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 25, 2000
-------------------------------------------------
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: (641) 585-3535
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 20,543,424 shares of $.50 par value common stock outstanding on
January 4, 2001.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets (Interim period information 1 & 2
unaudited)
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial 5 - 7
Statements
Management's Discussion and Analysis of Financial Condition 8 - 10
and Results of Operations
PART II. OTHER INFORMATION 11 & 12
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
NOVEMBER 25, AUGUST 26,
ASSETS 2000 2000
- ---------------------------------------------------- ------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 62,208 $ 51,443
Receivables, less allowance for doubtful
accounts ($1,050 and $1,168, respectively) 15,592 32,045
Dealer financing receivables, less allowance
for doubtful accounts ($35 and $27, respectively) 37,946 32,696
Inventories 91,268 85,707
Prepaid expenses 4,164 3,952
Deferred income taxes 7,675 7,675
------------ ------------
Total current assets 218,853 213,518
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Land 1,138 1,138
Buildings 45,680 45,219
Machinery and equipment 80,075 78,099
Transportation equipment 5,526 5,414
------------ ------------
132,419 129,870
Less accumulated depreciation 85,806 84,415
------------ ------------
Total property and equipment, net 46,613 45,455
------------ ------------
INVESTMENT IN LIFE INSURANCE 21,402 21,028
------------ ------------
DEFERRED INCOME TAXES, NET 20,635 20,635
------------ ------------
OTHER ASSETS 7,704 8,050
------------ ------------
TOTAL ASSETS $ 315,207 $ 308,686
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
NOVEMBER 25, AUGUST 26,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 2000
- -------------------------------------------------------- ------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 31,494 $ 26,212
Income tax payable 13,677 10,381
Accrued expenses:
Insurance 5,554 5,384
Product warranties 7,507 8,114
Accrued compensation 9,470 13,924
Promotional 4,933 3,145
Other 3,924 4,675
------------ ------------
Total current liabilities 76,559 71,835
------------ ------------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 62,928 61,942
------------ ------------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: issued 25,883,000 and 25,878,000
shares, respectively 12,941 12,939
Additional paid-in capital 22,057 21,994
Reinvested earnings 204,095 195,556
------------ ------------
239,093 230,489
Less treasury stock, at cost 63,373 55,580
------------ ------------
Total stockholders' equity 175,720 174,909
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 315,207 $ 308,686
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements
2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
================================================================================
In thousands except per share data
THIRTEEN WEEKS ENDED
NOVEMBER 25, NOVEMBER 27,
2000 1999
------------ ------------
Net revenues $ 164,167 $ 184,946
Cost of goods sold 141,684 155,797
------------ ------------
Gross profit 22,483 29,149
------------ ------------
Operating expenses:
Selling 6,339 6,489
General and administrative 2,764 4,600
------------ ------------
Total operating expenses 9,103 11,089
------------ ------------
Operating income 13,380 18,060
Financial income 971 653
------------ ------------
Income before tax and cumulative effect of a change in
accounting method 14,351 18,713
Provision for taxes 4,755 6,332
------------ ------------
Income before cumulative effect of a change in
accounting method 9,596 12,381
Cumulative effect on prior years of the accounting
method change (1,050) --
------------ ------------
Net income $ 8,546 $ 12,381
============ ============
Earnings per share-basic (Note 8):
Income before cumulative effect of a change
in accounting method $ .45 $ .56
Cumulative effect on prior years of the accounting
method change (.05) --
------------ ------------
Net income $ .40 $ .56
============ ============
Number of shares used in per share
calculations-basic (Note 8) 21,101 22,114
============ ============
Earnings per share-diluted (Note 8):
Income before cumulative effect of a change in
accounting method $ .45 $ .55
Cumulative effect on prior years of the accounting
method change (.05) --
------------ ------------
Net income $ .40 $ .55
============ ============
Number of shares used in per share
calculations-diluted (Note 8) 21,280 22,531
============ ============
Proforma information for the adoption of SAB101
Net revenues $ 164,167 $ 187,096
Net income 9,596 12,436
Earnings per share - basic .45 .56
Earnings per share - diluted .45 .55
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands THIRTEEN WEEKS ENDED
NOVEMBER 25, NOVEMBER 27,
2000 1999
------------ ------------
Cash flows from operating activities:
Net income $ 9,596 $ 12,381
Change in accounting method (1,050) --
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,791 1,526
Other 117 81
Change in assets and liabilities:
