scheduled reversal of deferred tax liabilities projected future taxable income and tax planning strategies in making the assessment of the realizability of deferred tax assets The Company will continue to evaluate its valuation allowance requirements in light of changing facts and circumstances and may adjust its deferred tax valuation allowances accordingly It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowance in the future
The Company recognizes liabilities for uncertain income tax positions based on a two step process The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit including resolution of related appeals or litigation processes if any The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50 likely to be realized upon ultimate settlement It is inherently difficult and subjective to estimate such amounts as the Company must determine the probability of various possible outcomes The Company evaluates these uncertain tax positions on a quarterly basis or when new information becomes available to management The evaluations are based on factors including but not limited to changes in facts or circumstances changes in tax law successfully settled issues under audit and new audit activity Such a change in recognition or measurement could result in the recognition of a tax benefit or an increase to the related provision
The Company includes interest and penalties related to income tax liabilities in Provision for income taxes in the Company s Consolidated Statements of Income and Comprehensive Income Liabilities for income taxes payable accrued interest and penalties that are due within one year of the balance sheet date are included in Other current liabilities
Stock Based Compensation Stock compensation expense for restricted stock units and awards is recorded over the service period based on the grant date fair value of the awards The grant date fair value is equal to the closing share price of the Company s common stock on the date of grant Forfeitures of restricted stock units and awards are recognized as they occur
Stock compensation expense for performance stock unit awards is recorded over the service period based on the grant date fair value of the awards if achievement of specified performance targets is considered probable The grant date fair value is equal to the closing share price of the Company s common stock on the date of grant Forfeitures of performance stock units and awards are recognized as they occur
In September 2022 the Financial Accounting Standards Board FASB issued Accounting Standards Update ASU 2022 04 Liabilities Supplier Finance Programs Subtopic 405 50 Disclosure of Supplier Finance Program Obligations The amendments in this ASU require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program s nature activity during the period changes from period to period and potential magnitude ASU 2022 04 is effective for fiscal years beginning after December 15 2022 except for the amendment on rollfoward information which is effective for fiscal years beginning after December 15 2023 We adopted ASU 2022 04 in the first quarter of fiscal year 2024 except for the amendment on rollforward information which is not yet required for adoption by the Company and have indicated the impact of ASU 2022 04 to our consolidated financial statements Refer to Note 3 Supply Chain Finance Program for further details
In November 2023 the FASB issued ASU 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures The amendments in this ASU require public entities to disclose information about their reportable segments significant expenses on an interim and annual basis The ASU is effective for fiscal years beginning after December 15 2023 and interim periods within fiscal years beginning after December 15 2024 with early adoption permitted We expect to adopt the annual requirements of ASU 2023 07 in fiscal year 2025 and the interim requirements of ASU 2023 07 in fiscal year 2026 and are currently evaluating the impact of ASU 2023 07 on our consolidated financial statements
The Company has an unsecured agreement with a third party financial institution to facilitate a supply chain finance SCF program The SCF program allows qualifying suppliers to sell their receivables due from the Company on an invoice level at the selection of the supplier to the financial institution and negotiate their outstanding receivable arrangements and associated fees directly with the financial institution The Company is not party to the agreements between the supplier and the financial institution The supplier invoices that have been confirmed as valid under the program require payment in full by the Company within 120 days of the invoice date
All outstanding amounts related to suppliers participating in the SCF program are confirmed with the third party financial institution and are recorded in Accounts payable in the Consolidated Balance Sheets The Company s outstanding obligation under the SCF program was 9 1 million and 13 1 million as of October 31 2024 and October 31 2023 respectively
Depreciation expense for fiscal years 2024 2023 and 2022 was 23 2 million 22 7 million and 25 2 million respectively In connection with the discontinuation of manufacturing operations at the Company s ENC facility the Company recorded impairment charges of property plant and equipment of 4 4 million during fiscal year 2024 which were based on Level 3 inputs as defined by Accounting Standards Codification ASC 820 Fair Value Measurements Refer to Note 7 Restructuring and Other Related Charges for further details
