Winnebago Industries Announces Third Quarter Fiscal 2019 Results
-- Sales Performance Continues to
-- Quarterly Gross Margins of 16.4% Increased 120 Basis Points Over Prior Year --
-- Quarterly Diluted EPS of
-- Strong YTD Operating Cash Flow, Up 36% Over Prior Year --
Third Quarter Results
Revenues for the Fiscal 2019 third quarter ended May 25, 2019, were
President and Chief Executive Officer
Motorhome
In the third quarter, revenues for the Motorhome segment were
Towable
Revenues for the Towable segment were
Tax
Our effective tax rate for the third quarter was 19.4%, driven lower by the year-over-year impact of the reduction in the corporate income tax rate associated with the TCJA and a favorable change in estimate related to R&D tax credits. The impact from the TCJA and change in estimate was
Balance Sheet and Cash Flow
As of May 25, 2019, the Company had total outstanding debt of
Quarterly Cash Dividend
On
Mr. Happe continued, “As we transition into the final quarter of Fiscal 2019, we are well positioned to continue our positive momentum with top line sales and share gains. Our North American RV retail share is approaching 10%, up from 3% just three years ago. The imbalance between industry wholesale shipments and retail sales continues to improve and will continue to do so in the back half of calendar 2019. The materials cost environment remains volatile, as newly implemented and pending tariffs start to impact cost inputs in the back half of calendar 2019. We absorbed an unexpected challenge to our motorhome sales and profits during the quarter due primarily to a supply interruption of Class B chassis and we remain focused on seeing that situation improve. We are pleased with the recent pace of steady inbound RV orders from dealers. Additionally, Chris-Craft has launched several new models in the front half of 2019, which will continue their momentum forward in the marine industry. Our broader portfolio, combined with our operational resiliency as a company, are working to solidify our unique position within the outdoor lifestyle market and making
Conference Call
About
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increase in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to mergers and acquisitions activities, business interruptions, any unexpected expenses related to ERP, risks related to compliance with debt covenants and leverage ratios, and other factors. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company's filings with the Securities and Exchange Commission ("SEC") over the last 12 months, copies of which are available from the SEC or from the Company upon request. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained in this release or to reflect any changes in the Company's expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
Three Months Ended | |||||||||||||
May 25, 2019 | May 26, 2018 | ||||||||||||
Net revenues | $ | 528,940 | 100.0 | % | $ | 562,261 | 100.0 | % | |||||
Cost of goods sold | 442,356 | 83.6 | % | 476,747 | 84.8 | % | |||||||
Gross profit | 86,584 | 16.4 | % | 85,514 | 15.2 | % | |||||||
Selling, general, and administrative expenses | 35,332 | 6.7 | % | 35,304 | 6.3 | % | |||||||
Amortization of intangible assets | 2,278 | 0.4 | % | 1,933 | 0.3 | % | |||||||
Total operating expenses | 37,610 | 7.1 | % | 37,237 | 6.6 | % | |||||||
Operating income | 48,974 | 9.3 | % | 48,277 | 8.6 | % | |||||||
Interest expense | 4,446 | 0.8 | % | 4,172 | 0.7 | % | |||||||
Non-operating income | (360 | ) | (0.1 | )% | (100 | ) | — | % | |||||
Income before income taxes | 44,888 | 8.5 | % | 44,205 | 7.9 | % | |||||||
Provision for income taxes | 8,717 | 1.6 | % | 11,684 | 2.1 | % | |||||||
Net income | $ | 36,171 | 6.8 | % | $ | 32,521 | 5.8 | % | |||||
