ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three and nine months ended June 30, 2021, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (the “2020 Form 10-K”).
Note about Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts.
Specific forward-looking statements contained in this portion of the Quarterly Report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, (v) statements about the Chapter 11 Case, (vi) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months, and (vii) statements that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity.
Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2020 Form 10-K under Item 1A “Risk Factors” and Part II, Item 1A. "Risk Factors" below, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.
In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website www.liveventures.com or any other websites referenced in this Quarterly Report are not part of this Quarterly Report.
Our Company
Live Ventures Incorporated is a holding company of diversified businesses, which, together with our subsidiaries, we refer to as the “Company”, “Live Ventures”, “we”, “us” or “our”. We acquire and operate companies in various industries that have historically demonstrated a strong history of earnings power. We currently have three segments to our business: Retail, Flooring Manufacturing, and Steel Manufacturing.
Under the Live Ventures brand, we seek opportunities to acquire profitable and well-managed companies. We work closely with third party advisors who will help us identify target companies that fit within the criteria we have established for opportunities that will provide synergies with our businesses.
Our principal offices are located at 325 E. Warm Springs Road, Suite 102, Las Vegas, Nevada 89119, our telephone number is (702) 939-0231, and our corporate website (which does not form part of this Quarterly Report Form 10-Q) is located at www.liveventures.com. Our common stock trades on the Nasdaq Capital Market under the symbol “LIVE”.
Retail Segment
Our Retail Segment is composed of Vintage Stock, Inc. ("Vintage Stock") and ApplianceSmart, Inc. ("ApplianceSmart").
Vintage Stock
Vintage Stock is an award-winning specialty entertainment retailer offering a large selection of entertainment products including new and pre-owned movies, video games and music products, as well as ancillary products such as books, comics, toys and collectibles all available in a single location. With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned
24
movies, music, video games, electronics and collectibles through more than 60 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, New Mexico, Oklahoma, Texas, and Utah.
ApplianceSmart
ApplianceSmart operates one store in Reynoldsburg, Ohio. ApplianceSmart is a household appliance retailer with two product categories: one consisting of typical and commonly available, innovative appliances, and the other consisting of affordable value-priced, offerings such as close-outs, factory overruns, discontinued models, and special-buy appliances, including open box merchandise and others.
On December 9, 2019, ApplianceSmart filed a voluntary petition (the “Chapter 11 Case”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The bankruptcy affects Live Ventures’ indirect subsidiary ApplianceSmart only and does not affect any other subsidiary of Live Ventures, or Live Ventures itself. ApplianceSmart expects to continue to operate its business in the ordinary course of business as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. In addition, the Company reserves its right to file a motion seeking authority to use cash collateral of the lenders under the reserve-based revolving credit facility. The case is being administrated under the caption In re: ApplianceSmart, Inc. (case number 19-13887). Court filings and other information related to the Chapter 11 Case are available at the PACER Case Locator website for those registered to do so or at the Courthouse located at One Bowling Green, Manhattan, New York 10004.
Flooring Manufacturing Segment
Our Flooring Manufacturing segment is comprised of Marquis Industries, Inc. ("Marquis").
Marquis is a leading carpet manufacturer and distributor of carpet and hard surface flooring products. Over the last decade, Marquis has been an innovator and leader in the value-oriented polyester carpet sector, which is currently the market’s fastest-growing fiber category. Marquis focuses on the residential, niche commercial, and hospitality end-markets and serves thousands of customers.
Since commencing operations in 1995, Marquis has built a strong reputation for outstanding value, styling, and customer service. Its innovation has yielded products and technologies that differentiate its brands in the flooring marketplace. Marquis’s state-of-the-art operations enable high quality products, unique customization, and exceptionally short lead-times. In addition, the Company has recently invested in additional capacity to grow several attractive lines of business, including printed carpet and yarn extrusion.
Steel Manufacturing Segment
Our Steel Manufacturing segment is comprised of Precision Industries, Inc. (“Precision Marshall”).
Precision Marshall is a North American leader in providing and manufacturing pre-finished de-carb free tool and die steel. For over 70 years, Precision Marshall has served steel distributors through quick and accurate service. Precision Marshall has led the industry with exemplary availability and value-added processing that saves distributors time and processing costs.
