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 May 29, 1999
-------------------------------------------------
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 22,280,811 shares of $.50 par value common stock outstanding on July
2, 1999.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
PART I. FINANCIAL INFORMATION: -----------
Consolidated Balance Sheets (Interim period information unaudited) 1 & 2
Unaudited Consolidated Statements of Earnings 3
Unaudited Consolidated Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of Financial Condition and Results 7 - 10
of Operations
PART II. OTHER INFORMATION 11 - 13
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MAY 29, AUGUST 29,
ASSETS 1999 1998
- ----------------------------------------------------- ---------- ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 56,452 $ 53,859
Receivables, less allowance for doubtful
accounts ($1,172 and $1,582, respectively) 28,607 22,025
Dealer financing receivables, less allowance
for doubtful accounts ($182 and $78, respectively) 29,612 12,782
Inventories 63,022 55,433
Prepaid expenses 3,969 3,516
Deferred income taxes 6,906 6,906
---------- ----------
Total current assets 188,568 154,521
---------- ----------
PROPERTY AND EQUIPMENT, at cost
Land 1,158 1,158
Buildings 40,614 38,779
Machinery and equipment 72,393 69,095
Transportation equipment 5,221 5,047
---------- ----------
119,386 114,079
Less accumulated depreciation 82,253 81,167
---------- ----------
Total property and equipment, net 37,133 32,912
---------- ----------
LONG-TERM NOTES RECEIVABLE,
less allowances for doubtful accounts
($266 and $973, respectively) 1,915 5,396
---------- ----------
INVESTMENT IN LIFE INSURANCE AND
OTHER LONG-TERM INVESTMENTS 23,447 21,226
---------- ----------
DEFERRED INCOME TAXES, NET 16,309 16,071
---------- ----------
OTHER ASSETS 365 486
---------- ----------
TOTAL ASSETS $ 267,737 $ 230,612
========== ==========
See Unaudited Condensed Notes to Consolidated Financial Statements
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MAY 29, AUGUST 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ------------------------------------------------------------ ---------- ----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 26,614 $ 24,461
Income tax payable 11,944 12,623
Accrued expenses:
Insurance 3,688 3,566
Product warranties 6,437 5,260
Vacation liability 3,906 3,343
Promotional 6,248 2,236
Other 12,482 11,113
---------- ----------
Total current liabilities 71,319 62,602
---------- ----------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 55,528 51,487
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: outstanding 25,876,000 and 25,865,000
shares, respectively 12,937 12,932
Additional paid-in capital 22,133 22,507
Reinvested earnings 143,658 111,665
---------- ----------
178,728 147,104
Less treasury stock, at cost 37,838 30,581
---------- ----------
Total stockholders' equity 140,890 116,523
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 267,737 $ 230,612
========== ==========
See Unaudited Condensed Notes to Consolidated Financial Statements
2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
------------------------ ------------------------
May 29, May 30, May 29, May 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net revenues $ 191,546 $ 150,515 $ 503,342 $ 395,120
Cost of goods sold 157,804 129,610 420,355 341,437
---------- ---------- ---------- ----------
Gross profit 33,742 20,905 82,987 53,683
---------- ---------- ---------- ----------
Operating expenses:
Selling and delivery 5,997 4,645 16,593 14,564
General and administrative 6,129 6,029 16,112 15,741
---------- ---------- ---------- ----------
Total operating expenses 12,126 10,674 32,705 30,305
---------- ---------- ---------- ----------
Operating income 21,616 10,231 50,282 23,378
Financial income 670 860 1,816 2,244
---------- ---------- ---------- ----------
Pre-tax income 22,286 11,091 52,098 25,622
Provision for taxes 7,675 3,757 17,884 8,600
---------- ---------- ---------- ----------
Net income $ 14,611 $ 7,334 $ 34,214 $ 17,022
========== ========== ========== ==========
Earnings per common share (Note 7):
- -----------------------------------
Basic $ .66 $ .31 $ 1.54 $ .70
Diluted $ .65 .31 $ 1.52 $ .69
Weighted average common shares outstanding (Note 7):
- ----------------------------------------------------
Basic 22,190 23,642 22,186 24,434
Diluted 22,517 23,912 22,483 24,630
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands THIRTY-NINE WEEKS ENDED
-------------------------
May 29, May 30,
1999 1998
---------- ----------
Cash flows from operating activities:
Net income $ 34,214 $ 17,022
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,212 4,143
Other 545 1,431
Change in assets and liabilities:
Increase in receivable and other assets (24,877) (2,287)
(Increase) decrease in inventories (7,589) 2,950
Increase in accounts payable and accrued expenses 9,396 9,028
Increase in income taxes payable 16,746 20,100
Increase in postretirement benefits 3,609 2,559
Other (238) --
---------- ----------
Net cash provided by operating activities 36,018 54,946
---------- ----------
Cash flows used by investing activities:
Purchases of property and equipment (8,711) (3,194)
Investments in dealer receivables (74,494) (44,559)
Collections of dealer receivables 57,560 40,601
Other 2,067 (4,126)
---------- ----------
Net cash used by investing activities (23,578) (11,278)
---------- ----------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (8,975) (19,572)
Payments of long-term debt -- (695)
Payment of cash dividends (2,221) (2,548)
Other 1,349 1,285
---------- ----------
Net cash used by financing activities and
capital transactions (9,847) (21,530)
---------- ----------
Net increase in cash and cash equivalents 2,593 22,138
Cash and cash equivalents - beginning of period 53,859 32,130
---------- ----------
Cash and cash equivalents - end of period $ 56,452 $ 54,268
========== ==========
See Unaudited Condensed Notes to Consolidated Financial Statements.
4
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 May 29, 1999, the consolidated results of
operations for the 39 and 13 weeks ended May 29, 1999 and May 30, 1998,
and the consolidated cash flows for the 39 weeks ended May 29, 1999 and
May 30, 1998. The results of operations for the 39 weeks ended May 29,
1999, 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):
May 29, August 29,
1999 1998
---------- ----------
Finished goods................ $ 21,659 $ 24,147
Work in process............... 19,028 15,328
Raw materials................. 40,504 33,384
---------- ----------
81,191 72,859
LIFO reserve.................. (18,169) (17,426)
---------- ----------
$ 63,022 $ 55,433
========== ==========
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 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 May 29, 1999, the Company was in
compliance with these covenants. There were no outstanding borrowings
under the line of credit at May 29, 1999 or August 29, 1998.
