SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1996
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-6403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0803978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 582-3535
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No ____.
There were 25,406,679 shares of $.50 par value common stock outstanding on
January 8, 1997.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION: (Interim period information unaudited)
Consolidated Balance Sheets 1 & 2
Unaudited Consolidated Statements of Operations 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 & 8
PART II. OTHER INFORMATION 9 & 10
Part I Financial Information
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
NOVEMBER 30, AUGUST 31,
ASSETS 1996 1996
- ----------------------------------------------------- ------------ ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 56,620 $ 797
Marketable securities 729 4,316
Receivables, less allowance for doubtful
accounts ($650 and $702, respectively) 31,077 30,029
Dealer financing receivables less allowance
for doubtful accounts ($185 and $197, respectively) 10,824 11,491
Inventories 51,279 63,103
Prepaid expenses 3,333 3,253
Deferred income taxes 6,343 6,343
Current assets of discontinued operations -- 7,285
-------- --------
Total current assets 160,205 126,617
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,500 1,501
Buildings 43,968 43,952
Machinery and equipment 66,648 67,456
Transportation equipment 7,832 7,878
-------- --------
119,948 120,787
Less accumulated depreciation 80,588 80,858
-------- --------
Total property and equipment, net 39,360 39,929
-------- --------
LONG-TERM NOTES RECEIVABLE, less allowances
($797 and $797, respectively) 3,982 3,918
-------- --------
INVESTMENT IN LIFE INSURANCE 16,989 16,821
-------- --------
DEFERRED INCOME TAXES, NET 14,548 14,548
-------- --------
OTHER ASSETS 3,791 3,906
-------- --------
LONG-TERM ASSETS OF DISCONTINUED OPERATIONS -- 14,857
-------- --------
TOTAL ASSETS $238,875 $220,596
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
November 30, August 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996
- ------------------------------------------------------------------------ ------------ ----------
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 157 $ 1,866
Accounts payable, trade 18,232 20,232
Payable to minority shareholder of Cycle-Sat 7,590 --
Current liabilities of discontinued operations -- 17,532
Provision for loss on disposal of electronic component assembly segment 3,708 4,074
Income tax payable 15,604 --
Accrued expenses:
Insurance 3,169 2,947
Product warranties 3,507 3,489
Vacation liability 3,290 3,116
Promotional 2,710 2,193
Other 7,260 9,013
-------- --------
Total current liabilities 65,227 64,462
-------- --------
LONG-TERM DEBT 1,622 1,692
-------- --------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 47,276 46,937
-------- --------
MINORITY INTEREST IN DISCONTINUED OPERATIONS -- 2,194
-------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,923 12,920
Additional paid-in capital 23,445 23,723
Reinvested earnings 93,399 74,221
-------- --------
129,767 110,864
Less treasury stock, at cost 5,017 5,553
-------- --------
Total stockholders' equity 124,750 105,311
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $238,875 $220,596
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
===============================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN FOURTEEN
WEEKS ENDED WEEKS ENDED
------------ -----------
November 30, December 2,
1996 1995
------------ -----------
Net revenues $113,892 $113,735
Cost of goods sold 98,813 97,766
-------- --------
Gross profit 15,079 15,969
-------- --------
Operating expenses:
Selling and delivery 6,338 6,439
General and administrative 4,885 5,563
-------- --------
Total operating expenses 11,223 12,002
-------- --------
Operating income 3,856 3,967
Financial income 369 323
-------- --------
Income from continuing operations before income taxes 4,225 4,290
Provision for taxes 1,519 1,618
-------- --------
Income from continuing operations 2,706 2,672
Discontinued operations:
Income from discontinued Cycle-Sat operations
(less applicable income tax provisions of $140) -- 318
Gain from sale of discontinued Cycle-Sat subsidiary
(includes a loss on operations of $160,000 less applicable
income tax credits of $123,000 and a gain on disposal of
$16,632,000 less income taxes of $13,462,000) 16,472 --
-------- --------
Net income $ 19,178 $ 2,990
======== ========
Net income per common share:
Income from continuing operations $ .11 $ .11
Discontinued operations:
Income from discontinued Cycle-Sat subsidiary -- .01
Gain from sale of discontinued Cycle-Sat subsidiary .65 --
-------- --------
Net income $ .76 $ .12
======== ========
Weighted average number of
shares of common stock
outstanding 25,379 25,346
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands
Increase (decrease) in cash and cash equivalents THIRTEEN FOURTEEN
WEEKS ENDED WEEKS ENDED
------------ -----------
November 30, December 2,
1996 1995
------------ -----------
Cash flows from operating activities:
Net income $ 19,178 $ 2,990
Adjustments to reconcile net income
to net cash from operating activities:
