REV Group, Inc. (Form: 10-Q, Received: 06/08/2020 07:32:48)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37999

REV Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	26-3013415
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

111 East Kilbourn Avenue, Suite 2600 Milwaukee, WI	53202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (414) 290-0190

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock ($0.001 Par Value)	REVG	New York Stock Exchange

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 ☒ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Small 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 5, 2020, the registrant had 63,406,129 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
Cautionary Statement About Forward-Looking Statements		3
Website and Social Media Disclosure		3
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
	Condensed Unaudited Consolidated Balance Sheets	4
	Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)	5
	Condensed Unaudited Consolidated Statements of Cash Flows	6
	Condensed Unaudited Consolidated Statements of Shareholders’ Equity	7
	Notes to Condensed Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

Cautionary Statement About Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “aim” and other similar expressions, and include our segment net sales and other expectations described under “Overview” below, although not all forward-looking statements contain these identifying words. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increases in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to mergers and acquisitions activities and the overall impact of the novel coronavirus, known as "COVID-19", pandemic on the Company’s business, results of operations and financial condition. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the “Risk Factors” section in our filings with the U.S. Securities and Exchange Commission (“SEC”). We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this Form 10-Q or to reflect any changes in expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.

Website and Social Media Disclosure

We use our website (www.revgroup.com) and corporate Twitter account (@revgroupinc) as routine channels of distribution of company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under SEC Regulation FD. Accordingly, investors should monitor our website and our corporate Twitter account in addition to following press releases, SEC filings and public conference calls and webcasts. Additionally, we provide notifications of news or announcements as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.

None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social media channels is incorporated into, or deemed to be a part of, this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our website or our social media channels are intended to be inactive textual references only.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

				(Audited)
	April 30, 2020			October 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	21.5		$	3.3
Accounts receivable, net		217.2			253.5
Inventories, net		594.0			513.4
Other current assets		37.9			19.4
Assets held for sale		53.2			19.5
Total current assets		923.8			809.1
Property, plant and equipment, net		192.7			201.7
Goodwill		157.3			159.8
Intangible assets, net		145.2			159.9
Right of use assets		27.9			—
Other long-term assets		16.0			16.6
Total assets	$	1,462.9		$	1,347.1
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	1.7		$	3.6
Accounts payable		193.2			200.8
Customer advances		184.6			129.9
Accrued warranty		20.8			16.1
Short-term lease obligations		8.2			—
Liabilities held for sale		1.9			15.4
Other current liabilities		64.8			70.2
Total current liabilities		475.2			436.0
Long-term debt, less current maturities		440.8			376.6
Deferred income taxes		23.9			15.4
Long-term lease obligations		19.9			—
Other long-term liabilities		18.2			13.9
Total liabilities		978.0			841.9
Commitments and contingencies
Shareholders' Equity:
Common stock ($.001 par value, 605,000,000 shares authorized; 63,397,526 and 62,217,486 shares issued and outstanding, respectively)		0.1			0.1
Additional paid-in capital		494.2			490.8
Retained (deficit) earnings		(7.6	)		15.8
Accumulated other comprehensive loss		(1.8	)		(1.7	)
Total REV's shareholders' equity		484.9			505.0
Non-controlling interest		—			0.2
Total shareholders' equity		484.9			505.2
Total liabilities and shareholders' equity	$	1,462.9		$	1,347.1

See Notes to Condensed Unaudited Consolidated Financial Statements.

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income

(Dollars in millions, except per share amounts)

	Three Months Ended April 30,						Six Months Ended April 30,
	2020			2019			2020			2019
Net sales	$	547.0		$	615.0		$	1,079.1		$	1,133.7
Cost of sales		494.6			542.6			979.3			1,015.0
Gross profit		52.4			72.4			99.8			118.7
Operating expenses:
Selling, general and administrative		54.9			48.6			100.9			96.3
Research and development costs		1.5			1.2			2.7			2.5
Amortization of intangible assets		3.4			4.6			7.4			9.3
Restructuring		6.1			1.8			6.7			2.9
Impairment charges		—			0.1			—			2.8
Total operating expenses		65.9			56.3			117.7			113.8
Operating (loss) income		(13.5	)		16.1			(17.9	)		4.9
Interest expense, net		7.3			8.0			14.6			15.8
Loss on sale of business		8.8			—			8.8			—
Gain on acquisition of business		(11.9	)		—			(11.9	)		—
(Loss) income before (benefit) provision for income taxes		(17.7	)		8.1			(29.4	)		(10.9	)
(Benefit) provision for income taxes		(10.1	)		2.5			(12.7	)		(1.9	)
Net (loss) income	$	(7.6	)	$	5.6		$	(16.7	)	$	(9.0	)

Other comprehensive loss, net of tax		(0.1	)		(0.2	)		(0.1	)		(0.2	)
Comprehensive (loss) income	$	(7.7	)	$	5.4		$	(16.8	)	$	(9.2	)

(Loss) income per common share:
Basic	$	(0.12	)	$	0.09		$	(0.27	)	$	(0.14	)
Diluted	$	(0.12	)	$	0.09		$	(0.27	)	$	(0.14	)
Dividends declared per common share	$	0.05		$	0.05		$	0.10		$	0.10

See Notes to Condensed Unaudited Consolidated Financial Statements.

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(Dollars in millions)

	Six Months Ended April 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(16.7	)	$	(9.0	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		21.7			23.8
Amortization of debt issuance costs		1.2			1.0
Stock-based compensation expense		5.5			4.8
Deferred income taxes		4.6			3.3
Gain on sale of assets		(0.5	)		(1.4	)
Impairment charges		—			2.8
Loss on sale of business		8.8			—
Gain on acquisition of business		(11.9	)		—
Changes in operating assets and liabilities, net		9.3			(64.5	)
Net cash provided by (used in) operating activities		22.0			(39.2	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(7.7	)		(9.4	)
Purchase of rental and used vehicles		(2.8	)		(3.0	)
Proceeds from sale of assets		4.8			17.1
Proceeds from sale of business		2.0			—
Acquisition of business		(54.8	)		—
Net cash (used in) provided by investing activities		(58.5	)		4.7
Cash flows from financing activities:
Net proceeds (repayments) from borrowings under April 2017 ABL Facility		64.7			(9.0	)
Net proceeds from borrowings of Term Loan		—			49.2
Payment of dividends		(6.3	)		(6.3	)
Repurchase and retirement of common stock		—			(5.3	)
Other financing activities		(3.7	)		0.5
Net cash provided by financing activities		54.7			29.1
Net increase (decrease) in cash and cash equivalents		18.2			(5.4	)
Cash and cash equivalents, beginning of period		3.3			11.9
Cash and cash equivalents, end of period	$	21.5		$	6.5

Supplemental disclosures of cash flow information:
Cash paid (received) for:
Interest	$	14.9	$	15.6
Income taxes, net of refunds	$	0.2	$	(8.0	)

See Notes to Condensed Unaudited Consolidated Financial Statements.

REV Group, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Shareholders’ Equity

(Dollars in millions)

	Common Stock				Additional Paid-in			Retained			Non-controlling			Accumulated Other Comprehensive			Total Shareholders'
	Amount		# Shares		Capital			Earnings (Deficit)			Interest			Loss			Equity
Balance, October 31, 2019	$	0.1		62,217,486 Sh.	$	490.8		$	15.8		$	0.2		$	(1.7	)	$	505.2
Net loss									(9.4	)								(9.4	)
Sale of business												(0.2	)					(0.2	)
Other comprehensive loss, net of tax															—			—
Stock-based compensation expense						2.6												2.6
Exercise of common stock options		—		102,000 Sh.		0.8												0.8
Vesting of restricted and performance stock, net of employee tax withholdings		—		360,986 Sh.		—												—
Dividends declared on common stock									(3.1	)								(3.1	)
Balance, January 31, 2020	$	0.1		62,680,472 Sh.	$	494.2		$	3.3		$	—		$	(1.7	)	$	495.9
Net loss									(7.6	)								(7.6	)
Other comprehensive loss, net of tax															(0.1	)		(0.1	)
Stock-based compensation expense						2.9												2.9
Vesting and issuance of restricted stock units and awards, net of forfeitures and employee tax withholdings		—		717,054 Sh.		(1.2	)											(1.2	)
Reclassification of liability awards						(1.7	)											(1.7	)
Dividends declared on common stock									(3.3	)								(3.3	)
Balance, April 30, 2020	$	0.1		63,397,526 Sh.	$	494.2		$	(7.6	)	$	—		$	(1.8	)	$	484.9

	Common Stock					Additional Paid-in			Retained			Accumulated Other Comprehensive			Total Shareholders'
	Amount		# Shares			Capital			Earnings			Loss			Equity
Balance, October 31, 2018	$	0.1		62,683,808 Sh.		$	492.1		$	40.6		$	(1.4	)	$	531.4
Net loss										(14.6	)					(14.6	)
Other comprehensive income (loss), net of tax													—			—
Stock-based compensation expense							1.4									1.4
Exercise of common stock options		—		20,000 Sh.			0.1									0.1
Vesting of restricted and performance stock, net of employee tax withholdings		—		94,237 Sh.			—									—
Dividends declared on common stock										(3.2	)					(3.2	)
Balance, January 31, 2019	$	0.1		62,798,045 Sh.		$	493.6		$	22.8		$	(1.4	)	$	515.1
Net income										5.6						5.6
Other comprehensive income (loss), net of tax													(0.2	)		(0.2	)
Stock-based compensation expense							2.9									2.9
Exercise of common stock options		—		54,000 Sh.			0.4									0.4
Vesting of restricted and performance stock, net of employee tax withholdings		—		40,828 Sh.			—									—
Dividends declared on common stock										(3.2	)					(3.2	)
Repurchase and retirement of common stock				(495,475 Sh.	)		(5.3	)								(5.3	)
Balance, April 30, 2019	$	0.1		62,397,398 Sh.		$	491.6		$	25.2		$	(1.6	)	$	515.3

See Notes to Condensed Unaudited Consolidated Financial Statements.

REV Group, Inc. and Subsidiaries

Notes to the Condensed Unaudited Consolidated Financial Statements

(All tabular amounts presented in millions, except share and per share amounts)

Note 1. Basis of Presentation

The unaudited Condensed Consolidated Financial Statements include the accounts of REV Group, Inc. (“REV” or “the Company”) and all its subsidiaries. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments, unless otherwise noted) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of the Company for the year ended October 31, 2019. The interim results are not necessarily indicative of results for the full year. Certain reclassifications have been made to the fiscal year 2019 financial statements to conform to the fiscal year 2020 presentation.

Equity Sponsor: The Company’s primary equity holders are funds and an investment vehicle associated with AIP CF IV, LLC, which the Company collectively refers to as “American Industrial Partners,” “AIP” or “Sponsor” and which indirectly own approximately 53.3% of REV Group’s voting equity as of April 30, 2020. AIP is an operations and engineering-focused private equity firm headquartered in New York, New York.

Related Party Transactions: During the three months ended April 30, 2020 and April 30, 2019, the Company reimbursed expenses of its primary equity holder in the amount of $0 million and $0.1 million, respectively. During the six months ended April 30, 2020 and April 30, 2019, the Company reimbursed expenses of its primary equity holder in the amount of $0.1 million and $0.6 million, respectively. These expenses are included in selling, general and administrative expenses in the Company’s Condensed Unaudited Consolidated Statements of Operations.

Certain production facilities and offices for two of the Company’s subsidiaries are leased from certain members of management. Rent expense under these arrangements totaled $0.1 million and $0.5 million for the three months ended April 30, 2020, and April 30, 2019, respectively. Rent expense under these arrangements totaled $0.6 million and $1.0 million for the six months ended April 30, 2020, and April 30, 2019, respectively.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

The following accounting pronouncements did not have a material impact on the Company’s consolidated financial statements:

•

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases” (Accounting Standards Codification (ASC) 842). ASC 842 is intended to increase transparency and comparability among organizations by recognizing lease liabilities with corresponding right-of-use (“ROU”) assets on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the new standard on November 1, 2019, following the optional transition method provided by ASU No. 2018-11. Accordingly, prior period comparative information was not recast to reflect the impact of the new guidance and therefore continues to be reported under the accounting guidance in effect during those periods (ASC 840). The most significant impact of the Company’s adoption of ASC 842 is the recognition of ROU assets and lease liabilities on the balance sheet for operating leases. The adoption did not have any impact on the Company’s results of operations or cash flows.

ASC 842 provides a number of optional transition related practical expedients. The Company elected to adopt the standard using the package of practical expedients, which allowed the Company not to reassess prior conclusions about the identification of leases, the classification of leases, and the treatment of initial direct costs. ASC 842 also provides a number of optional practical expedients for an entity’s ongoing lessee accounting. In connection with our evaluation of these practical expedients, the Company has elected not to separate payments for lease components from payments for non-lease components for all classes of leases. Additionally, the Company has elected the short-term lease recognition exemption for all leases that qualify, which means ROU assets and lease liabilities will not be recognized for leases with an initial term of twelve months or less.

Subsequent Events

On May 8, 2020, the Company completed the sale of its two shuttle bus businesses. Refer to Note 8, Divestiture Activities, for further details.

Note 2. Revenue Recognition

Substantially all of the Company’s revenue is recognized from contracts with customers with product shipment destinations in the United States and Canada. The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. The Company determines the transaction price for each contract at inception based on the consideration that it expects to receive for the goods and services promised under the contract. The transaction price excludes sales and usage-based taxes collected.

The Company’s primary source of revenue is generated from the manufacture and sale of specialty vehicles through its direct sales force or dealer network. The Company also generates revenue through separate contracts that relate to the sale of aftermarket parts and services. Revenue is typically recognized at a point-in-time, when control is transferred, which generally occurs when the product has been shipped to the customer or when it has been picked-up from the Company’s manufacturing facilities. Shipping and handling costs that occur after the transfer of control are fulfillment costs that are accrued when control is transferred. Periodically, certain customers request bill and hold transactions. In such cases, revenue is not recognized until after control has transferred which is generally when the customer has requested such transaction and has been notified that the product (i) has been completed according to customer specifications, (ii) has passed our quality control inspections, and (iii) has been separated from our inventory and is ready for physical transfer to the customer. Warranty obligations associated with the sale of a unit are assurance-type warranties that are a guarantee of the unit’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.

Contract Assets and Contract Liabilities

The Company is generally entitled to bill its customers upon satisfaction of its performance obligations, and payment is usually received shortly after billing. Payments for certain contracts are received in advance of satisfying the related performance obligations. Such payments are recorded as customer advances in the Company’s Condensed Unaudited Consolidated Balance Sheets. The corresponding performance obligations are generally satisfied within one year of the contract inception. During the three months ended April 30, 2020 and April 30, 2019, the Company recognized $26.2 million and $30.4 million, respectively, of revenue that was included in the customer advance balances as of October 31, 2019 and October 31, 2018, respectively. During the six months ended April 30, 2020 and April 30, 2019, the Company recognized $80.6 million and $74.0 million, respectively, of revenue that was included in the customer advance balances as of October 31, 2019 and October 31, 2018, respectively. The Company’s payment terms do not include a significant financing component and the Company does not have significant contract assets.

Note 3. Leases

The Company leases certain administrative and production facilities and equipment under long-term, non-cancelable operating lease agreements. The Company determines if an arrangement is or contains a lease at contract inception and recognizes a ROU asset and a lease liability based on the present value of fixed, and certain index-based lease payments at the lease commencement date. Variable payments are excluded from the present value of lease payments and are recognized in the period in which the payment is made. Lease agreements may include options to extend or terminate the lease or purchase the underlying asset. In situations where the Company is reasonably certain to exercise such options, they are considered in determining the lease term and the associated option payments, or exercise price in the case of an option to purchase, are included in the measurement of the lease liabilities and ROU assets. The Company’s leases generally do not include restrictive financial or other covenants, or residual value guarantees. The Company generally uses its incremental borrowing rate as the discount rate for measuring its lease liabilities, as the Company cannot determine the interest rate implicit in the lease because it does not have access to certain lessor specific information. Lease expense is recognized on a straight-line basis over the lease term. The Company does not have significant finance leases.

During the three and six months ended April 30, 2020, the Company recognized total operating lease costs of approximately $2.5 million and $4.8 million, respectively, and paid cash of $2.3 million for amounts included in the measurement of lease liabilities.

At April 30, 2020, future minimum operating lease payments due under ASC 842 are summarized by fiscal year in the table below:

Remaining six months of fiscal year 2020	$	4.7
2021		8.6
2022		6.9
2023		4.2
2024		2.4
Thereafter		3.8
Total undiscounted lease payments		30.6
Less: imputed interest		(2.5	)
Total lease liabilities	$	28.1

As of April 30, 2020, the weighted average remaining lease term and the weighted average discount rate for operating leases was 4.8 years and 5.0%, respectively.

As of October 31, 2019, future minimum operating lease payments (under ASC 840) summarized by fiscal year were as follows:

2020	$	8.5
2021		7.5
2022		5.8
2023		3.3
2024		1.5
Thereafter		0.1

Note 4. Acquisition

Spartan Emergency Response

On February 1, 2020, the Company acquired substantially all of the assets and liabilities of Spartan Emergency Response (“Spartan ER”), a leading designer, manufacturer and distributor of custom emergency response vehicles, cabs and chassis for the emergency response market, and its brands, from Spartan Motors, Inc. (NASDAQ: SPAR). Spartan ER is reported as part of the Fire & Emergency segment. The acquisition increases the Company’s market share in several key product categories and provides access to several new large municipalities and regional markets. The purchase price for Spartan ER was $54.8 million, subject to an adjustment based on the level of net working capital at closing, as defined in the purchase agreement. The net cash consideration paid at closing was funded through the Company’s ABL credit facility. The preliminary purchase price allocation resulted in a gain of $11.9 million, which is included in the Company’s Condensed Unaudited Consolidated Statement of Operations for the three and six months ended April 30, 2020. Prior to recognizing the gain, the Company reassessed the measurement and recognition of identifiable assets acquired, and liabilities assumed and concluded that the valuation procedures and resulting preliminary measures were appropriate. The Company believes that its ability to negotiate a purchase price lower than the fair market value of the acquired net assets was due to the limited number of strategic buyers that exist in this specific market and the desire of the sellers to exit the business on an accelerated basis. The Company incurred acquisition related costs of $1.3 million, which are included in selling, general and administrative expenses in the Company’s Condensed Unaudited Consolidated Statements of Operations for the three and six months ended April 30, 2020.

As of April 30, 2020, the fair value of the acquired assets, liabilities and gain on acquisition of business, is provisional pending receipt of the final valuation report from a third-party valuation firm.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for Spartan ER:

Assets:
Accounts receivable, net	$	30.9
Inventories, net		77.7
Other current assets		2.4
Property, plant and equipment		15.2
Right of use assets		6.0
Total assets acquired		132.2
Liabilities:
Accounts payable		5.0
Customer advances		32.8
Accrued warranty		0.7
Other current liabilities		7.1
Short-term lease obligations		0.8
Deferred income taxes		3.9
Long-term lease obligations		5.4
Other long-term liabilities		9.8
Total liabilities assumed		65.5
Net assets acquired		66.7
Consideration paid		54.8
Gain on acquisition of business	$	(11.9	)

Net sales and operating income attributable to Spartan ER were $62.6 million and $1.0 million for the three and six months ended April 30, 2020. In connection with the acquisition, Spartan ER changed its method for recognizing revenue from over-time to point-in-time to align with the Company. The Company determined that it is impracticable to determine the cumulative effect of applying this change retrospectively because records of certain sales transactions are no longer available for all prior periods. Accordingly, the supplemental proforma disclosures required by ASC 805 have been omitted.

Note 5. Inventories

Inventories, net of reserves, consisted of the following:

	April 30, 2020			October 31, 2019
Chassis	$	45.3		$	44.9
Raw materials		207.5			198.1
Work in process		263.0			200.8
Finished products		89.9			79.6
		605.7			523.4
Less: reserves		(11.7	)		(10.0	)
Total inventories, net	$	594.0		$	513.4

Note 6. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	April 30, 2020			October 31, 2019
Land & land improvements	$	26.1		$	24.2
Buildings & improvements		104.6			107.6
Machinery & equipment		94.3			93.1
Rental & used vehicles		21.4			24.4
Computer hardware & software		54.9			58.1
Office furniture & fixtures		5.9			5.8
Construction in process		9.7			11.4
		316.9			324.6
Less: accumulated depreciation		(124.2	)		(122.9	)
Total property, plant and equipment, net	$	192.7		$	201.7

Depreciation expense was $7.5 million and $7.0 million for the three months ended April 30, 2020, and April 30, 2019, respectively, and $14.3 million and $14.5 million for the six months ended April 30, 2020, and April 30, 2019, respectively.

