The company has a record backlog totaling $5.74 billion at the conclusion of its 2020 fiscal year. Fourth Quarter net sales amounted to $2.32 billion. The Q4 results include $1.55 billion in North American RV net sales and $739.9 million in European RV net sales.
Its consolidated gross profit margin for the fourth quarter was 14.9 percent, a 0.5 percent improvement over 2019.
- Thor’s Q4 net income was $119.2 million, or $2.14 per diluted share.
- Net cash from operations for fiscal year 2020 was $540.9 million.
- The company paid $275.0 million during the fiscal year on its EHG acquisition-related debt. Life-to-date, Thor has paid approximately $678 million on its acquisition-related debt.
- Its consolidated RV backlog increased 186.4 percent over the prior year, to $5.74 billion as of July 31, 2020.
“I am pleased to report that Thor’s net sales increased significantly with each passing month in the fourth quarter of fiscal 2020 as we emerged from the COVID-19 induced production furlough that started in our third fiscal quarter. Our fourth quarter results prove that our employees and management teams around the world are experienced and agile, and that our highly variable business model facilitated a rebound from a virtual production standstill in May to full production by July,” said Bob Martin, Thor Industries president and CEO.
“We saw increasing retail demand over the course of the quarter, driving dealer inventories to historically low levels by year end and our year-end backlog to a record high. As I have noted before, the long-term outlook for our business remains excellent. Now, with the increasing interest in the RV lifestyle from a new group of consumers, the short-to-medium-term outlook is also robust. This current demand for RVs, coupled with the need to replenish dealer inventories that are at all-time lows, positions us for continued success well into calendar 2021. We also believe that the influx of new RV buyers will lead to many becoming long-term RV enthusiasts down the road. Historically, long-term RVers trade in and trade up for a new RV every 3 to 5 years, which further positions us for success well into the future,” added Martin.
Fourth-Quarter Financial Results
Fourth-quarter net sales were $2.32 billion, compared to $2.31 billion in Q4 of fiscal 2019. This year’s fourth quarter net sales figure includes $1.18 billion from the North American Towable RV segment, $366.5 million from the North American Motorized RV segment, and $739.9 million from the European RV segment.
Consolidated gross profit margin was 14.9 percent for the fourth quarter of fiscal 2020, compared to 14.4 percent in the corresponding period a year ago. The improved gross profit margin is primarily due to decreased warranty costs, as a percent of sales, in addition to overhead savings from management-led cost reduction measures in response to COVID-19, which partially offset an increase in the material cost percentage primarily due to product mix.
Net income attributable to Thor and diluted earnings per share for the fourth quarter of fiscal 2020 were $119.2 million and $2.14 per share, compared to net income attributable to Thor and diluted earnings per share of $92.1 million and $1.67, respectively, during the prior-year period.
Fiscal Year 2020 Financial Results
Net sales for fiscal year 2020 were $8.17 billion compared to $7.86 billion for fiscal year 2019. The increase in net sales is primarily attributable to incremental European net sales of $998.4 million, as the current fiscal year includes twelve months of operations when compared to the prior fiscal year which included six months of operations from the date of acquisition of the Erwin Hymer Group (“EHG”) on February 1, 2019. The increase was offset by a decrease in North American net sales, due to the COVID-19 pandemic and the resulting six-to-eight-week production shutdowns that started in the fiscal third quarter.
Net income attributable to Thor in fiscal year 2020 was $223.0 million, or $4.02 per diluted share, compared to net income attributable to Thor of $133.3 million, or $2.47 per diluted share, in fiscal year 2019. Fiscal year 2019 results include EHG acquisition-related costs of $114.9 million and the negative impact of $61.4 million related to the fair value step-up in purchase accounting of acquired EHG inventory that was subsequently sold during the first three months following the acquisition.
Thor’s overall annual effective income tax rate for fiscal 2020 was 18.9 percent compared with 28.3 percent for fiscal 2019. The primary drivers of the change in the overall effective tax rate between comparable periods are certain foreign tax rate differences from the U.S. federal corporate tax rate of 21 percent and the change in the annual mix of foreign and domestic earnings.
In addition, the fiscal 2019 effective income tax rate was impacted by an unfavorable, non-deductible foreign currency forward contract loss and certain non-deductible transaction costs resulting from the EHG acquisition. The company estimates its overall effective income tax rate for fiscal 2021 will be between 19 and 22 percent before consideration of any discrete tax items. The actual effective income tax rate will be dependent upon the mix of foreign and domestic pretax earnings and will be subject to the impact of foreign currency exchange rates.