Founded in 1948, Precision Marshall, “The Deluxe Company”, has built a reputation of high integrity, speed of service, and doing things the “Deluxe Way”. The term Deluxe refers to all aspects of the product and customer service to be head and shoulders above the rest. From order entry to packaging and delivery, Precision Marshall makes it easy to do business and backs all products and service with a guarantee.
Precision Marshall provides four key products to over 500 steel distributors in four product categories: deluxe alloy plate, deluxe tool steel plate, precision ground flat stock, and drill rod. With over 5,000 distinct size grade combinations in stock every day, Precision Marshall arms tool steel distributors with deep inventory availability and same day shipment to their place of business or often ships direct to their customer saving time and handling.
Critical Accounting Policies
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant and material impact on amounts reported in these financial statements. Estimates and assumptions are based on management's experience and other information available prior to the issuance of our financial statements. Our actual
25
realized results may differ materially from management’s initial estimates as reported. Our critical and significant accounting policies include Trade and Other Receivables, Inventories, Goodwill, Revenue Recognition, Fair Value Measurements, Stock Based Compensation, Income Taxes, Segment Reporting and Concentrations of Credit Risk. For a summary of significant accounting policies and the means by which we develop estimates thereon, see Part II, Item 8 – Financial Statements - Notes to unaudited condensed consolidated financial statements Note 2 – summary of significant accounting policies in the Company’s 10-K report as filed on January 13, 2021.
Results of Operations Three Months Ended June 30, 2021 and 2020
The following table sets forth certain statement of income items and as a percentage of revenue, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,2021
|
|
|
For the Three Months Ended June 30,2020
|
|
|
|
|
|
|
% of Total
Revenue
|
|
|
|
|
|
% of Total
Revenue
|
|
Statement of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
69,095
|
|
|
|
100.0
|
%
|
|
$
|
42,472
|
|
|
|
100.0
|
%
|
Cost of revenues
|
|
|
44,029
|
|
|
|
63.7
|
%
|
|
|
25,759
|
|
|
|
60.6
|
%
|
Gross profit
|
|
|
25,066
|
|
|
|
36.3
|
%
|
|
|
16,713
|
|
|
|
39.4
|
%
|
General and administrative expenses
|
|
|
13,794
|
|
|
|
20.0
|
%
|
|
|
8,221
|
|
|
|
19.4
|
%
|
Sales and marketing expenses
|
|
|
3,040
|
|
|
|
4.4
|
%
|
|
|
2,502
|
|
|
|
5.9
|
%
|
Operating income
|
|
|
8,232
|
|
|
|
11.9
|
%
|
|
|
5,990
|
|
|
|
14.1
|
%
|
Interest expense, net
|
|
|
(938
|
)
|
|
|
(1.4
|
)%
|
|
|
(1,155
|
)
|
|
|
(2.7
|
)%
|
Gain on Payroll Protection Program loan forgiveness
|
|
|
4,768
|
|
|
|
6.9
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Gain on bankruptcy settlement
|
|
|
650
|
|
|
|
0.9
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Other income (expense)
|
|
|
(76
|
)
|
|
|
(0.1
|
)%
|
|
|
173
|
|
|
|
0.4
|
%
|
Income before provision for income taxes
|
|
|
12,636
|
|
|
|
18.3
|
%
|
|
|
5,008
|
|
|
|
11.8
|
%
|
Provision for income taxes
|
|
|
2,703
|
|
|
|
3.9
|
%
|
|
|
1,423
|
|
|
|
3.4
|
%
|
Net income
|
|
$
|
9,933
|
|
|
|
14.4
|
%
|
|
$
|
3,585
|
|
|
|
8.4
|
%
|
The following table sets forth revenues by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,2021
|
|
|
For the Three Months Ended June 30,2020
|
|
|
|
Net
Revenue
|
|
|
% of
Total
Revenue
|
|
|
Net
Revenue
|
|
|
% of
Total
Revenue
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Movies, Music, Games and Other
