UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, | ||
or
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ___________ to ___________
Commission file number 001-38424
Lazydays Holdings, Inc.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)
Delaware | 82-4183498 | |
(State or
| (I.R.S. Employer
| |
Incorporation or Organization) | Identification No.) |
6130 Lazy Days | 33584 | |
(Address of | (Zip Code) |
813-246-4999
(Registrant’s telephone number, including area code)Telephone Number, Including Area Code)
(Former name, former addressName, Former Address and former fiscal year,Former Fiscal Year, if changed since last report)Changed Since Last Report)
Securities registered pursuant to 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock | LAZY | NASDAQ Capital Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [X] |
Emerging growth company [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
There were 8,471,6089,593,150 shares of common stock, par value $0.0001, issued and outstanding as of November 7, 2019.October 30, 2020.
Lazydays Holdings, Inc.
Form 10-Q for the Quarter Ended September 30, 20192020
Table of Contents
2 |
Part I – FINANCIAL INFORMATION
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except for share and per share data)
As of | As of | |||||||
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 81,654 | $ | 31,458 | ||||
Receivables, net of allowance for doubtful accounts of $654 and $382 at September 30, 2020 and December 31, 2019, respectively | 20,697 | 16,025 | ||||||
Inventories | 71,546 | 160,864 | ||||||
Income tax receivable | - | 326 | ||||||
Prepaid expenses and other | 2,862 | 2,999 | ||||||
Total current assets | 176,759 | 211,672 | ||||||
Property and equipment, net | 95,337 | 86,876 | ||||||
Operating lease assets | 16,283 | - | ||||||
Goodwill | 40,742 | 38,979 | ||||||
Intangible assets, net | 68,473 | 68,854 | ||||||
Other assets | 311 | 255 | ||||||
Total assets | $ | 397,905 | $ | 406,636 |
As of | As of | |||||||
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 33,531 | $ | 26,603 | ||||
Receivables, net of allowance for doubtful accounts of $435 and $687 at September 30, 2019 and December 31, 2018, respectively | 21,399 | 16,967 | ||||||
Inventories | 126,217 | 167,378 | ||||||
Income tax receivable | - | 2,630 | ||||||
Prepaid expenses and other | 2,957 | 3,166 | ||||||
Total current assets | 184,104 | 216,744 | ||||||
Property and equipment, net | 81,273 | 78,043 | ||||||
Goodwill | 39,049 | 36,762 | ||||||
Intangible assets, net | 69,900 | 70,189 | ||||||
Other assets | 296 | 358 | ||||||
Total assets | $ | 374,622 | $ | 402,096 |
See the accompanying notes to the unaudited condensed consolidated financial statements
3 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(Dollar amounts in thousands except for share and per share data)
As of | As of | As of | As of | |||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable, accrued expenses and other current liabilities | $ | 24,223 | $ | 22,599 | $ | 37,373 | $ | 23,855 | ||||||||
Income taxes payable | 535 | - | 2,208 | - | ||||||||||||
Dividends payable | - | 1,210 | 10,983 | |||||||||||||
Floor plan notes payable, net of debt discount | 107,331 | 143,469 | 59,150 | 143,949 | ||||||||||||
Financing liability, current portion | 887 | 714 | 1,462 | 936 | ||||||||||||
Long-term debt, current portion | 5,955 | 4,408 | 23,468 | 5,993 | ||||||||||||
Operating lease liability, current portion | 3,164 | - | ||||||||||||||
Total current liabilities | 138,931 | 172,400 | 137,808 | 174,733 | ||||||||||||
Long term liabilities | ||||||||||||||||
Financing liability, non-current portion, net of debt discount | 63,808 | 60,533 | 71,095 | 63,557 | ||||||||||||
Long term debt, non-current portion, net of debt discount | 17,105 | 19,013 | 10,512 | 15,573 | ||||||||||||
Operating lease liability, non-current portion | 12,841 | - | ||||||||||||||
Deferred tax liability | 18,717 | 18,717 | 16,451 | 16,450 | ||||||||||||
Total liabilities | 238,561 | 270,663 | 248,707 | 270,313 | ||||||||||||
Commitments and Contingencies | ||||||||||||||||
Series A Convertible Preferred Stock; 600,000 shares, designated, issued, and outstanding as of September 30, 2019 and December 31, 2018; liquidation preference of $64,290 and $61,210 as of September 30, 2019 and December 31, 2018, respectively | 59,273 | 54,983 | ||||||||||||||
Series A Convertible Preferred Stock; 600,000 shares, designated, issued, and outstanding as of September 30, 2020 and December 31, 2019; liquidation preference of $60,000 and $65,910 as of September 30, 2020 and December 31, 2019, respectively | 54,983 | 60,893 | ||||||||||||||
Stockholders’ Equity | ||||||||||||||||
Preferred Stock, $0.0001 par value; 5,000,000 shares authorized; | - | - | - | - | ||||||||||||
Common stock, $0.0001 par value; 100,000,000 shares authorized; 8,471,608 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | - | - | ||||||||||||||
Common stock, $0.0001 par value; 100,000,000 shares authorized; 9,593,150 and 8,506,666 shares issued and 9,451,851 and 8,428,666 outstanding at September 30, 2020 and December 31, 2019, respectively | - | - | ||||||||||||||
Additional paid-in capital | 79,728 | 80,606 | 78,931 | 79,186 | ||||||||||||
Accumulated deficit | (2,940 | ) | (4,156 | ) | ||||||||||||
Treasury Stock, at cost, 141,299 and 78,000 shares at September 30, 2020 and December 31, 2019, respectively | (499 | ) | (314 | ) | ||||||||||||
Retained earnings (accumulated deficit) | 15,783 | (3,442 | ) | |||||||||||||
Total stockholders’ equity | 76,788 | 76,450 | 94,215 | 75,430 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 374,622 | $ | 402,096 | $ | 397,905 | $ | 406,636 |
See the accompanying notes to the unaudited condensed consolidated financial statements
4 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands except for share and per share data)
(Unaudited)
Three Months | Nine Months | |||||||||||||||||||
Successor | Successor | Predecessor | ||||||||||||||||||
July 1, 2019 to | July 1, 2018 to | January 1, 2019 to | March 15, 2018 to | January 1, 2018 to | ||||||||||||||||
September 30, | September 30, | September 30, | September 30, | March 14, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Revenues | ||||||||||||||||||||
New and pre-owned vehicles | $ | 138,861 | $ | 125,348 | $ | 440,541 | $ | 308,876 | $ | 119,111 | ||||||||||
Other | 19,541 | 17,035 | 59,464 | 39,526 | 14,828 | |||||||||||||||
Total revenues | 158,402 | 142,383 | 500,005 | 348,402 | 133,939 | |||||||||||||||
Cost applicable to revenues (excluding depreciation and amortization shown below) | ||||||||||||||||||||
New and pre-owned vehicles (including adjustments to the LIFO reserve of $910, $884, $1,516, $884, and $148, respectively) | 123,017 | 108,333 | 382,510 | 264,345 | 101,830 | |||||||||||||||
Other | 4,841 | 3,776 | 14,526 | 8,353 | 3,047 | |||||||||||||||
Total cost applicable to revenue | 127,858 | 112,109 | 397,036 | 272,698 | 104,877 | |||||||||||||||
Transaction costs | 193 | �� | 243 | 508 | 3,300 | 438 | ||||||||||||||
Depreciation and amortization | 2,732 | 2,532 | 8,067 | 5,624 | 1,212 | |||||||||||||||
Stock-based compensation | 1,286 | 2,857 | 3,912 | 5,986 | 140 | |||||||||||||||
Selling, general, and administrative expenses | 25,570 | 23,793 | 77,173 | 52,878 | 22,200 | |||||||||||||||
Income from operations | 763 | 849 | 13,309 | 7,916 | 5,072 | |||||||||||||||
Other income/expenses | ||||||||||||||||||||
Gain/(loss) on sale of property and equipment | 13 | (9 | ) | 11 | 1 | 1 | ||||||||||||||
Interest expense | (2,321 | ) | (2,428 | ) | (7,879 | ) | (5,346 | ) | (2,019 | ) | ||||||||||
Total other expense | (2,308 | ) | (2,437 | ) | (7,868 | ) | (5,345 | ) | (2,018 | ) | ||||||||||
(Loss) income before income tax expense | (1,545 | ) | (1,588 | ) | 5,441 | 2,571 | 3,054 | |||||||||||||
Income tax expense | (941 | ) | (1,141 | ) | (4,225 | ) | (2,766 | ) | (718 | ) | ||||||||||
Net (loss) income | $ | (2,486 | ) | $ | (2,729 | ) | $ | 1,216 | $ | (195 | ) | $ | 2,336 | |||||||
Dividends on Series A Convertible Preferred Stock | (1,581 | ) | (1,210 | ) | (4,290 | ) | (2,635 | ) | ||||||||||||
Deemed dividend on Series A Convertible Preferred Stock | - | - | - | (3,392 | ) | |||||||||||||||
Net loss attributable to common stock and participating securities | $ | (4,067 | ) | $ | (3,939 | ) | $ | (3,074 | ) | $ | (6,222 | ) | ||||||||
Succesor EPS: | ||||||||||||||||||||
Basic and diluted loss per share | $ | (0.41 | ) | $ | (0.41 | ) | $ | (0.31 | ) | $ | (0.64 | ) | ||||||||
Weighted average shares outstanding - basic and diluted | 9,811,107 | 9,668,250 | 9,772,907 | 9,668,250 |
See the accompanying notes to the unaudited condensed consolidated financial statements
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
(PREDECESSOR)
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
JANUARY 1, 2018 THROUGH MARCH 14, 2018INCOME
(Dollar amounts in thousands except for share and per share data)
(Unaudited)
Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In | Retained | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Total | ||||||||||||||||||||||||||||
Balance at January 1, 2018 | - | $ | - | 3,333,166 | $ | 3 | 165 | $ | (11 | ) | $ | 49,756 | $ | 1,085 | $ | 50,833 | ||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 2,336 | 2,336 | |||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | - | - | 140 | - | 140 | |||||||||||||||||||||||||||
Balance at March 14, 2018 | - | $ | - | 3,333,166 | $ | 3 | 165 | $ | (11 | ) | $ | 49,896 | $ | 3,421 | $ | 53,309 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
(SUCCESSOR)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
MARCH 15, 2018 THROUGH SEPTEMBER 30, 2018
(Unaudited)
Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
Shares | Amount | capital | deficit | Equity | ||||||||||||||||
Balance at March 15, 2018 | 1,872,428 | $ | - | $ | 6,139 | $ | (1,536 | ) | $ | 4,603 | ||||||||||
Conversion of Andina rights into shares of Lazydays Holdings, Inc. | 615,436 | - | - | - | - | |||||||||||||||
Reclassification shares of Andina common stock subject to redemption | 472,571 | - | 4,910 | - | 4,910 | |||||||||||||||
Issuance of common stock and warrants in PIPE transaction, net | 2,653,984 | - | 32,718 | - | 32,718 | |||||||||||||||
Issuance of shares in acquisition of Lazy Days’ R.V. Center, Inc. | 2,857,189 | - | 29,400 | 29,400 | ||||||||||||||||
Beneficial conversion feature of Series A convertible preferred stock | - | - | 3,392 | - | 3,392 | |||||||||||||||
Deemed dividend related to immediate accretion of beneficial conversion | - | - | (3,392 | ) | - | (3,392 | ) | |||||||||||||
Issuance of warrants issued to Series A preferred stockholders and placement agent | - | - | 2,666 | - | 2,666 | |||||||||||||||
Stock-based compensation | - | - | 485 | - | 485 | |||||||||||||||
Dividends on Series A preferred stock | (210 | ) | - | (210 | ) | |||||||||||||||
Net income | - | - | - | 691 | 691 | |||||||||||||||
Balance at March 31, 2018 | 8,471,608 | $ | - | $ | 76,108 | $ | (845 | ) | $ | 75,263 | ||||||||||
Stock-based compensation | - | - | 2,644 | - | 2,644 | |||||||||||||||
Dividends on Series A preferred stock | - | - | (218 | ) | (997 | ) | (1,215 | ) | ||||||||||||
Net income | - | - | - | 1,842 | 1,842 | |||||||||||||||
Balance at June 30, 2018 | 8,471,608 | $ | - | $ | 78,534 | $ | - | $ | 78,534 | |||||||||||
Stock-based compensation | - | - | 2,857 | - | 2,857 | |||||||||||||||
Dividends on Series A preferred stock | - | - | (2,208 | ) | 998 | (1,210 | ) | |||||||||||||
Net loss | - | - | - | (2,729 | ) | (2,729 | ) | |||||||||||||
Balance at September 30, 2018 | 8,471,608 | $ | - | $ | 79,183 | $ | (1,731 | ) | $ | 77,452 |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
Revenues | ||||||||||||||||
New and pre-owned vehicles | $ | 194,552 | $ | 138,861 | $ | 553,245 | $ | 440,541 | ||||||||
Other | 21,171 | 19,541 | 67,293 | 59,464 | ||||||||||||
Total revenues | 215,723 | 158,402 | 620,538 | 500,005 | ||||||||||||
Cost applicable to revenues (excluding depreciation and amortization shown below) | ||||||||||||||||
New and pre-owned vehicles (including adjustments to the | ||||||||||||||||
LIFO reserve of ($1,431), $910, ($1,481) and $1,516, respectively) | 160,837 | 123,017 | 468,616 | 382,510 | ||||||||||||
Other | 5,544 | 4,841 | 17,154 | 14,526 | ||||||||||||
Total cost applicable to revenue | 166,381 | 127,858 | 485,770 | 397,036 | ||||||||||||
Transaction costs | 233 | 193 | 534 | 508 | ||||||||||||
Depreciation and amortization | 2,760 | 2,732 | 8,068 | 8,067 | ||||||||||||
Stock-based compensation | 219 | 1,286 | 1,239 | 3,912 | ||||||||||||
Selling, general, and administrative expenses | 28,598 | 25,570 | 87,983 | 77,173 | ||||||||||||
Income from operations | 17,532 | 763 | 36,944 | 13,309 | ||||||||||||
Other income/expenses | ||||||||||||||||
Loss on sale of property and equipment | - | 13 | (8 | ) | 11 | |||||||||||
Interest expense | (1,749 | ) | (2,321 | ) | (6,262 | ) | (7,879 | ) | ||||||||
Total other expense | (1,749 | ) | (2,308 | ) | (6,270 | ) | (7,868 | ) | ||||||||
Income before income tax expense | 15,783 | (1,545 | ) | 30,674 | 5,441 | |||||||||||
Income tax expense | (4,184 | ) | (941 | ) | (8,020 | ) | (4,225 | ) | ||||||||
Net income (loss) | $ | 11,599 | $ | (2,486 | ) | $ | 22,654 | $ | 1,216 | |||||||
Dividends on Series A Convertible Preferred Stock | (1,745 | ) | (1,581 | ) | (5,073 | ) | (4,290 | ) | ||||||||
Net income attributable to common stock and participating securities | $ | 9,854 | $ | (4,067 | ) | $ | 17,581 | $ | (3,074 | ) | ||||||
EPS: | ||||||||||||||||
Basic and diluted income (loss) per share | $ | 0.55 | $ | (0.41 | ) | $ | 1.00 | $ | (0.31 | ) | ||||||
Weighted average shares outstanding - basic and diluted | 10,807,368 | 9,811,107 | 10,747,370 | 9,772,907 |
See the accompanying notes to the unaudited condensed consolidated financial statements
5 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
JANUARY 1, 20192020 THROUGH SEPTEMBER 30, 20192020
(Dollar amounts in thousands except for share and per share data)
(Unaudited)
Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | Common Stock | Treasury Stock | Additional Paid-In | (Accumulated Deficit) Retained | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | capital | deficit | Equity | Shares | Amount | Shares | Amount | capital | Earnings | Equity | |||||||||||||||||||||||||||||||||||||
Balance at January 1, 2019 | 8,471,608 | $ | - | $ | 80,606 | $ | (4,156 | ) | $ | 76,450 | ||||||||||||||||||||||||||||||||||||||
Repurchase of Unit Purchase Options | - | - | (500 | ) | - | (500 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | 8,506,666 | $ | - | 78,000 | $ | (314 | ) | $ | 79,186 | $ | (3,442 | ) | $ | 75,430 | ||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | 1,514 | - | 1,514 | - | - | - | - | 680 | - | 680 | ||||||||||||||||||||||||||||||||||||
Repurchase of Treasury Stock | - | - | 44,729 | (145 | ) | - | - | (145 | ) | |||||||||||||||||||||||||||||||||||||||
Dividends on Series A preferred stock | - | - | (1,184 | ) | - | (1,184 | ) | - | - | - | - | (1,644 | ) | - | (1,644 | ) | ||||||||||||||||||||||||||||||||
Net income | - | - | - | 1,844 | 1,844 | - | - | - | - | 2,987 | 2,987 | |||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | 8,471,608 | $ | - | $ | 80,436 | $ | (2,312 | ) | $ | 78,124 | ||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 8,506,666 | $ | - | 122,729 | $ | (459 | ) | $ | 78,222 | $ | (455 | ) | $ | 77,308 | ||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | 1,112 | - | 1,112 | - | - | 340 | - | 340 | ||||||||||||||||||||||||||||||||||||||
Repurchase of Treasury Stock | - | - | 18,570 | (40 | ) | - | - | (40 | ) | |||||||||||||||||||||||||||||||||||||||
Shares issued pursuant to the Employee Stock Purchase Plan | 41,858 | 150 | 150 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends on Series A preferred stock | - | - | (1,525 | ) | - | (1,525 | ) | - | - | - | - | - | (1,684 | ) | (1,684 | ) | ||||||||||||||||||||||||||||||||
Net income | - | - | - | 1,858 | 1,858 | - | - | - | - | - | 8,068 | 8,068 | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 8,471,608 | $ | - | $ | 80,023 | $ | (454 | ) | $ | 79,569 | ||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 8,548,524 | $ | - | 141,299 | $ | (499 | ) | $ | 78,712 | $ | 5,929 | $ | 84,142 | |||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | 1,286 | - | 1,286 | - | - | - | - | 219 | - | 219 | ||||||||||||||||||||||||||||||||||||
Conversion of pre-funded warrants, warrants and options | 1,044,626 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
Dividends on Series A preferred stock | - | - | (1,581 | ) | - | (1,581 | ) | - | - | - | - | - | (1,745 | ) | (1,745 | ) | ||||||||||||||||||||||||||||||||
Net loss | - | - | - | (2,486 | ) | (2,486 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 8,471,608 | $ | - | $ | 79,728 | $ | (2,940 | ) | $ | 76,788 | ||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | 11,599 | 11,599 | |||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 9,593,150 | $ | - | 141,299 | $ | (499 | ) | $ | 78,931 | $ | 15,783 | $ | 94,215 |
See the accompanying notes to the unaudited condensed consolidated financial statements
6 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
JANUARY 1, 2019 THROUGH SEPTEMBER 30, 2019
(Dollar amounts in thousands except for share and per share data)
(Unaudited)
Common Stock | Treasury Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | Equity | ||||||||||||||||||||||
Balance at January 1, 2019 | 8,471,608 | $ | - | - | - | $ | 80,606 | $ | (4,156 | ) | $ | 76,450 | ||||||||||||||||
Repurchase of Unit Purchase Options | - | - | - | - | (500 | ) | - | (500 | ) | |||||||||||||||||||
Stock-based compensation | - | - | - | - | 1,514 | - | 1,514 | |||||||||||||||||||||
Dividends on Series A preferred stock | - | - | (1,184 | ) | - | (1,184 | ) | |||||||||||||||||||||
Net income | - | - | - | - | - | 1,844 | 1,844 | |||||||||||||||||||||
Balance at March 31, 2019 | 8,471,608 | $ | - | - | $ | - | $ | 80,436 | $ | (2,312 | ) | $ | 78,124 | |||||||||||||||
Stock-based compensation | - | - | - | - | 1,112 | - | 1,112 | |||||||||||||||||||||
Dividends on Series A preferred stock | - | - | - | - | (1,525 | ) | - | (1,525 | ) | |||||||||||||||||||
Net income | - | - | - | - | - | 1,858 | 1,858 | |||||||||||||||||||||
Balance at June 30, 2019 | 8,471,608 | $ | - | - | $ | - | $ | 80,023 | $ | (454 | ) | $ | 79,569 | |||||||||||||||
Stock-based compensation | - | $ | - | - | $ | - | $ | 1,286 | $ | - | $ | 1,286 | ||||||||||||||||
Dividends on Series A preferred stock | - | - | - | - | (1,581 | ) | - | $ | (1,581 | ) | ||||||||||||||||||
Net income | - | - | - | - | - | (2,486 | ) | $ | (2,486 | ) | ||||||||||||||||||
Balance at September 30, 2019 | 8,471,608 | $ | - | - | $ | - | $ | 79,728 | $ | (2,940 | ) | $ | 76,788 |
See the accompanying notes to the unaudited condensed consolidated financial statements
7 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
For the nine months ended | For the nine months ended | |||||||
Cash Flows From Operating Activities | ||||||||
Net income | $ | 22,654 | $ | 1,216 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Stock based compensation | 1,239 | 3,912 | ||||||
Bad debt expense | 319 | 255 | ||||||
Depreciation and amortization of property and equipment | 4,925 | 5,144 | ||||||
Amortization of intangible assets | 3,143 | 2,923 | ||||||
Amortization of debt discount | 127 | 215 | ||||||
Non-cash lease expense | 160 | - | ||||||
Loss (gain) on sale of property and equipment | 8 | (11 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (4,092 | ) | (4,661 | ) | ||||
Inventories | 100,060 | 54,010 | ||||||
Prepaid expenses and other | 140 | 226 | ||||||
Income tax receivable/payable | 2,534 | 3,165 | ||||||
Other assets | (53 | ) | 62 | |||||
Accounts payable, accrued expenses and other current liabilities | 12,758 | 300 | ||||||
Operating lease liability | (2,021 | ) | - | |||||
Total Adjustments | 119,247 | 65,540 | ||||||
Net Cash Provided By Operating Activities | 141,901 | 66,756 | ||||||
Cash Flows From Investing Activities | ||||||||
Cash paid for acquisitions | (2,749 | ) | (2,568 | ) | ||||
Proceeds from sales of property and equipment | 4,963 | 37 | ||||||
Purchases of property and equipment | (9,219 | ) | (7,907 | ) | ||||
Net Cash Used In Investing Activities | (7,005 | ) | (10,438 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Net repayments under M&T bank floor plan | (96,199 | ) | (47,769 | ) | ||||
Borrowings under Houston mortgage with M&T bank and PPP Loans | 14,840 | - | ||||||
Repayment of long term debt with M&T bank | (1,450 | ) | (2,175 | ) | ||||
Proceeds from financing liability | 1,343 | 3,972 | ||||||
Repayments of financing liability | (788 | ) | (527 | ) | ||||
Payment of dividends on Series A preferred stock | - | (1,210 | ) | |||||
Repurchase of Unit Purchase Options | - | (500 | ) | |||||
Repurchase of Treasury Stock | (185 | ) | - | |||||
Proceeds from shares issued pursuant to the Employee Stock Purchase Plan | 150 | - | ||||||
