**UNITED STATES SECURITIES**

**ANDEXCHANGE COMMISSION****Washington, DC 20549**

**FORM 10-Q**

**ý****    QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d)    OF THE SECURITIES EXCHANGE ACT OF 1934for the quarterly period ended September 30, 2004**

**OR**

**o****    TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d)   OF THE SECURITIES EXCHANGE ACT OF 1934for the transition period from          to           .**

**COMMISSION FILE NUMBER:333-118185**

** **

**LAZY DAYS’ R.V. CENTER, INC.**

(Exactname of registrant as specified in its charter)

 

| **Florida**                                                   | **59-1764794**                                             |
|---------------------------------------------------------------|------------------------------------------------------------|
| (State of  incorporation)                                     | (I.R.S. Employer  Identification No.)                      |
|                                                          |                                                       |
| **6130  Lazy Days Boulevard**                                 |                                                       |
| **Seffner,  Florida 33584-2968.**                             | **(800)  626-7800**                                        |
| (Address of Principal  Executive Offices, including Zip Code) | (Registrant’s Telephone  Number, Including Area Code) |

** **

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yeso No ý

 

Indicate by check mark whether the Registrant is anaccelerated filer (as defined in Rule 12b-2 of the Act). Yes o  No ý

As of September 30, 2004, the registrant had 100 of shares of commonstock outstanding.

 

 

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** **

** **

**TABLE OF CONTENTS**
| PART I. Financial Information |
|-------------------------------|
| ITEM  1.                      | Financial  Statements |
| ITEM  2.                      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
| ITEM 3.                       | Quantitative and  Qualitative Disclosures About Market Risk |
| ITEM 4.                       | Controls and Procedures |
|                          |   |
| PART II. OTHER INFORMATION    |
| ITEM 1.                       | Legal Proceedings |
| ITEM 2.                       | Unregistered  Sales of Equity Securities and Use of Proceeds |
| ITEM 3.                       | Defaults Upon Senior Securities |
| ITEM  4.                      | Submission  of Matters to a Vote of Security Holders |
| ITEM 5.                       | Other  Information |
| ITEM 6.                       | Exhibits and Reports on Form 8-K |
|                          |   |
| SIGNATURES                    |

# ** **

 

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# ** **

# **PART I**.Financial Information

## **ITEM 1. Financial Statements**

**Lazy Days’ R.V. Center, Inc., awholly owned**

** subsidiary of LD Holdings, Inc.**

***CondensedBalance Sheets***

 
| ** **                                                                                                                                             | ** ** | **September 30,** | ** **  | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|-------------|------------------|------------|
| ** **                                                                                                                                             | ** ** | **2004**          | ** **  | **2003**         | ** ** |
| **ASSETS**                                                                                                                                             | ** ** | **(Unaudited)**   | ** **  | ** **       | ** ** |
| Current assets                                                                                                                                         |       |              |        |             |       |
| Cash                                                                                                                                                   |       | $                 | 5,772,846   |             | $          | 8,575,911 |   |
| Receivables, net                                                                                                                                       |       | 8,949,330         |        | 15,079,603       |       |
| Inventories                                                                                                                                            |       | 78,506,861        |        | 69,872,724       |       |
| Refundable  income taxes                                                                                                                               |       | 4,563,496         |        | —           |       |
| Other current  assets                                                                                                                                  |       | 3,932,086         |        | 4,122,969        |       |
| Total current  assets                                                                                                                                  |       | 101,724,619       |        | 97,651,207       |       |
|                                                                                                                                                   |       |              |        |             |       |
| Property and  equipment, net                                                                                                                           |       | 33,861,619        |        | 23,938,987       |       |
| Loan and other  costs, net                                                                                                                             |       | 6,934,217         |        | 3,121,872        |       |
| Goodwill                                                                                                                                               |       | 105,338,631       |        | —           |       |
| Intangible  assets, net                                                                                                                                |       | 83,024,688        |        | —           |       |
| Other assets                                                                                                                                           |       | 4,269,178         |        | 6,800,031        |       |
|                                                                                                                                                   |       |              |        |             |       |
| Total assets                                                                                                                                           |       | $                 | 335,152,952 |             | $          | 131,512,097 |   |
|                                                                                                                                                   |       |              |        |             |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY (DEFICIENCY)**                                                                                            |       |              |        |             |       |
| Current  liabilities                                                                                                                                   |       |              |        |             |       |
| Floor plan notes  payable                                                                                                                              |       | $                 | 61,893,737  |             | $          | 52,045,981 |   |
| Current  maturities of long-term debt                                                                                                                  |       | —            |        | 18,018,916       |       |
| Accounts payable                                                                                                                                       |       | 6,496,229         |        | 14,805,504       |       |
| Income taxes  payable                                                                                                                                  |       | —            |        | 1,632,557        |       |
| Accrued interest  payable                                                                                                                              |       | 6,796,722         |        | 291,176          |       |
| Other current  liabilities                                                                                                                             |       | 3,324,846         |        | 1,845,844        |       |
| Total current liabilities                                                                                                                              |       | 78,511,534        |        | 88,639,978       |       |
|                                                                                                                                                   |       |              |        |             |       |
| Long-term debt,  less current maturities                                                                                                               |       | 150,167,331       |        | 39,796,635       |       |
| Deferred  compensation                                                                                                                                 |       | —            |        | 3,622,929        |       |
| Deferred income  taxes                                                                                                                                 |       | 35,599,570        |        | —           |       |
| Other                                                                                                                                                  |       | 2,854,787         |        | 3,398,196        |       |
| Total  liabilities                                                                                                                                     |       | 267,133,222       |        | 135,457,738      |       |
|                                                                                                                                                   |       |              |        |             |       |
| ESOP guarantee  purchase obligation of parent                                                                                                          |       | —            |        | 18,606,448       |       |
|                                                                                                                                                   |       |              |        |             |       |
| Redeemable  preferred stock of parent — Class A, $.01 par value, redemption value $1 per  share: 81,013,368 shares issued and outstanding in 2003 |       | —            |        | 81,013,368       |       |
|                                                                                                                                                   |       |              |        |             |       |
| Stockholder’s  equity (deficiency):                                                                                                               |       |              |        |             |       |
| Common stock,  $.01 par value: 100 shares issued and outstanding                                                                                       |       | 1                 |        | 1                |       |
| Unearned ESOP  shares of parent                                                                                                                        |       | —            |        | (114,129,813     | )          |
| Paid-in capital                                                                                                                                        |       | 67,000,000        |        | (16,823,287      | )          |
| Retained  earnings                                                                                                                                     |       | 1,019,729         |        | 27,387,642       |       |
| Total  stockholder’s equity (deficiency)                                                                                                          |       | 68,019,730        |        | (103,565,457     | )          |
|                                                                                                                                                   |       |              |        |             |       |
| Total  liabilities and stockholder’s equity (deficiency)                                                                                          |       | $                 | 335,152,952 |             | $          | 131,512,097 |   |

 

See accompanying notes tocondensed financial statements

 

1

----

 

 

