UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31 |
ORor
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 name of registrant as specified in its charter)
Delaware | 82-4183498 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| ||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:(813)246-4999
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock, par value $0.0001 per share | Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] ☐ No [X] ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] ☐ No [X] ☒
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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. (Check one):
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | Smaller reporting company | ||
Emerging growth company |
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] ☐ No [X] ☒
The aggregate market value of the 5,521,7887,925,647 voting and non-voting shares of common stock held by non-affiliates of the registrant as of June 29, 201830, 2022 (based on the last reported sales price of such stock on the Nasdaq Capital Market on such date, the last business day of the registrant’s quarter ended June 30, 2018,2022, of $8.89$11.78 per share) was approximately $49.1$93.4 million.
As of March 15, 2019,February 24, 2023, the registrant had 8,471,608
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 for its 20192023 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this report, are incorporated by reference into Part III of this report.
TABLE OF CONTENTS
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PART IForward Looking Statements
Certain statements in this Annual Report on Form 10-K (including but not limited to this Item 7 – “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 Annual Report on Form 10-K, including, without limitation, statements regarding the impact of the COVID-19 pandemic on our business, results of operations and financial condition, our 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 we 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:
● | Changes in our expected liquidity from our cash, availability under our credit facility and unfinanced real estate; | |
● | Compliance with financial and restrictive covenants under our credit facility and other debt agreements; | |
● | Changes in our anticipated levels of capital expenditures in the future; | |
● | The repurchase of shares under our share repurchase program; | |
● | Our business strategies for customer retention, growth, market position, financial results and risk management. |
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PART I
Item 1. Business
As used in this report, the terms “Lazydays,” the “Company,“the Company,” “Holdco,” “we,” “us,” and “our” refer to Lazydays Holdings, Inc. and its consolidated subsidiaries unless otherwise expressly stated or the context otherwise requires.
Company History
We were formed under the name “AndinaAndina Acquisition Corp. II”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 our business. Accordingly, Lazydays Holdings, Inc. is now a holding company operating through our 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 ourthe initial public offering (“IPO”) of Andina until October 27, 2017, we wereAndina was searching for a suitable target business to acquire. On October 27, 2017, a merger agreement was entered into by and among Andina, Acquisition Corp. II (“Andina”), Andina II Holdco Corp. (“Holdco”), a Delaware corporation and wholly-ownedwholly owned subsidiary of Andina (“Holdco”), Andina II Merger Sub Inc., a Delaware corporation and a wholly-ownedwholly 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 RVLazy Days’ R.V. Center, Inc. with and into Merger Sub with Lazydays RVLazy Days’ R.V. Center, Inc. surviving and becoming a direct wholly-ownedwholly owned subsidiary of Holdco (the “Transaction Merger” and together with the Redomestication Merger, the “Mergers”). On March 15, 2018, weHoldco held an extraordinary general meeting of ourthe shareholders, at which the Andina shareholders approved the Mergers and other related proposals. On the same date, we closed the Mergers.Mergers were closed. In connection with the Mergers, our business became the business of Lazy Days’ R.V. Center, Inc. and its subsidiaries.subsidiaries became the business of Holdco. As a result of the Mergers, the Company’sour stockholders and the shareholders of Andina became stockholders of Holdco and wethe Company changed the name of Holdco to “Lazydays Holdings, Inc.”
Our BusinessOverview
The CompanyLazydays Holdings, Inc. operates RecreationRecreational Vehicle (“RV”) dealerships across the U.S. and offers a comprehensive portfolio of products and services for RV owners and outdoor enthusiasts. The Company generatesWe generate revenue by providing RV owners and outdoor enthusiasts a full spectrum of RV products: New and pre-owned RV sales, RV-parts and services,service, financing and insurance products, third-party protection plans, after-market parts and accessories, RV rentals and RV camping. 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.
The Company believes,camping facilities. We believe, based on industry research and management’sinternal estimates, it operatesthat we operate one of the world’s largest RV dealerships, measured in terms of on-site inventory, located on 126 acres outside Tampa, Florida. The Company also has dealerships located
We strive to create diversification in Tucson, Arizona; Minneapolis, Minnesota; Knoxville, Tennessee;our products, services, brands and Lovelandgeographic locations to reduce dependence on any one manufacturer, reduce susceptibility to changing consumer preferences, manage seasonality and Denver, Colorado. Lazydays offers onemarket risk and maintain profitability. As of the largest selections of leading RV brands in the nation featuringDecember 31, 2022, we operated 18 locations, representing more than 3,000 new and pre-owned RVs. The Company has nearly 400 service bays30 original equipment manufacturers (“OEM’s”) across all locations and has RV parts and accessories stores at all locations. Lazydays also has RV rental fleets in Florida and Colorado and availability to two on-site campgrounds with over 700 RV campsites. The Company welcomes over 500,000 visitors to its dealership locations annually and employs over 800 people at the six facilities. The Company’s dealership locations are staffed with knowledgeable local team members, providing customers access to extensive RV expertise. The Company believes its dealership 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 and Tennessee) account for a significant portion of new RV units sold on an annual basis in the U.S. The Company’s dealerships in these key markets attract customers from all states, except Hawaii.11 states.
The Company attracts new customers primarily through Lazydays dealership locations as well as digital and traditional marketing efforts. Once the Company acquires customers through a transaction, those customers become part of the Company’s customer database where the Company leverages customized customer relationship management (“CRM”) tools and analytics to actively engage, market and sell its products and services.Business Strategy
Recent Developments
On December 6, 2018, Lazydays completed its asset purchase of Tennessee RV Supercenter near Knoxville, Tennessee. The assets and liabilities purchased consisted primarily of inventory, accounts receivable, equipment, accounts payable, floor plan liabilities, and the certificates, permits, approvals and licenses pertaining to the dealership properties. The total consideration paid for the net acquired assets was $24.7 million consisting of cash, the acquisition of the floor plan liabilities (which is included as a component of net assets acquired in Note 3 to the accompanying consolidated financial statements), and a note due to the owner of Tennessee RV (the “Seller Note”). The Seller Note of approximately $4.1 million accrues interest at a rate of 5.0% per annum, and in the case of an event of default, increases to 8.0% per annum until the event of default is cured. Pursuant to the terms of the Seller Note, the Company shall make monthly payments of principal and interest of approximately $0.1 million through the fourth anniversary of the Seller Note at which time any residual accrued principal and interest shall be due and payable. Additionally, the purchase price is subject to a final net working capital adjustment after the closing date. If the final net working capital exceeds the estimated net working capital adjustment threshold, the Company shall pay to the seller such excess and if the final net working capital is less than the estimated net working capital adjustment threshold, the amount of such deficiency will be set-off against the next required payment under the Seller Note.
Also on December 6, 2018, LDRV Holdings Corp., Lazydays RV America, LLC, Lazydays RV Discount, LLC, Lazydays Mile HI RV, LLC, and Lazydays of Minneapolis LLC (the “Borrowers” pursuant to the credit agreement, dated as of March 15, 2018 (the “Credit Agreement”), as amended pursuant to the First Amendment to the Credit Agreement, dated as of June 30, 2018 with Manufacturers and Traders Trust Company (“M&T Bank”)) entered into the Second Amendment to the Credit Agreement (“Second Amendment”) with M&T Bank. The Second Amendment increases the Letter of Credit Sublimit from $0.5 million to $1.0 million, increases the dollar limit on unsecured indebtedness from $5.0 million to $15.0 million, and makes certain other amendments to the Credit Agreement.
During December 2018, the Company consolidated its six acre operation located in Longmont, CO into its nearby Loveland, CO location. The costs associated were not material to the consolidated statements of operations.
During January 2019, we exchanged $0.5 million to purchase an aggregate of 400,000 unit purchase options as permitted under the terms of the unit purchase options, and as a result the unit purchase options and any obligation to issue any underlying securities were cancelled. See Note 16 to the accompanying consolidated financial statements for additional information.
Company Strengths
The Iconic Brand. With over forty years of history dating back to 1976, Lazydays is an iconic industry leading brand that we believe is synonymous with the RV lifestyle, and is known nationally as The RV AuthorityTM®, a registered trademark. The trademark has been consistently used by the CompanyWe seek to provide customers with a seamless online and in its marketing and branding communications since 2013. Based on a research report prepared by Russell Research in November / December 2017, Lazydays is the second most well-known R.V. dealership brand among a national audience of non-Lazydays customers surveyed. According to the report, over 85% of Lazydays customers and over 80% of prospective customers surveyed believe that Lazydays is among the category leaders in the industry. The Company’s consistent quality, breadth and depth of offerings, as well as its comprehensive range of RV lifestyle resources, have resulted in the Company’s customers having loyalty to and trust in the Company’s brands.
Comprehensive Portfolio of Products, Services and Protection Plans. The Company is a provider of a comprehensive portfolio of products, services, third-party protection plans, and resources for RV enthusiasts. The Company offers more than 40,000 products and services through Lazydays dealership locations. The Company’s offerings are based on more than four decades ofstore experience, and feedback from RV enthusiasts.
Customer Experience. Lazydays’ target customers aretargeting RV enthusiasts who are seeking a lifestyle centered around the RV.RV. Lazydays believes it has built its reputation on providing an outstanding customer experience with exceptional service and product expertise. One of the Company’sour primary goals is to create “Customers for Life” by offering a unique purchasing experience that combines aour large selection of new and used RV inventory with a nationwide team of experienced sales and service, customer-focused professionals.
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Our long-term strategy to create value for our customers, employees and shareholders includes the Company’s unique scenic facilitiesfollowing:
Driving Operational Excellence Across Our Existing Stores
We are focused on improving performance through increasing market share and profitability at each of our locations. By promoting an entrepreneurial model, we are building strong businesses responsive to each of our local markets. Utilizing performance-based action plans, we strive to drive operational performance and develop high-performing teams. We believe our strong brands, market position, ongoing investment in our service platform, broad product portfolio and full array of RV offerings will continue to provide us with multiple amenitiesa competitive advantage in targeting and its customercapturing a larger share of consumers, including the growing number of new RV enthusiasts that we believe are entering the market. We continuously work to attract new customers to our dealership locations through targeted integrated digital and traditional marketing efforts, attractive offerings, and access to our wide array of resources for RV enthusiasts. The Company has focused process-oriented approach to servicing the customer. Building a welcoming atmosphere that catersspecifically on marketing to the fast-growing RV enthusiast community is an intangible element critical to the Company’s success,demographics of Baby Boomers, Gen X and the Company’s philosophy is thoroughly ingrained in and continually reinforced throughout its corporate culture at every level. As per a research report prepared by Russell Research in November / December 2017, over 70% of Lazydays’ customers and over 60% of prospective customers surveyed strongly agree that Lazydays provides a high quality customer experience.Millennials. The Company believesalso markets to these segments through RV lifestyle-focused partnership and sponsorship efforts.
Our performance-based culture is geared toward an incentive-based compensation structure for a majority of our personnel. We develop pay plans that its customer-focused business model has resultedare measured upon various factors such as customer satisfaction, profitability and individual performance metrics. These plans serve to reward team members for creating exceptional customer experiences, customer loyalty and achieving store potential. This approach allows us to mitigate fluctuations in RV sales and general economic conditions.
Growth Through Acquisitions and Greenfields
The RV industry is highly fragmented with primarily independent dealers. We target increasing our physical network of stores through acquisitions to strategically grow our presence and create density in our network to provide convenience for our customers across the country. Our value-based acquisition strategy targets underperforming stores with strong brands in desirable markets. As we integrate these stores into our network, we focus on increasing profitability through gaining market share, elevating the customer experience and leveraging our cost structure.
In addition to acquisitions, we will, from time to time, open greenfield sites in new or existing markets. We are currently on track to open four future greenfield sites located in the following markets: Council Bluffs, Iowa; Fort Pierce, Florida; Wilmington, Ohio; and Surprise, Arizona.
Leveraging Our Scale and Cost Structure to Create Operational Efficiencies
As we grow, we are positioned to leverage our scale to improve operating margins. We have centralized many administrative functions to drive efficiencies and streamline store-level operations. The reduction of administrative functions at our stores allows our local teams to focus on customer-facing opportunities to increase revenues and gross profit. Our stores also receive supply chain management support, ensuring optimal levels of new and used RV inventory; and finance and insurance product and training support to provide a loyal, stable and growing customer base as well as a strong reputation within the RV community.full array of offerings to our customers.
Employee Service and Commitment. Lazydays’ Tampa location has been recognized as a “Top 50 RV Dealer” by RVBusiness. Lazydays believes its position as a top-rated dealer and workplace has been cultivated over decades, is very difficult
Community Involvement
We are committed to replicate, and is a significant competitive advantage.
making an impact in our communities. In 2005, Lazydays’Lazydays employees startedformed the Lazydays Employee Foundation (the “Foundation”), a 501(c)(3) non-profit organization focused on making a positive impact in the lives of at-risk children. The Foundation is run exclusively by employees as volunteers and members of the Foundation’s board of directors, and their mission is to measurably change the lives of children by instilling hope, inspiring dreams and empowering them with education. Since its inception, the Foundation has donated more than $1.6$2.5 million to help disadvantaged children in Florida, Arizona, Colorado, Minnesota and Minnesota.Tennessee. The Foundation recently donated approximately $0.4 million to help createsponsors two facilities in Florida that carry its name; The Lazydays House at a Kids Place which houses foster children in a facility where siblings can remain together and the first long term care facility in the Tampa Bay area for girlsLazydays House at Bridging Freedom which houses and rehabilitates children rescued from human trafficking. Lazydays’The Foundation also provides financial contributions to other smaller community programs that benefit at-risk youth by providing educational tutoring, expression through the arts, and education scholarships. Lazydays employees also volunteer on small building projects, perform repair work for group homes or homeless shelters, cook and feed the needy,their time to many worthwhile charities and engage in life enriching activities with at-risk youth. The Foundation has received the 2016 Olin Mott Golden Heart award and was also recognized with A Kid’s Place Guardian Angel Award. In 2017, the Foundation was awardedmultiple awards for their philanthropic work, including the national Arthur J. Decio Humanitarian Award for outstanding civic and community outreach in the RV industry.
Leading Market Position and Scale. Lazydays believes it is one of the largest RV retailers in the United States. As per a research report prepared by Russell Research in November / December 2017, Lazydays is the second most well-known RV brand among the national audience. The Company’s scale and its long-term stability make it attractive to the Company’s original equipment manufacturers (“OEMs”), suppliers, financiers and business partners. The Company believes its strong relationship with OEMs and suppliers enables the Company to negotiate attractive product pricing and availability. The Company also aligns with its OEMs on product development in which the Company leverages its customer base to provide feedback on new products. The Company believes its scale and strong relationship with its financing and insurance partners enables it to offer extensive financing products and insurance plans that fit almost every customer’s needs.
Consistent Processes and Procedures. Lazydays utilizes a system of process documentation and implementation called the “Lazydays Way.” Lazydays believes that the Lazydays Way allows it to implement and maintain very efficient and consistent operating procedures across all of its dealerships.
Variable Cost Structure and Capital Efficient Model. Lazydays’ decentralized and flat management structure coupled with incentive programs focused on profitability have allowed Lazydays to achieve a highly variable cost structure. The Company’s digital marketing and analytics capabilities provides it with significant flexibility and meaningfully improves its marketing productivity and efficiency via targeted marketing programs. The Company believes its operating model leads to strong and stable margins through economic cycles, resulting in what it believes to be high cash flow generation, low capital expenditure requirements and strong returns on invested capital.
Experienced Team. Lazydays’ management team has extensive dealership and industry, experience. The Company offers highly competitive compensation tightly tied to performance, which has allowed the Company to attract and retain its highly capable team.
Lazydays Product and Service Offerings
New and Used Vehicles
New Vehicles: Lazydays offers a comprehensive selection of new RVs across almost the entire range of price points, classes and floor plans, from entry level travel trailers to Class A diesel pushers, at its dealership locations and on its website. Lazydays has formed strategic alliances with leading RV manufacturers. The core brands that the Company sells, representing 92.1% of the new vehicles that were sold by the Company in 2018, are manufactured by Thor Industries, Winnebago Industries, Forest River, Inc., and Tiffin Motorhomes.
Used Vehicles: Lazydays sells a comprehensive selection of used RVs at its dealership locations. The primary source of used RVs is through trade-ins associated with the sale of new and used RVs. Lazydays is also very active in the used RV market and its extensive RV knowledge and experience allows Lazydays to buy used RVs at attractive prices. Used RVs are generally reconditioned in the Company’s service departments prior to sale. Used RVs that do not meet the Company’s standards for retail sale are wholesaled.
Dealership Finance and Insurance
Vehicle financing: Lazydays arranges for financing for vehicle purchases through third-party financing sources in exchange for a commission payable to it. Lazydays does not directly finance its customers’ purchases, and its exposure to loss in connection with these financing arrangements generally is limited to the commissions that it receives. For the year ended December 31, 2018 and the year ended December 31, 2017, the Company arranged financing transactions for a majority of the total number of new and used units sold.
Protection Plans:Lazydays offers a variety of third-party protection plans and services to the purchasers of its RVs as part of the delivery process, including extended vehicle service contracts, tire and wheel protection, guaranteed auto protection (known as “GAP”, this protection covers the shortfall between a customer’s loan balance and insurance payoff in the event of a casualty) and property insurance. These products are primarily underwritten and administered by independent third parties. Lazydays is primarily compensated on a straight commission basis. The Company may be charged back (“charge-backs”) for financing fees, insurance or vehicle service contract commissions in the event of early termination of the contracts by the customers.
Parts and Services and Other
Repair and Maintenance: In addition to preparing RVs for delivery to customers, Lazydays’ service and repair operations, with nearly 400 service bays, provide onsite general RV maintenance and repair services at all of the Company’s dealership locations. Lazydays employs over 180 highly skilled technicians, with many of them being certified with the Recreational Vehicle Industry Association (“RVIA”) or the National RV Dealers Association (“RVDA”). The Company is equipped to offer comprehensive services and perform OEM warranty repairs for most RV components. The Company also maintains a body shop, cabinet shop, chassis shop and windshield and glass repair shop with specialized equipment and facilities at its Tampa location.
Installation of parts and accessories: Lazydays’ full-service repair facilities enable Lazydays to install all parts and accessories sold at its dealership locations, including, among other items, towing and hitching products, satellite systems, braking systems, leveling systems and appliances. While other RV dealerships may be able to install RV parts and accessories and other retailers may be able to sell certain parts and accessories, Lazydays believes its ability to both sell and install necessary parts and accessories affords the Company a competitive advantage over online retailers and big box retailers that do not have service centers designed to accommodate RVs, and other RV dealerships that do not offer a comprehensive inventory of parts and accessories.
Collision repair: Lazydays offers collision repair services in all markets and the Company’s Tampa, Florida, Tucson, Arizona, Loveland, Colorado, and Knoxville, Tennessee locations are equipped with full body paint booths. Lazydays’ facilities are equipped to offer a wide selection of collision repair services, including fiberglass front and rear cap replacement, windshield replacement, interior remodel solutions and paint work. The Company can perform collision repair services for a wide array of insurance carriers.
Parts and Accessories Store: With sizable parts and accessories inventory, in addition to a fully stocked onsite retail and accessory stores and access through the Lazydays’ networks for hard to find parts, Lazydays provides new and pre-owned RV buyers the option of dealer installed accessories, such as tow hitches, satellite dishes and specialized suspension systems that can be included in each buyer’s financing or aftermarket through the Lazydays retail store footprint. The Company believes that its Tampa, Florida Accessories & More store is among the largest aftermarket parts and accessories stores in the state of Florida.
RV Rentals: Lazydays offers consumers interested in the RV lifestyle a fleet of vehicles available for rent. Lazydays’ rentals offer comprehensive amenities allowing for a more premier camping experience and an introduction to the RV lifestyle. Lazydays offers unlimited mileage and trip planning services and add-ons such as outdoor living, kitchen and linen packages.
RV Campground: Lazydays also operates the Lazydays RV Resort at its Tampa, Florida location. Also knownwell as the Lazydays RV Campground, the Lazydays RV Resort includes amenities designed to allow guests to relax, unwind,Olin Mott Golden Heart Award and enjoy fun activities as a family. The resort offers 300 RV sites with full 50-amp hookups, a full-time activities coordinator, sports courts, trolley service to and from the Lazydays dealership, and a screened and heated pool. The resort also offers rental units that can comfortably accommodate up to 6 people with one and a half bathrooms, full indoor and outdoor kitchens and other amenities. The resort also operates on-site restaurants.several WEDU Be More awards.
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Growth Strategy
Grow the Company’s Customer Base. Lazydays believes its strong brands, market position, ongoing investment in its service platform, broad product portfolio and full array of RV offerings will continue to provide it with competitive advantages in targeting and capturing a larger share of consumers in addition to the growing number of new RV enthusiasts that will enter the market. The Company continuously works to attract new customers to its dealership locations through targeted integrated digital and traditional marketing efforts, attractive offerings and access to its wide array of resources for RV enthusiasts. The Company has focused specifically on marketing to the fast-growing demographics of retiring baby boomers and younger millennial and Generation X market entrants. The Company also markets to these segments through partnership marketing efforts and its sponsorships of college and professional athletic events, music festivals, motorsports events, RV campsites across the country, and other RV lifestyle efforts.
Dealership Location Acquisitions. The RV dealership industry is highly fragmented with many independent RV dealers. The Company has used, and plans to continue to use, acquisitions of independent dealers as an alternative to new dealership location openings to expand its business and grow the Company’s customer base. Lazydays believes its experience and scale allow it to operate acquired locations efficiently. During 2018, Lazydays acquired Shorewood RV Center in Minneapolis, Minnesota and Tennessee RV Supercenter near Knoxville, Tennessee. Lazydays intends to continue to pursue acquisitions that will grow its customer base and present attractive risk-adjusted returns and significant value-creation opportunities.
Greenfield Dealership Locations. Lazydays may establish dealership locations in new and existing markets to expand its customer base. Target markets and locations are identified by employing proprietary data and analytical tools. The Company believes there is ample white space for additional development opportunities. The Company intends to open greenfield sites that will grow its customer base and present attractive risk-adjusted returns and significant value-creation opportunities.
Service and Collision. Lazydays believes that its service and repair capabilities represent a significant opportunity for incremental revenue growth, especially as the Company grows geographically. Lazydays frequently welcomes customers who travel from across the country to have their vehicles serviced by Lazydays’ team of service and repair professionals. As a result, the service and repair department serves as a means of attracting potential customers to the Lazydays facilities and offers greater additional sales opportunities for Lazydays.
Parts and Accessories Store “Accessories & More”. Aftermarket RV parts and accessories are typically under-represented at RV dealerships. The Company believes that parts and accessories are an important part of the RV lifestyle and serve to engage customers with the Lazydays brand outside of the typical RV buying and servicing cycle. The Company understands that RV owners need a reliable resource for RV necessities and products that make their camping experience more enjoyable. Lazydays stores have expansive offerings and provide access to RV product experts to assist RV owners in their RV lifestyle needs. Lazydays believes that the “Accessories & More” offering encompasses all of the needs of the RV consumer.
RV Rentals. Renting RVs continues to grow in popularity as a cost-effective vacation alternative. Lazydays has a fleet of vehicles available for rental at 3 dealership locations, one in Florida and two in Colorado. The Company’s rental vehicles have a robust amenity offering and the Company’s value proposition includes unlimited mileage, add-ons and trip planning for consumers resulting in a superior rental experience. Lazydays believes that RV rentals drive interest in the RV lifestyle and provides an opportunity to introduce new customers to the Lazydays brand. Lazydays is well positioned to take advantage of this growing opportunity.
Leverage the Company’s scale and cost structure to improve operating efficiency. As Lazydays grows, it is positioned to leverage its scale to achieve competitive operating margins. The Company manages its new and used RV inventories so that its dealerships’ supply and mix of vehicles are in line with seasonal sales trends and minimize the Company’s carrying costs. In addition, the Company leverages its scale to reduce costs related to purchasing certain equipment, supplies, and services through national vendor relationships.
Customers and Markets
The RV industry is characterized by RV enthusiasts’ investment in, and steadfast commitment to, the RV lifestyle. The estimated number ofApproximately 11 million U.S. households thatare estimated to own an RV is approximately 9 million.RV.
Owners invest in insurance, extended service contracts, parts and accessories, roadside assistance and regular maintenance to protect and maintain their RVs. They typically invest in new accessories and the necessary installation costs as they upgrade their RVs. They also spend on services and resources as they plan, engage in, and return from their road trips. Furthermore, based on industry research and management’s estimates, the Company believeswe believe that RV owners typically trade-in to buy another RV every four to five years.
Per the RV Industry Association’s (RVIA) December 20182022 survey of manufacturers, total RV wholesale shipments ended 2018 with 483,672 units,2022 at 493,268, down (-4.1%)17.8% compared to the 504,599600,240 units in 2017. The shipment total for 2018 was the second highest on comparable record.2021. Towable RVs were down (-3.6%)20.1% at 426,087 units;434,858 from 544,028 units and motorhome shipments were down (-8.1%)up 3.9% at 57,58558,410 units compared to 2017 shipment totals.from 56,212 units in 2021. Per the RVIA survey, 2022 ended with the third best year on record of wholesale shipments. Generally, usedpre-owned RVs are sold at a lower price levelpoint than comparable new RVs and the sale of usedpre-owned RVs has historically been more stable through business cycles than the sale of new vehicles.vehicles through business cycles.
Lazydays believesWe believe RV trips remain one of the least expensive typetypes of vacation, and allowallowing RV owners to travel more while spending less. RV trips offer savings on a variety of vacation costs, including, among others, airfare, lodging, pet boarding and dining. While fuel costs are a component of the overall vacation cost, the Company believeswe believe fluctuations in fuel prices are not a significant factor affecting a family’s decision to take RV trips. Based on RVIA information, the average annual mileage use of an RV is between 3,000 and 5,000 miles. In addition, our customer research indicates that customers are attracted to RV ownership based on the comfortable and convenient travel it provides.
Competition
The Company believesWe believe that the principal competitive factors in the RV industry are breadth and depth of product selection, value pricing, convenient dealership locations, quality technical services, customer service, and overall experience. The Company competesWe compete directly and/or indirectly with RV dealers, RV service providers, RV rental operators, and RV parts and accessories retailers. One of the Company’sour direct competitors, Camping World Holdings, Inc., is publicly listed on the New York Stock Exchange. Additional competitors may enter the businesses in which the Companywe currently operates.operate.
Lazydays RV Dealerships
The Company operates six Lazydays dealership locations across five states. The Company’s dealership 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 of Florida, Colorado, Arizona, Minnesota and Tennessee account for a significant portion of new RV units sold on an annual basis in the U.S. The Company’s dealerships in these key markets attract customers from all states, except Hawaii. Generally, the Company’s dealership locations provide RV repair and installation services, collision repair, parts, and accessories for RVs and RV enthusiasts, RV rentals and all of the Company’s locations sell new and used RVs. The Company believes its dealership strategy of offering a comprehensive range of RV parts, services, accessories, products, rentals and new and used RVs, generates powerful cross-selling opportunities.
Dealership Design and Layout
The Company’s operating dealership locations range in size from approximately 14,000 to 384,000 square feet and are situated on 11 to 126 acres. The Company’s dealership locations feature service centers staffed with expert, in-house trained product specialists and are equipped with merchandise demonstrations to assist in educating customers about RV performance products. The Company’s dealership locations also provide opportunities to promote a more interactive and consultative selling environment. The Lazydays staff is trained to cross-sell and explain the benefits of the Company’s breadth of services, protection plans and products to which the Company’s customers have become accustomed, such as extended service contracts, emergency roadside assistance products, club memberships, discount camping and travel assistance.
The Company regularly refreshes its dealership locations to enhance the customers’ shopping experience and maximize product and service offerings. New products and services are introduced to capitalize on the advances of the RV industry and to satisfy needs of the Company’s customers. Store dress, promotional signage and directional signage are also periodically refreshed to further enhance the Lazydays customer shopping experience at Lazydays dealership locations.
Expansion Opportunities and Site Selection
The Company’s disciplined expansion and acquisition strategy focuses on growing its geographic footprint and customer base. The Company believes it has developed a rigorous and flexible process that employs exclusive data and analytical tools to identify target markets for acquisitions and new dealership openings. The Company evaluates acquisition opportunities or selects sites for new locations based on criteria such as local demographics, traffic patterns, proximity to RV parks and campgrounds, proximity to major interstates, analytics from the Company’s customer database, RV sales and registrations, product availability and availability of attractive acquisition and/or lease terms. Members of the Lazydays development team spend considerable time evaluating markets and prospective sites.
Dealership Management and Training
The Company’s Vice President, National General Manager oversees all dealership operations. He has over 38 years of experience in the RV industry and has been employed by Lazydays for over 5 years.
Each dealership location employs a General Manager or a General Sales Manager (in either case, the “GM”) that has responsibility for the daily operations of the dealership location. Areas of responsibility include inventory management, hiring, associate training and development, maintenance of the facilities, customer service and customer satisfaction. A GM’s management team includes a sales manager, a parts and accessories manager, a service manager, and a finance and insurance manager to help oversee the operations of each dealership location department. A typical Lazydays dealership location employs approximately 30 to 100 full-time equivalent employees.
The Company employs a Vice President, Operations and Supply Chain, and a centralized inventory management team to oversee the Company’s RV inventory and provide consistency and controls in the forecasting, ordering, purchasing and distribution of RV inventory.
The Company employs a Vice President of Service who has responsibility for the service operations of the dealership locations. His responsibilities include ensuring efficiency, logistics, and scheduling of service operations to deliver a premium customer experience.
The Company is constantly seeking to add top talent by partnering with local school districts, trade schools, military bases and community organizations. The interview process identifies current and future candidates with the goal of hiring talented people that are customer focused. The Company identifies hard to fill positions and has taken a proactive approach to creating viable candidates with its Tech U and Sales U programs. Through its Tech U and Sales U programs, the Company enrolls students with technical aptitude and provides them training to successfully complete industry certification courses and prepare them for a career as an RV technician or a successful sales partner.
Once hired, the Company continues to provide extensive training programs and opportunities for its employees, including, among others, new-hire training and orientations, institutionalized monthly e-learning and training modules, and certification programs for the Company’s RV technicians.
Product Sourcing and Distribution
Sourcing
New and Used RVs
The Company generally acquires new RVs for retail sale directly from the applicable manufacturer. Lazydays has strategic contractual arrangements with many of the leading RV manufacturers. Lazydays maintains a central inventory management and purchasing group to manage and maintain adequate inventory levels and mix. RVs are transported directly from a manufacturer’s facility to Lazydays dealership locations via a third-party transportation company.
Lazydays’ strategy is to partner with financially sound manufacturers that make quality products, have adequate manufacturing capacity and distribution, and maintain an appropriate product mix.
Lazydays’ supply arrangements with OEMs are typically governed by dealer agreements, which are customary in the RV industry. The Company’s dealer agreements with OEMs are generally made on a location-by-location basis. The terms of these dealer agreements are typically subject to Lazydays, among other things, meeting all the requirements and conditions of the dealer agreement, maintaining certain sales objectives, performing services and repairs for owners of the manufacturer’s RVs that are still under manufacturer warranty, carrying the manufacturer’s parts and accessories needed to service and repair the manufacturer’s RVs in stock at all times, actively advertising and promoting the manufacturer’s RVs and indemnifying the manufacturer under certain circumstances. Lazydays’ dealer agreements generally designate a specific geographic territory, exclusive to Lazydays, provided that Lazydays meets the material obligations of the dealer agreement. Wholesale pricing is generally established on a model year basis and is subject to change in the manufacturer’s sole discretion. In certain cases, the manufacturer may also establish a suggested retail price, below which the Company cannot advertise that manufacturer’s RVs.
Lazydays generally acquires used RVs from customers, primarily through trade-ins, as well as through private sales, auctions, the Company’s rental inventory and other sources, and the Company generally reconditions used RVs acquired for retail sale in its parts and service departments. Used RVs that Lazydays does not sell at Lazydays dealership locations generally are sold at wholesale prices through auctions.
Lazydays finances the purchase of substantially all of the Company’s new RV inventory from OEMs through the floor plan facility. Used vehicles may also be financed from time to time through the floor plan facility. For more information on the floor plan facility, see“Management’s Discussion and Analysis of Financial Condition and Results of Operations — M&T Credit Facility” below.
Parts and Accessories
The purchasing activities for the Company’s parts and accessories departments are focused on RV maintenance products, outdoor lifestyle products, RV parts and accessories, such as, among other things, generators and electrical, satellite receivers and GPS systems, towing and hitching products and RV appliances, essential supplies and other products and services necessary or desirable for the RV lifestyle. The Company maintains central purchasing functions to manage inventory, product-planning, allocate merchandise to the Company’s dealership locations and oversee the replenishment of basic merchandise. The Company has no long-term purchase commitments. The Company leverages its scale to reduce costs related to purchasing certain equipment, supplies, and services through long-standing, continuous relationships with its largest vendors.
Marketing and Advertising
The Company markets itsWe market our product offerings through integrated marketing campaigns across all digital and traditional marketing disciplines, with an emphasis on digital. The Company’sOur marketing efforts include itsour website, paid and organic search efforts, email, social media, online blog and video content, television, radio, billboards, direct mail, telemarketing, retail point of sale, promotional events,and RV shows and rallies, advertisements in nationalrallies. We also have exclusive partnership and regional industry publications, vendor co-op advertising programs and personal solicitations and referrals. Lazydays also has numerous exclusive sponsorship and partnership relationships with various RV lifestyle properties and events, including college sports teams, National Football League teams, music festivals, RV campsites across the country, motorsports events, and others. The Companyproperties. We currently hashave a segmented marketing database of over 3.22.5 million RV owners and prospects. Lazydays’Our principal marketing strategy is to capitalize on its broad name recognition,leverage our unique brand positioning, extensive product selection, differentiated value proposition and exclusive benefits, and high quality customer experience among RV owners. As per a research report prepared by Russell Research in November / December 2017, over 70% of Lazydays customers and over 60% of prospective customers surveyed strongly agree that Lazydays provides a high quality customer experience.
The Company uses data-driven marketing methods and reviews results by marketing discipline and campaign, by geographic market and by business on an ongoing basis to enhance and update the Company’s efforts to optimize its marketing effectiveness and productivity.
The Company currently operates an extensive responsive RV lifestyle-related website that we believe provides an exceptional user experience on all types of digital devices. The Company’sOur total website traffic for the year ended December 31, 20182022 was approximately 7.828.1 million visits with approximately 4.027.6 million unique visitors. The LazydaysOur website features over 3,0006,000 new and preownedpre-owned RVs, as well as information regarding Lazydays’our RV financing and insurance products, service capabilities, RV rentals, parts and accessories Lazydays’ RV resort, and RV seminars and classes schedule. The Lazydays website also includes The RV AuthorityTM blog, video content, RV trip planningofferings, and other RV lifestyle associated content. The Lazydays website
We measure our marketing productivity and many other digitaleffectiveness with front end analytics integrated with 1st party data to optimize marketing efforts provide RV owners and enthusiasts with the most expansive access to RV related content in the industry.efforts.
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Customer Service
Lazydays strives to exceed expectations by providing the best overall customer experience throughout every interaction with the Company. The Company believes customer service and access to a live person is a critical component of Lazydays’ digital marketing, sales, service and rental operations, and to achieving a best-in-class customer experience. The Company’s sales and customer service centers are multi-channel, full-service contact centers. RV enthusiasts can visit Lazydays’ locations, call, email, internet chat, text and use social media to contact Lazydays regarding products, services, protection plans, rentals, concerns and anything else related to the RV lifestyle. RV enthusiasts can also speak with Lazydays’ customer service specialists for help with aftermarket accessory orders, installations, scheduling, answers to questions, and to make purchases for any product and install services offered through the Lazydays website.
Lazydays’ contact center specialists are extensively trained to assist customers with complex orders and provide a level of service that leads to long-term customer relationships. In addition, Lazydays’ quality assurance team monitors contacts daily and provides the leadership team with tools to maintain sales and service standards. With low turnover, the Company retains employees longer than the industry average, which the Company believes allows its callers to be assisted by experienced contact center agents who are familiar with the RV lifestyle and Lazydays’ services, protection plans and products.
Management Information Systems
The Company utilizes multiple computer systems to support its operations, including a third-party dealer management system (“DMS”), point-of-sale registers (“POS”), enterprise resource planning system, supply chain, CRM system, rental reservation system, marketing database and other business intelligence tools. In addition, the Company utilizes proprietary systems and data warehouses to provide analytical views of its data.
To support the applications, the Company has multiple data centers and cloud services with advanced servers, storage and networking capabilities, giving the Company the ability to scale quickly to meet demand. The Company has a secure wide area network that facilitates communication within and between its offices and provides both voice and data services. The Company’s business critical systems are replicated in real time and all systems are protected with on and off-site backups.
A database containing all customer activity across the Company’s various businesses and programs has been integrated into its website and contact centers. Comprehensive information on each customer, including a profile of the purchasing activities, is made available to drive future sales. The Company utilizes information technology and analytics to actively market and sell multiple products and services to its customers, including list segmentation and merge and purge programs, to select prospects for email and direct mail solicitations and other direct marketing efforts.
The Company’s management information systems and electronic data processing systems consist of an extensive range of retail, financial and merchandising systems, including purchasing, inventory distribution and logistics, sales reporting, accounts payable and merchandise management. The Company’s POS and dealer management systems report comprehensive data in near real time to the Company’s data warehouses, including detailed sales volume, inventory information by product, merchandise transfers and receipts, special orders, supply orders and returns of product purchases to vendors. The Company can capture associated sales and reference to specific promotional campaigns. Lazydays management monitors the performance of each dealership location to evaluate inventory levels, determine markdowns and analyze gross profit margins by product.
