ELKHART, Ind., Dec. 9,
2019 /PRNewswire/ -- Thor Industries, Inc. (NYSE: THO) today
announced results for the first quarter of fiscal 2020 ended
October 31, 2019.
"In our fiscal first quarter, we achieved a pronounced
improvement in our operating results, reflecting the benefits of
the flexible and highly variable cost model we have developed, as
we increased gross profit margins in our North American RV segments
despite modest decreases in net sales," commented Bob Martin, President and CEO of Thor
Industries. "EHG's results for the quarter were generally in line
with expectations as EHG has historically generated
flat-to-negative first quarter results due to the European holiday
shutdowns that occur in August, and due to the higher concentration
of marketing and advertising expenses in the fiscal first quarter
to support the annual RV shows in Europe. Industry conditions in North America continued to improve as the
independent dealer inventory rationalization that has affected our
results over the past year nears its end. Dealer optimism is strong
in both the North American and European markets with excellent
feedback from our September Open House in Elkhart, Indiana, and positive performance at
industry wholesale and retail shows in Germany and across the United States. We look forward to
continuing that momentum as the spring RV show season starts in
North America in January and the
European selling season begins."
First Quarter Highlights
First-quarter net sales were $2.16
billion, an increase of $402.8
million, or 22.9%, from the first quarter of fiscal 2019.
The addition of $493.0 million in net
sales from the European RV segment was partially offset by net
sales decreases of 6.1% and 3.6% in the North American Towable RV
and the North American Motorized RV segments, respectively.
Consolidated gross profit margin was 14.3% for the quarter,
compared to 11.8% in the prior-year period, primarily reflecting
favorable overall product mix and reductions in material, labor and
warranty cost percentages in the North American RV segment,
tempered by the gross profit margin from the European RV segment,
which was lower than the overall North American gross margin for
the current quarter.
Net income attributable to Thor and diluted earnings per share
for the first quarter of fiscal 2020 were $51.1 million and $0.92, respectively, compared to $14.0 million and $0.26, respectively, in the prior period. Results
for the first quarter of fiscal 2020 included incremental interest
expense and amortization of intangibles related to the acquisition
of EHG amounting to $39.7 million, or $0.58 per diluted share, while first quarter
fiscal 2019 results were adversely impacted by a foreign currency
forward contract loss and costs related to the acquisition of EHG
which, in aggregate, totaled $57.1
million, or $1.02 per diluted
share.
The Company's effective income tax rate for the first quarter of
fiscal 2020 was 24.5% compared to a tax rate of 55.7% in the prior
year. The primary reason for the decrease in the overall effective
income tax rate between the comparative periods was the
non-deductible foreign currency forward contract loss of
$42.6 million that occurred during
the first quarter of fiscal 2019. The Company expects a worldwide
effective tax rate for the remainder of fiscal 2020 ranging between
19% and 22%, before consideration of any discrete tax items.
North American independent dealer inventory rationalization
continued during the fiscal first quarter, as North American
industry wholesale shipments once again declined at a faster rate
than retail registrations. As a result, independent dealer
inventory levels of Thor products in North America decreased by 22.8% to
approximately 101,500 units as of October
31, 2019, compared to approximately 131,500 units as of
October 31, 2018. Independent dealer
inventory of Thor products in North
America, following the first quarter of fiscal 2020, was at
its lowest point since the first quarter of fiscal 2017. Management
believes independent dealer orders will generally be commensurate
with consumer demand during calendar 2020.
European dealer inventory is also going through a modest
rationalization, though inventory levels were not as high as in
North America on a relative basis.
Management believes that independent dealer inventory levels of EHG
products in Europe, while somewhat
elevated in certain locations, remain generally appropriate for
seasonal consumer demand in Europe
moving into calendar 2020.
