SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) for the fiscal year ended August 25, 2001; or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _______________ to _______________
Commission File Number 1-6403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0802678
(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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------------- -------------------------------------
Common Stock ($.50 par value) The New York Stock Exchange, Inc.
and Preferred Share Purchase Rights Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Annual Report on Form
10-K or any amendment to this Annual Report on Form 10-K _____.
Aggregate market value of the common stock held by non-affiliates of the
registrant on November 19, 2001: $375,376,638 (12,944,022 shares at closing
price on New York Stock Exchange of $29).
Common stock outstanding on November 19, 2001, 20,620,294 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Winnebago Industries, Inc. Annual Report to Shareholders for the fiscal
year ended August 25, 2001, portions of which are incorporated by reference
into Part II hereof.
2. The Winnebago Industries, Inc. Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held January 15, 2002, portions of which are
incorporated by reference into Part III hereof.
WINNEBAGO INDUSTRIES, INC.
FORM 10-K
Report for the Fiscal Year Ended August 25, 2001
PART I
ITEM 1. Business
GENERAL
Winnebago Industries, Inc. is a leading U.S. manufacturer of motor homes,
self-contained recreation vehicles used primarily in leisure travel and outdoor
recreation activities. Motor home sales by the Company represented more than 86
percent of its revenues in each of the past five fiscal years. The Company's
motor homes are sold through dealer organizations primarily under the Winnebago,
Itasca, Rialta and Ultimate brand names.
Other products manufactured by the Company consist principally of extruded
aluminum, commercial vehicles, and a variety of component products for other
manufacturers. Finance revenues consisted of revenues from floor plan unit
financing for a limited number of the Company's dealers.
The Company was incorporated under the laws of the state of Iowa on February 12,
1958, and adopted its present name on February 28, 1961. The Company's executive
offices are located at 605 West Crystal Lake Road in Forest City, Iowa. Unless
the context indicates otherwise, the term "Company" refers to Winnebago
Industries, Inc. and its subsidiaries.
FORWARD LOOKING INFORMATION
Certain of the matters discussed in this Annual Report on Form 10-K 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
reactions to actual or threatened terrorist attacks, availability and price of
fuel, a significant increase in interest rates, a further 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
Annual Report on Form 10-K. 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.
1
PRINCIPAL PRODUCTS
The Company determined it was appropriate to define its operations into two
business segments for fiscal 2001 (See Note 12, "Business Segment Information"
in the Company's Annual Report to Shareholders for the year ended August 25,
2001). However, during each of the last five fiscal years, at least 91% of the
revenues of the Company were derived from recreational vehicle products.
The following table sets forth the respective contribution to the Company's net
revenues by product class for each of the last five fiscal years (dollars in
thousands):
Fiscal Year Ended (1)
----------------------------------------------------------------------
August 25, August 26, August 28, August 29, August 30,
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Motor Homes (Class A and C) ......... $ 630,017 $ 695,767 $ 619,171 $ 474,954 $ 387,161
92.4% 92.4% 91.5% 89.0% 86.9%
Other Recreation
Vehicle Revenues (2) ............ 17,808 18,813 16,620 19,222 21,159
2.6% 2.5% 2.5% 3.6% 4.7%
Other Manufactured Products
Revenues (3) .................... 29,768 34,894 38,225 37,133 35,881
4.4% 4.6% 5.6% 7.0% 8.1%
---------- ---------- ---------- ---------- ----------
Total Manufactured
Products Revenues ......... 677,593 749,474 674,016 531,309 444,201
99.4% 99.5% 99.6% 99.6% 99.7%
Finance Revenues (4) ................ 4,241 3,908 2,995 2,076 1,420
.6% .5% .4% .4% .3%
---------- ---------- ---------- ---------- ----------
Total Net Revenues .................. $ 681,834 $ 753,382 $ 677,011 $ 533,385 $ 445,621
100.0% 100.0% 100.0% 100.0% 100.0%
(1) All fiscal years in the table contained 52 weeks.
(2) Primarily recreation vehicle related parts, EuroVan Campers (Class B motor
homes), and recreation vehicle service revenue.
(3) Primarily sales of extruded aluminum, commercial vehicles and component
products for other manufacturers.
(4) Winnebago Acceptance Corporation (WAC) revenues from dealer financing.
Unit sales of the Company's principal recreation vehicles for the last five
fiscal years were as follows:
Fiscal Year Ended (1)
------------------------------------------------------------------
August 25, August 26, August 28, August 29, August 30,
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Unit Sales:
Class A ............................ 5,666 6,819 6,054 5,381 4,834
Class C ............................ 3,410 3,697 4,222 3,390 2,724
---------- ---------- ---------- ---------- ----------
Total Motor Homes .............. 9,076 10,516 10,276 8,771 7,558
Class B Conversions (EuroVan Camper) 703 854 600 978 1,205
(1) All fiscal years in the table contained 52 weeks.
2
The primary use of recreation vehicles for leisure travel and outdoor recreation
has historically led to a peak retail selling season concentrated in the spring
and summer months. The Company's sales of recreation vehicles are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory.
The Company's products are generally manufactured against orders from the
Company's dealers and from time to time to build inventory to satisfy the peak
selling season. As of August 25, 2001, the Company's backlog of orders for Class
A and Class C motor homes was approximately 1,600 units compared to
approximately 1,300 units at August 26, 2000. The Company includes in its
backlog all accepted purchase orders from dealers shippable within the next six
months. Orders in backlog can be canceled or postponed at the option of the
purchaser at any time without penalty and, therefore, backlog may not
necessarily be a measure of future sales.
Presently, the Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally. During the first quarter of fiscal 2001, the Company terminated a
financing and security agreement with Bank of America Specialty Group (formerly
Nations Bank Specialty Lending Unit). On October 19, 2000, the Company entered
into an unsecured Credit Agreement with Wells Fargo Bank Iowa, National
Association. The Credit Agreement provides the Company with a line of credit of
$20,000,000 until January 31, 2002. (See Note 4, "Notes Payable" in the
Company's Annual Report to Shareholders for the year ended August 25, 2001.)
RECREATION VEHICLES
MOTOR HOMES - A motor home is a self-propelled mobile dwelling used primarily as
a temporary dwelling during vacation and camping trips.
Recreation Vehicle Industry Association (RVIA) classifies motor homes into three
types (Class A, Class B and Class C). The Company currently manufactures Class A
and Class C motor homes and converts Class B motor homes.
Class A models are conventional motor homes constructed directly on medium-duty
truck chassis which include the engine and drivetrain components. The living
area and driver's compartment are designed and produced by the recreation
vehicle manufacturer.
Class B models are panel-type trucks to which sleeping, kitchen and toilet
facilities are added. These models also have a top extension added to them for
more head room.
Class C models are mini motor homes built on van-type chassis onto which the
manufacturer constructs a living area with access to the driver's compartment.
Certain models of the Company's Class C units include van-type driver's
compartments built by the Company.
The Company currently manufactures and sells Class A and Class C motor homes
primarily under the Winnebago, Itasca, Rialta and Ultimate brand names. These
motor homes generally provide living accommodations for four to seven persons
and include kitchen, dining, sleeping and bath areas, and in some models, a
lounge. Optional equipment accessories include, among other items, air
conditioning, electric power plant, stereo system and a wide selection of
interior equipment. The Company converts Class B motor homes under the EuroVan
Camper brand name, which are distributed through the Volkswagen dealer
organization.
The Company offers, with the purchase of any new Winnebago, Itasca, or Ultimate
motor home, a comprehensive 12-month/15,000-mile warranty, a 3-year/36,000-mile
warranty on sidewalls, floors and slide-out room assemblies, and a 10-year
fiberglass roof warranty. The Rialta has a 2-year/24,000-mile warranty. The
EuroVan Camper has a 2-year/ 24,000-mile warranty on the conversion portion of
the unit. Estimated warranty costs are accrued at the time of sale of the
warranted products. Estimates of future warranty costs are based on prior
experience and known current events.
The Company's Class A and Class C motor homes are sold by dealers in the retail
market at prices ranging from approximately $49,000 to more than $270,000,
depending on size and model, plus optional equipment and delivery charges.
The Company currently manufactures Class A and Class C motor homes ranging in
length from 27 to 40 feet and 21 to 31 feet, respectively. Class B motor homes
converted by the Company (EuroVan Camper) are 17 feet in length.
3
NON-RECREATION VEHICLE ACTIVITIES
OEM, COMMERCIAL VEHICLES, AND OTHER PRODUCTS
OEM - Original equipment manufacturer sales are sales of component parts such as
aluminum extrusions, metal stamping, rotational moldings, vacuum formed
plastics, fiberglass components, panel lamination, electro-deposition painting
of steel and sewn or upholstered items to outside manufacturers.
Commercial Vehicles - Commercial vehicles sales are shells primarily custom
designed for the buyer's special needs and requirements.
WINNEBAGO ACCEPTANCE CORPORATION (WAC) - WAC engages in floor plan financing for
a limited number of the Company's dealers.
4
PRODUCTION
The Company's Forest City facilities have been designed to provide vertically
integrated production line manufacturing. The Company also operates a fiberglass
manufacturing facility in Hampton, Iowa, a sewing operation in Lorimor, Iowa and
a high-line assembly plant and cabinet door manufacturing facilities in Charles
City, Iowa. The Company manufactures the majority of the components utilized in
its motor homes, with the exception of the chassis, engines, auxiliary power
units and appliances.
Most of the raw materials and components utilized by the Company are obtainable
from numerous sources. The Company believes that substitutes for raw materials
and components, with the exception of chassis, would be obtainable with no
material impact on the Company's operations. Certain components, however, are
produced by only a small group of quality suppliers who presently have the
capacity to supply sufficient quantities to meet the Company's needs. This is
especially true in the case of motor home chassis, where Ford Motor Company and
Freightliner Custom Chassis Corporation are the Company's dominant suppliers.
Decisions by such suppliers to decrease chassis production, utilize chassis
production internally, or shortages, production delays or work stoppages by the
employees of such suppliers could have a material adverse effect on the
Company's ability to produce, and ultimately the results from operations. The
Company purchases Class A and C chassis from Ford Motor Company, Class A chassis
from Freightliner Custom Chassis Corporation, Workhorse Custom Chassis LLC and
Spartan Motors, Inc., and Class C chassis from Chevrolet Motor Division and
Volkswagen of America, Inc. Class B chassis from Volkswagen of America, Inc. are
utilized in the Company's EuroVan Camper. Only three vendors accounted for as
much as five percent of the Company's raw material purchases in fiscal 2001,
Ford Motor Company, Freightliner Custom Chassis Corporation, and Workhorse
Custom Chassis LLC (approximately 38 percent, in the aggregate). Ford Motor
Company has been the Company's primary supplier of chassis for the past four
fiscal years.
Motor home bodies are made from various materials and structural components
which are typically laminated into rigid, lightweight panels. Body designs are
developed with computer design and analysis, and subjected to a variety of tests
and evaluations to meet Company standards and requirements.
The Company manufactures picture windows, lavatories, and most of the doors,
cabinets, shower pans, waste holding tanks, wheel wells and sun visors used in
its recreation vehicles. In addition, the Company produces most of the bucket
seats, upholstery items, lounge and dinette seats, seat covers, decorator
pillows, curtains and drapes.
The Company produces substantially all of the raw, liquid-painted and
powder-coated aluminum extrusions used for interior and exterior trim in its
recreation vehicles. The Company also sells aluminum extrusions to over 85
customers.
DISTRIBUTION AND FINANCING
The Company markets its recreation vehicles on a wholesale basis to a broadly
diversified dealer organization located throughout the United States and, to a
limited extent, in Canada. Foreign sales, including Canada, were less than three
percent of net revenues in fiscal 2001. As of August 25, 2001 and August 26,
2000, the motor home dealer organization in the United States and Canada
included approximately 305 and 340 dealer locations, respectively. During fiscal
2001, eight dealers accounted for approximately 25 percent of motor home unit
sales, and only one dealer accounted for as much as nine percent (9.9%) of motor
home unit sales.
All international sales (except Canada) are now handled by one distributor in
Japan and one distributor in England who market the Company's recreation
vehicles.
5
The Company has sales agreements with dealers which generally have a term of
five years. Many of the dealers are also engaged in other areas of business,
including the sale of automobiles, and many dealers carry one or more
competitive lines. The Company continues to place high emphasis on the
capability of its dealers to provide complete service for its recreation
vehicles. Dealers are obligated to provide full service for owners of the
Company's recreation vehicles, or in lieu thereof, to secure such service at
their own expense from other authorized firms.
At August 25, 2001, the Company had a staff of 31 people engaged in field sales
and service to the motor home dealer organization.
The Company advertises and promotes its products through national RV magazines
and cable TV networks and on a local basis through trade shows, television,
radio and newspapers, primarily in connection with area dealers.
Over 90 percent of recreation vehicle sales to dealers are made on cash terms.
Most dealers are financed on a "floor plan" basis under which a bank or finance
company lends the dealer all, or substantially all, of the purchase price,
collateralized by a lien upon, or title to, the merchandise purchased. Upon
request of a lending institution financing a dealer's purchases of the Company's
products, and after completion of a credit investigation of the dealer involved,
the Company will execute a repurchase agreement. These agreements provide that,
in the event of default by the dealer on the dealer's agreement to pay the
lending institution, the Company will repurchase the financed merchandise. The
agreements provide that the Company's liability will not exceed 100 percent of
the invoice price and provide for periodic liability reductions based on the
time since the date of the invoice. The Company's contingent liability on all
repurchase agreements was approximately $216,784,000 and $219,873,000 at August
25, 2001 and August 26, 2000, respectively. Included in these contingent
liabilities are approximately $3,276,000 and $6,846,000, respectively, of
certain dealer receivables subject to recourse (See Note 6, "Contingent
Liabilities and Commitments" in the Company's Annual Report to Shareholders for
the year ended August 25, 2001). The Company's contingent liability under
repurchase agreements varies significantly from time to time, depending upon
general economic conditions, seasonal shipments, competition, dealer
organization, gasoline availability and price and cost of bank financing.
COMPETITION
The recreation vehicle market is highly competitive, both as to price and
quality of the product. The Company believes its principal marketing advantages
are the quality of its products, its dealer organization, its warranty and
service capability and its marketing techniques. The Company also believes that
its prices are competitive with the competitions' units of comparable size and
quality.
The Company is a leading manufacturer of motor homes. For the 12 months ended
August 31, 2001, RVIA reported factory shipments of 34,000 Class A motor homes,
2,700 Class B motor homes and 13,800 Class C motor homes. Unit sales of such
products by the Company for the last five fiscal years are shown on page 2 of
this report. The Company has numerous competitors and potential competitors in
this industry. The five largest manufacturers represented approximately 70
percent of the combined Class A and Class C motor home markets for the 12 months
ended August 31, 2001, including the Company's sales, which represented
approximately 19 percent of the market. As the Company does not manufacture
Class B motor homes but only completes a conversion package on these units, the
Class B motor home comparison is not included in this report. The Company is not
a significant factor in the markets for its other recreation vehicle products
and its non-recreation vehicle products and services.
6
REGULATION, TRADEMARKS AND PATENTS
The Company is subject to a variety of federal, state and local regulations,
including the National Traffic and Motor Vehicle Safety Act, under which the
National Highway Traffic Safety Administration may require manufacturers to
recall recreational vehicles that contain safety-related defects, and numerous
state consumer protection laws and regulations relating to the operation of
motor vehicles, including so-called "Lemon Laws." The Company is subject to
regulations promulgated by the Occupational Safety and Health Administration
(OSHA). The Company's facilities are periodically inspected by federal or state
agencies, such as OSHA, concerned with workplace health and safety. The Company
believes that its products and facilities comply in all material respects with
the applicable vehicle safety, consumer protection, RVIA and OSHA regulations
and standards. Amendments to any of these regulations and the implementation of
new regulations, however, could significantly increase the cost of
manufacturing, purchasing, operating or selling the Company's products and could
have a material adverse effect on the Company's results of operations. The
failure of the Company to comply with present or future regulations could result
in fines being imposed on the Company, potential civil and criminal liability,
suspension of sales or production, or cessation of operations. In addition, a
major product recall could have a material adverse effect on the Company's
results of operations.
The Company's operations are subject to a variety of federal and state
environmental regulations relating to the use, generation, storage, treatment,
emission and disposal of hazardous materials and wastes and noise pollution.
Although the Company believes that it is currently in material compliance with
applicable environmental regulations, the failure of the Company to comply with
present or future regulations could result in fines being imposed on the
Company, potential civil and criminal liability, suspension of production or
operations, alterations to the manufacturing process, or costly cleanup or
capital expenditures.
The Company has several registered trademarks, including Winnebago, Itasca,
Minnie Winnie, Brave, Chieftain, Sunrise, Adventurer, Spirit, Sunflyer,
Suncruiser, Sundancer, Rialta, Minnie, Ultimate, Ultimate Advantage, Ultimate
Freedom, Horizon and Journey.
RESEARCH AND DEVELOPMENT
During fiscal 2001, 2000, and 1999, the Company spent approximately $2,121,000,
$2,293,000, and $1,978,000, respectively, on research and development
activities. These activities involved the equivalent of 27, 25 and 32 full-time
employees during fiscal 2001, 2000, and 1999, respectively.
HUMAN RESOURCES
As of September 1, 2001, 2000 and 1999, the Company employed approximately
3,325, 3,300 and 3,400 persons, respectively. Of these, approximately 2,675,
2,700 and 2,800 persons, respectively, were engaged in manufacturing and
shipping functions. None of the Company's employees are covered under a
collective bargaining agreement.
7
ITEM 2. Properties
The Company's principal manufacturing, maintenance and service operations are
conducted in multi-building complexes owned by the Company, containing an
aggregate of approximately 1,546,000 square feet in Forest City, Iowa. The
Company also owns 453,000 square feet of warehouse facilities located in Forest
City. The Company leases approximately 412,000 square feet of its unoccupied
manufacturing facilities in Forest City to others. The Company also owns a
manufacturing facility (126,000 square feet) in Hampton, Iowa and manufacturing
facilities (109,000 square feet) in Charles City, Iowa. The Company leases a
storage facility (16,700 square feet) in Hampton, Iowa and a manufacturing
facility (17,200 square feet) in Lorimor, Iowa. Leases on the above leased
facilities expire at various dates, the earliest of which is December 31, 2001.
The Company's facilities in Forest City are located on approximately 780 acres
of land, all owned by the Company.
Most of the Company's buildings are of steel or steel and concrete construction
and are protected from fire with high-pressure sprinkler systems, dust collector
systems, automatic fire doors and alarm systems. The Company believes that its
facilities and equipment are well maintained, in excellent condition and
suitable for the purposes for which they are intended. The Company believes its
facilities will be sufficient to meet its production requirements for the
foreseeable future. Should the Company require increased production capacity in
the future, the Company believes that additional or alternative space adequate
to serve the Company's foreseeable needs would be available.
