Winnebago Industries reported net earnings increased 23.4 percent in the first quarter ended November 24 on a 9.7 percent climb in revenues.
First Quarter Fiscal 2019 Results
Revenues for the Fiscal 2019 first quarter ended November 24, 2018, were $493.6 million, an increase of 9.7 percent compared to $450.0 million for the Fiscal 2018 period. Gross profit was $71.0 million, an increase of 13.0 percent compared to $62.8 million for the Fiscal 2018 period. Gross profit margin increased 40 basis points in the quarter, driven by favorable business mix due to the strong growth in the Towable segment and improved margins in the Motorhome segment. Operating income was $32.6 million for the quarter, an increase of 4.6 percent compared to $31.2 million in the first quarter of last year. Fiscal 2019 first quarter net income was $22.2 million, an increase of 23.4 percent compared to $18.0 million in the same period last year. Earnings per diluted share were $0.70, an increase of 22.8 percent compared to earnings per diluted share of $0.57 in the same period last year. Consolidated Adjusted EBITDA was $38.5 million for the quarter, compared to $35.4 million last year, an increase of 8.6 percent.
President and Chief Executive Officer, Michael Happe, commented, “We are very pleased with the strong start to our Fiscal Year 2019, resulting from our upward momentum within the North American RV business and the positive integration of our new marine division. Sales growth remained robust as we continued to take overall retail market share on the RV side, and we were successful in expanding margins during the quarter, primarily driven by the continued profitability recovery within our Motorhome segment. Our dual-branded approach with Winnebago and Grand Design on the RV business continues to result in a strengthened line of high-quality, versatile products that reach a broader customer base through a network of dealer partners that value our aftermarket support and commitment to their profitability. We were also satisfied with the strong reception our new products received at both the RV Open House and the Fort Lauderdale International Boat Show this fall. As always, I want to thank all of our Winnebago Industries teammates for their tremendous work during the quarter and for their ongoing dedication to providing great quality, service, and innovation to our customers and helping us transform the future of this company. It is because of this team that we feel confident in our aspiration to outperform the markets in which we compete.”
In the first quarter, revenues for the Motorhome segment were $181.3 million, down 3.6 percent from the previous year. Segment Adjusted EBITDA was $12.0 million, up 144.4 percent from the prior year. Adjusted EBITDA margin increased 400 basis points, driven by net pricing and operational improvements. Backlog decreased 23.6 percent, in dollars, versus the prior year, reflecting rental unit and new product order timing, in addition to a more challenging late fall shipment environment.
Revenues for the Towable segment were $292.8 million for the first quarter, up 12.8 percent over the prior year, driven by continued strong organic unit growth across the Grand Design RV branded line and pricing. Segment Adjusted EBITDA was $30.8 million, down 7.7 percent vs. the prior year. Adjusted EBITDA margin of 10.5 percent decreased 240 basis points, reflecting continued cost input pressures and a robust comparable period in the year prior. Backlog levels remained strong but declined 3.9 percent, in dollars, versus the prior year, reflecting a re-balance from high backlog levels in first quarter Fiscal 2018 and utilizing additional capacity added during calendar 2018, in addition to a more challenging late fall shipment environment.
Balance Sheet and Cash Flow
As of November 24, 2018, the company had total outstanding debt of $253.3 million ($260.0 million of debt, net of debt issuance costs of $6.7 million) and working capital of $144.1 million. The ratio of net debt to Adjusted EBITDA improved to 1.4x as of the end of the quarter compared to 1.6x as of August 25, 2018. Cash flow from operations was $54.2 million in the first quarter of Fiscal 2019, an increase of $24.7 million from the same period in Fiscal 2018.
Tax Reform Impact
The company recorded a tax rate of 23.3 percent in the third quarter compared to a rate of 32.3 percent in the prior year. The reduction in the rate is related to the lower federal tax rate enacted in accordance with the Tax Cuts and Jobs Act.
Quarterly Cash Dividend
On December 12, 2018, the company’s board of directors approved a quarterly cash dividend of $0.11 per share payable on January 23, 2019, to common stockholders of record at the close of business on January 9, 2019. Winnebago’s current annualized dividend rate of $0.44 per share represents an increase of 10 percent over the annual dividend of $0.40 paid in Fiscal 2018.
Happe continued, “We are intent on building a larger, more diversified, and more profitable organization; one with a productive, healthy balance sheet and a strategic roadmap that is carefully considered and executed. We remain focused on providing differentiated products and services to our customers, which we optimistically think will result in further market share accretion in our core RV business. We continue to believe that our overall Winnebago and Grand Design branded field inventory levels are appropriate, both in size and age, especially in relation to our momentum and the addition of new products entering the market. We are also pleased with the integration of our new Chris-Craft business into the overall portfolio, as a credible first step in uniquely positioning Winnebago Industries as a premium outdoor lifestyle products manufacturer. We are mindful of the many tailwinds and headwinds that comprise the dynamic, near-term macro-economic and industry conditions, yet we look forward to carefully driving long-term value for our shareholders and customers in Fiscal Year 2019 and beyond.”
The company’s brands include Winnebago, Grand Design and Chris-Craft.