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 $198,448,000 and
$132,540,000 under repurchase agreements with lending institutions as of
May 29, 1999 and August 29, 1998, respectively. Included in these
contingent liabilities as of May 29, 1999 and August 29, 1998 are
approximately $8,409,000 and $18,623,000, respectively, of certain dealer
receivables subject to recourse agreements with NationsCredit and Green
Tree Financial Corporation.
5. For the periods indicated, the Company paid cash for the following
(dollars in thousands):
THIRTY-NINE WEEKS ENDED
--------------------------
May 29, May 30,
1999 1998
--------- ---------
Interest $ 97 $ 364
Income taxes 18,800 6,849
5
6. On September 28, 1998, the Company completed the $36,500,000 repurchase
of outstanding shares of its common stock authorized by the Board of
Directors on December 29, 1997. Under this repurchase program, 3,612,660
shares were repurchased for an aggregate consideration of $36,499,018. A
voluntary program for shareholders owning fewer than 100 shares of the
Company's common stock was initiated in November, 1998 in which these
shareholders could conveniently sell all their shares or purchase enough
additional shares to increase their holdings to 100 shares. A total of
60,823 shares were repurchased from 40 percent of eligible shareholders
at a cost of approximately $834,000, an average of $13.72 per share. This
program was completed in February, 1999.
On June 17, 1999, the Board of Directors authorized the repurchase of
outstanding shares of the Company's common stock for an aggregate
purchase price of up to $15,000,000.
7. The following table reflects the calculation of basic and diluted
earnings per share for the 13 and 39 weeks ended May 29, 1999 and May 30,
1998:
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------ ------------------------
MAY 29, MAY 30, MAY 29, MAY 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
EARNINGS PER SHARE - BASIC:
- --------------------------
Net income $ 14,611 $ 7,334 $ 34,214 $ 17,022
---------- ---------- ---------- ----------
Weighted average shares outstanding 22,190 23,642 22,186 24,434
---------- ---------- ---------- ----------
Earnings per share - basic $ .66 $ .31 $ 1.54 $ .70
---------- ---------- ---------- ----------
EARNINGS PER SHARE - ASSUMING DILUTION:
- --------------------------------------
Net income $ 14,611 $ 7,334 $ 34,214 $ 17,022
---------- ---------- ---------- ----------
Weighted average shares outstanding 22,190 23,642 22,186 24,434
Dilutive impact of options outstanding 327 270 297 196
---------- ---------- ---------- ----------
Weighted average shares & potential
dilutive shares outstanding 22,517 23,912 22,483 24,630
---------- ---------- ---------- ----------
Earnings per share - assuming dilution $ .65 $ .31 $ 1.52 $ .69
---------- ---------- ---------- ----------
There were options to purchase 14,000 shares of common stock outstanding
at a price of $15.375 per share during the 13 weeks ended May 29, 1999
which were not included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market
price of the common shares.
8. The Company was required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" at the
beginning of fiscal 1999. The statement requires companies to disclose
comprehensive income and its components in their financial statements.
The Company has no items of comprehensive income other than net income.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 29, 1999 Compared to Thirteen Weeks Ended May 30, 1998
Net revenues for the 13 weeks ended May 29, 1999 were $191,546,000 an increase
of $41,031,000 or 27.3 percent from the 13 week period ended May 30, 1998. Motor
home shipments (Class A and C) were 2,981 units, an increase of 427 units, or
16.7 percent, during the third quarter of fiscal 1999 compared to the third
quarter of fiscal 1998. The difference in percentages when comparing the percent
increase in revenue dollars for the third quarter of fiscal 1999 to the percent
increase in unit shipments for the third quarter of fiscal 1999 was caused by
the shipments of more units with slide-out features and the demand for the
Company's new high-line (Ultimate) unit. Market conditions for the Company's
motor home products as well as in the recreation vehicle industry in general
continue to remain very favorable due to low interest rates, low fuel prices,
and very high consumer confidence levels. As of May 29, 1999, the Company's
order backlog of Class A and Class C motor homes was approximately 2,200 orders,
an increase of 170 percent, when compared to the orders on hand at the close of
the third quarter in fiscal 1998. The Company includes in its backlog all
accepted purchase orders from dealers shippable within the next six months.
Orders in backlog can be canceled at the option of the purchaser at any time
without penalty and, therefore, backlog may not necessarily be a measure of
future sales.
Gross profit, as a percent of net revenues, was 17.6 percent for the 13 weeks
ended May 29, 1999 compared to 13.9 percent for the 13 weeks ended May 30, 1998.
The Company's gross profit percentage increased as a result of higher volume of
motor homes and favorable product mix change during the third quarter of fiscal
1999.
Selling and delivery expenses were $5,997,000 or 3.1 percent of net revenues
during the third quarter of fiscal 1999 compared to $4,645,000 or 3.1 percent of
net revenues during the third quarter of fiscal 1998. The increase in dollars
can be attributed primarily to the Company's increased advertising expenses
during the third quarter of fiscal 1999. The difference is also partially
attributed to a reclassification to general and administrative expenses of
approximately $570,000 in the Company's dealer recourse reserve during the third
quarter of fiscal 1998.
General and administrative expenses were $6,129,000 or 3.2 percent of net
revenues during the 13 weeks ended May 29, 1999 compared to $6,029,000 or 4.0
percent of net revenues during the 13 weeks ended May 30, 1998. The increase in
dollars can be attributed to increases in the Company's employee incentive
programs during the third quarter of fiscal 1999, partially offset by a
reclassification and increase in bad debt reserves recorded during the third
quarter of fiscal 1998. Increased sales volume during the third quarter of
fiscal 1999 contributed to the decrease in percentage.
The Company had net financial income of $670,000 for the third quarter of fiscal
1999 compared to net financial income of $860,000 for the comparable quarter of
fiscal 1998. During the 13 weeks ended May 29, 1999, the Company recorded
$639,000 of net interest income and gains of $31,000 in foreign currency
transactions. During the 13 weeks ended May 30, 1998, the Company recorded
$719,000 of net interest income and gains of $141,000 in foreign currency
transactions.
For the third quarter ended May 29, 1999, the Company had net income of
$14,611,000, or $.65 per diluted share, compared to the third quarter ended May
30, 1998's net income of $7,334,000, or $.31 per diluted share. Net income
increased by 99.2 percent when comparing the third quarter of fiscal 1999 to the
third quarter of fiscal 1998 but increased by 109.7 percent on a per diluted
share basis when comparing the two quarters due to fewer shares of the Company's
common stock being outstanding during the third quarter of fiscal 1999. See
Notes 6 and 7.
