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 March 2, 2002
-------------------------------------------------
OR
___
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission file number 1-6403
------
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0803978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (641) 585-3535
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
There were 18,764,093 shares of $.50 par value common stock outstanding on April
11, 2002.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets (Interim period information
unaudited) 1 & 2
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial
Statements 5 - 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 12
Independent Accountants' Report 13
PART II. OTHER INFORMATION 14 - 16
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MARCH 2, AUGUST 25,
ASSETS 2002 2001
- ------------------------------------------------------ ------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 134,477 $ 102,280
Receivables, less allowance for doubtful
accounts ($353 and $244, respectively) 21,763 21,571
Dealer financing receivables, less allowance
for doubtful accounts ($112 and $117, respectively) 38,180 40,263
Inventories 83,131 79,815
Prepaid expenses 3,675 3,604
Prepaid taxes 4,500 - - -
Deferred income taxes 6,723 6,723
------------ ------------
Total current assets 292,449 254,256
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Land 1,018 1,029
Buildings 46,180 45,992
Machinery and equipment 84,103 82,182
Transportation equipment 5,634 5,482
------------ ------------
136,935 134,685
Less accumulated depreciation 90,875 88,149
------------ ------------
Total property and equipment, net 46,060 46,536
------------ ------------
INVESTMENT IN LIFE INSURANCE 23,136 22,223
------------ ------------
DEFERRED INCOME TAXES, NET 21,495 21,495
------------ ------------
OTHER ASSETS 8,329 7,412
------------ ------------
TOTAL ASSETS $ 391,469 $ 351,922
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MARCH 2, AUGUST 25,
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
- ------------------------------------------------------- ------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 44,694 $ 40,678
Income tax payable 12,149 4,938
Accrued expenses:
Insurance 5,686 4,567
Product warranties 7,763 8,072
Accrued compensation 13,711 13,730
Promotional 7,011 3,181
Other 5,013 4,842
------------ ------------
Total current liabilities 96,027 80,008
------------ ------------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 67,284 64,450
------------ ------------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: issued 25,888,000 and 25,886,000
shares, respectively 12,944 12,943
Additional paid-in capital 25,714 22,261
Reinvested earnings 252,223 234,139
------------ ------------
290,881 269,343
Less treasury stock, at cost 62,723 61,879
------------ ------------
Total stockholders' equity 228,158 207,464
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 391,469 $ 351,922
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
================================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
TWENTY-SEVEN TWENTY-SIX
THIRTEEN WEEKS ENDED WEEKS ENDED WEEKS ENDED
--------------------------- ------------ ------------
MARCH 2, FEBRUARY 24, MARCH 2, FEBRUARY 24,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenues $ 184,169 $ 142,531 $ 363,282 $ 306,698
Cost of goods sold 160,117 125,529 313,687 267,449
------------ ------------ ------------ ------------
Gross profit 24,052 17,002 49,595 39,249
------------ ------------ ------------ ------------
Operating expenses:
Selling 5,607 5,306 11,735 11,409
General and administrative 5,031 3,146 9,135 5,910
------------ ------------ ------------ ------------
Total operating expenses 10,638 8,452 20,870 17,319
------------ ------------ ------------ ------------
Operating income 13,414 8,550 28,725 21,930
Financial income 912 901 1,804 1,872
------------ ------------ ------------ ------------
Income before income taxes 14,326 9,451 30,529 23,802
Provision for taxes 4,878 3,267 10,371 8,022
------------ ------------ ------------ ------------
Income before cumulative effect of a change in
accounting principle 9,448 6,184 20,158 15,780
Cumulative effect of change in principle, net of taxes - - - - - - - - - (1,050)
------------ ------------ ------------ ------------
Net income $ 9,448 $ 6,184 $ 20,158 $ 14,730
============ ============ ============ ============
Earnings per share - basic (Note 8):
- ------------------------------------
Income before cumulative effect of change in
accounting principle $ .46 $ .30 $ .97 $ .76
Cumulative effect of change in accounting
principle - - - - - - - - - (.05)
------------ ------------ ------------ ------------
Income per share $ .46 $ .30 $ .97 $ .71
============ ============ ============ ============
Earnings per share - diluted (Note 8):
- --------------------------------------
Income before cumulative effect of a change in
accounting principle $ .45 $ .30 $ .95 $ .75
Cumulative effect of change in accounting
principle - - - - - - - - - (.05)
------------ ------------ ------------ ------------
Income per share $ .45 $ .30 $ .95 $ .70
============ ============ ============ ============
Weighted average shares of common stock outstanding:
Basic 20,760 20,576 20,715 20,839
============ ============ ============ ============
Diluted 21,215 20,882 21,157 21,082
============ ============ ============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
TWENTY-SEVEN TWENTY-SIX
Dollars in thousands WEEKS ENDED WEEKS ENDED
------------ ------------
MARCH 2, FEBRUARY 24,
2002 2001
------------ ------------