**Lazy Days’ R.V. Center, Inc., awholly owned**

** subsidiary of LD Holdings, Inc.**

***CondensedStatements of Operations*** (Unaudited)

 
| ** **                                                                                      | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                      | ** ** | **September 30,**      | ** ** | **September 30,**     | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                                      | ** ** | **2004**               | ** ** | **2003**              | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| **Revenues**                                                                                    |       |                   |       |                  |       |   |   |   |   |
| New vehicle                                                                                     |       | $                      | 90,277,420 |                  | $          | 85,043,840 |   | $ | 365,877,978 |   | $ | 317,889,657 |   |
| Pre-owned  vehicle                                                                              |       | 52,004,073             |       | 62,718,056            |       | 202,915,427 |   | 218,066,104 |   |
| Parts, service  and other                                                                       |       | 8,114,585              |       | 8,264,078             |       | 30,463,078 |   | 29,476,715 |   |
| Finance and  insurance                                                                          |       | 4,088,037              |       | 4,370,270             |       | 17,253,306 |   | 17,404,641 |   |
|                                                                                            |       | 154,484,115            |       | 160,396,244           |       | 616,509,789 |   | 582,837,117 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| **Cost of  revenues**                                                                           |       |                   |       |                  |       |   |   |   |   |
| New vehicle                                                                                     |       | 81,444,600             |       | 76,827,267            |       | 331,771,932 |   | 287,236,868 |   |
| Pre-owned  vehicle                                                                              |       | 47,029,335             |       | 58,211,275            |       | 180,540,033 |   | 198,302,373 |   |
| Parts, service  and other                                                                       |       | 3,998,910              |       | 3,828,541             |       | 13,139,018 |   | 13,575,407 |   |
|                                                                                            |       | 132,472,845            |       | 138,867,083           |       | 525,450,983 |   | 499,114,648 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| **Gross  profit**                                                                               |       | 22,011,270             |       | 21,529,161            |       | 91,058,806 |   | 83,722,469 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Selling, general  and administrative expenses                                                   |       | 19,778,667             |       | 16,609,011            |       | 68,251,214 |   | 54,354,559 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Interest expense                                                                                |       | 5,143,811              |       | 1,318,111             |       | 9,397,005 |   | 4,621,549 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| **Income  (loss) before income taxes**                                                          |       | (2,911,208             | )          | 3,602,049             |       | 13,410,587 |   | 24,746,361 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Income tax  expense (benefit)                                                                   |       | (478,021               | )          | 547,512               |       | 4,996,929 |   | 3,761,447 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| **Net  income (loss)**                                                                          |       | $                      | (2,433,187 | )                     | $          | 3,054,537 |   | $ | 8,413,658 |   | $ | 20,984,914 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Earnings (loss)  per common share:                                                              |       |                   |       |                  |       |   |   |   |   |
| Basic                                                                                           |       | $                      | (24,331.87 | )                     | $          | 7.33 |   | $ | 34.41 |   | $ | 50.35 |   |
| Diluted                                                                                         |       | (24,331.87             | )          | 1.33                  |       | 8.79 |   | 9.16 |   |
|                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Weighted-average  number of shares used in the computation of earnings (loss) per common share: |       |                   |       |                  |       |   |   |   |   |
| Basic                                                                                           |       | 100                    |       | 416,780               |       | 244,537 |   | 416,813 |   |
| Diluted                                                                                         |       | 100                    |       | 2,290,534             |       | 956,754 |   | 2,290,566 |   |

 

Seeaccompanying notes to condensed financial statements

 

2

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**Lazy Days’ R.V. Center, Inc., awholly owned**

** subsidiary of LD Holdings, Inc.**

***Condensed Statements of Cash Flows*** (Unaudited)

 
| ** **                                                                                | ** ** | **Nine Months Ended** | ** **  |
|-------------------------------------------------------------------------------------------|------------|-----------------------|-------------|
| ** **                                                                                | ** ** | **September 30,**     | ** **  | **September 30,** | ** ** |
| ** **                                                                                | ** ** | **2004**              | ** **  | **2003** | ** ** |
| **Cash  flows from operating activities**                                                 | ** ** | ** **            | ** **  | ** ** | ** ** |
| Net income                                                                                |       | $                     | 8,413,658   |   | $ | 20,984,914 |   |
| Adjustments to  reconcile net income to net cash from operating activities                |       |                  |        |   |   |
| Depreciation of  property and equipment                                                   |       | 1,559,629             |        | 1,589,319 |   |
| Depreciation of  rental inventory                                                         |       | 235,725               |        | — |   |
| Amortization of  intangible assets                                                        |       | 2,275,312             |        | — |   |
| Amortization and  write-off of loan and other costs                                       |       | 3,362,441             |        | 825,282 |   |
| Amortization of  discount on long-term debt                                               |       | 90,131                |        | — |   |
| Deferred income  taxes                                                                    |       | (306,680              | )           | — |   |
| Gain on sale of  property and equipment                                                   |       | (3,212                | )           | (5,135 | ) |
| Change in assets  and liabilities                                                         |       |                  |        |   |   |
| Receivables                                                                               |       | 6,130,273             |        | 3,236,438 |   |
| Inventories                                                                               |       | (3,893,380            | )           | 13,809,017 |   |
| Accounts payable                                                                          |       | (8,309,275            | )           | (5,790,805 | ) |
| Accrued interest  payable                                                                 |       | 6,505,546             |        | — |   |
| Deferred compensation                                                                     |       | (3,622,929            | )           | — |   |
| Other assets and  liabilities                                                             |       | (2,298,755            | )           | (273,794 | ) |
| Net cash from  operating activities                                                       |       | 10,138,484            |        | 34,375,236 |   |
|                                                                                      |       |                  |        |   |   |
| **Cash  flows from investing activities**                                                 |       |                  |        |   |   |
| Proceeds from  sale of property and equipment                                             |       | 4,696                 |        | 10,947 |   |
| Purchases of  property and equipment                                                      |       | (1,269,470            | )           | (1,310,422 | ) |
| Loan and other  costs                                                                     |       | (7,174,786            | )           | — |   |
| Net advances to  parent                                                                   |       | (106,611,394          | )           | (3,510,724 | ) |
| Net cash from  investing activities                                                       |       | (115,050,954          | )           | (4,809,999 | ) |
|                                                                                      |       |                  |        |   |   |
| **Cash  flows from financing activities**                                                 |       |                  |        |   |   |
| Net borrowings  (payments) under floor plan                                               |       | 9,847,756             |        | (12,696,040 | ) |
| Borrowings on  long-term debt                                                             |       | 150,077,200           |        | — |   |
| Repayments of  long-term debt                                                             |       | (57,815,551           | )           | (14,291,446 | ) |
| Net cash from  financing activities                                                       |       | 102,109,405           |        | (26,987,486 | ) |
|                                                                                      |       |                  |        |   |   |
| Net change in  cash                                                                       |       | (2,803,065            | )           | 2,577,751 |   |
|                                                                                      |       |                  |        |   |   |
| Cash at  beginning of period                                                              |       | 8,575,911             |        | 4,621,442 |   |
|                                                                                      |       |                  |        |   |   |
| **Cash at  end of period**                                                                |       | $                     | 5,772,846   |   | $ | 7,199,193 |   |
|                                                                                      |       |                  |        |   |   |
| Supplemental  disclosures of cash flow information                                        |       |                  |        |   |   |
| Cash paid during  the period for interest                                                 |       | $                     | 3,021,196   |   | $ | 4,161,713 |   |
| Cash paid during  the period for income taxes                                             |       | 10,123,408            |        | 10,350,000 |   |
|                                                                                      |       |                  |        |   |   |
| Non-cash  investing and financing activities in conjunction with a business  acquisition: |       |                  |        |   |   |
| Fair value of  assets acquired                                                            |       | $                     | 325,115,634 |   | $ | — |   |
| Liabilities  assumed                                                                      |       | 108,038,434           |        | — |   |

** **

See accompanying notes tocondensed financial statements

 

3

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**Lazy Days’ R.V. Center, Inc., awholly owned**

** subsidiary of LD Holdings, Inc.**

***Notes to CondensedFinancial Statements***

** **

**NOTE 1 - BASIS OF PRESENTATION ANDOPINION OF MANAGEMENT**

 

The accompanying unaudited interim condensed financialstatements include the accounts of Lazy Days’ R.V. Center, Inc. (the “Company”or “Lazy Days”), a wholly owned subsidiary of LD Holdings, Inc. (“LD Holdings”),a non-operating holding company, and have been prepared in accordance with theinstructions to Form 10-Q and therefore do not include all of the informationand financial statement disclosures necessary for a fair presentation offinancial position, results of operations and cash flows in conformity withaccounting principles generally accepted in the United States of America.  In the opinion of management, the informationfurnished herein includes all adjustments necessary to reflect a fair statementof the interim periods reported. All adjustments are of a normal and recurringnature. The December 31, 2003 condensed balance sheet data was derivedfrom audited financial statements, but does not include all disclosuresrequired by accounting principles generally accepted in the United States ofAmerica.