Note 7. Goodwill and Intangible Assets

The table below represents goodwill by segment:

	April 30, 2020		October 31, 2019
Fire & Emergency	$	88.6	$	88.6
Commercial		26.2		28.7
Recreation		42.5		42.5
Total goodwill	$	157.3	$	159.8

The change in the net carrying value amount of goodwill consisted of the following:

	Six Months Ended April 30,
	2020			2019
Balance at beginning of period	$	159.8		$	161.8
Activity during the period:
Acquisitions		—			(2.0	)
Divestitures		(2.5	)		—
Balance at end of period	$	157.3		$	159.8

Intangible assets (excluding goodwill) consisted of the following:

	April 30, 2020
	Weighted- Average Life		Gross		Accumulated Amortization			Net
Finite-lived intangible assets:
Customer relationships		8.0	$	69.8	$	(35.3	)	$	34.5
Non-compete agreements		5.0		2.0		(1.5	)		0.5
Trade names		7.0		1.3		(1.2	)		0.1
				73.1		(38.0	)		35.1
Indefinite-lived trade names				110.1		—			110.1
Total intangible assets, net			$	183.2	$	(38.0	)	$	145.2

	October 31, 2019
	Weighted- Average Life		Gross		Accumulated Amortization			Net
Finite-lived intangible assets:
Customer relationships		8.0	$	126.7	$	(84.0	)	$	42.7
Order backlog		1.0		6.7		(6.7	)		—
Non-compete agreements		5.0		2.0		(1.3	)		0.7
Trade names		7.0		3.5		(3.0	)		0.5
Technology-related		7.0		0.9		(0.8	)		0.1
				139.8		(95.8	)		44.0
Indefinite-lived trade names				115.9		—			115.9
Total intangible assets, net			$	255.7	$	(95.8	)	$	159.9

Amortization expense was $3.4 million and $4.6 million for the three months ended April 30, 2020, and April 30, 2019, respectively, and $7.4 and $9.3 million for the six months ended April 30, 2020, and April 30, 2019, respectively. As of April 30, 2020, we wrote off fully amortized intangible assets and the related accumulated amortization.

Note 8. Divestiture Activities

In the first quarter of fiscal year 2019, the Company completed the sale of its mobility van business, Revability, with annual sales of approximately $40 million. In the second quarter of fiscal year 2019, the Company completed the sale of a Regional Technical Center (“RTC”) for net cash proceeds of $11.4 million. In connection with this sale, the Company recognized a gain on sale of $1.2 million.

In the first quarter of fiscal year 2020, the Company completed the sale of REV Coach. The Company received cash proceeds of $1.1 million in the first quarter of fiscal year 2020, and the remaining $0.9 million in the second quarter of fiscal year 2020.

Effective May 8, 2020, and in connection with a strategic review of the product portfolio, the Company completed the sale of its shuttle bus businesses for approximately $49.0 million in cash. The Company retained accounts payable and accounts receivable; in addition, the parts inventory will be transferred at a later date. These items are expected to result in an additional $5.0 million in cash. The Company used the proceeds from the disposition to reduce outstanding borrowings. The shuttle bus businesses are reported as part of the Commercial segment.

The assets and liabilities to be disposed of in connection with this transaction met the held for sale criteria as of April 30, 2020. The carrying value of the assets held for sale was greater than the fair value, less costs to sell, resulting in a loss of $8.8 million, which is included in the Condensed Unaudited Consolidated Statement of Operations for the three and six months ended April 30, 2020. The loss included $2.5 million related to goodwill that was allocated to the shuttle bus businesses and the costs to sell of $1.8 million.

As of April 30, 2020, assets and liabilities held for sale consisted of the following balances related to the sale of the shuttle bus businesses: inventories, net—$30.5 million, property, plant and equipment, net—$14.8 million, intangible assets, net—$7.4 million, other current and long-term assets—$0.5 million, other current and long-term liabilities—$1.9 million.

As of October 31, 2019, assets and liabilities held for sale consisted of the following balances related to the sale of REV Coach: property, plant and equipment, net—$0.2 million, inventories, net—$14.0 million, accounts receivable, net—$0.4 million, other current and long-term assets—$4.9 million, accounts payable—$11.7 million and other current and long-term liabilities—$3.7 million.

Note 9. Long-Term Debt

The Company was obligated under the following debt instruments:

	April 30, 2020			October 31, 2019
April 2017 ABL facility	$	275.0		$	210.0
Term Loan, net of debt issuance costs ($2.3 and $2.2)		167.5			170.2
		442.5			380.2
Less: current maturities		(1.7	)		(3.6	)
Long-term debt, less current maturities	$	440.8		$	376.6

April 2017 ABL Facility

Effective April 25, 2017, the Company entered into a $350.0 million revolving credit and guaranty agreement (the “April 2017 ABL Facility” or “ABL Agreement”) with a syndicate of lenders. The April 2017 ABL Facility consists of: (i) Revolving Loans, (ii) Swing Line Loans, and (iii) Letters of Credit, aggregating up to a combined maximum of $350.0 million. The total amount borrowed under the April 2017 ABL Facility is subject to a $30.0 million sublimit for Swing Line loans and a $35.0 million sublimit for Letters of Credit, along with certain borrowing base and other customary restrictions as defined in the ABL Agreement. The Company incurred $4.9 million of debt issuance costs related to the April 2017 ABL Facility. The amount of debt issuance costs is included in other long-term assets in the Company’s Condensed Unaudited Consolidated Balance Sheets.

The April 2017 ABL Facility allows for incremental borrowing capacity in an aggregate amount of up to $100.0 million, plus the excess, if any, of the borrowing base then in effect over total commitments then in effect. Any such incremental borrowing capacity is subject to receiving additional commitments from lenders and certain other customary conditions. The April 2017 ABL Facility matures on April 25, 2022. The Company may prepay principal, in whole or in part, at any time without penalty.

The following amendments have been made to the April 2017 ABL Facility:

•

On December 22, 2017, the Company exercised a $100.0 million incremental borrowing capacity option under the April 2017 ABL Facility to fund the Lance Camper acquisition, which increased total borrowing capacity under the facility from $350.0 million to $450.0 million. The Company incurred an additional $0.4 million of debt issuance costs related to the incremental borrowing capacity option under the April 2017 ABL Facility.

•

On January 31, 2020, the Company increased total borrowing capacity under the facility, in anticipation of its acquisition of Spartan ER, from $450.0 million to $500.0 million. The Company incurred an additional $0.3 million of debt issuance costs related to the incremental borrowing capacity option under the April 2017 ABL Facility. The outstanding balance for the April 2017 ABL facility as of January 31, 2020 reflects the draw-down of additional debt to fund the acquisition of Spartan ER.

Revolving Loans under the April 2017 ABL Facility bear interest at rates equal to, at the Company’s option, either a base rate plus an applicable margin, or a Eurodollar rate plus an applicable margin. Applicable interest rate margins are initially 0.75% for all base rate loans and 1.75% for all Eurodollar rate loans (with the Eurodollar rate having a floor of 0%), subject to adjustment based on utilization in accordance with the ABL Agreement. The weighted-average interest rate on borrowings outstanding under the April 2017 ABL Facility was 2.50% as of April 30, 2020. Interest is payable quarterly for all base rate loans and is payable monthly or quarterly for all Eurodollar rate loans.

The lenders under the April 2017 ABL Facility have a first priority security interest in substantially all accounts receivable and inventory of the Company, and a second priority security interest in substantially all other assets of the Company.

The April 2017 ABL Facility contains customary representations and warranties, affirmative and negative covenants, subject in certain cases to customary limitations, exceptions and exclusions. The April 2017 ABL Facility also contains certain customary events of default, which should such events occur, could result in the termination of the commitments under the April 2017 ABL Facility and the acceleration of all outstanding borrowings under it. The April 2017 ABL Facility contains a financial covenant restricting the Company from allowing its fixed charge coverage ratio to drop below 1.00 to 1.00 during a compliance period, which is triggered when the availability under the April 2017 ABL Facility falls below a threshold set forth in the credit agreement.

The Company was in compliance with all financial covenants under the April 2017 ABL Facility as of April 30, 2020. As of April 30, 2020, the Company’s availability under the April 2017 ABL Facility was $214.6 million.

The fair value of the April 2017 ABL Facility approximated book value at both April 30, 2020 and October 31, 2019.

Term Loan

Effective April 25, 2017, the Company entered into a $75.0 million term loan agreement (“Term Loan” and “Term Loan Agreement”), as Borrower with certain subsidiaries of the Company, acting as guarantors of debt. Principal may be prepaid at any time during the term of the Term Loan without penalty. The Company incurred $2.0 million of debt issuance costs related to the Term Loan.

The Term Loan Agreement allows for incremental facilities in an aggregate amount of up to $125.0 million. Any such incremental facilities are subject to receiving additional commitments from lenders and certain other customary conditions. The Term Loan agreement requires quarterly payments of 0.25% of the original principal balance, with remaining principal payable at maturity, April 25, 2022.

The lenders under the Term Loan have a second priority security interest in substantially all accounts receivable and inventory of the Company.

The following amendments have been made to the Term Loan:

•

On July 18, 2018, the Company exercised a $50.0 million incremental commitment option under the Term Loan Agreement, which increased total borrowing under the facility from $75.0 million to $125.0 million. The Company incurred an additional $0.6 million of debt issuance costs related to the incremental commitment option under the Term Loan. Proceeds from the incremental commitment were used to repay a portion of the outstanding borrowings under the April 2017 ABL Facility.

•

On March 29, 2019, the Company exercised a $50.0 million incremental commitment option under the Term Loan Agreement, which increased total borrowing under the facility from $125.0 million to $175.0 million. The Company incurred an additional $0.8 million of debt issuance costs related to the incremental commitment option under the Term Loan, which were deducted from proceeds received by the Company. Proceeds from the incremental commitment were used to repay a portion of the outstanding borrowings under the April 2017 ABL Facility.

•

On October 18, 2019, the Company amended the term loan agreement to raise the maximum leverage net ratio to 4.00 to 1.00 from 3.50 to 1.00. The ratio will decline by 25 basis points in the third quarter of each fiscal year after the amendment date, reaching a final maximum leverage ratio of 3.50 to 1.00 on July 31, 2021. Additionally, the Company received a waiver related to the excess cash flow calculation payment for fiscal year 2019. The Company incurred $0.2 million of debt issuance costs related to the amendment raising the maximum leverage ratio and the waiver for the excess cash flow calculation payment under the Term Loan Agreement.

•

On January 31, 2020, the Company amended the term loan agreement, in contemplation of its pending acquisition of Spartan ER, to raise the maximum net leverage ratio to 5.00 to 1.00 from 4.00 to 1.00. The ratio will decline by 25 basis points in the fourth quarter of fiscal year 2020, and each fiscal quarter ending thereafter, reaching a final maximum leverage ratio of 3.75 to 1.00 on October 31, 2021. The Company incurred $0.4 million of debt issuance costs related to this amendment.

•

On April 29, 2020, the Company amended the term loan agreement to eliminate the maximum leverage ratio covenant and replace it with a fixed charge coverage ratio test with a minimum ratio of 1.25 to 1.00. The fixed charge coverage ratio covenant will remain in effect through of the fourth quarter of fiscal year 2020. The maximum leverage ratio covenant will be reinstated at 5.25 to 1.00 starting in the first quarter of fiscal year 2021 and decline by 25 basis points each subsequent quarter, to a final level of 4.25 to 1.00 in first quarter of fiscal 2022. The applicable interest rate margins increased by 75 basis points corresponding with the amendment. The Company incurred $0.2 million of debt issuance costs related to the amendment.

Applicable interest rate margins for the Term Loan are 3.25% for base rate loans and 4.25% for Eurodollar rate loans (with the Eurodollar rate having a floor of 1.00%) as a result of the April 29, 2020 Term Loan amendment. Interest is payable quarterly for all base rate loans and is payable monthly or quarterly for all Eurodollar rate loans. The weighted-average interest rate on borrowings outstanding under the Term Loan was 4.50% as of April 30, 2020.

The Term Loan Agreement contains customary representations and warranties, affirmative and negative covenants, in each case, subject to customary limitations, exceptions and exclusions. The Term Loan Agreement also contains certain customary events of default. The Term Loan Agreement requires the Company to maintain a specified secured leverage ratio, which will be tested quarterly and become more restrictive over the term of the loan.

The Company was in compliance with all financial covenants under the Term Loan as of April 30, 2020.

The fair value of the Term Loan approximated book value at both April 30, 2020 and October 31, 2019.

Note 10. Warranties

The Company’s products generally carry explicit warranties that extend from several months to several years, based on terms that are generally accepted in the marketplace. Selected components (such as engines, transmissions, tires, etc.) included in the Company’s end products may include warranties from original equipment manufacturers (“OEM”). These OEM warranties are passed on to the end customer of the Company’s products, and the customer deals directly with the applicable OEM for any issues encountered on those components.

Changes in the Company’s warranty liability consisted of the following:

	Six Months Ended April 30,
	2020			2019
Balance at beginning of period	$	22.6		$	30.8
Warranty provisions		14.8			9.2
Settlements made		(14.0	)		(14.9	)
Warranties for current year acquisition		10.2			—
Divestiture adjustments		(0.6	)		—
Changes in liability of pre-existing warranties		(0.6	)		(0.6	)
Balance at end of period	$	32.4		$	24.5

Accrued warranty is classified in the Company’s consolidated balance sheets as follows:

	April 30, 2020		October 31, 2019
Current liabilities	$	20.8	$	16.1
Other long-term liabilities		11.6		6.5
Total warranty liability	$	32.4	$	22.6

Note 11. Stock Repurchase Program

On March 20, 2018 the Company’s Board of Directors authorized up to $50.0 million of repurchases of the Company’s issued and outstanding common stock with an expiration date of March 19, 2020. On September 5, 2018 the Company’s Board of Directors authorized an additional $50.0 million of repurchases of the Company’s issued and outstanding common stock with an expiration date of September 4, 2020. The Company’s share repurchase program is executed from time to time through open market or through private transactions. Shares purchased under the share repurchase program are retired and returned to authorized and unissued status. During fiscal year 2018, the Company repurchased 3,233,352 shares under this repurchase program at a total cost of $53.3 million at an average price per share of $16.47. During fiscal year 2019, the Company repurchased 717,597 shares under this repurchase program at a total cost of $8.3 million at an average price per share of $11.62. There were no repurchases under this program during the three and six months ended April 30, 2020. As of April 30, 2020, the Company had $38.3 million of authorization remaining under this program. The Company is no longer permitted to repurchase stock under the provisions of our Term Loan, as amended on April 29, 2020, from the date of the amendment through the maturity of the Term Loan Agreement.

Note 12. Earnings Per Share

Basic earnings per common share (“EPS”) is computed by dividing net (loss) income by the weighted average number of common shares outstanding. Diluted EPS is computed by dividing net (loss) income by the weighted-average number of common shares outstanding assuming dilution. The difference between basic EPS and diluted EPS is the result of the dilutive effect of outstanding stock options, performance stock units and restricted stock units. The table below reconciles basic weighted-average common shares outstanding to diluted weighted-average shares outstanding for the three and six months ended April 30, 2020 and April 30, 2019:

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
Basic weighted-average common shares outstanding		63,108,468		62,957,854		62,941,904		62,994,738
Dilutive stock options		—		169,913		—		—
Dilutive restricted stock units		—		219,847		—		—
Dilutive performance stock units		—		—		—		—
Diluted weighted-average common shares outstanding		63,108,468		63,347,614		62,941,904		62,994,738

The table below represents exclusions from the calculation of weighted-average shares outstanding assuming dilution due to the anti-dilutive effect of the common stock equivalents for the three and six months ended April 30, 2020 and April 30, 2019:

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
Anti-dilutive stock options		651,600		172,951		779,600		988,551
Anti-dilutive restricted stock units		2,724,840		497,925		2,905,823		1,750,723
Anti-dilutive performance stock units		—		18,408		—		18,408
Anti-dilutive common stock equivalents		3,376,440		689,284		3,685,423		2,757,682

Note 13. Income Taxes

For interim financial reporting, the Company estimates its annual effective tax rate based on the projected income for its entire fiscal year and records a provision (benefit) for income taxes on a quarterly basis based on the estimated annual effective income tax rate, adjusted for any discrete tax items.

The Company recorded income tax benefit of $10.1 million for the three months ended April 30, 2020, or 56.1% of pre-tax loss, compared to $2.5 million of expense, or 30.8% of pre-tax income, for the three months ended April 30, 2019. Results for the three months ended April 30, 2020 were favorably impacted by $5.7 million of net discrete tax benefits primarily related to net operating loss carrybacks allowable under the CARES Act and the nontaxable gain on the acquisition of Spartan ER. Results for the three months ended April 30, 2019 were unfavorably impacted by $0.4 million of net discrete tax expenses related to share-based compensation tax deductions.

The Company recorded income tax benefit of $12.7 million for the six months ended April 30, 2020, or 42.5% of pre-tax loss, compared to $1.9 million, or 17.8% of pre-tax loss, for the six months ended April 30, 2019. Results for the six months ended April 30, 2020 were favorably impacted by $5.4 million of net discrete tax benefits primarily related to net operating loss carrybacks allowable under the CARES Act and the nontaxable gain on the acquisition of Spartan ER. Results for the six months ended April 30, 2019 were unfavorably impacted by $0.8 million of net discrete expenses primarily related to stock-based compensation tax deductions.

On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The Cares Act is an emergency economic stimulus package that includes spending and tax benefits to strengthen the U.S. economy and fund a nationwide effort to curtail the effect of COVID-19. While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions include removal of certain limitations on utilization of net operating losses, allowing for net operating loss carrybacks for certain past and future losses, increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. The Company evaluated the impact of the CARES Act during the quarter and recorded an expected tax benefit of $3.5 million for the carryback the fiscal year 2018 federal net operating loss. As the Company is carrying the losses back to years beginning before January 1, 2018, the tax benefit of $3.5 million is a result of the rate differential between the previous 35% federal tax rate and current statutory rate of 21%.

The Company periodically evaluates its valuation allowance requirements as facts and circumstances change and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s effective income tax rate. During the three and six months ended April 30, 2020, there were no changes to the Company’s valuation allowances.

The Company’s liability for unrecognized tax benefits, including interest and penalties, was $2.7 million as of April 30, 2020 and $2.6 million as of October 31, 2019. The unrecognized tax benefits are presented in other long-term liabilities in the Company’s Condensed Unaudited Consolidated Balance Sheets for the period ended April 30, 2020. During the next twelve months, it is reasonably possible that $0.4 million of the unrecognized tax benefits, if recognized, would affect the annual effective income tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in its Condensed Unaudited Consolidated Statement of Operations.

The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of April 30, 2020, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be

materially different from the Company’s estimates and/or from its historical income tax provisions and income tax liabilities and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments related to income tax examinations.

Note 14. Commitments and Contingencies

Personal Injury Actions and Other: Product and general liability claims arise against the Company from time to time in the ordinary course of business. These claims are generally covered by third-party insurance. There is inherent uncertainty as to the eventual resolution of unsettled claims. Management, however, believes that any losses will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

Market Risks: The Company is contingently liable under bid, performance and specialty bonds and has open standby letters of credit issued by the Company’s banks in favor of third parties as follows:

	April 30, 2020		October 31, 2019
Performance, bid and specialty bonds	$	340.0	$	229.9
Open standby letters of credit		10.4		14.3
Total	$	350.4	$	244.2

The increase in performance, bid and specialty bonds is attributable to municipal contracts within our Commercial segment and customer contracts related to Spartan ER.