Decrease in receivable and other assets 16,112 2,470
(Increase) decrease in inventories (5,561) 937
Increase (decrease) in accounts payable and accrued
expenses 1,428 (16,110)
Increase in income taxes payable 3,296 6,332
Increase in postretirement benefits 2,323 1,619
------------ ------------
Net cash provided by operating activities 28,052 9,236
------------ ------------
Cash flows used by investing activities:
Purchases of property and equipment (2,971) (2,992)
Investments in dealer receivables (24,254) (28,971)
Collections of dealer receivables 18,998 24,953
Other (1,325) (1,513)
------------ ------------
Net cash used by investing activities (9,552) (8,523)
------------ ------------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (8,317) (9,280)
Payment of cash dividends (7) (7)
Other 589 627
------------ ------------
Net cash used by financing activities and
capital transactions (7,735) (8,660)
------------ ------------
Net increase (decrease) in cash and cash equivalents 10,765 (7,947)
Cash and cash equivalents - beginning of period 51,443 48,160
------------ ------------
Cash and cash equivalents - end of period $ 62,208 $ 40,213
============ ============
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 November 25, 2000, the consolidated results of
operations and the consolidated cash flows for the 13 weeks ended November
25, 2000 and November 27, 1999. The statement of income for the 13 weeks
ended November 25, 2000, are not necessarily indicative of the results to
be expected for the full year. The balance sheet data as of August 26, 2000
was derived from audited financial statements, but does not include all
disclosures contained in the Company's Annual Report to Shareholders for
the year ended August 26, 2000. These interim consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto appearing in the Company's Annual Report to
Shareholders for the year ended August 26, 2000.
2. Beginning in the first quarter of fiscal 2001, the Company elected to adopt
the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin
No. 101 ("SAB 101") - Revenue Recognition in Financial Statements, which
the SEC staff issued in December 1999. SAB 101 sets forth the SEC's views
concerning revenue recognition, the effect of which on the Company is to
record revenue upon delivery of products to Winnebago Industries' dealers
rather than upon shipment by the Company. This change requires an
adjustment to retained earnings in the Company's first quarter 2001
results, which reflects the cumulative effect on the prior year's results
due to the application of SAB 101. Pro forma information for the first
quarter of fiscal 2000 is disclosed on the Company's Unaudited Consolidated
Statements of Income (page 3 of this report).
3. 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 25, August 26,
2000 2000
------------ ------------
Finished goods........... $ 30,257 $ 28,286
Work in process.......... 20,632 19,577
Raw materials............ 62,543 59,674
------------ ------------
113,432 107,537
LIFO reserve............. (22,164) (21,830)
------------ ------------
$ 91,268 $ 85,707
============ ============
4. On October 19, 2000, the Company entered into an unsecured Credit Agreement
with Wells Fargo Bank, National Association. The Credit Agreement provides
the Company with a line of credit of $20,000,000 until January 31, 2002, at
an interest rate of either (1) a variable rate per annum of one percent
below the Bank's prime rate in effect from time to time or (2) a fixed rate
per annum determined by the Bank to be one percent above LIBOR, as selected
by the Company in accordance with the Credit Agreement. The Credit
Agreement contains covenants that, among other matters, impose certain
limitations on mergers, transfers of assets and encumbering or otherwise
pledging the Company's assets. In addition, the Company is required to
satisfy certain financial covenants and tests relating to tangible net
worth, total liabilities and current ratio. As of November 25, 2000, the
Company was in compliance with these financial covenants. There were no
outstanding borrowings under the line of credit at November 25, 2000.
5
5. 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 $216,763,000 and
$219,873,000 under repurchase agreements with lending institutions as of
November 25, 2000 and August 26, 2000, respectively. Included in these
contingent liabilities as of November 25, 2000 and August 26, 2000 are
approximately $4,974,000 and $6,846,000, respectively, of certain dealer
receivables subject to recourse agreements with Bank of America Specialty
Group (formerly NationsBank Specialty Lending Unit) and Conseco Finance
Servicing Group (formerly Green Tree Financial).
6. For the periods indicated, the Company paid cash for the following (dollars
in thousands):
THIRTEEN WEEKS ENDED
------------------------------
November 25, November 27,
2000 1999
------------ ------------
Interest $ -- $ --
Income taxes -- --
7. On March 15, 2000, 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. As of January 4, 2001, 1,099,066 shares were
repurchased for an aggregate consideration of $13,932,000 under this
repurchase authorization.