Proceeds from exercise of stock options | 40 | - | ||||||
Repayments of acquisition notes payable | (2,320 | ) | (1,181 | ) | ||||
Loan issuance costs | (131 | ) | - | |||||
Net Cash Used In Financing Activities | (84,700 | ) | (49,390 | ) | ||||
Net Increase In Cash | 50,196 | 6,928 | ||||||
Cash - Beginning | 31,458 | 26,603 | ||||||
Cash - Ending | $ | 81,654 | $ | 33,531 |
Successor | Predecessor | |||||||||||
January 1, 2019 to | March 15, 2018 to | January 1, 2018 to | ||||||||||
September 30, 2019 | September 30, 2018 | March 14, 2018 | ||||||||||
Cash Flows From Operating Activities | ||||||||||||
Net income (loss) | $ | 1,216 | $ | (195 | ) | $ | 2,336 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Stock based compensation | 3,912 | 5,986 | 140 | |||||||||
Bad debt expense | 255 | 403 | - | |||||||||
Depreciation and amortization of property and equipment | 5,144 | 3,870 | 1,058 | |||||||||
Amortization of intangible assets | 2,923 | 1,754 | 154 | |||||||||
Amortization of debt discount | 215 | 500 | 136 | |||||||||
Gain on sale of property and equipment | (11 | ) | (1 | ) | (1 | ) | ||||||
Deferred income taxes | - | - | 630 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Receivables | (4,661 | ) | (6,482 | ) | 5,143 | |||||||
Inventories | 54,010 | 6,529 | 1,435 | |||||||||
Prepaid expenses and other | 226 | (770 | ) | 44 | ||||||||
Income tax receivable/payable | 3,165 | (962 | ) | (3,573 | ) | |||||||
Other assets | 62 | (75 | ) | 18 | ||||||||
Accounts payable, accrued expenses and other current liabilities | 300 | (2,857 | ) | 2,463 | ||||||||
Total Adjustments | 65,540 | 7,895 | 7,647 | |||||||||
Net Cash Provided By Operating Activities | 66,756 | 7,700 | 9,983 | |||||||||
Cash Flows From Investing Activities | ||||||||||||
Cash paid for acquisitions | (2,568 | ) | (92,478 | ) | - | |||||||
Cash acquired in the purchase of Lazy Days’ R.V. Center, Inc. | - | 9,188 | - | |||||||||
Proceeds from sales of property and equipment | 37 | 41 | - | |||||||||
Purchases of property and equipment | (7,907 | ) | (1,431 | ) | (694 | ) | ||||||
Net Cash Used In Investing Activities | (10,438 | ) | (84,680 | ) | (694 | ) | ||||||
Cash Flows From Financing Activities | ||||||||||||
Net (repayments)/borrowings under M&T bank floor plan | (47,769 | ) | 98,222 | - | ||||||||
Repayment of Bank of America floor plan | - | (96,740 | ) | - | ||||||||
Net repayments under floor plan with Bank of America | - | - | (12,272 | ) | ||||||||
Repayments under long term debt with Bank of America | - | (8,820 | ) | (310 | ) | |||||||
Borrowings under long term debt with M&T bank | - | 20,000 | - | |||||||||
Repayment of long term debt with M&T bank | (2,175 | ) | (1,455 | ) | - | |||||||
Net proceeds from the issuance of Series A preferred stock and warrants | - | 57,650 | - | |||||||||
Net proceeds from the issuance of common stock and warrants | - | 32,719 | - | |||||||||
Proceeds from financing liability | 3,972 | 5,350 | - | |||||||||
Repayments of financing liability | (527 | ) | (285 | ) | (144 | ) | ||||||
Payment of dividends on Series A preferred stock | (1,210 | ) | (1,425 | ) | - | |||||||
Repurchase of Unit Purchase Options | (500 | ) | - | - | ||||||||
Repayments of notes payable to Andina related parties | - | (761 | ) | - | ||||||||
Repayments of acquisition notes payable | (1,181 | ) | (52 | ) | - | |||||||
Payment of contingent liability - RV America acquisition | - | - | (667 | ) | ||||||||
Loan issuance costs | - | (693 | ) | - | ||||||||
Net Cash (Used In) Provided by Financing Activities | (49,390 | ) | 103,710 | (13,393 | ) | |||||||
Net Increase (Decrease) In Cash | 6,928 | 26,730 | (4,104 | ) | ||||||||
Cash - Beginning | 26,603 | 10,671 | 13,292 | |||||||||
Cash - Ending | $ | 33,531 | $ | 37,401 | $ | 9,188 |
See the accompanying notes to the unaudited condensed consolidated financial statements
8 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Dollar amounts in thousands)
(Unaudited)
Successor | Predecessor | |||||||||||
January 1, 2019 to | March 15, 2018 to | January 1, 2018 to | ||||||||||
September 30, 2019 | September 30, 2018 | March 14, 2018 | ||||||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||
Cash paid during the period for interest | $ | 7,805 | $ | 5,048 | $ | 2,182 | ||||||
Cash paid during the period for income taxes net of refunds received | $ | 1,061 | $ | 3,728 | $ | 3,587 | ||||||
Non-Cash Investing and Financing Activities | ||||||||||||
Rental vehicles transferred to inventory, net | $ | 678 | $ | 114 | $ | 89 | ||||||
Conversion of Andina redeemable common stock to common stock of Lazydays Holdings, Inc. | $ | - | $ | 4,910 | $ | - | ||||||
Fixed assets purchased with accounts payable | $ | 1,093 | $ | - | $ | - | ||||||
Rental equipment purchased under floor plan | $ | - | $ | - | $ | 2,911 | ||||||
Accrued dividends on Series A Preferred Stock | $ | 4,290 | $ | 1,210 | $ | - | ||||||
Beneficial conversion feature on Series A Preferred Stock | $ | - | $ | 3,392 | $ | - | ||||||
Warrants issued to Series A Preferred stockholders and investment bank | $ | - | $ | 2,660 | $ | - | ||||||
Common stock issued to former stock holders of Lazy Days’ R.V. Center, Inc. | $ | - | $ | 29,400 | $ | - | ||||||
Notes payable incurred in acquisitions | $ | 3,045 | $ | 1,755 | $ | - | ||||||
Net assets acquired in acquistions | $ | 5,613 | $ | 7,961 | $ | - | ||||||
Net assets acquired in the acquisition of Lazy Days’ R.V. Center, Inc. | $ | - | $ | 106,391 | $ | - |
For the nine months ended | For the nine months ended | |||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for interest | $ | 6,483 | $ | 7,805 | ||||
Cash paid during the period for income taxes net of refunds received | $ | 5,486 | $ | 1,061 | ||||
Non-Cash Investing and Financing Activities | ||||||||
Rental vehicles transferred to inventory, net | $ | - | $ | 678 | ||||
Fixed assets purchased with accounts payable | $ | - | $ | 1,093 | ||||
Accrued dividends on Series A Preferred Stock | $ | 5,073 | $ | 4,290 | ||||
Operating lease assets - ASC 842 adoption | $ | (17,781 | ) | $ | - | |||
Operating lease liabilities - ASC 842 adoption | $ | 17,845 | $ | - | ||||
Operating lease assets - new | $ | (756 | ) | $ | - | |||
Operating lease liabilities - new | $ | 756 | $ | - | ||||
Net assets acquired in acquisitions | $ | 3,045 | ||||||
Net assets acquired in acquisitions | $ | 2,749 | $ | 5,613 |
See the accompanying notes to the unaudited condensed consolidated financial statements
9 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share, per share, and unit amounts)
(unaudited)
NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Lazydays Holdings, Inc. (the “Company” or “Holdings”), a Delaware corporation, was originally formed on October 24, 2017, as a wholly owned subsidiary of Andina Acquisition Corp. II (“Andina”), an exempted company incorporated in the Cayman Islands on July 1, 2015 for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more business targets. On October 27, 2017, a merger agreement was entered into by and among Andina, Andina II Holdco Corp. (“Holdco”), a Delaware corporation and wholly-owned subsidiary of Andina, Andina II Merger Sub Inc., a Delaware corporation, and a wholly-owned subsidiary of Holdco (“Merger Sub”), Lazy Days’ R.V. Center, Inc. (and its subsidiaries), a Delaware corporation (“Lazydays RV”), and solely for certain purposes set forth in the merger agreement, A. Lorne Weil (the “Merger Agreement”). The Merger Agreement provided for a business combination transaction by means of (i) the merger of Andina with and into Holdco, with Holdco surviving, changing its name to Lazydays Holdings, Inc. and becoming a new public company (the “Redomestication Merger”) and (ii) the merger of Lazydays RV with and into Merger Sub with Lazydays RV surviving and becoming a direct wholly-owned subsidiary of Holdings (the “Transaction Merger” and together with the Redomestication Merger, the “Mergers”). On March 15, 2018, the Mergers were consummated.
Lazydays RV has subsidiaries that operate recreational vehicle (“RV”) dealerships in seveneight locations including two in the state of Florida, two in the state of Colorado, onetwo in the state of Arizona (one of which was acquired in May 2020), one in the state of Tennessee and one in the state of Minnesota. Lazydays RV also has a dedicated service center location near Houston, Texas which opened in February 2020. Through its subsidiaries, Lazydays RV sells and services new and pre-owned recreational vehicles, and sells related parts and accessories, and rents recreational vehicles.accessories. It also offers to its customers such ancillary services as extended service contracts, overnight campground and restaurant facilities. The Company also arranges financing and extended service contracts for vehicle sales through third-party financing sources.sources and extended warranty providers.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. For additional information, these condensed consolidated financial statements should be read in conjunction with Lazydays Holdings, Inc.’s and Lazy Days’ R.V. Center, Inc.’s consolidated financial statements and notes as of December 31, 20182019 and 20172018 and for the years then ended, included in the Annual Report on Form 10-K filed with the SEC on March 22, 2019.20, 2020. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
Principles of Consolidation
Successor
The condensed consolidated financial statements in the period from March 15, 2018 to September 30, 2018 and January 1, 2019 to September 30, 2019 include the accounts of Holdings, Lazydays RV and its wholly owned subsidiary LDRV Holdings Corp. LDRV Holdings Corp is the sole owner of Lazydays Land Holdings, LLC, Lazydays Tampa Land Holdings, LLC, Lazydays RV America, LLC, Lazydays RV Discount, LLC, Lazydays Mile Hi RV, LLC, LDRV of Tennessee LLC, Lazydays of Minneapolis LLC, Lazydays of Central Florida, LLC, Lone Star Acquisition LLC, and Lone Star Diversified LLC, LDRV Acquisition Corp of Nashville LLC, LDRV of Nashville LLC and Lazydays RV of Phoenix, LLC (collectively, the “Company”, “Lazydays” or “Successor”). All significant inter-company accounts and transactions have been eliminated in consolidation.
10 |
Predecessor
The condensed consolidated financial statements in the periods from January 1, 2018 to March 14, 2018 include the accounts of Lazydays RV and its wholly owned subsidiary LDRV Holdings Corp. LDRV Holdings Corp was the sole owner of Lazydays Arizona, LLC, Lazydays Land Holdings, LLC, Lazydays Tampa Land Holdings, LLC, Lazydays RV America, LLC, Lazydays RV Discount, LLC, and Lazydays Mile Hi RV, LLC (collectively, the “Predecessor”). All significant inter-company accounts and transactions have been eliminated in consolidation.
Predecessor and Successor Periods
As a result of the Mergers, Holdings is the acquirer for accounting purposes and Lazy Days’ R.V. Center, Inc. is the acquiree and the accounting predecessor. The financial statement presentation distinguishes the results into two distinct periods, the period up to March 14, 2018 (the “Predecessor Period”), the day immediately prior to March 15, 2018 (the “Acquisition Date”) and the period including and after that date (the “Successor Period”). The Mergers were accounted for as a business combination using the acquisition method of accounting and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired.
As a result of the application of the acquisition method of accounting as of the effective time of the Transaction Merger, the accompanying condensed consolidated financial statements include a black line division which indicates that the Predecessor and Successor reporting entities shown are presented on a different basis and are, therefore, not directly comparable.
The historical financial information of Andina (which was a special purpose acquisition company) prior to the business combination has not been reflected in the Predecessor financial statements as these historical amounts have been considered immaterial. Accordingly, no other activity in the Company was reported in the Predecessor Period other than the activity of Lazydays RV.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the assumptions used in the valuation of the net assets acquired in business combinations, goodwill and other intangible assets, provision for charge-backs, inventory write-downs, allowance for doubtful accounts and stock-based compensation.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (Accounting Standards Codification (“ASC”) 606 (“ASC 606”) which superseded existing accounting guidance for revenue recognition. The core principle of the revenue standard is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance applies a five-step model for revenue measurement and recognition, and also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients.
The Company adopted the new revenue recognition standard at the beginning of the first quarter of fiscal 2019 using the modified retrospective method of adoption and applied the guidance to those contracts that were not completed as of December 31, 2018.adoption. Based on the evaluation, the Company did not identify customer contracts which will require different recognition under the new guidance.
Revenues are recognized when control of the promised goods or services is transferred to the customers at the expected amount the Company is entitled to for such goods and services. Taxes collected on revenue producing transactions are excluded from revenue in the condensed consolidated statements of operations.income. The following table represents the Company’s disaggregation of revenue:
Three Months | Nine Months | Three months ended | Nine months ended | |||||||||||||||||||||||||||||||||
Successor | Successor | Successor | Predecessor | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||||||
July 1, 2019 to September 30, 2019 | July 1, 2018 to September 30, 2018 | January 1, 2019 to September 30, 2019 | March 15, 2018 to September 30, 2018 | January 1, 2018 to March 14, 2018 | ||||||||||||||||||||||||||||||||
New vehicles revenue | $ | 86,814 | $ | 79,769 | $ | 278,860 | $ | 193,697 | $ | 73,831 | ||||||||||||||||||||||||||
New vehicle revenue | $ | 130,297 | $ | 86,814 | $ | 362,139 | $ | 278,860 | ||||||||||||||||||||||||||||
Preowned vehicle revenue | 52,047 | 45,579 | 161,681 | 115,179 | 45,280 | 64,255 | 52,047 | 191,106 | 161,681 | |||||||||||||||||||||||||||
Parts, accessories, and related services | 8,813 | 7,153 | 26,319 | 17,097 | 6,121 | 9,470 | 8,813 | 29,400 | 26,319 | |||||||||||||||||||||||||||
Finance and insurance revenue | 9,253 | 8,138 | 28,505 | 18,794 | 6,861 | 11,073 | 9,253 | 35,108 | 28,505 | |||||||||||||||||||||||||||
Campground, rental, and other revenue | 1,475 | 1,744 | 4,640 | 3,635 | 1,846 | 628 | 1,475 | 2,785 | 4,640 | |||||||||||||||||||||||||||
$ | 158,402 | $ | 142,383 | $ | 500,005 | $ | 348,402 | $ | 133,939 | |||||||||||||||||||||||||||
Total | $ | 215,723 | $ | 158,402 | $ | 620,538 | $ | 500,005 |
Revenue from the sale of vehicle contracts is recognized at a point in time on delivery, transfer of title and completion of financing arrangements.
Revenue from the sale of parts, accessories, and related service is recognized as services and parts are delivered or as a customer approves elements of the completion of service. Revenue from the sale of parts, accessories, and related service is recognized in other revenue in the accompanying condensed consolidated statements of operations.income.
Revenue from the rental of vehicles is recognized pro rata over the period of the rental agreement.agreement (the Company’s rental business was phased out in 2019). The rental agreements are generally short-term in nature. Revenue from rentals is included in other revenue in the accompanying condensed consolidated statementsCondensed Consolidated Statements of operations.Income. Campground revenue is also recognized over the time period of use of the campground.
11 |
The Company receives commissions from the sale of insurance and vehicle service contracts to customers. In addition, the Company arranges financing for customers through various financial institutions and receives commissions. The Company may be charged back (“charge-backs”) for financing fees, insurance or vehicle service contract commissions in the event of early termination of thesome contracts by the customers. The revenues from financing fees and commissions are recorded at the time of the sale of the vehicles and if applicable, an allowance for future charge-backs is established based on historical operating results and the termination provision of the applicable contracts. The estimates for future chargebacks require judgment by management, and as a result there is an element of risk associated with these revenue streams. The Company recognized finance and insurance revenues, net of chargebacks,less the additions to the charge-back allowance, which is included in other revenue as follows (unaudited):
Three Months | Nine Months | |||||||||||||||||||||||||||||||||||
Successor | Successor | Successor | Predecessor | Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
July 1, 2019 to September 30, 2019 | July 1, 2018 to September 30, 2018 | January 1, 2019 to September 30, 2019 | March 15, 2018 to September 30, 2018 | January 1, 2018 to March 14, 2018 | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||||||||||
Gross finance and insurance revenues | $ | 10,395 | $ | 8,945 | $ | 32,082 | $ | 20,522 | $ | 7,483 | $ | 13,073 | $ | 10,395 | $ | 39,573 | $ | 32,082 | ||||||||||||||||||
Chargebacks | (1,142 | ) | (807 | ) | (3,577 | ) | (1,728 | ) | (622 | ) | ||||||||||||||||||||||||||
Additions to charge-back allowance | (2,000 | ) | (1,142 | ) | (4,465 | ) | (3,577 | ) | ||||||||||||||||||||||||||||
Net Finance Revenue | $ | 9,253 | $ | 8,138 | $ | 28,505 | $ | 18,794 | $ | 6,861 | $ | 11,073 | $ | 9,253 | $ | 35,108 | $ | 28,505 |
The Company has an accrual for charge-backs which totaled $4,256$5,989 and $3,252$4,221 at September 30, 20192020 and December 31, 2018,2019, respectively, and is included in “Accounts payable, accrued expenses, and other current liabilities” in the accompanying condensed consolidated balance sheets.
Deposits on vehicles received in advance are accounted for as a liability and recognized into revenue upon completion of each respective transaction. These contract liabilities are included in Note 5 – Accounts Payable, Accrued Expenses, and Other Current Liabilities as customer deposits. During the Successor Period from January 1, 2019 tonine months ended September 30, 2019, $2,0422020, $1,898 of contract liabilities as of December 31, 20182019 were recognized in revenue.
Inventories
Vehicle and parts inventories are recorded at the lower of cost or net realizable value, with cost determined by the last-in, first-out (“LIFO”) method. Cost includes purchase costs, reconditioning costs, dealer-installed accessories, and freight. For vehicles accepted in trades, the cost is the fair value of such used vehicles at the time of the trade-in. Retail parts, accessories, and other inventories primarily consist of retail travel and leisure specialty merchandise. The current replacement costs of LIFO inventories exceeded their recorded values by $2,791$2,239 and $1,275$3,719 as of September 30, 20192020 and December 31, 2018,2019, respectively.
Cumulative Redeemable Convertible Preferred Stock
The Company’s Series A Preferred Stock (See Note 910 – Preferred Stock) is cumulative redeemable convertible preferred stock. Accordingly, it is classified as temporary equity and is shown net of issuance costs and the relative fair value of warrants issued in conjunction with the issuance of the Series A Preferred Stock. Unpaid preferred dividends are accumulated, compounded at each quarterly dividend date and presented within the carrying value of the Series A Preferred Stock until a dividend is declared by the board of directors.
Stock Based Compensation
The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC 718”).Compensation. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operationsincome based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as expense over the employee’s requisite or derived service period. In accordance with ASC 718, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the condensed consolidated statements of operations.income.
12 |
Earnings Per Share
The Company computes basic and diluted earnings/(loss) per share (“EPS”) by dividing net earnings/(loss) by the weighted average number of shares of common stock outstanding during the period.
The Company is required, in periods in which it has net income, to calculate EPS using the two-class method. The two-class method is required because the Company’s Series A Preferred Stock have the right to receive dividends or dividend equivalents should the Company declare dividends on its common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares.
In periods in which the Company has a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method is not used, because the preferred stock does not participate in losses.
