-- Strong Sales Growth Continues to Outperform the RV Industry --
-- Quarterly Revenues Increased 45%, including Robust Organic Growth of 13% --
-- Reported Quarterly Diluted EPS of $0.51, Adjusted EPS of $0.67 Up 9.8% Over Prior Year --
-- YTD Operating Cash Flow Up 129% Over Prior Year --
-- First Full Quarter of Contribution From Newmar with Integration Progressing as Planned --
FOREST CITY, Iowa, March 25, 2020 (GLOBE NEWSWIRE) -- Winnebago Industries, Inc. (NYSE:WGO), a leading outdoor lifestyle product manufacturer, today reported financial results for the Company's second quarter Fiscal 2020.
Second Quarter Fiscal 2020 Results
Revenues for the Fiscal 2020 second quarter ended February 29, 2020, increased 44.9% to $626.8 million compared to $432.7 million for the Fiscal 2019 period. Revenues for Newmar, which was acquired in the first quarter of Fiscal 2020, were $138.4 million. Revenues excluding Newmar increased 12.9% to $488.4 million. Gross profit increased 20.1% to $79.8 million, compared to $66.4 million for the Fiscal 2019 period. Gross profit margin decreased 270 basis points in the quarter, primarily driven by a change in mix due to the inclusion of a full quarter of Newmar, the impact of inventory step-up purchase accounting related to the Newmar acquisition and start-up costs associated with our Towable segment new production facilities. Operating income was $29.6 million for the quarter, compared to $28.9 million in the second quarter of last year. Fiscal 2020 second quarter net income decreased 20.0% to $17.3 million compared to $21.6 million in the same period last year. Reported earnings per diluted share decreased 25.0% to $0.51 compared to reported earnings per diluted share of $0.68 in the same period last year. Consolidated adjusted earnings per share increased 9.8% to $0.67 for the second quarter, excluding inventory step-up and the non-cash portion of interest expense, totaling $5.4 million, or $0.16 per share, after tax. Consolidated Adjusted EBITDA increased 31.7% to $45.4 million for the quarter compared to $34.5 million last year.
President and Chief Executive Officer Michael Happe commented, “Our outdoor brands continue to resonate with consumers as reflected in our impressive consolidated results for the second quarter. Topline growth continues to outperform the industry, driven by robust Class B sales within our Winnebago Motorhome business, and another exceptional quarter from Grand Design RV. Newmar-branded Class A Diesel retail momentum is resulting in increased market share results in that category, and our overall wholesale performance of Newmar in our second quarter was in line with our acquisition plan. Our more diversified, full-line of products continues to drive higher margins within the Motorhome segment and accelerate our market share gains. Winnebago Industries’ North American RV retail market share is 13.2% on a trailing three-month basis through January, 2020, up 2.6 share points (up 1.8 share points on an organic basis) over the same period last year. The Chris-Craft business has also driven meaningful retail results during the spring show season, driven by a dynamic array of new models. This consolidated Company growth reflects the increasing appeal of our evolving portfolio of businesses and our progressively competitive position in these outdoor industries. We are confident that our relentless focus on quality, innovation, and customer service will build brands that consumers will seek out. Our results include a full quarter of Newmar’s performance and we are pleased that integration efforts are progressing as planned and that the sharing of best practices and identification of synergies as a result of this acquisition are active across the enterprise. As always, but especially during these now increasingly tumultuous times, I want to thank all of our Winnebago Industries employees for their hard work during the quarter, and for their steadfast commitment to working safely and to our vision of Winnebago Industries becoming a premier outdoor lifestyle company.”
Towable
Revenues for the Towable segment increased 13.1% to $283.5 million for the second quarter, primarily driven by the overall strength of the Grand Design RV product line and the popularity of several recently redesigned flagship products, including the Reflection and Imagine models. Segment Adjusted EBITDA increased 3.3% to $34.7 million. Adjusted EBITDA margin of 12.3% decreased 110 basis points, primarily due to the Towable segment facilities start-up costs and lower productivity in the early phases of production, and a shift in product mix. Backlog increased 22.3%, in units, over the prior year period reflecting higher retail demand for travel trailers.
