News Release

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Winnebago Industries Announces Third Quarter Fiscal 2018 Results

-- Record Quarterly Revenues Increased 18% on Continued Strong Towable Segment Growth --
-- Record Quarterly Diluted EPS of $1.02, Up 67% Over Prior Year --
-- Gross Margins Increased 30 Basis Points Over Prior Year --

FOREST CITY, Iowa, June 20, 2018 (GLOBE NEWSWIRE) -- Winnebago Industries, Inc. (NYSE:WGO), a leading outdoor lifestyle product manufacturer, today reported financial results for the Company's third quarter of Fiscal 2018.

Third Quarter Fiscal 2018 Results
Revenues for the Fiscal 2018 third quarter ended May 26, 2018, were $562.3 million, an increase of 18.0% compared to $476.4 million for the Fiscal 2017 period. Gross profit was $85.5 million, an increase of 20.8% compared to $70.8 million for the Fiscal 2017 period. Gross profit margin was 15.2% in the quarter, an increase of 30 basis points versus 14.9% last year, driven by the continuation of accelerated growth in the Towable segment. Operating income was $48.3 million for the quarter, an improvement of 38.5% compared to $34.9 million in the third quarter of last year. Fiscal 2018 third quarter net income was $32.5 million, an increase of 67.7% compared to $19.4 million in the same period last year. Earnings per diluted share were $1.02, an increase of 67.2% compared to earnings per diluted share of $0.61 in the same period last year. During the quarter, the Company utilized a portion of its tax reform benefit for employee bonuses and making a contribution to its foundation, leading to a one-time expense of $3.4 million, or $0.11 per share, net of tax. Consolidated Adjusted EBITDA was $53.4 million for the quarter, compared to $47.3 million last year, an increase of 12.7% driven by strong Towable segment revenue and profit growth.

President and Chief Executive Officer Michael Happe commented, “Winnebago Industries delivered strong top and bottom-line growth, margin expansion and market share gains in the quarter. New product performance, our evolving portfolio mix, and agility in managing cost pressures all contributed nicely to our third quarter results. The Towable segment saw strong organic top-line growth and increased profitability, in addition to delivering another period of retail market share expansion. Our strong performance to-date in Fiscal 2018 and confidence in our market share trends for Towable RVs is reflected in our capacity expansion efforts during the quarter, as we broke ground on our Winnebago-branded Towable expansion project and started up a new Grand Design RV production line. We look forward to having additional capacity to deliver more of the Towable products our customers love as well as to bring new innovative products to market. Our Motorized business also saw continued progress with adjusted EBITDA strengthening from our previous quarter, as multiple investments in the business start to generate the moderate improvement we anticipated. While inflationary pressures have been building and will continue to do so, our teams are working hard to mitigate these through numerous cost savings initiatives and select price increases where necessary. Our new product launches across both segments are performing well, driving healthy backlog increases, and we remain comfortable with our current dealer inventory levels which are supported by our strong retail performance and increases in market share.”

Mr. Happe added, “During the quarter, and as previously announced, we distributed a portion of our tax reform savings to our hardworking Winnebago Industries employees through one time bonus payments. Additionally, we made a meaningful donation to our Winnebago foundation which will help us, in the future, to give back to the communities in which we operate. As always, I want to thank all of our employees for their dedication and commitment to the future of Winnebago Industries.”

Motorized
In the third quarter, revenues for the Motorized segment were $249.2 million, up 3.1% from the previous year. Segment Adjusted EBITDA was $9.3 million, down 36.0% from the prior year. Adjusted EBITDA margin was 3.7%, a decrease of 230 basis points versus the same period last year, but an improvement of 170 basis points compared to 2.0% in the Second Quarter of Fiscal 2018. The margin impact of the one-time tax reform reinvestments mentioned earlier was dilutive to Adjusted EBITDA by 120 basis points in the quarter.  Backlog increased 31.4% over the prior year, reflecting the strength of our recently introduced products.

