ELKHART, Ind., March 6,
2019 /PRNewswire/ -- Thor Industries, Inc. (NYSE: THO) today
announced second- quarter results with net sales of $1.29 billion, compared with the record
second-quarter revenue posted in the prior year. Net loss and
diluted loss per share for the second quarter of fiscal 2019 were
$(5.4) million and $(0.10), respectively. Second-quarter results
reflect acquisition-related costs totaling $42.1 million, or $0.75 per share, and compare to record
second-quarter net income and diluted earnings per share in the
prior year of $79.8 million and
$1.51, respectively.
Second quarter fiscal 2019 financial results reflect the impact
of balancing production with market demand, as wholesale shipments
declined relative to retail sales as dealers continued to sell
through existing inventories before placing orders for new product,
and various acquisition-related costs.
- Balancing Production and Demand: The dealer
inventory rationalization process continued during the second
quarter as industry wholesale shipments declined at a double-digit
percentage compared with relatively stable retail registrations
through the end of December 2018.
This excess of retail sales over wholesale shipments resulted in
reductions in dealer inventory ahead of the early spring retail
shows and peak summer selling season. The overall levels of
discounts and incentives increased compared with the unusually low
levels recorded in the second quarter of fiscal 2018.
- Acquisition-Related Costs:
-
- Foreign Currency Forward Contract: On
September 18, 2018, the Company
entered into a foreign currency forward contract in the amount of
€1.625 billion related to the anticipated cash portion of the
purchase price of EHG. The contract does not qualify as a hedging
instrument for accounting purposes; therefore, changes in fair
value are reported in current-period earnings. As a result of the
change in the U.S. dollar-Euro exchange rate from the date of the
establishment of the contract to the end of the fiscal second
quarter on January 31, 2019, and
changes in the likelihood and timing of the acquisition closing,
the Company recorded non-cash, mark-to-market losses on the forward
contract of approximately $31.2
million and $73.7 million
during the three and six-month periods ended January 31, 2019, respectively. At the completion
of the EHG acquisition on February 1,
2019, the forward contract was closed, and the final
settlement will be realized in the Company's third-quarter
financial results.
- Transaction Costs: During the quarter, Thor
incurred $10.9 million in expenses
related to the recently completed acquisition of EHG, comprised
primarily of ticking fees.
In aggregate, the acquisition-related costs for the foreign
currency forward contract and transaction costs totaled
approximately $42.1 million, or
$0.75 per diluted share, in the
fiscal second quarter.
"We made considerable progress on a number of fronts in the
second quarter, supported by a positive start to the 2019 retail
show season, with a number of the larger shows posting strong
attendance levels, which supports our view of a stable long-term
retail environment," said Bob
Martin, Thor President and CEO. "We were also pleased to
have closed our acquisition of EHG just after the end of the second
quarter. This transformational acquisition represents a major step
forward in our long-term strategic growth plan, and our entire team
is focused on integrating EHG and providing strong returns for our
shareholders. While we are optimistic for the long term, we also
expect to face challenging conditions in the near term, as dealers
continue to reduce inventory levels and we experience difficult
comparisons to the record third-quarter results posted in fiscal
2018."
Second-quarter net sales decreased 35.8% for the Towable
segment, 33.7% for the Motorized segment and 34.5% overall. Overall
gross profit margins declined to 11.0% in the quarter, compared to
13.7% in the prior-year period, primarily reflecting the impact of
lower sales levels and higher relative sales discounts and
promotions compared with unusually low levels in the prior year.
The levels of promotions and discounting during the quarter was
more in line with our historical seasonal averages. Overhead costs
increased as a percentage of sales due to lower fixed cost
absorption over the reduced net sales in the quarter. Net income in
the quarter was also adversely affected by an unusually high
effective tax rate. The Company's second-quarter effective tax rate
was 389.1% compared to a tax rate of 43.5% in the prior year
because the $31.2 million non-cash,
mark-to-market loss on the foreign currency forward contract is not
deductible for income tax purposes. The Company expects to return
to a more normalized effective tax rate of 23% to 25% by the end of
its fiscal second half of 2019, before consideration of any
discrete tax items and the acquisition of the Erwin Hymer
Group.
As dealers continue to rationalize inventory levels following
the unusually high seasonal order and wholesale delivery patterns
in the first nine months of fiscal 2018, the Company has taken
steps to adjust its production levels accordingly. A number of
Thor's production facilities have reduced their production unit
rates, while others have shifted to four-day production weeks.
These reductions, combined with the start of the stronger spring
and summer selling season, are expected to result in reductions in
Thor's finished goods inventory. Finished goods inventory levels
were elevated at January 31, 2019, in
part due to the unusually bitter winter weather which forced most
of the Company's operations to close for several days at the end of
the fiscal second quarter. As a result of these factors, the
Company expects that production and wholesale sales will be
balanced with overall retail demand by the end of the normally
stronger second half of the fiscal year.
