ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, all dollar amounts are presented in thousands except per share data.
Forward Looking Statements
This
report 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 managements 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 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 level 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 recent 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 and services, consumer preferences, the pace of obtaining and producing at new production facilities, the pace of acquisitions and the successful closing and financial impact thereof, the potential loss of
existing customers of acquisitions, the integration of new 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, the
availability of delivery personnel, asset impairment charges, cost structure changes, competition, the impact of potential losses under repurchase agreements, the potential impact of the strength of the U.S. dollar on international demand, general
economic, market and political conditions, changes to investment and capital allocation strategies or other facets of our strategic plan, and the other risks and uncertainties discussed more fully in ITEM 1A of our Annual Report on Form
10-K
for the year ended July 31, 2017.
We disclaim any obligation or undertaking to disseminate
any updates or revisions to any forward looking statements contained in this report 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.
Executive Overview
We were founded in 1980 and have grown to be the largest manufacturer of RVs in North America. According to Statistical Surveys, Inc. (Stat Surveys), for the calendar quarter ended March 31, 2018,
Thors combined U.S. and Canadian market share was approximately 47.9% for travel trailers and fifth wheels combined and approximately 40.5% for motorhomes. Our business model includes decentralized operating units, and our RV products are sold
to independent,
non-franchise
dealers who, in turn, retail those products. Our growth has been achieved both organically and by acquisition, and our strategy is designed to increase our profitability by
driving innovation, servicing our customers, manufacturing quality products, improving the efficiencies of our facilities and making strategic growth acquisitions.
Recent Events
Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act), was signed into law. The Tax Act includes numerous changes to tax
laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 35.0% to 21.0%. The rate reduction took effect on January 1, 2018. As the Companys 2018 fiscal year ends on
July 31, 2018, the Companys estimated federal corporate income tax rate for fiscal year 2018 will be prorated to a blended 26.9% rate, based on the applicable tax rates before and after the Tax Act and the number of days in the fiscal
year to which the two different rates applied. As a result of other Tax Act changes, the Companys income tax rate for fiscal year 2019 will be negatively impacted by the repeal of the domestic production activities (Code
Section 199) deduction and limitations on the deductibility of executive compensation.
13
As a result of the reduction of the federal corporate income tax rate, the Company was required to
perform a revaluation of its net deferred tax assets. Based on currently available information, the Company has performed a preliminary analysis of the impact of the Tax Act as of the enactment date and has recorded a
non-recurring,
non-cash
reduction of its net deferred tax assets due to the reduced federal income tax rate, and a corresponding charge to income tax expense, of
approximately $34,000 in the nine months ended April 30, 2018. The Companys revaluation of its net deferred tax assets, with respect to the reduced federal income tax rate and the potential impact of limitations on the deductibility of
executive compensation, among other items, are subject to further refinement, review and clarification under the new law as additional information becomes available.
The reduction in the statutory US federal income tax rate is expected to positively impact the Companys fiscal 2018 and future US
after-tax
earnings. The Company
currently estimates an overall effective income tax rate between 27.0% and 29.0% for the fourth quarter of fiscal year 2018, before consideration of any discrete tax items, as compared to an effective income tax rate of 32.7% for fiscal 2017. For
fiscal 2019, after considering the lower federal income tax rate of 21.0%, an estimated blended state income tax rate, the elimination of the Code Section 199 deduction and the limitations on the deductibility of executive compensation, the
Company currently estimates an overall effective income tax rate between 23.0% and 25.0%, before consideration of any discrete tax items.
While the Tax Act is expected to increase cash flow in the future, our main priorities for the use of current and future available cash generated
from operations will continue to focus on funding our growth, both organically and through acquisitions, maintaining and growing our regular dividends over time, and reducing indebtedness. Strategic share repurchases or special dividends, as
determined by the Companys Board, will also continue to be considered. As a component of funding our growth, we anticipate making additional investments in our workforce through a variety of initiatives, including enhanced employee training
and development programs and other initiatives that will be introduced in fiscal 2018 and fiscal 2019 and targeted to the varying needs of our individual operating entities.
Joint Venture
On February 15, 2018, the Company announced the formation of a joint
venture with Tourism Holdings Limited (
thl
) called TH2. The Company and
thl
each have a 50% ownership position in TH2 and equal representation on the board of directors of TH2. The Company contributed
cash totaling $46,902 to TH2 in early March 2018 while
thl
contributed various assets with the same approximate fair value. The Companys investment in TH2 was funded entirely from cash on hand. In accordance with the
operating agreement, TH2s future capital needs, which are not expected to be material to the Company, will be funded proportionally by
thl
and the Company. The Companys investment in TH2 is accounted for under the
equity method of accounting, and the Companys portion of TH2s operating results are recorded on a
one-month
lag basis.
TH2 was formed to own, improve and sell innovative and comprehensive digital applications through a platform designed for the global RV industry. TH2 will offer a variety of products focused on enhancing the
enjoyment, safety, connectivity and convenience of RV ownership and use.
Industry Outlook
The Company monitors industry conditions in the RV market through the use of monthly wholesale shipment data as reported by the Recreation Vehicle
Industry Association (RVIA), which is typically issued on a
one-month
lag and represents manufacturers RV production and delivery to dealers. In addition, we monitor monthly retail sales
trends as reported by Stat Surveys, whose data is typically issued on a
month-and-a-half
lag. The Company believes that monthly
RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production.
RV dealer inventory
of Thor products as of April 30, 2018 increased 30.8% to approximately 166,200 units, compared to approximately 127,100 units as of April 30, 2017. We believe our dealer inventory levels are generally appropriate for seasonal consumer
demand, although modestly elevated in certain locations due to several factors, including the prolonged winter delaying the typical spring retail sales and delivery activity, dealer orders being delivered quicker in the current fiscal year due to
our capacity expansions and the continued improvement of the Canadian market.
Thors RV backlog as of April 30, 2018
decreased $356,975, or 15.1%, to $2,003,149 compared to $2,360,124 as of April 30, 2017, with the decrease mainly attributable to our capacity expansions since the prior year allowing for quicker production and delivery of units to dealers and
the existing dealer inventory levels noted above.
14
Industry Wholesale Statistics
Key wholesale statistics for the RV industry, as reported by RVIA for the periods indicated, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Wholesale
Unit
Shipments
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
%
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
119,593
|
|
|
|
104,519
|
|
|
|
15,074
|
|
|
|
14.4
|
|
Motorized Units
|
|
|
17,493
|
|
|
|
16,347
|
|
|
|
1,146
|
|
|
|
7.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
137,086
|
|
|
|
120,866
|
|
|
|
16,220
|
|
|
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
According to the most recent RVIA forecast issued in March, 2018, shipments for towable and motorized units for the
2018 calendar year are estimated to be approximately 472,000 and 67,900 units, respectively, which are 6.8% and 8.3% higher, respectively, than the corresponding 2017 calendar year wholesale shipments. Travel trailers and fifth wheels are expected
to account for approximately 85% of all RV shipments in calendar year 2018, and shipments of Class C motorhomes are expected to hit an
all-time
high. The outlook for calendar year 2018 growth in RV sales
is based on the expectation of continued growth in employment, wages and
after-tax
incomes.
