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 June 1, 2002
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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
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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 18,795,628 shares of $.50 par value common stock outstanding on July
12, 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 & 15
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
JUNE 1, AUGUST 25,
ASSETS 2002 2001
- ------------------------------------------------------ ------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 72,201 $ 102,280
Receivables, less allowance for doubtful
accounts ($419 and $244, respectively) 23,004 21,571
Dealer financing receivables, less allowance
for doubtful accounts ($112 and $117, respectively) 39,049 40,263
Inventories 96,376 79,815
Prepaid expenses 3,595 3,604
Deferred income taxes 7,668 6,723
------------ ------------
Total current assets 241,893 254,256
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Land 1,018 1,029
Buildings 46,413 45,992
Machinery and equipment 85,301 82,182
Transportation equipment 5,621 5,482
------------ ------------
138,353 134,685
Less accumulated depreciation 92,506 88,149
------------ ------------
Total property and equipment, net 45,847 46,536
------------ ------------
INVESTMENT IN LIFE INSURANCE 23,298 22,223
------------ ------------
DEFERRED INCOME TAXES, NET 22,087 21,495
------------ ------------
OTHER ASSETS 8,475 7,412
------------ ------------
TOTAL ASSETS $ 341,600 $ 351,922
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
JUNE 1, AUGUST 25,
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
- ------------------------------------------------------- ------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 46,207 $ 40,678
Income tax payable 11,369 4,938
Accrued expenses:
Insurance 6,935 4,567
Product warranties 8,141 8,072
Accrued compensation 16,374 13,730
Promotional 10,330 3,181
Other 4,438 4,842
------------ ------------
Total current liabilities 103,794 80,008
------------ ------------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 68,334 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 25,699 22,261
Reinvested earnings 270,316 234,139
------------ ------------
308,959 269,343
Less treasury stock, at cost 139,487 61,879
------------ ------------
Total stockholders' equity 169,472 207,464
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 341,600 $ 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
FORTY THIRTY-NINE
THIRTEEN WEEKS ENDED WEEKS ENDED WEEKS ENDED
---------------------------- ------------ ------------
JUNE 1, MAY 26, JUNE 1, MAY 26,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenues $ 246,636 $ 195,605 $ 607,493 $ 499,615
Cost of goods sold 209,381 169,423 523,068 436,872
------------ ------------ ------------ ------------
Gross profit 37,255 26,182 84,425 62,743
------------ ------------ ------------ ------------
Operating expenses:
Selling 4,257 4,155 13,567 12,876
General and administrative 5,709 3,929 14,844 9,839
------------ ------------ ------------ ------------
Total operating expenses 9,966 8,084 28,411 22,715
------------ ------------ ------------ ------------
Operating income 27,289 18,098 56,014 40,028
Financial income 547 922 2,351 2,794
------------ ------------ ------------ ------------
Income before income taxes 27,836 19,020 58,365 42,822
Provision for taxes 9,742 6,576 20,113 14,598
------------ ------------ ------------ ------------
Income before cumulative effect of a change in
accounting principle 18,094 12,444 38,252 28,224
Cumulative effect of change in accounting principle,
net of taxes - - - - - - - - - (1,050)
------------ ------------ ------------ ------------
Net income $ 18,094 $ 12,444 $ 38,252 $ 27,174
============ ============ ============ ============
Earnings per share - basic (Note 9):
- ------------------------------------
Income before cumulative effect of change in
accounting principle $ .93 $ .61 $ 1.88 $ 1.36
Cumulative effect of change in accounting
principle - - - - - - - - - (.05)
------------ ------------ ------------ ------------
Income per share $ .93 $ .61 $ 1.88 $ 1.31
============ ============ ============ ============
Earnings per share - diluted (Note 9):
- --------------------------------------
Income before cumulative effect of a change in
accounting principle $ .90 $ .60 $ 1.84 $ 1.34
Cumulative effect of change in accounting
principle - - - - - - - - - (.05)
------------ ------------ ------------ ------------
