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REV Group CEO ‘Disappointed’ with Financial Results

REV Group

REV Group has reported results for the three months ended Oct. 31. Consolidated net sales in the fourth quarter 2018 were $659.8 million, representing a decline of 3.5 percent. The decline in sales was primarily the result of lower fire and emergency segment shipments, partially offset by sales growth in the commercial and recreation segments. Consolidated net sales were $2.38 billion for the twelve months ended Oct. 31, which was an increase of 5 percent.

The company’s fourth quarter 2018 net loss was $22 million, which included a $35.6 million impairment charge for the planned disposition and write-down of certain assets. Adjusted net income for the fourth quarter 2018 was $17.6 million, compared to $29.3 million in the fourth quarter 2017. Net income for the full year 2018 was $13 million. Full year 2018 adjusted net income was $72.7 million, compared to $75.8 million for the full year 2017, which represents a decline of 4.1 percent resulting from lower earnings from organic operations and higher interest expense, partially offset by the benefits of the Lance acquisition.

As of Oct. 31, management decided to divest certain businesses and activities which include the Revability mobility van business, one Regional Technical Center and the company’s rental fleet. Total cash that the company expects to generate in fiscal year 2019 from these initiatives is approximately $40 million. A definitive agreement to sell the Revability business was signed on Dec. 19.

“We are disappointed with our financial results for fiscal year 2018,” said Tim Sullivan, CEO REV Group. “Fiscal 2018 was a year in which we were confronted with the strong headwinds from the impacts of tariffs, chassis availability, material lead time extensions and temporary labor inefficiencies. … As we look to fiscal year 2019, we expect improvement in the availability of chassis and flow of raw materials. We are taking actions to increase manufacturing output to meet the ongoing strength of demand and to catch up with the delayed shipments we have experienced. We enter fiscal year 2019 with expectations for a return to growth in organic sales and profitability as well as significantly stronger cash flow generation and higher returns on invested capital.”

Recreation segment net sales were $235.4 million in the fourth quarter 2018, an increase of $46.5 million from $188.9 million in the fourth quarter 2017. The increase in net sales was primarily due to net sales attributable to our Class B and C products, as well as the acquisition of Lance. Excluding the impact of net sales from Lance, recreation segment net sales increased by $13.7 million, or 7.3 percent, in the fourth quarter 2018 compared to the fourth quarter 2017. Recreation net sales for the full year 2018 were $811.9 million, a 23.1 percent increase from $659.8 million in full year 2017. Recreation segment backlog at the end of the fourth quarter 2018 was $290.7 million, which was up 100 percent from $144.8 million at the end of fiscal year 2017, and up 16.5 percent sequentially from the end of the third quarter 2018.

“Strong growth in sales and backlog during the quarter were the result of our diverse portfolio of recreation products and the benefit of our acquisition growth strategy,” said Sullivan. “Our recreation segment acquisitions are helping drive increased profitability and, along with the synergies earned from those acquisitions, they are bringing the segment closer to attaining our goal of Adjusted EBITDA margins above 10 percent. Recent efforts to realign our Class A product line are progressing well and we are receiving encouraging feedback from customers and dealers. In addition, we believe our distribution channel is healthy with capacity for additional units when the new selling season gets underway in early calendar year 2019. We believe our focus on maintaining leadership in the high-end, luxury channels of the recreation market should enable us to outperform the industry over time, and we’re looking forward to continuing solid performance improvements in this segment in fiscal year 2019.”

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