Industry
Retail Statistics
We believe that retail demand is the key to continued growth in the RV industry, and that annual RV industry
wholesale shipments will generally be in line with annual retail sales going forward, although seasonal differences may exist during those annual periods.
Key retail statistics for the RV industry, as reported by Stat Surveys for the periods indicated, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Retail
Unit
Registrations
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
81,388
|
|
|
|
75,152
|
|
|
|
6,236
|
|
|
|
8.3
|
|
Motorized Units
|
|
|
12,633
|
|
|
|
11,977
|
|
|
|
656
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
94,021
|
|
|
|
87,129
|
|
|
|
6,892
|
|
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Data reported by Stat Surveys is based on official state records. This information is subject to
adjustment and is continuously updated.
Company Wholesale Statistics
The Companys wholesale RV shipments, for the calendar quarters ended March 31, 2018 and 2017 to correspond to the industry wholesale
periods noted above, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Wholesale
Unit
Shipments
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
63,038
|
|
|
|
54,733
|
|
|
|
8,305
|
|
|
|
15.2
|
|
Motorized Units
|
|
|
7,540
|
|
|
|
7,189
|
|
|
|
351
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
70,578
|
|
|
|
61,922
|
|
|
|
8,656
|
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Retail Statistics
Retail statistics of the Companys RV products, as reported by Stat Surveys, for the calendar quarters ended March 31, 2018 and 2017 to correspond to the industry retail periods noted above, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada Retail
Unit
Registrations
|
|
|
|
Calendar Quarter Ended March 31,
|
|
|
|
|
|
%
|
|
|
|
2018
|
|
|
2017
|
|
|
Increase
|
|
|
Change
|
|
Towable Units
|
|
|
38,228
|
|
|
|
36,577
|
|
|
|
1,651
|
|
|
|
4.5
|
|
Motorized Units
|
|
|
5,112
|
|
|
|
5,027
|
|
|
|
85
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
43,340
|
|
|
|
41,604
|
|
|
|
1,736
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Data reported by Stat Surveys is based on official state records. This information is subject to
adjustment and is continuously updated.
15
Our outlook for future growth in retail sales is dependent upon various economic conditions faced by
consumers such as the rate of unemployment, the level of consumer confidence, the growth in disposable income of consumers, changes in interest rates, credit availability, the health of the housing market and changes in tax rates and fuel prices.
With continued stability or improvement in consumer confidence, availability of retail and wholesale credit, low interest rates and the absence of negative economic factors, we would expect to see continued growth in the RV industry.
A positive future outlook for the RV segment is supported by favorable demographics, as more people reach the age brackets that historically have
accounted for the bulk of retail RV sales. The number of consumers between the ages of 55 and 74 will total 79 million by 2025, 15% higher than in 2015 according to the RVIA. In addition, in recent years the industry has benefited
from growing retail sales to younger consumers with new product offerings targeted to younger, more active families, as they place a higher value on family outdoor recreation than any prior generation. Based on a study from the Pew Research Center,
the Millennial generation, defined as those between the ages of 18 and 34, consisted of more than 75 million people in 2015. In general, these consumers are more technologically savvy, but still value active outdoor experiences
shared with family and friends, making them strong potential customers for our industry in the decades to come. Based on the Kampgrounds of America (KOA) 2018 North American Camping Report, their millennial group comprised 31% of the total
population in the most recent census, yet accounted for 40% of the total campers in 2017, which increased from 38% of the total campers in 2016 and 34% of the total campers in 2015. Younger RV consumers are generally attracted to lower and
moderately-priced travel trailers, as affordability is a key driver at this stage in their lives.
As the first generation of the
internet age, Millennials are generally more comfortable gathering information online, and are therefore generally more knowledgeable about products and competitive pricing than any prior generation. This generation is camping more as they view
camping as an opportunity to spend time with family and friends as well as a way to reduce stress, escape the pressures of everyday life, be more active and lead a healthier lifestyle. In addition to younger age demographics, there are opportunities
to expand sales to a more ethnically diverse customer base. In our efforts to connect with RV consumers of all generations, beginning in the first quarter of fiscal 2017 we launched a new consumer-facing website designed to inspire consumers to
explore the RV lifestyle. The new website includes video and interactive features to help consumers determine the type of RV which may suit their specific camping needs, while providing video footage that can be utilized by dealers to market our
products. In the second quarter of fiscal 2018, we launched a targeted campaign towards Millennials, and have begun exploring related marketing opportunities. We will continue to consider additional marketing opportunities to younger and more
diverse consumers over the remainder of the year. We anticipate our recent formation of the joint venture TH2, as discussed in Note 9 to the Condensed Consolidated Financial Statements, will further enhance the RV value proposition and ownership
experience for this younger, more technologically savvy customer group.
Economic or industry-wide factors affecting our RV business
include the costs of commodities and the labor used in the manufacture of our products. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs would impact our
profit margins negatively if we were unable to offset those cost increases through a combination of product decontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts.
Historically, we have generally been able to offset net cost increases over time.
We have not experienced any recent unusual cost
increases or supply constraints from our chassis suppliers. The recreational vehicle industry has, from time to time, experienced shortages of chassis for various reasons, including component shortages, production delays and work stoppages at the
chassis manufacturers. These shortages have had a negative impact on our sales and earnings in the past. We believe that the current supply of chassis used in our motorized RV production is adequate for current production levels, and that
available inventory would compensate for short-term changes in supply schedules if they occur.