On January 26 2024 the Company entered into a Stock Purchase Agreement the Collins Stock Purchase Agreement by and among the Company Collins Industries Collins Forest River Inc and Forest River Bus LLC Forest River pursuant to which Collins Industries agreed to sell all of the issued and outstanding shares of capital stock of Collins to Forest River The sale is aimed at optimizing the Company s portfolio of products and to create a more focused operating structure aligned with markets where the Company has a strong presence of industry leading brands The transactions under the Collins Stock Purchase Agreement closed on January 26 2024 In connection with the completion of the sale of Collins the Company received cash consideration of 309 6 million and recorded a gain on sale of 258 9 million which is included in the Company s Consolidated Statements of Income and Comprehensive Income The Company incurred 5 0 million of transaction costs in connection with this sale which are included in the Selling general and administrative expense in the Company s Consolidated Statements of Income and Comprehensive Income for the fiscal year ended October 31 2024 Collins was previously reported as part of the Specialty Vehicles segment
On April 30 2024 in connection with a strategic review of the product portfolio the Company entered into an agreement to sell certain assets of the Fire RTC business In connection with the sale the Company recorded a gain of 1 5 million which is included in the Company s Consolidated Statements of Income and Comprehensive Income The remaining assets and liabilities of the Fire RTC business are included within the Specialty Vehicles segment
On October 18 2024 in connection with the strategic decision to wind down operations and exit the bus manufacturing business the Company entered into a Stock Purchase agreement the ENC Stock Purchase Agreement by and among the Company ENC and Rivaz Inc Rivaz pursuant to which the Company agreed to sell all of the issued and outstanding shares of capital stock of ENC to Rivaz In connection with the completion of this sale on October 18 2024 the Company received cash consideration of 52 0 million and recorded a gain on sale of 28 9 million which is included in the Company s Consolidated Statements of Income and Comprehensive Income ENC was previously reported as part of the Specialty Vehicles Segment
In September 2021 the Company announced that it would close its KME production facilities located in Nesquehoning PA and Roanoke VA and relocate the production to other existing Specialty Vehicles segment facilities within the United States The production facilities have been closed to better align our manufacturing footprint to access our broad operational expertise and resources enhance quality and improve delivery times by leveraging the advanced manufacturing capabilities that we have throughout the Specialty Vehicles segment
The Company incurred certain restructuring and other related charges in connection with the decision to relocate its existing KME production facilities The Company did not incur any restructuring or restructuring related charges related to this matter during fiscal year 2024 During fiscal year 2023 the Company did not incur any restructuring charges relating to this matter but did incur 3 8 million of other charges primarily consisting of production inefficiencies During fiscal year 2022 the Company recorded restructuring charges of 9 4 million and additional charges of 12 0 million consisting of 8 5 million of production inefficiencies 2 3 million of accelerated depreciation and 1 2 million of other costs
On January 29 2024 the Company announced that it would discontinue manufacturing operations at the Company s ENC facility in Riverside California Management believes the discontinuation of manufacturing at ENC will create a more focused portfolio that provides opportunities for growth consistent cash generation and improved margin performance As noted in Note 6 Divestitures the Company sold ENC in the fourth quarter of fiscal year 2024
The Company incurred certain restructuring and other related charges in connection with the decision to discontinue manufacturing at the ENC facility During fiscal year 2024 the Company recorded restructuring charges related to this matter of 12 3 million primarily related to severance and retention costs and contract cancelation costs During fiscal year 2024 the Company also incurred restructuring related charges from this activity consisting of 11 6 million of impairment charges related to intangible assets and property plant and equipment 7 5 million of inventory charges and 0 3 million of other costs With the finalization of the discontinuation of manufacturing operations and the sale of ENC the restructuring activity is complete
Amortization expense was 2 2 million 3 5 million and 7 1 million for fiscal years 2024 2023 and 2022 respectively The estimated future amortization expense of intangible assets for the subsequent five fiscal years is as follows 2025 1 7 million 2026 1 2 million 2027 1 2 million 2028 1 2 million 2029 0 7 million at which point all finite lived intangible assets will be fully amortized As of October 31 2024 fully amortized intangible assets and the related accumulated amortization were written off