Towable
Revenues for the Towable segment were $313.0 million for the quarter, up 33.4% from the previous year, driven by strong organic growth across the Grand Design RV and Winnebago-branded product lines. Segment Adjusted EBITDA was $44.0 million, up 34.4% over the prior year. Adjusted EBITDA margin was 14.1%, an increase of 10 basis points, driven by higher volumes and a favorable product mix. The margin impact of the one-time tax reform investments mentioned earlier was dilutive to Adjusted EBITDA by 60 basis points in the quarter. Backlog remains strong, growing 15.1% and compared to a strong backlog in the prior year, while retail sales continue to yield market share gains by outpacing the industry for both brands.

Balance Sheet and Cash Flow
As of May 26, 2018, the Company had total outstanding debt of $251.8 million ($260.0 million of debt, net of debt issuance costs of $8.2 million) and working capital of $183.4 million. Cash flow from operations was $61.0 million for the nine months ended May 26, 2018.  The ratio of net debt to Adjusted EBITDA was 1.2x as of May 26, 2018.

Tax Reform Impact
The Company recorded a tax rate of 26.4% in the third quarter compared to a rate of 34.6% in the prior year. The reduction in the rate is related to the lower federal tax rate enacted in accordance with the Tax Cuts and Jobs Act.

Quarterly Cash Dividend
On May 23, 2018, the Company’s board of directors approved a quarterly cash dividend of $0.10 per share payable on July 5, 2018, to common stockholders of record at the close of business on June 20, 2018.

Mr. Happe continued, “As we enter the final quarter of Fiscal 2018, there is much to be excited about at Winnebago Industries even as we navigate several external pressures. As mentioned earlier, we experienced inflationary input cost pressures during our fiscal third quarter and we expect those pressures to continue into the fourth quarter.  As always, we will work closely with our supplier base, and internally on cost savings initiatives, to lessen the impacts on our dealer network and end customers of any necessary increases. In the quarter, we announced the launch of an all-electric, zero-emission commercial vehicle platform in conjunction with a strategic partnership with Motiv Power Systems, a U.S. market leader in medium-duty electric vehicle chassis. And earlier this month, but after the close of our fiscal third quarter, we announced our acquisition of Chris-Craft, an iconic marine brand and an industry leader in recreational boating. The addition of a premium marine brand aligns with our strategic initiative to expand the Winnebago Industries portfolio within the outdoor lifestyle market and provides a new revenue platform in an exciting marine market that will enable us to continue to drive improved profitability and shareholder value over the long term. Our improved RV portfolio and strategic investments continue to benefit the business as a whole, and we look forward to realizing the strategic and financial benefits of a broader, more balanced and diversified portfolio of products uniquely positioned across the outdoor lifestyle and leisure travel industries.”

Conference Call
Winnebago Industries, Inc. will conduct a conference call to discuss third quarter Fiscal 2018 results at 9:00 a.m. Central Time today. Members of the news media, investors and the general public are invited to access a live broadcast of the conference call via the Investor Relations page of the Company's website at http://investor.wgo.net. The event will be archived and available for replay for the next 90 days.

About Winnebago Industries
Winnebago Industries, Inc. is a leading U.S. manufacturer of outdoor lifestyle products under the Winnebago, Grand Design and Chris-Craft brands, which are used primarily in leisure travel and outdoor recreation activities. The Company builds quality motorhomes, travel trailers, fifth wheel products and boats. Winnebago Industries has multiple facilities in Iowa, Indiana, Oregon, Minnesota and Florida. The Company's common stock is listed on the New York and Chicago Stock Exchanges and traded under the symbol WGO. Options for the Company's common stock are traded on the Chicago Board Options Exchange. For access to Winnebago Industries' investor relations material or to add your name to an automatic email list for Company news releases, visit http://investor.wgo.net.

Forward Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increase in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to mergers and acquisitions activities, business interruptions, any unexpected expenses related to ERP, risks related to compliance with debt covenants and leverage ratios, and other factors. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company's filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or from the Company upon request. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained in this release or to reflect any changes in the Company's expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.