16
Three Months Ended April 30, 2018 Compared to the Three Months Ended April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30,
2018
|
|
|
|
|
|
Three Months Ended
April 30,
2017
|
|
|
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
1,608,214
|
|
|
|
|
|
|
$
|
1,426,192
|
|
|
|
|
|
|
$
|
182,022
|
|
|
|
12.8
|
|
Motorized
|
|
|
598,459
|
|
|
|
|
|
|
|
549,883
|
|
|
|
|
|
|
|
48,576
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
2,206,673
|
|
|
|
|
|
|
|
1,976,075
|
|
|
|
|
|
|
|
230,598
|
|
|
|
11.7
|
|
Other
|
|
|
82,239
|
|
|
|
|
|
|
|
70,019
|
|
|
|
|
|
|
|
12,220
|
|
|
|
17.5
|
|
Intercompany eliminations
|
|
|
(37,342
|
)
|
|
|
|
|
|
|
(30,870
|
)
|
|
|
|
|
|
|
(6,472
|
)
|
|
|
(21.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,251,570
|
|
|
|
|
|
|
$
|
2,015,224
|
|
|
|
|
|
|
$
|
236,346
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
64,666
|
|
|
|
|
|
|
|
58,481
|
|
|
|
|
|
|
|
6,185
|
|
|
|
10.6
|
|
Motorized
|
|
|
7,316
|
|
|
|
|
|
|
|
6,927
|
|
|
|
|
|
|
|
389
|
|
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
71,982
|
|
|
|
|
|
|
|
65,408
|
|
|
|
|
|
|
|
6,574
|
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT:
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
238,799
|
|
|
|
14.8
|
|
|
$
|
219,686
|
|
|
|
15.4
|
|
|
$
|
19,113
|
|
|
|
8.7
|
|
Motorized
|
|
|
64,835
|
|
|
|
10.8
|
|
|
|
61,081
|
|
|
|
11.1
|
|
|
|
3,754
|
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
303,634
|
|
|
|
13.8
|
|
|
|
280,767
|
|
|
|
14.2
|
|
|
|
22,867
|
|
|
|
8.1
|
|
Other, net
|
|
|
13,111
|
|
|
|
15.9
|
|
|
|
13,074
|
|
|
|
18.7
|
|
|
|
37
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
316,745
|
|
|
|
14.1
|
|
|
$
|
293,841
|
|
|
|
14.6
|
|
|
$
|
22,904
|
|
|
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
79,598
|
|
|
|
4.9
|
|
|
$
|
72,415
|
|
|
|
5.1
|
|
|
$
|
7,183
|
|
|
|
9.9
|
|
Motorized
|
|
|
24,811
|
|
|
|
4.1
|
|
|
|
22,796
|
|
|
|
4.1
|
|
|
|
2,015
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
104,409
|
|
|
|
4.7
|
|
|
|
95,211
|
|
|
|
4.8
|
|
|
|
9,198
|
|
|
|
9.7
|
|
Other
|
|
|
2,673
|
|
|
|
3.3
|
|
|
|
2,497
|
|
|
|
3.6
|
|
|
|
176
|
|
|
|
7.0
|
|
Corporate
|
|
|
12,367
|
|
|
|
|
|
|
|
13,414
|
|
|
|
|
|
|
|
(1,047
|
)
|
|
|
(7.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
119,449
|
|
|
|
5.3
|
|
|
$
|
111,122
|
|
|
|
5.5
|
|
|
$
|
8,327
|
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
147,853
|
|
|
|
9.2
|
|
|
$
|
134,504
|
|
|
|
9.4
|
|
|
$
|
13,349
|
|
|
|
9.9
|
|
Motorized
|
|
|
38,908
|
|
|
|
6.5
|
|
|
|
37,356
|
|
|
|
6.8
|
|
|
|
1,552
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
186,761
|
|
|
|
8.5
|
|
|
|
171,860
|
|
|
|
8.7
|
|
|
|
14,901
|
|
|
|
8.7
|
|
Other, net
|
|
|
8,872
|
|
|
|
10.8
|
|
|
|
8,713
|
|
|
|
12.4
|
|
|
|
159
|
|
|
|
1.8
|
|
Corporate
|
|
|
(15,108
|
)
|
|
|
|
|
|
|
(14,342
|
)
|
|
|
|
|
|
|
(766
|
)
|
|
|
(5.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
180,525
|
|
|
|
8.0
|
|
|
$
|
166,231
|
|
|
|
8.2
|
|
|
$
|
14,294
|
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORDER BACKLOG:
|
|
As of
April 30, 2018
|
|
|
As of
April 30, 2017
|
|
|
Change
Amount
|
|
|
%
Change
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
1,304,836
|
|
|
$
|
1,564,609
|
|
|
$
|
(259,773
|
)
|
|
|
(16.6
|
)
|
Motorized
|
|
|
698,313
|
|
|
|
795,515
|
|
|
|
(97,202
|
)
|
|
|
(12.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,003,149
|
|
|
$
|
2,360,124
|
|
|
$
|
(356,975
|
)
|
|
|
(15.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
CONSOLIDATED
Consolidated net sales for the three months ended April 30, 2018 increased $236,346, or 11.7%, compared to the three months ended April 30, 2017. Consolidated gross profit for the three months ended
April 30, 2018 increased $22,904, or 7.8%, compared to the three months ended April 30, 2017. Consolidated gross profit was 14.1% of consolidated net sales for the three months ended April 30, 2018 and 14.6% for the three months ended
April 30, 2017.
Selling, general and administrative expenses for the three months ended April 30, 2018 increased $8,327, or
7.5%, compared to the three months ended April 30, 2017. Amortization of intangible assets expense for the three months ended April 30, 2018 decreased $1,334, or 8.8%, compared to the three months ended April 30, 2017, primarily due
to lower dealer network amortization as compared to the prior-year period. Income before income taxes for the three months ended April 30, 2018 was $180,525, as compared to $166,231 for the three months ended April 30, 2017, an increase of
$14,294, or 8.6%.
Additional information concerning the changes in net sales, gross profit, selling, general and administrative
expenses, amortization of intangible assets expense and income before income taxes are addressed in the segment reporting that follows.
Corporate costs included in selling, general and administrative expenses decreased $1,047 to $12,367 for the three months ended April 30, 2018
compared to $13,414 for the three months ended April 30, 2017. The decrease is primarily due to a decrease in deferred compensation expense of $2,590, which relates to the equal and offsetting increase in other expense related to the deferred
compensation plan assets as noted below. This decrease was partially offset by an increase in compensation costs, as incentive compensation increased $354 in correlation with the increase in income before income taxes compared to the prior year, and
stock-based compensation increased $1,089. The stock-based compensation increase is due to increasing income before income taxes over the past three years, as most stock awards are based on that metric and vest ratably over a three-year period.
Corporate interest and other income and expense was $2,741 of net expense for the three months ended April 30, 2018 compared to
$928 of net expense for the three months ended April 30, 2017. This increase in net expense of $1,813 is primarily due to the change in the fair value of the Companys deferred compensation plan assets due to market fluctuations and
investment income resulting in net expense of $1,547 in the current-year period as compared to net income of $1,043 in the prior-year period, an increase in expense of $2,590. The three months ended April 30, 2018 also included a $399 operating
loss related to the recent joint venture as discussed in Note 9 to the Condensed Consolidated Financial Statements. These increases in expense were partially offset by interest expense and fees on the revolving credit facility of $1,231 in
the current-year period as compared to $2,389 in the prior-year period, a decrease in expense of $1,158 as a result of the lower outstanding debt balance.