Income per common share: | |||||||||||||
Basic | $ | 1.15 | $ | 1.03 | |||||||||
Diluted | $ | 1.14 | $ | 1.02 | |||||||||
Weighted average common shares outstanding: | |||||||||||||
Basic | 31,493 | 31,582 | |||||||||||
Diluted | 31,644 | 31,753 | |||||||||||
Nine Months Ended | |||||||||||||
May 25, 2019 | May 26, 2018 | ||||||||||||
Net revenues | $ | 1,455,278 | 100.0 | % | $ | 1,480,641 | 100.0 | % | |||||
Cost of goods sold | 1,231,269 | 84.6 | % | 1,264,635 | 85.4 | % | |||||||
Gross profit | 224,009 | 15.4 | % | 216,006 | 14.6 | % | |||||||
Selling, general, and administrative expenses | 106,303 | 7.3 | % | 95,381 | 6.4 | % | |||||||
Amortization of intangible assets | 7,204 | 0.5 | % | 5,921 | 0.4 | % | |||||||
Total operating expenses | 113,507 | 7.8 | % | 101,302 | 6.8 | % | |||||||
Operating income | 110,502 | 7.6 | % | 114,704 | 7.7 | % | |||||||
Interest expense | 13,293 | 0.9 | % | 13,871 | 0.9 | % | |||||||
Non-operating income | (1,330 | ) | (0.1 | )% | (212 | ) | — | % | |||||
Income before income taxes | 98,539 | 6.8 | % | 101,045 | 6.8 | % | |||||||
Provision for income taxes | 18,609 | 1.3 | % | 28,478 | 1.9 | % | |||||||
Net income | $ | 79,930 | 5.5 | % | $ | 72,567 | 4.9 | % | |||||
Income per common share: | |||||||||||||
Basic | $ | 2.53 | $ | 2.30 | |||||||||
Diluted | $ | 2.52 | $ | 2.28 | |||||||||
Weighted average common shares outstanding: | |||||||||||||
Basic | 31,546 | 31,617 | |||||||||||
Diluted | 31,722 | 31,825 | |||||||||||
Percentages may not add due to rounding differences. |
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
May 25, 2019 |
August 25, 2018 |
||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 4,176 | $ | 2,342 | |||||
Receivables, net | 185,546 | 164,585 | |||||||
Inventories, net | 190,883 | 195,128 | |||||||
Prepaid expenses and other assets | 10,480 | 9,883 | |||||||
Total current assets | 391,085 | 371,938 | |||||||
Property, plant, and equipment, net | 121,977 | 101,193 | |||||||
Other assets: | |||||||||
Goodwill | 275,657 | 274,370 | |||||||
Other intangible assets, net | 258,513 | 265,717 | |||||||
Investment in life insurance | 27,111 | 28,297 | |||||||
Other assets | 8,860 | 10,290 | |||||||
Total assets | $ | 1,083,203 | $ | 1,051,805 | |||||
Liabilities and Stockholders' Equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 84,304 | $ | 81,039 | |||||
Income taxes payable | — | 15,655 | |||||||
Accrued expenses | 114,047 | 107,491 | |||||||
Current maturities of long-term debt | 6,500 | — | |||||||
Total current liabilities | 204,851 | 204,185 | |||||||
Non-current liabilities: | |||||||||
Long-term debt, less current maturities | 253,071 | 291,441 | |||||||
Deferred income taxes | 5,255 | 4,457 | |||||||
Unrecognized tax benefits | 3,501 | 1,745 | |||||||
Deferred compensation benefits, net of current portion | 13,161 | 15,282 | |||||||
Other | 371 | 250 | |||||||
Total non-current liabilities | 275,359 | 313,175 | |||||||
Stockholders' equity | 602,993 | 534,445 | |||||||
Total liabilities and stockholders' equity | $ | 1,083,203 | $ | 1,051,805 | |||||
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended | |||||||
May 25, 2019 |
May 26, 2018 |
||||||
Operating activities: | |||||||
Net income | $ | 79,930 | $ | 72,567 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 9,788 | 6,679 | |||||
Amortization of intangible assets | 7,204 | 5,921 | |||||
Amortization of debt issuance costs | 1,186 | 1,222 | |||||
Last in, first-out expense | 1,544 | 1,238 | |||||
Stock-based compensation | 5,735 | 4,983 | |||||
Deferred income taxes | 362 | 4,807 | |||||
Other, net | 1,265 | 194 | |||||
Change in assets and liabilities: | |||||||
Receivables | (20,961 | ) | (24,595 | ) | |||