|
|
$
|
21,491
|
|
|
|
31.1
|
%
|
|
$
|
13,563
|
|
|
|
31.9
|
%
|
Appliances
|
|
|
228
|
|
|
|
0.3
|
%
|
|
|
696
|
|
|
|
1.6
|
%
|
Flooring Manufacturing
|
|
|
34,234
|
|
|
|
49.5
|
%
|
|
|
28,079
|
|
|
|
66.1
|
%
|
Steel Manufacturing
|
|
|
13,018
|
|
|
|
18.8
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Corporate & other
|
|
|
124
|
|
|
|
0.2
|
%
|
|
|
134
|
|
|
|
0.3
|
%
|
Total Revenue
|
|
$
|
69,095
|
|
|
|
100.0
|
%
|
|
$
|
42,472
|
|
|
|
100.0
|
%
|
26
The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,2021
|
|
|
For the Three Months Ended June 30,2020
|
|
|
|
Gross
Profit
|
|
|
Gross
Profit % of Total Revenue
|
|
|
Gross
Profit
|
|
|
Gross
Profit % of Total Revenue
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Movies, Music, Games and Other
|
|
$
|
11,580
|
|
|
|
53.9
|
%
|
|
$
|
7,867
|
|
|
|
58.0
|
%
|
Appliances
|
|
|
104
|
|
|
|
45.6
|
%
|
|
|
142
|
|
|
|
20.4
|
%
|
Flooring Manufacturing
|
|
|
9,857
|
|
|
|
28.8
|
%
|
|
|
8,579
|
|
|
|
30.6
|
%
|
Steel Manufacturing
|
|
|
3,409
|
|
|
|
26.2
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Corporate & other
|
|
|
116
|
|
|
|
93.5
|
%
|
|
|
125
|
|
|
|
93.3
|
%
|
Total Gross Profit
|
|
$
|
25,066
|
|
|
|
36.3
|
%
|
|
$
|
16,713
|
|
|
|
39.4
|
%
|
Revenue
Revenue increased by 63% to $69,095 for the three months ended June 30, 2021 as compared to $42,472 for the three months ended June 30, 2020.
Retail: The increase in Movies, Music, Games, and Other of $7,928 was primarily due the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19. Appliance revenue decreased $468 due to the closure of certain retail locations were incurring continual decreases in sales resulting from increased competition.
Flooring Manufacturing revenues increased $6,155 as a result of the development of new products and higher demand by residential consumers.
Steel Manufacturing revenues were $13,018 due to the acquisition of Precision Marshall during July 2020. Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms. In addition to higher demand, raw material prices and consumable costs have increased and have successfully been passed on to the market.
Cost of Revenue
Cost of revenue increased 71% to $44,029 for the three months ended June 30, 2021 as compared to $25,759 for the three months ended June 30, 2020, proportionately to the increase in revenue.
General and Administrative Expense
General and Administrative increased 68% to $13,794 for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 due the an increase in employee compensation, increase in sales tax expense and expenses associated with Precision Marshall's corporate activity. Precision Marshall was acquired during July 2020.
Selling and Marketing Expense
Selling and marketing expense increased 22% to $3,040 for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020 increased compensation associated with the Marquis sales force.
Interest Expense, net
Interest expense, net decreased 19% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, due to a decrease in certain interest rates and the continued efforts to repay certain debt obligations, offset by debt incurred as part of the Precision acquisition during July 2020.
Gain on Payroll Protection Program
27
During the three months ended June 30, 2021, the Company recorded a gain of $4,768 due to the forgiveness of Marquis' PPP Loan. There were no similar transactions during the three months ended June 30, 2020.
Gain on Bankruptcy Settlement
During the three months ended June 30, 2021, the Company recorded a gain of $650 due to the discharge of certain payables from bankruptcy proceedings. There were no similar transactions during the three months ended June 30, 2020.