The overall effective income tax rate for the three months ended April 30, 2018 was 25.9% compared with 33.1% for the three months ended April 30, 2017. The primary reason for the decrease in the
effective income tax rate was the impact of the Tax Cuts and Jobs Act (the Tax Act) that was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate has been reduced from 35.0% to 21.0%
starting January 1, 2018, which results in the use of an estimated blended federal corporate income tax rate of 26.9% for the Companys 2018 fiscal year.
18
Segment Reporting
TOWABLE RECREATIONAL VEHICLES
Analysis of the change in net sales for the three months
ended April 30, 2018 compared to the three months ended April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2018
|
|
|
% of
Segment
Net Sales
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
$
|
978,906
|
|
|
|
60.9
|
|
|
$
|
859,572
|
|
|
|
60.3
|
|
|
$
|
119,334
|
|
|
|
13.9
|
|
Fifth Wheels
|
|
|
629,308
|
|
|
|
39.1
|
|
|
|
566,620
|
|
|
|
39.7
|
|
|
|
62,688
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
$
|
1,608,214
|
|
|
|
100.0
|
|
|
$
|
1,426,192
|
|
|
|
100.0
|
|
|
$
|
182,022
|
|
|
|
12.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2018
|
|
|
% of
Segment
Shipments
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
|
50,164
|
|
|
|
77.6
|
|
|
|
45,439
|
|
|
|
77.7
|
|
|
|
4,725
|
|
|
|
10.4
|
|
Fifth Wheels
|
|
|
14,502
|
|
|
|
22.4
|
|
|
|
13,042
|
|
|
|
22.3
|
|
|
|
1,460
|
|
|
|
11.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
|
64,666
|
|
|
|
100.0
|
|
|
|
58,481
|
|
|
|
100.0
|
|
|
|
6,185
|
|
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Product Mix and Price on Net Sales:
|
|
%
Increase
(Decrease)
|
|
Towables
|
|
|
|
|
Travel Trailers and Other
|
|
|
3.5
|
|
Fifth Wheels
|
|
|
(0.1
|
)
|
Total Towables
|
|
|
2.2
|
|
The increase in total towables net sales of 12.8% compared to the prior-year quarter resulted from a 10.6% increase
in unit shipments and a 2.2% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the three months ended April 30, 2018, combined travel trailer and
fifth wheel wholesale unit shipments increased 10.5% compared to the same period last year.
The increases in the overall net price per
unit within the travel trailer and other product lines of 3.5% was primarily due to changes in product mix and selective net price increases since the prior-year quarter.
Cost of products sold increased $162,909 to $1,369,415, or 85.2% of towables net sales, for the three months ended April 30, 2018 compared to $1,206,506 or 84.6% of towables net sales, for the three months
ended April 30, 2017. The changes in material, labor,
freight-out
and warranty costs comprised $155,985 of the $162,909 increase in cost of products sold. Material, labor,
freight-out
and warranty costs as a combined percentage of towables net sales increased to 79.7% for the three months ended April 30, 2018 compared to 78.9% for the three months ended April 30, 2017.
This increase in percentage was primarily the result of an increase in the warranty cost percentage, which was partially due to offering extended coverage on certain structural components of certain products since the prior-year period. The labor
cost percentage also increased slightly due to the continued competitive RV labor market. The material cost percentage to net sales was also up slightly, as recent material cost increases exceeded the favorable impact of selective net price
increases and operating efficiencies attained since the prior-year period. Total manufacturing overhead increased $6,924 with the increase in sales, but decreased as a percentage of towables net sales from 5.7% to 5.5%, as the increased production
resulted in better absorption of fixed overhead costs.
Towables gross profit increased $19,113 to $238,799, or 14.8% of towables net
sales, for the three months ended April 30, 2018 compared to $219,686, or 15.4% of towables net sales, for the three months ended April 30, 2017. The increase in gross profit is primarily due to the 10.6% increase in unit sales volume
noted above, while the decrease in gross profit percentage is due to the increase in the cost of products sold percentage noted above.
19
Selling, general and administrative expenses were $79,598, or 4.9% of towables net sales, for the
three months ended April 30, 2018 compared to $72,415, or 5.1% of towables net sales, for the three months ended April 30, 2017. The primary reason for the $7,183 increase was increased towables net sales and towables income before income
taxes, which caused related commissions, bonuses and other compensation to increase by $5,180. Sales-related travel, advertising and promotional costs also increased $1,501 in correlation with the sales increase. The overall selling, general and
administrative expense as a percentage of towables net sales decreased by 0.2% due to the increase in towables net sales.
Towables
income before income taxes was $147,853, or 9.2% of towables net sales, for the three months ended April 30, 2018 compared to $134,504 or 9.4% of towables net sales, for the three months ended April 30, 2017. The primary reasons for the
decrease in percentage was the increase in the cost of products sold percentage, partially offset by the decrease in the selling, general and administrative expense percentage to sales noted above. In addition, the towables amortization cost
percentage decreased by 0.2%, primarily due to lower dealer network amortization as compared to the prior-year period.
MOTORIZED RECREATIONAL
VEHICLES
Analysis of the change in net sales for the three months ended April 30, 2018 compared to the three months ended
April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2018
|
|
|
% of
Segment
Net Sales
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
273,095
|
|
|
|
45.6
|
|
|
$
|
242,770
|
|
|
|
44.1
|
|
|
$
|
30,325
|
|
|
|
12.5
|
|
Class C
|
|
|
301,303
|
|
|
|
50.3
|
|
|
|
282,703
|
|
|
|
51.4
|
|
|
|
18,600
|
|
|
|
6.6
|
|
Class B
|
|
|
24,061
|
|
|
|
4.1
|
|
|
|
24,410
|
|
|
|
4.5
|
|
|
|
(349
|
)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
$
|
598,459
|
|
|
|
100.0
|
|
|
$
|
549,883
|
|
|
|
100.0
|
|
|
$
|
48,576
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
April 30, 2018
|
|
|
% of
Segment
Shipments
|
|
|
Three Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
2,471
|
|
|
|
33.8
|
|
|
|
2,151
|
|
|
|
31.1
|
|
|
|
320
|
|
|
|
14.9
|
|
Class C
|
|
|
4,669
|
|
|
|
63.8
|
|
|
|
4,584
|
|
|
|
66.2
|
|
|
|
85
|
|
|
|
1.9
|
|
Class B
|
|
|
176
|
|
|
|
2.4
|
|
|
|
192
|
|
|
|
2.7
|
|
|
|
(16
|
)
|
|
|
(8.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
|
7,316
|
|
|
|
100.0
|
|
|
|
6,927
|
|
|
|
100.0
|
|
|
|
389
|
|
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Product Mix and Price on Net Sales:
|
|
%
Increase
(Decrease)
|
|
Motorized
|
|
|
|
|
Class A
|
|
|
(2.4
|
)
|
Class C
|
|
|
4.7
|
|
Class B
|
|
|
6.9
|
|
Total Motorized
|
|
|
3.2
|
|
The increase in total motorized net sales of 8.8% compared to the prior-year quarter resulted from a 5.6% increase
in unit shipments and a 3.2% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the three months ended April 30, 2018, combined motorhome wholesale
unit shipments increased 7.2% compared to the same period last year.