Cash flows from operating activities:
Net income as shown on the statements of income $ 20,158 $ 14,730
(page 3)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,961 3,636
Tax benefit of stock options 3,008 - - -
Other 86 106
Change in assets and liabilities:
(Increase) decrease in receivable and other assets (374) 14,099
Increase in inventories (3,316) (3,453)
Increase (decrease) in accounts payable and accrued expenses 8,808 (7,470)
Increase in income taxes payable 5,719 3,536
Increase in postretirement benefits 3,238 3,862
------------ ------------
Net cash provided by operating activities 41,288 29,046
------------ ------------
Cash flows used by investing activities:
Purchases of property and equipment (3,666) (4,795)
Investments in dealer receivables (52,795) (52,392)
Collections of dealer receivables 54,887 47,220
Other (2,037) (2,481)
------------ ------------
Net cash used by investing activities (3,611) (12,448)
------------ ------------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (4,078) (9,300)
Payment of cash dividends (2,075) (2,062)
Proceeds from issuance of common and treasury stock 673 1,355
------------ ------------
Net cash used by financing activities and
capital transactions (5,480) (10,007)
------------ ------------
Net increase in cash and cash equivalents 32,197 6,591
Cash and cash equivalents - beginning of period 102,280 51,443
------------ ------------
Cash and cash equivalents - end of period $ 134,477 $ 58,034
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
4
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of March 2, 2002, the consolidated results of
operations for the 27 and 13 weeks ended March 2, 2002 and the 26 and 13
weeks ended February 24, 2001, and the consolidated cash flows for the 27
weeks ended March 2, 2002 and the 26 weeks ended February 24, 2001. The
statement of income for the 27 weeks ended March 2, 2002, is not
necessarily indicative of the results to be expected for the full year. The
balance sheet data as of August 25, 2001 was derived from audited financial
statements, but does not include all disclosures contained in the Company's
Annual Report to Shareholders for the year ended August 25, 2001. These
interim consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto appearing in the
Company's Annual Report to Shareholders for the year ended August 25, 2001.
NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS
On August 27, 2000, the Company adopted the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101 - REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, which the SEC staff issued in December
1999. SAB No. 101 sets forth the SEC staff'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 required an adjustment to income in
the Company's first quarter 2001 results, which reflects the cumulative
effect on the prior year's results due to the application of SAB No. 101.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." SFAS No. 141 establishes new standards for accounting and
reporting requirements for business combinations and requires that the
purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method will
be prohibited. In July 2001, the FASB also issued SFAS No. 142, "Goodwill
and Other Tangible Assets." SFAS No. 142 establishes new standards for
goodwill acquired in a business combination and eliminates amortization of
goodwill and instead sets forth methods to periodically evaluate goodwill
for impairment. The Company expects to adopt these statements on September
1, 2002, the first quarter of the Company's fiscal 2003. Management does
not believe that either SFAS No. 141 or 142 will have a material impact on
the Company's consolidated financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 required entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. Also, in September 2001, the FASB issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," it retains many of the fundamental provisions of
that statement. The Company is required to adopt SFAS Nos. 143 and 144 in
fiscal 2003. The Company is reviewing the impact of SFAS Nos. 143 and 144,
and does not believe adoption of either of these new standards will have a
material affect on the Company's financial statements.
5
NOTE 3: INVENTORIES
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):
March 2, August 25,
2002 2001
------------ ------------
Finished goods ......... $ 33,234 $ 36,930
Work in process ........ 23,921 21,725
Raw materials .......... 49,752 44,232
------------ ------------
106,907 102,887
LIFO reserve ........... (23,776) (23,072)
------------ ------------
$ 83,131 $ 79,815
============ ============
NOTE 4: LINE OF CREDIT
On October 19, 2000, the Company entered into an unsecured Credit Agreement
with Wells Fargo Bank Iowa, National Association, as amended. The Credit
Agreement provided the Company with a line of credit of $20,000,000. The
Company did not renew this agreement when it expired on January 31, 2002.
NOTE 5: CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for manufacturers in the recreation vehicle
industry to enter into repurchase agreements with lending institutions
which have provided wholesale floorplan 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 $242,910,000 and
$216,784,000 under repurchase agreements with lending institutions as of
March 2, 2002 and August 25, 2001, respectively. Included in these
contingent liabilities as of March 2, 2002 and August 25, 2001 are
approximately $517,000 and $3,276,000, respectively, of certain dealer
receivables subject to recourse agreements with Bank of America Specialty
Group and Conseco Finance Servicing Group.