**NOTE 2 - ACQUISITION**

 

On May 14, 2004, RV Acquisition, Inc. (“RV Acquisition”),a newly formed holding company owned by an affiliate of Bruckmann, Rosser,Sherrill & Co., Inc. (“BRS”) and certain original shareholders of LDHoldings, purchased all of the issued and outstanding shares of LD Holdings fora total purchase price of $217.1 million. The acquisition has been accounted for as a purchase and, accordingly,the acquired assets and liabilities assumed have been recorded at theirestimated fair values at the date of acquisition and approximate the following:

| Cash                           |   | $           | 6,438,002   |   |
|--------------------------------|--------|-------------|-------------|--------|
| Other current  assets          |   | 82,988,043  |        |
| Property, plant  and equipment |   | 33,547,745  |        |
| Other assets                   |   | 4,328,427   |        |
| Loan and other  costs          |   | 7,174,786   |        |
| Intangible  assets             |   | 85,300,000  |        |
| Goodwill                       |   | 105,338,631 |        |
| Current  liabilities           |   | (66,688,430 | )           |
| Other  liabilities             |   | (5,443,754  | )           |
| Deferred income  taxes         |   | (35,906,250 | )           |
|                           |   |        |        |
|                           |   | $           | 217,077,200 |   |
|                           |   |        |        |

 

In connection with the acquisition, the Companyentered into a management services agreement with BRS and a shareholder of LDHoldings, whereby the parties agreed to provide general management services tothe Company, as defined.  In exchange forthese services, the Company agreed to pay the parties an annual management feeequal to the greater of:  1.75% of theCompany’s annual EBITDA, as defined, or $500,000.  Management fee expense for the three andnine-month periods ended September 30, 2004 was $84,892 and $127,338,respectively.  

4

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**NOTE3 - RECEIVABLES**

 

Receivables consist of the following:

| ** **                                    | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                                    | ** ** | **2004**          | ** ** | **2003**         | ** ** |
|                                          |       |              |       |             |       |
| Contracts in  transit and vehicle receivables |       | $                 | 4,147,024  |             | $          | 9,112,832 |   |
| Manufacturer  receivables                     |       | 3,870,102         |       | 3,774,843        |       |
| Finance and  other receivables                |       | 1,176,057         |       | 2,513,762        |       |
|                                          |       | 9,193,183         |       | 15,401,437       |       |
| Less: Allowance  for doubtful accounts        |       | 243,853           |       | 321,834          |       |
|                                          |       |              |       |             |       |
|                                          |       | $                 | 8,949,330  |             | $          | 15,079,603 |   |

 

 

Contracts in transit represent receivables fromfinancial institutions for the portion of the vehicle sales price financed bythe Company’s customers through financing sources arranged by the Company.

** **

**NOTE4 - INVENTORIES**

 

Inventories consist of the following:

| ** **                                                     | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                                                     | ** ** | **2004**          | ** ** | **2003**         | ** ** |
|                                                           |       |              |       |             |       |
| New recreational  vehicles                                     |       | $                 | 56,752,204 |             | $          | 52,968,630 |   |
| Pre-owned  recreational vehicles                               |       | 18,495,864        |       | 20,820,388       |       |
| Rental  inventory, net of accumulated depreciation of $235,725 |       | 2,963,474         |       | —           |       |
| Parts,  accessories and other                                  |       | 969,241           |       | 1,060,188        |       |
|                                                           |       | 79,180,783        |       | 74,849,206       |       |
| Less: LIFO  reserve                                            |       | 673,922           |       | 4,976,482        |       |
|                                                           |       |              |       |             |       |
|                                                           |       | $                 | 78,506,861 |             | $          | 69,872,724 |   |

 

**NOTE 5 — GOODWILL AND OTHER INTANGIBLE ASSETS**

 

Goodwill represents the excess of costs over fairvalue of net assets of businesses acquired. Pursuant to Statement of Financial Accounting Standards (‘‘SFAS’’) No.142, *Goodwill and Other Intangible Assets*,goodwill and intangible assets acquired in a purchase business combination anddetermined to have an indefinite life are not amortized, but instead tested forimpairment at least annually.  SFAS No.142 also requires that intangible assets with estimable useful lives be amortizedover their respective estimated useful lives and reviewed for impairment inaccordance with SFAS No. 144, *Accounting for Impairmentor Disposal of Long-Lived Assets*.

 

5

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Intangible assets (all acquired in connection with theacquisition described in Note 2) and the related accumulated amortization as ofSeptember 30, 2004 are summarized as follows:

 

| ** **                        | ** ** | **Gross**    | ** ** | ** **       | ** ** |
|-----------------------------------|------------|--------------|------------|------------------|------------|
| ** **                        | ** ** | **Carrying** | ** ** | **Accumulated**  | ** ** |
| ** **                        | ** ** | **Amount**   | ** ** | **Amortization** | ** ** |
| Amortizable  intangible assets:   | ** ** | ** **   | ** ** | ** **       | ** ** |
| Manufacturer  relationships       |       | $            | 26,700,000 |             | $          | 250,312 |   |
| Non-compete  agreement            |       | 9,000,000    |       | 675,000          |       |
| Customer  database                |       | 3,600,000    |       | 1,350,000        |       |
|                              |       | 39,300,000   |       | 2,275,312        |       |
| Unamortizable  intangible assets: |       |         |       |             |       |
| Trade names and  trademarks       |       | 46,000,000   |       | —           |       |
|                              |       | $            | 85,300,000 |             | $          | 2,275,312 |   |

 

Amortizable intangible assets are being amortizedusing the straight-line method over 40 years for manufacturer relationships,five years for the non-compete agreement and one year for the customerdatabase.  The weighted-averageamortization period for all amortizable intangible assets acquired during 2004is 28.4 years.  Trade names andtrademarks are considered to have indefinite useful lives and are not beingamortized.

Amortization expense for the three and nine-monthperiods ended September 30, 2004 was $1,516,874 and $2,275,312,respectively.  Estimated amortizationexpense for the three month period ending December 31, 2004 and for each of thesubsequent five years ending December 31 is: 2004 (three months)—$1,516,875, 2005—$3,817,500,2006— $2,467,500, 2007—$2,467,500, 2008—$2,467,500 and 2009—$1,342,500.

**NOTE 6 — REVOLVING LINE OF CREDIT**

 

Effective May 14, 2004, the Company entered into afive-year, senior secured revolving line of credit facility.  The facility provides for borrowings up to$15 million, as defined, which includes a $10 million sub-facility for theissuance of letters of credit.  Therewere no outstanding advances under the revolving line of credit at September30, 2004.  The Company had outstandingletters of credit amounting to $2,500,000 at September 30, 2004.  Interest on outstanding advances is payablemonthly at the lender’s prime rate plus 1.00% or LIBOR rate plus 3.50%depending on the pricing option selected by the Company.  The Company must also pay an annual fee of..50% on the unused portion of the line of credit.