Trademarks and Other Intellectual Property
The Company ownsWe own a variety of registered trademarks and service marks related to itsour brands and itsour services, protection plans, products and resources, including Lazydays, Lazydays The RV AuthorityTM®, Lazydays RV Accessories & More, Crown Club, and Exit 10, among others. The CompanyWe also ownsown numerous domain names, including Lazdays.com,Lazydays.com, LazydaysRVSale.com, LazydaysEvents.com, LazydaysService.com, RVPlace.com, and RVListings.com,LazydaysService.com among many others. The Company believesWe believe that itsour trademarks and other intellectual property have significant value and are important to itsour marketing efforts. The Company is not aware of any material pending claims of infringement or other challenges to the Company’s right to use its intellectual property in the United States or elsewhere.
Government Regulation
The Company’sOur operations are subject to varying degrees of federal, state and local regulation, including the Company’sour RV sales, vehicle financing, outbound telemarketing, email, direct mail, roadside assistance programs, extended vehicle service contracts and insurance activities. These laws and regulations include consumer protection laws, so-called “lemon laws,” privacy laws, escheatment laws, anti-money laundering laws, environmental laws and other extensive laws and regulations applicable to new and usedpre-owned vehicle dealers, as well as a variety of other laws and regulations. These laws also include federal and state wage and hour, anti-discrimination and other employment practices laws.
Motor Vehicle Laws and Regulations
The Company’sOur operations are subject to the National Traffic and Motor Vehicle Safety Act, Federal Motor Vehicle Safety Standards promulgated by the United States Department of Transportation and the rules and regulations of various state motor vehicle regulatory agencies. The Company isWe are also subject to federal and state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles. Federal, state and local laws and regulations also impose upon vehicle operators’ various restrictions on the weight, length and width of motor vehicles that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions. Federal and state authorities also have various environmental control standards relating to air, water, noise pollution and hazardous waste generation and disposal.
The Company’sOur financing activities with customers are subject to federal truth-in-lending, consumer leasing and equal credit opportunity laws and regulations as well as state and local motor vehicle finance laws, leasing laws, installment finance laws, usury laws and other installment sales and leasing laws and regulations, some of which regulate finance and other fees and charges that may be imposed or received in connection with motor vehicle retail installment sales.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which was signed into law on July 21, 2010, established the Bureau of Consumer Financial Protection (“BCFP”BCFP��), an independent federal agency funded by the United States Federal Reserve with broad regulatory powers and limited oversight from the United States Congress. Although automotive dealers are generally excluded, the Dodd-Frank Act could lead to additional, indirect regulation of automotive dealers, in particular, their sale and marketing of finance and insurance products, through its regulation of automotive finance companies and other financial institutions. In March 2013, the BCFP issued supervisory guidance highlighting its concern that the practice of automotive dealers being compensated for arranging customer financing through discretionary markup of wholesale rates offered by financial institutions (“dealer markup”) results in a significant risk of pricing disparity in violation of the Equal Credit Opportunity Act (“ECOA”). The BCFP recommended that financial institutions under its jurisdiction take steps to address compliance with the ECOA, which may include imposing controls on dealer markup, monitoring and addressing the effects of dealer markup policies, and eliminating dealer discretion to markup buy rates.
Insurance Laws and Regulations
As a marketer of insurance programs, the Company iswe are subject to state rules and regulations governing the business of insurance including, without limitation, laws governing the administration, underwriting, marketing, solicitation and/or sale of insurance programs. The insurance carriers that underwrite the programs that the Company sellswe sell are required to file their rates for approval by state regulators. Additionally, certain state laws and regulations govern the form and content of certain disclosures that must be made in connection with the sale, advertising or offering of any insurance program to a consumer. The Company isWe are required to maintain certain licenses to market insurance programs.
Marketing Laws and Regulations
The Federal Trade Commission (the “FTC”) and each of the states have enacted consumer protection statutes designed to ensure that consumers are protected from unfair and deceptive marketing practices. Lazydays reviewsWe review all of itsour marketing materials for compliance with applicable FTC regulations and state marketing laws.
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Environmental, Health and Safety Laws and Regulations
The Company’sOur operations involve the use, handling, storage and contracting for recycling and/or disposal of materials such as motor oil and filters, transmission fluids, antifreeze, refrigerants, paints, thinners, batteries, cleaning products, lubricants, degreasing agents, tires and propane. Consequently, the Company’sour business is subject to a variety of federal, state and local requirements that regulate the environment and public health and safety.
Most of the Lazydaysour dealership locations utilize aboveground storage tanks, and to a lesser extent underground storage tanks, primarily for petroleum-based products. Storage tanks are subject to periodic testing, containment, upgrading and removal requirements under the Resource Conservation and Recovery Act and its state law counterparts. Clean-up or other remedial action may be necessary in the event of leaks or other discharges from storage tanks or other sources. In addition, water quality protection programs under the federal Water Pollution Control Act (commonly known as the Clean Water Act), the Safe Drinking Water Act and comparable state and local programs govern certain discharges from some of the Company’sour operations. Similarly, air emissions from the Company’sour operations, such as RV painting, are subject to the federal Clean Air Act and related state and local laws. Certain health and safety standards promulgated by the Occupational Safety and Health Administration of the United States Department of Labor and related state agencies also apply to certain of the Company’sour operations.
Although the Company incurswe incur costs to comply with applicable environmental, health and safety laws and regulations in the ordinary course of itsour business, the Company doeswe do not presently anticipate that these costs will have a material adverse effect on itsour business, financial condition or results of operations. The Company doesWe do not have any material known environmental commitments or contingencies.
Insurance
The Company utilizesWe utilize insurance to provide for the potential liabilities for workers’ compensation, product liability, general liability, business interruption, property liability, director and officers’ liability, cyber, environmental issues, and vehicle liability andliability. Beginning in 2020, we became self-insured for employee health-care benefits. Liabilities associated with the risks that are retained by the Company are estimated, in part, by considering actuarial reports, historical claims experience, demographic factors, severity factors, stop loss coverage and other assumptions. The Company’sOur results could be adversely affected by claims and other expenses related to such plans and policies if future occurrences and claims differ from these assumptions and historical trends.
Employees
As of December 31, 2018, Lazydays2022, we had approximately 880over 1,400 employees, including approximately 850almost all of which are full-time employees. None of the Lazydaysour employees are represented by a labor union or are party to a collective bargaining agreement, and Lazydays haswe have not had any labor-related work stoppages. The Company believesWe believe that itsour employee relations are in good standing.
Seasonality
Seasonality and Effects of Weather
The Company’s overall
Our operations generally experience modestly higher volumes of vehicle sales in the first half of each year due in part to consumer buying patternstrends and the warmerhospitable warm climate during the winter months at our Florida and Arizona locations. In addition, the Company’snorthern locations in Colorado, Tennessee, Minnesota, Indiana, Oregon, Oklahoma, Washington and Wisconsin generally experience modestly higher vehicle sales during the spring months.
Our largest locationRV dealership is located near Tampa, Florida, which is in Tampa, Florida.
Revenues for eachclose 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 last two fiscal years, fortraffic to our dealerships. Although we believe that we have adequate insurance coverage, if we were to experience a catastrophic loss, we may exceed our policy limits, and/or may have difficulty obtaining similar products and services which accounted for more than 10 percent or more of consolidated revenue are presentedinsurance coverage in the accompanying statements of operations.future.
Principal Executive Offices
Our principal executive offices are located at 6130 Lazy Days4042 Park Oaks Boulevard, Seffner,Suite 350, Tampa, Florida 3358433610 and our telephone number is (813) 246-4999.
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Available Information
Our Internet website is www.lazydays.com. Our reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, under the Investor Relations – Finance Information tab of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). You may also read and copy any materials we file with the SEC at the SEC’s Internet website located at www.sec.gov that contains the information we file or furnish electronically with the SEC.www.sec.gov.
Item 1A. Risk Factors
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The following are certainmaterial risks to which our business operations are subject. Any of these risks could materially adversely affect our business, financial condition, or results of operations. These risks could also cause our actual results to differ materially from those indicated in the forward-looking statements contained herein and elsewhere. The risks described below are not the only risks we face. Additional risks not currently known to us or those we currently deem to be immaterial may also materially and adversely affect our business operations.
Risks Related to Lazydays’Lazydays Business
Certain of our warrants are accounted for as liabilities and the changes in the fair values of the warrants could have a material effect on our financial results.
We account for the Private Warrants and PIPE Warrants as liabilities for all periods presented. Prior to the SEC Staff Statement on April 12, 2021, we had previously accounted for our Warrants as components of equity, consistent with common market practice. Under liability accounting treatment, we are required to measure the fair value of the warrants at the end of each reporting period and recognize changes in the fair value from the prior period in our operating results for the current period. Fluctuations in the fair value of our warrants are primarily driven by changes in our stock price. As a result of this recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, through March 2023 when our warrants expire, based on factors which are outside our control. We expect that we will periodically recognize non-cash gains or losses due to the quarterly mark-to-market of our warrants and that such gains or losses could be material and may not be reflective of the performance of our underlying business operations.
A material weakness in our internal control over financial reporting related to our information technology systems was determined to exist. If we are unable to maintain an effective system of internal controls, we may not be able to accurately report our financial results, which could lead to a loss of investor confidence in our financial statements and have an adverse effect on our stock price.
As of December 31, 2022, management identified a material weakness in internal controls related to ineffective information technology general controls. The Company’smaterial weakness did not result in any identified misstatements to the financial statements and there were no changes to previously released financial results. Management has developed and implemented a remediation plan to address the material weakness. However, we cannot assure you that the testing of the operational effectiveness of the new control will be complete within a specific timeframe. Effective internal controls are necessary for us to provide reliable and accurate financial statements and to effectively prevent fraud. We devote significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002 as amended (the “Sarbanes-Oxley Act”). There is no assurance that material weaknesses or significant deficiencies will not occur or that we will be successful in adequately remediating any such material weaknesses and significant deficiencies. We may in the future discover areas of our internal controls that need improvement. We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes. Furthermore, as we grow our business, including through acquisition, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies, and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, subject us to investigations from regulatory authorities or cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.
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Natural disasters, whether or not caused by climate change, unusual weather conditions, epidemic and pandemic outbreaks, terrorist acts and political events could disrupt business and result in lower sales and otherwise adversely affect our financial performance.
The occurrence of one or more natural disasters, such as tornadoes, hurricanes, fires, floods, hail storms and earthquakes, unusual weather conditions, epidemic and pandemic outbreaks such as Coronavirus, or other global health emergencies, terrorist attacks or disruptive political events in certain regions where our stores are located could adversely affect our business and result in lower sales. Severe weather, such as heavy snowfall or extreme temperatures, may discourage or restrict customers in a particular region from traveling to our dealerships or utilizing our products, thereby reducing our sales and profitability. Natural disasters including tornadoes, hurricanes, floods, hail storms and earthquakes may damage our stores or other operations, which may materially adversely affect our financial results. Any of these events could have a material adverse effect on our business, financial condition and results of operations.
Our business is affected by the availability of financing to itus and itsour customers.
The Company’sOur business is affected by the availability of financing to itus and itsour customers. Generally, RV dealers including the Company, finance their purchases of inventory with financing provided by lending institutions. On March 15, 2018, the CompanyJuly 14, 2021, we entered into a $369.1 million amended and restated credit agreement with M&T Bank including a new floor plan facility with M&T Bank whichthat increased the committed floor plan financing to $175.0$327.0 million. As of December 31, 2018, the Company2022, we had $143.9$349.1 million outstanding under itsthe M&T floor plan facility and $17.8$7.2 million outstanding under the M&T term loan. As of December 31, 2018,2022, substantially all of the invoice cost of new RV inventory and 4.2% of book value of used RV inventory was financed under the floor plan facility. A decrease in the availability of this type of wholesale financing or an increase in the cost of such wholesale financing could prevent the Companyus from carrying adequate levels of inventory, which may limit product offerings and could lead to reduced sales and revenues.
Furthermore, manymost of the Company’sour customers finance their RV purchases. Although consumer credit markets are generally favorable, consumerConsumer credit market conditions, including rising interest rates, continue to influence demand, especially for RVs, and may continue to do so. There continues to be fewer lenders, more stringent underwriting and loan approval criteria, and greater down payment requirements than in the past. If credit conditions or the credit worthiness of the Company’sour customers worsen, and adversely affect the ability of consumers to finance potential purchases on acceptable terms and interest rates, it could result in a decrease in the sales of the Company’sour products and have a material adverse effect on the Company’sour business, financial condition and results of operations.
Fuel shortages,Climate change legislation or high prices for fuel,regulations restricting emission of “greenhouse gases” could have a negative effect on the Company’s business.
Gasoline or diesel fuel is requiredresult in increased operating costs and reduced demand for the operationRVs we sell.
The United States Environmental Protection Agency has adopted rules under existing provisions of RVs. There can be no assurancethe federal Clean Air Act that the supplyrequire a reduction in emissions of these petroleum products will continue uninterrupted, that rationing will not be imposedgreenhouse gases from motor vehicles. The Biden Administration has focused significant attention on greenhouse gases and climate change. The adoption of any laws or that the price ofregulations requiring significant increases in fuel economy requirements or taxnew federal or state restrictions on these petroleum products will not significantly increasevehicles and automotive fuels in the future. Shortages of gasolineUnited States or internationally could adversely affect demand for those vehicles and diesel fuel have had a material adverse effect on the RV industry as a whole in the past and any such shortages or substantial increases in the price of fuel could have a material adverse effect on the Company’sour business, financial condition orand results of operations.
The Company’sOur success will dependdepends to a significant extent on the well-being, as well as the continued popularity, financial condition and reputation for quality, of the Company’sour manufacturers, particularly Thor Industries, Inc., Tiffin Motorhomes, Winnebago Industries, Inc., and Forest River, Inc., as well as their respective supply chains.
Thor Industries, Inc., Tiffin Motorhomes, Winnebago Industries, Inc., and Forest River, Inc. supplied approximately 29.0%49.1%, 28.1%, 17.6%29.1%, and 17.2%18.3%, respectively, of the Company’sour purchases of new RV inventory during the year ended December 31, 2018. The Company depends2022. We depend on itsour manufacturers to provide itus with products that compare favorably with competing products in terms of quality, performance, safety and advanced features. Any adverse change in the production efficiency, product development efforts, technological advancement, marketplace acceptance, reputation, marketing capabilities or financial condition of the Company’sour manufacturers or their respective supply chains could have a substantial adverse impact on the Company’sour business. Any difficulties encountered by any of the Company’sour manufacturers resulting from economic, financial, or other factors could adversely affect the quality and amountnumber of products that they are able to supply to the Companyus and the services and support they provide to the Company.
us. The interruption or discontinuance of the operations of the Company’sour manufacturers or their respective supply chains could cause the Companyus to experience shortfalls, disruptions, or delays with respect to needed inventory. Although the Company believeswe believe that adequate alternate sources would be available that could replace any manufacturer as a product source, those alternate sources may not be available at the time of any interruption, alternative products may not be available at comparable quality and prices and alternative products may not be equally appealing to the Company’sour customers.
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Any change, non-renewal, unfavorable renegotiation or termination of the Company’sour supply arrangements for any reason could have a material adverse effect on product availability and cost and the Company’sour financial performance.
The Company’sOur supply arrangements with manufacturers are typically governed by dealer agreements, which are customary in the RV industry. The Company’sOur dealer agreements with manufacturers are generally made on a location-by-location basis, and each retail location typically enters into multiple dealer agreements with multiple manufacturers. The terms of the Company’sour dealer agreements are typically subject to:to the Company meeting program requirements and retail sales objectives, performing services and repairs for customers still under warranty (regardless from whom the RV was purchased), carrying the relevant manufacturer’s parts and accessories needed to service and repair its RVs, actively advertising and promoting the manufacturer’s RVs, and in some instances indemnifying the manufacturer.
The Company’sOur dealer agreements designate a specific geographicalgeographic territory for the Company, exclusive to the Company,us, provided that the Company iswe are able to meet the material obligations of the applicable dealer agreement.
In addition, many of the Company’sour dealer agreements contain contractual provisions concerning minimum advertised product pricing for current model year units. Wholesale pricing is generally established on a model year basis and is subject to change in the manufacturer’s sole discretion. In certain cases, the manufacturer may also establish a suggested retail price, below which the Company cannot advertise that manufacturer’s RVs. Any change, non-renewal, unfavorable renegotiation or termination of these dealer agreements for any reason could have a material adverse effect on product availability and cost and the Company’sour 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 consumer discretionary spending and, accordingly, the Company may be adversely affected if its customers reduce, delay or forego their purchases of the Company’s products, services, and protection plans as a result of:
Decreases in the number of customers, average spend per customer or retention and renewal rates for the Company’s consumer services and plans would negatively affect the Company’s financial performance. A prolonged period of depressed consumer spending could have a material adverse effect on the Company’s business. In addition, adverse economic conditions may result in an increase in the Company’s operating expenses due to, among other things, higher costs of labor, energy, equipment and facilities. Due to recent fluctuations in the U.S. economy, the Company’s sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results for future periods. Additionally, the Company is subject to economic fluctuations in local markets that may not reflect the general economic conditions of the broader U.S. economy. Any of the foregoing factors could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company depends on its ability to attract and retain customers.
The Company’s future success depends in large part upon the Company’s ability to attract and retain customers for its products, services, protection plans, and resources. The extent to which the Company achievesOur growth in its customer base materially influences the Company’s profitability. Any number of factors could affect the Company’s ability to grow its customer base. These factors include consumer preferences and general economic conditions, the Company’s ability to maintain its retail locations, weather conditions, the availability of alternative products, significant increases in gasoline prices, the disposable income of consumers available for discretionary expenditures and the external perception of the Company’s brands. Any significant decline in the Company’s customer base, the rate of growth of its customer base or customer demand could have a material adverse effect on its business, financial condition and results of operations.
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 market for services, protection plans and products targeting the RV lifestyle or RV enthusiast is highly fragmented and competitive. Competition in the RV market is driven by price, product and service features, technology, performance, reliability, quality, availability, variety, delivery and customer service. In addition to competing with other dealers of new and used RVs, the Company competes directly or indirectly with major national insurance and warranty companies, providers of roadside assistance and providers of extended service contracts.
Additional competitors may enter the businesses in which the Company currently operates. If any of the Company’s competitors successfully provides a broader, more efficient or attractive combination of services, protection plans and products to the Company’s target customers, the Company’s business results could be materially adversely affected. The Company’s inability to compete effectively with existing or potential competitors could have a material adverse effect on the Company’s business, financial condition and results of operations.
Some of the Company’s existing competitors have, and some of the Company’s future competitors may have, greater financial, personnel, and other resources, more well-established brands or reputations and broader customer bases than the Company and, as a result, these competitors may be in a stronger position to respond quickly to potential acquisitions and other market opportunities and changes in customer preferences. Some of these competitors may have customer bases that are more geographically balanced than the Company’s and, therefore, may be less affected by an economic downturn in a particular region or market. Competitors with greater resources also may be able to offer lower prices, additional products or services or other incentives that the Company cannot match or does not offer. Industry consolidations may also create competitors with broader and more geographic coverage.
The Company’s expansion into new, unfamiliar markets, whether through acquisitions or otherwise, presents increased risks that may prevent it from being profitable in these new markets. Delays in opening or acquiring new retail locations could have a material adverse effect on the Company’s business, financial condition and results of operations.materially affect profitability.
During 2018, the Company acquired Shorewood RV Center in Minneapolis, Minnesota and Tennessee RV Supercenter near Knoxville, Tennessee. In March of 2019, the Company announced that it will open a dealership in Nashville, Tennessee. The Company intends to continue to expand in part by acquiring or building new retail locations in new markets. As a result, the Company may have less familiarity with local consumer preferences and could encounter difficulties in attracting customers due to a reduced level of consumer familiarity with the Company’s brands. Other factors that may impact the Company’s ability to acquire or open new retail locations in new markets and operate them profitably, many of which are beyond the Company’s control, include:
Once the Company decides on a new market and identifies a suitable acquisition or location opportunity, any delays in acquiring or opening or developing new retail locations could impact the Company’s financial results. It is possible that events, such as delays in the acquisitions process or construction delays caused by permitting or licensing issues, material shortages, labor issues, weather delays or other acts of God, discovery of contaminants, accidents, deaths or injuries could delay planned openings or force the Company to abandon planned openings altogether.
As the Company grows, the Company will face the risk that its existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support its growth. There can be no assurance that the Company will be able to retain the personnel or make the changes in its systems that may be required to support its growth. Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on the Company’s results of operations. In addition, hiring additional personnel and implementing changes and enhancements to the Company’s systems will require capital expenditures and other increased costs that could also have a material adverse impact on the Company’s results of operations.
The Company’s expansion into new markets may also create new challenges including an increase in information to be processed by the Company’s information management systems and diversion of management attention from existing operations. To the extent that the Company is not able to meet these additional challenges, the Company’s sales could decrease, and the Company’s operating expenses could increase, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
Finally, the size, timing, and integration of any future new retail location openings or acquisitions may cause substantial fluctuations in the Company’s results of operations from quarter to quarter. Consequently, the Company’s results of operations for any quarter may not be indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuations could have a material adverse effect on the Company’s business, financial condition and results of operations.
As a result of the above factors, there can be no assurance that the Company will be able to operate retail locations in new markets on a profitable basis. The failure to operate retail locations in new markets on a profitable basis could have a material adverse effect on the Company’s business, financial condition and results of operations.
Unforeseen expenses, difficulties, and delays encountered in connection with expansion through acquisitions could inhibit the Company’s growth and negatively impact its profitability.
The Company’sOur success will depend, in part, on theour ability of the Company to make successful acquisitions and to integrate the operations of acquired retail locations, including centralizing certain functions to achieve cost savings and pursuing programs and processes that promote cooperation and the sharing of opportunities and resources among the Company’sour retail locations and consumer services and plans. Unforeseen expenses, difficulties and delays encountered in connection with rapid expansion through acquisitions could inhibit the Company’s growth, which could have a negative impact on the Company’s profitability.
Additionally, the Company may be unable to identify suitable acquisition candidates or consummate acquisitions. Increased competition for acquisition candidates or increased asking prices by acquisition candidates may increase purchase prices for acquisitions to levels beyond the Company’s financial capability or to levels that would be unlikely to provide the returns required by the Company’s acquisition criteria. Acquisitions also may become more difficult or less attractive in the future as the Company continues to focus on acquiring what it believes are the most attractive dealers. The Company may incur expenses associated with sourcing, evaluating and negotiating acquisitions (including those that are not completed), and the Company also may pay fees and expenses associated with obtaining financing for acquisitions and with investment banks and others finding acquisitions for the Company. In addition, the Company may encounter difficulties in integrating the operations of acquired dealers with its own operations or managing acquired dealers and stores profitably without substantial costs, delays, or other operational or financial problems. The CompanyWe may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of itsour acquisitions within the anticipated timing or at all. For at leastas long as the first year after a substantial acquisition and possibly longer, the benefits from the acquisition may be offset by the costs incurred in integrating the business and operations. The Company may also assume liabilities
In 2021, we acquired one dealership in connection with acquisitions that the Company would otherwise not be exposed to.
The Company’s abilityOklahoma. We intend to continue to grow through the acquisition of additionalexpand in part by acquiring or building new retail or service locations will depend upon various factors, including the following:
As a part of the Company’s acquisition strategy, the Company has engaged and will continue to engage in acquisition discussions with various dealerships. In connection with these acquisition discussions, the Company and each potential acquisition candidate exchange confidential operational and financial information, conduct due diligence inquiries, and consider the structure, terms, and conditions of the potential acquisition. Potential acquisition discussions may take place over a long period of time and involve difficult business integration and other issues, including in some cases, management succession, employee transitions and related matters.new markets. As a result of thesethis and otherany future expansion, we may have less familiarity with local consumer preferences and could encounter difficulties in attracting customers due to a reduced level of consumer familiarity with the Company and our brands.
Other factors, many of which are beyond our control, may impact our ability to acquire or open retail locations successfully, whether in existing or new markets, and operate them profitably. These factors include (a) the ability to (i) identify suitable acquisition opportunities at purchase prices likely to provide returns required by our acquisition criteria, (ii) control expenses associated with sourcing, evaluating and negotiating acquisitions (including those that are not completed), (iii) accurately assess the profitability of potential acquisitions that may from timeor new locations, (iv) secure required third party or governmental permits and approvals, (v) negotiate favorable lease agreements, (vi) hire and train skilled operating personnel, especially management personnel, (vii) provide a satisfactory product mix responsive to time appear likely to occur may not be consummated. In addition,local market preferences where new retail locations are built or acquired, (viii) secure product lines, (ix) supply new retail locations with inventory in a timely manner; (b) the Company may haveavailability of construction materials and labor for new retail locations and the occurrence of significant construction delays or cost overruns; (c) competitors in the same geographic area and regional economic variants; (d) the absence of disagreements with potential acquisition targets whichthat could lead to litigation. Anylitigation; (e) successfully integrating the operations of acquired dealers with our own operations; (f) managing acquired dealers and stores profitably without substantial costs, delays, or other operational or financial problems; and (g) the ability of our information management systems to process increased information accurately and in a timely fashion. A negative outcome associated with any of these factors or outcomes could result inhave a material adverse effect on the Company’sour business, financial condition and results of operations.
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Once we decide on a new market and identifies a suitable acquisition or location opportunity, any delays in acquiring or opening or developing new retail locations could impact our financial results. For example, delays in the acquisition process or construction delays caused by permitting or licensing issues, material shortages, labor issues, weather delays or other acts of God, discovery of contaminants, accidents, deaths or injuries, third parties attempting to impose unsatisfactory restrictions on the Company in connection with their approval of acquisitions, and other factors could delay planned openings or force us to abandon planned openings altogether.
As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth.
Finally, the size, timing, and integration of any future new retail location openings or acquisitions may cause substantial fluctuations in our results of operations from quarter to quarter. Consequently, our results of operations for any quarter may not be indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuations could have a material adverse effect on our business, financial condition and results of operations.
Failure to maintain the strength and value of the Company’sour brands could have a material adverse effect on the Company’sour business, financial condition and results of operations.
The Company’sOur success depends on the value and strength of the Lazydays brands. The Lazydays name and Lazydays’Lazydays brands are integral to the Company’sour business as well as to the implementation of the Company’sour strategies for expanding itsour business. Maintaining, enhancing, promoting and positioning the Company’sour brands, particularly in new markets where the Company haswe have limited brand recognition, will depend largely on the success of the Company’sour marketing efforts and itsour ability to provide high quality products, services, protection plans, and resources and a consistent, high quality customer experience. The Company’sOur brands could be adversely affected if the Company failsif: (a) we fail to achieve these objectives if the Company failsor to comply with local laws and regulations, if the Company isregulations; (b) we are subject to publicized litigationlitigation; or if the Company’s(c) our public image or reputation were to be tarnished by negative publicity. Some of these risks are not within the Company’sour control, such as the effects of negative publicity regarding the Company’sour manufacturers, suppliers or third party providers of services or negative publicity related to members of management. Any of these events could result in decreases in revenues. Further, maintaining, enhancing, promoting and positioning the Company’sour brand image may require the Companyus to make substantial investments in areas such as marketing, dealership operations, community relations, store graphics and employee training, which could adversely affect the Company’sour cash flow.flow and profitability. Furthermore, efforts to maintain, enhance or promote the Company’sour brand image may ultimately be unsuccessful. These factors could have a material adverse effect on the Company’sour business, financial condition and results of operations.
The Company’sOur failure to successfully orderprocure and manage itsour inventory to reflect consumer demand in a volatile market and anticipate changing consumer preferences and buying trends could have a material adverse effect on the Company’sour business, financial condition and results of operations.
The Company’sOur success depends upon the Company’sour ability to successfully manage the Company’sour inventory and to anticipate and respond to product trends and consumer demands in a timely manner. The Company’s products appeal to consumers who are, or could become, RV owners. The preferences of theseour target consumers cannot be predicted with certainty and are subject to change. Further, the retail consumer industry, by its nature, is volatile and sensitive to numerous economic factors, including consumer preferences, competition, market conditions, general economic conditions and other factors outside of the Company’s control. The Company typically ordersWe may order products well in advance of the following selling season. The extendedExtended lead times for many of the Company’sour purchases may make it difficult for the Companyus to respond rapidly to new or changing product trends, increases or decreases in consumer demand or changes in prices. If the Company misjudgeswe misjudge either the market for the Company’sour products or itsour consumers’ purchasing habits in the future, the Company’sour revenues may decline significantly, the Companywe may not have sufficient inventory to satisfy consumer demand or sales orders, or the Companywe may be required to discount excess inventory; all of which could have a material adverse effect on the Company’sour business, financial condition and results of operations.
The Company’s same store salesOur business is impacted by general economic conditions, ongoing economic and financial uncertainties, and or a change in consumer tastes, may fluctuatecause a decline in consumer spending that may adversely affect our business, financial condition and results of operations.
We depend on consumer discretionary spending and, accordingly, we may be adversely affected if our customers reduce, delay or forego their purchases of our products, services, and protection plans as a result of, including but not belimited to, recessionary conditions, job loss, bankruptcy, higher consumer debt, rising interest rates, inflation, reduced access to credit, higher energy and fuel costs, relative or perceived cost, availability and comfort of RV use versus other modes of travel, such as air travel and rail (including as a meaningful indicatorresult of future performance.consumer tastes in response to climate change), falling home prices, lower consumer confidence, uncertain or changes in tax policies, uncertainty due to national or international security or health concerns, volatility in the stock market, or epidemics.
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The Company’s same store sales may vary from quarter to quarter. ADecreases in the number of factorscustomers, average spend per customer, or retention and renewal rates for our consumer services and plans would negatively affect and will continue to affect the Company’s same store sales results, including:
An unanticipated decline in revenues or same store salesour financial performance. A prolonged period of depressed consumer spending could have a material adverse effect on our business. In addition, adverse economic conditions may result in an increase in our operating expenses due to, among other things, higher costs of labor, energy, equipment and facilities. Due to recent fluctuations in the Company’sU.S. economy and the COVID-19 pandemic, our sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results for future periods. Additionally, we are subject to economic fluctuations in local markets, most significantly Florida, that may not reflect the general economic conditions of the broader U.S. economy. Any of the foregoing factors could have a material adverse effect on our business, financial condition and results of operations.
Additionally, economic uncertainty and business downturns in the U.S. markets have adversely affected, and may in the future adversely affect, our financial condition and results of operations.
Competition in the market for products, services, and protection plans targeting the RV lifestyle or RV enthusiast could reduce our revenues and profitability.
Competition in the RV market is fragmented, driven by price, product and service features, technology, performance, reliability, quality, availability, variety, delivery and customer service. In addition to competing with other dealers of new and pre-owned RVs we compete directly or indirectly with major national insurance and warranty companies, providers of roadside assistance and providers of extended service contracts.
Additional competitors may enter the businesses in which we currently operate. If any of our competitors successfully provides a broader, more efficient or attractive combination of products, services and protection plans to our target customers, our business results could be materially adversely affected. Our inability to compete effectively with existing or potential competitors, some of which may have greater resources or be better positioned to absorb economic downturns in local markets, could have a material adverse effect on our business, financial condition and results of operations.
The cyclical nature of the Company’sour business has caused itsour sales and results of operations to fluctuate. These fluctuations may continue in the future, which could result in operating losses during downturns.
The RV industry is cyclical and is influenced by many national and regional economic and demographic factors, including:
(a) the terms and availability of financing for retailers and consumers; (b) overall consumer confidence and the level of discretionary consumer spending; (c) population and employment trends; and (d) income levels and general economic conditions, such as inflation, including as a result of tariffs, deflation, increasing interest rates and recessions. As a result of the foregoingthese factors, the Company’sour sales and results of operations have fluctuated, and the Company expectswe expect that they will continue to fluctuate in the future.
The Company’sOur business is seasonal, and this leads to fluctuations in sales and revenues.
The Company hasWe have experienced, and expectsexpect to continue to experience, some variability in revenue, net income and cash flows as a result of annual seasonality in itsour business. Because the Company’sour largest dealership is located in the southern United States, demand for services, protection plans, products and resources generally increases during the winter season when people move south for the winter or vacation in warmer climates, while sales and profits are generally lower during the summer months. In addition, unusually severe weather conditions in some geographic areas may impact demand. This includes the threat of hurricanes in Florida, which could substantially damage property and inventory in our Florida dealerships, especially in Tampa, and lead to a material disruption of operations at our Tampa, Florida headquarters and dealership.
For the years ended December 31, 20182022 and 2017,2021, we generated 58% and 51% (excluding the Company generated 56% and 54%impact of itsacquisitions) of our annual revenue in the first and second fiscal quarters, respectively, which include the peak winter months. The Company incursCOVID-19 pandemic affected our sales patterns in 2021. We incur additional expenses in the first and second fiscal quarters due to higher purchase volumes, increased staffing in the Company’sour retail locations and program costs. If, for any reason, the Company miscalculateswe miscalculate the demand for itsour products or itsour product mix during the first and second fiscal quarters, the Company’sour sales in these quarters could decline, resulting in higher labor costs as a percentage of sales, lower margins and excess inventory, which could have a material adverse effect on the Company’sour business, financial condition and results of operations.
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Due to the Company’sour seasonality, the possible adverse impact from other risks associated with itsour business, including atypicalextreme weather, consumer spending levels and general business conditions, is potentially greater if any such risks occur during the Company’sour peak sales seasons.seasons, which are the first and second fiscal quarters.
The Company’s business mayWe primarily lease our retail locations and if we are unable to maintain those leases or locate alternative sites for retail locations in our target markets and on terms that are acceptable to it, our revenues and profitability could be materially adversely affected by unfavorable conditions in its local markets, even if those conditions are not prominent nationally.affected.
The Company’s performance is subject to local economic, competitive, weather and other conditions prevailing in geographic areas where it operates. Since a large portionWe lease 12 of the Company’s sales are generated18 real properties where we have operations. At inception of the leases, they generally provide for fixed monthly rentals with escalation clauses and range from three to twenty years. There can be no assurance that we will be able to maintain our existing retail locations as leases expire, extend the leases or be able to locate alternative sites in Florida,our target markets and on favorable terms. Any failure to maintain our existing retail locations, extend the Company’s results of operations depend substantiallyleases or locate alternative sites on general economic conditions and consumer spending habits in the Southeastern United States. In the event that this geographic area experiences a downturn in economic conditions, itfavorable or acceptable terms could have a material adverse effect on the Company’sour business, financial condition and results of operations.
We may be unable to enforce our intellectual property rights and/or we may be accused of infringing the intellectual property rights of third parties which could have a material adverse effect on our business, financial condition and results of operations.
We own a variety of registered trademarks and service marks. We believe that our trademarks have significant value and are important to our marketing efforts. If we are unable to continue to protect the trademarks and service marks for our proprietary brands, if such marks become generic or if third parties adopt marks similar to our marks, our ability to differentiate our products and services may be diminished. In the event that our trademarks or service marks are successfully challenged by third parties, we could lose brand recognition and be forced to devote additional resources to advertising and marketing new brands for our products.
From time to time, we may be compelled to protect our intellectual property, which may involve litigation. Such litigation may be time-consuming, expensive and distract our management from running the day-to-day operations of our business, and could result in the impairment or loss of the involved intellectual property. There is no guarantee that the steps we take to protect our intellectual property, including litigation when necessary, will be successful. The Companyloss or reduction of any of our significant intellectual property rights could diminish our ability to distinguish our products and services from competitors’ products and services and retain our market share for our products and services. Our inability to effectively protect our proprietary intellectual property rights could have a material adverse effect on our business, results of operations and financial condition.
Other parties also may claim that we infringe on their proprietary rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us or the payment of damages. These claims could have a material adverse effect on our business, financial condition and results of operations.
Regulations applicable to the sale of extended service contracts could materially impact our business and results of operations.
We offer extended service contracts that may be purchased as a supplement to the original purchaser’s warranty as well as other optional products to protect the consumer’s investment. These products are subject to complex federal and state laws and regulations. There can be no assurance that regulatory authorities in the jurisdictions in which these products are offered will not seek to further regulate or restrict these products. Failure to comply with applicable laws and regulations could result in fines or other penalties including orders by state regulators to discontinue sales of the warranty products in one or more jurisdictions. Such a result could materially and adversely affect our business, results of operations and financial condition.
Third parties bear the majority of the administration and liability obligations associated with these extended service contracts upon purchase by the customer. State laws and regulations, however, may limit or condition our ability to transfer these administration and liability obligations to third parties, which could in turn impact the way revenue is recognized from these products. Failure to comply with these laws could result in fines or other penalties, including orders by state regulators to discontinue sales of these product offerings as currently structured. Such a result could materially and adversely affect our business, financial condition and results of operations.
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If state dealer laws are repealed or weakened, our dealerships will be more susceptible to termination, non-renewal or renegotiation of dealer agreements.
State dealer laws generally provide that a manufacturer may not terminate or refuse to renew a dealer agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Some state dealer laws allow dealers to file protests or petitions or attempt to comply with the manufacturer’s criteria within a specified notice period to avoid the termination or non-renewal. Manufacturers have been lobbying and continue to lobby for the repeal or revision of state dealer laws. If dealer laws are repealed in the states in which we operate, or manufacturers convince legislators to pass legislation in those states allowing termination or non-renewal of dealerships without cause, manufacturers may be able to expand geographically,terminate our dealer agreements without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of state dealer laws, it may also be more difficult for us to renew our dealer agreements upon expiration.
