Thor Industries Inc. announced that its board approved at its Dec. 11 meeting a special cash dividend of $1.50 per share payable on the company’s common shares. The Jackson Center, Ohio-based builder also announced that board approved an acceleration of the payment of Thor’s regular quarterly dividend of 18 cents per share from January 2013 to December 2012.
Both the special dividend and regular dividend are payable on Dec. 28 to shareholders of record at the close of business on Dec. 21.
“The payment of a special dividend reflects the confidence of the board in the strong cash position of Thor’s balance sheet and the future performance of our company,” said Peter B. Orthwein, Thor chairman and CEO. “With cash of more than $4 per share as of Oct. 31, 2012, we believe we have adequate resources to invest in capital projects while providing an important cash return to our shareholders. In addition, given the current uncertainty surrounding the direction of future tax policy, the board thought it prudent to pay the special dividend and our next regular dividend in December to take advantage of current tax rates.”
The 50th Anniversary National RV Show is barely underway and industry observers are already forecasting a bullish outlook for the industry.
Officials with Robert W. Baird & Co. are hosting a field trip to the trade show this week in Louisville, Ky., including meetings with Thor Industries Inc., Winnebago Industries Inc., Drew Industries Inc., Bank of America, Ally Bank and the Recreation Vehicle Dealers Association (RVDA).
“We expect a bullish tone driven by optimistic dealers and strong orders, underpinned by budding signs of a housing recovery,” Baird stated in a note to investors. “We will be interested to monitor retail trends, dealer sentiment, inventory, orders and margin pressure – along with the impact of macro drivers like housing, the fiscal cliff, and tax policy on discretionary wealth (including talk of changes to the mortgage interest deduction which current benefits RV buyers).”
This positive outlook comes the same day that the Recreation Vehicle Industry Association (RVIA) released its 2013 forecast, forecasting wholesale shipments will rise 4.5% in the coming year.
Baird noted the recent first quarter financial results released on Monday by Thor Industries Inc. leads the industry upturn. Highlights of that report follow:
Optimistic dealers drive solid quarter. After posting impressive preliminary sales and a robust backlog Nov. 5, Thor reported on Monday a modest EPS shortfall due to discounting and one-time items. Dealers are confident, supporting a healthy backlog and inventory growth. “We remain optimistic as negative equity evaporates (housing), but would be selective on valuation – especially as inventory grows. Industry fundamentals continue to improve, but with tax policy up for grabs and dealer inventory back in balance, we prefer to pick our spots.”
EPS shortfall. Thor reported a modest EPS shortfall ($0.58 vs. $0.61) due to one-time items ($0.63 consensus). As a reminder, Thor previously reported robust revenue growth (+30%) and a strong backlog (+41%) – driving investor enthusiasm for the stock. A legal settlement and severance costs reduced EPS by $0.02, although Thor generally emphasizes GAAP (not pro forma) EPS.
Discounting persists. Management twice referred to elevated discounting, suggesting the environment has not improved. As the industry shifts the order cycle from November (RVIA show) to September (Elkhart show), manufacturers make every effort to book business early. Again this year, Thor offered to cover floorplan costs for Elkhart orders – but only for orders placed at the show.
Dealer optimism drives inventory growth. Dealer inventory in Thor products increased 14% as dealers bet on a recovery. After a long destocking period, management characterized inventory levels as “appropriate.” Meanwhile, recent checks and strong OEM backlogs indicate a confident dealer base. The Baird RV Dealer Sentiment Index hit 68 in October (100 point scale), the second-highest reading since we began tracking the metric in 2006. Meanwhile, Thor reported a 73% jump in the RV backlog earlier this month.
On the eve of the opening of the 50th Annual National RV Trade Show in Louisville, Ky., industry giant Thor Industries Inc. today (Nov. 26) announced another blockbuster quarter.
Thor announced consolidated sales for its first quarter ended Oct. 31 were $875.6 million, up 30% from $673.0 million in the first quarter last year. Net income for the first quarter was $31.0 million, up 38% from $22.4 million in the first quarter last year. Basic earnings per share (EPS) for the first quarter were up 44% from in the first quarter last year.
“We are pleased with the strength of our revenue growth and profitability demonstrated in the first quarter. Despite this strength, our results were affected by an ongoing competitive environment, along with certain expenses that we do not expect to repeat,” said Bob Martin, Thor president and COO. “The RV and bus markets remain very competitive, with heightened discounting and aggressive bidding affecting sales and margins. Bus margins were also affected by a shift in product mix toward lower-margin units. During the quarter, we incurred separation costs related to management transitions and a legal settlement that, combined, were approximately $1.6 million, which we do not anticipate will recur.”