20
The decrease in the overall net price per unit within the Class A product line of 2.4% was
primarily due to a slight shift in the concentration of sales from the generally larger and more expensive diesel units to the more modestly-priced gas units compared to the prior-year period. The increase in the overall net price per unit within
the Class C product line of 4.7% was primarily due to the net impact of product mix changes and selective net price increases. The increase in the overall net price per unit within the Class B product line of 6.9% is primarily due to the
introduction of a new, higher-priced model since the prior-year period, and more option content per unit in the current-year period.
Cost of products sold increased $44,822 to $533,624, or 89.2% of motorized net sales, for the three months ended April 30, 2018 compared to
$488,802, or 88.9% of motorized net sales, for the three months ended April 30, 2017. The changes in material, labor,
freight-out
and warranty costs comprised $44,601 of the $44,822 increase due to
increased sales volume. Material, labor,
freight-out
and warranty costs as a combined percentage of motorized net sales increased to 85.3% for the three months ended April 30, 2018 compared to 84.7% for
the three months ended April 30, 2017. This increase in percentage was primarily the result of an increase in the warranty cost percentage, and a slight increase in labor costs associated with increasing employment levels and the continued
competitive RV labor market. Total manufacturing overhead increased $221 with the volume increase, but decreased as a percentage of motorized net sales from 4.2% to 3.9%, as the increase in production resulted in better absorption of fixed overhead
costs.
Motorized gross profit increased $3,754 to $64,835, or 10.8% of motorized net sales, for the three months ended April 30,
2018 compared to $61,081, or 11.1% of motorized net sales, for the three months ended April 30, 2017. The increase in gross profit was due primarily to the 5.6% increase in unit sales volume noted above, and the decrease as a percentage of
motorized net sales is due to the increase in the cost of products sold percentage noted above.
Selling, general and administrative
expenses were $24,811, or 4.1% of motorized net sales, for the three months ended April 30, 2018 compared to $22,796, or 4.1% of motorized net sales, for the three months ended April 30, 2017. The $2,015 increase was partially due to
increased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to increase by $1,048. In addition, legal, professional and related settlement costs increased $701.
Motorized income before income taxes was $38,908, or 6.5% of motorized net sales, for the three months ended April 30, 2018 compared to
$37,356, or 6.8% of motorized net sales, for the three months ended April 30, 2017. The primary reason for this decrease in percentage was the impact of the increase in the cost of products sold percentage as noted above.
21
Nine Months Ended April 30, 2018 Compared to the Nine Months Ended April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
April 30,
2018
|
|
|
|
|
|
Nine Months Ended
April 30,
2017
|
|
|
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
4,599,833
|
|
|
|
|
|
|
$
|
3,719,314
|
|
|
|
|
|
|
$
|
880,519
|
|
|
|
23.7
|
|
Motorized
|
|
|
1,724,979
|
|
|
|
|
|
|
|
1,486,309
|
|
|
|
|
|
|
|
238,670
|
|
|
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
6,324,812
|
|
|
|
|
|
|
|
5,205,623
|
|
|
|
|
|
|
|
1,119,189
|
|
|
|
21.5
|
|
Other
|
|
|
233,171
|
|
|
|
|
|
|
|
182,906
|
|
|
|
|
|
|
|
50,265
|
|
|
|
27.5
|
|
Intercompany eliminations
|
|
|
(103,185
|
)
|
|
|
|
|
|
|
(76,249
|
)
|
|
|
|
|
|
|
(26,936
|
)
|
|
|
(35.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,454,798
|
|
|
|
|
|
|
$
|
5,312,280
|
|
|
|
|
|
|
$
|
1,142,518
|
|
|
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
186,107
|
|
|
|
|
|
|
|
155,409
|
|
|
|
|
|
|
|
30,698
|
|
|
|
19.8
|
|
Motorized
|
|
|
20,894
|
|
|
|
|
|
|
|
18,177
|
|
|
|
|
|
|
|
2,717
|
|
|
|
14.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
207,001
|
|
|
|
|
|
|
|
173,586
|
|
|
|
|
|
|
|
33,415
|
|
|
|
19.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT:
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
|
|
|
% of
Segment
Net
Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
693,817
|
|
|
|
15.1
|
|
|
$
|
546,431
|
|
|
|
14.7
|
|
|
$
|
147,386
|
|
|
|
27.0
|
|
Motorized
|
|
|
191,699
|
|
|
|
11.1
|
|
|
|
162,806
|
|
|
|
11.0
|
|
|
|
28,893
|
|
|
|
17.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
885,516
|
|
|
|
14.0
|
|
|
|
709,237
|
|
|
|
13.6
|
|
|
|
176,279
|
|
|
|
24.9
|
|
Other, net
|
|
|
34,742
|
|
|
|
14.9
|
|
|
|
33,058
|
|
|
|
18.1
|
|
|
|
1,684
|
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
920,258
|
|
|
|
14.3
|
|
|
$
|
742,295
|
|
|
|
14.0
|
|
|
$
|
177,963
|
|
|
|
24.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
236,725
|
|
|
|
5.1
|
|
|
$
|
201,158
|
|
|
|
5.4
|
|
|
$
|
35,567
|
|
|
|
17.7
|
|
Motorized
|
|
|
75,828
|
|
|
|
4.4
|
|
|
|
64,978
|
|
|
|
4.4
|
|
|
|
10,850
|
|
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
312,553
|
|
|
|
4.9
|
|
|
|
266,136
|
|
|
|
5.1
|
|
|
|
46,417
|
|
|
|
17.4
|
|
Other
|
|
|
7,481
|
|
|
|
3.2
|
|
|
|
7,089
|
|
|
|
3.9
|
|
|
|
392
|
|
|
|
5.5
|
|
Corporate
|
|
|
50,766
|
|
|
|
|
|
|
|
37,176
|
|
|
|
|
|
|
|
13,590
|
|
|
|
36.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
370,800
|
|
|
|
5.7
|
|
|
$
|
310,401
|
|
|
|
5.8
|
|
|
$
|
60,399
|
|
|
|
19.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES:
|
|
|
|
|
|
|
|
|
|
Recreational vehicles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
$
|
423,432
|
|
|
|
9.2
|
|
|
$
|
306,677
|
|
|
|
8.2
|
|
|
$
|
116,755
|
|
|
|
38.1
|
|
Motorized
|
|
|
114,032
|
|
|
|
6.6
|
|
|
|
94,767
|
|
|
|
6.4
|
|
|
|
19,265
|
|
|
|
20.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recreational vehicles
|
|
|
537,464
|
|
|
|
8.5
|
|
|
|
401,444
|
|
|
|
7.7
|
|
|
|
136,020
|
|
|
|
33.9
|
|
Other, net
|
|
|
22,645
|
|
|
|
9.7
|
|
|
|
20,787
|
|
|
|
11.4
|
|
|
|
1,858
|
|
|
|
8.9
|
|
Corporate
|
|
|
(51,428
|
)
|
|
|
|
|
|
|
(41,835
|
)
|
|
|
|
|
|
|
(9,593
|
)
|
|
|
(22.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
508,681
|
|
|
|
7.9
|
|
|
$
|
380,396
|
|
|
|
7.2
|
|
|
$
|
128,285
|
|
|
|
33.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
CONSOLIDATED
Consolidated net sales for the nine months ended April 30, 2018 increased $1,142,518, or 21.5%, compared to the nine months ended April 30, 2017. Consolidated gross profit for the nine months ended
April 30, 2018 increased $177,963, or 24.0%, compared to the nine months ended April 30, 2017. Consolidated gross profit was 14.3% of consolidated net sales for the nine months ended April 30, 2018 and 14.0% for the nine months ended
April 30, 2017.