Chassis Contingent Liabilities: The Company obtains certain vehicle chassis from automobile manufacturers under converter pool agreements. These agreements generally provide that the manufacturer will supply chassis at the Company’s various production facilities under the terms and conditions set forth in the agreement. The manufacturer does not transfer the certificate of origin to the Company and, accordingly, the chassis are treated as consigned inventory of the automobile manufacturer. Upon being put into production, the Company becomes obligated to pay the manufacturer for the chassis. Chassis are typically converted and delivered to customers within 90 to 120 days of receipt. If the chassis are not converted within this timeframe of delivery, the Company generally purchases the chassis and records inventory, or the Company is obligated to begin paying an interest charge on this inventory until purchased. Such agreements are customary in the industries in which the Company operates and the Company’s exposure to loss under such agreements is limited by the value of the vehicles that would be repossessed and resold to mitigate any losses. The Company’s contingent liability under such agreements was $36.0 million and $48.6 million as of April 30, 2020 and October 31, 2019, respectively.

Repurchase Commitments: The Company has repurchase agreements with certain lending institutions. The repurchase commitments are on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer or other customer, generally not exceeding two years. The Company’s outstanding obligations under such agreements were $199.6 million and $212.5 million as of April 30, 2020, and October 31, 2019, respectively. This value represents the gross value of all vehicles under repurchase agreements and does not take into consideration proceeds that would be received upon resale of repossessed vehicles, which would be used to reduce the Company’s ultimate net liability. Such agreements are customary in the industries in which the Company operates and the Company’s exposure to loss under such agreements is limited by the potential loss on the resale value of the inventory which is required to be repurchased. Losses incurred under such arrangements have not been significant and the Company expects this pattern to continue. The reserve for losses included in other liabilities on contracts outstanding at April 30, 2020 and October 31, 2019 is immaterial.

Guarantee Arrangements: The Company is party to multiple agreements whereby it guarantees indebtedness of others, including losses under loss pool agreements. The Company estimated that its maximum loss exposure under these contracts was $23.7 million and $25.5 million at April 30, 2020 and October 31, 2019, respectively. Under the terms of these and various related agreements and upon the occurrence of certain events, the Company generally has the ability to, among other things, take possession of the underlying collateral. If the financial condition of the customers and dealers were to deteriorate and result in their inability to make payments, then additional accruals may be required. While the Company does not expect to experience losses under these agreements that are materially in excess of the amounts reserved, it cannot provide any assurance that the financial condition of the third parties will not deteriorate resulting in the third party’s inability to meet their obligations.

In the event that third parties are unable to meet obligations under these agreements, the Company cannot guarantee that the collateral underlying the agreements will be available or sufficient to avoid losses materially in excess of the amounts reserved. Any losses under these guarantees would generally be mitigated by the value of any underlying collateral, including financed equipment, and are generally subject to the finance company’s ability to provide the Company clear title to foreclosed equipment and other conditions. During periods of economic weakness, collateral values generally decline and can contribute to higher exposure to losses.

Other Matters: The Company is, from time to time, party to various legal proceedings arising out of ordinary course of business. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty; however, the Company believes that its ultimate liability, if any, arising from pending legal proceedings, as well as from asserted legal claims and known potential legal claims, which are probable of assertion, taking into account established accruals for estimated liabilities, should not be material to the business, financial condition or results of operations.

A consolidated federal putative securities class action and a consolidated state putative securities class action are pending against the Company and certain of its officers and directors. These actions collectively purport to assert claims on behalf of putative classes of purchasers of the Company’s common stock in or traceable to its January 2017 IPO, purchasers in its secondary offering of common stock in October 2017, and purchasers from October 10, 2017 through June 7, 2018. The state action also names certain of the underwriters for the Company’s IPO or secondary offering as defendants. The federal and state courts each consolidated multiple separate actions pending before them, the first of which was filed on June 8, 2018. The actions have alleged certain violations of the Securities Act of 1933 and, for the federal action, the Securities Exchange Act of 1934. The consolidated state action is currently stayed in favor of the consolidated federal action.

Collectively, the actions seek certification of the putative classes asserted and compensatory damages and attorneys’ fees and costs. The underwriter defendants have notified the Company of their intent to seek indemnification from the Company pursuant to the IPO underwriting agreement regarding the claims asserted with respect to the IPO, and the Company expects the underwriters to do the same in regard to the claims asserted with respect to the October 2017 offering. Two purported derivative actions, which have since been consolidated, were also filed in federal court in Delaware in 2019 against the Company’s directors (with the Company as a nominal defendant), premised on allegations similar to those asserted in the consolidated federal securities litigation. The Company and the other defendants intend to defend these lawsuits vigorously. Additional lawsuits may be filed and, at this time, the Company is unable to predict the outcome of the lawsuits, the possible loss or range of loss, if any, associated with the resolution of the lawsuits, or any potential effect that it may have on the Company or its operations.

Note 15. Business Segment Information

The Company is organized into three reportable segments based on management’s process for making operating decisions, allocating capital and measuring performance, and based on the similarity of products, customers served, common use of facilities, and economic characteristics. The Company’s segments are as follows:

Fire & Emergency: This segment includes KME, E-One, Ferrara, Spartan ER, American Emergency Vehicles, Leader Emergency Vehicles, Horton Emergency Vehicles, REV Ambulance Orlando and REV Brazil. These business units manufacture and market commercial and custom fire and emergency vehicles primarily for fire departments, airports, other governmental units, contractors, hospitals and other care providers in the United States and other countries.

Commercial: This segment includes Collins Bus, Champion Bus, ENC, ElDorado National (Kansas), Capacity and Lay-Mor. Collins Bus manufactures, markets and distributes school buses, normally referred to as Type A school buses, as well as shuttle buses used for churches, transit authorities, hotels and resorts, retirement centers and other similar uses. Champion Bus, ENC and ElDorado National (Kansas) manufacture, market and distribute shuttle buses, transit buses, airport car rental and hotel/motel shuttles, tour and charter operations and other uses under several well-established brand names. Capacity manufactures, markets and distributes trucks used in terminal type operations, i.e., rail yards, warehouses, rail terminals and shipping terminals/ports. Lay-Mor manufactures, markets and distributes industrial sweepers for both the commercial and rental markets. On May 8, 2020, the Company sold its shuttle bus businesses. Refer to Note 8, Divestiture Activities, for further details.

Recreation: This segment includes REV Recreation Group (“RRG”), Goldshield Fiberglass, Inc. (“Goldshield”), Renegade, Midwest and Lance, and their respective manufacturing facilities, service and parts divisions. RRG primarily manufactures, markets and distributes Class A mobile RVs in both gas and diesel models. Renegade primarily manufacturers, markets and distributes Class C and “Super C” RVs. Goldshield manufactures, markets and distributes fiberglass reinforced molded parts to a diverse cross section of original equipment manufacturers and other commercial and industrial customers, including various components for RRG, which is one of Goldshield’s primary customers. Midwest manufactures, markets and distributes Class B RVs and luxury vans. Lance manufactures, markets and distributes truck campers, towable campers and toy haulers.

For purposes of measuring financial performance of its business segments, the Company does not allocate to individual business segments costs or items that are of a corporate nature. The caption “Corporate, Other & Elims” includes corporate office expenses, results of insignificant operations, intersegment eliminations and income and expense not allocated to reportable segments.

Total assets of the business segments exclude general corporate assets, which principally consist of cash and cash equivalents, certain property, plant and equipment and certain other assets pertaining to corporate and other centralized activities.

Intersegment sales generally include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed and agreed-upon pricing which is intended to be reflective of the contribution made by the supplying business segment. All intersegment transactions have been eliminated in consolidation.

Selected financial information of the Company’s segments is as follows:

	Three Months Ended April 30, 2020
	Fire & Emergency		Commercial		Recreation			Corporate, Other & Elims			Consolidated
Net sales	$	289.3	$	143.2	$	114.0		$	0.5		$	547.0
Depreciation and amortization	$	3.6	$	1.9	$	3.3		$	2.1		$	10.9
Capital expenditures	$	2.3	$	0.8	$	0.6		$	0.8		$	4.5
Total assets	$	796.6	$	250.5	$	289.8		$	126.0		$	1,462.9
Adjusted EBITDA	$	10.2	$	8.0	$	(1.1	)	$	(9.5	)

	Three Months Ended April 30, 2019
	Fire & Emergency		Commercial		Recreation		Corporate, Other & Elims			Consolidated
Net sales	$	247.1	$	170.0	$	199.7	$	(1.8	)	$	615.0
Depreciation and amortization	$	3.5	$	2.1	$	4.3	$	1.7		$	11.6
Capital expenditures	$	1.8	$	1.1	$	1.0	$	(0.8	)	$	3.1
Total assets	$	627.2	$	322.3	$	356.6	$	107.2		$	1,413.3
Adjusted EBITDA	$	15.1	$	14.7	$	17.3	$	(11.0	)

	Six Months Ended April 30, 2020
	Fire & Emergency		Commercial		Recreation		Corporate, Other & Elims			Consolidated
Net sales	$	495.8	$	301.3	$	280.9	$	1.1		$	1,079.1
Depreciation and amortization	$	7.1	$	3.7	$	6.9	$	4.0		$	21.7
Capital expenditures	$	4.0	$	1.4	$	1.4	$	0.9		$	7.7
Total assets	$	796.6	$	250.5	$	289.8	$	126.0		$	1,462.9
Adjusted EBITDA	$	12.1	$	17.9	$	5.9	$	(17.5	)

	Six Months Ended April 30, 2019
	Fire & Emergency		Commercial		Recreation		Corporate, Other & Elims			Consolidated
Net sales	$	451.2	$	310.6	$	375.9	$	(4.0	)	$	1,133.7
Depreciation and amortization	$	7.0	$	4.7	$	8.3	$	3.8		$	23.8
Capital expenditures	$	3.2	$	1.7	$	2.4	$	2.1		$	9.4
Total assets	$	627.2	$	322.3	$	356.6	$	107.2		$	1,413.3
Adjusted EBITDA	$	23.4	$	19.7	$	26.5	$	(21.2	)

In considering the financial performance of the business, the chief operating decision maker analyzes the primary financial performance measure of Adjusted EBITDA. Adjusted EBITDA is defined as net income for the relevant period before depreciation and amortization, interest expense and benefit for income taxes, as adjusted for items management believes are not indicative of the Company’s ongoing operating performance. Adjusted EBITDA is not a measure defined by U.S. GAAP but is computed using amounts that are determined in accordance with U.S. GAAP. A reconciliation of this performance measure to net income (loss) is included below.

The Company believes Adjusted EBITDA is useful to investors and used by management for measuring profitability because the measure excludes the impact of certain items which management believes have less bearing on the Company’s core operating performance, and allows for a more meaningful comparison of operating fundamentals between companies within its industries by eliminating the impact of capital structure and taxation differences between the companies. Additionally, Adjusted EBITDA is used by management to measure and report the Company’s financial performance to the Company’s Board of Directors, assists in providing a meaningful analysis of the Company’s operating performance and is used as a measurement in incentive compensation for management.

Provided below is a reconciliation of segment Adjusted EBITDA to net (loss) income:

	Three Months Ended April 30,						Six Months Ended April 30,
	2020			2019			2020			2019
Fire & Emergency Adjusted EBITDA	$	10.2		$	15.1		$	12.1		$	23.4
Commercial Adjusted EBITDA		8.0			14.7			17.9			19.7
Recreation Adjusted EBITDA		(1.1	)		17.3			5.9			26.5
Corporate and Other Adjusted EBITDA		(9.5	)		(11.0	)		(17.5	)		(21.2	)
Depreciation and amortization		(10.9	)		(11.6	)		(21.7	)		(23.8	)
Interest expense, net		(7.3	)		(8.0	)		(14.6	)		(15.8	)
Benefit (provision) for income taxes		10.1			(2.5	)		12.7			1.9
Transaction expenses		(0.9	)		—			(2.0	)		(0.2	)
Sponsor expense reimbursement		—			(0.1	)		(0.1	)		(0.6	)
Restructuring costs		(6.1	)		(1.8	)		(6.7	)		(2.9	)
Stock-based compensation expense		(2.9	)		(3.4	)		(5.5	)		(4.8	)
Legal matters		(1.4	)		(2.4	)		(1.5	)		(4.5	)
Loss on sale of business		(8.8	)		—			(8.8	)		—
Gain on acquisition of business		11.9			—			11.9			—
Impairment charges		—			(0.1	)		—			(2.8	)
Earnings (losses) attributable to assets held for sale		1.1			—			1.3			(1.7	)
Deferred purchase price payment		—			(0.6	)		(0.1	)		(2.2	)
Net (loss) income	$	(7.6	)	$	5.6		$	(16.7	)	$	(9.0	)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This management’s discussion and analysis should be read in conjunction with the Condensed Unaudited Consolidated Financial Statements and risk factors contained in this Form 10-Q as well as the Management’s Discussion and Analysis and Risk Factors and audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K filed on December 18, 2019.

Overview

REV is a leading designer, manufacturer, and distributor of specialty vehicles and related aftermarket parts and services. We serve a diversified customer base, primarily in the United States, through three segments: Fire & Emergency, Commercial, and Recreation. We provide customized vehicle solutions for applications, including essential needs for public services (ambulances, fire apparatus, school buses, and transit buses), commercial infrastructure (terminal trucks and industrial sweepers) and consumer leisure (recreational vehicles). Our diverse portfolio is made up of well-established principal vehicle brands, including many of the most recognizable names within their industry. Several of our brands pioneered their specialty vehicle product categories and date back more than 50 years. We believe that in most of our markets, we hold the first or second market share position and approximately 69% of our net sales during the second quarter of fiscal year 2020 came from products where we believe we hold such share positions.

Segments

We serve a diversified customer base primarily in the United States through the following segments:

Fire & Emergency – Our Fire & Emergency segment sells fire apparatus equipment under the Emergency One (E-ONE), Kovatch Mobile Equipment (KME), Ferrara, Spartan, Smeal and Ladder Tower brands, and ambulances under the American Emergency Vehicles (AEV), Horton Emergency Vehicles (HEV), Leader Emergency Vehicles (LEV), Marque, McCoy Miller, Road Rescue, Wheeled Coach and Frontline brands. We believe we are the largest manufacturer by unit volume of fire and emergency vehicles in the United States and have one of the industry’s broadest portfolios of products including Type I ambulances (aluminum body mounted on a heavy truck-style chassis), Type II ambulances (van conversion ambulance typically favored for non-emergency patient transportation), Type III ambulances (aluminum body mounted on a van-style chassis), pumpers (fire apparatus on a custom or commercial chassis with a water pump and small tank to extinguish fires), ladder trucks (fire apparatus with stainless steel or aluminum ladders), tanker trucks and rescue and other vehicles. Each of our individual brands is distinctly positioned and targets certain price and feature points in the market such that dealers often carry, and customers often buy more than one REV Fire & Emergency product line. On February 1, 2020, the Company acquired Spartan Emergency Response (“Spartan ER”), a leading designer, manufacturer and distributor of custom emergency response vehicles, cabs and chassis for the emergency response market.

Commercial – Our Commercial segment serves the bus market through the following principal brands: Collins Bus, Goshen Coach, ENC, ElDorado National, Federal Coach, Champion and World Trans. We serve the terminal truck market through the Capacity brand and the sweeper market through the Lay-Mor brand. We are a leading producer of small- and medium-sized buses, Type A school buses, transit buses, terminal trucks and street sweepers in the United States. Our products in the Commercial segment include cut-away buses (customized body built on various types and sizes of commercial chassis), transit buses (large municipal buses where we build our own chassis and body), luxury buses (bus-style limo or high-end luxury conversions), Type A school buses (small school bus built on commercial chassis), street sweepers (three- and four-wheel versions used in road construction activities), and terminal trucks (specialized vehicles which move freight in warehouses or intermodal yards and ports). Within each market segment, we produce many customized configurations to address the diverse needs of our customers. On May 8, 2020, the Company sold its shuttle bus businesses. Refer to Note 8, Divestiture Activities, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

Recreation – Our Recreation segment serves the RV market through seven principal brands: American Coach, Fleetwood RV, Monaco Coach, Holiday Rambler, Renegade, Midwest and Lance. We believe our brand portfolio contains some of the longest standing, most recognized brands in the RV industry. Under these brands, REV provides a variety of highly recognized motorized and towable RV line-makes such as: American Eagle, Bounder, Pace Arrow, Verona, Weekender and Lance, among others. Our products in the Recreation segment include Class A motorized RVs (motorhomes built on a heavy duty chassis with either diesel or gas engine configurations), Class C and “Super C” motorized RVs (motorhomes built on a commercial truck or van chassis), Class B RVs (motorhomes built out on a van chassis), and towable travel trailers and truck campers. The Recreation segment also includes Goldshield Fiberglass, which produces a wide range of custom molded fiberglass products for the heavy-duty truck, RV and broader industrial markets.

Factors Affecting Our Performance

The primary factors affecting our results of operations include:

General Economic Conditions

Our business is impacted by the U.S. economic environment, employment levels, consumer confidence, municipal spending, municipal tax receipts, changes in interest rates and instability in securities markets around the world, among other factors. In particular, changes in the U.S. economic climate can impact demand in key end markets. In addition, the Company is susceptible to supply chain disruptions resulting from the impact of tariffs and global macro-economic factors (refer to “Impact of COVID-19” section below), which can have a dramatic effect, either directly or indirectly, on the availability, lead-times and costs associated with raw materials and parts.

RV purchases are discretionary in nature and therefore sensitive to the availability of financing, consumer confidence, unemployment levels, levels of disposable income and changing levels of consumer home equity, among other factors. RV markets are affected by general U.S. and global economic conditions, which create risks that future economic downturns will further reduce consumer demand and negatively impact our sales.

While less economically sensitive than the Recreation segment, the Fire & Emergency segment and the Commercial segment are also impacted by the overall economic environment. Local tax revenues are an important source of funding for fire and emergency response departments. Fire and emergency products and buses are typically a larger cost item for municipalities and their service life is relatively long, making the purchase more deferrable, which can result in reduced demand for our products. In addition to commercial demand, local, state and federal tax revenues can be an important source of funding for many of our bus products including Type A school buses, transit buses and shuttle buses. Volatility in tax revenues or availability of funds via budgetary appropriation can have a negative impact on the demand for these products.

A decrease in employment levels, consumer confidence or the availability of financing, or other adverse economic events, or the failure of actual demand for our products to meet our estimates, could negatively affect the demand for our products. Any decline in overall customer demand in markets in which we operate could have a material adverse effect on our operating performance.

Seasonality

In a typical year, our operating results are impacted by seasonality. Historically, the slowest quarters have been the first and second fiscal quarters when the purchasing seasons for vehicles, such as school buses, RVs and sweepers are the lowest due to the colder weather and the relatively long time until the summer vacation season, and the fact that the school year is underway with municipalities and school bus contractors utilizing their existing fleets to transport student populations. Sales of our products have typically been higher in the third and fourth fiscal quarters (with the fourth fiscal quarter typically being the strongest) due to better weather, the vacation season, buying habits of RV dealers and end-users, timing of government/municipal customer fiscal years, and the beginning of a new school year. Our quarterly results of operations, cash flows, and liquidity are likely to be impacted by these seasonal patterns. Sales and earnings for other vehicles that we produce, such as essential emergency vehicles and commercial bus fleets, are less seasonal, but fluctuations in sales of these vehicles can also be impacted by timing surrounding the fiscal years of municipalities and commercial customers, as well as the timing and amounts of multi-unit orders.

Impact of Acquisitions

We actively evaluate opportunities to improve and expand our business through targeted acquisitions that are consistent with our strategy. On occasion, we also may dispose of certain components of our business that no longer fit within our overall strategy. Historically, a significant component of our growth has been through acquisitions of businesses. We typically incur upfront costs as we integrate acquired businesses and implement our operating philosophy at newly acquired companies, including consolidation of supplies and materials, purchases, improvements to production processes, and other restructuring initiatives. The benefits of these integration efforts and divestiture activities may not positively impact our financial results until subsequent periods.

We recognize acquired assets and liabilities at fair value. This includes the recognition of identified intangible assets and goodwill which, in the case of definite-life intangible assets, are then amortized over their expected useful lives, which typically results in an increase in amortization expense. In addition, assets acquired, and liabilities assumed generally include tangible assets, as well as contingent assets and liabilities.

On February 1, 2020, the Company acquired Spartan ER, a leading designer, manufacturer and distributor of custom emergency response vehicles, cabs and chassis for the emergency response market. Refer to Note 4, Acquisition, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

On May 8, 2020, the Company sold its shuttle bus businesses. Refer to Note 8, Divestiture Activities, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

Impact of COVID-19

During our second quarter of fiscal year 2020, the novel coronavirus known as "COVID-19" spread throughout the world creating a global pandemic. The pandemic has triggered a significant downturn in global commerce and these challenging market conditions may continue for an extended period of time. As a result of the spread of COVID-19, we have also experienced disruption and delays in our supply chain, customer demand, and logistics challenges, including our customers’ ability to inspect and take delivery of vehicles.