 

 
Winnebago Industries, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except percent and per share data)
 
    Three Months Ended
    May 26, 2018   May 27, 2017
Net revenues   $ 562,261     100.0 %   $ 476,364     100.0 %
Cost of goods sold   476,747     84.8 %   405,560     85.1 %
Gross profit   85,514     15.2 %   70,804     14.9 %
Operating expenses:                
Selling   13,100     2.3 %   10,141     2.1 %
General and administrative   21,404     3.8 %   15,194     3.2 %
Transaction costs   800     0.1 %   450     0.1 %
Amortization of intangible assets   1,933     0.3 %   10,159     2.1 %
Total SG&A   37,237     6.6 %   35,944     7.5 %
Operating income   48,277     8.6 %   34,860     7.3 %
Interest expense   4,172     0.7 %   5,265     1.1 %
Non-operating income   (100 )   %   (54 )   %
Income before income taxes   44,205     7.9 %   29,649     6.2 %
Provision for income taxes   11,684     2.1 %   10,258     2.2 %
Net income   $ 32,521     5.8 %   $ 19,391     4.1 %
Income per common share:                
Basic   $ 1.03         $ 0.61      
Diluted   $ 1.02         $ 0.61      
Weighted average common shares outstanding:                
Basic   31,582         31,587      
Diluted   31,753         31,691      


    Nine Months Ended
    May 26, 2018   May 27, 2017
Net revenues   $ 1,480,641     100.0 %   $ 1,092,183     100.0 %
Cost of goods sold   1,264,635     85.4 %   943,188     86.4 %
Gross profit   216,006     14.6 %   148,995     13.6 %
Operating expenses:                
Selling   37,443     2.5 %   25,564     2.3 %
General and administrative   57,088     3.9 %   37,640     3.4 %
Postretirement health care benefit income                      %   (24,796 )   (2.3 )%
Transaction costs   850     0.1 %   6,374     0.6 %
Amortization of intangible assets   5,921     0.4 %   22,578     2.1 %
Total SG&A   101,302     6.8 %   67,360     6.2 %
Operating income   114,704     7.7 %   81,635     7.5 %
Interest expense   13,871     0.9 %   11,571     1.1 %
Non-operating income   (212 )   %   (137 )   %
Income before income taxes   101,045     6.8 %   70,201     6.4 %
Provision for taxes   28,478     1.9 %   23,794     2.2 %
Net income   $ 72,567     4.9 %   $ 46,407     4.2 %
Income per common share:                
Basic   $ 2.30         $ 1.53      
Diluted   $ 2.28         $ 1.52      
Weighted average common shares outstanding:                
Basic   31,617         30,333      
Diluted   31,825         30,448      

Percentages may not add due to rounding differences.

 

 
Winnebago Industries, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
 
    May 26,
2018
  Aug 26,
2017
ASSETS        
Current assets:        
Cash and cash equivalents   $ 39,029     $ 35,945  
Receivables, net   148,948     124,539  
Inventories   177,378     142,265  
Prepaid expenses and other assets   8,408     11,388  
Total current assets   373,763     314,137  
Total property and equipment, net   82,481     71,560  
Other assets:        
Goodwill   244,684     242,728  
Other intangible assets, net   222,519     228,440  
Investment in life insurance   28,130     27,418  
Deferred income taxes   7,043     12,736  
Other assets   7,090     5,493  
Total assets   $ 965,710     $ 902,512  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 88,397     $ 79,194  
Current maturities of long-term debt       2,850  
Income taxes payable   6,186     7,450  
Accrued expenses   95,823     77,664  
Total current liabilities   190,406     167,158  
Non-current liabilities:        
Long-term debt, less current maturities   251,798     271,726  
Unrecognized tax benefits   1,703     1,606  
Deferred compensation benefits, net of current portion   15,732     19,270  
Other   250     1,078  
Total non-current liabilities   269,483     293,680  
Shareholders' equity   505,821     441,674  
     Total liabilities and shareholders' equity   $ 965,710     $ 902,512  

 