During the second quarter of fiscal 2002, the Company guaranteed certain
interest bearing debt obligations of an unaffiliated vendor to a bank
totaling an amount of up to but not to exceed $700,000 and agreed to pledge
a $500,000 certificate of deposit to said bank. Mr. John V. Hanson, a
director of the Company, is also a director of the bank and its parent and
owns approximately 33.3 percent of record and beneficially of the parent's
outstanding stock. Mary Jo Boman, the wife of Gerald E. Boman, a director
of the Company, is a director of the bank and its parent and owns
approximately 33.3 percent of record and beneficially of the parent's
outstanding stock. The Company believes that this obligation will be repaid
and has therefore provided no reserve for this contingency at March 2,
2002.
In February 2002, the Company entered into a repurchase agreement with
Transamerica Commercial Finance Corporation, Canada (Transamerica). The
agreement provides for the repurchase by the Company from Transamerica of
rental units upon default by one of the Company's Canadian dealers under a
financing agreement with Transamerica. As of March 2, 2002, there have
been no rental transactions between Transamerica and such dealer.
6
NOTE 6: SUPPLEMENTAL CASH FLOW DISCLOSURE
For the periods indicated, the Company paid cash for the following (dollars
in thousands):
Twenty-Seven Twenty-Six
Weeks Ended Weeks Ended
------------ ------------
March 2, February 24,
2002 2001
------------ ------------
Interest $ - - - $ - - -
Income taxes 4,500 3,000
NOTE 7: REPURCHASE OF OUTSTANDING STOCK
On March 14, 2001, the Board of Directors authorized the repurchase of
outstanding shares of the Company's common stock for an aggregate purchase
price of up to $15,000,000. As of March 2, 2002, 218,000 shares had been
repurchased for an aggregate consideration of approximately $4,491,000
under this authorization.
On April 5, 2002, pursuant to an authorization of the Board of Directors,
the Company repurchased 2,100,000 shares of common stock from Hanson
Capital Partners, LLC ("HCP"). HCP is a Delaware limited liability company
whose members are the Luise V. Hanson Qualified Terminable Interest
Property Marital Deduction Trust (the "QTIP Trust"), which has a 34.9
percent membership interest in HCP, and the Luise V. Hanson Revocable
Trust, dated September 22, 1984 (the "Revocable Trust"), which has a 65.1
percent membership interest in HCP. John V. Hanson, a director of the
Company, Mary Jo Boman, the wife of Gerald E. Boman, a director of the
Company, Paul D. Hanson and Bessemer Trust Company, N.A. act as co-trustees
under the QTIP Trust. Mrs. Luise V. Hanson is trustee of the Revocable
Trust. As a result of the foregoing, Mrs. Hanson is a controlling person of
the Company. Mrs. Hanson is the mother of John V. Hanson, Mary Joan Boman
and Paul D. Hanson and the mother-in-law of Gerald E. Boman. The shares
were repurchased for an aggregate purchase price of $77,700,000 ($37 per
share). The Company utilized its cash on hand to pay the purchase price of
the stock.
NOTE 8: INCOME PER SHARE
The following table reflects the calculation of basic and diluted earnings
per share for the 13 and 27 weeks ended March 2, 2002 and the 13 and 26
weeks ended February 24, 2001 (in thousands except per share data):
TWENTY-SEVEN TWENTY-SIX
THIRTEEN WEEKS ENDED WEEKS ENDED WEEKS ENDED
---------------------------- ------------ ------------
MARCH 2, FEBRUARY 24, MARCH 2, FEBRUARY 24,
2002 2001 2002 2001
------------ ------------ ------------ ------------
EARNINGS PER SHARE - BASIC:
---------------------------
Net income $ 9,448 $ 6,184 $ 20,158 $ 14,730
------------ ------------ ------------ ------------
Weighted average shares outstanding 20,760 20,576 20,715 20,839
------------ ------------ ------------ ------------
Earnings per share - basic $ .46 $ .30 $ .97 $ .71
------------ ------------ ------------ ------------
EARNINGS PER SHARE - ASSUMING DILUTION:
---------------------------------------
Net income $ 9,448 $ 6,184 $ 20,158 $ 14,730
------------ ------------ ------------ ------------
Weighted average shares outstanding 20,760 20,576 20,715 20,839
Dilutive impact of options outstanding 455 306 442 243
------------ ------------ ------------ ------------
Weighted average shares & potential
dilutive shares outstanding 21,215 20,882 21,157 21,082
------------ ------------ ------------ ------------
Earnings per share - assuming dilution $ .45 $ .30 $ .95 $ .70
------------ ------------ ------------ ------------
There were options to purchase 166,800 shares of common stock outstanding
at a price of $18.50 and 14,000 shares of common stock at a price of
$19.71875 per share during the 13 weeks ended February 24, 2001.
These options were not included in the computation of diluted earnings per
share because the option's exercise price was greater than the average
market price of the common stock.
