Winnebago Industries Announces Strong Second Quarter Fiscal 2021 Results

— Record Quarterly Revenues of $839.9 million Up 34.0% Year-Over-Year, Driven by Robust End Consumer Demand —
— Organic RV Market Share Gains Continue, Rising to 11.5% (+90 Basis Points) on a Trailing Twelve Month Basis —
— Second Quarter Gross Margin Expansion of 590 Basis Points to 18.6% —
— Record Reported Diluted EPS of $2.04 Up 300.0%; Record Adjusted EPS of $2.12 Up 216.4% Over Prior Year —
— Interest in the Outdoors Remains High as Evidenced by Elevated Order Backlogs and Retail Sales Growth —

EDEN PRAIRIE, Minn., March 24, 2021 (GLOBE NEWSWIRE) — Winnebago Industries, Inc. (NYSE: WGO), a leading outdoor lifestyle product manufacturer, today reported financial results for the Company’s second quarter of Fiscal 2021.

Second Quarter Fiscal 2021 Results
Revenues for the Fiscal 2021 second quarter ended February 27, 2021, were $839.9 million, an increase of 34.0% compared to $626.8 million for the Fiscal 2020 period. Gross profit was $156.6 million, an increase of 96.3% compared to $79.8 million for the Fiscal 2020 period. Gross profit margin increased 590 basis points in the quarter, driven by pricing, including lower discounts and allowances, operating leverage, motorhome segment productivity initiatives and favorable segment mix. Operating income was $100.0 million for the quarter, an increase of 237.3% compared to $29.6 million for the second quarter last year. Fiscal 2021 second quarter net income was $69.1 million, an increase of 300.0% compared to $17.3 million in the prior year quarter. Reported earnings per diluted share were $2.04 compared to reported earnings per diluted share of $0.51 in the same period last year. Consolidated adjusted earnings per diluted share increased 216.4% to $2.12 for the second quarter compared to adjusted earnings per diluted share of $0.67 in the same period last year. Consolidated Adjusted EBITDA was $108.0 million for the quarter, compared to $45.4 million last year, an increase of 137.7%.

President and Chief Executive Officer Michael Happe commented, “We are pleased with the outstanding market and financial results from our second quarter of fiscal 2021, as they reflect the sustained strength of our leading brand portfolio and our world-class team’s commitment to safely deliver high-quality products to our valued dealer network. Winnebago Industries’ golden threads of quality, innovation, and service consistently resonate with end consumers who continue to flock to the great outdoors in search of extraordinary experiences with family and friends and aspire to choose a premium OEM partner. We are seeing strong retail momentum heading into the prime spring season. I am especially excited and extremely grateful for our team’s ability to deliver strong profitability in the midst of a very dynamic environment – this is a testament to their resiliency, the appeal of our innovative product lines, and sustained continuous improvement efforts operationally. Looking forward, our relentless focus on building a premier outdoor lifestyle company to maximize value for our employees, consumers, dealers, and shareholders remains steadfast.”

Towable
Revenues for the Towable segment were $439.3 million for the second quarter, up 55.0% over the prior year, driven by elevated consumer demand for Grand Design and Winnebago branded products. Segment Adjusted EBITDA was $62.4 million, up 79.5% over the prior year period. Adjusted EBITDA margin of 14.2% increased 190 basis points, primarily due to pricing and operating leverage. Backlog increased to 39,855 units, an increase of 307.1% over the prior year period, as dealer inventories continue to experience a significant reduction amidst heightened levels of consumer retail demand since the summer of 2020.

Motorhome
Revenues for the Motorhome segment were $382.6 million for the second quarter, up 17.5% from the prior year, driven by continued strong demand for motorhomes, particularly Winnebago branded Class B products. Segment Adjusted EBITDA was $51.0 million, up 241.0% from the prior year. Adjusted EBITDA margin increased 870 basis points to 13.3% over the prior year, driven by pricing, operating leverage and productivity initiatives. Backlog increased to 14,974 units, an increase of 424.3% over the prior year period, as dealers have experienced sizable reductions to their inventory due to encountering extremely high levels of consumer demand since the summer of 2020.

