Winnebago Industries reported net earnings rose 7.0 percent in the fourth quarter ended August 31 despite a 1.1 percent dip in sales.
Fourth Quarter Fiscal 2019 Results
Revenues for the Fiscal 2019 fourth quarter ended August 31, 2019, were $530.4 million, a decrease of 1.1 percent compared to $536.2 million for the Fiscal 2018 period. Gross profit was $83.2 million, a decrease of 0.8 percent compared to $83.8 million for the Fiscal 2018 period. Gross profit margin increased 10 basis points to 15.7 percent in the quarter, driven by favorable segment mix from accelerated growth in the Towable segment. Operating income was $44.8 million for the quarter, a decrease of 2.0 percent compared to $45.7 million in the fourth quarter of last year. Fiscal 2019 fourth quarter net income was $31.9 million, an increase of 7.0 percent compared to $29.8 million in the same period last year. Earnings per diluted share were $1.01, an increase of 7.4 percent compared to earnings per diluted share of $0.94 in the same period last year. Net income and earnings per share were favorably impacted by an improved tax rate resulting from the Tax Cuts and Jobs Act (“TCJA”). Net income and earnings per share were unfavorably impacted by due diligence costs of $0.7 million, or $0.02 earnings per share, related to the Newmar acquisition announced on September 16, 2019. Consolidated Adjusted EBITDA was $50.8 million for the quarter, a decrease of 5.1 percent compared to $53.6 million last year.
President and Chief Executive Officer, Michael Happe, commented, “In Fiscal Year 2019, our team made significant strides in profitably strengthening our core recreational vehicles business, while also executing a successful first full year in the marine industry. In the face of challenging RV market conditions, we drove increased share in our towables segment and continued to stabilize our motorhome platform with improved products and dealer relationships. We are especially pleased to deliver record profitability for the company against the headwinds of ongoing tariffs and higher levels of competitive promotional activity in our target markets. Grand Design continues to set the pace within our brand portfolio, producing material market share gains and superlative customer satisfaction. We continue to be excited with the positive progress we are making to transform Winnebago Industries into a premier outdoor lifestyle company, focused on authentic differentiation in the areas of product quality, valued innovation, and superior customer service. Our commitment to building a diversified portfolio of truly premium, iconic brands was recently bolstered with the mid-September announced acquisition of Newmar, the foremost luxury motorhome manufacturer in North America. As always, I want to thank all of our Winnebago Industries employees across each of our brands for their tireless work and service to our channel partners and end customers. Every day the culture is strengthened through their relentless focus on safely driving excellence in our markets and giving back to the communities we have a presence in.”
Full Year Fiscal 2019 Results
Fiscal 2019 revenues of $1.99 billion decreased 1.5 percent from $2.02 billion in Fiscal 2018 driven by strong growth in the Towable segment of 6.2 percent which was more than offset by a decline in the Motorhome segment of 17.9 percent. Gross profit margin improved 60 basis points, primarily due to accelerated growth in the Towable segment and improved Motorhome profitability. Operating income was $155.3 million for Fiscal 2019, a decline of 3.2 percent compared to $160.4 million in Fiscal 2018. Net income for Fiscal 2019 was $111.8 million, an increase of 9.2 percent compared to $102.4 million in Fiscal 2018. Earnings per diluted share were $3.52, an increase of 9.3 percent compared to earnings per diluted share of $3.22 in Fiscal 2018. Net income and earnings per share were favorably impacted by an improved tax rate resulting from the Tax Cuts and Jobs Act (“TCJA”) and a favorable change in estimate related to prior year R&D tax credits. Fiscal 2019 consolidated Adjusted EBITDA was $179.7 million, a decrease of 1.2 percent from $181.7 million in Fiscal 2018.
Towable
Revenues for the Towable segment were $307.0 million for the fourth quarter, up 6.3 percent over the prior year, driven by pricing actions and continued strong organic unit deliveries in the Grand Design RV brand. Segment Adjusted EBITDA was $42.0 million, up slightly over the prior year. Adjusted EBITDA margin decreased 80 basis points, driven by higher input costs and increased sales allowances, partially offset by pricing actions. Backlog decreased 4.3 percent, in dollars, over the prior year period, reflecting the positive impact of utilizing additional capacity added during calendar 2018 and dealers continuing to normalize inventory levels.
For the full year Fiscal 2019, revenues for the Towable segment were $1.20 billion, up 6.2 percent from Fiscal 2018. Segment Adjusted EBITDA for the full year was $163.7 million, up 4.2 percent from Fiscal 2018. Adjusted EBITDA margin decreased 20 basis points for the full year. Fiscal 2019 marked a strong period of growth for the Towable segment as unit deliveries grew almost 1 percent, well ahead of industry-wide declines of 20 percent (TTM thru August, 2019).
Motorhome
In the fourth quarter, revenues for the Motorhome segment were $200.7 million, down 12.2 percent from the previous year driven by strength in the Class B line-up which was more than offset by decreases in Class C and Class A. Segment Adjusted EBITDA was $10.7 million, down 18.9 percent from the prior year. Adjusted EBITDA margin of 5.4 percent decreased 40 basis points, primarily due to higher input costs and fixed cost de-leverage, partially offset by pricing actions, positive product mix and decreased sales allowances. Fourth quarter Adjusted EBITDA margin increased 520 basis points sequentially from the third quarter of Fiscal 2019 due to an improvement in supply of Class B and C chassis, although ongoing challenges still persist. Backlog increased 5.0 percent, in dollars, over the prior year, due to an increase in Class B units, particularly the Revel and Travato models, and an increase in the View/Navion diesel models in Class C.
For the full year Fiscal 2019, revenues for the Motorhome segment were $706.9 million, down 17.9 percent from Fiscal 2018, slightly improved versus the decline of motorhome industry shipments of 21.7 percent (TTM thru August, 2019). Segment Adjusted EBITDA for the full year was $27.5 million, down 22.7 percent from Fiscal 2018. Adjusted EBITDA margin of 3.9 percent was down 20 basis points for the full year, primarily due to higher input costs and fixed cost de-leverage partially offset by pricing actions and positive product mix.
Balance Sheet and Cash Flow
As of August 31, 2019, the company had total outstanding debt of $254.3 million ($260.0 million of debt, net of debt issuance costs of $5.7 million) and working capital of $212.9 million. Cash flow from operations was $133.8 million for the full year Fiscal 2019, an increase of 60.5 percent from the prior period in Fiscal 2018 due to year-on-year improvements in cash flow from changes in working capital.
Happe continued, “With the mid-November close of our latest acquisition, we will have four of the most premium and sought after brands in the outdoor lifestyle arena – Winnebago, Grand Design, Newmar, and Chris-Craft. Each of these business platforms offers a unique and distinct value proposition to outdoor enthusiasts, but all have golden threads via our enterprise focus on quality, service, and innovation. We are a larger, more balanced, increasingly diversified organization delivering consistent and rising profitability in challenging market conditions. While pleased with our progress over the last four years, we remain determined and driven to outperform the industries in which we compete in the future. There is significant runway in front of our team and overall business. The North American consumer continues to participate in record levels in outdoor recreation activities and we believe our brands are poised to help our customers have extraordinary experiences as they travel, live, work, and play in the outdoors.”