Net cash provided by operating activities for fiscal year 2020 was $540.9 million compared to $508.0 million in fiscal 2019. During the fiscal year, Thor Industries made payments on its EHG acquisition-related debt of $275.0 million.
Segment Results: North American Towable RVs
North American Towable RV net sales were $1.18 billion for Q4 of fiscal 2020, largely unchanged compared to fourth-quarter net sales of $1.16 billion in the prior-year period. For fiscal 2020, North American Towable RV net sales were $4.14 billion, down 9.2 percent from $4.56 billion in fiscal 2019.
This fiscal year decrease was substantially due to lower net sales in Q3 of fiscal 2020 as compared to the third quarter of fiscal 2019. The company said this was primarily due to the impact of the COVID-19 pandemic and the resulting six to eight-week production shutdowns in North American Towable production facilities.
North American Towable RV gross profit margin were 16.6 percent for Q4 of fiscal 2020, compared to 16.0 percent in the prior-year period. For fiscal 2020, North American Towable RV gross profit margin was 15.0 percent, an increase of 1.5 percent from 2019. The improvement in gross profit margin for the fourth quarter and fiscal year was primarily the result of lower material and warranty costs as a percentage of North American towables net sales.
North American Towable RV income before income tax for the fourth quarter of fiscal 2020 was $129.2 million, compared to $109.9 million in the fourth quarter last year. North American Towable RV income before income tax was $336.2 million for fiscal 2020, up 4.3 percent from $322.2 million in fiscal 2019. The increase was driven by improved gross profit margin, despite the COVID-related production shutdowns in Q3 and the early part of fiscal Q4.
North American Towable RV backlog on July 31, 2020 was $2.76 billion, an increase of approximately $2.07 billion, or nearly 300 percent, from the July 31, 2019 backlog level of $693.2 million.
Segment Results: North American Motorized RVs
North American Motorized RV Q4 net sales were $366.5 million, compared to $387.4 million in Q4, 2019. The decrease in motorized net sales for the quarter was driven by lower unit sales and a shift in product mix, including a higher volume of its modestly priced Class B motorhomes, which are generally priced lower than Type A and Type C motorhomes.
For fiscal 2020, North American Motorized RV net sales were $1.39 billion, down 15.7 percent from $1.65 billion in fiscal 2019. The fiscal year decrease in net sales within the Motorized segment was primarily due to lower net sales in Q3 of fiscal 2020, when compared to Q3 of fiscal 2019, primarily due to the impact of the COVID-19 pandemic and the resulting six to eight weeks of production shutdowns for North American Motorized production facilities.
North American Motorized RV gross profit margin was 12.1 percent for Q4 of fiscal 2020, compared to 9.6percent in the prior-year period. The gross profit margin improvement for Q4 was primarily the result of lower material and warranty costs as a combined percentage of North American motorized net sales, and overhead savings from management-led cost saving initiatives.
North American Motorized RV gross profit margin for fiscal 2020 was 10.8 percent, up 80 basis points over fiscal 2019.
North American Motorized RV income before income tax for the fourth quarter of fiscal 2020 increased to $24.3 million compared to $16.8 million a year ago. The increase was driven by the improvement in gross profit margin for the quarter, despite a sales reduction. North American Motorized RV income before income tax for fiscal 2020 was $71.9 million, down 11.1 percent from $80.9 million in the prior year. The totals reflected the production halt in Q3, 2020 and the resulting reduction in sales due to the COVID-19 pandemic.
North American Motorized RV backlog on July 31, 2020 increased approximately $992.8 million, or 216.4 percent, to $1.45 billion compared to $458.8 million a year earlier.
Segment Results: European RVs
European RV net sales were $739.9 million for fiscal 2020, Q4, compared to $719.5 million the prior-year period. The increase in European net sales was driven by a product mix change and selective selling price increases. European RV net sales were $2.49 billion for full-year fiscal 2020 compared to $1.49 billion in fiscal 2019. The increase in full-year net sales is the result of the inclusion of twelve months of sales in fiscal 2020, while fiscal 2019 only included the six months of operations.
European RV gross profit margin was 13.2 percent of net sales for Q4, compared to 13.4 percent in the prior-year period. European RV gross profit margin was 12.2 percent for fiscal 2020, up from 10.1 percent in fiscal 2019.
The 2020 fiscal year increase in gross profit as a percentage of European RV net sales is due to the unfavorable impact of $61.4 million related to the fair value step-up in purchase accounting of acquired inventory that was subsequently sold during the first three months following the acquisition which negatively impacted fiscal 2019, partially offset by changes in product mix.