ITEM 3. Legal Proceedings
The Company is involved in various legal proceedings which are ordinary routine
litigation incident to its business, many of which are covered in whole or in
part by insurance. While it is impossible to estimate with certainty the
ultimate legal and financial liability with respect to this litigation,
management is of the opinion that while the final resolution of any such
litigation may have an impact on the Company's consolidated results for a
particular reporting period, the ultimate disposition of such litigation will
not have any material adverse effect on the Company's financial position,
results of operations or liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
8
Executive Officers of the Registrant
NAME OFFICE (YEAR FIRST ELECTED AN OFFICER) AGE
- --------------------- -------------------------------------------------------------------- -----
Bruce D. Hertzke + Chairman of the Board, Chief Executive Officer and President (1989) 50
Edwin F. Barker Vice President, Chief Financial Officer (1980) 54
Raymond M. Beebe Vice President, General Counsel & Secretary (1974) 59
Robert L. Gossett Vice President, Administration (1998) 50
Brian J. Hrubes Controller (1996) 50
James P. Jaskoviak Vice President, Sales and Marketing (1994) 49
William O'Leary Vice President, Product Development (2001) 52
Robert J. Olson Vice President, Manufacturing (1996) 50
Joseph L. Soczek, Jr. Treasurer (1996) 58
+ Director
Officers are elected annually by the Board of Directors. All of the foregoing
officers have been employed by the Company as officers or in other responsible
positions for at least the last five years, except that Robert L. Gossett was a
Vice President of TCB, Inc. prior to joining the Company in 1998. Mr. Gossett
had been with TCB for at least five years prior to joining the Company. TCB,
Inc. is a nationwide distributor and value-added manufacturer of glass, plastic
and ceramic consumer and packaging industry products.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Reference is made to information concerning the market for the Company's common
stock, cash dividends and related stockholder matters on page 40 of the
Company's Annual Report to Shareholders for the year ended August 25, 2001,
which information is incorporated by reference herein. On October 17, 2001, the
Board of Directors declared a cash dividend of $.10 per common share payable
January 7, 2002 to shareholders of record on December 7, 2001. The Company paid
dividends of $.20 per common share during fiscal years 2001 and 2000.
ITEM 6. Selected Financial Data
Reference is made to the information included under the caption "Selected
Financial Data" on page 1 of the Company's Annual Report to Shareholders for the
year ended August 25, 2001, which information is incorporated by reference
herein.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made to the information under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 17
through 21 of the Company's Annual Report to Shareholders for the year ended
August 25, 2001, which information is incorporated by reference herein.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
As of August 25, 2001, the Company had an investment portfolio of fixed income
securities, which are classified as cash and cash equivalents of $93.8 million.
These securities, like all fixed income investments, are subject to interest
rate risk and will decline in value if market interest rates increase. However,
the Company has the ability to hold its fixed income investments until maturity
and, therefore, the Company would not expect to recognize an adverse impact in
income or cash flows in such an event.
As of August 25, 2001, the Company had dealer financing receivables in the
amount of $40.3 million. Interest rates charged on these receivables vary based
on the prime rate and are adjusted monthly.
9
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company which appear on pages 22
through 37 and the report of the independent accountants which appears on page
38, and the supplementary data under "Interim Financial Information (Unaudited)"
on page 39 of the Company's Annual Report to Shareholders for the year ended
August 25, 2001, are incorporated by reference herein.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Reference is made to the table entitled Executive Officers of the Registrant in
Part One of this report and to the information included under the caption
"Election of Directors" in the Company's Proxy Statement for the Annual Meeting
of Shareholders scheduled to be held January 15, 2002, which information is
incorporated by reference herein.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires the Company's officers and directors and persons who beneficially
own more than 10 percent of the Company's common stock (collectively "Reporting
Persons") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Reporting Persons are required by the SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received or written representations from certain
Reporting Persons that no Forms 5 were required for those persons, the Company
believes that, during fiscal year 2001, all the Reporting Persons complied with
all applicable filing requirements, except that Hanson Capital Partners, L.L.C.
("HCP"), Luise V. Hanson, John V. Hanson, Gerald E. Boman, Mary Jo Boman and
Paul D. Hanson each inadvertently filed a late Form 4 relating to the July 2001
distribution by HCP of a total of 585,000 shares of Common Stock to its members
and the sale in July 2001 by its members of such shares in a total of eight
transactions.
ITEM 11. Executive Compensation
Reference is made to the information included under the caption "Executive
Compensation" in the Company's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held January 15, 2002, which information is
incorporated by reference herein.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the share ownership information included under the caption
"Voting Securities and Principal Holders Thereof" in the Company's Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held January
15, 2002, which information is incorporated by reference herein.
ITEM 13. Certain Relationships and Related Transactions
Reference is made to the information included under the caption "Certain
Transactions with Management" in the Company's Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held January 15, 2002, which information
is incorporated by reference herein.
10
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. The consolidated financial statements of the Company are incorporated by
reference in ITEM 8 and an index to financial statements appears on page
13 of this report.
2. Consolidated Financial Statement Schedules
Winnebago Industries, Inc. and Subsidiaries
Page
----
Report of Independent Auditors on Supplemental Financial
Schedule 14
II. Valuation and Qualifying Accounts 15
All schedules, other than Schedule II, are omitted because of the
absence of the conditions under which they are required or because the
information required is shown in the consolidated financial statements
or the notes thereto.
(a) 3. Exhibits
See Exhibit Index on pages 16 and 17.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
UNDERTAKING
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form S-8 Nos. 2-40316
(which became effective on or about June 10, 1971), 2-82109 (which became
effective on or about March 15, 1983), 33-21757 (which became effective on or
about May 31, 1988), 33-59930 (which became effective on or about March 24,
1993) and 333-31595 (which became effective on or about July 18, 1997).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ Bruce D. Hertzke
-------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, President and Director
(Principal Executive Officer)
Date: November 19, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on, November 19, 2001, by the following persons on behalf
of the Registrant and in the capacities indicated.
SIGNATURE CAPACITY
--------- --------
/s/ Bruce D. Hertzke
- -----------------------------------
Bruce D. Hertzke Chairman of the Board, Chief Executive
Officer, President and Director
(Principal Executive Officer)
/s/ Edwin F. Barker
- -----------------------------------
Edwin F. Barker Vice President, Chief Financial Officer
(Principal Financial Officer)
/s/ Brian J. Hrubes
- -----------------------------------
Brian J. Hrubes Controller
(Principal Accounting Officer)
/s/ Gerald E. Boman
- -----------------------------------
Gerald E. Boman Director
/s/ Jerry N. Currie
- -----------------------------------
Jerry N. Currie Director
/s/ Joseph W. England
- -----------------------------------
Joseph W. England Director
/s/ John V. Hanson
- -----------------------------------
John V. Hanson Director
/s/ Gerald C. Kitch
- -----------------------------------
Gerald C. Kitch Director
/s/ Richard C. Scott
- -----------------------------------
Richard C. Scott Director
/s/ Frederick M. Zimmerman
- -----------------------------------
Frederick M. Zimmerman Director
12
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES *PAGE
- ------------------------------------------- -----
Independent Auditors' Report 38
Consolidated Balance Sheets 22-23
Consolidated Statements of Income 24
Consolidated Statements of Cash Flows 25
Consolidated Statements of Changes in Stockholders' Equity 26
Notes to Consolidated Financial Statements 27-37
* Refers to respective pages in the Company's 2001 Annual Report to
Shareholders, a copy of which is attached hereto, which pages are
incorporated herein by reference.
13
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Winnebago Industries, Inc.
Forest City, Iowa
We have audited the consolidated financial statements of Winnebago Industries,
Inc. and subsidiaries (the Company) as of August 25, 2001 and August 26, 2000
and for each of the three years in the period ended August 25, 2001 and have
issued our report thereon dated October 3, 2001. Such consolidated financial
statements and report are included in your fiscal 2001 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the consolidated financial statement schedule of the Company, as listed in Item
14(a)2. This consolidated financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Minneapolis, Minnesota
October 3, 2001
14
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
================================================================================
(Dollars in thousands)
---------------------------------------------------------------------------
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F
- ---------------------------- ----------- ----------------------- --------- --------- ----------
ADDITIONS
(REDUCTIONS)
BALANCE CHARGED TO BAD DEDUC- BALANCE
AT COST DEBTS TIONS AT END
BEGINNING AND RE- CHARGE- OF
PERIOD AND DESCRIPTION OF PERIOD EXPENSES COVERIES OFFS OTHER PERIOD
- ---------------------------- ----------- ---------- ---------- --------- --------- ----------
Year Ended August 25, 2001:
Allowance for doubtful
accounts receivable $ 1,168 $ (45) $ (31) $ 848 $ - - - $ 244
Allowance for doubtful
dealer receivables 27 79 11 - - - - - - 117
Allowance for doubtful
notes receivable 250 - - - - - - 250 - - - - - -
Year Ended August 26, 2000:
Allowance for doubtful
accounts receivable 960 263 - - - 55 - - - 1,168
Allowance for doubtful
dealer receivables 73 (59) 13 - - - - - - 27
Allowance for doubtful
notes receivable 262 (12) - - - - - - - - - 250
Year Ended August 28, 1999:
Allowance for doubtful
accounts receivable 1,582 (616) - - - 6 - - - 960
Allowance for doubtful
dealer receivables 78 (16) 11 - - - - - - 73
Allowance for doubtful
notes receivable 973 (711) - - - - - - - - - 262
15
EXHIBIT INDEX
3a. Articles of Incorporation previously filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended May 27, 2000
(Commission File Number 1-6403), and incorporated by reference herein.
3b. Amended Bylaws of the Registrant previously filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended February 27, 1999
(Commission File Number 1-6403), and incorporated by reference herein.
4a. Credit Agreement dated October 19, 2000 between Winnebago Industries,
Inc. and Wells Fargo Bank, National Association previously filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
26, 2000 (Commission File Number 1-6403), and incorporated by reference
herein and the First Amendment dated October 19, 2000 previously filed
with the Registrant's Quarterly Report Form 10-Q for the quarter ended
February 24, 2001 (Commission File Number 1-6403), and incorporated by
reference herein.
10a. Winnebago Industries, Inc. Stock Option Plan for Outside Directors
previously filed with the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 29, 1992 (Commission File Number 1-6403), and
incorporated by reference herein.
10b. Amendment to Winnebago Industries, Inc. Deferred Compensation Plan
previously filed with the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 26, 1995 (Commission File Number 1-6403), and
incorporated by reference herein.
10c. Amendment to Winnebago Industries, Inc. Profit Sharing and Deferred
Savings and Investment Plan previously filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 26, 1995 (Commission
File Number 1-6403), and incorporated by reference herein.
10d. Winnebago Industries, Inc. 1987 Non-Qualified Stock Option Plan
previously filed with the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 29, 1987 (Commission File Number 1-6403), and
incorporated by reference herein.
10e. Amendment dated June 20, 2001 to the Winnebago Industries, Inc. Officers'
Incentive Compensation Plan for fiscal 2001.
10f. Winnebago Industries, Inc. Employee's Stock Bonus Plan and Trust
Agreement previously filed with the Registrant's Annual Report on Form
10-K for the fiscal year ended August 31, 1996 (Commission File Number
1-6403) and incorporated by reference herein.
10g. Winnebago Industries, Inc. Directors' Deferred Compensation Plan
previously filed with the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 30, 1997 (Commission File Number 1-6403) and
incorporated by reference herein.
10h. Winnebago Industries, Inc. 1997 Stock Option Plan previously filed with
the Registrant's Annual Report on Form 10-K for the fiscal year ended
August 30, 1997 (Commission File Number 1-6403) and incorporated by
reference herein.
10i. Amendment to Winnebago Industries, Inc. Executive Share Option Plan
previously filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended May 29, 1999 (Commission File Number 1-6403), and
incorporated by reference herein and the Amendment dated January 1, 2001
previously filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended February 24, 2001 (Commission File Number 1-6403), and
incorporated by reference herein.
10j. Winnebago Industries, Inc. Officers' Long-Term Incentive Plan, fiscal
three-year period 2000, 2001 and 2002 previously filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
28, 1999 (Commission File Number 1-6403) and incorporated by reference
herein.
10k. Winnebago Industries, Inc. Officers' Long-Term Incentive Plan, fiscal
three-year period 2001, 2002 and 2003 previously filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
26, 2000 (Commission Report Number 1-6403), and incorporated by reference
herein.
10l. Winnebago Industries, Inc. Rights Plan Agreement previously filed with
the Registrant's Current Report on Form 8-K dated May 3, 2000 (Commission
File Number 1-6403) and incorporated by reference herein.
16
Exhibit Index
Page Two
10m. Winnebago Industries, Inc. Officers' Long-Term Incentive Plan, fiscal
three-year period 2002, 2003 and 2004.
10n. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Bruce D. Hertzke previously filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended February
24, 2001 (Commission File Number 1-6403), and incorporated by reference
herein.
10o. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Edwin F. Barker previously filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended February
24, 2001 (Commission File Number 1-6403), and incorporated by reference
herein.
10p. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Raymond M. Beebe previously filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended February
24, 2001 (Commission File Number 1-6403), and incorporated by reference
herein.
10q. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Robert L. Gossett previously filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
February 24, 2001 (Commission File Number 1-6403), and incorporated by
reference herein.
10r. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and James P. Jaskoviak previously filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
February 24, 2001 (Commission File Number 1-6403), and incorporated by
reference herein.
10s. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Robert J. Olson previously filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended February
24, 2001 (Commission File Number 1-6403), and incorporated by reference
herein.
10t. Executive Change of Control Agreement dated July 12, 2001 between
Winnebago Industries, Inc. and William J. O'Leary.
10u. Winnebago Industries, Inc. Officers' Incentive Compensation Plan for
fiscal 2002.
13. Winnebago Industries, Inc. Annual Report to Shareholders for the year
ended August 25, 2001.
21. List of Subsidiaries.
23. Consent of Independent Auditors.
17
EXHIBIT 10e.
WINNEBAGO INDUSTRIES, INC.
OFFICERS INCENTIVE COMPENSATION PLAN
GROUP A - OFFICERS
FISCAL PERIOD 2000-2001
PLAN AMENDMENT
On June 20, 2001, the Winnebago Industries, Inc. Board of Directors
approved a Plan amendment to the Officers Incentive Plan for fiscal period
2000-2001 as recommended by the Compensation Committee. As provided by the Plan,
the Committee does have the discretion and authority to make any and all
determinations necessary or advisable for administration of the Plan and may
amend or revoke any rule or regulation so established for the proper
administration of the Plan. The Committee exercised its discretion and received
approval from the Board during the third and fourth quarters of fiscal 2001 by
measuring performance using only the EPS element of the Plan against the
financial plan as established. The performance measurement was then expressed as
a percentage (Financial Factor) against the compensation targets previously
established by the Board of Directors in accordance with the Plan.
EXHIBIT 10m.
OFFICERS LONG-TERM INCENTIVE PLAN
FISCAL THREE-YEAR PERIOD
2002, 2003 AND 2004
WINNEBAGO INDUSTRIES, INC.
OFFICERS LONG-TERM INCENTIVE PLAN
FISCAL THREE-YEAR PERIOD 2002, 2003 AND 2004
1. PURPOSE. The purpose of the Winnebago Industries, Inc. Officers Long-Term
Incentive Plan (the "Plan") is to promote the long-term growth and
profitability of Winnebago Industries, Inc. (the "Company") by providing
its officers with an incentive to achieve long-term corporate profit
objectives and to attract and retain officers by providing such officers
with an equity interest in the Company.
2. ADMINISTRATION.
a. HUMAN RESOURCES COMMITTEE. The Plan shall be administered by a
Committee (the "Committee") appointed by the Board of
Directors.
b. POWERS AND DUTIES. The Committee shall have sole discretion
and authority to make any and all determinations necessary or
advisable for administration of the Plan and may amend or
revoke any rule or regulation so established for the proper
administration of the Plan. All interpretations, decisions, or
determinations made by the Committee pursuant to the Plan
shall be final and conclusive.
c. ANNUAL APPROVAL. The Committee must approve the Plan prior to
the beginning of each new fiscal three (3) year plan period.
Each year a new plan will be established for a new three-year
period.
3. PARTICIPATION ELIGIBILITY.
a. Participants must be an officer of the Company with
responsibilities that can have a real impact on the
Corporation's end results.
b. The Committee will approve all initial participation prior to
the beginning of each new program except as provided for in
Section c. below.
c. The President of Winnebago Industries, Inc. will make the
determination on participation for new participants, for
partial awards due to retirement or disability and other
related partial year participation issues necessary to
maintain routine and equitable administration of the Plan.
4. NATURE OF THE PLAN. The long-term incentive award is based upon financial
performance of the Corporation as established by the three (3) year
Management Plan. The Plan is a three (3) year (fiscal) program that
provides for an opportunity for an incentive award based on the
achievement of long-term performance results as measured at the end of the
three (3) year fiscal period.
The financial performance measurements for this Plan will be earnings per share
and return on equity of the Company for this period. These financial performance
measurements will provide an appropriate balance between quality and quantity of
earnings. The Company's formal three-year financial plan will be the basis on
which actual performance will be measured. The beginning of the fiscal year
stockholders' equity at the first year of this period will be used as the base
figure for the calculation of return on equity. Any stock repurchase program,
adopted or completed outside of the three (3) year Management Plan will not be
considered in the earnings per share and the return on equity calculations.
5. METHOD OF PAVMENT. The long-term incentive award will be a performance
stock grant made in restricted shares of the common stock of Winnebago
Industries, Inc. The amount of the participants' long-term incentive award
for the three (3) year fiscal period shall be in direct proportion to the
financial performance expressed as a percentage (Financial Factor) against
predetermined award targets for each participant. The results for the
fiscal three (3) year period will be used in identifying the Financial
Factor to be used for that plan period when calculating the participant's
long-term incentive awards.
The long-term incentive for the officers provides for an opportunity of
25% of the annualized base salary (Target) to be awarded in restricted
stock at 100% achievement of the financial long-term objectives of
earnings per share and return on equity. The annualized base salary figure
used shall be the salary in place for each participant as of January 2002.
The stock target opportunity shall be established by dividing the base
salary target by the mean stock price as of the first business day of the
three (3) year fiscal period. The resultant stock unit share opportunity
(at 100% of Plan) will be adjusted up or down as determined by actual
financial performance expressed as a percentage (Financial Factor) at the
end of the three (3) year fiscal period.
A participant must be employed by Winnebago Industries, Inc. at the end of
the fiscal three (3) year period to be eligible for any long-term
incentive award except as waived by the President of Winnebago Industries,
Inc. for normal retirement and disability.
6. CHANGE IN CONTROL. In the event the Company undergoes a change in control
during the fiscal three (3) year plan period including, without
limitation, an acquisition or merger involving the Corporation ("Change in
Control"), the Committee shall, prior to the effective date of the Change
in Control (the "Effective Date"), make a good faith estimate with respect
to the achievement of the financial performance through the end of the
Plan three (3) year period. In making such estimate, the Committee may
compare the achievement of the financial performance against the forecast
through the Plan three (3) year period and may consider such other factors
as it deems appropriate. The Committee shall exclude from any such
estimate any and all costs and expenses arising out of or in connection
with the Change in Control. Based on such estimate, the Committee shall
make a full three (3) year Plan award within 15 days after the Effective
Date to all participants.