The following table summarizes net lossincome attributable to common stockholders used in the calculation of basic and diluted lossincome (loss) per common share:
Successor | ||||||||||||||||
(Dollars in thousands - except per share and per share amounts) | July 1, 2019 to September 30, 2019 | July 1, 2018 to September 30, 2018 | January 1, 2019 to September 30, 2019 | March 15, 2018 to September 30, 2018 | ||||||||||||
Distributed earnings allocated to common stock | $ | - | $ | - | $ | - | $ | - | ||||||||
Undistributed loss allocated to common stock | (4,067 | ) | (3,939 | ) | (3,074 | ) | (6,222 | ) | ||||||||
Net loss allocated to common stock | (4,067 | ) | (3,939 | ) | (3,074 | ) | (6,222 | ) | ||||||||
Net earnings allocated to participating securities | - | - | - | - | ||||||||||||
Net loss allocated to common stock and participating securities | $ | (4,067 | ) | $ | (3,939 | ) | $ | (3,074 | ) | $ | (6,222 | ) | ||||
Weighted average shares outstanding for basic earnings per common share | 9,811,107 | 9,668,250 | 9,772,907 | 9,668,250 | ||||||||||||
Dilutive effect of warrants and options | - | - | - | - | ||||||||||||
Weighted average shares outstanding for diluted earnings per common share | 9,811,107 | 9,668,250 | 9,772,907 | 9,668,250 | ||||||||||||
Basic loss per common share | $ | (0.41 | ) | $ | (0.41 | ) | $ | (0.31 | ) | $ | (0.64 | ) | ||||
Diluted loss per common share | $ | (0.41 | ) | $ | (0.41 | ) | $ | (0.31 | ) | $ | (0.64 | ) |
Three months ended | Nine months ended | |||||||||||||||
(Dollars in thousands - except share and per share amounts) | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||
Distributed earning allocated to common stock | $ | - | $ | - | $ | - | $ | - | ||||||||
Undistributed earnings allocated to common stock | 5,991 | (4,067 | ) | 10,751 | (3,074 | ) | ||||||||||
Net earnings allocated to common stock | 5,991 | (4,067 | ) | 10,751 | (3,074 | ) | ||||||||||
Net earnings allocated to participating securities | 3,863 | - | 6,830 | - | ||||||||||||
Net earnings allocated to common stock and participating securities | $ | 9,854 | $ | (4,067 | ) | $ | 17,581 | $ | (3,074 | ) | ||||||
Weighted average shares outstanding for basic earnings per common share | 9,753,211 | 9,811,107 | 9,746,136 | 9,722,907 | ||||||||||||
Dilutive effect of warrants and options | 1,054,157 | - | 1,001,234 | - | ||||||||||||
Weighted average shares outstanding for diluted earnings per share computation | 10,807,368 | 9,811,107 | 10,747,370 | 9,722,907 | ||||||||||||
Basic income (loss) per common share | $ | 0.55 | $ | (0.41 | ) | $ | 1.00 | $ | (0.31 | ) | ||||||
Diluted income (loss) per common share | $ | 0.55 | $ | (0.41 | ) | $ | 1.00 | $ | (0.31 | ) |
During the Successor Periods, theThe denominator of the basic and dilutive EPS was calculated as follows:
July 1, 2019 to September 30, 2019 | July 1, 2018 to September 30, 2018 | January 1, 2019 to September 30, 2019 | March 15, 2018 to September 30, 2018 | Three months ended | Nine months ended | |||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||||||
Weighted average outstanding common shares | 8,471,608 | 8,471,608 | 8,433,408 | 8,471,608 | 9,452,854 | 8,471,608 | 9,445,779 | 8,433,408 | ||||||||||||||||||||||||
Weighted average shares held in escrow | - | (142,857 | ) | - | (142,857 | ) | ||||||||||||||||||||||||||
Weighted average prefunded warrants | 1,339,499 | 1,339,499 | 1,339,499 | 1,339,499 | 300,357 | 1,339,499 | 300,357 | 1,339,499 | ||||||||||||||||||||||||
Weighted average warrants | 381,071 | - | 381,071 | - | ||||||||||||||||||||||||||||
Weighted average options | 673,086 | - | 620,163 | - | ||||||||||||||||||||||||||||
Weighted shares outstanding - basic and diluted | 9,811,107 | 9,668,250 | 9,772,907 | 9,668,250 | 10,807,368 | 9,811,107 | 10,747,370 | 9,772,907 |
13 |
For the Successor Periods, theThe following common stock equivalent shares were excluded from the computation of the diluted lossincome per share, since their inclusion would have been anti-dilutive:
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
July 1, 2019 to September 30, 2019 | July 1, 2018 to September 30, 2018 | January 1, 2019 to September 30, 2019 | March 15, 2018 to September 30, 2018 | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||||||||
Shares underlying Series A Convertible Preferred Stock | 6,231,950 | 5,962,733 | 5,962,733 | 5,962,733 | - | 6,231,950 | - | 5,962,733 | ||||||||||||||||||||||||
Shares underlying warrants | 4,677,458 | 4,677,458 | 4,677,458 | 4,677,458 | - | 4,677,458 | - | 4,677,458 | ||||||||||||||||||||||||
Stock options | 3,677,580 | 3,658,421 | 3,677,580 | 3,658,421 | 150,000 | 3,677,580 | 150,000 | 3,677,580 | ||||||||||||||||||||||||
Shares issuable under the Employee Stock Purchase Plan | 30,077 | - | 30,077 | - | 20,529 | 30,077 | 20,259 | 30,077 | ||||||||||||||||||||||||
Shares underlying unit purchase options | - | 657,142 | - | 657,142 | ||||||||||||||||||||||||||||
Share equivalents excluded from EPS | 14,617,065 | 14,955,754 | 14,347,848 | 14,955,754 | 170,529 | 14,617,065 | 170,259 | 14,347,848 |
As of September 30, 2019,2020, the Company did not declare and payhad declared dividends of $10,983 on its Series A Convertible Preferred Stock, which are included in dividends payable on the dividend.accompanying Condensed Consolidated Balance Sheets. The dividend was paid on October 7, 2020. As a result, the Series A Convertible Preferred Stock was convertible into 6,389,0255,962,733 shares of common stock.stock as of September 30, 2020. Upon conversion the Company has the option to pay accrued dividends in cash or allow conversion into common stock.
Advertising Costs
Advertising and promotion costs are charged to operations in the period incurred. Advertising and promotion costs totaled approximately $2,656$2,139 and $2,643$2,656 for the three months ended September 30, 2020 and September 30, 2019, respectively, and 2018 (Successor Periods), respectively.
Advertising$9,229 and promotion charges were $9,946 $5,699, and $2,624 for the nine months ended September 30, 2019 (Successor Period), the period from March 15, 2018 to2020 and September 30, 2018 (Successor Period), and the period from January 1, 2018 to March 14, 2018 (Predecessor Period),2019, respectively.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction.
In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods.
Seasonality
The Company’s combined operations generally experience modestly higher vehicle sales in the first half of each year during the winter months at the Company’s largest locationFlorida and Arizona locations. In addition, the northern locations in Tampa, Florida.Colorado, Tennessee and Minnesota generally experience modestly higher vehicle sales during the spring months.
Vendor Concentrations
The Company purchases its new recreational vehicles and replacement parts from various manufacturers. During the Successor Period from July 1, 2019 tothree months ended September 30, 2020, four major manufacturers accounted for 29.4%, 26.8%, 20.4% and 20.2% of RV purchases. During the nine months ended September 30, 2020, four major manufacturers accounted for 26.8%, 24.1%, 23.3% and 19.4% of RV purchases.
During the three months ended September 30, 2019, five major manufacturers accounted for 30.5%, 21.1%, 18.4%, 16.9%, and 10.9% of RV purchases. During the Successor Period from January 1, 2019 tonine months ended September 30, 2019, four major manufacturers accounted for 35.7%, 19.4%, 18.7% and 14.8% of RV purchases.
During the Successor Period from July 1, 2018 to September 30, 2018, four major manufacturers accounted for 29.9%, 24.9%, 21.5%, and 16.1% of RV purchases. During the Successor Period from March 15, 2018 to September 30, 2018, four major manufacturers accounted for 29.2%, 28.8%, 17.4%, and 15.8% of RV purchases. During the Predecessor Period from January 1, 2018 to March 14, 2018, four major manufacturers accounted for 36.1%, 21.4%, 18.2%, and 16.1% of RV purchases.
The Company is subject to dealer agreements with each manufacturer. The manufacturer is entitled to terminate the dealer agreement if the Company is in material breach of the agreement terms.
14 |
Geographic Concentrations
The percent of revenues generated by customers of the Florida locations, Colorado locations and the ColoradoArizona locations, which generate greater than 10% of revenues, were as follows (unaudited):
Three Months | Nine Months | |||||||||||||||||||
Successor | Successor | Successor | Predecessor | |||||||||||||||||
July 1, 2019 to September 30, 2019 | July 1, 2018 to September 30, 2018 | January 1, 2019 to September 30, 2019 | March 15, 2018 to September 30, 2018 | January 1, 2018 to March 14, 2018 | ||||||||||||||||
Florida | 62 | % | 64 | % | 67 | % | 70 | % | 81 | % | ||||||||||
Colorado | 19 | % | 25 | % | 15 | % | 21 | % | 11 | % |
Three months ended | Nine months ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
Florida | 56 | % | 62 | % | 64 | % | 67 | % | ||||||||
Colorado | 17 | % | 19 | % | 15 | % | 15 | % | ||||||||
Arizona | 12 | % | 6 | % | 9 | % | 7 | % |
These geographic concentrations increase the exposure to adverse developments related to competition, as well as economic, demographic, weather and other changes in these regions.
Subsequent EventsImpact of COVID-19
ManagementIn March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and globally. The Company is monitoring the progress of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees.
Due to the early impact of the COVID-19 pandemic, the Company has analyzedtook a number of actions effective April 6, 2020 to adjust resources and costs to align with reduced demand caused by the activities and transactions subsequent to September 30, 2019 through the date these condensed consolidated financial statements were issued to determine the need for any adjustments to or disclosures within the financial statements. The Company did not identify subsequent events that would require disclosure in the condensed consolidated financial statements.pandemic. These actions included:
Reduction of its workforce by 25%; | ||
● | Temporary reduction of senior management salaries (April 2020 through May 2020); | |
● | Suspension of 2020 annual pay increases; | |
● | Temporary suspension of 401k match (April 2020 through June 2020); | |
● | Delay non-critical capital projects; | |
● | Focus resources on core sales and service operations |
As described under Note 7 - Debt below, in order to help mitigate the effects of the COVID-19 pandemic, the Company entered into the Fourth Amendment to the M&T credit agreement on April 15, 2020 and applied for and received funds under loans (“PPP Loans”) under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) with M&T Bank.
Starting in May 2020, the Company experienced significant improvement in sales of new and pre-owned vehicles. Senior management was able to resume normal salaries in late May 2020, and the Company adjusted its workforce where necessary to meet demand. The Company continued to delay non-critical capital projects and is focusing its resources on core sales and service operations in response to the operational and financial impact of the COVID-19 pandemic.
The extent to which the COVID-19 pandemic ultimately impacts the Company’s business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic, and further actions that may be taken by individuals, businesses and federal, state and local governments in response. Even after the COVID-19 pandemic has subsided, the Company may experience significant adverse effects to its business as a result of its global economic impact, including any economic recession or downturn and the impact of such a recession or downturn on unemployment levels, consumer confidence, levels of personal discretionary spending and credit availability.
15 |
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported net income.income (loss).
Recently Issued Accounting Standards
The Company qualifies as an emerging growth company pursuant to the provision of the Jumpstart Our Business Startups Act (“JOBS Act”JOBS”). Act. Section 107 of the JOBS Act provides that an emerging growth company can delay the adoption of certain new accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the extended transition periodprovided by the JOBSAct for complying with new or revised accounting standardsstandards.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). This standard requires the use of a forward-looking expected loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements, which provides guidance on accounting for credit losses on accrued interest receivable balances and guidance on including recoveries when estimating the allowance. In May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, which allows entities with an option to elect fair value for certain instruments upon adoption of Topic 326. The standard is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the impact that the adoption of the provisions of ASU 2016-03 will have on its condensed consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). This standard, effective for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., London Interbank Offered Rate (“LIBOR”)) with a new alternative reference rate. The guidance is applicable to investment securities, receivables, loans, debt, leases, derivatives and hedge accounting elections and other contractual arrangements. The new standard provides temporary optional expedients and exceptions to current GAAP guidance on contract modifications and hedge accounting. Specifically, a modification to transition to an alternative reference rate is treated as an event that does not require contract remeasurement or reassessment of a previous accounting treatment. The standard is generally effective for all contract modifications made and hedging relationships evaluated through December 31, 2022, as a result of reference rate reform. The Company is currently evaluating the impact that this new standard will have on our condensed consolidated financial statements.
Leases
Adoption of new lease standard
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02a new accounting standard that amends the guidance for the accounting and disclosure of leases. This new standard requires an entity tothat lessees recognize the assets and liabilities arisingthat arise from a lease for both financingleases on the balance sheet, including leases classified as operating leases, and operating leases. ASU 2016-02 will also require newdisclose qualitative and quantitative disclosuresinformation about leasing arrangements. The FASB subsequently issued additional amendments to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flowsaddress issues arising from leases. Asthe implementation of the new lease standard. We adopted this standard as of January 1, 2020, using the modified-retrospective method. This approach provides a method for recording existing leases at adoption. We used the adoption date as our date of initial application, and thus comparative-period financial information is not presented for periods prior to the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company qualifiesto carry forward the historical lease classification.
Adoption of the new standard resulted in total operating lease liabilities of approximately $17,800 and operating lease assets of approximately $17,800 as an emerging growth company, thisof January 1, 2020. The standard will be effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating ASU 2016-02did not materially impact our Condensed Consolidated Statements of Income and itshad no impact on itsour Condensed Consolidated Statements of Cash Flows. Our accounting policies under the new standard are described below. See Note 6, Leases.
Lease recognition
At inception of a contract, we determine whether an arrangement is or contains a lease. For all leases, we determine the classification as either operating or financing.
Operating lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments under the lease. Lease recognition occurs at the commencement date and lease liability amounts are based on the present value of lease payments over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Because most of our leases do not provide information to determine an implicit interest rate, we use our incremental borrowing rate in determining the present value of lease payments. Operating lease assets also include any lease payments made prior to the commencement date and exclude lease incentives received. Operating lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with both lease and non-lease components, which are generally accounted for together as a single lease component.
Subsequent Events
Management of the Company has analyzed the activities and transactions subsequent to September 30, 2020 through the date these condensed consolidated financial statements were issued to determine the need for any adjustments to or disclosures within the financial statements. The Company did not identify any recognized or non-recognized subsequent events that would require disclosure in the condensed consolidated financial statements other than the item below.
On October 6, 2020, the Company completed its acquisition of Total Value Recreation Vehicles of Indiana, Inc. (Total RV) located in Elkhart, Indiana. The purchase price for the transaction consists of the following, in each case subject to adjustment in accordance with the terms of the purchase agreement: (a) a cash payment, subject to a working capital adjustment and disclosures.an inventory adjustment and (b) the assumption of of Total RV’s floorplan debt, which was paid off and added to the Company’s current floorplan. In addition, the Company purchased an adjoining parcel of land from the same seller.
16 |
NOTE 3 – BUSINESS COMBINATION
Lazy Days’ R.V. Center, Inc.
On March 15, 2018, the Company consummated the Mergers. Under the Merger Agreement, upon consummation of the Redomestication Merger, (i) each ordinary share of Andina was exchanged for one share of common stock of Holdings (“Holdings Shares”), except that holders of ordinary shares of Andina sold in its initial public offering (“public shares”) were entitled to elect instead to receive a pro rata portion of Andina’s trust account, as provided in Andina’s charter documents, (ii) each Andina initial public offering (“IPO”) right (4,310,000 at March 15, 2018 prior to the Mergers) entitled the holder to receive one-seventh of a Holdings Share and (iii) each Andina warrant (4,310,000 at March 15, 2018) entitled the holder to purchase one-half of one Holdings Share at a price of $11.50 per whole share. Upon consummation of the Transaction Merger, the Lazydays RV’s stockholders received their pro rata portion of: (i) 2,857,189 Holdings Shares; and (ii) $86,741 in cash, subject to adjustments based on the Predecessor’s finalization of working capital and debt as of closing and also subject to any such Holdings Shares and cash that was issued and paid to the Predecessor’s option holders and participants under the transaction incentive plan (the “Transaction Incentive Plan”). During the year ended December 31, 2018, the Company received $563 as a result of the settlement of the working capital adjustment and the amount was reflected as an adjustment to goodwill.
The Company accounted for the Mergers as a business combination using the purchase method of accounting. As a result, the Company determined its allocation of the fair value of the assets acquired and the liabilities assumed of the Predecessor as follows:
Cash | $ | 9,188 | ||
Receivables | 14,768 | |||
Inventories | 124,354 | |||
Prepaid expenses and other | 4,754 | |||
Property and equipment | 73,642 | |||
Intangible assets | 68,200 | |||
Other assets | 200 | |||
Total assets acquired | 295,106 | |||
Accounts payable, accrued expenses and other current liabilities | 26,988 | |||
Floor plan notes payable | 95,663 | |||
Financing liability | 56,000 | |||
Deferred tax liability | 20,491 | |||
Long-term debt | 8,781 | |||
Total liabilities assumed | 207,923 | |||
Net assets acquired | $ | 87,183 |
The fair value of the consideration paid was as follows:
Purchase Price: | ||||
Cash consideration paid | $ | 86,178 | ||
Common stock issued to former stockholders, option holders, and bonus receipients of Lazy Days’ R.V. Center, Inc. | 29,400 | |||
$ | 115,578 |
The common stock was valued at $10.29 per share, the closing price of Andina’s common stock on the date of the Mergers.
Goodwill represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed from the Predecessor. Goodwill associated with the Mergers is detailed below:
As of March 15, 2018 | ||||
Total consideration | $ | 115,578 | ||
Less net assets acquired | 87,183 | |||
Goodwill | $ | 28,395 |
The following table summarizes the Company’s allocation of the purchase price to the identifiable intangible assets acquired as of the date of the closing of the Mergers.
Gross Asset Amount at Acquisition Date | Weighted Average Amortization Period in Years | |||||||
Trade Names, Service Marks and Domain Names | $ | 30,100 | Indefinite | |||||
Customer Lists | $ | 9,100 | 12 years | |||||
Dealer Agreements | $ | 29,000 | 12 Years |
Trade names and trademarks are indefinite-lived assets and are not subject to amortization. The value of trade names, trademarks, and customer relationships was determined utilizing the relief from royalty method. The Company determined the fair value of the manufacturer relationships utilizing a discounted cash flow model.
Direct transaction related costs consist of costs incurred in connection with the Merger Agreement. These costs totaled $2,730 for the period from March 15, 2018 to March 31, 2018 which primarily consisted of the business combination expenses of Andina that were contingent upon the completion of the Mergers. These costs total $381 for the period from January 1, 2018 to March 14, 2018.
Acquisitions of Dealerships
On August 7, 2018, the Company consummated its asset purchase agreement with Shorewood RV Center (“Shorewood”). The Company simultaneously entered into a real estate purchase agreement with the owners of Shorewood for the land and building at the Shorewood location. The purchase price consisted of cash and a note payable to the seller of Shorewood, subject to a final working capital adjustment. The note payable is a three year note which matures on August 7, 2021, which requires monthly payments of $52 in principal and interest. The note bears interest at 4.75% per year. As part of the acquisition, the Company acquired the inventory of Shorewood and has added the inventory to the M&T Floor Plan Line of Credit (as defined below). The Company entered into a sales arrangement with a third party for the assets purchased in the real estate purchase agreement and simultaneously leased the property back from the third party.
On December 6, 2018, the Company consummated its asset purchase agreement with Tennessee Sales and Service, LLC (“Tennessee RV”). The purchase price consisted of cash and a note payable to the seller of Tennessee RV. The note payable is a four year note which matures on December 6, 2022, which requires monthly payments of $94 in principal and interest. The note bears interest at 5.0% per year. As part of the acquisition, the Company acquired the inventory of Tennessee RV and has added the inventory to the M&T Floor Plan Line of Credit.
On August 1, 2019, the Company consummated its asset purchase agreement with Alliance Coach Inc. (“Alliance”). The purchase price consisted of cash and a note payable to the seller of Alliance. The note payable is a two year note which maturesmaturing on August 1, 2021, which requires monthly payments of $134 in principal and interest. The note bears interest at 5.0% per year. As part of the acquisition, the Company acquired the inventory of Alliance and has added the inventory to the M&T Floor Plan Line of Credit (as defined below).
On May 19, 2020, the Company consummated its asset purchase agreement with Korges Enterprises, Inc. (“Korges”). The purchase price consisted solely of cash paid to Korges. As part of the acquisition, the Company acquired the inventory of Korges and has added the inventory to the M&T Floor Plan Line of Credit (as defined below).
The Company accounted for the asset purchase agreements as business combinations using the purchase method of accounting as it was determined that Shorewood RV, Tennessee RVAlliance and AllianceKorges each constituted businesses.a business. As a result, the Company determined its preliminary allocation of the fair value of the assets acquired and the liabilities assumed as follows for these dealerships:dealerships as follows:
2019 | 2018 | |||||||
Inventories | $ | 12,171 | $ | 23,530 | ||||
Accounts receivable and prepaid expenses | 53 | 378 | ||||||
Property and equipment | 77 | 6,175 | ||||||
Intangible assets | 2,630 | 4,610 | ||||||
Total assets acquired | 14,931 | 34,693 | ||||||
Accounts payable, accrued expenses and other current liabilities | 206 | 719 | ||||||
Floor plan notes payable | 11,434 | 21,163 | ||||||
Total liabilities assumed | 11,640 | 21,882 | ||||||
Net assets acquired | $ | 3,291 | $ | 12,811 |
2019 | 2018 | |||||||
Purchase Price: | ||||||||
Cash consideration paid | $ | 2,568 | $ | 15,300 | ||||
Amounts due from former owners | - | 24 | ||||||
Note payable issued to former owners | 3,045 | 5,820 | ||||||
$ | 5,613 | $ | 21,144 |
2020 | 2019 | |||||||
Inventories | $ | 10,742 | $ | 12,171 | ||||
Accounts receivable and prepaid expenses | 905 | 53 | ||||||
Property and equipment | 202 | 77 | ||||||
Intangible assets | 2,760 | 2,630 | ||||||
Total assets acquired | 14,609 | 14,931 | ||||||
Accounts payable, accrued expenses and other current liabilities | 719 | 243 | ||||||
Floor plan notes payable | 11,322 | 11,434 | ||||||
Total liabilities assumed | 12,041 | 11,677 | ||||||
Net assets acquired | $ | 2,568 | $ | 3,254 |
The fair value of consideration paid was as follows:
2019 | 2018 | 2020 | 2019 | |||||||||||||
Purchase Price: | $ | 2,749 | $ | 2,568 | ||||||||||||
Cash consideration paid | $ | 2,568 | $ | 15,300 | (107 | ) | ||||||||||
Amounts due from former owners | - | 24 | ||||||||||||||
Amounts due (from) to former owners | - | - | ||||||||||||||
Note payable issued to former owners | 3,045 | 5,820 | 3,045 | |||||||||||||
$ | 5,613 | $ | 21,144 | $ | 2,749 | $ | 5,506 |
17 |
Goodwill represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed from the Shorewood, Tennessee RV,Alliance and Alliance acquisitions.Korges. Goodwill associated with the transactions is detailed below:
2019 | 2018 | |||||||
Total consideration | $ | 5,613 | $ | 21,144 | ||||
Less net assets acquired | 3,291 | 12,811 | ||||||
Goodwill | $ | 2,322 | $ | 8,333 |
2020 | 2019 | |||||||
Total consideration | $ | 2,749 | $ | 5,506 | ||||
Less net assets acquired | 2,568 | 3,254 | ||||||
Goodwill | $ | 181 | $ | 2,252 |
The following table summarizes the Company’s preliminary allocation of the purchase price to the identifiable intangible assets acquired as of the date of the closing during 2018.closings.