European RV income before income tax for the fourth quarter of fiscal 2020 was $28.4 million, compared to income before income tax of $25.0 million during the fourth quarter of fiscal 2019. European RV income before income tax for fiscal 2020 was $9.9 million, compared to a loss of $5.9 million in fiscal 2019. The increase in income before income taxes for fiscal 2020 was a combination of various factors over the two fiscal years, including the following:
- The absence of the impacts of the fair value step up of inventory in fiscal 2020 as compared to the $61.4 million negative impact in fiscal 2019.
- A net loss before income taxes of $18.3 million in the first six months of fiscal 2020, while fiscal 2019 had no results for the first six months in the corresponding prior-year period.
- The adverse impact of the COVID-19 pandemic on Q3 of fiscal 2020 as compared to Q3 of fiscal 2019.
European RV backlog was $1.53 billion as of July 31, 2020, an increase of $673.3 million, or 79.0 percent, compared to $852.7 million as of July 31, 2019.
“This year’s financial results are a testament to our ability to successfully manage through uncertainty, along with the proven agility and flexibility of our business model,” said Colleen Zuhl, Thor’s senior vice president and CFO. “In an unprecedented year, with vastly changing operating conditions caused by the COVID-19 pandemic, we effectively managed our world-wide operations keeping the safety of our employees as the top priority while also generating a solid profit for our shareholders. With the full-year addition of EHG, we generated an annual record high cash flow from operations of $540.9 million for fiscal 2020, and, as planned, we continued to regularly pay down our EHG acquisition-related debt. During the fiscal year, we paid $275.0 million on the EHG acquisition-related debt, and life-to-date, we have paid approximately $678 million on the EHG acquisition-related debt since the acquisition of EHG.
“Our cash and cash equivalents totaled $538.5 million at the end of the year, and we currently have approximately $660 million available for borrowing on our ABL. Our priorities for cash remain consistent with our historical priorities, which are:
- Reducing our debt obligations
- Paying and growing our dividend over time
- Funding our growth both organically and opportunistically through acquisitions.
We may also consider strategic and opportunistic repurchases of shares and special dividends as determined by our board of directors,” concluded Zuhl.
Year in Review
“Fiscal 2020 was both a challenging and rewarding year for Thor,” Martin said. “I am proud of our employees and our management teams around the world for continuing to prioritize employee safety above all else. Once again, our teams have demonstrated Thor’s resilience and ability to manage through uncertainty. We have shown that when challenges arise, we come together to work collaboratively, we make decisions quickly with as much data as possible, and we adjust as conditions require. When we needed to ramp production back up based on increased demand for our products across the board, we did so quickly and effectively, while continuing to prioritize employee safety by maintaining compliance with our robust safety protocols. We supported one another and worked closely with our dealer and supply partners. We are proud to be providing end consumers with products that allow them to travel in the safety of a contained living space. I am also proud of the financial results we generated for our shareholders in spite of the many challenges we encountered. We delivered robust cash flow and profitability by managing our costs and our cash outlays during the initial phases of the COVID-19 pandemic when, for the first time in our history, we were required to shut down production at all of our domestic locations and almost all of our foreign facilities for what was an unknown period at first. In the end, we had a successful and profitable fiscal year and one that won’t soon be forgotten.”
Fiscal Year 2021 Outlook
“We are entering our fiscal year 2021 with a strong balance sheet, record backlogs and dealer inventories at historic lows. There is considerable interest in the RV lifestyle from first-time buyers, and we are seeing continued strength in the upgrade buyer as well. We are also seeing challenges and constraints in the supply chain as suppliers ramp up to meet the unexpectedly high level of demand from RV manufacturers. Managing through peaks and valleys of demand and supply constraints is part of the history of our business and is not new to our management teams. Today we are working closely with our supply chain partners to manage production and delivery of the components we need, and where necessary, seeking alternative supply solutions. We are committed to quickly resolving any temporary supply chain issues but recognize that in the short term we may experience impacts to our production schedules.
“Looking ahead, we expect a year of continued growth in fiscal 2021, and we concur with RVIA’s recent RoadSigns most likely forecast of an approximate 19.5 percent increase in calendar 2021 shipments over their most likely estimate for calendar 2020 shipments.
“In closing, we continue to be very positive about both the short-term and long-term outlooks for our company and our industry.
Supplemental Earnings Release Materials
Thor provided a comprehensive question and answer document, as well as a PowerPoint presentation, relating to its quarterly results and other topics. To view the materials, go to http://ir.thorindustries.com.