Fiscal 2019 Outlook: Solid Retail
Growth
Thor Industries, Inc. (NYSE:THO), the sole owner of operating
subsidiaries, that combined, represent the world’s largest
manufacturer of recreational vehicles, today reported results for
the full-year fiscal 2018 and for the fourth quarter ended
July 31, 2018.
For the full-year fiscal 2018:
- Financial results for the full year
reflect all-time records in the Company’s history:
- Net sales increased 14.9% to $8.33
billion
- Gross profit increased 11.6% to $1.16
billion
- Income before taxes increased 13.8% to
$633.0 million
- Diluted EPS increased 14.8% to
$8.14
- Cash flow from operating activities
increased 11.3% to $466.5 million
Net sales increased 17.2% for the Towable segment, 8.9% for the
Motorized segment and 14.9% overall. Overall gross profit margin
decreased to 14.0% from 14.4% in the prior year.
“Our full-year results reflect another record year of both sales
and earnings,” said Bob Martin, Thor President and CEO. "We
leveraged the strength in retail demand to drive year-over-year
growth in both our top and bottom lines. We experienced a solid
increase in gross margins in the first half of the year due to
strong sales growth, as well as achieving operating and process
improvements, primarily by Jayco. During the second half of the
year, however, we reduced our production levels, lowered wholesale
shipments and increased dealer incentives in order to balance
dealer inventories, resulting in modest net revenue growth. Also,
during the second half, we lapped the Jayco prior-year process
improvements and experienced increased labor, warranty and material
costs, resulting in the modest decrease of 40 basis points on our
full-year gross margin."
For the fourth quarter of 2018:
- Net sales decreased 3.1% to $1.87
billion
- Gross profit decreased 18.9% to $244.4
million
- Income before taxes decreased 29.3% to
$124.3 million
- Diluted EPS decreased 26.1% to
$1.67
- Consolidated RV backlog of $1.40
billion, as of July 31, 2018
Net sales for the fourth quarter were flat for the Towable
segment, down 13.2% for the Motorized segment and declined 3.1%
overall. Overall gross profit margin decreased to 13.0% compared to
15.6% in the prior year. Diluted EPS benefited as a result of the
Tax Cuts and Jobs Act enacted in December 2017, as the Company's
fourth quarter 2018 effective tax rate of 29.1% compared favorably
to a tax rate of 32.1% in the prior year.
“Our fourth quarter results reflect the actions taken during the
period to balance dealer inventory levels," added Martin. “We
believe our reduced production levels, combined with higher
promotional costs and solid retail demand, have improved the
position of our dealers' inventories as they enter the new model
year and prepare for the upcoming Dealer Open House.
“While labor costs began to moderate during the latter part of
fiscal 2018, they remained elevated on a year-over-year basis. In
addition, we experienced higher warranty and warranty-related
costs, as well as inflationary price increases in certain raw
material and commodity-based components, due primarily to headwinds
created by the announcement and implementation of steel and
aluminum tariffs and other regulatory actions. We will continue to
manage these input factors through a combination of strategic
actions and believe, over time, we will be able to offset these
cost increases.
“Also, during the quarter, we incurred incremental
expenses from transaction costs associated with the announced
acquisition of the Erwin Hymer Group, as well as certain legal
settlement costs.
“Our consolidated backlog at July 31, 2018 is reflective of our
current, pre-Open House time of the year as our dealers await the
introduction of our 2019 models. Overall, we believe that our
backlog reflects a more normalized level and will provide us with
the ability to realize the benefits associated with a more stable
production environment in future quarters."
Segment summary for the quarter and full year ended July 31,
2018:
Towable RVs
- Towable RV sales were $1.41 billion for
the fourth quarter, comparable to $1.41 billion in the prior-year
period. Towable RV sales were $6.01 billion for the full year, up
17.2% from $5.13 billion in the prior year.
- Towable RV income before tax was $109.2
million for the fourth quarter, down 28.3% from $152.2 million in
the fourth quarter last year. Towable RV income before tax was
$532.7 million for the full year, up 16.1% from $458.9 million in
the prior year.
- Towable RV backlog decreased $649.3
million, or 45.8%, to $767.0 million, compared to $1.42 billion at
the end of the fourth quarter of fiscal 2017. This decrease is
attributable to a number of factors including (1) capacity
expansions since the prior year, allowing for increased production
and therefore quicker delivery of units to dealers, (2) elevated
existing dealer inventory levels in certain locations and (3) a
more normalized pre-Open House order pattern compared to the
elevated levels in the prior year.