Income per share $ .90 $ .60 $ 1.84 $ 1.29
============ ============ ============ ============
Weighted average shares of common stock
outstanding:
Basic 19,552 20,566 20,337 20,748
============ ============ ============ ============
Diluted 19,995 20,885 20,779 21,016
============ ============ ============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FORTY THIRTY-NINE
Dollars in thousands WEEKS ENDED WEEKS ENDED
-----------------------------
JUNE 1, MAY 26,
2002 2001
------------ ------------
Cash flows from operating activities:
Net income $ 38,252 $ 27,174
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,906 5,508
Tax benefit of employee stock options 3,292 - - -
Other 165 122
Change in assets and liabilities:
(Increase) decrease in receivable and other assets (1,610) 10,414
(Increase) decrease in inventories (16,561) 10,269
Increase in accounts payable and accrued expenses 17,355 1,272
Increase in income taxes payable 6,431 6,073
Decrease in deferred icome taxes (1,537) - - -
Increase in postretirement benefits 4,075 4,967
------------ ------------
Net cash provided by operating activities 55,768 65,799
------------ ------------
Cash flows used by investing activities:
Purchases of property and equipment (5,418) (6,577)
Investments in dealer receivables (87,819) (82,464)
Collections of dealer receivables 89,025 78,464
Other (2,099) (2,564)
------------ ------------
Net cash used by investing activities (6,311) (13,141)
------------ ------------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (81,778) (10,686)
Payment of cash dividends (2,075) (2,062)
Proceeds from issuance of common stock (including treasury stock) 4,317 1,829
------------ ------------
Net cash used by financing activities and
capital transactions (79,536) (10,919)
------------ ------------
Net (decrease) increase in cash and cash equivalents (30,079) 41,739
Cash and cash equivalents - beginning of period 102,280 51,443
------------ ------------
Cash and cash equivalents - end of period $ 72,201 $ 93,182
============ ============
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 June 1, 2002, the consolidated results of
operations for the 40 and 13 weeks ended June 1, 2002 and the 39 and 13
weeks ended May 26, 2001, and the consolidated cash flows for the 40 weeks
ended June 1, 2002 and the 39 weeks ended May 26, 2001. The statement of
income for the 40 weeks ended June 1, 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 Intangible 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 beginning of the first quarter of the Company's 2003 fiscal
year. 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
The Company adopted Emerging Issues Task Force (EITF) Issue No. 01-9,
ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER OR A RESELLER
OF THE VENDOR'S PRODUCTS, at the beginning of the third quarter of fiscal
2002. This guidance was effective for periods beginning after December 15,
2001. EITF 01-9 requires that certain payments to customers for cooperative
advertising and certain sales incentive offers that were historically
classified in selling expense be shown as a reduction in net revenues. The
adoption of EITF 01-9 resulted in a reduction of previously reported net
revenues (and an offsetting reduction of selling expense) of $4.1 million
for the 39 weeks ended May 26, 2001 ($1.4 million for the 13 weeks ended
May 26, 2001). The adoption of this new accounting policy had no impact on
previously reported operating income, net income, or earnings per share.
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):
June 1, August 25,
2002 2001
------------ ------------
Finished goods ........... $ 34,520 $ 36,930
Work in process .......... 24,083 21,725
Raw materials ............ 61,964 44,232
------------ ------------
120,567 102,887
LIFO reserve ............. (24,191) (23,072)
------------ ------------
$ 96,376 $ 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 $262,514,000 and
$216,784,000 under repurchase agreements with lending institutions as of
June 1, 2002 and August 25, 2001, respectively. Included in these
contingent liabilities as of June 1, 2002 and August 25, 2001 are
approximately $1,254,000 and $3,276,000, respectively, of certain dealer
receivables subject to recourse agreements with Bank of America Specialty
Group and Conseco Finance Servicing Group. Also included in these
contingent liabilities are approximately $1,789,000 and $0 under a
repurchase agreement with Transamerica Commercial Finance Corporation,
Canada (Transamerica) as of June 1, 2002 and August 25, 2001, respectively.