Total RV sales for the first quarter were $761.4 million, up 36% from $561.7 million in the first quarter last year. Towable RV sales for the first quarter were $639.2 million, up 28% from $499.1 million in the first quarter last year. Motorized RV sales for the first quarter were $122.2 million, up 95% from $62.6 million in the first quarter last year. Bus segment sales for the first quarter were $114.2 million, up 3% from $111.3 million in the first quarter last year.
Total RV income before tax for the first quarter ended Oct. 31, 2012 was $51.1 million, up 51% from $33.9 million in the prior year period. Towable RV income before tax for the first quarter was $42.7 million, up 31% from $32.6 million in the first quarter last year. Motorized RV income before tax for the first quarter was $8.4 million, up more than six fold from $1.3 million last year. Bus segment income before tax for the first quarter was $3.7 million, compared to $5.3 million in the first quarter last year.
“Thor delivered revenue that was a record for the fiscal first quarter and improved bottom-line results, driven by solid growth in the RV market and a stable bus market,” said Peter B. Orthwein, Thor chairman. “Our first-quarter results were supported by dealer optimism and strong orders at our Elkhart Open House held in September, and the strength we experienced provides reason for optimism in the first half of the fiscal year.
“As we open the largest RV trade show of the year in Louisville this week, we will assess the level of dealer confidence as we head into the early retail show season beginning in January. Although we have seen a recent upturn, we remain cautious given the overall economic uncertainty. In addition, both the RV and bus markets remain very competitive, with elevated levels of discounting.”
Thor Industries Inc. gained the most in three months after the maker of RVs and buses said sales surged 30% to a fiscal first-quarter record.
Bloomberg reported that Thor shares climbed 12% to $44.96 in midday trading after advancing as much as 14%, the most intraday since Aug. 3. The Jackson Center, Ohio-based company’s stock had risen 46% this year through yesterday.
Sales for the quarter ended Oct. 31 rose to $876.8 million, Thor said in releasing preliminary results. The average of analysts’ estimates compiled by Bloomberg was $745.5 million. Thor said in a statement that its order backlog at the end of October was $720.4 million, up 41% from a year earlier.
According to Bloomberg, sales of recreational vehicles are monitored as a sign of an improving economy because motorhomes and travel trailers are discretionary purchases that consumers defer during a slump.
Thor Industries Inc. reported record sales of $876.8 million during its fiscal 2013 first quarter, ended Oct. 31, representing a 30% increase from $673 million the previous year.
RV sales were $763 million, up 36% from $561.7 million in last year’s first quarter. Towable RV sales were $640.8 million, a 28% increase from $499.1 million a year ago, while motorized RV sales doubled to $122.2 million from $62.6 million. Bus Group sales were $113.8 million, up 2% from $111.3 million in the first quarter last year.
Cash, cash equivalents and investments on Oct. 31 were $215.6 million versus $209.5 million the previous year. Backlog on Oct. 31 was $720.4 million, up 41% from $509.7 million last year. RV backlog was $516.7 million, up 73% from $299.5 million at the end of the first quarter of fiscal 2012.
“Thor achieved a first-quarter record for revenue in the quarter ending Oct. 31 as the strength of our products met with considerable success among dealers at the Open House held in Elkhart, Ind., in September,” said Peter B. Orthwein, Thor chairman and CEO. “While we are pleased with the favorable reception our products received, the overall environment is still very competitive and industry incentives remain elevated. Our higher backlogs provide us with a clearer view into sales expectations through the first half of fiscal 2013.
“Given the view of our business through the January quarter, we believe Thor will be well positioned to enter the important spring retail show season. The success of our products in those early spring shows will help shape our outlook for the second half of the fiscal year.”
Jackson Center, Ohio-based Thor Industries Inc. announced today (Oct. 15) that Christian G. Farman, senior vice president, treasurer and CFO, has left the company to pursue other interests.
According to a press release, Farman’s resignation from Thor was effective Oct. 12.
“Thor thanks Chris for the value that he brought to our company during his years with us and we wish him well in all of his future endeavors,” said Peter B. Orthwein, Thor’s chairman and CEO. “We are fortunate to benefit from the strong financial team that Chris built here, led by Colleen Zuhl, who will serve as Thor’s interim CFO as we conduct a search for a replacement.
“Colleen’s experience as a CFO of one of our former publicly-traded competitors makes her an ideal candidate for the interim role. The depth of our corporate finance team gives me great confidence in the near-term performance and future direction of our company.”
It was tough not to notice the recreational vehicle group over the past week, according to a report by Investors.com
Drew Industries Inc. jumped 7% for the week. Patrick Industries Inc. settled 13% higher, after spiking 20% on Monday (Oct. 1). Group leader Thor Industries Inc. coasted home with a 1% gain but has a three- month advance under its belt, including a 15% gain for September.
The entire group lagged in the rankings, ranked No. 134 at the start of August. It broad-jumped into the Top 20 this week to end Friday at No. 18.
The annual RV show in Hershey, Pa., billed as “America’s Largest RV Show,” ran from Sept. 19-23.
