Winnebago Industries Inc. reported significant gains in revenue and net income for the company’s fiscal first quarter, ended Nov. 25.
Revenues for the quarter ended were $450 million, an increase of 83.5% compared to $245.3 million for the fiscal 2017 period, which included three weeks of performance from its Grand Design RV Co. subsidiary.
First quarter net income was $18 million, an increase of 53% compared to $11.7 million in the same period last year. Earnings per diluted share were 57 cents, an increase of 36% compared to earnings per diluted share of 42 cents in the same period last year.
Gross profit was rose 117.6% to $62.8 million from $28.9 million for the fiscal 2017 period. Gross profit margin increased 220 basis points in the quarter, driven by the continuation of accelerated growth in the more profitable towable segment. Operating income was $31.2 million for the quarter, an improvement of 69.4% compared to $18.4 million in the first quarter of last year. Consolidated Adjusted EBITDA was $35.4 million for the quarter, compared to $14.7 million last year, an increase of 141.2%.
President and Chief Executive Officer Michael Happe commented, “As we begin fiscal 2018, we’re pleased with our consolidated results, including continued robust sales growth and margin improvement, as well as further progress toward becoming a larger, more profitable full-line RV provider centered around our two leading brands, Winnebago and Grand Design RV. Our results reflect a transformed portfolio and focused dual-brand strategy that positions us to drive increasing market share and profitability, balancing our motorized business with a fast-growing towable segment.
“Our Grand Design RV business recently celebrated its one-year anniversary as part of Winnebago Industries and continues to perform well, as does our Winnebago-branded towable division. On the motorized side, profitability continues to be impacted by new product line start-up costs, ongoing expenses related to the ramp up of our West Coast production facility and an increase in direct material costs. All of our businesses had a successful fall season, with strong new product showings at the two largest industry events of the year, driving an increased order backlog.”
Significant items related to the Grand Design RV acquisition that are impacting income before income taxes in the first quarter of Fiscal 2018:
- For the first quarter, amortization expenses of $2.1 million were recorded related to the definite-lived intangible assets acquired, or 4 cents per diluted share, net of tax. The company expects ongoing amortization expense will be approximately $2 million per quarter through Fiscal 2021.
- Interest expense of $4.8 million was recorded in the first quarter related to the debt associated with the acquisition of Grand Design RV, or 10 cents per diluted share, net of tax. On Dec. 8, Winnebago announced a successful repricing of a $260 million Term Loan B facility, at an interest rate of LIBOR plus 3.5%, to replace the previous facility that carried an interest rate of LIBOR plus 4.5%. Prior to this repricing, $19.7 million was drawn on our ABL and the proceeds from the ABL borrowing were used to pay down our Term Loan B.
In the first quarter, revenues for the motorized segment were $190.4 million, down 2.4% from the previous year. Segment Adjusted EBITDA was $3.2 million, down 71.6% from the prior year. Adjusted EBITDA margin decreased 400 basis points, driven by investments related to start-up of new lines and increased operational and direct materials costs. Backlog increased during the quarter, benefiting from recently introduced new products, which should benefit sales performance through the remainder of fiscal 2018.
Revenues for the towable segment were $259.7 million for the quarter, up $209.5 million over the prior year, driven by the addition of $195.4 million in revenue from the Grand Design RV acquisition and continued strong organic growth in Winnebago-branded towable products, which increased more than 50% compared to last year. Segment Adjusted EBITDA was $32.3 million, up $28.7 million over the prior year. Adjusted EBITDA margin increased 530 basis points, driven by higher volumes and a favorable product mix, including the annualization of Grand Design RV within this segment. Backlog remains strong while retail sales continue to outpace the industry for both brands.
Happe continued, “Going forward, our focus remains on improving the operations of our business to drive long-term, sustainable profitability. The motorized business continues to strive to build a profitable foundation with improved products, stronger dealer relationships and a more efficient operations base. Our towable businesses remain well-positioned to drive future market share and profitability growth given our strong backlog and improving dealer lot space via new product launches. We remain optimistic about the strength of the RV marketplace as a whole, with overall U.S. shipments expected to exceed 500,000 units in 2017, and a ninth consecutive year of growth projected in 2018.
“Winnebago Industries launched several strong new products this fall, all of which have received very positive industry response. On the motorized side, we introduced the Intent, our value-priced Class A Gas RV; the Horizon Class A Diesel, which was named RV of the Year by RVBusiness magazine; and the Class B Revel, which was awarded Best in Show at the RVIA Trade Show. On the towable side, we introduced a new Winnebago branded fifth-wheel and Grand Design RV’s new Transcend line, a differentiated product marking the brand’s introduction to the stick-and-tin segment, which should benefit the back half of Fiscal 2018. Our previously-announced towable capacity expansion projects continue moving forward as we position our business to ensure supply keeps pace with future expected demand.”
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