Borrowings under the revolving line of credit arecollateralized by substantially all of the Company’s assets.

 

6

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** **

**NOTE 7 - LONG-TERM DEBT**

 

Effective May 14, 2004, the Company issued $152million of unsecured, senior notes in conjunction with the acquisition of LDHoldings (see Note 2).  The notes matureMay 15, 2012 and bear interest at an annual rate of 11.75% payable eachNovember 15 and May 15, commencing November 15, 2004, to the registered holdersat the close of business on November 1 and May 1 immediately preceding theinterest payment date.  The notes aresubordinated to all secured debt of the Company and are subject to certain restrictivecovenants.  The outstanding balance ofunsecured senior notes at September 30, 2004 was $150,167,331, net of unearneddiscount of $1,832,669.

**NOTE 8 — EARNINGS PER SHARE**

 

Earnings (loss) per share forthe three months and nine months ended September 30, 2004 and 2003 are computedas follows:
| ** **                                                         | ** ** | **Three Months Ended Sept. 30,** | ** ** | **Nine Months Ended Sept. 30,** | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                         | ** ** | **2004**                         | ** ** | **2003**                        | ** ** | **2004** | ** ** | **2003** | ** ** |
| Numerator:                                                         |       |                             |       |                            |       |   |   |   |   |
|                                                               |       |                             |       |                            |       |   |   |   |   |
| Net income (loss)                                                  |       | $                                | (2,433,187 | )                               | $          | 3,054,537 |   | $ | 8,413,658 |   | $ | 20,984,914 |   |
|                                                               |       |                             |       |                            |       |   |   |   |   |
| Denominator:                                                       |       |                             |       |                            |       |   |   |   |   |
|                                                               |       |                             |       |                            |       |   |   |   |   |
| Weighted-average  shares outstanding, for basic earnings per share |       | 100                              |       | 416,780                         |       | 244,537 |   | 416,813 |   |
|                                                               |       |                             |       |                            |       |   |   |   |   |
| Effect of  dilutive securities: Common stock put options of parent |       | —                           |       | 1,873,754                       |       | 712,217 |   | 1,873,754 |   |
|                                                               |       |                             |       |                            |       |   |   |   |   |
| Weighted-average  shares, for diluted earnings per share           |       | 100                              |       | 2,290,534                       |       | 956,754 |   | 2,290,566 |   |
|                                                               |       |                             |       |                            |       |   |   |   |   |
| Earnings (loss) per share — basic                        |       | $                                | (24,331.87 | )                               | $          | 7.33 |   | $ | 34.41 |   | $ | 50.35 |   |
| Earnings (loss) per share — diluted                      |       | (24,331.87                       | )          | 1.33                            |       | 8.79 |   | 9.16 |   |

** **

 

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** **

**NOTE 9 — LD HOLDINGS AND RVACQUISITION**

 

The balance sheets of LDHoldings, a wholly owned subsidiary of RV Acquisition, consisted of thefollowing:
| ** **                                                    | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **2004**          | ** ** | **2003**         | ** ** |
|                                                          |       |              |       |             |       |
| ASSETS                                                        |       |              |       |             |       |
| Investment in  Lazy Days                                      |       | $                 | 68,019,730 |             | $          | — |   |
|                                                          |       |              |       |             |       |
| LIABILITIES                                                   |       |              |       |             |       |
| Investment in  Lazy Days                                      |       | $                 | —     |             | $          | 3,945,641 |   |
|                                                          |       |              |       |             |       |
| ESOP GUARANTEE  PURCHASE OBLIGATION                           |       | —            |       | 18,606,448       |       |
|                                                          |       |              |       |             |       |
| REDEEMABLE PREFERRED  STOCK, CLASS A                          |       | —            |       | 81,013,368       |       |
|                                                          |       |              |       |             |       |
| STOCKHOLDERS’  EQUITY (DEFICIENCY)                       |       |              |       |             |       |
| Convertible  preferred stock, Class B                         |       | —            |       | 10,675,448       |       |
| Common stock,  Class A                                        |       | 100               |       | 16,802           |       |
| Common stock,  Class C                                        |       | —            |       | 472              |       |
| Unearned ESOP  shares                                         |       | —            |       | (114,129,813     | )          |
| Paid-in capital                                               |       | 48,592,635        |       | (10,347,233      | )          |
| Retained  earnings                                            |       | 19,426,995        |       | 10,331,775       |       |
| Treasury stock                                                |       | —            |       | (112,908         | )          |
| Total  stockholders’ equity (deficiency)                 |       | 68,019,730        |       | (103,565,457     | )          |
|                                                          |       |              |       |             |       |
| Total  liabilities and stockholders’ equity (deficiency) |       | $                 | 68,019,730 |             | $          | — |   |

 

The Class A Preferred stock of LD Holdings, which wasredeemed on May 14, 2004, paid a 12% cumulative dividend, compounded quarterly,and was senior to all other equity.  Itwas convertible into the common equity of LD Holdings, at any time, equal tothe number of shares being converted divided by 7.0267751 and voted on an “asconverted” basis.  The dividends werepaid in additional Class A Preferred stock, in arrears, prior to the date onwhich all debt of the Company has been repaid and in cash, in arrears,thereafter.  LD Holdings was required toredeem, at a price of $1 per share, all Class A Preferred stock on the earlierof the following specified dates:  (1)August 2, 2007 or (2) the 90th day following the full payment of all debt.

The Class B Preferred stock of LD Holdings, which wasredeemed on May 14, 2004, paid an 8% cumulative dividend, compounded quarterly,in additional Class B Preferred stock, in arrears, and was senior to the commonequity of LD Holdings. It was convertible into the common equity of LD Holdingsequal to the number of shares being converted divided by the current per sharefair value of LD Holdings’ common stock, at any time or automatically upon theconsummation of the sale of LD Holdings or the conversion of 50% of theoriginally issued Class A Preferred shares, into the common equity of LDHoldings.  The Class B Preferred stockvoted on the basis of 200% of its “as converted” basis.  The dividends are to be paid at theredemption price only after all Company debt has been paid.

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The balance sheet of RV Acquisition consisted of thefollowing at September 30, 2004:
| ASSETS                           |   |      |       |
|----------------------------------|--------|-----------|------------|
| Investment in LD  Holdings       |   | $         | 68,019,730 |   |
|                             |   |      |       |
| STOCKHOLDERS’  EQUITY       |   |      |       |
| Preferred stock,  Series A       |   | $         | 62,000,000 |   |
| Common stock,  $.01 par value    |   | 50,000    |       |
| Paid-in capital                  |   | 4,950,000 |       |
| Retained  earnings               |   | 1,019,730 |       |
| Total  stockholders’ equity |   | $         | 68,019,730 |   |

 

The Series A Preferred Stock of RV Acquisition accruesdividends at a rate of 14% per annum, compounded semi-annually. Dividends onthe Series A Preferred Stock are not required to be paid in cash and accruewhether or not declared and whether or not there are profits, surplus or otherfunds legally available for payment of the dividend. Upon a sale of theCompany, the holders of Series A Preferred Stock have the right to request RVAcquisition to redeem their shares at a price equal to the initial purchaseprice plus any accrued and unpaid dividends thereon. Similarly, BRS (as holderof the majority of the Series A Preferred Stock) has the right, upon certainchange of control transactions, to have such transactions treated as aliquidation event, as a result of which all shares of Series A Preferred Stockwill be redeemed at a price equal to the initial purchase price plus anyaccrued and unpaid dividends thereon.