7
Thirty-Nine Weeks Ended May 29, 1999 Compared to Thirty-Nine Weeks Ended May 30,
1998
Net revenues for the 39 weeks ended May 29, 1999 were $503,342,000, an increase
of $108,222,000, or 27.4 percent from the 39 week period ended May 30, 1998.
Motor home shipments (Class A and C) were 7,732 units, an increase of 1,107
units, or 16.7 percent, during the 39 weeks ended May 29, 1999 when compared to
the 39 weeks ended May 30, 1998. The differences in percentages when comparing
the percent increase in revenue dollars for the 39 weeks ended May 29, 1999 to
the percent increase in unit shipments for the 39 weeks ended May 29, 1999 was
caused by the shipments of more units with slide-out features and the demand for
the Company's new high-line (Ultimate) unit. Industry demand for motorized
recreation vehicles remained strong during the 39 weeks ended May 29, 1999 and
the Company's 1999 products continued to be well received by dealers and retail
customers.
Gross profit, as a percent of net revenues, was 16.5 percent for the 39 weeks
ended May 29, 1999 compared to 13.6 percent for the 39 weeks ended May 30, 1998.
The Company's gross profit percentage increased as a result of higher volume of
motor homes and favorable product mix change during the 39 weeks ended May 29,
1999.
Selling and delivery expenses were $16,593,000 or 3.3 percent of net revenues
during the 39 weeks ended May 29, 1999 compared to $14,564,000 or 3.7 percent of
net revenues during the 39 weeks ended May 30, 1998. The increase in dollars can
be attributed primarily to increases in advertising as well as to an increase in
delivery expense during the 39 weeks ended May 29, 1999 when compared to the
comparable period of fiscal 1998. Increased sales volume, during the 39 weeks
ended May 29, 1999, contributed to the decrease in percentage.
General and administrative expenses were $16,112,000 or 3.2 percent of net
revenues during the 39 weeks ended May 29, 1999 compared to $15,741,000 or 4.0
percent of net revenues during the 39 weeks ended May 30, 1998. Increases in the
Company's employee incentive programs during the fiscal 1999 period primarily
contributed to the dollar increase when comparing the two nine-month periods.
Partially offsetting the dollar increase in general and administrative expenses
was monies the Company received and recorded during the 39 weeks ended May 29,
1999 on a previously fully reserved receivable that was repaid to the Company.
Increased sales volume, during the 39 weeks ended May 29, 1999, contributed to
the decrease in percentage.
The Company had net financial income of $1,816,000 for the 39 weeks ended May
29, 1999 compared to net financial income of $2,244,000 for the 39 weeks ended
May 30, 1998. During the 39 weeks ended May 29, 1999, the Company recorded
$1,844,000 of net interest income and losses of $28,000 in foreign currency
transactions. During the 39 weeks ended May 30, 1998, the Company recorded
$2,090,000 of net interest income and gains of $154,000 in foreign currency
transactions.
For the nine-month period of fiscal 1999, the Company recorded net income of
$34,214,000, or $1.52 per diluted share, compared to the nine-month period of
fiscal 1998's net income of $17,022,000, or $.69 per diluted share. Net income
increased by 101.0 percent when comparing the two nine-month periods but
increased by 120.3 percent on a per diluted share basis when comparing the two
nine-month periods due to fewer shares of the Company's common stock being
outstanding during the 39 week period ended May 29, 1999. See Notes 6 and 7.
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally. At May 29, 1999, working capital was $117,249,000, an increase of
$25,330,000 from the amount at August 29, 1998. The Company's principal use of
cash during the 39 weeks ended May 29, 1999 were an increase of $74,494,000 of
dealer receivables, $8,975,000 for the repurchase of shares of the Company's
common stock, and $8,711,000 for
8
purchases of property and equipment. The Company's principal sources of cash
during the 39 weeks ended May 29, 1999 was cash flow from operations and the
collection of $57,560,000 in dealer receivables. The Company's sources and uses
of cash during the 39 weeks ended May 29, 1999 are set forth in the unaudited
consolidated statement of cash flows for that period.
Principal known demands at May 29, 1999 on the Company's liquid assets for the
remainder of fiscal 1999 include approximately $1,500,000 of capital
expenditures (primarily equipment replacement) and approximately $2,200,000 of
cash dividends declared by the Board of Directors on March 18, 1999 (payable on
July 2, 1999 to shareholders of record as of June 4, 1999).
Management currently expects its cash on hand and funds from operations to be
sufficient to cover both short-term and long-term operating requirements.
ACCOUNTING CHANGES
Segment Disclosures
SFAS No. 131, "Disclosures about Segment of and Enterprise and Related
Information" was issued in June 1997 and will be adopted by the Company in the
fourth quarter of fiscal 1999. The statement establishes standards, which
redefine how operating segments are determined, and requires public companies to
report financial and descriptive information about reportable operating
segments.
Pension and Other Postretirement Benefits Disclosure
SFAS No. 132, "Employer's Disclosure About Pensions and Other Postretirement
Benefits" was issued in February 1998 and will be adopted by the Company in the
fourth quarter of fiscal 1999. The statement revises employer' s disclosures
about pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans.
Accounting for Derivative Instruments and Hedging Activities
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998 and must be adopted by the Company no later than fiscal
2001. This statement requires that an entity recognizes all derivatives as
either assets or liabilities in the statement of financial position and measure
these instruments at fair value.
The Company has not completed the process of evaluating the effects of SFAS No.
131, SFAS No. 132 or SFAS No. 133. Since all these pronouncements, except for
SFAS No. 133, relate primarily to changes in disclosure requirements, the
Company does not believe the new requirements will significantly affect its
financial condition or operating results.
FORWARD LOOKING INFORMATION
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties, including, but not limited to availability of chassis, demand
from customers, effects of competition, the general state of the economy,
interest rates, consumer confidence, changes in the product or customer mix or
revenues and in the level of operating expenses and other factors which may be
disclosed throughout this Form 10-Q. Any forecasts and projections in this
report are "forward looking statements," and are based on management's current
expectations of the Company's near term results, based on current information
available pertaining to the Company, including the aforementioned risk factors.
Actual results could differ materially.