Many of the vehicles and parts we supply are vital to serving communities across our nation. The Cybersecurity and Infrastructure Security Agency (CISA), which implements the Secretary of Homeland Security’s responsibilities, has designated our fire trucks, ambulances, transit and school buses and terminal trucks (representing roughly 70% of the vehicles we produce) as essential to the nation’s health and safety, and are critical to the emergency service and transportation infrastructure.

We have taken a number of precautionary steps to safeguard our employees and our business from the effects of the outbreak of COVID-19, including closing Recreation vehicle manufacturing locations for 3-6 weeks and shuttle bus manufacturing locations for 2 weeks, substantially limiting the presence of personnel in our offices and manufacturing locations, implementing travel restrictions and withdrawing from various industry events. We have requested that office employees work from home and implemented business continuity plans in an effort to minimize further business disruption, protect our employees and operations. In addition, we have limited discretionary spending, furloughed salaried employees, deferred capital investments, suspended future quarterly dividends, replaced our Term Loan debt leverage ratio covenant with a fixed charge coverage ratio through fiscal 2020, and temporarily lowered the salaries of our leadership team.

While the global market downturn, closures and limitations on movement are expected to be temporary, the duration of any demand reductions, production and supply chain disruptions, and related financial impacts, cannot be reliably estimated at this time.

Results of Operations

	Three Months Ended April 30,					Six Months Ended April 30,
($ in millions)	2020			2019		2020			2019
Net sales	$	547.0		$	615.0	$	1,079.1		$	1,133.7
Gross profit		52.4			72.4		99.8			118.7
Selling, general and administrative		54.9			48.6		100.9			96.3
Restructuring		6.1			1.8		6.7			2.9
Loss on sale of business		8.8			—		8.8			—
Gain on acquisition of business		(11.9	)		—		(11.9	)		—
(Benefit) provision for income taxes		(10.1	)		2.5		(12.7	)		(1.9	)
Net (loss) income		(7.6	)		5.6		(16.7	)		(9.0	)

Adjusted EBITDA	$	7.6		$	36.1	$	18.4		$	48.4
Adjusted Net (Loss) Income	$	(5.8	)	$	15.2	$	(8.8	)	$	12.3

Net Sales. Consolidated net sales were $547.0 million for the three months ended April 30, 2020, a decrease of $68.0 million, or 11.1%, from $615.0 million for the three months ended April 30, 2019. Net sales for the quarter included $62.6 million of revenue attributable to Spartan ER which was acquired on February 1, 2020. Excluding the impact of Spartan ER, net sales decreased by $130.6 million, or 21.2% compared to the prior year period. Organic sales volume decreased across all segments with the most significant impact in the Recreation segment and the shuttle bus businesses within the Commercial segment as production was temporarily shut down during the months of March and April in response to the COVID-19 Stay-At-Home orders, but also was indirectly affected due to the fact that travel restrictions, imposed by our customers driven by reaction to the pandemic, resulted in delays in inspection and delivery of some vehicles during the quarter.

Consolidated net sales were $1,079.1 million for the six months ended April 30, 2020, a decrease of $54.6 million, or 4.8%, from $1,133.7 million for the six months ended April 30, 2019. Net sales for the six months ended April 30, 2020, included $62.6

million of revenue attributable to Spartan ER acquired on February 1, 2020. Excluding the impact of Spartan ER, net sales decreased by $117.2 million, or 10.3% compared to the prior year period. The decrease in net sales was primarily due to a decrease in volume of shipments during the second quarter of fiscal year 2020 due to the impacts from COVID-19 and the temporary shutdowns of the Recreation and shuttle bus businesses.

Gross Profit. Consolidated gross profit was $52.4 million for the three months ended April 30, 2020, compared to $72.4 million for the three months ended April 30, 2019. Consolidated gross profit, as a percentage of consolidated net sales, was 9.6% for the three months ended April 30, 2020, a decrease compared to 11.8% for the three months ended April 30, 2019. The decrease was primarily due to a decrease in sales volumes due to the impacts from COVID-19 and the related period costs from under absorbed manufacturing facilities in our Recreation segment and, to a lesser extent, in our Commercial and Fire & Emergency segments, partially offset by the gross profit contribution from Spartan ER.

Consolidated gross profit was $99.8 million for the six months ended April 30, 2020, compared to $118.7 million for the six months ended April 30, 2019. Consolidated gross profit, as a percentage of consolidated net sales, was 9.3% for the six months ended April 30, 2020, a decrease compared to 10.5% for the six months ended April 30, 2019. The decrease was primarily due to the volume decrease in the second quarter related to the impacts of COVID-19 partially offset by the gross profit contribution from Spartan ER.

Selling, General and Administrative. Consolidated selling, general and administrative (“SG&A”) costs were $54.9 million for the three months ended April 30, 2020, an increase of $6.3 million, or 13.0%, from consolidated SG&A costs of $48.6 million for the three months ended April 30, 2019. Consolidated SG&A costs were $100.9 million for the three months ended April 30, 2020, an increase of $4.6 million, or 4.8%, from consolidated SG&A costs of $96.3 million for the three months ended April 30, 2019. The increase SG&A costs was primarily due to the acquisition of Spartan ER and higher transaction costs.

Restructuring. Consolidated restructuring costs were $6.1 million for the three months ended April 30, 2020, compared to $1.8 million for the three months ended April 30, 2019. Consolidated restructuring costs were $6.7 million for the six months ended April 30, 2020, compared to $2.9 million for the six months ended April 30, 2019. The increase in restructuring costs for the three and six months ended April 30, 2020, is primarily related to leadership changes, such as a change in CEO, and headcount reductions in Corporate and the Fire division, as well as lease termination costs related to the closure of a Spartan ER facility.

Loss on Sale of Business. Effective May 8, 2020, we completed the sale of our shuttle bus businesses for approximately $49.0 million in cash. As a result, we recorded a loss on sale of $8.8 million during the three months ended April 30, 2020. Refer to Note 8, Divestiture Activities, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

Gain on Acquisition of Business. During the second quarter of fiscal year 2020, we recorded the preliminary purchase accounting for the acquisition of Spartan ER, which resulted in a gain on acquisition of $11.9 million. Refer to Note 4, Acquisition, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

(Benefit) Provision for Income Taxes. Consolidated income tax benefit of $10.1 million for the three months ended April 30, 2020, or 56.1% of pre-tax loss, compared to $2.5 million of expense, or 30.8% of pre-tax income, for the three months ended April 30, 2019. Results for the three months ended April 30, 2020 were favorably impacted by $5.7 million of net discrete tax benefits primarily related to net operating loss carrybacks allowable under the CARES Act and the nontaxable gain on the acquisition of Spartan ER. Results for the three months ended April 30, 2019 were unfavorably impacted by $0.4 million of net discrete tax expenses related to stock-based compensation tax deductions.

Consolidated income tax benefit of $12.7 million for the six months ended April 30, 2020, or 42.5% of pre-tax loss, compared to $1.9 million, or 17.8% of pre-tax loss, for the six months ended April 30, 2019. Results for the six months ended April 30, 2020 were favorably impacted by $5.4 million of net discrete tax benefit primarily related to net operating loss carrybacks allowable under the CARES Act and the nontaxable gain on acquisition of Spartan ER. Results for the six months ended April 30, 2019 were unfavorably impacted by $0.8 million of net discrete expenses primarily related to share-based compensation tax deductions.

Net (Loss) Income. Consolidated net loss was $7.6 million for the three months ended April 30, 2020, a decrease of $13.2 million, or 235.7%, from consolidated net income of $5.6 million for the three months ended April 30, 2019. The decrease was primarily due to the decrease in operating income, the loss on the sale of the shuttle bus businesses, partially offset by the gain on acquisition of Spartan ER, lower interest expense and lower income tax expense.

Consolidated net loss was $16.7 million for the six months ended April 30, 2020, an increase of $7.7 million, or 85.6%, from $9.0 million for the six months ended April 30, 2019. The increase in loss was primarily due to the decrease in operating income and the loss on the sale of the shuttle bus businesses, partially offset by the gain on acquisition of Spartan ER.

Refer to Adjusted EBITDA and Adjusted Net Income section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q for a reconciliation of Net (Loss) Income to Adjusted EBITDA tables and related footnotes.

Fire & Emergency Segment

	Three Months Ended April 30,						Six Months Ended April 30,
($ in millions)	2020			2019			2020			2019
Net sales	$	289.3		$	247.1		$	495.8		$	451.2
Adjusted EBITDA		10.2			15.1			12.1			23.4
Adjusted EBITDA % of net sales		3.5	%		6.1	%		2.4	%		5.2	%

Fire & Emergency segment net sales were $289.3 million for the three months ended April 30, 2020, an increase of $42.2 million, or 17.1%, from $247.1 million for the three months ended April 30, 2019. The increase in net sales compared to the prior year period was primarily due to net sales of Spartan ER, which was acquired on February 1, 2020. Excluding the impact of Spartan ER, net sales decreased by $20.4 million, or 8.3% compared to the prior year period. The decrease in sales was largely attributable to the impacts from COVID-19 which caused higher absentee rates at our plants resulting in reduced throughput. Travel restrictions during the quarter impacted some customers’ ability to inspect and take delivery of units, partially offset by favorable pricing on fire trucks. Our fire truck plants in Pennsylvania and Louisiana and our ambulance plant in Florida experienced higher absentee rates than our other Fire & Emergency plants.

Fire & Emergency segment net sales were $495.8 million for the six months ended April 30, 2020, an increase of $44.6 million, or 9.9%, from $451.2 million for the six months ended April 30, 2019. The increase in net sales compared to the prior year period was primarily due to the net sales of Spartan ER, which was acquired on February 1, 2020. Excluding the impact of Spartan ER, Fire & Emergency net sales decreased by $18.0 million, or 4.0% compared to the prior year period. The decrease in sales was largely attributable to the impacts from COVID-19 which affected second quarter shipments, partially offset by higher pricing on fire trucks and increased volume at our largest fire plant.

Fire & Emergency segment Adjusted EBITDA was $10.2 million for the three months ended April 30, 2020, a decrease of $4.9 million, or 32.5%, from $15.1 million for the three months ended April 30, 2019. Spartan ER contributed $3.4 million of Adjusted EBITDA during the second quarter of fiscal year 2020. Excluding the impact of Spartan ER, Fire & Emergency Adjusted EBITDA decreased by $8.3 million, or 55.0% compared to the prior year period. Second quarter profitability in the Fire & Emergency segment was negatively impacted by volume of shipments of fire trucks and related under absorption of plant costs, partially offset by higher pricing on fire trucks and improved profitability at our largest Fire and two largest Ambulance businesses.

Fire & Emergency segment Adjusted EBITDA was $12.1 million for the six months ended April 30, 2020, a decrease of $11.3 million, or 48.3%, from $23.4 million for the six months ended April 30, 2019. Spartan ER contributed $3.4 million of Adjusted EBITDA during the second quarter of fiscal year 2020. Excluding the impact of Spartan ER, Fire & Emergency Adjusted EBITDA decreased by $14.7 million, or 62.8% compared to the prior year period. The decrease in Adjusted EBITDA compared to the prior year period was primarily due to a decrease in the volume of fire truck shipments and the related under absorption of plant costs, partially offset by higher pricing on fire trucks, an increase in volume of fire truck shipments and improved profitability at our largest Fire and two largest Ambulance businesses.

Commercial Segment

	Three Months Ended April 30,						Six Months Ended April 30,
($ in millions)	2020			2019			2020			2019
Net sales	$	143.2		$	170.0		$	301.3		$	310.6
Adjusted EBITDA		8.0			14.7			17.9			19.7
Adjusted EBITDA % of net sales		5.6	%		8.6	%		5.9	%		6.3	%

Commercial segment net sales were $143.2 million for the three months ended April 30, 2020, a decrease of $26.8 million, or 15.8%, from $170.0 million for the three months ended April 30, 2019. The decrease in net sales compared to the prior year period was primarily due to a decrease in volume associated with temporary plant closures primarily impacting our shuttle bus businesses and

reductions in demand for school buses resulting from the impacts of COVID-19, partially offset by an increase in volume of transit bus shipments, and improved pricing on transit buses associated with our larger municipal transit bus orders.

Commercial segment net sales were $301.3 million for the six months ended April 30, 2020, a decrease of $9.3 million, or 3.0%, from $310.6 million for the six months ended April 30, 2019. The decrease in net sales compared to the prior year period was primarily due to the decreases in volumes associated with the impacts of COVID-19 and decreased volumes of terminal trucks, street sweepers and commercial buses. The decreases were partially offset by an increase in volume of transit bus shipments, and improved pricing on transit buses associated with our larger municipal transit bus orders.

Commercial segment Adjusted EBITDA was $8.0 million for the three months ended April 30, 2020, a decrease of $6.7 million, or 45.6%, from $14.7 million for the three months ended April 30, 2019. The decrease in Adjusted EBITDA compared to the prior year period was primarily due to reduced volumes associated with the impacts of COVID-19 and the related under absorption at several manufacturing plants as well as the sale of the shuttle bus businesses, partially offset by increased sales of higher margin transit buses. Adjusted EBITDA results related to the shuttle bus businesses for the three months ended April 30, 2020 were not included in Commercial segment Adjusted EBITDA total due to being classified as held for sale as of April 30, 2020.

Commercial segment Adjusted EBITDA was $17.9 million for the six months ended April 30, 2020, a decrease of $1.8 million, or 9.1%, from $19.7 million for the six months ended April 30, 2019. The decrease in Adjusted EBITDA compared to the prior year period was primarily due to reduced volumes associated with the impacts of COVID-19 and the related under absorption in our manufacturing plants, a decrease in volume of terminal trucks, street sweepers and school buses, as well as the sale of the shuttle bus businesses, partially offset by increased sales of higher margin transit buses and operational improvements. Adjusted EBITDA results related to the shuttle bus businesses for the six months ended April 30, 2020 were not included in Commercial segment Adjusted EBITDA total due to being classified as held for sale as of April 30, 2020.

Recreation Segment

	Three Months Ended April 30,						Six Months Ended April 30,
($ in millions)	2020			2019			2020			2019
Net sales	$	114.0		$	199.7		$	280.9		$	375.9
Adjusted EBITDA		(1.1	)		17.3			5.9			26.5
Adjusted EBITDA % of net sales		-1.0	%		8.7	%		2.1	%		7.0	%

Recreation segment net sales were $114.0 million for the three months ended April 30, 2020, a decrease of $85.7 million, or 42.9%, from $199.7 million for the three months ended April 30, 2019. The decrease in net sales compared to the prior year period was primarily due to the temporary shutdown of all Recreation businesses during the COVID-19 Stay-At-Home orders, partially offset by an increase in shipments of Class B RV’s.

Recreation segment net sales were $280.9 million for the six months ended April 30, 2020, a decrease of $95.0 million, or 25.3%, from $375.9 million for the six months ended April 30, 2019. The decrease in net sales compared to the prior year period was primarily due to a decrease in volumes related to COVID-19 Stay-At-Home orders during the second quarter of fiscal year 2020.

Recreation segment Adjusted EBITDA was a loss of $1.1 million for the three months ended April 30, 2020, a decrease of $18.4 million, or 106.4%, from $17.3 million for the three months ended April 30, 2019. The reduction in profitability was primarily due to lower shipments across most product categories due to the temporary shutdowns of all Recreation manufacturing plants during the COVID-19 Stay-At-Home orders, the related under-absorption at those manufacturing facilities and medical insurance costs for laid off and furloughed employees.

Recreation segment Adjusted EBITDA was $5.9 million for the six months ended April 30, 2020, a decrease of $20.6 million, or 77.7%, from $26.5 million for the six months ended April 30, 2019. The decrease in Adjusted EBITDA compared to the prior year period was primarily due to lower shipments across most product categories due to the temporary shutdowns of all Recreation businesses during the COVID-19 Stay-At-Home orders.

Backlog

Backlog represents firm orders received from dealers or directly from end customers. Backlog does not include purchase options or verbal orders. The following table presents a summary of our backlog by segment:


($ in millions)	April 30, 2020		January 31, 2020		April 30, 2019
Fire & Emergency	$	1,111.7	$	807.3	$	786.5
Commercial		413.2		455.6		435.9
Recreation		122.9		158.3		169.0
Total Backlog	$	1,647.8	$	1,421.2	$	1,391.4

Each of our three segments has a backlog of new vehicle orders that generally extends out from two to twelve months in duration.

Orders from our dealers and end customers are evidenced by a contract, firm purchase order or reserved production slot for delivery of one or many vehicles. These orders are reported in our backlog at the aggregate selling prices, net of discounts or allowances.

As of April 30, 2020, our backlog was $1,647.8 million compared to $1,421.2 million as of January 31, 2020, and $1,391.4 million as of April 30, 2019, respectively. The increase in Fire & Emergency backlog was primarily due to the acquisition of Spartan ER. Excluding the impacts of Spartan ER, the increase in Fire & Emergency backlog was due to strong Ambulance order intake over the trailing twelve months. The decrease in Commercial backlog sequentially and year over year was primarily due to a decrease in terminal truck and shuttle bus orders, partially offset by an increase in orders for municipal transit bus units. The decrease in Recreation backlog sequentially and year over year was primarily the result of lower demand for non-motorized units, partially offset by an increase in orders for Class A motorhomes. Recreation backlog at April 30, 2020 was also negatively impacted by the closures of the Company’s RV dealers and a lack of incoming orders due to the COVID-19 Stay-At-Home orders.

Liquidity and Capital Resources

General

Our primary requirements for liquidity and capital are working capital, the improvement and expansion of existing manufacturing facilities, debt service payments and general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities, cash and cash equivalents and borrowings under our term loan and ABL credit facility.

We believe that our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to continue to incur as a public company. However, we cannot assure you that cash provided by operating activities and borrowings under the current revolving credit facility will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, and if availability under the current revolving credit facility is not sufficient due to the size of our borrowing base or other external factors, we may have to obtain additional financing. If additional capital is obtained by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain financial and other covenants that may significantly restrict our operations or may involve higher overall interest rates. We cannot assure you that we will be able to obtain refinancing or additional financing on favorable terms or at all.

Cash Flow

The following table shows summary cash flows for the six months ended April 30, 2020 and April 30, 2019:

	Six Months Ended April 30,
($ in millions)	2020			2019
Net cash provided by (used in) operating activities	$	22.0		$	(39.2	)
Net cash (used in) provided by investing activities		(58.5	)		4.7
Net cash provided by financing activities		54.7			29.1
Net increase (decrease) in cash and cash equivalents	$	18.2		$	(5.4	)

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities for the six months ended April 30, 2020 was $22.0 million, compared to net cash used in operating activities of $39.2 million for the six months ended April 30, 2019. The generation of positive cash from operating activities for the six months ended April 30, 2020, compared to the use of cash in the prior year period was related to improved net working capital efficiency and cash preservation measures due to the impact of the COVID-19 pandemic on the Company’s businesses and liquidity, partially offset by a decrease in net income.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities for the six months ended April 30, 2020 was $58.5 million, compared to net cash provided by investing activities of $4.7 million for the six months ended April 30, 2019. The increase in net cash used in investing activities for the six months ended April 30, 2020, compared to the prior year period, was due to the acquisition of Spartan ER on February 1, 2020.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the six months ended April 30, 2020 was $54.7 million, which primarily consisted of net borrowings to fund the acquisition of Spartan ER and to pay quarterly dividends. Net cash provided by financing activities for the six months ended April 30, 2019 was $29.1 million, which primarily consisted of net borrowings to fund working capital requirements, to repurchase the Company’s common stock and to pay quarterly dividends.

Dividends

Subject to legally available funds and the discretion of our board of directors, we may or may not pay a quarterly cash dividend in the future on our common stock. During the six months ended April 30, 2020, the Company paid cash dividends of $6.3 million. Our ability to pay dividends is limited under our Term Loan agreement, as amended on April 29, 2020. In order to pay dividends, the Company must have a leverage ratio, including the impact of the dividend, not to exceed 3.5 to 1.0. As a result, the Company announced the suspension of its quarterly dividend beginning the second quarter of fiscal year 2020 and will reassess at a future date.

