Thor Industries reported earnings doubled in the fiscal second quarter ended January 31 as sales expanded 42.1 percent. Thor’s consolidated RV backlog for the second fiscal quarter increased by more than 60 percent year over year.
“While we remain very focused on our performance as a business and I’m pleased to report on our results, we would be remiss if we did not state our firm support for the people of Ukraine in the defense of their country. We have sent and will continue to send our support and evaluate ways we can assist and respond to the humanitarian and refugee crisis unfolding in Europe. This includes offering our recently acquired facility in Nowa Sol, Poland as a staging operation for the Red Cross as it attempts to provide relief for the displaced Ukrainians. We are also working on procuring and donating needed staples for these displaced persons. The people of Ukraine are at the front of our minds and we are focused on finding additional ways we can continue to be an impactful global citizen,” said Bob Martin, president and CEO, Thor Industries.
“As for the second fiscal quarter results, our performance was extremely strong, despite the continuation of supply chain challenges. Our results show the strong appeal of our products, the continued strong demand in our industry and the outstanding performance by our team members. In addition to our second-quarter record top line, we reported a consolidated gross profit margin of 17.4 percent. Our increased margins were driven by the increase in net sales, improved quality and operating efficiencies, a reduction in sales discounts compared to the prior-year period and certain selling price increases put in place since the prior-year period to offset known and anticipated material cost increases. We continue to outperform the market and continue to hold a positive outlook.
“This quarter, our consolidated RV wholesale shipments were up by 14.5 percent compared to wholesale shipments during the second fiscal quarter ended January 31, 2021. Our consolidated RV backlog for the second fiscal quarter of 2022 increased by more than 60 percent compared to RV backlog as of the second fiscal quarter ended January 31, 2021. At the same time, our order backlog declined sequentially from our fiscal first quarter ended October 31, 2021 and dealer inventory levels are improving. We are working hard to deliver enough units to continue to reduce our order backlog and we are making progress. Our backlog at the end of our second fiscal quarter of 2022 decreased by approximately $344 million to $17.73 billion from $18.07 billion at the end of our first fiscal quarter on October 31, 2021.
“Currently, independent dealer inventories remain below the levels we achieved prior to the pandemic, particularly for North American Motorized units. For towables, dealer inventories have grown closer to optimal levels as we head into prime retail season. Going forward, we will monitor retail pull-through and adjust our production accordingly, carefully managing our production schedules to meet independent demand without overproducing. We learned from the industry-wide overproduction in 2018 and have established a system of dynamic checks to closely monitor dealer inventories. During the second fiscal quarter, we worked closely with our dealers to reconfirm the backlog, so we remain confident in the alignment among our current production rates, wholesale demand and retail demand. We will continue to work closely with our independent dealers and rely upon a number of other initiatives to ensure that our independent dealer inventories are adequately but not over supplied. We expect dealer towable inventories to normalize more quickly than motorized inventories due to ongoing chassis supply constraints that continue to affect motorized motorhome production levels,” said Martin.
Second-Quarter Financial Results
Consolidated net sales were $3.88 billion in the second quarter of fiscal 2022, compared to $2.73 billion in the second quarter of fiscal 2021. The increase in consolidated net sales is primarily due to the continuing demand for RVs, as well as the contribution of our recent acquisitions. The addition of the Tiffin Group, acquired in December 2020, accounted for $132.3 million of the increase in net sales for the second quarter of fiscal 2022, while the addition of Airxcel, acquired in September 2021, accounted for $128.8 million of the increase in net sales for the second quarter of fiscal 2022, net of intercompany sales.
By segment, sales in the fourth quarter of North American Towable RVs reached $1.99 billion against $1.37 billion, a gain of 44.6 percent. North American Motorized RVs sales totaled $976.8 million versus $577.0 million, a gain of 69.3 percent. European RVs sales amounted to $723.7 million against $733.5 million, reflecting a 1.3 percent decline.
Consolidated gross profit margin increased 220 basis points to 17.4 percent for the second quarter of fiscal 2022, from 15.2 percent in the corresponding period a year ago.
Net income attributable to Thor Industries and diluted earnings per share for the second quarter of fiscal 2022 were $266.6 million and $4.79, respectively, compared to $132.5 million and $2.38, respectively, in the prior-year period.
Sales at $3.88 billion topped Wall Street’s consensus estimate of $3.56 billion. Earnings of $4.79 were well ahead of Wall Street’s consensus estimate of $3.39.
Management Commentary
“In the second quarter, we generated strong net cash from operations, and we remained disciplined and balanced in our deployment of capital,” said Colleen Zuhl, senior vice president and chief financial officer.
“We are pleased to report that the integration of Airxcel has gone exceedingly well, which is a testament to our integration planning and the strong team at Airxcel. Demand for their products remains very robust, and we are making investments in capacity to grow Airxcel’s presence both within Thor and across the entire industry. Our decentralized business model enables our supply companies to work with all RV OEMs on equal footing. As we grow the supply chain side of our business, we expect it to enhance our margins further.
“In Europe, we have a strong order book, however, given the heavier concentration of motorhomes to our business in Europe as compared to our North America operations, chassis shortages had a more significant impact on our European production and shipment volumes. We currently expect to see the global chassis issues begin to resolve by the end of the 2022 calendar year. Demand for our European products remains very strong and our European operations are well-positioned to perform strongly once our chassis suppliers are able to meet this demand,” added Zuhl.