Segment Results
North American Towable RVs
- North American Towable RV sales were $1.20 billion for the first quarter of fiscal
2020, compared to first-quarter sales of $1.28 billion in the prior-year period. This
decrease was primarily driven by lower unit shipment volume
compared with the first-quarter of fiscal 2019, as independent
dealers continued to reduce their inventory levels, but was
partially offset by a shift in product mix toward higher-priced
units.
- North American Towable RV gross profit margin rose 330 basis
points to 15.3% in the fiscal first quarter, driven by numerous
management-led actions that reduced material, labor and warranty
costs as a percent of sales, as well as a shift in mix toward
higher-margin units.
- North American Towable RV income before tax was $104.3 million, compared to $74.6 million in the first quarter last year.
This improvement was driven primarily by the improved gross profit
margin.
- North American Towable RV backlog increased $48.6 million to $1.07
billion at the end of the first quarter of fiscal 2020,
compared to $1.02 billion at the end
of the first quarter of fiscal 2019. The Company believes the
current towable RV backlog is returning to a more normalized level
and is reflective of dealer trends toward smaller, more frequent,
order patterns.
North American Motorized RVs
- North American Motorized RV sales were $415.9 million for the first quarter compared to
$431.2 million in the prior-year
period. The decrease in motorized sales was primarily driven by a
shift in product mix towards lower-priced products.
- North American Motorized RV gross profit margin rose 50 basis
points to 10.8% in the fiscal first quarter primarily due to
various management-led actions that improved labor and warranty
costs as a percent of sales.
- North American Motorized RV income before tax was $21.8 million, compared to $21.7 million last year, driven primarily by the
increase in gross profit margin, mainly offset by an increase in
selling, general and administrative expenses.
- North American Motorized RV backlog decreased approximately
$70.3 million to $670.0 million from $740.2
million a year earlier. The Company believes the current
motorized RV backlog is reflective of the shift in dealer order
patterns to smaller and more frequent orders.
European RVs
- European RV sales were $493.0
million for the first quarter. Historically, for EHG, the
first quarter represents the slowest quarter due to the annual
European holiday shutdown period in the month of August, as well as
the consumer trend of purchasing units earlier in the calendar year
for use during the summer months. Historically, EHG's quarterly net
sales tend to improve sequentially from the first to the second
quarter, and even more so into the third quarter.
- European RV gross profit was $64.6
million, or 13.1% of net sales, in the fiscal first quarter.
Gross profit margin is historically impacted in the fiscal first
quarter by reduced fixed cost absorption from seasonally lower
first quarter sales levels.
- European RV loss before tax was $23.0
million, which includes the combined impact of amortization
of intangible assets and depreciation expense of $27.5 million. The European RV segment loss
before tax was also impacted by advertising and marketing costs
associated with the Düsseldorf Caravan Salon and other annual
retail shows which occur during the first quarter.
- European RV backlog was $1.29
billion as of October 31,
2019, reflecting current levels of demand within the
European market.
"During the quarter, we continued to reduce acquisition-related
debt levels. To date, we have repaid approximately $500 million on the acquisition-related debt. Our
cash priorities remain the same. We will use our cash to fund
operations, to pay down our acquisition-related debt, to continue
to pay our regular dividend and to evaluate share repurchases
strategically and opportunistically," said Colleen Zuhl, Thor's Senior Vice President and
Chief Financial Officer.
Integration Update
Bob Martin commented, "Our
integration is advancing as planned and we are making progress in a
number of areas. We are already leveraging our global supply chain
relationships to enhance our material spend and are also leveraging
efficiencies across our global operations. Additionally, our
international product transfer team is aggressively developing a
plan to manufacture EHG products in North
America and we expect to release additional details
regarding their efforts shortly."
Outlook
"We are optimistic about our prospects for improved results in
fiscal 2020, particularly following such a solid start to the
fiscal year," Bob Martin continued.
"Attendance and feedback from recent shows in Düsseldorf,
Germany; Hershey, Pennsylvania; Fontana, California; and our Open House in
Elkhart, Indiana, have been very
positive.