Results of Operations Nine Months Ended June 30, 2021 and 2020
The following table sets forth certain statement of income items and as a percentage of revenue, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30,2021
|
|
|
For the Nine Months Ended June 30,2020
|
|
|
|
|
|
|
% of Total
Revenue
|
|
|
|
|
|
% of Total
Revenue
|
|
Statement of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
202,439
|
|
|
|
100.0
|
%
|
|
$
|
130,904
|
|
|
|
100.0
|
%
|
Cost of revenues
|
|
|
128,614
|
|
|
|
63.5
|
%
|
|
|
79,789
|
|
|
|
61.0
|
%
|
Gross profit
|
|
|
73,825
|
|
|
|
36.5
|
%
|
|
|
51,115
|
|
|
|
39.0
|
%
|
General and administrative expenses
|
|
|
38,638
|
|
|
|
19.1
|
%
|
|
|
30,731
|
|
|
|
23.5
|
%
|
Sales and marketing expenses
|
|
|
8,539
|
|
|
|
4.2
|
%
|
|
|
7,839
|
|
|
|
6.0
|
%
|
Operating income
|
|
|
26,648
|
|
|
|
13.2
|
%
|
|
|
12,545
|
|
|
|
9.6
|
%
|
Interest expense, net
|
|
|
(4,057
|
)
|
|
|
(2.0
|
)%
|
|
|
(3,782
|
)
|
|
|
(2.9
|
)%
|
Gain on lease settlement, net
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
223
|
|
|
|
0.2
|
%
|
Gain on Payroll Protection Program loan forgiveness
|
|
|
6,150
|
|
|
|
3.0
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Gain on bankruptcy settlement
|
|
|
1,765
|
|
|
|
0.9
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Other income (expense)
|
|
|
782
|
|
|
|
0.4
|
%
|
|
|
(133
|
)
|
|
|
-0.1
|
%
|
Income before provision for income taxes
|
|
|
31,288
|
|
|
|
15.5
|
%
|
|
|
8,853
|
|
|
|
6.8
|
%
|
Provision for income taxes
|
|
|
7,381
|
|
|
|
3.6
|
%
|
|
|
2,402
|
|
|
|
1.8
|
%
|
Net income
|
|
$
|
23,907
|
|
|
|
11.8
|
%
|
|
$
|
6,451
|
|
|
|
4.9
|
%
|
The following table sets forth revenues by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30,2021
|
|
|
For the Nine Months Ended June 30,2020
|
|
|
|
Net
Revenue
|
|
|
% of
Total Revenue
|
|
|
Net
Revenue
|
|
|
% of Total
Total Revenue
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Movies, Music, Games and Other
|
|
$
|
67,216
|
|
|
|
33.2
|
%
|
|
$
|
51,283
|
|
|
|
39.2
|
%
|
Appliances
|
|
|
876
|
|
|
|
0.4
|
%
|
|
|
3,450
|
|
|
|
2.6
|
%
|
Flooring Manufacturing
|
|
|
97,428
|
|
|
|
48.1
|
%
|
|
|
75,747
|
|
|
|
57.9
|
%
|
Steel Manufacturing
|
|
|
36,546
|
|
|
|
18.1
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Corporate & other
|
|
|
373
|
|
|
|
0.2
|
%
|
|
|
424
|
|
|
|
0.3
|
%
|
Total Revenue
|
|
$
|
202,439
|
|
|
|
100.0
|
%
|
|
$
|
130,904
|
|
|
|
100.0
|
%
|
28
The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30,2021
|
|
|
For the Nine Months Ended June 30,2020
|
|
|
|
Gross
Profit
|
|
|
Gross
Profit % of Total Revenue
|
|
|
Gross
Profit
|
|
|
Gross
Profit % of Total Revenue
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Movies, Music, Games and Other
|
|
$
|
36,309
|
|
|
|
54.0
|
%
|
|
$
|
28,752
|
|
|
|
56.1
|
%
|
Appliances
|
|
|
392
|
|
|
|
44.7
|
%
|
|
|
712
|
|
|
|
20.6
|
%
|
Flooring Manufacturing
|
|
|
28,204
|
|
|
|
28.9
|
%
|
|
|
21,255
|
|
|
|
28.1
|
%
|
Steel Manufacturing
|
|
|
8,565
|
|
|
|
23.4
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
Corporate & other
|
|
|
355
|
|
|
|
95.2
|
%
|
|
|
396
|
|
|
|
93.4
|
%
|
Total Gross Profit
|
|
$
|
73,825
|
|
|
|
36.5
|
%
|
|
$
|
51,115
|
|
|
|
39.0
|
%
|
Revenue
Revenue increased by 55% to $202,439 for the nine months ended June 30, 2021 as compared to $130,904 for the nine months ended June 30, 2020.
Retail: The increase in Movies, Music, Games and Other of $15,933 was primarily due the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19. Appliance revenue decreased $2,574 due to the closure of certain retail locations were incurring continual decreases in sales resulting from increased competition.
Flooring Manufacturing revenues increased $21,681 as a result of the development of new products, higher demand from residential consumers and the acquisition of Lonesome Oak in January 2020.
Steel Manufacturing revenues were $36,546 due to the acquisition of Precision Marshall during July 2020. Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms. In addition to higher demand, raw material prices and consumable costs have increased and have successfully been passed on to the market.