7
NOTE 9: BUSINESS SEGMENT INFORMATION
The Company defines its operations into two business segments: Recreational
vehicles and other manufactured products, and dealer financing. Recreation
vehicles and other manufactured products includes all data relating 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, used and rental unit financing for a limited number of
the Company's dealers. Management focuses on operating income as a
segment's measure of profit or loss when evaluating a segment's financial
performance. Operating income is before interest expense, interest income,
and income taxes. A variety of balance sheet ratios are used by management
to measure the business. Maximizing the return from each segment's assets
excluding cash and cash equivalents is the primary focus. Identifiable
assets are those assets used in the operations of each industry segment.
General corporate assets consist of cash and cash equivalents, deferred
income taxes and other corporate assets not related to the two business
segments. General corporate income and expenses include administrative
costs. Inter-segment sales and expenses are not significant.
For the 27 weeks ended March 2, 2002 and the 26 weeks ended February 24,
2001, the Company's segment information is as follows:
RECREATION
VEHICLES & OTHER
MANUFACTURED DEALER GENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
-----------------------------------------------------------------------------------------------------------
27 Weeks Ended March 2, 2002
Net revenues $ 361,634 $ 1,648 $ - - - $ 363,282
Operating income 27,752 630 343 28,725
Identifiable assets 182,137 38,483 170,849 391,469
26 Weeks Ended February 24, 2001
Net revenues $ 304,458 $ 2,240 $ - - - $ 306,698
Operating income 20,162 658 1,110 21,930
Identifiable assets 182,192 38,750 90,201 311,143
Certain prior year information has been reclassified to conform to the
current year presentation.
8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Certain of the matters discussed in this report are "forward looking
statements," as defined in the Private Securities Litigation Reform Act of 1995,
which involve risks and uncertainties, including, but not limited to, reactions
to actual or threatened terrorist attacks, the availability and price of fuel, a
significant increase in interest rates, a slowdown in the economy, availability
of chassis, slower than anticipated sales of new or existing products, new
products introduced by competitors, collections of dealer receivables and other
factors which may be disclosed throughout this 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.
CRITICAL ACCOUNTING POLICIES
In preparing the consolidated financial statements, we follow accounting
principles generally accepted in the United States of America, which in many
cases require us to make assumptions, estimates and judgments that affect the
amounts reported. Many of these policies are straightforward. There are,
however, a few policies that are critical because they are important in
determining the financial condition and results of operations and they can be
difficult to apply. These policies were selected because they involve additional
management judgment due to the sensitivity of the methods, assumptions and
estimates necessary in determining the related income statement, asset and/or
liability amounts.
The Company had reserves for numerous loss exposures, such as product liability,
litigation and accounts receivable. The Company also has loss exposure on loan
guarantees and repurchase agreements (see Note 5 of Unaudited Condensed Notes to
Consolidated Financial Statements). Establishing loss reserves for these matters
requires the use of estimates and judgment in regards to risk exposure and
ultimate liability. The Company estimates losses under the programs using
consistent and appropriate methods; however, changes in assumptions could
materially affect the Company's recorded liabilities for loss.
RESULTS OF OPERATIONS
Thirteen Weeks Ended March 2, 2002 Compared to Thirteen Weeks Ended February 24,
2001
Net revenues for recreation vehicle and other manufactured products for the 13
weeks ended March 2, 2002 were $183,465,000, an increase of $42,145,000, or 29.8
percent from the 13-week period ended February 24, 2001. Motor home unit sales
(Class A and C) were 2,448, an increase of 644 units, or 35.7 percent, during
the second quarter of fiscal 2002 compared to the second quarter of fiscal 2001.
The percentage increase in net revenue dollars in the second quarter of fiscal
2002 was lower than the percentage increase in motor home unit sales for that
period as a result of the excellent acceptance of the Company's new lower priced
2002 motor homes in the Class A and Class C segments. The Company believes that
lower interest rates and more favorable general economic conditions contributed
to the improvement in revenues.
Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC) were
$704,000 for the 13 weeks ended March 2, 2002; a decrease of $507,000 or 41.9
percent from the 13-week period ended February 24, 2001. A significant reduction
in interest rates and to a much lesser extent, a reduction in average borrowings
contributed to the decrease when comparing the two quarters.
Gross profit, as a percent of net revenues, was 13.1 percent for the 13 weeks
ended March 2, 2002 compared to 11.9 percent for the 13 weeks ended February 24,
2001. The Company's gross profit was higher due primarily to increased volumes
of motor home production and shipments.
9
Selling expenses were $5,607,000 or 3.0 percent of net revenues during the
second quarter of fiscal 2002 compared to $5,306,000 or 3.7 percent of net
revenues during the second quarter of fiscal 2001. The increase in dollars when
comparing the two quarters resulted from primarily larger advertising expenses
during the second quarter of fiscal 2002. Increased sales volume was the primary
cause of the reduction in percentage during the second quarter of fiscal 2002.
