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Thor
Announces Record Results for Fiscal 2018
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Elkhart,
IN – September 2018 / Newsmaker Alert / 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:
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Net sales
increased 14.9% to $8.33 billion
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Gross
profit increased 11.6% to $1.16 billion
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Income
before taxes increased 13.8% to $633.0 million
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Diluted
EPS increased 14.8% to $8.14
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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:
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Net sales
decreased 3.1% to $1.87 billion
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Gross
profit decreased 18.9% to $244.4 million
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Income
before taxes decreased 29.3% to $124.3 million
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Diluted
EPS decreased 26.1% to $1.67
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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
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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.
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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.
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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
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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.
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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.
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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 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.
Investor
Relations:
Bruce
Byots
Senior
Director of Investor Relations
574-970-7912 |