 

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## **ITEM 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

**Forward-lookingStatements**

Some of the statements contained in this report areforward-looking in nature. In some cases, you can identify forward-lookingstatements by terminology such as “believes,” “expects,” “may,” “will,” “should,”“anticipates” or “intends” or the negative of such terms or other comparableterminology, or by discussions of strategy. You are cautioned that our businessand operations are subject to a variety of risks and uncertainties, and,consequently, our actual results may materially differ from those projected byany forward-looking statements. Some of the risks and uncertainties arediscussed below in “—Cautionary Statement for Forward Looking Information” andelsewhere in this report.

**Certain Defined Terms**

In this report, “Lazydays,” the “Company,” “we,” “us”or “our” refer to Lazy Days’ R.V. Center, Inc. In this report, “Holdings”refers to LD Holdings, Inc., our parent company, and, unless the contextotherwise requires, its subsidiaries.

**Recent Events**

Florida was hit by four hurricanes between August 13,2004 and September 26, 2004.  Theseevents impacted our third quarter results significantly.  From an operations standpoint we were withoutpower and/or phones, or forced to close, for approximately 10 days.  From a sales standpoint we were unable towrite insurance policies for our Florida customers for approximately 20days.  Additionally, in a period when oursales typically are derived from the Florida market, millions of Floridaresidents were forced to evacuate their homes for several days.  Fortunately we did not experience significantdamage to our facility or inventory from any of the recent hurricanes, and wewere able to resume business after power and telecommunications services wererestored and evacuation orders were rescinded.

**Overview**

We are the world’s largest single-site dealer ofrecreational vehicles (‘‘RVs’’) with the industry’s broadest selection of newand previously-owned RVs. We are a primary point of distribution for nine ofthe leading manufacturers in the recreational vehicle retail industry. Locatedon a 126-acre facility outside of Tampa, Florida, we are widely recognized inthe RV community as the premier destination for RV enthusiasts, attracting over250,000 visitors each year to our RV dealership, and approximately 1.3 millionvisitors per year to our facility (including visitors to additional attractionsthat appeal to RV owners located adjacent to our site, namely Camping World,Cracker Barrel and Flying J Travel Plaza).

We offer our customers an extensive selection of RVsand a variety of services, such as financing, insurance and a 230-bay,fully-staffed service and repair department. Our inventory is displayed in apark-like setting and our facility also includes a full-service RV park, twoswimming pools, tennis courts and meeting and dining facilities.

We derive our revenues from sales of new units, salesof pre-owned units, commissions earned on sales of third-party financing andinsurance products, service and repairs and visitors fees at RallyPark.  In 2003, we derived our revenues from thesecategories in the following percentages, 55.1%, 36.9%, 3.0%, 4.8% and 0.2%,respectively. New and pre-owned unit sales accounted for more than 90% of totalrevenues. These revenue contributions have remained consistent through the lastthree years, varying by no more than 2% in any category.

The vast majority of our costs of revenues are relatedto inventory purchases. New and pre-owned vehicles have accounted for 97% ormore of cost of revenues in each of the previous three years. We 

 

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believe we are the nation’slargest single point of distribution for RVs and a primary retail outlet fornine of the leading manufacturers in the industry. Additionally, increased unitcosts are immediately passed through to end customers. As a result, our grossprofit margin has been 14.4%, 14.5% and 14.1% for the years ended December 31,2003, 2002 and 2001, respectively.

Our gross profit margins on pre-owned vehicles aretypically higher on a percentage basis while our gross profit margins on anabsolute dollar basis are typically higher on new vehicles. In 2003, however,gross profit margins on new vehicles averaged 9.2% compared to 9.1% forpre-owned vehicles, and our gross profit from sales of new vehicles was $38million and $25 million for pre-owned vehicles. Our gross profit margin onpre-owned vehicles was lower in 2003 due to reductions of pre-owned vehicleinventory over the course of the year and additional sales through the wholesalechannel.

Salaries, commissions and benefits represent thelargest component of Lazydays’ total selling, general and administrativeexpense and comprised more than 60% of total selling, general andadministrative expense. In 2003, approximately 15% of our selling, general andadministrative expense consisted of commissions for our sales force which aredirectly correlated to RV vehicle sales levels. Selling, general andadministrative expense has consistently tracked revenue on a percentage basis.

**Results of Operations**

**Three Months Ended  September 30, 2004 Compared to Three MonthsEnded September 30, 2003 (Unaudited)**

*Revenues*. Revenues decreased from $160.4 million in the three months ended Septemer 30, 2003 to $154.5 million inthe comparable period in 2004, or approximately 3.7%. This decrease primarilyresulted from hurricane activity throughout the state of Florida.

*New Unit Sales*. Sales of new vehicles increased from $85.0 million in the three monthsended September 30, 2003 to $90.3 million in the comparable period in 2004, or6.2%. Unit sales of new vehicles, excluding wholesale, increased from 765****in the three months ended September 30,2003 to 840 in the comparable period in 2004, or 9.8%.  Although unit volumes increased, the averageselling price for new units decreased. This was due to a change in sales mixresulting from a 69% increase in towable sales.

*Pre-Owned Unit Sales*. Sales of pre-owned vehicles decreased from $62.7 million in the threemonths ended September 30, 2003 to $52.0 million in the comparable period in2004, or 17.1%.  This decrease wasprimarily attributable to a reduction in wholesale sales and hurricane activitythroughout the state of Florida.**** The average selling price for pre-owned units,excluding wholesale units, increased from approximately $59,200 in the threemonths ended September 30, 2003 to approximately $61,800 in the comparableperiod in 2004, or 4.4%. Unit sales of pre-owned vehicles, excluding wholesaleunits, decreased from 852 in the three months ended September 30, 2003 to 726in the comparable period in 2004, or 14.8%. ** **The increase in the average salesprice per pre-owned vehicle was attributable to more expensive vehicles beingsold. We acquire most of our pre-owned vehicle inventory through trade-ins and,over time, these trade-ins increasingly include features and amenitiesintroduced into the RV market over the past few years, such as ‘‘slide-outs,’’which effectively increase the value of the vehicles.

*Finance and Insurance RelatedRevenues*.  Finance, insurance and extended warrantyrelated revenues decreased from $4.4 million in the three months endedSeptember 30, 2003 to $4.1 million in the comparable period in 2004, or 6.5%.The decrease in finance, insurance and extended warranty related revenues wasprimarily attributable to a decrease in the percentage of units for which wearranged financing. Finance, insurance and extended warranty revenue per unitdecreased from $2,703 in the three months ended September 30, 2003 to $2,610 inthe comparable period in 2004, or 3.4%.

 

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*Parts, Service and Other Revenues*. Parts and service revenues decreased from $8.3 million in the threemonths ended September 30, 2003 and to $8.1 million in the comparable period in2004, or 1.8%.

*Gross Profit*. Gross profit consists of gross revenues less our cost of sales andservices. Gross profit increased from $21.5 million in the three months endedSeptember 30, 2003 to $22.0 million in the comparable period in 2004, or 2.2%.This increase was largely attributable to increased new unit sales volume.Gross profit margin increased from 13.4% in the three months ended September30, 2003 to 14.2% in the comparable period in 2004.

*Selling,General and Administrative Expenses*.  Selling,general and administrative expenses, including depreciation and amortization,increased from $16.6 million, or 10.4% of revenues, in the three months endedSeptember 30, 2003 to $19.8 million, or 12.8% of revenues, in the comparableperiod in 2004. This increase was primarily due to increases in amortizationand depreciation related to the acquisition. Historically, salary, commissionsand benefits have comprised the majority of our total selling, general andadministrative expenses, and were equal to****49.2% of selling, general andadministrative expenses in the three months ended September 30, 2004, ascompared to 60.7% in the comparable period in 2003.