 
Winnebago Industries, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 
    Nine Months Ended
    May 26,
 2018
  May 27,
 2017
Operating activities:        
Net income   $ 72,567     $ 46,407  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation   6,679     5,287  
Amortization of intangible assets   5,921     22,578  
Amortization of debt issuance costs   1,222     889  
LIFO expense   1,238     897  
Stock-based compensation   4,983     2,206  
Deferred income taxes   4,807     6,396  
Postretirement benefit income and deferred compensation expenses   852     (23,687 )
Other   (658 )   (946 )
Change in assets and liabilities:        
Inventories   (36,351 )   (7,497 )
Receivables, prepaid and other assets   (21,275 )   (21,336 )
Income taxes and unrecognized tax benefits   (1,081 )   5,806  
Accounts payable and accrued expenses   24,506     32,778  
Postretirement and deferred compensation benefits   (2,398 )   (2,428 )
Net cash provided by operating activities   61,012     67,350  
         
Investing activities:        
Purchases of property, plant and equipment   (18,123 )   (9,740 )
Proceeds from the sale of property   316     219  
Acquisition of business, net of cash acquired       (394,694 )
Other   (83 )   684  
Net cash used in investing activities   (17,890 )   (403,531 )
         
Financing activities:        
Payments for purchase of common stock   (6,481 )   (1,367 )
Payments of cash dividends   (9,557 )   (9,554 )
Payments of debt issuance costs       (11,020 )
Borrowings on credit facility   19,700     366,400  
Repayment of credit facility   (43,700 )   (69,400 )
Other       (92 )
Net cash (used in) provided by financing activities   (40,038 )   274,967  
         
Net increase (decrease) in cash and cash equivalents   3,084     (61,214 )
Cash and cash equivalents at beginning of period   35,945     85,583  
Cash and cash equivalents at end of period   $ 39,029     $ 24,369  
         
Supplemental cash flow disclosure:        
Income taxes paid, net   $ 24,833     $ 11,811  
Interest paid   $ 11,935     $ 7,288  
Non-cash transactions:        
Issuance of Winnebago common stock for acquisition of business   $     $ 124,066  
Capital expenditures in accounts payable   $ 607     $ 279  
Accrued dividend   $     $ 3,184  

 

 
Winnebago Industries, Inc.
Supplemental Information by Reportable Segment (Unaudited) - Motorized
(In thousands, except unit data)
 
    Quarter Ended    
    May 26,
 2018
% of Revenue   May 27,
 2017
% of Revenue   Change
Net revenues   $ 249,245       $ 241,670       $ 7,575   3.1 %
Adjusted EBITDA   9,319   3.7 %   14,567   6.0 %   (5,248 ) (36.0 )%
                   
Unit deliveries   May 26,
 2018
Product
Mix %(1)
  May 27,
 2017
Product
Mix %(1)
  Change
Class A   722   25.3 %   797   28.5 %   (75 ) (9.4 )%
Class B   606   21.2 %   471   16.9 %   135   28.7 %
Class C   1,528   53.5 %   1,524   54.6 %   4   0.3 %
Total motorhomes   2,856   100.0 %   2,792   100.0 %   64   2.3 %
                   
                   
    Nine Months Ended    
    May 26,
 2018
% of Revenue   May 27,
 2017
% of Revenue   Change
Net revenues   $ 641,602       $ 635,732       $ 5,870   0.9 %
Adjusted EBITDA   16,518   2.6 %   36,521   5.7 %   (20,003 ) (54.8 )%
                   
Unit deliveries   May 26,
 2018
Product
Mix %(1)
  May 27,
 2017
Product
Mix %(1)
  Change
Class A   2,326   32.8 %   2,263   32.8 %   63   2.8 %
Class B   1,387   19.6 %   1,148   16.6 %   239   20.8 %
Class C   3,372   47.6 %   3,488   50.6 %   (116 ) (3.3 )%
Total motorhomes   7,085   100.0 %   6,899   100.0 %   186   2.7 %
                   
                   
          As Of    
Backlog(2)         May 26,
 2018
May 27,
 2017
  Change
Units         2,155   1,640     515   31.4 %
Dollars         $ 193,079   $ 141,998     $ 51,081   36.0 %
                   
Dealer Inventory                  
Units         4,750   4,670     80   1.7 %

(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers generally to be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

 