Cost of Revenue
Cost of revenue increased 61% to $128,614 for the nine months ended June 30, 2021 as compared to $79,789 for the nine months ended June 30, 2020, proportionately to the increase in revenue.
General and Administrative Expense
General and Administrative expense increased $7,907 or 26%, for the nine months ended June 30, 2021 as compared to the nine months ended June 30, 2020, primarily due to expenses associated with Precision which was acquired during July 2020 and higher warehouse costs at Marquis, and an increase in other administrative costs.
Selling and Marketing Expense
Selling and marketing expense remained relatively flat for the nine months ended June 30, 2021 as compared to the nine months ended June 30, 2020.
Interest Expense, net
Interest expense, net increased 7% for the nine months ended June 30, 2021 as compared to the nine months ended June 30, 2020, due to a decrease in certain interest rates and the continued efforts to repay certain debt obligations, offset by debt incurred as part of the Precision acquisition during July 2020.
29
Gain on lease settlement, net
During the nine months ended June 30, 2020, the Company recorded a net gain on lease settlement of $223 which consisted of impairment charges of $614 related to the decision to close additional ApplianceSmart retail locations resulting in a decrease to the associated right of use asset related to these leases, offset by a gain on lease settlement of $837 resulting from the extinguishment of the lease liability associated with the closed retail locations. There were no similar gains during the nine months ended June 30, 2021.
Gain on Payroll Protection Program
During the nine months ended June 30, 2021, the Company recorded a gain of $6,150 due to the forgiveness of the PPP Loans. There were no similar transactions during the nine months ended June 30, 2020.
Gain on Bankruptcy Settlement
During the nine months ended June 30, 2021, the Company recorded a gain of $1,765 due to the discharge of certain payables from bankruptcy proceedings. There were no similar transactions during the nine months ended June 30, 2020.
Results of Operations by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,2021
|
|
|
For the Three Months Ended June 30,2020
|
|
|
|
Retail
|
|
|
Flooring
Manufacturing
|
|
|
Steel
Manufacturing
|
|
|
Corporate
& Other
|
|
|
Total
|
|
|
Retail
|
|
|
Flooring
Manufacturing
|
|
|
Steel
Manufacturing
|
|
|
Corporate
& Other
|
|
|
Total
|
|
Revenue
|
|
$
|
21,719
|
|
|
$
|
34,234
|
|
|
$
|
13,018
|
|
|
$
|
124
|
|
|
$
|
69,095
|
|
|
$
|
14,259
|
|
|
$
|
28,079
|
|
|
$
|
—
|
|
|
$
|
134
|
|
|
$
|
42,472
|
|
Cost of Revenue
|
|
|
10,035
|
|
|
|
24,377
|
|
|
|
9,609
|
|
|
|
8
|
|
|
|
44,029
|
|
|
|
6,250
|
|
|
|
19,500
|
|
|
|
—
|
|
|
|
9
|
|
|
|
25,759
|
|
Gross Profit
|
|
|
11,684
|
|
|
|
9,857
|
|
|
|
3,409
|
|
|
|
116
|
|
|
|
25,066
|
|
|
|
8,009
|
|
|
|
8,579
|
|
|
|
—
|
|
|
|
125
|
|
|
|
16,713
|
|
General and
Administrative
Expense
|
|
|
7,751
|
|
|
|
3,025
|
|
|
|
1,353
|
|
|
|
1,665
|
|
|
|
13,794
|
|
|
|
5,595
|
|
|
|
1,929
|
|
|
|
—
|
|
|
|
697
|
|
|
|
8,221
|
|
Selling and
Marketing
Expense
|
|
|
73
|
|
|
|
2,835
|
|
|
|
128
|
|
|
|
4
|
|
|
|
3,040
|
|
|
|
129
|
|
|
|
2,370
|
|
|
|
—
|
|
|
|
3
|
|
|
|
2,502
|
|
Operating Income
(Loss)
|
|
$
|
3,860
|
|
|
$
|
3,997
|
|
|
$
|
1,928
|
|
|
$
|
(1,553
|
)
|
|
$
|
8,232
|
|
|
$
|
2,285
|
|
|
$
|
4,280
|
|
|
$
|
—
|
|
|
$
|
(575
|
)
|
|
$
|
5,990
|
|
Retail Segment
Segment results for Retail include Vintage Stock and ApplianceSmart. Revenue for the three months ended June 30, 2021 increased $7,460 or 52%, as compared to the prior year, primarily due to the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19. Cost of revenue increased proportionately with the increase in revenue. Operating income for the three months ended June 30, 2021 was $3,860, as compared to operating income of $2,285 the prior year period.