Stock Repurchase Program

On March 20, 2018, the Company’s Board of Directors authorized up to $50.0 million of repurchases of the Company’s issued and outstanding common stock with an expiration date of March 19, 2020. On September 5, 2018, the Company’s Board of Directors authorized an additional $50.0 million of repurchases of the Company’s issued and outstanding common stock with an expiration date of September 4, 2020. The Company’s share repurchase program was executed from time to time through open market or through private transactions. Shares purchased under the share repurchase program were retired and returned to authorized and unissued status. During fiscal year 2018, the Company repurchased 3,233,352 shares under this repurchase program at a total cost of $53.3 million at an average price per share of $16.47. During fiscal year 2019, the Company repurchased 717,597 shares under this repurchase program at a total cost of $8.3 million at an average price per share of $11.62. There were no repurchases under this program during the three and six months ended April 30, 2020. The Company is no longer permitted to repurchase stock under the provisions of our Term Loan, as amended on April 29, 2020, from the date of the amendment through the maturity of the Term Loan Agreement.

Term Loan

On April 25, 2017, we entered into a $75.0 million term loan (“Term Loan” or “Term Loan Agreement”), as Borrower, certain subsidiaries of the Company, as Guarantor Subsidiaries. Principal may be prepaid at any time during the term of the Term Loan without penalty. The Company incurred $2.0 million in debt issuance costs related to the Term Loan. The Term Loan Agreement expires on April 25, 2022.

On July 18, 2018, the Company exercised its $50.0 million incremental commitment option under the Term Loan Agreement, which increased total borrowing under the facility from $75.0 million to $125.0 million. The Company incurred an additional $0.6 million of debt issuance costs related to the incremental commitment option under the Term Loan. Proceeds from the increase in the Term Loan were used to repay a portion of the borrowings under the April 2017 ABL Facility.

On March 29, 2019, the Company exercised a $50.0 million incremental commitment option under the Term Loan Agreement, which increased total borrowing under the facility from $125.0 million to $175.0 million. The Company incurred an additional $0.8 million of debt issuance costs related to the incremental commitment option under the Term Loan. Proceeds from the incremental commitment were used to repay a portion of the outstanding borrowings under the April 2017 ABL Facility.

On October 18, 2019, the Company amended the term loan agreement to raise the maximum net leverage ratio to 4.00 to 1.00 from 3.50 to 1.00. The ratio will decline by 25 basis points in the third quarter of each fiscal year after the amendment date, reaching a

final maximum leverage ratio of 3.50 to 1.00 on July 31, 2021. Additionally, the Company received a waiver related to the excess cash flow calculation payment for fiscal year 2019. The Company incurred $0.2 million of debt issuance costs related to the amendment raising the maximum leverage ratio and the waiver for the excess cash flow calculation payment under the Term Loan Agreement.

On April 29, 2020, the Company amended the term loan agreement to eliminate the maximum leverage ratio covenant and replace it with a fixed charge coverage ratio test with a minimum ratio of 1.25 to 1.00. The fixed charge coverage ratio covenant will remain in effect through of the fourth quarter of fiscal year 2020. The maximum leverage ratio covenant will be reinstated at 5.25 to 1.00 starting in the first quarter of fiscal year 2021, and decline by 25 basis points each subsequent quarter, to a final level of 4.25 to 1.00 in first quarter of fiscal 2022. The applicable interest rate margins increased by 75 basis points corresponding with the amendment. The Company incurred $0.2 million of debt issuance costs related to the amendment.

The Company may voluntarily prepay principal, in whole or in part, at any time, without penalty. Commencing with fiscal year 2018 and payable in fiscal year 2019, the Company is obligated to prepay certain minimum amounts based on the Company’s excess cash flow, as defined in the Term Loan Agreement. The Term Loan is also subject to mandatory prepayment if the Company or any of its restricted subsidiaries receives proceeds from certain events, including certain asset sales and casualty events, and the issuance of certain debt and equity interests.

The Term Loan Agreement contains certain financial covenants. The Company was in compliance with all financial covenants under the Term Loan as of April 30, 2020.

April 2017 ABL Facility

On April 25, 2017, we entered into a new $350.0 million revolving credit and guaranty agreement (the “April 2017 ABL Facility” or “ABL Agreement”) with a syndicate of lenders. The April 2017 ABL Facility provides for revolving loans and letters of credit in an aggregate amount of up to $350.0 million. The total April 2017 ABL Facility is subject to a $30.0 million sublimit for swing line loans and a $35.0 million sublimit for letters of credit, along with certain borrowing base and other customary restrictions as defined in the ABL Agreement. The April 2017 ABL Facility expires on April 25, 2022.

On December 22, 2017, the Company exercised its $100.0 million incremental commitment option under the April 2017 ABL Facility to fund the Lance Camper acquisition, which increased the facility to $450.0 million.

Principal may be repaid at any time during the term of the ABL Facility without penalty.

The April 2017 ABL Facility contains certain financial covenants. We were in compliance with all financial covenants under the ABL Facility as of April 30, 2020. As of April 30, 2020, our availability under the April 2017 ABL Facility was $214.6 million.

Refer to Note 9, Long-Term Debt, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

Adjusted EBITDA and Adjusted Net Income

In considering the financial performance of the business, management analyzes the primary financial performance measures of Adjusted EBITDA and Adjusted Net Income. Adjusted EBITDA is defined as net income for the relevant period before depreciation and amortization, interest expense and provision for income taxes, as adjusted for certain items described below that we believe are not indicative of our ongoing operating performance. Adjusted Net Income is defined as net income, as adjusted for certain items described below that we believe are not indicative of our ongoing operating performance.

We believe Adjusted EBITDA and Adjusted Net Income are useful to investors because these performance measures are used by our management and the Company’s Board of Directors for measuring and reporting the Company’s financial performance and as a measurement in incentive compensation for management. These measures exclude the impact of certain items which we believe have less bearing on our core operating performance because they are items that are not needed or available to the Company’s managers in the daily activities of their businesses. We believe that the core operations of our business are those which can be affected

by our management in a particular period through their resource allocation decisions that affect the underlying performance of our operations conducted during that period. We also believe that decisions utilizing Adjusted EBITDA and Adjusted Net Income allow for a more meaningful comparison of operating fundamentals between companies within our markets by eliminating the impact of capital structure and taxation differences between the companies.

To determine Adjusted EBITDA, we adjust Net Income for the following items: non-cash depreciation and amortization, interest expense, income taxes and other items as described below. Stock-based compensation expense and sponsor expense reimbursement is excluded from both Adjusted Net Income and Adjusted EBITDA because it is an expense, which cannot be impacted by our business managers. Stock-based compensation expense also reflects a cost which may obscure trends in our underlying vehicle businesses for a given period, due to the timing and nature of the equity awards. We also adjust for exceptional items, which are determined to be those that in management’s judgment are not indicative of our ongoing operating performance and need to be disclosed by virtue of their size, nature or incidence, and include non-cash items and items settled in cash. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

Adjusted EBITDA and Adjusted Net Income have limitations as analytical tools. These are not presentations made in accordance with GAAP, are not measures of financial condition and should not be considered as an alternative to net income or net loss for the period determined in accordance with GAAP. The most directly comparable GAAP measure to Adjusted EBITDA and Adjusted Net Income is Net Income for the relevant period. Adjusted EBITDA and Adjusted Net Income are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider this performance measure in isolation from, or as a substitute analysis for, our results of operations as determined in accordance with GAAP. Moreover, such measures do not reflect:

•

our cash expenditures, or future requirements for capital expenditures or contractual commitments;

•

changes in, or cash requirements for, our working capital needs;

•

the cash requirements necessary to service interest or principal payments on our debt;

•

the cash requirements to pay our taxes.

The following table reconciles Net (Loss) Income to Adjusted EBITDA for the periods presented:

	Three Months Ended April 30,					Six Months Ended April 30,
($ in millions)	2020			2019		2020			2019
Net (loss) income	$	(7.6	)	$	5.6	$	(16.7	)	$	(9.0	)
Depreciation and amortization		10.9			11.6		21.7			23.8
Interest expense, net		7.3			8.0		14.6			15.8
(Benefit) provision for income taxes		(10.1	)		2.5		(12.7	)		(1.9	)
EBITDA		0.5			27.7		6.9			28.7
Transaction expenses(a)		0.9			—		2.0			0.2
Sponsor expense reimbursement(b)		—			0.1		0.1			0.6
Restructuring costs(c)		6.1			1.8		6.7			2.9
Stock-based compensation expense(d)		2.9			3.4		5.5			4.8
Legal matters(e)		1.4			2.4		1.5			4.5
Loss on sale of business (f)		8.8			—		8.8			—
Gain on acquisition of business (g)		(11.9	)		—		(11.9	)		—
Impairment charges(h)		—			0.1		—			2.8
(Earnings) losses attributable to assets held for sale(i)		(1.1	)		—		(1.3	)		1.7
Deferred purchase price payment(j)		—			0.6		0.1			2.2
Adjusted EBITDA	$	7.6		$	36.1	$	18.4		$	48.4

The following table reconciles Net (Loss) Income to Adjusted Net (Loss) Income for the periods presented:

	Three Months Ended April 30,						Six Months Ended April 30,
($ in millions)	2020			2019			2020			2019
Net (loss) income	$	(7.6	)	$	5.6		$	(16.7	)	$	(9.0	)
Amortization of intangible assets		3.4			4.6			7.4			9.3
Transaction expenses(a)		0.9			—			2.0			0.2
Sponsor expense reimbursement(b)		—			0.1			0.1			0.6
Restructuring costs(c)		6.1			1.8			6.7			2.9
Stock-based compensation expense(d)		2.9			3.4			5.5			4.8
Legal matters(e)		1.4			2.4			1.5			4.5
Loss on sale of business (f)		8.8			—			8.8			—
Gain on acquisition of business (g)		(11.9	)		—			(11.9	)		—
Impairment charges(h)		—			0.1			—			2.8
(Earnings) losses attributable to assets held for sale(i)		(1.1	)		—			(1.3	)		1.7
Deferred purchase price payment(j)		—			0.6			0.1			2.2
Impact of tax rate change(k)		(3.5	)		—			(3.5	)		—
Income tax effect of adjustments(l)		(5.2	)		(3.4	)		(7.5	)		(7.7	)
Adjusted Net Loss (Income)	$	(5.8	)	$	15.2		$	(8.8	)	$	12.3

(a)	Reflects costs incurred in connection with business acquisitions and capital market transactions. These expenses consist primarily of legal, accounting and due diligence expenses.

(b)	Reflects the reimbursement of expenses to the Company’s primary equity holder.

(c)

Restructuring expenses in the current fiscal year consisted of personnel costs, including severance, vacation and other employee benefit payments associated with leadership changes and headcount reductions in Corporate and the Fire division and lease termination costs related to the closure of a Spartan ER facility.

Restructuring expenses in the prior year period consisted of personnel costs, including severance, vacation and other employee benefit payments as well as facility closure and lease termination costs.

(d)	Reflects expenses associated with the redemption of performance-based stock options and vesting of restricted and performance stock units.

(e)	Reflects legal fees and costs incurred to litigate and settle legal claims against us which are outside the normal course of business. Costs include payments: (i) to settle certain claims arising from a putative class action in the state of California, (ii) for

fees and costs to litigate and settle non-ordinary course product, intellectual property and employment disputes and (iii) for fees and costs to litigate the putative securities class actions and derivative action pending against us and certain of our directors and officers.

(f)	Reflects losses related to the sale of our shuttle bus businesses, which was completed on May 8, 2020. Refer to Note 8, Divestiture Activities, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

(g)	Reflects gain on acquisition of Spartan ER, which was completed on February 1, 2020. Refer to Note 4, Acquisition, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

(h)	Reflects additional non-cash impairment charges related to the sale of Revability. Refer to Note 8, Divestiture Activities, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

(i)	Adjusted EBITDA attributable to businesses that are or were classified as held for sale, which represents shuttle bus businesses and REV Coach during fiscal year 2020 and Revability during fiscal year 2019.

(j)	Reflects the expense associated with the deferred purchase price payments to sellers of Lance. The Company paid $5.0 million during the first quarter of 2019 and $5.0 million during the second quarter of fiscal year 2020 to fully settle the deferred liability.

(k)	Reflects the provisional impact of net operating loss carrybacks as a result of the CARES Act. Refer to Note 13, Income Taxes, of the Notes to Condensed Unaudited Consolidated Financial Statements for further details.

(l)	Income tax effect of adjustments using a 26.5% effective income tax rate for the three and six months ended April 30, 2020 and April 30, 2019, except for certain transaction expenses, impact of tax rate change and losses attributable to assets held for sale.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into or disclosed in our consolidated financial statements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures and capital resources. In addition, we do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates, assumptions and judgments that affect amounts reported in the consolidated financial statements and accompanying notes. The Company's disclosures of critical accounting policies are reported in its 2019 Annual Report on Form 10-K for the fiscal year ended October 31, 2019. In the first quarter of fiscal year 2020, the Company adopted ASU 2016-02 relating to leases, as discussed in Note 1 and Note 3 of the Notes to Condensed Unaudited Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 1 of the Notes to Condensed Unaudited Consolidated Financial Statements for a discussion of the impact on our financial statements of new accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our exposure to interest rate risk, foreign exchange risk and commodity price risk from the information provided in the Company’s Annual Report on Form 10-K filed on December 18, 2019.

Item 4. Controls and Procedures.

The Company maintains “disclosure controls and procedures”, as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2020.

During the quarter ended April 30, 2020, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For a description of our legal proceedings, see Note 14, Commitments and Contingencies, of the Notes to Condensed Unaudited Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Our business faces many risks and uncertainties that we cannot control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks set forth below and in “Item 1A. Risk Factors,” in 2019 Annual Report on Form 10-K for the fiscal year ended October 31, 2019, together with the other information contained in our other filings with the SEC, in connection with evaluating the Company and our business. Such risks may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us.

The COVID-19 pandemic has impacted, and could in the future materially and adversely affect, our business.

The novel strain of the coronavirus identified in China in late 2019 (COVID-19) and now affecting the global community has impacted and is expected to continue to impact our operations, and the full nature and extent of the impact is highly uncertain and may be beyond our control. Among other things, uncertainties relating to COVID-19 include the duration of the outbreak, the severity of the virus and the actions, or perception of actions, that may be taken to contain or treat its impact, by governments and others, including declarations of states of emergency, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations.

Furthermore, as a result of COVID-19 and the measures implemented that are designed to contain its spread, our customers have been and could continue to be negatively impacted, resulting in a disruption in demand which could negatively impact our sales and have a material adverse effect on our business, results of operations and financial condition. Similarly, as a result of COVID-19 and measures implemented that are designed to contain its spread, our suppliers may not have the materials, capacity, or capability to enable the manufacture of our products according to our schedule and specifications. For example, in early 2020, we experienced delays in the supply of certain components for our vehicles. Because of impacts to suppliers’ operations, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our results of operations.

The COVID-19 pandemic has also disrupted our internal operations, including by heightening the risk that a significant portion of our workforce will suffer illness or otherwise not be permitted or be unable to work and exposing us to cyber and other risks associated with a large number of our employees working remotely. Beginning the week of March 23, 2020, we suspended normal production activities within the Recreation segment at all four of our RV production facilities in Indiana and California and furloughed most salaried employees within the Recreation segment. While operations at these facilities generally restarted in May, we cannot predict whether our facilities will experience additional disruptions or more significant or frequent disruptions in the future.

In addition, the COVID-19 pandemic has led to disruption and volatility in the global capital markets, which could impact our capital resources and liquidity in the future. To improve our liquidity position, we obtained financial covenant relief under an

amendment to our Term Loan Agreement on April 29, 2020. However, there can be no assurances that we will be able to obtain further amendments that we may require to our ABL Facility or Term Loan Agreement, or that we will be able to obtain any financing required to support our liquidity position on commercially reasonable terms or at all.

The impact of the COVID-19 pandemic continues to evolve and its duration and ultimate disruption to our customers and to our supply chain, and related financial impact to us, cannot be estimated at this time. Should such disruption continue for an extended period of time, the impact could have a more severe adverse effect on our business, results of operations and financial condition. Additionally, weaker economic conditions generally could result in impairment in value of our tangible or intangible assets, or our ability to raise additional capital, if needed.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Although we continue to examine the impacts the CARES Act may have on our business, results of operations, financial condition and liquidity, and our financial statements include the benefits we have been able to assess at this time, future benefits rely to some extent on future performance of the company, and it is currently unclear how we will fully benefit from the CARES Act.

The COVID-19 pandemic could cause downturns in the specialty vehicles industry, which could adversely affect our business.

Concerns regarding and measures implemented in response to pandemics of infectious disease have and could further cause changes in global travel patterns, negatively influencing demand for new RVs and other vehicles, resulting in cancellations or deferrals of orders and/or decreases in new deliveries. Moreover, because demand for new RVs and terminal trucks is tied closely to overall economic strength, economic uncertainty and/or increased unemployment that results from the COVID-19 pandemic or measures undertaken in response could lead to reduced demand for our products, which could adversely affect our financial position, results of operations and cash flows. Further, federal, state and municipal governments have incurred unexpected costs and spending related to the COVID-19 pandemic, and it is unclear how that may impact government budgets and future spending on fire trucks, ambulances, transit buses and other vehicles for which government funding is used to purchase the Company’s products.

A disruption, termination or alteration of the supply of vehicle chassis or other critical components from third-party suppliers could materially adversely affect the sales of our products.

Our sales and our manufacturing processes depend on the supply of manufactured vehicle chassis and other critical components such as engines, transmissions and axles from major auto manufacturers and other original equipment manufacturers (“OEMs”), including Allison Transmission, Chrysler, Cummins, Ford, Freightliner, General Motors, Navistar and Volvo, among others. For the standardized, mass-produced chassis models, we convert the chassis for our customers under approved “authorized converter” agreements with the OEMs. We have tailored our products and processes to the specifications of these OEM agreements and have built customer expectations and planning around these designs. We are therefore reliant on a consistent supply of chassis and the maintenance of our status as “approved converters” in order to maintain our sales. If these manufacturers experience production delays, we may receive a lower allocation of chassis than anticipated, or if the quality or design of their chassis changes, or if these manufacturers implement recalls, we could incur significant costs or disruptions to our business, which could have a material adverse effect on our net sales, financial condition, profitability and/or cash flows. At various times, we may carry increased inventory to protect against these concerns, which may negatively impact our results of operations.

We purchase a significant number of components from domestic suppliers. To the extent tariffs increase the price of imported products, the industry may move more component orders to domestic suppliers, which could strain the capacity of our suppliers, putting the normal, uninterrupted supply of components at risk. In addition, our suppliers may experience operational delays or disruptions, including as a result of the outbreak of epidemics or other public health crises, which could in turn affect our manufacturing processes and sales. For example, we have experienced delays in the supply of certain components for our vehicles as a result of the ongoing outbreak of COVID-19 and the restrictive measures put in place in response to the outbreak. Should these delays continue, or should our supply of such components be interrupted, our business and results of operations may be adversely affected. Additionally, certain important components that we use in our vehicles, such as engines and transmissions, are produced by a limited number of qualified suppliers or we may have a single supplier sourcing a specific component, and any disruption in their supply of such components to us would have a negative impact on our business.

Volatility in the financial markets generally, and in the truck and automotive sectors in particular, could impact the financial viability of certain of our key third-party suppliers, or could cause them to exit certain business lines, or change the terms on which they are willing to provide products. For example, during the 2008-2010 automotive industry crisis, many vehicle manufacturers, including Ford and General Motors, idled factories and reduced their output of vehicle chassis. During 2018 and 2019, many of our vehicle manufacturers encountered production issues and delivery delays due to factors which included a vendor factory fire, new

plant location inefficiencies, unplanned work stoppages and indirect impacts from the implementation of tariffs. A recurrence of either of these events or another similar development could lead to difficulties in meeting our customers’ demands and reduce our overall sales volume. Further, any changes in quality or design, capacity limitations, shortages of raw materials or other problems could result in shortages or delays in the supply of vehicle chassis or components to us. Our business, operating results and financial condition could suffer if our suppliers reduce output or introduce new chassis models that are unpopular with our customers or are incompatible with our current product designs or production process.

Our international operations are subject to exchange rate fluctuations and other risks relating to doing business internationally.