Pre-tax gain on sale of Cycle-Sat subsidiary (29,811) --
Depreciation and amortization 1,665 1,747
Realized and unrealized (gains) losses on investments, net (120) 40
Investments in trading securities -- (2,103)
Proceeds from sale of trading securities 3,707 1,851
Other (112) (156)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (960) 8,042
Decrease (increase) in inventories 11,824 (3,067)
Increase in accounts payable and accrued expenses 11,661 5,275
Increase in postretirement benefits 339 838
Other (2,194) (338)
-------- --------
Net cash provided by operating activities 15,177 15,119
-------- --------
Cash flows provided (used) by investing activities:
Gross proceeds from the sale of Cycle-Sat subsidiary* 55,883 --
Purchases of property and equipment (1,106) (1,959)
Investments in dealer receivables (9,128) (10,719)
Collections of dealer receivables 9,807 7,708
Other (72) 282
-------- --------
Net cash provided (used) by investing activities 55,384 (4,688)
-------- --------
Cash flows used by financing activities and capital transactions:
Payment of long-term debt of discontinued operation (13,220) --
Payments of long-term debt and capital leases (1,779) (488)
Other 261 35
-------- --------
Net cash used by financing activities and
capital transactions (14,738) (453)
-------- --------
Net increase in cash and cash equivalents 55,823 9,978
Cash and cash equivalents - beginning of period 797 8,508
-------- --------
Cash and cash equivalents - end of period $ 56,620 $ 18,486
======== ========
* Includes $7,590,000 paid to the minority shareholders subsequent to November
30, 1996.
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of November 30, 1996, the consolidated results of
operations for the 13 weeks ended November 30, 1996 and the 14 weeks
ended December 2, 1995, and the consolidated cash flows for the 13 weeks
ended November 30, 1996 and the 14 weeks ended December 2, 1995. The
results of operations for the 13 weeks ended November 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
2. Inventories are valued at the lower of cost or market, with cost being
determined under the last-in, first-out (LIFO) method and market defined
as net realizable value.
Inventories are composed of the following (dollars in thousands):
November 30, August 31,
1996 1996
------------ ------------
Finished $ 21,175 $ 28,228
goods.........................
Work in 14,899 13,915
process.......................
Raw 32,014 37,537
materials.....................
------------ ------------
68,088 79,680
LIFO 16,809 16,577
reserve......................
============ ============
$ 51,279 $ 63,106
============ ============
3. Since March 1992, the Company has had a financing and security agreement
with NationsCredit Corporation (NationsCredit).
Terms of the agreement limit borrowings to the lesser of $30,000,000 or
75 percent of eligible inventory (fully manufactured recreation vehicles
and motor home chassis and related components). Borrowings are secured by
the Company's receivables and inventory. Borrowings under the agreement
bear interest at the prime rate, as defined in the agreement, plus 50
basis points. The line of credit is available through March 31, 1997, and
continues during successive one-year periods unless either party provides
at least 90-days notice prior to the end of the one-year period to the
other party that they wish to terminate the line of credit. The agreement
also contains certain restrictive covenants including maintenance of
minimum net worth, working capital and current ratio. As of November 30,
1996, the Company was in compliance with these covenants. There were no
outstanding borrowings under the line of credit at November 30, 1996 or
August 31, 1996.
4. It is customary practice for companies in the recreation vehicle industry
to enter into repurchase agreements with lending institutions which have
provided wholesale floor plan financing to dealers. The Company's
agreements provide for the repurchase of its products from the financing
institution in the event of repossession upon a dealer's default. The
Company was contingently liable for approximately $130,734,000 and
$129,135,000 under repurchase agreements with lending institutions as of
November 30, 1996 and August 31, 1996, respectively. Included in these
contingent liabilities as of November 30, 1996 and August 31, 1996 are
approximately $31,638,000 and $33,216,000, respectively, of certain
dealer receivables subject to recourse agreements with NationsCredit and
Green Tree Financial Corporation.
5. Fiscal year-to-date the Company paid cash for the following (dollars in
thousands):
Thirteen Fourteen
Weeks Ended Weeks Ended
------------- ------------
November 30, December 2,
1996 1995
------------- ------------
Interest $ 186 $ 449
Income taxes 4 20
6. On November 19, 1996, the Company sold all of the assets of its
Cycle-Sat, Inc. subsidiary to Vyvx, Inc., a subsidiary of The Williams
Companies, Inc., Tulsa, Oklahoma for approximately $57 million in cash.
Vyvx, Inc. is a leading provider of integrated satellite and fiber-optic
video transmission services. The transaction resulted in an after-tax
gain of $16.5 million or $.65 per common share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen weeks ended November 30, 1996 compared to fourteen weeks ended December
2, 1995.