During the second quarter of fiscal 2002, the Company guaranteed to a bank
certain interest bearing debt obligations of Forest City Economic
Development, Inc. 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 the parent's
outstanding stock. Mary Jo Boman, the wife of Gerald E. Boman, a director
of the Company, is also director of the bank and its parent and owns
approximately 33.3 percent of the parent's outstanding stock. The Company
believes that this obligation will be repaid in full and has therefore
provided no reserve for this contingency at June 1, 2002.
NOTE 6: SUPPLEMENTAL CASH FLOW DISCLOSURE
For the periods indicated, the Company paid cash for the following (dollars
in thousands):
Forty Thirty-Nine
Weeks Ended Weeks Ended
------------ ------------
June 1, May 26,
2002 2001
------------ ------------
Interest $ 246 $ - - -
Income taxes 11,717 7,020
NOTE 7: DIVIDEND DECLARED
On June 19, 2002, the Board of Directors declared a cash dividend of $.10
per common share payable July 8, 2002, to shareholders of record on June 7,
2002.
NOTE 8: REPURCHASE OF OUTSTANDING STOCK
On June 19, 2002, 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.
In April 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. Mrs. Hanson
is also a controlling person of the Company. Mrs. Hanson is the mother of
John V. Hanson, Mary Jo 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 9: INCOME PER SHARE
The following table reflects the calculation of basic and diluted earnings
per share for the 13 and 40 weeks ended June 1, 2002 and the 13 and 39
weeks ended May 26, 2001 (in thousands except per share data):
FORTY THIRTY-NINE
THIRTEEN WEEKS ENDED WEEKS ENDED WEEKS ENDED
--------------------------- ----------------------------
JUNE 1, MAY 26, JUNE 1, MAY 26,
2002 2001 2002 2001
------------ ------------ ------------ ------------
EARNINGS PER SHARE - BASIC:
- ---------------------------
Net income $ 18,094 $ 12,444 $ 38,252 $ 27,174
------------ ------------ ------------ ------------
Weighted average shares outstanding 19,552 20,566 20,337 20,748
------------ ------------ ------------ ------------
Earnings per share - basic $ .93 $ .61 $ 1.88 $ 1.31
------------ ------------ ------------ ------------
EARNINGS PER SHARE - ASSUMING DILUTION:
- ---------------------------------------
Net income $ 18,094 $ 12,444 $ 38,252 $ 27,174
------------ ------------ ------------ ------------
Weighted average shares outstanding 19,552 20,566 20,337 20,748
Dilutive impact of options outstanding 443 319 442 268
------------ ------------ ------------ ------------
Weighted average shares & potential
dilutive shares outstanding 19,995 20,885 20,779 21,016
------------ ------------ ------------ ------------
Earnings per share - diluted $ .90 $ .60 $ 1.84 $ 1.29
------------ ------------ ------------ ------------
7
During the 13 weeks ended May 26, 2001, there were options to purchase
166,800 shares of common stock outstanding at a price of $18.50, 14,000
shares of common stock at a price of $19.71875 per share and 22,000 shares
of common stock at a price of $18. These options were not included in the
computation of diluted earnings per share because the exercise prices for
the options were greater than the average market price of the common stock.
NOTE 10: 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 40 weeks ended June 1, 2002 and the 39 weeks ended May 26, 2001,
the Company's segment information is as follows:
RECREATION
VEHICLES & OTHER
MANUFACTURED DEALER GENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
-----------------------------------------------------------------------------------------------
40 Weeks Ended June 1, 2002
Net revenues $ 605,121 $ 2,372 $ - - - $ 607,493
Operating income 54,622 893 499 56,014
Identifiable assets 196,672 39,351 105,577 341,600
39 Weeks Ended May 26, 2001
Net revenues $ 496,321 $ 3,294 $ - - - $ 499,615
Operating income 37,305 1,028 1,695 40,028
Identifiable assets 172,632 37,132 125,289 335,053
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. The Company
undertakes no obligation to publicly update or revise any forward looking
statements whether as a result of new information, future events or otherwise,
except as required by law or the rules of The New York Stock Exchange.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of the Company's financial condition and results of
operations are based upon the Company's Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make assumptions, estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis, the
Company evaluates its estimates. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. The Company believes the following critical
accounting policies and related judgments and estimates affect the preparations
of its Consolidated Financial Statements. These policies were selected because
they involve additional management judgement due to the sensitivity of the
methods, assumptions and estimates necessary in determining the related income
statement, asset and/or liability amounts.