Thor reported “record retail sales for units sold” at the annual show. RV maker and Berkshire Hathaway subsidiary Forest River Inc. said it sold “virtually hundreds of units” at the show.
Although this industry group is listed in the building sector, the top stocks are really leisure sector plays. Thor and Drew see more than three-quarters and Patrick more than half their revenue from RV sales.
Snowmobile and off-road vehicle sales have gone great guns for the past two years, sending Polaris sales to record highs last year. The stock soared 233% since a March 2010 breakout.
RV makers have been a different bag of nuts, but they service very similar audiences. And they have also seen an accelerating recovery in sales beginning last year.
Thor Industries Inc. announced that its Eldorado National Kansas subsidiary purchased the bus operation assets of Krystal Infinity LLC, dba Krystal Enterprises, (“Krystal”) for $3.9 million in cash.
Eldorado plans to move the assets to its bus facility in Salina, Kansas and produce the Krystal buses there. Krystal manufactures luxury buses and its sales are estimated to be in excess of $30 million per year.
“The addition of the Krystal bus line provides an upscale, high-end retail unit that complements our Kansas facility’s Aerolite, Aerotech and Aero Elite core products as well as its competitively-priced, low cost Advantage product line,” said Andrew Imanse, Thor Bus Group president.
Confidence is a huge economic driver in the RV business. According to a report by NASDAQ.com, if consumers are uncertain about their own situations, they don’t go out and buy an RV.
With the U.S. economy still limping, Thor Industries Inc. has naturally struggled with earnings stability. The five-year stability factor is a 47 on a scale of 0 (calm) to 99 (erratic).
Yet Thor has reassured investors with a solid dividend record. During the recession, the dividend was never reduced. Afterward, increases grew aggressively. The quarterly payout has been raised from 7 cents a share in mid-2010 to 18 cents a share for a 2% annual yield.
This is impressive when you consider that the U.S. has not enjoyed a textbook economic recovery. It’s been more of a footnote recovery — hard to find and hard to see.
Thor’s business involves several segments. Towable RVs accounted for 74% of revenue in fiscal 2012 ended in July. Buses and ambulances deliver 14% of revenue, and motorized RVs 12%.
As of June, Thor’s U.S. market share in the towable sector was 38% and in motorized RVs, 21%. For small and midsize buses, market share is about 35%. The buses are mostly sold to government entities.
Thor is not a lone wolf. The RV stocks have some winners. Patrick Industries Inc. (PATK ), though thinly traded, has a Composite Rating of 98. Drew Industries Inc. (DW), which supplies manufacturers with windows, doors and other items, has a Composite Rating of 97. Thor’s Composite Rating also is 97.
The Composite Rating combines all five IBD ratings into a single number.
Thor’s industry group was No. 39 among 197 groups as of Friday’s IBD. Six weeks ago, the group was No. 92. The group, though, includes manufactured home companies — something that Thor does not get into.
The RV business traditionally has had low barriers to entry, but increased regulations have made that less true. Also, developing a dealer network can pose barriers to entry.
Demographics look favorable. By 2020, the number of Americans age 55 to 64 will be 73% higher than in 2000, according to consulting firm AgeWave.
Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the release of Thor Industries Inc.’s 4Q and year-end financials. The following offers a summary of the results.
• Overview: Earnings per share (EPS) topped expectations on solid margin performance and a lower tax rate. After several disappointing quarters in which margin fell below expectations, the lack of any surprises is a plus. Meanwhile, reports from the Elkhart, Ind., industry event suggest momentum is building, supporting an appetite for more dealer inventory.
EPS tops expectations: Q4 (July) EPS topped the consensus estimate (84 cents vs. 79 cents) and our 77 cent estimate, driven by lower taxes (+5 cents) and better bus margin (+2 cents). RV margin met our expectation (slight upside in motorhomes, slight downside in towables), a good sign given investor concerns about persistent discounting. Thor also reported robust preliminary sales (+15%) and a strong RV backlog (+48%).
• Sentiment improving following Elkhart event: Thor and other leading RV manufacturers hosted an open house for thousands of dealers in Elkhart. Multiple sources indicated strong attendance, healthy orders, and enthusiastic dealers. Inventory is expanding – but lenders tell us that dealer lines of credit are underutilized as retail improves. We expect to have better information after we conclude our Q3 RV dealer survey, but it may be fair to say that dealer inventory is closer to “balanced” that “lean.”
More balanced outlook: RV stocks have surged recently (WGO up 23%, THO up 20%) as investors pursue: a derivative play on housing; improving industry trends; and an appetite for risk in a bull market. Thor’s results, the Elkhart open house and housing signals all support a more favorable outlook, in our view. Meanwhile, we like Thor fundamentals, noting its market leadership, strong balance sheet ($4/share in cash, no debt), and lack of European exposure. We are raising our price target to $38, but acknowledge likely diminishing upside from here.