Winnebago Industries, Inc. (reported financial results for the Company’s second quarter Fiscal 2020.
Revenues for the Fiscal 2020 second quarter ended February 29, 2020, increased 44.9% to $626.8 million compared to $432.7 million for the Fiscal 2019 period. Revenues for Newmar, which was acquired in the first quarter of Fiscal 2020, were $138.4 million. Revenues excluding Newmar increased 12.9% to $488.4 million. Gross profit increased 20.1% to $79.8 million, compared to $66.4 million for the Fiscal 2019 period. Gross profit margin decreased 270 basis points in the quarter, primarily driven by a change in mix due to the inclusion of a full quarter of Newmar, the impact of inventory step-up purchase accounting related to the Newmar acquisition and start-up costs associated with our Towable segment new production facilities. Operating income was $29.6 million for the quarter, compared to $28.9 million in the second quarter of last year. Fiscal 2020 second quarter net income decreased 20.0% to $17.3 million compared to $21.6 million in the same period last year. Reported earnings per diluted share decreased 25.0% to $0.51 compared to reported earnings per diluted share of $0.68 in the same period last year. Consolidated adjusted earnings per share increased 9.8% to $0.67 for the second quarter, excluding inventory step-up and the non-cash portion of interest expense, totaling $5.4 million, or $0.16 per share, after tax. Consolidated Adjusted EBITDA increased 31.7% to $45.4 million for the quarter compared to $34.5 million last year.
President and Chief Executive Officer Michael Happe commented, “Our outdoor brands continue to resonate with consumers as reflected in our impressive consolidated results for the second quarter. Topline growth continues to outperform the industry, driven by robust Class B sales within our Winnebago Motorhome business, and another exceptional quarter from Grand Design RV. Newmar-branded Class A Diesel retail momentum is resulting in increased market share results in that category, and our overall wholesale performance of Newmar in our second quarter was in line with our acquisition plan. Our more diversified, full-line of products continues to drive higher margins within the Motorhome segment and accelerate our market share gains. Winnebago Industries’ North American RV retail market share is 13.2% on a trailing three-month basis through January, 2020, up 2.6 share points (up 1.8 share points on an organic basis) over the same period last year. The Chris-Craft business has also driven meaningful retail results during the spring show season, driven by a dynamic array of new models. This consolidated Company growth reflects the increasing appeal of our evolving portfolio of businesses and our progressively competitive position in these outdoor industries. We are confident that our relentless focus on quality, innovation, and customer service will build brands that consumers will seek out. Our results include a full quarter of Newmar’s performance and we are pleased that integration efforts are progressing as planned and that the sharing of best practices and identification of synergies as a result of this acquisition are active across the enterprise. As always, but especially during these now increasingly tumultuous times, I want to thank all of our Winnebago Industries employees for their hard work during the quarter, and for their steadfast commitment to working safely and to our vision of Winnebago Industries becoming a premier outdoor lifestyle company.”
Revenues for the Towable segment increased 13.1% to $283.5 million for the second quarter, primarily driven by the overall strength of the Grand Design RV product line and the popularity of several recently redesigned flagship products, including the Reflection and Imagine models. Segment Adjusted EBITDA increased 3.3% to $34.7 million. Adjusted EBITDA margin of 12.3% decreased 110 basis points, primarily due to the Towable segment facilities start-up costs and lower productivity in the early phases of production, and a shift in product mix. Backlog increased 22.3%, in units, over the prior year period reflecting higher retail demand for travel trailers.
In the second quarter, revenues for the Motorhome segment increased 97.7% to $325.5 million, mostly driven by a full quarter of Newmar contribution and strength in the Class B line-up. Segment revenues excluding Newmar grew 13.6% over the prior year period. Segment Adjusted EBITDA was $14.9 million, up 242.9% from the prior year due to the inclusion of a full quarter of Newmar operating results and improved organic profitability. Adjusted EBITDA margin increased 200 basis points to 4.6% driven by mix of business related to Newmar being included for a full quarter and healthy improvements in our Winnebago Motorhome margins compared to the prior year. Backlog increased 51.8%, in units, over the prior year, due to the addition of Newmar and the continued strength in Winnebago branded Class B retail demand.
Balance Sheet and Cash Flow
As of February 29, 2020, the Company had total outstanding debt of $464.8 million ($557.2 million of debt, net of convertible note discount of $80.8 million and net of debt issuance costs of $11.6 million) and working capital of $313.5 million. Cash flow from operations was $119.2 million for the first six months of Fiscal 2020, an increase of $67.2 million from the same period in Fiscal 2019.
Quarterly Cash Dividend
On March 17, 2020, the Company’s board of directors approved a quarterly cash dividend of $0.11 per share payable on April 29, 2020, to common stockholders of record at the close of business on April 15, 2020.
Mr. Happe continued, “While our Company performed solidly in the second quarter, the focus of every industry in the U.S. have been on the increasing risk presented by the coronavirus outbreak. As evidenced by our recent decision to temporarily suspend production across each of our businesses through April 12, 2020, the health and safety of our team members, business partners, and the communities in which we operate remains our top priority. We have seen significant change in mid-March for the demand of our products by both consumers and dealer partners. A COVID-19 task force, consisting of team leaders from across all of Winnebago Industries, has been in place for many weeks and continues to proactively develop contingency plans to ensure the health and safety of our team and navigate through what appears to be very real disruption in both our internal operations and end markets. Additionally, we will continue to be very disciplined in our financial management of the Company as we closely follow the status of the health crisis and the end markets to stay ahead, as possible, of any further disruptions.
After enduring persistent headwinds throughout calendar 2019, RV industry conditions have improved as demonstrated by normalized dealer inventories, a stable price environment and strong retail show attendance and sales results during the first quarter of calendar 2020. Our portfolio is stronger and more balanced than ever, with four of the most iconic brands in the outdoor lifestyle arena – Winnebago, Grand Design, Newmar, and Chris-Craft. In addition, we entered the second half of our fiscal year with significant cash on hand of $122.9 million, access to a credit line of $192.5 million, and the ability to leverage a highly variable cost structure, that when combined will assist tremendously in maximizing our liquidity and managing through the challenging period ahead. While the industry continues to look for its footing in these uncertain times as a result of the coronavirus pandemic, we are confident that the outdoor recreation industry will rebound in the future, and as such, our focus remains on activating our premium brands and products to accelerate our market share building when a new normal state presents itself. We continue to work closely with our Board of Directors during these challenging times and together we are aligned on executing our strategic priorities to enhance our position as an outdoor industry leader and maximizing value for our shareholders over the long-term.”