Gross Asset Amount at Acquisition Date | Weighted Average Amortization Period in Years | |||||||
Customer Lists | $ | 210 | 7-8 years | |||||
Dealer Agreements | $ | 4,400 | 7-8 years |
The following table summarizes the Company’s preliminary allocation of the purchase price to the identifiable intangible assets acquired as of the date of the closing during 2019.
Gross Asset Amount at Acquisition Date | Weighted Average Amortization Period in Years | Gross Asset Amount at Acquisition Date | Weighted Average Amortization Period in Years | |||||||||||
Customer Lists | $ | 230 | 7 years | $ | 270 | 7 years | ||||||||
Dealer Agreements | $ | 2,400 | 7 years | $ | 4,900 | 7 years | ||||||||
Noncompete Agreement | $ | 220 | 5 years |
The Company recorded approximately $66.4 million$27,723 in revenue and $3.4 million in net income prior to income taxes during the period from January 1, 2019 to September 30, 2019 related to these acquisitions. The Company recorded approximately $30.2 million in revenue and $1.8 million$1,882 in net income prior to income taxes during the period from July 1, 20192020 to September 30, 2019.2020 related to these acquisitions. The Company recorded approximately $61,414 in revenue and $4,079 in net income prior to income taxes during the period for the nine months ended September 30, 2020 related to these acquisitions.
Pro Forma Information
The following unaudited pro forma financial information summarizes the combined results of operations for the Company as though the Mergers and the purchase of Shorewood, Tennessee RV,Alliance and AllianceKorges had been consummated on January 1, 2018.2019.
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | 161,481 | $ | 170,920 | $ | 532,038 | $ | 574,751 | ||||||||
(Loss) Income before income taxes | $ | (1,415 | ) | $ | (163 | ) | $ | 5,385 | $ | 11,697 | ||||||
Net (loss) income | $ | (2,383 | ) | $ | (1,603 | ) | $ | 1,172 | $ | 6,938 |
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue | $ | 215,723 | $ | 173,416 | $ | 636,544 | $ | 562,401 | ||||||||
Income before income taxes | $ | 15,783 | $ | (1,241 | ) | $ | 30,758 | $ | 7,301 | |||||||
Net income (loss) | $ | 11,599 | $ | (2,246 | ) | $ | 22,721 | $ | 2,686 |
18 |
The Company adjusted the combined income of Lazydays RV with Andina, Shorewood, Tennessee RV,Alliance and AllianceKorges and adjusted net (loss) income to eliminate business combination expenses as well as the incremental depreciation and amortization associated with the preliminary purchase price allocation to determine pro forma net (loss) income.
NOTE 4 – INVENTORIES
Inventories consist of the following:
Successor | ||||||||||||||||
As of | As of | As of | As of | |||||||||||||
September 30, 2019 | December 31, 2018 | September 30, 2020 | December 31, 2019 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
New recreational vehicles | $ | 88,668 | $ | 129,361 | $ | 50,587 | $ | 124,096 | ||||||||
Pre-owned recreational vehicles | 36,350 | 34,905 | 19,060 | 36,639 | ||||||||||||
Parts, accessories and other | 3,990 | 4,387 | 4,138 | 3,848 | ||||||||||||
129,008 | 168,653 | 73,785 | 164,583 | |||||||||||||
Less: excess of current cost over LIFO | (2,791 | ) | (1,275 | ) | (2,239 | ) | (3,719 | ) | ||||||||
$ | 126,217 | $ | 167,378 | |||||||||||||
Total | $ | 71,546 | $ | 160,864 |
NOTE 5 – ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities consist of the following:
Successor | ||||||||||||||||
As of | As of | |||||||||||||||
September 30, 2019 | December 31, 2018 | As of September 30, 2020 | As of December 31, 2019 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Accounts payable | $ | 10,433 | $ | 10,642 | $ | 15,465 | $ | 11,231 | ||||||||
Other accrued expenses | 2,983 | 3,577 | 7,419 | 3,392 | ||||||||||||
Customer deposits | 2,813 | 2,511 | 3,693 | 2,267 | ||||||||||||
Accrued compensation | 3,428 | 2,164 | 4,744 | 2,388 | ||||||||||||
Accrued charge-backs | 4,256 | 3,252 | 5,989 | 4,221 | ||||||||||||
Accrued interest | 310 | 453 | 63 | 356 | ||||||||||||
Total | $ | 24,223 | $ | 22,599 | $ | 37,373 | $ | 23,855 |
NOTE 6 – LEASES
On January 1, 2020, we adopted a new accounting standard that amends the guidance for the accounting and reporting of leases. Certain required disclosures have been made on a prospective basis in accordance with the guidance of the standard. See Note 2, Significant Accounting Policies.
The Company leases property and equipment throughout the United States primarily under operating leases. Leases with lease terms of 12 months or less are expensed on a straight-line basis over the lease term and are not recorded in the Condensed Consolidated Balance Sheets.
Most leases include one or more options to renew, with renewal terms that can extend the lease term up to 20 years (some leases include multiple renewal periods). The exercise of lease renewal options is at our sole discretion. In addition, some of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements neither contain any residual value guarantees nor impose any significant restrictions or covenants.
The Company leases properties for its RV retail locations through nine operating leases. The Company also leases billboards and certain of its equipment through operating leases. The related right-of-use (“ROU”) assets for these operating leases are included in operating lease assets.
On May 19, 2020, the Company entered into a new lease for the property associated with the Korges acquisition. The lease was evaluated as a finance lease. As a result, a right of use asset was recorded in property and equipment for $4,015 with an offsetting $4,015 financing liability.
As of September 30, 2020, the weighted-average remaining lease term and weighted-average discount rate of operating leases was 5.4 years and 5.0%, respectively.
19 |
Operating lease costs for the three and nine month periods ending September 30, 2020 was $938 and $2,894, respectively, including variable lease costs. There were no short term leases for the three and nine months ended September 30, 2020.
Maturities of lease liabilities as of September 30, 2020 were as follows:
Maturity Date | Operating Leases | |||
Remaining three months ending December 31, 2020 | $ | 988 | ||
2021 | 3,838 | |||
2022 | 3,520 | |||
2023 | 3,317 | |||
2024 | 2,586 | |||
Thereafter | 4,118 | |||
Total lease payments | 18,367 | |||
Less: Imputed Interest | 2,362 | |||
Present value of lease liabilities | $ | 16,005 |
The following presents supplemental cash flow information related to leases during 2020:
For the nine months ended September 30, 2020 | ||||
Cash paid for amounts included in the measurement of lease liability: | ||||
Operating cash flows for operating leases | $ | 2,894 | ||
ROU assets obtained in exchange for lease liabilities: | ||||
Operating leases | $ | 756 | ||
Finance lease | $ | 4,015 | ||
$ | 4,771 |
On March 10, 2020, the Company entered into an agreement for the sale of land to LD Murfreesboro TN Landlord, LLC for $4,921. The Company has entered into a lease agreement with the buyer with lease payments to commence upon granting of a certificate of occupancy and completion of planned construction, the cost of which will be paid for by LD Murfreesboro TN Landlord, LLC. The commencement date of the lease will occur at the completion of construction which is expected to occur in the fourth quarter of 2020.
NOTE 67 – DEBT
M&T Financing Agreement
On March 15, 2018, the Company terminated and replaced the Bank of America (“BOA”) credit facility with a $200,000 Senior Secured Credit Facility with M&T Bank (the “M&T Facility”). The M&T Facility includes a Floor Plan Facility (the “M&T Floor Plan Line of Credit”), a Term Loan (the “M&T Term Loan”), and a Revolving Credit Facility (the “M&T Revolver”). The M&T Facility will mature on March 15, 2021. The M&T Facility requires the Company to meet certain financial and other covenants and is secured by substantially all the assets of the Company. The costs of the M&T Facility were recorded as a debt discount.
20 |
On March 15, 2018, the Company repaid $96,740 outstanding under the BOA floor plan notes payable and $8,820 outstanding under the BOA term loan with the proceeds of the M&T Facility.
On March 6, 2020, the Company entered into the Third Amendment and Joinder to Credit Agreement (“Third Amendment”) on the M&T Facility. Pursuant to the Third Amendment, Lone Star Land of Houston, LLC (the “Mortgage Loan Borrower”) and Lone Star Diversified, LLC (“Diversified”), wholly owned subsidiaries of LDRV, became parties to the Credit Agreement and were identified as Additional Loan Parties. The existing borrowers and guarantors also requested that the lenders provide a mortgage loan credit facility in the aggregate principal amount of acquisition, construction, and permanent mortgage financing for a property acquired by the Mortgage Loan Borrower. The mortgage loans maximum borrowing amount is $6,136. The mortgage shall bear interest at (a) LIBOR plus an applicable margin of 2.25% or (b) the Base Rate plus a margin of 1.25%. The mortgage requires monthly payments of principal of $0.03 million and matures on March 15, 2021 when all remaining principal and accrued interest payments become due. As of September 30, 2020, the mortgage balance was $6,136 and the interest rate was 2.4375%.
In order to help mitigate the early effects of the COVID-19 pandemic, the Company entered into the Fourth Amendment to the M&T Credit agreement on April 15, 2020 (the “Fourth Amendment”). Pursuant to the Fourth Amendment, the parties agreed to a suspension of scheduled principal payments on the term loans and mortgage loans (to the extent the permanent loan period has begun for the mortgage loans) for the period from April 15, 2020 through June 15, 2020. Interest on the outstanding principal balances of the term loans and mortgage loans continued to accrue and be paid at the applicable interest rate during the deferment period. At the end of the deferment period, the borrowers resumed making all required payments of principal on the term loans and mortgage loans. All principal payments of the term loans and mortgage loans deferred during the deferment period are due and payable on the term loan maturity date or the mortgage loan maturity date, as applicable. Additionally, all principal payments deferred during the deferment period are due and payable (a) as described above or (b) if earlier, the date all outstanding amounts are otherwise due and payable under the terms of the credit documents (including, without limitation, upon maturity, acceleration or, to the extent applicable under the credit documents, demand for payment). In addition, the amendment includes a temporary suspension of scheduled curtailment payments required by the credit agreement for the period from April 1, 2020 through June 15, 2020. Amounts related to floor plan unused commitment fees and interest on the outstanding principal balance of the M&T Floor Plan Line of Credit (as defined below) will continue to accrue and be paid at the applicable rate and on the terms set forth in the credit agreement during the suspension period.
As of September 30, 2019,2020, the payment of dividends by the Company (other than from proceeds of revolving loans) was permitted under the M&T Facility, so long as at the time of payment of any such dividend, no event of default existed under the M&T Facility, or would result from the payment of such dividend, and so long as any such dividend was permitted under the M&T Facility. As of September 30, 2019,March 31, 2020 and taking into account the effect of the Fourth Amendment to the Credit Agreement entered into on April 15, 2020, the maximum amount of cash dividends that the Company could make from legally available funds to its stockholders was limited to an aggregate of $3,828$22,795 pursuant to a trailing twelve month calculation as defined in the M&T Facility.
Floor Plan Line of Credit
The $175,000 M&T Floor Plan Line of Credit may be used to finance new vehicle inventory, but only $45,000 may be used to finance pre-owned vehicle inventory and $4,500 may be used to finance rental units. Principal becomes due upon the sale of the related vehicle. The M&T Floor Plan Line of Credit shall accrue interest at either (a) the fluctuating 30-day LIBOR rate plus an applicable margin which ranges from 2.00% to 2.30% based upon the Company’s total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus an applicable margin ranging from 1.00% to 1.30% based upon the Company’s total leverage ratio (as defined in the M&T Facility). The Base Rate is defined in the M&T Facility as the highest of M&T’s prime rate, the Federal Funds rate plus 0.50% or one-month LIBOR plus 1.00%. In addition, the Company will be charged for unused commitments at a rate of 0.15%. As of September 30, 2019,2020, the interest rate on the M&T Floor Plan Line of Credit was approximately 4.04%2.14663%.
The M&T Floor Plan Line of Credit consists of the following:
Successor | ||||||||||||||||
As of September 30, 2019 | As of December 31, 2018 | As of September 30, 2020 | As of December 31, 2019 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Floor plan notes payable, gross | $ | 107,550 | $ | 143,885 | $ | 59,255 | $ | 144,133 | ||||||||
Debt discount | (219 | ) | (416 | ) | (105 | ) | (184 | ) | ||||||||
Floor plan notes payable, net of debt discount | $ | 107,331 | $ | 143,469 | $ | 59,150 | $ | 143,949 |
21 |
Term Loan
The $20,000 M&T Term Loan will be repaid in equal monthly principal installments of $242 plus accrued interest through the maturity date of March 15, 2021. At the maturity date, the Company will pay a principal balloon payment of $11,300 plus any accrued interest. The M&T Term Loan shall bear interest at (a) LIBOR plus an applicable margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus a margin of 1.25% to 2.00% based on the total leverage ratio (as defined in the M&T Facility). As of September 30, 2019,2020, there was $15,650$13,475 outstanding under the M&T Term Loan. As of September 30, 2019,2020, the interest rate on the M&T Term Loan was approximately 4.56%2.4375%.
Revolver
The $5,000 M&T Revolver allows the Company to draw up to $5,000. The M&T Revolver shall bearbears interest at (a) 30-day LIBOR plus an applicable margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus a margin of 1.25% to 2.00% based on the total leverage ratio (as defined in the M&T Facility). The M&T Revolver is also subject to unused commitment fees at rates varying from 0.25% to 0.50% based on the total leverage ratio (as defined in the M&T Facility). During the Successor periodthree and nine months ended September 30, 2019,2020, there were no outstanding borrowings under the M&T Revolver.
PPP Loan
In response to economic uncertainty caused by the COVID-19 pandemic, subsidiaries of the Company took the additional step of applying for loans (“PPP Loans”) under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) with M&T Bank (the “Lender”). On April 28, 2020, certain of the Company’s subsidiaries executed promissory notes (the “Notes”) in favor of the Lender for PPP Loans in an aggregate amount of $6,831 which mature on April 29, 2022. Applications were submitted by other subsidiaries of the Company, which resulted in the execution of a promissory note on April 30, 2020 for $1,236 and on May 4, 2020 for $637, which will mature on April 30, 2022 and May 4, 2022, respectively. Pursuant to the promissory notes evidencing the PPP loans (the “Notes”), such PPP Loans will bear interest at a rate of 1.0% per year. Commencing six months after each PPP Loan was disbursed, monthly payments of principal and interest will be required in amounts necessary to fully amortize the principal amount by the maturity date. The PPP Loans are unsecured and are non-recourse obligations. The Notes provide for customary events of default, and the PPP Loans may be accelerated upon the occurrence of an event of default. All or a portion of the PPP Loans may be forgiven upon application to the Lender for payroll and certain other costs incurred during the 8-week period beginning on the date each PPP Loan is disbursed, in accordance with the requirements and limitations under the CARES Act. The amount of the PPP Loan eligible for forgiveness will be reduced if the Company terminates employees or reduces salaries during the 8-week period. While the Company’s subsidiaries used the entire amount of the PPP Loans for qualifying expenses, no assurance can be provided that forgiveness of any portion of the PPP Loans will be obtained.
22 |
NOTE 78 – INCOME TAXES
The Company recorded a provision for federal and state income taxes of $941$4,184 and $1,141$941 for the three month Successor Periodsmonths ended September 30, 20192020 and 2018,2019, respectively, which represent effective tax rates of approximately 26% and (61%) and (72%), respectively. The Company recorded a provision for federal and state income taxes of $8,020 and $4,225 for the Successor Period from January 1, 2019 tonine months ended September 30, 2020 and 2019, $2,766 for the Successor Period from March 15, 2018 to September 30, 2018, and $718for the Predecessor period from January 1, 2018 to March 14, 2018respectively, which represent effective tax rates of approximately 26% and 77%, 108%, and 24%, respectively.
The Company’s effective tax rates differ from the federal statutory rate of 21% primarily due to local and state income tax rates, net of the federal tax effect as well as the non-deductibility of stock-based compensation expense and certain transaction costs.expense.
NOTE 89 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company entered into an employment agreement with the Chief Executive Officer (“CEO”) of the Company effective as of the consummation of the Mergers. The employment agreement with the CEO provides for an initial base salary of $540 subject to annual discretionary increases. In addition, the executive is eligible to participate in any employee benefit plans adopted by the Company from time to time and is eligible to receive an annual cash bonus based on the achievement of performance objectives. The CEO’s target bonus is 100% of his base salary. The employment agreement also providedprovides that the executive wasis to be granted an option to purchase shares of common stock of the Company which was granted in March of 2018 (See Note 1011 – Stockholders’ Equity).
The employment agreement provides that if the executive is terminated for any reason, he is entitled to receive any accrued benefits, including any earned but unpaid portion of base salary through the date of termination, subject to withholding and other appropriate deductions. In addition, in the event the executive resigns for good reason or is terminated without cause (all as defined in the employment agreement) prior to January 1, 2022, subject to entering into a release, the Company will pay the executive severance equal to two times the base salary and average bonus for the CEO.
During May 2018, the Company entered into an offer letter with the Chief Financial Officer (the “CFO”) of the Company. The offer letter provides for an initial base salary of $325 per year subject to annual discretionary increases. In addition, the executive is eligible to participate in any employee benefit plans adopted by the Company from time to time and is eligible to receive an annual cash bonus based on the achievement of performance objectives. The CFO’s target bonus is 75% of his annual base salary (with a potential to earn a maximum of up to 150% of his target bonus). He was also provided with a relocation allowance of $100 which the CFO will be required to repay if he resigns from the Company or is terminated by the Company for cause within two years of his start date. If he is terminated without cause, he will receive twelve months of his base salary as severance. If he is terminated following a change in control, he is also eligible to receive a pro-rated bonus, if the board of directors determines that the performance objectives have been met. He also was granted an option to purchase shares of common stock of the Company (See Note 10-11- Stockholders’ Equity).
Due to the COVID-19 pandemic, as of April 6, 2020, senior management opted to forgo 25% of their salary in order to reduce costs to align with decreased demand in sales and services. Due to improvements in sales in May 2020, senior management resumed normal salaries in late May 2020.
Director Compensation
The Company’s non-employee members of the board of directors will receivereceives annual cash compensation of $50 for serving on the board of directors, $5 for serving on a committee of the board of directors (other than the Chairman of each of the committees) and $10 for serving as the Chairman of any of the committees of the board of directors.
Legal Proceedings
The Company is a party to multiple legal proceedings that arise in the ordinary course of business. The Company has certain insurance coverage and rights of indemnification. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s business, results of operations, financial condition, and/or cash flows.
23 |
NOTE 910 – PREFERRED STOCK
Simultaneous with the closing of the Mergers,On March 15, 2018, the Company consummated a private placement with institutional investors for the sale of convertible preferred stock, common stock, and warrants for an aggregate purchase price of $94,800 (the “PIPE Investment”). At the closing, the Company issued an aggregate of 600,000 shares of Series A Preferred Stock for gross proceeds of $60,000. The investors in the PIPE Investment were granted certain registration rights as set forth in the securities purchase agreements. The holders of the Series A Preferred Stock include 500,000 shares owned by funds managed by a member of the Company’s board of directors.
The Series A Preferred Stock ranks senior to all outstanding stock of the Company. Holders of the Series A Preferred Stock are entitled to vote on an as-converted basis together with the holders of the common stock, and not as a separate class, at any annual or special meeting of stockholders. Each share of Series A Preferred Stock is convertible at the holder’s election at any time, at an initial conversion price of $10.0625 per share, subject to adjustment (as applicable, the “Conversion Price”). Upon any conversion of the Series A Preferred Stock, the Company will be required to pay each holder converting shares of Series A Preferred Stock all accrued and unpaid dividends, in either cash or shares of common stock, at the Company’s option. The Conversion Price will be subject to adjustment for stock dividends, forward and reverse splits, combinations and similar events, as well as for certain dilutive issuances.
Dividends on the Series A Preferred Stock accrue at an initial rate of 8% per annum (the “Dividend Rate”), compounded quarterly, on each $100 (which represents a per share amount) of Series A Preferred Stock (the “Issue Price”) and are payable quarterly in arrears. Accrued and unpaid dividends, until paid in full in cash, will accrue at the then applicable Dividend Rate plus 2%. The Dividend Rate will be increased to 11% per annum, compounded quarterly, in the event that the Company’s senior indebtedness less unrestricted cash during any trailing twelve-month period ending at the end of any fiscal quarter is greater than 2.25 times earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Dividend Rate will be reset to 8% at the end of the first fiscal quarter when the Company’s senior indebtedness less unrestricted cash during the trailing twelve-month period ending at the end of such quarter is less than 2.25 times EBITDA.