Selling, general and administrative expenses for the nine months ended April 30, 2018 increased $60,399, or
19.5%, compared to the nine months ended April 30, 2017. Amortization of intangible assets expense for the nine months ended April 30, 2018 decreased $7,474, or 15.3%, compared to the nine months ended April 30, 2017, primarily due to
backlog amortization in the prior-year period related to the Jayco acquisition and lower dealer network amortization as compared to the prior-year period. Income before income taxes for the nine months ended April 30, 2018 was $508,681, as
compared to $380,396 for the nine months ended April 30, 2017, an increase of $128,285, or 33.7%.
Additional information
concerning the changes in net sales, gross profit, selling, general and administrative expenses, amortization of intangible assets expense and income before income taxes are addressed in the segment reporting that follows.
Corporate costs included in selling, general and administrative expenses increased $13,590 to $50,766 for the nine months ended April 30, 2018
compared to $37,176 for the nine months ended April 30, 2017. The increase is due in part to an increase in compensation costs, as incentive compensation increased $2,619 in correlation with the increase in income before income taxes compared
to the prior year, and stock-based compensation increased $3,928. The stock-based compensation increase is due to increasing income before income taxes over the past three years, as most stock awards are based on that metric and vest ratably over a
three-year period. Deferred compensation expense also increased $359, which relates to the equal and offsetting increase in other income noted below due to the increase in the related deferred compensation plan assets. In addition, legal and
professional fees, including costs related to sales and marketing initiatives and the joint venture discussed in Note 9 to the Condensed Consolidated Financial Statements, increased $3,930.
Corporate interest and other income and expense was $662 of net expense for the nine months ended April 30, 2018 compared to $4,659 of net
expense for the nine months ended April 30, 2017. This favorable change of $3,997 is primarily due to interest expense and fees of $3,690 in the current-year period on the revolving credit facility as compared to $7,112 in the prior-year
period, a decrease in expense of $3,422 as a result of the lower outstanding debt balance. In addition, the change in the fair value of the Companys deferred compensation plan assets due to market fluctuations and investment income resulted in
$2,187 of net income in the current-year period as compared to net income of $1,828 in the prior-year period, an increase in income of $359.
The overall effective income tax rate for the nine months ended April 30, 2018 was 32.8% compared with 33.0% for the nine months ended April 30, 2017. The primary reason for the modest decrease in the
effective income tax rate was the impact of the Tax Cuts and Jobs Act (the Tax Act) that was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate was reduced from 35.0% to 21.0% starting
January 1, 2018, which results in the use of an estimated blended federal corporate income tax rate of 26.9% for the Companys 2018 fiscal year. In addition, the Company was also required to revalue its net deferred tax assets to reflect
the impact of the lower tax rates. This revaluation caused a
non-recurring,
non-cash
reduction of the Companys net deferred tax assets, and a corresponding charge
to income tax expense, of approximately $34,000 in the nine months ended April 30, 2018. This charge, however, was mostly offset by the lower tax expense reflected in the nine-month period ended April 30, 2018 due to the decrease in our
federal corporate income tax rate to 26.9% for fiscal 2018 as a result of the Tax Act.
23
Segment Reporting
TOWABLE RECREATIONAL VEHICLES
Analysis of the change in net sales for the nine months
ended April 30, 2018 compared to the nine months ended April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
April 30, 2018
|
|
|
% of
Segment
Net Sales
|
|
|
Nine Months
Ended
April 30, 2017
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
$
|
2,801,828
|
|
|
|
60.9
|
|
|
$
|
2,236,445
|
|
|
|
60.1
|
|
|
$
|
565,383
|
|
|
|
25.3
|
|
Fifth Wheels
|
|
|
1,798,005
|
|
|
|
39.1
|
|
|
|
1,482,869
|
|
|
|
39.9
|
|
|
|
315,136
|
|
|
|
21.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
$
|
4,599,833
|
|
|
|
100.0
|
|
|
$
|
3,719,314
|
|
|
|
100.0
|
|
|
$
|
880,519
|
|
|
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
April 30, 2018
|
|
|
% of
Segment
Shipments
|
|
|
Nine Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Trailers and Other
|
|
|
144,811
|
|
|
|
77.8
|
|
|
|
120,813
|
|
|
|
77.7
|
|
|
|
23,998
|
|
|
|
19.9
|
|
Fifth Wheels
|
|
|
41,296
|
|
|
|
22.2
|
|
|
|
34,596
|
|
|
|
22.3
|
|
|
|
6,700
|
|
|
|
19.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Towables
|
|
|
186,107
|
|
|
|
100.0
|
|
|
|
155,409
|
|
|
|
100.0
|
|
|
|
30,698
|
|
|
|
19.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Product Mix and Price on Net Sales:
|
|
%
Increase
|
|
Towables
|
|
|
|
|
Travel Trailers and Other
|
|
|
5.4
|
|
Fifth Wheels
|
|
|
1.9
|
|
Total Towables
|
|
|
3.9
|
|
The increase in total towables net sales of 23.7% compared to the prior-year period resulted from a 19.8% increase
in unit shipments and a 3.9% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the nine months ended April 30, 2018, combined travel trailer and
fifth wheel wholesale unit shipments increased 19.1% compared to the same period last year.
The increases in the overall net price per
unit within the travel trailer and other product lines of 5.4% and the fifth wheel product lines of 1.9% were both primarily due to changes in product mix and selective net price increases since the prior-year period.