In connection with the discontinuation of manufacturing operations at the Company s ENC facility the Company recorded an impairment charge of an indefinite lived trade name of 7 2 million during fiscal year 2024 Refer to Note 7 Restructuring and Other Related Charges for further details related to this discontinuation Additionally during fiscal year 2024 the Company recorded a 1 9 million impairment charge of an indefinite lived trade name included within the Recreational Vehicles segment which was due to lower than expected operating results at a specific business unit These impairments were based on Level 3 inputs as defined by ASC 820 Fair Value Measurements
On April 13 2021 the Company entered into a 550 0 million revolving credit agreement with a syndicate of lenders The 2021 ABL Facility provides for revolving loans and letters of credit in an aggregate amount of up to 550 0 million The total credit facility is subject to a 30 0 million sublimit for swing line loans and a 35 0 million sublimit for letters of credit plus up to an additional 20 0 million of letters of credit at issuing bank s discretion along with certain borrowing base and other customary restrictions as defined in the 2021 ABL Agreement The 2021 ABL Agreement allows for incremental facilities in an aggregate amount of up to 100 0 million plus the excess if any of the borrowing base then in effect over total commitments then in effect Any such incremental facilities are subject to receiving additional commitments from lenders and certain other customary conditions The debt issuance costs capitalized in connection with the 2021 ABL Facility less accumulated amortization are included in Other long term assets in the Company s Consolidated Balance Sheets The debt issuance costs are amortized over the life of the debt on a straight line basis The 2021 ABL Facility matures on April 13 2026 The Company may prepay principal in whole or in part at any time without penalty
All revolving loans under the 2021 ABL Facility as amended bear interest at rates equal to at the Company s option either a base rate plus an applicable margin or a SOFR rate plus an applicable margin and credit spread adjustment of 0 10 for all interest periods As of October 31 2024 the interest rate margins are 1 0 for all base rate loans and 2 0 for all SOFR rate loans with the SOFR rate having a floor of 0 0 subject to adjustment based on the Company s fixed charge coverage ratio in accordance with the 2021 ABL Agreement Interest is payable quarterly for all base rate loans and is payable the last day of any interest period or every three months for all SOFR rate loans The weighted average interest rate on borrowings outstanding under the 2021 ABL Facility was 6 84 as of October 31 2024 The weighted average interest rate on borrowings outstanding under the 2021 ABL Facility was 6 93 as of October 31 2023
The lenders under the 2021 ABL Facility have a first priority security interest in substantially all personal property assets and certain real property assets of the Company The 2021 ABL Facility s borrowing base is comprised of eligible receivables and eligible inventory plus a fixed asset sublimit of certain eligible real property and eligible equipment which fixed asset sublimit reduces by quarterly amortization as specified in the 2021 ABL Agreement
The 2021 ABL Agreement contains customary representations and warranties affirmative and negative covenants subject in certain cases to customary limitations exceptions and exclusions The 2021 ABL Agreement also contains certain customary events of default The occurrence of an event of default under the 2021 ABL Agreement could result in the termination of the commitments under the 2021 ABL Facility and the acceleration of all outstanding borrowings under it
The Company would become subject to compliance with a 1 10 to 1 0 minimum fixed charge coverage ratio financial covenant under the 2021 ABL Agreement if the Company s borrowing base availability falls below 40 0 million or 15 of the borrowing base As of October 31 2024 the Company s availability under the 2021 ABL Facility was 349 6 million
The Company s products generally carry explicit warranties that extend from several months to several years based on terms that are generally accepted in the marketplace Selected components such as engines transmissions tires etc included in the Company s products may include warranties from original equipment manufacturers OEM These OEM warranties are passed on to the end customer of the Company s products and the customer deals directly with the applicable OEM for any issues encountered on those components
The Company leases certain administrative and production facilities and equipment under long term non cancelable operating lease agreements The Company determines if an arrangement is or contains a lease at contract inception and recognizes a right of use ROU asset and a lease liability based on the present value of fixed and certain index based lease payments at the lease commencement date Variable payments are excluded from the present value of lease payments and are recognized in the period in which the payment is made Lease agreements may include options to extend or terminate the lease or purchase the underlying asset In situations where the Company is reasonably certain to exercise such options they are considered in determining the lease term and the associated option payments or the exercise price in the case of an option to purchase are included in the measurement of the lease liabilities and ROU assets The Company s leases generally do not include restrictive financial or other covenants or residual value guarantees The Company generally uses its incremental borrowing rate as the discount rate for measuring its lease liabilities as the Company cannot determine the interest rate implicit in the lease because it does not have access to certain lessor specific information Lease expense is recognized on a straight line basis over the lease term The Company does not have significant finance leases The Company has elected not to separate payments for lease components from payments for non lease components for all classes of leases Additionally the Company has elected the short term lease recognition exemption for all leases that qualify which means ROU assets and lease liabilities will not be recognized for leases with an initial term of twelve months or less
