Winnebago Industries, which earlier this year entered the marine segment with the company’s acquisition of Chris-Craft, reported earnings rose 19.5 percent in the fourth quarter ended August 25 on a 17.9 percent revenue gain.
Fourth Quarter Fiscal 2018 Results
Revenues for the Fiscal 2018 fourth quarter ended August 25, 2018, were $536.2 million, an increase of 17.9 percent compared to $454.9 million for the fiscal 2017 period. Gross profit was $83.8 million, an increase of 13.9 percent compared to $73.6 million for the fiscal 2017 period. Gross profit margin decreased 60 basis points in the quarter as higher input costs were largely offset by cost savings initiatives and pricing actions, but the results compared against a favorable inventory adjustment in the prior year as well. Operating income was $45.7 million for the quarter, an improvement of 5.1 percent compared to $43.5 million in the fourth quarter of last year. Fiscal 2018 fourth quarter net income was $29.8 million, an increase of 19.5 percent compared to $24.9 million in the same period last year. Earnings per diluted share were $0.94, an increase of 19.0 percent compared to earnings per diluted share of $0.79 in the same period last year. Consolidated Adjusted EBITDA was $53.6 million for the quarter compared to $47.8 million last year, an increase of 12.1 percent. Fourth quarter results include costs related to the Chris-Craft acquisition of $2.8 million or $0.06 per diluted share, including amortization expenses of $1.5 million related to the definite-lived intangible assets acquired and transaction costs of $1.3 million.
“Fiscal 2018 was a tremendous step forward for Winnebago Industries in all aspects: strategically, financially and culturally,” stated President and Chief Executive Officer Michael Happe. “Strategically, we made strong strides in the journey to transform ourselves into a premier outdoor lifestyle company, especially with our fourth-quarter entry into the attractive marine market with the acquisition of Chris-Craft. We have also elevated our level of competitiveness within the North American RV market as a stronger full-line OEM, raising consolidated market share primarily on the strength of our sustained Towables segment growth. Both our Winnebago and Grand Design-branded towables business have material momentum, with new products and superlative quality driving increased business with dealers and end customers. Our Motorhome business continues to make sequential progress in improving its product line vitality and profitability.”
Happe further commented, “Financially, we are thrilled to exceed the $2.0 billion revenue mark for the first time in our company’s storied 60-year history, and we are delivering record bottom-line results in the face of inflationary headwinds on material and labor costs. Our balance sheet is solid and appropriately positioned to allow us to pursue further smart, profitable growth in the years ahead. Culturally, our employees are extremely focused on enabling extraordinary experiences in the outdoors for our customers, around a business model platform focused on quality, service and innovation. Our leadership is committed to driving an even higher level of employee engagement, and we are directing more resources to giving back to the communities our team lives and works in. Our success in fiscal 2018 is a result of the incredible hard work of our 4,700-plus employees and their dedication to ensuring our customers receive the very best products and service possible.”
Full Year Fiscal 2018 Results
Fiscal 2018 revenues of $2.0 billion increased 30.4 percent from $1.5 billion in Fiscal 2017. Gross profit improved 50 basis points, primarily due to strong growth in the Towable segment and improved operating efficiencies in that segment. Operating income was $160.4 million for fiscal 2018, an improvement of 28.2 percent compared to $125.1 million in fiscal 2017. Net income for fiscal 2018 was $102.4 million, an increase of 43.5 percent compared to $71.3 million in fiscal 2017. Earnings per diluted share were $3.22, an increase of 38.8 percent compared to earnings per diluted share of $2.32 in fiscal 2017. Fiscal 2018 consolidated Adjusted EBITDA was $181.7 million, an increase of 30.9 percent from $138.9 million in fiscal 2017.
In the fourth quarter, revenues for the Motorhome segment were $228.5 million, up 2.5 percent from the previous year. Segment Adjusted EBITDA was $13.2 million, down 18.8 percent from the prior year. Adjusted EBITDA margin decreased 150 basis points, driven by investments in the business and increasing cost pressures that have not yet been overcome with recent pricing actions. Unit backlog increased 30.9 percent over the prior year, reflecting continued strength in our recently introduced products.
For the full year Fiscal 2018, revenues for the Motorhome segment were $860.7 million, up 0.9 percent from Fiscal 2017. Segment Adjusted EBITDA for the full year was $35.5 million, down 37.2 percent from Fiscal 2017. Adjusted EBITDA margin decreased 250 basis points for the full year.
Revenues for the Towable segment were $288.7 million for the fourth quarter, up 26.2 percent over the prior year, driven by continued strong organic growth across the Grand Design RV and Winnebago-branded businesses. Segment Adjusted EBITDA was $41.9 million, up 23.9 percent over the prior year. Adjusted EBITDA margin of 14.5 percent decreased 30 basis points from the prior year due to cost input pressures that were mitigated by effective price increases and cost reduction efforts and also comparing against a favorable inventory adjustment in the prior year. Dollar backlog remained strong at over $244.9 million, growing 6.6 percent over last year, driven by a favorable product mix. Unit backlog was a robust 7,651 units but declined 4.4 percent against the prior year period, reflecting extremely high backlogs in late fiscal 2017 and two plant expansions that have added additional production capacity during the course of calendar 2018.
For the full year fiscal 2018, revenues for the Towable segment were $1,127.7 million, up 64.6 percent from fiscal 2017. Segment Adjusted EBITDA for the full year was $157.0 million, up 75.0 percent from Fiscal 2017. Adjusted EBITDA margin increased 80 basis points for the full year.
Change in Segment Reporting
During the quarter, Winnebago Industries realigned its operating segments following the Chris-Craft transaction and created a new “Corporate / All Other” category, which includes the Marine and Specialty Vehicles businesses as well as certain Corporate costs. The company has retrospectively reclassified prior period amounts to conform to the current segment presentation. We have posted a document containing revenues and adjusted EBITDA, by quarter, for fiscal 2017 and fiscal 2018 on the company’s Investor Relations website.
Balance Sheet and Cash Flow
As of August 25, 2018, the company had total outstanding debt of $291.4 million ($298.5 million of debt, net of debt issuance costs of $7.1 million) and working capital of $167.8 million. Cash flow from operations was $83.3 million for the full year, a decrease of 14.2 percent from the prior period in fiscal 2017, as timing of working capital balances offset improvements in net income.
Happe continued: “Winnebago Industries enters Fiscal 2019 as a larger, increasingly diversified and more profitable organization. Our expectation going forward is to exceed the growth projections of the industries we compete in. We remain comfortable with our own dealer inventories across the whole of our businesses. Our backlogs are reflective of strong future demand, but also our progress to increase capacity where needed to deliver more timely product to our dealers. We continue to make further strategic investments in talent acquisition, new product development and manufacturing capacity and efficiency across the company. Our RV businesses introduced many new models to favorable reviews at the recent Open House event in September, and indications from the early fall RV retail shows confirm the momentum of our dual-brand, full-line RV portfolio. The RV industry, while transitioning to a more moderate pace of shipments in the short-term, continues to be positioned for strong secular growth in the years ahead, as does the marine industry. We do, however, face strong comps within the RV industry in the first six months of our fiscal year as well as current cost pressures on key materials and components. The Chris-Craft integration has been executed well in the last three months, and we look forward to enabling profitable growth via several different strategic initiatives for that iconic luxury brand in the future. We remain extremely focused on strengthening and growing our core RV business but also diversifying the overall portfolio via progress in new profitable outdoor lifestyle markets like marine and specialty vehicles.”