ELKHART, Ind., June 10,
2019 /PRNewswire/ -- Thor Industries, Inc. (NYSE: THO) today
announced third-quarter results with record net sales of
$2.51 billion, compared with the
previous sales record posted in the third quarter of the prior
year. Current year third-quarter net sales include the net sales of
EHG since the date of acquisition on February 1, 2019. Net
income attributable to Thor and diluted earnings per share for the
third quarter of fiscal 2019 were $32.7
million and $0.59,
respectively. Third-quarter results include acquisition-related
costs and purchase accounting adjustments related to the EHG
acquisition, which total $74.8
million, or $1.06 per diluted
share. In addition, ongoing amortization expense and interest
expense were incurred as a result of the acquisition which also
impacted the third-quarter results.
"EHG made a significant contribution to our top-line results for
the quarter, and as we move through some of the transitional costs,
we look forward to EHG's meaningful contribution to our bottom line
as well," said Bob Martin, Thor
President and CEO. "This transformational acquisition is a critical
first step in our long-term strategic plan to expand outside of the
North American market. Beyond the acquisition, we have seen
improvements in the operating results of our North American
segments, reflecting a more stable environment as we finish the
fiscal year."
Third quarter fiscal 2019 financial results also reflect the
impact of the ongoing North American independent dealer inventory
rationalization, as dealers continued to reduce inventory levels to
better match ongoing retail demand for RVs in North America.
The Company's third-quarter financial results were impacted by
certain acquisition-related items as noted below.
- Transaction-related Impacts to Third Quarter
Results:
-
- Purchase Accounting Costs: During the quarter,
gross profit of the European RV segment was impacted by the step up
in assigned value of acquired inventory, which was subsequently
sold during the quarter, to fair value less cost to sell, which
increased cost of goods sold by approximately $61.4 million.
- Acquisition-related Costs: During the third
quarter, Thor incurred $13.4 million
in net expenses related to the acquisition of EHG. These net costs
include $16.3 million of expenses
consisting primarily of bank fees, professional and advisory
integration fees and the write off of the remaining unamortized
debt fees related to Thor's previous asset-based loan facility,
partially offset by a $2.9 million
favorable change in value of the acquisition-related foreign
currency forward contract.
- Total Acquisition Impact: In
aggregate, acquisition-related costs and the purchase accounting
adjustment impacted third quarter reported results by $74.8 million, or $1.06 per diluted share.
- Ongoing Incremental Costs: During the
quarter, the Company also incurred other ongoing expenses related
to the acquisition of EHG, including EHG amortization expense of
$12.8 million and interest expense of
$35.4 million. These two items,
combined, further impacted diluted EPS by $0.69 per share.
As a result of the acquisition of EHG, the Company has expanded
its reporting segments to include a European RV segment, which
consists solely of the operations of the recently acquired EHG
business. This new segment complements the Company's North American
Towable RV and North American Motorized RV reporting segments.
The North American independent dealer inventory rationalization
process continued during the third quarter, as North American
industry wholesale shipments declined at a double-digit percentage
compared with a single-digit decrease in retail registrations
through the end of March 2019. As a
result of the lower wholesale shipments relative to retail demand,
Thor's North American independent dealer inventory levels decreased
by 20.3% to approximately 132,500 units, compared to approximately
166,200 units as of April 30, 2018.
Third-quarter net sales increased 11.3%, as the inclusion of
$767.5 million in net sales from the
European RV segment was partially offset by a 23.1% decrease in
North American Towable RV sales and a 23.3% decrease in North
American Motorized RV sales. Overall gross profit margin was 11.7%
in the quarter, compared to 14.1% in the prior-year period,
primarily reflecting the $61.4
million impact on the European RV segment gross profit as a
result of the acquired inventory, which was subsequently sold
during the quarter, being stepped up under purchase accounting, as
well as the impact of lower North American sales levels and higher
relative sales discounts and promotions compared with unusually low
levels in the prior year. North American overhead costs increased
as a percentage of sales due to lower fixed cost absorption over
the reduced net sales in the quarter. The Company's third-quarter
effective tax rate was 24.3% compared to a tax rate of 25.9% in the
prior year due to favorable impacts of certain foreign rate
differences resulting from the acquisition of EHG. The Company
expects an effective rate that approximates the Company's combined
federal and state statutory rates of between 21% and 23% for the
remainder of fiscal 2019, before consideration of any discrete tax
items.