The Company has reserves for numerous loss exposures, such as product
warranties, product liability, litigation, accounts receivable and reserve for
incurred but not reported health care claims. 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 assumptions, 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 June 1, 2002 Compared to Thirteen Weeks Ended May 26, 2001
Net revenues for recreation vehicle and other manufactured products for the 13
weeks ended June 1, 2002 were $245,913,000, an increase of $51,361,000, or 26.4
percent from the 13-week period ended May 26, 2001. Motor home unit sales (Class
A and C) were 3,355, an increase of 668 units, or 24.9 percent, during the third
quarter of fiscal 2002 compared to the third quarter of fiscal 2001. The
increases can be attributed to more volume during the third quarter of fiscal
2002. The Company believes that its continued market share gains, improvements
in consumer confidence levels and sustained low interest rates have all
contributed to the improvement in revenues.
9
Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC) were
$723,000 for the 13 weeks ended June 1, 2002; a decrease of $330,000 or 31.3
percent from the 13-week period ended May 26, 2001 due primarily to lower
interest rates.
Gross profit, as a percent of net revenues, was 15.1 percent for the 13 weeks
ended June 1, 2002 compared to 13.4 percent for the 13 weeks ended May 26, 2001.
The Company's gross profit was higher due primarily to increased volume of motor
home production and deliveries to dealers.
Selling expenses were $4,257,000 or 1.7 percent of net revenues during the third
quarter of fiscal 2002 compared to $4,155,000 or 2.1 percent of net revenues
during the third quarter of fiscal 2001. Increased sales volume was the primary
cause of the reduction in percentage during the third quarter of fiscal 2002.
General and administrative expenses were $5,709,000 or 2.3 percent of net
revenues during the 13 weeks ended June 1, 2002 compared to $3,929,000 or 2.0
percent of net revenues during the 13 weeks ended May 26, 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 $547,000 for the third quarter of fiscal
2002 compared to net financial income of $922,000 for the comparable quarter of
fiscal 2001. During the 13 weeks ended June 1, 2002, the Company recorded
$551,000 of net interest income and losses of $4,000 in foreign currency
transactions. During the 13 weeks ended May 26, 2001, the Company recorded
$927,000 of net interest income and losses of $5,000 in foreign currency
transactions. When comparing the two quarters, the average available cash for
investing during the third quarter of fiscal 2002 was larger than the average
available cash during the third quarter of fiscal 2001. However, the average
rate the Company earned on investments was lower than the average rate earned
during the second quarter of fiscal 2001.
The effective income tax rate increased to 35.0 percent during the third quarter
of fiscal 2002 from 34.6 percent during the third quarter of fiscal 2001. The
increase was due primarily to higher provisions for state income taxes during
the 13 weeks ended June 1, 2002.
For the third quarter of fiscal 2002, the Company had net income of $18,094,000,
or $.90 per diluted share compared to the third quarter of fiscal 2001's net
income of $12,444,000, or $.60 per diluted share. Net income and earnings per
diluted share increased by 45.4 percent and 50.0 percent, respectively, when
comparing the third quarter of fiscal 2002 to the third quarter of fiscal 2001.
The difference in percentages when comparing net income to net earnings per
share was due primarily to a lower number of outstanding shares of the Company's
common stock during the 13 weeks ended June 1, 2002 (see Note 8).
Forty Weeks Ended June 1, 2002 Compared to Thirty-Nine Weeks Ended May 26, 2001.
Net revenues for manufactured products for the 40 weeks ended June 1, 2002 were
$605,121,000, an increase of $108,800,000, or 21.9 percent from the 39-week
period ended May 26, 2001. Motor home unit sales (Class A and C) were 8,120
units, an increase of 1,432 units, or 21.4 percent during the 40 weeks ended
June 1, 2002 when compared to the 39 weeks ended May 26, 2001. The Company
believes that its continued market share gains, improvements in consumer
confidence levels and sustained low interest rates have all contributed to the
improvement in revenues.