Cost of products sold increased $733,133 to $3,906,016, or 84.9% of towables net sales, for the nine months ended April 30, 2018 compared to
$3,172,883, or 85.3% of towables net sales, for the nine months ended April 30, 2017. The changes in material, labor,
freight-out
and warranty costs comprised $697,265 of the $733,133 increase in cost of
products sold. Material, labor,
freight-out
and warranty costs as a combined percentage of towables net sales decreased to 79.3% for the nine months ended April 30, 2018 compared to 79.4% for the nine
months ended April 30, 2017. This decrease in percentage was primarily the result of a decrease in the material cost percentage to net sales, due to operating efficiencies attained since the prior-year period, primarily by Jayco, and selective
net price increases. This decrease was mostly offset by increases in the labor cost percentage, due to the continued competitive RV labor market, and the warranty cost percentage, which was partially due to offering extended coverage on certain
structural components of certain products since the prior-year period. Total manufacturing overhead increased $35,868 with the increase in sales, but decreased as a percentage of towables net sales from 5.9% to 5.6%, as the increased production
resulted in better absorption of fixed overhead costs.
Towables gross profit increased $147,386 to $693,817, or 15.1% of towables net
sales, for the nine months ended April 30, 2018 compared to $546,431, or 14.7% of towables net sales, for the nine months ended April 30, 2017. The increase in gross profit is primarily due to the 19.8% increase in unit sales volume noted
above, while the increase in gross profit percentage is due to the decrease in the cost of products sold percentage noted above.
24
Selling, general and administrative expenses were $236,725, or 5.1% of towables net sales, for the
nine months ended April 30, 2018 compared to $201,158, or 5.4% of towables net sales, for the nine months ended April 30, 2017. The primary reason for the $35,567 increase was increased towables net sales and towables income before income
taxes, which caused related commissions, bonuses and other compensation to increase by $28,118. Legal, professional and related settlement costs increased $2,232, primarily due to estimated product liability settlement costs. In addition,
sales-related travel, advertising and promotional costs also increased $3,611 in correlation with the sales increase. In spite of these increased amounts, the overall selling, general and administrative expense as a percentage of towables net sales
decreased by 0.3% due to the significant increase in towables net sales.
Towables income before income taxes was $423,432, or 9.2% of
towables net sales, for the nine months ended April 30, 2018 compared to $306,677, or 8.2% of towables net sales, for the nine months ended April 30, 2017. The primary reasons for the increase in percentage were the decreases in both the
cost of products sold and selling, general and administrative expense percentages to sales noted above. In addition, the towables amortization cost percentage decreased by 0.4%, primarily due to
non-recurring
backlog amortization in the prior-year period related to the Jayco acquisition.
MOTORIZED RECREATIONAL VEHICLES
Analysis of the change in net sales for the nine months ended April 30, 2018 compared to the nine months ended April 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
April 30,
2018
|
|
|
% of
Segment
Net Sales
|
|
|
Nine Months
Ended
April 30,
2017
|
|
|
% of
Segment
Net Sales
|
|
|
Change
Amount
|
|
|
%
Change
|
|
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
$
|
782,610
|
|
|
|
45.4
|
|
|
$
|
706,702
|
|
|
|
47.5
|
|
|
$
|
75,908
|
|
|
|
10.7
|
|
Class C
|
|
|
866,822
|
|
|
|
50.3
|
|
|
|
715,795
|
|
|
|
48.2
|
|
|
|
151,027
|
|
|
|
21.1
|
|
Class B
|
|
|
75,547
|
|
|
|
4.3
|
|
|
|
63,812
|
|
|
|
4.3
|
|
|
|
11,735
|
|
|
|
18.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
$
|
1,724,979
|
|
|
|
100.0
|
|
|
$
|
1,486,309
|
|
|
|
100.0
|
|
|
$
|
238,670
|
|
|
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
April 30, 2018
|
|
|
% of
Segment
Shipments
|
|
|
Nine Months
Ended
April 30, 2017
|
|
|
% of
Segment
Shipments
|
|
|
Change
Amount
|
|
|
%
Change
|
|
# OF UNITS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motorized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
7,102
|
|
|
|
34.0
|
|
|
|
6,399
|
|
|
|
35.2
|
|
|
|
703
|
|
|
|
11.0
|
|
Class C
|
|
|
13,224
|
|
|
|
63.3
|
|
|
|
11,274
|
|
|
|
62.0
|
|
|
|
1,950
|
|
|
|
17.3
|
|
Class B
|
|
|
568
|
|
|
|
2.7
|
|
|
|
504
|
|
|
|
2.8
|
|
|
|
64
|
|
|
|
12.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Motorized
|
|
|
20,894
|
|
|
|
100.0
|
|
|
|
18,177
|
|
|
|
100.0
|
|
|
|
2,717
|
|
|
|
14.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Change in Product Mix and Price on Net Sales:
|
|
%
Increase
(Decrease)
|
|
Motorized
|
|
|
|
|
Class A
|
|
|
(0.3
|
)
|
Class C
|
|
|
3.8
|
|
Class B
|
|
|
5.7
|
|
Total Motorized
|
|
|
1.2
|
|
The increase in total motorized net sales of 16.1% compared to the prior-year period resulted from a 14.9% increase
in unit shipments and a 1.2% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the nine months ended April 30, 2018, combined motorhome wholesale
unit shipments increased 12.7% compared to the same period last year.
25
The small decrease in the overall net price per unit within the Class A product line of 0.3% was
primarily due to a slight shift in the concentration of sales from the generally larger and more expensive diesel units to the more modestly-priced gas units compared to the prior-year period. The increase in the Class C product line of 3.8%
was primarily due to the net impact of product mix changes and selective net price increases. The increase in the overall net price per unit within the Class B product line of 5.7% is primarily due to the introduction of a new, higher-priced
model since the prior-year period, and more option content per unit in the current-year period.
Cost of products sold increased
$209,777 to $1,533,280, or 88.9% of motorized net sales, for the nine months ended April 30, 2018 compared to $1,323,503, or 89.0% of motorized net sales, for the nine months ended April 30, 2017. The changes in material, labor,
freight-out
and warranty costs comprised $203,559 of the $209,777 increase due to increased sales volume. Material, labor,
freight-out
and warranty costs as a combined
percentage of motorized net sales was 84.9% for the nine-month period ended April 30, 2018 and 84.8% for the nine-month period ended April 30, 2017. The primary reason for this slight increase in percentage was an increase in labor costs
associated with increasing employment levels and the continued competitive RV labor market, and an increase in the warranty cost percentage. Total manufacturing overhead increased $6,218 with the volume increase, but decreased as a percentage of
motorized net sales from 4.2% to 4.0%, as the increase in production resulted in better absorption of fixed overhead costs.