Motorhome
In the second quarter, revenues for the Motorhome segment increased 97.7% to $325.5 million, mostly driven by a full quarter of Newmar contribution and strength in the Class B line-up. Segment revenues excluding Newmar grew 13.6% over the prior year period. Segment Adjusted EBITDA was $14.9 million, up 242.9% from the prior year due to the inclusion of a full quarter of Newmar operating results and improved organic profitability. Adjusted EBITDA margin increased 200 basis points to 4.6% driven by mix of business related to Newmar being included for a full quarter and healthy improvements in our Winnebago Motorhome margins compared to the prior year. Backlog increased 51.8%, in units, over the prior year, due to the addition of Newmar and the continued strength in Winnebago branded Class B retail demand.
Balance Sheet and Cash Flow
As of February 29, 2020, the Company had total outstanding debt of $464.8 million ($557.2 million of debt, net of convertible note discount of $80.8 million and net of debt issuance costs of $11.6 million) and working capital of $313.5 million. Cash flow from operations was $119.2 million for the first six months of Fiscal 2020, an increase of $67.2 million from the same period in Fiscal 2019.
Quarterly Cash Dividend
On March 17, 2020, the Company’s board of directors approved a quarterly cash dividend of $0.11 per share payable on April 29, 2020, to common stockholders of record at the close of business on April 15, 2020.
Mr. Happe continued, “While our Company performed solidly in the second quarter, the focus of every industry in the U.S. have been on the increasing risk presented by the coronavirus outbreak. As evidenced by our recent decision to temporarily suspend production across each of our businesses through April 12, 2020, the health and safety of our team members, business partners, and the communities in which we operate remains our top priority. We have seen significant change in mid-March for the demand of our products by both consumers and dealer partners. A COVID-19 task force, consisting of team leaders from across all of Winnebago Industries, has been in place for many weeks and continues to proactively develop contingency plans to ensure the health and safety of our team and navigate through what appears to be very real disruption in both our internal operations and end markets. Additionally, we will continue to be very disciplined in our financial management of the Company as we closely follow the status of the health crisis and the end markets to stay ahead, as possible, of any further disruptions.
After enduring persistent headwinds throughout calendar 2019, RV industry conditions have improved as demonstrated by normalized dealer inventories, a stable price environment and strong retail show attendance and sales results during the first quarter of calendar 2020. Our portfolio is stronger and more balanced than ever, with four of the most iconic brands in the outdoor lifestyle arena – Winnebago, Grand Design, Newmar, and Chris-Craft. In addition, we entered the second half of our fiscal year with significant cash on hand of $122.9 million, access to a credit line of $192.5 million, and the ability to leverage a highly variable cost structure, that when combined will assist tremendously in maximizing our liquidity and managing through the challenging period ahead. While the industry continues to look for its footing in these uncertain times as a result of the coronavirus pandemic, we are confident that the outdoor recreation industry will rebound in the future, and as such, our focus remains on activating our premium brands and products to accelerate our market share building when a new normal state presents itself. We continue to work closely with our Board of Directors during these challenging times and together we are aligned on executing our strategic priorities to enhance our position as an outdoor industry leader and maximizing value for our shareholders over the long-term.”