Although the amount of our sales and costs denominated in foreign currencies is not currently significant, we may increase our international operations in the future, which would increase our exposure to risks of doing business internationally, including fluctuations in foreign currencies, changes in the economic strength of the countries in which we do business, difficulties in enforcing contractual obligations and intellectual property rights, burdens of complying with a wide variety of international and U.S. export and import laws and social, political and economic instability and the widespread outbreak of infectious diseases, including the ongoing coronavirus outbreak in China and other countries. In particular, changes in currency values could also impact the level of foreign competition in our domestic market as international products become more or less costly due to the relationship of the U.S. Dollar to other currencies. Currency exchange rates have fluctuated significantly over the past few years and may continue to do so in the future. Such fluctuations could have a material effect on our results of operations, balance sheets and cash flows and impact the comparability of our results between financial periods.

Federal and local government spending and priorities may change in a manner that materially and adversely affects our future sales and limits our growth prospects.

Our business depends upon continued federal and local government expenditures on certain of our Commercial and Fire & Emergency products. These expenditures have not remained constant over time. Current government spending levels on programs that we support may not be sustainable as a result of changes in government leadership, policies or priorities. A significant portion of our sales are subject to risks specific to doing business with the U.S. government and municipalities, including, but not limited to:

•

budgetary constraints or fluctuations affecting government spending generally, or specific departments or agencies in particular, and changes in fiscal policies or a reduction of available funding;

•

changes in government programs or requirements;

•

realignment of funds to government priorities that we do not serve;

•

government shutdowns (such as those which occurred in 1995-1996, in 2013, in late 2018 through early 2019, and related to the COVID-19 pandemic) and other potential delays in government appropriations processes;

•

delays in the payment of our invoices by government authorities;

•

adoption of new laws or regulations and our ability to meet specified performance thresholds; and

•

general economic conditions.

These or other factors could cause government agencies and departments to delay or reduce their purchases or deliveries under contracts, exercise their right to terminate contracts, or not exercise options to renew contracts, any of which could cause us to lose sales. A significant decline in overall government spending or a shift in expenditures away from agencies or programs that we support could cause a material decline in our sales and harm our financial results.

Cancellations, reductions or delays in customer orders, customer breaches of purchase agreements, or reduction in expected backlog may adversely affect our results of operations.

We provide products to our customers for which we are customarily not paid in advance. We rely on the creditworthiness of our customers to collect on our receivables from them in a timely manner after we have billed for products previously provided. While we generally provide products pursuant to a written contract which determines the terms and conditions of payment to us by our customers, occasionally customers may dispute an invoice and delay, contest or not pay our receivable. Further, in connection with dealers’ wholesale floor-plan vehicle financing programs, we enter into repurchase agreements with certain lending institutions, customary in the industries in which we operate, which may require us to repurchase previously sold vehicles. Although our exposure under these agreements is limited by the expected resale value of the inventory we may repurchase, we may receive less than anticipated on such resale and would collect payment on such resale later than originally expected. Our failure to collect our receivables or to resell and collect on repurchased vehicles on a timely basis could adversely affect our cash flows and results of

operations and, in certain cases, could cause us to fail to comply with the financial covenants under our April 2017 ABL Facility and Term Loan Agreement or other outstanding debt.

We typically have backlog due to the nature of our production and sales process, and our financial results are affected if any backlog is deferred or canceled. Backlog represents the amount of sales that we expect to derive from signed contracts, including purchase orders and oral contracts that have been subsequently memorialized in writing. When a binding sale contract has been signed with a customer, the purchase price of the vehicle is included in backlog until it is completed, shipped and the revenue is recognized. When we sign a contract giving a potential purchaser an option to purchase a vehicle which only becomes binding on a non-refundable payment or a subsequent firm purchase order, we do not include the purchase price of the vehicle in backlog until the non-refundable payment has been made or the subsequent purchase order is formalized and the contract is a binding purchase contract. A customer may default on a purchase contract that has become binding, and we may not be able to convert sales contract backlog into sales. As a result, our estimates of backlog for some of our contracts could be affected by variables beyond our control and may not be entirely realized, if at all. In addition, given the nature of our customers and our markets, there is a risk that some amount of our backlog may not be fully realized in the future. Failure to realize sales from our existing or future backlog would negatively impact our financial results.

From time to time, we enter into large, multi-year contracts with federal and local government bodies. Due to the size of the contracts, there are often stringent approval processes that must be completed before the contract is finalized. As a result, until these contracts are finalized, there can be no assurance regarding the timing of our commencing work on any such contract, or the ultimate revenue that we may recognize under any such contract. At any time, a portion of our backlog can include orders placed by federal, state and municipal government bodies. There is no certainty that these customers will have adequate tax revenues or will allocate available funds to the purchase of our vehicles in the future. In addition, future governmental tax revenues may be negatively impacted as a result of the COVID-19 pandemic and therefore may result in lower future vehicle order rates than expected or experienced in prior periods resulting in lower backlogs.

In addition, as a result of firm purchase orders from our customers, we enter into agreements to produce and sell vehicles at a specified price with certain adjustments for changes and options based upon our estimation of the cost to produce and the timing of delivery. Due to the nature of these product cost estimates and the fluctuations in input costs and availability, we may underestimate the costs of production and therefore overestimate the profitability in our backlog. As a result, the actual profitability on those sales in the future may differ materially from our initial estimates when we recorded the firm purchase order in backlog.

Item 5. Other Information

On June 3, 2020, the compensation committee of the Company’s Board of Directors (the “Compensation Committee”) approved measures relating to the compensation of Ian Walsh, the Company’s Chief Operating Officer, and Christopher Daniels, the Company’s Chief Human Resources Officer.

For Mr. Walsh, the Compensation Committee approved (i) an increase in Mr. Walsh’s incentive target under the Company’s Management Incentive Plan (the “MIP”) from 80% to 100% of Mr. Walsh’s base salary, which was recently increased from $500,000 to $550,000, (ii) a cash retention grant in the amount of $200,000 that is payable on December 31, 2020 based on Mr. Walsh’s continued employment on such date and (iii) a grant of 80,000 performance stock units (“PSUs”).

Subject to continued employment through the applicable vesting date, the PSUs will vest as follows: (i) 20,000 of the PSUs are eligible to vest based on the achievement of Spartan Synergies as validated by the Company’s Chief Financial Officer as of June 30, 2021 and (ii) up to 60,000 of the PSUs are eligible to vest based on the Company’s Fire Business trailing 4-quarter EBITDA margin achievement. To the extent that the specified EBITDA margin targets are not achieved by December 31, 2021, any PSUs that have not yet vested will be forfeited. In the event that Mr. Walsh (i) is terminated due to death or disability or (ii) is terminated without “cause” or resigns for “good reason” within twelve (12) months following an applicable change in control of the Company, any outstanding unvested PSUs will vest at target level.

For Mr. Daniels, the Compensation Committee approved (i) an increase in Mr. Daniels’ incentive target under the MIP from 60% to 70% of Mr. Daniels’ base salary, which was recently increased from $358,800 to $400,000 and (ii) a minimum payout under the MIP of $250,000 in respect of fiscal year 2020.

The foregoing description of the PSU agreement with Mr. Walsh contained herein does not purport to be complete and is qualified in its entirety by the complete text of the agreement.

Item 6. Exhibits.

Exhibit Number		Description

3.1		Second Amended and Restated Bylaws of REV Group, Inc., effective March 4, 2020.
10.1		Fifth Amendment to Term Loan and Guaranty Agreement, dated as of April 29, 2020, by and among the Company, as Borrower, certain subsidiaries of the Company, as Guarantor Subsidiaries, Ally Bank, as Administrative Agent and Collateral Agent, and certain other lenders and agents party thereto.
10.2*		Change in Control Severance Agreement between REV Group, Inc. and Rodney Rushing dated June 3, 2020.
10.3*		Form of Performance Stock Unit Award Agreement under REV Group, Inc. 2016 Omnibus Incentive Plan.
31.1*		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REV GROUP, INC.

Date: June 8, 2020	By:	/s/ Rod Rushing
		Rod Rushing
		Chief Executive Officer

Date: June 8, 2020	By:	/s/ Dean J. Nolden
		Dean J. Nolden
		Chief Financial Officer

Exhibit 10.2

REV GROUP, INC.

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT, made and entered into as of the 3^rd day of June, 2020, by and between REV GROUP, INC., a Delaware corporation (“Company”), and Rodney N. Rushing (“Executive”).

WITNESSETH:

WHEREAS, the Executive is employed by the Company as a key executive officer, and the Executive’s services in such capacities are critical to the continued successful conduct of the business of the Company;

WHEREAS, the Company recognizes that circumstances in which a change in control of the Company occurs, through acquisition or otherwise, are highly disruptive and will cause uncertainty about the Executive’s future employment with the Company without regard to the Executive’s competence or past contributions and that such uncertainty may materially adversely affect the Company;

WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively, with reference only to the best interests of the Company and its stockholders and without undue regard for the Executive’s personal interests; and

WHEREAS, the Executive will be in a better position to consider the Company’s and its stockholders’ best interests if the Executive is afforded reasonable security, in the form of severance as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows:

1.Definitions.

(a)Accounting Firm. For purposes of this Agreement “Accounting Firm” shall mean a nationally recognized certified public accounting firm or other professional organization that is a certified public accounting firm recognized as an expert in determinations and calculations for purposes of Section 280G of the Code that is selected by the Company prior to a Change of Control for purposes of making the applicable determinations hereunder and is reasonably acceptable to the Executive, which firm shall not, without the Executive’s consent, be a firm serving as accountant or auditor for the individual, entity or group effecting the Change of Control.

(b)Act. For purposes of this Agreement, the term “Act” means the Securities Exchange Act of 1934, as amended.

(c)Affiliate and Associate. For purposes of this Agreement, the terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations of the Act.

(d)Beneficial Owner. For purposes of this Agreement, a Person shall be deemed to be the “Beneficial Owner” of any securities:

(i)which such Person or any of such Person’s Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase;

(ii)which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d‑3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule 13D under the Act (or any comparable or successor report); or

(iii)which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in Subsection 1(d)(ii) above) or disposing of any voting securities of the Company.

(e)Cause. “Cause” for termination by the Company of the Executive’s employment after a Change in Control of the Company (or prior to a Change in Control of the Company pursuant to Section 2) shall, for purposes of this Agreement, be limited to any of the following: (i) the engaging by the Executive in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal) which substantially impairs the Executive’s ability to perform his duties or responsibilities; and (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive’s duties or responsibilities (unless significantly changed without the Executive’s consent).

(f)Change in Control of the Company. For purposes of this Agreement, a “Change in Control of the Company” shall be deemed to have occurred if:

i.any Person (other than the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing one-half (50%) or more of the combined voting power of the Company’s then outstanding voting securities;

ii.the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board of Directors of the Company or nomination for election by the Company’s stockholders was approved or recommended by a vote of a majority of the directors then still in office who either were directors as of the date of this Agreement or whose appointment, election or nomination for election was previously so approved or recommended;

iii.there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation immediately following which the individuals who comprise the Board of Directors of the Company immediately prior thereto constitute at least a majority of the Board of Directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the ultimate parent thereof; or

iv.there is a complete liquidation of the Company or there is sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, immediately following which the individuals who comprise the Board of Directors of the Company immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed of or, if such entity is a subsidiary, the ultimate parent thereof.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the holders of the Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

(g)Code. For purposes of this Agreement, the term “Code” means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof.

(h)Covered Termination. For purposes of this Agreement, the term “Covered Termination” means any termination of the Executive’s employment where the Termination Date

is any date on or after a Change in Control of the Company (except as provided in Section 2) and prior to the end of the Employment Period.

(i)Disability. For purposes of this Agreement, “Disability” shall mean the Executive’s inability to perform the essential functions of Executive’s job, with or without reasonable accommodation, for a period of one hundred and twenty (120) consecutive days, or one hundred and eighty (180) days in the aggregate during any three hundred sixty-five (365) day period.

(j)Employment Period. For purposes of this Agreement, the term “Employment Period” means the period commencing on the date of a Change in Control of the Company and ending at 11:59 p.m. Milwaukee time on the second anniversary of such date.

(k)Good Reason. For purposes of this Agreement, the Executive shall have a “Good Reason” for termination of employment after a Change in Control of the Company in the event of any of the following without Executive’s written consent:

i.A material reduction in Executive's base salary or annual cash incentive compensation opportunity;

ii.A material reduction in Executive’s authority, duties or responsibilities with the Company;

iii.Executive being required by the Company to be based at any office or location that is more than fifty (50) miles from the location where Executive was principally employed immediately preceding the Change in Control by the Company, which the Parties acknowledge would be a material relocation; and

iv.A material breach by the Company or its successor or assign, of this Agreement.

Notwithstanding the foregoing, in order for Executive to terminate for Good Reason, the Executive must give the Company a written notice of the Executive’s claim for Good Reason within 90 days of the initial existence of the condition(s) specified by Executive that constitute Good Reason and the Company shall have 30 days from the date of such notice in which to cure the condition giving rise to Good Reason, if curable. If, during such 30-day period, the Company cures the condition giving rise to Good Reason, Executive shall not have a “Good Reason” to terminate under this Agreement. If, during such 30-day period, the Company fails or refuses to cure the condition giving rise to Good Reason, the Executive shall have a “Good Reason” to terminate if he terminates his employment within 120 days of Executive’s original written notice of Good Reason.

(l)Net After-Tax Receipt. For purposes of this Agreement, the term “Net After-Tax Receipt” shall mean the present value (as determined in accordance with Section 280G(b)(2)(A)(ii) and Section 280G(d)(4) of the Code) of a Payment net of all taxes imposed on the Executive with respect thereto under Section 1 and Section 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determines to be likely to apply to the Executive in the relevant tax year(s).

(m)Parachute Value. For purpose of this Agreement, the term “Parachute Value” of a Payment shall mean the present value as of the date of the Change of Control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the excise tax under Section 4999 of the Code will apply to such Payment.

(n)Payment. For purposes of this Agreement, “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to the Agreement or otherwise.

(o)Person. For purposes of this Agreement, the term “Person” shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert.

(p)Safe Harbor Amount. For purposes of this Agreement, “Safe Harbor Amount” shall mean 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code.

(q)Stock. For purposes of this Agreement, the term “Stock” means shares of the common stock, par value $.001 per share, of the Company.

(r)Termination Date. For purposes of this Agreement, except as otherwise provided in Section 6 hereof, the term “Termination Date” means (i) if the Executive’s employment is terminated by the Executive’s death, then the date of death; (ii) if the Executive’s employment is terminated by reason of Disability pursuant to Section 7 hereof, then the date the Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Executive voluntarily, then the date the Notice of Termination is given; and (iv) if the Executive’s employment is terminated by the Company (other than by reason of Disability pursuant to Section 7 hereof) or by the Executive for Good Reason, then the earlier of thirty (30) days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing,

(A)If termination is by the Company for Cause pursuant to Section 1(e)(iii) of this Agreement and if the Executive has substantially cured the conduct constituting such Cause as described by the Company in its Notice of Termination within such thirty (30) day or shorter period, then the Executive’s employment hereunder shall continue as if the Company had not delivered its Notice of Termination and there shall be no Termination Date arising out of such Notice.

(B)If the termination is described in Section 2 hereof, then the Termination Date shall be the date of the Executive’s termination of employment from the Company.

2.Termination or Cancellation Prior to Change in Control. The Company shall retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company, subject to the terms and conditions of any other then existing written employment

arrangement or agreement between the Executive and the Company; provided, however, that if the Executive’s employment is terminated by the Company, other than by reason of (i) death, (ii) Disability in accordance with Section 7 hereof, or (iii) Cause, at any time after Board of Directors’ authorized negotiations are commenced between the Company and another Person which ultimately lead to a Change in Control of the Company, then the Executive shall be entitled to receive at the earlier to occur of the closing or the effective date of such Change in Control of the Company all Accrued Benefits (to the extent not theretofore paid) and a Termination Payment, including benefits under Section 5(b) hereof, as if such termination of employment was a Covered Termination under Section 5 hereof. Other than as set forth above or as provided in Section 11 hereof, in the event the Executive’s employment is terminated prior to a Change in Control of the Company, this Agreement shall be terminated and canceled and of no further force and effect and any and all rights and obligations of the parties hereunder shall cease.

3.Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive’s voluntarily terminating his employment other than for Good Reason (any such terminations to be subject to the procedures set forth in Section 8 hereof), then the Executive shall be entitled to receive only Accrued Benefits described in Section 5(a) hereof.

Termination Giving Rise to a Termination Payment.

(a) If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) Disability pursuant to Section 7 hereof, or (iii) Cause, then the Executive shall be entitled to receive, and the Company shall pay, Accrued Benefits described in Section 5(a) hereof and, as severance pay, the Termination Payment, described in Section 5(b) hereof.

(b)If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Executive shall be entitled to the following additional benefits:

(i)The Executive shall receive, at the expense of the Company, reasonable outplacement services on an individual basis provided by a nationally recognized executive placement firm selected by the Company and acceptable to Executive for up to one year following the date of the Covered Termination, up to a maximum expense of Thirty Thousand Dollars ($30,000.00).

(ii)Until the earlier of the eighteen month anniversary of the Termination Date or such time as the Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given. The continuation of hospitalization, medical and dental coverage hereunder shall count as COBRA continuation coverage; and

If an Executive is entitled to the benefits described in this Section 4(b)(ii) due to Executive’s termination of employment pursuant to Section 2 of this Agreement, then to the extent necessary to discharge the Company’s obligation to Executive under this Section 4(b)(ii) the

Company shall either (1) reimburse the Executive for any COBRA premiums paid by Executive between the date of the Executive’s Termination Date and the date of the Change in Control of the Company (or such earlier date as the Executive would cease being eligible for the benefits as described herein), or (2) provide retroactive coverage effective as of the Executive’s Termination Date.

5.Payments Upon Termination.

(a)Accrued Benefits. For purposes of this Agreement, the Executive’s “Accrued Benefits” shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company for the time period ending with the Termination Date; (iii) any and all other cash earned though the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) subject to any irrevocable deferral election then in effect, a lump sum payment of the bonus, incentive compensation and other compensation reportable on Form W‑2 otherwise payable to the Executive with respect to the year in which termination occurs under all bonus or incentive compensation plan or plans of the Company in which the Executive is a participant; and (v) all other payments and benefits to which the Executive may be entitled as compensatory fringe benefits or under the terms of any benefit plan of the Company. Payment of Accrued Benefits shall be made promptly in accordance with the Company’s prevailing practice with respect to Subsections (i) and (ii) (provided that reimbursements due under clause (ii) must be completed no later than the end of the second calendar year following the year in which the Termination Date occurs) or, with respect to Subsections (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits.

Termination Payment. The Termination Payment shall be an amount equal to three (3) times the sum of (i) the Executive’s base salary in effect as of the Termination, or if higher, the Executive’s base salary that was in effect immediately prior to the Change in Control of the Company, plus (ii) the greater of (x) the Executive’s target annual cash incentive for the Company’s fiscal year that includes the Termination Date or (y) the Executive’s target annual cash incentive for the fiscal year during which the Change in Control of the Company occurred. The Termination Payment shall be contingent on the Executive executing a general release of claims in substantially the same form as the Release and Waiver included as Exhibit A to this Agreement and the expiration of the revocation period applicable thereto, which execution must occur on or following the Termination Date but no later than forty-five (45) days following the Termination Date, or earlier if provided in the Release and Waiver. Except as otherwise provided herein, the Termination Payment shall be paid to the Executive in a cash lump sum as soon as practical following the Executive’s execution of, and expiration of the revocation period provided for in the Release and Waiver, but in no event later than sixty (60) business days after the Termination Date. The Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. For the avoidance of doubt, if the Executive is entitled to the Termination Payment under this Agreement, the Termination Payment shall be in lieu of any payments under any other severance policy or practice of the Company or its successor.

(b)Certain Reductions in Payments.

(i)Notwithstanding anything in this to the contrary, if the Accounting Firm shall determine that receipt of all Payments would subject the Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine whether to reduce any of the Payments paid or payable pursuant to the Agreement (the “Agreement Payments”) so that the Parachute Value (as defined below) of all Payments, in the aggregate, equals the Safe Harbor Amount (as defined below). The Agreement Payments shall be so reduced only if the Accounting Firm determines that the Executive would have a greater Net After-Tax Receipt of aggregate Payments if the Agreement Payments were so reduced. If the Accounting Firm determines that the Executive would not have a greater Net After-Tax Receipt of aggregate Payments if the Agreement Payments were so reduced, the Executive shall receive all Agreement Payments to which the Executive is entitled hereunder.

