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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
____
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 27, 1993
OR
___
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number 1-6403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0802678
(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: (515) 582-3535
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ____.
There were 25,144,852 shares of $.50 par value common
stock outstanding on January 6, 1994.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
PART I. FINANCIAL INFORMATION:
(Interim period information unaudited)
Consolidated Balance Sheets 1 & 2
Unaudited Consolidated Statements of Operations 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to
Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 & 8
PART II. OTHER INFORMATION 9 & 10
PART I FINANCIAL INFORMATION
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
ASSETS November 27, 1993 August 28, 1993
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $3,465 $11,238
Marketable securities 2,931 2,309
Receivables, less allowance
for doubtful accounts
($2,163 and $2,798, respectively) 25,396 29,239
Dealer financing receivables
less allowance for doubtful
accounts ($356 and $290, respectively) 9,542 6,742
Inventories 44,339 40,610
Prepaid expenses 4,150 3,636
Deferred income taxes 511 511
Total current assets 90,334 94,285
PROPERTY AND EQUIPMENT, at cost
Land 1,538 2,153
Buildings 39,621 38,373
Machinery and equipment 73,557 72,505
Transportation equipment 5,925 5,609
120,641 118,640
Less accumulated depreciation 82,226 81,012
Total property and equipment, net 38,415 37,628
LONG-TERM NOTES RECEIVABLE, less allowances
($2,017 and $1,362, respectively) 3,692 4,203
INVESTMENT IN LIFE INSURANCE 12,605 11,853
DEFERRED INCOME TAXES 2,652 2,652
OTHER ASSETS 6,338 6,429
TOTAL ASSETS $154,036 $157,050
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
LIABILITIES AND STOCKHOLDERS' EQUITY November 27, 1993 August 28, 1993
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $2,082 $1,719
Accounts payable, trade 16,534 19,462
Accrued expenses:
Insurance 6,297 6,445
Vacation liability 3,195 2,864
Promotional 1,458 4,636
Other 7,418 10,399
Liability on product warranties 3,220 4,091
Total current liabilities 40,204 49,616
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASE 3,908 3,183
POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS 40,592 18,766
DEFERRED INCOME TAXES 1,823 1,823
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,029 1,969
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50;
authorized 60,000,000 shares 12,910 12,908
Additional paid-in capital 24,704 24,811
Reinvested earnings 35,567 52,245
73,181 89,964
Less treasury stock, at cost 7,701 8,271
Total stockholders' equity 65,480 81,693
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $154,036 $157,050
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands except per share data
Thirteen Weeks Ended
November 27, 1993 November 28, 1992
Revenues:
Manufactured products $99,589 $78,864
Services 4,967 4,552
Total net revenues 104,556 83,416
Costs and Expenses:
Cost of manufactured products 85,516 68,482
Cost of services 2,887 3,509
Selling and delivery 6,026 4,830
General and administrative 6,414 5,660
Other expense 76 111
Minority interest in net income (loss)
of consol. subsidiary 60 (115)
Total costs and expenses 100,979 82,477
Operating income 3,577 939
Financial income 165 178
Income from operations before income taxes* 3,742 1,117
Provision for income taxes - - - - - -
Income from operations* 3,742 1,117
Cumulative effect of change in
in accounting principle (20,420) - - -
Net income (loss) $(16,678) $1,117
Income (loss) per common share:
Operations $0.15 $0.04
Cumulative effect of change
in accounting principle (0.81) - - -
Net income (loss) $(0.66) $0.04
Weighted average number of shares
of common stock outstanding 25,137 25,027
*Before Cumulative Effect of Change in Accounting Principle.