"CHANGE IN CONTROL" for the purposes of the Officers Long-Term Incentive
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.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
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 (I) 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 the 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 Industries, 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.
7. GOVERNING LAW. Except to the extent preempted by federal law, the
consideration and operation of the Plan shall be governed by the laws of
the State of Iowa.
8. EMPLOYMENT RIGHTS. Nothing in this Plan shall confer upon any employee the
right to continue in the employ of the Company, or affect the right of the
Company to terminate an employee's employment at any time, with or without
cause.
Approved by:
/s/ Bruce D. Hertzke 10-17-01
- ------------------------------ -----------------------
Bruce D. Hertzke Dated
Chairman of the Board, CEO and President
/s/ Frederick M. Zimmerman 10-17-01
- ------------------------------ -----------------------
Frederick M. Zimmerman Dated
Human Resources Committee Chairman
EXHIBIT 10t.
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT is made as of July 12, 2001,
by and between WINNEBAGO INDUSTRIES, INC., an Iowa corporation (the "Company"),
and William J. O'Leary (the "Executive").
RECITALS:
WHEREAS, the Executive is a senior executive and officer of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change of Control (as hereafter defined)
exists;
WHEREAS, it is in the best interests of the Company, considering the
past and future services of the Executive, to improve the security and climate
for objective decision making by providing for the personal security of the
Executive upon a Change of Control.
NOW, THEREFORE, in consideration of the foregoing premises and the past
and future services rendered and to be rendered by the Executive to the Company
and of the mutual covenants and agreements hereinafter set forth, the parties
agree as follows:
A G R E E M E N T:
1. CONTINUED SERVICE BY EXECUTIVE. In the event a person or entity, in
order to effect a Change of Control, commences a tender or exchange offer,
circulates a proxy to shareholders or takes other steps, the Executive agrees
that the Executive will not voluntarily leave the employ of the Company, and
will render faithful services to the Company consistent with Executive's
position and responsibilities, until the person or entity has abandoned or
terminated its efforts to effect such Change of Control or until such Change of
Control has occurred.
2. CHANGE OF CONTROL. For purposes of this Agreement, the term "Change
of Control" means 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 foregoing definition of "Change of Control," the
capitalized terms shall have the following meanings:
(a) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such person as 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.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
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 following January 17, 2001, 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 the 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 (deceased) 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) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political
subdivision thereof.
3. SPECIAL BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL. If
a Change of Control shall have occurred while the Executive is still an employee
of the Company, then the Executive shall immediately be entitled to the
following benefits:
(a) IMMEDIATE VESTING OF ALL STOCK OPTIONS AND RIGHTS. All
options and rights granted to the Executive by the Company pursuant to the
Company's Stock Option Plan effective as of August 14, 1997, or any successor or
supplemental stock plan shall become immediately exercisable upon a Change of
Control.
(b) EXECUTIVE SPLIT DOLLAR LIFE INSURANCE PROGRAM. If the
Executive is a participant under the Company's Executive Split Dollar Life
Insurance Program at the time of a Change of Control and the Company has paid
any portion of the premium on the policy or policies issued in connection
therewith during the twelve months preceding the occurrence of the Change of
Control, then the Company shall continue to pay all premiums on such policies so
long as the Executive remains in the employ of the Company.
(c) RETIREE HEALTH INSURANCE. Any plans or policies of the
Company providing for medical, dental, vision or similar benefits for retired
employees existing as of the time of a Change of Control shall, as to the
Executive, not be rescinded or modified in any manner which is adverse to the
Executive following a Change of Control.
(d) RESTRICTED STOCK. All nonregistered stock of the Company
owned by the Executive, which is subject to restrictions on sale or other
transfer, shall, at the option of the Executive (exercisable at any time by the
delivery of written notice to the Company) be purchased by the Company at its
fair market value. The purchase shall be completed by the Company within thirty
(30) days after the Company receives the written notice of exercise from the
Executive. So long as the Company's stock is traded on the New York Stock
Exchange (the "NYSE"), the "fair market value" shall be the mean between the
highest and lowest reported selling prices as reported by the NYSE on the
business day immediately preceding the day of sale.
4. OTHER BENEFITS EFFECTIVE IMMEDIATELY UPON A CHANGE OF CONTROL
PURSUANT TO PLAN DOCUMENTS. It is acknowledged that there presently exist other
plans and agreements of the Company which may provide benefits to the Executive
and which contain specific provisions dealing with the occurrence of a change of
control of the Company (as defined in such plan or agreement). Following a
Change of Control, no such plan or agreement shall be rescinded or modified in
any manner which is adverse to the Executive. Such other plans and agreements of
the Company shall mean: (a) the Executive Share Option Program; (b) the Officers
Long-Term Incentive Plan; (c) the Deferred Compensation and Deferred Bonus
Plans; and (d) the Officers Incentive Compensation Plan. Nothing herein shall be
construed to affect the Company's right and ability to terminate or amend any
such plan or agreement (subject to the terms thereof) prior to a Change of
Control.
5. TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Change of Control
shall have occurred while the Executive is still an employee of the Company, and
if the Executive's employment with the Company is terminated, within three years
following such Change of Control, then the Executive shall be entitled to the
compensation and benefits provided in Sections 6 and 7, unless such termination
is a result of: (a) the Executive's death; (b) the Executive's Disability [as
defined in Section S(a) below]; (c) the Executive's Retirement [as defined in
Section 5(b) below]; (d) the Executive's termination by the Company for Cause
[as defined in Section S(c) below]; or (e) the Executive's decision to terminate
employment other than for Good Reason [as defined in Section 5(d) below].
(a) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for six months and within 30 days
after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance of the
Executive's duties, the Company may terminate the Executive for "Disability."
(b) RETIREMENT. The term "Retirement" as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive's employment based on the Executive having attained the age of 65 or
such other age as shall have been fixed in any arrangement established with the
Executive's consent with respect to the Executive.
(c) CAUSE. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement only, the Company shall
have "Cause" to terminate the Executive's employment hereunder only on the basis
of (i) fraud, misappropriation or embezzlement on the part of the Executive; or
(ii) intentional misconduct or gross negligence on the part of the Executive
which has resulted in material harm to the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Company's Board of Directors at a meeting of the
Board called and held for the purpose (after reasonable notice to the Executive
and an opportunity for the Executive, together with the Executive's counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
the Executive was guilty of conduct set forth in the second sentence of this
Section 5(c) and specifying the particulars thereof in detail. Nothing herein
shall limit the right of the Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(d) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities
and status with the Company immediately prior to a Change in Control of
the Company, or a change in the Executive's titles or offices as in
effect immediately prior to a Change in Control of the Company, or any
removal of the Executive from or any failure to reelect the Executive
to any of such positions, except in connection with the termination of
his employment for Disability, Retirement or Cause or as a result of
the Executive's death or by the Executive other than for Good Reason;
(ii) a reduction by the Company in the Executive's base salary
as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement or the Company's failure
to increase (within 12 months of the Executive's last increase in base
salary) the Executive's base salary after a Change in Control of the
Company in an amount which at least equals, on a percentage basis, the
average percentage increase in base salary for all officers of the
Company effected in the preceding 12 months;
(iii) any failure by the Company to continue in effect any
benefit plan or arrangement [including, without limitation, the
Company's 401(K) plan, nonqualified deferred compensation plan, profit
sharing plan, group life insurance plan, and medical, dental, accident
and disability plans] in which the Executive is participating at the
time of a Change of Control (or any other plans providing the Executive
with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which
would adversely affect the Executive's participation in or materially
reduce the Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the Executive
at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitation, the
Company's Officers Incentive Compensation Plan, Officers Long-Term
Incentive Plan, bonus and contingent bonus arrangements and credits and
the right to receive performance awards and similar incentive
compensation benefits) in which the Executive is participating at the
time of a Change of Control (or any other plans or arrangements
providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any action by the
Company which would adversely affect the Executive's participation in
any such Incentive Plan or reduce the Executive's benefits under any
such Incentive Plan, expressed as a percentage of his base
salary, by more than 10 percentage points in any fiscal year as
compared to the immediately preceding fiscal year;
(v) any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company in which the
Executive is participating at the time of a Change of Control (or plans
or arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan;
(vi) a relocation of the Company's principal executive offices
to a location outside of Forest City, Iowa, or the Executive's
relocation to any place other than the location at which the Executive
performed the Executive's duties prior to a Change in Control of the
Company, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations at the time of a Change in Control of the
Company;
(vii) any failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled at
the time of a Change in Control of the Company;
(viii) any material breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(x) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 3(f), and for purposes of this Agreement,
no such purported termination shall be effective.
(e) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 5(a), (b) or (c) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (a)
if this Agreement is terminated by the Company for Disability, 30 days after
Notice of Termination is given to the Executive (provided that the Executive
shall not have returned to the performance of the Executive's duties on a
full-time basis during such 30-day period) or (b) if the Executive's employment
is terminated by the Company for any other reason, the date on which a Notice of
Termination is given; PROVIDED that if within 30 days after any Notice of
Termination is given to the Executive by the Company the Executive notifies the
Company that a dispute exists concerning the termination, the Date of
Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
6. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If the
Company shall terminate the Executive's employment other than pursuant to
Section 5(a), (b) or (c) or if the Executive shall terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to three (3) times the average of the aggregate annual
compensation paid to the Executive during the three (3) fiscal years of the
Company immediately preceding the Change of Control by the Company subject to
United States income taxes [or, such fewer number of fiscal years if the
Executive has not been employed by the Company during each of the preceding
three (3) fiscal years].
7. ADDITIONAL BENEFITS UPON TERMINATION. If within three years
following a Change of Control, the Company shall terminate the Executive's
employment other than pursuant to Section 5(a), 5(b) or 5(c) or if the Executive
shall terminate his employment for Good Reason, then the Company shall further
provide to the Executive the following benefits:
(a) LIFE, DENTAL, VISION, HEALTH AND LONG-TERM DISABILITY
COVERAGE. The Executive's participation in, and entitlement to, benefits under:
(i) all life insurance plans of the Company; (ii) all health insurance plans of
the Company, including but not limited to those providing major medical and
hospitalization benefits, dental benefits and vision benefits; and (iii) the
Company's long-term disability plan or plans; as all such plans existed
immediately prior to the Change of Control shall continue as though the
Executive remained employed by the Corporation for an additional period of three
(3) years or until the obtainment of such coverages by the Executive through
another employer, whichever is earlier; provided, however, that in the case of
all health insurance plans of the Company (including but not limited to those
providing major medical and hospitalization benefits, dental benefits and vision
benefits), such three (3) year period shall be extended to the time that the
Executive attains age 65 [and provided further that the Executive may then be
entitled to certain retiree health insurance under Section 3(c) hereof]. To the
extent such participation or entitlement is not possible for any reason
whatsoever, equivalent benefits shall be provided by the Company to the
Executive.
(b) AUTOMOBILE BENEFIT. If the Executive is entitled to the
use of a Company-owned automobile at the time of a Change of Control, then title
to such automobile shall be transferred to the Executive (upon termination of
employment as described in Section 7 above) free and clear of all liens and
encumbrances (or, if the Company does not own such automobile at the time of
termination, then the Company shall arrange for the purchase, for the benefit of
the Executive, of a similar make, model and year of automobile).
(c) EXECUTIVE SPLIT-DOLLAR LIFE INSURANCE PROGRAM. Provided
that the Company is obligated, pursuant to Section 3(b) hereof, to pay premiums
on a policy or policies issued in favor of the Executive following a Change of
Control, then the Company shall, in the same manner, continue making such
premium payments until the later of (i) the Executive attains the age of 55; or
(ii) three (3) years following the Executive's termination of employment
(provided, however, that the Company shall not be obligated to make any such
payments after the Executive attains age 65).
(d) DEFERRED COMPENSATION PLANS. Any vesting requirement
imposed under the provisions of, or rules relating to, the Company's Deferred
Compensation and Deferred Bonus Plans, (including, but not limited to, vesting
conditions requiring that the Executive attain the age of 55 and/or complete
five years of service following a deferral) shall be waived and the Executive
shall be fully vested in all deferrals made under such plans.
8. EXCISE TAX-ADDITIONAL PAYMENT.
(a) Notwithstanding anything in this Agreement or any written
or unwritten policy of the Company to the contrary, (i) if it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, any other agreement between the Company
and the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the
Executive shall otherwise become obligated to pay the Excise Tax in respect of a
Payment, then the Company shall pay to the Executive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
such Payment.
(b) All determinations and computations required to be made
under this Section 8, including whether a Gross-Up Payment is required under
clause (ii) of paragraph 8(a) above, and the amount of any Gross-Up Payment,
shall be made by the Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause the Accounting Firm
to provide detailed supporting calculations both to the Company and the
Executive within 15 business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment determined pursuant to
this Section 8 shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive, except to the extent the Executive
becomes obligated to pay an Excise Tax in respect of a Payment. In the event
that the Company or the subsidiary exhausts or waives its remedies pursuant to
paragraph 8(c) and the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall exceed the amount, if
any, of any Excise Tax computed by the Accounting Firm pursuant to this
paragraph 8(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the additional
Gross-Up Payment to the Executive. All expenses and fees of the Accounting Firm
incurred by reason of this Section 8 shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the thirty-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest
and shall indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this paragraph 8(c),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company or the subsidiary shall determine; PROVIDED,
HOWEVER, that if the Company or the subsidiary directs the Executive to pay such
claim and sue for a refund, the Company or the subsidiary shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and, FURTHER PROVIDED, that any extension of the statue
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, control of the contest by
the Company shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of Section 8 by the
Company or the subsidiary) promptly pay to the Company or the subsidiary the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to paragraph 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall off-set,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreements or other contract, plan or arrangement.
10. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) of all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement
and shall entitle the Executive to terminate the Executive's employment for Good
Reason. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. NO GUARANTY OF EMPLOYMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company prior
to a Change of Control, and the rights of the Company to terminate the
employment of the Executive, prior to a Change of Control, shall continue as
fully as if this Agreement were not in effect.
12. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
Attn: General Counsel
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, Iowa 50436
If to the Executive:
William J. O'Leary
765 - 11th Street Place
Garner, Iowa 50438
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject maker hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa.
14. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
16. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
17. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
COMPANY:
WINNEBAGO INDUSTRIES, INC.
By:
--------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
EXECUTIVE:
------------------------------------------
William J. O'Leary
EXHIBIT 10u.
OFFICERS INCENTIVE COMPENSATION PLAN
GROUP A - OFFICERS
FISCAL PERIOD 2001 - 2002
WINNEBAGO INDUSTRIES, INC.
OFFICERS INCENTIVE COMPENSATION PLAN
FISCAL PERIOD 2001- 2002
1. PURPOSE. The purpose of the Winnebago Industries, Inc. Officers Incentive
Compensation Plan (the "Plan") is to promote the growth and profitability
of Winnebago Industries, Inc. (the "Company") by providing its officers
with an incentive to achieve corporate profit objectives and to attract
and retain officers who will contribute to the achievement of growth and
profitability of the company.
2. ADMINISTRATION.
a. HUMAN RESOURCES COMMITTEE. The Plan shall be administered by a
Committee (the "Committee") appointed by the Board of
Directors.
b. POWERS AND DUTIES. The Committee shall have sole discretion
and authority to make any and all determinations necessary or
advisable for administration of the Plan and may amend or
revoke any rule or regulation so established for the proper
administration of the Plan. All interpretations, decisions, or
determinations made by the Committee pursuant to the Plan
shall be final and conclusive.
c. ANNUAL APPROVAL. The Committee must approve the Plan prior to
the beginning of each new fiscal year.
3. PARTICIPATION ELIGIBILITY.
a. Participants must be an officer of the Company with
responsibilities that can have a real impact on the
Corporation's end results.
b. The Committee will approve all initial participation prior to
the beginning of each new program except as provided for in
Section c. below.
c. The President of Winnebago Industries, Inc. will make the
determination on participation for new participants, for
payment of earned holdback allocations due to retirement or
disability and other related partial year participation issues
necessary to maintain routine and equitable administration of
the Plan.
4. NATURE OF THE PLAN. The incentive award is based upon financial
performance of the Corporation as established by the Management Plan. The
Plan is an annual program that provides for quarterly cumulative
measurements of financial performance and an opportunity for quarterly
incentive payment based on performance results.
The financial performance measurements for this Plan will be earnings per
share and return on equity of the Company. These financial performance
measurements will provide an appropriate balance between quality and
quantity of earnings. The Company's beginning of the fiscal year
stockholders' equity will be used as the base figure for the calculation
of return on equity. Any stock repurchase program, adopted or completed
outside of the Management Plan, will not be considered in the earnings per
share and the return on equity calculations.
5. METHOD OF PAYMENT. The amount of the participants' incentive compensation
for the quarter shall be in direct proportion to the financial performance
expressed as a percentage (Financial Factor) against predetermined
compensation targets for each participant. Upon completion of the first
quarter of the fiscal year, quarterly results thereafter shall be combined
to form cumulative fiscal year-to-date results. The results for the
respective period will be used in identifying the Financial Factor to be
used for that period when calculating the participants' incentive
compensation.
50% of the quarterly calculated incentive will be paid within 45 days
after the close of the fiscal quarter. The remaining 50% of the quarterly
calculated incentive will be held back and carried forward into the next
cumulative quarter. At the end of the fourth fiscal quarter (fiscal year
end), a final year-end accounting will be made prior to the payment of any
remaining incentive holdback for the year.
The incentive for the officers except for the Chief Executive Officer,
provides for a 60% bonus (Target) comprised of (2/3) cash and (1/3) stock
at 100% achievement of the financial objectives of earnings per share and
return on equity. The incentive for the Chief Executive Officer provides
for a 87.5% bonus (Target) comprised of (2/3) cash and (1/3) stock at 100%
achievement of the financial objectives of earnings per share and return
on equity.
A participant must be employed by Winnebago Industries, Inc. at the end of
the fiscal year to be eligible for any previous quarterly holdback
allocations except as waived by the President of Winnebago Industries,
Inc. for normal retirement and disability.
6. STRATEGIC PERFORMANCE. The Human Resources Committee reserves the right to
modify the core incentive eligibility by plus/minus 20% (of the calculated
Financial Factor) based upon strategic organizational priorities.
Strategic performance will be measured at the end of the fiscal year only.
Strategic measurements may focus on one or more of the following strategic
factors but are not limited to those stated.
Revenue Growth Customer Satisfaction
Market Share Inventory Management
Product Quality Technical Innovation
Product Introductions Ethical Business Practices
7. ANNUAL STOCK MATCH. 50% of the total cash incentives earned for the year
will be matched annually and paid in restricted stock to encourage stock
ownership and promote the long-term growth and profitability of Winnebago
Industries, Inc.
8. CHANGE IN CONTROL. In the event the Company undergoes a change in control
during the Plan year including, without limitation, an acquisition or
merger involving the Corporation ("Change in Control"), the Committee
shall, prior to the effective date of the Change in Control (the
"Effective Date"), make a good faith estimate with respect to the
achievement of the financial performance through the end of the Plan year
immediately preceding the Effective Date. In making such estimate, the
Committee may compare the achievement of the finance performance against
forecast through the Plan period and may consider such factors as it deems
appropriate. The Committee shall exclude from any such estimate any and
all costs and expenses arising out of or in connection with the Change in
Control. Based on such estimate, the Committee shall make a full Plan year
award within 15 days after the Effective Date to all participants. Any
holdback for previous period(s) will be released and paid to the
participant together with the annual stock match payment earned.