The ability of a manufacturer to grant additional dealer agreements is based on a number of factors which we cannot control. If manufacturers grant new dealer agreements in areas near our existing markets, such new dealer agreements could have a material adverse effect on our business, financial condition and any geographic expansion may not adequately insulate the Company from the adverse effectsresults of local or regional economic conditions.operations.
Risks Associated with Our Debt Obligations
The CompanyWe may not be able to satisfy itsour debt obligations upon the occurrence of a change in control under itsour credit facility.
A Changechange in Control,control is an event of default under the credit facility. Upon the occurrence of a Changechange in Control,control, M&T Bank will have the right to declare all outstanding obligations under the credit facility immediately due and payable and to terminate the availability of future advances to the Company. There can be no assurance that the Company’sour lenders will agree to an amendment of the credit facility or a waiver of any such event of default. There can be no assurance that the Companywe will have sufficient resources available to satisfy all of itsour obligations under the credit facility if no waiver or amendment is obtained. The effect of this provision may be to make a change in control less likely, potentially decreasing the value of our shares of common stock. In the event the Company waswe are unable to satisfy these obligations, it could have a material adverse impact on the Company’sour business, financial condition and results of operations.
The Company’sOur ability to operate and expand itsour business and to respond to changing business and economic conditions will depend on the availability of adequate capital.
As of December 31, 2017, the Company had an existing credit agreement that included a $13.0 million term loan (the “Term Loan Facility”) and $7.0 million of commitments for revolving loans (the “Revolving Credit Facility” and, together with the Term Loan Facility, as amended, the “Senior Secured Credit Facilities”). Additionally, the Company also had up to $140.0 million in committed financing under the floor plan facility. As of December 31, 2017, the Company had $9.1 million of term loans outstanding under the Senior Secured Credit Facilities, net of $0.1 million of unamortized original issue discount, no borrowings outstanding under the Senior Secured Credit Facilities and $105.0 million in floor plan notes payable outstanding under the floor plan facility, net of $0.2 million of unamortized original issue discount, with $7.0 million of additional borrowing capacity under the Revolving Credit Facility and $34.8 million of additional borrowing capacity under the floor plan facility. On March 15, 2018, the Company entered into a $200.0 million facility with M&T Bank, which includes a $175.0 million floor plan facility, a $20.0 million term loan and a $5.0 million line of credit (the “M&T Facility”), which replaced the Senior Secured Credit Facilities. As of December 31, 2018, the Company had $17.8 million outstanding under the term loan and $143.9 million outstanding under the floor plan facility. There were no outstanding borrowings under the line of credit.
The operation of the Company’sour business, the rate of the Company’sour expansion and the Company’sour ability to respond to changing business and economic conditions depend on the availability of adequate capital, which in turn depends on cash flow generated by the Company’sour business and, if necessary, the availability of equity or debt capital. The CompanyWe also requiresrequire sufficient cash flow to meet itsour obligations under itsour existing debt agreements. The Term Loan Facility with Bank of America required the Company to make monthly principal payments of the outstanding principal amount thereof and the Company paid $0.3 million and $1.9 million for the years ended December 31, 2018 and 2017, respectively. The Company repaid the Term Loan Facility on March 15, 2018 for $8.8 million. Additionally, the Company paid total cash interest on its Senior Secured Credit Facilities of $0.1 million and $0.6 million for the years ended December 31, 2018 and 2017, respectively, and the Company paid total floor plan interest expense on its floor plan facility of $1.0 million and $3.7 million for the years ended December 31, 2018 and 2017, respectively. The M&T Term LoanOur term loan requires the Companyit to pay monthly principal installments of $0.242 million plus accrued interest through the maturity date. At the maturity date, the Companywe will pay a principal balloon payment of $11.3$2.6 million plus accrued interest. For the year ended December 31, 2018, the Company made principal payments of $2.2 million, paid total cash interest of $0.7 million and paid total floor plan interest of $3.2 million under its credit agreement with M&T Bank. See “Management’s Discussion and Analysis and Results of Operations —Liquidity and Capital Resources” below.
The Company isWe are dependent to a significant extent on itsour ability to finance itsour new and certain of its usedour pre-owned RV inventory under the credit facility. Floor plan financing arrangements allow the Companyus to borrow money to purchase new RVs from the manufacturer or usedpre-owned RVs on trade-in or at auction and pay off the loan when the Company sellswe sell the financed RV. The CompanyWe may need to increase the capacity of itsour existing credit facility in connection with itsour acquisition of dealerships and overall growth. In the event that the Company iswe are unable to obtain such incremental financing, the Company’sour ability to complete acquisitions could be limited.
The CompanyWe cannot ensure you that itsour cash flow from operations or cash available under itsour credit facility will be sufficient to meet itsour needs. If the Company iswe are unable to generate sufficient cash flows from operations in the future, and if availability under itsour credit facility is not sufficient, the Companywe may have to obtain additional financing. If the Company obtainswe obtain additional capital through the issuance of equity, the interests of existing stockholders of the Company may be diluted. If the Company incurswe incur additional indebtedness, such indebtedness may contain significant financial covenants and other negative covenants that may significantly restrict the Company’sour ability to operate. The CompanyWe cannot ensure you that itwe could obtain additional financing on favorable terms or at all.
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The documentation governing the Company’sOur credit facility containcontains restrictive covenants that may impair the Company’sour ability to access sufficient capital and operate itsour business.
The documentation governing the Company’sOur credit facility containcontains various provisions that limit the Company’sour ability to, among other things: (a) incur additional indebtedness or liens; (b) consolidate or merge; (c) alter the business conducted by the Company and our subsidiaries; (d) make investments, loans, advances, guarantees and acquisitions; (e) sell assets, including capital stock of our subsidiaries; (f) enter into certain sale and leaseback transactions; (g) pay dividends on capital stock or redeem, repurchase or retire capital stock or certain other indebtedness; (h) engage in transactions with affiliates; and (i) and enter into agreements restricting our subsidiaries’ ability to pay dividends.
In addition, the restrictive covenants contained in the documentation governing the credit facility require the Companyus to maintain specified financial ratios. See “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”Resources” below. The Company’sOur ability to comply with those financial ratios may be affected by events beyond itsour control, and itsour failure to comply with these ratios could result in an event of default.
The restrictive covenants contained in the documentation governing the credit facility may affect the Company’sour ability to operate and finance itsour business as it deemswe deem appropriate. The Company’sOur inability to meet obligations as they become due or to comply with various financial covenants contained in the instruments governing itsour current or future indebtedness could constitute an event of default under the instruments governing the Company’sour indebtedness.
If there were an event of default under the instruments governing the Company’sour indebtedness, the holders of the affected indebtedness could declare all of the affected indebtedness immediately due and payable, which, in turn, could cause the acceleration of the maturity of all of the Company’sour other indebtedness. The CompanyWe may not have sufficient funds available, or the Companywe may not have access to sufficient capital from other sources, to repay any accelerated debt. Even if the Companywe could obtain additional financing, the terms of such financing may not be favorable to the Company.us. In addition, substantially all of the Company’sour assets are subject to liens securing the obligations under the credit facility. If amounts outstanding under the credit facility were accelerated, the Company’sour lenders could foreclose on these liens and the Companywe could lose substantially all of itsour assets. Any event of default under the instruments governing the Company’sour indebtedness could have a material adverse effect on the Company’sour business, financial condition and results of operations.
Natural disasters, 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.
The occurrence of one or more natural disasters, such as tornadoes, hurricanes, fires, floods, hail storms and earthquakes, unusual weather conditions, epidemic outbreaks such as Ebola, Zika virus or measles, terrorist attacks or disruptive political events in certain regions where the Company’s stores are located could adversely affect the Company’s business and result in lower sales. Severe weather, such as heavy snowfall or extreme temperatures, may discourage or restrict customers in a particular region from traveling to the Company’s dealerships or utilizing the Company’s products, thereby reducing the Company’s sales and profitability. Natural disasters including tornadoes, hurricanes, floods, hail storms and earthquakes may damage the Company’s stores or other operations, which may materially adversely affect the Company’s financial results. Any of these events could have a material adverse effectWe depend on the Company’s business, financial condition and results of operations.
The Company depends on itsour 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’sour business and results of operations.
The Company’sOur business depends in part on developing and maintaining productive relationships with third party providers of products, services, protection plans, and resources that the Company marketswe market to itsour customers. Additionally, the Company relieswe rely on certain third party providers to support itsour products, services, protection plans, and resources, including insurance carriers for the Company’sour property and casualty insurance and extended service contracts, banks and captive financing companies for vehicle financing and refinancing. The CompanyWe cannot accurately predict when,whether, or the extent to which, itwe will experience any disruption in the supply of products from itsour vendors or services from itsour third party providers. Any such disruption could negatively impact the Company’sour ability to market and sell itsour products, services, protection plans, and resources, which could have a material adverse effect on the Company’sour business, financial condition and results of operations.
With respect to the insurance programs that the Company offers, the Company iswe offer, we are dependent on the insurance carriers that underwrite the insurance to obtain appropriate regulatory approvals and maintain compliance with insurance regulations. If such carriers do not obtain appropriate state regulatory approvals or comply with such changing regulations, the Companywe may be required to use an alternative carrier or change itsour insurance products or cease marketing certain insurance related products in certain states, which could have a material adverse effect on the Company’sour business, financial condition and results of operations. If the Company iswe are required to use an alternative insurance carrier or change itsour insurance related products, itwe may materially increase the time required to bring an insurance related product to market. Any disruption in the Company’sour service offerings could harm the Company’sour reputation and result in customer dissatisfaction.
Additionally, the Company provideswe provide financing to qualified customers through a number of third party financing providers. If one or more of these third party providers ceases to provide financing to the Company’sour customers, provides financing to fewer customers or no longer provides financing on competitive terms, or if the Company iswe are unable to replace the current third party providers upon the occurrence of one or more of the foregoing events, it could have a material adverse effect on the Company’sour business, financial condition and results of operations.
A portion of the Company’sour revenue is from financing, insurance and extended service contracts, which depend on third party lenders and insurance companies. The CompanyWe cannot ensure these third parties will continue to provide RV financing and other products.
A portion of the Company’sour revenue comes from the fees the Company receiveswe receive from lending institutions and insurance companies for arranging financing and insurance coverage for the Company’sour customers. The lending institution pays the Company a fee for each loan that it arranges. If these lenders were to lend to the Company’sour customers directly rather than through the Company, the Companyus, we would not receive a fee. In addition, if customers prepay financing the Companywe arranged within a specified period (generally within six months of making the loan), the Company iswe are required to rebate (or “chargeback”) all or a portion of the commissions paid to the Company by the lending institution. The Company’ssame process applies to vehicle services contract fees, which are also subject to chargebacks if a customer chooses to terminate the contract early. We receive a chargeback for a portion of the initial fees received. Our revenues from financing fees and vehicle service contract fees are recorded net of a reserve for estimated future chargebacks based on historical operating results. Lending institutions may change the criteria or terms they use to make loan decisions, which could reduce the number of customers for whom the Companywe can arrange financing, or may elect to not continue to provide these products with respect to RVs. The Company’sOur customers may also use the internet or other electronic methods to find financing alternatives. If any of these events occur the Companyon a large scale, we could lose a significant portion of itsour income and profit.
Furthermore, new and usedpre-owned vehicles may be sold and financed through retail installment sales contracts entered into between the Company and third-party purchasers. Prior to entering into a retail installment sales contract with a third-party purchaser, the Companywe typically hashave a commitment from a third-party lender for the assignment of such retail installment sales contract, subject to final review, approval and verification of the retail installment sales contract, related documentation and the information contained therein. Retail installment sales contracts are typically assigned by the Company to third-party lenders simultaneously with the execution of the retail installment sales contracts. Contracts in transit represent amounts due from third-party lenders from whom pre-arranged assignment agreements have been determined, and to whom the retail installment sales contract have been assigned. The Company recognizesWe recognize revenue when the applicable new or usedpre-owned vehicle is delivered and the Company haswe have assigned the retail installment sales contract to a third-party lender and collectability is reasonably assured. Funding from the third-party lender is provided upon receipt, final review, approval and verification of the retail installment sales contract, related documentation and the information contained therein. Retail installment sales contracts are typically funded within ten days of the initial approval of the retail installment sales contract by the third-party lender. Contracts in transit are included in current assets in the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K and totaled $12.3$15.4 million and $24.2 million as of December 31, 20182022 and $15.5 million as of December 31, 2017.2021, respectively. Any significant number of defaults on these retail installment sales contracts could have a material adverse effect on the Company’sour business, financial condition and results of operations.
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 success depends in part on its ability to attract, hire, train and retain qualified managerial, sales and marketing personnel. Competition for these types of personnel is high. The Company may be unsuccessful in attracting and retaining the personnel it requires to conduct its operations successfully and, in such an event, the Company’s business could be materially and adversely affected. The Company’s success also depends to a significant extent on the continued service and performance of the Company’s senior management team, including its Chairman and Chief Executive Officer, William Murnane. The loss of any member of the Company’s senior management team could impair its ability to execute its business plan and could therefore have a material adverse effect on the Company’s business, results of operations and financial condition. The Company does not currently maintain key man life insurance policies on any member of its senior management team or other key employees. The Company entered into an employment agreement with William Murnane, the Company’s Chief Executive Officer and Chairman, which became effective upon the consummation of the Mergers. The Company has entered into an employment offer letter with Nicholas Tomashot, the Company’s Chief Financial Officer. The Company does not have any other employment agreements currently in place with other senior executives.
The Company’s business depends on its ability to meet its labor needs.
The Company’s success depends in part upon its ability to attract, motivate and retain a sufficient number of qualified employees, including market managers, general managers, sales managers, department managers and sales associates. Qualified individuals of the requisite caliber may be scarce in some areas. If the Company is unable to hire and retain sales associates capable of consistently providing a high level of customer service, as demonstrated by, among other qualities, their enthusiasm for the Company’s culture and knowledge of the Company’s products, the Company’s business could be materially adversely affected. Although none of the Company’s employees is currently covered by collective bargaining agreements, the Company’s employees may elect to be represented by labor unions in the future. If Company employees were to so elect, the Company’s labor costs could increase. Additionally, competition for qualified employees could require the Company to pay higher wages to attract the required number of employees. An inability to recruit and retain a sufficient number of qualified employees in the future may delay any planned openings or expansions of new dealerships. Any such delays, any material increases in employee turnover rates at existing stores or any increases in labor costs could have a material adverse effect on the Company’s business, financial condition or results of operations.
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 leases most of the real properties where it has operations, including, as of December 31, 2018, five of the six Lazydays retail locations operating in four states. The Company’s leases, at inception, generally provide for fixed monthly rentals with escalation clauses and range from five to twenty years. There can be no assurance that the Company will be able to maintain its existing retail locations as leases expire, extend the leases or be able to locate alternative sites in its target markets and on favorable terms. Any failure to maintain its existing retail locations, extend the leases or locate alternative sites on favorable or acceptable terms could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’sOur business is subject to numerous federal, state and local regulations.regulations.
The Company’sOur operations are subject to varying degrees of federal, state and local regulation, including regulations with respect to the Company’sour RV sales, RV financing, marketing, direct mail, roadside assistance programs and insurance activities. New regulatory efforts may be proposed from time to time that may affect the way the Company operates itswe operate our businesses. For example, in the past a principal source of leads for the Company’sour direct response marketing efforts was new vehicle registrations provided by motor vehicle departments in various states. Currently, all states restrict access to motor vehicle registration information.
The Company isWe are also subject to federal and state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles. Federal, state and local laws and regulations also impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions. Federal and state authorities also have various environmental control standards relating to air, water, noise pollution and hazardous waste generation and disposal which affect the Company’s business and operations.
Further, certain federal and state laws and regulations affect the Company’sour activities. Areas of the Company’sour business affected by such laws and regulations include, but are not limited to, labor, advertising, consumer protection, digital marketing, real estate, promotions, quality of services, intellectual property, tax, import and export, anti-corruption, anti-competition, environmental, health and safety. Compliance with these laws and others may be onerous and costly, at times, and may be inconsistent from jurisdiction to jurisdiction which further complicates compliance efforts.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law on July 21, 2010, established the BCFP,Bureau of Consumer Financial Protection (“BCFP”), an independent federal agency funded by the United States Federal Reserve with broad regulatory powers and limited oversight from the United States Congress. Although automotive dealers are generally excluded, the Dodd-Frank Act could lead to additional, indirect regulation of automotive dealers, in particular, their sale and marketing of finance and insurance products, through its regulation of automotive finance companies and other financial institutions. In March 2013, the BCFP issued supervisory guidance highlighting its concern that the practice of automotive dealers being compensated for arranging customer financing through discretionary markup of wholesale rates offered by financial institutions (“dealer markup”) results in a significant risk of pricing disparity in violation of ECOA. The BCFP recommended that financial institutions under its jurisdiction take steps to address compliance with the ECOA, which may include imposing controls on dealer markup, monitoring and addressing the effects of dealer markup policies, and eliminating dealer discretion to markup buy rates and fairly compensating dealers using a different mechanism.
In addition, the Patient Protection and Affordable Care Act (the “Affordable Care Act”), which was signed into law on March 23, 2010, may increase the Company’sour annual employee health care costs that it fundswe fund and has increased the Company’sour cost of compliance and compliance risk related to offering health care benefits. Efforts to modify, repeal or otherwise invalidate all, or certain provisions of, the Affordable Care Act and/or adopt a replacement healthcare reform law may impact the Company’sour employee healthcare costs. If health carehealthcare costs rise, the Companywe may experience increased operating costs, which may adversely affect the Company’sour business, financial condition and results of operations.
Furthermore, the Company’sour property and casualty insurance programs that it offerswe offer through third party insurance carriers are subject to state laws and regulations governing the business of insurance, including, without limitation, laws and regulations governing the administration, underwriting, marketing, solicitation or sale of insurance products. The Company’sOur third party insurance carriers are required to apply for, renew, and maintain licenses issued by state, federal or foreign regulatory authorities. Such regulatory authorities have relatively broad discretion to grant, renew and revoke such licenses. Accordingly, any failure by such parties to comply with the then current licensing requirements, which may include any determination of financial instability by such regulatory authorities, could result in such regulatory authorities denying third party insurance carriers’ initial or renewal applications for such licenses, modifying the terms of licenses or revoking licenses that they currently possess, which could severely inhibit the Company’sour ability to market these insurance products. Additionally, certain state laws and regulations govern the form and content of certain disclosures that must be made in connection with the sale, advertising or offer of any insurance program to a consumer. The Company reviewsWe review all marketing materials it disseminateswe disseminate to the public for compliance with applicable insurance regulations. The Company isWe are required to maintain certain licenses and approvals in order to market insurance products.
The Company hasWe have instituted various comprehensive policies and procedures to address compliance. However, there can be no assurance that employees, contractors, vendors or the Company’sour agents will not violate such laws and regulations or the Company’sour policies and procedures.
Regulations applicable to the sale of extended service contracts could materially impact the Company’s business and results of operations.
The Company offers extended service contracts that may be purchased as a supplement to the original purchaser’s warranty. These products are subject to complex federal and state laws and regulations. There can be no assurance that regulatory authorities in the jurisdictions in which these products are offered will not seek to regulate or restrict these products. Failure to comply with applicable laws and regulations could result in fines or other penalties including orders by state regulators to discontinue sales of the warranty products in one or more jurisdictions. Such a result could materially and adversely affect the Company’s business, results of operations and financial condition.
The Company currently transfers the majority of the administration and liability obligations associated with these extended service contracts to a third party upon purchase by the customer. State laws and regulations, however, may limit or condition the Company’s ability to transfer these administration and liability obligations to third parties, which could in turn impact the way revenue is recognized from these products. Failure to comply with these laws could result in fines or other penalties, including orders by state regulators to discontinue sales of these product offerings as currently structured. Such a result could materially and adversely affect the Company’s business, financial condition 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.
State dealer laws generally provide that a manufacturer may not terminate or refuse to renew a dealer agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Some state dealer laws allow dealers to file protests or petitions or attempt to comply with the manufacturer’s criteria within a specified notice period to avoid the termination or non-renewal. Manufacturers have been lobbying and continue to lobby for the repeal or revision of state dealer laws. Although the lobbying efforts have been unsuccessful to date, if dealer laws are repealed in the states in which the Company operates, manufacturers may be able to terminate the Company’s dealer agreements without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of state dealer laws, it may also be more difficult for the Company to renew its dealer agreements upon expiration.
The ability of a manufacturer to grant additional dealer agreements is based on a number of factors which the Company cannot control. If manufacturers grant new dealer agreements in areas near the Company’s existing markets, such new dealer agreements could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’sOur failure to comply with certain environmental regulations could adversely affect the Company’sour business, financial condition and results of operations.
The Company’sOur operations involve the use, handling, storage and contracting for recycling and/or disposal of materials such as motor oil and filters, transmission fluids, antifreeze, refrigerants, paints, thinners, batteries, cleaning products, lubricants, degreasing agents, tires and propane. Consequently, the Company’sour business is subject to federal, state and local requirements that regulate the environment and public health and safety. The CompanyWe may incur significant costs to comply with such requirements. The Company’sOur failure to comply with these regulations and requirements could cause the Companyus to become subject to fines and penalties or otherwise have an adverse impact on the Company’sour business. In addition, the Company haswe have indemnified certain of itsour landlords for any hazardous waste which may be found on or about property the Company leases.we lease. If any such hazardous waste were to be found on property that the Company occupies,we occupy, a significant claim giving rise to the Company’sour indemnity obligation could have a negative effect on the Company’sour business, financial condition and results of operations.
Risks Related to Our Capital Stock
Climate change legislationFuture resales of the shares of common stock of the Company issued to the stockholders and the investors in the Private Investment in Public Equity (PIPE) Investment may cause the market price of our securities to drop significantly, even if our business is doing well.
We are party to a registration rights agreement pursuant to which certain stockholders have been granted certain demand and “piggy-back” registration rights with respect to their securities. Additionally, the investors who simultaneously with the closing of the Merger purchased convertible preferred stock, common stock and warrants for an aggregate purchase price of $94.8 million (the “PIPE Investment”) were granted registration rights pursuant to which we filed a registration statement covering the resale of granted securities. This resale registration statement is currently effective.
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Furthermore, the stockholders and investors in the PIPE Investment may sell Company common stock pursuant to Rule 144 under the Securities Act, if available, rather than under a registration statement. In these cases, the resales must meet the criteria and conform to the requirements of that rule.
Subject to the continuing effectiveness of the resale registration statement or regulations restricting emissionupon satisfaction of “greenhouse gases”the requirements of Rule 144 under the Securities Act, the stockholders and investors in the PIPE Investment may sell large amounts of Company common stock in the open market or in privately negotiated transactions, which could resulthave the effect of increasing the volatility in increased operating costsour stock price or putting significant downward pressure on the price of our common stock.
Our outstanding Series A convertible preferred stock, warrants, options and reduced demandrestricted stock units may have an adverse effect on the market price of our common stock.
As of December 31, 2022, we had outstanding (i) stock options issued to the board of directors and employees to purchase 1,052,093 shares of common stock at exercise prices ranging from $5.05 to $30.00 per share, (ii) pre-funded warrants to purchase up to 300,357 shares of common stock that were issued in the PIPE Investment, (iii) warrants to purchase 726,878 shares of our common stock at $11.50 per share issued in the PIPE Investment, (iv) warrants to purchase 2,138,190 shares of our common stock at $11.50 per share held by Andina public shareholders, (v) 600,000 shares of Series A Preferred Stock which are convertible into up to 5,962,733 shares of common stock, taking into account any accrued dividends which we may elect to pay in cash or shares of common stock, and (vi) 207,822 restricted stock units. We may also issue additional equity awards under our Amended and Restated 2018 Long-Term Incentive Plan (the “Amended 2018 Plan”).
The sale, or even the possibility of sale, of the shares of common stock underlying the warrants, stock options, restricted stock units and Series A Preferred Stock and the shares issuable under the Amended 2018 Plan could have an adverse effect on the market price of the common stock or on our ability to obtain future financing. If and to the extent these warrants, stock options and restricted stock units are exercised or the Series A Preferred Stock is converted to common stock, you may experience substantial dilution to your holdings.
The conversion of the Series A Preferred Stock into Company common stock may dilute the value for the RVsother holders of our common stock.
The Series A Preferred Stock is convertible into Company common stock. As a result of the conversion of any issued and outstanding Series A Preferred Stock, the existing holders of Company common stock will own a smaller percentage of the outstanding Company common stock. Further, additional Company common stock may be issuable pursuant to certain other features of the Series A Preferred Stock, with such issuances being further dilutive to existing holders of Company common stock.
If the Series A Preferred Stock is converted into Company common stock, holders of such converted Company common stock will be entitled to the same dividend and distribution rights as other holders of Company common stock. As such, another dilutive effect which may result from the conversion of any shares of Series A Preferred Stock will be a dilution to dividends and distributions receivable on account of Company common stock.
The holders of Series A Preferred Stock own a large portion of the voting power of the Company sells.
The United States Environmental Protection Agency has adopted rules under existing provisionscommon stock and have the right to designate two members to our board of directors. This significantly influences the composition of the board of directors of the Company and future actions taken by the board of directors of the Company.
Our board of directors currently has seven members. The holders of the Series A Preferred Stock are exclusively entitled to designate two members to our board of directors. In addition, the holders of the Series A Preferred Stock are entitled to vote upon all matters upon which holders of our common stock have the right to vote and are entitled to the number of votes equal to the number of full shares of Company common stock into which such shares of Series A Preferred Stock could be converted at the then applicable conversion rate. These matters include the election of all director nominees not designated by the holders of the Series A Preferred Stock. As a result, the holders of the Series A Preferred Stock have significant influence on the composition of our board of directors.
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As of December 31, 2022, the holders of the Series A Preferred Stock held approximately 34.9% of the voting power of the Company on an as-converted basis, taking into account the accrued dividends which we may elect to pay in cash or shares of common stock. As a result, the holders of the Series A Preferred Stock will have the ability to influence future actions by the Company requiring stockholder approval.
Pursuant to the Certificate of Designations governing the Series A Preferred Stock, the holders of the Series A Preferred Stock must consent to the Company taking certain actions, including among others, the increase in the number of directors constituting our board of directors above eight members, the incurrence of certain indebtedness and the sale of certain assets. The holders of the Series A Preferred Stock are not obligated to consent to any specific action and there can be no assurance that the holders will consent to any action our board of directors determines is in the best interests of our stockholders as a whole.
Additionally, the holders of the Series A Preferred Stock have been granted a right of first refusal on certain debt financings. Pursuant to this right, the holders of the Series A Preferred Stock have 15 business days to determine whether they want to undertake a covered debt financing. This may delay our ability to undertake a debt financing and may cause certain third parties to be less willing to engage in any debt financing with us. As a shareholder Series A Preferred shareholders could negatively impact your investment and may not take actions that will be in your best interest.
Our board of directors approved a new stock repurchase program, which could increase the volatility of the price of our common stock.
In September 2021, our board of directors approved a stock repurchase program authorizing us to repurchase up to a maximum of $25.0 million of our shares of common stock through December 31, 2022. On December 15, 2022, our board of directors approved the extension of the program for the remaining balance of $13.7 million and approved additional repurchases of $50.0 million, each through December 31, 2024. Repurchases may be made at management’s discretion from time to time in the open market, through privately negotiated transactions or pursuant to a trading plan subject to market conditions, applicable legal requirements and other factors. There can be no assurance that we would buy shares of our common stock or the timeframe for repurchases under our stock repurchase program or that any repurchases would have a positive impact on our stock price or earnings per share.
Our 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 us and our stockholders, which could increase the costs to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides to the fullest extent permitted by law that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to the Company or our 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 our directors, officers or other employees, which may discourage such lawsuits against the Company or our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in our amended and restated certificate of incorporation does not apply to actions arising under the federal Clean Airsecurities 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 that require a reductionof 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
General Risk Factors
We depend on our ability to attract and retain customers.
Our future success depends upon our ability to attract and retain customers for our products, services, protection plans, and resources. The extent to which we achieve growth in emissionsour customer base materially influences our profitability. Any number of greenhouse gases from motor vehicles. The adoptionfactors could affect our ability to grow our customer base. These factors include consumer preferences and general economic conditions, our ability to maintain our retail locations, weather conditions, the availability of any laws or regulations requiringalternative products, significant increases in fuel economy requirementsgasoline prices, the disposable income of consumers available for discretionary expenditures and the external perception of our brands. Any significant decline in our customer base, the rate of growth of our customer base or new federal or state restrictions on vehicles and automotive fuels in the United States could adversely affectcustomer demand for those vehicles and could have a material adverse effect on the Company’sour business, financial condition and results of operations.
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.
The Company owns a variety of registered trademarks and service marks. The Company believes that its trademarks have significant value and are important to its marketing efforts. If the Company is unable to continue to protect the trademarks and service marks for its proprietary brands, if such marks become generic or if third parties adopt marks similar to the Company’s marks, the Company’s ability to differentiate its products and services may be diminished. In the event that the Company’s trademarks or service marks are successfully challenged by third parties, the Company could lose brand recognition and be forced to devote additional resources to advertising and marketing new brands for its products.
From time to time, the Company may be compelled to protect its intellectual property, which may involve litigation. Such litigation may be time-consuming, expensive and distract the Company’s management from running the day-to-day operations of its business, and could result in the impairment or loss of the involved intellectual property. There is no guarantee that the steps the Company takes to protect its intellectual property, including litigation when necessary, will be successful. The loss or reduction of any of the Company’s significant intellectual property rights could diminish the Company’s ability to distinguish its products from competitors’ products and retain its market share for its proprietary products. The Company’s inability to effectively protect the Company’s proprietary intellectual property rights could have a material adverse effect on the Company’s business, results of operations and financial condition.
Other parties also may claim that the Company infringes on their proprietary rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against the Company or the payment of damages. These claims could have a material adverse effect on the Company’s business, financial condition and results of operations.
If the Company iswe are unable to protect, maintain or upgrade itsour information technology systems or if the Company iswe are unable to convert to alternate systems in an efficient and timely manner, the Company’sour operations may be disrupted or become less efficient.
The Company dependsWe depend on a variety of information technology systems for the efficient operation of itsour business. The Company reliesWe rely on hardware, telecommunications and software vendors to maintain and periodically upgrade many of these information technology systems so that the Companywe can continue to operate itsour business. Various components of the Company’sour information technology systems, including hardware, networks, and software, are licensed to the Companyus by third party vendors. The Company reliesWe rely extensively on itsour information technology systems to process transactions, summarize results and efficiently manage itsour business. Additionally, because the Company acceptswe accept debit and credit cards for payment, the Company iswe are subject to the Payment Card Industry Data Security Standard (the “PCI Standard”), issued by the Payment Card Industry Security Standards Council. The PCI Standard contains various compliance guidelines with respect to the Company’sour security surrounding the physical and electronic storage, processing and transmission of cardholder data. The Company isWe are currently in compliance with the PCI Standard, however, complying with the PCI Standard and implementing related procedures, technology and information security measures requires significant resources and ongoing attention to compliance. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to maintain compliance with the PCI Standard or with respect to maintenance or support of existing systems could also disrupt or reduce the efficiency of the Company’sour operations. Any material interruptions or failures in the Company’sour payment-related systems could have a material adverse effect on the Company’sour business, financial condition and results of operations.
Any disruptions to the Company’sour information technology systems or breaches of the Company’sour network security could interrupt itsour operations, compromise itsour reputation, expose itus to litigation, government enforcement actions and costly response measures and could have a material adverse effect on the Company’sour business, financial condition and results of operations.
The Company reliesWe rely on the integrity, security and successful functioning of itsour information technology systems and network infrastructure across the Company’sour operations. The Company usesWe use information technology systems to, among other things, generate and manage sales leads, support itsour consumer services and plans, manage procurement, manage itsour supply chain, track inventory information at itsour retail locations, communicate customer information and aggregate daily sales, margin and promotional information. The CompanyWe also usesuse information systems to report and audit itsour operational results.
In connection with sales, the Company transmitswe transmit encrypted confidential credit and debit card information. Although the Company iswe are currently in compliance with the PCI Standard, there can be no assurance that in the future the Companywe will be able to remain compliant with the PCI Standard or other industry recommended or contractually required practices. Even if the Company continueswe continue to be compliant with such standards, itwe still may not be able to prevent security breaches.
The CompanyWe also hashave access to, collectscollect or maintainsmaintain private or confidential information regarding itsour customers, associates and suppliers, as well as the Company’sour business. The protection of the Company’sour customer, associate, supplier and company data is critical to the Company.us. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and constantly changing requirements across the Company’sour business and operations. In addition, the Company’sour customers have a high expectation that the Companywe will adequately protect their personal information from cyber-attacks and other security breaches. The Company hasWe have procedures in place to safeguard itsour customer’s data and information. However, a significant breach of customer, employee, supplier, or company data could attract a substantial amount of negative media attention, damage the Company’sour relationships with itsour customers and suppliers, harm the Company’sour reputation and result in lost sales, fines and/or lawsuits.
An increasingly significant portion of the Company’sour sales depends on the continuing operation of itsour information technology and communications systems, including but not limited to itsour point-of-sale system and itsour credit card processing systems. The Company’sOur information technology, communication systems and electronic data may be vulnerable to damage or interruption from earthquakes, acts of war or terrorist attacks, floods, fires, tornadoes, hurricanes, power loss and outages, computer and telecommunications failures, computer viruses, loss of data, unauthorized data breaches, usage errors by the Company’sour associates or the Company’sour contractors or other attempts to harm the Company’sour systems, including cyber-security attacks, hacking by third parties, computer viruses or other breaches of cardholder data. Some of the Company’sour information technology and communication systems are not fully redundant and the Company’sour disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, intentional sabotage or other unanticipated problems could result in lengthy interruptions in the Company’sour information technology and communications systems. Any errors or vulnerabilities in the Company’sour information technology and communications systems, or damage to or failure of itsour information technology and communications systems, could result in interruptions in the Company’s services and non-compliance with certain regulations or expose the Companyus to risk of litigation and liability, which could have a material adverse effect on the Company’sour business, financial condition and results of operations.
Increases in the minimum wage or overall wage levels could adversely affect the Company’s financial results.
From time to time, legislative proposals are made to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states. As federal or state minimum wage rates increase, the Company may be required to increase not only the wage rates of the Company’s minimum wage employees, but also the wages paid to the Company’s other hourly employees as well. Any increase in the cost of the Company’s labor could have an adverse effect on the Company’s operating costs, financial condition and results of operations.
The CompanyWe may be subject to product liability claims if people or property are harmed by the products the Company sellswe sell and may be adversely impacted by manufacturer safety recalls.
Some of the products the Company sellswe sell may expose the Companyus to product liability claims relating to personal injury, death, or environmental or property damage, and may require product recalls or other actions. Although the Company maintainswe maintain liability insurance, the Companywe cannot be certain that itsour insurance coverage will be adequate for liabilitieslosses actually incurred or that insurance will continue to be available to the Companyus on economically reasonable terms, or at all. In addition, some of the Company’sour agreements with itsour vendors and sellers do not indemnify the Companyus from losses attributable to product liability. In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that the products sold by the Company caused property damage or personal injury could damage the Company’s brand image and itsour reputation with existing and potential consumers and have a material adverse effect on the Company’sour business, financial condition and results of operations.
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 faces legal risks in its business, including claims from disputes with its employees and its former employees and claims associated with general commercial disputes, product liability and other matters. Risks associated with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time. While the Company maintains director and officer insurance, as well as general and product liability insurance, the amount of insurance coverage may not be sufficient to cover a claim and the continued availability of this insurance cannot be assured. Regardless of their subject matter or merits, class action lawsuits may result in significant cost to the Company, which costs may not be covered by insurance, may divert the attention of management or may otherwise have an adverse effect on the Company’s business, brand image, financial condition and results of operations. Negative publicity from litigation, whether or not resulting in a substantial cost to the Company, could materially damage the Company’s reputation. The Company may in the future be the target of litigation and any such litigation may result in substantial costs and reputational harm and divert management’s attention and resources. Costs, harm to the Company’s reputation and diversion of management’s attention and resources could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’sOur risk management policies and procedures may not be fully effective in achieving their purposes.
The Company’sOur policies, procedures, controls and oversight to monitor and manage itsour enterprise risks may not be fully effective in achieving their purpose and may leave the Companyus exposed to identified or unidentified risks. Past or future misconduct by the Company’sour employees or vendors could result in violations of law by the Company, regulatory sanctions and/or serious reputational or financial harm to the Company. The Company monitors itsus. We monitor our policies, procedures and controls; however, there can be no assurance that its policies, procedures and controlsthese will be sufficient to prevent all forms of misconduct. The Company reviews itsWe review our compensation policies and practices as part of the Company’sour overall enterprise risk management program, but it is possible that itsour compensation policies could incentivize inappropriate risk taking or misconduct. If such inappropriate risks or misconduct occurs, it is possible that it could have a material adverse effect on the Company’sour business, financial condition and results of operations.
The CompanyWe could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.