9
YEAR 2000 (Y2K) COMPLIANCE
The Company has conducted a comprehensive review of its computer systems that
could be affected by the "Year 2000" issue and began an implementation plan in
1996 to resolve this issue. As the Company was reviewing its needs to be Y2K
compliant the Company discovered that software systems, for its Finance and
Human Resources needs were already Y2K compliant. With respect to other systems,
the Company decided to make corrections for compliance by programming rather
than through file conversion. The program corrections were completed in May
1998. All programs are tested individually and in a systems test mode. For all
practical purposes the Company has completed this testing and believes it is Y2K
compliant. The Company will continue to test personal computers used within the
Company on an individual basis and expects to have this testing completed during
the fourth quarter of the Company's 1999 fiscal year.
The Company's Plant Engineering and Maintenance Department was charged with the
assessment and remediation of any Y2K problems in plant production equipment and
in any building infrastructure equipment. Each machine will be checked
individually and steps taken at that time to update for Y2K compliance. The
completion of this project is scheduled for July 1999 and is on schedule.
The Company's Purchasing and Information Systems Departments have contacted all
of the Company's major suppliers to determine their readiness for their
compliance with the Y2K issue. The responses are being monitored and the
Purchasing Department will contact any major supplier that has reported they may
have a problem with being Y2K compliant by the start of the calendar year 2000.
The largest exposure appears to be the Company's interface with chassis
manufacturers for order processing. The Company believes these order processing
systems to be year 2000 compliant based on statements from representatives of
the companies involved. The chassis suppliers have also advised the Company that
the chassis are year 2000 compliant.
The Company does not believe that possible noncompliance with Y2K issues by its
dealers will have a material impact on the ability of its dealers to purchase
and sell products of the Company.
The total cost associated with the modifications required to be Y2K compliant
are not expected to exceed $300,000 of which approximately $280,000 has been
expensed ($30,000 in fiscal 1999).
At this time, the Company believes it has addressed all Y2K issues that may
arise, therefore, no contingency plan has been developed. If during the
Company's in-house testing or if information is received from an outside source
that they would be unable to be Y2K compliant, the Company will then develop an
appropriate contingency plan to address Y2K problems that may arise.
Readers are cautioned that forward-looking statements contained in the Y2K
update should be read in conjunction with the Company's disclosures under the
heading: "FORWARD LOOKING INFORMATION."
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
10
Part II
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on page 13.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
11
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 July 2, 1999 /s/ Bruce D. Hertzke
------------------ ------------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, and President
(Principal Executive Officer)
Date July 2, 1999 /s/ Edwin F. Barker
------------------ ------------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
12
EXHIBIT INDEX
10j. Amended and restated Winnebago Industries, Inc. Executive Share Option
Plan.
27 Financial Data Schedule.
13
EXHIBIT 10j.
WINNEBAGO INDUSTRIES, INC.
EXECUTIVE SHARE OPTION PLAN
(Amended and Restated Effective July 1, 1999)
TABLE OF CONTENTS
ARTICLE PAGE
- --------------------------------------------------------------------------------
ARTICLE I
PURPOSE ................................................................. 1
ARTICLE II
DEFINITIONS AND CONSTRUCTION ............................................ 1
ARTICLE III
OPTION GRANT ............................................................ 3
ARTICLE IV
OPTION EXERCISE ......................................................... 6
ARTICLE V
AMENDMENT OR TERMINATION ................................................ 7
ARTICLE VI
ADMINISTRATION .......................................................... 8
ARTICLE VII
TRUST PROVISIONS ........................................................ 10
ARTICLE VIII
MISCELLANEOUS PROVISIONS ................................................ 10
WINNEBAGO INDUSTRIES, INC.
EXECUTIVE SHARE OPTION PLAN
ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the Plan is to provide stock options to
certain key individuals, commensurate with their contributions to the success of
the Employer, in a form that will provide incentives and rewards for superior
performance, encourage the recipients to continue in the employment of the
Employer, and allow the recipients to diversify their investment portfolios.
1.2 INTENT. The Plan is intended to be a nonqualified stock option plan
within the meaning of section 83 of the Code. The Plan is not intended to be a
plan covered by the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
As used herein, the following capitalized words and phrases shall have
the respective meanings set forth below
2.1 "BENEFICIARY" means the person or persons designated by a
Participant, pursuant to Section 3.7, to exercise an Option after the
Participant's death.
2.2 "BOARD OF DIRECTORS" or "BOARD" means the board of directors of the
Employer.
2.3 "CHANGE OF CONTROL" for the purposes of the Plan shall mean the
time when (i) any Person, becomes an Acquiring Person, or (ii) individuals who
shall qualify as Continuing Directors of the Company shall have ceased for any
reason to constitute at least a majority of the Board of Directors of the
Company; provided, however, that in the case of either clause (i) or (ii) a
Change of Control shall not be deemed to have occurred if the event shall have
been approved prior to the occurrence thereof by a majority of the Continuing
Directors who shall then be members of such Board of Directors, and in the case
of clause (i), a Change of Control shall not be deemed to have occurred upon the
acquisition of stock of the Company by a pension, profit sharing, stock bonus,
employee stock ownership plan or other retirement plan intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended,
established by the Company or any subsidiary of the Company. (In addition, stock
held by such a plan shall not be treated as outstanding in determining ownership
percentages for purposes of this definition.)
For the purpose of the definition "Change of Control:"
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person is a member of the Board, who is not
an Affiliate or Associate of any Acquiring Person or of any such Acquiring
Person's Affiliate or Associate and was a member of the Board prior to the time
when such Acquiring Person shall have become an Acquiring Person, and (ii) any
successor of a Continuing Director, while such successor is a member of the
Board, who is not an Acquiring Person or any Affiliate or Associate of any
Acquiring Person or a representative or nominee of an Acquiring Person or of any
affiliate or associate of such Acquiring Person and is recommended or elected to
succeed the Continuing Director by a majority of the Continuing Directors.
1
(b) "Acquiring Person" means any person or any individual or group of
Affiliates or Associates of such Person who acquires the beneficial ownership,
directly or indirectly, of 20% or more of the outstanding stock of the Company
if such acquisition occurs in whole or in part, except that the term "Acquiring
Person" shall not include a Hanson Family Member or an Affiliate or Associate of
a Hanson Family Member.
(c) "Affiliate" means a person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
(d) "Associate" means (1) any corporate, partnership, limited liability
company, entity or organization (other than the Company or a majority-owned
subsidiary of the Company) of which such a Person is an officer, director,
member, or partner or is, directly or indirectly the beneficial owner of ten
percent (10%) or more of any class of equity securities, (2) any trust or fund
in which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, (3) any relative or
spouse of such person, or any relative of such spouse, or (4) any investment
company for which such person or any Affiliate of such person serves as
investment advisor.