Motorized RVs
- Motorized RV sales were $421.3 million
for the fourth quarter, down 13.2% from $485.2 million in the
prior-year period. Motorized RV sales were $2.15 billion for the
full year, up 8.9% from $1.97 billion in the prior year.
- Motorized RV income before tax was
$20.8 million for the fourth quarter, down 32.1% from $30.6 million
in the fourth quarter last year. Motorized RV income before tax was
$134.8 million for the full year, up 7.6% from $125.3 million in
the prior year.
- Motorized RV backlog decreased $281.5
million, or 30.7%, to $634.1 million compared to $915.6 million at
the end of the fourth quarter of fiscal 2017. This decrease is
attributable to a number of factors including (1) capacity
expansions since the prior year, allowing for increased production
and therefore quicker delivery of units to dealers, (2) elevated
existing dealer inventory levels in certain locations and (3) a
more normalized pre-Open House order pattern compared to the
elevated levels in the prior year.
Balance Sheet and Cash Flow
As of July 31, 2018, the Company has $275.2 million of cash and
cash equivalents. During fiscal 2018, the Company invested $138.2
million in various capital projects that support our existing
businesses. Cash flow from operating activities increased 11.3% to
a record level of $466.5 million. During the final quarter of the
year, Thor paid in full the outstanding balance on its revolving
credit facility. For the fiscal year, the total amount of debt paid
down on the credit facility was $145.0 million.
"The Jayco acquisition, completed in 2016, has been a great
success, delivering significant accretive value to our organization
and shareholders,” said Colleen Zuhl, Thor Senior Vice President
and CFO. "Our execution, combined with strong earnings and cash
flows following the acquisition, allowed us to pay off the debt in
just two years,” concluded Zuhl.
Outlook
“While we are pleased with our full-year results, fiscal 2018
ended with near-term challenges for both the top line and gross
margin," added Martin. “Our entire organization focused throughout
the second half of the fiscal year in assisting our dealers in
balancing their inventory levels, as well as taking numerous
actions to offset our rising costs, however, we have more work to
do in fiscal 2019.
“As dealer orders, and our resulting production schedules,
return to a more normalized pattern beginning in calendar 2019, we
will continue to match production to our dealer needs, protect and
seek to grow our space on dealer lots, ensure we provide
high-quality, innovative products in all key price points with the
features consumers are seeking and act aggressively to offset items
pressuring our margins, whether from labor, tariffs, commodity
increases or other sources.
“Our outlook for fiscal year 2019 reflects a similar healthy
macroeconomic environment consistent with current conditions, as
well as the continuation of favorable demographic and lifestyle
growth trends, including the ongoing strength of baby boomer
customers, in addition to first-time and younger buyers. Dealer
optimism remains high and their inventory is fresh.
"However, due to dealer order strength experienced in the first
half of fiscal 2018, we are planning for tougher year-over-year
comparisons in the first half of fiscal 2019 with more favorable
top-line growth rates in the second half of the fiscal year.
Similar to the quarterly progression of our top line, we anticipate
gross margin pressure to be greater in the first half of the year.
During fiscal year 2019, our diluted EPS will benefit from a lower
effective tax rate," concluded Martin.
"Although we expect to have some near-term growth challenges,
our industry's end-market demand trends continue to remain very
favorable,” said Peter B. Orthwein, Thor Executive Chairman.
"Unlike many of the market expansions we have experienced over the
past two decades, the current market strength has been driven
largely by new consumers adopting the RV lifestyle with many
consumers adopting the lifestyle at a much younger age than we have
seen historically. We view such retail growth to be more
sustainable over the long term.
"During fiscal 2019, we will remain focused on executing our
overall strategic plan, including our capital allocation strategy,
which reflects funding our growth initiatives, and returning
capital to our shareholders. This week we announced our plan to
acquire the Erwin Hymer Group, the leading European RV manufacturer
and an important step in our journey to become the world's premier
RV manufacturing company. Given our proven history of acquiring
successful companies with strong management teams and overall
strategic fit, we believe this acquisition, combined with the
favorable North American and European market fundamentals, enables
the Company to continue to be successful in executing its long-term
growth strategy and enhancing shareholder value."