"CHANGE IN CONTROL" for the purposes of the Officers Incentive
Compensation 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.
(b) "Acquiring Person" means any Person or any individual or group
of Affiliates or Associates of such Person who acquires
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 (I) 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 the 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 Industries, 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.
9. GOVERNING LAW. Except to the extent preempted by federal law, the
consideration and operation of the Plan shall be governed by the laws of
the State of Iowa.
10. EMPLOYMENT RIGHTS. Nothing in this Plan shall confer upon any employee the
right to continue in the employ of the Company, or affect the right of the
Company to terminate an employee's employment at any time, with or without
cause.
Approved by:
/s/ Bruce D. Hertzke 10-17-01
- ------------------------------ -----------------------
Bruce D. Hertzke Dated
Chairman of the Board, CEO and President
/s/ Frederick M. Zimmerman 10-17-01
- ------------------------------ -----------------------
Frederick M. Zimmerman Dated
Human Resources Committee Chairman
EXHIBIT 13
[PHOTO]
[LOGO]
WINNEBAGO
INDUSTRIES
2001
ANNUAL REPORT
TABLE OF CONTENTS
Selected Financial Data ...............................................1
Mission Statement .....................................................2
Report to Shareholders ................................................3
Operations Review .....................................................6
Motor Home
Product Classification ..............................................16
Management's Discussion
and Analysis of
Financial Condition
and Results of Operations ...........................................17
Consolidated Balance Sheets ..........................................22
Consolidated Statements
of Income ...........................................................24
Consolidated Statements of
Cash Flows ..........................................................25
Consolidated Statements of
Changes in Stockholders' Equity .....................................26
Notes to Consolidated
Financial Statements ................................................27
Report of Independent Auditors .......................................38
Net Revenues by Major Product Class ..................................39
Interim Financial Information ........................................39
Shareholder Information ..............................................40
Directors and Officers ......................................Inside Back
Cover
CORPORATE PROFILE
Winnebago Industries, Inc., headquartered in Forest City, Iowa, is a leading
United States manufacturer of motor homes, self-contained recreation vehicles
used primarily in leisure travel and outdoor recreation activities. The Company
builds quality motor homes with state-of-the-art computer-aided design and
manufacturing systems on automotive-styled assembly lines. The Company's
products are subjected to what the Company believes is the most rigorous testing
in the RV industry. These vehicles are sold through dealer organizations
primarily under the Winnebago(R), Itasca(R), Rialta(R) and Ultimate(R) brand
names. The Company markets its recreation vehicles on a wholesale basis to a
broadly diversified dealer organization located throughout the United States,
and to a limited extent, in Canada. As of August 25, 2001, the motor home dealer
organization in the United States and Canada included approximately 305 dealer
locations. Motor home sales by Winnebago Industries represented at least 86
percent of its revenues in each of the past five fiscal years. In addition, the
Company's subsidiary, Winnebago Acceptance Corporation, engages in floor plan
financing for a limited number of the Company's dealers. Other products
manufactured by the Company consist principally of a variety of component parts
for other manufacturers.
Winnebago Industries was incorporated under the laws of the state of Iowa on
February 12, 1958, and adopted its present name on February 28, 1961.
RECENT FINANCIAL PERFORMANCE
(In thousands, except per share data)
FISCAL 2001 FISCAL 2000 FISCAL 1999
Net Revenues $ 681,834 $ 753,382 $ 677,011
Gross Profit $ 94,504 $ 112,894 $ 102,408
Operating Income $ 55,474 $ 70,654 $ 63,982
Net Income $ 42,704 $ 48,399 $ 44,260
Diluted Income Per Share $ 2.03 $ 2.20 $ 1.96
Diluted Weighted Average Shares 21,040 22,011 22,537
INSIDE FRONT COVER THE PHOTO ON THE COVER WAS PROVIDED BY THE NEVADA
COMMISSION ON TOURISM, AND PORTRAYS THE COMPANY'S
TOP-SELLING WINNEBAGO ADVENTURER.
SELECTED FINANCIAL DATA
(dollars in thousands, except per share data) AUG. 25, AUG. 26, AUG. 28, AUG. 29, AUG. 30,
2001(1) 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
FOR THE YEAR:
Net revenues (2) $681,834 $753,382 $677,011 $533,385 $445,621
Income before taxes 59,228 73,992 66,609 35,927 6,992
Pretax profit % of revenue 8.7% 9.8% 9.8% 6.7% 1.6%
Provision for income taxes $ 15,474 $ 25,593 $ 22,349 $ 11,543 $ 416
Income tax rate 26.1% 34.6% 33.6% 32.1% 5.9%
Income from continuing operations $ 42,704 $ 48,399 $ 44,260 $ 24,384 $ 6,576
Gain on sale of Cycle-Sat subsidiary -- -- -- -- 16,472
----------------------------------------------------------------
Net income $ 42,704 $ 48,399 $ 44,260 $ 24,384 $ 23,048
Income per share:
Continuing operations:
Basic $ 2.06 $ 2.23 $ 1.99 $ 1.01 $ .26
Diluted 2.03 2.20 1.96 1.00 .26
Discontinued operations:
Basic -- -- -- -- .65
Diluted -- -- -- -- .64
----------------------------------------------------------------
Net income per share:
Basic $ 2.06 $ 2.23 $ 1.99 $ 1.01 $ .91
Diluted 2.03 2.20 1.96 1.00 .90
----------------------------------------------------------------
Weighted average common shares
outstanding (in thousands):
Basic 20,735 21,680 22,209 24,106 25,435
Diluted 21,040 22,011 22,537 24,314 25,550
----------------------------------------------------------------
Cash dividends per share $ .20 $ .20 $ .20 $ .20 $ .20
Book value 9.99 8.22 6.70 5.11 4.86
Return on assets (ROA) 12.5% 15.7% 15.5% 10.6% 10.8%
Return on equity (ROE) 20.6% 27.7% 29.6% 20.9% 18.6%
Unit Sales:
Class A 5,666 6,819 6,054 5,381 4,834
Class C 3,410 3,697 4,222 3,390 2,724
----------------------------------------------------------------
Total Class A & C Motor Homes 9,076 10,516 10,276 8,771 7,558
Class B Conversions (EuroVan Campers) 703 854 600 978 1,205
AT YEAR END:
Total assets $342,033 $307,095 $285,889 $230,612 $213,475
Stockholders' equity 207,464 174,909 149,384 116,523 123,882
Working capital 174,248 143,274 123,720 92,800 100,772
Long-term debt -- -- -- -- --
Current ratio 3.5 to 1 3.0 to 1 2.5 to 1 2.5 to 1 3.4 to 1
Number of employees 3,325 3,300 3,400 3,010 2,830
(1) Includes a noncash after tax cumulative effect of change in accounting
principle of $1.1 million expense or $.05 per share due to the adoption of
SAB No. 101.
(2) Net revenues have been restated for the adoption of a new accounting
principle related to shipping and handling fees and costs.
[BAR CHARTS]
Net Revenues
(Dollars in Millions)
1997 1998 1999 2000 2001
$445.6 $533.4 $677.0 $753.4 $681.8
Net Income Per Diluted Share
(Dollars)
1997 1998 1999 2000 2001
$0.90 $1.00 $1.96 $2.20 $2.03
Shareholders' Equity
(Dollars In Millions)
1997 1998 1999 2000 2001
$123.9 $116.5 $149.4 $174.9 $207.5
WINNEBAGO INDUSTRIES, INC.
MISSION STATEMENT
Winnebago Industries, Inc. is a leading United States manufacturer of recreation
vehicles (RVs) and related products and services. Our mission is to continually
improve our products and services to meet or exceed the expectations of our
customers. We emphasize employee teamwork and involvement in identifying and
implementing programs to save time and lower production costs while maintaining
the highest quality products. These strategies allow us to prosper as a business
with a high degree of integrity and to provide a reasonable return for our
shareholders, the ultimate owners of our business.
VALUES
How we accomplish our mission is as important as the mission itself. Fundamental
to the success of the Company are these basic values we describe as the four
P's:
PEOPLE -- Our employees are the source of our vast strength. They provide our
corporate intelligence and determine our reputation and vitality. Involvement
and teamwork are our core corporate values.
PRODUCTS -- Our products are the end result of our teamwork's combined efforts,
and they should be the best in meeting or exceeding our customers' expectations.
As our products are viewed, so are we viewed.
PLANT -- Our facilities are believed to be the most technologically advanced in
the RV industry. We continue to review facility improvements that will increase
the utilization of our plant capacity and enable us to build the best quality
product for the investment.
PROFITABILITY -- Profitability is the ultimate measure of how efficiently we
provide our customers with the best products for their needs. Profitability is
required to survive and grow. As our respect and position within the marketplace
grows, so will our profit.
GUIDING PRINCIPLES
QUALITY COMES FIRST -- To achieve customer satisfaction, the quality of our
products and services must be our number one priority.
CUSTOMERS ARE CENTRAL TO OUR EXISTENCE -- Our work must be done with our
customers in mind, providing products and services that meet or exceed the
expectations of our customers. We must not only satisfy our customers, we must
also surprise and delight them.
CONTINUOUS IMPROVEMENT IS ESSENTIAL TO OUR SUCCESS -- We must strive for
excellence in everything we do: in our products, in their safety and value, as
well as in our services, our human relations, our competitiveness, and our
profitability.
EMPLOYEE INVOLVEMENT IS OUR WAY OF LIFE -- We are a team. We must treat each
other with trust and respect.
DEALERS AND SUPPLIERS ARE OUR PARTNERS -- The Company must maintain mutually
beneficial relationships with dealers, suppliers and our other business
associates.
INTEGRITY IS NEVER COMPROMISED -- The Company must pursue conduct in a manner
that is socially responsible and that commands respect for its integrity and for
its positive contributions to society.
2
TO MY FELLOW SHAREHOLDERS:
Winnebago Industries, Inc. completed fiscal 2001 with its third highest net
revenues and net income in its history, in spite of the economic challenges we
faced as a nation. We believe the Company's performance in fiscal 2001 is a
result of the excellent acceptance of our new products, the solid performance of
our dealer partners, our brand name recognition and strong quality reputation -
all of which are competitive advantages in the marketplace.
On the following pages, we will detail many advantages that have
contributed to Winnebago Industries' success during fiscal 2001, and which we
believe will continue to have a positive impact on our future.
Financial measurements show that Winnebago Industries is leading the RV
industry in:
* Return on Shareholders' Equity
* Return on Assets
* Operating Margin
* Net Profit Margin
[BAR CHART]
Class A & C Retail Market Share
(As reported by Statistical Surveys, Inc. CYTD Through September 2001)
WINNEBAGO IND. INC. 18.9%
FLEETWOOD ENT. 17.1%
MONACO COACH CORP. 14.8%
COACHMEN IND. 10.8%
THOR INDUSTRIES INC. 8.5%
NATIONAL RV HOLDINGS 4.8%
Since fiscal 1997 we have chosen to refocus on our core motor home business
with an emphasis on new product development. Through this product development
process, over 65% of our 2002 motor homes were introduced as brand new products
with innovative new features. We have also emphasized additional and improved
sales and service programs, and the manufacturing of high quality products.
[PHOTO]
CAPTION: 2002 WINNEBAGO SIGHTSEER AND ITASCA SUNOVA
3
COMPETITIVE COMPARISON
(Information obtained from last 12 months public filings.)
[BAR CHARTS]
RETURN ON EQUITY RETURN ON ASSETS
WGO 22.3% WGO 13.2%
MNC 13.6% THO 9.0%
THO 12.9% MNC 7.2%
COA -4.2% COA -3.0%
NVH -6.2% NVH -4.8%
FLE -64.1% FLE -20.9%
OPERATING MARGIN NET PROFIT MARGIN
WGO 8.1% WGO 6.3%
MNC 4.9% THO 3.2%
THO 4.7% MNC 2.9%
COA -2.1% COA -1.4%
NVH -4.5% NVH -2.6%
FLE -12.3% FLE -11.1%
As a result of this change in focus, we've experienced healthy market share
gains. Winnebago Industries' market share is up 10 percent calendar year to date
through September 2001 versus one year ago, placing us in the number one
position in combined Class A and C retail sales for the first time in 20 years.
Certainly, this is a very significant achievement for the Company.
According to Statistical Surveys, Inc., the recreation vehicle (RV) retail
reporting firm, Winnebago Industries achieved 18.9 percent of the combined Class
A and C retail market nationally calendar year to date through September 2001
versus 17.2 percent for the same period last year.
Winnebago Industries believes that it also leads the industry in RV
manufacturing technology. We continue to refine our systems and processes to
enhance our ability to increase quality, while maximizing the productivity of
our workforce and facilities.
To further enhance shareholder value, in March 2001, Winnebago Industries'
Board of Directors authorized the repurchase of up to $15 million of the
Company' s common stock. Since November 1997 through November 12, 2001,
Winnebago Industries has had five repurchase programs, repurchasing
approximately 5.9 million shares, or 23 percent, of the Company's outstanding
stock as of November 1997.
We are encouraged by the continued reduction in interest rates, and the
acceptance of our new products, however, the economic environment since the
September 11 tragedy leads us to be cautious about the next couple of quarters.
Long-term, however, demographics are still in our favor as our target market of
consumers age 50 and older is expected to increase for the next 30 years.
Winnebago Industries was pleased to have received six consecutive Quality
Circle Awards from
4
the Recreation Vehicle Dealers Association. These awards are [PHOTO]
testaments to the Company's emphasis on quality in its total
operation. By providing our customers with the highest quality motor
homes with industry-leading sales and service programs, while creating
solid working relationships with our dealer partners and our dedicated
employees, we are ultimately delivering the best value for the owners
of our corporation -- you, our shareholders. Winnebago Industries is
the leading motor home manufacturer and believes that it has the
competitive advantages necessary to continue to grow our market share
and enhance our shareholder value well into the future.
/s/ Bruce D. Hertzke
Bruce D. Hertzke
Chairman of the Board,
Chief Executive Officer and President
November 28, 2001
[GRAPHIC] AMERICAN FLAG
- --------------------------------------------------------------------------------
LAND OF THE FREE
HOME OF THE BRAVE
A TRIBUTE TO OUR HEROES
Winnebago Industries wishes to honor those killed and injured in the
September 11 attacks and those who fight to protect our many freedoms on a daily
basis.
The following timely message has been displayed in Winnebago Industries'
Visitors Center since 1986.
"One of our most precious freedoms is the freedom to travel...to see and
experience the ever-changing tapestry of life throughout the land. American
enthusiasm for travel is rooted deep in our pioneer heritage.
"Motor homes are a uniquely American way to enjoy that freedom..."
Luise V. and John K. Hanson, Founders
Winnebago Industries, Inc.
- --------------------------------------------------------------------------------
5
WINNEBAGO INDUSTRIES
CLASS A & C RETAIL MARKET SHARE
(Calendar Year)
[BAR CHART]
1997 1998 1999 2000 2001
CYTD/Sept.
15.8% 16.2% 16.4% 17.2% 18.9%
[PHOTO]
CAPTION: 2002 ITASCA SUNSTAR
OPERATIONS REVIEW
MARKET LEADERSHIP
Winnebago Industries strengthened its market leadership role in fiscal
2001. In fact, Winnebago Industries ended its fiscal year in the number one
motor home retail sales position for the first time in 20 years. Obviously, the
Company's competitive advantages have had an effect in the marketplace. As
stated in the Report to Shareholders, the Company has grown its retail market
share of combined Class A and C motor homes from 15.8 percent in calendar 1997
to 18.9 percent year to date through September 2001. Also, Winnebago Industries
improved its market share by 10 percent when compared to the same period last
year.
NEW PRODUCT ADVANTAGES
Competitive advantage was gained through the continued introduction of new
product offerings with consistent high quality. New product lines are important
for several reasons. Expanded product offerings create broader exposure of
Winnebago Industries' products at the Company's dealerships and allow the
Company to be able to reach more customers. New product lines also create
additional opportunities for current owners of Winnebago Industries' products or
other brands in the RV industry to trade up or down. Consumers often want the
latest and greatest offerings available in the marketplace.
Winnebago Industries' innovative motor home lineup for 2002 consists of
Winnebago, Itasca, Rialta and Ultimate motor homes. In total, 65 percent of
Winnebago Industries model lineup is new for 2002, including four brand new
product lines: the Class A Winnebago Sightseer(TM) and Itasca Sunova(TM) and the
Class C Winnebago Vista(TM) and Itasca Sunstar(TM). In addition to the four
models mentioned above, the new 2002 model lineup also includes the redesigned
Winnebago Chieftain(R) and Itasca Sunflyer(R). These high-line gas motor homes
feature luxurious offerings in each of their four floorplans, and spaciousness
with a dual slideout design.
Along with the expansion of product offerings, Winnebago Industries has
provided more features as standard equipment, as well as a continued emphasis on
increasing usable interior space through greater utilization of slideouts on the
Company's 2002 product offerings. Slideouts are now included in 82 percent of
the Company's Class A & C product floorplans and all of Winnebago Industries
Class A products. Also, all of Winnebago Industries' Class A diesel lineup and
83 percent of the Company's total Class A products feature two slideouts, while
24 percent of the Company's Class C models are now dual slides as well.
6
CLASS C RETAIL SALES
(As reported by Statistical Surveys, Inc. CYTD Through September 2001)
[BAR CHART]
WINNEBAGO IND. 24.9%
THOR IND. 18.3%
COACHMEN IND. 17.4%
FLEETWOOD ENT. 14.0%
GULFSTREAM COACH 7.6%
JAYCO INC. 7.1%
CLASS C ADVANTAGES
Winnebago Industries, the top selling Class C manufacturer since 1998,
continues to expand its Class C model lineup for 2002.
The aerodynamic 2002 Rialta is built on the highly-maneuverable,
front-wheel-drive Volkswagen chassis. The new 2.8L VR6+ engine featured in 2002
increases the Rialta's horsepower to 201hp, a 44 percent increase from the VR6
previously offered, while maintaining excellent fuel efficiency of approximately
16.3 miles per gallon combined city and highway using the Environmental
Protection Agency testing guidelines. The Rialta is available in three models
with four 22-foot floorplan options, each maximizing space without sacrificing
comfort.
[PHOTO]
CAPTION: 2002 WINNEBAGO VISTA
The brand new Winnebago Vista and Itasca Sunstar Class C motor homes are
unique, fuel-efficient motor homes that are also built on the front-wheel-drive
7,275-lb. gross vehicle weight rating (GVWR) Volkswagen chassis. Offering great
maneuverability, the Vista and Sunstar provide a multitude of sleeping areas, a
full galley and a bathroom area with wardrobe in a compact 21-foot size.
Multiple sleeping areas, slideout availability for expanded living areas
and basement storage are all key ingredients to making the Winnebago Minnie(R)
and Itasca Spirit(R) motor homes a must for great family trips. The Minnie and
Spirit are excellent value-priced motor homes, each with seven models to choose
from ranging from 22- to 31-feet in length. Two new models join the lineup for
2002, the 24F with a front slideout and the 29B with both a front lounge and
rear bedroom slideout.