Net revenues for the 13 weeks ended November 30, 1996 were $113,892,000, an
increase of $157,000, or 0.1 percent from the 14 week period ended December 2,
1995. Motor home shipments (Classes A and C) were 1,958 units, a decrease of 106
units, or 5.1 percent, during the first quarter of fiscal 1997 compared to the
first quarter of fiscal 1996. The Company is encouraged by the positive response
it has received on its 1997 product line and the Company's orders are presently
running ahead of last year's level.
Gross profit, as a percent of net revenues, was 13.2 percent for the 13 weeks
ended November 30, 1996 compared to 14.0 percent for the 14 weeks ended December
2, 1995. This decrease can be attributed primarily to lower production levels
and discounts on selected models.
Selling and delivery expenses were $6,338,000 or 5.6 percent of net revenues
during the first quarter of fiscal 1997 compared to $6,439,000 or 5.7 percent of
net revenues during the first quarter of fiscal 1996. The decrease in dollars
and percentage can be attributed primarily to a reduction in dealer promotional
expenses.
General and administrative expenses decreased by $678,000 to $4,885,000
comparing the 13 weeks ended November 30, 1996 to the 14 weeks ended December 2,
1995 and decreased as a percentage of net revenues to 4.3 percent from 4.9
percent. The decreases in dollars and percentage was caused primarily by higher
product liability costs incurred during the 14 weeks ended December 2, 1995 and
by a reduction in the postretirement benefit obligation caused by revisions in
certain assumptions used in estimating the cost of the Company's postretirement
health care plan which caused an unrecognized net gain that will be amortized
over the average remaining service period of active plan participants. This
unrecognized net gain is being recorded starting with fiscal year 1997.
The Company had net financial income of $369,000 for the first quarter of fiscal
1997 compared to income of $323,000 for the comparable quarter of fiscal 1996.
During the 13 weeks ended November 30, 1996, the Company recorded $309,000 of
interest income, $121,000 of realized and unrealized gains in its trading
securities portfolio and losses of $61,000 in foreign currency transactions.
During the 14 weeks ended December 2, 1995, the Company recorded $254,000 of
interest income, gains of $109,000 in foreign currency transactions and realized
and unrealized losses of $40,000 in its trading securities portfolio.
For the 13 weeks ended November 30, 1996, the Company had income from continuing
operations before taxes of $4,225,000 and a provision for taxes of $1,519,000
resulting in income from continuing operations of $2,706,000 or $.11 per share.
For the 14 weeks ended December 2, 1995, the Company had income from continuing
operations before taxes of $4,290,000 and a provision for taxes of $1,618,000
resulting in income from continuing operations of $2,672,000 or $.11 per share.
For the 13 weeks ended November 30, 1996, the Company recorded a gain from the
sale of the discontinued Cycle-Sat subsidiary of $16,472,000 (net of income
taxes of $13,462,000), or $.65 per share.
For the first quarter of fiscal 1996, the Company reported income from
discontinued Cycle-Sat operations of $318,000 (net of income tax provisions of
$140,000), or $.01 per share.
During the 13 weeks ended November 30, 1996, the Company had net income of
$19,178,000, or $.76 per share, compared to $2,990,000, or $.12 per share for
the 14 weeks ended December 2, 1995.
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital and capital equipment requirements and
cash requirements of subsidiaries with funds generated internally and funds from
agreements with financial institutions.
At November 30, 1996, working capital was $94,978,000, an increase of
$32,823,000 from the amount at August 31, 1996. The increase in the Company's
working capital was caused primarily by the Company's sale of the Cycle-Sat
subsidiary. The Company's principal sources and uses of cash during the 13 weeks
ended November 30, 1996 are set forth in the unaudited consolidated condensed
statement of cash flows for that period.
Principal known demands at November 30, 1996 on the Company's liquid assets for
the remainder of fiscal 1997 include approximately $13,300,000 of income taxes
as a result of the gain on the sale of Cycle-Sat, a $7,600,000 payment to the
minority shareholder of Cycle-Sat, $5,200,000 of capital expenditures (primarily
equipment replacement) and $2,500,000 of cash dividends declared by the Board of
Directors on October 17, 1996 (payable January 6, 1997).
Management currently expects its cash on hand, funds from operations and
borrowings available under existing credit facilities to be sufficient to cover
both short-term and long-term operating requirements.
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) No exhibits are being filed as a part of this report.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
------------------------------------------
(Registrant)
Date January 10, 1997 /s/ Fred G. Dohrmann
--------------------- ------------------------------------------
Fred G. Dohrmann
Chairman of the Board and Chief
Executive Officer
Date January 10, 1997 /s/ Edwin F. Barker
---------------------- ------------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
5
3-MOS
AUG-30-1997
NOV-30-1996
56,620
729
42,736
835
51,279
160,209
119,948
80,588
238,879
65,231
0
0
0
12,923
111,827
238,879
113,892
113,892
98,813
98,813
11,223
0
(369)
4,225
1,519
2,706
16,472
0
0
19,178
.76
0