Balance Sheet and Cash Flow
As of February 27, 2021, the Company had total outstanding debt of $520.3 million ($600.0 million of debt, net of convertible note discount of $67.5 million, and net of debt issuance costs of $12.2 million) and working capital of $544.0 million. Cash flow from operations was $66.9 million for the first six months of Fiscal 2021, a decrease of $52.2 million from the same period in Fiscal 2020, due to year-over-year changes in working capital that have been required to support increased production and the rapid growth in sales.

Quarterly Cash Dividend
On March 17, 2021, the Company’s board of directors approved a quarterly cash dividend of $0.12 per share payable on April 28, 2021, to common stockholders of record at the close of business on April 14, 2021.

Mr. Happe continued, “While we are pleased with the exceptional financial and operating results delivered for the second quarter, we are also optimistic about the positive retail and wholesale conditions for the rest of our fiscal year. Our Winnebago Industries teams are working diligently with supplier partners to deliver higher volume levels of product to the market for the foreseeable future. Strong retail demand, low field inventory, and record committed dealer orders set the table for continued robust performance, but it should be especially noted we also believe there is secular and ongoing growth in outdoor lifestyle products as consumer priorities have changed due to the pandemic. We are making well-considered capital investments across our premium brand portfolio to increase capacity to meet this elevated demand and will remain disciplined in managing future production to match healthy market behavior and economic conditions. Winnebago Industries is encouraged by the ramp-up of vaccinations in North America and continues to encourage all our stakeholders to keep their families and themselves healthy as they enjoy the outdoors. Lastly, our company is committed to building a more diverse, equitable, and inclusive culture and working to create more equitable outdoor experiences in our communities. Recent exciting announcements on new Board of Director appointments and a renewed enterprise partnership with the National Park Foundation are proof points of positive progress on this critical journey with much more work ahead to do.”

Conference Call
Winnebago Industries, Inc. will discuss Fiscal 2021 second quarter earnings results during a conference call scheduled for 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 North American manufacturer of outdoor lifestyle products under the Winnebago, Grand Design, Chris-Craft, and Newmar 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, Minnesota and Florida. The Company’s common stock is listed on the New York Stock Exchange and traded under the symbol WGO. 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.

Contact: Steve Stuber – Investor Relations – 952-828-8461 – [email protected]  
Media Contact: Sam Jefson – Public Relations Specialist – 641-585-6803 – [email protected]  

Winnebago Industries, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)

  Three Months Ended
  February 27, 2021   February 29, 2020
Net revenues $ 839,886     100.0 %   $ 626,810     100.0 %
Cost of goods sold 683,304     81.4 %   547,028     87.3 %
Gross profit 156,582     18.6 %   79,782     12.7 %
Selling, general, and administrative expenses 53,016     6.3 %   42,164     6.7 %
Amortization of intangible assets 3,591     0.4 %   7,974     1.3 %
Total operating expenses 56,607     6.7 %   50,138     8.0 %
Operating income 99,975     11.9 %   29,644     4.7 %
Interest expense 10,052     1.2 %   8,651     1.4 %
Non-operating income (311 )   %   (270 )   %
Income before income taxes 90,234     10.7 %   21,263     3.4 %
Provision for income taxes 21,166     2.5 %   3,995     0.6 %
Net income $ 69,068     8.2 %   $ 17,268     2.8 %
Income per common share:              
Basic $ 2.06         $ 0.51      
Diluted $ 2.04         $ 0.51      
Weighted average common shares outstanding:              
Basic 33,533         33,614      
Diluted 33,910         33,918      
               