*Operating Profit*. Operating profit represents our gross profit, less selling, general andadministrative expenses and depreciation and amortization.  Operating profit decreased from $4.9 millionin the three months ended September 30, 2003 to $2.2 million in the comparableperiod in 2004, or 54.6%. This decrease was due to increased selling, generaland administrative expenses, particularly the acquisition related amortizationand depreciation expenses.

*Interest Expense—Floor Plan CreditFacility*.  Interest expense on our floor plan creditfacility increased from $0.5****millionin the three months ended September 30, 2003 to $0.7****million in the comparable period in 2004, or 21.7%. This wasattributable to an increase in average outstanding borrowings under our floorplan credit facility.

*Other Interest Expense*. Other interest expense was primarily related to interest payments underour senior secured revolving credit facility and new senior notes. Otherinterest expense increased from $0.8 million in the three months endedSeptember 30, 2003 to $4.5 million in the comparable period in 2004, or 480.9%.This increase was attributable to our new senior notes.

*Income Tax Expense (Benefit)*. Income tax expense decreased from $0.5 million in the three months endedSeptember 30, 2003 to an income tax benefit of $0.5 million in the comparableperiod in 2004.  This decrease wasprimarily attributable to the pre-tax loss of $2.9 million we experiencedduring the three-month period ended September 30, 2004 compared to pre-taxincome of $3.6****million during thethird quarter of 2003.  Income taxexpense in 2003 was also favorably impacted by the reversal of a $7.2 milliondeferred income tax valuation allowance established in prior years, of which$0.9 million was reflected in the third quarter of 2003.

**Nine Months EndedSeptember 30, 2004 compared to Nine Months Ended September 30, 2003 (Unaudited)**

*Revenues*. Revenues increased from $582.8 million in the nine-month period endedSeptember 30, 2003 to $616.5 million for the comparable period in 2004, or5.8%. This increase resulted from increased market share penetration and morefavorable macroeconomic conditions.

*New Unit Sales*. Sales of new vehicles increased from $317.9 million in the nine-monthperiod ended September 30, 2003 to $365.9 million for the comparable period in2004, or 15.1%. Unit sales of new vehicles, excluding wholesale, increased from2,652 in the nine-month period ended September 30, 

 

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2003 to 3,075****for the comparable period in 2004, or16.0%. This increase resulted from increased market share penetration and morefavorable macroeconomic conditions.

*Pre-Owned Unit Sales*. Sales of pre-owned vehicles decreased from $218.1 million in thenine-month period ended September 30, 2003 to $202.9 million for the comparableperiod in 2004, or 6.9%. This decrease was primarily attributable to areduction in wholesale sales. The average selling price for pre-owned units,excluding wholesale units, increased slightly from approximately $59,700 in thenine-month period ended September 30, 2003 to approximately $60,100 in thecomparable period in 2004, or 0.7%. Unit sales of pre-owned vehicles, excludingwholesale units, decreased from 3,100 in the nine-month period ended September30, 2003 to 2,996 for the comparable period in 2004, or 3.4%.

*Finance and Insurance RelatedRevenues*.  Finance, insurance and extended warrantyrelated revenues decreased from $17.4 million in the nine-month period endedSeptember 30, 2003 to $17.3 million for the comparable period in 2004, or 0.9%.  Finance, insurance and extended warrantyrevenue per unit decreased from $3,026 in the nine-month period ended September30, 2003 to $2,842 for the comparable period in 2004, or 6.1%. The decrease infinance, insurance and extended warranty related revenues and revenues per unitwere primarily attributable to a decrease in the percentage of units for whichwe arranged financing.

*Parts, Service and Other Revenues*. Parts and service revenues increased from $29.5 million in thenine-month period ended September 30, 2003 to $30.5 million for the comparableperiod in 2004, or 3.3%. This increase was attributable to increases in salesrelated to the increase in unit sales, along with an increase in our servicelabor rate.

*Gross Profit*.   Gross profit consists of gross revenues less our cost of sales andservices. Gross profit increased from $83.7 million in the nine-month periodended September 30, 2003, to $91.1 million for the comparable period in 2004,or 8.8%. This increase was largely attributable to increased new unit volumesand increased margins on pre-owned units. Gross profit margin increased from14.4% in the nine-month period ended September 30, 2003 to 14.8% for thecomparable period in 2004.

*Selling, General and AdministrativeExpenses*.  Selling, general and administrative expenses,including depreciation and amortization, increased from $54.4 million, or 9.3%of revenues, in the nine-month period ended September 30, 2003 to $68.3million, or 11.1% of revenues, for the comparable period in 2004. This increasecorresponded to increases in salary, commissions and benefits expenses, whichincreased primarily due to increased gross profit as well as acquisitionrelated expenses of approximately $6.6 million. Historically, salary,commissions and benefits have comprised the majority of our total selling,general and administrative expenses, and were equal to 49% of selling, generaland administrative expenses in the nine-month period ended September 30, 2004,as compared to 57% for the comparable period in 2003.

*Operating Profit*.   Operating profit represents our gross profit, less selling, general andadministrative expenses and depreciation and amortization. Operating profitdecreased from $29.4 million in the nine-month period ended September 30, 2003to $22.8 million for the comparable period in 2004, or 22.3%. This decrease waslargely due to higher sales and gross profits offset by increased selling,general and administrative expenses as outlined above.

*Interest Expense—Floor Plan CreditFacility*.    Interest expense on our floor plan creditfacility decreased from $2.1****millionin the nine-month period ended September 30, 2003 to $1.6 million for thecomparable period in 2004, or 22.9%. This was attributable to a decrease inaverage outstanding borrowings under our floor plan credit facility and adecrease in the applicable interest rate.

*Other Interest Expense*.   Other interest expense was primarily related to interest payments underour then existing senior credit facility and new senior notes. Other interestexpense increased from $2.5 

 

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million for thenine-month period ended September 30, 2003 to $7.8 million for the comparableperiod in 2004, or 208.6%. This increase was attributable to the new seniornotes.

*Income Tax Expense*.   Income tax expense increased from $3.8 million for the nine-month periodended September 30, 2003 to $5.0 million for the comparable period in 2004.Income tax expense in 2003 was favorably impacted by the reversal of a $7.2million deferred income tax valuation allowance established in prior years, ofwhich $6.0 million was reflected in the first nine months of 2003.

**Liquidity and CapitalResources**

*Liquidity*. Historically, we have satisfied our liquidity needs through cash fromoperations and various borrowing arrangements. Our cash requirements consist principally of scheduled payments ofprincipal and interest on outstanding indebtedness (including indebtednessunder our amended floor plan credit facility), capital expenditures, salary andsales commissions, lease expenses and the acquisition of inventory. Based uponour current level of operations, we believe that our cash flow from operations,available cash and available borrowings under the new senior secured revolvingcredit facility will be adequate to meet our future liquidity needs for thenext several years.

*Operating Activities*. Net cash provided by operating activities during the nine months endedSeptember 30, 2004 was equal to $10.1 million, compared with net cash providedby operating activities of $34.4 million during the comparable period in2003.  This decline in net cash providedby operating activities for 2004 was primarily the result of a decrease in net income and an increase ininventories.

*Investing Activities*. Net cash used in investing activities was $115.1 million during the ninemonths ended September 30, 2004, compared with net cash used in investingactivities of $4.8 million during the comparable period in 2003.  The increase in net cash used in investingactivities during the nine-month period ended September 30, 2004 versus 2003was attributable to the payment of $7.2 million of loan costs associated withthe issuance of our new senior notes, the entry into our new senior securedrevolving credit facility and our amended floor plan credit facility andadvances of $106.6 million to our parent compared to advances of $3.5 millionin the comparable period of 2003.