General and administrative expenses were $5,031,000 or 2.7 percent of net
revenues during the 13 weeks ended March 2, 2002 compared to $3,146,000 or 2.2
percent of net revenues during the 13 weeks ended February 24, 2001. The
increases in dollars and percentage when comparing the two quarters were
primarily due to increases in employee incentive programs and to a lesser extent
increased legal reserves.
The Company had net financial income of $912,000 for the second quarter of
fiscal 2002 compared to net financial income of $901,000 for the comparable
quarter of fiscal 2001. During the 13 weeks ended March 2, 2002, the Company
recorded $918,000 of net interest income and losses of $6,000 in foreign
currency transactions. During the 13 weeks ended February 24, 2001, the Company
recorded $917,000 of net interest income and losses of $16,000 in foreign
currency transactions. When comparing the two quarters, the average available
cash for investing during the second quarter of fiscal 2002 was approximately
twice as much as was available during the second quarter of fiscal 2001.
However, the average rate the Company earned on its permitted investments, under
the Company's investment policy, was approximately 50 percent of the average
rate earned during the second quarter of fiscal 2001.
The effective income tax rate decreased to 34.0 percent during the second
quarter of fiscal 2002 from 34.6 percent during the second quarter of fiscal
2001.
For the second quarter of fiscal 2002, the Company had net income of $9,448,000,
or $.45 per diluted share compared to the second quarter of fiscal 2001's net
income of $6,184,000, or $.30 per diluted share. Net income and earnings per
diluted share increased by 52.8 percent and 50.0 percent, respectively, when
comparing the second quarter of fiscal 2002 to the second quarter of fiscal
2001.
Twenty-Seven Weeks Ended March 2, 2002 Compared to Twenty-Six Weeks Ended
February 24, 2001
Net revenues for manufactured products for the 27 weeks ended March 2, 2002 were
$361,634,000, an increase of $57,176,000, or 18.8 percent from the 26-week
period ended February 24, 2001. Motor home unit sales (Class A and C) were 4,765
units, an increase of 764 units, or 19.1 percent during the 27 weeks ended March
2, 2002 when compared to the 26 weeks ended February 24, 2001. The Company feels
the increases and growth were the result of the excellent acceptance of its new
products and the continued reduction of interest rates.
Net revenues for dealer financing of WAC were $1,648,000 for the 27 weeks ended
March 2, 2002; a decrease of $591,000 or 26.4 percent from the 26-week period
ended February 24, 2001. Decreased revenues for dealer financing reflect a
decrease of interest rates partially offset by higher average borrowings when
comparing the 27 weeks ended March 2, 2002 to the 26 weeks ended February 24,
2001.
Gross profit, as a percent of net revenue, was 13.7 percent for the 27 weeks
ended March 2, 2002 compared to 12.8 percent for the 26 weeks ended February 24,
2001. The Company's higher margins were due primarily to increased volumes of
motor home production and shipments.
Selling expenses were $11,735,000, or 3.2 percent of net revenues during the 27
weeks ended March 2, 2002 compared to $11,409,000, or 3.7 percent of net
revenues during the 26 weeks ended February 24, 2001. The increase in selling
expense dollars when comparing the two periods consisted primarily of higher
advertising expenses during the fiscal 2002 period. Increased sales volume was
the primary cause of the reduction in percentage during the fiscal 2002 period.
General and administrative expenses were $9,135,000 or 2.5 percent of net
revenues during the 27 weeks ended March 2, 2002 compared to $5,910,000, or 1.9
of net revenues during the 26 weeks ended February 24, 2001.
10
The increases in dollars and percentage when comparing the two periods were
primarily due to increases in employee incentive programs and to a lesser extent
increased legal reserves.
The Company had net financial income of $1,804,000 for the 27 weeks ended March
2, 2002 compared to net financial income of $1,872,000 for the 26 weeks ended
February 24, 2001. During the fiscal 2002 period, the Company recorded
$1,826,000 of net interest income and losses of $22,000 in foreign currency
transactions. During the fiscal 2001 period, the Company recorded $1,869,000 of
net interest income and gains of $3,000 in foreign currency transactions. When
comparing the two periods, the average available cash for investing during
fiscal 2002 was approximately twice as much as was available during fiscal 2001.
However, the average rate the Company earned on its permitted investments, under
the Company's investment policy, was approximately 50 percent of the average
rate earned during the fiscal 2001 period.
The effective income tax rate increased to 34.0 percent during the 27 weeks
ended March 2, 2002 from 33.7 percent during the 26 weeks ended February 24,
2001. The primary reason for the increase was due to higher provisions for state
income taxes during the 27 weeks ended March 2, 2002.