(e) "Hanson Family Member" means John K. Hanson and Luise V. Hanson
(and the executors or administrators of their estates), their lineal descendants
(and the executors or administrators of their estates), the spouses of their
lineal descendants (and the executors or administrators of their estates), and
the John K. and Luise V. Hanson Foundation.
(f) "Company" means Winnebago Inc., an Iowa corporation.
(g) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust, unincorporated
organization or government or political subdivision thereof.
2.4 "CODE" means the Internal Revenue Code of 1986, any amendments
thereto, and any regulations or rulings issued thereunder.
2.5 "COMMITTEE" means the Winnebago Compensation Committee appointed in
accordance with Section 6.1.
2.6 "EFFECTIVE DATE" means April 1, 1997 as originally adopted by the
Board of Directors. The effective date of this amended and restated plan is July
1, 1999.
2.7 "EMPLOYEE" means any key individual, including but not limited to a
person in an executive position with the Employer, who is employed by the
Employer.
2.8 "EMPLOYER" means Winnebago Industries, Inc. and any successor
thereto.
2.9 "ERISA" means the Employee Retirement Income Security Act of 1974,
any amendments thereto, and any regulations or rulings issued thereunder.
2.10 "EXERCISE DATE" means, with respect to any Option, the date on
which the Option is exercised by a Participant.
2.11 "EXERCISE PERIOD" means the period during which a Participant may
exercise an Option, as determined under Section 4.1.
2.12 "EXERCISE PRICE" means the price to be paid by a Participant to
exercise an Option, as determined under Section 3.3.
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2.13 "GRANT DATE" means, with respect to any Option, the date on which
the Option Agreement is executed by the Employer and the Participant.
2.14 "MARKET PRICE" means the closing price of a share of Stock
reflected in the consolidated trading tables of the Wall Street Journal
(presently the NYSE Composite Transactions), or other recognized market source,
as determined by the Committee, on the applicable date of reference hereunder,
or if there is no sale on such date, then the closing price on the last previous
day on which a sale is reported. In the case of open-end mutual fund shares, the
Market Price means the net asset value per share as reported by the fund in such
publication on the applicable date of reference hereunder.
2.15 "OPTION" means the right of a Participant, granted by the Employer
in accordance with Section 3.2, to purchase Stock from the Employer at the
Exercise Price.
2.16 "OPTION AGREEMENT" means an agreement setting forth the terms of
an Option executed by the Employer and a Participant pursuant to Section 3.2.
2.17 "PARTICIPANT" means any Employee who has been designated by the
Human Resources Committee of the Board of Directors of the Employer and who has
been granted Options in accordance with the Plan and whose Options have not been
exercised in full.
2.18 "PLAN" means the Winnebago Industries, Inc. Executive Share Option
Plan, as set forth herein and from time to time amended.
2.19 "STOCK" means shares of common or preferred stock of a corporation
listed on a national securities exchange (exclusive of the stock of Winnebago
Industries, Inc.) or NASDAQ, or shares of a regulated investment company
designated by the Committee as subject to purchase through the exercise of an
Option.
2.20 "TERMINATION OF EMPLOYMENT" means an Employee's separation from
the service of the Employer (including all subsidiaries and affiliates of the
Employer) by reason of resignation, discharge, death or other termination. The
Committee may, in its discretion, determine whether any leave or other absence
from service constitutes a Termination of Employment for purposes of the Plan.
2.21 "TRUST" means the trust established pursuant to Article VII to
hold the Stock that is subject to purchase through the exercise of an Option.
2.22 "TRUST AGREEMENT" means an agreement setting forth the terms of
the Trust established pursuant to Article VII.
2.23 "TRUST FUND" means the Stock subject to an Option that is held in
the Trust.
2.24 "TRUSTEE" means the persons or institution acting as trustee of
the Trust.
ARTICLE III
OPTION GRANT
3.1 ELIGIBILITY. Options may be granted to any Employee selected by the
Committee from the key Employees of the Employer who have the capability of
making a substantial contribution to the success of the Employer. In making this
selection and in determining the form and amount of Options, the Committee shall
consider any factors that it deems relevant, including the individual's
functions, responsibilities, value of services to the Employer and past and
potential contributions to the Employer's profitability and growth.
Participation shall commence on the next day following the last Saturday of
November, February, May, or August subsequent to an Employee's selection by the
Committee.
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3.2 GRANT OF OPTION. Options may be granted by the Committee at any
time on or after the Effective Date and prior to the termination of the Plan.
Options may be granted, at the discretion of the Committee, in the form of
outright awards, in exchange for a specified amount of the future compensation
or bonus of the Participant, or in return for the Participant's agreement to
relinquish rights to unfunded, nonqualified deferred compensation that he or she
has accrued but does not have a current right to receive. While a Participant
may agree to exchange all or a portion of any future bonus or incentive
compensation payable to him or her for an Option, in the manner prescribed by
the Committee and prior to the fiscal year in which such compensation is earned,
the maximum percentage of future base compensation which a Participant may
exchange for an Option during a calendar year shall not exceed 30 percent. No
Committee member may take part in any way in determining the amount of any award
of an Opinion to himself or herself.
(a) SUBMISSION OF REQUESTS TO EXCHANGE COMPENSATION. Any specified
exchange of future base compensation or bonus by a Participant for an Option
must be executed by the Participant and the Committee before the beginning of
the calendar year in which the base compensation will be earned or before the
fiscal year in which the bonus will be earned. In the case of a newly eligible
Participant, such specified initial request to exchange compensation shall be
filed with the Committee within 30 days following the effective date of his or
her Plan eligibility and prior to the rendition of any services to which any
exchanged base compensation pertains or prior to the commencement of any
quarterly fiscal period beginning on the next day following the last Saturday of
November, February, May, and August with respect to any specified exchanges of
quarterly bonuses.
(b) GRANT DATE AND OPTION AGREEMENT. Options granted in exchange for a
specified amount of the future base compensation of the Participant shall be
granted in January of each year and shall reflect the requested exchange of base
compensation of the Participant for the calendar year.
Options granted in exchange for a specified amount of the future bonus
of the Participant shall be granted quarterly following the determination of
such bonus as of the last Saturday in November, February, May, and August of
each fiscal year and shall reflect the requested exchange of bonus of the
Participant for the fiscal quarter (excluding any fiscal quarter during which a
Participant's Termination of Employment occurs.) Options granted in the form of
outright awards or in exchange for the Participant's agreement to relinquish
rights to nonqualified deferred compensation which the Participant does not have
a current right to receive may be granted to Participant at any time at the
discretion of the Committee.