As North American independent 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 North American
production levels accordingly. A number of Thor's North American
production facilities have reduced their production unit rates,
while others have shifted to four-day production weeks, with the
option of taking extended holiday shutdowns in the fiscal fourth
quarter. Finished goods inventory levels were higher at
April 30, 2019 than at July 31, 2018 due to the inclusion of finished
goods inventory at EHG, which was acquired at the beginning of the
third quarter.
North American Towable RVs
- North American Towable RV sales were $1.24 billion for the third quarter, compared to
the record third-quarter sales of $1.61
billion in the prior-year period. This decrease was driven
primarily by lower unit volume compared with the record
third-quarter unit sales last year, but was partially offset by a
shift in product mix toward higher-priced units.
- North American Towable gross profit margin fell 30 basis points
to 14.5% in the fiscal third quarter, with the increase in the
overhead cost percentage from the sales decrease being partially
offset by improved material, labor and warranty costs as a percent
of sales.
- North American Towable RV income before tax was $103.7 million, compared to $147.9 million in the third quarter last year.
This decrease was driven primarily by lower unit sales, increased
relative levels of discounting compared to the unusually low levels
the prior year which resulted in a decrease in gross profit, as
well as lower absorption of fixed SG&A costs.
- North American Towable RV backlog decreased $408.8 million to $896.0
million, compared to $1.30
billion at the end of the third quarter of fiscal 2018,
reflecting the positive impact of capacity additions, improved
delivery times and independent dealers continuing to rationalize
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.
North American Motorized RVs
- North American Motorized RV sales were $459.2 million for the third quarter compared to
the record third-quarter sales level of $598.5 million in the prior-year period. The
decrease in motorized sales was driven primarily by lower unit
sales compared to the record third-quarter unit sales last year,
partially offset by a mix shift toward higher-priced product.
- North American Motorized RV gross profit margin fell 50 basis
points to 10.3% in the fiscal third quarter primarily due to
reduced unit sales levels and reduced fixed overhead absorption for
the quarter.
- North American Motorized RV income before tax was $25.2 million, compared to $38.9 million last year, driven primarily by the
lower unit sales levels, the decrease in gross profit and lower
absorption of fixed SG&A costs.
- North American Motorized RV backlog decreased $184.6 million to $513.7
million from $698.3 million a
year earlier, reflecting the positive impact of capacity additions,
improved delivery times and independent dealers continuing to
rationalize 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.
European RVs
- European RV sales were $767.5
million for the third quarter, the initial quarter
reflecting the results of EHG which was acquired on February 1, 2019.
- European RV gross profit was $54.0
million, or 7.0% of net sales in the fiscal third quarter.
Segment gross profit was impacted by purchase accounting
adjustments related to the step-up in the value of acquired
inventory, which was subsequently sold during the quarter, of
approximately $61.4 million, or 8.0%,
of segment net sales.
- European RV loss before tax was $30.9
million, which includes the impact of $61.4 million related to the step-up in assigned
value of acquired inventory that was subsequently sold during the
period and amortization expense related to acquired intangible
assets of $12.8 million.
- European RV backlog was $687.4
million as of April 30, 2019,
reflecting current levels of demand within the European
market.
"With the inclusion of EHG into our operations in the quarter,
we continue to focus on integration and the sharing of best
practices that will drive long-term improvements in margins and
profitability for our overall business," said Colleen Zuhl, Thor's Senior Vice President and
Chief Financial Officer. "As we review our cash priorities, our
main focus is to utilize free cash flow to reduce overall debt
levels, which were reduced by $40
million during the quarter. Subsequent to the end of the
quarter, we fully paid the remaining $60
million outstanding on the ABL facility, and made payments
of approximately $155 million on our
term loan. To date, we have made total principal payments of
approximately $255 million towards
our original ABL and Term Loan B debt balances. As we generate
future cash flow, we will balance our strategic goal to invest in
the continued growth of our business along with the financial goals
of reducing our net debt level and returning cash to
shareholders."