The Company hasWe have a significant amount of goodwill, intangible assets and other long-lived assets. At least annually, the Company reviewswe review goodwill, trademarks and tradenamestrade names for impairment. Long-lived assets, identifiable intangible assets and goodwill are also reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from future cash flows. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. The Company’sOur determination of future cash flows, future recoverability and fair value of the Company’sour long-lived assets includes significant estimates and assumptions. Changes in those estimates and/or assumptions or lower than anticipated future financial performance may result in the identification of an impaired asset and a non-cash impairment charge, which could be material. Any such charge could adversely affect the Company.
Risks RelatedWe may be unable to Our Stockretain senior executives and attract and retain other qualified employees.
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.
Under the Merger Agreement, the stockholders, the optionholders, and the bonus payment recipients received, among other things, an aggregate of: (i) 2,857,189 shares of Company common stock; and (ii) $86.8 million. On May 15, 2018, as a result of a working capital adjustment, the Company received $0.6 million from the working capital escrow funds resultingOur success depends in a net purchase price of $86.2 million. On March 15, 2019, the indemnity escrow period set forth in the Merger Agreement expired and as a result certain stockholders, optionholders and the bonus payment recipients received, an aggregate of (i) 142,857 shares of Company common stock; and (ii) $5.7 million. Pursuant to the Merger Agreement, certain of the stockholders were restricted from selling any of the Company common stock that they received as a result of the Transaction Merger during the nine month period after the closing date of the Mergers, for certain stockholders, and during the twelve month period after the closing date of the Merger for certain stockholders subject to certain exceptions. These lock-up restrictions have now lapsed.
Subject to these restrictions, the Company has entered into a registration rights agreement pursuant to which certain stockholders have been granted certain demand and “piggy-back” registration rights with respect to their securities. Additionally, the investors who simultaneously with the closing of the Mergers purchased convertible preferred stock, common stock and warrants for an aggregate purchase price of $94.8 million (the “PIPE Investment”) have entered into a registration rights agreement granting them certain registration rights pursuant to which the Company has filed a registration statement covering the resale of such securities.
Furthermore, the stockholders and investors in the PIPE Investment may sell Company common stock pursuant to Rule 144 under the Securities Act, if available, rather than under a registration statement. In these cases, the resales must meet the criteria and conform to the requirements of that rule.
Subject to the effectiveness of any registration statement the Company files pursuant to the above-referenced registration rights or upon satisfaction of the requirements of Rule 144 under the Securities Act, the stockholders and investors in the PIPE Investment may sell large amounts of Company common stock in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the Company’s stock price or putting significant downward pressure on the price of the Company’s common stock.
Nasdaq may delist the Company’s common stock on 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 common stock is listed on the Nasdaq Stock Market. There is no assurance that the Company will be able to maintain the listing of its common stock in the future.
If the Company’s common stock is delisted from trading on Nasdaq, the Company could face significant material adverse consequences, including:
The Company’s outstanding convertible preferred stock, warrants and options may have an adverse effect on the market price of its common stock.
As of March 19, 2019, we had outstanding (i) stock options issued to the board of directors and employees to purchase 3,823,421 shares of common stock at exercise prices ranging from $6.47 to $11.10 per share, (ii) pre-funded warrants to purchase up to 1,339,499 shares of common stock that were issued in the PIPE Investment, (iii) warrants to purchase 2,522,458 shares of our common stock at $11.50 per share issued in the PIPE Investment, (iv) warrants to purchase 2,155,000 shares of our common stock at $11.50 per share held by Andina public shareholders, and (v) 5,962,733 shares of common stock issuable upon the conversion of the 600,000 Series A Preferred Stock of Holdco. We may also issue additional equity awards under our 2018 Long-Term Incentive Equity Plan (the “2018 Plan”). The sale, or even the possibility of sale, of the shares of common stock underlying the warrants, stock options and Series A Preferred Stock and the shares issuable under our incentive plan could have an adverse effect on the market price of the common stock orpart on our ability to obtain future financing. Ifattract, hire, train and retain qualified personnel. Competition for the personnel required is high. We may be unsuccessful in attracting and retaining the personnel needed to the extent these warrantsconduct operations successfully. In this event, our business could be materially and stock options are exercised or the Series A Preferred Stock is converted to common stock, you may experience dilution to your holdings.
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.
We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, and we will take advantage of certain exemptions from various reporting requirements that are applicable to other public companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Investors may find our common stock less attractive because we rely, or may rely, on these exemptions.adversely affected. In addition, under the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. If some investors find our common stock less attractive as a result, the priceloss of members of our common stock may be reduced, there may be a less active trading market forsenior management team could impair our common stock and the price ofability to execute our common stock may be more volatile.
We could remain an “emerging growth company” until the last day of 2020, although a variety of circumstances could cause us to lose that status earlier. For as long as we take advantage of the reduced reporting obligations, the information that we provide stockholders may be different from information provided by other public companies.
Stockholders may become diluted as a result of issuance of options under existing or future incentive plans or the issuance of common stock as a result of acquistions or otherwise.
The Company’s 2018 Long-Term Equity Incentive Plan (the “2018 Plan”) allows the Company to issue common stock underlying stock options or other forms of stock-based compensation to employees and directors totalling 3,824,566 shares of Company common stock. As of December 31, 2018, there were 3,658,421 options outstanding, which if vested in the future may be exercised for 3,658,421 shares of Company common stock and there were 166,145 shares available to be issued under equity incentive awards pursuant to the 2018 Plan. The effect of the issuance of common stock or other instruments, such as stock options, convertible into common stock under the 2018 Plan or future plans may be dilutive to current common stockholders.
The Company may issue additional securities in the future if it needs to raise capital for operations or growth initiatives, including acquisitions. For example, the Company may currently issue 1,900,000 shares of common stock in an acquisition transaction pursuant to the Form S-4 filed with the SEC on August 31, 2018. In the event a transaction was consummated which utilized these shares, the impact may be dilutive to current common stockholders.
The price of the Company’s common stock may be volatile for a variety of reasons.
The price of the Company’s common stock may be volatile,business plan and could decline, forhave a varietymaterial and adverse effect on our business, results of reasons including the Company’s operating performance, ability to retain key employees, ability to meet covenants,operations and ability to successfully execute its growth strategy amongst other factors. The Company’s stock price may also be impacted by external factors including the general economic and political environment, actions of competitors including their quarterly performance, litigation, the perception of the industry as a whole, and changes in laws or regulations, including accounting standards. As a result, these factors may adversely impact the market price of the Company’s common stock, regardless of the Company’s operational or finanical performance. Additionally, the impact of volatility may be greater if the Company’s public float and volume is smaller than some of its competitors.financial condition.
Item 1B. Unresolved Staff Comments
None.
Item 2. The conversion of the Series A Preferred Stock into Company common stock may dilute the value for the other holders of Company common stock.Properties
The Series A Preferred Stock is convertible into Company common stock. As a result of the conversion of any issued and outstanding Series A Preferred Stock, the existing holders of Company common stock will own a smaller percentage of the outstanding Company common stock. Further, additional Company common stock may be issuable pursuant to certain other features of the Series A Preferred Stock, with such issuances being further dilutive to existing holders of Company common stock.
If the Series A Preferred Stock is converted into Company common stock, holders of such converted Company common stock will be entitled to the same dividend and distribution rights as other holders of Company common stock. As such, another dilutive effect resulting from the conversion of any shares of Series A Preferred Stock will be a dilution to dividends and distributions receivable on account 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 are entitled to vote upon all matters upon which holders of the Company common stock have the right to vote and are entitled to the number of votes equal to the number of full shares of Company common stock into which such shares of Series A Preferred Stock could be converted at the then applicable conversion rate. Accordingly, the holders of the Series A Preferred Stock hold approximately 41.3% of the voting power of the Company on an as-converted basis. As a result, the holders of the Series A Preferred Stock may have the ability to influence future actions by the Company requiring stockholder approval.
Further, the Certificate of Designations of the Series A Preferred Stock provides that the holders of the Series A Preferred Stock have the right to nominate for election two individuals to the Company’s board of directors. As a result, the holders of Series A Preferred Stock will be able to influence the composition of the board of directors and, in turn, potentially influence and impact 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.
Pursuant to the certificate of designations governing the Series A Preferred Stock, the holders of the Series A Preferred Stock must consent to the Company taking certain actions, including among others, the increase in the number of directors constituting the Company’s board of directors above eight members, the incurrence of certain indebtedness and the sale of certain assets. The holders of the Series A Preferred Stock are not obligated to consent to any specific action and there can be no assurance that the holders will consent to any action the Company’s board of directors determines is in the best interests of its stockholders as a whole.
Additionally, the holders of the Series A Preferred Stock have been granted a right of first refusal on certain debt financings. Pursuant to this right, the holders of the Series A Preferred Stock have 15 business days to determine whether they want to undertake a covered debt financing. This may delay the Company’s ability to undertake a debt financing and may cause certain third parties to be less willing to engage in any debt financing with the Company.
None.
Although we own the property inat five of our Arizona location,locations, we have typically leaseleased all the real estate properties where we have operations. As of December 31, 2022, there was an outstanding balance on the Houston property mortgage of $5.4 million. Our real property leases generally provide for fixed monthly rents with annual escalation clauses and multiple renewal terms of 5 or3 to 20 years each. The leases are typically “triple net” requiring us to pay real estate taxes, insurance and maintenance costs. We believe that our properties are suitable and adequate for present purposes, and that the productive capacity in such properties is substantially being utilized.
The table below sets forth certain information concerning ourOur largest leased dealership locations.property is located in Tampa, Florida. The dealership is 384,000 square feet and sits on 126 acres. The lease term is 20 years with an initial expiration date in 2035.
Location | Acres | Square Feet | Term (years) | Initial Expiration | |||||||||
FL | 126 | 384,000 | 20 | 2035 | |||||||||
CO | 28 | 129,300 | 5 | 2020 | |||||||||
CO | 11 | 14,150 | 5 | 2020 | |||||||||
CO | 6 | 18,699 | 5 | 2020 | |||||||||
MN | 20 | 37,861 | 20 | 2038 | |||||||||
TN | 22 | 68,544 | 10 | 2028 |
The Company isItem 3. Legal Proceedings
We are a party to multiple legal proceedings that arise in the ordinary course of itsour business. The Company doesWe do not believe that the ultimate resolution of these matters will have a material adverse effect on itsour 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 or other matters could have a material adverse effect on the Company’sour business, results of operations, financial condition and/or cash flows.
Item 4. Mine Safety Disclosures
None.
None.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Currently, our shares of common stock are listed on the NASDAQNasdaq Capital Market under the symbol “LAZY” and our warrants are quoted on the OTC Pink marketplace under the symbol “LAZYW”.
Any over-the-counter market quotations of the warrants reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
As of March 19, 2019,February 24, 2023, there were 5140 holders of record of our shares of common stock, 4 holders of record of our shares of Series A Preferred Stock and 3112 holders of record of our warrants.
We have not paid any cash dividends on our common stock and do not plan to pay any cash dividends on our common stock in the foreseeable future. Our board of directors will determine our future dividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions, subject to any restrictions under our credit facility and the Certificate of Designations for the Series A Preferred Stock.
Recent Sales of Unregistered Securities
As detailed in the following table, during the year ended December 31, 2022 several institutional investors exercised warrants issued in the PIPE Investment, pursuant to the cashless exercise provisions on the warrants, resulting in the issuance of shares of our common stock.
Common | ||||||||
Date | Warrants Exercised | Shares Issued | ||||||
January 5, 2022 | 57,143 | 24,276 | ||||||
December 6, 2022 | 133,653 | 133,653 | ||||||
December 6, 2022 | 363,241 | 363,241 |
The above issuances were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3(a)(9) of such act, as exchanges of Company securities by existing security holders where no commission or remuneration was paid or given directly or indirectly for soliciting the exchanges.
Purchases of Equity Securities by the Issuer
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 (1) | ||||||||||||
October 1, 2022 - October 31, 2022 | 90,200 | $ | 12.31 | 3,388,089 | $ | 13,655 | ||||||||||
November 1, 2022 - November 30, 2022 | - | $ | - | 3,388,089 | $ | 13,655 | ||||||||||
December 1, 2022 - December 31, 2022 | 14,700 | $ | 11.91 | 3,402,789 | $ | 63,479 |
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.6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company’sour financial condition and results of operations should be read in conjunction with Part I, including matters set forth in the “Risk Factors” section of this Form 10-K and our Consolidated Financial Statements and notes thereto, included in Part II, Item 8 of this Form 10-K.
Forward Looking StatementsBusiness Overview
Certain statements in this Annual Report on Form 10-K (including but not limited to this Item 7 – “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 Annual Report on Form 10-K, including, without limitation, statements regarding 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 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.
Results of Operations
For the year ended December 31, 2022, we reported net income of $66.4 million, or $2.42 per diluted share. For the year ended December 31, 2021, we reported net income of $82.0 million or $3.93 per diluted share.
Year ended | % | |||||||||||||||
December 31 | Increase | |||||||||||||||
(In thousands, except per vehicle data) | 2022 | 2021 | Change | (Decrease) | ||||||||||||
Revenue | ||||||||||||||||
New Vehicle Retail | $ | 777,807 | $ | 725,114 | $ | 52,693 | 7.3 | % | ||||||||
Pre-Owned Vehicle Retail | 394,582 | 372,566 | 22,016 | 5.9 | % | |||||||||||
Vehicle Wholesale | 21,266 | 14,241 | 7,025 | 49.3 | % | |||||||||||
Finance & Insurance | 75,482 | 72,647 | 2,835 | 3.9 | % | |||||||||||
Service, Body & Parts, Other | 57,824 | 50,480 | 7,344 | 14.5 | % | |||||||||||
Total Revenue | 1,326,961 | 1,235,048 | 91,913 | 7.4 | % | |||||||||||
Gross Profit | ||||||||||||||||
New Vehicle Retail | 145,491 | 138,238 | 7,253 | 5.2 | % | |||||||||||
Pre-Owned Vehicle Retail | 93,017 | 94,530 | (1,513 | ) | (1.6 | )% | ||||||||||
Vehicle Wholesale | (354 | ) | 650 | (1,004 | ) | NM | ||||||||||
Finance & Insurance | 72,753 | 70,174 | 2,579 | 3.7 | % | |||||||||||
Service, Body & Parts, Other | 30,167 | 24,709 | 5,458 | 22.1 | % | |||||||||||
LIFO | (12,383 | ) | (4,811 | ) | (7,572 | ) | 157.4 | % | ||||||||
Total Gross Profit | 328,691 | 323,490 | 5,201 | 1.6 | % | |||||||||||
Gross profit margins | ||||||||||||||||
New Vehicle Retail | 18.7 | % | 19.1 | % | (36) bps | |||||||||||
Pre-Owned Vehicle Retail | 23.6 | % | 25.4 | % | (180) bps | |||||||||||
Vehicle Wholesale | (1.7 | %) | 4.6 | % | (623) bps | |||||||||||
Finance & Insurance | 96.4 | % | 96.6 | % | (21) bps | |||||||||||
Service, Body & Parts, Other | 52.2 | % | 48.9 | % | 322 bps | |||||||||||
Total gross profit margin | 24.8 | % | 26.2 | % | (142) bps | |||||||||||
Total gross profit margin (ex-LIFO) | 25.7 | % | 26.86 | % | (110) bps | |||||||||||
Retail units sold | ||||||||||||||||
New Vehicle Retail | 8,603 | 8,930 | (327 | ) | (3.7 | )% | ||||||||||
Used Vehicle Retail | 5,409 | 5,283 | 126 | 2.4 | % | |||||||||||
Total retail units sold | 14,012 | 14,213 | (201 | ) | (1.4 | )% | ||||||||||
Average selling price per retail unit | ||||||||||||||||
New Vehicle Retail | $ | 90,411 | $ | 81,200 | 9,211 | 11.3 | % | |||||||||
Used Vehicle Retail | 72,949 | 70,522 | 2,427 | 3.4 | % | |||||||||||
Average gross profit per retail unit (ex-LIFO) | ||||||||||||||||
New Vehicle Retail | $ | 16,912 | $ | 15,480 | 1,432 | 9.2 | % | |||||||||
Used Vehicle Retail | 17,197 | $ | 17,893 | (696 | ) | (3.9 | )% | |||||||||
Finance and Insurance | 5,192 | 4,937 | 255 | 5.2 | % |
Business Overview
NM - Not meaningful
Our Business
23 |
Same Store Operating Data
We believe that same store comparisons are an important indicator of our financial performance. Same store measures demonstrate our ability to grow operations in our existing locations.
Same store measures reflect results for stores that were operating in each comparison period, and only include the months when operations occurred in both periods. For example, a store acquired in August 2021 would be included in same store operating data beginning in September 2022, after its first complete comparable month of operations. The Company operates RV dealershipsfourth quarter operating results for the same store comparisons would include results for that store for both comparable periods. Note that this financial metric has no standardized meaning and offersmay not be comparable to similar measures presented by other companies.
Year ended | % | |||||||||||||||
December 31 | Increase | |||||||||||||||
(In thousands, except per vehicle data) | 2022 | 2021 | Change | (Decrease) | ||||||||||||
Revenue | ||||||||||||||||
New Vehicle Retail | $ | 682,077 | $ | 725,114 | ($ | 43,037 | ) | (5.9 | )% | |||||||
Pre-Owned Vehicle Retail | 360,173 | 372,566 | (12,393 | ) | (3.3 | )% | ||||||||||
Vehicle Wholesale | 19,841 | 14,241 | 5,600 | 39.3 | % | |||||||||||
Finance & Insurance | 67,680 | 72,647 | (4,967 | ) | (6.8 | )% | ||||||||||
Service, Body & Parts, Other | 51,979 | 50,480 | 1,499 | 3.0 | % | |||||||||||
Total Revenue | 1,181,750 | 1,235,048 | (53,298 | ) | (4.3 | )% | ||||||||||
Gross Profit | ||||||||||||||||
New Vehicle Retail | $ | 125,128 | $ | 138,237 | ($ | 13,109 | ) | (9.5 | )% | |||||||
Pre-Owned Vehicle Retail | 83,375 | 94,531 | (11,156 | ) | (11.8 | )% | ||||||||||
Vehicle Wholesale | (377 | ) | 650 | (1,027 | ) | NM | ||||||||||
Finance & Insurance | 65,296 | 70,174 | (4,878 | ) | (7.0 | )% | ||||||||||
Service, Body & Parts, Other | 27,182 | 24,710 | 2,472 | 10.0 | % | |||||||||||
LIFO | (12,383 | ) | (4,811 | ) | (7,572 | ) | 157.4 | % | ||||||||
Total Gross Profit | 288,221 | 323,491 | (35,270 | ) | (10.9 | )% | ||||||||||
Gross profit margin | ||||||||||||||||
New Vehicle Retail | 18.3 | % | 19.1 | % | (72) bps | |||||||||||
Pre-Owned Vehicle Retail | 23.1 | % | 25.4 | % | (222) | |||||||||||
Vehicle Wholesale | (1.9 | %) | 4.6 | % | (646) | |||||||||||
Finance & Insurance | 96.5 | % | 96.6 | % | (12) | |||||||||||
Service, Body & Parts | 52.3 | % | 48.9 | % | 335 | |||||||||||
Total gross profit margin | 24.4 | % | 26.2 | % | (180) | |||||||||||
Total gross profit margin (Ex-LIFO) | 25.4 | % | 26.6 | % | (114) | |||||||||||
Retail units sold | ||||||||||||||||
New Vehicle Retail | 7,361 | 8,930 | (1,569 | ) | (17.6 | )% | ||||||||||
Used Vehicle Retail | 4,847 | 5,283 | (436 | ) | (8.3 | )% | ||||||||||
Total retail units sold | 12,208 | 14,213 | (2,005 | ) | (14.1 | )% | ||||||||||
Average selling price per retail unit | ||||||||||||||||
New Vehicle Retail | $ | 92,661 | $ | 81,200 | 11,461 | 14.1 | % | |||||||||
Used Vehicle Retail | 74,308 | 70,522 | 3,786 | 5.4 | % | |||||||||||
Average gross profit per retail unit (ex-LIFO) | ||||||||||||||||
New Vehicle Retail | $ | 16,999 | $ | 15,480 | 1,519 | 9.8 | % | |||||||||
Used Vehicle Retail | 17,201 | 17,893 | (683 | ) | (3.9 | )% | ||||||||||
Finance and Insurance | 5,349 | 4,937 | 411 | 8.3 | % |
NM - Not meaningful
24 |
New Vehicles
We offer a comprehensive portfolioselection of productsnew RVs across a wide range of price points, classes and services forfloor plans, from entry level travel trailers to Class A motorhomes, at our dealership locations and on our website. We have strong strategic alliances with leading RV ownersmanufacturers. The core brands that we sell, representing 96.6% of the new vehicles that we sold in 2022, are manufactured by Thor Industries, Inc., Winnebago Industries, Inc., and outdoor enthusiasts. The Company generates revenueForest River, Inc.
Under our business strategy, we believe that our new RV sales create incremental profit opportunities by providing used RV owners and outdoor enthusiasts a full spectruminventory through trade-ins, arranging of products:third-party financing, RV sales, RV repair and services, financingservice and insurance products, third-party protection plans, after-marketcontracts, future resale of trade-ins and parts and accessories,service work.
Revenue from new vehicle revenues and gross profits increased 7.3% and 5.2%, respectively, compared to 2021. The growth resulted primarily from acquisitions. During 2022 same store new vehicle revenues decreased 5.9% compared to the prior year. This was primarily due to an increase in average unit selling price of 14.1%, offset by a decrease in new vehicle units retailed of 17.6%. New vehicle gross profit (excluding LIFO) declined 9.5% in 2022 compared to 2021 on a same store basis. This was driven by a decrease in retailed units of 17.6%, offset by an increase in gross profit (excluding LIFO) per unit of 9.8%. While demand remained high through the first half of the year, we noted declines in the back half of the year as inventory supply began to normalize. To address normalizing inventory levels and demand, our stores discounted pricing on 2022 new vehicle model year inventory in the second half of the year in order to limit the percentage of previous model year inventory by year end. We ended 2022 with approximately 65% of our inventory as current model year.
Pre-owned vehicles
Pre-owned vehicle retail sales are a strategic focus for growth. Our pre-owned vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, to sell models other than the store’s new vehicle models, access additional used vehicle inventory through trade-ins and increase sales from finance and insurance products. We sell a comprehensive selection of pre-owned RVs at our dealership locations. We have established a goal to reach a used to new ratio of 1:1. Strategies to achieve this target include reducing wholesale sales, procuring additional used RV rentalsinventory direct from consumers and selling deeper into the pre-owned RV camping. The Company provides these offeringsspectrum.
Revenue from pre-owned vehicle sales increased 5.9% and gross profit decreased 1.6% compared to 2021. Pre-owned vehicle revenue increased primarily due to growth through its Lazydays branded dealerships. Lazydaysacquisitions. On a same store basis, pre-owned vehicle retail revenue decreased 3.3% due to a 5.4% increase in average selling price offset by an 8.3% decrease in retail units sold. Pre-owned vehicle retail gross profits decreased 11.8% in 2022 on a same store basis due to a decrease in pre-owned retail units sold of 8.3% and a decrease of 3.9% in gross profit per unit.
Finance and Insurance
We believe that arranging timely financing is known nationallyan important part of providing access to the RV lifestyle and we attempt to arrange financing for every vehicle we sell. We also offer related products such as Theextended warranties, insurance contracts and other maintenance products.
Finance and insurance (“F&I”) revenues grew 3.9% during 2022 compared to 2021, primarily due to acquisitions. On a same store basis, finance and insurance revenue decreased 6.8% primarily due to a decrease in total retail units sold of 14.1% offset by an increase in F&I per unit of 8.3%. During 2022 our finance penetration increased 130 basis points from 63% to 64.3%.
Our gross margin on finance and insurance revenues is approximately 96%.
Service, Body and Parts
With approximately 575 service bays, we provide onsite general RV AuthorityTM , a registered trademark that has been consistently usedmaintenance and repair services at all of our dealership locations. We employ over 300 highly skilled technicians, many of them certified by the CompanyRecreational Vehicle Industry Association (“RVIA”) or the National RV Dealers Association (“RVDA”) and we are equipped to offer comprehensive services and perform OEM warranty repairs for most RV components. Earnings from service, body and parts have historically been more resilient during economic downturns, when owners have tended to hold and repair their existing RVs rather than buy a new one.
25 |
Service, body and parts, other is a strategic area of focus and area of opportunity to grow additional earnings. Our service, body and parts revenue and gross profit increased 14.5% and 22.1%, respectively, during 2022 compared to 2021. This growth was driven primarily by acquisitions, complimented by growth in its marketingsame store results. During 2022, our same store service, body and branding communications since 2013. In this Annual Report on Form 10-K, the Company refers to Lazydays Holdings, Inc. as “Lazydays,” the “Company,” “Holdco,” “we,” “us,” “our,”parts revenue increased 3.0% and similar words.our gross profit increased 10.0%.
The Company believes, based on industry research and management’s estimates, it operates the world’s largest RV dealership, measured in terms of on-site inventory, located on 126 acres outside Tampa, FL. The Company also operates RV dealerships in Tucson, Arizona; Minneapolis, Minnesota; and two cities in Colorado, Loveland and Denver. Lazydays offers one of the largest selections of RV brands in the nation featuring more than 3,000 new and pre-owned RVs. The Company has over 400 service bays across all locations and has RV parts and accessories stores at all locations. Lazydays also has RV rental fleets in Florida, and Colorado and availability to two on-site campgrounds with over 700 RV campsites. The Company welcomes over 500,000 visitors to its dealership locations annually, and employs over 800 people at the six facilities. The Company’s dealership locations are staffed with knowledgeable local team members, providing customers access to extensive RV expertise. The Company believes its dealership 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 account for a significant portion of new RV units sold on an annual basis in the U.S. The Company’s dealerships in these key markets attract customers from every state 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 CRM tools and analytics to actively engage, market and sell its products and services.Other Revenue
How The Company Generates Revenue
The Company derives its revenues from sales of new units, sales of pre-owned units, and other revenue. Other revenue consists of RV parts, service and repairs, commissions earned on sales of third-party financingparts, accessories, and insurance products, visitor fees at the Tamparelated services as well as campground revenues.
Selling, General and food facilities, and miscellaneous revenues. During the years ended December 31, 2018 and 2017, the Company derived its revenues from these categories in the following percentages:Administrative Expenses
Comined Successor and Predecessor | Predecessor | |||||||
For the Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
New vehicles | 54.9 | % | 54.6 | % | ||||
Pre-owned vehicles | 33.6 | % | 34.3 | % | ||||
Other | 11.5 | % | 11.1 | % | ||||
100.0 | % | 100.0 | % |
New and pre-owned RV sales accounted for approximately 89% of total revenues for the years ended December 31, 2018 and 2017. These revenue contributions have remained relatively consistent year over year.
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 97% of the cost of revenues for the years ended December 31, 2018 and 2017. 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 years ended December 31, 2018 and 2017, gross profit was $131.7 million and $127.1 million, respectively, and gross margin was 21.6% and 20.7% for the years then ended. Excluding the impact of LIFO adjustments, gross profit was $133.1 million and $130.9 million and gross margin was 21.9% and 21.3%, respectively for the years ended December 31, 2018 and 2017. The Company’s gross margins on pre-owned vehicles are typically higher than gross margins on new vehicles, on a percentage basis.
During the years ended December 31, 2018 and 2017, gross margins were also favorably impacted by other revenue, 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. These combined revenues were 11.5% and 11.1%, respectively, of total revenues during the years ended December 31, 2018 and 2017.
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, commissionsexpenses, transaction costs, and benefits represent the largest component of the Company’s total selling, general and administrativestock-based compensation expense, and averages approximately 53% of selling, general and administrative expenses, stock-based compensation,do not include depreciation and amortization and transaction costs. Duringexpense. SG&A expenses increased 20.1% to $222.2 million from $185.0 million during the years ended December 31, 20182022 and December 31, 2017, salaries, commissions,2021, respectively. The increase was primarily related to; (a) overhead associated with the Maryville, Tennessee dealership acquired in March 2021; (b) overhead associated with the Portland, Oregon, Vancouver, Washington and benefits represented 53%Milwaukee, Wisconsin dealerships acquired in August 2021; (c) overhead associated with the Monticello, Minnesota dealership opened in March 2022; (d) overhead associated with the Tulsa, Oklahoma dealership acquired in July 2022 and; (e) increases in other SG&A expenses including marketing expense, performance wages, support costs and 52% of these operating expenses.investments in IT infrastructure and compliance.
The Company calculates
We calculate SG&A expenses as a percentage of gross profit by dividing SG&A expenses for the period by total gross profit. For the years ended December 31, 20182022 and 2017, SG&A, excluding transaction costs, depreciation and amortization, and stock-based compensation expense as a percentage of gross profit was 73.5% and 75.8%, respectively. For the years ended December 31, 2018 and 2017, excluding the effect of transaction costs, LIFO adjustments, stock-based compensation and depreciation and amortization expense,2021, SG&A as a percentage of gross profit was 72.7%67.6% and 73.6%57.2%, respectively. The Company’s operating expenses haveincrease in this percentage is driven primarily by the lower comparable gross profit generated by the business as margins normalize, and overhead costs associated with locations added between the two periods, marketing, support costs and investments in IT infrastructure and compliance.
Stock based compensation increased compared to prior periods in part due to additional stock-based compensation, legal, accounting, insurance and other expenses that the Company expects to incur$2.1 million as a result of beingnew Restricted Stock Unit awards issued to management during 2022.
Interest Expense
Floor plan interest expense increased by approximately $6.7 million to $8.6 million from $1.9 million for the years ended December 31, 2022 and 2021, respectively, due primarily to higher floor plan balances combined with higher interest rates. These increases were offset by the use of an interest reduction equity account, which earns interest to offset floorplan interest expense. Other interest expense increased by approximately $1.4 million to $8.0 million from $6.6 million for the years ended December 31, 2022 and 2021, respectively, due primarily to higher interest rates.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with our SPAC merger. The change in fair value of the outstanding warrants was $12.5 million and ($11.7) million for the years ended December 31, 2022 and 2021, respectively. The change in fair value is the result of decreases in market prices which drive the value of the financial instruments.
Income Taxes
Income tax expense decreased to $19.2 million during the year ended December 31, 2022 from income tax expense of $28.2 million during the same period of 2021, due to the decrease in income.
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Non-GAAP Reconciliations
Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a public company,result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We believe each of the non-GAAP financial measures below improves the transparency of our disclosures, provides a meaningful presentation of our results from the core business operations because they exclude items not related to our ongoing core business operations and other non-cash items, and improves the period-to-period comparability of our results from the core business operations. We use these measures in conjunction with GAAP financial measures to assess our business, including our compliance with the Securities Actcovenants in our credit facility and in communications with our Board of 1933,Directors concerning financial performance. These measures should not be considered an alternative to GAAP measures.
EBITDA is defined as amended, the Securities Exchange Actnet income excluding depreciation and amortization of 1934, as amended, the Sarbanes-Oxley Actproperty and the related rules and regulations. In addition, as the Company executes its growth strategy the Company may acquireequipment, interest expense, net, amortization of intangible assets, and property, plant, and equipment which may result in additional depreciation and amortizationincome tax expense.
Adjusted EBITDA.Adjusted EBITDA is a not a U.S. Generally Accepted Accounting Principle (“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 performancedefined as follows:
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 gain on sale of property and equipment. The Company believes Adjusted EBITDA, when considered along withPPP Loan forgiveness, 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 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 this non-GAAP financial measure, see “Non-GAAP Financial Measures” below.
Results of Operations
The following table sets forth information comparing the components of net (loss) income for the years ended December 31, 2018 and 2017.
Summary Financial Data
(in thousands)
Combined Successor and Predecessor | Predecessor | |||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||
Revenues | ||||||||
New and pre-owned vehicles | $ | 538,129 | $ | 546,385 | ||||
Other | 70,065 | 68,453 | ||||||
Total revenue | 608,194 | 614,838 | ||||||
Cost of revenues (excluding depreciation and amortization expense) | ||||||||
New and pre-owned vehicles | 459,163 | 468,546 | ||||||
Adjustments to LIFO reserve | 1,424 | 3,772 | ||||||
Other | 15,941 | 15,383 | ||||||
Total cost of revenues (excluding depreciation and amortization) | 476,528 | 487,701 | ||||||
Gross profit (excluding depreciation and amortization) | 131,666 | 127,137 | ||||||
Transaction costs | 3,898 | 2,313 | ||||||
Depreciation and amortization expense | 9,416 | 6,030 | ||||||
Stock-based compensation expense | 8,758 | 497 | ||||||
Selling, general, and administrative expenses | 96,824 | 96,256 | ||||||
Income from operations | 12,770 | 22,041 | ||||||
Other income/expenses | ||||||||
Gain on sale of property and equipment | 2 | 98 | ||||||
Interest expense | (10,020 | ) | (8,752 | ) | ||||
Total other expense | (10,018 | ) | (8,654 | ) | ||||
Income before income tax expense | 2,752 | 13,387 | ||||||
Income tax expense | (3,036 | ) | (5,085 | ) | ||||
Net (loss) income | $ | (284 | ) | $ | 8,302 |
Revenue
Revenue decreased by approximately $6.6 million, or 1.1%, to $608.2 million from $614.8 million for the years ended December 31, 2018 and 2017, respectively.
New Vehicles and Pre-Owned Vehicles Revenue
Revenue from new and pre-owned vehicles sales decreased by approximately $8.3 million, or 1.5%, to $538.1 million from $546.4 million for the years ended December 31, 2018 and 2017, respectively.
Revenue from new vehicle sales decreased by approximately $1.7 million, or 0.5%, to $333.6 million from $335.3 million for the years ended December 31, 2018 and 2017, respectively. This was due to a small decrease in the average selling price per unit sold from $79,100 to $76,800 for the year ended December 31, 2017 as compared to the year ended December 31, 2018. This decrease was partially offset by an increase in the number of new vehicle units sold from 4,221 in 2017 to 4,319 in 2018.
Revenue from pre-owned vehicle sales decreased by approximately $6.5 million, or 3.1%, to $204.6 million from $211.1 million for the years ended December 31, 2018 and 2017, respectively. This was due to a decrease in the number of pre-owned vehicles sold from 3,167 to 2,977, excluding wholesale units sold. Excluding the effect of wholesale sales, the impact of the decrease in the number of pre-owned vehicles sold was partially offset by the increase in the average revenue per unit sold from approximately $62,400 in 2017 to $64,900 per unit in 2018.
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 $1.6 million, or 2.4%, to $70.1 million from $68.5 million for the years ended December 31, 2018 and 2017, respectively.
As a component of other revenue, excluding e-commerce revenue from 2017, sales of parts, accessories and related services increased by approximately $1.4 million, or 4.7%, to $30.9 million from $29.5 million for the years ended December 31, 2018 and 2017, respectively, due to increased volume. Revenues from the Company’s e-commerce business were $2.3 million during the year ended December 31, 2017. There were no revenues from e-commerce sales in 2018 as the Company no longer operates an e-commerce business.
Finance and insurance revenue increased by approximately $2.6 million, or 8.7%, to $32.4 million from $29.8 million for the year ended December 31, 2018 as compared to December 31, 2017, respectively, primarily due to higher penetration rates and higher per unit revenue in our extended warranty products.
Campground and other revenue, which includes RV rental revenue, remained flat at approximately $6.7 million for each annual period presented.
Gross Profit (excluding depreciation and amortization)
Gross profit consists of gross revenues less cost of sales and services and excludes depreciation and amortization. Gross profit increased by approximately $4.6 million, or 3.6%, to $131.7 million from $127.1 million for the years ended December 31, 2018 and 2017, respectively. This increase was partially attributable to a decrease in LIFO adjustments in 2018 compared to 2017 and the increase in the sale of new towable units in our product mix. Excluding the impact of LIFO adjustments, gross profit increased by approximately $2.2 million, or 1.7%, to $133.1 million from $130.9 million for the years ended December 31, 2018 and 2017, respectively.
New and Pre-Owned Vehicles Gross Profit
Excluding the impact of LIFO adjustments, new and pre-owned vehicle gross profit increased $1.2 million, or 1.5%, to $79.0 million from $77.8 million for the years ended December 31, 2018 and 2017, respectively. This increase is attributable to the increase in towable units sold.
Other Gross Profit
Other gross profit increased by $1.0 million, or 2.0% to $54.1 million from $53.1 million for the years ended December 31, 2018 and 2017 primarily due to increased finance and insurance revenues.
Selling, General and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses, excluding transaction costs, stock-based compensation expense, and depreciation and amortization expense, increased 0.6% to $96.8 million during the year ended December 31, 2018, from $96.3 million during the year ended December 31, 2017. In addition, there was an increase in non-cash expenses including stock-based compensation of $8.4 million primarily attributable to the awards with market conditions issued to management on March 16, 2018 and May 7, 2018. There was also a $3.4 million increase in depreciation and 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.
Interest Expense
Interest expense increased by approximately $1.2 million to $10.0 million for the year ended December 31, 2018 from $8.8 million for the year ended December 31, 2017, respectively. This was due to the increase in floor plan interest due to the increase in the outstanding floor plan balance from acquisitions as well as a build up of inventory at year end. In addition, interest increased as a result of the increase in the term loan with M&T Bank as well as the interest expense from the sale leaseback transaction and note payable associated with the acquisition of the Minnesota location.
Income Taxes
Income tax expense decreased to $3.0 million during the year ended December 31, 2018 from income tax expense of $5.1 million during the same period of 2017, due to the decrease in book and taxable income. While book income decreased from December 31, 2017 to December 31, 2018, non-deductible expenses such as stock-based compensation and transaction costs associated with acquisitions resulting in significant increases to the Company’s effective tax rate. As book income approaches zero, the impact of each non-deductible item has a larger impact on the effective tax rate.