The Company has a defined contribution 401 k plan covering substantially all employees The plan allows employees to defer up to 100 of their employment income subject to annual contribution limits imposed by the I R S after all taxes and applicable benefit deductions Each employee who elects to participate is eligible to receive Company matching contributions that are based on employee contributions to the plans subject to certain limitations Amounts expensed for the Company s matching contributions were 10 7 million 10 6 million and 10 5 million during fiscal years 2024 2023 and 2022 respectively
On September 2 2021 the Company s Board of Directors approved a share repurchase program that allowed the repurchase of up to 150 0 million of the Company s outstanding common stock the 2021 Repurchase Program The share repurchase authorization would have expired in 24 months and gave management the flexibility to determine conditions under which shares could be purchased During fiscal year 2022 the Company repurchased and retired 5 803 483 shares under this repurchase program at a total cost of 70 0 million at an average price excluding commissions of 12 03 per share During fiscal year 2023 the Company did not repurchase any shares under the 2021 Repurchase Program
On June 1 2023 the Company s Board of Directors approved a new share repurchase program that allowed the repurchase of up to 175 0 million of the Company s outstanding common stock the 2023 Repurchase Program The 2023 Repurchase Program replaced the 2021 Repurchase Program The 2023 Repurchase Program expires 24 months after the approval date and gives management flexibility to determine conditions under which the shares may be purchased subject to certain limitations During fiscal year 2023 the Company did not repurchase any shares under the 2023 Repurchase Program During fiscal year 2024 the Company repurchased and retired 8 000 000 shares under this repurchase program at a total cost of 126 1 million and at a price of approximately 15 76 per share as described further below The Company incurred approximately 3 6 million in additional fees and excise taxes associated with the repurchase which has been included within the total cost of the share repurchase and recorded directly within equity
On February 20 2024 the Company closed the first of the Offerings which included the sale of 18 400 000 shares of its common stock held by AIP 10 400 000 of these shares were sold to the public at the public offering price of 16 50 per share The Company repurchased from the underwriters 8 000 000 of these shares at a price per common share of approximately 15 76 which is equal to the price paid by the underwriters to AIP
The Company did not sell any shares of common stock and did not receive any proceeds from the Offerings The Company incurred approximately 1 4 million in offering costs during the year ended October 31 2024 which are included within Selling general and administrative expenses in the Company s Consolidated Statements of Income and Comprehensive Income
The 2016 Omnibus Incentive Plan the 2016 Plan had 8 000 000 shares authorized for issuance and replaced the 2010 Long Term Incentive Plan During fiscal year 2024 the 2016 Plan was amended and restated the Amended and Restated 2016 Plan which resulted in an increase to the maximum number of shares available for issuance At October 31 2024 there were 2 916 028 shares remaining under the Amended and Restated 2016 Plan which excludes shares underlying outstanding awards
Under the Amended and Restated 2016 Plan officers directors including non employee directors employees and consultants of the Company may be granted restricted stock awards RSAs restricted stock units RSUs performance stock units PSUs stock options or other awards RSAs and RSUs generally vest over a one to four year service period following the grant date provided the recipient is still our employee consultant or non employee director at the time of vesting PSUs generally vest over a two to four year service period following the grant date provided the recipient is still our employee at the time of vesting and provided the achievement of performance targets applicable to each award are achieved
For fiscal years 2024 2023 and 2022 the Company recorded stock based compensation expense of 12 7 million 14 4 million and 8 7 million respectively within Selling general and administrative expenses in the Company s Consolidated Statements of Income and Comprehensive Income The actual income tax benefit realized totaled 2 3 million 2 9 million and 1 9 million for those same periods
The weighted average grant date fair value of restricted stock awards granted during fiscal years 2024 2023 and 2022 was 17 04 13 01 and 16 08 per award respectively The total fair value of restricted stock awards that vested during fiscal years 2024 2023 and 2022 was 6 7 million 7 4 million and 6 1 million respectively