Inventories | 2,701 | (36,351 | ) | ||||
Prepaid expenses and other assets | (653 | ) | 3,320 | ||||
Accounts payable | 3,954 | 9,617 | |||||
Income taxes and unrecognized tax benefits | (13,898 | ) | (1,081 | ) | |||
Accrued expenses and other liabilities | 4,692 | 12,491 | |||||
Net cash provided by operating activities | 82,849 | 61,012 | |||||
Investing activities: | |||||||
Purchases of property and equipment | (31,681 | ) | (18,123 | ) | |||
Acquisition of business, net of cash acquired | (702 | ) | — | ||||
Proceeds from the sale of property | 134 | 316 | |||||
Other, net | 1,752 | (83 | ) | ||||
Net cash used in investing activities | (30,497 | ) | (17,890 | ) | |||
Financing activities: | |||||||
Borrowings on credit agreement | 342,549 | 19,700 | |||||
Repayments of credit agreement | (375,438 | ) | (43,700 | ) | |||
Payments of cash dividends | (10,201 | ) | (9,557 | ) | |||
Payments for repurchases of common stock | (7,724 | ) | (6,481 | ) | |||
Other, net | 296 | — | |||||
Net cash used in financing activities | (50,518 | ) | (40,038 | ) | |||
Net increase in cash and cash equivalents | 1,834 | 3,084 | |||||
Cash and cash equivalents at beginning of period | 2,342 | 35,945 | |||||
Cash and cash equivalents at end of period | $ | 4,176 | $ | 39,029 | |||
Supplement cash flow disclosure: | |||||||
Income taxes paid, net | $ | 33,852 | $ | 24,833 | |||
Interest paid | $ | 10,335 | $ | 11,935 | |||
Non-cash transactions: | |||||||
Capital expenditures in accounts payable | $ | 9 | $ | 607 | |||
Supplemental Information by Reportable Segment (Unaudited) - Motorhome
(in thousands, except unit data)
Three Months Ended | ||||||||||||||||||||
May 25, 2019 |
% of Revenues |
May 26, 2018 |
% of Revenues |
$ Change | % Change | |||||||||||||||
Net revenues | $ | 160,239 | $ | 244,870 | $ | (84,631 | ) | (34.6 | )% | |||||||||||
Adjusted EBITDA | 381 | 0.2 | % | 11,677 | 4.8 | % | (11,296 | ) | (96.7 | )% | ||||||||||
Three Months Ended | ||||||||||||||||||||
Unit deliveries | May 25, 2019 |
Product Mix (1) |
May 26, 2018 |
Product Mix (1) |
Unit Change |
% Change | ||||||||||||||
Class A | 378 | 19.3 | % | 722 | 25.3 | % | (344 | ) | (47.6 | )% | ||||||||||
Class B | 515 | 26.2 | % | 606 | 21.2 | % | (91 | ) | (15.0 | )% | ||||||||||
Class C | 1,069 | 54.5 | % | 1,528 | 53.5 | % | (459 | ) | (30.0 | )% | ||||||||||
Total motorhomes | 1,962 | 100.0 | % | 2,856 | 100.0 | % | (894 | ) | (31.3 | )% | ||||||||||
Nine Months Ended | ||||||||||||||||||||
May 25, 2019 |
% of Revenues |
May 26, 2018 |
% of Revenues |
$ Change | % Change | |||||||||||||||
Net revenues | $ | 506,229 | $ | 632,148 | $ | (125,919 | ) | (19.9 | )% | |||||||||||
Adjusted EBITDA | 16,716 | 3.3 | % | 22,264 | 3.5 | % | (5,548 | ) | (24.9 | )% | ||||||||||
Nine Months Ended | ||||||||||||||||||||
Unit deliveries | May 25, 2019 |
Product Mix(1) |
May 26, 2018 |
Product Mix(1) |
Unit Change |
% Change | ||||||||||||||
Class A | 1,329 | 23.7 | % | 2,326 | 32.8 | % | (997 | ) | (42.9 | )% | ||||||||||
Class B | 1,847 | 33.0 | % | 1,387 | 19.6 | % | 460 | 33.2 | % | |||||||||||
Class C | 2,430 | 43.3 | % | 3,372 | 47.6 | % | (942 | ) | (27.9 | )% | ||||||||||
Total motorhomes | 5,606 | 100.0 | % | 7,085 | 100.0 | % | (1,479 | ) | (20.9 | )% | ||||||||||
May 25, 2019 |
May 26, 2018 |
Change | % Change | |||||||||||||||||
Backlog(2) | ||||||||||||||||||||
Units | 2,074 | 2,155 | (81 | ) | (3.8 | )% | ||||||||||||||
Dollars | $ | 182,354 | $ | 193,079 | $ | (10,725 | ) | (5.6 | )% | |||||||||||
Dealer Inventory | ||||||||||||||||||||
Units | 4,235 | 4,750 | (515 | ) | (10.8 | )% |
(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers to generally be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.