[PHOTO]
CAPTION: 2002 ITASCA SPIRIT 24F
The Winnebago Minnie Winnie(R) and Itasca Sundancer(R) lines each feature
three, widebody models for 2002. Featuring below floor construction, box-fold
style valance doors and a curved fiberglass roof, the Minnie Winnie and
Sundancer are designed with Class A features, yet have the conveniences of a
Class C. Ranging from 27- to 31-feet in length, the 27P and the new 30V each
offer two slideout rooms. The 27P features a refrigerator/dinette slideout,
while the 30V features a galley/dinette slideout and the 31C features a
dinette/couch slideout. The 27P and 30V models also feature a rear bed slideout,
large bedroom wardrobe with drawers and a convenient desk/vanity area.
7
CLASS A ADVANTAGES
Winnebago Industries also continues to expand its offerings of Class A
motor homes, all of which feature slideouts in 2002.
Brand new for 2002, the Winnebago Sightseer and Itasca Sunova offer
outstanding value, quality construction and comfort at an affordable price.
These wide-body, basement-style Class A models are available in 27- and 30-foot
models and feature many standard features typically found as options on
competitive coaches in this price class. The Sightseer and Sunova 27C models
feature a unique dinette/refrigerator and pantry slideout, while the 30B models
have a dinette/couch slideout. The 27C model utilizes the 14,800-lb. GVWR
Workhorse(R) chassis, while the 30B model is available with the standard
18,000-lb. GVWR Ford(R) chassis, or the optional 18,000-lb. GVWR Workhorse
chassis. The striking exterior features a durable fiberglass skin, attractive
graphics and large storage compartments with painted, box-fold one-piece doors
like those typically found on more expensive motor homes.
The Winnebago Brave(R) and Itasca Sunrise(R) have been repositioned to a
higher appointment and feature level in 2002. Ranging from 30- to 36-feet in
length, three of the four models (32V, 34D and 36M) are brand new for 2002 and
feature both a dinette/couch slideout and a 30-inch bedroom slideout room for
increased living space, while the 30W model features a functional L-shaped
galley/dinette slideout.
[PHOTO]
The Winnebago Adventurer(R) motor home is the best selling Class A motor
home on the market. Winnebago Industries also believes the Adventurer and the
comparable Itasca Suncruiser(R) are the most user-friendly motor homes on the
market today. Ranging in size from 30- to 37-feet in length, three of the four
models in each line are new for 2002 and feature dual slideouts.
[PHOTO]
CAPTION: 2002 WINNEBAGO ADVENTURER
[PHOTO]
CAPTION: 2002 ITASCA SUNOVA
8
The newly redesigned Winnebago Chieftain and Itasca Sunflyer also make
their mark in 2002. Filling a niche for motor home consumers who want
top-of-the-line elegance in front-engine gas-powered motor homes, the Chieftain
and Sunflyer feature exclusive amenities and upgrades with the convenience,
performance and floorplan flexibility only front-engine gas-powered motor homes
can provide. Thanks to the new heavier 22,000 lb. GVWR Workhorse chassis with
standard 22.5-inch aluminum wheels, Winnebago Industries was able to offer four
spacious and luxurious floorplans ranging from 36- to 39-feet in length.
Offering a front, flat floor slideout as well as a rear slideout in the bedroom,
each model offers floorplan flexibility with innovative galley designs and a
beautiful new entertainment center with expansive 32-inch color TV on most
floorplans.
Winnebago Industries continued its growth in the diesel pusher market as
well. Since calendar 1998 through the most recent reported period ending
calendar year to date through September, Winnebago Industries' percentage of the
diesel retail market has grown by 111 percent from 4.5 percent in calendar 1998
to 9.5 percent year to date through September 2001.
The Winnebago Journey(R) series is Winnebago Industries' entry-level diesel
pusher product. Three of the four Journey models are new for 2002 and all
feature dual slideouts. Ranging in length from 32- to 36-feet, the Journey is
built on the 26,850-lb. GVWR Freightliner chassis with 275 hp Cummins engine and
5-speed MH 1000 Allison transmission.
Available in five models (four are new for 2002) ranging in length from 32-
to 39-feet in length, the Journey DL(R) is built on the 26,850-lb. GVWR
Freightliner chassis with 330 hp Caterpillar diesel engine, 6-speed Allison
transmission, rear radiator and Jacobs Extarder exhaust brake. The 32TD model
offers a 300 hp Cummins engine and 6-speed transmission.
WINNEBAGO INDUSTRIES
DIESEL RETAIL SALES
[BAR CHART]
1998 1999 2000 2001 CYTD/Sept
4.5% 8.7% 8.9% 9.5%
[PHOTO]
CAPTION: 2002 WINNEBAGO CHIEFTAIN
9
The Itasca Horizon(TM) features four models in 32-foot and 39-foot lengths,
three of which are new for 2002. All of the Horizon models feature both front
slideout room extensions as well as rear bedroom slides. The Itasca Horizon
models are also built on the Freightliner 26,850 lb. GVWR chassis with a 330 hp
Caterpillar engine and 6-speed transmission. The 32TD model offers a 300 hp
Cummins engine and 6-speed transmission.
[PHOTO]
CAPTION: 2002 ITASCA HORIZON
Offering increased horsepower and GVWR in 2002, Winnebago Industries'
premium diesel pusher Ultimate Advantage(R) line is now based on the 32,000-lb.
GVWR Spartan chassis with a 350 hp Cummins diesel engine. The Ultimate Advantage
is available in four models, three of which are new for 2002. The Ultimate
Advantage features dual slides, a side radiator, independent front suspension,
hydraulic leveling jacks and a Bi-Directional Isolator Relay Delay(TM), which
charges either battery when needed. Also in 2002, the trailer hitch was
increased in towing capacity from 5,000 to 10,000 pounds.
Winnebago Industries' top-of-the-line Ultimate Freedom(R) is built on the
32,000 lb. GVWR Spartan Mountain Master GT chassis. Increased from 350 hp to 370
hp the Ultimate Freedom features a Cummins diesel engine, independent front
suspension, side radiator and 6-speed Allison transmission. The Freedom also
features the Bi-Directional Isolator Relay Delay. The Ultimate Freedom has two
luxurious new floorplans for 2002, the 40JD and new 40WD. Both of these models
feature a galley/sofa slideout in the front lounge area and unique rear chest of
drawer slide in the bedroom with a 19-inch color TV with remote mounted above
for optimal viewing.
The 2002 Ultimate Advantage and Ultimate Freedom offer numerous new
conveniences such as a remote doorbell, global positioning system, and the new
SmartWheel(TM) steering wheel. This innovative steering wheel includes controls
for the windshield wipers, ICC courtesy blink and cruise control.
Working with Spartan Custom Chassis, Winnebago Industries' designers
utilize the Company's Ulti-Bay(TM) chassis design for the Ultimate Advantage and
Ultimate Freedom, providing major efficiencies in terms of material use and
storage space utilization.
Spartan provides the front and rear sections of the chassis, while
Winnebago Industries completes the mid-section structure of the chassis and body
with tall, extremely spacious storage compartments in the area normally claimed
by chassis rails. The Ulti-Bay design centralizes exterior storage and provides
a tremendous increase in storage space - up to 203 cubic feet of exterior
storage space is available. The Ulti-Bay design also provides a consistent
location for important components such as the electrical and water service
centers, generator, etc.
NEW FEATURE ADVANTAGES
Most 2002 models feature the new RV Radio(TM). Designed by Winnebago
Industries' engineers and the radio manufacturer exclusively for RV usage, the
customized RV Radio features an AM/FM radio, cassette and CD, as well as
weatherband so you can check the weather whenever and wherever you're traveling.
The large knobs and easy to read display make this innovative cassette/CD/radio
the first of its kind in the industry.
[PHOTO]
10
[PHOTO]
CAPTION: 2002 ITASCA HORIZON WITH NEW DINING TABLE/COMPUTER DESK.
A unique new dining table/computer desk is available for 2002 in the
Winnebago Journey DL, Itasca Horizon, Ultimate Advantage and Ultimate Freedom
models. The dining table easily extends to seat four people comfortably, while
an adjacent cabinet provides additional storage for computer equipment or
supplies.
Finally, there's an electric slideout that meets Winnebago Industries high
quality standards. The DigiSync(R) dual-arm slide system from Kwikee(R) is new
to select Company products for 2002. Designed exclusively for the Company with
the help of Winnebago Industries' engineers, this revolutionary new concept in
slideout room design is a dual arm slide system that digitally synchronizes both
slideout arms as they smoothly extend and retract to automatically square up the
slideout room. The Kwikee DigiSync Electric Slide is featured in the Winnebago
Minnie and Itasca Spirit Class C motor homes and the new Winnebago Sightseer and
Itasca Sunova Class A motor homes.
A rave success when introduced last year, the Rest Easy(TM) Multi-Position
Lounge is now available on many of Winnebago Industries motor homes. Designed
exclusively by Winnebago Industries, Rest Easy looks like a normal couch, but
after pressing the electric switch, it turns into a cozy lounger with ottoman.
Press the switch again, and presto - it's a comfortable bed. Variations of the
Rest Easy are available in most Winnebago, Itasca and Ultimate models.
[PHOTO]
CAPTION: CORPORATE HOSPITALITY VEHICLE
COMMERCIAL AND
SPECIALTY VEHICLE ADVANTAGES
Winnebago Industries maintains a competitive advantage with over 30 years
experience in the commercial and specialty vehicle business, manufacturing a
broad range of offerings. Products sold by the Commercial Vehicle Division
continue to be an important source of incremental sales for Winnebago
Industries. Several models are offered that can be custom designed for a wide
variety of applications including medical, dental, law enforcement, and computer
training. An upscale, 40-foot "corporate hospitality" vehicle based on the
Ultimate Freedom platform was also developed in fiscal 2001. This versatile unit
was created to meet the hospitality needs of race teams, corporate sponsors or
vendors. The floor plan design provides a conference room in the rear and a
spacious lounge environment in the forward area. The Specialty Vehicle
Department is responsible for the sale of ability-equipped motor homes that are
custom built for individuals with special mobility needs. Ability-equipped motor
homes can be outfitted with wider entrance doors, wheelchair lifts, roll-in
showers, hand driving controls, and other equipment needed to make them wheel
chair accessible.
OEM ADVANTAGES
Another competitive advantage, Winnebago Industries manufactures the
majority of the parts used in its motor homes. This allows the Company to
maintain strict quality standards, design parts to unique motor home needs and
easily facilitate parts replacement for years to come. In addition, Winnebago
11
Industries is able to maximize its production capacity through the sale of
original equipment manufacturing (OEM) components, while providing the added
benefit of low cost component parts. Winnebago Industries generated revenues of
$24.3 million from the sale of original equipment manufacturing (OEM) components
in fiscal 2001.
The largest portion of OEM revenues were generated by Winnebago Industries
Creative Aluminum Products Company (CAPCO), which produces aluminum extrusion
products, primarily for the RV and home building industries.
MARKETING ADVANTAGES
Winnebago Industries also realizes a competitive advantage due to its
strong brand name recognition. Winnebago Industries participated in several
outstanding marketing opportunities in fiscal 2001. These opportunities
continued to maximize our brand strength while further positioning us as the
industry leader.
Winnebago Industries participated in two media tours sponsored by the
Recreation Vehicle Industry Association (RVIA) during fiscal 2001. For their
second season touring as RVIA spokespersons, Brad and Amy Herzog used a 2001
Winnebago Adventurer for their "Baby Makes Three...in an RV" tour. The tour
capitalized on Brad's recent national TV appearances and best-selling book
STATES OF MIND, which describes Brad and Amy's 11-month Steinbeck-like journey
across America in their motor home. The addition of Luke, their 8-month old son,
has also helped reinforce the ease and flexibility of RV travel for the whole
family.
In his 10th consecutive year as RVIA spokesperson, David Woodworth used a
2001 Winnebago Journey DL for his "National RV History Tour." As a noted RV
historian, David also towed an antique "Mae West" motor home behind the
JourneyDL to relate the long history of RV travel benefits.
Winnebago Industries also provided several motor homes during fiscal 2001
for "Biff Henderson's America" segments that appeared on the CBS "Late Show with
David Letterman" TV show. We worked closely with RVIA, CBS and Letterman's staff
to support these humorous Charles Kuralt-style segments.
"Jeopardy" and "The Wheel of Fortune" TV shows also utilize Winnebago
Braves as their contestant search vehicles. In addition, Winnebago Industries
motor homes continued to be offered as grand prizes for "The Wheel of Fortune".
In a spring promotion, some 1.8 million packages of Nabisco Mini Oreo bite
size cookies appeared in grocery and convenience stores across the United
[PHOTO]
CAPTION: RV HISTORIAN DAVID WOODWORTH WITH 2001 WINNEBAGO JOURNEY DL AND 1931
MAE WEST HOUSECAR.
12
[PHOTO]
States with a Winnebago Minnie 31C featured on both the front and back of the
package. The 2001 Minnie was the Grand Prize for the motorsports theme
promotion.
Also in fiscal 2001, the Nevada Commission on Tourism launched a campaign
that will award up to five Winnebago Industries motor homes as grand prizes
throughout the duration of the sweepstakes to the year 2003. The $1 million
campaign also prominently features a 2001 Adventurer in the promotional
material.
This continued exposure in the media is a competitive advantage that is
immeasurable in terms of continued brand recognition.
SALES AND SERVICE SUPPORT ADVANTAGES
Further competitive advantage is realized by Winnebago Industries'
comprehensive sales and service support for our dealers and retail customers.
The Company believes that providing quality product and service support to our
dealers through hands-on training and support materials, such as our on-line WIN
NET information system, will ensure that our retail customers are more
satisfied; thus promoting long-term growth and profitability.
Winnebago Industries started its new "Peak Performer" product knowledge
program in fiscal 2000 to encourage dealer sales staff to continue to build on
their product knowledge. An additional "Best Product Knowledge" award program
linked to this training program was started in fiscal 2001. The Best Product
Knowledge awards honor the salespersons who have the best product knowledge of
the features and benefits of the Company's Winnebago, Itasca, Rialta and
Ultimate motor homes. From the over one thousand individuals in the Peak
Performer program, one sales professional from each of the Company's 15 sales
districts achieved the "Best Product Knowledge" status. These individuals were
selected by their district sales managers based upon test results, training
participation and application of product knowledge in their sales presentations.
From the district winners, four ultimate "survivors" were then selected to
compete in the final "Survivor" competition at Winnebago Industries' Dealer Days
event in August, 2001.
Winnebago Industries also prides itself on providing what it believes to be
the highest level of warranty, parts and service programs in the industry and
conducts extensive service training. In the past few years, Winnebago Industries
has implemented additional industry-leading programs like the 40 percent
warranty parts mark up, TripSaver Emergency Warranty Parts Shipments, and the
enhanced WIN NET data entry system.
To ensure that our sales and service programs are effective, we continually
monitor our customer's satisfaction levels through surveys. From this data,
Winnebago Industries has developed a Customer Satisfaction Index (CSI) that is
used to shape our sales and service programs and to reward our most effective
dealers. In 1986, Winnebago Industries initiated the first dealer recognition
program within the RV industry. This "Circle of Excellence" Award recognized 139
dealers with this top honor for the 2001 model year, including six dealers who
have achieved this exclusive status each year since the program was initiated 15
years ago, as well as 15 first-time winners.
[PHOTO]
CAPTION: DISCUSSION OF STEEL CAB ADVANTAGES DURING DEALER PRODUCT TRAINING
SESSION.
13
[PHOTO]
CAPTION: WINNEBAGO INDUSTRIES' SERVICE DEPARTMENT PERSONNEL PROVIDE TECHNICAL
ASSISTANCE TO OWNERS OF THE COMPANY'S MOTOR HOMES DURING THE ANNUAL WIT GRAND
NATIONAL RALLY HELD IN FOREST CITY, IOWA.
WIT ADVANTAGES
The Winnebago-Itasca Travelers (WIT) Club is very important to Winnebago
Industries, particularly as club members have proven themselves to be extremely
loyal, repeat buyers of the Company's products. The WIT Club enables the Company
to stay connected with our motor home owners and provides added benefits to our
owners as well. Caravans, rallies and tours held frequently throughout the year
provide WIT Club members with a way to use their motor homes, remain active and
keep in touch with their club-member friends. Winnebago Industries encourages
its dealers to actively participate in local chapters by offering complimentary
memberships to new purchasers and to host "Show & Tell" events on the dealership
lots. The WIT Club also provides member benefits such as a monthly magazine,
professional trip routing, purchasing and service discounts, mail forwarding and
various types of insurance.
QUALITY ADVANTAGES
Quality is also a competitive advantage for Winnebago Industries. The
Company was pleased to again receive the Quality Circle Award from the
Recreation Vehicle Dealers' Association (RVDA). Quality Circle status is the
result of outstanding ratings on the RVDA's annual Dealer Satisfaction Index
survey. Winnebago Industries was one of the two motor home manufacturers and the
only company among the six largest motor home manufacturers to receive the
Quality Circle Award. Winnebago Industries was also the only major motor home
manufacturer to have won this award each year since it was instituted six years
ago.
[PHOTO]
CAPTION: QUALITY CIRCLE AWARD
WINNEBAGO INDUSTRIES CHAIRMAN, CEO AND PRESIDENT BRUCE HERTZKE (SECOND FROM
RIGHT) AND WINNEBAGO INDUSTRIES VICE PRESIDENT OF SALES AND MARKETING JIM
JASKOVIAK (RIGHT) PROUDLY ACCEPT THE QUALITY CIRCLE AWARD FROM RVDA PRESIDENT
MIKE MOLINO (LEFT) AND FORMER RVDA CHAIRMAN OF THE BOARD ERNIE FRIESEN (SECOND
FROM LEFT) AT THE COMPANY'S DISPLAY DURING THE 2000 NATIONAL RV TRADE SHOW IN
LOUISVILLE, KY.
Additional programs continue to be a tremendous benefit to Winnebago
Industries and the quality of our products as well. The Cost Savings Suggestion
Program rewards employees for suggesting improvements to the Company's motor
homes or internal processes that result in cost and/or time savings. Also,
Action Teams have been developed to maximize efficiencies in our manufacturing
system. The continued implementation of new technology is also allowing
Winnebago Industries to continually improve quality, while increasing its
production capacities.
TECHNOLOGY ADVANTAGES
Winnebago Industries believes that it is the most technologically advanced
RV manufacturer in the industry and remains on the cutting edge in terms of
computerized equipment at all of its facilities. An
14
additional $9.1 million was spent on capital expenditures in fiscal 2001 to
upgrade manufacturing equipment and expand manufacturing capabilities in order
to increase productivity and improve the quality of Winnebago Industries
products. The new manufacturing technology installed in fiscal 2001 includes:
[PHOTO]
CAPTION: SLIDEOUT ROOM LOWERED FOR INSTALLATION FROM NEW MEZZANINE.
* A new mezzanine was constructed over the assembly lines at the end of our
main motor home manufacturing facility in order to expand the manufacturing
capacity of slideout rooms.