Outlook
With the completion of the EHG acquisition, Thor's management
team remains focused on creating long-term shareholder value by
supporting both the integration of EHG, and the Company's growth in
North America. To help drive that
growth the Company recently announced the creation of two new
senior management positions at Thor Industries in North America to provide incremental support
to subsidiary leadership and help achieve key goals on an
accelerated basis. The Company has elevated two of its top RV
leaders, Matt Zimmerman of Keystone
and Chris Hermon of Heartland, to
the newly-created roles of RV Group Managers. In their new roles,
Matt and Chris will be assisting Thor's North American operating
companies in their realization of key strategic initiatives, all of
which are designed to improve the Company's offerings to its
dealers and retail customers, increase engagement with its
employees and improve its operating margins.
"During the remainder of our fiscal 2019, we expect the North
American dealer inventory rationalization will continue, but we
expect to see a resumption of growth in the North American markets
in 2020. In Europe, we believe our
dealer inventory levels of EHG products, while elevated in certain
locations, are generally appropriate for seasonal consumer demand
in Europe and are progressing
towards more normalized levels," added Bob
Martin. "Currently, our focus is on identifying and
realizing the benefits of sharing best practices and operating
efficiencies across Europe and
North America, and continuing to
optimize our working capital management processes."
"Having completed the EHG acquisition, we are now beginning the
hard work of realizing the full value of EHG to our Company,"
commented Peter B. Orthwein,
Executive Chairman of Thor. "With the strong industry fundamentals
and demographic tailwinds, we are confident that our strategic
expansion into the European RV market will contribute to Thor's
long-term growth, and provide the strong cash flow and returns on
investment that our shareholders have come to expect from
Thor."
Supplemental Earnings Release Materials
Thor has provided a comprehensive question and answer document,
as well as a PowerPoint presentation, relating to its quarterly
results and other topics. To view these materials, go to
http://ir.thorindustries.com.
About Thor Industries, Inc.
Thor is the sole owner of operating subsidiaries that, combined,
represent the world's largest manufacturer of recreational
vehicles. For more information on the Company and its products,
please go to www.thorindustries.com.
Forward Looking Statements
This release includes certain statements that are "forward
looking" statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward looking
statements are made based on management's current expectations and
beliefs regarding future and anticipated developments and their
effects upon Thor, and inherently involve uncertainties and risks.
These forward looking statements are not a guarantee of future
performance. We cannot assure you that actual results will not
differ materially from our expectations. Factors which could cause
materially different results include, among others, raw material
and commodity price fluctuations; raw material, commodity or
chassis supply restrictions; the impact of tariffs on material or
other input costs; the level and magnitude of warranty claims
incurred; legislative, regulatory and tax law and/or policy
developments including their potential impact on our dealers and
their retail customers or on our suppliers; the costs of compliance
with governmental regulation; legal and compliance issues including
those that may arise in conjunction with recently completed
transactions; lower consumer confidence and the level of
discretionary consumer spending; interest rate fluctuations; the
potential impact of interest rate fluctuations on the general
economy and specifically on our dealers and consumers; restrictive
lending practices; management changes; the success of new and
existing products 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 or financed receivable agreements; the potential
impact of the strength of the U.S. dollar on international demand
for products priced in U.S. dollars; general economic, market and
political conditions; the impact of changing emissions standards in
the various jurisdictions in which our products are sold; 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 ("EHG") include