Conference Call
Winnebago Industries, Inc. will discuss second quarter Fiscal 2020 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 U.S. manufacturer of outdoor lifestyle products under the Winnebago, Newmar, 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 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, impacts of public health crises, such as COVID-19, 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 per share data)
| Three Months Ended | ||||||||||||||
| February 29, 2020 | February 23, 2019 | |||||||||||||
| Net revenues | $ | 626,810 | 100.0 | % | $ | 432,690 | 100.0 | % | ||||||
| Cost of goods sold | 547,028 | 87.3 | % | 366,261 | 84.6 | % | ||||||||
| Gross profit | 79,782 | 12.7 | % | 66,429 | 15.4 | % | ||||||||
| Selling, general, and administrative expenses | 42,164 | 6.7 | % | 35,259 | 8.1 | % | ||||||||
| Amortization of intangible assets | 7,974 | 1.3 | % | 2,267 | 0.5 | % | ||||||||
| Total operating expenses | 50,138 | 8.0 | % | 37,526 | 8.7 | % | ||||||||
| Operating income | 29,644 | 4.7 | % | 28,903 | 6.7 | % | ||||||||
| Interest expense | 8,651 | 1.4 | % | 4,346 | 1.0 | % | ||||||||
| Non-operating income | (270 | ) | — | % | (207 | ) | — | % | ||||||
| Income before income taxes | 21,263 | 3.4 | % | 24,764 | 5.7 | % | ||||||||
| Provision for income taxes | 3,995 | 0.6 | % | 3,166 | 0.7 | % | ||||||||
| Net income | $ | 17,268 | 2.8 | % | $ | 21,598 | 5.0 | % | ||||||
| Income per common share: | ||||||||||||||
| Basic | $ | 0.51 | $ | 0.68 | ||||||||||
| Diluted | $ | 0.51 | $ | 0.68 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 33,614 | 31,577 | ||||||||||||
| Diluted | 33,918 | 31,724 | ||||||||||||
| Six Months Ended | ||||||||||||||
| February 29, 2020 | February 23, 2019 | |||||||||||||
| Net revenues | $ | 1,215,268 | 100.0 | % | $ | 926,338 | 100.0 | % | ||||||
| Cost of goods sold | 1,056,873 | 87.0 | % | 788,913 | 85.2 | % | ||||||||
| Gross profit | 158,395 | 13.0 | % | 137,425 | 14.8 | % | ||||||||
| Selling, general, and administrative expenses | 93,269 | 7.7 | % | 70,971 | 7.7 | % | ||||||||
| Amortization of intangible assets | 11,588 | 1.0 | % | 4,926 | 0.5 | % | ||||||||
| Total operating expenses | 104,857 | 8.6 | % | 75,897 | 8.2 | % | ||||||||
| Operating income | 53,538 | 4.4 | % | 61,528 | 6.6 | % | ||||||||
| Interest expense | 14,700 | 1.2 | % | 8,847 | 1.0 | % | ||||||||
| Non-operating income | (386 | ) | — | % | (970 | ) | (0.1) | % | ||||||
| Income before income taxes | 39,224 | 3.2 | % | 53,651 | 5.8 | % | ||||||||
| Provision for income taxes | 7,888 | 0.6 | % | 9,892 | 1.1 | % | ||||||||
| Net income | $ | 31,336 | 2.6 | % | $ | 43,759 | 4.7 | % | ||||||
| Income per common share: | ||||||||||||||
| Basic | $ | 0.95 | $ | 1.39 | ||||||||||
| Diluted | $ | 0.95 | $ | 1.38 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 32,840 | 31,572 | ||||||||||||
| Diluted | 33,143 | 31,755 | ||||||||||||
Percentages may not add due to rounding differences.
