Labor and warranty cost improvements and a favorable product mix contributed to a 4% fourth-quarter earnings increase for Thor Industries.

The Elkhart-based recreational vehicle manufacturer reported earnings of $92.1 million for its fourth quarter ended July 31, up from $88.2 million for the same period last year.

Its earnings per share of $1.67 did not change from a year earlier because its number of shares outstanding rose to 55.2 million from 52.9 million.

The company’s fourth-quarter sale grew 23% to $2.31 billion from $1.87 billion for the prior-year quarter.

The most recent quarter’s sales included $719.5 million from Erwin Hymer Group, which Thor acquired in February. Sales growth from the acquisition was partly offset by an 18% decrease in the company’s North American towable RV sales and an 8% reduction in its North American motorized RV sales.

“We are encouraged by the improvement in the North American RV Towables segment in the fourth quarter, as we saw our flexible business model and the benefits of our variable cost structure drive improvement in margins for the quarter,” Bob Martin, Thor president and CEO, said in the statement.

“Fiscal 2019 was a year of significant accomplishments amid challenging industry conditions. We completed the largest acquisition in our company’s and the RV industry’s history, while managing through the overhang of inventory among our independent dealers,” he said.

“As we look ahead to fiscal 2020, we see many reasons for optimism as we leverage the global growth opportunities of EHG.”

For its 2019 fiscal year, Thor saw its earnings drop to $133.3 million, or $2.47 per share, from $430.2 million, or $8.17 per share the prior year, as its sales fell to $7.86 billion from $8.33 billion.

The fiscal year results included $114.9 million in acquisition-related costs and “the impact of the step-up in assigned value of acquired inventory, which was subsequently sold during the fiscal third quarter and which increased cost of goods sold by approximately $61.4 million,” Thor said in a statement.

Acquisition-related costs reduced the company’s 2019 fiscal year earnings per share by $2.71 per share. Amortization expense of $25.6 million and interest expense of $66.1 million incurred as a result of the acquisition also reduced the company’s fiscal year earnings per share by $1.22 per share, it said.

“Our expansion into the European RV market represents a first step in our long-term goal of growing our business beyond North America and capitalizing on global growth opportunities,” Martin said.

“Our integration plan is proceeding, and we have made measurable progress in a number of areas. We are developing a culture of collaboration among our companies at the same time as we integrate EHG into the Thor family of companies.”

The collaboration is focused for the moment on opportunities to gain some cost efficiencies by adopting global best practices in purchasing and research and development.

“Working capital management has already led to an increase in net cash provided by operating activities, which totaled more than $500 million in fiscal 2019, which we have used to fund payments on the acquisition-related debt,” Martin said. “Additionally, we have created an international product transfer team that is responsible for the planning and implementation of the manufacturing, sales and distribution of EHG products in North America,” he said.

“We showed a select number of European-model EHG products at our Open House event held last week, and the response was overwhelmingly positive.”

So far the company has paid down more than $480 million of its acquisition financing debt.

The industry’s North American shipments fell faster than its retail registrations, and as a result, Thor’s independent dealer inventories in North America decreased 25% to about 103,400 units at the end of July.

That left the company’s independent deal inventory at its lowest level since the first quarter of Thor’s 2017 fiscal year, and it said it expects “dealer ordering will start to align with consumer demand by the end of calendar 2019.”

“We see positive factors supporting our outlook for fiscal year 2020. North American dealer inventory levels are 25% lower than the unusually high levels at the end of last year, and nearly 6% lower than they were two years ago,” Martin said.

“Dealers remain confident, and many of the dealers I speak with continue to invest in growing their businesses for the long term,” he said.

With the dealer inventory adjustment continuing through the first half of its new fiscal year, the company expects to see a flat performance to a modest decline from its North American markets, barring a significant macroeconomic change, he said.

The August survey of manufacturers in the business by the RV Industry Association found they ended the month with 33,674 shipments, down 15% from a year earlier.

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