At the start of fiscal 2001, the Company elected to adopt SAB No. 101 issued by
the SEC in December 1999. SAB No. 101 set forth the views of the SEC staff
concerning revenue recognition. As a result of SAB No. 101, the Company began
recording revenue upon receipt of products by the Company's dealers rather than
upon shipment by the Company. Adoption of SAB No. 101 during the 26 weeks ended
February 24, 2001 resulted in a negative adjustment to the Company's income of
$1,050,000, or $.05 per diluted share.
For the 27 weeks ended March 2, 2002, the Company had net income of $20,158,000,
or $.95 per diluted share compared to the 26 weeks ended February 24, 2001's net
income of $14,730,000, or $.70 per diluted share. Net income and earnings per
diluted share increased by 36.9 percent and 35.7 percent, respectively, when
comparing the fiscal 2002 period to the fiscal 2001 period.
LIQUIDITY AND FINANCIAL CONDITION
The Company generally meets its working capital, capital equipment and cash
requirements with funds generated from operations.
As of March 2, 2002, working capital was $196,422,000, an increase of
$22,174,000 from the amount at August 25, 2001. The Company's principal uses of
cash during the 27 weeks ended March 2, 2002 were $4,078,000 for the purchase of
shares of the Company's Common Stock, $3,666,000 for the purchase of property
and equipment and $2,075,000 for the payment of cash dividends. The Company's
sources and uses of cash during the 27 weeks ended March 2, 2002 are set forth
in the unaudited consolidated condensed statement of cash flows for that period.
Principal known demands at March 2, 2002 on the Company's liquid assets for the
remainder of fiscal 2002 include capital expenditures of approximately
$14,000,000 and the payment of cash dividends.
Management currently expects its cash on hand and funds from operations to be
sufficient to cover both short-term and long-term operating requirements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 2, 2002, the Company has an investment portfolio of fixed income
securities, which are classified as cash and cash equivalents of $134,477,000.
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
(which approximates 45 days) and, therefore, the Company would not expect to
recognize an adverse impact in income or cash flows in such an event.
As of March 2, 2002, the Company has dealer-financing receivables in the amount
of $38,180,000. Interest rates charged on these receivables vary based on the
prime rate.
11
COMPANY OUTLOOK
Studies show that the Company's prime target market of people 50 years of age
and older will continue to increase by over 4 million a year through the year
2030. Order backlog for the Company's Class A and Class C motor homes was
approximately 3,200 orders at March 2, 2002, an increase of 106.5 percent over
sales order backlog of approximately 1,550 orders at February 24, 2001. 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.
12
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of
Winnebago Industries, Inc.
Forest City, Iowa
We have reviewed the accompanying condensed consolidated balance sheet of
Winnebago Industries, Inc. and subsidiaries (the Company) as of March 2, 2002,
and the related condensed consolidated statements of income and cash flows for
the 13-week and 27-week periods ended March 2, 2002 and 13-week and 26-week
periods ended February 24, 2001. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America
(generally accepted auditing standards), the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of August 25, 2001,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated October 3, 2001, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of August 25, 2001 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Deloitte & Touche LLP
Minneapolis, Minnesota
April 8, 2002
13
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held January 15, 2002.
(b) The breakdown of votes for the election of three directors was as
follows*:
Votes Cast For Authority Withheld
-------------- ------------------
Gerald E. Boman (2005) 19,479,389 36,142
Jerry N. Currie (2005) 19,495,995 19,537
Frederick M. Zimmerman (2005) 19,495,459 20,072
* There were no broker non-votes.
( ) Represents year of Annual Meeting that individual's term will
expire.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on page 16.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
14
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 April 11, 2002 /s/ Bruce D. Hertzke
---------------------- ----------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, and President
(Principal Executive Officer)
Date April 11, 2002 /s/ Edwin F. Barker
---------------------- ----------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
15
EXHIBIT INDEX
3b. Amended Bylaws of the Registrant.
4b. Letter of Intent dated March 1, 2002 among Winnebago Industries, Inc.,
Forest City Economic Development, and CDI, LLC.
10v. Agreement dated March 13, 2002 between Winnebago Industries, Inc. and
Bruce D. Hertzke.
16
EXHIBIT 3b.
BY-LAWS
OF
WINNEBAGO INDUSTRIES, INC.
AS AMENDED
ARTICLE I. OFFICES
The principal office of the Corporation in the State of Iowa, shall be
located in the City of Forest City, County of Winnebago, State of Iowa.
The Corporation may have such other offices, either within or without
of the State of Iowa, as the Board of Directors may designate or as the business
of the Corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting
The Annual Meeting of the Shareholders shall be held on a date in the
month of January of each year, commencing with the January, 1999 meeting, to be
annually set by the Board of Directors with written notice thereof to be given
not less than ten (10) days prior thereto by the Secretary, to be held in Forest
City, Iowa, at such place as may be designated by the Board of Directors, for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting.