(ii)If the Accounting Firm determines that aggregate Agreement Payments should be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, the Company shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 5(c) shall be binding upon the Company, the Affiliated Entities and the Executive and shall be made as soon as reasonably practicable and in no event later than 15 days following the Termination Date. For purposes of reducing the Agreement Payments so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, only amounts payable under the Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the Agreement Payments that are parachute payments in the following order: (1) outplacement benefits under Section 4(b)(i), (2) the cash Termination Payment described under Section 5(b), and (3) subsidized COBRA continuation coverage as provided under Section 4(b)(ii). All reasonable fees and expenses of the Accounting Firm shall be borne solely by the Company.

(iii)As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement that should not have been so paid or distributed (each, an “Overpayment”) or that additional amounts that will have not been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (each, an “Underpayment”). In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Executive that the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be repaid by the Executive to the Company (as applicable) together with Interest; provided, however, that no such repayment shall be required if and to the extent such deemed repayment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall

be promptly paid by the Company to or for the benefit of the Executive together with Interest.

(iv)To the extent requested by the Executive, the Company and the Affiliated Entities shall cooperate with the Executive in good faith in valuing, and the Accounting Firm shall take into account the value of, services provided or to be provided by the Executive (including, without limitation, the Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant, before, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) of the final regulations under Section 280G of the Code)), such that payments in respect of such services may be considered reasonable compensation within the meaning of Q&A-9 and Q&A-40 to Q&A-44 of the final regulations under Section 280G of the Code and/or exempt from the definition of the term “parachute payment” within the meaning of Q&A-2(a) of the final regulations under Section 280G of the Code in accordance with Q&A-5(a) of the final regulations under Section 280G of the Code.

Death.

(a) Except as provided in Section 6(b) hereof, in the event of a Covered Termination due to the Executive’s death, the Executive’s estate, heirs and/or beneficiaries (as determined by the Executive’s personal representative) shall receive all the Executive’s Accrued Benefits through the Termination Date.

(b)In the event the Executive dies after a Notice of Termination is given (i) by the Company, other than by reason of disability, or (ii) by the Executive for Good Reason, the Executive’s estate, heirs and beneficiaries shall be entitled to the benefits described in Section 6(a) hereof and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived. For purposes of this Section 6(b), the Termination Date shall be the earlier of thirty (30) days following the giving of the Notice of Termination or one day prior to the end of the Employment Period.

7.Termination for Disability. If there is a Covered Termination by the Company due to Executive’s Disability, then the Executive shall be entitled to receive only the Accrued Benefits described in h Section 5(a) hereof; provided, however, that Executive shall remain eligible for all benefits provided by any long term disability programs of the Company in effect at the time of such termination. The Company may terminate Executive’s employment due to Disability hereunder only if (i) the Company provides at least thirty (30) day’s advance written notice to Executive that it intends to terminate Executive’s employment on account of Disability (which notice shall not constitute the Notice of Termination contemplated below); (ii) Executive shall have not returned to performing essential functions of Executive’s job, with or without accommodation, prior to the termination date specified in such notice; and (iii) the Company provides a Notice of Termination in accordance with Section 8 hereof. The Company may also terminate Executive’s employment due to Disability immediately upon the provision of a Notice of Termination if Executive has returned to work after receiving a notice of intent to terminate for Disability as provided in subsection (ii) above, and Executive is unable or unwilling to perform the essential functions of his/her job with or without accommodation for a period of ninety (90) consecutive days following Executive’s return to work.

8.Termination Notice and Procedure. Any Covered Termination by the Company or the Executive shall be communicated by written Notice of Termination to the Executive, if such

Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 17 hereof:

(a)If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination.

(b)Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted in good faith by a majority of the directors of the Company (or any successor entity) then in office.

(c)The Executive shall have thirty (30) days, or such longer period as the Company may determine to be appropriate, to substantially cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive’s employment for Cause under this Agreement.

(d)Except as otherwise provided in Section 1(k) hereof, the recipient of the Notice of Termination shall personally deliver or mail in accordance with Section 17 hereof written notice of any dispute relating to such Notice of Termination to the party giving such Notice within fifteen (15) days after receipt thereof. After the expiration of such fifteen (15) days, the contents of the Notice of Termination shall become final and not subject to dispute.

9.Confidentiality Obligations of the Executive; Noncompetition; Nonsolicitation.

(a)Confidentiality and Nondisclosure Obligations.

(i)Executive acknowledges (1) Company’s business is both highly specialized and competitive, and (2) certain non-public documents and information regarding Company’s customers, clients, services, methods of operation, sales, and the specialized business needs of Company’s customers and clients, constitute highly Confidential Information (as defined herein) that is not generally known to, or readily ascertainable by, the public or Company’s competitors. Executive further acknowledges that, during Executive’s employment, Executive will have access to Confidential Information and property, processes and/or systems belonging to Company and/or its clients/customers, agrees such information shall remain the exclusive property of Company and/or its clients/customers respectively, and understands the misappropriation or unauthorized use/disclosure of such information at any time is prohibited and will cause Company irreparable injury.

(ii)For purposes of this Agreement, the term “Trade Secrets” shall have that meaning set forth under applicable law. Likewise, the term “Confidential Information” means information, property, processes and/or systems (whether or not in writing) that is not generally known to the public, is related to Company’s business and is maintained as confidential. Confidential Information includes, without limitation, means (i) any information, including formulas, patterns, compilations, programs, devices, methods, techniques, or processes that Company considers confidential and is valuable and provides a competitive advantage because it is not generally known and not readily ascertainable by proper means); methods or policies; prices or price formulas; processes; procedures;

information relating to customers, including customer lists, prospective partners, partners, and other entities; financial information; computer software (including design, programming techniques, flow charts, source code, object code, and related information and documentation); personnel information; and any and all other information of any kind or character relating to the development, improvement, manufacture, sale, or delivery of products or services by Company, whether or not reduced to writing, (ii) information that is marked or otherwise treated as confidential or proprietary by the Company; and (iii) information received by the Company from others which the Company is obligated to keep confidential. Confidential Information does not include information that (a) is or becomes generally available to the public other than by the fault of Executive, (b) becomes available to Executive on a non-confidential basis from a source other than Company, provided that the source is not prohibited from disclosing such information to Executive by any contractual or other obligation with Company or otherwise, or (c) information that can be demonstrated to have been known by Executive prior to Executive’s employment with the Company. Confidential Information also does not include the general nature of Company’s business or this Agreement or a summary of it.

(iii)Both during and after Executive’s employment with the Company, Executive shall not, except as required to fulfill Executive’s job duties for the Company, directly or indirectly use or disclose Trade Secrets.

(iv)During Executive’s employment with the Company and for a period of two (2) years’ thereafter, Executive shall not, except as required to fulfill Executive’s job duties for the Company, directly or indirectly use or disclose any Confidential Information.

(b)Non-Solicitation.

(i)Executive acknowledges Company’s confidential/trade secret information and relationships with its customers, clients, employees, and other business associations are among Company’s most important assets. Executive further acknowledges that, in his/her employment with Company, he/she will have access to such information/relationships and be responsible for developing and maintaining such information/relationships.

(ii)For purposes of this Agreement, the term “Restricted Client” means any individual or entity (i) for whom/which the Company sold or provided products or services and (ii) with whom/which Executive had contact on behalf of the Company, or about whom/which Executive acquired Confidential Information as a result of Executive’s employment by the Company, in the case of both (i) and (ii), above, during the twelve (12) month period immediately prior to the end of Executive’s employment with the Company. Likewise, the term “Prospective Client” means any individual or entity (i) for whom/which the Company has made a bid or proposal to provide goods or services and (ii) with whom/which Executive had contact on behalf of the Company, or about whom/which Executive acquired non-public or proprietary information as a result of his/her employment with the Company, in the case of both (i) and (ii), above, during the twelve (12) month period immediately prior to the end of Executive’s employment with the Company.

(iii)Executive agrees that, during Executive’s employment with Company and for a period of twenty-four (24) months thereafter, Executive will not directly or indirectly solicit, divert, or take away, or attempt to solicit, divert, or take away, the business or patronage of any Restricted Client.

(iv)Executive agrees that, during Executive’s employment with Company and for a period of twenty-four (24) months thereafter, Executive will not directly or indirectly solicit, divert, or take away, or attempt to solicit, divert, or take away, the business or patronage of any Prospective Client.

(v)Executive agrees that, during Executive’s employment with Company and for a period of twenty-four (24) months thereafter, Executive will not directly or indirectly, whether for Executive’s benefit or for the benefit of a third party, recruit, solicit, or induce, or attempt to recruit, solicit, or induce: (1) anyone employed by Company to terminate employment with, or otherwise cease a relationship with, Company; or (2) anyone employed by Company at any time during the immediately preceding twelve (12) months to provide services of any kind to a competitor of Company.

(c)Non-Competition.

For purposes of this Agreement, the term “Restricted Services” means employment duties and functions of the type provided by Executive to the Company during the twelve (12) month period immediately preceding the end of Executive’s employment with the Company. Likewise, the term “Competitor” means any individual or entity that sells goods or services competitive with those sold by the Company, and the term “Territory” shall mean the United States of America.

(ii)For a period of twenty-four (24) months immediately following the end, for whatever reason, of Executive’s employment with the Company, Executive agrees not to directly or indirectly provide Restricted Services to any Competitor, anywhere in Restricted Territory

(d)Enforcement.

(i)Executive agrees, during the term of any restriction contained in this Agreement, to disclose the terms of this Section 9 to any person or entity that offers employment to Executive. Executive further agrees that the Company may send a copy of this Agreement to, or otherwise make the provisions hereof known to, any of Executive’s potential or future employers.

(ii)The parties agree that damages will be an inadequate remedy for breaches of this Section 9 and, in addition to damages and any other available relief, a court

shall be empowered to grant injunctive relief (without the necessity of posting bond or other security).

(iii)Notwithstanding anything in this Agreement to the contrary, the activity restrictions contained in this Section 9 are intended to run alongside, and neither supersede, be subservient to, nor replace any similar restrictions imposed by other agreements that may exist between Executive and the Company. If any provision of this Section 9 is deemed by a court of competent jurisdiction to be in irresolvable conflict with any other activity restriction that may be in place between Executive and the Company, and each restriction in question is deemed by such court to be fully enforceable on its terms, the provision which is determined by the Company to be more protective of its business interests shall control.

10.Payment Obligations and Expenses in the Event of a Dispute

(a)Payment Obligations Absolute. The Company’s obligations during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set off, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 5(c) and Section 10(b) of this Agreement, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

(b)Expenses and Interest. If, after a Change in Control of the Company, a good faith dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any provision contained herein, or to recover damages for breach hereof, the Executive shall recover from the Company any reasonable attorneys’ fees and necessary costs and disbursements incurred by the Executive as a result of such dispute, legal or arbitration proceeding (“Expenses”), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by US Bank, N.A. from time to time as its prime or base lending rate from the date that payments to him should have been made under this Agreement. Within ten (10) days after the Executive’s written request therefor, but no later than the end of the calendar year following the year in which the Executive incurred the Expense, the Company shall reimburse the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive’s Expenses.

Assignment: Successors.

(a) If the Company proposes to engage in a potential Change in Control of the Company, then, at least ten (10) days in advance of the closing of such event, the Company shall, subject only to consummation of such Change in Control of the Company, assign all of its right,

title and interest in this Agreement effective as of the closing date of such event to such Person, and the Company shall cause such Person, at least ten (10) days in advance of the closing of such event, by written agreement in form and substance reasonably satisfactory to the Executive and with written notice thereof to Executive, to expressly assume and agree to perform, subject only to consummation of such Change in Control of the Company, from and after the effective date of such event all of the terms, conditions and provisions imposed by this Agreement upon the Company. If such Change in Control of the Company is consummated, failure of the Company to obtain such an assumption agreement at least ten (10) days in advance of the closing of such event shall be a breach of this Agreement constituting “Good Reason” hereunder. In case of an effective assignment by the Company and of assumption and agreement by such Person, “Company” shall thereafter mean such Person which executes and delivers the agreement provided for in this Section 11 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of and be enforceable by such Person. The Executive shall, in his discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the Company (as defined in the first paragraph of this Agreement) and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Subsection, this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company.

(b)This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 3, 4, 5, 6 and 7 hereof if the Executive had lived shall be paid, in the event of the Executive’s death, to the Executive’s estate, heirs and representatives.

12.Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.

13.Amendment. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive.

14.Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that, the amount so withheld shall not exceed the minimum amount required to be withheld by law. The Company shall be entitled to rely on an opinion of nationally recognized tax counsel if any question as to the amount or requirement of any such withholding shall arise.

15.Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company.

16.Governing Law: Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. Any dispute arising out of this Agreement shall, at the Executive’s election, be determined by arbitration under the rules of the American Arbitration Association then in effect or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Milwaukee, Wisconsin or, at the Executive’s election, in the judicial district encompassing the city in which the Executive resides. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices.

17.Notice. Notices given pursuant to this Agreement shall be in writing and shall be deemed given when actually received by the Executive or actually received by the Company’s General Counsel or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to 111 East Kilbourn Ave., Suite 2600, ATTN: Chief Human Resources Officer, Milwaukee, WI 53202, or if to the Executive, at the address set forth below the Executive’s signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing.

18.No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

19.Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.


EXECUTIVE		REV GROUP, INC.

/s/ Rodney R. Rushing		By:/s/ Christopher Daniels
Rodney N. Rushing		Name: Christopher Daniels Title: Chief Human Resources Officer
Residential Address:
On file with the Company

18137498.4

EXHIBIT A

RELEASE AND WAIVER

This RELEASE AND WAIVER is made this ________ day of ________________, 20____,

by and between __________________and REV GROUP, INC.

IN CONSIDERATION FOR BENEFITS payable to me as contained in the REV Group, Inc. Change in Control Severance Agreement, I hereby agree as follows:

I, with the intention of binding myself, my heirs, executors, administrators and assigns, do hereby release, acquit and forever discharge REV Group, Inc. and its past and present subsidiaries and affiliates, and all of its past, present and future officers, directors, employees, shareholders, agents, partners, principals, members, representatives, insurers, reinsurers, estates, executors, administrators, heirs, successors, assigns and attorneys (hereinafter collectively the “Company"), of and from all manner of actions, causes of action, arbitrations, suits, debts, sums of money, accounts, reckonings, bonds, covenants, controversies, agreements, promises, damages, judgments, charges, claims and demands whatsoever that I now have or may have for actions, inactions or omissions of the Company on or prior to the date of execution of this Agreement, both known and unknown, fixed and contingent, including, but not limited to, any claims of employment discrimination under federal, state or local laws, claims under the Age Discrimination in Employment Act, claims under the Fair Employment Laws, any claimed violations of statute, any violations of public policy, any claims arising from my employment with the Company and/or my separation from employment, any claims growing out of any legal restriction on the Company’s right to terminate its employees, and any tort, contract, quasi-contract or other common law claims; provided, however, that the foregoing release shall not apply to: (i) any breach by the Company of this Agreement; (ii) my rights to any accrued benefits under any employee benefit plans; or (iii) any claims which may arise after the date this Agreement is signed.

I hereby expressly waive the benefits of any statute or rule of law which, if applied to this release, would otherwise exclude from its binding effect any claims not known by me to exist which arose prior to the signing of this Agreement.

Notwithstanding the foregoing, I understand that the scope of this release does not apply to claims under applicable workers’ compensation or unemployment insurance law, to any vested benefits I may be entitled, or to any other laws which, by their nature, cannot be legally released. I further understand and acknowledge that my acceptance of this release does not prevent, restrict or in any way limit my right to file a charge or complaint with a government agency or participate in an investigation or proceeding initiated or conducted by a government agency; provided, however, this release of claims does prevent me from making any personal recovery against the Company, including the recovery of money damages, as a result of filing a charge or complaint with a government agency against the Company.

The Company understands and agrees that the releases set forth herein do not in any way affect my rights to take whatever steps may be necessary to enforce the terms of this Agreement or to obtain relief in the event of the breach of the terms of this Agreement.

I understand that if I am 40 years of age or older, I am entitled to certain information as provided in the Older Workers Benefit Protection Act. If applicable, that information is attached and should remain attached to this RELEASE AND WAIVER. An additional copy has been provided and will be retained by me. In addition, I understand that I have a period of at least 45 days to review this RELEASE AND WAIVER.

I understand that if I am under the age of 40, I have a period of at least 21 days to review this RELEASE AND WAIVER.

I expressly acknowledge that this RELEASE AND WAIVER is subject to an express agreement that all terms of the RELEASE AND WAIVER are confidential and shall not be disclosed to any person or entity except in response to a specific court order directing me to disclose such terms. If I obtain a prior promise of confidentiality for the benefit of the Company from my professional tax preparer, accountant, or attorney, and/or spouse, as applicable, I may disclose the terms of the RELEASE AND WAIVER to such a person who has agreed to keep the terms of this RELEASE AND WAIVER confidential.

I understand that all payments will cease, if there is any breach of this confidentiality provision.

I have carefully read and fully understand all the provisions of this RELEASE AND WAIVER which sets forth the entire RELEASE AND WAIVER between the Company and me. I have entered into this RELEASE AND WAIVER voluntarily and have not relied upon any representation or statement, written or oral, concerning the subject matter of this RELEASE AND WAIVER which is not set forth herein. I have also read and fully understand the severance letter previously provided to me. I understand that I am hereby advised to consult, and have had the opportunity to consult with, an attorney of my choosing.

I understand that this RELEASE AND WAIVER will be governed by the laws of the state in which I reside and of the United States and may be changed only by an amendment in writing signed by both the Company and me.

I understand that if I am 40 years of age or older, that I may revoke this RELEASE AND WAIVER at any time within a seven (7) day period immediately following the execution of this RELEASE AND WAIVER. This RELEASE AND WAIVER shall not become effective or enforceable until the eighth (8th) day following execution of this RELEASE AND WAIVER.

IN WITNESS WHEREOF, the parties have executed this RELEASE AND WAIVER on the date written above.

__________________________ (EMPLOYEE):

REV Group, Inc. (EMPLOYER):


			By:

Name:			Title:

Date:			Date:

CAUTION

THIS IS A RELEASE AND WAIVER. PLEASE READ BEFORE SIGNING.

YOU ARE HEREBY ADVISED TO SEEK THE ADVICE OF AN ATTORNEY BEFORE SIGNING.

EXHIBIT 10.3

REV GROUP, INC.

2016 OMNIBUS INCENTIVE PLAN

PERFORMANCE SHARE UNIT AWARD

Subject to the terms and conditions set forth in this grant letter (the “Grant Letter”) and Exhibit A (the Grant Letter and Exhibit A constituting this “Agreement”), REV Group, Inc., a Delaware corporation (the “Company”), has granted you as of the Grant Date set forth below an award of Performance Share Units (the “Award”). The Award is granted under and is subject to the REV Group, Inc. 2016 Omnibus Incentive Plan (the “Plan”). Unless defined in this Agreement, capitalized terms shall have the meanings assigned to them in the Plan. The provisions of the Plan shall control in the event of a conflict among the provisions of the Plan, this Agreement and any descriptive materials provided to you.

AWARD TERMS

PARTICIPANT:

GRANT DATE:

UNITS SUBJECT TO AWARD AT TARGET:

PERFORMANCE CONDITIONS AND VESTING: See below:

ADDITONAL TERMS: Notwithstanding anything to the contrary in this Grant Letter and the attached Agreement:

1.For the avoidance of doubt, if your employment with the Company is terminated by you or by the Company, any unvested PSUs will be forfeited.

ACHIEVEMENT OF TARGETS: Achievement will be determined by the Company, in its sole discretion but based on accounting rules and principals applied consistently across the Company.

PERFORMANCE GOAL 1:

The PSUs will be earned based on the achievement of [•], during the Performance Period as set forth below. This grant sunsets as of [•].

PERFORMANCE GOAL 2:

The PSUs will be earned based on the successful achievement of [•] identified at close, as of [•].

Please review this Agreement and let us know if you have any questions about this Agreement, the Award or the Plan. You are advised to consult with your own tax advisors in respect of any tax consequences arising in connection with this Award.