* A new material handling system was installed in Winnebago Industries' main
motor home manufacturing facility in order to facilitate the transfer of
components by conveyer to drop points on each assembly line.
* A welding robot was installed for the welding of components for parts
assemblies.
* A windshield manipulator was installed to assist with windshield placement.
* A fourth laser cutting system was installed in the Company's Metal Stamping
Division.
* A new CNC router was installed in the Company's Charles City Hardwoods
Division.
* The Plastics Division installed their first CNC router to route several
different sizes, shapes and types of plastic components. (Winnebago Industries
now has a total of 14 CNC routers and mills throughout the corporation.)
[PHOTO]
CAPTION: COMPARTMENT DOOR PRODUCTION IN HAMPTON FACILITY.
* A compartment door manufacturing cell was added to the Company's Hampton
facility, now building approximately 80 percent of the Company's compartment
doors.
* A new heat plenum roll former was installed to form aluminum heat runs for
the Company's motor homes.
* New low pressure RTM (resin transfer molding) device was installed in the
Company's Hampton facility. This new device allows Winnebago Industries to
manufacture fiberglass in a closed mold environment for improved surface quality
and material thickness, as well as lower air emissions.
* The ceramic floor installation area was expanded, enabling Winnebago
Industries' capacity for installation in the Company's most luxurious motor
homes to increase from two to 10 motor homes per day.
* The sidewall laser projection system was replaced in the Company's main
motor home complex. This system is used for placement of steel within the motor
homes' sidewalls to enable secure installation of cabinets and appliances.
Winnebago Industries' employees have worked extremely hard to successfully
develop the Company's many competitive advantages. With the country's positive
demographics trends and in spite of the current economic slowdown, Winnebago
Industries believes it has the competitive advantages necessary to deliver the
best results for its shareholders and continue to lead the RV industry as the
industry faces demographic growth for the next 30 years.
15
MOTOR HOME PRODUCT CLASSIFICATION
CLASS A MOTOR HOMES
These are conventional motor homes constructed directly on medium-duty truck
chassis which include the engine and drivetrain components. The living area and
the driver's compartment are designed and produced by Winnebago Industries.
Class A motor homes from Winnebago Industries include: Winnebago Sightseer,
Brave, Adventurer, Chieftain, Journey and Journey DL; Itasca Sunova, Sunrise,
Suncruiser, Sunflyer and Horizon; and Ultimate Advantage and Ultimate Freedom.
CLASS B VAN CAMPERS
These are panel-type trucks to which sleeping, kitchen, and/or toilet facilities
are added. These models also have a top extension to provide more headroom.
Winnebago Industries converts the EuroVan Camper, which is distributed by
Volkswagen of America and Volkswagen of Canada.
CLASS C MOTOR HOMES (MINI)
These are mini motor homes built on a van-type chassis onto which manufacturers
construct a living area with access to the driver's compartment. Class C motor
homes from Winnebago Industries include: Winnebago Vista, Minnie and Minnie
Winnie; Itasca Sunstar, Spirit and Sundancer; and Rialta.
[LOGO]
WINNEBAGO
INDUSTRIES
MOTOR HOME FAMILY TREE
Winnebago Industries manufactures four brands of Class A and C motor homes.
Listed below are the brand names and model designations of the Company's 2002
product line.
[LOGO] [LOGO] [LOGO] [LOGO]
WINNEBAGO ITASCA RIALTA ULTIMATE
* Vista * Sunstar * Rialta * Ultimate
* Minnie * Spirit Advantage
* Minnie Winnie * Sundancer * Ultimate Freedom
* Sightseer * Sunova
* Brave * Sunrise
* Adventurer * Suncruiser
* Chieftain * Sunflyer
* Journey/Journey DL * Horizon
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Certain of the matters discussed in this Annual 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, reactions
to actual or threatened terrorist attacks, availability and price of fuel, a
significant increase in interest rates, a further 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 Annual
Report. 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.
GENERAL
The primary use of recreation vehicles (RVs) for leisure travel and outdoor
recreation has historically led to a peak retail selling season concentrated in
the spring and summer months. The Company's sales of RVs are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory. The Company's products are generally manufactured
against orders from the Company's dealers and from time to time to build
inventory to satisfy the peak selling season.
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED TO FISCAL 2000
Net revenues for recreation vehicles and other manufactured products were
$677,593,000 for fiscal 2001, a decrease of $71,881,000, or 9.6 percent, from
fiscal 2000. Motor home shipments (Class A and C) during fiscal 2001 were 9,076
units, a decrease of 1,440 units, or 13.7 percent, compared to fiscal 2000. The
percentage decrease in net revenues was less than the percentage decrease in
motor home unit sales because the Company's fiscal 2001 sales, as a percentage
of total units sales, contained relatively more higher-priced units with
slideout features as well as diesel powered Class A vehicles. The Company's net
revenues during fiscal 2001 continued to reflect the decline in consumer
confidence levels and a slowdown in the economy. The Company's performance
within the RV industry in fiscal 2001 is a result of the excellent acceptance of
its new products, solid performance of its dealer partners, brand recognition
and strong quality reputation.
Net revenues for dealer financing at Winnebago Acceptance Corporation (WAC)
were $4,241,000 for fiscal 2001, an increase of $333,000 or 8.5 percent from
fiscal 2000. Increased revenues for dealer financing reflect an increase in
dealer receivable balances and to a lesser extent, an increase in interest rates
17
charged when comparing fiscal 2001 to fiscal 2000.
Cost of manufactured products, as a percent of manufactured product
revenues, was 86.7 percent for fiscal 2001, compared to 85.5 percent for fiscal
2000. The Company's lower volume of production and sales of motor homes
contributed to the reduced margins for fiscal 2001.
Selling expenses increased by $305,000 to $25,423,000 comparing fiscal 2001
to fiscal 2000 and increased as a percentage of net revenues to 3.7 percent from
3.3 percent. The increases in dollars and percentage can be attributed primarily
to increases in the Company's promotional programs. Decreased sales volume,
during fiscal 2001 also contributed to the increase in percentage.
General and administrative expenses decreased by $3,515,000 to $13,607,000
and to 2.0 percent of net revenues from 2.3 percent when comparing fiscal 2001
to fiscal 2000. Lower payments for employee incentive programs and reduced
product liability costs were the primary reasons for the decreases in both
dollars and percentages.
For fiscal 2001, the Company had net financial income of $3,754,000
compared to net financial income of $3,338,000 during fiscal 2000. During 2001,
the Company recorded $3,731,000 of net interest and dividend income and gains of
$23,000 in foreign currency transactions. During fiscal 2000, the Company
recorded $3,280,000 of net interest and dividend income and gains of $58,000 in
foreign currency transactions. The increase in interest and dividend income when
comparing the two periods was due primarily to larger cash balances available
for investing during fiscal 2001.
The effective income tax rate decreased from 34.6 percent in fiscal 2000 to
26.1 percent in fiscal 2001. The primary reason for the decrease was due to the
Company realizing certain tax benefits during fiscal 2001 which had not been
recorded previously due to the uncertainty of realization.
For fiscal 2001, the Company had income before cumulative effect of a
change in accounting principle (Staff Accounting Bulletin [SAB] No. 101) of
$43,754,000, or $2.08 per diluted share. The comparable results for fiscal 2000
was net income of $48,399,000, or $2.20 per diluted share.
The Company adopted SAB No. 101 at the beginning of fiscal 2001. SAB No.
101 which was issued by the Securities and Exchange Commission (SEC) in December
1999 sets forth the views of the SEC concerning revenue recognition. As a result
of SAB No. 101, the Company began recording revenue upon the dealers' receipt of
products rather than upon shipment by the Company. Adoption of SAB No. 101
during fiscal 2001 resulted in a decrease in the Company's net income of
$1,050,000, or $.05 per diluted share.
For fiscal 2001, the Company had net income of $42,704,000, or $2.03 per
diluted share compared to fiscal 2000's net income of $48,399,000, or $2.20 per
diluted share.
FISCAL 2000 COMPARED TO FISCAL 1999
Net revenues for manufactured products were $749,474,000 for fiscal 2000,
an increase of $75,458,000, or 11.2 percent, from fiscal 1999. Motor home
shipments (Class A and C) during fiscal 2000 were 10,516 units, an increase of
240 units, or 2.3 percent, compared to fiscal 1999. Increased revenues reflected
the Company's efforts to provide the market with more higher-priced units with
slideout features as
18
well as diesel-powered Class A vehicles.
Net revenues for dealer financing at WAC were $3,908,000 for fiscal 2000,
an increase of $913,000 or 30.5 percent from fiscal 1999. Increased revenues for
dealer financing reflected an increase in dealer receivable balances and to a
lesser extent, an increase in interest rates charged when comparing fiscal 2000
to fiscal 1999.
Cost of manufactured products, as a percent of manufactured product
revenues, was 85.5 percent for fiscal 2000, compared to 85.3 percent for fiscal
1999. Increases in the Company's discount programs during fiscal 2000
contributed to the reduced margins.
Selling expenses increased by $797,000 to $25,118,000 comparing fiscal 2000
to fiscal 1999 but decreased as a percentage of net revenues to 3.3 percent from
3.6 percent. The increase in dollars can be attributed primarily to increases in
advertising costs and in the Company's promotional programs. Increased sales
volume, during fiscal 2000 contributed to the decrease in percentage.
General and administrative expenses increased by $3,017,000 to $17,122,000
and to 2.3 percent of net revenues from 2.1 percent when comparing fiscal 2000
to fiscal 1999. Increases in insurance and legal costs during fiscal 2000 were
the primary reasons for the increases in both dollars and percentages. A portion
of the increase between the two periods was the result of expenses for fiscal
1999 being reduced due to monies the Company received and recorded on a
previously fully reserved receivable.
For fiscal 2000, the Company had net financial income of $3,338,000
compared to net financial income of $2,627,000 during fiscal 1999. During fiscal
2000, the Company recorded $3,280,000 of net interest and dividend income and
gains of $58,000 in foreign currency transactions. During fiscal 1999, the
Company recorded $2,615,000 of net interest and dividend income and gains of
$12,000 in foreign currency transactions. The increase in interest and dividend
income when comparing the two periods was due primarily to higher rates of
returns earned on available invested cash and larger cash balances during fiscal
2000.
The effective income tax rate increased from 33.6 percent in fiscal 1999 to
34.6 percent in fiscal 2000. The primary reason for the increase was due to
increased state income taxes.
For fiscal 2000, the Company had net income of $48,399,000, or $2.20 per
diluted share, compared to fiscal 1999's net income of $44,260,000, or $1.96 per
diluted share.
ANALYSIS OF FINANCIAL
CONDITION, LIQUIDITY
AND RESOURCES
The Company generally meets its working capital, capital equipment and cash
requirements with funds generated from operations.
At August 25, 2001, working capital was $174,248,000, an increase of
$30,974,000 from the amount at August 26, 2000. Cash provided by operations was
$73,411,000, $51,412,000 and $25,004,000 during fiscal years ended August 25,
2001, August 26, 2000 and August 28, 1999, respectively. Operating cash flows
were provided in fiscal 2001 primarily by income generated from operations as
well as a decrease in working capital components. Cash flows used by
19
investing activities were $19,717,000, $25,255,000 and $20,185,000 in fiscal
2001, 2000 and 1999, respectively. Cash flows used by investing activities
primarily include increases in dealer receivables and investments in capital
expenditures. Capital expenditures were $9,089,000 in fiscal 2001, $14,548,000
in fiscal 2000 and $11,577,000 in fiscal 1999. Net cash used by financing
activities was $11,358,000 in fiscal 2001, $22,874,000 in fiscal 2000 and
$11,399,000 in fiscal 1999. Cash used by financing activities in fiscal 2001,
2000 and 1999 was primarily to repurchase shares of the Company's common stock
at a cost of $10,686,000, $19,726,000 and $8,975,000, respectively. (See
Consolidated Statements of Cash Flows.)
The Company's sources of liquidity consisted principally of cash and cash
equivalents in the amount of $93,779,000 at August 25, 2001 compared to
$51,443,000 at August 26, 2000.
On October 19, 2000, the Company entered into an unsecured Credit Agreement
with Wells Fargo Bank Iowa, National Association. The Credit Agreement provides
the Company with a line of credit of $20,000,000 until January 31, 2002. The
Company did not borrow under the line of credit with Wells Fargo Bank during
fiscal 2001. (See Note 4 to the Company's 2001 Consolidated Financial
Statements).
Principal expected demands at August 25, 2001 on the Company's liquid
assets for fiscal 2002 include capital expenditures of approximately $14,800,000
and payments of cash dividends. On March 14, 2001, the Board of Directors
authorized the repurchase of outstanding shares of the Company's common stock,
depending on market conditions, for an aggregate purchase price of up to
$15,000,000. As of October 3, 2001, 218,000 shares had been repurchased for an
aggregate consideration of approximately $4,491,000 under this authorization.
Management currently expects its cash on hand and funds from operations to
be sufficient to cover both short-term and long-term operating requirements.
NEW ACCOUNTING STANDARDS
On August 27, 2000, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and for hedging activities.
It requires that all derivatives, including those embedded in other contracts,
be recognized as either assets or liabilities and that those financial
instruments be measured at fair value. The accounting for changes in the fair
value of derivatives depends on their intended use and designation.
All contracts that contain provisions meeting the definition of a
derivative also meet the requirements of, and have been designated as, normal
purchases or sales. The Company's policy is not to enter into contracts with
terms that cannot be designated as normal purchases or sales. The adoption of
SFAS No. 133 on August 27, 2000, resulted in no transition adjustment.
On August 27, 2000, the Company adopted the SEC's SAB No. 101, "Revenue
Recognition in Financial Statements," which the SEC staff issued in
20
December 1999. SAB No. 101 sets forth the SEC's views concerning revenue
recognition. As a result of SAB No. 101 the Company began recording revenue upon
receipt of products by Winnebago Industries dealers rather than upon shipment by
the Company. This change in revenue recognition required a non-cash charge to
income in the Company's first quarter 2001 results, which reflects the
cumulative effect of the prior year's results due to the application of SAB No.
101.
IMPACT OF INFLATION
Historically, the impact of inflation on the Company's operations has not
been significantly detrimental, as the Company has usually been able to adjust
its prices to reflect the inflationary impact on the cost of manufacturing its
products. The inability of the Company to successfully offset increases in
manufacturing costs could have a material adverse effect on the Company's
results of operations.
COMPANY OUTLOOK
Due to the September 11 tragedy and the current economic environment, the
Company is cautious about the next few quarters. Long-term, demographics are in
the Company's favor as its target market of consumers age 50 and older is
expected to increase for the next 30 years. Order backlog for the Company's
Class A and Class C motor homes was approximately 1,600 orders at August 25,
2001, approximately 1,300 orders at August 26, 2000 and approximately 2,700
orders at August 28, 1999. The Company includes in its backlog all accepted
purchase orders from dealers shippable within the next six months. Orders in
backlog can be canceled or postponed at the option of the purchaser at any time
without penalty and, therefore, backlog may not necessarily be a measure of
future sales.
21
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS) AUGUST 25, 2001 AUGUST 26, 2000
- -------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 93,779 $ 51,443
Receivables, less allowance for doubtful accounts
($244 and $1,168, respectively) 20,183 32,045
Dealer financing receivables, less allowance for doubtful
accounts ($117 and $27, respectively) 40,263 32,696
Inventories 79,815 85,707
Prepaid expenses 3,604 3,952
Deferred income taxes 6,723 7,675
----------------------------------
Total current assets 244,367 213,518
----------------------------------
Property and equipment, at cost:
Land 1,029 1,138
Buildings 45,992 45,219
Machinery and equipment 82,182 78,099
Transportation equipment 5,482 5,414
----------------------------------
134,685 129,870
Less accumulated depreciation 88,149 84,415
----------------------------------
Total property and equipment, net 46,536 45,455
----------------------------------
Investment in life insurance 22,223 21,028
----------------------------------
Deferred income taxes 21,495 19,044
----------------------------------
Other assets 7,412 8,050
----------------------------------
Total assets $ 342,033 $ 307,095
----------------------------------
See notes to consolidated financial statements.