Motorized
gross profit increased $28,893 to $191,699, or 11.1% of motorized net sales, for the nine months ended April 30, 2018 compared to $162,806, or 11.0% of motorized net sales, for the nine months ended April 30, 2017. The increase in gross
profit was due primarily to the 14.9% increase in unit sales volume noted above, and the slight increase as a percentage of motorized net sales is due to the decrease in the cost of products sold percentage noted above.
Selling, general and administrative expenses were $75,828, or 4.4% of motorized net sales, for the nine months ended April 30, 2018 compared
to $64,978, or 4.4% of motorized net sales, for the nine months ended April 30, 2017. The $10,850 increase was partially due to increased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses
and other compensation to increase by $5,778. In addition, legal, professional and related settlement costs increased $3,458, primarily due to estimated product liability settlement costs. Sales related travel, advertising and promotional costs also
increased $1,038 in connection with the sales increase.
Motorized income before income taxes was $114,032, or 6.6% of motorized net
sales, for the nine months ended April 30, 2018 compared to $94,767, or 6.4% of motorized net sales, for the nine months ended April 30, 2017. The primary reason for this increase in percentage was the impact of the decrease in the cost of
products sold percentage noted above. In addition, the motorized income before income taxes percentage increased due to a gain of $1,506 on the sale of certain motorized buildings and equipment during the nine months ended April 30, 2018.
Financial Condition and Liquidity
As of April 30, 2018, we had $147,019 in cash and cash equivalents compared to $223,258 on July 31, 2017. The components of this $76,239 decrease in cash and cash equivalents are described in more detail
below, but the decrease was primarily attributable to capital expenditures of $100,021, $46,902 paid for an equity investment in a joint venture, principal payments on long-term debt of $65,000 and $58,492 paid for dividends, partially offset by
cash provided by operations of $197,185.
Working capital at April 30, 2018 was $571,796 compared to $399,121 at July 31,
2017, with the increase primarily attributable to increases in accounts receivable and inventory due to the increases in sales and production lines. Capital expenditures of $100,021 for the nine months ended April 30, 2018 were made primarily
for land and production building additions and improvements, as well as replacing machinery and equipment used in the ordinary course of business.
We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. We believe our
on-hand
cash
and cash equivalents, and funds generated from continuing operations, along with funds available under the revolving asset-based credit facility, will be sufficient to fund expected future operational requirements for the foreseeable future. We have
historically relied on internally generated cash flows from operations to finance substantially all our growth, however, we obtained a revolving asset-based credit facility to partially fund the fiscal 2016 acquisition of Jayco as discussed in Notes
2 and 12 to the Condensed Consolidated Financial Statements.
26
While the Tax Act enacted in December 2017 is expected to increase cash flow in the future, our main
priorities for the use of current and future available cash generated from operations will continue to focus on funding our growth, both organically and through acquisitions, maintaining and growing our regular dividends over time, and reducing
indebtedness. Strategic share repurchases or special dividends, as determined by the Companys Board, will also continue to be considered. As a component of funding our growth, we anticipate making additional investments in our workforce
through a variety of initiatives, including enhanced employee training and development programs and other initiatives that will be introduced in fiscal 2018 and fiscal 2019 and targeted to the varying needs of our individual operating entities.
In regard to growing our business, we anticipate capital expenditures during the remainder of fiscal 2018 of approximately $60,000,
primarily for the continued expansion of our facilities and replacing and upgrading machinery, equipment and other assets to be used in the ordinary course of business.
In regard to reducing indebtedness, subsequent to April 30, 2018, we made additional debt payments of $60,000. Furthermore, absent an alternative to strategically employ funds available under the credit
facility, we expect to pay off the current remaining indebtedness of $20,000 in its entirety by the end of fiscal 2018. We may also consider additional strategic growth acquisitions that complement or expand our ongoing operations.
The Companys Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under asset-based
lines of credit, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the payments of dividends include a minimum level of adjusted excess cash
availability and a fixed charge coverage ratio test, both as defined in the credit agreement. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are
subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors.
Future purchases
of the Companys common stock or special cash dividends may occur based upon market and business conditions and excess cash availability, subject to potential customary limits and restrictions pursuant to the credit facility, applicable legal
limitations and determination by the Board.
Operating Activities
Net cash provided by operating activities for the nine months ended April 30, 2018 was $197,185 as compared to net cash provided by operating activities of $182,834 for the nine months ended April 30,
2017.
For the nine months ended April 30, 2018, net income adjusted for
non-cash
items
(primarily depreciation, amortization of intangibles, deferred income tax provision and stock-based compensation) provided $442,180 of operating cash. The change in net working capital used $244,995 of operating cash during that period, primarily as
a result of a larger than usual seasonal increase in accounts receivable due to both the timing of shipments and the increase in sales. Inventory also increased in conjunction with the increases in production facilities and lines and the timing of
unit shipments. Required income tax payments exceeded the income tax provision during the period as well. These increases were partially offset by increases in accounts payable and accrued liabilities.
For the nine months ended April 30, 2017, net income adjusted for
non-cash
items (primarily
depreciation, amortization of intangibles, deferred income tax provision and stock-based compensation) provided $327,816 of operating cash. The changes in working capital used $144,982 of operating cash during that period, primarily due to larger
than usual seasonal increases in accounts receivable and inventory in correlation with the increases in sales, backlog and production lines, partially offset by an increase in accounts payable.
Investing Activities
Net cash used
in investing activities for the nine months ended April 30, 2018 was $141,996, primarily due to capital expenditures of $100,021 and $46,902 paid for the equity investment in TH2, our joint venture.
Net cash used in investing activities for the nine months ended April 30, 2017 was $81,446, primarily due to capital expenditures of $79,456
and a final purchase price adjustment payment of $5,039 related to the fiscal 2016 acquisition of Jayco, partially offset by proceeds received on the dispositions of property, plant and equipment of $4,630.
27
Financing Activities
Net cash used in financing activities for the nine months ended April 30, 2018 was $131,428, primarily for principal payments on the revolving credit facility totaling $65,000 and regular quarterly cash
dividend payments of $0.37 per share for each of the first three quarters of fiscal 2018 totaling $58,492.
Net cash used in financing
activities for the nine months ended April 30, 2017 was $121,879, primarily for principal payments on the revolving credit facility totaling $65,000 and regular quarterly cash dividend payments of $0.33 per share for each of the first three
quarters of fiscal 2017 totaling $52,057.
The Company increased its previous regular quarterly dividend of $0.33 per share to $0.37 per
share in October 2017. In October 2016, the Company increased its previous regular quarterly dividend of $0.30 per share to $0.33 per share.
Accounting Pronouncements
Reference
is made to Note 1 of our Condensed Consolidated Financial Statements contained in this report for a summary of recently issued accounting pronouncements, which summary is hereby incorporated by reference.
28