Section 2. Notice of Shareholder Business and Nominations
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any shareholder of the Corporation who was a shareholder of
record at the time of giving of notice provided for in this Section 2 who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 2.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (c) of Section 2(1) of these
By-Laws, the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such other business must otherwise be a proper
matter for shareholder action. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the 90th day nor earlier than the close
of business on the 120th day prior to the first anniversary of the preceding
year's annual meeting of shareholders; provided, however, that in the event that
the date of the annual meeting to which such shareholder's notice relates is
more than 30 days before or more than 60 days after such anniversary date,
notice by the shareholder to be timely must be so delivered not earlier than the
close of business on the 120th day prior to such annual meeting and not later
than the close of business on the later of the 90th day prior to such annual
meeting or the 10th day following the day on which public announcement of the
date of such annual meeting is first made by the Corporation. In no event shall
the public announcement of an adjournment of an annual meeting commence a new
time period for the giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934 as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
shareholder and such beneficial owner.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers
The business and affairs of this Corporation shall be managed by its
Board of Directors.
Section 2. Number, Tenure and Qualifications
The number of directors constituting the Board of Directors of the
Corporation shall be not more than fifteen (15) and not less than three (3), the
precise number to be determined by resolution of the Board of Directors from
time to time. Effective with the election of the directors at the annual meeting
of shareholders to be held in 2000, the directors shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, with the Board of Directors consisting of
eight (8) members existing at the time of the annual meeting of shareholders to
be held in 2000 to be classified as follows: Two directors to hold office
initially for a term expiring at the annual meeting of shareholders to be held
in 2001, three directors to hold office initially for a term expiring at the
annual meeting of shareholders to be held in 2002, and three directors to hold
office initially for a term expiring at the annual meeting of shareholders to be
held in 2003, with the respective members of each class to hold office until
their respective successors are elected and qualified. At each annual meeting of
shareholders commencing with the annual meeting in 2001, the successors to the
class of directors whose term then expires shall be elected to serve a
three-year term and until their successors are duly elected and qualified. No
decrease in the number of directors shall have the effect of shortening the
terms of any incumbent director. Any increase or decrease in the number of
directors shall be apportioned among the classes so as to make all classes as
nearly equal in number as possible.
Section 3. Regular Meetings
The regular meeting of the Board of Directors shall be held without
other notice than these By-Laws, immediately after, and at the same place as,
the Annual Meeting of the Shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Iowa, for
the holding of additional regular meetings without other notice than such
resolution.
Section 4. Special Meetings
Special meetings of the Board of Directors may be called by or at the
request of the President or any one director. The persons or person authorized
to call special meetings of the Board of Directors may fix the time for holding
any special meetings of the Board of Directors so called, but the place shall be
the same as the regular meeting place unless another place is unanimously agreed
upon at the time and ratified by appropriate resolution.
Section 5. Notice of Meetings
Notice of any special meeting of the Board of Directors shall be given
at least five (5) days previously thereto by written notice delivered personally
or mailed to each director at his business address, or by telegram. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with sufficient postage thereon prepaid. If notice be given
by telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company; any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
expressed purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of any regular or special meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
Section 6. Committees
The Board of Directors may, by resolution adopted by a majority of the
whole board, designate from among its members an Executive Committee and one or
more other committees. Any such committee, to the extent provided in the
resolution, shall have and may exercise all the authority of the Board of
Directors; provided, however, that no such committee shall have such authority
in reference to any matter for which such authority is specifically reserved to
the full Board of Directors by the terms of the Iowa Business Corporation Act,
as amended. Each such committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
ARTICLE IV. OFFICERS
Section 1. Number
The officers of the Corporation shall be a President, Vice President, a
Secretary and a Treasurer. Such other officers, assistant officers and acting
officers as may be deemed necessary, may be elected or appointed by the Board of
Directors. Any two or more offices may be held by the same person if so
nominated and elected.
Section 2. Election and Term of Office
The officers of the Corporation to be elected by the Board of Directors
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. The officers of the Corporation
shall hold office until their successors are chosen and qualify or until their
death or resignation. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors in office. Any vacancy occurring in any office in the Corporation
shall be filled by the Board of Directors.
ARTICLE V. FISCAL YEAR
The fiscal year of this Corporation shall begin on the 1st day of
September and end on the last day of August, in each year.
ARTICLE VI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the Board of Directors at any regular or special meeting of the
Board of Directors.
PROPOSED AMENDMENT TO BY-LAWS
OF
WINNEBAGO INDUSTRIES, INC.