  Six Months Ended
  February 27, 2021   February 29, 2020
Net revenues $ 1,633,017     100.0 %   $ 1,215,268     100.0 %
Cost of goods sold 1,339,431     82.0 %   1,056,873     87.0 %
Gross profit 293,586     18.0 %   158,395     13.0 %
Selling, general, and administrative expenses 101,415     6.2 %   93,269     7.7 %
Amortization of intangible assets 7,181     0.4 %   11,588     1.0 %
Total operating expenses 108,596     6.7 %   104,857     8.6 %
Operating income 184,990     11.3 %   53,538     4.4 %
Interest expense 19,993     1.2 %   14,700     1.2 %
Non-operating income (217 )   %   (386 )   %
Income before income taxes 165,214     10.1 %   39,224     3.2 %
Provision for taxes 38,723     2.4 %   7,888     0.6 %
Net income $ 126,491     7.7 %   $ 31,336     2.6 %
Income per common share:              
Basic $ 3.77         $ 0.95      
Diluted $ 3.74         $ 0.95      
Weighted average common shares outstanding:              
Basic 33,571         32,840      
Diluted 33,821         33,143      

Percentages may not add due to rounding differences.

Winnebago Industries, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)

  February 27, 2021   August 29, 2020
Assets      
Current assets:      
Cash and cash equivalents $ 333,015     $ 292,575  
Receivables, net 232,349     220,798  
Inventories, net 278,468     182,941  
Prepaid expenses and other assets 21,146     17,296  
Total current assets 864,978     713,610  
Total property, plant, and equipment, net 173,609     174,945  
Other assets:      
Goodwill 348,058     348,058  
Other intangible assets, net 397,587     404,768  
Investment in life insurance 28,301     27,838  
Operating lease assets 27,833     29,463  
Other assets 15,429     15,018  
Total assets $ 1,855,795     $ 1,713,700  
       
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 144,604     $ 132,490  
Income taxes payable     8,840  
Accrued expenses 176,399     159,060  
Total current liabilities 321,003     300,390  
Non-current liabilities:      
Long-term debt, less current maturities 520,284     512,630  
Deferred income taxes 16,528     15,608  
Unrecognized tax benefits 6,207     6,511  
Operating lease liabilities 25,942     27,048  
Deferred compensation benefits, net of current portion 10,521     11,130  
Other 12,946     12,917  
Total non-current liabilities 592,428     585,844  
Stockholders’ equity 942,364     827,466  
Total liabilities and stockholders’ equity $ 1,855,795     $ 1,713,700  

Winnebago Industries, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

  Six Months Ended
(in thousands) February 27, 2021   February 29, 2020
Operating activities:      
Net income $ 126,491     $ 31,336  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 8,559     7,720  
Amortization of intangibles 7,181     11,588  
Non-cash interest expense, net 6,769     4,182  
Amortization of debt issuance costs 1,229     1,457  
Last in, first-out expense 552     664  
Stock-based compensation 6,981     3,640  
Deferred income taxes 914     576  
Other, net (3,460 )   252  
Change in assets and liabilities:      
Receivables (11,547 )   11,734  
Inventories (96,079 )   45,275  
Prepaid expenses and other assets 2,321     (4,081 )
Accounts payable 12,487     4,688  
Income taxes and unrecognized tax benefits (10,698 )   (966 )
Accrued expenses and other liabilities 15,222     1,099  
Net cash provided by operating activities 66,922     119,164  
       
Investing activities:      
Purchases of property and equipment (14,920 )   (19,057 )
Acquisition of business, net of cash acquired     (264,280 )
Proceeds from sale of property 7,778      
Other, net (223 )   179  
Net cash used in investing activities (7,365 )   (283,158 )
       
Financing activities:      
Borrowings on long-term debt 1,647,764     1,412,294  
Repayments on long-term debt (1,647,764 )   (1,115,044 )
Purchase of convertible bond hedge     (70,800 )
Proceeds from issuance of warrants     42,210  
Payments of cash dividends (8,075 )   (7,174 )
Payments for repurchases of common stock (12,109 )    
Payments of debt issuance costs (224 )   (10,761 )
Other, net 1,291     (1,223 )
Net cash (used in) provided by financing activities (19,117 )   249,502  
       