The weighted average grant date fair value of restricted stock units granted during fiscal years 2024 2023 and 2022 was 18 22 12 93 and 14 90 per unit respectively The total fair value of restricted stock units that vested during fiscal years 2024 2023 and 2022 was 6 3 million 4 1 million and 4 6 million respectively
There were no performance stock units granted during fiscal year 2024 The weighted average grant date fair value of performance stock units granted during fiscal year 2023 was 12 41 per unit There were no performance stock units granted during fiscal year 2022 The total fair value of performance stock units that vested during fiscal years 2024 2023 and 2022 was 14 9 million 3 6 million and 1 3 million respectively
As of October 31 2024 the Company has state net operating loss carryforwards of approximately 78 6 million which begin to expire in 2029 and are partially offset by a valuation allowance The Company also has net operating loss carryforwards generated in Singapore of 0 9 million which are offset by valuation allowances because the losses are projected to expire prior to being utilized The Company has state tax credit carryforwards of 1 1 million which will begin to expire in 2025 and are partially offset by a valuation allowance
The Company or one of its subsidiaries files income tax returns in the U S India Singapore and various state jurisdictions Fiscal years 2021 through 2023 remain open to tax examination by U S federal authorities and fiscal years 2020 through 2023 remain open to tax examination by state tax authorities The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves
The Company is from time to time party to various legal proceedings including product and general liability claims arising out of the ordinary course of business Assessments of legal proceedings can involve complex judgments about future events that may rely on estimates and assumptions When assessing whether to record a liability related to legal proceedings the Company adheres to the requirements of ASC 450 Contingencies and other applicable guidance as necessary and records liabilities in those instances where it can reasonably estimate the amount of the loss and when the loss is probable When a range exists that is reasonably estimable and the loss is probable the Company records an accrual in its financial statements equal to the most likely estimate of the loss or the low end of the range if there is no one best estimate Additionally these claims are sometimes covered by third party insurance which for some insurance policies is subject to a retention for which the Company is responsible
Chassis Contingent Liabilities The Company obtains certain vehicle chassis from automobile manufacturers under converter pool agreements These agreements generally provide that the manufacturer will supply chassis at the Company s various production facilities under the terms and conditions set forth in the agreement The manufacturer does not transfer the certificate of origin to the Company upon delivery Accordingly the chassis are not owned by the Company when delivered and therefore are excluded from the Company s inventory Upon being put into production the Company owns the inventory and becomes obligated to pay the manufacturer for the chassis Chassis are typically placed into production within 90 to 120 days of delivery to the Company If the chassis are not placed into production within this timeframe the Company generally purchases the chassis and records inventory or the Company is obligated to begin paying an interest charge on this inventory until purchased Such agreements are customary in the industries in which the Company operates and the Company s exposure to loss under such agreements is limited by the value of the vehicle chassis that would be resold to mitigate any losses The Company s contingent liability under such agreements was 20 8 million and 8 8 million as of October 31 2024 and October 31 2023 respectively
From time to time the Company s customers may provide their own vehicle chassis at their sole discretion in connection with specific vehicle orders These vehicle chassis are stored at the Company s various production facilities until the related value added work is completed and the finished unit is shipped back to the customer The customer does not transfer the vehicle chassis certificate of origin to the Company Accordingly such chassis are not owned by the Company when delivered or throughout the production process and are therefore excluded from the Company s inventory The Company s maximum contingent liability related to these vehicle chassis was 38 1 million and 25 9 million as of October 31 2024 and October 31 2023 respectively Losses incurred related to these arrangements have not been significant
Repurchase Commitments The Company has repurchase agreements with certain lending institutions The repurchase commitments are on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer or other customer generally not exceeding two years The Company also repurchases inventory from dealers from time to time due to state law or regulatory requirements that require manufacturers to repurchase inventory if a dealership exits the business The Company s maximum contingent liability under such agreements were 380 6 million and 490 1 million as of October 31 2024 and October 31 2023 respectively which represents the gross value of all vehicles under repurchase agreements Such agreements are customary in the industries in which the Company operates and the Company s exposure to loss under such agreements is limited by the resale value of the units which is required to be repurchased Losses incurred under such arrangements have not been significant The reserve for losses included in other liabilities on contracts outstanding at October 31 2024 and October 31 2023 is immaterial
Guarantee Arrangements The Company is party to multiple agreements whereby it guaranteed an aggregate of 21 7 million and 27 2 million at October 31 2024 and October 31 2023 respectively of indebtedness of others including losses under loss pool agreements The Company estimated that its maximum loss exposure under these contracts was 4 0 million and 5 4 million at October 31 2024 and October 31 2023 respectively Under the terms of these and various related agreements and upon the occurrence of certain events the Company generally has the ability to among other things take possession of the underlying collateral While the Company does not expect to experience losses under these agreements that are materially in excess of the amounts reserved it cannot provide any assurance that the financial condition of the third parties will not deteriorate resulting in the third party s inability to meet their obligations Additionally the Company cannot guarantee that the collateral underlying the agreements will be available or sufficient to avoid losses materially in excess of the amount reserved
Other Matters In January 2023 the Company agreed in principle to settle a claim brought by a plaintiff who was injured as a passenger in an accident involving a shuttle bus that was manufactured by Krystal Bus prior to the Company s acquisition of certain assets related to that business The Company did not admit to any liability on the merits of the claim but deemed a settlement to be in its best interest based on the facts and circumstances of the claim as they developed in the first quarter of fiscal year 2023 The Company was also involved in additional lawsuits filed by plaintiffs who were passengers on the shuttle bus that was in the same accident The Company settled all of these claims for an aggregate amount of 13 7 million which was expensed and paid during fiscal year 2023 and as such there is no remaining liability as of October 31 2023 The losses associated with the collective group of claims are included within Selling general and administrative expenses in the Company s Consolidated Statements of Income and Comprehensive Income for the fiscal year ended October 31 2023 The Company is in the process of seeking reimbursement of the settlement payments from its insurers however no loss recovery asset has been recorded as of October 31 2024
Basic earnings per common share EPS is computed by dividing net income by the weighted average number of common shares outstanding Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding assuming dilution The difference between basic EPS and diluted EPS is the result of the dilutive effect of outstanding stock options performance stock units restricted stock units and restricted stock awards The table below reconciles basic weighted average common shares outstanding to diluted weighted average shares outstanding
During the first fiscal quarter of 2024 the Company formed the Specialty Vehicles Segment by combining the Fire Emergency and Commercial segment businesses Additionally the Recreation segment was renamed Recreational Vehicles As a result the Company is now organized into two reportable segments which is aligned with the chief operating decision maker s internal reporting structure and with the chief operating decision maker s process for making operating decisions allocating capital and measuring performance All segment information has been recast to conform to the new reportable segments The Company s segments are as follows
Specialty Vehicles This segment includes E ONE KME Ferrara Spartan ER AEV Leader Horton REV Group Orlando Capacity and LayMor These businesses manufacture market and distribute commercial and custom fire and ambulance vehicles primarily for fire departments airports other governmental units contractors hospitals and other care providers in the United States and other countries trucks used in terminal type operations i e rail yards warehouses rail terminals and shipping terminals ports and industrial sweepers for both the commercial and rental markets
Recreational Vehicles This segment includes REV Recreation Group Renegade Midwest Lance and Goldshield Fiberglass Inc and their respective manufacturing facilities service and parts divisions REV Recreation Group primarily manufactures markets and distributes Class A RVs in both gas and diesel models and also distributes Class B and Class C RVs Renegade primarily manufactures markets and distributes Class C and Super C RVs Midwest manufactures markets and distributes Class B RVs and luxury vans Lance manufactures markets and distributes truck campers and towable campers Goldshield manufactures markets and distributes fiberglass reinforced molded parts to a diverse cross section of original equipment manufacturers and other commercial and industrial customers including various components for REV Recreation Group s Fleetwood family of brands
For purposes of measuring financial performance of its business segments the Company does not allocate to individual business segments costs or items that are of a corporate nature The caption Corporate Other Elims includes corporate expenses results of insignificant operations intersegment eliminations and income and expense not allocated to reportable segments