8. The following table reflects the calculation of basic and diluted earnings
per share for the 13 weeks ended November 25, 2000 and November 27, 1999:
THIRTEEN WEEKS ENDED
---------------------------
NOVEMBER 25, NOVEMBER 27,
IN THOUSANDS EXCEPT PER SHARE DATA 2000 1999
------------ ------------
EARNINGS PER SHARE - BASIC:
--------------------------
Net income $ 8,546 $ 12,381
------------ ------------
Weighted average shares outstanding 21,101 22,114
------------ ------------
Earnings per share - basic $ .40 .56
------------ ------------
EARNINGS PER SHARE - ASSUMING DILUTION:
--------------------------------------
Net income $ 8,546 $ 12,381
------------ ------------
Weighted average shares outstanding 21,101 22,114
Dilutive impact of options outstanding 179 417
------------ ------------
Weighted average shares & potential
dilutive shares outstanding 21,280 22,531
------------ ------------
Earnings per share - assuming dilution $ .40 $ .55
------------ ------------
9. The Company defines its operations into two business segments: Recreational
vehicles and other manufactured products and dealer financing. Recreation
vehicles and other manufactured products includes all data relative to the
manufacturing and selling of the Company's Class A, B and C motor home
products as well as sales of component products for other manufacturers and
recreation vehicle related parts and service revenue. Dealer financing
includes floorplan and rental unit financing for a limited number of the
Company's dealers. Management focuses on operating income as a segment's
measure of profit or loss when evaluating a segment's financial
performance. Operating income is before interest expense, interest income,
and income taxes. A variety of balance sheet ratios are used by management
to measure the business. Maximizing the return from each segment's assets
excluding cash and cash equivalents is the primary focus. Identifiable
assets are those assets used in the operations of each industry segment.
General corporate assets consist of cash and cash equivalents, deferred
income taxes and other corporate assets not related to the two business
segments. General corporate income and expenses include administrative
costs. Inter-segment sales and expenses are not significant.
6
For the 13 weeks ended November 25, 2000 and November 27, 1999, the
Company's segment information is as follows:
RECREATION
VEHICLES & OTHER
MANUFACTURED DEALER GENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
-----------------------------------------------------------------------------------------
13 WEEKS ENDED NOVEMBER 25, 2000
Net revenues $ 163,138 $ 1,029 $ -- $ 164,167
Operating income (loss) 12,484 1,022 (126) 13,380
Identifiable assets 182,171 38,634 94,402 315,207
13 WEEKS ENDED NOVEMBER 27, 1999
Net revenues $ 184,076 $ 870 $ -- $ 184,946
Operating income (loss) 17,345 841 (126) 18,060
Identifiable assets 181,790 29,527 70,485 281,802
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended November 25, 2000 Compared to Thirteen Weeks Ended November
27, 1999
Net revenues for recreation vehicles and other manufactured products for the 13
weeks ended November 25, 2000 were $163,138,000, a decrease of $20,938,000, or
11.4 percent from the 13-week period ended November 27, 1999. Motor home unit
sales (Class A and C) were 2,197 units, a decrease of 428 units, or 16.3
percent, during the first quarter of fiscal 2001 compared to the first quarter
of fiscal 2000. The percentage decrease in net revenues in the first quarter of
fiscal 2001 was less than the percentage decrease in motor home unit sales for
that period as a result of the Company's sales of more units, as a percentage of
the total unit sales, with the higher-priced slideout option during the first
quarter of fiscal 2001. A slowing U.S. economy, increased interest rates and a
decline in consumer confidence levels contributed to reductions in the Company's
net revenues and unit sales. The Company's expectations for the next couple of
quarters remain below prior year levels. However, due to demographic studies,
the long-term outlook for motor home sales continues to appear very favorable as
the industry's prime target market of people age 50 and older is growing and is
expected to continue to grow over the next 30 years. Order backlog for the
Company's Class A and Class C motor homes was approximately 1,420 orders and
2,700 orders at November 25, 2000 and November 27, 1999, respectively. 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.
Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC) were
$1,029,000 for the 13 weeks ended November 25, 2000, an increase of $159,000 or
18.3 percent from the 13-week period ended November 27, 1999. Increased revenues
for dealer financing reflect an increase in interest rates charged and to a
lesser extent, an increase in dealer receivable balances when comparing the
first quarter of 2001 to the first quarter of 2000.
Gross profit, as a percent of net revenues, was 13.7 percent for the 13 weeks
ended November 25, 2000 compared to 15.8 percent for the 13 weeks ended November
27, 1999. The Company's lower volume of production and sales of motor homes
resulted in the lower margins.
