Winnebago Industries, Inc. reported financial results for the Company’s first quarter Fiscal 2020.
First Quarter Fiscal 2020 Results
Revenues for the Fiscal 2020 first quarter ended November 30, 2019, were $588.5 million, an increase of 19.2% compared to $493.6 million for the Fiscal 2019 period. Revenues excluding the recently acquired Newmar business were $552.8 million, representing an organic growth rate of 12.0% over the prior year period driven by strong growth in the Towable segment and modest growth in the Motorhome business. Gross profit was $78.6 million, an increase of 10.7% compared to $71.0 million for the Fiscal 2019 period. Gross profit margin decreased 100 basis points in the quarter primarily due to a change in mix as a result of the acquisition of Newmar and the impact of the associated purchase accounting. Operating income was $23.9 million for the quarter, which includes $10.0 million of transaction costs related to the acquisition of Newmar, compared to $32.6 million in the first quarter of last year. Fiscal 2020 first quarter net income was $14.1 million, a decrease of 36.5% compared to $22.2 million in the same period last year. Reported earnings per diluted share were $0.44, a decrease of 37.1% compared to reported earnings per diluted share of $0.70 in the same period last year. Consolidated adjusted earnings per share were $0.73 for the first quarter, an increase of 4.3% over the prior period, excluding approximately $12.1 million, or $0.29 per share after tax, of transaction costs, inventory step-up, and the non-cash portion of the interest expense related to the convertible bond that was issued to finance the Newmar acquisition. Consolidated Adjusted EBITDA was $42.0 million for the quarter, an increase of 9.3% compared to $38.5 million last year.
President and Chief Executive Officer Michael Happe commented, “We delivered strong consolidated results for the first quarter of Fiscal 2020 as we continued to make progress in transforming Winnebago Industries into a premier outdoor lifestyle company. Overall revenue growth remains strong, driven by vibrant Class B sales in our Motorhome segment and another stellar quarter from Grand Design in the Towable segment. These businesses are driving significant market share gains in the RV industry. Our RV retail market share is now 10.8% on a trailing three month basis through October, up 1.7 share points over the prior year period and exceeding our 2020 goal of 10% we established in November, 2017. Our results included approximately three weeks of contribution from the recently acquired Newmar business, the foremost luxury motorhome manufacturer in North America. We are extremely focused on the integration of the Newmar business and ensuring a smooth transition for Newmar’s employees, dealers, and end-customers. Our continued growth reflects our competitive position in the RV industry and the resilience of our diversified portfolio, which has positioned us well to deliver solid results despite prevailing industry headwinds. As we look ahead to the balance of Fiscal 2020, we remain focused on authentically differentiating ourselves from the competition around quality, customer service and innovation. I want to thank all of our Winnebago Industries employees for their hard work during the quarter and for their unwavering commitment to our ambitious goal of transforming Winnebago Industries into a stronger enterprise. I also want to welcome the Newmar employees to the Winnebago Industries family and thank them for their hard work now and into the future as the integration process ramps up.”
Revenues for the Towable segment were $341.3 million for the first quarter, up 16.5% over the prior year, driven by strong unit growth in the Grand Design RV product line. Segment Adjusted EBITDA was $35.8 million, up 16.1% over the prior year. Adjusted EBITDA margin of 10.5% was in line with the prior period. Backlog decreased 22.0%, in units, compared to the prior year period reflecting an increased utilization of incremental capacity and a change in dealer ordering patterns to smaller and more frequent purchases.
In the first quarter, revenues for the Motorhome segment were $225.9 million, up 24.6% from the prior year primarily driven by strength in the Class B line-up and the addition of Newmar revenues during the quarter. Excluding Newmar, segment revenues grew 4.9% over the prior year period. Segment Adjusted EBITDA was $9.3 million, down 22.1%, due to an unfavorable mix and higher SG&A expense partially offset by the three week contribution to Adjusted EBITDA from the Newmar acquisition and pricing in excess of inflation. Adjusted EBITDA margin decreased 250 basis points. Backlog increased 34.2%, in units, compared to the prior year, due to the acquisition of Newmar and new product introductions in the Winnebago motorhome line-up, partially offset by a change in dealer ordering patterns to smaller and more frequent purchases.
Balance Sheet and Cash Flow
As of November 30, 2019, the Company had total outstanding debt of $463.5 million ($560.0 million of debt, net of convertible note discount of $84.0 million, and debt issuance costs of $12.5 million) and working capital of $297.8 million. Cash flow from operations was $79.0 million in the first quarter of Fiscal 2020, reflecting a strong increase of 45.9%, or $24.9 million, from the same period in Fiscal 2019.
Quarterly Cash Dividend
On December 18, 2019, the Company’s board of directors approved a quarterly cash dividend of $0.11 per share payable on January 29, 2020, to common stockholders of record at the close of business on January 15, 2020.
Corporate Responsibility and Governance
As announced earlier this week, Winnebago Industries’ initial Corporate Responsibility report was released, which provides an overview of the Company’s process to identify and prioritize the most relevant environmental, social and governance related topics and goals. Additionally, the Company’s board of directors approved the addition of Sara Armbruster as a member of its board of directors.
Mr. Happe continued, “We are eager to build upon the tremendous progress we’ve made towards enhancing our position as a leader in premium outdoor lifestyle solutions. The acquisition of Newmar is pivotal in increasing our competitiveness and we are excited about the accretion Newmar brings to our portfolio – culturally, strategically and financially. We enter Fiscal 2020 with a stronger business that now includes four of the most iconic brands in the outdoor lifestyle arena – Winnebago, Grand Design, Newmar, and Chris-Craft. The benefits of having an expanded and more diversified product portfolio have translated to more consistent earnings results and are driving incremental growth and market share expansion in our business. We continue to monitor the health of the RV and marine channels and the confidence of consumers. By keeping our teams focused on delivering against our golden threads – superior quality, valued innovation, outstanding customer service – we are confident that Winnebago Industries will continue to outperform the marketplace and maximize value for our shareholders and customers in fiscal year 2020.”
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.