Options shall become effective upon the execution by Employer and the
Participant of an Option Agreement specifying the Stock, the number of shares
subject to the Option the Exercise Price, and such other terms and in such form
as the Committee may from time to time determine in accordance with the Plan.
Any items not specified in the Plan shall be specified in the Option Agreement.
(c) EFFECT OF TERMINATION. In the event that a Participant' s
employment with the Employer terminates prior to the grant of his or her Option
in January pertaining to a requested exchange of base compensation, an amount of
compensation equivalent to the amount of foregone base compensation, which was
to be exchanged for an Option, through the date of Termination of Employment,
shall be paid to the Participant by the Employer upon his or her Termination of
Employment.
(d) MAXIMUM OPTION GRANTS. The maximum number of underlying cumulative
share units permitted to be covered by all Option grants made to any one
Participant throughout his or her participation in the Plan is that number of
units for which the cumulative Market Price of the Stock, determined as of the
Grant Dates, totals $1,333,333.33
(e) EFFECT OF CASH DIVIDENDS AND DISTRIBUTIONS WITH RESPECT TO STOCK.
All cash dividends and distributions received with respect to Stock shall be
reinvested in additional property of the same kind (or as nearly the same kind
as feasible, if property of the same kind is not available). Any property
acquired
4
through reinvestment will be added to the Stock which is subject to an Option
Agreement. Any Stock representing shares of an open-end regulated investment
company which are acquired through reinvestment of long-term capital gain
dividends and return of capital distributions will be added to the Stock which
is subject to an Option Agreement. Any Stock representing shares of an open-end
regulated investment company which are acquired through reinvestment of ordinary
income dividends and exempt-interest dividends will also be added to the Stock
which is subject to an Option Agreement.
3.3 EXERCISE PRICE. The Exercise Price shall be initially determined by
the Committee but shall be no less than 25 percent and no more than 100 percent
of the Fair Market Value of the Stock on the Grant Date. The Exercise Price
shall be adjusted for the following events:
In the event of a stock dividend, stock split, reverse stock split,
rights offering, recapitalization or similar transaction that materially affects
the Market Price of the Stock, the Committee shall adjust the Exercise Price so
that it retains the same ratio to the Market Price of the Stock as existed
immediately before such transactions, or as otherwise provided in the Option
Agreement. Any Stock acquired because of one of the above events will
immediately be subject to an Option in favor of the Participant on terms
identical to those set forth in the pertinent Option Agreement.
3.4 CONDITIONS OF GRANT. As a condition to the grant of a Stock Option,
the Committee may, in its discretion, require a Participant to enter into one or
more of the following agreements with the Employer on or before the Grant Date:
(a) A covenant not to compete with the Employer, which shall become
effective on the date of Termination of Employment of the Participant with the
Employer and which shall contain such terms and conditions as may be required by
the Committee.
(b) An agreement to remain in the employ of the Employer for at least
six months after the Grant Date of an Option.
3.5 STOCK TO BE HELD IN TRUST. Upon the grant of an Option, the
Employer in accordance with the Trust Agreement, shall instruct the Trustee to
purchase the Stock underlying each Option Agreement as of the day of the Option
Agreement. The Employer shall transfer to the Trustee an amount of funds equal
to the Market Price of the Stock. Such funds shall be applied by the Trustee for
the purpose of payment for such underlying securities. In addition, if on the
date the Committee grants the Option, the principal of the Trust, and any
earnings thereon, are not sufficient to purchase such underlying securities, the
Employer may transfer to the Trustee an amount of funds sufficient to purchase
the underlying securities.
The Trustee shall establish a separate account for each Option
Agreement in which the Trustee shall hold funds to purchase securities, as well
as securities already purchased, underlying the Option Agreement. The Trustee
shall hold the securities in its own name until the Plan Participant exercises
the Option to purchase securities.
3.6 SUBSTITUTION OF ASSETS HELD IN TRUST. The Committee may, in its
discretion, after consultation with the Participant, substitute Stock of equal
Market Price for any Stock subject to purchase through the exercise of an
Option. When that substitution occurs, both parties are required to terminate
the Option Agreement and to adopt a new Option Agreement which awards an Option
of equal Market Price on the new Stock. Such change in Option property shall be
considered the grant of a new Option and the terms of this Plan, including
Articles III and IV, shall apply to the grant of the new Option, except that the
term of the new Option shall not extend beyond the term of the original Option.
The Exercise Price of the new Option shall be the same as the Exercise Price of
the original Option immediately before the substitution.
5
3.7 DESIGNATION OF BENEFICIARY. AS soon as practicable after the grant
of an Option, the Participant shall designate one or more Beneficiaries and
successor Beneficiaries, and may change a Beneficiary designation at any time,
by filing the prescribed form with the Committee. The consent of the
Participant's current Beneficiary shall not be required for a change of
Beneficiary. No Beneficiary shall have any rights under the Plan or an Option
Agreement during the lifetime of the Participant, except as may otherwise be
provided in Section 3.9.
(a) The Beneficiary of a Participant who dies without having designated
a Beneficiary in accordance with this Section 3.7 and who is lawfully married on
the date of death shall be the Participant's surviving spouse.
(b) The Beneficiary of any other Participant who dies without having
designated a Beneficiary in accordance with this Section 3.7 shall be the
Participant's estate.
3.8 GENERAL NON-TRANSFERABILITY. No Option granted under this Plan may
be transferred, assigned, or alienated (whether by operation of law or
otherwise), except as provided herein, and no Option shall be subject to
execution, attachment or similar process. An Option may be exercised only by the
Participant (or the Participant's Beneficiary pursuant to Section 3.7).
ARTICLE IV
OPTION EXERCISE
4.1 EXERCISE PERIOD. A Participant may exercise all or any portion of
an Option at any time during the period beginning six months after the Grant
Date and ending on the earlier of:
(a) twelve months after the Participant's date of death, and
(b) fifteen years after the Grant Date.
4.2 EXERCISE OF VESTED PORTION OF OPTION. A Participant (or the
Participant's Beneficiary pursuant to Section 3.7) may exercise the "Vested
Portion" of an Option in accordance with this Section 4.2. The terms of the
Participant's Option Agreement will determine the Vested Portion of an Option
eligible for exercise in the case of an Option granted to a Participant in the
form of an outright award or in exchange for the Participant's agreement to
relinquish rights to nonqualified deferred compensation which the Participant
does not have a current right to receive. That percentage of a Participant's
Option granted in the form of an outright award or in exchange for the
Participant's agreement to relinquish rights to nonqualified deferred
compensation which the Participant does not have a current right to receive,
which is not a Vested Portion of an Option, shall be forfeited by the
Participant upon Termination of Employment.