Towable RVs
- Towable RV sales were $881.6
million for the second quarter, compared to the record
second-quarter sales of $1.37 billion
in the prior-year period. This decrease was driven primarily by
lower unit volume compared with the record second-quarter unit
sales last year, but was partially offset by a shift in product mix
toward higher-priced units.
- Towable gross profit margin fell to 10.9% in the fiscal second
quarter, reflecting increased discounting levels, as well as
slightly increased warranty costs. Although warranty costs were
elevated compared to year-ago levels, the rate of increase fell
from the first quarter, partially due to the impact of improved
quality metrics and warranty claims experience.
- Towable RV income before tax was $34.1
million, compared to $116.7
million in the second quarter last year. This decrease was
driven primarily by lower sales, increased relative levels of
discounting and the resulting decrease in gross profit.
- Towable RV backlog decreased $1.00
billion to $812.0 million,
compared to $1.82 billion at the end
of the second quarter of fiscal 2018, reflecting the positive
impact of capacity additions, improved delivery times, and dealers'
continuing to right-size inventory levels. The Company believes the
current towable RV backlog is returning to a normalized level and
is reflective of dealer trends toward smaller, but more frequent
order patterns.
Motorized RVs
- Motorized RV sales were $371.5
million for the second quarter compared to the record
second-quarter sales level of $559.9
million in the prior-year period. The decrease in motorized
sales was driven primarily by lower unit sales compared to the
record second-quarter unit sales last year, partially offset by a
mix shift toward higher-priced product.
- Motorized gross profit margin fell to 9.8% in the fiscal second
quarter as a result of reduced sales levels and reduced fixed
overhead absorption for the quarter.
- Motorized RV income before tax was $17.2
million, compared to $37.5
million last year, driven primarily by the lower sales
levels as well as the decrease in gross margin.
- Motorized RV backlog decreased $342.0
million to $639.9 million from
$981.8 million a year earlier,
reflecting the positive impact of capacity additions, improved
delivery times, and dealers' continuing to right-size inventory
levels. The Company believes the current motorized RV backlog is
returning to a normalized level and is reflective of the shift in
dealer order patterns to smaller and more frequent orders.
Erwin Hymer Group Acquisition
On February 1, 2019, Thor completed its acquisition
of EHG. The acquisition excluded EHG's North American operations
and the Canadian-specific Roadtrek brands. The Canadian-specific
trademarks excluded from the transaction were such brands as
Roadtrek, Aktiv, American Fastbacks and Fastbacks, and Ecotrek. To
be clear, the acquisition does include the trademarks from all
European Hymer brands including those formerly licensed to the
North American operations. The acquisition is expected to be
accretive to earnings in its first twelve months, before taking
into account anticipated efficiencies, purchase accounting
adjustments and transaction-related expenses.
As previously noted, Thor incurred a number of
acquisition-related expenses within the second quarter. The Company
expects to incur additional expenses relating to the acquisition,
including professional, legal and advisory fees related to the
closing of the transaction as well as the integration and
implementation of enhanced controls consistent with SOX
requirements. Capitalized fees related to the Company's former debt
facility will be fully expensed in Thor's fiscal third-quarter
results as that debt facility was terminated at the closing of the
acquisition. The Company estimates that these acquisition-related
costs will range from approximately $30
million to $40 million for the
remainder of fiscal 2019, not including costs expected to be
capitalized in connection with the debt facilities and purchase
price accounting related charges. A large portion of these costs
will be recognized within the fiscal third quarter.
"Now that we have completed our acquisition of EHG, we are
focused on the integration of those operations as well as
strengthening our balance sheet through the repayment of the debt
incurred for the purchase," said Colleen
Zuhl, Thor Senior Vice President and CFO. "As we review our
cash priorities, our main focus will be to utilize free cash flow
to reduce overall debt levels. Subsequent to the end of the
quarter, we reduced borrowings under the ABL facility by
$20 million. We will balance our goal
of reducing our net debt level with our strategic needs to invest
in the continuing growth of our business and returning cash to
shareholders."
Outlook
Thor's management team and Board remain
focused on creating long-term shareholder value. As a result of the
combination of strong underlying industry demographics and
fundamentals, Thor's leadership position in the RV industry, and
the international growth opportunities presented by the EHG
acquisition, the Company is optimistic about the long-term
future.
"For the rest of fiscal 2019, we expect to face challenges that
may impact our financial results as dealers continue to closely
manage inventory to levels that better reflect current retail
demand, and their ability to replenish inventory more quickly,"
added Bob Martin. "While we also
face difficult year-over-year comparisons to the record
third-quarter results for fiscal 2018, we are confident that Thor
is on a path toward growth in fiscal 2020."
"We remain optimistic regarding the demographics and long-term
fundamentals driving the global RV industry which gave us
confidence to embark on the largest acquisition in our Company's
history," commented Peter B.
Orthwein, Executive Chairman of Thor. "With the acquisition
of EHG now completed, we are focused on capturing synergies and
driving positive cash flow which we will use to reduce our
outstanding debt as quickly as possible."