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands
Increase (decrease) in cash and
cash equivalents Thirteen Weeks Ended
November 27, November 28,
1993 1992
Cash flows from operating activities:
Net income (loss) $(16,678) $1,117
Adjustments to reconcile net loss
to net cash from operating activities:
Cumulative effect of change
in accounting principle 20,420 - - -
Depreciation and amortization 1,880 1,945
Employee stock bonus plan 437 - - -
Realized and unrealized gains
on investments, net (69) (104)
Postretirement benefits other
than pensions 1,406 468
Minority shareholders' portion
of consolidated subsidiary's gain (loss) 60 (115)
Other 37 737
Change in assets and liabilities:
Decrease in accounts receivable 4,691 5,310
Increase in inventories (3,729) (2,656)
Decrease in accounts payable
and accrued expenses (8,305) (7,018)
Increase in other categories (1,385) (56)
Net cash used by operating activities (1,235) (372)
Cash flows from investing activities:
Investments in marketable securities (2,930) (2,918)
Proceeds from the sale of
marketable securities 2,377 1,110
Purchases of property and equipment (2,626) (1,469)
Investments in dealer receivables (8,770) (5,734)
Proceeds from dealer receivables 5,919 1,114
Other (1,025) (1,612)
Net cash used by investing activities (7,055) (9,509)
Cash flows from financing
activities and capital transactions:
Proceeds from issuance of long-term debt 807 2,000
Payments of long-term debt (318) (189)
Other 28 29
Net cash provided by financing activities and
capital transactions 517 1,840
Net decrease in cash and cash equivalents (7,773) (8,041)
Cash and cash equivalents -
beginning of period 11,238 13,286
Cash and cash equivalents - end of period $ 3,465 $ 5,245
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying
unaudited consolidated condensed financial statements
contain all adjustments necessary to present fairly the
consolidated financial position as of November 27,
1993, the consolidated results of operations and the
consolidated cash flows for the 13 weeks ended November
27, 1993 and November 28, 1992.
2. The results of operations for the 13 weeks ended
November 27, 1993, are not necessarily indicative of
the results to be expected for the full year.
Service revenues, in the Consolidated Statements of
Operations, consist of revenues generated by Cycle-Sat, Inc.
(Cycle-Sat), and Winnebago Acceptance Corporation
(WAC), subsidiaries of the Company. Also during the 13
weeks ended November 28, 1992 service revenues included
revenues generated by North Iowa Electronics,
Inc. (NIE), a subsidiary of the Company. NIE was sold
during fiscal 1993.
3. Inventories are valued at the lower of cost or
market, with cost being determined under the last-in,
first-out (LIFO) method and market defined as net
realizable value.
Inventories are composed of the following (dollars
in thousands):
November 27, August 28,
1993 1993
Finished Goods $17,403 $16,578
Work In Process 11,937 11,051
Raw Materials 28,847 26,614
58,187 54,243
LIFO Reserve 13,848 13,633
$44,339 $40,610
4. The Company entered into a $12,000,000 financing
and security agreement with NationsCredit Corporation
(NationsCredit) formally Chrysler First
Commercial Corporation dated March 26, 1992, as
amended. Terms of the agreement limit borrowings to the lesser of
$12,000,000 or 75% of eligible inventory (fully manufactured
recreational vehicles ready for delivery to a
dealer). Borrowings are secured by the Company's
receivables and inventory. The agreement requires a graduated
interest rate based upon the bank's reference rate as
defined within the agreement. The line of credit had an
initial term of one year and continues during
successive one-year periods unless either party provides at
least 90-days notice prior to the one-year period to
the other party that they wish to terminate the line of
credit. The agreement prohibits any advances or loans
to any subsidiary or affiliate or additional guarantees
of any obligations of any subsidiary or affiliate, in
either case in excess of $4,000,000 or $7,500,000 in the
aggregate for all subsidiaries and affiliates from the
date of the agreement. There was no outstanding
balance under the line of credit at November 27, 1993.
5. It is customary practice for companies in the
recreation vehicle industry to enter into repurchase
agreements with lending institutions which have provided
wholesale floor plan financing to dealers. The
Company's agreements provide for the repurchase of its
products from the financing institution in the event of
repossession upon a dealer's default. The
Company was contingently liable for approximately
$113,430,000 and $101,445,000 under repurchase agreements with the
lending institutions as of November 27, 1993, and August 28,
1993, respectively. Included in these contingent
liabilities are approximately $32,164,000 and
$27,758,000, respectively, of certain dealer receivables
subject to recourse agreements with ITT Commercial
Finance Corporation, NationsCredit and John Deere Credit,
Inc.