The Vested Portion of an Option granted in exchange for the base
compensation of a Participant is 100 percent if the Participant remains in
service with the Employer through the end of the calendar year in which the
Option is granted. If the Participant's service with the Employer is terminated
during the same calendar year in which the Grant Date occurs, he or she may
exercise the Vested Portion of the Option, which is equal to the full number of
payroll periods during which the Participant was in the service of the Employer
during the calendar year in which the Option was granted, divided by 50. That
percentage of a Participant's Option granted in exchange for the base
compensation of a Participant which is not a Vested Portion of the Option shall
be forfeited by the Participant upon Termination of Employment during the
calendar year in which the Option was granted.
6
The Participant shall exercise the Vested Portion of the Option by
giving written notice to the Committee and (i) tendering full payment of the
Exercise Price on or before the date of exercise, or (ii) by obtaining necessary
financing from a financial institution which is utilized to pay the Exercise
Price. The minimum number of share units allowed to be exercised at any one time
is the number of share units for which the Market Price of the Stock totals
$2,500.
In the event that the listing, registration, or qualification of the
Option or the Stock on any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, or the
availability of any exemption therefrom, is necessary as a condition of, or in
connection with, the exercise of the Option, then the Option shall not be
exercised in whole or in part until such listing, registration, qualification,
consent, approval, or exemption has been effected, obtained, or established to
the satisfaction of the Committee.
4.3 DELIVERY OF STOCK. On the date of exercise, or as soon as
practicable thereafter (but in no event later than five business days after the
date of exercise), the Employer shall deliver or cause to be delivered the Stock
then being purchased to the Participant (or the Participant's Beneficiary
pursuant to Section 3.7). In the event that the listing, registration, or
qualification of the Option or the Stock on any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary as a condition of, or in connection with, the exercise of the
Option, then the Option shall not be exercised in whole or in part until such
listing, registration, qualification, consent or approval has been effected or
obtained.
4.4 TAX WITHHOLDING. Whenever Stock is to be delivered upon exercise of
an Option under the Plan, the Employer shall require as a condition of such
delivery
(a) the cash payment by the Participant of an amount sufficient to
satisfy all federal, state and local tax withholding, requirements related
thereto,
(b) the withholding of such amount from any Stock to be delivered to
the Participant,
(c) the withholding of such amount from compensation otherwise due to
the Participant, OR
(d) any combination of the foregoing, at the election of the
Participant with the consent of the Employer. Such election shall be made before
the date on which the amount of tax to be withheld is determined by the
Employer, and such election shall be irrevocable.
4.5 ADDITIONAL WITHHOLDING. With the consent of the Employer, the
Participant may elect a greater amount of withholding, not to exceed the
estimated amount of the Participant's total tax liability with respect to the
delivery of Stock under the Plan. Such election shall be made at the same time
and in the same manner as provided under Section 4.4.
4.6 FAILURE TO EXERCISE. No Option shall be exercised, in whole or in
part, after the end of the Exercise Period and the Employer shall have no
obligation to deliver or cause to be delivered to the Participant (or the
Participants Beneficiary or Assignee) the Stock subject to such Option.
ARTICLE V
AMENDMENT OR TERMINATION
5.1 PLAN AMENDMENT. The Board may, from time to time in its discretion,
amend any provision of the Plan, in whole or in part, with respect to any
Participant or group of Participants. Such amendment shall be effective as of
the date specified therein and shall be binding upon the Committee, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan.
7
5.2 PLAN TERMINATION. The Plan shall terminate on the fifteenth
anniversary of the original Effective Date or such earlier date as the Board may
determine in its discretion. Such termination shall be effective as of the date
determined by the Board and shall be binding upon the Committee, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan. Options shall continue to be exercisable after the effective date of
such termination, and may be exercised in accordance with Article IV, but no new
Options shall be granted. However, in the event of a termination of the Plan in
connection with compliance with or any addition or change in the Code or ERISA,
federal or state securities laws, or any other law or regulations, all Options
shall be required to be exercised immediately.
5.3 AMENDMENT OF OPTIONS. An Option may be amended by the Committee at
any time if the Committee determines that an amendment is necessary or advisable
as a result of:
(a) any addition to or change in the Code or ERISA, a federal or state
securities law or any other law or regulation, which occurs after the Grant Date
and by its terms applies to the Option,
(b) any substitution of stock held in Trust pursuant to Section 3.6,
(c) any Plan amendment pursuant to Section 5.1, or Plan termination
pursuant to Section 5.2, provided that the amendment does not materially affect
the terms, conditions and restrictions applicable to the Option, or
(d) any circumstances not specified in Paragraphs (a), (b), or (c),
with the consent of the Participant.
5.4 CHANGE OF CONTROL. Notwithstanding any other provision of the Plan
or an Option Agreement, in the event of a Change of Control:
(a) the Participant shall not be required to remain in the employ of
the Employer for at least six months after the Grant Date of an Option under
Section 3.4(b),
(b) the Exercise Period under Section 4.1 shall not end prior to six
months after such Change of Control,
(c) an Option Agreement shall not be amended by the Committee under
Section 5.3 for any reason without the consent of the Participant, and
(d) an Option may be terminated by the Committee on any date after a
Change of Control, in its sole discretion and without the consent of the
Participant, if the Committee makes a cash payment to the Participant on such
date in an amount equal to the Fair Market Value of the Stock subject to such
Option, reduced by the Exercise Price, and multiplied by the number of shares
subject to such Option.
ARTICLE VI
ADMINISTRATION
6.1 THE COMMITTEE. The Plan shall be administered by a Committee
consisting of one or more persons appointed by the Board of Directors. The
Committee shall act by a majority of its members at the time in office and may
take action either by vote at a meeting or by consent in writing without a
meeting.
(a) The Board may remove any member of the Committee at any time, with
or without cause, and may fill any vacancy. If a vacancy occurs, the remaining
member or members of the Committee shall have full authority to act.
8
(b) Any member of the Committee may resign by written resignation
delivered to the Board. Any such resignation shall become effective upon its
receipt by the Board or on such other date as agreed to by the Board and the
resigning member.