Article III, Section 2 of the By-Laws currently reads as follows:
"Section 2. Number, Tenure and Qualifications
The number of directors constituting the Board of Directors of the
Corporation shall be eight (8) until increased or decreased by proper amendment
thereto. Each director shall hold office until the next annual meeting of the
shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Iowa nor shareholders of the
Corporation."
Proposed new Article III, Section 2:
"Section 2. Number, Tenure and Qualifications
The number of directors constituting the Board of Directors of the
Corporation shall be not more than fifteen (15) and not less than three (3), the
precise number to be determined by resolution of the Board of Directors from
time to time. Effective with the election of the directors at the annual meeting
of shareholders to be held in 2000, the directors shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, with the Board of Directors consisting of
eight (8) members existing at the time of the annual meeting of shareholders to
be held in 2000 to be classified as follows: Two directors to hold office
initially for a term expiring at the annual meeting of shareholders to be held
in 2001, three directors to hold office initially for a term expiring at the
annual meeting of shareholders to be held in 2002, and three directors to hold
office initially for a term expiring at the annual meeting of shareholders to be
held in 2003, with the respective members of each class to hold office until
their respective successors are elected and qualified. At each annual meeting of
shareholders commencing with the annual meeting in 2001, the successors to the
class of directors whose term then expires shall be elected to serve a
three-year term and until their successors are duly elected and qualified. No
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. Any increase or decrease in the number of directors
shall be apportioned among the classes so as to make all classes as nearly equal
in number as possible."
EXHIBIT 4b.
[LOGO] MBT
Manufacturers Bank & Trust Company
February 5, 2002
Bruce Hertzke, President & CEO
Winnebago Industries
P.O. Box 474
Forest City, IA 50436
LETTER OF INTENT
Dear Bruce:
Manufacturers Bank (MBT) is considering a loan to Forest City Economic
Development., Inc. The loan is for 95% of the project cost ($2.2 Mil. of $2.325
Mil.). It is illegal and presents unacceptable risk to make a loan of this type.
Therefore, Forest City Economic Development, Inc., through MBT, requests that
Winnebago Industries guarantee a portion of the loan and pledge a C.D. as
additional collateral.
In consideration of a loan by MBT to Forest City Economic Development, Inc. in
the amount of $2.2 Mil. to build a painting facility, Winnebago Industries
agrees to pledge a $500,000 certificate of deposit at MBT and guarantee any loan
balances over $1,500,000.
In the event of termination of CDI, or default on the MBT loan, Winnebago
Industries will buy the property at the pay-off balance or assume the Capital
Lease between FCED and CDI.
Sincerely,
- -------------------------------------
/s/ David L. Kingland
President/CEO
I agree substantially to these terms.
- -------------------------------------
Bruce Hertzke
President/CEO
EXHIBIT 10v.
AGREEMENT
This Agreement is made as of March 13, 2002, by and between Winnebago
Industries, Inc., an Iowa corporation (the "Company") and Bruce D. Hertzke
("Hertzke").
RECITALS:
WHEREAS, Hertzke is Chairman of the Board, Chief Executive Officer and
President 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, it is in the best interests of the Company, considering the
past and future services of Hertzke, to improve the security and climate for
objective decision making by providing for the personal security of Hertzke;
WHEREAS, Hertzke, who has been an employee of the Company since October
4, 1971, has been a participant in the Winnebago Industries, Inc. Deferred
Compensation Plan (the "Plan") since 1983, has made several contributions to the
Plan subsequent to 1992 and he is not vested in such 1993 and subsequent
deferrals because of a Plan change adopted in 1992 which provided that for 1993
and subsequent deferrals vesting occurred upon five years of service after each
deferral and attaining age 55 (Mr. Hertzke's date of birth is July 6, 1951);
WHEREAS, Hertzke has been the most adversely impacted of any
participant in the Plan by amendments made to the Deferred Compensation Plan in
1994;
WHEREAS, at a meeting held on January 16, 2002 the Board of Directors
of the Company took action to immediately vest Hertzke in any post-1992
deferrals to the Plan and authorized Raymond M. Beebe, Vice President-General
Counsel and Secretary, on behalf of the Company to execute an agreement with Mr.
Hertzke to such effect:
AGREEMENT:
It is therefore agreed by and between the Company and Hertzke
that the rule change adopted in 1992 which provided that for 1993 and
subsequent deferrals to the Plan vesting occurs upon five years of
service after each deferral and attaining age 55 is hereby waived as to
Hertzke and that any contributions which Hertzke made to the Plan in
1993 and subsequent years are by the terms of this Agreement
immediately vested as of March 13, 2002.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date set out above.
WINNEBAGO INDUSTRIES, INC.
By:
------------------------------------------ ------------------------------
Raymond M. Beebe Bruce D. Hertzke
Vice President-General Counsel & Secretary