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
25 brand companies, supported by approximately 210 facilities in
five countries 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 or
announced 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; increasing costs
for freight and transportation; 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 for products priced in
U.S. dollars; 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 potential
benefits of the acquisition and the anticipated operating
synergies, the integration of the business, changes in Euro-U.S.
dollar exchange rates that could impact the mark-to-market value of
outstanding derivative instruments, 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 and Part II, Item 1A of our quarterly report on
Form 10-Q for the period ended January 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 AND SIX
MONTHS ENDED JANUARY 31, 2019 AND 2018
|
($000's except
share and per share data) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
January 31,
|
|
Six Months Ended
January 31,
|
|
|
2019
|
%
Net
Sales
(1)
|
|
2018
|
%
Net
Sales
(1)
|
|
2019
|
%
Net
Sales
(1)
|
|
2018
|
%
Net
Sales
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,290,576
|
|
|
|
$
|
1,971,560
|
|
|
|
$
|
3,046,552
|
|
|
|
$
|
4,203,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
$
|
141,596
|
|
11.0%
|
|
$
|
270,328
|
|
13.7%
|
|
$
|
348,852
|
|
11.5%
|
|
$
|
603,513
|
|
14.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
expenses
|
|
85,069
|
|
6.6%
|
|
117,088
|
|
5.9%
|
|
187,762
|
|
6.2%
|
|
251,351
|
|
6.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
12,526
|
|
1.0%
|
|
13,796
|
|
0.7%
|
|
25,117
|
|
0.8%
|
|
27,354
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs
|
|
42,059
|
|
3.3%
|
|
—
|
|
—%
|
|
99,148
|
|
3.3%
|
|
—
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense), net
|
|
816
|
|
0.1%
|
|
(953)
|
|
—%
|
|
1,162
|
|
—%
|
|
(1,984)
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense), net
|
|
(885)
|
|
(0.1)%
|
|
2,574
|
|
0.1%
|
|
(4,597)
|
|
(0.2)%
|
|
5,332
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
1,873
|
|
0.1%
|
|
141,065
|
|
7.2%
|
|
33,390
|
|
1.1%
|
|
328,156
|
|
7.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
7,290
|
|
0.6%
|
|
61,313
|
|
3.1%
|
|
24,854
|
|
0.8%
|
|
119,998
|
|
2.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net and comprehensive
income (loss)
|
|
$
|
(5,417)
|
|
(0.4)%
|
|
$
|
79,752
|
|
4.0%
|
|
$
|
8,536
|
|
0.3%
|
|
$
|
208,158
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.10)
|
|
|
|
$
|
1.51
|
|
|
|
$
|
0.16
|
|
|
|
$
|
3.95
|
|
|
Diluted
|
|
$
|
(0.10)
|
|
|
|
$
|
1.51
|
|
|
|
$
|
0.16
|
|
|
|
$
|
3.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-avg. common
shares
outstanding -
basic
|
|
52,806,981
|
|
|
|
52,694,680
|
|
|
|
52,766,739
|
|
|
|
52,653,303
|
|
|
Weighted-avg. common
shares
outstanding -
diluted
|
|
52,867,687
|
|
|
|
52,861,140
|
|
|
|
52,883,645
|
|
|
|
52,839,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Percentages may
not add due to rounding differences
|
|
|
|
|
|
|
SUMMARY CONDENSED
CONSOLIDATED BALANCE SHEETS ($000)
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
January 31,
2019
|
|
July 31,
2018
|
|
|
|
January 31,
2019
|
|
July 31,
2018
|
Cash and
equivalents
|
|
$
|
305,833
|
|
|
$
|
275,249
|
|
|
Current
liabilities
|
|
$
|
750,643
|
|
|
$
|
769,330
|
|
Accounts receivable,
net
|
|
344,782
|
|
|
487,235
|
|
|
Other long-term
liabilities
|
|
72,624
|
|
|
71,594
|
|
Inventories,
net
|
|
561,842
|
|
|
537,909
|
|
|
Stockholders'
equity
|
|
1,906,931
|
|
|
1,937,741
|
|
Prepaid expenses
and
other
|
|
35,699
|
|
|
11,281
|
|
|
|
|
|
|
|
Total
current assets
|
|
1,248,156
|
|
|
1,311,674
|
|
|
|
|
|
|
|
Property, plant
&
equipment,
net
|
|
550,471
|
|
|
522,054
|
|
|
|
|
|
|
|
Goodwill
|
|
377,693
|
|
|
377,693
|
|
|
|
|
|
|
|
Amortizable
intangible
assets,
net
|
|
363,231
|
|
|
388,348
|
|
|
|
|
|
|
|
Deferred income
taxes
and other,
net
|
|
190,647
|
|
|
178,896
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,730,198
|
|
|
$
|
2,778,665
|
|
|
|
|
$
|
2,730,198
|
|
|
$
|
2,778,665
|
|
Contact
Investor Relations:
Mark Trinske, Vice President of
Investor Relations
mtrinske@thorindustries.com
(574) 970-7912
View original
content:http://www.prnewswire.com/news-releases/thor-announces-results-for-second-quarter-of-fiscal-2019-300807231.html
SOURCE Thor Industries, Inc.