Flooring Manufacturing Segment
Segment results for Flooring Manufacturing includes Marquis. Revenue for the three months ended June 30, 2021 increased $6,155, or 22%, as compared to the prior year period, due to increased sales of carpets and hard surface products related to development of new products. Cost of revenue for the three months ended June 30, 2021 increased proportionately with revenue, as compared to the prior year period. Operating income remained relatively flat for the three months ended June 30, 2021.
Steel Manufacturing Segment
Segment results for Steel Manufacturing includes Precision Marshall. The Company completed the acquisition of Precision Marshall in July 2020. Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms. In addition to higher demand, raw material prices and consumable costs have increased and have successfully been passed on to the market. Precision Marshall had experienced a more challenging work environment to hire qualified hourly workers but has been successful in ramping up staffing needs to meet the higher demand.
30
Corporate and Other Segment
Segment results for Corporate and Other includes our directory services business. Revenues and operating income continue to decline due to decreasing renewals. We expect revenue and operating income from this segment to continue to decrease in the future. We are no longer accepting new customers in our directory services business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30,2021
|
|
|
For the Nine Months Ended June 30,2020
|
|
|
|
Retail
|
|
|
Flooring
Manufacturing
|
|
|
Steel
Manufacturing
|
|
|
Corporate
& Other
|
|
|
Total
|
|
|
Retail
|
|
|
Flooring
Manufacturing
|
|
|
Steel
Manufacturing
|
|
|
Corporate
& Other
|
|
|
Total
|
|
Revenue
|
|
$
|
68,092
|
|
|
$
|
97,428
|
|
|
$
|
36,546
|
|
|
$
|
373
|
|
|
$
|
202,439
|
|
|
$
|
54,733
|
|
|
$
|
75,747
|
|
|
$
|
—
|
|
|
$
|
424
|
|
|
$
|
130,904
|
|
Cost of Revenue
|
|
|
31,391
|
|
|
|
69,224
|
|
|
|
27,981
|
|
|
|
18
|
|
|
|
128,614
|
|
|
|
25,269
|
|
|
|
54,492
|
|
|
|
—
|
|
|
|
28
|
|
|
|
79,789
|
|
Gross Profit
|
|
|
36,701
|
|
|
|
28,204
|
|
|
|
8,565
|
|
|
|
355
|
|
|
|
73,825
|
|
|
|
29,464
|
|
|
|
21,255
|
|
|
|
—
|
|
|
|
396
|
|
|
|
51,115
|
|
General and
Administrative
Expense
|
|
|
22,871
|
|
|
|
6,575
|
|
|
|
4,321
|
|
|
|
4,871
|
|
|
|
38,638
|
|
|
|
22,931
|
|
|
|
5,099
|
|
|
|
—
|
|
|
|
2,701
|
|
|
|
30,731
|
|
Selling and
Marketing
Expense
|
|
|
406
|
|
|
|
7,471
|
|
|
|
430
|
|
|
|
232
|
|
|
|
8,539
|
|
|
|
1,052
|
|
|
|
6,775
|
|
|
|
—
|
|
|
|
12
|
|
|
|
7,839
|
|
Operating Income
(Loss)
|
|
$
|
13,424
|
|
|
$
|
14,158
|
|
|
$
|
3,814
|
|
|
$
|
(4,748
|
)
|
|
$
|
26,648
|
|
|
$
|
5,481
|
|
|
$
|
9,381
|
|
|
$
|
—
|
|
|
$
|
(2,317
|
)
|
|
$
|
12,545
|
|
Retail Segment
Segment results for Retail include Vintage Stock and ApplianceSmart. Revenue for the nine months ended June 30, 2021 increased $13,359 or 24%, as compared to the prior year, primarily due to the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19. Cost of revenue increased proportionately with the increase in revenue. Operating income for the nine months ended June 30, 2021 was $13,424, as compared to operating income of $5,481 the prior year period.