Supplemental Information by Reportable Segment (Unaudited) - Towable
(in thousands, except unit data)
Three Months Ended | ||||||||||||||||||||
May 25, 2019 |
% of Revenues |
May 26, 2018 |
% of Revenues |
$ Change | % Change | |||||||||||||||
Net revenues | $ | 346,811 | $ | 313,016 | $ | 33,795 | 10.8 | % | ||||||||||||
Adjusted EBITDA | 57,172 | 16.5 | % | 45,378 | 14.5 | % | 11,794 | 26.0 | % | |||||||||||
Three Months Ended | ||||||||||||||||||||
Unit deliveries | May 25, 2019 |
Product Mix(1) |
May 26, 2018 |
Product Mix(1) |
Unit Change |
% Change | ||||||||||||||
Travel trailer | 6,185 | 59.5 | % | 6,063 | 62.1 | % | 122 | 2.0 | % | |||||||||||
Fifth wheel | 4,216 | 40.5 | % | 3,703 | 37.9 | % | 513 | 13.9 | % | |||||||||||
Total towables | 10,401 | 100.0 | % | 9,766 | 100.0 | % | 635 | 6.5 | % | |||||||||||
Nine Months Ended | ||||||||||||||||||||
May 25, 2019 |
% of Revenues |
May 26, 2018 |
% of Revenues |
$ Change | % Change | |||||||||||||||
Net revenues | $ | 890,335 | $ | 839,039 | $ | 51,296 | 6.1 | % | ||||||||||||
Adjusted EBITDA | 121,638 | 13.7 | % | 115,066 | 13.7 | % | 6,572 | 5.7 | % | |||||||||||
Nine Months Ended | ||||||||||||||||||||
Unit deliveries | May 25, 2019 |
Product Mix(1) |
May 26, 2018 |
Product Mix(1) |
Unit Change |
% Change | ||||||||||||||
Travel trailer | 16,564 | 60.5 | % | 16,495 | 61.3 | % | 69 | 0.4 | % | |||||||||||
Fifth wheel | 10,818 | 39.5 | % | 10,428 | 38.7 | % | 390 | 3.7 | % | |||||||||||
Total towables | 27,382 | 100.0 | % | 26,923 | 100.0 | % | 459 | 1.7 | % | |||||||||||
May 25, 2019 |
May 26, 2018 |
Change | % Change | |||||||||||||||||
Backlog(2) | ||||||||||||||||||||
Units | 7,089 | 9,968 | (2,879 | ) | (28.9 | )% | ||||||||||||||
Dollars | $ | 237,708 | $ | 313,513 | $ | (75,805 | ) | (24.2 | )% | |||||||||||
Dealer Inventory | ||||||||||||||||||||
Units | 18,984 | 15,986 | 2,998 | 18.8 | % |
(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers to generally be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.
Non-GAAP Reconciliation (Unaudited)
(in thousands)
Non-GAAP financial measures, which are not calculated or presented in accordance with accounting principles generally accepted in
The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA.
Three Months Ended | Nine Months Ended | ||||||||||||||
(in thousands) | May 25, 2019 |
May 26, 2018 |
May 25, 2019 |
May 26, 2018 |
|||||||||||
Net income | $ | 36,171 | $ | 32,521 | $ | 79,930 | $ | 72,567 | |||||||
Interest expense | 4,446 | 4,172 | 13,293 | 13,871 | |||||||||||
Provision for income taxes | 8,717 | 11,684 | 18,609 | 28,478 | |||||||||||
Depreciation | 3,520 | 2,351 | 9,788 | 6,679 | |||||||||||
Amortization of intangible assets | 2,278 | 1,933 | 7,204 | 5,921 | |||||||||||
EBITDA | 55,132 | 52,661 | 128,824 | 127,516 | |||||||||||
Acquisition-related costs | — | 800 | — | 850 | |||||||||||
Restructuring expenses | 1,102 | — | 1,321 | — | |||||||||||
Non-operating income | (360 | ) | (100 | ) | (1,330 | ) | (212 | ) | |||||||
Adjusted EBITDA | $ | 55,874 | $ | 53,361 | $ | 128,815 | $ | 128,154 |
We have provided non-GAAP performance measures of EBITDA and Adjusted EBITDA as a comparable measure to illustrate the effect of non-recurring transactions occurring during the reported periods and improve comparability of our results from period to period. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation and amortization expense, and other adjustments made in order to present comparable results from period to period. We believe Adjusted EBITDA provides meaningful supplemental information about our operating performance because this measure excludes amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted EBITDA include acquisition-related costs, restructuring expenses, and non-operating income.
Management uses these non-GAAP financial measures (a) to evaluate its historical and prospective financial performance and trends as well as its performance relative to competitors and peers; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of its board of directors to enable its board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company; (d) to evaluate potential acquisitions; and, (e) to ensure compliance with covenants and restricted activities under the terms of its Credit Agreement. We believe these non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry.
Contact: Steve Stuber - Investor Relations - 952-828-8461 - srstuber@wgo.net
Media Contact: Sam Jefson - Public Relations Specialist - 641-585-6803 - sjefson@wgo.net