"We expect the independent dealer inventory rationalization to
be complete by the end of the calendar year, and believe this
process, in both North America and
Europe, has largely run its
course.
"Consistent with our comments from last quarter, our outlook for
North American markets is to remain relatively flat, or decline
modestly, in fiscal 2020, barring a significant macroeconomic
change, with the potential for better results should retail demand
strengthen. For the European retail market, we expect to see modest
growth similar to fiscal 2019.
"Finally, at our recent Investor Day in Germany, we introduced our long-term financial
goals. We believe we will achieve $14
billion in annual net sales, attain sustainable gross
margins of 16%, and generate more than $3
billion in cumulative net cash from operations by the end of
fiscal 2025. We believe that the long-term outlook for the RV
industry and for Thor Industries is compelling, and we look forward
to regularly reporting on our progress toward these goals," Martin
concluded.
Supplemental Earnings Release Materials
Thor has provided a comprehensive question and answer document,
as well as a PowerPoint presentation, relating to its quarterly
results and other topics. To view these materials, go to
http://ir.thorindustries.com.
About Thor Industries, Inc.
Thor is the sole owner of operating subsidiaries that, combined,
represent the world's largest manufacturer of recreational
vehicles. For more information on the Company and its products,
please go to www.thorindustries.com.
Forward Looking Statements
This release includes certain statements that are "forward
looking" statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward looking
statements are made based on management's current expectations and
beliefs regarding future and anticipated developments and their
effects upon Thor, and inherently involve uncertainties and risks.
These forward looking statements are not a guarantee of future
performance. We cannot assure you that actual results will not
differ materially from our expectations. Factors which could cause
materially different results include, among others, raw material
and commodity price fluctuations; raw material, commodity or
chassis supply restrictions; the impact of tariffs on material or
other input costs; the level and magnitude of warranty claims
incurred; legislative, regulatory and tax law and/or policy
developments including their potential impact on our dealers and
their retail customers or on our suppliers; the costs of compliance
with governmental regulation; legal and compliance issues including
those that may arise in conjunction with recently completed
transactions; lower consumer confidence and the level of
discretionary consumer spending; interest rate fluctuations; the
potential impact of interest rate fluctuations on the general
economy and specifically on our dealers and consumers; restrictive
lending practices; management changes; the success of new and
existing products, services and production facilities; consumer
preferences; the ability to efficiently utilize existing production
facilities; the pace of acquisitions and the successful closing,
integration and financial impact thereof; the potential loss of
existing customers of acquisitions; our ability to retain key
management personnel of acquired companies; a shortage of necessary
personnel for production; the loss or reduction of sales to key
dealers; disruption of the delivery of units to dealers; increasing
costs for freight and transportation; asset impairment charges;
equity investment impairment charges; cost structure changes;
competition; the impact of potential losses under repurchase or
financed receivable agreements; the potential impact of the
strength of the U.S. dollar on international demand for products
priced in U.S. dollars; general economic, market and political
conditions in the various countries in which our products are sold;
the impact of changing emissions and other regulatory standards in
the various jurisdictions in which our products are sold; and
changes to our investment and capital allocation strategies or
other facets of our strategic plan. Additional risks and
uncertainties surrounding the acquisition of Erwin Hymer Group SE
("EHG") include risks regarding the potential benefits of the
acquisition and the anticipated operating synergies, the
integration of the business, the impact of exchange rate
fluctuations and unknown or understated liabilities related to the
acquisition and EHG's business. These and other risks and
uncertainties are discussed more fully in Item 1A of our Annual
Report on Form 10-K for the year ended July
31, 2019.
We disclaim any obligation or undertaking to disseminate any
updates or revisions to any forward looking statements contained in
this release or to reflect any change in our expectations after the
date hereof or any change in events, conditions or circumstances on
which any statement is based, except as required by law.