*Financing Activities*. Net cash provided by financing activities during the nine months endedSeptember 30, 2004 was $102.1 million, compared to $27.0 million used infinancing activities during the comparable period in 2003. The increase in cashprovided by financing activities primarily resulted from the proceeds of ournew senior notes, offset by repayments of our then existing credit facilities,and borrowings under our amended floor plan credit facility in connection withour acquisition by Holdings which closed on May 14, 2004.

*Working Capital*. Working capital, including cash and cash equivalents, totaledapproximately $23.2 million at September 30, 2004.  We maintain sizable inventories in order tomeet the expectations of our customers, and believe that we will continue torequire working capital consistent with past experience. Historically, we havefunded our operations with internally generated cash flow and borrowings.  Changes in our working capital are drivenprimarily by our profit levels.

Our principal sources of funds are cash flows fromoperating activities and available borrowings under our new senior securedrevolving credit facility and amended floor plan credit facility. As ofSeptember 30, 2004, we had $85.0 million of borrowing capacity and $23.1million of availability under our amended floor plan credit facility and $15.0million of borrowing capacity and $12.5 million of availability under our newsenior secured revolving credit facility. We have nothing drawn under our senior secured revolving creditfacility, while $2.5 of availability has been used to support letter of creditobligations under our letter of credit subfacility.  Based on current facts and circumstances, webelieve we have adequate cash flow coupled with borrowing capacity under ournew senior secured revolving credit

 

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facility and amendedfloor plan credit facility to fund our current operations and capitalexpenditures budgeted for 2004.

Borrowings under our amended floor plan creditfacility to finance our new vehicle inventory may not exceed (i) 100% of thefactory invoices for the related vehicles, (ii) 85% of the wholesale value ofall pre-owned inventory (as determined in accordance with National AutomobileDealers Association RV Industry Appraisal Guide, or appraised NADA value) forvehicles in the current through 7th prior model years and (iii) 65% of theappraised NADA value with respect to pre-owned vehicles in the 8th, 9th and10th prior model years. At times, we have made repayments on our then existingfloor plan credit facility using excess cash flow from operations.

Borrowings under the new senior secured revolvingcredit facility generally bear interest based on a margin over, at our option,the base rate or the reserve-adjusted LIBOR. The new senior secured revolvingcredit facility is secured by first priority interests in, and mortgages on,substantially all of our tangible and intangible assets and first prioritypledges of all the equity interests owned by us in any future domesticsubsidiaries, other than a second priority lien on those assets which arepledged under our amended floor plan credit facility.

*Capital Expenditures*. Our capital expenditures include expenditures to extend the useful lifeof our current facilities and expand operations. Historically, our annualmaintenance capital expenditures have been lower than our annual depreciationcharge. From 2001 to 2003, we invested approximately $4.6 million in capitalexpenditures primarily to improve our facility and upgrade our informationsystems.  Capital expenditures in thefirst nine months of 2004 continued to follow this pattern.

We anticipate that we will spend approximately $4.2million on capital expenditures in 2004, of which approximately $2.2 millionwill be used to upgrade our main dealership building and approximately $2.0million will be used to maintain our facilities, and we expect to spend similaramounts on maintenance expenditures in subsequent periods. The new seniorsecured revolving credit facility and amended floor plan credit facility willlimit our ability to make capital expenditures in excess of $5.0 million perannum. Based on current estimates, management believes that the amount ofcapital expenditures permitted to be made under the new senior securedrevolving credit facility and amended floor plan credit facility will beadequate to grow our business according to our business strategy and tomaintain the properties and business of our continuing operations.

 

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**Contractual Obligationsand Commercial Commitments**

The following table sets forth our contractual andcommercial commitments as of September 30, 2004: 
| ** **                          | ** ** | **Payments Due by Period** | ** **  |
|-------------------------------------|------------|----------------------------|-------------|
| **Contractual Obligations**         | ** ** | **Total**                  | ** **  | **Less than 1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **After 5 years** | ** ** |
| Senior notes(1)                     |       | $                          | 152,000,000 |   | $ | — |   | $ | — |   | $ | — |   | $ | 152,000,000 |   |
| Operating lease  obligations        |       | 96,302,264                 |        | 6,980,827 |   | 10,969,472 |   | 10,386,731 |   | 67,965,234 |   |
| Floor plan notes  payable           |       | 61,893,737                 |        | 61,893,737 |   | — |   | — |   | — |   |
| Total  contractual cash obligations |       | $                          | 310,196,001 |   | $ | 68,874,564 |   | $ | 10,969,472 |   | $ | 10,386,731 |   | $ | 219,965,234 |   |
|                                |       |                       |        |   |   |   |   |   |   |   |   |

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(1)               Does not reflect any potential redemptions bynoteholders associated with any free cash flow offer made by the Company inconnection with our senior notes.

 

**Cautionary Statement forForward-Looking Information**

Certain information set forth in this report contains “forward-lookingstatements” within the meaning of the federal securities laws. Forward-lookingstatements include statements concerning our plans, objectives, goals,strategies, future events, future revenues or performance, capitalexpenditures, financing needs, plans or intentions relating to acquisitions andother information that is not historical information. In some cases,forward-looking statements can be identified by terminology such as “believes,”“expects,” “may,” “will,” “should,” or “anticipates,” or the negative of suchterms or other comparable terminology, or by discussions of strategy. We mayalso make additional forward-looking statements from time to time. All suchsubsequent forward-looking statements, whether written or oral, by us or on ourbehalf, are also expressly qualified by these cautionary statements.

All forward-looking statements, including withoutlimitation, management’s examination of historical operating trends, are basedupon our current expectations and various assumptions. Our expectations,beliefs and projections are expressed in good faith and we believe there is areasonable basis for them, but there can be no assurance that management’sexpectations, beliefs and projections will result or be achieved. Allforward-looking statements apply only as of the date made. Unless required bylaw, we undertake no obligation to update or revise forward-looking statementsto reflect events or circumstances after the date made or to reflect theoccurrence of unanticipated events.

There are a number of risks and uncertainties thatcould cause our actual results to differ materially from the forward-lookingstatements contained in or contemplated by this report. The following are amongthe factors that could cause actual results to differ materially from theforward-looking statements. There may be other factors, including thosediscussed elsewhere in this report, that may cause our actual results to differmaterially from the forward-looking statements. Any forward-looking statementsshould be considered in light of the risk factors specified in our offeringmemorandum dated May 12, 2004, some of which are summarized below.

•                  changes from anticipated levels of sales,whether due to future national or regional economic and competitive conditions,including new into the industry, customer acceptance of existing and newproducts, consumer confidence or otherwise;

•                  significant indebtedness that may limitour financial and operational flexibility;

•                  increased interest rates which increasethe cost of financing new vehicle purchases;

 

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•                  higher fuel costs which may deterpurchases of recreational vehicles;

•                  actions of current or new competitorsthat increase competition with respect to prices and services;

•                  increased advertising costs associatedwith promotional efforts;

•                  pending or new litigation or governmentalregulations;

•                  other uncertainties which are difficultto predict or beyond our control; and

•                  the risk that we incorrectly analyzethese risks and forces, or that the strategies we develop to address them couldbe unsuccessful.

 

## **ITEM 3. Quantitativeand Qualitative Disclosures About Market Risk**

*Interest Rates*. We are exposed to market risk from changes in the interest rates on aportion of our outstanding indebtedness. Outstanding balances under our newsenior secured revolving credit facility bear interest at a variable rate basedon prime or LIBOR as adjusted each interest period. As of September 30, 2004,no borrowings were outstanding under our new senior secured revolving creditfacility (a $2.5 million letter of credit outstanding under our letter ofcredit subfacility is charged a fixed spread of 350 basis points on the face amountof the letter of credit). As a result, a 100 basis point change in interestrates under our new senior secured revolving credit facility would not resultin any additional interest expense. Similarly, amounts outstanding under floorplan financing arrangements bear interest at a variable rate based on prime orLIBOR as adjusted each interest period. As of September 30, 2004, based on theaggregate amount of $61.9 million outstanding under our amended floor planfinancing facility as of such date, a 100 basis point change in interest rateswould have changed our annual floor plan interest expense by approximately $0.6million.