22
(DOLLARS IN THOUSANDS) AUGUST 25, 2001 AUGUST 26, 2000
- -------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade $ 30,789 $ 26,212
Income taxes payable 4,938 8,790
Accrued expenses:
Accrued compensation 13,730 13,924
Product warranties 8,072 8,114
Insurance 4,567 5,384
Promotional 3,181 3,145
Other 4,842 4,675
----------------------------------
Total current liabilities 70,119 70,244
----------------------------------
Postretirement health care and deferred
compensation benefits 64,450 61,942
----------------------------------
Contingent liabilities and commitments
Stockholders' equity:
Capital stock common, par value $.50; authorized
60,000,000 shares, issued 25,886,000 and
25,878,000 shares, respectively 12,943 12,939
Additional paid-in capital 22,261 21,994
Reinvested earnings 234,139 195,556
----------------------------------
269,343 230,489
Less treasury stock, at cost 61,879 55,580
----------------------------------
Total stockholders' equity 207,464 174,909
----------------------------------
Total liabilities and stockholders' equity $ 342,033 $ 307,095
----------------------------------
23
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED
AUGUST 25, AUGUST 26, AUGUST 28,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------
Revenues:
Manufactured products $ 677,593 $ 749,474 $ 674,016
Dealer financing 4,241 3,908 2,995
-------------------------------------------------
Total net revenues 681,834 753,382 677,011
-------------------------------------------------
Costs and expenses:
Cost of manufactured products 587,330 640,488 574,603
Selling 25,423 25,118 24,321
General and administrative 13,607 17,122 14,105
-------------------------------------------------
Total costs and expenses 626,360 682,728 613,029
-------------------------------------------------
Operating income 55,474 70,654 63,982
Financial income 3,754 3,338 2,627
-------------------------------------------------
Income before income taxes 59,228 73,992 66,609
Provision for taxes 15,474 25,593 22,349
-------------------------------------------------
Income before cumulative effect of
change in accounting principle 43,754 48,399 44,260
Cumulative effect of change in accounting
principle, net of taxes (1,050) - - - - - -
-------------------------------------------------
Net income $ 42,704 $ 48,399 $ 44,260
-------------------------------------------------
Earnings per common share (basic):
Income before cumulative effect of change in
accounting principle $ 2.11 $ 2.23 $ 1.99
Cumulative effect of change in
accounting principle (.05) - - - - - -
-------------------------------------------------
Income per share (basic) $ 2.06 $ 2.23 $ 1.99
=================================================
Earnings per common share (diluted):
Income before cumulative effect of change
in accounting principle $ 2.08 $ 2.20 $ 1.96
Cumulative effect of change in accounting
principle (.05) - - - - - -
-------------------------------------------------
Income per share (diluted) $ 2.03 $ 2.20 $ 1.96
=================================================
Weighted average shares of common
stock outstanding:
Basic 20,735 21,680 22,209
-------------------------------------------------
Diluted 21,040 22,011 22,537
=================================================
See notes to consolidated financial statements
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
AUGUST 25, AUGUST 26, AUGUST 28,
(IN THOUSANDS) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 42,704 $ 48,399 $ 44,260
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 7,380 6,622 5,748
Loss on disposal of property, leases and other assets 325 350 82
Provision (credit) for doubtful receivables 34 203 (1,049)
Tax benefit of stock options 1,209 - - - - - -
Change in assets and liabilities:
Decrease (increase) in receivables and other assets 12,344 702 (11,740)
Decrease (increase) in inventories 5,892 1,324 (31,598)
Increase (decrease) in accounts payable
and accrued expenses 3,727 (8,306) 19,781
(Decrease) increase in income taxes payable (3,852) 180 (2,422)
Increase in deferred income taxes (1,499) (2,674) (2,659)
Increase in postretirement benefit 5,147 4,612 4,601
-------------------------------------------------
Net cash provided by operating activities 73,411 51,412 25,004
-------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (9,089) (14,548) (11,577)
Proceeds from sale of property and equipment 338 531 355
Investments in dealer receivables (114,907) (103,125) (91,386)
Collections of dealer receivables 107,261 95,061 79,611
Investments in other assets (3,320) (3,724) (2,962)
Proceeds from other assets - - - 550 5,774
-------------------------------------------------
Net cash used by investing activities (19,717) (25,255) (20,185)
-------------------------------------------------
Cash flows from financing activities
and capital transactions:
Payments for purchase of common stock (10,686) (19,726) (8,975)
Payments of cash dividends (4,121) (4,324) (4,443)
Proceeds from issuance of common
and treasury stock 3,449 1,176 2,019
-------------------------------------------------
Net cash used by financing activities and
capital transactions (11,358) (22,874) (11,399)
-------------------------------------------------
Net increase (decrease) in cash and cash equivalents 42,336 3,283 (6,580)
Cash and cash equivalents at beginning of year 51,443 48,160 54,740
-------------------------------------------------
Cash and cash equivalents at end of year $ 93,779 $ 51,443 $ 48,160
-------------------------------------------------
See notes to consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL
(AMOUNTS IN THOUSANDS COMMON SHARES PAID-IN REINVESTED TREASURY STOCK
EXCEPT PER SHARE DATA) NUMBER AMOUNT CAPITAL INCOME NUMBER AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
Balance, August 29, 1998 25,865 $ 12,932 $ 22,507 $ 111,665 3,052 $ 30,581
Proceeds from the sale of common
stock to employees 9 5 (600) -- (254) (2,614)
Payments for purchase of common stock -- -- -- -- 777 8,975
Cash dividends on common stock -
$.20 per share -- -- -- (4,443) -- --
Net income -- -- -- 44,260 -- --
----------------------------------------------------------------------------------
Balance, August 28, 1999 25,874 12,937 21,907 151,482 3,575 36,942
Proceeds from the sale of common
stock to employees 4 2 87 -- (98) (1,088)
Payments for purchase of common stock -- -- -- -- 1,127 19,726
Cash dividends on common stock -
$.20 per share -- -- -- (4,325) -- --
Net income -- -- -- 48,399 -- --
----------------------------------------------------------------------------------
Balance, August 26, 2000 25,878 12,939 21,994 195,556 4,604 55,580
Proceeds from the sale of common
stock to employees 8 4 267 - - - (364) (4,387)
Payments for purchase of common stock - - - - - - - - - - - - 883 10,686
Cash dividends on common stock -
$.20 per share - - - - - - - - - (4,121) - - - - - -
Net income - - - - - - - - - 42,704 - - - - - -
----------------------------------------------------------------------------------
Balance, August 25, 2001 25,886 $ 12,943 $ 22,261 $ 234,139 5,123 $ 61,879
----------------------------------------------------------------------------------
See notes to consolidated financial statements.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company's operations are conducted predominantly in two industry segments:
the manufacture and sale of recreation vehicles and other manufactured products,
and floor plan financing for selected Winnebago, Itasca, Rialta, and Ultimate
dealers. The recreation vehicle market is highly competitive, both as to price
and quality of the product. The Company believes its principal marketing
advantages are its brand name recognition, the quality of its products, its
dealer organization, its warranty and service capability and its marketing
techniques. The Company also believes that its prices are competitive with the
competitions' units of comparable size and quality.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
parent company and subsidiary companies. All material intercompany balances and
transactions with subsidiaries have been eliminated.
STATEMENTS OF CASH FLOWS. For purposes of these statements, cash equivalents
primarily consisted of commercial paper, tax exempt money market preferreds and
variable rate auction preferred stock with an original maturity of three months
or less. For cash equivalents, the carrying amount is a reasonable estimate of
fair value.
FISCAL PERIOD. The Company follows a 52/53 week fiscal year period. The
financial statements presented are all 52 week periods.
REVENUE RECOGNITION. The Company adopted SAB 101, "Revenue Recognition," as of
the beginning of fiscal 2001. This new accounting principle requires the Company
to recognize revenue upon delivery of products to the dealer, which is when
title passes, instead of when shipped by the Company. Interest income from
dealer floor plan receivables is recorded on the accrual basis in accordance
with the terms of the loan agreements.
SHIPPING REVENUES AND EXPENSES. Shipping revenues for products shipped are
included within sales, while shipping expenses are included within cost of goods
sold, in accordance with Emerging Issues Task Force No. 00-10, Accounting for
Shipping and Handling Fees and Costs (EITF 00-10). Shipping revenue and expense
was previously reported as a net amount within selling expenses. Prior period
revenues and expenses have been reclassified to revenues and cost of goods sold,
which had no effect on previously reported net income.
INVENTORIES. Inventories are valued at the lower of cost or market, with cost
being determined by using the last-in, first-out (LIFO) method and market
defined as net realizable value.
PROPERTY AND EQUIPMENT. Depreciation of property and equipment is computed using
the straight-line method on the cost of the assets, less allowance for salvage
value where appropriate, at rates based upon their estimated service lives as
follows:
ASSET CLASS ASSET LIFE
- --------------------------------------------------------------------------------
Buildings 10-30 yrs.
Machinery and Equipment 3-10 yrs.
Transportation Equipment 3-6 yrs.
Management periodically reviews the carrying values of long-lived assets for
impairment whenever events or
27
changes in circumstances indicate that the carrying value may not be
recoverable. In performing the review for recoverability, management estimates
the nondiscounted future cash flows expected to result from the use of the asset
and its eventual disposition.
PROVISION FOR WARRANTY CLAIMS. Estimated warranty costs are provided at the time
of sale of the warranted products. Estimates of future warranty costs are based
on prior experience and known current events.
INCOME TAXES. The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes." This Statement requires recognition of deferred
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. All contracts that contain
provisions meeting the definition of a derivative also meet the requirements of,
and have been designated as, normal purchases or sales. The Company's policy is
to not enter into contracts with terms that cannot be designated as normal
purchases or sales.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. The allowance for doubtful accounts is based on
previous loss experience. Additional amounts are provided through charges to
income as management believes necessary after evaluation of receivables and
current economic conditions. Amounts which are considered to be uncollectible
are charged off and recoveries of amounts previously charged off are credited to
the allowance upon recovery.
RESEARCH AND DEVELOPMENT. Research and development expenditures are expensed as
incurred. Development activities generally relate to creating new products and
improving or creating variations of existing products, to meet new applications.
During fiscal 2001, 2000 and 1999, the Company spent approximately $2,121,000,
$2,293,000 and $1,978,000, respectively, on research and development activities.
INCOME PER COMMON SHARE. Basic income per common share is computed by dividing
net income by the weighted average common shares outstanding during the period.
Diluted income per common share is computed by dividing net income by the
weighted average common shares outstanding plus the incremental shares that
would have been outstanding upon the assumed exercise of dilutive stock options
(See Note 13).
FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS. All financial instruments are
carried at amounts believed to approximate fair value.
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
RECLASSIFICATIONS. Certain prior year information has been reclassified to
conform to the current year presentation. This reclassification had no affect on
net income or stockholders' equity as previously reported.
28
NOTE 2: DEALER FINANCING RECEIVABLES
Dealer floor plan receivables are collateralized by recreation vehicles and are
due upon the dealer's sale of the vehicle, with the entire balance generally due
at the end of one year. At August 25, 2001 and August 26, 2000, the Company had
a concentration of credit risks whereby $39,243,000 and $32,565,000,
respectively, of dealer financing receivables were due from one dealer.
NOTE 3: INVENTORIES
Inventories consist of the following:
AUGUST 25, AUGUST 26,
(DOLLARS IN THOUSANDS) 2001 2000
- --------------------------------------------------------------------------------
Finished goods $ 36,930 $ 28,286
Work-in-process 21,725 19,577
Raw materials 44,232 59,674
-------------------------
102,887 107,537
LIFO reserve 23,072 21,830
-------------------------
$ 79,815 $ 85,707
-------------------------
The above value of inventories, before reduction for the LIFO reserve,
approximates replacement cost at the respective dates.
NOTE 4: NOTES PAYABLE
Short-term lines of credit and related borrowings outstanding at fiscal year-end
are as follows:
AUGUST 25, AUGUST 26,
(DOLLARS IN THOUSANDS) 2001 2000
- --------------------------------------------------------------------------------
Available Credit Lines $ 20,000 $ 30,000
Outstanding - - - - - -
Interest Rate 4.52% 10.0%
During the first quarter of fiscal 2001, the Company terminated a financing and
security agreement with Bank of America Specialty Group (formerly Nations Bank
Specialty Lending Unit). On October 19, 2000, the Company entered into an
unsecured Credit Agreement with Wells Fargo Bank Iowa, 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 which the Company was in compliance with at August
25, 2001. There were no outstanding borrowings under the Financing and Security
Agreement and/or the Credit Agreement during fiscal 2001 or fiscal 2000.
NOTE 5: EMPLOYEE RETIREMENT PLANS
The Company has a qualified profit sharing and contributory 401(k) plan for
eligible employees. The plan provides for contributions by the Company in such
amounts as the Board of Directors may determine. Contributions to the plan in
cash for fiscal 2001, 2000 and 1999 were $2,283,000, $2,685,000 and $2,391,000,
respectively.
The Company also has a non-qualified deferred compensation program which permits
key employees to annually elect (via individual contracts) to defer a portion of
their compensation until their retirement. The retirement benefit to be provided
is based upon the amount of compensation deferred and the age of the individual
at the time of the contracted deferral. An individual generally vests at the
later of age 55 and five years of service since the deferral was made. For
deferrals prior to December 1992, vesting occurs at the later of age 55 and five
years of service from first
29
deferral or 20 years of service. Deferred compensation expense was $1,659,000,
$1,645,000 and $1,923,000, in fiscal 2001, 2000 and 1999, respectively. Total
deferred compensation liabilities were $24,646,000 and $26,192,000 at August 25,
2001 and August 26, 2000, respectively.
To assist in funding the deferred compensation liability, the Company has
invested in corporate-owned life insurance policies. The cash surrender value of
these policies (net of borrowings of $13,637,000 and $11,640,000 at August 25,
2001 and August 26, 2000, respectively) are presented as assets of the Company
in the accompanying balance sheets.
The Company provides certain health care and other benefits for retired
employees who have fulfilled eligibility requirements at age 55 with 15 years of
continuous service. Retirees are required to pay a monthly premium for medical
coverage based on years of service at retirement and then current age. The
Company's postretirement health care plan currently is not funded. The status of
the plan is as follows:
AUGUST 25, AUGUST 26,
(DOLLARS IN THOUSANDS) 2001 2000
- --------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation,
beginning of year $ 36,925 $ 28,045
Service cost 1,955 1,714
Interest cost 2,750 1,953
Net benefits paid (587) (475)
Plan amendment (1,089) - - -
Actuarial loss 1,225 5,688
--------------------------
Benefit obligation,
end of year $ 41,179 $ 36,925
--------------------------
Funded status -
benefit obligation $ 41,179 $ 36,925
Unrecognized net
actuarial loss (2,777) (1,537)
Unrecognized prior
service cost 1,402 362
--------------------------
Accrued benefit cost $ 39,804 $ 35,750
--------------------------
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.0 percent at August 25, 2001 and 7.5 percent at August 26,
2000. The average assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligations as of August 25, 2001 was 9.6
percent, decreasing each successive year until it reaches 5.3 percent in 2022
after which it remains constant.
Net postretirement benefit expense for the fiscal years ended August 25, 2001,
August 26, 2000 and August 28, 1999 consisted of the following components:
30
(DOLLARS IN AUG. 25, AUG. 26, AUG. 28,
THOUSANDS) 2001 2000 1999
- --------------------------------------------------------------------------------
Components of net periodic benefit cost:
Service cost $ 1,955 $ 1,714 $ 1,880
Interest cost 2,750 1,953 1,834
Net amortization
and deferral (65) (129) (48)
-----------------------------------
Net periodic
benefit cost $ 4,640 $ 3,538 $ 3,666
-----------------------------------
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one percentage point change in assumed
health care cost trend rates would have the following effects:
ONE ONE
PERCENTAGE PERCENTAGE
POINT POINT
(DOLLARS IN THOUSANDS) INCREASE DECREASE
- --------------------------------------------------------------------------------
Effect on total of service
and interest cost
components $ 1,325 $ (979)
Effect on postretirement
benefit obligation $ 10,034 $ (7,576)
NOTE 6: CONTINGENT LIABILITIES AND COMMITMENTS
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. Most dealers are financed on a "floor
plan" basis under which a bank or finance company lends the dealer all, or
substantially all, of the purchase price, collateralized by a lien upon, or
title to, the merchandise purchased. Upon request of a lending institution
financing a dealer's purchases of the Company's products, and after completion
of a credit investigation of the dealer involved, the Company will execute a
repurchase agreement. These agreements provide that, in the event of default by
the dealer on the agreement to pay the lending institution, the Company will
repurchase the financed merchandise. The agreements provide that the Company's
liability will not exceed 100 percent of the dealer invoice and provide for
periodic liability reductions based on the time since the date of the original
invoice. The Company's contingent obligations under these repurchase agreements
are reduced by the proceeds received upon the sale of any repurchased unit. The
Company's contingent liability on all repurchase agreements was approximately
$216,784,000 and $219,873,000 at August 25, 2001 and August 26, 2000. The
Company's losses under repurchase agreements were approximately $197,000,
$282,000, and $55,000 during fiscal 2001, 2000 and 1999, respectively.
Included in these contingent liabilities are certain dealer receivables subject
to full recourse to the Company with Bank of America Specialty Group (formerly
NationsBank Specialty Lending Unit) and Conseco Financing Servicing Group
(formerly Green Tree Financial Servicing Corporation). Contingent liabilities
under these recourse agreements were $3,276,000 and $6,846,000 at August 25,
2001 and August 26, 2000, respectively. The Company did not incur any actual
losses under these recourse agreements during fiscal 2001, 2000 and 1999.
The Company self-insures for a portion of product liability claims.
Self-insurance retention liability varies annually based on market conditions
and for the past four fiscal years was at $2,500,000 per occurrence and
$6,000,000 in aggregate per policy year. Liabilities in excess of these amounts
are the responsibility of the insurer.
The Company is involved in various legal proceedings which are ordinary routine
litigation incident to its business, many of which are covered in whole or in
31
part by insurance. While it is impossible to estimate with certainty the
ultimate legal and financial liability with respect to this litigation,
management is of the opinion that while the final resolution of any such
litigation may have an impact on the Company's consolidated results for a
particular reporting period, the ultimate disposition of such litigation will
not have any material adverse effect on the Company's financial position,
results of operations or liquidity.
NOTE 7: INCOME TAXES
The components of the provision for income taxes are as follows:
YEAR ENDED
(DOLLARS IN AUG. 25, AUG. 26, AUG. 28,
THOUSANDS) 2001 2000 1999
- ------------------------------------------------------------------------------------------
Current:
Federal $ 16,448 $ 27,162 $ 24,693
State 524 1,105 315
-----------------------------------
$ 16,972 $ 28,267 $ 25,008
Deferred:
(Principally
federal) (1,498) (2,674) (2,659)
-----------------------------------
Total provision $ 15,474 $ 25,593 $ 22,349
-----------------------------------
The following is a reconciliation of the U.S. statutory tax rate to the
effective income tax rates (benefit) provided:
YEAR ENDED
AUGUST 25, 2001 AUGUST 26, 2000 AUGUST 28, 1999
- -----------------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% 35.0%
Cash surrender value (0.7) (0.6) (0.6)
Life insurance premiums 0.1 0.1 0.1
Tax credits (0.5) (0.3) (0.7)
State taxes, net of federal benefit 0.6 0.8 0.5
Foreign sales corporation commissions (0.2) (0.2) (0.2)
Previously unrecorded tax benefits (7.7) - - - - - -
Other (0.5) (0.2) (0.5)
---------------------------------------------------
Total 26.1% 34.6% 33.6%
---------------------------------------------------
32
The tax effect of significant items comprising the Company's net deferred tax
assets are as follows:
AUGUST 25, 2001 AUGUST 26, 2000
(DOLLARS IN THOUSANDS) ASSETS LIABILITIES TOTAL TOTAL
- ------------------------------------------------------------------------------------- ----------------
CURRENT:
Accrued vacation $ 1,404 $ - - - $ 1,404 $ 1,394
Legal reserves 365 - - - 365 498
Warranty reserves 2,825 - - - 2,825 2,840
Bad debt reserves 126 - - - 126 418
Self-insurance reserve 1,598 - - - 1,598 2,055
Miscellaneous reserves 624 (219) 405 470
---------------------------------------------- ----------------
Subtotal 6,942 (219) 6,723 7,675
---------------------------------------------- ----------------
NONCURRENT:
Postretirement health care benefits 13,931 - - - 13,931 12,512
Deferred compensation 10,788 - - - 10,788 9,507
Property and equipment - - - (3,224) (3,224) (2,975)
---------------------------------------------- ----------------
Subtotal 24,719 (3,224) 21,495 19,044
---------------------------------------------- ----------------
Total $ 31,661 $ (3,443) $ 28,218 $ 26,719
---------------------------------------------- ----------------
NOTE 8: FINANCIAL INCOME AND EXPENSE
The following is a reconciliation of financial income (expense):
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 25, 2001 AUGUST 26, 2000 AUGUST 28, 1999
- --------------------------------------------------------------------------------------------------------
Interest income from investments and receivables $ 1,332 $ 1,478 $ 1,085
Dividend income 2,488 2,076 1,621
Interest expense (89) (274) (91)
Gains on foreign currency transactions 23 58 12
--------------------------------------------------
$ 3,754 $ 3,338 $ 2,627
--------------------------------------------------
NOTE 9: DIVIDEND DECLARED
On October 17, 2001, the Board of Directors declared a cash dividend of $.10 per
common share payable January 7, 2002, to shareholders of record on December 7,
2001.
33
NOTE 10: STOCK OPTION PLANS
The Company's 1987 stock option plan allowed the granting of non-qualified and
incentive stock options to key employees at prices not less than 100 percent of
fair market value, determined by the mean of the high and low prices, on the
date of grant. The plan expired in fiscal 1997; however, exercisable options
representing 81,418 shares remain outstanding at August 25, 2001.
The Company's stock option plan for outside directors provided that each
director who was not a current or former full-time employee of the Company
received an option to purchase 10,000 shares of the Company's common stock at
prices equal to 100 percent of the fair market value, determined by the mean of
the high and low prices on the date of grant. The Board of Directors has
terminated this plan as to future grants. Future grants of options to outside
directors will be made under the Company's 1997 stock option plan described as
follows.
