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Winnebago Revenue, Profit Soar

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Winnebago revenues increased 64 percent in the second quarter of fiscal 2017, with gross profit increasing 95 percent, according to the company’s quarterly report.

In its first full quarter with Grand Design as part of the company, revenues for the towable segment were $172 million for the quarter, up $151 million over the prior year.

“Our second quarter results reflect our progress in transforming Winnebago into a larger company with greater scale, a more balanced portfolio, increased profitability and better positioned to compete effectively across the entire RV market,” said Winnebago President and CEO Michael Happe.
Revenues were $370 million, an increase of 64 percent, compared to $226 million for the fiscal 2016 period. Gross profit was $49 million, an increase of 95 percent compared to $25 million for the fiscal 2016 period. Gross profit margins expanded 210 basis points driven by the favorable inclusion of Grand Design products within the overall sales mix. Operating income was $28 million for the current quarter, an improvement of 110 percent compared to $13.5 million in the second quarter of last year. Fiscal 2017 second quarter net income was $15 million, an increase of 63 percent compared to $9 million in the same period last year.

“In our first full quarter with Grand Design as part of our organization,” stated Happe, “we continued to deliver significant wholesale and retail growth in our towable segment, enabling us to reach our highest level of consolidated gross margin in nearly a decade. … As we move into the second half of 2017, we intend to build on this momentum by further expanding Towable market penetration and working diligently to improve future results for our motorized business by strengthening product value and leveraging our reputation for industry leading customer service.”

As reported, there were some significant items impacting income before income taxes in the second quarter of Fiscal 2017. For one, Winnebago’s decision to terminate its postretirement healthcare plan effective January 1, positively impacted the quarter by $12 million net of tax, compared to prior year postretirement health care benefit income of $1.6 million. All of the benefits of this plan termination have now been recorded in the financial statements and there will be no further impact on a prospective basis.

Related to the Grand Design acquisition:

  • Additional transaction costs related to the Grand Design acquisition were $0.5 million, or $0.01 per diluted share, net of tax
  • A full quarter of amortization expense of $10.4 million was recorded related to the definite-lived intangible assets acquired, or $0.22 per diluted share, net of tax. We expect that there will be a similar level of amortization expense in the third quarter of Fiscal 2017 as the remaining backlog-related intangible assets are amortized. Starting in the fiscal fourth quarter, we expect amortization expense will be approximately $2.0 million per quarter through Fiscal 2021.
  • A full quarter of interest expense of $5.2 million was recorded related to the debt established to fund the acquisition, or $0.11 per diluted share, net of tax.

Excluding these items as well as depreciation expense, consolidated adjusted EBITDA (a non-GAAP measure) was $29.1 million compared to $13.3 million last year, an increase of 118.5%.

Regarding their motorized segment, revenues were $199 million for the quarter, which was down 3 percent from the previous year. Although unit deliveries were up 3.6 percent over the prior year same quarter, the average selling price of product sold decreased 5 percent due to a shift in product mix. The segment-adjusted non-GAAP measure (EBITDA) was $9 million, down 22 percent from the prior year. Adjusted EBITDA decreased 110 basis points, primarily driven by product mix, pricing pressures and acceleration of West Coast operations.

Revenues for the towable segment were $172 million for the quarter, up $151 million over the prior year. This was driven by the addition of $144 million in revenue from the Grand Design acquisition and continued strong organic growth from Winnebago-branded towable products in excess of 36 percent. Segment-adjusted EBITDA was $20 million, up $18 million over the prior year. Adjusted EBITDA increased 400 basis points primarily due to the inclusion of Grand Design’s products within this segment.

As of February 25, Winnebago had the total outstanding debt of $330 million, and working capital of $142 million. The debt to equity ratio was 82 percent, and the current ratio was 1.9 as of the end of the quarter. Cash from operations improved by $14 million compared to the same period last year.

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