We continually evaluate our exposure to interest ratefluctuations and follow established policies and procedures to implement strategiesdesigned to manage the amount of variable rate indebtedness outstanding at anypoint in time in an effort to mitigate the effect of interest rate fluctuationson our earnings and cash flows.

Interest rate fluctuations affect the fair market valueof our fixed rate debt, including the notes, but with respect to such fixedrate instruments, do not impact our earnings or cash flows.

*Foreign Currency Exchange Rates*. We currently have very limited exposure to exchange rate risk as we havevery limited foreign operations. Nearly all of our new and pre-owned vehicleinventories are sourced domestically.

*Inflation*. Although we cannot accurately anticipate the effect of inflation on ouroperations, we believe that inflation has not had, and is not likely in theforeseeable future to have, a material impact on our results of operations.

*Cyclicality*. Unit sales of RV vehicles historicallyhave been cyclical, fluctuating with general economic cycles. During economicdownturns, the RV retailing industry tends to experience similar periods ofdecline and recession as the general economy. We believe that the industry isinfluenced by general economic conditions and particularly by consumerconfidence, the level of personal discretionary spending, fuel prices, interestrates and credit availability.

 

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*Seasonality and Effects of Weather*. Our operations generally experience higher volumes of vehicle sales inthe first and fourth quarters of each year due in part to consumer buyingtrends and our hospitable warm climate during the winter months. The serviceand parts business experiences relatively modest seasonal fluctuations.

We have a single location near Tampa, Florida, whichis in close proximity to the Gulf of Mexico. As a single-site operator, asevere weather event such as a hurricane could cause severe damage to ourproperty and inventory. Although we believe we have adequate insurancecoverage, if we were to experience a catastrophic loss, we may exceed our policylimits and/or we may have difficulty obtaining similar insurance coverage inthe future. There was minimal impact to our facility as a result of recenthurricane activity throughout the state of Florida in the summer of 2004.

## **ITEM 4.  Controls and Procedures**

Our management, with the participation of our chiefexecutive officer and chief financial officer, has evaluated the effectivenessof our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as ofSeptember 30, 2004. Based on this evaluation, our chief executive officer andchief financial officer have concluded that, as of September 30, 2004, ourdisclosure controls and procedures were (1) designed to ensure that materialinformation relating to our Company, is made known to the chief executiveofficer and chief financial officer by others within those entities,particularly during the period in which this report was being prepared, and (2)effective, in that they provide reasonable assurance that information requiredto be disclosed by our Company in the reports that we file or submit, or wouldhave filed or submitted, under the Exchange Act are recorded, processed,summarized and reported within the time periods specified in the applicablerules and forms.

No change in our internal control over financialreporting occurred during the three and nine months ended September 30, 2004that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act).

 

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# **PART II.**

 

# **OTHERINFORMATION**

## **ITEM 1. Legal Proceedings**

We are party to numerous legal proceedings that arisein the ordinary course of our business. We do not believe that the ultimateresolution of these matters will have a material adverse effect on ourbusiness, results of operations, financial condition or cash flows. However,the results of these matters cannot be predicted with certainty and anunfavorable resolution of one or more of these matters could have a materialadverse effect on our business, results of operations, financial conditionand/or cash flows.

## **ITEM 2. Unregistered Salesof Equity Securities and Use of Proceeds**

On September 28, 2004, RV Acquisition and BRS LPconsummated an offering of RV Acquisition stock previously issued by RVAcquisition to BRS LP on May 14, 2004 and its affiliates to certain employeesof Lazydays. As a result, 186,787 shares of RV Acquisition Common Stock and1,489,228 shares of RV Acquisition Series A Preferred Stock were sold to suchemployees that participated in the private placement.  All of the proceeds of the private placementwere paid to BRS LP and its affiliates as a result of the sale of RVAcquisition Common Stock and Series A Preferred Stock held by them to ouremployees pursuant to****Section 4(1)of the Securities Act of 1933, as amended.

## **ITEM 3. Defaults Upon SeniorSecurities**

Not applicable.

## **ITEM 4. Submission of Matters to a Vote of SecurityHolders**

Not applicable.

## **ITEM 5. Other Information**

On August 20, 2004, RV Acquisition adopted the RVAcquisition Inc. 2004 Stock Option Plan under which certain key employees,including the named executive officers of Lazydays, may be granted options topurchase shares of up to 606,061 RV Acquisition Common Stock. The plan isadministered by the board of directors of RV Acquisition, or to the extentpermitted by law, a committee designated by RV Acquisition’s board. DonWallace, Chuck Thibault and John Horton were each granted options to purchase121,212 shares of RV Acquisition Common Stock as of August 20, 2004 inaccordance with the RV Acquisition Inc. 2004 Stock Option Plan.  A copy of the 2004 Stock Option Plan wasfiled as Exhibit 10.23 to Amendment No. 1 to our registration statement on FormS-4 filed October 29, 2004 and is incorporated herein by reference.

On October 28, 2004, we amended the amended floor plancredit facility to permit us to finance with the floor plan credit the purchaseof eligible new floor plan units that will be sold by us to the FederalEmergency Management Agency, or FEMA, or leased to certain non-governmentalentities for use as temporary housing for persons affected by the hurricanes inthe State of Florida, in each case in accordance with the terms and conditionsof the amended floor plan credit facility. The amendment provides, among otherthings, that the aggregate principal amount of loans outstanding andrepresenting borrowings advanced against floor plan units sold to FEMA orleased under the new lease program shall not, in each case, exceed $5 million.In connection with the amendment, we are required to collaterally assign all ofour interests in the leases for the vehicles that are leased to certainnon-governmental agencies under the new lease program.  A copy of the amendment was filed as Exhibit10.26 to 

 

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Amendment No. 1 to ourregistration statement on Form S-4 filed October 29, 2004 and is incorporatedherein by reference.

On October 29, 2004 Rice Edmonds resigned as a memberof RV Acquisition’s Board of Directors and was replaced by Michael Salvati, anindependent director.

## **ITEM 6. Exhibits and Reports on Form 8-K**

(a) Each of the exhibitsrequired to be filed by Item 601 of Regulation S-K were filed with the Company’sregistration statement on Form S-4 dated August 12, 2004, as amended byAmendment No. 1 to Form S-4 dated October 29, 2004 and are incorporated by referenceherein.

31.1   Certification of Chief Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2   Certification of Chief Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification Chief ExecutiveOfficer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification ChiefFinancial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Not applicable.

 

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
| Lazy Days’ R.V. Center,  Inc. |
|------------------------------------|
|                               |
| /s/                                |  Donald W. Wallace |
| By: Donald W. Wallace              |
| Its: Chief  Executive Officer      |
|                               |
| /s/                                |  Charles L. Thibault |
| By: Charles L.  Thibault           |
| Its: Chief  Financial Officer      |
|                               |
| Dated: November** **15, 2004  |

 

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**EXHIBITINDEX**

 
| **Number** | ** ** | **Description of Exhibits**                                                                              | ** ** |
|------------|------------|----------------------------------------------------------------------------------------------------------|------------|
| 31.1       |       | Certification of Chief Executive Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |       |
| 31.2       |       | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |       |
| 32.1       |       | Certification Chief Executive Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002         |       |
| 32.2       |       | Certification Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002         |       |

 

 

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