6.2 POWERS OF THE COMMITTEE. In carrying out its duties with respect to
the general administration of the Plan, the Committee shall have, in addition to
any other powers conferred by the Plan or by law, the following powers:
(a) to determine eligibility to participate in the Plan and eligibility
to receive Options;
(b) to grant Options, and to determine the form. amount and timing of
such Options;
(c) to determine the terms and provisions of the Option Agreements, and
to modify such Option Agreements as provided in Section 5.3,
(d) to substitute stock held in Trust as provided in Section 3.6;
(e) to maintain all records necessary for the administration of the
Plan;
(f) to prescribe, amend, and rescind rules for the administration of
the Plan to the extent not inconsistent with the terms thereof,
(g) to direct the Trustee respecting investment of the Trust Fund;
(h) to appoint such individuals and subcommittees as it deems desirable
for the conduct of its affairs and the administration of the Plan;
(i) to employ counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the Plan; and
(j) to perform any other acts necessary, and proper for the conduct of
its affairs and the administration of the Plan, except those reserved by the
Board.
6.3 DETERMINATIONS BY THE COMMITTEE. The Committee shall interpret and
construe the Plan and the Option Agreements. and its interpretations and
determinations shall be conclusive and binding on all Participants,
Beneficiaries and any other persons claiming an interest under the Plan or any
Option Agreement. The Committee's interpretations and determinations under the
Plan and Option Agreements need not be uniform and may be made by it selectively
among Participants, Beneficiaries and any other persons whether or not they are
similarly situated. The failure of the Committee to strictly enforce the terms
and conditions of the Plan or the Option Agreement shall not constitute a waiver
of any provision of the Plan or the Option Agreement. No Participant may rely on
any act or statement of the Committee or anyone charged with the administration
of the Plan which is inconsistent with any of the terms and conditions of the
Plan or the Option Agreement.
6.4 INDEMNIFICATION OF THE COMMITTEE. The Employer shall indemnify and
hold harmless each member of the Committee against any and all expenses and
liabilities arising out of such member's action or failure to act in such
capacity excepting only expenses and liabilities arising out of such member's
own willful misconduct or gross negligence.
(a) Expenses and liabilities against which a member of the Committee is
indemnified hereunder shall include, without limitation, the amount of any
settlement or judgment, costs, counsel fees and related charges reasonably
incurred in connection with a claim asserted or a proceeding brought against him
or the settlement thereof, provided that the Employer shall not be liable for
any settlement to which it does not consent but such consent shall not be
unreasonably withheld.
9
(b) This right of indemnification shall be in addition to any other
rights to which any member of the Committee may be entitled.
(c) The Employer may, at its own expense, settle any claim asserted or
proceeding brought against any member of the Committee when such settlement
appears to be in the best interests of the Employer, provided that such
settlement includes a complete release from liability of such member and is
otherwise reasonably acceptable to such member.
The provisions of this Section 6.4 are for the benefit of each member
of the Committee, his or her heirs, successors and assigns and as to each such
member shall survive the termination of his or her service as such. Any
amendment of this Section 6.4 shall not materially impair the rights of members
and former members of the Committee thereunder as to any period prior to such
amendment.
6.6 EXPENSES OF THE COMMITTEE. The members of the Committee shall serve
without compensation for services as such. All expenses of the Committee shall
be paid by the Employer.
ARTICLE VII
TRUST PROVISIONS
7.1 ESTABLISHMENT OF THE TRUST. The Trust shall be established to hold
all Stock contributed by the Employer pursuant to Section 3.5. Except as
otherwise provided in Section 7.2, and Section 12 of the Trust Agreement, the
Trust shall be irrevocable and no portion of the Trust Fund shall be used for
any purpose other than the delivery of Stock pursuant to the exercise of an
Option, and the payment of expenses of the Plan and Trust.
7.2 TRUST STATUS. The Trust is intended to be a grantor trust, within
the meaning of section 671 of the Code. of which the Employer is the grantor,
and this Plan is to be construed in accordance with that intention.
Notwithstanding any other provision of this Plan, the Trust Fund shall remain
the property of the Employer and shall be subject to the claims of its creditors
in the event of its bankruptcy or insolvency. No Participant shall have any
priority claim on the Trust Fund or any security interest or other right
superior to the rights of a general creditor of the Employer.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 HEADINGS. The headings of Articles, Sections and Paragraphs are
solely for convenience of reference. If there is any conflict between such
headings and the text of this Plan, the text shall control.
8.2 GENDER. Unless the context clearly requires a different meaning,
all pronouns shall refer indifferently to persons of any gender.
8.3 SINGULAR AND PLURAL. Unless the context clearly requires a
different meaning, singular terms shall also include the plural and vice versa.
8.4 GOVERNING LAW. Except to the extent preempted by federal law the
construction and operation of the Plan shall be governed by the laws of the
State of Iowa without regard to the choice of law principles of such state.
8.5 SEVERABILITY. If any provision of this Plan is held illegal or
invalid by any court or governmental authority for any reason, the remaining
provisions shall remain in full force and effect and shall be construed and
enforced in accordance with the purposes of the Plan as if the illegal or
invalid provision did not exist.
10
8.6 NO OBLIGATION TO EXERCISE. The granting of an Option shall impose
no obligation upon a Participant to exercise such Option.
8.7 NO RIGHTS OF SHAREHOLDER. Neither the Participant or, a
Beneficiary shall be, or shall have any of the rights and privileges of, a
stockholder with respect to any Stock purchasable or issuable upon the exercise
of an Option, prior to the date of exercise of such Option.
8.8 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in the Plan
shall be deemed to give any person the right to be retained in the employ of the
Employer, or to interfere with the right of the Employer to discharge any person
at any time without regard to the effect that such discharge shall have upon
such person's rights or potential rights, if any, under the Plan. The provisions
of the Plan are in addition to, and not a limitation on, any rights that a
Participant may have against the Employer by reason of any employment or other
agreement with the Employer.
8.9 NOTICES. Unless otherwise specified in an Option Agreement, any
notice to be provided under the Plan to the Committee shall be mailed (by
certified mail, postage prepaid) or delivered to the Committee in care of the
Employer at its executive offices, and any notice to the Participant shall be
mailed (by certified mail, postage prepaid) or delivered to the Participant at
the current address shown on the payroll records of the Employer. No notice
shall be binding on the Committee until received by the Committee, and no notice
shall be binding on the Participant until received by the Participant.
11
5
3-MOS
AUG-28-1999
MAY-29-1999
56,452
0
59,573
1,354
63,022
205,993
119,386
82,253
285,162
88,744
0
0
0
12,937
127,953
285,162
191,546
191,546
157,804
157,804
12,126
0
(670)
22,286
7,675
14,611
0
0
0
14,611
.66
.65