Senior Vice President and Chief Operating Officer, Todd Woelfer said, “Our capital allocation strategy remains consistent and our capital expenditures for the remainder of this fiscal year will address the needs of our recent acquisitions and certain COVID-delayed maintenance projects, continue our focus on electrification and other projects directly related to enhancing the quality of our products and include various strategic capacity enhancement initiatives including building a new production facility in Sturgis, Michigan. During the fiscal second quarter, we increased our dividend, repaid approximately $35 million of borrowings on our asset-based credit facility (“ABL”) and completed the tuck-in acquisition of Elkhart Composites into our Airxcel operations. We also remain very focused on reducing our acquisition-related debt and subsequent to the end of our fiscal second quarter we made a principal payment of $40 million on our U.S. term loan and repaid an additional $25 million of borrowings on our ABL. In addition, during the quarter, we also announced the auThorization of a $250 million share repurchase program. After the announcement, we repurchased 590,961 shares of common stock for $58.3 million. We believe that the buybacks present an excellent investment opportunity to create value for our shareholders, making the repurchase program a compelling use of capital in the second quarter. Moving forward, we will continue to be disciplined, flexible and balanced in how we deploy capital to generate the greatest return for our shareholders.
Outlook
“We remain very optimistic about the growth of the RV industry for 2022 and in the long term,” Woelfer continued. “We continue to agree with the RV Industry Association forecast which projects total North American wholesale RV shipments ranging between 578,800 and 603,300 units with a most likely total of 591,100 units. This forecast represents the second-best year on record for wholesale shipments and is in line with our continued bullish view of what lies ahead over the remainder of fiscal year 2022 and into fiscal year 2023. We are obviously aware of the current macro-economic and geopolitical events, including Russia’s invasion of Ukraine, that combine to create a litany of challenges that could affect the performance of virtually every company in the short term, however, our long-term outlook remains very bullish. Thor has consistently proven that the greatest strength of our business model is that it empowers us to remain nimble despite our size. In the event that the macro pressures eventually create a downturn, we expect Thor to outperform the market as it has in every downturn since its inception in 1980. Our model has enabled us to generate a profit in every year of our 41-year existence, even during the most difficult years for our industry and the economy more broadly. In fact, each time our industry has experienced such a downturn, Thor has come out stronger than it was before.
“Thor has delivered outstanding financial performance over the last six quarters, and at the same time has experienced some shift of market share. Our focus has been and will remain on creating sustainable margin improvements and volume improvements to drive continued growth and increased profitability. We have elected to not chase share at the risk of slippage in either quality or margins. We are in a market wherein most every RV produced by Thor and its competitors sells quickly. In this situation, it is easy to fall into the trap of overproducing, but we chose to produce at a prudent rate to ensure profitable growth and greater quality during this period of very strong retail demand. The success of this approach is evident in our improving financial results. While we are aware of the bear case against Thor’s historical market share position, we believe that case is off the mark today. In the most recent calendar year-ended December 31, 2021, our total towable share did decline, but only by 0.4 percent, while both our margins and our volume of unit sales increased. Our choice to produce at a prudent rate to ensure greater quality drove better bottom-line results. In North American motorized, we gained 3.3 percent of organic market share in calendar year 2021. In the hottest segment in the industry, Class B motorhomes, our organic growth was over four times that of our nearest competitor in calendar 2021 and we grew our unit sales by approximately 200 percent.
“Calendar year 2022 started strong for Thor as we grew our market share position in every category in which we participate. Our products have and will continue to perform well at the retail level. While we will continue to seek to regain share, we will first remain focused on prudently producing high-quality products to meet demand and reduce our backlog without overproducing and overloading our independent dealer channel. As I noted, we are focused on achieving continued growth and increased profitability. We believe this is the best strategy and expect this effort to deliver strong shareholder returns in Fiscal 2022 and 2023,” added Woelfer.
“Looking to the future, we are working on many strategic initiatives to drive increased shareholder value. An example of these initiatives is our eMobility strategy that we initiated several years ago. This strategy is an exciting plan to move Thor and the RV industry into the electric future. Our first step was the recent introduction of two new electric RVs, one towable and one motorized. Our motorized model, the Thor Vision Vehicle, is designed to deliver an industry-leading 300-mile range. The towable model, the eStream by Airstream, creates a whole new segment for the RV industry. The eStream creates the opportunity to maintain most of the towable range and gas mileage of the tow vehicle as it dramatically reduces the drag typically created when towing an RV. The eStream also offers a number of other compelling features, including the ability to park your RV using an app on your phone or tablet. We showcased these two new electric RVs at the 2022 Florida RV SuperShow, and the resulting feedback and media coverage have been phenomenal. Thor is focused on being the leader of the next generation of RVs as we drive to produce more sustainable solutions that maximize the RV user experience,” concluded Woelfer.
“The outlook for Thor and the RV industry continues to be very positive, and we believe our outstanding performance will continue for the balance of our fiscal year,” added Martin. “Consumer interest is at an all-time high as evidenced by record attendance and sales at the recent Florida RV SuperShow in Tampa, the largest RV show in the United States, and we see continued strong demand as we enter our peak selling season. This is an exciting time to be the world’s leading RV manufacturer, and we look forward to leveraging our position to grow our Company and advance the RV industry for many years to come.”
Photo courtesy Thor Industries/Tiffin Group
