Elkhart, ind.-based Thor Industries Inc. announced record second-quarter results as sales grew 24.1% to $1.97 billion compared with $1.59 billion a year ago.
Net income during the period, ended Jan. 31, totaled $79.8 million, or $1.51 per diluted share, compared with $64.8 million, or $1.23 per share a year ago. Net income before taxes totaled $1.41 million, up 43.4% from $98.4 million in the prior-year period.
Gross profit for the second quarter increased 27.7% to $270.3 million. As a result of the strength of revenues and production during the quarter, as well as operating efficiencies and process improvements attained in the past year, primarily by Jayco Inc., gross profit margins increased to 13.7% in the second quarter compared to 13.3% in the prior-year period.
Thor noted that during the second quarter the Tax Act was enacted which provided significant changes to the U.S. tax code, including reducing the federal corporate income tax rate to 21%, effective Jan. 1. As the company’s 2018 fiscal year ends on 2018, the company’s estimated federal corporate income tax rate for fiscal 2018 will be prorated to a blended 26.9% rate. In addition to the benefit of the lower blended federal tax rate of 26.9% in the second quarter, an income tax benefit of $12.5 million was recognized to reflect the impact of applying the lower tax rate to the results of the first quarter of fiscal 2018. The company also recognized a non-recurring, non-cash income tax charge of $34.0 million due to the revaluation of its net deferred tax assets as a result of the lower federal tax rate under the Tax Act.
“Our second quarter results reflect another period of exceptional growth of both sales and earnings,” said Bob Martin, Thor president and CEO. “In what has historically been our lowest volume quarter, we achieved our third highest sales level of any quarter in the company’s history.”
“Our innovative products and the breadth of products we offer at all price points along the spectrum, particularly within the entry-level and mid-price point categories, combined with our outstanding dealer network, resulted in market share gains during calendar 2017,” Martin continued. “We leveraged the combined strength in industry demand and share gains to drive increased profitability across both segments of our business through a combination of increased output from recently added production capacity, enhanced scheduling and optimization of production runs at our existing facilities, as well as various initiatives implemented across the company over the last year to improve operating efficiencies.
“During the quarter, we continued to experience a tight labor market in northern Indiana and began to experience some inflationary price increases in certain raw material and commodity-based components. We continue to manage these challenges through a combination of actions,” Martin added.
- Towable RV sales were $1.37 billion for the second quarter, up 26.9% from $1.08 billion in the prior-year period, driven primarily by continued strong demand for more affordably-priced travel trailers and fifth-wheels.
- Towable RV income before tax was $116.7 million, up 49.7% from $78 million in the second quarter last year. This increase was driven primarily by the increase in sales; improved gross margins due to improved operating efficiencies and process improvements, primarily by Jayco; decreased selling, general and administrative (SG&A) expense as a percent of revenues; and slightly lower amortization expense.
- Towable RV backlog increased $493.1 million, or 37.3%, to $1.82 billion, compared to $1.32 billion at the end of the second quarter of fiscal 2017, reflecting the continued momentum and demand for travel trailers in advance of the spring selling season.
- Motorized RV sales were $559.9 million for the second quarter, up 17.9% from $475.0 million in the prior-year second quarter. The increase in motorized RV sales was a result of the ongoing growth in the more moderately-priced gas Class A and Class C motorhomes, both of which continue to be in high demand by dealers and end consumers.
- Motorized RV income before tax was $37.5 million, up 31.8% from $28.5 million last year, driven primarily by the growth in motorized sales and improved gross margins due to improved operating efficiencies, primarily by Jayco.
- Motorized RV backlog increased $214.9 million, or 28%, to $981.8 million from $766.9 million a year earlier, reflecting the continued strong demand for our smaller, affordably-priced gas Class A and Class C motorhomes.
“Our balance sheet remains very strong. As of Jan. 31, we held $109.8 million of cash. During the first half of fiscal 2018, we invested over $63 million on various capital projects that support our existing businesses and will further increase capacity across our product lines, while working capital increased $118.0 million to support our seasonal needs,” said Colleen Zuhl, Thor senior vice president and CFO. “We also continued to reduce the outstanding balance under our credit facility, paying down $65.0 million during the first half of the year to exit with $80 million outstanding as of January 31, compared to $145.0 million outstanding at July 31, 2017.”
“Subsequent to the end of the second quarter, Thor made a $46.9 million investment in a newly created joint venture, named TH2. TH2 was formed to own, improve and sell innovative and comprehensive digital platforms throughout the RV marketplace. This investment was funded by cash on hand at the closing, in early March 2018,” added Zuhl.
Thor Executive Chairman Peter B. Orthwein noted, “Looking ahead, we will continue executing the components of our strategic plan — investing in prudent capacity expansions to capitalize on demand, providing market-leading, innovative and high quality products that exceed customer expectations and maintaining our focus on operational efficiency improvements and cost management disciplines. In addition to our historically strong operating cash flow, the positive impact provided by the U.S. tax reform legislation on our cash flow will allow us to focus on funding growth, both organically and through acquisition, paying down our debt and increasing returns to our shareholders over time.”
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