THOR INDUSTRIES,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME FOR THE
|
Three Months Ended
October 31, 2019 and 2018
|
($000's except
share and per share data) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
|
|
2019
|
% Net Sales
(1)
|
|
2018
|
% Net Sales
(1)
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
2,158,785
|
|
|
$
|
1,755,976
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
$
|
308,811
|
14.3%
|
|
$
|
207,256
|
11.8%
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
188,464
|
8.7%
|
|
102,693
|
5.8%
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
|
24,293
|
1.1%
|
|
12,591
|
0.7%
|
|
|
|
|
|
|
|
|
Acquisition-related
costs
|
|
|
—
|
—%
|
|
57,089
|
3.3%
|
|
|
|
|
|
|
|
|
Interest income
(expense), net
|
|
|
(27,050)
|
(1.3)%
|
|
346
|
—%
|
|
|
|
|
|
|
|
|
Other income
(expense), net
|
|
|
(370)
|
—%
|
|
(3,712)
|
(0.2)%
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
|
68,634
|
3.2%
|
|
31,517
|
1.8%
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
16,789
|
0.8%
|
|
17,564
|
1.0%
|
|
|
|
|
|
|
|
|
Net income
|
|
|
51,845
|
2.4%
|
|
13,953
|
0.8%
|
|
|
|
|
|
|
|
|
Less: net income
attributable to non-controlling interests
|
|
|
780
|
—%
|
|
—
|
—%
|
|
|
|
|
|
|
|
|
Net income
attributable to Thor Industries, Inc.
|
|
|
$
|
51,065
|
2.4%
|
|
$
|
13,953
|
0.8%
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.93
|
|
|
$
|
0.26
|
|
Diluted
|
|
|
$
|
0.92
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
Weighted-avg. common
shares outstanding – basic
|
|
|
55,095,074
|
|
|
52,726,496
|
|
Weighted-avg. common
shares outstanding – diluted
|
|
|
55,224,655
|
|
|
52,899,603
|
|
|
|
|
|
|
|
|
|
(1) Percentages may not add due to
rounding differences
|
|
|
|
|
|
|
SUMMARY CONDENSED
CONSOLIDATED BALANCE SHEETS ($000) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31,
2019
|
|
July 31,
2019
|
|
|
|
October 31,
2019
|
|
July 31,
2019
|
Cash and
equivalents
|
|
$
|
270,482
|
|
$
|
451,262
|
|
Current
liabilities
|
|
$
|
1,439,385
|
|
$
|
1,448,325
|
Accounts receivable,
net
|
|
776,572
|
|
716,227
|
|
Long-term
debt
|
|
1,780,091
|
|
1,885,253
|
Inventories,
net
|
|
915,485
|
|
827,988
|
|
Other long-term
liabilities
|
|
263,094
|
|
231,640
|
Prepaid expenses and
other
|
|
30,944
|
|
41,880
|
|
Stockholders'
equity
|
|
2,124,971
|
|
2,095,228
|
Total
current assets
|
|
1,993,483
|
|
2,037,357
|
|
|
|
|
|
|
Property, plant &
equipment, net
|
|
1,104,764
|
|
1,092,471
|
|
|
|
|
|
|
Goodwill
|
|
1,361,265
|
|
1,358,032
|
|
|
|
|
|
|
Amortizable
intangible assets, net
|
|
946,581
|
|
970,811
|
|
|
|
|
|
|
Deferred income taxes
and other, net
|
|
201,448
|
|
201,775
|
|
|
|
|
|
|
Total
|
|
$
|
5,607,541
|
|
$
|
5,660,446
|
|
|
|
$
|
5,607,541
|
|
$
|
5,660,446
|
Contact
Investor Relations:
Mark Trinske, Vice President of
Investor Relations
mtrinske@thorindustries.com
(574) 970-7912
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SOURCE Thor Industries, Inc.