Non-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 income (loss) 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.equipment and change in fair value of warrant liabilities.
Adjusted Net Income is defined as net income excluding change in fair value of warrant liabilities, LIFO adjustments, acquisition expenses and severance and executive transition costs and other supplemental adjustments for the period.
Reconciliations
The following tables reconcile certain reported non-GAAP measures, which we refer to as “adjusted,” to the most comparable GAAP measure from Net (Loss) Income per theour Consolidated Statements of OperationsOperations.
For the years ended December 31, | ||||||||
2022 | 2021 | |||||||
EBITDA | ||||||||
Net income | $ | 66,393 | $ | 82,021 | ||||
Interest expense, net* | 16,592 | 8,500 | ||||||
Depreciation and amortization of property and equipment | 9,480 | 8,386 | ||||||
Amortization of intangible assets | 7,278 | 6,025 | ||||||
Income tax expense | 19,183 | 28,242 | ||||||
Subtotal EBITDA | 118,926 | 133,174 | ||||||
Floor plan interest | (8,596 | ) | (1,852 | ) | ||||
LIFO adjustment | 12,383 | 4,811 | ||||||
Transaction costs | 286 | 1,744 | ||||||
PPP loan forgiveness | - | (6,626 | ) | |||||
Gain on sale of property and equipment | (20 | ) | (156 | ) | ||||
Change in fair value of warrant liabilities | (12,453 | ) | 11,711 | |||||
Inducement loss on warrant conversion | - | 246 | ||||||
Non-compete, severance and other | 582 | - | ||||||
Acquisition inventory valuation adjustments | - | 1,107 | ||||||
Stock-based compensation | 2,813 | 750 | ||||||
Adjusted EBITDA | $ | 113,921 | $ | 144,909 |
* Interest expense includes $7.0 million and $5.5 million relating to EBITDA and Adjusted EBITDAfinance lease payments for the years ended December 31, 20182022 and 20172021, respectively. Operating lease payments are shownincluded as rent expense and included in the tables below.net income.
Year ended December 31, 2022 | ||||||||||||||||||||||||
As reported | (Gain)/Loss on fair value of warrant liabilities | LIFO | Acquisition expense | Severance and executive transition costs | Adjusted | |||||||||||||||||||
Cost of goods sold | $ | 998,270 | $ | (12,383 | ) | $ | 985,887 | |||||||||||||||||
Selling, general and administrative | 222,218 | (286 | ) | (900 | ) | 221,032 | ||||||||||||||||||
Operating income | 89,715 | 12,383 | 286 | 900 | 103,284 | |||||||||||||||||||
Change in fair value of warrant liabilities | 12,453 | (12,453 | ) | - | ||||||||||||||||||||
Income before taxes | 85,576 | (12,453 | ) | 12,383 | 286 | 900 | 86,692 | |||||||||||||||||
Income tax (provision) benefit | (19,183 | ) | (3,143 | ) | (73 | ) | (228 | ) | (22,627 | ) | ||||||||||||||
Net income | $ | 66,393 | $ | (12,453 | ) | $ | 9,240 | $ | 213 | $ | 672 | $ | 64,065 | |||||||||||
Diluted earnings per share | $ | 2.42 | $ | 3.05 |
Combined Successor and Predecessor | Predecessor | |||||||
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
EBITDA | ||||||||
Net (loss) income | $ | (284 | ) | $ | 8,302 | |||
Interest expense, net | 10,020 | 8,752 | ||||||
Depreciation and amortization of property and equipment | 6,641 | 5,286 | ||||||
Amortization of intangible assets | 2,775 | 744 | ||||||
Income tax expense | 3,036 | 5,085 | ||||||
Subtotal EBITDA | 22,188 | 28,169 | ||||||
Floor plan interest | (4,265 | ) | (3,739 | ) | ||||
LIFO adjustment | 1,424 | 3,772 | ||||||
Transaction costs | 3,898 | 2,313 | ||||||
Gain on sale of property and equipment | (2 | ) | (98 | ) | ||||
Severance costs/Other | 353 | 325 | ||||||
Stock-based compensation | 8,758 | 497 | ||||||
Adjusted EBITDA | $ | 32,354 | $ | 31,239 |
Combined Successor and Predecessor | Predecessor | |||||||
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
EBITDA margin | ||||||||
Net (loss) income margin | 0.0 | % | 1.4 | % | ||||
Interest expense, net | 1.6 | % | 1.4 | % | ||||
Depreciation and amortization of property and equipment | 1.1 | % | 0.9 | % | ||||
Amortization of intangible assets | 0.5 | % | 0.1 | % | ||||
Income tax expense | 0.5 | % | 0.8 | % | ||||
Subtotal EBITDA margin | 3.6 | % | 4.6 | % | ||||
Floor plan interest | -0.7 | % | -0.6 | % | ||||
LIFO adjustment | 0.2 | % | 0.6 | % | ||||
Transaction costs | 0.6 | % | 0.4 | % | ||||
Gain on sale of property and equipment | 0.0 | % | 0.0 | % | ||||
Severance costs/Other | 0.1 | % | 0.1 | % | ||||
Stock-based compensation | 1.4 | % | 0.1 | % | ||||
Adjusted EBITDA | 5.3 | % | 5.1 | % |
Note: Figures in the table may not recalculate exactly due to rounding.
Year ended December 31, 2021 | ||||||||||||||||||||||||
As reported | (Gain)/Loss on fair value of warrant liabilities | LIFO | Acquisition expense | Severance and transition costs | Adjusted | |||||||||||||||||||
Cost of goods sold | $ | 911,588 | $ | (4,811 | ) | $ | 906,777 | |||||||||||||||||
Selling, general and administrative | 184,985 | (1,744 | ) | - | 183,241 | |||||||||||||||||||
Operating income | 124,094 | 4,811 | 1,744 | - | 130,649 | |||||||||||||||||||
Change in fair value of warrant liabilities | (11,711 | ) | 11,711 | - | ||||||||||||||||||||
Income before taxes | 110,263 | 11,711 | 4,811 | 1,744 | - | 128,529 | ||||||||||||||||||
Income tax (provision) benefit | (28,242 | ) | (498 | ) | (180 | ) | - | (28,920 | ) | |||||||||||||||
Net income | $ | 82,021 | $ | 11,711 | $ | 4,313 | $ | 1,564 | $ | - | $ | 99,609 | ||||||||||||
Diluted earnings per share | $ | 3.93 | $ | 4.82 |
Liquidity and Capital Resources
Our principal needs for liquidity and capital resources are for capital expenditures and working capital as well as for growth through acquisitions and greenfielding. We have historically satisfied our liquidity needs through cash flows from operations, borrowings under our credit facilities as well as occasional sale-leaseback arrangements. In addition to these sources of liquidity, potential sources to fund our business strategy include financing of owned real estate, construction loans, and proceeds from debt or equity offerings. We evaluate all of these options and may select one or more of them depending upon overall capital needs and the availability and cost of capital, although no assurances can be provided that these capital sources will be available in sufficient amounts or with terms acceptable to us.
As of December 31, 2022, we had cash of $61.7 million. With our recent credit facility amendment noted below, we estimate total liquidity of $165.0 million. This includes approximately $52.0 million of unfinanced real estate which we estimate could provide $38.0 million of capital.
On February 21, 2023, we entered into a new credit agreement that amends and restates our credit agreement dated July 14, 2021. The new agreement increases our floorplan capacity to $525.0 million, increases our revolving credit facility capacity to $50.0 million, provides for higher advances on used inventory and extends the term of our agreement to February 21, 2027. With this amendment, we also retired the outstanding mortgage and term loans under the prior facility using cash on hand.
Cash Flow Summary
($ in thousands) | Combined Successor and Predecessor | Predecessor | ||||||
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
Net (loss) income | $ | (284 | ) | $ | 8,302 | |||
Non cash adjustments | 18,357 | 6,192 | ||||||
Changes in operating assets and liabilities | (23,416 | ) | 9,562 | |||||
Net cash (used in) provided by operating activities | (5,343 | ) | 24,056 | |||||
Net cash used in investing activities | (96,570 | ) | (2,335 | ) | ||||
Net cash provided by (used in) financing activities | 113,741 | (12,587 | ) | |||||
Net increase in cash | $ | 11,828 | $ | 9,134 |
Net Cash from Operating Activities
($ in thousands) | ||||||||
Years ended December 31, | ||||||||
2022 | 2021 | |||||||
Net income | $ | 66,393 | $ | 82,021 | ||||
Non cash adjustments | 9,048 | 19,377 | ||||||
Changes in operating assets and liabilities | (147,401 | ) | (98,627 | ) | ||||
Net cash (used in) provided by operating activities | (71,960 | ) | 2,771 | |||||
Net cash used in investing activities | (54,542 | ) | (84,126 | ) | ||||
Net cash provided by financing activities | 90,069 | 115,963 | ||||||
Net (decrease) increase in cash | $ | (36,433 | ) | $ | 34,608 |
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The CompanyWe used cash in operating activities of approximately $5.3($72.0) million during the year ended December 31, 20182022 compared to generating cash provided byfrom operating activities of $2.8 million during the year ended December 31, 2021. Net income decreased by approximately $24.1$15.6 million for the year ended December 31, 2017. Net income decreased by approximately $8.6 million for the year ended December 31, 20182022 compared to the year ended December 31, 2017.2021. Adjustments for non-cash expenses, included in net income, increased $12.2decreased $10.3 million to $18.4$9.0 million from $19.4 million for the year ended December 31, 2018.2021. Non-cash adjustments include an increase in net income of $12.5 million related to the change in fair value of our warrants. During the year ended December 31, 2018,2022, there was approximately $23.4($147.4) million of cash used by changes in operating assets and liabilities as compared to $9.6$98.6 million of cash provided by changesused in operating assets and liabilities during the year ended December 31, 2017.2021. The fluctuations in assets and liabilities were primarily due to the increase in inventory of $18.9$127.6 million during the year ended December 31, 2018. This increase in inventory was due to a seasonal build up2022, excluding the impact of inventory added by the acquisition near Tulsa, Oklahoma.
Borrowings from and repayments to the M&T Floor Plan Line of Credit as defined under “M&T Credit Facility” below, related to our new vehicle inventory floor plan financing are presented as financing activities. Additionally, the cash paid for inventory purchased as part of an acquisition is presented as an investing activity, while the subsequent flooring of the new inventory is included in Tampa.our floor plan payable cash activities.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP financial measure, is presented below:
Years ended December 31, | ||||||||||||
December 31, 2022 | December 31, 2021 | Change | ||||||||||
Net cash provided by operating activities | ||||||||||||
As Reported | $ | (71,960 | ) | $ | 2,771 | $ | (74,731 | ) | ||||
Net borrowings on floor plan notes payable | 148,180 | 73,097 | 75,083 | |||||||||
Net cash provided by operating activities-adjusted | $ | 76,220 | $ | 75,868 | $ | 352 |
Inventories are the most significant component of our cash flow from operations. As of December 31, 2022, our new vehicle days’ supply was 250 days which was 166 days higher than our days’ supply as of December 31, 2021. As of December 31, 2022, our days’ supply of pre-owned vehicles was 78 days, which was 20 days higher than our days’ supply at December 31, 2021. We calculate days’ supply of inventory based on current inventory levels and a 90 day historical cost of sales level. We continue to focus on managing our unit mix and maintaining appropriate levels of new and used vehicle inventory.
Net Cash from Investing Activities
The CompanyWe used cash in investing activities of approximately $96.6$54.5 million during the year ended December 31, 2018,2022, compared to approximately $2.3$84.1 million for the year ended December 31, 2017. The Company used2021. During 2022, net cash used in investing activities was primarily related to cash paid for acquisitions of approximately $92.3 million for the acquisition of Lazy Days’ R.V. Center, Inc., Shorewood RV Center, and Tennessee RV.$14.7 million. In addition, therein December 2022, we purchased the real estate of our Elkhart and Nashville locations for approximately $24.5 million. These properties were purchases of property and equipment of approximately $4.3 million.previously leased facilities recorded as finance leases on our balance sheet.
Net Cash from Financing Activities
The Company hadWe generated cash from financing activities of $90.1 million during the year ended December 31, 2022 compared to cash provided by financing activities of approximately $113.7$116.0 million during the year ended December 31, 2018, compared to net2021. Net cash used inprovided by financing activities of approximately $12.6 million for the year ended December 31, 2017. During2022 was primarily related to a net increase of the year ended December 31, 2018,M&T Floor Plan Line of Credit related to increased inventory of $148.2 million as defined under “M&T Credit Facility” below, proceeds from financing liabilities of $11.7 million, proceeds from exercises of warrants of $5.7 million, and proceeds from exercises of stock options of $2.4 million. These payments were partially offset by stock repurchases of $44.5 million and repayment of financing liabilities of $24.2 million primarily related to the Company raised net proceedspurchase of $90.4 million through the PIPE offering through the issuance of common stock, Series A Convertible Preferred Stock,previously leased real estate for our Elkhart and warrants. The CompanyNashville locations. In addition, we paid dividends of $2.6 million during the year ended December 31, 2018 on the Series A Convertible Preferred Stock. During the year ended December 31, 2018, the Company also received net proceedsStock of approximately $20.0$4.8 million from the proceeds of a newas well as $4.4 million in long term loan with M&T Bank which was offset by the repayment of approximately $8.8debt repayments and $1.1 million of long-term debt with Bank of America. During 2018 the Company repaid $2.2 million of the new term loan with M&T Bank. The Company also repaid $96.7 million in floor planacquisition notes payable to Bank of America and received net proceeds of $123.6 million from the new floor plan loan with M&T Bank. The Company also made net repayments to Bank of America of $12.3 million during the Predecessor Period (as defined below) prior to the Merger. In addition, the Company entered into a new sales leaseback transaction which resulted in proceeds from the resulting financing liability of approximately $5.6 million. Net cash used in financing activities for the year ended December 31, 2017 primarily consisted of a $15.0 million dividend payment, a $3.0 million repayment of the line of credit, and $9.2 million of proceeds under the floor plan loan.payable.
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.
As of December 31, 2018, the Company had liquidity of approximately $26.6 million in cash and had working capital of approximately $44.3 million.
Capital expenditures include expenditures to extend the useful life of current facilities and expand operations. For the years ended December 31, 2018 and 2017, the Company invested approximately $4.3 million and $2.6 million in capital expenditures, respectively.
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.
As a result of the Mergers on March 15, 2018, approximately $105.5 million of incremental cash was made available from various sources, of which $86.7 million was paid out to the Stockholders leaving approximately $9.0 million of cash available for future opportunities, including potential acquisitions.
M&T Credit Facility
On March 15, 2018, the Companywe replaced itsour existing debt agreements with Bank of America with a $200 million Senior Secured Credit Facility (the “M&T Facility” and the related credit agreement, the “Credit Agreement”). The M&T Facility includesincluded a $175 million M&T floor plan line of credit (“M&T Floor Plan Line of Credit”), a $20 million M&T term loan (“M&T Term Loan”), and a $5 million M&T revolver (“M&T Revolver”). The M&T Facility will mature on March 15, 2021. The M&T Facility requires the Companyrequired us to meet certain financial covenants and iswas secured by substantially all of the assets of the Company. The credit facility was subsequently amended to include a Mortgage of $6.136 million. The M&T Facility was originally due to mature on March 15, 2021. The maturity date was subsequently extended to September 15, 2021.
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On July 14, 2021, we entered into an amended and restated credit agreement with M&T, as a Lender, Administrative Agent, Swingline Lender, and Issuing Bank, and other financial institutions as Lender parties, (“new M&T Facility”). The credit agreement evidences an approximately $369.1 million aggregate credit facility, consisting of a $327 million floor plan credit facility, a term loan of approximately $11.3 million, a $25 million revolving credit and a $5.8 million mortgage loan facility. The new M&T Facility requires us to meet certain financial and other covenants and is secured by substantially all the assets of the Company. The costs of the new M&T Facility were recorded as a debt discount. The new M&T facility matures on July 14, 2024.
On May 13, 2022, we entered into the First Amendment to the Amended and Restated Credit Agreement (“First Amendment”). Pursuant to this amendment, SOFR was replaced with the Secured Overnight Financing Rate (“SOFR”) as the applicable reference rate.
The mortgage loan facility (“mortgage”) has SOFR borrowings bearing interest at SOFR plus 2.25% and a Base Rate margin of 1.25%. The mortgage requires monthly payments of principal of $0.03 million.
The M&T Floor Plan Line of Credit may be used to finance new vehicle inventory, but only $45.0$90 million may be used to finance pre-owned vehicle inventory and $4.5$1.0 million may be used to finance rental units.permitted Company vehicles. Principal becomes due upon the sale of the respective vehicle. The M&T Floor Plan Line of Credit shall accrue interest at eithereither: (a) the fluctuating 30-day London Interbank Offered Rate (“LIBOR”)SOFR rate plus an applicable margin which ranges from 2.00% to 2.30% based upon the Company’sour total leverage ratio (as defined in the new M&T Facility); or (b) the Base Rate plus an applicable margin ranging from 1.00% to 1.30% based upon the Company’sour total leverage ratio (as defined in the new 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 LIBORSOFR plus 1.00%. In addition, the Companywe 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 Companywe will pay a principal balloon payment of $11.3$2.6 million plus any accrued interest. The M&T Term Loan shall bear interest atat: (a) LIBORSOFR plus an applicable margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the agreement)new 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 agreement)new M&T Facility).
The M&T Revolver allows the Companyus to draw up to $5.0$25 million. The M&T Revolver shall bear interest atat: (a) 30-day LIBORSOFR plus an applicable margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the new 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 new 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).
As of December 31, 2018,2022, there was $143.9$348.3 million outstanding under the M&T Floor Plan Line of Credit, and $17.8$7.2 million outstanding under the M&T Term Loan.Loan and $5.4 million outstanding under the M&T Mortgage.
Inflation
Off-Balance Sheet Arrangements
AsWe have experienced higher than normal RV retail and wholesale price increases as manufacturers have passed through increased supply chain costs in their pricing to dealers. We monitor the health of December 31, 2018, there were no off-balance sheet arrangementsour inventory and focus on discounting prior model year units as defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
Although the Companyneeded. We cannot accurately anticipate the effect of inflation on itsour operations it believes that inflation has not had,from possible continued cost increases, the introduction of 2024 model year units into inventory and is not likely in the foreseeable futurerelated pricing of those units, consumers’ willingness to have, a materialaccept higher prices and the potential impact on its results of operations.retail demand and margins.
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 believesWe believe 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.
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Seasonality and Effects of Weather
The Company’sOur 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, Indiana, Oregon, Washington and Wisconsin generally experience modestly higher vehicle sales during the spring months.
The Company’sOur 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 believeswe believe that it haswe have adequate insurance coverage, if the Companywe were to experience a catastrophic loss, the Companywe may exceed itsour policy limits, and/or may have difficulty obtaining similar insurance coverage in the future.
On September 29, 2022, Hurricane Ian made landfall in the State of Florida. We did not sustain damage to property or inventory, but telephone and internet capabilities were temporarily impacted. In addition, insurance companies halted binding of policies for six days during the storm’s progress, which resulted in certain sales and service activity being delayed into the fourth quarter. We did not experience a material loss of revenue due to Hurricane Ian.
Critical Accounting Policies and Estimates
The Company prepares itsWe prepare our consolidated financial statements in accordance with GAAP, and in doing so, it has towe must 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 itsWe base our estimates, assumptions and judgments on historical experience and on various other factors it believeswe believe to be reasonable under the circumstances. Different assumptions and judgments would change estimates used in the preparation of the consolidated financial statements, which, in turn, could change the results from those reported. The Company evaluates itsWe evaluate our critical accounting estimates, assumptions and judgments on an ongoing basis.
We believe that, of our significant accounting policies (see Note 2 of the financial statements included in this Form 10-K), the following policies are the most critical:
Basis of Presentation
Predecessor and Successor Periods
As a result of the Mergers, Holdco is the acquirer for accounting purposes and Lazydays 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 15, 2018 (the “Acquisition Date”) (“Predecessor Periods”) 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 Period 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 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 Period 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 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,LIFO adjustments, the allowance for doubtful accounts and stock-based compensation.fair value of warrant liabilities.
Revenue Recognition
The Companycore principle of revenue recognition is that an entity recognizes revenue whento depict the following four criteria are met: (1) delivery has occurredtransfer of promised goods or services rendered; (2) persuasive evidenceto clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We apply a five-step model for revenue measurement and recognition.
Revenues are recognized when control of an arrangement exists; (3) feesthe promised goods or services is transferred to the customers at the expected amount we are fixed or determinable,entitled to for such goods and (4)services. Taxes collected on revenue producing transactions are excluded from revenue in the collectionconsolidated statements of related accounts receivable is probable.operations.
Revenue from the sale of vehicles is recognized at a point in time on delivery, transfer of title and completion of financing arrangements.
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Revenue from the sale of parts, sales,accessories, and related service is recognized on deliveryas services and parts are delivered or as a customer approves elements of the service or product.completion of service. Revenue from the sale of parts, sales,accessories, and related service is recognized in other revenue in the accompanying consolidated statements of operations.
Revenue from the rental of vehiclesCampground revenue is also recognized pro rata over the time period of use of the rental agreement. The rental agreements are generally short-term in nature. Revenue from rentals is included in other revenue in the accompanying consolidated statements of operations.campground.
The Company receivesWe receive commissions from the sale of insurance and vehicle service contracts to customers. In addition, the Company arrangeswe arrange financing for customers through various financial institutions and receivesreceive commissions. The CompanyWe may be charged back (“charge-backs”) for financing fees, insurance or vehicle service contract commissions in the event of early termination of the contracts by the customers. The revenues from financing fees and commissions are recorded at the time of the sale of the vehicles and an estimated 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 may be an element of risk associated with these revenue streams.
Cumulative Redeemable Convertible Preferred StockWarrants
The Company’s Series A Preferred Stock (See Note 15 – 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 ofWe account for our 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 Accounting Standards Codification (“ASC”) 718, Compensation (“applicable accounting guidance provided in ASC 718”). ASC 718 requires all share-based payments815-40, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreements. In periods subsequent to employees, including grants of employee stock options,issuance, the warrants classified as liabilities are subject to be recognizedremeasurement at each balance sheet date and transaction date with changes in the statement of operations based on theirestimated fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair valuevalues of the award,common stock warrant liabilities 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 exercisegains and losses on extinguishment 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 benefitcommon stock warrant liabilities reported in the consolidated statements of operations.
We account for our warrants in the following ways: (i) the Private Warrants as liabilities for all periods presented; (ii) the PIPE Warrants as liabilities for all periods presented and (iii) the Public Warrants as equity for all periods presented.
The Public Warrants trade in active markets. When classified as liabilities, warrants traded in active markets with sufficient trading volume represent Level 1 financial instruments as they were publicly traded in active markets and thus had observable market prices which were used to estimate the fair value adjustments for the related common stock warrant liabilities. When classified as liabilities, warrants not traded in active markets, or traded with insufficient volume, represent Level 3 financial instruments that are valued using a Black-Scholes option-pricing model to estimate the fair value adjustments for the related warrant liabilities.
The PIPE Warrants are considered a Level 1 measurement because they are similar to the Public Warrants which trade under the symbol LAZYW and thus have observable market prices which were used to estimate the fair value adjustments for the PIPE Warrants liabilities. The Private Warrants are considered a Level 3 measurement and were valued using a Black-Scholes Valuation Model to estimate the fair value adjustments for the Private Warrants liabilities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information requested by this Item is not applicable as the Company haswe have elected scaled disclosure requirements available to smaller reporting companies with respect to this Item.
Item 8. Financial Statements and Supplementary Data
Lazydays Holdings, Inc.
Index to Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
ToStockholders and the Shareholders and Board of Directors of
Lazydays Holdings, Inc. and SubsidiariesInc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lazydays Holdings, Inc. and Subsidiariesits subsidiaries (the “Company”)Company) as of December 31, 2018 (Successor)2022 and December 31, 2017 (Predecessor),2021, the related consolidated statements of operations, consolidated statements of stockholders’ equity and consolidated statements of cash flows, for each of the two years in the period from March 15, 2018 to December 31, 2018 (Successor), for the period from January 1, 2018 to March 14, 2018 (Predecessor) and for the year ended December 31, 2017 (Predecessor),2022, and the related notes to the consolidated financial statements (collectively, referred to as the “financial statements”)financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 (Successor)2022 and December 31, 2017 (Predecessor),2021, and the results of itstheir operations and itstheir cash flows for each of the years in the period from March 15, 2018 to December 31, 2018 (Successor), for the period from January 1, 2018 to March 14, 2018 (Predecessor) and for the year ended December 31, 2017 (Predecessor),2022, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Our report dated February 28, 2023 expressed an opinion that the Company had not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
Basis for Opinion
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits providesprovide a reasonable basis for our opinion.
Critical Audit Matter
/s/ MarcumllpThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Marcumllp
Goodwill Impairment Testing
As discussed in Notes 1 and 7 to the consolidated financial statements, the Company’s goodwill balance was $83.5 million at December 31, 2022. At September 30, 2022, the Company performed its annual goodwill impairment test considering qualitative factors supported with a quantitative analysis and concluded there was no impairment. The multi-step goodwill impairment test included, among other factors, a comparison of its single reporting unit’s market capitalization to its carrying value. The Company estimates the market capitalization using a market approach, which incorporates the market price of the Company’s common stock and an estimate of the fair value of the preferred stock on an as converted basis. Significant judgment is required to estimate the market capitalization of the reporting unit including timing and appropriateness of the price of the common stock used as well as the selection of a control premium.
We identified the Company’s annual goodwill impairment test as a critical audit matter because of the significant assumptions management used in its annual impairment test, including the determination of a reasonable control premium. Auditing management’s assumptions involved a high degree of auditor judgment and an increase in audit effort, including the use of our valuation specialists, due to the impact these assumptions have on the accounting estimate.
Our audit procedures related to the Company’s annual goodwill impairment test included the following, among others:
We obtained an understanding of the relevant controls related to management’s annual goodwill impairment test and tested such controls for design and operating effectiveness, including controls related to management’s determination of a reasonable control premium.
We evaluated the appropriateness of the model used by management to determine the market capitalization of the Company’s reporting unit and tested its mathematical accuracy.
We tested the underlying data used by management in its model for completeness and accuracy.
With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s selected control premium by:
Testing the accuracy of the market data referenced by management in determining the selected control premium by agreeing such market data to independently sourced information.
Testing the completeness of the market data used by management by performing an independent search of publicly available market data for the Company’s industry.
Calculating an average and median control premium based upon independently sourced market data and comparing the results to the control premium utilized by management.
/s/ RSM US LLP
We have served as the Company’s auditor since 2017.2021.
Melville, NYOrlando, Florida
March 22, 2019February 28, 2023
F-1 |
Report of Independent Registered Public Accounting Firm
Stockholders and the Board of Directors of Lazydays Holdings, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited Lazydays Holdings, Inc.’s (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2022 and 2021, and the related consolidated statement of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022 of the Company and our report dated February 28, 2023 expressed an unqualified opinion.
As described in Management’s Annual Report on Internal Control Over Financial Reporting, management has excluded Dave’s Claremore RV, Inc. from its assessment of internal control over financial reporting as of December 31, 2022, because it was acquired by the Company in a purchase business combination in 2022. We have also excluded Dave’s Claremore RV, Inc. from our audit of internal control over financial reporting. Dave’s Claremore RV, Inc. is a wholly owned subsidiary whose total revenues represent approximately 0.8% of the related consolidated financial statement amount as of and for the year ended December 31, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. There were deficiencies in the operation of information technology general controls (ITGCs) in the areas of logical access, change management and security administration over information technology (IT) system that support the Company’s financial reporting processes. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report dated February 28, 2023 on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
Orlando, Florida
February 28, 2023
F-2 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except for share and per share data)
Successor | Predecessor | |||||||||||||||
As of | As of | |||||||||||||||
December 31, | December 31, | As of | As of | |||||||||||||
2018 | 2017 | December 31, 2022 | December 31, 2021 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash | $ | 26,603 | $ | 13,292 | $ | 61,687 | $ | 98,120 | ||||||||
Receivables, net of allowance for doubtful accounts of $687 and $1,013 at December 31, 2018 and 2017, respectively | 16,967 | 19,911 | ||||||||||||||
Receivables, net of allowance for doubtful accounts of $476 and $456 at December 31, 2022 and December 31, 2021, respectively | 25,053 | 30,604 | ||||||||||||||
Inventories | 167,378 | 114,170 | 378,881 | 242,906 | ||||||||||||
Income tax receivable | 2,630 | - | 7,912 | 1,302 | ||||||||||||
Prepaid expenses and other | 3,166 | 2,062 | 3,316 | 2,703 | ||||||||||||
Total current assets | 216,744 | 149,435 | 476,849 | 375,635 | ||||||||||||
Property and equipment, net | 78,043 | 45,669 | 158,991 | 120,748 | ||||||||||||
Operating lease assets | 26,984 | 32,004 | ||||||||||||||
Goodwill | 36,762 | 25,216 | 83,460 | 80,318 | ||||||||||||
Intangible assets, net | 70,189 | 25,862 | 81,665 | 87,800 | ||||||||||||
Deferred tax asset | - | 144 | ||||||||||||||
Other assets | 358 | 219 | 2,769 | 1,623 | ||||||||||||
Total assets | $ | 402,096 | $ | 246,545 | $ | 830,718 | $ | 698,128 |
See the accompanying notes to the consolidated financial statementsstatements.
F-3 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
(Dollar amounts in thousands except for share and per share data)
As of | As of | |||||||
December 31, 2022 | December 31, 2021 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable, accrued expenses and other current liabilities | $ | 38,718 | $ | 58,999 | ||||
Dividends payable | 1,210 | 1,210 | ||||||
Floor plan notes payable, net of debt discount | 348,735 | 192,220 | ||||||
Financing liability, current portion | 2,281 | 1,970 | ||||||
Long-term debt, current portion | 3,607 | 5,510 | ||||||
Operating lease liability, current portion | 5,074 | 6,441 | ||||||
Total current liabilities | 399,625 | 266,350 | ||||||
Long term liabilities | ||||||||
Financing liability, non-current portion, net of debt discount | 89,770 | 102,466 | ||||||
Long term debt, non-current portion, net of debt discount | 10,131 | 13,684 | ||||||
Operating lease liability, non-current portion | 22,755 | 25,563 | ||||||
Deferred income tax liability | 15,536 | 13,663 | ||||||
Warrant liabilities | 906 | 15,293 | ||||||
Total liabilities | 538,723 | 437,019 | ||||||
Commitments and Contingencies | - | |||||||
Series A Convertible Preferred Stock; 60,000 as of December 31, 2022 and December 31, 2021, respectively | shares, designated, issued, and outstanding as of December 31, 2022 and December 31, 2021; liquidation preference of $54,983 | 54,983 | ||||||
Stockholders’ Equity | ||||||||
Preferred Stock, $ | par value; shares authorized;- | - | ||||||
Common stock, $ | par value; shares authorized; and shares issued and and outstanding at December 31, 2022 and December 31, 2021, respectively- | - | ||||||
Additional paid-in capital | 130,828 | 121,831 | ||||||
Treasury Stock, at cost, | and shares at and December 31, 2021, respectively(57,019 | ) | (12,515 | ) | ||||
Retained earnings | 163,203 | 96,810 | ||||||
Total stockholders’ equity | 237,012 | 206,126 | ||||||
Total liabilities and stockholders’ equity | $ | 830,718 | $ | 698,128 |
Successor | Predecessor | |||||||
As of | As of | |||||||
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable, accrued expenses and other current liabilities | $ | 22,599 | $ | 25,181 | ||||
Income tax payable | - | 1,536 | ||||||
Dividends payable | 1,210 | - | ||||||
Floor plan notes payable, net of debt discount | 143,469 | 104,976 | ||||||
Contingent liability, current portion | - | 667 | ||||||
Financing liability, current portion | 714 | 595 | ||||||
Long-term debt, current portion | 4,408 | 1,870 | ||||||
Total current liabilities | 172,400 | 134,825 | ||||||
Long term liabilities | ||||||||
Financing liability, non-current portion, net of debt discount | 60,533 | 53,680 | ||||||
Long term debt, non-current portion, net of debt discount | 19,013 | 7,207 | ||||||
Deferred tax liability | 18,717 | - | ||||||
Total liabilities | 270,663 | 195,712 | ||||||
Commitments and Contingencies | ||||||||
Series A Convertible Preferred Stock; 600,000 shares, designated, issued, and outstanding as of December 31, 2018; liquidation preference of $61,210 as of December 31, 2018 | 54,983 | - | ||||||
Stockholders’ Equity | ||||||||
Successor: | ||||||||
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 December 31, 2018 | ||||||||
- | - | |||||||
Additional paid-in capital | 80,606 | - | ||||||
Accumulated deficit | (4,156 | ) | - | |||||
Predecessor: | ||||||||
Preferred stock, $0.001 par value 150,000 shares authorized: | ||||||||
Senior Preferred Stock, convertible and 8% cumulative dividend; 10,000 shares designated; -0- issued and outstanding; liquidation preference $0 at December 31, 2017 | - | - | ||||||
Common stock, $0.001 par value; 4,500,000 shares authorized; 3,333,331 shares issued and 3,333,166 shares outstanding at December 31, 2017 | - | 3 | ||||||
Additional paid-in capital | - | 49,756 | ||||||
Treasury stock, 165 shares, at cost | - | (11 | ) | |||||
Retained earnings | - | 1,085 | ||||||
Total stockholders’ equity | 76,450 | 50,833 | ||||||
Total liabilities and stockholders’ equity | $ | 402,096 | $ | 246,545 |
See the accompanying notes to the consolidated financial statementsstatements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands except for share and per share data)
For the year ended | For the year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Revenues | ||||||||
New vehicle retail | $ | 777,807 | $ | 725,114 | ||||
Pre-owned vehicle retail | 394,582 | 372,566 | ||||||
Vehicle wholesale | 21,266 | 14,241 | ||||||
Finance and insurance | 75,482 | 72,647 | ||||||
Service, body and parts, other | 57,824 | 50,480 | ||||||
Total revenues | 1,326,961 | 1,235,048 | ||||||
Cost applicable to revenues (excluding depreciation and amortization shown below) | ||||||||
New vehicle | 632,316 | 586,876 | ||||||
Pre-owned vehicle | 301,565 | 278,036 | ||||||
Vehicle wholesale | 21,620 | 13,591 | ||||||
Finance and insurance | 2,729 | 2,473 | ||||||
Service, body and parts, other | 27,657 | 25,771 | ||||||
LIFO | 12,383 | 4,811 | ||||||
Total cost applicable to revenue | 998,270 | 911,558 | ||||||
Depreciation and amortization | 16,758 | 14,411 | ||||||
Selling, general, and administrative expenses | 222,218 | 184,985 | ||||||
Income from operations | 89,715 | 124,094 | ||||||
Other income/expenses | ||||||||
PPP loan forgiveness | - | 6,626 | ||||||
Floorplan interest expense | (8,596 | ) | (1,852 | ) | ||||
Other interest expense | (7,996 | ) | (6,648 | ) | ||||
Change in fair value of warrant liabilities | 12,453 | (11,711 | ) | |||||
Inducement Loss on Warrant Conversion | - | (246 | ) | |||||
Total other expense | (4,139 | ) | (13,831 | ) | ||||
Income before income tax expense | 85,576 | 110,263 | ||||||
Income tax expense | (19,183 | ) | (28,242 | ) | ||||
Net income | $ | 66,393 | $ | 82,021 | ||||
Dividends on Series A Convertible Preferred Stock | (4,801 | ) | (4,801 | ) | ||||
Net income attributable to common stock and participating securities | $ | 61,592 | $ | 77,220 | ||||
EPS: | ||||||||
Basic | $ | 3.47 | $ | 4.43 | ||||
Diluted | $ | 2.42 | $ | 3.93 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 11,701,302 | 11,402,655 | ||||||
Diluted | 12,797,796 | 12,852,318 |
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Revenues | ||||||||||||
New and pre-owned vehicles | $ | 419,018 | $ | 119,111 | $ | 546,385 | ||||||
Other | 55,237 | 14,828 | 68,453 | |||||||||
Total revenues | 474,255 | 133,939 | 614,838 | |||||||||
Cost applicable to revenues (excluding depreciation and amortization shown below) | ||||||||||||
New and pre-owned vehicles (including adjustments to theLIFO reserve of $1,276, $148, and $3,772, respectively) | 358,757 | 101,830 | 472,318 | |||||||||
Other | 12,894 | 3,047 | 15,383 | |||||||||
Total cost applicable to revenue | 371,651 | 104,877 | 487,701 | |||||||||
Transaction costs | 3,460 | 438 | 2,313 | |||||||||
Depreciation and amortization | 8,204 | 1,212 | 6,030 | |||||||||
Stock-based compensation | 8,618 | 140 | 497 | |||||||||
Selling, general, and administrative expenses | 74,624 | 22,200 | 96,256 | |||||||||
Income from operations | 7,698 | 5,072 | 22,041 | |||||||||
Other income/expenses | ||||||||||||
Gain on sale of property and equipment | 1 | 1 | 98 | |||||||||
Interest expense | (8,001 | ) | (2,019 | ) | (8,752 | ) | ||||||
Total other expense | (8,000 | ) | (2,018 | ) | (8,654 | ) | ||||||
(Loss) income before income tax expense | (302 | ) | 3,054 | 13,387 | ||||||||
Income tax expense | (2,318 | ) | (718 | ) | (5,085 | ) | ||||||
Net (loss) income | $ | (2,620 | ) | $ | 2,336 | $ | 8,302 | |||||
Dividends on Series A Convertible Preferred Stock | (3,845 | ) | ||||||||||
Deemed dividend on Series A Convertible Preferred Stock | (3,392 | ) | ||||||||||
Net (loss) income attributable to common stock and participating securities | $ | (9,857 | ) | |||||||||
Succesor EPS: | ||||||||||||
Basic and diluted loss per share | $ | (1.02 | ) | |||||||||
Weighted average shares outstanding - basic and diluted | 9,668,250 |
See the accompanying notes to the consolidated financial statementsstatements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
(PREDECESSOR)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
JANUARY 1, 2017 THROUGH MARCH 14, 2018FOR THE YEARS ENDED DECEMBER 31, 2022 AND DECEMBER 31, 2021
(Dollar amounts in thousands except for share and per share data)
Shares | Amount | Shares | Amount | capital | Earnings | Equity | ||||||||||||||||||||||
Common Stock | Treasury Stock | Additional Paid-In | Retained | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | Earnings | Equity | ||||||||||||||||||||||
Balance at December 31, 2020 | 9,656,041 | $ | - | 141,299 | $ | (499 | ) | $ | 71,226 | $ | 14,789 | $ | 85,516 | |||||||||||||||
Stock-based compensation | - | - | - | - | 750 | - | 750 | |||||||||||||||||||||
Repurchase of treasury stock | - | - | 566,013 | (12,016 | ) | - | - | (12,016 | ) | |||||||||||||||||||
Conversion of warrants and options | 3,940,770 | - | - | - | 54,018 | - | 54,018 | |||||||||||||||||||||
Shares issued pursuant to the Employee Stock Purchase Plan | 97,606 | - | - | - | 638 | - | 638 | |||||||||||||||||||||
Dividends on Series A preferred stock | - | - | - | - | (4,801 | ) | - | (4,801 | ) | |||||||||||||||||||
Net income | - | - | - | - | - | 82,021 | 82,021 | |||||||||||||||||||||
Balance at December 31, 2021 | 13,694,417 | - | 707,312 | $ | (12,515 | ) | $ | 121,831 | $ | 96,810 | $ | 206,126 | ||||||||||||||||
Stock-based compensation | - | - | - | - | 2,813 | - | 2,813 | |||||||||||||||||||||
Repurchase of treasury stock | - | - | 2,695,477 | (44,504 | ) | - | - | (44,504 | ) | |||||||||||||||||||
Conversion of warrants, options and restricted stock units | 753,951 | - | - | - | 10,067 | - | 10,067 | |||||||||||||||||||||
Shares issued pursuant to the Employee Stock Purchase Plan | 66,885 | - | - | - | 918 | - | 918 | |||||||||||||||||||||
Dividends on Series A preferred stock | - | - | - | - | (4,801 | ) | - | (4,801 | ) | |||||||||||||||||||
Net income | - | - | - | - | - | 66,393 | 66,393 | |||||||||||||||||||||
Balance at December 31, 2022 | 14,515,253 | - | 3,402,789 | $ | (57,019 | ) | $ | 130,828 | $ | 163,203 | $ | 237,012 |
Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In | Retained | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Earnings | Total | ||||||||||||||||||||||||||||
Balance at January 1, 2017 | 10,000 | $ | - | 999,835 | $ | 1 | 165 | $ | (11 | ) | $ | 49,261 | $ | 7,783 | $ | 57,034 | ||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 8,302 | 8,302 | |||||||||||||||||||||||||||
Conversion of preferred stock | (10,000 | ) | - | 2,333,331 | 2 | - | - | (2 | ) | - | - | |||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | - | - | 497 | - | 497 | |||||||||||||||||||||||||||
Dividends | - | - | - | - | - | - | - | (15,000 | ) | (15,000 | ) | |||||||||||||||||||||||||
Balance at December 31, 2017 | - | - | 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)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
MARCH 15, 2018 THROUGH DECEMBER 31, 2018
(Dollar amounts in thousands except for share and per share data)
Common Stock | ||||||||||||||||||||
Shares | Amount | Additional Paid-In capital | Accumulated deficit | Total Stockholders’ 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 | - | - | 8,618 | - | 8,618 | |||||||||||||||
Dividends on Series A preferred stock | - | - | (3,845 | ) | - | (3,845 | ) | |||||||||||||
Net loss | - | - | - | (2,620 | ) | (2,620 | ) | |||||||||||||
Balance at December 31, 2018 | 8,471,608 | $ | - | $ | 80,606 | $ | (4,156 | ) | $ | 76,450 |
See the accompanying notes to the consolidated financial statementsstatements.