The Company's 1997 stock option plan provides additional incentives to those
officers, employees, directors, advisors and consultants of the Company whose
substantial contributions are essential to the continued growth and success of
the Company's business. A total of 2,000,000 shares of the Company's common
stock may be issued or transferred or used as the basis of stock appreciation
rights under the 1997 stock option plan. The plan allows the granting of
non-qualified and incentive stock options as well as stock appreciation rights.
The plan is administered by a committee appointed by the Company's Board of
Directors. The option prices for these shares shall not be less than 85 percent
of the fair market value of a share at the time of option granting for
non-qualified stock options or less than 100 percent for incentive stock
options. The term of each option expires and all rights to purchase shares
thereunder cease ten years after the date such option is granted or on such date
prior thereto as may be fixed by the Committee. Options granted under this plan
become exercisable six months after the date the option is granted unless
otherwise set forth in the agreement. Outstanding options granted to employees
generally vest in three equal annual installments provided that all options
granted under the 1997 stock option plan shall become vested in full and
immediately upon the occurrence of a change in control of the Company.
A summary of stock option activity for fiscal 2001, 2000 and 1999 is as follows:
2001 2000 1999
WTD. WTD. WTD.
AVG. AVG. AVG.
PRICE PER EXERCISE PRICE PER EXERCISE PRICE PER EXERCISE
SHARES SHARE PRICE/SH SHARES SHARE PRICE/SH SHARES SHARE PRICE/SH
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at
beginning of year 795,514 $ 4 - $20 $10.88 680,176 $ 4 - $15 $ 8.56 650,695 $ 4 - $ 9 $ 7.34
Options granted 312,000 12 - 18 12.83 180,800 19 - 20 18.59 259,250 10 - 15 10.47
Options exercised (312,944) 4 - 19 8.64 (65,462) 6 - 10 8.15 (227,098) 6 - 10 7.24
Options canceled (6,402) 9 - 19 13.84 --- --- --- (2,671) 8 7.75
--------------------------------------------------------------------------------------------------
Outstanding at
end of year 788,168 $ 7 - $20 $12.51 795,514 $ 4 - $20 $10.88 680,176 $ 4 - $15 $ 8.56
--------------------------------------------------------------------------------------------------
Exercisable at end
of year 352,018 $ 7 - $20 $11.33 469,214 $ 4 - $20 $ 8.40 309,593 $ 4 - $15 $ 7.47
--------------------------------------------------------------------------------------------------
34
The following table summarizes information about stock options outstanding at
August 25, 2001:
RANGE OF NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
PRICES AUGUST 25, 2001 CONTRACTUAL LIFE EXERCISE PRICE AUGUST 25, 2001 EXERCISE PRICE
- ---------------------------------------------------------------------------------------------------------
$ 7.19 - $ 7.75 49,418 5 $ 7.58 49,418 $ 7.58
8.56 - 9.00 113,336 5 8.65 113,336 8.65
10.19 - 15.38 452,114 8 11.71 116,364 10.99
18.00 - 19.72 173,300 8 18.53 72,900 18.58
---------------------------------------------------------------------------------------
788,168 8 $ 12.51 352,018 $ 11.33
In 1997, the Company adopted SFAS No. 123, "Accounting for Stock Based
Compensation." The Company has elected to continue following the accounting
guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" for measurement and recognition of stock-based transactions
with employees. No compensation cost has been recognized for options issued
under the stock option plans because the exercise price of all options granted
was not less than 100 percent of fair market value of the common stock on the
date of grant. Had compensation cost for the stock options issued been
determined based on the fair value at the grant date, consistent with provisions
of SFAS No. 123, the Company's 2001, 2000 and 1999 income and income per share
would have been changed to the pro forma amounts indicated as follows:
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA) 2001 2000 1999
--------------------------------------------------------------------------------------
Net income
As reported $ 42,704 $ 48,399 $ 44,260
Pro forma 41,006 47,143 43,508
Income per share (basic)
As reported $ 2.06 $ 2.23 $ 1.99
Pro forma 1.98 2.17 1.96
Income per share (diluted)
As reported $ 2.03 $ 2.20 $ 1.96
Pro forma 1.95 2.14 1.93
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
2001 2000 1999
- ---------------------------------------------------------------------------------------------
Dividend yield 1.13% 1.21% 1.54%
Risk-free interest rate 4.55% 6.92% 6.05%
Expected life 5 years 5 years 7 years
Expected volatility 49.92% 49.64% 44.36%
Estimated fair value of options
granted per share $5.29 $8.30 $5.06
35
NOTE 11: SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the year for:
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 25, 2001 AUGUST 26, 2000 AUGUST 28, 1999
- ------------------------------------------------------------------------------------------------------
Interest $ 3 $ 249 $ 96
Income taxes 18,205 28,305 27,430
NOTE 12: BUSINESS SEGMENT INFORMATION
The Company defines its operations into two business segments: Recreation
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
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. The accounting
policies of the segments are the same as those described in the Summary of
Significant Accounting Policies (Note 1). 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.
For the years ended August 25, 2001, August 26, 2000 and August 28, 1999, the
Company's segment information is as follows:
RECREATION VEHICLES
& OTHER
MANUFACTURED DEALER GENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
- ------------------------------------------------------------------------------------------------------
2001
Net revenues $ 677,593 $ 4,241 $ -- $ 681,834
Operating income (loss) 52,120 4,102 (748) 55,474
Identifiable assets 175,343 40,856 125,834 342,033
Depreciation and amortization 7,158 5 217 7,380
Capital expenditures 8,974 19 96 9,089
2000
Net revenues $ 749,474 $ 3,908 $ -- $ 753,382
Operating income (loss) 67,252 3,892 (490) 70,654
Identifiable assets 191,501 33,508 82,086 307,095
Depreciation and amortization 6,375 4 243 6,622
Capital expenditures 14,412 -- 136 14,548
1999
Net revenues $ 674,016 $ 2,995 $ -- $ 677,011
Operating income (loss) 60,435 4,085 (538) 63,982
Identifiable assets 181,951 25,439 78,499 285,889
Depreciation and amortization 5,507 4 237 5,748
Capital expenditures 11,463 18 96 11,577
Operating income of the dealer financing segment reflects a $1,100,000 repayment
of a previously fully reserved receivable.
36
NOTE 13: INCOME PER SHARE
The following table reflects the calculation of basic and diluted income per
share for the past three fiscal years.
(IN THOUSANDS, EXCEPT PER SHARE DATA) AUGUST 25, 2001 AUGUST 26, 2000 AUGUST 28, 1999
- ------------------------------------------------------------------------------------------------------
Income per share - basic:
- -------------------------
Net income $ 42,704 $ 48,399 $ 44,260
-----------------------------------------------------
Weighted average shares outstanding 20,735 21,680 22,209
-----------------------------------------------------
Net income per share - basic $ 2.06 $ 2.23 $ 1.99
-----------------------------------------------------
Income per share - assuming dilution:
- -------------------------------------
Net income $ 42,704 $ 48,399 $ 44,260
-----------------------------------------------------
Weighted average shares outstanding 20,735 21,680 22,209
Dilutive impact of options outstanding 305 331 328
-----------------------------------------------------
Weighted average shares and potential
dilutive shares outstanding 21,040 22,011 22,537
-----------------------------------------------------
Net income per share - assuming dilution $ 2.03 $ 2.20 $ 1.96
-----------------------------------------------------
NOTE 14: PREFERRED STOCK AND SHAREHOLDERS RIGHTS PLAN
The Board of Directors may authorize the issuance from time to time of preferred
stock in one or more series with such designations, preferences, qualifications,
limitations, restrictions, and optional or other special rights as the Board may
fix by resolution. In connection with the Rights Plan discussed below, the Board
of Directors has reserved, but not issued, 300,000 shares of preferred stock.
In May 2000, the Company adopted a shareholder rights plan providing for a
dividend distribution of one preferred share purchase right for each share of
common stock outstanding on and after May 26, 2000. The rights can be exercised
only if an individual or group acquires or announces a tender offer for 15
percent or more of the Company's common stock. Certain members of the Hanson
family (including trusts and estates established by such Hanson family members
and the John K. and Luise V. Hanson Foundation) are exempt from the
applicability of the Rights Plan as it relates to the acquisition of 15 percent
or more of the Company's outstanding common stock. If the rights first become
exercisable as a result of an announced tender offer, each right would entitle
the holder (other than the individual or group acquiring or announcing a tender
offer for 15 percent or more of the Company's common stock) to buy 1/100th of a
share of a new series of preferred stock at an exercise price of $67.25. The
preferred shares will be entitled to 100 times the per share dividend payable on
the Company's common stock and to 100 votes on all matters submitted to a vote
of the shareowners. Once an individual or group acquires 15 percent or more of
the Company's common stock, each right held by such individual or group becomes
void and the remaining rights will then entitle the holder to purchase the
number of common shares having a market value of twice the exercise price of the
right. In the event the Company is acquired in a merger or 50 percent or more of
its consolidated assets or earnings power are sold, each right will then entitle
the holder to purchase a number of the acquiring company's common shares having
a market value of twice the exercise price of the right. After an individual or
group acquires 15 percent of the Company's common stock and before they acquire
50 percent, the Company's Board of Directors may exchange the rights in whole or
in part, at an exchange ratio of one share of common stock per right. Before an
individual or group acquires 15 percent of the Company's common stock, the
rights are redeemable for $.01 per right at the option of the Company's Board of
Directors. The Company's Board of Directors is authorized to reduce the 15
percent threshold to no less than 10 percent. Each right will expire on May 3,
2010, unless earlier redeemed by the Company.
37
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Winnebago Industries, Inc.
Forest City, Iowa
We have audited the consolidated balance sheets of Winnebago Industries, Inc.
and subsidiaries (the Company) as of August 25, 2001 and August 26, 2000 and the
related consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the period ended August 25,
2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of August 25, 2001
and August 26, 2000, and the results of their operations and their cash flows
for each of the three years in the period ended August 25, 2001 in conformity
with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
October 3, 2001
38
NET REVENUES BY MAJOR PRODUCT CLASS (UNAUDITED)
FISCAL YEAR ENDED (1)
AUG. 25, AUG. 26, AUG. 28, AUG. 29, AUG. 30,
(DOLLARS IN THOUSANDS) 2001 2000 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Motor homes (Class A & C) $ 630,017 $ 695,767 $ 619,171 $ 474,954 $ 387,161
92.4% 92.4% 91.5% 89.0% 86.9%
Other recreation vehicle revenues (2) 17,808 18,813 16,620 19,222 21,159
2.6% 2.5% 2.5% 3.6% 4.7%
Other manufactured products revenues (3) 29,768 34,894 38,225 37,133 35,881
4.4% 4.6% 5.6% 7.0% 8.1%
----------------------------------------------------------------------------
Total manufactured products revenues 677,593 749,474 674,016 531,309 444,201
99.4% 99.5% 99.6% 99.6% 99.7%
Finance revenues (4) 4,241 3,908 2,995 2,076 1,420
.6% .5% .4% .4% .3%
----------------------------------------------------------------------------
Total net revenues $ 681,834 $ 753,382 $ 677,011 $ 533,385 $ 445,621
100.0% 100.0% 100.0% 100.0% 100.0%
(1) All fiscal years in the table contained 52 weeks.
(2) Primarily recreation vehicle related parts, EuroVan Campers (Class B motor
homes), and recreation vehicle service revenue.
(3) Primarily sales of extruded aluminum, commercial vehicles, and component
products for other manufacturers.
(4) WAC revenues from dealer financing.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER ENDED
NOVEMBER 25, FEBRUARY 24, MAY 26, AUGUST 25,
FISCAL 2001 2000 2001 2001 2001
- -----------------------------------------------------------------------------------------------------------------
Net revenues $ 164,167 $ 142,531 $ 197,005 $ 178,131
Gross profit 22,483 17,166 27,986 26,869
Operating income 13,380 8,550 18,098 15,446
Net income 8,546 6,184 12,444 15,530
Net income per share (basic) .40 .30 .61 .75
Net income per share (diluted) .40 .30 .60 .74
Net revenues for the quarter ended November 25, 2000 reflect the impact of the
adoption of SAB 101.
QUARTER ENDED
NOVEMBER 27, FEBRUARY 26, MAY 27, AUGUST 26,
FISCAL 2000 AS REPORTED 1999 2000 2000 2000
- -----------------------------------------------------------------------------------------------------------------
Net revenues $ 184,946 $ 189,568 $ 214,070 $ 164,798
Gross profit 29,149 28,571 34,577 20,597
Operating income 18,060 17,003 23,713 11,878
Net income 12,381 11,851 16,257 7,910
Net income per share (basic) .56 .54 .76 .37
Net income per share (diluted) .55 .54 .74 .37
Certain prior periods' information has been reclassified to conform to the
current year end presentation. This reclassification has no impact on net income
as previously reported.
QUARTER ENDED
NOVEMBER 27, FEBRUARY 26, MAY 27, AUGUST 26,
FISCAL 2000 PRO FORMA 1999 2000 2000 2000
- -----------------------------------------------------------------------------------------------------------------
Net revenues $ 187,096 $ 183,004 $ 217,511 $ 165,239
Net income 12,436 11,216 16,633 8,159
Earnings per share - basic .56 .52 .77 .38
Earnings per share - diluted .55 .51 .76 .38
The above pro forma quarterly financial information reflects the impact of the
adoption of SAB 101 on August 27, 2000.
39
SHAREHOLDER INFORMATION
PUBLICATIONS
A notice of Annual Meeting of Shareholders and Proxy Statement is furnished to
shareholders in advance of the annual meeting.
Copies of the Company's quarterly financial news releases and the annual report
on Form 10-K (without exhibits), required to be filed by the Company with the
Securities and Exchange Commission, may be obtained without charge from the
corporate offices as follows:
Investor Relations Department
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, Iowa 50436-0152
Telephone: (641) 585-3535
Fax: (641) 585-6966
E-Mail: ir@winnebagoind.com
This annual report as well as corporate news releases may also be viewed online
in the Investor Relations section of Winnebago Industries website:
http://www.winnebagoind.com
SHAREHOLDER ACCOUNT ASSISTANCE
Transfer Agent to contact for address changes, account certificates and stock
holdings:
Wells Fargo Bank Minnesota, N.A.
P.O. Box 64854
St. Paul, Minnesota 55164-0854
or
161 North Concord Exchange
South St. Paul, Minnesota 55075-1139
Telephone: (800) 468-9716 or (651) 450-4064
E-Mail: stocktransfer@wellsfargo.com
ANNUAL MEETING
The Annual Meeting of Shareholders will be held on Tuesday, January 15, 2002, at
7:30 p.m. (CST) in Friendship Hall, Highway 69 South, Forest City, Iowa.
AUDITOR
Deloitte & Touche LLP
400 One Financial Plaza
120 South Sixth Street
Minneapolis, Minnesota 55402-1844
PURCHASE OF COMMON STOCK
Winnebago Industries stock may be purchased from Netstock through the Company's
website at http://www.winnebagoind.com/investor_relations.htm. Winnebago
Industries is not affiliated with Netstock and has no involvement in the
relationship between Netstock and any of its customers.
COMMON STOCK DATA
The Company's common stock is listed on the New York, Chicago and Pacific Stock
Exchanges.
Ticker symbol: WGO
Shareholders of record as of November 19, 2001: 5,513
Below are the New York Stock Exchange high, low and closing prices of Winnebago
Industries, Inc. stock for each quarter of fiscal 2001 and fiscal 2000.
FISCAL 2001 HIGH LOW CLOSE FISCAL 2000 HIGH LOW CLOSE
- ----------------------------------------------------------------------------------------------------------------
First Quarter $13.63 $10.75 $11.50 First Quarter $28.25 $15.56 $19.00
Second Quarter 19.00 11.56 17.10 Second Quarter 21.50 18.63 21.38
Third Quarter 19.60 15.60 18.77 Third Quarter 21.75 14.25 14.56
Fourth Quarter 30.75 18.44 28.02 Fourth Quarter 14.69 12.06 12.81
CASH DIVIDENDS PER SHARE
FISCAL 2001 FISCAL 2000
- ---------------------------------------------------------------------------------------------------------------
AMOUNT DATE PAID AMOUNT DATE PAID
- ------ --------- ------ ---------
$ .10 January 8, 2001 $ .10 January 10, 2000
.10 July 9, 2001 .10 July 10, 2000
40
DIRECTORS AND OFFICERS
DIRECTORS
BRUCE D. HERTZKE (50)
Chairman of the Board,
Chief Executive Officer
and President
Winnebago Industries, Inc.
GERALD E. BOMAN (66)
Former Senior Vice President
Winnebago Industries, Inc.
JERRY N. CURRIE (56)
President and
Chief Executive Officer
CURRIES Company and
GRAHAM Manufacturing
JOSEPH W. ENGLAND (61)
Former Senior Vice President
Deere and Company
JOHN V. HANSON (59)
Former Deputy Chairman
of the Board
Winnebago Industries, Inc.
GERALD C. KITCH (63)
Former Executive
Vice President
Pentair, Inc.
RICHARD C. SCOTT (67)
Vice President,
University Development
Baylor University
FREDERICK M. ZIMMERMAN (65)
Professor of Manufacturing
Systems Engineering
The University of St. Thomas
LUISE V. HANSON (88)
Director Emeritus
OFFICERS
[PHOTO]
BRUCE D. HERTZKE (50)
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER
AND PRESIDENT
[PHOTO]
EDWIN F. BARKER (54)
VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
[PHOTO]
RAYMOND M. BEEBE (59)
VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
[PHOTO]
ROBERT L. GOSSETT (50)
VICE PRESIDENT, ADMINISTRATION
[PHOTO]
BRIAN J. HRUBES (50)
CONTROLLER
[PHOTO]
JAMES P. JASKOVIAK (49)
VICE PRESIDENT, SALES
AND MARKETING
[PHOTO]
WILLIAM J. O'LEARY (52)
VICE PRESIDENT, PRODUCT DEVELOPMENT
[PHOTO]
ROBERT J. OLSON (50)
VICE PRESIDENT, MANUFACTURING
[PHOTO]
JOSEPH L. SOCZEK, JR. (58)
TREASURER
EXHIBIT 21
List of Subsidiaries
JURISDICTION PERCENT
OF OF
NAME OF CORPORATION INCORPORATION OWNERSHIP
- ----------------------------------------- ------------------- ---------------
Winnebago Industries, Inc. Iowa Parent
Winnebago International Corporation Virgin Island 100%
Winnebago Health Care Management Company Iowa 100%
Winnebago Acceptance Corporation Iowa 100%
Winnebago R.V., Inc. Delaware 100%
EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 2-40316, No. 2-82109, No. 33-21757, No. 33-59930, and No. 333-31595 of Winnebago Industries, Inc. on Form S-8 of our reports dated October 6, 2000 appearing in and incorporated by reference in the Annual Report on Form 10-K for Winnebago Industries, Inc. for the year ended August 25, 2001. /s/ Deloitte & Touche LLP - ------------------------- Deloitte & Touche LLP Minneapolis, Minnesota November 20, 2001