Flooring Manufacturing Segment
Segment results for Flooring Manufacturing includes Marquis. Revenue for the nine months ended June 30, 2021 increased $21,681, or 29%, as compared to the prior year period, due to increased sales of carpets and hard surface products related to development of new products and the acquisition of Lonesome Oak. Cost of revenue for the nine months ended June 30, 2021 increased proportionately with revenue, as compared to the prior year period. Operating income for the nine months ended June 30, 2021 increased $4,777, or 51%, as compared to the prior year period.
Steel Manufacturing Segment
Segment results for Steel Manufacturing includes Precision Marshall. The Company completed the acquisition of Precision Marshall in July 2020. Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms. In addition to higher demand, raw material prices and consumable costs have increased and have successfully been passed on to the market. Precision Marshall had experienced a more challenging work environment to hire qualified hourly workers but has been successful in ramping up staffing needs to meet the higher demand.
Corporate and Other Segment
Segment results for Corporate and Other includes our directory services business. Revenues and operating income continue to decline due to decreasing renewals. We expect revenue and operating income from this segment to continue to decrease in the future. We are no longer accepting new customers in our directory services business.
Liquidity and Capital Resources
Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities, and funds available under our asset-based revolver lines of credit will provide sufficient liquidity to fund our operations, pay our scheduled loan payments, repurchase shares under our share buyback program, if any, and pay dividends on our shares of Series E Preferred Stock as declared by the Board of Directors, for at least the next 12 months.
We have the following three asset-based revolver lines of credit: (i) Texas Capital Bank Revolver Loan (“TCB Revolver”) utilized by Vintage Stock, (ii) Bank of America Revolver Loan (“BofA Revolver”) utilized by Marquis, and (iii) Encina Revolver Loan (“Encina Revolver”) utilized by Precision Marshall. Additionally, we have an unsecured revolving line of credit with Isaac Capital Group (“ICG Revolver”) available for use by the Company.
31
As of June 30, 2021, we had total cash on hand of $10,565 and an additional $37,707 of available borrowing under our revolving credit facilities. As we continue to pursue acquisitions and other strategic transactions to expand and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public or private sales of debt or equity securities. The amount, nature and timing of any borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.
Coronavirus
In March 2020, there was a global outbreak of COVID-19 (Coronavirus) which continues to create challenges and unprecedented conditions. Although there are effective vaccines for COVID-19 that have been approved for use, distribution of the vaccines did not begin until late 2020, and a majority of the public will likely not have access to a vaccination until sometime in 2021. Accordingly, there remains significant uncertainty about the duration and the extent of the impact of the COVID-19 pandemic. These uncertainties include, but are not limited to, the potential adverse effect of the pandemic on the Company’s supply chain partners, its employees and customers, customer sentiment in general, and traffic within shopping centers, and, where applicable, malls, containing its stores. Recommendations and/or mandates from federal, state, and local authorities to avoid large gatherings of people or self-quarantine have previously affected, and may continue to affect, traffic to the stores. As of March 31, 2020, Vintage Stock had closed all of its retail locations in response to the crisis. Beginning May 1, 2020, Vintage Stock began to reopen certain locations in compliance with government regulations and, at June 30, 2020, all Vintage Stock retail locations were reopened while maintaining compliance with government mandates. The Company is unable to predict if additional periods of store closures will be needed or mandated. During March and April 2020, Marquis conducted rolling layoffs for certain employees, however, during May 2020, most employees have returned to their respective locations. Continued impacts of the pandemic could materially adversely affect the near-term and long-term revenues, earnings, liquidity, and cash flows, and may require significant actions in response, including but not limited to, employee furloughs, reduced store hours, store closings, expense reductions or discounting of pricing of products, all in an effort to mitigate such impacts. The extent of the impact of the pandemic on the business and financial results will depend largely on future developments, including the duration of the spread of the outbreak within the U.S. and the effect of the vaccines, the impact on capital and financial markets and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted. This situation is changing rapidly, and additional impacts may arise that the Company is not aware of currently.
Working Capital
We had working capital of $36,794 as of June 30, 2021 as compared to working capital of $38,566 as of September 30, 2020.
Cash Flows from Operating Activities
The Company’s cash and cash equivalents as of June 30, 2021 was $10,565 compared to $8,984 as of September 30, 2020, an increase of $1,581. Net cash provided by operations was $32,199 for the nine months ended June 30, 2021 as compared to net cash provided by operations of $18,075 for the nine months ended June 30, 2020 primarily due to the Result of operations discussed above.