risks regarding the potential benefits of the acquisition and the
anticipated operating synergies, the integration of the business,
the impact of exchange rate fluctuations and unknown or understated
liabilities related to the acquisition and EHG's business. These
and other risks and uncertainties are discussed more fully in Item
1A of our Annual Report on Form 10-K for the year ended
July 31, 2018 and Part II, Item 1A of
our quarterly reports on Form 10-Q for the periods ended
January 31, 2019 and April 30, 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 NINE
MONTHS ENDED APRIL 30, 2019 AND 2018
|
($000's except
share and per share data) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
April 30,
|
|
Nine Months Ended
April 30,
|
|
|
2019
|
%
Net
Sales
(1)
|
|
2018
|
%
Net
Sales
(1)
|
|
2019
|
%
Net
Sales
(1)
|
|
2018
|
%
Net
Sales
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,506,583
|
|
|
|
$
|
2,251,570
|
|
|
|
$
|
5,553,135
|
|
|
|
$
|
6,454,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
$
|
292,430
|
|
11.7%
|
|
$
|
316,745
|
|
14.1%
|
|
$
|
641,282
|
|
11.5%
|
|
$
|
920,258
|
|
14.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
expenses
|
|
176,983
|
|
7.1%
|
|
119,449
|
|
5.3%
|
|
364,745
|
|
6.6%
|
|
370,800
|
|
5.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
25,259
|
|
1.0%
|
|
13,882
|
|
0.6%
|
|
50,376
|
|
0.9%
|
|
41,236
|
|
0.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs
|
|
13,363
|
|
0.5%
|
|
—
|
|
—%
|
|
112,511
|
|
2.0%
|
|
—
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense), net
|
|
(32,962)
|
|
(1.3)%
|
|
(923)
|
|
—%
|
|
(31,800)
|
|
(0.6)%
|
|
(2,907)
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense), net
|
|
(2,340)
|
|
(0.1)%
|
|
(1,966)
|
|
(0.1)%
|
|
(6,937)
|
|
(0.1)%
|
|
3,366
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
41,523
|
|
1.7%
|
|
180,525
|
|
8.0%
|
|
74,913
|
|
1.3%
|
|
508,681
|
|
7.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
10,085
|
|
0.4%
|
|
46,737
|
|
2.1%
|
|
34,939
|
|
0.6%
|
|
166,735
|
|
2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
31,438
|
|
1.3%
|
|
133,788
|
|
5.9%
|
|
39,974
|
|
0.7%
|
|
341,946
|
|
5.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: net (loss)
attributable to non-controlling interests
|
|
(1,246)
|
|
—%
|
|
—
|
|
—%
|
|
(1,246)
|
|
—%
|
|
—
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Thor
Industries,
Inc.
|
|
$
|
32,684
|
|
1.3%
|
|
$
|
133,788
|
|
5.9%
|
|
$
|
41,220
|
|
0.7%
|
|
$
|
341,946
|
|
5.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.59
|
|
|
|
$
|
2.54
|
|
|
|
$
|
0.77
|
|
|
|
$
|
6.49
|
|
|
Diluted
|
|
$
|
0.59
|
|
|
|
$
|
2.53
|
|
|
|
$
|
0.77
|
|
|
|
$
|
6.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-avg. common
shares
outstanding -
basic
|
|
55,063,473
|
|
|
|
52,695,365
|
|
|
|
53,515,491
|
|
|
|
52,667,016
|
|
|
Weighted-avg. common
shares
outstanding -
diluted
|
|
55,166,067
|
|
|
|
52,853,541
|
|
|
|
53,627,627
|
|
|
|
52,844,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Percentages may not add due to
rounding differences
|
|
|
|
|
|
|
SUMMARY CONDENSED
CONSOLIDATED BALANCE SHEETS ($000)
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
April 30,
2019
|
|
July 31,
2018
|
|
|
|
April 30,
2019
|
|
July 31,
2018
|
Cash and
equivalents
|
|
$
|
486,913
|
|
|
$
|
275,249
|
|
|
Current
liabilities
|
|
$
|
1,512,128
|
|
|
$
|
769,330
|
|
Accounts receivable,
net
|
|
841,111
|
|
|
487,235
|
|
|
Long-term
debt
|
|
2,182,289
|
|
|
—
|
|
Inventories,
net
|
|
962,588
|
|
|
537,909
|
|
|
Other long-term
liabilities
|
|
238,370
|
|
|
71,594
|
|
Prepaid expenses and
other
|
|
43,563
|
|
|
11,281
|
|
|
Stockholders'
equity
|
|
2,039,533
|
|
|
1,937,741
|
|
Total
current assets
|
|
2,334,175
|
|
|
1,311,674
|
|
|
|
|
|
|
|
Property, plant &
equipment, net
|
|
1,088,130
|
|
|
522,054
|
|
|
|
|
|
|
|
Goodwill
|
|
1,350,187
|
|
|
377,693
|
|
|
|
|
|
|
|
Amortizable
intangible assets, net
|
|
999,858
|
|
|
388,348
|
|
|
|
|
|
|
|
Deferred income taxes
and other, net
|
|
199,970
|
|
|
178,896
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,972,320
|
|
|
$
|
2,778,665
|
|
|
|
|
$
|
5,972,320
|
|
|
$
|
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-financial-results-for-third-quarter-of-fiscal-2019-and-the-pay-down-of-approximately-255-million-of-acquisition-related-debt-to-date-300864266.html
SOURCE Thor Industries, Inc.