Net increase in cash and cash equivalents 40,440     85,508  
Cash and cash equivalents at beginning of year 292,575     37,431  
Cash and cash equivalents at end of year $ 333,015     $ 122,939  
       
       
Supplement cash flow disclosure:      
Income taxes paid, net $ 47,804     $ 7,652  
Interest paid $ 12,244     $ 9,938  
       
Non-cash transactions:      
Issuance of Winnebago common stock for acquisition of business $     $ 92,572  
Capital expenditures in accounts payable $ 195     $ 118  

Winnebago Industries, Inc.
Supplemental Information by Reportable Segment (Unaudited) – Towable
(in thousands, except unit data)

  Three Months Ended
($ in thousands) February 27, 2021   % of Revenues   February 29, 2020   % of Revenues   $ Change   % Change
Net revenues $ 439,284         $ 283,463         $ 155,821     55.0 %
Adjusted EBITDA 62,366     14.2 %   34,746     12.3 %   27,620     79.5 %
                       
                       
  Three Months Ended
Unit deliveries February 27, 2021   Product Mix(1)   February 29, 2020   Product Mix(1)   Unit Change   % Change
Travel trailer 8,876     65.7 %   5,446     62.4 %   3,430     63.0 %
Fifth wheel 4,632     34.3 %   3,287     37.6 %   1,345     40.9 %
Total towables 13,508     100.0 %   8,733     100.0 %   4,775     54.7 %
                       
                       
  Six Months Ended
(in thousands) February 27, 2021   % of Revenues   February 29, 2020   % of Revenues   $ Change   % Change
Net revenues $ 894,185         $ 624,713         $ 269,472     43.1 %
Adjusted EBITDA 125,509     14.0 %   70,531     11.3 %   54,978     77.9 %
                       
                       
  Six Months Ended
Unit deliveries February 27, 2021   Product Mix(1)   February 29, 2020   Product Mix(1)   Unit Change   % Change
Travel trailer 18,036     65.1 %   11,782     60.9 %   6,254     53.1 %
Fifth wheel 9,686     34.9 %   7,550     39.1 %   2,136     28.3 %
Total towables 27,722     100.0 %   19,332     100.0 %   8,390     43.4 %
                       
                       
($ in thousands) February 27, 2021       February 29, 2020       Change   % Change
Backlog(2)                      
Units 39,855         9,790         30,065     307.1 %
Dollars $ 1,206,695         $ 330,738         $ 875,957     264.8 %
Dealer Inventory                      
Units 15,952         19,731         (3,779 )   (19.2 )%

(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers which generally have been requested 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) – Motorhome
(in thousands, except unit data)

  Three Months Ended
(in thousands) February 27, 2021   % of Revenues   February 29, 2020   % of Revenues   $ Change   % Change
Net revenues $ 382,575         $ 325,542         $ 57,033     17.5 %
Adjusted EBITDA 50,969     13.3 %   14,946     4.6 %   36,023     241.0 %
                       
                       
  Three Months Ended
Unit deliveries February 27, 2021   Product Mix(1)   February 29, 2020   Product Mix(1)   Unit Change   % Change
Class A 704     24.4 %   843     37.7 %   (139 )   (16.5 )%
Class B 1,419     49.2 %   784     35.0 %   635     81.0 %
Class C 762     26.4 %   612     27.3 %   150     24.5 %
Total motorhomes 2,885     100.0 %   2,239     100.0 %   646     28.9 %
                       
                       
  Six Months Ended
(in thousands, except ASP) February 27, 2021   % of Revenues   February 29, 2020   % of Revenues   $ Change   % Change
Net revenues $ 704,964         $ 551,433         $ 153,531     27.8 %
Adjusted EBITDA 81,312     11.5 %   24,277     4.4 %   57,035     234.9 %
                       
                       
  Six Months Ended
Unit deliveries February 27, 2021   Product Mix(1)   February 29, 2020   Product Mix(1)   Unit Change   % Change
Class A 1,302     25.0 %   1,242     30.1 %   60     4.8 %
Class B 2,517     48.3 %   1,593     38.7 %   924     58.0 %
Class C 1,396     26.7 %   1,286     31.2 %   110     8.6 %
Total motorhomes 5,215     100.0 %   4,121     100.0 %   1,094     26.5 %
                       