F-6 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
For the year ended December 31, 2022 | For the year ended December 31, 2021 | |||||||
Cash Flows From Operating Activities | ||||||||
Net income | $ | 66,393 | $ | 82,021 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Stock based compensation | 2,813 | 750 | ||||||
Bad debt expense | (526 | ) | 128 | |||||
Depreciation and amortization of property and equipment | 9,480 | 8,386 | ||||||
Amortization of intangible assets | 7,278 | 6,025 | ||||||
Amortization of debt discount | 431 | 261 | ||||||
Non-cash lease expense | 173 | 80 | ||||||
Gain on sale of property and equipment | (20 | ) | (156 | ) | ||||
Deferred income taxes | 1,872 | (1,428 | ) | |||||
PPP loan forgiveness | - | (6,626 | ) | |||||
Change in fair value of warrant liabilities | (12,453 | ) | 11,711 | |||||
Inducement loss on warrant conversion | - | 246 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | 6,512 | (8,473 | ) | |||||
Inventories | (127,594 | ) | (105,511 | ) | ||||
Prepaid expenses and other | (613 | ) | 37 | |||||
Income tax receivable/payable | (6,725 | ) | 595 | |||||
Other assets | (1,146 | ) | (1,130 | ) | ||||
Accounts payable, accrued expenses and other current liabilities | (17,835 | ) | 15,855 | |||||
Total Adjustments | (138,353 | ) | (79,250 | ) | ||||
Net Cash (Used In) Provided By Operating Activities | (71,960 | ) | 2,771 | |||||
Cash Flows From Investing Activities | ||||||||
Cash paid for acquisitions | (14,694 | ) | (63,036 | ) | ||||
Proceeds from sales of property and equipment | 36 | 174 | ||||||
Purchases of property and equipment | (39,884 | ) | (21,264 | ) | ||||
Net Cash Used In Investing Activities | (54,542 | ) | (84,126 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Net borrowings under M&T bank floor plan | 148,180 | 73,097 | ||||||
Repayment of long term debt with M&T bank | (4,410 | ) | (4,250 | ) | ||||
Proceeds from financing liability | 11,686 | 26,226 | ||||||
Repayments of financing liability | (24,163 | ) | (1,843 | ) | ||||
Payment of dividends on Series A preferred stock | (4,801 | ) | (4,801 | ) | ||||
Repurchase of Treasury Stock | (44,504 | ) | (12,016 | ) | ||||
Proceeds from shares issued pursuant to the Employee Stock Purchase Plan | 918 | 714 | ||||||
Proceeds from exercise of warrants | 5,714 | 11,582 | ||||||
Proceeds from exercise of stock options | 2,418 | 30,675 | ||||||
Tax benefit related to stock-based awards | 115 | - | ||||||
Repayments of acquisition notes payable | (1,084 | ) | (2,501 | ) | ||||
Loan issuance costs | - | (920 | ) | |||||
Net Cash Provided By Financing Activities | 90,069 | 115,963 | ||||||
Net (Decrease) Increase In Cash | (36,433 | ) | 34,608 | |||||
Cash - Beginning | 98,120 | 63,512 | ||||||
Cash - Ending | $ | 61,687 | $ | 98,120 |
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Cash Flows From Operating Activities | ||||||||||||
Net (loss) income | $ | (2,620 | ) | $ | 2,336 | $ | 8,302 | |||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||||||
Stock based compensation | 8,618 | 140 | 497 | |||||||||
Bad debt expense | 816 | - | 422 | |||||||||
Depreciation and amortization of property and equipment | 5,583 | 1,058 | 5,286 | |||||||||
Amortization of intangible assets | 2,621 | 154 | 744 | |||||||||
Amortization of debt discount | 377 | 136 | 371 | |||||||||
Gain on sale of property and equipment | (1 | ) | (1 | ) | (98 | ) | ||||||
Deferred income taxes | (1,774 | ) | 630 | (1,030 | ) | |||||||
Changes in operating assets and liabilities: | ||||||||||||
Receivables | (2,686 | ) | 5,143 | (6,647 | ) | |||||||
Inventories | (18,896 | ) | 1,435 | 9,823 | ||||||||
Prepaid expenses and other | (479 | ) | 44 | 1,179 | ||||||||
Income tax receivable/payable | (593 | ) | (3,573 | ) | 2,863 | |||||||
Other assets | (157 | ) | 18 | 176 | ||||||||
Accounts payable, accrued expenses and other current liabilities | (6,135 | ) | 2,463 | 2,168 | ||||||||
Total Adjustments | (12,706 | ) | 7,647 | 15,754 | ||||||||
Net Cash (Used in) Provided By Operating Activities | (15,326 | ) | 9,983 | 24,056 | ||||||||
Cash Flows From Investing Activities | ||||||||||||
Cash paid for acquisitions | (101,478 | ) | - | - | ||||||||
Cash acquired in the purchase of Lazy Days’ R.V. Center, Inc. | 9,188 | - | - | |||||||||
Proceeds from sales of property and equipment | 41 | - | 249 | |||||||||
Purchases of property and equipment | (3,627 | ) | (694 | ) | (2,584 | ) | ||||||
Net Cash Used In Investing Activities | (95,876 | ) | (694 | ) | (2,335 | ) | ||||||
Cash Flows From Financing Activities | ||||||||||||
Net borrowings under M&T bank floor plan | 123,619 | - | - | |||||||||
Repayment of Bank of America floor plan | (96,740 | ) | - | - | ||||||||
Net (repayments)/borrowings under floor plan | - | (12,272 | ) | 9,208 | ||||||||
Repayments of line of credit | - | - | (3,000 | ) | ||||||||
Repayments under long term debt with Bank of America | (8,820 | ) | (310 | ) | (1,858 | ) | ||||||
Borrowings under long term debt with M&T bank | 20,000 | - | - | |||||||||
Repayment of long term debt with M&T bank | (2,176 | ) | - | - | ||||||||
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 | 5,584 | - | - | |||||||||
Repayments of financing liability | (430 | ) | (144 | ) | (465 | ) | ||||||
Dividend payments to Series A Preferred stockholders | (2,635 | ) | - | - | ||||||||
Dividend payments | - | - | (15,000 | ) | ||||||||
Repayments of notes payable to Andina related parties | (761 | ) | - | - | ||||||||
Repayments of acquisition notes payable | (183 | ) | - | - | ||||||||
Payment of contingent liability - RV America acquisition | - | (667 | ) | (1,333 | ) | |||||||
Loan issuance costs | (693 | ) | - | (139 | ) | |||||||
Net Cash Provided by (Used In) Financing Activities | 127,134 | (13,393 | ) | (12,587 | ) | |||||||
Net Increase (Decrease) In Cash | 15,932 | (4,104 | ) | 9,134 | ||||||||
Cash - Beginning | 10,671 | 13,292 | 4,158 | |||||||||
Cash - Ending | $ | 26,603 | $ | 9,188 | $ | 13,292 |
See the accompanying notes to the consolidated financial statementsstatements.
F-7 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Dollar amounts in thousands)
For the year ended December 31, 2022 | For the year ended December 31, 2021 | |||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for interest | $ | 15,558 | $ | 7,301 | ||||
Cash paid during the period for income taxes net of refunds received | $ | 23,920 | $ | 29,070 | ||||
Non-Cash Investing and Financing Activities | ||||||||
Fixed assets purchased with accounts payable | $ | 203 | ||||||
Accrued dividends on Series A Preferred Stock | $ | 1,210 | $ | 1,210 | ||||
Operating lease assets | $ | (886 | ) | $ | (20,659 | ) | ||
Operating lease liabilities | $ | 886 | $ | 20,659 | ||||
Net assets acquired in acquisitions | $ | 18,071 | $ | 44,005 |
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||
Cash paid during the year for interest | $ | 7,541 | $ | 2,182 | $ | 8,332 | ||||||
Cash paid during the year for income taxes net of refunds received | $ | 4,706 | $ | 3,587 | $ | 3,325 | ||||||
Non-Cash Investing and Financing Activities | ||||||||||||
Rental vehicles transferred to inventory, net | $ | 598 | $ | 89 | $ | 74 | ||||||
Conversion of Andina redeemable common stock to common stock of Lazydays Holdings, Inc. | $ | 4,910 | $ | - | $ | - | ||||||
Rental equipment purchased under floor plan | $ | - | $ | 2,911 | $ | - | ||||||
Fixed assets purchased with accounts payable | $ | 818 | $ | - | $ | - | ||||||
Conversion of preferred stock into common stock | $ | - | $ | - | $ | 2 | ||||||
Accrued dividends on Series A Preferred Stock | $ | 1,210 | $ | - | $ | - | ||||||
Beneficial conversion feature on Series A Preferred Stock | $ | 3,392 | $ | - | $ | - | ||||||
Warrants issued to Series A Preferred stockholders and investment bank | $ | 2,666 | $ | - | $ | - | ||||||
Common stock issued to former stock holders of Lazy Days’ R.V. Center, Inc. | $ | 29,400 | $ | - | $ | - | ||||||
Note payable incurred in acquisitions | $ | 5,820 | $ | - | $ | - | ||||||
Net assets acquired in dealership acquisitions | $ | 21,034 | $ | - | $ | - | ||||||
Net assets acquired in the acquisition of Lazy Days’ R.V. Center, Inc. | $ | 106,391 | $ | - | $ | - |
See the accompanying notes to the consolidated financial statementsstatements.
F-8 |
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share amounts)
NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Lazydays Holdings, Inc. (“Holdings”), a Delaware corporation, which 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 sixeighteen locations including onetwo in the state of Florida, two in the state of Colorado, two in the state of Arizona, three in the state of Tennessee, two in the state of Minnesota, two in the state of Indiana, one in the state of Arizona,Oregon, one in the state of TennesseeWashington, one in the state of Wisconsin and one located in Minnesota.the state of Oklahoma. Lazydays RV has also operated a dedicated service center location near Houston, Texas since early 2020, which was expanded to include a sales center in the fourth quarter of 2022. Through its subsidiaries, Lazydays RV sells and services new and pre-owned recreational vehicles and sells related parts and accessories,accessories. We also arrange financing and rents recreational vehicles. It also offers to its customers such ancillary services as extended service contracts overnight campground and restaurant facilities. The Company also arranges financing for vehicle sales through third-party financing sources.sources and extended warrant providers. We also offer our customers such ancillary services as overnight campground and restaurant facilities.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
Successor
The consolidated financial statements infor the period from March 15, 2018 toyears ended December 31, 20182022 and 2021 include the accounts of Holdings, Lazydays RVLazy Days R.V. Center, Inc. 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, Lazydays of Minneapolis LLC, and LDRV of Tennessee LLCthe subsidiaries as described in Exhibit 21.1 (collectively, the “Company”, “Lazydays” or “Successor”). All significant inter-company accounts and transactions have been eliminated in consolidation.
PredecessorSegments
The consolidated financial statements inWe operate one reportable segment, which includes all aspects of our RV dealership operations which include sales of new and pre-owned RVs, assisting customers with vehicle financing and protection plans, servicing and repairing new and pre-owned RVs, sales of RV parts and accessories and campground facilities. We identified our reporting segment by considering the periods from January 1, 2018level at which the operating results are regularly reviewed by our chief operating decision maker to March 14, 2018allocate resources and January 1, 2017 through December 31, 2017 include the accounts of Lazydays RV and its wholly owned subsidiary LDRV Holdings Corp. LDRV Holdings Corp is 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.assess performance.
F-9 |
Predecessor and Successor Periods
As a result of the Mergers, Holdings is the acquirer for accounting purposes and Lazydays RV is the acquiree and the accounting predecessor. The financial statement presentation distinguishes the results into two distinct periods, the periods up to March 15, 2018 (the “Acquisition Date”) (“Predecessor Periods”) 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 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 generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from 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,LIFO adjustments, the allowance for doubtful accounts and stock-based compensation.fair value of warrant liabilities.
Cash and Cash Equivalents
The Company considersWe consider all short-term, highly liquid investments purchased with a maturity date of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short-term maturity of these instruments. Cash consists of business checking accounts with its banks, the first $250 of which is insured by the Federal Deposit Insurance Corporation.our banks. There are nocash equivalents as of December 31, 20182022 and 2017.2021.
Revenue Recognition
The Companycore principle of revenue recognition is that an entity recognizes revenue whento depict the following four criteria are met: (1) delivery has occurredtransfer of promised goods or services rendered; (2) persuasive evidenceto clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We apply a five-step model for revenue measurement and recognition.
Revenues are recognized when control of an arrangement exists; (3) feesthe promised goods or services is transferred to customers at the expected amount we are fixed or determinable,entitled to for such goods and (4)services. Taxes collected on revenue producing transactions are excluded from revenue in the collectionconsolidated statements of related accounts receivable is probable.operations.
Revenue from the sale of vehiclesvehicle contracts is recognized at a point in time on delivery, transfer of title and completion of financing arrangements.
Revenue from the sale of parts, sales,accessories, and related service is recognized on deliveryas services and parts are delivered or as a customer approves elements of the service or product.completion of service. Revenue from the sale of parts, sales,accessories, and related service is recognized in other revenue in the accompanying consolidated statements of operations.
Revenue from the rental of vehicles is recognized pro rata over the period of the rental agreement. The rental agreements are generally short-term in nature. Revenue from rentals is included in other revenue in the accompanying consolidated statements of operations.
The Company receivesWe receive commissions from the sale of insurance and vehicle service contracts to customers. In addition, the Company arrangeswe arrange financing for customers through various financial institutions and receivesreceive commissions. The CompanyWe may be charged back (“charge-backs”) for financing fees, insurance or vehicle service contract commissions in the event of early termination of the contracts by theour customers. The revenues from financing fees and commissions are recorded at the time of the sale of the vehiclesvehicle and an allowance for future charge-backs is established based on historical operating results and the termination provision of the applicable contracts. The Companyestimates for future chargebacks require judgment by management, and as a result, there is an element of risk associated with these revenue streams. We recognized finance and insurance revenues, net of chargebacks,less the addition to the charge-back allowance, which is included in other revenue as follows:
SCHEDULE OF REVENUE RECOGNIZED OF FINANCE AND INSURANCE REVENUES
For the year ended | For the year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Gross finance and insurance revenues | $ | 82,226 | $ | 80,364 | ||||
Additions to charge-back allowance | (6,744 | ) | (7,717 | ) | ||||
Net Finance Revenue | $ | 75,482 | $ | 72,647 |
F-10 |
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Gross finance and insurance revenues | $ | 27,926 | $ | 7,483 | $ | 32,509 | ||||||
Chargebacks | (2,338 | ) | (622 | ) | (2,661 | ) | ||||||
Net Finance Revenue | $ | 25,588 | $ | 6,861 | $ | 29,848 |
The Company hasWe have an accrual for charge-backs which totaled $3,252 and $2,373$8.2 million at December 31, 20182022 and 2017,December 31, 2021, respectively, and is included in “Accounts payable, accrued expenses, and other current liabilities” in the accompanying 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.
Receivables
Revenue is recorded net of related sales and excise taxes.
Occupancy Costs
As a retail merchandising organization, the Company has elected to classify occupancy costs as selling, general and administrative expense in the consolidated statements of operations.
Shipping and Handling Fees and Costs
The Company reports shipping and handling costs billed to customers as a component of revenues, and related costs are reported as a component of costs applicable to revenues. For the period from March 15, 2018 to December 31, 2018, shipping and handling included as a component of revenue were $1,896. For the periods from January 1, 2018 to March 14, 2018 and January 1, 2017 to December 31, 2017 shipping and handling costs included as a component of revenue were $603 and $2,760 respectively.
Receivables
The Company sellsWe sell to customers and arrangesarrange third-party financing, as is customary in the industry. These financing arrangements result in receivables from financial institutions. Interest is not normally charged on receivables. Management establishes an allowance for doubtful accounts based on itsour historic loss experience and current economic conditions. Losses are charged to the allowance when management deems further collection efforts will not produce additional recoveries.
Inventories
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 usedpre-owned 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 $1,276$20.8 million and $11,930$8.4 million as of December 31, 20182022 and 2017,2021, respectively.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense in the period incurred. Improvements and additions are capitalized. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the lesser of the useful life of the asset or the term of the lease.
Successor
Useful lives range from 2 to 2639 years for buildings and improvements and from 2 to 12 years for vehicles and equipment.
Predecessor
Useful lives range from 15 to 20 years for buildings and improvements and from 2 to 7 years for vehicles and equipment.
Goodwill and Intangible Assets
The Company’s goodwill, trade names and trademarks are deemed to have indefinite lives, and accordingly are not amortized, but are evaluated at least annually for impairment and more often whenever changes in facts and circumstances may indicate that the carrying value may not be recoverable. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining fair value. Significant judgment is required to estimate the fair value of reporting units which includes estimating future cash flows, determining appropriate discount rates, consideration of the Company’s aggregate fair value, and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment.
When testing goodwill for impairment, the Company may assess qualitative factors for some or all of our reporting units to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit is less than the carrying amount, including goodwill. Alternatively, the Company may bypass this qualitative assessment for some or all our reporting units and perform a detailed quantitative test of impairment (Step 1). If the Company performs the detailed quantitative impairment test and the carrying amount of the reporting unit exceeds its fair value, the Company would perform an analysis, (Step 2) to measure such impairment. At December 31, 2018 and 2017,September 30, 2022, the Company performed a qualitative assessment to identify and evaluate events and circumstances to conclude whether it is more likely than not that the fair value of the Company’s reporting units is less than their carrying amounts. Based on the Company’s qualitative assessments, the Company concluded that a positive assertion can be made that it is more likely than not that the fair value of the reporting units exceeded their carrying values and no impairments were identified at December 31, 2018.2022.
F-11 |
The Company’sOur manufacturer and customer relationships are amortized over their estimated useful lives on a straight-line basis.
Successor
The estimated useful lives are 78 to 1215 years for both the manufacturer and customer relationships.
Predecessor
The estimated useful lives were 13 to 18 years for the manufacturer relationships. The customer relationships were fully amortized and had a net carrying value of $0 at December 31, 2017.
Vendor Allowances
As a component of the Company’sour consolidated procurement program, the Companywe frequently entersenter into contracts with vendors that provide for payments of rebates. These vendor payments are reflected in the carrying value of the inventory when earned or as progress is made toward earning the rebates and as a component of costs of sales as the inventory is sold. Certain of these vendor contracts provide for rebates that are contingent upon the Company meeting specified performance measures such as a cumulative level of purchases over a specified period of time. Such contingent rebates are given accounting recognition at the point at which achievement of the specified performance measures is deemed to be probable and reasonably estimable.
Financing Costs
Debt financing costs are recorded as a debt discount and are amortized over the term of the related debt. Amortization of debt discount included in interest expense was $377 for the period from March 15, 2018 to December 31, 2018. Amortization of debt discount included in interest expense was $136 and $371 for the period from January 1, 2018 to March 14, 2018 and January 1, 2017 to December 31, 2017, respectively.
Impairment of Long-Lived Assets
The Company evaluatesWe evaluate the carrying value of long-lived assets whenever events or changes in circumstances indicate that intangible asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measuresWe measure the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying amount of the asset being evaluated, an impairment loss would be recognized for the amount by which the carrying value of the asset exceeds its fair value. The evaluation of asset impairment requires the Companyus to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. Management believes there have been no changes in events or circumstances that would indicate an impairment of long-lived assets existed as of December 31, 20182022 and 2017.2021.
Fair Value of Financial Instruments
The carrying amounts of financial instruments approximate fair value as of December 31, 20182022 and 20172021 because of the relatively short maturities of these instruments. The carrying amount of the Company’sour bank debt approximates fair value as of December 31, 20182022 and 20172021 because the debt bears interest at a rate that approximates the current market rate at which the Companywe could borrow funds with similar maturities.
Cumulative Redeemable Convertible Preferred Stock
The Company’sOur Series A Preferred Stock (See Note 15 – 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 cash dividend payment is declared by the Board of Directors.
Stock Based Compensation
The Company accountsWe account for stock-based compensation for employees and directors in accordance with Accounting Standards Codification (“ASC”)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 operations 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 operatingfinancing activities. All
F-12 |
We record excess tax benefits and tax deficiencies (including tax benefitsresulting from the settlement of dividends on share-based payment awards) are recognizedstock-based awards as a benefit or expense within income tax expense or benefittaxes in the consolidated statements of operations.operations in the period in which they occur.
The Company computesWe compute basic and diluted earnings/(loss)earnings per share (“EPS”) by dividing net earnings/(loss)earnings by the weighted average number of shares of common stock outstanding during the period.
The Company isWe are required, in periods in which it haswe have net income, to calculate EPS using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders but does not require the presentation of basic and diluted EPS for securities other than common shares. The two-class method is required because the Company’sour Series A Preferred Stock have the right to receive dividends or dividend equivalents should the Companywe declare dividends on itsour common stock as if such holder of the Series A Preferred Stock had been converted to common stock. Under the two-class method, earnings for the period are allocated on a pro-rata basis to the common and preferred stockholders.stockholders taking into consideration Series A Preferred Stockholders participation in dividends on an as converted basis. 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. Diluted EPS is computed in the same manner as basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if certain shares issuable upon exercise of common share options or warrants were included unless those additional shares would have been anti-dilutive. For the diluted EPS computation, the treasury stock method is applied and compared to the two-class method and whichever method results in a more dilutive impact is utilized to calculate diluted EPS.
In periods in which the Company haswe have 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.
SUMMARY OF NET INCOME (LOSS) ATTRIBUTE TO COMMON STOCKHOLDERS
Year ended | Year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
(Dollars in thousands - except share and per share amounts) | ||||||||
Distributed earning allocated to common stock | $ | - | $ | - | ||||
Undistributed earnings allocated to common stock | 40,618 | 50,474 | ||||||
Net earnings allocated to common stock | 40,618 | 50,474 | ||||||
Net earnings allocated to participating securities | 20,974 | 26,746 | ||||||
Net earnings allocated to common stock and participating securities | $ | 61,592 | $ | 77,220 | ||||
Weighted average shares outstanding for basic earnings per common share computation | 11,400,945 | 11,102,298 | ||||||
Dilutive effect of pre-funded warrants | 300,357 | 300,357 | ||||||
Weighted average shares outstanding for diluted earnings per share computation | 11,701,302 | 11,402,655 | ||||||
Basic income per common share | $ | 3.47 | $ | 4.43 | ||||
Diluted income per common share | $ | 2.42 | $ | 3.93 |
Successor | ||||
March 15, 2018 to December 31, 2018 | ||||
(Dollars in thousands - except per share amounts) | ||||
Distributed earning allocated to common stock | $ | - | ||
Undistributed loss allocated to common stock | (9,857 | ) | ||
Net loss allocated to common stock | (9,857 | ) | ||
Net loss allocated to participating securities | - | |||
Net loss allocated to common stock and participating securities | $ | (9,857 | ) | |
Weighted average shares outstanding for basic earning per common share | 9,668,250 | |||
Dilutive effect of warrants and options | - | |||
Weighted average shares outstanding for diluted earnings per share computation | 9,668,250 | |||
Basic loss per common share | $ | (1.02 | ) | |
Diluted loss per common share | $ | (1.02 | ) |
During the Successor Period from March 15, 2018 toyears ended December 31, 2018,2022 and 2021, respectively, the denominator of the basic EPS was calculated as follows:
SCHEDULE OF DENOMINATOR OF BASIC EARNINGS PER SHARE
Year ended | Year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Weighted average outstanding common shares | 11,400,945 | 11,102,298 | ||||||
Weighted average prefunded warrants | 300,357 | 300,357 | ||||||
Weighted shares outstanding - basic | $ | 11,701,302 | $ | 11,402,655 |
F-13 |
SCHEDULE OF DENOMINATOR OF DILUTIVE EARNINGS PER SHARE
Year ended | Year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Weighted average outstanding common shares | 11,400,945 | 11,102,298 | ||||||
Weighted average prefunded warrants | 300,357 | 300,357 | ||||||
Weighted average warrants (equity) | 534,137 | 891,465 | ||||||
Weighted average warrants (liabilities) | 237,518 | - | ||||||
Weighted average options | 324,839 | 558,198 | ||||||
Weighted shares outstanding - diluted | 12,797,796 | 12,852,318 |
For the Successor period,years ended December 31, 2022 and 2021, respectively, the following common stock equivalent shares were excluded from the computation of the diluted lossincome per share, since their inclusion would have been anti-dilutive:
SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
Year ended | Year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Warrants (liabilities) | - | 645,458 | ||||||
Stock options | 245,032 | 245,000 | ||||||
Restricted stock units | 72,459 | - | ||||||
Shares issuable under the Employee Stock Purchase Plan | 4,517 | 6,625 | ||||||
Share equivalents excluded from EPS | 322,008 | 897,083 |
Advertising Costs
Advertising and promotion costs are charged to operations in the period incurred. Advertising and promotion costs totaled $8,663$30.6 million and $22.1 million for the period from March 15, 2018 toyears ended December 31, 2018 (Successor Period). Advertising2022 and promotion charges were $2,624 and $11,027 for the Predecessor periods from January 1, 2018 to March 14, 2018 and January 1, 2017 to December 31, 2017,2021, respectively.
Income Taxes
The Company accountsWe account for income taxes under ASC 740 Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company recordsWe record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Tax benefits claimed or expected to be claimed on a tax return are recorded in the Company’sour financial statements. A tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Uncertain tax positions have had no impact on the Company’sour financial condition, results of operations or cash flows. The Company doesWe do not expect any significant changes in itsour unrecognized tax benefits within twelve months of the reporting date.
The Company’sOur policy is to classify assessments, if any, for tax related interest and penalties as income tax expense in the consolidated statements of operations.
F-14 |
Seasonality
The Company’s operations generally experience modestly higher vehicle sales in the first half of each year during the winter months at the Company’s largest location in Tampa, Florida.
Vendor Concentrations
The Company purchases itsWe purchase our new recreational vehiclesRVs and replacement parts from various manufacturers. During the Successor period from March 15, 2018 toyear ended December 31, 2018, four major manufacturers2022, Thor Industries, Inc., Winnebago Industries, Inc, and Forest River, Inc. accounted for 30.5%49.1%, 27.4%29.1% and 18.3%, 17.3% and 16.8%respectively, of RV purchases. During the Predecessor Period from January 1, 2018 to March 14, 2018, four major manufacturersyear ended December 31, 2021, Thor Industries, Inc., Winnebago Industries, Inc, and Forest River, Inc. accounted for 36.1%46.4%, 21.4%30.6%, 18.2%, and 16.1%18.9% of RV purchases.
During the Predecessor period from January 1, 2017 to December 31, 2017, four major manufacturers accounted for 28.9%, 27.0%, 21.3%, and 15.0% of RV purchases.
The Company isWe are subject to dealer agreements with each manufacturer. The manufacturer is entitled to terminate the dealer agreement if the Company iswe are in material breach of the agreement terms.
Geographic Concentrations
Revenues generated by customers of the Florida locationlocations, the Colorado locations, the Arizona locations, and the ColoradoTennessee locations which generate greater than 10% of revenues, were as follows:
SCHEDULE OF GEOGRAPHIC CONCENTRATION RISK PERCENTAGE
For the year ended | For the year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Florida | 44 | % | 48 | % | ||||
Tennessee | 14 | % | 14 | % | ||||
Colorado | <10 | % | 11 | % | ||||
Arizona | <10 | % | 11 | % |
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Florida | 71 | % | 81 | % | 77 | % | ||||||
Colorado | 19 | % | 11 | % | 15 | % |
These geographic concentrations increase the exposure to adverse developments related to competition, as well as economic, demographic, weather and other changes in these regions.
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.
LeasesLease 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 rentdo 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 expected lease term, including cancellable option periods where the Company is reasonably assuredterm. We have lease agreements with both lease and non-lease components, which are generally accounted for together as a single lease component. Leases that are determined to exercise the options. Differences between amounts paid and amounts expensed are recorded as deferred rent. Capitalbe finance leases are recorded as an asset and an obligation at an amount equal to the present value of the future minimum lease payments during the lease term. Sale-leasebacks are transactions through which assets are sold at fair value and subsequently leased back from the seller. Failed sale-leaseback transactions result in retention of the “sold” assets within property and equipment, with a financing lease obligation equal to the amount of proceeds received recorded as a financing liability, on the accompanying consolidated balance sheets.liabilities. See Note 8. – Financing Liabilities.
Subsequent Events
Management of the Company has analyzed the activities and transactions subsequent to December 31, 2018 through the date these 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 consolidated financial statements other than those disclosed in Note 15 – Preferred Stock and Note 16 – Stockholders’ Equity.
Recently Issued Accounting Standards
The Company qualifies as an emerging growth company pursuant to the provision of the Jumpstart Our Business Startups (“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 standards.
In February 2016,October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This standard requires contract assets and contract liabilities, such as certain receivables and deferred revenue, acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards UpdateCodification (“ASU”ASC”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosuresat the same amounts recorded by the acquiree instead of recording those balances at fair value. This standard should be applied prospectively to help investors and other financial statement users better understandacquisitions occurring after the amount, timing, and uncertainty of cash flows arising from leases. As the Company qualifies as an emerging growth company, thiseffective date. The standard will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the impact that this new standard will have on our consolidated financial statements.
F-15 |
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial statements and disclosures.
In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Considerations”, in April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing” and in May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”). This update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue from Contracts with Customers which is not yet effective. These new standards provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition guidance. As the Company qualifies as an emerging growth company, this standard will be effective for fiscal years beginning after December 15, 2018. This standard has an effective date of January 1, 2019, and the Company used the modified retrospective implementation method, whereby a cumulative effect adjustment is recorded to retained earnings as of the date of initial application, if needed. In preparing for adoption, the Company has evaluated the terms, conditions and performance obligations under our existing contracts with customers. The Company does not expect to have a cumulative adjustment to retained earnings and does not anticipate that the new standard will have a material impact on its financial condition, results of operations or cash flows.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendment addresses several specific cash flow issues with the objective of reducing the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. As the Company qualifies as an emerging growth company, this standard will be effective for fiscal years beginning after December 15, 2018, and2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expectWe are currently evaluating the adoption ofimpact that this ASU to materially impact itsnew standard will have on our consolidated financial statements or results of operations.statements.
Recently Adopted Accounting Pronouncements
In November 2016,March 2020, the FASB issued ASU No. 2016-18, Statement of Cash Flows2020-04, Reference Rate Reform (Topic 230): Restricted Cash,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 consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”).new alternative reference rate. The amendments require thatguidance 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 statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU do not provide a definition of restricted cash or restricted cash equivalents. As the Company qualifiesmodification to transition to an alternative reference rate is treated as an emerging growth company, thisevent that does not require contract remeasurement or reassessment of a previous accounting treatment. The standard will beis generally effective for fiscal years beginning afterall contract modifications made and hedging relationships evaluated through December 15, 2018,31, 2022, as a result of reference rate reform. We adopted ASU 2020-04 on January 1, 2022 and interim periods within those fiscal years. The Company does not expect the adoption of this ASU to materially impact its consolidated financial statements or results of operations.
In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This standard will be effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements and disclosures.
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): (“ASU 2017-09”). ASU 2017-09 provides clarity on the accounting for modifications of stock-based awards. ASU 2017-09 requires adoption on a prospective basis in the annual and interim periods for our fiscal year ending December 31, 2019 for share-based payment awards modified on or after the adoption date. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.
In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). This ASU adds Securities and Exchange Commission (“SEC”) paragraphs pursuant to the SEC Staff Announcement at the July 20, 2017 Emerging Issues Task Force (EITF) meeting. The July announcement addresses Transition Related to Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), and No. 2016-02, Leases (Topic 842). This update also supersedes SEC paragraphs pursuant to the rescission of SEC Staff Announcement, “Accounting for Management Fees Based on a Formula,” effective upon the initial adoption of Topic 606, Revenue from Contracts with Customers, and SEC Staff Announcement, “Lessor Consideration of Third-Party Value Guarantees,” effective upon the initial adoption of Topic 842, Leases. The amendments in this update also rescind three SEC Observer Comments effective upon the initial adoption of Topic 842. One SEC Staff Observer comment is being moved to Topic 842. As the Company qualifies as an emerging growth company, this standard is required to be implemented effective January 1, 2019. The Company does not believe the impact of of this guidance will have a material impact on the financial statements.
In November 2017, the FASB issued ASU 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the new revenue recognition standard. As the Company qualifies as an emerging growth company, this standard will be effective for fiscal years beginning after December 15, 2018. The Company has evaluated the impact of these ASUs, and has concluded that it willdid not materially impact theour condensed consolidated financial statements.
NOTE 3 – BUSINESS COMBINATIONS
Lazy Days’ R.V. Center, Inc.Acquisitions of Dealerships
On March 15, 2018, the CompanyWe consummated the Mergers. Underfollowing acquisitions during the Merger Agreement, upon consummationyears ended December 31, 2022 and 2021. In all four acquisitions, the purchase price consisted solely 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 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 underseller. As part of each transaction, we acquired the transaction incentive plan (the “Transaction Incentive Plan”). During the year ended December 31, 2018, the Company received $563 as a resultinventory of the settlementseller and added the inventory to the M&T Floor Plan Line of the working capital adjustment and the amount was reflected as an adjustment to goodwill.Credit (as defined below).
● | March 23, 2021 | Chilhowee Trailer Sales (“Chilhowee”) in Maryville, Tennessee | |
● | August 3, 2021 | B. Young RV (“BYRV”) in Portland, Oregon and Vancouver, Washington | |
● | August 24, 2021 | Burlington RV Superstore (“Burlington”) in Milwaukee, Wisconsin | |
● | July 23, 2022 | Dave’s Claremore RV in Tulsa, Oklahoma |
F-16 |
The CompanyWe accounted for the Mergersasset purchase agreements as a business combinationcombinations using the purchase method of accounting.accounting as it was determined that Chilhowee, BYRV, Burlington and Dave’s Claremore RV each constituted a business. The allocation of the fair value of the assets acquired is final for Chilhowee, BYRV and Burlington. The allocation of the fair value of the assets acquired is still preliminary for Dave’s Claremore RV primarily due to any final adjustments necessary to parts inventory as the examination and inventory of parts acquired is not yet complete. As a result, the Companywe determined itsour final allocation (which are subject to potential settlements of contingencies that the Company does not expect to be material)for Chilhowee, BYRV and Burlington, and preliminary allocation for Dave’s Claremore RV of the fair value of the assets acquired and the liabilities assumed of the Predecessorfor these dealerships 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 |
SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
BYRV | Other | Total | ||||||||||||||
2022 | 2021 | |||||||||||||||
BYRV | Other | Total | ||||||||||||||
Cash | $ | 5 | $ | - | $ | 11 | $ | 11 | ||||||||
Inventories | 9,504 | 10,189 | 10,087 | 20,276 | ||||||||||||
Accounts receivable and prepaid expenses | 98 | 2,295 | 875 | 3,170 | ||||||||||||
Property and equipment | 7,353 | 939 | 629 | 1,568 | ||||||||||||
Intangible assets | 1,140 | 17,795 | 3,270 | 21,065 | ||||||||||||
Total assets acquired | 18,100 | 31,218 | 14,872 | 46,090 | ||||||||||||
Accounts payable, accrued expenses and other current liabilities | 29 | 788 | 1,297 | 2,085 | ||||||||||||
Total liabilities assumed | 29 | 788 | 1,297 | 2,085 | ||||||||||||
Net assets acquired | $ | 18,071 | $ | 30,430 | $ | 13,575 | $ | 44,005 |
The fair value of the consideration paid was as follows:
SCHEDULE OF FAIR VALUE OF CONSIDERATION PAID
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 |
BYRV | Other | Total | ||||||||||||||
2022 | 2021 | |||||||||||||||
BYRV | Other | Total | ||||||||||||||
Purchase Price | $ | 14,694 | $ | 49,506 | $ | 13,530 | $ | 63,036 | ||||||||
Floor plan notes payable | 8,069 | 6,912 | 7,373 | 14,285 | ||||||||||||
Fair value consideration paid | $ | 22,763 | $ | 56,418 | $ | 20,903 | $ | 77,321 |
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, Chilhowee, BYRV and Burlington. The primary items that generated the Predecessor.goodwill are the value of the synergies between the acquired businesses and the Company, and the growth and operational improvements that drive profitability growth, neither of which qualify for recognition as a separately identified intangible asset. Goodwill associated with the Mergerstransactions is detailed below:
SCHEDULE OF GOODWILL ASSOCIATED WITH MERGER
2022 | 2021 | |||||||||||||||||||
BYRV | Other | Total | ||||||||||||||||||
As of March 15, 2018 | ||||||||||||||||||||
Total consideration | $ | 115,578 | $ | 22,763 | $ | 56,418 | $ | 20,903 | $ | 77,321 | ||||||||||
Less net assets acquired | $ | 87,183 | 18,071 | 30,430 | 13,575 | 44,005 | ||||||||||||||
Goodwill | $ | 28,395 | $ | 4,692 | $ | 25,988 | $ | 7,328 | $ | 33,316 |
We recorded measurement period adjustments to goodwill of ($1.6) million and $0.35 million for the years ended December 31, 2022 and 2021, respectively.
The following table summarizes the Company’sour allocation of the purchase price to the identifiable intangible assets acquired as of the date of the closing as 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 | |||
Total intangible assets | $ | 68,200 |
Trade namesDecember 31, 2022 and trademarks are indefinite-lived assets and are not subject to amortization.December 31, 2021, respectively. 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 Mergers. These costs totaled $2,730allocation is final for the period from March 15, 20182021 acquisitions and preliminary for the 2022 acquisition.
SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED
Gross Asset Amount at Acquisition Date | Weighted Average Amortization Period in Years | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Customer Lists | $ | 240 | $ | 365 | 15 years | 10 years | ||||||||||
Dealer Agreements | $ | 900 | $ | 20,700 | 10 years | 10 years |
We recorded approximately $0.22 million in revenue and $0.02 million in net income prior to income taxes during the year ended December 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 RV Center for the land and building at the Shorewood RV Center location. The purchase price consisted of cash and a note payable2022, related to the seller of Shorewood RV Center, subject to a final working capital adjustment. The note payable is a three2022 acquisition. We recorded approximately $82.9 million in revenue and $11.8 million in pre-tax income during the year note which matures on August 7,ended December 31, 2021, which requires monthly payments of $52 in principal and interest. The note bears interest at 4.75%. As part of the acquisition, the Company acquired the inventory of Shorewood RV Center and has added the inventoryrelated to the M&T Floor Plan Line of Credit. 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 (See Note 10 - Debt).2021 acquisitions.
F-17 |
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%. 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.
The Company accounted for the asset purchase agreements as business combinations using the purchase method of accounting as it was determined that Shorewood RV Center and Tennessee RV both constituted 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:
Inventories | $ | 23,530 | ||
Accounts receivable and prepaid expenses | 388 | |||
Property and equipment | 6,175 | |||
Intangible assets | 4,610 | |||
Total assets acquired | 34,703 | |||
Accounts payable, accrued expenses and other current liabilities | 698 | |||
Floor plan notes payable | 21,163 | |||
Total liabilities assumed | 21,861 | |||
Net assets acquired | $ | 12,842 |
The fair value of consideration paid was as follows:
Purchase Price: | ||||
Cash consideration paid | $ | 15,300 | ||
Amounts due to former owners | 89 | |||
Note payable issued to former owners | 5,820 | |||
$ | 21,209 |
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 RV Center and Tennessee RV. Goodwill associated with the transaction is detailed below:
Total consideration | $ | 21,209 | ||
Less net assets acquired | $ | 12,842 | ||
Goodwill | $ | 8,367 |
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.
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 |
Pro Forma Information
The following unaudited pro forma financial information summarizes the combined results of operations for the Company as though the Mergerspurchase Chilhowee, BYRV, Burlington and the purchase of Shorewood RV Center and TennesseeDave’s Claremore RV had been consummated on January 1, 2017.2022 and 2021, respectively.
SCHEDULE OF PRO FORMA FINANCIAL INFORMATION
For the year ended December 31, | For the year ended | For the year ended | ||||||||||||||
2018 | 2017 | December 31, 2022 | December 31, 2021 | |||||||||||||
Revenue | $ | 663,878 | $ | 675,811 | $ | 1,346,439 | $ | 1,388,089 | ||||||||
Income before income taxes | $ | 6,890 | $ | 13,722 | $ | 85,998 | $ | 126,889 | ||||||||
Net income | $ | 2,715 | $ | 8,567 | $ | 66,726 | $ | 95,072 |
The Company adjustedfollowing unaudited pro forma financial information summarizes the combined incomeresults of Lazydaysoperations for the Company as though the purchase Chilhowee, BYRV, Burlington and Dave’s Claremore RV with Andina and Shorewood and adjusted net 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 income.had been consummated on January 1, 2021.
The Company recorded approximately $9.0 million in revenue and ($0.1 million) in net loss prior to income taxes during the period from March 15, 2018 to December 31, 2018 related to these acquisitions.
Goodwill that is deductible for tax purposes was determined to be $15,453.$53.7 million related to all acquisitions.
NOTE 4 – RECEIVABLES, NET
Receivables consist of the following:
Successor | Predecessor | |||||||
As of | As of | |||||||
December 31, 2018 | December 31, 2017 | |||||||
Contracts in transit and vehicle receivables | $ | 12,291 | $ | 15,528 | ||||
Manufacturer receivables | 3,823 | 3,555 | ||||||
Finance and other receivables | 1,540 | 1,841 | ||||||
17,654 | 20,924 | |||||||
Less: Allowance for doubtful accounts | (687 | ) | (1,013 | ) | ||||
$ | 16,967 | $ | 19,911 |
SCHEDULE OF RECEIVABLES
As of | As of | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Contracts in transit and vehicle receivables | $ | 15,442 | $ | 24,182 | ||||
Manufacturer receivables | 8,760 | 4,105 | ||||||
Finance and other receivables | 1,327 | 2,773 | ||||||
Receivables, gross | 25,529 | 31,060 | ||||||
Less: Allowance for doubtful accounts | (476 | ) | (456 | ) | ||||
Receivables, net | $ | 25,053 | $ | 30,604 |
Contracts in transit represent receivables from financial institutions for the portion of the vehicle and other products sales price financed by the Company’sour customers through financing sources arranged by the Company. Manufacturer receivables are due from the manufacturers for incentives, rebates, and other programs. These incentives and rebates are treated as a reduction of cost of revenues.
F-18 |
NOTE 5 – INVENTORIES
Inventories consist of the following:
Successor | Predecessor | |||||||
As of | As of | |||||||
December 31, 2018 | December 31, 2017 | |||||||
New recreational vehicles | $ | 129,361 | $ | 89,668 | ||||
Pre-owned recreational vehicles | 34,905 | 31,378 | ||||||
Parts, accessories and other | 4,387 | 5,054 | ||||||
168,653 | 126,100 | |||||||
Less: excess of current cost over LIFO | (1,275 | ) | (11,930 | ) | ||||
$ | 167,378 | $ | 114,170 |
SCHEDULE OF INVENTORIES
As of | As of | |||||||
December 31, 2022 | December 31, 2021 | |||||||
New recreational vehicles | $ | 342,415 | $ | 177,744 | ||||
Pre-owned recreational vehicles | 50,457 | 66,013 | ||||||
Parts, accessories and other | 6,831 | 7,586 | ||||||
Inventories, gross | 399,703 | 251,343 | ||||||
Less: excess of current cost over LIFO | (20,822 | ) | (8,437 | ) | ||||
Total | $ | 378,881 | $ | 242,906 |
NOTE 6 – PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
Successor | Predecessor | |||||||||||||||
As of | As of | As of | As of | |||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2022 | December 31, 2021 | |||||||||||||
Land | $ | 15,555 | $ | 10,366 | $ | 41,286 | $ | 31,910 | ||||||||
Building and improvments including leasehold improvements | 55,761 | 41,890 | ||||||||||||||
Building and improvements including leasehold improvements | 113,596 | 94,720 | ||||||||||||||
Furniture and equipment | 5,044 | 14,753 | 17,503 | 12,874 | ||||||||||||
Company vehicles and rental units | 4,856 | 3,612 | ||||||||||||||
Company vehicles | 1,691 | 1,333 | ||||||||||||||
Construction in progress | 2,359 | 396 | 20,190 | 5,786 | ||||||||||||
83,575 | 71,017 | |||||||||||||||
Property and equipment, gross | 194,266 | 146,623 | ||||||||||||||
Less: Accumulated depreciation and amortization | (5,532 | ) | (25,348 | ) | (35,275 | ) | (25,875 | ) | ||||||||
$ | 78,043 | $ | 45,669 | |||||||||||||
Property and equipment, net | $ | 158,991 | $ | 120,748 |
Depreciation and amortization expense is set forth in the table below:
SCHEDULE OF DEPRECIATION AND AMORTIZATION
As of | As of | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Depreciation | $ | 9,480 | $ | 8,386 |
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Depreciation and amortization | $ | 5,583 | $ | 1,058 | $ | 5,286 |
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
The following is a summary of changes in our goodwill for the years ended December 31, 2022 and 2021:
SCHEDULE OF CHANGES IN GOODWILL
Balance as of December 31, 2020 | 45,095 | |||
Acquisitions | 34,873 | |||
Measurement period adjustments | 350 | |||
Balance as of December 31, 2021 | $ | 80,318 | ||
Acquisitions | 4,692 | |||
Measurement period adjustments | (1,550 | ) | ||
Balance as of December 31, 2022 | $ | 83,460 |
F-19 |
Intangible assets and the related accumulated amortization are summarized as follows:
SCHEDULE OF INTANGIBLE ASSETS AND ACCUMULATED AMORTIZATION
Successor | Predecessor | |||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2018 | As of December 31, 2017 | As of December 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Asset Value | Gross Carrying Amount | Accumulated Amortization | Net Asset Value | Gross Carrying Amount | Accumulated Amortization | Net Asset Value | Gross Carrying Amount | Accumulated Amortization | Net Asset Value | |||||||||||||||||||||||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Manufacturer relationships | $ | 33,400 | $ | 2,015 | $ | 31,385 | $ | 11,100 | $ | 3,238 | $ | 7,862 | $ | 65,400 | $ | 20,346 | $ | 45,054 | $ | 64,500 | $ | 14,008 | $ | 50,492 | ||||||||||||||||||||||||
Customer relationships | 9,310 | 606 | 8,704 | 1,300 | 1,300 | - | 10,395 | 3,993 | 6,402 | 10,155 | 3,102 | 7,053 | ||||||||||||||||||||||||||||||||||||
Non-Compete agreements | 230 | 121 | 109 | 230 | 75 | 155 | ||||||||||||||||||||||||||||||||||||||||||
42,710 | 2,621 | 40,089 | 12,400 | 4,538 | 7,862 | 76,025 | 24,460 | 51,565 | 74,885 | 17,185 | 57,700 | |||||||||||||||||||||||||||||||||||||
Non-amortizable intangible assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Trade names and trademarks | 30,100 | - | 30,100 | 18,000 | - | 18,000 | 30,100 | - | 30,100 | 30,100 | - | 30,100 | ||||||||||||||||||||||||||||||||||||
$ | 72,810 | $ | 2,621 | $ | 70,189 | $ | 30,400 | $ | 4,538 | $ | 25,862 | $ | 106,125 | $ | 24,460 | $ | 81,665 | $ | 104,985 | $ | 17,185 | $ | 87,800 |
Amortization expense is set forth in the table below:
SCHEDULE OF AMORTIZATION EXPENSE
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Amortization | $ | 2,621 | $ | 154 | $ | 744 |
As of | As of | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Amortization | $ | 7,278 | $ | 6,025 |
Estimated future amortization expense is as follows:
SCHEDULE OF ESTIMATED FUTURE AMORTIZATION
Years ending | ||||
2019 | $ | 3,811 | ||
2020 | 3,811 | |||
2021 | 3,811 | |||
2022 | 3,811 | |||
2023 | 3,811 | |||
Thereafter | 21,034 | |||
$ | 40,089 |
Years ending | ||||
2023 | $ | 7,332 | ||
2024 | 7,332 | |||
2025 | 7,264 | |||
2026 | 6,585 | |||
2027 | 6,274 | |||
Thereafter | 16,778 | |||
Finite lived intangible assets, net | $ | 51,565 |
As of December 31, 2018,2022, the weighted average remaining amortization period was 10.89.84 years.
NOTE 8 – FINANCING LIABILITY
On December 23, 2015, the PredecessorWe have operations at several properties that were previously sold certain land, building and improvements for $56,000 and is leasingthen leased back the property from the purchaserpurchasers over a non-cancellable period of 20 years. The lease containsleases contain renewal options at lease termination, with three options to renew for 10 additional years each and containscontain a right of first offer in the event the property owner intends to sell any portion or all of the property to a third party. These rights and obligations constitute continuing involvement, which resulted in failed sale-leaseback (financing) accounting. The financing liability has anliabilities have implied interest rate of 7.3%rates ranging from 6.06% to 8.0%. At the conclusion of the 20-year20-year lease period, the financing liability residual will be $11,000, which will correspond to the carrying value of the land.
On August 7, 2018,December 29, 2022, we repurchased real estate in Nashville, Tennessee and Elkhart, Indiana that was previously leased through two finance leases for $24.5 million. Upon the Successor sold certain land, building and improvements for $5,350 and is leasing backrepurchase, the property from the purchaser over a non-cancellable period of 20 years (See Note 3 – Business Combinations). The lease contains renewal options at lease termination, with three options to renew for 10 additional years each and contains a right of first offer in the event the property owner intends to sell any portion or all of the property to a third party. These rights and obligations constitute continuing involvement, which resulted in failed sale-leaseback (financing) accounting. The financing liability has an implied interest rate of 7.9%. At the conclusion of the 20-year lease period, the financing liability residual will be $1,780, which will correspond to the carrying value of the land. As part of the lease, the Company may draw up to $5,000 from the lessor through September 30, 2019 to pay for certain improvements on the premises. As of December 31, 2018, the Company drew $234 to make such improvements. Repayments on advances are made over the term of the lease and are factored into the calculation of the outstanding financing liability. Annual payments are made at a rate of the amount of the outstanding advance multiplied by an advance rate of 8%.finance leases were terminated.
F-20 |
The financing liabilities, net of debt discount, is summarized as follows:
SCHEDULE OF FINANCING LIABILITY
Successor | Predecessor | |||||||||||||||
As of | As of | |||||||||||||||
December 31, | December 31, | As of | As of | |||||||||||||
2018 | 2017 | December 31, 2022 | December 31, 2021 | |||||||||||||
Financing liability | $ | 61,324 | $ | 55,158 | $ | 92,160 | $ | 104,638 | ||||||||
Debt discount | (77 | ) | (883 | ) | (109 | ) | (202 | ) | ||||||||
Financing liability, net of debt discount | 61,247 | 54,275 | 92,051 | 104,436 | ||||||||||||
Less: current portion | 714 | 595 | 2,281 | 1,970 | ||||||||||||
Financing liability, non-current portion | $ | 60,533 | $ | 53,680 | $ | 89,770 | $ | 102,466 |
The future minimum payments required by the arrangements are as follows:
SCHEDULE OF FUTURE MINIMUM PAYMENTS
Total | ||||||||||||
Years ending December 31, | Principal | Interest | Payment | |||||||||
2019 | $ | 714 | $ | 4,488 | $ | 5,202 | ||||||
2020 | 878 | 4,430 | 5,308 | |||||||||
2021 | 1,055 | 4,360 | 5,415 | |||||||||
2022 | 1,247 | 4,277 | 5,524 | |||||||||
2023 | 1,455 | 4,178 | 5,633 | |||||||||
Thereafter | 43,194 | 35,533 | 78,727 | |||||||||
$ | 48,543 | $ | 57,266 | $ | 105,809 |
Total | ||||||||||||
Years ending December 31, | Principal | Interest | Payment | |||||||||
2023 | $ | 2,281 | $ | 5,911 | $ | 8,192 | ||||||
2024 | 2,735 | 5,970 | 8,705 | |||||||||
2025 | 3,082 | 5,778 | 8,860 | |||||||||
2026 | 3,452 | 5,562 | 9,014 | |||||||||
2027 | 3,859 | 5,320 | 9,179 | |||||||||
Thereafter | 60,860 | 34,355 | 95,215 | |||||||||
Future minimum payments due | $ | 76,269 | $ | 62,896 | $ | 139,165 |
For the period from March 15, 2018 toyear ended December 31, 2018, the Successor2022, we made interest payments of $3,236$7.0 million and principal payments of $430.$2.2 million. In addition, we repaid $22.0 million in principal in connection with the repurchase of the Nashville and Elkhart properties, upon which the related leases were terminated. For the period from January 1, 2018 to March 14, 2018, the Predecessoryear ended December 31, 2021, we made interest payments of $1,020$5.5 million and principal payments of $144. For the period from January 1, 2017 to December 31, 2017, the Predecessor made interest payments of $4,104 and principal payments of $465.$1.9 million.
NOTE 9 – ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable, accrued expenses and other current liabilities consist of the following:
SCHEDULE OF ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Successor | Predecessor | |||||||||||||||
As of | As of | |||||||||||||||
December 31, 2018 | December 31, 2017 | As of December 31, 2022 | As of December 31, 2021 | |||||||||||||
Accounts payable | $ | 10,642 | $ | 12,394 | $ | 10,843 | $ | 28,356 | ||||||||
Other accrued expenses | 3,577 | 2,893 | 4,509 | 5,064 | ||||||||||||
Customer deposits | 2,511 | 3,999 | 6,000 | 8,511 | ||||||||||||
Accrued compensation | 2,164 | 3,211 | 6,910 | 8,564 | ||||||||||||
Accrued charge-backs | 3,252 | 2,373 | 8,218 | 8,243 | ||||||||||||
Accrued interest | 453 | 311 | 2,238 | 261 | ||||||||||||
Total | $ | 22,599 | $ | 25,181 | $ | 38,718 | $ | 58,999 |
NOTE 10 – DEBTLEASES
Successor DebtWe lease 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 Consolidated Balance Sheets.
F-21 |
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.
We lease properties for our RV retail locations through nine operating leases. We also lease billboards and certain of our equipment through operating leases. The related right-of-use (“ROU”) assets for these operating leases are included in operating lease assets.
As of December 31, 2022, the weighted-average remaining lease term and weighted-average discount rate of operating leases was 6.8 years and 5.0%, respectively.
Operating lease costs were $6.6 million and $5.3 million for the years ended December 31, 2022 and 2021, respectively, including variable lease costs. There were no short term leases for the year ended December 31, 2022.
Maturities of lease liabilities as of December 31, 2022 were as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
Maturity Date | Operating Leases | |||
2023 | $ | 6,247 | ||
2024 | 5,422 | |||
2025 | 4,505 | |||
2026 | 3,268 | |||
2027 | 3,235 | |||
Thereafter | 10,309 | |||
Total lease payments | 32,986 | |||
Less: Imputed interest | 5,157 | |||
Present value of lease liabilities | $ | 27,829 |
The following presents supplemental cash flow information related to leases during 2022 and 2021:
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
Year ended | Year ended | |||||||
December 31, 2022 | December 31, 2021 | |||||||
Cash paid for amounts included in the measurement of lease liability: | ||||||||
Operating cash flows for operating leases | $ | 6,556 | $ | 5,309 | ||||
ROU assets obtained in exchange for lease liabilities: | ||||||||
Operating leases | $ | 886 | $ | 20,659 | ||||
Finance lease | 24 | $ | 24 | |||||
$ | 910 | $ | 20,683 |
NOTE 11 – DEBT
M&T Financing Agreement
On March 15, 2018, the Company terminated andwe replaced theour existing debt agreements with Bank of America (“BOA”) credit facility with a $200,000$200 million Senior Secured Credit Facility with M&T Bank (the “M&T Facility” and the related credit agreement, the “Credit Agreement”). The M&T Facility includesincluded a Floor Plan Facility (the “M$175 million M&T floor plan line of credit (“M&T Floor Plan Line of Credit”), a Term Loan (the “M$20 million M&T term loan (“M&T Term Loan”), and a Revolving Credit Facility (the “M$5 million M&T revolver (“M&T Revolver”). The M&T Facility will mature on March 15, 2021.required the Company to meet certain financial covenants and was secured by substantially all of the assets of the Company. The credit facility was subsequently amended to include a Mortgage of $6.136 million. The M&T Facility was originally due to mature on March 15, 2021. The maturity date was subsequently extended to September 15, 2021.
F-22 |
On July 14, 2021, we entered into an amended and restated credit agreement with M&T, as a Lender, Administrative Agent, Swingline Lender, and Issuing Bank, and other financial institutions as Lender parties, (“new M&T Facility”). The credit agreement evidences an approximately $369.1 million aggregate credit facility, consisting of a $327 million floor plan credit facility, a term loan of approximately $11.3 million, a $25 million revolving credit and a $5.8 million mortgage loan facility. The new M&T Facility requires the Companyus to meet certain financial and other covenants and is secured by substantially all of the assets of the Company. The costs of the new M&T Facility were recorded as a debt discount. The new M&T facility matures on July 14, 2024.
On March 15, 2018,May 13, 2022, we entered into the Company repaid $96,740 outstanding underFirst Amendment to the BOA floor plan notes payableAmended and $8,820 outstanding under the BOA term loanRestated Credit Agreement (“First Amendment”). Pursuant to this amendment, LIBOR was replaced with the proceeds ofSecured Overnight Financing Rate (“SOFR”) as the M&T Facility.applicable reference rate.
As of December 31, 2018,2022, 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 December 31, 2018,2022, the maximum amount of cash dividends that the Companywe could make from legally available funds to itsour stockholders was limited to an aggregate of $3,486$9.7 million pursuant to a trailing twelve month calculation as defined in the M&T Facility.
Mortgage Loan Facility
The $175,000mortgage loan facility (“mortgage”) has SOFR borrowings bearing interest at SOFR plus 2.25% and a Base Rate margin of 1.25%. The mortgage requires monthly payments of principal of $0.03 million. As of December 31, 2022, the mortgage balance was $5.4 million, and the interest rate was 6.64%.
Floor plan Line of Credit
The $327.0 million M&T Floor Plan Line of Credit may be used to finance new vehicle inventory, but only $45,000$90.0 million may be used to finance pre-owned vehicle inventory and $4,500 may be used to finance rental units.$1.0 million for permitted Company vehicles. Principal becomes due upon the sale of the related vehicle.vehicle. The M&T Floor Plan Line of Credit shall accrue interest at eithereither: (a) the fluctuating 30-day London Interbank Offered Rate (“LIBOR”)SOFR rate plus an applicable margin which ranges from 2.00%2.00% to 2.30%2.30% based upon the Company’sour total leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus an applicable margin ranging from 1.00%1.00% to 1.30%1.30% based upon the Company’sour total leverage ratio (as defined in the new M&T Facility). The Base Rate is defined in the new M&T Facility as the highest of M&T’s prime rate, the Federal Funds rate plus 0.50% or one-month LIBORSOFR plus 1.00%. In addition, the Companywe will be charged for unused commitments at a rate of 0.15%0.15%. The interest rate in effect as of December 31, 20182022 was 4.52238%6.475%. Principal payments become due upon the sale of the vehicle. Additionally, principal payments are required to be made once the vehicle reaches a certain number of days on the lot. The average outstanding principal balance was $103,981$277.5 million, and the related floor plan interest expense was $4,265.$8.6 million for the year ended December 31, 2022.
The M&T Floor Plan Line of Credit consists of the following as of December 31, 2018:2022 and 2021:
SCHEDULE OF FLOOR PLAN NOTES PAYABLE
Successor | As of December 31, 2022 | As of December 31, 2021 | ||||||||||
As of December 31, 2018 | ||||||||||||
Floor plan notes payable, gross | $ | 143,885 | $ | 349,117 | $ | 192,868 | ||||||
Debt discount | (416 | ) | (382 | ) | (648 | ) | ||||||
Floor plan notes payable, net of debt discount | $ | 143,469 | $ | 348,735 | $ | 192,220 |
Term Loan
The $20,000$11,300 M&T Term Loan will be repaid in equal monthly principal installments of $242$242 plus accrued interest through the maturity date of March 15, 2021.date. At the maturity date, the Company willwe must pay a principal balloon payment of $11,300$2,600 plus any accrued interest. The M&T Term Loan shall bear interest atat: (a) LIBORSOFR plus an applicable margin of 2.25%2.25% to 3.00%3.00% based on the total leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus a margin of 1.25%1.25% to 2.00%2.00% based on the total leverage ratio (as defined in the new M&T Facility). The interest rate in effect at December 31, 20182022 was 4.5625%.6.67% and the balance was $7.2 million.
F-23 |
Long-term debt consists of the following as of December 31, 2018:Revolver
Successor | ||||||||||||
As of December 31, 2018 | ||||||||||||
Gross Principal Amount | Debt Discount | Total Debt, Net of Debt Discount | ||||||||||
Term loan | $ | 17,825 | $ | (42 | ) | $ | 17,783 | |||||
Acquisition notes payable (See Note 3) | 5,638 | - | 5,638 | |||||||||
Total long-term debt | 23,463 | (42 | ) | 23,421 | ||||||||
Less: current portion | 4,408 | - | 4,408 | |||||||||
Long term debt, non-current | $ | 19,055 | $ | (42 | ) | $ | 19,013 |
Future maturities of long term debt are as follows:
Years ending December 31, | ||||
2019 | $ | 4,408 | ||
2020 | 4,484 | |||
2021 | 13,477 | |||
2022 | 1,094 | |||
Total | $ | 23,463 |
The $5,000$25,000 M&T Revolver allows the Companyus to draw up to $5,000.$25.0 million. The M&T Revolver shall bearbears interest atat: (a) 30-day LIBORSOFR plus an applicable margin of 2.25%2.25% to 3.00%3.00% based on the total leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus a margin of 1.25%1.25% to 2.00%2.00% based on the total leverage ratio (as defined in the new M&T Facility). The M&T Revolver is also subject to unused commitment fees at rates varying from 0.25%0.25% to 0.50%0.50% based on the total leverage ratio (as defined in the new M&T Facility). During the Successor periodyear ended December 31, 2018,2022, there were no outstanding borrowings under the M&T Revolver. The M&T Revolver also includes a $1,000 Letter of Credit Sublimit which decreases the availability of the line. As of December 31, 2018, there were $715 outstanding letters of credit. As a result, there was $4,285$25.0 million available under the M&T Revolver.
Predecessor Debt
PPP Loans
On February 27, 2017,
In response to economic uncertainty caused by the PredecessorCOVID-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 BOA amendedEconomic Security Act (“CARES Act”) with M&T Bank (the “Lender”). The PPP Loans in aggregate totaled $6.8 million. Of this amount, $6.6 million was forgiven. The United States Small Business Administration (“SBA”) has stated that it intends to audit the floor plan notes payable asset-based borrowing facility to (a) increase the aggregate availability from $120PPP loan application of any Company, like us, that received PPP loan proceeds of more than $2 million to $140 million; (b) modify certain financial covenants; (c) decrease the interest rate applicableand as a result of such audit, could demand repayment of up to the facility over time until it reaches LIBOR plus 2.25%entire loan amount forgiven. However, we believs that we have used the proceeds for eligible purposes consistent with the period from November 1, 2017 until the maturity date (November 18, 2018)provisions of the facility;Cares Act, and (d) amendwe are not currently party to or modify other terms and conditions.
The entire facility could be used to finance new vehicle inventory but only up to $40.0 million could be used to finance pre-owned vehicle inventory,aware of which a maximum of $5.0 million could be used to finance rental units. Borrowings outstanding under this facility totaled $105,207 at December 31, 2017. For the year ended December 31, 2017, interest was based on LIBOR plus rates ranging between 2.25%-3.25% (3.63% at December 31, 2017). Principal was due upon the sale of the respective vehicle. The BOA floor plan notes payable was repaidany contemplated proceeding with the transitionSBA or any other government authority with respect to the M&T Floor Plan Line of Credit on March 15, 2018.our PPP Loans.
The floor plan line of creditLong-term debt consists of the following as of December 31, 2017:2022 and 2021:
SCHEDULE OF LONG TERM DEBT
Predecessor | ||||
As of December 31, 2017 | ||||
Floor plan notes payable, gross | $ | 105,207 | ||
Debt discount | (231 | ) | ||
Floor plan notes payable, net of debt discount | $ | 104,976 |
As of December 31, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
Gross Principal Amount | Debt Discount | Total Debt, Net of Debt Discount | Gross Principal Amount | Debt Discount | Total Debt, Net of Debt Discount | |||||||||||||||||||
Term loan and Mortgage | $ | 12,587 | $ | (49 | ) | $ | 12,538 | $ | 15,793 | $ | (93 | ) | $ | 15,700 | ||||||||||
Paycheck Protection Program Loans | - | - | - | 819 | - | 819 | ||||||||||||||||||
Acquisition notes payable (See Note 3) | 1,200 | - | 1,200 | 2,675 | - | 2,675 | ||||||||||||||||||
Total long-term debt | 13,787 | (49 | ) | 13,738 | 19,287 | (93 | ) | 19,194 | ||||||||||||||||
Less: current portion | 3,607 | - | 3,607 | 5,510 | - | 5,510 | ||||||||||||||||||
Long term debt, non-current | $ | 10,180 | $ | (49 | ) | $ | 10,131 | $ | 13,777 | $ | (93 | ) | $ | 13,684 |
On November 18, 2015, the Company entered into a credit agreement with BankFuture maturities of America for an aggregate commitment amount of $20,000, which includes two facilities (the “BOA Credit Agreement”). The first of two facilities under the BOA Credit Agreement was a $13,000 term note payable (“Term Loan”) which was collateralized by accounts receivable, inventory and equipment. The Term Loan carried interest at LIBOR plus 3.50% (4.84% at December 31, 2017) per annum and required monthly payments equal to $155 of principal, plus interest. The principal balance on the Term Loan was repaid on March 15, 2018 when the Company switched lenders to M&T Bank.long-term debt are as follows:
SCHEDULE OF MATURITIES OF LONG-TERM DEBT
Predecessor | ||||||||||||
As of December 31, 2017 | ||||||||||||
Gross Principal Amount | Debt Discount | Total Debt, Net of Debt Discount | ||||||||||
Term loan | $ | 9,130 | $ | (65 | ) | $ | 9,065 | |||||
Capital lease obligation | 12 | - | 12 | |||||||||
Total long-term debt | 9,142 | (65 | ) | 9,077 | ||||||||
Less: current portion | 1,870 | - | 1,870 | |||||||||
Long term debt, non-current | $ | 7,272 | $ | (65 | ) | $ | 7,207 |
Years ending December 31, | ||||
2023 | 3,576 | |||
2024 | 9,762 | |||
2025 | 400 | |||
Total | $ | 13,738 |
The second of the two facilities under the BOA Credit Agreement was a $7,000 revolving line of credit. The revolving line of credit carried interest at LIBOR plus 3.5% per annum and has no minimum payment requirements. The principal balance on the Revolver was $0 as of December 31, 2017. The revolver was no longer available upon the change to M&T bank on March 15, 2018.
NOTE 1112 – INCOME TAXES
The components of the Company’sour income tax expense are as follows:
SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE
Successor | Predecessor | Year ended | Year ended | |||||||||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | December 31, 2022 | December 31, 2021 | ||||||||||||||||
Current: | ||||||||||||||||||||
Federal | $ | 3,483 | $ | 85 | $ | 5,253 | $ | 13,389 | $ | 23,867 | ||||||||||
State | 609 | 3 | 862 | 3,922 | 5,804 | |||||||||||||||
4,092 | 88 | 6,115 | ||||||||||||||||||
Current: Income tax expense | 17,311 | 29,671 | ||||||||||||||||||
Deferred: | ||||||||||||||||||||
Federal | (1,738 | ) | 460 | (859 | ) | 1,651 | (1,161 | ) | ||||||||||||
State | (36 | ) | 170 | (171 | ) | 221 | (268 | ) | ||||||||||||
(1,774 | ) | 630 | (1,030 | ) | ||||||||||||||||
Deferred: Income tax expense | 1,872 | (1,429 | ) | |||||||||||||||||
Income tax expense | $ | 2,318 | $ | 718 | $ | 5,085 | $ | 19,183 | $ | 28,242 |
A reconciliation of income taxes calculated using the statutory federal income tax rate (21% in 20182022 and 34% in 2017)2021) to the Company’sour income tax expense is as follows:
SCHEDULE OF INCOME TAXES CALCULATED USING STATUTORY FEDERAL INCOME TAX RATE
Successor | Predecessor | Year Ended | Year Ended | |||||||||||||||||||||||||||||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||||||||
Income taxes at statutory rate | $ | (59 | ) | 21.0 | % | $ | 635 | 21.0 | % | $ | 4,540 | 34.0 | % | $ | 17,971 | 21.0 | % | $ | 23,155 | 21.0 | % | |||||||||||||||||||
Non-deductible expense | 35 | -12.4 | % | 10 | 0.3 | % | 48 | 0.4 | % | 55 | 0.1 | % | 40 | 0.0 | % | |||||||||||||||||||||||||
State income taxes, net of federal tax effect | 500 | -177.4 | % | 110 | 3.6 | % | 450 | 3.4 | % | 3,329 | 3.8 | % | 4,352 | 4.0 | % | |||||||||||||||||||||||||
Transaction costs | 623 | -221.3 | % | 578 | 18.9 | % | - | 0.0 | % | |||||||||||||||||||||||||||||||
PPP loan forgiveness | - | 0.0 | % | (1,391 | ) | -1.3 | % | |||||||||||||||||||||||||||||||||
Stock-based compensation and officer compensation | 1,248 | -442.7 | % | (241 | ) | -7.9 | % | - | 0.0 | % | 450 | 0.6 | % | (430 | ) | -0.4 | % | |||||||||||||||||||||||
Long-term incentive plan | - | 0.0 | % | (412 | ) | -13.5 | % | - | 0.0 | % | ||||||||||||||||||||||||||||||
Effect of increase in statutory rate for current year | - | 0.0 | % | - | 0.0 | % | 80 | 0.6 | % | |||||||||||||||||||||||||||||||
Tax rate adjustments | - | 0.0 | % | - | 0.0 | % | (12 | ) | -0.1 | % | ||||||||||||||||||||||||||||||
Other credits and changes in estimate and true ups | (29 | ) | 10.6 | % | 38 | 1.3 | % | (21 | ) | -0.3 | % | |||||||||||||||||||||||||||||
Change in fair value of warrant liabilities | (2,615 | ) | -3.0 | % | 2,511 | 2.3 | % | |||||||||||||||||||||||||||||||||
Other credits and changes in estimate | (7 | ) | -0.1 | % | 5 | 0.0 | % | |||||||||||||||||||||||||||||||||
Income tax expense | $ | 2,318 | -822.2 | % | $ | 718 | 23.7 | % | $ | 5,085 | 38.0 | % | $ | 19,183 | 22.4 | % | $ | 28,242 | 25.6 | % |
Due to limitations on the deductibility of compensation under Section 162(m) stock-based compensation expense attributable to certain employees has been treated as a permanent difference in the calculation of tax expense for the Successor Period. The Company doesexpense. We do not expect that these expenses will be deductible on the estimated exercise date of the awards. As such, no deferred tax asset hshas been established related to these amounts.