If, at any time following the second anniversary of the issuance of the Series A Preferred Stock, the volume weighted average price of the Company’s common stock equals or exceeds $25.00 per share (as adjusted for stock dividends, splits, combinations and similar events) for a period of thirty consecutive trading days, the Company may elect to force the conversion of any or all of the outstanding Series A Preferred Stock at the Conversion Price then in effect. From and after the eighth anniversary of the issuance of the Series A Preferred Stock, the Company may elect to redeem all, but not less than all, of the outstanding Series A Preferred Stock in cash at the Issue Price plus all accrued and unpaid dividends. From and after the ninth anniversary of the issuance of the Series A Preferred Stock, each holder of Series A Preferred Stock has the right to require the Company to redeem all of the holder’s outstanding shares of Series A Preferred Stock in cash at the Issue Price plus all accrued and unpaid dividends.
In the event of any liquidation, merger, sale, dissolution or winding up of the Company, holders of the Series A Preferred Stock will have the right to (i) payment in cash of the Issue Price plus all accrued and unpaid dividends, or (ii) convert the shares of Series A Preferred Stock into common stock and participate on an as-converted basis with the holders of common stock.
So long as the Series A Preferred Stock is outstanding, the holders thereof, by the vote or written consent of the holders of a majority in voting power of the outstanding Series A Preferred Stock, shall have the right to designate two members to the board of directors.
In addition, five-year warrants to purchase 596,273 shares of common stock at an exercise price of $11.50 per share were issued in conjunction with the issuance of the Series A Preferred Stock. The warrants may be exercised for cash or, at the option of the holder, on a “cashless basis” pursuant to the exemption provided by Section 3(a)(9) of the Securities Act. The warrants may be called for redemption in whole and not in part, at a price of $0.01 per share of common stock, if the last reported sales price of the Company’s common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-day trading period ending on the third business day prior to the notice of redemption to warrant holders, if there is a current registration statement in effect with respect to the shares underlying the warrants.
24 |
The Series A Preferred Stock, while convertible into common stock, is also redeemable at the holder’s option and, as a result, is classified as temporary equity in the condensed consolidated balance sheets. Based on anAn analysis of its features a determination was madedetermined that the Series A Preferred Stock was more akin to equity. While the embedded conversion option (“ECO”) was subject to an anti-dilution price adjustment, since the ECO was clearly and closely related to the equity host, it was not required to be bifurcated and it was not accounted for as a derivative liability under ASC 815.815, Derivatives and Hedging.
After factoring in the relative fair value of the warrants issued in conjunction with the Series A Preferred Stock, the effective conversion price is $9.72 per share, compared to the market price of $10.29 per share on the date of issuance. As a result, a $3,392 beneficial conversion feature was recorded as a deemed dividend in the condensed consolidated statementsstatement of operationsincome because the Series A Preferred Stock is immediately convertible, with a credit to additional paid-in capital. The relative fair value of the warrants issued with the Series A Preferred Stock of $2,035 was recorded as a reduction to the carrying amount of the preferred stock in the condensed consolidated balance sheet. In addition, aggregate offering costs of $2,981 consisting of cash and the value of five-year warrants to purchase 178,882 shares of common stock at an exercise price of $11.50 per share issued to the placement agent were recorded as a reduction to the carrying amount of the preferred stock. The $632 value of the warrants was determined utilizing the Black-Scholes option pricing model using a term of 5 years, a volatility of 39%, a risk-free interest rate of 2.61%, and a 0% rate of dividends.
The discount associated with the Series A Preferred Stock was not accreted during the Successor Periodthree months ended September 30, 2020 because redemption was not currently deemed to be probable.
The Company’s board of directors did not declaredeclared a dividend payment on the Series A Preferred Stock of $4,290$10,983 for the period from January 1, 2019 tonine months ended September 30, 2019.2020. The accrued dividends were $7.15 per share ofdividend was paid on October 7, 2020 to the holders. As a result, all Series A Preferred Stock for the period from January 1, 2019 to September 30, 2019. As a result, the amount was added to the carrying amount of the Series A Preferred Stockaccrued dividends were paid, and the dividend rate is currently at 10% until such dividends are paid.returned to 8% effective October 1, 2020.
NOTE 1011 – STOCKHOLDERS’ EQUITY
Authorized Capital
The Company is authorized to issue 100,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of preferred stock, $0.0001 par value. The holders of the Company’s common stock are entitled to one vote per share. The holders of Series A Preferred Stock are entitled to the number of votes equal to the number of shares of common stock into which the holder’s shares are convertible. These holders of Series A Preferred Stock also participate in dividends if they are declared by the board of directors. See Note 910 – Preferred Stock, for additional information associated with the Series A Preferred Stock.
2018 Long-Term Incentive Equity Plan
On March 15, 2018, the Company adopted the 2018 Long-Term Incentive Equity Plan (the “2018 Plan”). The 2018 Plan reserves up to 13% of the shares of common stock outstanding on a fully diluted basis. The 2018 Plan is administered by the Compensation Committee of the board of directors, and provides for awards of options, stock appreciation rights, restricted stock, restricted stock units, warrants or other securities which may be convertible, exercisable or exchangeable for or into common stock. Due to the fact that the fair market value per share immediately following the closing of the Mergers was greater than $8.75 per share, the number of shares authorized for awards under the 2018 Plan was increased by a formula (as defined in the 2018 Plan) not to exceed 18% of shares of common stock then outstanding on a fully diluted basis. On May 20, 2019, the Company’s stockholders approved the adoption of the Lazydays Holdings, Inc. Amended and Restated 2018 Long Term Incentive Plan (the “Incentive Plan”). The Incentive Plan amends and restates the previously adopted 2018 Plan in order to replenish the pool of shares of common stock available under the Incentive Plan by adding an additional 600,000 shares of common stock and making certain changes in light of the Tax Cuts and Jobs Act and its impact on Section 162(m) of the Internal Revenue Code of 1986, as amended. As of September 30, 2019,2020, there were 625,748274,557 shares of common stock available to be issued under the Incentive Plan.
25 |
2019 Employee Stock Purchase Plan
On May 20, 2019, the Company’s stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP reserved 900,000 shares of common stock for purchase by participants in the ESPP. Participants in the plan may purchase shares of common stock at a purchase price which will not be less than the lesser of 85% of the fair market value per share of the common on the first day of the purchase period or the last day of the purchase period. The initial offering and purchase period under the ESPP commenced on July 7, 2019 with the first purchase date to be December 2, 2019. During the three and nine monthsmonth periods ended September 30, 2019,2020, the Company recorded $24$14 and $85, respectively, of stock based compensation related to the ESPP.
Unit Purchase Options
On November 24, 2015, Andina sold options to purchase an aggregate of 400,000 units (collectively, the “Unit Purchase Options”) to an investment bank and its designees for $100. The Unit Purchase Options were exercisable at $10.00 per unit as a result of the Mergers described in Note 3 – Business Combination and they were set to expire on November 24, 2020. The Unit Purchase Options represented the right to purchase an aggregate of 457,142 shares of common stock (which included 57,142 shares of common stock issuable for the rights included in the units, as well as warrants to purchase 200,000 shares of common stock for $11.50 per share). The Unit Purchase Options granted to the holders “demand” and “piggy back” registration rights for periods of five and seven years, respectively, with respect to the securities directly and indirectly issuable upon exercise of the Unit Purchase Options. The Unit Purchase Options were exercisable for cash or on a “cashless” basis, at the holder’s option, such that the holder could have used the appreciated value of the Unit Purchase Options (the difference between the exercise price of the Unit Purchase Option and the market price of the Unit Purchase Options and the underlying shares of common stock) to exercise the Unit Purchase Options without the payment of any cash. The Company had no obligation to net cash settle the exercise of the Unit Purchase Options or the underlying rights or warrants. During January 2019, the Company exchanged $500 for all of the Unit Purchase Options, and as a result, the Unit Purchase Options and any obligation to issue any underlying securities were cancelled.
Warrants
The Company had the following activity related to shares of common stock underlying warrants:
Shares Underlying Warrants | Weighted Average Exercise Price | Shares Underlying Warrants | Weighted Average Exercise Price | |||||||||||||
Warrants outstanding January 1, 2019 | 4,677,458 | $ | 11.50 | |||||||||||||
Warrants outstanding January 1, 2020 | 4,677,458 | $ | 11.50 | |||||||||||||
Granted | - | - | - | $ | - | |||||||||||
Cancelled or Expired | - | - | - | $ | - | |||||||||||
Exercised | - | - | - | $ | - | |||||||||||
Warrants outstanding September 30, 2019 | 4,677,458 | $ | 11.50 | |||||||||||||
Warrants outstanding September 30, 2020 | 4,677,458 | $ | 11.50 |
The table above excludes perpetual non-redeemable prefunded warrants to purchase 1,339,499300,357 shares of common stock with an exercise price of $0.01 per share.
Stock Options
Stock option activity is summarized below:
Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||||||||||||||
Options outstanding at January 1, 2019 | 3,658,421 | $ | 11.10 | |||||||||||||||||||||||||||||
Options outstanding at January 1, 2020 | 3,798,818 | $ | 10.63 | |||||||||||||||||||||||||||||
Granted | 505,000 | 7.55 | �� | 530,000 | $ | 10.08 | ||||||||||||||||||||||||||
Cancelled or terminated | (364,603 | ) | 11.10 | (178,809 | ) | $ | (10.47 | ) | ||||||||||||||||||||||||
Exercised | - | - | (6,250 | ) | $ | 6.47 | ||||||||||||||||||||||||||
Options outstanding at September 30, 2019 | 3,798,818 | $ | 10.63 | 3.7 | $ | 7 | ||||||||||||||||||||||||||
Options vested at September 30, 2019 | 28,152 | $ | 11.10 | 3.5 | $ | - | ||||||||||||||||||||||||||
Options outstanding at September 30, 2020 | 4,143,759 | $ | 10.56 | 2.91 | $ | 9,066 | ||||||||||||||||||||||||||
Options vested at September 30, 2020 | 166,919 | $ | 8.05 | 3.96 | $ | 683 |
26 |
Awards with Market Conditions
On March 16, 2018, the Company granted five-year incentive stock options to purchase and aggregate of 3,573,113 shares of common stock at an exercise price of $11.10 per share to employees pursuant to the 2018 Plan, including 1,458,414 shares of common stock underlying the CEO’s stock options and 583,366 shares of common stock underlying the former CFO’s stock options. A set percentage of the stock options shall vest upon the volume weighted average price (“VWAP”) of the common stock, as defined in the option agreements, being equal to or greater than a specified price per share for at least thirty (30) out of thirty-five (35) consecutive trading days, as follows and are exercisable only to the extent that they are vested: 30% of the options shall vest upon the VWAP exceeding $13.125 per share; an additional 30% of the options shall vest upon the VWAP exceeding $17.50 per share; an additional 30% of the options shall vest upon the VWAP exceeding $21.875 per share; and an additional 10% of the options shall vest upon the VWAP exceeding $35.00 per share; provided that the option holder remains continuously employed by the Company (and/or any of its subsidiaries) from the grant date through (and including) the relevant date of vesting. On May 7, 2018, the Company hired a new CFO who received a stock option award exercisable for 583,366 shares of common stock underlying options under the same terms as the former CFO. On June 15, 2018, the former CFO forfeited her existing 583,366 options.
The fair value of the awards issued on March 16, 2018 of $15,004 was determined using a Monte Carlo simulation based on a 5-year term, a risk-free rate of 2.62%, an annual dividend yield of 0%, and an annual volatility of 42.8%. The expense is being recognized over the derived service period of each vesting tranche which was determined to be 0.74 years, 1.64 years, 2.24 years, and 3.13 years.
The fair value of the awards issued on May 7, 2018 of $2,357 was determined using a Monte Carlo simulation based on a 5- year term, a risk-free rate of 2.74%, an annual volatility of 54.70%, and an annual dividend yield of 0%. The expense is being recognized over the derived service period of each vesting tranche which was determined to be 0.97 years, 1.75 years, 2.15 years, and 2.96 years.
The expense recorded for awards with market conditions was $1,201$75, and $2,832$848 during the three and nine month Successor Periodsperiods ended September 30, 20192020 and 2018, respectively. The expense recorded for awards with market conditions was$1,201 and $3,730 during the three and nine monthsmonth periods ended September 30, 2019, and $5,935 during the Successor Period from March 15, 2018 to September 30, 2018, which is included in operating expenses in the condensed consolidated statements of operations.income.
Awards with Service Conditions
On March 16, 2018, the Company granted five-year stock options to purchase an aggregate of 99,526 shares of common stock at an exercise price of $11.10 per share to the non-employee directors of the Company, pursuant to the 2018 Plan. These options vest over three years with one-third vesting on each of the respective anniversary dates.
On March 23, 2018, stock options to purchase 14,218 shares of common stock that had been issued to one non-employee director were canceled, while new five-year options to purchase 15,123 shares of common stock at an exercise price of $10.40 per share were issued to certain investment funds pursuant to an arrangement between the same non-employee director and the investment adviser to the funds. The new options were scheduled to vest over three years with one-third vesting on each of the respective anniversary dates. On May 31, 2018, the samea non-employee director resigned and options to purchase 15,123 shares of common stock were forfeited.
The $350 fair value of these awards was determined using the Black-Scholes option pricing model based on a 3.5 year expected life, a risk-free rate of 2.42%, an annual dividend yield of 0%, and an annual volatility of 39%. The expense is being recognized over the three-year vesting period. The expected life was determined using the simplified method as the awards were determined to be plain-vanilla options.
During the nine monthsyear ended September 30,December 31, 2019, stock options to purchase 505,000 shares of common stock were issued to employees. The options have exercise prices ranging from $4.50 to $8.50. The options had a five year life and a four year vesting period. The fair value of the awards of $957 was determined using the Black-Scholes option pricing model based on a 3.75 year expected life, a risk free rate of 1.70%-2.51%, an annual dividend yield of 0% and an annual volatility of 52%-55%.
During the nine months ended September 30, 2020, stock options to purchase 530,000 shares of common stock were issued to employees and board members. The options have an exercise price of $7.91, $8.50 or $14.68. The options had a five year life and a four year vesting period. The fair value of the awards of $1,915 was determined using the Black-Scholes option pricing model based on the following range of assumptions:
For the | ||||
Risk free interest rate | % | |||
Expected term (years) | ||||
Expected volatility | % | |||
Expected dividends | 0.00 | % |
The expected life was determined using the simplified method as the awards were determined to be plain-vanilla options.
The expense for awards with service conditions was $61 and $25 during the three month Successor Periods ended September 30, 2019 and 2018, respectively. The expense recorded for awards with service conditions was $158 during$130 and $309 for the Successor Period from January 1, 2019 tothree and nine month periods ended September 30, 20192020 and $53 during$61 and $158 for the Successor Period from March 15, 2018 tothree and nine month periods ended September 30, 2018,2019, which is included in operating expenses in the condensed consolidated statements of operations.income.
As of September 30, 2019,2020, total unrecorded compensation cost related to all non-vested awards was $3,089$2,487 which is expected to be amortized over a weighted average service period of approximately 1.673.04 years. The weighted average grant date fair value of awards issued during January 1, 2019 tothe nine months ended September 30, 20192020 was $1.89$3.61 per share.
27 |
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
Certain statements in this Quarterly Report on Form 10-Q (including but not limited to this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition and the measures the Company has taken in response to the COVID-19 pandemic, the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are “forward-looking” statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and the Company can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary statements,” include, but are not limited to:
● | The COVID-19 pandemic had a significant adverse impact on the Company’s business, results of operations and financial condition in the first months of the pandemic; while increased sales since then have more than offset the initial adverse impact, there can be no assurance that such sales growth will continue at the same rate or at all, and the Company’s sales may ultimately decline, meaning that, in the long term, COVID-19 could result in a net negative impact on its business; |
● | The Company’s business is affected by the availability of financing to it and its customers; |
● | |
The Company’s success will depend to a significant extent on the | |
● | Any change, non-renewal, unfavorable renegotiation or termination of the Company’s supply arrangements for any reason could have a material adverse effect on product availability and cost and the Company’s financial performance. |
● | The Company’s business is impacted by general economic conditions in its markets, and ongoing economic and financial uncertainties may cause a decline in consumer spending that may adversely affect its business, financial condition and results of operations. |
● | The Company depends on its ability to attract and retain customers. |
● | Competition in the market for services, protection plans and products targeting the RV lifestyle or RV enthusiast could reduce the Company’s revenues and profitability. |
● | The Company’s expansion into new, unfamiliar markets presents increased risks that may prevent it from being profitable in these new markets. Delays in acquiring or opening new retail locations could have a material adverse effect on the Company’s business, financial condition and results of operations. |
● | Natural disasters (including hurricanes), whether or not caused by climate change, unusual weather conditions, epidemic outbreaks, terrorist acts and political events could disrupt business and result in lower sales and otherwise adversely affect the Company’s financial performance. |
● | Unforeseen expenses, difficulties, and delays encountered in connection with expansion through acquisitions could inhibit the Company’s growth and negatively impact its profitability. |
● | Failure to maintain the strength and value of the Company’s brands could have a material adverse effect on the Company’s business, financial condition and results of operations. |
● | |
● | The Company’s same store sales may fluctuate and may not be a meaningful indicator of future performance. |
● | The cyclical nature of the Company’s business has caused its sales and results of operations to fluctuate. These fluctuations may continue in the future, which could result in operating losses during |
● | The Company’s business is seasonal, and this leads to fluctuations in sales and revenues. |
28 |
● | The Company’s business may be adversely affected by unfavorable conditions in its local markets, even if those conditions are not prominent nationally. |
● | The Company may not be able to satisfy its debt obligations upon the occurrence of a change in control under its credit facility. |
● | The Company’s ability to operate and expand its business and to respond to changing business and economic conditions will depend on the availability of adequate capital. |
● | The documentation governing the Company’s credit facility contains restrictive covenants that may impair the Company’s ability to access sufficient capital and operate its business. |
● | |
● | The Company depends on its relationships with third party providers of services, protection plans, products and resources and a disruption of these relationships or of these providers’ operations could have an adverse effect on the Company’s business and results of operations. |
● | A portion of the Company’s revenue is from financing, insurance and extended service contracts, which depend on third party lenders and insurance companies. The Company cannot ensure these third parties will continue to provide RV financing and other products. |
● | Fuel shortages, or high prices for fuel, could have a negative effect on the Company’s business. |
● | If the Company is unable to retain senior executives and attract and retain other qualified employees, the Company’s business might be adversely affected. |
● | The Company’s business depends on its ability to |
● | The Company primarily leases its retail locations. If the Company is unable to maintain those leases or locate alternative sites for retail locations in its target markets and on terms that are acceptable to it, the Company’s revenues and profitability could be adversely affected. |
● | The Company’s business is subject to numerous federal, state and local regulations. |
● | Regulations applicable to the sale of extended service contracts could materially impact the Company’s business and results of operations. |
● | If state dealer laws are repealed or weakened, the Company’s dealerships will be more susceptible to termination, non-renewal or renegotiation of dealer agreements. |
● | The |
● | Climate change legislation or regulations restricting emission of “greenhouse gases” could result in increased operating costs and reduced demand for the RVs the Company sells. |
● | The Company may be unable to enforce its intellectual property rights and/or the Company may be accused of infringing the intellectual property rights of third parties which could have a material adverse effect on the Company’s business, financial condition and results of operations. |
● | If the Company is unable to maintain or upgrade its information technology systems or if the Company is unable to convert to alternative systems in an efficient and timely manner, the Company’s operations may be disrupted or become less efficient. |
● | Any disruptions to the Company’s information technology systems or breaches of the Company’s network security could interrupt its operations, compromise its reputation, expose it to litigation, government enforcement actions and costly response measures and could have a material adverse effect on the Company’s business, financial condition and results of operations. |
29 |
● | Increases in the minimum wage or overall wage levels could adversely affect the Company’s financial results. |
● | The Company may be subject to |
● | The Company may be named in litigation, which may result in substantial costs and reputational harm and divert management’s attention and resources. |
● | The Company’s risk management policies and procedures may not be fully effective in achieving their purposes. |
● | The Company could incur asset impairment charges for goodwill, intangible assets or other long-lived assets. |
● | Future resales of the shares of common stock of the Company issued to the stockholders and the investors in the PIPE Investment may cause the market price of the Company’s securities to drop significantly, even if the Company’s business is doing well. |
● | Nasdaq may delist the Company’s common stock from its exchange, which could limit investors’ ability to make transactions in the Company’s common stock and subject the Company to additional trading restrictions. |
● | The Company’s outstanding convertible preferred stock, warrants and options may have an adverse effect on the market price of its common stock. |
● | The Company is an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Company’s common stock less attractive to investors. |
● | Stockholders may become diluted as a result of the issuance of options under existing or future incentive plans or the issuance of common stock as a result of acquisitions or otherwise. |
● | The price of the Company’s common stock may be volatile for a variety of reasons. |
● | The conversion of the Series A Preferred Stock into Company common stock may dilute the value for the other holders of Company common stock. |
● | The holders of Series A Preferred Stock own a large portion of the voting power of the Company common stock and have the right to nominate two members to the Company’s board of directors. As a result, these holders may influence the composition of the board of directors of the Company and future actions taken by the board of directors of the Company. |
● | The holders of the Series A Preferred Stock have certain rights that may not allow the Company to take certain actions. |
● | The Company’s |
● | The Company’s amended and restated certificate of incorporation provides to the fullest extent permitted by law that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could limit the Company’s stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or employees. |
30 |
The following discussion and analysis of the Company’s financial condition and results of operations should be read together with the Company’s financial statements and related notes included in Part I, Item 1 of this Form 10-Q, as well as the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2019.20, 2020.
The amounts set forth below are in thousands unless otherwise indicated except for unit (including the average selling price per unit), share, and per share data.