 
Winnebago Industries, Inc.
Supplemental Information by Reportable Segment (Unaudited) - Towable
(In thousands, except unit data)
 
    Quarter Ended    
    May 26,
 2018
% of Revenue   May 27,
 2017
% of Revenue   Change
Net revenues   $ 313,016       $ 234,694       $ 78,322   33.4 %
Adjusted EBITDA   44,042   14.1 %   32,761   14.0 %   11,281   34.4 %
                   
Unit deliveries   May 26,
 2018
Product
Mix %(1)
  May 27,
 2017
Product
Mix %(1)
  Change
Travel trailer   6,063   62.1 %   4,359   58.5 %   1,704   39.1 %
Fifth wheel   3,703   37.9 %   3,092   41.5 %   611   19.8 %
Total towables   9,766   100.0 %   7,451   100.0 %   2,315   31.1 %
                   
                   
    Nine Months Ended    
    May 26,
 2018
% of Revenue   May 27,
 2017
% of Revenue   Change
Net revenues   $ 839,039       $ 456,451       $ 382,588   83.8 %
Adjusted EBITDA   111,636   13.3 %   54,557   12.0 %   57,079   104.6 %
                   
Unit deliveries   May 26,
 2018
Product
Mix %(1)
  May 27,
 2017
Product
Mix %(1)
  Change
Travel trailer   16,495   61.3 %   8,914   59.9 %   7,581   85.0 %
Fifth wheel   10,428   38.7 %   5,960   40.1 %   4,468   75.0 %
Total towables   26,923   100.0 %   14,874   100.0 %   12,049   81.0 %
                   
                   
          As Of    
Backlog(2)         May 26,
 2018
May 27,
 2017
  Change
Units         9,968   8,657     1,311   15.1 %
Dollars         $ 313,513   $ 269,965     $ 43,548   16.1 %
                   
Dealer Inventory                  
Units         15,986   9,520     6,466   67.9 %

(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers generally to be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

Winnebago Industries, Inc.
Non-GAAP Reconciliation (Unaudited)
(In thousands)

We have provided non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the accompanying news release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the news release. The non-GAAP financial measures in the accompanying news release may differ from similar measures used by other companies.

The following table reconciles net income to consolidated Adjusted EBITDA.

    Quarter Ended   Nine Months Ended
(In thousands)   May 26,
 2018
  May 27,
 2017
  May 26,
 2018
  May 27,
 2017
Net income   $ 32,521     $ 19,391     $ 72,567     $ 46,407  
Interest expense   4,172     5,265     13,871     11,571  
Provision for income taxes   11,684     10,258     28,478     23,794  
Depreciation   2,351     1,859     6,679     5,287  
Amortization of intangible assets   1,933     10,159     5,921     22,578  
EBITDA   52,661     46,932     127,516     109,637  
Postretirement health care benefit income               (24,796 )
Transaction costs   800     450     850     6,374  
Non-operating income   (100 )   (54 )   (212 )   (137 )
Adjusted EBITDA   $ 53,361     $ 47,328     $ 128,154     $ 91,078  

We have provided non-GAAP performance measures of EBITDA and Adjusted EBITDA as a comparable measure to illustrate the effect of non-recurring transactions occurring during the quarter and improve comparability of our results from period to period. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense.  We believe EBITDA and Adjusted EBITDA provide meaningful supplemental information about our operating performance because each measure excludes amounts that we do not consider part of our core operating results when assessing our performance. These types of adjustments are also specified in the definition of certain measures required under the terms of our credit facility. Examples of items excluded from Adjusted EBITDA include the postretirement health care benefit income from terminating the plan and transaction costs related to our acquisition of Grand Design.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as its performance relative to competitors and peers; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company; (d) to evaluate potential acquisitions; and, (e) to ensure compliance with covenants and restricted activities under the terms of our Credit Facility. We believe these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry.

Contact: Steve Stuber - Investor Relations - 952-828-8461 - srstuber@wgo.net
Media Contact: Sam Jefson - Public Relations Specialist - 641-585-6803 - sjefson@wgo.net

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Winnebago Industries, Inc.