Selling expenses were $6,339,000 or 3.9 percent of net revenues during the first
quarter of fiscal 2001 compared to $6,489,000 or 3.5 percent of net revenues
during the first quarter of fiscal 2000. The decrease in dollars can be
attributed primarily to reductions in the Company's advertising costs. The
increase in percentage was caused by the decreased sales volume during the first
quarter of fiscal 2001.
General and administrative expenses were $2,764,000 or 1.7 percent of net
revenues during the 13 weeks ended November 25, 2000 compared to $4,600,000 or
2.5 percent of net revenues during the 13 weeks ended November 27, 1999. The
decreases in dollars and percentage when comparing the two quarters were
primarily due to reductions in employee incentive programs. Also impacting the
two quarter comparison were commitments by the Company to corporate donations
during the first quarter ended November 27, 1999.
The Company had net financial income of $971,000 for the first quarter of fiscal
2001 compared to net financial income of $653,000 for the comparable quarter of
fiscal 2000. During the 13 weeks ended November 25, 2000, the Company recorded
$952,000 of net interest income and gains of $19,000 in foreign currency
transactions. During the 13 weeks ended November 27, 1999, the Company recorded
$626,000 of net interest income and gains of $27,000 in foreign currency
transactions. The increase in interest income when comparing the two periods was
due primarily to higher rates of return earned on available invested cash and
larger cash balances during the first quarter of fiscal 2001.
8
The effective income tax rate decreased to 33.1 percent during the first quarter
of fiscal 2001 from 33.8 percent during the first quarter of fiscal 2000. The
primary reason for the decrease was due to larger amounts of tax-free income
recorded from financial investments during the first quarter of fiscal 2001.
For the 13 weeks ended November 25, 2000, the Company had income before
cumulative effect of a change in accounting method (SAB No. 101) of $9,596,000,
or $.45 per diluted share. The comparable results for the 13 weeks ended
November 27, 1999 was income of $12,381,000, or $.55 per diluted share.
Beginning the first quarter of fiscal 2001, the Company elected to adopt SAB 101
issued by the SEC in December 1999. SAB 101 sets forth the views of the SEC
concerning revenue recognition, the effect of which on the Company is to record
revenue upon delivery of products to dealers rather than upon shipment by the
Company. Adoption of SAB 101 during the 13 weeks ended November 25, 2000
resulted in an adjustment to the Company's income of $1,050,000, or $.05 per
diluted share.
For the first quarter of fiscal 2001, the Company had net income of $8,546,000,
or $.40 per diluted share compared to the first quarter of fiscal 2000's net
income of $12,381,000, or $.55 per diluted share. Net income and earnings per
diluted share decreased by 31.0 percent and 27.3 percent, respectively, when
comparing the first quarter of fiscal 2001 to the first quarter of fiscal 2000.
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally and funds from agreements with financial institutions.
At November 25, 2000, working capital was $142,294,000, an increase of $611,000
from the amount at August 26, 2000. The Company's principal uses of cash during
the 13 weeks ended November 25, 2000 were $24,254,000 of dealer receivable
investments, $8,317,000 for the purchase of shares of the Company's Common Stock
and $2,971,000 for the purchase of property and equipment. The Company's
principal sources of cash during the 13 weeks ended November 25, 2000 were the
collection of $18,998,000 in dealer receivables, decrease in receivable levels
of $16,112,000 and income from operations. The Company's sources and uses of
cash during the 13 weeks ended November 25, 2000 are set forth in the unaudited
consolidated condensed statement of cash flows for that period.
Principal known demands at November 25, 2000 on the Company's liquid assets for
the remainder of fiscal 2001 include approximately $8,300,000 of capital
expenditures and payments of cash dividends. In addition, on March 15, 2000, 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. As
of January 4, 2001, 1,099,066 shares had been repurchased for an aggregate
consideration of $13,932,000 under this authorization.
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.
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 and price of fuel,
significant increase in interest rates, a general slowdown in the economy,
availability of chassis, slower than anticipated sales of new or existing
products, new product introductions by competitors, collections of dealer
receivables, and other factors which may be disclosed throughout this Form 10-Q
or in the Company's Annual Report on Form 10-K for the year ended August 26,
2000. 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
9
results, based on current information available pertaining to the Company,
including the aforementioned risk factors, actual results could differ
materially.
10
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.
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 January 5, 2001 /s/ Bruce D. Hertzke
--------------------------- ----------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, and President
(Principal Executive Officer)
Date January 5, 2001 /s/ Edwin F. Barker
--------------------------- ----------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
12