6. Fiscal year-to-date the Company paid cash for the following
(dollars in thousands):
Thirteen Weeks Ended
November 27, November 28,
1993 1992
Interest $ 56 $ 83
Income Taxes 1,406 - - -
7. At November 27, 1993, Postretirement Benefits
Other Than Pensions included Deferred Compensation of
$19,436,000 and Postretirement Benefits related to health
care and other benefits of $21,156,000. Effective
August 29, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106,
"Employers'Accounting for Postretirement Benefits Other Than
Pensions" related to health care and other benefits.
SFAS No. 106 requires the Company to accrue the
estimated cost of retiree benefit payments during the
years the employee provides services. The Company
previously expensed the cost of these benefits, which
are principally health care, as claims were incurred. SFAS No.
106 allows recognition of the cumulative effect of the
liability in the year of adoption or the
amortization of the obligation over a period of up to
twenty years.
The Company has elected to recognize the
cumulative effect of this obligation on the immediate
recognition
basis. The cumulative effect as of August 29,
1993 of adopting SFAS No. 106 was an accrual of
postretirement health care costs of $20,420,000 and a decrease
in net earnings of $20,420,000 ($.81 per share), which
has been included in the Company's consolidated statement
of operations for the 13 weeks ended November 27, 1993.
The effect of adopting SFAS No. 106 on income
from continuing operations for the 13 weeks ended
November 27, 1993 was a decrease of $736,000 ($.03 per share).
The Company provides certain health care and
other benefits for certain retired employees who have
fulfilled eligibility requirements of age 55 with fifteen
years of service. In fiscal year 1993 and 1992, the
Company recognized on a "pay-as-you-go" basis expense of
$501,000 and $364,000 respectively, for postretirement
health care benefits. The Company's postretirement
health care plan currently is not funded. The status
of the plans is as follows:
Accumulated postretirement benefit obligation at August 29, 1993:
Retirees $ 2,745,000
Fully eligible active plan participants 3,099,000
Other active plan participants 14,576,000
$20,420,000
Net postretirement benefit cost for the 13 weeks
ended November 27, 1993 consisted of the following components:
Service cost - benefits earned
during the quarter $406,000
Interest cost on accumulated
postretirement benefit obligation 330,000
$736,000
The assumed pre-65 and post 65 health care cost
trend rates used in measuring the accumulated
postretirement benefit obligation as of August 29, 1993 was
10.84% and 10.35%, respectively for 1993, decreasing
each successive year until it reaches 5.5% in 2014 and
2019, respectively after which it remains constant. A
one-percentage-point increase in the assumed health
care cost trend rate for each year would increase the
accumulated postretirement benefit obligation as
of August 29, 1993 and net postretirement health care
cost by approximately 27%. The assumed discount rate
used in determining the accumulated postretirement
benefit obligation was 6.5%.
8. At November 27, 1993, the Company had a tax loss
carryforward for financial reporting purposes of
approximately $60,000,000 which will, if unused, expire at
various times in fiscal years 2006 through 2008. The
Company has not recognized the tax benefits of net operating
loss carryforwards due to the uncertainty of future realization.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Thirteen Weeks Ended November 27, 1993 Compared to Thirteen Weeks
Ended November 28, 1992.
Net revenues of manufactured products for the 13 weeks
ended November 27, 1993 increased $20,725,000 or 26.3
percent from the 13 week period ended November 28, 1992. Motor
home shipments increased by 345 units or 20.1 percent
during the 13 weeks ended November 27, 1993 when compared to
the first quarter of fiscal 1993. The growth in
revenues is attributed to the volume increase in the overall motor
home industry and an increase in Winnebago's market
share as well as a sales mix of larger units. The Company's
outlook for the remainder of fiscal 1994 is optimistic
due to the most complete motor home lineup in its history.
Service revenues for the 13 weeks ended November 27,
1993 increased $415,000 or 9.1 percent from the 13
weeks ended November 28, 1992. This increase can be attributed
primarily to increased revenues ($957,000 or 25.3
percent) by Cycle-Sat due to increased revenues from established
customers as well as revenues generated with new
customers. This increase was partially offset by the Company's sale of
NIE (an electronic component assembly business), during
August, 1993.
Cost of manufactured products, as a percent of
manufactured product revenues, was 85.9 percent for the
13 weeks ended November 27, 1993 compared to 86.8 percent for the 13
weeks ended November 28, 1992. This decrease can be attributed
primarily to the increase in motor home volume.