F-25 |
Deferred tax assets and liabilities were as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
Successor | Predecessor | |||||||||||||||
As of | As of | As of | As of | |||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2022 | December 31, 2021 | |||||||||||||
Deferred tax assets: | ||||||||||||||||
Accounts receivable | $ | 173 | $ | 253 | $ | 167 | $ | 116 | ||||||||
Accrued charge-backs | 821 | 594 | 2,093 | 2,093 | ||||||||||||
Other accrued liabilities | 407 | 424 | 639 | 1,258 | ||||||||||||
Goodwill | - | 274 | - | - | ||||||||||||
Financing liability | 15,463 | 13,574 | 16,448 | 16,871 | ||||||||||||
Transaction costs | - | 579 | - | - | ||||||||||||
Stock based compensation | 676 | 165 | 406 | 596 | ||||||||||||
Other, net | 192 | 215 | 139 | 164 | ||||||||||||
17,732 | 16,078 | |||||||||||||||
Deferred tax assets, Total | 19,892 | 21,098 | ||||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Prepaid expenses | (370 | ) | (202 | ) | (649 | ) | (303 | ) | ||||||||
Goodwill | (115 | ) | - | (1,908 | ) | (857 | ) | |||||||||
Inventories | (4,939 | ) | (1,531 | ) | (6,873 | ) | (6,303 | ) | ||||||||
Property and equipment | (16,027 | ) | (9,178 | ) | (14,747 | ) | (14,782 | ) | ||||||||
Intangible assets | (14,998 | ) | (5,023 | ) | (11,251 | ) | (12,516 | ) | ||||||||
(36,449 | ) | (15,934 | ) | |||||||||||||
Deferred tax liabilities, Total | (35,428 | ) | (34,761 | ) | ||||||||||||
Net deferred tax (liabilities)/assets | $ | (18,717 | ) | $ | 144 | $ | (15,536 | ) | $ | (13,663 | ) |
No significant increases or decreases in the amounts of unrecognized tax benefits are expected in the next 12 months.
The Company isWe are subject to U.S. federal income tax and income tax in the states of Florida, Arizona, Colorado, Minnesota, Tennessee, Texas, Indiana, Oregon, Wisconsin and Tennessee. The Company isOklahoma as well as the city of Portland, Oregon. We are no longer subject to the examination by Federal and state taxing authorities for years prior to 2015. Subsequent to year end, the company received a notification from the state of Florida of their intent to audit the corporate income taxes for the years ended December 31, 2017, 2016, and 2015. Management believes it is too early to determine the outcome of the audit at this time. The Company recognizes2019. We recognize interest and penalties related to income tax matters in income tax (benefit) expense. Interest and penalties recorded in the statements of operations for the periods presented were insignificant.
Tax Legislation
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes to U.S. tax laws including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current top rate of 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. This revaluation resulted in a benefit of $12 to income tax expense for the year ended December 31, 2017.
NOTE 12 – RELATED PARTY TRANSACTIONS
On March 15, 2018, the non-executive Chairman of the Board of Andina was repaid aggregate outstanding notes payable totaling $661. In addition, $100 was repaid to other employees of Andina who held notes payable with the Company.
On March 15, 2018, in connection with the Mergers, the Company paid Hydra Management, LLC, an affiliate of A. Lorne Weil, an initial shareholder of Andina and the father of B. Luke Weil, a member of the Company’s Board of Directors, $500 as compensation for advisory services in connection with the Mergers.
NOTE 13 – EMPLOYEE BENEFIT PLANS
The Company hasWe have a 401(k) plan with profit sharing provisions (the “Plan”). The Plan covers substantially all employees. The Plan allows employee contributions to be made on a salary reduction basis under Section 401(k) of the Internal Revenue Code. Under the 401(k) provisions, the Company makeswe make discretionary matching contributions to employees’ 401(k). The CompanyWe made contributions to the Plan of $676 during$1.7 million and $1.5 million for the period from March 15, 2018 to December 31, 2018. The Company made contributions to the Plan of $179 during the period from January 1, 2018 to March 14, 2018. The Company made contributions to the Plan of $481 during the yearyears ended December 31, 2017.2022 and 2021, respectively.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company enteredFrom time to time, we enter into employment agreements with the Chief Executive Officer (“CEO”) and the former Chief Financial Officer (“CFO”)key executives. To date, none of these agreements has been material.
Effective November 15, 2022, Nicholas Tomashot stepped down as CFO of the Company effective as of the consummation of the Mergers. The employment agreements with the CEO and the CFO provide for initial base salaries of $540 and $325, respectively, subject to annual discretionary increases. In addition, each executive is eligible to participate in any employee benefit plans adopted byCompany. On October 19, 2022, the Company from timeand Mr. Tomashot entered into a Transition Agreement (the “Transition Agreement”). Pursuant to timethe Transition Agreement, Mr. Tomashot will remain as an employee at his current base salary through November 1, 2023 and is eligible to receive an annual cashfor a bonus based on the achievement of performance objectives. The CEO’s target bonus is 100% of his base salaryfor 2022. Additionally, Mr. Tomashot’s restricted stock units and the CFO’s target bonus is 75% of her base salary. The employment agreements also provide that each executive is to be granted an optionoptions to purchase shares of common stock ofwill continue to vest in accordance with their terms, so long as Mr. Tomashot remains employed by the Company (See Note 16 – Stockholders’ Equity).
The employment agreements provide that if the executiveCompany. Mr. Tomashot 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 withholdingcertain restrictive covenants regarding non-competition 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 (i) two times base salary and average bonus for the CEO and (ii) one times base salary and average bonus for the CFO.non-solicitation.
F-26 |
On April 30, 2018, the former CFO announced her voluntary resignation from the Company, effective May 11, 2018.
In May 2018, the Company entered into an offer letter with the new Chief Financial Officer (the “new 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 new 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). The offer letter also provides that the executive is to be granted an option to purchase shares of common stock of the Company. He is also being provided with a relocation allowance of $100 which the new 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 16- Stockholders’ Equity).
Director Compensation
The Company’s non-employee members of the board of directors will receive 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 isWe are a party to multiple legal proceedings that arise in the ordinary course of business. The Company hasWe have certain insurance coverage and rights of indemnification. The Company doesWe do not believe that the ultimate resolution of these matters will have a material adverse effect on the Company’sour 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 or other matters could have a material adverse effect on the Company’sour business, results of operations, financial condition, and/or cash flows.
The Company recordsWe record legal expenses as incurred in itsour consolidated statements of operations.
Operating Leases
The Company leases various land, office and dealership equipment under non-cancellable operating leases. These leases have terms ranging from 3 years to 10 years and expire through 2028.
Rent expense associated with operating leases was as follows:
Successor | Predecessor | |||||||||||
March 15, 2018 to December 31, 2018 | January 1, 2018 to March 14, 2018 | January 1, 2017 to December 31, 2017 | ||||||||||
Rent expense | $ | 2,426 | $ | 626 | $ | 3,026 |
Future minimum rent payments under operating leases are as follows:
Years ending December 31, | ||||
2019 | $ | 3,178 | ||
2020 | 2,683 | |||
2021 | 2,428 | |||
2022 | 740 | |||
2023 | 720 | |||
Thereafter | 3,437 | |||
Total | $ | 13,186 |
Transaction Incentive Plan
On January 30, 2017, the Company’s Board of Directors approved the Company’s Transaction Incentive Plan, which provided incentives to eight directors and employees of the Company upon the consummation of a qualifying sale transaction. The Transaction Incentive Plan expires on October 31, 2020. To the extent the proceeds received in a qualifying sale transaction exceed certain specified thresholds (the “Excess Amount”), participants in the Transaction Incentive Plan who met the specified service requirements were entitled to a cash and stock award on the closing date of the qualifying sale transaction equal to their awarded percentage of the Excess Amount. The cash and stock awards were paid from the consideration of the qualifying sale transaction. The Mergers (see Note 3 – Business Combination) represented a qualifying sale transaction that resulted in the payment to plan participants of an aggregate of $1,510 of cash (including amounts held in escrow) and 51,896 shares of Holdings’ common stock with a value of $534 based on the March 15, 2018 closing price of $10.29 per Andina share. As of the date of the Mergers, an additional $250 was set to be paid in cash and stock upon the release of amounts held in escrow under the Merger Agreement. On May 15, 2018, $40 was released from escrow pursuant to the working capital adjustment. As of March 21, 2019, the remaining amounts were released from escrow.
NOTE 15 – PREFERRED STOCK
Simultaneous with the closing of the Mergers, the Companywe 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$94.8 million (the “PIPE Investment”). At the closing, the Companywe issued an aggregate of shares of Series A Preferred Stock for gross proceeds of $60,000.$60.0 million. 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 shares owned by funds managed by a member of the Company’sour 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 Companywe 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’sour 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%8% per annum (the “Dividend Rate”), compounded quarterly, on each $100$100 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’sour 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’sour 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.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’sour common stock equals or exceeds $25.00$25.00 per share (as adjusted for stock dividends, splits, combinations and similar events) for a period of thirty consecutive trading days, the Companywe 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 Companywe 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.
F-27 |
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-yearfive-year warrants to purchase 596,273 shares of common stock at an exercise price of $11.50$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’sour 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.
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 consolidated balance sheets. An analysis of its features determined 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, DerivatesDerivatives 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$3.4 million beneficial conversion feature was recorded as a deemed dividend in the consolidated statement of income 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$2.0 million was recorded as a reduction to the carrying amount of the preferred stock in the consolidated balance sheet. In addition, aggregate offering costs of $2,981$3.0 million consisting of cash and the value of five-yearfive-year warrants to purchase 178,882 shares of common stock at an exercise price of $11.50$11.50 per share issued to the placement agent were recorded as a reduction to the carrying amount of the preferred stock. The $632$632,000 value of the warrants was determined utilizing the Black-Scholes option pricing model using a term of 5 years, a volatility of 39%39%, a risk-free interest rate of 2.61%2.61%, and a 0%0% rate of dividends.
The discount associated with the Series A Preferred Stock wasn’twas not accreted during the Successor periodyear ended December 31, 2022 because redemption was not currently deemed to be probable.
On June 19, 2018, the Company’s Board of DirectorsIn December 2022, we declared a dividend payment on the Series A Preferred Stock of $1,425$1.2 million for the period from March 15, 2018 to March 31, 2018 and for the period from April 1, 2018 to June 30, 2018. The dividend was paid on July 2, 2018 to the holders. On September 20, 2018, the Company’s Board of Directors declared a dividend payment on the Series A Preferred Stock of $1,210 for the period from July 1, 2018 to September 30, 2018. The dividend was paid to the holders of Series A Preferred Stock on October 1, 2018. On December 14, 2018, the Company’s Board of Directors declared a dividend payment on the Series A Preferred Stock of $1,210 for the period from October 1, 2018 tooutstanding dividends through December 31, 2018. The dividend was paid to2022 which is included in dividends payable in the holders of Series A Preferred Stock on January 2, 2019.accompanying consolidated balance sheets.
Successor
Authorized Capital
The Company is authorized to issue $0.0001$ par value, and shares of preferred stock, $0.0001$ par value. The holders of the Company’sour common stock are entitled to one vote per share. 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.convertible. These holders of Series A Preferred Stock also participate in dividends if they are declared by the Board. See Note 15 – Preferred Stock for additional information associated with the Series A Preferred Stock. shares of common stock,
2018 Long-Term Incentive Equity2019 Employee Stock Purchase Plan
On March 15, 2018,May 20, 2019, our stockholders approved the Company adopted the 2018 Long-Term Incentive Equity2019 Employee Stock Purchase Plan (the “2018 Plan”“ESPP”). The 2018 Plan reserves up to 13% of the shares 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 (pursuant to the terms of the 2018 Plan) not to exceed 18% of shares then outstanding on a fully diluted basis. As of December 31, 2018, there were 166,145 shares available to be issued under the 2018 Plan.
Common Stock
On March 15, 2018, the Company had 1,872,428ESPP reserved shares of common stock outstanding prior tofor purchase by participants in the consummation ofESPP. Participants in the Mergers.
On March 15, 2018, Andina rights holders converted their existing rights at a ratio of one share of common stock for seven Andina rights. As a result, 615,436 shares of common stock of the Company were issued to former Andina rights holders.
On March 15, 2018, holders of 472,571 shares of Andina common stock, which had been subject to redemption prior to the Mergers, were reclassified from temporary equity to stockholders’ equity at their carrying value of $4,910.
On March 15, 2018, 2,857,189plan may purchase shares of common stock at a purchase price which will not be less than the lesser of 85% of the fair value per share of $10.29 werethe common on the first day of the purchase period or the last day of the purchase period. We issued and shares of common stock pursuant to the former stockholdersESPP for the years ended December 31, 2022 and 2021, respectively. As a result, as of Lazydays RVDecember 31, 2022, there were shares available for issuance. During the years ended December 31, 2022 and 2021, we recorded $ million and $
F-28 |
Stock Repurchase Program
On September 13, 2021, the Board of Directors of the Company authorized the repurchase of up to $conjunction with the Mergersopen market at prevailing prices, in privately negotiated transactions or through block trades. million of our common stock through December 31, 2022. These shares may be purchased from time-to-time in
On December 15, 2022, the Board of Directors of the Company authorized the repurchase of up to $ million of our common stock through December 31, 2024. Additionally, our prior authorization of the repurchase of our common stock was extended through December 31, 2024 for the remaining balance of approximately $ million.
During the year ended December 31, 2022, we repurchased 44.5 million at a total valueweighted average price of $29,400.$ per share. During the year ended December 31, 2021, we repurchased shares of common stock for $12.0 million at a weighted average price of $ . All repurchased shares are included in treasury stock in the consolidated balance sheets. , shares of common stock for $
Warrants
Simultaneous with the Mergers, in addition to the Series A Preferred Stock and warrants issued in the PIPE Investment, the Company sold 1,339,499 shares of common stock at an exercise price of $0.01$0.01 per share, and five-yearfive-year warrants to purchase 1,630,927 shares of common stock at an exercise price of $11.50$11.50 per share for gross proceeds of $34,783.$34.8 million. The Company incurred offering costs of $2,065$2.1 million which was recorded as a reduction to additional paid-in capital in the consolidated balance sheet. As of December 31, 2022, 300,357 of the pre-funded warrants remain outstanding. shares of common stock, perpetual non-redeemable pre-funded warrants to purchase
The five-year 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 by surrendering the warrants for that number of shares of common stock as determined under the warrants. These warrants may be called for redemption in whole and not in part, at a price of $0.01$ per share if the last reported sales price of the Company’sour 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 common stock underlying the warrants. In addition, five-yearfive-year warrants to purchase 116,376 shares of common stock at an exercise price of $11.50$11.50 per share were issued to the placement agent.
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 are exercisable at $10.00 per unit, as a result of the Merger described in Note 3 – Business Combination and they expire on November 24, 2020. The Unit Purchase Options represent the right to purchase an aggregate of 457,142 shares of common stock (which includes 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 grant 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 may be exercised for cash or on a “cashless” basis, at the holder’s option, such that the holder may use 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 will have 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
As of March 15, 2018, holders of Andina warrants exchanged their existing 4,310,000 warrants with Andina with 4,310,000 warrants to purchase 2,155,000 shares of Company common stock at an exercise price of $11.50$11.50 per share and a contractual life of five years from the date of the Mergers. If a registration statement covering 2,000,000 of the shares issuable upon exercise of the public warrants is not effective, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis. The warrants may be called for redemption in whole and not in part, at a price of $0.01$ per warrant, if the last reported sales price of the Company’sour 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. Of the warrants to purchase 2,155,000 shares of common stock originally issued by Andina, 155,000, the Private Warrants, are not redeemable and are exercisable on a cashless basis at the holder’s option.
Additionally, warrants to purchase 2,522,458 shares of common stock were issued with the PIPE Investment, (the PIPE Warrants), including warrants issued to the investment bank but excluding prefunded warrants.
F-29 |
The CompanyWe had the following activity related to shares underlying warrants:
SCHEDULE OF WARRANTS ACTIVITY
Shares Underlying Warrants | Weighted Average Exercise Price | Shares Underlying Warrants | Weighted Average Exercise Price | |||||||||||||
Warrants outstanding March 15, 2018 | - | $ | - | |||||||||||||
Warrants outstanding January 1, 2022 | 3,419,105 | $ | 11.50 | |||||||||||||
Granted | 4,677,458 | $ | 11.50 | - | $ | - | ||||||||||
Cancelled or Expired | - | $ | - | - | $ | - | ||||||||||
Exercised | - | $ | - | (554,037 | ) | $ | 11.50 | |||||||||
Warrants outstanding December 31, 2018 | 4,677,458 | $ | 11.50 | |||||||||||||
Warrants outstanding December 31, 2022 | 2,865,068 | $ | 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$0.01 per share.
We determined the following fair values for the outstanding warrants recorded as liabilities at December 31:
SCHEDULE OF FAIR VALUES FOR OUTSTANDING WARRANTS LIABILITIES
December 31, 2022 | December 31, 2021 | |||||||
PIPE Warrants | $ | 742 | $ | 13,603 | ||||
Private Warrants | 164 | 1,690 | ||||||
Total warrant liabilities | $ | 906 | $ | 15,293 |
2018 Long-Term Incentive Equity Plan
On March 15, 2018, we adopted the 2018 Long-Term Incentive Equity Plan (the “2018 Plan”). The table also excludes warrants2018 Plan reserves up to purchase 200,000 % of the shares of common stock which are issuable upon exerciseoutstanding on a fully diluted basis. The 2018 Plan is administered by the Compensation Committee of the Unit Purchase Options.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 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 % of shares of common stock then outstanding on a fully diluted basis. On May 20, 2019, our 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 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. On June 9, 2022, our stockholders approved the addition of shares of common stock to the Incentive Plan. Stock options are canceled upon termination of employment. As of December 31, 2022, there were shares of common stock available to be issued under the Incentive Plan.
Stock Options
SCHEDULE OF STOCK OPTION ACTIVITY
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 March 15, 2018 | - | $- | ||||||||||||||||||||||||||||||
Options outstanding at January 1, 2022 | 1,286,672 | $ | 11.87 | |||||||||||||||||||||||||||||
Granted | 4,271,128 | $ | 11.10 | 54,631 | $ | 21.63 | ||||||||||||||||||||||||||
Cancelled or terminated | (612,707 | ) | $ | 11.08 | (68,753 | ) | $ | 15.21 | ||||||||||||||||||||||||
Exercised | - | $ | - | (220,457 | ) | $ | 10.97 | |||||||||||||||||||||||||
Options outstanding at December 31, 2018 | 3,658,421 | $ | 11.10 | 4.2 | $ | - | ||||||||||||||||||||||||||
Options vested at December 31, 2018 | - | $ | - | - | $ | - | ||||||||||||||||||||||||||
Options outstanding at December 31, 2022 | 1,052,093 | $ | 12.34 | $ | (427 | ) | ||||||||||||||||||||||||||
Options vested at December 31, 2022 | 413,158 | $ | 11.64 | $ | 126 |
F-30 |
Awards with Market Conditions
On March 16, 2018, the Company granted five-year incentive stock options to purchase 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 underlying the CEO’s stock options and 583,366 shares 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 exceeding $13.125 per share; an additional 30% of the options shall vest upon exceeding $17.50 per share; an additional 30% of the options shall vest upon exceeding $21.875 per share; and an additional 10% of the options shall vest upon 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 583,366 shares 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 $8,541 during($0.13) million and ($0.34) million for the Successor period from March 15, 2018 toyears ended December 31, 2018,2022 and 2021, respectively, which is included in operating expenses in the consolidated statements of operations.
Awards with Service Conditions
On March 16, 2018,During the Company granted five-yearyear ended December 31, 2021, stock options to purchase an aggregate of 99,526 shares 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 vest over three years with one-third vesting on each of the respective anniversary dates. On May 31, 2018, a non-employee director resigned and options to purchase 15,123 shares of common stock were forfeited.
issued to employees and board members. The $350options have an exercise price of $21.01, $22.41 or $23.11. A portion of the options had a life and a vesting period. The remaining options had a life and a vesting period. The fair value of thesethe awards of $2.9 million was determined using the Black-Scholes option pricing model based on a 3.5model.
During the year expected life, a risk-free rateended December 31, 2022, stock options to purchase shares of 2.42%,common stock were issued to employees. The options have an annual dividend yieldexercise price of 0%, and an annual volatility of 39%$30.00 or $14.55. The expense is being recognized over the three-yearoptions have a life and a vesting period. The expense recorded for thesefair value of the awards of $0.45 million was $77 duringdetermined using the Successor Period from March 15, 2018 to December 31, 2018, which is included in operating expenses inBlack-Scholes option pricing model. The fair values of the consolidated statements2022 and 2021 options was based on the following range of operations. assumptions:
SCHEDULE OF FAIR VALUE ASSUMPTIONS OF AWARDS
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 recorded for awards with service conditions was $1.6 million and $0.53 million for the years ended December 31, 2022 and December 31, 2021, respectively, which is included in operating expenses in the consolidated statements of operations.
As of December 31, 2018,2022, total unrecorded compensation cost related to non-vested awards was $6,593$ million which is expected to be amortized over a weighted average service period of approximately 2.1 years. TheFor the year ended December 31, 2022, the weighted average grant date fair value of awards issued during the Successor Periodperiod was $4.16$ per share.
Predecessor
Authorized Capital
As of December 31, 2017, the Company was authorized to issue 4,500,000 shares of common stock, $0.001 par value, and 150,000 shares of preferred stock, $0.001 par value. The holders of the Company’s common stock were entitled to one vote per share. The preferred stock was designated as follows: 10,000 shares to Senior Preferred Stock; and 140,000 shares undesignated. The holders of Senior Preferred Stock were entitled to the number of votes equal to the number of shares of common stock into which the holder’s shares are convertible. On March 2, 2017, the Company issued a Notice of Redemption to the holders of all of the then designated, issued and outstanding shares of Senior Preferred Stock, after which the holders surrendered all 10,000 shares of Senior Preferred Stock for conversion into 2,333,331 shares of common stock. As of December 31, 2017, there were 0 shares of Senior Preferred Stock outstanding.
Dividends
On April 10, 2017, the Company declared dividends totaling $15,000, which were distributed on April 19, 2017 in the form of a cash dividend to the common stockholders of record on April 10, 2017.
Stock Options
The Company’s 2010 Equity Incentive Plan (“2010 Plan”) provided for the issuance of incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units to employees, directors, and consultants of the Company and its affiliates. The common stock that may have been issued pursuant to awards was not to exceed 100,000 shares in the aggregate, provided that, no more than 14,000 shares were to be incentive stock options. On January 30, 2017, the Company cancelled the 2010 Plan.
On January 30, 2017, the Company’s Board of Directors approved the Company’s 2017 Equity Incentive Plan (“2017 Plan”), which provides for the issuance of incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units to employees, directors and consultants of the Company and its affiliates. The common stock that could be issued pursuant to awards was not to exceed 333,333 shares in the aggregate, provided that, no more than ten percent (10%) of such shares would be incentive stock options. The 2017 Plan was originally set to terminate on January 30, 2027. The 2017 Plan required the exercise priceintrinsic value of stock options to be greater than or equal to the fair value of the Company’s common stock on the date of grant.
The Company recognized stock-based compensation expense related to stock optionsexercised was $ million and $ million for the years ended December 31, 2017 of $4972022 and 2021, respectively. During 2022 and 2021 the current tax benefit related to stock-based awards was $0.12 million and $1.1 million, respectively.
NOTE 17 – FAIR VALUE MEASURES
Warrant Liabilities:
The PIPE Warrants are considered a Level 1 measurement, because they are similar to the Public Warrants which is included within operating expenses ontrade under the consolidatedsymbol LAZYW and thus have observable market prices which were used to estimate the fair value adjustments for the PIPE Warrants liabilities. The Private Warrants are considered a Level 3 measurement and were valued using a Black-Scholes Valuation Model to estimate the fair value adjustments for the Private Warrants liabilities.
SCHEDULE OF FAIR VALUE ADJUSTMENTS FOR PRIVATE WARRANTS LIABILITIES
Carrying Amount | Level 1 | Level 2 | Level 3 | Carrying Amount | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
Carrying Amount | Level 1 | Level 2 | Level 3 | Carrying Amount | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
PIPE Warrants | $ | 742 | $ | 742 | $ | - | $ | - | $ | 13,603 | $ | 13,603 | $ | - | $ | - | ||||||||||||||||
Private Warrants | 164 | - | - | 164 | 1,690 | - | - | 1,690 | ||||||||||||||||||||||||
Total | $ | 906 | $ | 742 | $ | - | $ | 164 | $ | 15,293 | $ | 13,603 | $ | - | $ | 1,690 |
F-31 |
Level 3 Disclosures
We utilize a Black Scholes option-pricing model to value the Private Warrants at each reporting period and transaction date, with changes in fair value recognized in the statements of income.
On January 30, 2017, holders of options to purchase an aggregate of 75,561 shares of common stock under the 2010 Plan with exercise prices of both $68.80 and $137.60 per share agreed to cancel their option awards in exchange for new awards under the Company’s Transaction Incentive Plan (see Note 14 – Commitments and Contingencies – Transaction Incentive Plan for details of the Transaction Incentive Plan awards). As a result of the option cancellation, the Company derecognized aggregate compensation expense of $14 related to the cancelled options that were unvested at the time of the cancellation.
On January 30, 2017, the Company granted ten-year, non-statutory stock options to purchase an aggregate of 216,667 shares of common stock with an aggregate grant date fair value of $1,562 under the 2017 Plan to two Company executives with an exercise price of $26.00 per share.operations. The options vested in equal installments of 25% on each of the next four anniversary dates from the date of grant. Upon a change of control, vesting of all then unvested shares would be accelerated. During April 2017, concurrent with the declaration of the stockholder dividend, the exercise prices of the options were reduced to $21.77 per share, resulting in a $269 increase in theestimated fair value of the options.warrant liabilities is determined using Level 3 inputs. Inherent in the pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The $1,831risk-free interest rate is based on the continuously compounded interest rate on U.S. Treasury Separate Trading of Registered Interest and Principal of Securities having a maturity similar to the contractual life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which we anticipate to remain at zero.
The following table provides quantitative information regarding Level 3 fair value measurements:
SCHEDULE OF FAIR VALUE MEASUREMENTS
December 31, 2022 | December 31, 2021 | |||||||
Stock Price | $ | 11.94 | $ | 21.54 | ||||
Strike Price | $ | 11.50 | $ | 11.50 | ||||
Expected life | 0.20 | 1.20 | ||||||
Volatility | 36.1 | % | 57.4 | % | ||||
Risk Free rate | 4.24 | % | 0.46 | % | ||||
Dividend yield | 0.00 | % | 0.00 | % | ||||
Fair value of warrants | $ | 0.53 | $ | 5.45 |
The following table presents changes in Level 1 and Level 3 liabilities measured at fair value for the years ended December 31, 2022 and 2021:
SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE
December 31, 2022 | December 31, 2021 | |||||||||||||||
PIPE Warrants | Private Warrants | PIPE Warrants | Private Warrants | |||||||||||||
Balance - beginning of year | $ | 13,603 | $ | 1,690 | $ | 13,716 | $ | 1,380 | ||||||||
Exercise or conversion | (2,087 | ) | - | (7,208 | ) | - | ||||||||||
Measurement adjustment | (10,774 | ) | (1,526 | ) | 7,095 | 310 | ||||||||||
Balance at December 31, 2022 | $ | 742 | $ | 164 | $ | 13,603 | $ | 1,690 |
NOTE 18 – SUBSEQUENT EVENTS
On February 15, 2023 , we consummated the acquisition contemplated by our asset purchase agreement with Hohl-Findlay, LLC (“Findlay”). The purchase price consisted solely of cash paid to Findlay. As part of the options,acquisition, we acquired the inventory of Findlay and has added the inventory to the M&T Floor Plan Line of Credit (as defined below).
On February 21, 2023, LDRV Holdings Corp. (“the Company”), Lazydays RV America, LLC, Lazydays RV Discount, LLC and Lazydays Mile HI RV, LLC (collectively with certain other subsidiary entities, the “Borrowers”) entered into a Second Amended and Restated Credit Agreement, (the “New Credit Agreement”), with Manufacturers and Traders Trust Company (“M&T”), as modified, was being recognized ratably overAdministrative Agent, Swingline Lender, Issuing Bank and a Lender, and other financial institutions as Lender parties. The New Credit Agreement amends and restates in its entirety that certain Amended and Restated Credit Agreement dated July 14, 2021, (as amended prior to the vestingdate hereof, the “Prior Credit Agreement”), among the Borrowers, M&T, as Administrative Agent, Swingline Lender, Issuing Bank and a Lender, and other financial institutions as Lender parties thereto.
The New Credit Agreement, among other things, amends the Prior Credit Agreement primarily to: (i) increase the capacity under the Floor Plan Line of Credit to up to $525 million and increase the capacity under the Revolving Credit Facility to up to $50 million; (ii) remove the Mortgage Loan Facility and Term Loan Facility; (iii) extend the term of the options.Floor Plan Line of Credit and the Revolving Credit to February 21, 2027; and (iv) remove certain guarantors.
F-32 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
On June 12, 2017, the Company granted a ten-year, non-statutory stock option to purchase an aggregate of 66,666 shares of common stock under the 2017 Plan to a Company executive with an exercise price of $26.00 per share. The options vested in equal installments of 25% on each of the next four anniversary dates from the date of grant. Upon a change of control, vesting of all then unvested shares was accelerated. The estimated aggregate grant date fair value of $466 was being recognized ratably over the vesting term of the options.Item 9A. Controls and Procedures
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options is estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility of comparable companies over the most recent period equal to the expected term and evaluates the extent to which available information indicates that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on stock options. Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the simplified method.
The grant date value of options granted during year ended December 31, 2017 was determined using the Black Scholes method with the following assumptions used:
A summary of the option activity during the year ended December 31, 2017 is presented below:
Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at January 1, 2017 | 75,561 | $ | 98.69 | |||||||||||||
Granted | 283,333 | 26.00 | ||||||||||||||
Cancelled or terminated | (75,561 | ) | 98.69 | |||||||||||||
Exercised | - | - | ||||||||||||||
Options outstanding at December 31, 2017 | 283,333 | $ | 22.77 | (1) | 9.2 | $ | - | |||||||||
Options vested at December 31, 2017 | - | $ | - | - | $ | - |
On March 15, 2018, as a result of the consummation of the Mergers (see Note 3 – Business Combination), the vesting of the existing options accelerated, and the option holders of the Predecessor became entitled to receive an aggregate of $2,636, of which $1,500 was distributable in cash and $530 was distributable in the form of 51,529 shares of common stock. An additional amount will be paid to the option holders in cash and stock upon the release of the amounts held in escrow under the Merger Agreement. These payments were allocated from the purchase consideration due to the sellers being associated with the business combination. On May 15, 2018, $109 was released from escrow as part of the working capital adjustment. As of March 21, 2019, the remaining amounts were released from escrow.
None.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. As of the end of the period covered by this Annual Report on Form 10-K, 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 disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).procedures. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2018,2022, the disclosure controls and procedures were not effective due to ensure that the information required to be disclosed by the Companya material weakness 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.internal control over financial reporting as described below.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published consolidated financial statements. Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.
Our management has conducted, with the participation of our CEOChief Executive Officer and CFO,Chief Financial Officer, an assessment, including testing of the effectiveness, of our internal control over financial reporting as of December 31, 2018.2022. Management’s assessment of internal control over financial reporting was based on assessment criteria established in the2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on such evaluation, management identified a material weakness in internal controls related to ineffective information technology general controls (ITGCs) in the areas of logical access, change management and security administration over information technology (IT) systems that support the Company’s financial reporting processes. These control deficiencies were a result of lack of documentation to evidence that (a) access provisioned match the access requested and (b) user access reviews were performed with complete and accurate data. In addition, evidence was not retained to support that changes to internally developed applications were approved prior to deployment to production. We were also unable to determine who has access to some server and database accounts impacting the same portal applications.
The material weakness did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results. Based on this material weakness, the Company’s management concluded that ourat December 31, 2022, the Company’s internal control over financial reporting was effectivenot effective. However, additional manual business process controls were executed throughout 2022 to address the risk of material misstatement heightened by the ineffective ITGCs.
Following identification of the material weakness and prior to filing this Annual Report on Form 10-K, we completed substantive procedures for the year ended December 31, 2022. Based on these procedures, management believes that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S. GAAP. Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K.
34 |
Management will continue to design and implement controls to ensure that control deficiencies contributing to the material weakness are remediated. The remediation actions include but are not limited to: (a) improving the processes and documentation around provisioning, deprovisioning, and reviews of access; and (b) modifying controls to include reviews of implemented application changes against supporting documents. The additional manual business process controls will continue to be performed while we remediate the ITGCs.
We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal 2023.
Management excluded the operations of the dealership acquired in Dave’s Claremore RV transaction from the assessment of internal control over financial reporting as of December 31, 2018.2022. These operations were excluded in accordance with the SEC’s general guidance because they and the related entities were acquired in purchase business combinations in 2022. Collectively, these operations accounted for approximately 0.8% of our total revenues, as reported in our consolidated financial statements as of and for the year ended December 31, 2022.
The registered public accounting firm that audited the financial statements included in this Form 10-K has issued an attestation report on our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no significant changes in our internal control over financial reporting during the most recent fiscal quarter that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
None
Item 10. Directors, Executive Officers and Corporate Governance
We have adopted a Code of Business Conduct applicable to all of our directors, officers and employees. A copy of the Code of Business Conduct is available on our corporate website at www.lazydays.com by clicking on the link “Investor Relations” on our homepage and then clicking on the link “Governance” and then clicking on the link “Documents—Code“Code of Business Conduct.Conduct” under “Governance Documents.” You also may obtain a printed copy of the Code of Business Conduct by sending a written request to: Investor Relations, Lazydays Holdings, Inc., 6130 Lazy Days Boulevard, Seffner, Florida 33584. In addition, the Code of Business Conduct is available in print to any stockholder who requests it4042 Park Oaks Blvd, Suite 350, Tampa, FL 33610, or by contacting Investor Relations at investors@lazydays.com or 855-629-3995. In the event that we amend or waive any of the provisions of the Code of Business Conduct that relate to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K, we intend to disclose the same on our Investor Relations website.
The other information required by this item will be contained in, and is incorporated by reference from, the proxy statement for our 20192023 annual meeting of stockholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the end of the year covered by this report.
Item 11. Executive Compensation
The information required by this item will be contained in, and is incorporated by reference from, the proxy statement for our 20192023 annual meeting of stockholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be contained in, and is incorporated by reference from, the proxy statement for our 20192023 annual meeting of stockholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be contained in, and is incorporated by reference from, the proxy statement for our 20192023 annual meeting of stockholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report.
Item 14. Principal Accounting Fees and Services
The information required by this item will be contained in, and is incorporated by reference from, the proxy statement for our 20192023 annual meeting of stockholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report.
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Report:
1. Financial statements
Reference is made to the information set forth in Part II, Item 8 of this Report, which information is incorporated by reference.
2. Consolidated Financial Statement Schedules
All required Financial Statement Schedules are included in the Consolidated Financial Statements or the Notes to Consolidated Financial Statements.
3. Exhibits
The following exhibits are filed as a part of this Report:
Exhibit Number |
37 |
38 |
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).** | |
The following financial statements from the Company’s Annual Report on Form 10-K for the period ended December 31, 2022, formatted in inline XBRL, | ||
Cover Page Interactive Data File (Embedded within the Inline XBRL | ||
* Filed herewith.
** Furnished herewith.
+ Management compensatory plan or arrangement.
None.Item 16. Form 10-K Summary
None.
Pursuant to the requirements of Section 13 or 15(d) 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. | |
/s/ | |
Chief Executive Officer |
Date: March 22, 2019February 28, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ | Chief Executive Officer and | |||
(Principal Executive Officer) | ||||
/s/ | Chief Financial Officer | |||
(Principal Financial Officer and Principal Accounting Officer) | ||||
/s/ | ||||
/s/ | Lead Independent Director | |||
/s/ Jordan Gnat | Director | February 28, 2023 | ||
Jordan Gnat | ||||
/s/ Erika Serow | Director | February 28, 2023 | ||
Erika Serow | ||||
/s/ James J. Fredlake | Director | |||
James J. Fredlake | ||||
/s/ | Director | |||
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