Winnebago Industries, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
| February 29, 2020 | August 31, 2019 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 122,939 | $ | 37,431 | |||
| Receivables, net | 182,475 | 158,049 | |||||
| Inventories, net | 237,808 | 201,126 | |||||
| Prepaid expenses and other assets | 20,883 | 14,051 | |||||
| Total current assets | 564,105 | 410,657 | |||||
| Property, plant, and equipment, net | 169,840 | 127,572 | |||||
| Other assets: | |||||||
| Goodwill | 348,860 | 274,931 | |||||
| Other intangible assets, net | 415,285 | 256,082 | |||||
| Investment in life insurance | 27,231 | 26,846 | |||||
| Operating lease assets | 30,460 | — | |||||
| Other assets | 16,146 | 8,143 | |||||
| Total assets | $ | 1,571,927 | $ | 1,104,231 | |||
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 99,211 | $ | 81,635 | |||
| Accrued expenses | 137,770 | 107,217 | |||||
| Current maturities of long-term debt | 13,668 | 8,892 | |||||
| Total current liabilities | 250,649 | 197,744 | |||||
| Non-current liabilities: | |||||||
| Long-term debt, less current maturities | 451,134 | 245,402 | |||||
| Deferred income taxes | 17,057 | 12,032 | |||||
| Unrecognized tax benefits | 6,253 | 3,591 | |||||
| Operating lease liabilities | 27,882 | — | |||||
| Deferred compensation benefits, net of current portion | 12,166 | 12,878 | |||||
| Other | 5,262 | 372 | |||||
| Total non-current liabilities | 519,754 | 274,275 | |||||
| Stockholders' equity | 801,524 | 632,212 | |||||
| Total liabilities and stockholders' equity | $ | 1,571,927 | $ | 1,104,231 | |||
Winnebago Industries, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Six Months Ended | ||||||||
| February 29, 2020 | February 23, 2019 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 31,336 | $ | 43,759 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 7,720 | 6,268 | ||||||
| Amortization of intangible assets | 11,588 | 4,926 | ||||||
| Non-cash interest expense, net | 4,182 | — | ||||||
| Amortization of debt issuance costs | 1,457 | 790 | ||||||
| Last-in, first-out expense | 664 | 1,029 | ||||||
| Stock-based compensation | 3,640 | 4,605 | ||||||
| Deferred income taxes | 576 | 346 | ||||||
| Other, net | 252 | (170 | ) | |||||
| Change in assets and liabilities: | ||||||||
| Receivables | 11,734 | (15,355 | ) | |||||
| Inventories | 45,275 | 4,488 | ||||||
| Prepaid expenses and other assets | (4,081 | ) | (4,926 | ) | ||||
| Accounts payable | 4,688 | 11,992 | ||||||
| Income taxes and unrecognized tax benefits | (966 | ) | (15,216 | ) | ||||
| Accrued expenses and other liabilities | 1,099 | 9,402 | ||||||
| Net cash provided by operating activities | 119,164 | 51,938 | ||||||
| Investing activities: | ||||||||
| Purchases of property and equipment | (19,057 | ) | (23,366 | ) | ||||
| Acquisition of business, net of cash acquired | (264,280 | ) | (702 | ) | ||||
| Other, net | 179 | 1,044 | ||||||
| Net cash used in investing activities | (283,158 | ) | (23,024 | ) | ||||
| Financing activities: | ||||||||
| Borrowings on credit agreement | 1,112,294 | 218,720 | ||||||
| Repayments of credit agreement | (1,112,294 | ) | (233,922 | ) | ||||
| Proceeds from issuance of convertible senior notes | 300,000 | — | ||||||
| Purchase of convertible note hedge | (70,800 | ) | — | |||||
| Proceeds from issuance of warrants | 42,210 | — | ||||||
| Payments on long-term debt | (2,750 | ) | — | |||||
| Payments of offering costs | (10,761 | ) | — | |||||
| Payments of cash dividends | (7,174 | ) | (6,713 | ) | ||||
| Payments for repurchase of common stock | — | (6,620 | ) | |||||
| Other, net | (1,223 | ) | 296 | |||||
| Net cash provided by (used in) financing activities | 249,502 | (28,239 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 85,508 | 675 | ||||||
| Cash and cash equivalents at beginning of period | 37,431 | 2,342 | ||||||
| Cash and cash equivalents at end of period | $ | 122,939 | $ | 3,017 | ||||
| Supplement cash flow disclosure: | ||||||||
| Income taxes paid, net | $ | 7,652 | $ | 30,262 | ||||
| Interest paid | $ | 9,938 | $ | 7,469 | ||||
| Non-cash transactions: | ||||||||
| Issuance of Winnebago common stock for acquisition of business | $ | 92,572 | $ | — | ||||
| Capital expenditures in accounts payable | $ | 118 | $ | 259 | ||||
Winnebago Industries, Inc.
Supplemental Information by Reportable Segment (Unaudited) - Towable
(in thousands, except unit data)
| Three Months Ended | ||||||||||||||||||||
| February 29, 2020 | % of Revenues | February 23, 2019 | % of Revenues | $ Change | % Change | |||||||||||||||
| Net revenues | $ | 283,463 | $ | 250,691 | $ | 32,772 | 13.1 | % | ||||||||||||
| Adjusted EBITDA | 34,746 | 12.3 | % | 33,638 | 13.4 | % | 1,108 | 3.3 | % | |||||||||||
| Three Months Ended | ||||||||||||||||||||
| Unit deliveries | February 29, 2020 | Product Mix(1) | February 23, 2019 | Product Mix(1) | Unit Change | % Change | ||||||||||||||
| Travel trailer | 5,446 | 62.4 | % | 4,543 | 59.8 | % | 903 | 19.9 | % | |||||||||||
| Fifth wheel | 3,287 | 37.6 | % | 3,053 | 40.2 | % | 234 | 7.7 | % | |||||||||||
| Total towables | 8,733 | 100.0 | % | 7,596 | 100.0 | % | 1,137 | 15.0 | % | |||||||||||
| Six Months Ended | ||||||||||||||||||||
| February 29, 2020 | % of Revenues | February 23, 2019 | % of Revenues | $ Change | % Change | |||||||||||||||
| Net revenues | $ | 624,713 | $ | 543,524 | $ | 81,189 | 14.9 | % | ||||||||||||
| Adjusted EBITDA | 70,531 | 11.3 | % | 64,466 | 11.9 | % | 6,065 | 9.4 | % | |||||||||||
| Six Months Ended | ||||||||||||||||||||
| Unit deliveries | February 29, 2020 | Product Mix(1) | February 23, 2019 | Product Mix(1) | Unit Change | % Change | ||||||||||||||
| Travel trailer | 11,782 | 60.9 | % | 10,379 | 61.1 | % | 1,403 | 13.5 | % | |||||||||||
| Fifth wheel | 7,550 | 39.1 | % | 6,602 | 38.9 | % | 948 | 14.4 | % | |||||||||||
| Total towables | 19,332 | 100.0 | % | 16,981 | 100.0 | % | 2,351 | 13.8 | % | |||||||||||
| February 29, 2020 | February 23, 2019 | Change | % Change | |||||||||||||||||
| Backlog(2) | ||||||||||||||||||||
| Units | 9,790 | 8,002 | 1,788 | 22.3 | % | |||||||||||||||
| Dollars | $ | 330,738 | $ | 285,391 | $ | 45,347 | 15.9 | % | ||||||||||||
| Dealer Inventory | ||||||||||||||||||||
| Units | 19,731 | 19,141 | 590 | 3.1 | % | |||||||||||||||
(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers to generally 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 | ||||||||||||||||||||||
| February 29, 2020 | % of Revenues | February 23, 2019 | % of Revenues | $ Change | % Change | |||||||||||||||||
| Net revenues | $ | 325,542 | $ | 164,662 | $ | 160,880 | 97.7 | % | ||||||||||||||
| Adjusted EBITDA | 14,946 | 4.6 | % | 4,359 | 2.6 | % | 10,587 | 242.9 | % | |||||||||||||
| Three Months Ended | ||||||||||||||||||||||
| Unit deliveries | February 29, 2020 | Product Mix(1) | February 23, 2019 | Product Mix(1) | Unit Change | % Change | ||||||||||||||||
| Class A | 843 | 37.7 | % | 529 | 29.0 | % | 314 | 59.4 | % | |||||||||||||
| Class B | 784 | 35.0 | % | 613 | 33.6 | % | 171 | 27.9 | % | |||||||||||||
| Class C | 612 | 27.3 | % | 683 | 37.4 | % | (71 | ) | (10.4 | ) | % | |||||||||||
| Total motorhomes | 2,239 | 100.0 | % | 1,825 | 100.0 | % | 414 | 22.7 | % | |||||||||||||
| Six Months Ended | ||||||||||||||||||||||
| February 29, 2020 | % of Revenues | February 23, 2019 | % of Revenues | $ Change | % Change | |||||||||||||||||
| Net revenues | $ | 551,433 | $ | 345,990 | $ | 205,443 | 59.4 | % | ||||||||||||||
| Adjusted EBITDA | 24,277 | 4.4 | % | 16,335 | 4.7 | % | 7,942 | 48.6 | % | |||||||||||||
| Six Months Ended | ||||||||||||||||||||||
| Unit deliveries | February 29, 2020 | Product Mix(1) | February 23, 2019 | Product Mix(1) | Unit Change | % Change | ||||||||||||||||
| Class A | 1,242 | 30.1 | % | 951 | 26.1 | % | 291 | 30.6 | % | |||||||||||||
| Class B | 1,593 | 38.7 | % | 1,332 | 36.6 | % | 261 | 19.6 | % | |||||||||||||
| Class C | 1,286 | 31.2 | % | 1,361 | 37.3 | % | (75 | ) | (5.5 | ) | % | |||||||||||
| Total motorhomes | 4,121 | 100.0 | % | 3,644 | 100.0 | % | 477 | 13.1 | % | |||||||||||||
| February 29, 2020 | February 23, 2019 | Change | % Change | |||||||||||||||||||
| Backlog(2) | ||||||||||||||||||||||
| Units | 2,856 | 1,882 | 974 | 51.8 | % | |||||||||||||||||
| Dollars | $ | 394,570 | $ | 169,581 | $ | 224,989 | 132.7 | % | ||||||||||||||
| Dealer Inventory | ||||||||||||||||||||||
| Units | 5,507 | 4,812 | 695 | 14.4 | % | |||||||||||||||||
(1) Percentages may not add due to rounding differences.
(2) We include in our backlog all accepted orders from dealers to generally 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 | |||||||||||||||||
| (in thousands) | February 29, 2020 | February 23, 2019 | February 29, 2020 | February 23, 2019 | ||||||||||||||
| Diluted income per share (GAAP) | $ | 0.51 | $ | 0.68 | $ | 0.95 | $ | 1.38 | ||||||||||
| Pretax acquisition-related costs(1) | — | — | 0.30 | — | ||||||||||||||
| Pretax acquisition-related fair-value inventory step-up | 0.11 | — | 0.15 | — | ||||||||||||||
| Pretax non-cash interest expense(2) | 0.09 | — | 0.13 | — | ||||||||||||||
| Tax impact of adjustments(3) | (0.04 | ) | (0.07 | ) | (0.12 | ) | (0.07 | ) | ||||||||||
| Adjusted diluted income per share (Non-GAAP) | $ | 0.67 | $ | 0.61 | $ | 1.41 | $ | 1.31 | ||||||||||
(1) Represents transaction-closing costs.
(2) Non-cash interest expense associated with the Convertible Notes issued related to our acquisition of Newmar.
(3) 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 29, 2020 | February 23, 2019 | February 29, 2020 | February 23, 2019 | ||||||||||||||
| Net income | $ | 17,268 | $ | 21,598 | $ | 31,336 | $ | 43,759 | ||||||||||
| Interest expense | 8,651 | 4,346 | 14,700 | 8,847 | ||||||||||||||
| Provision for income taxes | 3,995 | 3,166 | 7,888 | 9,892 | ||||||||||||||
| Depreciation | 4,134 | 3,099 | 7,720 | 6,268 | ||||||||||||||
| Amortization of intangible assets | 7,974 | 2,267 | 11,588 | 4,926 | ||||||||||||||
| EBITDA | 42,022 | 34,476 | 73,232 | 73,692 | ||||||||||||||
| Acquisition-related fair-value inventory step-up | 3,634 | — | 4,810 | — | ||||||||||||||
| Acquisition-related costs | — | — | 9,950 | — | ||||||||||||||
| Restructuring expenses | 43 | 219 | (129 | ) | 219 | |||||||||||||
| Non-operating income | (270 | ) | (207 | ) | (386 | ) | (970 | ) | ||||||||||
| Adjusted EBITDA | $ | 45,429 | $ | 34,488 | $ | 87,477 | $ | 72,941 | ||||||||||
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, 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 covenants and restricted activities under the terms of our debt agreements. 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