Intersegment sales generally include amounts invoiced by a segment for work performed for another segment Amounts are based on actual work performed and agreed upon pricing which is intended to be reflective of the contribution made by the supplying business segment All intersegment transactions have been eliminated in consolidation
In considering the financial performance of the business the chief operating decision maker analyzes the primary financial performance measure of Adjusted EBITDA Adjusted EBITDA is defined as net income for the relevant period before depreciation and amortization interest expense loss on extinguishment of debt and income taxes as adjusted for items management believes are not indicative of the Company s ongoing operating performance Adjusted EBITDA is not a measure defined by U S GAAP but is computed using amounts that are determined in accordance with U S GAAP A reconciliation of this performance measure to net income is included below
The Company believes Adjusted EBITDA is useful to investors and used by management for measuring profitability because the measure excludes the impact of certain items which management believes have less bearing on the Company s core operating performance and allows for a more meaningful comparison of operating fundamentals between companies within its industries Additionally Adjusted EBITDA is used by management to measure and report the Company s financial performance to the Company s Board of Directors assists in providing a meaningful analysis of the Company s operating performance and is used as a measurement in incentive compensation for management
On December 5 2024 the Company s Board of Directors authorized the Company to repurchase up to 250 0 million of the Company s outstanding common stock the 2024 Repurchase Program The 2024 Repurchase Program replaced the 2023 Repurchase Program The 2024 Repurchase Program expires 24 months after the authorization date and gives management flexibility to determine the conditions under which shares may be purchased from time to time through a variety of methods including in privately negotiated or open market transactions such as pursuant to a trading plan in accordance with Rule 10b5 1 and Rule 10b 18 of the Exchange Act or a combination of methods The 2024 Repurchase Program does not obligate the Company to acquire any specific number of shares and can be suspended or discontinued at any time without notice
In accordance with Rule 13a 15 b of the Securities Exchange Act of 1934 Exchange Act the Company s management evaluated with the participation of the Company s President and Chief Executive Officer and Chief Financial Officer the effectiveness of the design and operation of the Company s disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e under the Exchange Act as of October 31 2024 the end of the period covered by this report Based upon their evaluation of these disclosure controls and procedures the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded processed summarized and reported within the time period specified in the Securities and Exchange Commission SEC rules and forms and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company s management including its principal executive and principal financial officers as appropriate to allow timely decisions regarding required disclosure
The Company s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a 15 f of the Exchange Act The Company s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
The Company s management conducted an assessment of the effectiveness of its internal control over financial reporting as of October 31 2024 using the criteria set forth in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission Based on its assessment management believes that as of October 31 2024 the Company s internal control over financial reporting is effective based on those criteria
Refer to the Exhibit Index incorporated herein by reference Exhibits designated with an are filed as an exhibit to this report and exhibits designated with an are furnished as an exhibit to this report Exhibits designated with a are identified as management contracts or compensatory plans or arrangements Exhibits previously filed are incorporated by reference
Credit Agreement dated as of April 13 2021 by and among the Company as Borrower certain subsidiaries of the Company as other Loan Parties the Lenders party thereto and JPMorgan Chase Bank N A as Administrative Agent Incorporated by reference to Exhibit 10 1 of the REV Group Inc Current Report on Form 8 K file no 001 37999 filed on April 13 2021
Amendment No 1 to Credit Agreement dated as of November 1 2022 by and among the Company as Borrower certain subsidiaries of the Company as other Loan Parties the Lenders party thereto and JPMorgan Chase Bank N A as Administrative Agent Incorporated by reference to Exhibit 10 3 of the REV Group Inc Annual Report on Form 10 K file no 001 37999 filed on December 14 2022
Amendment No 2 to Credit Agreement dated as of February 7 2024 by and among the Company as Borrower certain subsidiaries of the Company as other Loan Parties the Lenders party thereto and JPMorgan Chase Bank N A as Administrative Agent Incorporated by reference to Exhibit 10 1 of the REV Group Inc Current Report on Form 8 K file no 001 37999 filed on February 8 2024

Company Name	REV Group, Inc. Vist SEC web-site
Category	MOTOR VEHICLES & PASSENGER CAR BODIES
Trading Symbol	REVG