Business Overview
Overview
Andina Acquisition Corp. II (“Andina”) was originally formed for the purpose of effecting a business combination with one or more businesses or entities. On March 15, 2018, the initial business combination was consummated. As a result, the business of Lazy Days’ R.V. Center, Inc. and its subsidiaries became the Company’s business. Accordingly, Lazydays Holdings, Inc. is now a holding company operating through ourits direct and indirect subsidiaries.
Company History
Andina was formed as an exempted company incorporated in the Cayman Islands on July 1, 2015 for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more target businesses.
From the consummation of the initial public offering (“IPO”) of Andina until October 27, 2017, Andina was searching for a suitable target business to acquire. On October 27, 2017, a merger agreement was entered into by and among Andina, Andina II Holdco Corp., a Delaware corporation and wholly owned subsidiary of Andina (“Holdco”), Andina II Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Holdco (“Merger Sub”), Lazy Days’ R.V. Center, Inc. (“Lazydays RV”) and solely for certain purposes set forth in the merger agreement, A. Lorne Weil (the “Merger Agreement”). The Merger Agreement provided for a business combination transaction by means of (i) the merger of Andina with and into Holdco, with Holdco surviving and becoming a new public company (the “Redomestication Merger”) and (ii) the merger of Lazy Days’ R.V. Center, Inc. with and into Merger Sub with Lazy Days’ R.V. Center, Inc. surviving and becoming a direct wholly owned subsidiary of Holdco (the “Transaction Merger” and together with the Redomestication Merger, the “Mergers”). On March 15, 2018, Holdco held an extraordinary general meeting of the shareholders, at which the Andina shareholders approved the Mergers and other related proposals. On the same date, the Mergers were closed. In connection with the Mergers, the business of Lazy Days’ R.V. Center, Inc. and its subsidiaries became the business of Holdco. As a result of the Mergers, the Company’s stockholders and the shareholders of Andina became stockholders of Holdco and the Company changed the name of Holdco to “Lazydays Holdings, Inc.”
For the purposes of this Management Discussion and Analysis of Financial Condition and Results of Operations, the Company combined the results of Lazy Days’ R.V. Center, Inc. (the “Predecessor”) for the period from January 1, 2018 to March 14, 2018 with the results of Lazydays Holdings, Inc. (the “Successor”) for the period from March 15, 2018 to September 30, 2018.
Our Business
The Company operates recreational vehicle (“RV”) dealerships and offers a comprehensive portfolio of products and services for RV owners and outdoor enthusiasts. The Company generates revenue by providing RV owners and outdoor enthusiasts a full spectrum of products: RV sales, RV repair and services, financing and insurance products, third-party protection plans, after-market parts and accessories RV rentals and RV camping.camping facilities. The Company provides these offerings through its Lazydays branded dealerships. Lazydays is known nationally as The RV Authority®, a registered trademark that has been consistently used by the Company in its marketing and branding communications since 2013. In this Quarterly Report on Form 10-Q, the Company refers to Lazydays Holdings, Inc. as “Lazydays,” the “Company,” “Holdco,” “we,” “us,” “our,” and similar words.
The Company believes, based on industry research and management’s estimates, it operates one of the world’s largest RV dealerships,dealership, measured in terms of on-site inventory, located on 126 acres outside Tampa, Florida. The CompanyWe also hashave dealerships located at The Villages, Florida; Tucson and Phoenix, Arizona; Minneapolis, Minnesota; Knoxville, Tennessee; and Loveland and Denver, Colorado. Colorado; and Elkhart, Indiana. We furthermore have a dedicated Service Center location near Houston, Texas.
Lazydays offers one of the largest selections of leading RV brands in the nation featuring more than 3,000 new and pre-owned RVs. The Company has more than 400 service bays across all locations and has RV parts and accessories stores at all locations. Lazydays also has RV rental fleets in Colorado and availability to two on-site campgrounds with over 700 RV campsites.campsites and operated RV rental fleets in Colorado that were phased out in 2019. The Company welcomes over 500,000 visitors to its dealership locations annually, and employs over 800approximately 900 people at its seven facilities.dealership and service locations. The Company’s dealership locations are staffed with knowledgeable local team members, providing customers access to extensive RV expertise. The Company believes its dealership and service locations are strategically located in key RV markets. Based on information collected by the Company from reports prepared by Statistical Surveys, these key RV markets (Florida, Colorado, Arizona, Minnesota, Tennessee, Texas and Tennessee)Indiana) account for a significant portion of new RV units sold on an annual basis in the U.S. The Company’s dealerships and service centers in these key markets attract customers from all states, except Hawaii.
The Company attracts new customers primarily through Lazydays dealership locations as well as digital and traditional marketing efforts. Once the Company acquires customers, those customers become part of the Company’s customer database where the Company leverages customer relationship management (“CRM”) tools and analytics to actively engage, market and sell its products and services.
31 |
Recent Developments
On August 1, 2019,March 10, 2020, the Company consummated its asset purchaseentered into an agreement for the sale of land to LD Murfreesboro TN Landlord, LLC for approximately $5 million. The Company has entered a lease agreement with Alliance Coach Inc., a business located near Ocala, Florida. Simultaneousthe buyer with lease payments to commence upon completion of planned construction expected to total $17 million including land, the executioncost of the asset purchase agreement,which will be paid for by LD Murfreesboro TN Landlord, LLC.
On May 19, 2020, the Company executed a lease with the former ownercompleted its acquisition of Alliance CoachKorges Enterprises, Inc. (“Desert Autoplex RV”) located in Phoenix, Arizona. The purchase price for the transaction consists of the following, in each case subject to adjustment in accordance with the terms of the purchase agreement: (a) approximately $4 million in cash, subject to a working capital adjustment and a note payablean inventory adjustment and (b) the assumption of approximately $11.6 million of Desert Autoplex RV’s floorplan debt, which was paid off and added to the seller of Alliance Coach Inc. In addition, the Company has acquired the inventory of Alliance Coach Inc. and has added the inventory to the M&T Floor Plan Line of Credit.Company’s current floorplan.
On September 16, 2019,October 6, 2020, we completed our acquisition of Total Value Recreational Vehicles of Indiana, Inc. (“Total Value RV”) located in Elkhart, Indiana. The purchase price for the Company announced that it plans to open its first dedicated service center in the Houston, Texas metro area. The facility is currently under construction. The Company anticipates commencing operations in the first quarter of 2020.
On November 6, 2019, the Board of Directors of Lazydays authorized the repurchase of up to $4.0 milliontransaction consists of the Company’s common stock through December 31, 2020. Repurchases may be made at management’s discretion from timefollowing, in each case subject to time on the open market, through privately negotiated transactions or a trading planadjustment in accordance with Rule 10b-18the terms of the Securities Exchange Actpurchase agreement: (a) a cash payment, subject to a working capital adjustment and an inventory adjustment and (b) the assumption of 1934,Total Value RV’s floorplan debt, which was paid off and added to our current floorplan. In addition, we acquired related real estate from the same seller.
COVID-19 Developments
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease COVID-19 a pandemic, which continues to spread throughout the United States and globally. Beginning in mid-to-late March of 2020, the COVID-19 pandemic led to severe disruptions in general economic activity as amended,businesses and pursuantfederal, state, and local governments took increasingly broad actions to applicable Securitiesmitigate the impact of the pandemic on public health, including through “shelter in place” or “stay at home” orders in the states in which we operate. As we modified our business practices to conform to government guidelines and Exchange Commission requirements. best practices to ensure the health and safety of our customers, employees and the communities we serve, we saw significant early declines in new and pre-owned vehicle unit sales, sales of parts, accessories and related services, including finance and insurance revenues as well as campground and miscellaneous revenues.
We took a number of actions in April 2020 to adjust resources and costs to align with reduced demand caused by the pandemic. These actions included:
● | Reduction of our workforce by 25%; | |
● | Temporary reduction of senior management salaries (April 2020 through May 2020); | |
● | Suspension of 2020 annual pay increases; | |
● | Temporary suspension of 401k match (April 2020 through May 2020); | |
● | Delay of non-critical capital projects; and | |
● | Focus of resources on core sales and service operations. |
To further protect our liquidity and cash position, we negotiated with our lenders for the temporary suspension of scheduled principal and interest payments on our term and mortgage loans from April 15, 2020 through June 15, 2020 and for the temporary suspension of scheduled floorplan curtailment payments from April 1, 2020 through June 15, 2020. We also received $8.7 million in loans under the Paycheck Protection Program (the “PPP Loans”).
Starting in May 2020, we experienced significant improvement in sales of new and pre-owned vehicles. Senior management was able to resume normal salaries in late May 2020, and we adjusted our workforce where necessary to meet demand. We continued to delay non-critical capital projects and we are focusing our resources on core sales and service operations in response to the operational and financial impact of the COVID-19 pandemic.
The repurchase programimprovement in sales beginning in May 2020 likely relates, at least in part, to an increase in consumer demand as consumers seek outdoor travel and leisure activities that permit appropriate social distancing. We can provide no assurances that such growth in sales will continue at the same rate or at all, over any time period, and sales may ultimately decline.
Our operations also depend on the continued health and productivity of our employees at our dealerships service locations and corporate headquarters throughout this pandemic. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic, and further actions that may be suspendedtaken by individuals, businesses and federal, state and local governments in response. Even after the COVID-19 pandemic has subsided, we may experience significant adverse effects to our business as a result of its global economic impact, including any economic recession or downturn and the impact of such a recession or downturn on unemployment levels, consumer confidence, levels of personal discretionary spending and credit availability.
See “Part II - Item 1.A. Risk Factors” in this quarterly report on Form 10-Q for periods or discontinued at any time.a discussion of additional risks related to COVID-19.
32 |
How The Company Generates Revenue
The Company derives its revenues from sales of new RV units, sales of pre-owned RV units, and other revenue. Other revenue consists of RV parts, service and repairs, commissions earned on sales of third-party financing and insurance products, visitor fees at the Tampa campground and food facilities revenue, and miscellaneousother revenues. During the three and nine months ended September 30, 20192020 and 2018,2019, the Company derived its revenues from these categories in the following percentages:
Successor | Successor | Successor | Combined Successor and Predecessor | |||||||||||||||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
New vehicles | 54.8 | % | 56.0 | % | 55.8 | % | 55.5 | % | 60.4 | % | 54.8 | % | 58.4 | % | 55.8 | % | ||||||||||||||||
Pre-owned vehicles | 32.9 | % | 32.0 | % | 32.3 | % | 33.3 | % | 29.8 | % | 32.9 | % | 30.8 | % | 32.3 | % | ||||||||||||||||
Other | 12.3 | % | 12.0 | % | 11.9 | % | 11.2 | % | 9.8 | % | 12.3 | % | 10.8 | % | 11.9 | % | ||||||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
New and pre-owned RV sales accounted for approximately 88%90% and 89% of total revenues infor the three and nine months ended September 30, 2019. New2020 and pre-owned RV sales accounted for approximately 88% and 89% of total revenues infor the three and nine months ended September 30, 2018.2019. These revenue contributions have remained relatively consistent.
Key Performance Indicators
Gross Profit and Gross Margins (excluding depreciation and amortization). Gross profit is total revenue less total costs applicable to revenue excluding depreciation and amortization. The vast majority of the cost applicable to revenues is related to the cost of vehicles. New and pre-owned vehicles have accounted for 96% to 97% of the cost of revenues for the three and nine months ended September 30, 20192020 and 2018.96% and 97% of the cost of revenues for the three and nine months ended September 30, 2019. Gross margin is gross profit as a percentage of revenue.
The Company’s gross profit is variable in nature and generally follows changes in revenue. For the three months ended September 30, 20192020 and 2018,2019, gross profit was $30.5$49.3 million and $30.3$30.5 million, respectively, and gross margin was 19.3%22.9% and 21.3%19.3%, respectively. For the nine months ended September 30, 20192020 and 2018,2019, gross profit was $103.0$134.8 million and $104.8$103.0 million, respectively, and gross margin was 20.6%21.7% and 21.7%20.6%, respectively. Last-in, first-out (“LIFO”) adjustments did not have a material impact on the variance in the Company’s gross margin during the periods presented. The margin decreases were driven by reduced per vehicle margins due to competitive pricing in the industry during the recent quarter.
During$1.4 million and $1.5 million for the three and nine months ended September 30, 20192020, respectively, which positively affected gross profit.
For the three and 2018,nine months ended September 30, 2020, gross margins were somewhatunfavorably impacted by other revenue relative to new and pre-owned vehicle sales revenues, including finance and insurance revenues and parts, service, and accessories revenue. The Company’s margins on these lines of business typically carry higher gross margin percentages than new and pre-owned vehicle sales.sales, and contributed a smaller portion of total revenues for the three and nine months ended September 30, 2020 than for the prior year periods. These combined other revenues were 12.3%9.8% and 12.0%12.3%, respectively, of total revenues duringfor the three months ended September 30, 20192020 and 2018.2019. These combined other revenues were 11.9%10.8% and 11.2%11.9%, respectively, of total revenues duringfor the nine months ended September 30, 20192020 and 2018.2019.
SG&A as a percentage of Gross Profit. Selling, general and administrative (“SG&A”) expenses as a percentage of gross profit allows the Company to monitor its expense control over a period of time. SG&A consistsconsist primarily of wage-related expenses, selling expenses related to commissions and advertising, lease expenses and corporate overhead expenses. Historically, salaries, commissions and benefits represent the largest component of the Company’s total selling, general and administrative expense and averages approximately 52%50% to 53%60% of total selling, general and administrative expenses. SG&A expenses do not include transaction costs, stock based compensation and depreciation and amortization expense. SG&A expenses as a percentage of gross profit allows the Company to monitor its expenses over a period of time.
The Company calculates SG&A expenses as a percentage of gross profit by dividing SG&A expenses for the period by total gross profit. For the three months ended September 30, 2020 and 2019, and 2018, SG&A, excluding transaction costs, depreciation and amortization expense, and stock-based compensation as a percentage of gross profit was 83.7%58.0% and 78.6%83.7%, respectively. For the nine months ended September 30, 2020 and 2019, and 2018, the percentage was 74.9% and 71.7%, respectively. These increases are driven by the decreased gross margins discussed above. In addition, as the Company executes its growth strategy, the Company may acquire intangible assets and property, plant, and equipment, and the related depreciation and amortization expense may negatively impact our SG&A, expenses as a percentage of gross margin.profit was 65.3% and 74.9%. The decrease in this percentage reflects the fact that the growth in gross profit exceeded the growth in SG&A costs, driven primarily by the overall growth of the business improving fixed costs operating leverage, as well as overhead cost reductions implemented in April 2020.
33 |
Adjusted EBITDA. Adjusted EBITDA is a not a U.S. Generally Accepted Accounting PrinciplesPrinciple (“GAAP”) financial measure, but it is one of the primary non-GAAP measures management uses to evaluate the financial performance of the business. Adjusted EBITDA is also frequently used by analysts, investors, and other interested parties to evaluate companies in the recreational vehicle industry. The Company uses Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance as follows:
● | as a measurement of operating performance to assist in comparing the operating performance of the Company’s business on a consistent basis, and remove the impact of items not directly resulting from the Company’s core operations; | |
● | for planning purposes, including the preparation of the Company’s internal annual operating budget and financial projections; | |
● | to evaluate the performance and effectiveness of the Company’s operational strategies; and | |
● | to evaluate the Company’s capacity to fund capital expenditures and expand the business. |
The Company defines Adjusted EBITDA as net (loss) income excluding depreciation and amortization of property and equipment, non-floor plan interest expense, amortization of intangible assets, income tax expense, stock-based compensation, transaction costs and other supplemental adjustments which for the periods presented includes LIFO adjustments, severance costs and other one timeone-time charges, and loss or gain on sale of property and equipment. The Company believes Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain operating drivers of the business, such as sales growth, operating costs, selling and administrative expense and other operating income and expense. The Company believes Adjusted EBITDA can provide a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations, or a measure comparable to net (loss) income as it does not take into account certain requirements such as non-recurring gains and losses which are not deemed to be a normal part of the underlying business activities.
The Company’s use of Adjusted EBITDA may not be comparable to other companies within the industry. The Company compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating business performance. In addition, capital expenditures, which impact depreciation and amortization, interest expense, and income tax expense, are reviewed separately by management. The Company’s measure of Adjusted EBITDA is not necessarily comparable to similarly titled captions of other companies due to different methods of calculation. For a reconciliation of Adjusted EBITDA to net (loss) income, a reconciliation of Adjusted EBITDA Margin to net (loss) income margin, and a further discussion of how the Company utilizes these non-GAAP financial measures, see “Non-GAAP Financial Measures” below.
34 |
Results of Operations
Three Months
The following table sets forth information comparing thecertain components of net lossincome (loss) for the three months ended September 30, 20192020 and 2018.2019.
Summary Financial Data
(in thousands)
Successor | Successor | |||||||||||||||
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | |||||||||||||
Revenues | ||||||||||||||||
New and pre-owned vehicles | $ | 138,861 | $ | 125,348 | $ | 194,552 | $ | 138,861 | ||||||||
Other | 19,541 | 17,035 | 21,171 | $ | 19,541 | |||||||||||
Total revenue | 158,402 | 142,383 | 215,723 | 158,402 | ||||||||||||
Cost of revenues (excluding depreciation and amortization expense) | ||||||||||||||||
New and pre-owned vehicles | 122,107 | 107,449 | 162,269 | $ | 122,107 | |||||||||||
Adjustments to LIFO reserve | 910 | 884 | (1,432 | ) | $ | 910 | ||||||||||
Other | 4,841 | 3,776 | 5,544 | $ | 4,841 | |||||||||||
Total cost of revenues (excluding depreciation and amortization) | 127,858 | 112,109 | 166,381 | 127,858 | ||||||||||||
Gross profit (excluding depreciation and amortization) | 30,544 | 30,274 | 49,342 | 30,544 | ||||||||||||
Transaction costs | 193 | 243 | 233 | 193 | ||||||||||||
Depreciation and amortization expense | 2,732 | 2,532 | 2,760 | 2,732 | ||||||||||||
Stock-based compensation expense | 1,286 | 2,857 | 219 | 1,286 | ||||||||||||
Selling, general, and administrative expenses | 25,570 | 23,793 | 28,598 | 25,570 | ||||||||||||
Income from operations | 763 | 849 | 17,532 | 763 | ||||||||||||
Other income/expenses | ||||||||||||||||
Gain (loss) on sale of property and equipment | 13 | (9 | ) | |||||||||||||
Loss on sale of property and equipment | - | 13 | ||||||||||||||
Interest expense | (2,321 | ) | (2,428 | ) | (1,749 | ) | (2,321 | ) | ||||||||
Total other expense | (2,308 | ) | (2,437 | ) | (1,749 | ) | (2,308 | ) | ||||||||
Loss before income tax expense | (1,545 | ) | (1,588 | ) | ||||||||||||
Income before income tax expense | 15,783 | (1,545 | ) | |||||||||||||
Income tax expense | (941 | ) | (1,141 | ) | (4,184 | ) | (941 | ) | ||||||||
Net loss | $ | (2,486 | ) | $ | (2,729 | ) | ||||||||||
Net income (loss) | $ | 11,599 | $ | (2,486 | ) |
35 |
Three Months Ended September 30, 20192020 Compared to the Three Months Ended September 30, 20182019
Revenue
Revenue increased by approximately $16.0$57.3 million, or 11.3%36.2%, to $158.4$215.7 million from $142.4$158.4 million for the three months ended September 30, 20192020 and 2018,2019, respectively.
New and Pre-Owned Vehicles Revenue
Revenue from new and pre-owned vehiclesvehicle sales increased by approximately $13.6$55.7 million, or 10.8%40.1%, to $138.9$194.6 million from $125.3$138.9 million for the three months ended September 30, 20192020 and 2018,2019, respectively.
Revenue from new vehicle sales increased by approximately $7.0$43.5 million, or 8.8%50.1%, to $86.8$130.3 million from $79.8$86.8 million for the three months ended September 30, 20192020 and 2018,2019, respectively. This increase was due to an increase in the number of new vehicle units sold from 1,0781,248 to 1,248 which was driven by the acquisitions of three new dealerships since August 2018. This1,645, as well as an increase was offset by a decrease in the average selling price from $73,500 for the three months ended September 30, 2018 as compared$69,100 to $69,100 for the three months ended September 30, 2019.$76,900 per unit.
Revenue from pre-owned vehicle sales increased by approximately $6.4$12.2 million, or 14.2%23.5%, to $52.0$64.2 million from $45.6$52.0 million for the three months ended September 30, 2020 and 2019, and 2018, respectively. The increaseThis was primarily driven bydue to an increase in wholesale revenue by approximately $4.0 million. The revenue increase from wholesale sales was offset by a decrease in the number of pre-owned vehicles sold, from 722 to 687, excluding wholesale units, sold. After excluding the effect of wholesale sales,from 687 to 950. This increase was partially offset by a decrease in the average selling pricerevenue per unit sold increased from approximately $60,000$65,500 to $62,900 per unit for the three months ended September 30, 2018 as compared to $65,500 for the three months ended September 30, 2019.unit.
Other Revenue
Other revenue consists of sales of parts, accessories, and related services. It also consists of finance and insurance revenues as well as campground and miscellaneous revenues. Other revenue increased by approximately $2.5$1.6 million, or 14.7%8.2%, to $19.5$21.1 million from $17.0$19.5 million for the three months ended September 30, 20192020 and 2018,2019, respectively.
As a component of other revenue, sales of parts, accessories and related services increased by approximately $1.6$0.7 million, or 23.2%7.5%, to $9.5 million from $8.8 million from $7.2 million, primarily due to the Company’s new locations in Tennessee, Minnesota, and The Villages, Florida.increased volume.
Finance and insurance revenue increased by approximately $1.2$1.8 million, or 13.7%19.7%, to $9.3$11.1 million from $8.1$9.3 million for the three months ended September 30, 20192020 as compared to September 30, 2018,2019, respectively, primarily due to finance and insurance revenue at the Company’s new locations in Tennessee, Minnesota, and The Villages, Florida. In addition, the Company has had improved penetration rates and perhigher unit revenue on its finance and insurance products.sales.