                       
($ in thousands) February 27, 2021       February 29, 2020       Change   % Change
Backlog(2)                      
Units 14,974         2,856         12,118     424.3 %
Dollars $ 1,816,503         $ 394,570         $ 1,421,933     360.4 %
Dealer Inventory                      
Units 2,739         5,507         (2,768 )   (50.3 )%

(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers which generally have been requested 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, except per share data)

Non-GAAP financial measures, which are not calculated or presented in accordance with accounting principles generally accepted in the United States (“GAAP”), have been provided 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 presented may differ from similar measures used by other companies.

The following table reconciles Diluted income per share to Adjusted diluted income per share:

  Three Months Ended   Six Months Ended
  February 27, 2021   February 29, 2020   February 27, 2021   February 29, 2020
Diluted income per share(1) $ 2.04     $ 0.51     $ 3.74     $ 0.95  
Pretax acquisition-related costs(2)             0.30  
Pretax acquisition-related fair-value inventory step-up     0.11         0.15  
Pretax non-cash interest expense(3) 0.10     0.09     0.20     0.13  
Gain on sale of property and equipment         (0.11 )    
Impact of convertible share dilution(4) 0.01              
Tax impact of adjustments(5) (0.02 )   (0.04 )   (0.02 )   (0.12 )
Adjusted diluted income per share $ 2.12     $ 0.67     $ 3.82     $ 1.41  

(1) Per share numbers may not foot due to rounding.
(2) Represents transaction-closing costs.
(3) Non-cash interest expense associated with the Convertible Notes issued related to our acquisition of Newmar.
(4) Represents the dilution of convertible notes (the average market price became higher than the strike price in the second quarter of FY21).
(5) Income tax charge calculated using the statutory tax rate for the U.S. of 21.0% for both periods presented.

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA.

  Three Months Ended   Six Months Ended
(in thousands) February 27, 2021   February 29, 2020   February 27, 2021   February 29, 2020
Net (loss) income $ 69,068     $ 17,268     $ 126,491     $ 31,336  
Interest expense 10,052     8,651     19,993     14,700  
Provision for income taxes 21,166     3,995     38,723     7,888  
Depreciation 4,399     4,134     8,559     7,720  
Amortization of intangible assets 3,591     7,974     7,181     11,588  
EBITDA 108,276     42,022     200,947     73,232  
Acquisition-related fair-value inventory step-up     3,634         4,810  
Acquisition-related costs             9,950  
Restructuring expenses     43     93     (129 )
Gain on sale of property and equipment         (3,565 )    
Non-operating income (311 )   (270 )   (217 )   (386 )
Adjusted EBITDA $ 107,965     $ 45,429     $ 197,258     $ 87,477  

We have provided non-GAAP performance measures of Adjusted diluted income per share, EBITDA, and Adjusted EBITDA as comparable measures to illustrate the effect of non-recurring transactions occurring during the reported periods and improve comparability of our results from period to period. Adjusted diluted income per share is defined as income per share adjusted for items that impact the 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. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation and amortization expense, and other adjustments made in order to present comparable results from period to period. We believe Adjusted diluted income per share and Adjusted EBITDA provide meaningful supplemental information about our operating performance because these measures exclude amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted income per share include acquisition-related costs, acquisition-related fair-value inventory step-up, non-cash interest expense, and the tax impact of the adjustments. Examples of items excluded from Adjusted EBITDA include acquisition-related fair-value inventory step-up, acquisition-related costs, restructuring expenses, gain or loss on the sale of property and equipment, and non-operating income.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our 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 its assessments of performance and in forecasting and budgeting for our company; (d) to evaluate potential acquisitions; and (e) to ensure compliance with restricted activities under the terms of our ABL credit facility and outstanding notes. We believe these non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry.