The decrease in total motorized net sales of 28.7% compared to the prior-year period resulted
from a 37.7% decrease in unit shipments and a 9.0% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the six months ended January 31, 2019, combined
motorhome wholesale unit shipments decreased 22.1% compared to the same period last year. According to statistics published by Stat Surveys, for the six-month periods ended December 31, 2018 and 2017, our market share for travel trailers and fifth
wheels combined was 38.6% and 38.4%, respectively. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.
The increase in the overall net price per unit within the Class A product line of 12.5% was primarily due to a shift in the concentration of
sales toward the generally larger and more expensive diesel units from the more modestly-priced gas units compared to the prior-year period. The increase in the overall net price per unit within the Class C product line of 4.7% was primarily
due to the net impact of product mix changes and selective net price increases. The increase in the overall net price per unit within the Class B product line of 4.8% is primarily due to the introduction of a new, higher-priced model and more
option content per unit in the current-year period.
Cost of products sold decreased $277,475 to $722,181, or 90.0% of motorized net
sales, for the six months ended January 31, 2019 compared to $999,656, or 88.7% of motorized net sales, for the six months ended January 31, 2018. The changes in material, labor,
freight-out
and
warranty costs comprised $272,040 of the $277,475 decrease due to the decreased sales volume. Material, labor,
freight-out
and warranty costs as a combined percentage of motorized net sales increased to 85.0%
for the six months ended January 31, 2019 compared to 84.7% for the six months ended January 31, 2018. This increase in percentage was primarily the result of a slight increase in the warranty cost percentage. Total manufacturing overhead
decreased $5,435 with the volume decrease, but increased as a percentage of motorized net sales from 4.0% to 5.0%, as the decrease in production resulted in higher overhead costs per unit sold.
Motorized gross profit decreased $46,352 to $80,512, or 10.0% of motorized net sales, for the six months ended January 31, 2019 compared to
$126,864, or 11.3% of motorized net sales, for the six months ended January 31, 2018. The decrease in gross profit was due primarily to the 37.7% decrease in unit sales volume noted above, and the decrease as a percentage of motorized net sales
is due to the increase in the cost of products sold percentage noted above.
Selling, general and administrative expenses were $39,060,
or 4.9% of motorized net sales, for the six months ended January 31, 2019 compared to $51,017, or 4.5% of motorized net sales, for the six months ended January 31, 2018. The $11,957 decrease was primarily due to decreased motorized net
sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to decrease by $10,670. In addition, sales-related travel, advertising and promotions expenses decreased $1,032.
Motorized income before income taxes was $38,917, or 4.8% of motorized net sales, for the six months ended January 31, 2019 compared to
$75,124, or 6.7% of motorized net sales, for the six months ended January 31, 2018. The primary reasons for this decrease in percentage were the increases in both the cost of products sold and selling, general and administrative expense
percentages noted above.
Financial Condition and Liquidity
As of January 31, 2019, we had $305,833 in cash and cash equivalents compared to $275,249 on July 31, 2018. The components of this $30,584 increase in cash and cash equivalents are described in more
detail below, but the increase was primarily attributable cash provided by operations of $134,630 being partially offset by capital expenditures of $54,802, and cash dividend payments of $41,189.
Working capital at January 31, 2019 was $497,513 compared to $542,344 at July 31, 2018. This decrease is primarily attributable to the
impact of the foreign currency forward contract liability of $73,707 included in the January 31, 2019 total. Capital expenditures of $54,802 for the six months ended January 31, 2019 were made primarily for land and production building
additions and improvements, as well as replacing machinery and equipment used in the ordinary course of business.
We strive to maintain
adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. As discussed in Note 17 to the Condensed Consolidated Financial Statements, on February 1, 2019 we obtained financing
commitments for an asset-based credit facility and a term loan to fund the acquisition of Erwin Hymer Group (EHG). Upon closing of this acquisition, these new financing commitments replaced the asset-based facility in place as of
January 31, 2019 obtained in conjunction with the Jayco acquisition. As such, the remaining unamortized facility fees related to this facility, which totaled $3,794 at January 31, 2019, will be expensed in the third quarter of fiscal 2019.
We believe our
on-hand
cash and cash equivalents, and funds generated from operations, along with funds available under the new revolving asset-based credit facility obtained in conjunction with the EHG
acquisition completed on February 1, 2019, will be sufficient to fund expected future operational requirements for the foreseeable future.
Our main priorities for the use of current and future available cash generated from operations include reducing indebtedness, funding our long-term growth, both organically and through acquisition, and maintaining
and growing our regular dividends over time. We will also consider strategic and opportunistic repurchases of shares under the share repurchase program, as discussed in Note 14 to the Condensed Consolidated Financial Statements, and special
dividends or other strategic share repurchases, as determined by the Companys Board.
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