Campground and miscellaneous revenue, which includesincluded RV rental campground, restaurant, and consignment revenue, decreased by approximately $0.2$0.9 million to $0.6 million for the three months ended September 30, 2020 as compared to $1.5 million for the three months ended September 30, 2019 as compareddue to $1.7 million for the three months ended September 30, 2018.discontinuance of RV rentals in 2019.
Gross Profit (excluding depreciation and amortization)
Gross profit consists of gross revenues less cost of revenuessales and services and excludes depreciation and amortization. Gross profit increased by approximately $0.2$18.8 million, or 0.9%61.5%, to $30.5$49.3 million from $30.3$30.5 million for the three months ended September 30, 2020 and 2019, and 2018, respectively. Gross margins declined dueThis increase was attributable to decreased new and pre-owned vehicle gross profit per unit which declined due to competitive pricinggrowth in the industry. Additionally, wholesale sales, which have approximately breakeven margins, increased by $4.0 million.all lines of business.
New and Pre-Owned Vehicles Gross Profit
New and pre-owned vehicle gross profit decreased $1.2increased $17.9 million, or 6.9%112.8%, to $15.8$33.7 million from $17.0$15.8 million for the three months ended September 30, 20192020 and 2018,2019, respectively. The decreaseincrease is primarily attributable to the decreased gross margin onincrease in units sold, the increase in the average selling price of new vehicles from pricing competition.units and a $2.3 million decrease in LIFO adjustments due to decreases in inventory levels, partially offset by the decrease in the average selling price of pre-owned motorized vehicles.
Other Gross Profit
Other gross profit increased by $1.4$0.9 million, or 10.9%6.3% to $14.7$15.6 million from $13.3$14.7 million for the three months ended September 30, 20192020 and 2018,2019, respectively, due to increased finance and insurance revenue from the Company’s new locations in Tennessee, Minnesota, and The Villages, Floridarevenues associated with increased RV sales as well as increasedhigher penetration rates on the Company’s finance and insurance products.products, partially offset by the effect of the discontinuation of the rental business.
36 |
Selling, General and Administrative Expenses
Selling, general, and administrative (“SG&A&A”) expenses, excludingwhich, as explained above, do not include transaction costs, stock-based compensation, and depreciation and amortization, increased $1.8$3.0 million, or 7.5%11.8%, to $25.6$28.6 million duringfor the three months ended September 30, 2019,2020, from $23.8$25.6 million duringfor the three months ended September 30, 2018.2019. The increase in SG&A expenses was related to overhead associated with The Villages dealership acquired August 2019, the new locationsservice center near Houston, the Phoenix dealership acquired since August 2018. Stock-basedin May 2020 and increased performance wages as a result of the increased unit sales and revenues for the period ending September 30, 2020. This increase was partially offset by a decrease in stock based compensation a non-cash expense, decreased by $1.6of $1.1 million as a result of the graded vesting of the awards with market conditions which were issued to members of management in 2018, with the majority of the expense being recorded in the early portion of the derived service period.
Interest Expense
Interest expense decreased by approximately $0.1$0.6 million to $2.3$1.7 million from $2.4$2.3 million for the three months ended September 30, 20192020 and 2018,2019, respectively, due primarily to more favorable interest rates, lower floorplan balances and the decrease in floor planuse of an interest from reduced inventory levels.reduction equity account.
Income Taxes
Income tax expense decreased $0.2was $4.2 million and $0.9 million for the three months endedmonth periods ending September 30, 2020 and 2019, as compared to the three months ended September 30, 2018. The difference between the statutory rates and the estimated effective tax rate for the year relate to permanent differences in non-cash, non tax deductible stock-based compensation. The effective tax rate is also subject to the timing of changes in market conditions which impact the Company’s calculation of the estimated effective tax rate.respectively.
Results of Operations
Nine Months
The following table sets forth information comparing thecertain components of net income for the nine months ended September 30, 20192020 and 2018.2019.
Summary Financial Data
(in thousands)
Successor | Combined Successor and Predecessor | |||||||
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | |||||||
Revenues | ||||||||
New and pre-owned vehicles | $ | 440,541 | $ | 427,987 | ||||
Other | 59,464 | 54,354 | ||||||
Total revenue | 500,005 | 482,341 | ||||||
Cost of revenues (excluding depreciation and amortization expense) | ||||||||
New and pre-owned vehicles | 380,994 | 365,143 | ||||||
Adjustments to LIFO reserve | 1,516 | 1,032 | ||||||
Other | 14,526 | 11,400 | ||||||
Total cost of revenues (excluding depreciation and amortization) | 397,036 | 377,575 | ||||||
Gross profit (excluding depreciation and amortization) | 102,969 | 104,766 | ||||||
Transaction costs | 508 | 3,738 | ||||||
Depreciation and amortization expense | 8,067 | 6,836 | ||||||
Stock-based compensation expense | 3,912 | 6,126 | ||||||
Selling, general, and administrative expenses | 77,173 | 75,078 | ||||||
Income from operations | 13,309 | 12,988 | ||||||
Other income/expenses | ||||||||
Gain on sale of property and equipment | 11 | 2 | ||||||
Interest expense | (7,879 | ) | (7,365 | ) | ||||
Total other expense | (7,868 | ) | (7,363 | ) | ||||
Income before income tax expense | 5,441 | 5,625 | ||||||
Income tax expense | (4,225 | ) | (3,484 | ) | ||||
Net income | $ | 1,216 | $ | 2,141 |
Nine Months Ended | Nine Months Ended | |||||||
September 30, 2020 | September 30, 2019 | |||||||
Revenues | ||||||||
New and pre-owned vehicles | $ | 553,245 | $ | 440,541 | ||||
Other | 67,293 | 59,464 | ||||||
Total revenue | 620,538 | 500,005 | ||||||
Cost of revenues (excluding depreciation and amortization expense) | ||||||||
New and pre-owned vehicles | 470,097 | 380,994 | ||||||
Adjustments to LIFO reserve | (1,481 | ) | 1,516 | |||||
Other | 17,154 | 14,526 | ||||||
Total cost of revenues (excluding depreciation and amortization) | 485,770 | 397,036 | ||||||
Gross profit (excluding depreciation and amortization) | 134,768 | 102,969 | ||||||
Transaction costs | 534 | 508 | ||||||
Depreciation and amortization expense | 8,068 | 8,067 | ||||||
Stock-based compensation expense | 1,239 | 3,912 | ||||||
Selling, general, and administrative expenses | 87,983 | 77,173 | ||||||
Income from operations | 36,944 | 13,309 | ||||||
Other income/expenses | ||||||||
(Loss) gain on sale of property and equipment | (8 | ) | 11 | |||||
Interest expense | (6,262 | ) | (7,879 | ) | ||||
Total other expense | (6,270 | ) | (7,868 | ) | ||||
Income before income tax expense | 30,674 | 5,441 | ||||||
Income tax expense | (8,020 | ) | (4,225 | ) | ||||
Net income | $ | 22,654 | $ | 1,216 |
37 |
Nine Months Ended September 30, 20192020 Compared to the Nine Months Ended September 30, 20182019
Revenue
Revenue increased by approximately $17.7$120.5 million, or 3.7%24.1%, to $500.0$620.5 million from $482.3$500.0 million for the nine months ended September 30, 20192020 and 2018,2019, respectively.
New and Pre-Owned Vehicles Revenue
Revenue from new and pre-owned vehicles sales increased by approximately $12.5$112.7 million, or 2.9%25.6%, to $440.5$553.2 million from $428.0$440.5 million for the nine months ended September 30, 20192020 and 2018,2019, respectively.
Revenue from new vehicle sales increased by approximately $11.4$83.3 million, or 4.2%29.9%, to $278.9$362.2 million from $267.5$278.9 million for the nine months ended September 30, 2020 and 2019, and 2018, respectively. TheThis increase was due to thean increase in the number of new vehicle units sold from 3,5343,774 to 3,774 which was supported by the acquisitions of the Company’s dealerships in Tennessee, Minnesota and4,815. The Villlages, Florida which were acquired after August 2018. This increase was partially offset by a decrease in the average selling price from $75,300remained steady at $73,400 for the nine months ended September 30, 2018 as compared to $73,400 for the nine months ended September 30,2020 and 2019.
Revenue from pre-owned vehicle sales increased by approximately $1.2$29.4 million, or 0.8%18.2%, to $161.7$191.1 million from $160.5$161.7 million for the nine months ended September 30, 2020 and 2019, and 2018, respectively. ThereThis was a decreaseprimarily due to an increase in the number of pre-owned vehicles sold from 2,223 to 3,106, excluding wholesale units sold, from 2,429 to 2,223. The decrease in unit volumesold. This increase was offset by an increasea decrease in the average selling pricerevenue per unit sold from approximately $62,900$64,500 per unit for the nine months ended September 30, 20182019 as compared to $64,500$58,000 for the nine months ended September 30, 2019. Wholesale revenue increased $6.6 million.2020.
Other Revenue
Other revenue consists of sales of parts, accessories, and related services. It also consists of finance and insurance revenues as well as campground and miscellaneous revenues. Other revenue increased by approximately $5.1$7.8 million, or 9.4%13.2%, to $59.5$67.3 million from $54.4$59.5 million for the nine months ended September 30, 20192020 and 2018,2019, respectively.
As a component of other revenue, sales of parts, accessories and related services increased by approximately $3.1 million, or 13.4%11.7%, to $29.4 million from $26.3 million from $23.2 million for the nine months ended September 30, 2019 and 2018 due to the Company’s new locations in Tennessee, Minnesota, and The Villages, Florida.increased volume.
Finance and insurance revenue increased by approximately $2.8$6.6 million, or 11.1%23.2%, to $28.5$35.1 million from $25.7$28.5 million for the nine months ended September 30, 20192020 as compared to September 30, 2018,2019, respectively, primarily due to finance and insurance revenue at the Company’s new locations in Tennessee, Minnesota, and The Villages, Florida. In addition, the Company has had improved penetration rates and perhigher unit revenue on its finance and insurance products.sales.
Campground and miscellaneous revenue, which includesincluded RV rental revenue, decreased by approximately $0.9$1.9 million to $2.7 million for the nine months ended September 30, 2020 as compared to $4.6 million for the nine months ended September 30, 2019 as compared to $5.5 million for the nine months ended September 30, 2018 due to decreased rental revenue as the Company has eliminated this revenue stream at the Tampa location.discontinuance of RV rentals in 2019.
Gross Profit (excluding depreciation and amortization)
Gross profit consists of gross revenues less cost of revenuessales and services and excludes depreciation and amortization. Gross profit decreasedincreased by approximately $1.8$31.8 million, or 1.7%30.9%, to $103.0$134.8 million from $104.8$103.0 million for the nine months ended September 30, 2020 and 2019, and 2018, respectively. The decreaseThis increase was attributable to growth in gross profit was due to increased wholesale sales as a percentageour core lines of the Company’s sales mix, decreased gross profit on new units due to competitive pricing, and decreased pre-owned motorized vehicle unit sales.business.
New and Pre-Owned Vehicles Gross Profit
New and pre-owned vehicle gross profit decreased by approximately $3.8increased $26.6 million, or 6.1%45.8%, to $58.0$84.6 million from $61.8$58.0 million for the nine months ended September 30, 20192020 and 2018,2019, respectively. The increase is primarily attributable to the increase in units sold, partially offset by the decrease in gross profit wasthe average selling price of pre-owned motorized vehicles and a $3.0 million decrease in LIFO adjustments due to increased wholesale sales as a percentage of the Company’s sales mix, decreased gross margin on new units due to competitive pricingdecreases in the industry, and decreased pre-owned motorized vehicle unit sales.inventory levels.
Other Gross Profit
Other gross profit increased by $1.9$5.2 million, or 4.6%11.6% to $44.9$50.1 million from $43.0$44.9 million for the nine months ended September 30, 20192020 and 2018,2019, respectively, due to increased finance and insurance revenue resulting from acquisitionsrevenues associated with increased RV sales as well as increasedhigher penetration rates on the Company’s finance and insurance products.products, partially offset the gross profit decline associated with the discontinuation of the rental business.
38 |
Selling, General and Administrative Expenses
Selling, general, and administrative (“SG&A&A”) expenses, excludingwhich, as explained above, do not include transaction costs, stock-based compensation, and depreciation and amortization, increased $2.1$10.8 million, or 2.8%14.0%, to $77.2$88.0 million duringfor the nine months ended September 30, 2019,2020, from $75.1$77.2 million duringfor the nine months ended September 30, 2018 due2019. The increase was related to overhead costs atassociated with The Villages dealership acquired August 2019, the new locations. In addition, thereservice center near Houston, the Phoenix dealership acquired in May 2020 and increased performance wages which align with the increased unit sales and revenues for the period ending September 30, 2020. This increase was partially offset by a decrease in non-cash expenses including stock-basedstock based compensation of $2.2$2.7 million primarily attributable toas a result of the graded vesting of the awards with market conditions which were issued to members of management on March 16,in 2018, and May 7, 2018 wherewith the majority of the expense recognition is more significantbeing recorded in the early portion of the derived service period. There was also a $1.2 million increase in depreciation amortization expense primarily as a result of the valuation of fixed assets and intangibles assets associated with the acquisition of Lazy Days’ R.V. Center, Inc. by Andina. Transaction costs decreased $3.2 million due to the fees incurred upon acquisition of Lazy Days’ R.V. Center, Inc. by Andina during the nine months ended September 30, 2018.
Interest Expense
Interest expense increaseddecreased by approximately $0.5$1.6 million to $7.9$6.3 million from $7.4$7.9 million for the nine months ended September 30, 20192020 and 2018,2019, respectively, due primarily to the increase in the averagemore favorable interest rates, lower floor plan balance frombalances and the acquisitions as well as theuse of an interest associated with the Minnesota, Tennessee, and The Villages, Florida acquisition notes payable.reduction equity account.
Income Taxes
Income tax expense increased by $0.7was $8.0 million and $4.2 million for the nine months endedmonth periods ending September 30, 2020 and 2019, as compared to the nine months ended September 30, 2018. The difference between the statutory rates and the estimated effective tax rate for the year relates to permanent differences in non-cash, non tax deductible stock-based compensation. The effective tax rate is also subject to the timing of changes in market conditions which impact the Company’s calculation of the estimated effective tax rate.respectively.
Non-GaapNon-GAAP Financial Measures
The Company uses certain non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, to enable it to analyze its performance and financial condition, as described in “Key Performance Indicators”, above. The Company utilizes these financial measures to manage the business on a day-to-day basis and believes that they are relevant measures of performance. The Company believes that these supplemental measures are commonly used in the industry to measure performance. The Company believes these non-GAAP measures provide expanded insight to measure revenue and cost performance, in addition to the standard GAAP-based financial measures.
The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. You should read this discussion and analysis of the Company’s financial condition and results of operations together with the consolidated financial statements of the Company and the related notes thereto also included herein.
EBITDAis defined as net (loss) income excluding depreciation and amortization of property and equipment, interest expense, net, amortization of intangible assets, and income tax expense.
Adjusted EBITDA is defined as net (loss) income excluding depreciation and amortization of property and equipment, non-floor plan interest expense, amortization of intangible assets, income tax expense, stock-based compensation, transaction costs and other supplemental adjustments which for the periods presented includes LIFO adjustments, severance costs and other one timeone-time charges, and gain or loss on sale of property and equipment.
Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of total revenues.
39 |
Reconciliations from Net (Loss) Income per the Condensed Consolidated Statements of OperationsIncome to EBITDA and Adjusted EBITDA and Net (loss) income margin to EBITDA margin and Adjusted EBITDA margin for the three months and ninesix months ended September 30, 20192020 and 20182019 are shown in the tables below.
Three Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
EBITDA | ||||||||
Net income (loss) | $ | 11,599 | $ | (2,486 | ) | |||
Interest expense, net* | 1,749 | 2,321 | ||||||
Depreciation and amortization of property and equipment | 1,712 | 1,716 | ||||||
Amortization of intangible assets | 1,048 | 1,016 | ||||||
Income tax expense | 4,184 | 941 | ||||||
Subtotal EBITDA | 20,292 | 3,508 | ||||||
Floor plan interest | (293 | ) | (874 | ) | ||||
LIFO adjustment | (1,431 | ) | 910 | |||||
Transaction costs | 233 | 193 | ||||||
Loss on sale of property and equipment | - | (13 | ) | |||||
Severance costs/Other | - | 262 | ||||||
Stock-based compensation | 219 | 1,286 | ||||||
Adjusted EBITDA | $ | 19,020 | $ | 5,272 |
Successor | Successor | |||||||
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
EBITDA and Adjusted EBITDA | ||||||||
Net loss | $ | (2,486 | ) | $ | (2,729 | ) | ||
Interest expense, net | 2,321 | 2,428 | ||||||
Depreciation and amortization of property and equipment | 1,716 | 1,704 | ||||||
Amortization of intangible assets | 1,016 | 828 | ||||||
Income tax expense | 941 | 1,141 | ||||||
Subtotal EBITDA | 3,508 | 3,372 | ||||||
Floor plan interest | (874 | ) | (1,066 | ) | ||||
LIFO adjustment | 910 | 884 | ||||||
Transaction costs | 193 | 243 | ||||||
(Gain)/loss on sale of property and equipment | (13 | ) | 9 | |||||
Severance costs/Other | 262 | - | ||||||
Stock-based compensation | 1,286 | 2,857 | ||||||
Adjusted EBITDA | $ | 5,272 | $ | 6,299 |
* Interest expense includes $1,189 and $1,144 relating to finance lease payments for the three months ended September 30, 2020 and 2019, respectively. Depreciation on leased assets under finance leases is included in depreciation expense and included in net income. Operating lease payments are included as rent expense and included in net income.
Successor | Successor | |||||||
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
EBITDA margin and Adjusted EBITDA margin | ||||||||
Net loss margin | -1.6 | % | -1.9 | % | ||||
Interest expense, net | 1.5 | % | 1.7 | % | ||||
Depreciation and amortization of property and equipment | 1.1 | % | 1.2 | % | ||||
Amortization of intangible assets | 0.6 | % | 0.6 | % | ||||
Income tax expense | 0.6 | % | 0.8 | % | ||||
Subtotal EBITDA margin | 2.2 | % | 2.4 | % | ||||
Floor plan interest | -0.6 | % | -0.7 | % | ||||
LIFO adjustment | 0.6 | % | 0.6 | % | ||||
Transaction costs | 0.1 | % | 0.2 | % | ||||
(Gain)/loss on sale of property and equipment | 0.0 | % | 0.0 | % | ||||
Severance costs/Other | 0.2 | % | 0.0 | % | ||||
Stock-based compensation | 0.8 | % | 2.0 | % | ||||
Adjusted EBITDA margin | 3.3 | % | 4.4 | % |
Successor | Combined Successor and Predecessor | |||||||
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
EBITDA and Adjusted EBITDA | ||||||||
Net income | $ | 1,216 | $ | 2,141 | ||||
Interest expense, net | 7,879 | 7,365 | ||||||
Depreciation and amortization of property and equipment | 5,144 | 4,928 | ||||||
Amortization of intangible assets | 2,923 | 1,908 | ||||||
Income tax expense | 4,225 | 3,484 | ||||||
Subtotal EBITDA | 21,387 | 19,826 | ||||||
Floor plan interest | (3,392 | ) | (3,050 | ) | ||||
LIFO adjustment | 1,516 | 1,032 | ||||||
Transaction costs | 508 | 3,738 | ||||||
Gain on sale of property and equipment | (11 | ) | (2 | ) | ||||
Severance costs/Other | 691 | 79 | ||||||
Stock-based compensation | 3,912 | 6,126 | ||||||
Adjusted EBITDA | $ | 24,611 | $ | 27,749 |
Successor | Combined Successor and Predecessor | Three Months Ended September 30, | ||||||||||||||
Nine Months Ended September 30, | 2020 | 2019 | ||||||||||||||
2019 | 2018 | |||||||||||||||
EBITDA margin and Adjusted EBITDA margin | ||||||||||||||||
Net income margin | 0.2 | % | 0.4 | % | ||||||||||||
EBITDA margin | ||||||||||||||||
Net income (loss) margin | 5.4 | % | -1.6 | % | ||||||||||||
Interest expense, net | 1.6 | % | 1.5 | % | 0.8 | % | 1.5 | % | ||||||||
Depreciation and amortization of property and equipment | 1.0 | % | 1.0 | % | 0.8 | % | 1.1 | % | ||||||||
Amortization of intangible assets | 0.6 | % | 0.4 | % | 0.5 | % | 0.6 | % | ||||||||
Income tax expense | 0.8 | % | 0.7 | % | 1.9 | % | 0.6 | % | ||||||||
Subtotal EBITDA margin | 4.3 | % | 4.1 | % | 9.4 | % | 2.2 | % | ||||||||
Floor plan interest | -0.7 | % | -0.6 | % | -0.1 | % | -0.6 | % | ||||||||
LIFO adjustment | 0.3 | % | 0.2 | % | -0.7 | % | 0.6 | % | ||||||||
Transaction costs | 0.1 | % | 0.8 | % | 0.1 | % | 0.1 | % | ||||||||
Gain on sale of property and equipment | 0.0 | % | 0.0 | % | ||||||||||||
Loss on sale of property and equipment | 0.0 | % | 0.0 | % | ||||||||||||
Severance costs/Other | 0.1 | % | 0.0 | % | 0.0 | % | 0.2 | % | ||||||||
Stock-based compensation | 0.8 | % | 1.3 | % | 0.1 | % | 0.8 | % | ||||||||
Adjusted EBITDA margin | 4.9 | % | 5.8 | % | 8.7 | % | 3.3 | % |
Note: Figures in the table may not recalculate exactly due to rounding.