Our primary source of cash inflows is from customer receipts from sales on account, factor accounts receivable proceeds and net remittances from directory services customers processed in the form of ACH billings. Our most significant cash outflows include payments for raw materials and general operating expenses, including payroll costs and general and administrative expenses that typically occur within close proximity of expense recognition.
Cash Flows from Investing Activities
Our cash flows used in investing activities of $14,470 for the nine months ended June 30, 2021 consisted primarily of purchases of property and equipment and the investment in SW Financial. Our cash flows used in investing activities of $2,992 for the nine months ended June 30, 2020 consisted primarily of purchases of property and equipment of $2,357 and a $550 payment associated with the Lonesome Oak acquisition.
Cash Flows from Financing Activities
Our cash flows used in financing activities during the nine months ended June 30, 2021 consisted of $3,247 in net payments under revolver loans, payment on notes payable of $15,059, purchase of treasury stock of $409, partially offset by the issuance of notes payable of $2,258 primarily associated with the acquisition of a facility by Marquis.
32
Our cash flows used in financing activities during the nine months ended June 30, 2020 consisted of $5,169 net payments under revolver loans, purchase of treasury stock $1,433, payment on notes payable $15,152, proceeds on notes payable of $9,768 and cash classified as debtor-in-possession of $86.
Currently, the Company does not intend to issue shares of its common stock for liquidity purposes. We prefer to use asset-based lending arrangements and mezzanine financing together with Company provided capital to finance acquisitions and have done so historically.
Sources of Liquidity
We utilize cash on hand and cash generated from operations and have funds available to us under our revolving loan facilities to cover normal and seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash equivalents are carried at cost and consist primarily of demand deposits with commercial banks. Our term debt facilities are not revolving credit facilities and require scheduled payments of principal and interest.
TCB Revolver
Vintage Stock may borrow funds for operations under the TCB Revolver subject to availability as described in Note 6 to the consolidated financial statements. The following tables summarize the TCB Revolver for the period:
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cumulative borrowing during the period
|
|
$
|
68,892
|
|
|
$
|
46,792
|
|
Cumulative repayment during the period
|
|
|
68,510
|
|
|
|
51,063
|
|
Maximum borrowed during the period
|
|
|
8,930
|
|
|
|
11,798
|
|
Weighted average interest for the period
|
|
|
2.38
|
%
|
|
|
3.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
Total availability
|
|
$
|
4,503
|
|
|
$
|
5,520
|
|
Total outstanding
|
|
|
7,497
|
|
|
|
7,115
|
|
BofA Revolver
Marquis may borrow funds for operations under the BofA Revolver subject to availability as described in Note 6 to the consolidated financial statements. The following tables summarize the BofA Revolver for the period:
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cumulative borrowing during the period
|
|
$
|
99,137
|
|
|
$
|
85,563
|
|
Cumulative repayment during the period
|
|
|
102,854
|
|
|
|
87,919
|
|
Maximum borrowed during the period
|
|
|
—
|
|
|
|
11,347
|
|
Weighted average interest for the period
|
|
|
0.00
|
%
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
Total availability
|
|
$
|
26,765
|
|
|
$
|
21,732
|
|
Total outstanding
|
|
|
—
|
|
|
|
—
|
|
33
Encina Revolver
Precision may borrow funds for operations under the Encina Revolver subject to availability as described in Note 6 to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cumulative borrowing during the period
|
|
$
|
32,711
|
|
|
$
|
—
|
|
Cumulative repayment during the period
|
|
|
36,338
|
|
|
|
—
|
|
Maximum borrowed during the period
|
|
|
1,250
|
|
|
|
—
|
|
Weighted average interest for the period
|
|
|
6.50
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
Total availability
|
|
$
|
5,439
|
|
|
$
|
421
|
|
Total outstanding
|
|
|
11,523
|
|
|
|
14,886
|
|
Future Sources of Cash; New Products and Services
We may require additional debt financing and/or capital to finance new acquisitions, refinance existing indebtedness or other strategic investments in our business. Other sources of financing may include stock issuances and additional loans or other forms of financing. Any financing obtained may further dilute or otherwise impair the ownership interest of our existing stockholders.
34