Cost of services, as a percent of service revenues,
decreased to 58.1 percent from 77.1 percent when
comparing the 13 weeks ended November 27, 1993 to the 13 weeks ended
November 28, 1992. This decrease can be attributed primarily to
the increase in revenues at Cycle-Sat.
Selling and delivery expenses increased by $1,196,000
but remained at 5.8 percent of net revenues when
comparing the 13 weeks ended November 27, 1993 to the comparable
period of fiscal 1993. The increase in dollars can be
attributed primarily to an increase in advertising and promotional
expenses during the 13 weeks ended November 27, 1993
when compared to the 13 weeks ended November 28, 1992.
General and administrative expenses increased by
$754,000 but decreased to 6.1 percent of net revenues
from 6.8 percent of net revenues when comparing the 13 weeks
ended November 27, 1993 to the comparable period of
fiscal 1993. The increase in dollars is primarily attributed to the
Company's adoption of FASB No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions"
($736,000) which requires the Company to record the
ongoing incremental cost as a current operating expense.
The Company had other expense of $76,000 during the 13
weeks ended November 27, 1993 compared to $111,000
during the 13 weeks ended November 28, 1992. The primary reason
for the change when comparing the two periods was the
reduction in the Company's provision for losses on the resale of
motor homes repurchased by the Company under its
repurchase agreements with financial institutions partially offset
by the recording of lease income received by WAC during
the period ended November 28, 1992.
The Company had net financial income of $165,000 during
the first quarter of fiscal 1994 compared to $178,000
during the first quarter of fiscal 1993. The Company recorded
interest income of $101,000 during the first quarter of
fiscal 1994 compared to $98,000 during the first quarter of
fiscal 1993. The decrease was primarily due to reduced
realized and unrealized capital gains in the Company's
marketable securities portfolio.
For the 13 weeks ended November 27, 1993, the Company
realized income from operations of $3,742,000 or $.15
per share. Favorably affecting net income was income of $241,000
($.01 per share) for Cycle-Sat operations. For the 13
weeks ended November 28, 1992, the Company realized income
from operations and net income of $1,117,000 or $.04
per share; however, unfavorably affecting net income was a loss of
$460,000 ($.02 per share) for Cycle-Sat operations.
On August 29, 1993, the Company was required to adopt
FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" which
covers health care and other benefits provided to
retirees and which requires accruing such benefits during the years
the employee provides services. This change in
accounting principles resulted in a cumulative non-cash charge of
$20,420,000 or $.81 per share. With the adoption of
FASB No. 106, the 13 weeks ended November 27, 1993 net loss was
$16,678,000 or $.66 per share.
LIQUIDITY AND FINANCIAL CONDITION
Presently, the Company meets its working capital and
capital equipment requirements and cash requirements of
subsidiaries with funds generated internally and funds
from agreements with financial institutions.
At November 27, 1993, working capital was $50,130,000
an increase of $5,461,000 from the amount at August 28,
1993. The Company's principal sources and uses of cash during
the 13 weeks ended November 27, 1993 are set forth in
the unaudited consolidated condensed statement of cash
flows for that period.
The Company's principal sources of liquidity at
November 27, 1993 consisted of cash in the amount of
$3,465,000 and marketable securities in the amount of $2,931,000.
Included in the cash and marketable securities balance
is a $4,000,000 compensating balance as required in the
Company's Inventory Floor Planning Financing Agreement
with NationsCredit Corporation.
Principal expected demands at November 27, 1993 on the
Company's liquid assets for the remainder of fiscal
1994 include approximately $6,500,000 for capital
expenditures consisting primarily of tooling, equipment
replacement and new equipment.
Based upon the above cash and financing resources
available (See Notes 4 and 5), management believes that
the Company has adequate sources of financing to meet its remaining
fiscal 1994 cash requirements. However, any
significant adverse events in the market for motor homes or in the
economy could have a significant effect on the
Company's future cash requirements.
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) No exhibits are being filed as a part of this report.
(b) The Company did not file any reports on
Form 8-K during the period covered by this report.
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
(Registrant)
Date January 6, 1994
Fred G. Dohrmann
President and Chief Executive Officer
Date January 6, 1994
Ed F. Barker
Vice President, Controller and
Chief Financial Officer