Subsequent Event
On September 18, 2018, the Company and the shareholders of Erwin
Hymer Group SE ("Erwin Hymer Group") announced that they entered
into a definitive agreement for the Company to acquire Erwin Hymer
Group. In accordance with the agreement, total consideration
to be paid to the sellers at closing will consist of approximately
EUR 1.7 billion cash ($2.0 billion at current exchange rate) and
equity consisting of approximately 2.3 million shares of Thor
Industries' common stock. The Company will also assume
responsibility for the debt of the Erwin Hymer Group of
approximately EUR 300 million ($350 million at current exchange
rate).
The Erwin Hymer Group is headquartered in Bad Waldsee, Germany,
and is the largest RV manufacturer in Europe, by revenue. The
transaction is subject to customary closing conditions, including
regulatory approvals. The transaction is expected to close
near the end of calendar year 2018.
Supplemental Earnings Release Materials
Thor has also provided a comprehensive question and answer
document relating to its quarterly and annual results and other
topics. To view this document, 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 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 ability to efficiently utilize
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;
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; and changes to investment and capital allocation
strategies or other facets of our strategic plan. Additional risks
and uncertainties surrounding the acquisition of Erwin Hymer Group
SE (the "Erwin Hymer Group") include risks regarding the
anticipated timing of the closing of the acquisition, the potential
benefits of the proposed acquisition and the anticipated operating
synergies, the satisfaction of the conditions to closing the
acquisition (including obtaining necessary regulatory approvals) in
the anticipated timeframe or at all, the integration of the
business, the impact of exchange rate fluctuations and unknown or
understated liabilities related to the acquisition and Erwin Hymer
Group'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, 2018.
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 AND FISCAL YEARS ENDED JULY
31, 2018 AND 2017 ($000's except share and per share
data)
THREE MONTHS ENDED JULY 31, (Unaudited) FISCAL YEARS
ENDED JULY 31, % Net % Net % Net
% Net
Sales Sales Sales
Sales
2018 (1) 2017 (1)
2018 (1) 2017
(1)
Net sales $ 1,874,111 $ 1,934,672 $ 8,328,909
$ 7,246,952 Gross profit $ 244,408 13.0% $
301,288 15.6% $ 1,164,666 14.0% $ 1,043,583 14.4% Selling,
general and administrative expenses 106,644 5.7% 109,446 5.7%
477,444 5.7% 419,847 5.8% Amortization of intangible assets
13,882 0.7% 15,215 0.8% 55,118 0.7% 63,925 0.9% Interest
expense, net 132 —% 1,749 0.1% 3,039 —% 8,807 0.1% Other
income, net 598 —% 1,112 0.1% 3,964 —% 5,382 0.1%
Income before income
taxes
124,348 6.6% 175,990 9.1% 633,029 7.6% 556,386 7.7% Income
taxes 36,143 1.9% 56,526 2.9% 202,878 2.4% 182,132 2.5%
Net income and
comprehensive income
$ 88,205 4.7% $ 119,464 6.2% $ 430,151 5.2% $
374,254 5.2%
Earnings per common
share
Basic $ 1.67 $ 2.27 $ 8.17 $ 7.12 Diluted $ 1.67 $ 2.26 $ 8.14 $
7.09 Weighted-avg. common shares outstanding - basic
52,695,365 52,583,291 52,674,161 52,562,723 Weighted-avg. common
shares outstanding - diluted 52,881,088 52,814,395 52,853,360
52,758,442 (1) Percentages may not add due to rounding
differences
SUMMARY CONDENSED CONSOLIDATED BALANCE SHEETS
($000) JULY 31, 2018
JULY 31, 2017 JULY 31, 2018 JULY 31, 2017 Cash
and equivalents $ 275,249 $ 223,258 Current liabilities $ 769,330 $
781,046 Accounts receivable, net 487,235 484,844 Long-term debt —
145,000 Inventories, net 537,909 460,488 Other long-term
liabilities 71,594 55,345 Prepaid expenses and other 11,281
11,577 Stockholders' equity 1,937,741 1,576,540 Total
current assets 1,311,674 1,180,167 Property, plant & equipment,
net 522,054 425,238 Goodwill 377,693 377,693 Amortizable intangible
assets, net 388,348 443,466 Equity investment in joint venture
48,463 — Deferred income taxes and other, net 130,433
131,367 Total $ 2,778,665 $ 2,557,931
$ 2,778,665 $ 2,557,931
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version on businesswire.com: https://www.businesswire.com/news/home/20180920005148/en/
Thor Industries, Inc.Investor Relations:Bruce Byots, Senior
Director of Investor Relations(574) 970-7912
Thor Industries (NYSE:THO)
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