If you have questions please contact the Company’s Corporate Total Rewards Director via email at compensation@revgroup.com. If not, please provide your signature, address and the date for this Agreement where indicated below.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.



REV GROUP, INC.
By:
		Name:	Christopher Daniels
		Title:	Chief Human Resources Officer

	Name


	Address

Date: ___________, 2020

EXHIBIT A

REV GROUP, INC. 2016 OMNIBUS INCENTIVE PLAN
PERFORMANCE SHARE UNIT AWARD AGREEMENT

THIS AGREEMENT, made and entered into on the date of the Grant Letter, by and between REV Group, Inc. (the “Company”), a Delaware corporation, and the individual listed in the Grant Letter as the Participant.

WHEREAS, the Participant has been granted the Award under the Plan;

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1.Award of Shares. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Participant is hereby granted the number of performance share units (“PSUs”) as set forth in the Grant Letter, subject to the terms and conditions of the Plan and those herein set forth. The Award is granted as of the date set forth in the Grant Letter.

2.Issuance of PSUs. Each PSU shall represent the right to receive one Share upon the vesting of such PSU, as determined in accordance with and subject to the terms of this Agreement and the Plan.

3.Terms and Conditions. It is understood and agreed that the Award evidenced hereby is subject to the following terms and conditions:

(a)Voting Rights. The Participant shall have no voting rights or any other rights as a shareholder of the Company with respect to the PSUs unless and until the Participant becomes the record owner of the Shares, including Dividend Shares (as defined below) to the extent applicable, underlying such PSUs.

(b)Dividend Shares. If a dividend is paid on Shares during the period commencing on the Grant Date and ending on the date on which the Shares underlying the PSUs are distributed to the Participant pursuant to Section 3(d), the Participant shall be eligible to receive an amount equal to the dividend that the Participant would have received had the Shares underlying the PSUs been distributed to the Participant as of the time a which such dividend is paid; provided, however, that no such amount shall be payable with respect to any PSUs that are forfeited. Such amount shall be paid to the Participant on the date on which the Shares underlying the PSUs are distributed to the Participant in the same form (cash, Shares or other property) in which such dividend is paid to holders of Shares generally. Any Shares that the Participant is eligible to receive pursuant to this Section 3(b) are referred to herein as “Dividend Shares.”

(c)Vesting of Award. Subject to the provisions of this Section 3 and Sections 8 and 9, the Award shall vest and become non-forfeitable in accordance with the vesting schedule set forth in the Grant Letter, subject to the Participant’s continuous service with the Company or any of its Affiliates through the Vesting Date.

(d)Distribution on Vesting. Subject to the provisions of this Agreement, upon the vesting of any of the PSUs, the Company shall deliver to the Participant, as soon as reasonably practicable after the applicable Vesting Date (or the date of the Participant’s Termination of Service, as applicable), one Share for each such PSU and the number of Dividend Shares (as determined in accordance with Section 3(b)); provided that such delivery of Shares shall be made no later than March 15 of the calendar year immediately following the year in which the applicable Vesting Date (or the date of the Participant’s Termination of Service, as applicable) occurs. Upon such delivery, such Shares (including Dividend Shares) shall be fully assignable, alienable, saleable and transferrable by the Participant; provided that any such assignment, alienation, sale, transfer or other alienation with respect to such Shares shall be in accordance with applicable securities laws and any applicable Company policy.

(e)Termination of Service; Forfeiture of Unvested Shares. In the event of Termination of Service of the Participant prior to the date on which the Award otherwise becomes vested, the unvested portion of the Award shall immediately be forfeited by the Participant and become the property of the Company.

(f)Change of Control. Notwithstanding any provision of this Agreement to the contrary, if, within twelve (12) months following a Change of Control, the Award (or a substitute award) remains outstanding and the Participant incurs a Termination of Service without Cause or for Good Reason, the Award shall become immediately vested at target and all restrictions shall lapse upon such Termination of Service. For purposes of this Agreement, “Good Reason” means “Good Reason” as defined in the Participant’s Service Provider Agreement, if any, or if not so defined, the occurrence of any of the following events, in each case without the Participant’s consent: (i) a material reduction by the Company or any of its Affiliates of the Participant’s base salary, other than any such reduction that applies generally to similarly situated employees of the Company or (ii) a relocation by the Company or any of its Affiliates of the principal place of the Participant’s employment or service outside a 50 mile radius from its current location; provided that, in each case, (A) the Participant shall provide the Company with written notice specifying the circumstances alleged to constitute Good Reason within 90 days following the first occurrence of such circumstances; (B) if possible, the Company shall have 60 days following receipt of such notice to cure such circumstances; and (C) if the Company has not cured such circumstances within such 60-day period, the Participant shall terminate his or her employment or service not later than 60 days after the end of such 60-day period.

(g)Death or Disability.

(h)In the event of the Participant’s Termination of Service at any time due to the Participant’s death or Disability, any unvested PSUs shall vest at target level on the date of such Termination of Service.

(i)No Right to Continued Service. The grant of an Award shall not be construed as giving the Participant the right to be retained in the employ of, or to continue to provide services to, the Company or any Affiliate. The receipt of any Award under the Plan is not intended to confer any rights on the receiving Participant except as set forth in the applicable Award Agreement.

(j)No Right to Future Awards. Any Award granted under the Plan shall be a one-time Award that does not constitute a promise of future grants. The Company, in its sole discretion, maintains the right to make available future grants under the Plan.

4.Restrictions on Transferability. Except as may be permitted by the Administrator, neither this Award nor any right under this Award shall be assignable, alienable, saleable or transferable by the Participant otherwise than by will or pursuant to the laws of descent and distribution. This provision shall not apply to any portion of this Award that has been fully vested and distributed and shall not preclude forfeiture of any portion of this Award in accordance with the terms herein.

5.Tax Liability; Withholding Requirements.

(a)The Participant shall be solely responsible for any applicable taxes (including, without limitation, income and excise taxes) and penalties, and any interest that accrues thereon, that the Participant incurs in connection with the receipt, vesting or distribution of any PSUs granted hereunder.

(b)The Company may withhold any tax (or other governmental obligation) that becomes due with respect to the PSUs (or any dividend distribution thereon) and take such action as it deems appropriate to ensure that all applicable withholding, income or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from the Participant. The Participant shall make arrangements satisfactory to the Company to enable the Company to satisfy all such withholding requirements. Notwithstanding the foregoing, the Administrator may, in its sole discretion, permit the Participant to satisfy any such withholding requirement by transferring to the Company pursuant to such procedures as the Administrator may require, effective as of the date on which such requirement arises, a number of vested Shares owned and designated by the Participant having an aggregate Fair Market Value as of such date that is equal to the minimum amount required to be withheld. If the Administrator permits the Participant to satisfy any such withholding requirement pursuant to the preceding sentence, the Company shall remit to the Internal Revenue Service and appropriate state and local revenue agencies, for the credit of the Participant, an amount of cash withholding equal to the Fair Market Value of the Shares transferred to the Company as provided above.

6.Not Salary, Pensionable Earnings or Base Pay. The Participant acknowledges that the Award shall not be included in or deemed to be a part of (a) salary, normal salary or other ordinary compensation, (b) any definition of pensionable or other earnings (however defined) for the purpose of calculating any benefits payable to or on behalf of the Participant under any pension, retirement, termination or dismissal indemnity, severance benefit,

retirement indemnity or other benefit arrangement of the Company or any Subsidiary or (c) any calculation of base pay or regular pay for any purpose.

7.Whistleblower Protection. The Participant has the right under federal law to certain protections for cooperating with or reporting legal violations to the Securities and Exchange Commission (the “SEC”) or its Office of the Whistleblower, as well as certain other governmental entities and self-regulatory organizations. As such, nothing in this Agreement or otherwise is intended to prohibit the Participant from disclosing this Agreement to, or from cooperating with or reporting violations to, the SEC or any such governmental entity or self-regulatory organization, and the Participant may do so without notifying the Company. The Company may not retaliate against the Participant for any of these activities, and nothing in this Agreement or otherwise requires the Participant to waive any monetary award or other payment that the Participant might become entitled to from the SEC or any such governmental entity or self-regulatory organization.

8.Forfeiture Upon Breach of Certain Other Agreements. Subject to Section 7, the Participant’s breach of any non-competition, non-solicitation, confidentiality, non-disparagement, assignment of inventions or other intellectual property agreement that the Participant may be a party to with the Company or any Affiliate, in addition to whatever other equitable relief or monetary damages that the Company or any Affiliate may be entitled to, shall result in automatic rescission, forfeiture, cancellation or return of any Shares (whether or not vested) held by the Participant. Without limiting the generality of the foregoing:

(a)Non-Competition . The Participant agrees that, during the term of employment and for a period of twelve (12) months after the Termination of Service (collectively, the “Restriction Period”), the Participant shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, compete with the Company or any of its Affiliates. Specifically, but without limiting the foregoing, the Participant agrees not to engage in any manner in any activity that is directly or indirectly competitive with the business of the Company or any of its Affiliates, as conducted or, to Participant’s knowledge, under consideration at any time during the Participant’s employment or other service, and further agrees not to work or provide services, in any capacity, whether as an employee, independent contractor or otherwise, whether with or without compensation, to any person who is engaged in any business that is competitive with the business of the Company or any of its Affiliates for which the Participant has provided services as of the Termination of Service.

(b)Non-Solicitation. The Participant agrees that, during the Restriction Period, the Participant shall not, and shall not assist any other person to directly or indirectly: (i) solicit or encourage any customer of the Company or any of its Affiliates to terminate or diminish its relationship with them; (ii) seek to persuade any such customer or any prospective customer of the Company or any of its Affiliates to conduct with anyone else any business or activity which such customer or prospective customer conducts or could conduct with the Company or any of its Affiliates; (iii) hire or solicit for hiring any employee of the Company or any of its Affiliates or seek to persuade any employee of the Company or any of its Affiliates to discontinue employment; or (iv)

solicit or encourage any independent contractor providing services to the Company or any of its Affiliates to terminate or diminish its relationship with them.

(c)Confidentiality. Subject to Section 7, the Participant agrees to protect Confidential Information, as defined herein, and that the Participant shall never, directly or indirectly, use or disclose it other than in the course and scope of his or her employment. For purposes of this Agreement, “Confidential Information” means all confidential and proprietary information of the Company and its Affiliates, including, without limitation, information derived from reports, investigations, experiments, research, work in progress, drawings, designs, plans, proposals, codes, marketing and sales programs, client lists, client mailing lists, supplier lists, financial projections, cost summaries, pricing formula, marketing studies relating to prospective business opportunities and all other know-how, trade secrets, inventions, concepts, ideas, materials, or information developed, prepared or performed for or by the Company or its Affiliates. For purposes of this Agreement, Confidential Information shall not include and the Participant’s obligation’s shall not extend to information that the Participant can demonstrate with competent evidence is (i) generally available to the public without any action or involvement by the Participant or (ii) independently obtained by the Participant from a third party on a non-confidential and authorized basis.

(d)Non-Disparagement. Subject to Section 7, the Participant agrees that, for a period of twelve (12) months after the Termination of Service, the Participant shall not disparage or criticize the Company, its Affiliates, their business, their management or their products or services, and that the Participant will not otherwise do or say anything that could disrupt the good morale of employees of the Company or any of its Affiliates or harm the interests or reputation of the Company or any of its Affiliates.

(e)Assignment of Inventions or Other Intellectual Property.

(i)Definitions. For purposes of this Agreement, (A) “Intellectual Property” means all patents, invention disclosures, invention registrations, trademarks, service marks, trade names, trade dress, logos, domain names, copyrights, mask works, trade secrets, know-how and all other intellectual property and proprietary rights recognized by any applicable law of any jurisdiction, and all registrations and applications for registration of, and all goodwill associated with, the foregoing; and (B) “Inventions” means all inventions, discoveries, concepts, information, works, materials, processes, methods, data, software, programs, apparatus, designs and the like.

(ii)Disclosure. The Participant shall disclose promptly in writing to the Company any and all Inventions and Intellectual Property, in each case that the Participant conceives, develops, creates or reduces to practice, either alone or jointly with others, during the period of the Participant’s employment or provision of service that (A) are conceived, created or developed using any equipment, supplies, facilities, trade secrets, know-how or other Confidential Information of the Company or any of its Affiliates; (B) result from any work performed by the Participant for the Company or any of its Affiliates; and/or (C) otherwise relate to

the Company’s or any of its Affiliates’ business or actual or demonstrably anticipated research or development (collectively, “Company Intellectual Property”).

(iii)Ownership and Assignment. The Participant acknowledges and agrees that the Company shall have exclusive title and ownership rights in and to all Company Intellectual Property. To the extent that exclusive title and/or ownership rights may not originally vest in the Company as contemplated herein, the Participant hereby assigns, transfers, conveys and delivers to the Company all right, title and interest in and to all Company Intellectual Property. The Participant acknowledges and agrees that, with respect to any Company Intellectual Property that may qualify as a Work Made For Hire as defined in 17 U.S.C. § 101 or other applicable law, such Company Intellectual Property is and will be deemed a Work Made for Hire and the Company will have the sole and exclusive right to the copyright (or, in the event that any such Company Intellectual Property does not qualify as a Work Made for Hire, the copyright and all other rights thereto are automatically assigned to the Company as above).

(iv)Prior Inventions. The Participant has previously provided to an authorized representative of the Company a complete list of all Inventions that the Participant has, alone or jointly with others, conceived, developed, created or reduced to practice prior to the commencement of the Participant’s employment or other service with the Company, that are the Participant’s property, and that the Company acknowledges and agrees are excluded from the scope of this Agreement (collectively, “Prior Inventions”). If disclosure of any such Prior Invention would cause the Participant to violate any prior confidentiality agreement, the Participant understands that he or she is not to list such Prior Inventions but is only to disclose where indicated a cursory name for each such Prior Invention, a listing of each person or entity to whom it belongs, and the fact that full disclosure as to such Prior Inventions has not been made for that reason (it being understood that, if no Invention or disclosure is provided, the Participant hereby represents and warrants that there are no Prior Inventions). If, in the course of the Participant’s employment or other service with the Company, the Participant incorporates any Prior Invention into any Company product, process or machine or otherwise uses any Prior Invention, the Participant hereby grants to the Company and its Affiliates a worldwide, non-exclusive, irrevocable, perpetual, fully paid-up and royalty-free license (with rights to sublicense through multiple tiers of sublicensees) to use, reproduce, modify, make derivative works of, publicly perform, publicly display, make, have made, sell, offer for sale, import and otherwise exploit such Prior Invention for any purpose.

(v)Non-Assignable Inventions. If the Participant is an employee or other service provider whose principal work location is in California, Illinois, Kansas, Minnesota or Washington State, the provisions regarding the Participant’s assignment of Company Intellectual Property to the Company in Section 8(e)(iii) hereof do not apply to certain Inventions (“Non-Assignable Inventions”) as specified in the statutory code of the applicable state. The Participant

acknowledges having received and reviewed notification regarding such Non-Assignable Inventions pursuant to such states’ codes.

(vi)Waiver of Moral Rights. To the extent that the Participant may do so under applicable law, the Participant hereby waives and agrees never to assert any Moral Rights that the Participant may have in or with respect to any Company Intellectual Property, even after termination of any work on behalf of the Company. For purposes of this Agreement, “Moral Rights” means any rights to claim authorship of a work, to object to or prevent the modification or destruction of a work, or to withdraw from circulation or control the publication or distribution of a work, and any similar right, existing under any applicable law of any jurisdiction, regardless of whether or not such right is denominated or generally referred to as a “moral right.”

(vii)Further Assurances. The Participant shall give the Company and its Affiliates all reasonable assistance and execute all documents necessary to assist with enabling the Company and its Affiliates to prosecute, perfect, register, record, enforce and defend any of their rights in any Company Intellectual Property and Confidential Information.

9.Recoupment/Clawback. This Award may be subject to recoupment or “clawback” as may be required by applicable law, stock exchange rules or by any applicable Company policy or arrangement, as it may be established or amended from time to time.

10.References. References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participant’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

11.Miscellaneous.

(a)Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

REV Group, Inc.

111 East Kilbourn Avenue, Suite 2600

Milwaukee, WI 53202

Attention: Total Rewards Director
Email: compensation@revgroup.com

If to the Participant:

At the Participant’s most recent address shown on the signature page of the Grant Letter, or at any other address which the Participant may specify in a notice delivered to the Company in the manner set forth herein.

(b)Entire Agreement. This Award Agreement, the Plan and any other agreements, schedules, exhibits and other documents referred to herein or therein constitute the entire agreement and understanding between the parties in respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets, presentations or otherwise, between the parties with respect to the subject matter hereof.

(c)Severability. If any provision of this Award Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Award Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Board, materially altering the intent of this Award Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Award Agreement shall remain in full force and effect.

(d)Amendment; Waiver. No amendment or modification of any provision of this Award Agreement that has a material adverse effect on the Participant shall be effective unless signed in writing by or on behalf of the Company and the Participant; provided that the Company may amend or modify this Award Agreement without the Participant’s consent in accordance with the provisions of the Plan or as otherwise set forth in this Award Agreement. No waiver of any breach or condition of this Award Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. Any amendment or modification of or to any provision of this Award Agreement, or any waiver of any provision of this Award Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

(e)Assignment. Neither this Award Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Participant.

(f)Successors and Assigns; No Third-Party Beneficiaries. This Award Agreement shall inure to the benefit of and be binding upon the Company and the Participant and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Award Agreement, express or implied, is intended to confer on any Person other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Award Agreement.

(g)Governing Law; Waiver of Jury Trial. This Award Agreement shall be governed by the laws of the State of Delaware, without application of the conflicts of law

principles thereof. BY RECEIPT OF THIS AWARD, THE PARTICIPANT WAIVES ANY RIGHT THAT THE PARTICIPANT MAY HAVE TO TRIAL BY JURY IN RESECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AWARD AGREEMENT OR THE PLAN.

(h)Participant Undertaking; Acceptance. The Participant agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to carry out or give effect to any of the obligations or restrictions imposed on either the Participant or the PSUs pursuant to this Award Agreement. The Participant acknowledges receipt of a copy of the Plan and this Award Agreement and understands that material definitions and provisions concerning the PSUs and the Participant’s rights and obligations with respect thereto are set forth in the Plan. The Participant has read carefully, and understands, the provisions of this Award Agreement and the Plan.

(i)Dispute Resolution. Any dispute or claim arising out of, under or in connection with the Plan or any Award Agreement shall be submitted to arbitration in Delaware and shall be conducted in accordance with the rules of, but not necessarily under the auspices of, the American Arbitration Association (“AAA”) rules in force when the notice of arbitration is submitted. The arbitration shall be conducted before an arbitration tribunal comprised of one individual, mutually selected by the Company and the Participant, such selection to be made within 30 calendar days after notice of arbitration has been given. In the event the parties are unable to agree in such time, AAA will provide a list of 3 available arbitrators and an arbitrator will be selected from such 3-member panel provided by AAA by the parties alternately striking out one name of a potential arbitrator until only one name remains. The party entitled to strike an arbitrator first shall be selected by a toss of a coin. The Participant and the Company agree that such arbitration will be confidential and no details, descriptions, settlements or other facts concerning such arbitration shall be disclosed or released to any third party without the specific written consent of the other party, unless required by law or court order or in connection with enforcement of any decision in such arbitration. Any damages awarded in such arbitration shall be limited to the contract measure of damages, and shall not include punitive damages.

(j)Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULES 13a-14 AND 15d-14, AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Rod Rushing, certify that:

I have reviewed this Quarterly Report on Form 10-Q of REV Group, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 8, 2020

By:

/s/ Rod Rushing

Rod Rushing

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULES 13a-14 AND 15d-14, AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Dean Nolden, certify that:

I have reviewed this Quarterly Report on Form 10-Q of REV Group, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 8, 2020

By:

/s/ Dean Nolden

Dean Nolden

Chief Financial Officer

(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of REV Group, Inc. (the “Company”) on Form 10-Q for the period ended April 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to REV Group, Inc. and will be retained by REV Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Dated: June 8, 2020	By:	/s/ Rod Rushing
		Rod Rushing
		Chief Executive Officer (Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: June 8, 2020	By:	/s/ Dean Nolden
		Dean Nolden
		Chief Financial Officer (Principal Financial Officer)