Thor Boasts Record Results, Q3

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Thor Industries reported record third-quarter net income of $111.3 million, or $2.11 per diluted share, on record revenues of $2.02 billion for the third quarter ended April 30.

Gross profit increased 45.5 percent to $293.8 million. As anticipated, due primarily to acquisition-related dilution and market-driven changes in product mix, gross profit margins decreased to 14.6 percent in the third quarter compared to 15.7 percent in the previous-year period.

Diluted earnings per share for the fiscal 2017 third quarter increased 41.6 percent from the previous year. The strong growth in revenues and earnings was a combination of organic growth in both towable and motorized RVs, and the inclusion of the results from Jayco, which was acquired on June 30, 2016.

“We continue to see strength in the RV market, as dealers and consumers remain optimistic and the prospects for continued industry growth remain strong,” said Bob Martin, Thor president and CEO. “As an industry, and at Thor in particular, we continue to make strides in bringing new consumers into the RV lifestyle. This focus has driven an expansion in our customer base, which has contributed to our strong top line growth and, while margins may be modestly suppressed on the more affordably priced units, to our bottom line as well. … Over time, we anticipate this short-term trend will translate into longer term demand for higher priced units …”

He continued mentioning that the company has new plants and expansion projects that will contribute to “overall production capacity in the fourth quarter of fiscal 2017 and early fiscal 2018.”

Towable RVs:

Towable RV sales were $1.43 billion for the third quarter, up 52.6 percent from $934.6 million in the previous-year period. Jayco contributed $362.9 million to towable sales for the quarter. Towable sales growth excluding the acquisition was 13.8 percent, driven primarily by continued strong demand for our more affordably priced travel trailers.

Towable RV income before tax was $134.5 million, up 38.8 percent from $96.9 million in the third quarter last year. This increase was driven primarily by the increase in sales and improved Selling General and Administrative (SG&A) expense as a percent of revenues, partially offset by increased amortization expense and lower gross margins associated with Jayco, product mix changes and labor costs.

Towable RV backlog increased $837.1 million, or 115.1 percent, to $1.56 billion, compared to $727.5 million at the end of the third quarter of fiscal 2016, reflecting the inclusion of Jayco’s $445.9 million backlog as well as continued momentum and demand for our travel trailers.

Motorized RVs:

Motorized RV sales were $549.9 million for the third quarter, up 78.7 percent from $307.6 million in the previous-year third quarter.

The increase in motorized RV sales was a result of continued robust growth in our more moderately priced gas Class A and Class C motorhomes, which have been in high demand by our dealers and end consumers. Motorized revenues also benefited from the inclusion of Jayco’s motorized revenues of $153.7 million.

Motorized RV income before tax was $37.4 million, up 54.9 percent from $24.1 million last year, driven primarily by the growth in motorized sales and improved SG&A expense as a percent of revenues, partially offset by increased amortization expense and lower gross margins associated with Jayco, product mix changes and labor costs.

Motorized RV backlog increased $466.2 million, or 141.6 percent, to $795.5 million from $329.3 million a year earlier, reflecting the inclusion of Jayco’s $123.2 million motorized backlog as well as continued, exceptional demand for our smaller gas Class A and Class C motorhomes.

“With the strong operating performance during the quarter and year to date, we have seen a significant increase in operating cash flow, which increased 26.2 percent to $182.8 million for the first nine months of fiscal 2017,” said Colleen Zuhl, Thor senior VP and CFO. “During the third quarter, we invested approximately $28.5 million in capital projects, bringing our year to date investment in capital projects to $79.5 million. Total forecasted capital investments for the fiscal year remain at approximately $130 million as we expect to invest approximately $50 million in additional capital projects during the fourth quarter to meet the robust demand for our products as reflected in our record backlogs.”

Zuhl added, “We also made $30 million of principal payments on our revolving credit facility during the third quarter, bringing our payments to $65 million for the first nine months of our fiscal year. As of April 30, we held $189.4 million of cash and $295 million was outstanding under the debt agreement. Subsequent to April 30, we made additional principal payments on the revolving credit facility totaling $50 million.”

Acquisition Impact:

For the third quarter, Jayco contributed approximately $516.5 million in sales and $66.1 million in gross profit.

Interest expense and amortization of debt issuance costs for the quarter were approximately $2.3 million.

Results for the quarter were also affected by the increase in amortization of intangibles. Total amortization for the quarter attributable to the Jayco acquisition amounted to $10 million.

“As we continue to strategically build on our strengths in product innovation to meet the demands of consumers, and given the current favorable economic conditions, we are confident that the market will reward our efforts,” said Peter B. Orthwein, Thor executive chairman. “While there are some modest labor and capacity challenges ahead as we manage through our growth, our management team will continue to focus on balancing the short-term costs associated with expanding our company with the long-term returns we expect to generate for our shareholders.”


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