40 |
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
EBITDA | ||||||||
Net income | $ | 22,654 | $ | 1,216 | ||||
Interest expense, net | 6,262 | 7,879 | ||||||
Depreciation and amortization of property and equipment | 4,925 | 5,144 | ||||||
Amortization of intangible assets | 3,143 | 2,923 | ||||||
Income tax expense | 8,020 | 4,225 | ||||||
Subtotal EBITDA | 45,004 | 21,387 | ||||||
Floor plan interest | (1,888 | ) | (3,392 | ) | ||||
LIFO adjustment | (1,481 | ) | 1,516 | |||||
Transaction costs | 534 | 508 | ||||||
Loss on sale of property and equipment | 8 | (11 | ) | |||||
Severance costs/Other | - | 691 | ||||||
Stock-based compensation | 1,239 | 3,912 | ||||||
Adjusted EBITDA | $ | 43,416 | $ | 24,611 |
* Interest expense includes $3,589 and $3,423 relating to finance lease payments for the nine months ended September 30, 2020 and 2019, respectively. Depreciation on leased assets under finance leases is included in depreciation expense and included in net income (loss). Operating lease payments are included as rent expense and included in net income.
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
EBITDA margin | ||||||||
Net income margin | 3.7 | % | 0.2 | % | ||||
Interest expense, net | 1.0 | % | 1.6 | % | ||||
Depreciation and amortization of property and equipment | 0.8 | % | 1.0 | % | ||||
Amortization of intangible assets | 0.5 | % | 0.6 | % | ||||
Income tax expense | 1.3 | % | 0.8 | % | ||||
Subtotal EBITDA margin | 7.3 | % | 4.3 | % | ||||
Floor plan interest | -0.3 | % | -0.7 | % | ||||
LIFO adjustment | -0.2 | % | 0.3 | % | ||||
Transaction costs | 0.1 | % | 0.1 | % | ||||
Loss on sale of property and equipment | 0.0 | % | 0.0 | % | ||||
Severance costs/Other | 0.0 | % | 0.1 | % | ||||
Stock-based compensation | 0.2 | % | 0.8 | % | ||||
Adjusted EBITDA margin | 7.0 | % | 4.9 | % |
41 |
Liquidity and Capital Resources
Cash Flow Summary
($ in thousands) | Successor | Combined Successor and Predecessor | ||||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Net income | $ | 1,216 | $ | 2,141 | $ | 22,654 | $ | 1,216 | ||||||||
Non cash adjustments | 12,438 | 14,629 | 9,921 | 12,438 | ||||||||||||
Changes in operating assets and liabilities | 53,102 | 913 | 109,326 | 53,102 | ||||||||||||
Net cash provided by operating activities | 66,756 | 17,683 | 141,901 | 66,756 | ||||||||||||
Net cash used in investing activities | (10,438 | ) | (85,374 | ) | (7,005 | ) | (10,438 | ) | ||||||||
Net cash (used in) provided by financing activities | (49,390 | ) | 90,317 | (84,700 | ) | (49,390 | ) | |||||||||
Net increase in cash | $ | 6,928 | $ | 22,626 | $ | 50,196 | $ | 6,928 |
Net Cash from Operating Activities
The Company generated cash from operating activities of approximately $66.8$141.9 million duringfor the nine months ended September 30, 2019,2020, compared to cash provided by operating activities of approximately $17.7$66.8 million for the nine months ended September 30, 2018.2019. Net income decreasedincreased by approximately $0.9$21.4 million for the nine months ended September 30, 20192020 compared to the nine months ended September 30, 2018.2019. Adjustments for non-cash expenses, included in net income, decreased $2.2$2.5 million to $12.4$9.9 million for the nine months ended September 30, 2019. During2020 compared to the prior period. For the nine months ended September 30, 2019,2020, there was approximately $53.1$109.3 million of cash generated by changes in operating assets and liabilities as compared to $0.9$53.1 million of cash generated by changes in operating assets and liabilities duringfor the nine months ended September 30, 2018.2019. The fluctuations in assets and liabilities duringfor the nine months ended September 30, 2020 and September 30, 2019 were primarily due to the decrease in inventory excluding the impact of the Alliance acquisition$100.1 million and other non-cash adjustments of $54.0 million, respectively, as the Company managed inventories down from highs as of December 31, 2018.inventory declined due to supply constraints.
Net Cash from Investing Activities
The Company used cash in investing activities of approximately $10.4 million during the nine months ended September 30, 2019, compared to approximately $85.4$7.0 million for the nine months ended September 30, 2018. The Company2020, compared to cash used net cashin investing activities of approximately $83.2$10.4 million for the acquisition of Lazy Days’ R.V. Center, Inc. and Shorewood RV Center during the nine months ended September 30, 2018. During2019. Net cash used in investing activities for the nine months ended September 30, 2019,2020 was primarily related to cash provided by the consummation of a sale leaseback in Nashville, Tennessee of $4.9 million offset by purchases of property and equipment of $9.2 million and cash used in investing activities primarily consistedpaid for acquisitions of costs of the development of the dedicated service center near Houston, Texas, the development of the new service center adjacent to the Minnesota dealership, and the acquisition of Alliance Coach Inc.$2.7 million.
Net Cash from Financing Activities
The Company had cash used cash in financing activities of approximately $49.4 million during the nine months ended September 30, 2019, compared to net cash provided by financing activities of approximately $90.3$84.7 million for the nine months ended September 30, 2018.2020, compared to approximately $49.4 million for the nine months ending September 30, 2019. Net cash used in financing activities duringfor the nine months ended SeptemberJune 30, 20192020 was primarily related to net repayments on the M&T Floor Plan Line of Credit of $47.8$96.2 million. During the nine months ended September 30, 2018, the Company raised net proceeds of $90.4 million through the PIPE Investment through the issuance of common stock, Series A Convertible Preferred Stock, and warrants. During the nine months ended September 30, 2018, the Company also received net proceeds of approximately $20.0 million from the proceeds of a new term loan with M&T Bank which wasThese payments were offset by the repayment of approximately $8.8 million of long term debt with Bank of America. The Company also repaid $96.7 million in floor plan notes payable to Bank of America and received net proceeds of $98.2 million fromcash provided by the new floor plan loan with M&T Bank. The Company also made net repayments to Bankmortgage for the Houston service center of America$6.1 million and PPP loans of $12.3 million during the Predecessor Period prior to the Merger. As a result, during the nine months ended September 30, 2018, the Company incurred a net total of $10.8 million in floor plan repayments.$8.7 million.
Funding Needs and Sources
The Company has historically satisfied its liquidity needs through cash from operations and various borrowing arrangements. Cash requirements consist principally of scheduled payments of principal and interest on outstanding indebtedness (including indebtedness under its existing floor plan credit facility), the acquisition of inventory, capital expenditures, salary and sales commissions and lease expenses. We believe, based on our current business plan, that our existing cash, funds available under the M&T Facility (defined below), funds received under the Paycheck Protection Program (PPP) and cash flow from operations will be sufficient to fund necessary capital expenditures and operating cash requirements for at least the next twelve months. The Company further believes that its financial resources, along with managing discretionary expenses, will allow it to manage the anticipated impact of COVID-19 on the Company’s business operations for the foreseeable future which could include reduced sales and net income levels for the Company. Based on reduced sales levels in late March and early April, the Company took actions to mitigate the expected impact of COVID-19 including reducing spending more broadly across the Company, focusing our resources on core sales and service operations and delaying non-critical capital projects. We also reduced our workforce by 25%, senior management agreed to temporarily forgo 25% of their salary, and we temporarily suspended 2020 annual pay increases and 401k matches. To further protect our liquidity and cash position, we negotiated with our lenders for the temporary suspension of scheduled principal and interest payments on our term and mortgage loans from April 15, 2020 through June 15, 2020 and for the temporary suspension of scheduled floorplan curtailment payments from April 1, 2020 through June 15, 2020. In addition, the Company applied for and received $8.7 million in loans under the PPP loan program. Due to significant improvements in sales in May 2020, senior management resumed normal salaries in late May 2020. In addition, the 401k match was reinstated for all employees in late June 2020. The challenges posed by COVID-19 on the Company’s business are evolving. Consequently, the Company will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19.
As of September 30, 2019,2020, the Company had liquidity of approximately $33.5$81.7 million in cash and had working capital of approximately $45.2$39.0 million.
Capital expenditures include expenditures to extend the useful life of current facilities and expand operations. For the nine months ended September 30, 2020, the Company invested approximately $9.2 million in capital expenditures, consisting primarily of $6.9 million related to greenfield construction costs. For the nine months ended September 20, 2019, and 2018, the Company invested approximately $7.9 million and $2.1 million in capital expenditures, respectively.consisting primarily of $5.8 million related to greenfield construction costs.
The Company maintains sizable inventory in order to meet the expectations of its customers and believes that it will continue to require working capital consistent with past experience. Historically, the Company has funded its operations with internally generated cash flow and borrowings. Changes in working capital are driven primarily by levels of business activity. The Company maintains a floor plan credit facility to finance its vehicle inventory. At times, the Company has made repayments on its existing floor plan credit facility using excess cash flow from operations.
42 |
M&T Credit Facility
On March 15, 2018, the Company replaced its existing debt agreements with Bank of America with a $200.0 million$200,000 Senior Secured Credit Facility (the “M&T Facility”). The M&T Facility includes a $175.0 million$175,000 M&T Floor Plan Line of Credit, a $20.0 million$20,000 M&T Term Loan, and a $5.0 million$5,000 M&T Revolver. The M&T Facility will mature on March 15, 2021. The M&T Facility requires the Company to meet certain financial covenants and is secured by substantially all of the assets of the Company.
The M&T Floor Plan Line of Credit may be used to finance new vehicle inventory, but only $45.0 million$45,000 may be used to finance pre-owned vehicle inventory and $4.5 million$4,500 may be used to finance rental units. Principal becomes due upon the sale of the respective vehicle. The M&T Floor Plan Line of Credit shall accrue interest at either (a) the fluctuating 30-day LIBOR rate plus an applicable margin which ranges from 2.00% to 2.30% based upon the Company’s total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus an applicable margin ranging from 1.00% to 1.30% based upon the Company’s total leverage ratio (as defined in the M&T Facility). The Base Rate is defined in the agreement as the highest of M&T’s prime rate, the Federal Funds rate plus 0.50% or one-month LIBOR plus 1.00%. In addition, the Company will be charged for unused commitments at a rate of 0.15%.
The M&T Term Loan will be repaid in equal monthly principal installments of $0.242 million$242 plus accrued interest through the maturity date. At the maturity date, the Company will pay a principal balloon payment of $11.3 million$11,300 plus any accrued interest. The M&T Term Loan shall bear interest at (a) LIBOR plus an applicable margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the agreement) or (b) the Base Rate plus a margin of 1.25% to 2.00% based on the total leverage ratio (as defined in the agreement).
On March 6, 2020, the Company entered into the Third Amendment and Joinder to Credit Agreement (“Third Amendment”) on the M&T Facility)Facility. Pursuant to the Third Amendment, the Mortgage Loan Borrower and Diversified, wholly owned subsidiaries of LDRV, became parties to the Credit Agreement and were identified as Additional Loan Parties. The Existing Borrowers and Guarantors also requested that the Lenders provide a mortgage loan credit facility in the aggregate principal amount of acquisition, construction, and permanent mortgage financing for a property acquired by the Mortgage Loan Borrower. The mortgage loans maximum borrowing amount is $6.136 million. The mortgage shall bear interest at (a) LIBOR plus an applicable margin of 2.25% or (b) the Base Rate plus a margin of 1.25%. The mortgage requires monthly payments of principal of $0.03 million and matures on March 15, 2021 when all remaining principal and accrued interest payments become due.
The M&T Revolver allows the Company to draw up to $5.0 million.$5,000. The M&T Revolver shall bear interest at (a) 30-day LIBOR plus an applicable margin of 2.25% to 3.0% based on the total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus a margin of 1.25% to 2.00% based on the total leverage ratio (as defined in the M&T Facility). The M&T Revolver is also subject to the unused commitment fees at rates varying from 0.25% to 0.50% based on the total leverage ratio (as defined in the M&T Facility)defined).
As of September 30, 2019,2020, there was $107.6$59.3 million outstanding under the M&T Floor Plan Line of Credit, and $15.7$13.5 million outstanding under the M&T Term Loan.Loan and $6.1 million outstanding on the M&T Mortgage.
In order to mitigate the early effects of the COVID-19 pandemic, the Company entered into the Fourth Amendment to the M&T credit agreement on April 16, 2020. Pursuant to the Fourth Amendment, the parties agreed to a suspension of scheduled principal payments on the term loans and mortgage loans (to the extent the permanent loan period has begun for the mortgage loans) for the period from April 15, 2020 through June 15, 2020. Interest on the outstanding principal balances of the term loans and mortgage loans continued to accrue and was paid at the applicable interest rate during the deferment period. At the end of the deferment period, the borrowers resumed making all required payments of principal on the term loans and mortgage loans. All principal payments of the term loans and mortgage loans deferred during the deferment period are due and payable on the term loan maturity date or the mortgage loan maturity date, as applicable. Additionally, all principal payments deferred during the deferment period are due and payable (a) as described above or (b) if earlier, the date all outstanding amounts are otherwise due and payable under the terms of the credit documents (including, without limitation, upon maturity, acceleration or, to the extent applicable under the credit documents, demand for payment). In addition, the amendment includes a temporary suspension of scheduled curtailment payments required by the credit agreement for the period from April 1, 2020 through June 15, 2020. Amounts related to floor plan unused commitment fees and interest on the outstanding principal balance of the M&T Floor Plan Line of Credit continue to accrue and are paid at the applicable rate and on the terms set forth in the credit agreement during the suspension period.
Contractual and Commercial Commitments
During the nine months ended September 30, 2019,2020, the Company did not have any significantmaterial changes in its contractual and commercial commitments other thanoutside of the following:
On August 1, 2019, the Company consummated its asset purchase agreement with Alliance. The purchase price consistedordinary course of cash and a note payable to the seller of Alliance. The note payable is a two year note which matures on August 1, 2021, which requires monthly payments of $134 in principal and interest. The note bears interest at 5.0% per year.business.
The Company entered into a lease agreement for the Alliance properties with an initial base rent of $636 per annum for five years with the option of five extension periods of five years. The Company also assumed a lease with a base rent of $84 per annum which expires in June 2022.
Off-Balance Sheet Arrangements
As of September 30, 2019,2020, there were no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
Although the Company cannot accurately anticipate the effect of inflation on its operations, it believes that inflation has not had, and is not likely in the foreseeable future to have, a material impact on the results of operations.
Cyclicality
Unit sales of RV vehicles historically have been cyclical, fluctuating with general economic cycles. During economic downturns, the RV retailing industry tends to experience similar periods of decline and recession as the general economy. The Company believes that the industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, fuel prices, interest rates and credit availability.
43 |
Seasonality and Effects of Weather
The Company’s operations generally experience modestly higher volumes of vehicle sales in the first half of each year due in part to consumer buying trends and the hospitable warm climate during the winter months at our largest locationFlorida and Arizona locations. In addition, the northern locations in Tampa, Florida.Colorado, Tennessee, Minnesota and Indiana generally experience modestly higher vehicle sales during the spring months.
The Company’s largest RV dealership is located near Tampa, Florida, which is in close proximity to the Gulf of Mexico. A severe weather event, such as a hurricane, could cause severe damage to property and inventory and decrease the traffic to our dealerships. Although the Company believes that it has adequate insurance coverage, if the Company were to experience a catastrophic loss, the Company may exceed its policy limits, and/or may have difficulty obtaining similar insurance coverage in the future.
Critical Accounting Policies and Estimates
The Company prepares its condensed consolidated financial statements in accordance with GAAP, and in doing so, it has to make estimates, assumptions and judgments affecting the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. The Company bases its estimates, assumptions and judgments on historical experience and on various other factors it believes to be reasonable under the circumstances. Different assumptions and judgments would change estimates used in the preparation of the condensed consolidated financial statements, which, in turn, could change the results from those reported. The Company evaluates its critical accounting estimates, assumptions and judgments on an ongoing basis.
Please refer to Note 2 of the accompanying unaudited condensed consolidated financial statements for the update to the Company’s revenue recognition policies as a result of the adoption of ASC 606.606 and ASC 842. There have been no other material changes in the Company’s critical accounting policies from those previously reported and disclosed in its Annual Report on Form 10-K.
Item 3.— Quantitative and Qualitative Disclosures About Market Risk.
Information requested by this Item is not applicable as the Company has elected scaled disclosure requirements available to smaller reporting companies with respect to this Item.
Item 4. — Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company conducted an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2019,2020, the disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in internal controlscontrol over financial reporting during the quarterthree months ended September 30, 20192020 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
The Company is a party to multiple legal proceedings that arise in the ordinary course of its business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its business, results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s business, results of operations, financial condition and/or cash flows.
Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 20182019 (the “2018“2019 Form 10-K”) includes a detailed discussion of the risk factors that could materially affect our business, financial condition or future prospects. Set forth below is an additional risk factor that is a material change to our risk factors previously disclosed in the 20182019 Form 10-K. The information below updates, and should be read in conjunction with, the risk factors in our 20182019 Form 10-K. We encourage you to read these risk factors in their entirety.
44 |
The Company’s amendedCOVID-19 pandemic had a significant adverse impact, on our business, results of operations, and restated certificate of incorporation provides tofinancial condition in the fullest extent permitted by law that the Court of Chanceryfirst months of the Statepandemic. While increased sales since then have more than offset initial adverse impact, there can be no assurance that such sales growth will continue at the same rate or at all, and our sales may ultimately decline. The long term effects of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, whichCOVID-19 could limit the Company’s stockholders’ ability to obtainresult in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or employees.net negative impact on our business.
The Company’s amendedIn March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease COVID-19 a pandemic, which continues to spread throughout the United States and restated certificateglobally. Beginning in mid-to-late March of incorporation provides2020, the COVID-19 pandemic led to severe disruptions in general economic activity as businesses and federal, state, and local governments took increasingly broad actions to mitigate the impact of the pandemic on public health, including through “shelter in place” or “stay at home” orders in the states in which we operate. As lwe modified our business practices to conform to government guidelines and best practices to ensure the health and safety of our customers, employees and the communities we serve, we saw significant early declines in new and pre-owned vehicle unit sales, sales of parts, accessories and related services, including finance and insurance revenues as well as campground and miscellaneous revenues.
We previously enacted cost saving measures, including the reduction of our workforce by 25% and senior management agreeing to temporarily forego 25% of their salary. To further protect our liquidity and cash position, we had negotiated with our lenders for the temporary suspension of scheduled principal and interest payments on our term and mortgage loans from April 15, 2020 through June 15, 2020 and for the temporary suspension of scheduled floorplan curtailment payments from April 1, 2020 through June 15, 2020. We also received $8.7 million in loans under the Paycheck Protection Program.
Starting in May 2020, we experienced significant improvement in sales of new and pre-owned vehicles. Senior management was able to resume normal salaries in late May 2020, and we adjusted our workforce where necessary to meet demand. We continued to delay non-critical capital projects and we are focusing our resources on core sales and service operations in response to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chanceryoperational and financial impact of the StateCOVID-19 pandemic.
The improvement in sales beginning in May 2020 likely relates, at least in part, to an increase in consumer demand as consumers seek outdoor travel and leisure activities that permit appropriate social distancing. We can provide no assurances that such growth in sales will continue at the same rate or at all, over any time period, and sales may ultimately decline. Furthermore, our improved sales and cost savings measures to date may not be sufficient to offset any later adverse impacts of Delawarethe pandemic, and our liquidity could be negatively impacted, if sales trends from late spring and summer of 2020 are reversed. While we may pursue the forgiveness of the PPP Loans received in accordance with the requirements and limitations under the CARES Act, no assurance can be provided that forgiveness of any portion of the PPP Loans will be obtained.
Our operations also depend on the solecontinued health and exclusive forum for any derivative action or proceeding broughtproductivity of our employees at our dealerships service locations and corporate headquarters throughout this pandemic. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, and financial condition will depend on behalffuture developments, which are highly uncertain and cannot be predicted, including the severity and duration of the Company,COVID-19 pandemic, and further actions that may be taken by individuals, businesses and federal, state and local governments in response. Even after the COVID-19 pandemic has subsided, we may experience significant adverse effects to our business as a result of its global economic impact, including any action assertingeconomic recession or downturn and the impact of such a claimrecession or downturn on unemployment levels, consumer confidence, levels of breach of a fiduciary duty owed by any of the Company’s directors, officers or other employees to the Company or the Company’s stockholders, any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), or any action asserting a claim governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officerspersonal discretionary spending and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in the Company’s amended and restated certificate of incorporation does not apply to actions arising under the federal securities laws and will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.credit availability.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None.Stock Repurchases
The table below sets forth the information with respect to purchases made by or on behalf of Lazydays Holdings, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our shares of common stock during the three months ended September 30, 2020.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
July 1, 2020 – July 31, 2020 | - | $ | - | - | ||||||||||||
August 1, 2020 – August 31, 2020 | - | $ | - | - | ||||||||||||
September 1, 2020 – September 30, 2020 | - | $ | - | - | ||||||||||||
Total | $ | 3,502.00 | (1) |
(1) | On November 7, 2019, we announced that our Board of Directors authorized a stock repurchase program authorizing us to repurchase up to $4.0 million of our shares of common stock. The program is effective through December 31, 2020. |
Item 3 – Default Upon Senior Securities
None.
Item 4 – Mine Safety Disclosures
None.
None.
45 |
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended | |
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended | |
32.1** | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) | |
32.2** | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer) | |
101 INS* | XBRL Instance Document | |
101 SCH* | XBRL Taxonomy Extension Schema Document | |
101 CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101 DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101 LAB* | XBRL Extension Label Linkbase Document | |
101 PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
** Furnished herewith.
Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.
46 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Lazydays Holdings, Inc. | ||
Dated November | 6, 2020 | /s/ WILLIAM P. MURNANE |
William P. Murnane | ||
Chief Executive Officer | ||
(Duly authorized officer and | ||
principal executive officer) | ||
Dated November | 6, 2020 | /s/ NICHOLAS TOMASHOT |
Nicholas J. Tomashot | ||
Chief Financial Officer | ||
(Duly authorized officer and | ||
principal financial and accounting officer) |
47 |