Net revenues for dealer financing of WAC were $2,372,000 for the 40 weeks ended
June 1, 2002; a decrease of $922,000 or 28.0 percent from the 39-week period
ended May 26, 2001. Decreased revenues for dealer financing reflect a
significant decrease in interest rates partially offset by higher average
outstanding balances when comparing the 40 weeks ended June 1, 2002 to the 39
weeks ended May 26, 2001.
Gross profit, as a percent of net revenue, was 13.9 percent for the 40 weeks
ended June 1, 2002 compared to 12.6 percent for the 39 weeks ended May 26, 2001.
The Company's higher margins were due primarily to increased volume of motor
home production and deliveries to dealers.
10
Selling expenses were $13,567,000, or 2.2 percent of net revenues during the 40
weeks ended June 1, 2002 compared to $12,876,000, or 2.6 percent of net revenues
during the 39 weeks ended May 26, 2001. Increased sales volume was the primary
cause of the reduction in percentage during the fiscal 2002 period.
General and administrative expenses were $14,844,000 or 2.4 percent of net
revenues during the 40 weeks ended June 1, 2002 compared to $9,839,000, or 2.0
percent of net revenues during the 39 weeks ended May 26, 2001. 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 $2,351,000 for the 40 weeks ended June
1, 2002 compared to net financial income of $2,794,000 for the 39 weeks ended
May 26, 2001. During the fiscal 2002 period, the Company recorded $2,377,000 of
net interest income and losses of $26,000 in foreign currency transactions.
During the fiscal 2001 period, the Company recorded $2,796,000 of net interest
income and losses of $2,000 in foreign currency transactions. When comparing the
two periods, the average available cash for investing during fiscal 2002 was
larger than the average available cash during fiscal 2001. However, the average
rate the Company earned on investments was significantly lower than the average
rate earned during the fiscal 2001 period.
The effective income tax rate increased to 34.5 percent during the 40 weeks
ended June 1, 2002 from 34.1 percent during the 39 weeks ended May 26, 2001. The
primary reason for the increase was due to higher provisions for state income
taxes during the 40 weeks ended June 1, 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 39 weeks ended
May 26, 2001 resulted in a negative adjustment to the Company's income of
$1,050,000, or $.05 per diluted share.
For the 40 weeks ended June 1, 2002, the Company had net income of $38,252,000,
or $1.84 per diluted share compared to the 39 weeks ended May 26, 2001's net
income of $27,174,000, or $1.29 per diluted share. Net income and earnings per
diluted share increased by 40.8 percent and 42.6 percent, respectively, when
comparing the fiscal 2002 period to the fiscal 2001 period. The difference in
percentages when comparing net income to net earnings per share was primarily
due to a lower number of outstanding shares of the Company's common stock during
the 40 weeks ended June 1, 2002 (see Note 8).
LIQUIDITY AND FINANCIAL CONDITION
The Company generally meets its working capital, capital equipment and cash
requirements with funds generated from operations.
As of June 1, 2002, working capital was $138,099,000, a decrease of $36,149,000
from the amount at August 25, 2001. The Company's principal uses of cash during
the 40 weeks ended June 1, 2002 were $81,778,000 for the purchase of shares of
the Company's common stock (See Note 8), $5,418,000 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 40 weeks ended June 1, 2002 are set forth in
the unaudited consolidated condensed statement of cash flows for that period.
Principal known demands at June 1, 2002 on the Company's liquid assets for the
remainder of fiscal 2002 include capital expenditures of approximately
$5,100,000 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.
11
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 1, 2002, the Company had an investment portfolio of fixed income
securities, which are classified as cash and cash equivalents of $72,201,000.
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 June 1, 2002, the Company had dealer-financing receivables in the amount
of $39,049,000. Interest rates charged on these receivables vary based on the
prime rate.
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 2,700 orders at June 1, 2002, an increase of approximately 125
percent over sales order backlog of approximately 1,200 orders at May 26, 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; 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 June 1, 2002,
and the related condensed consolidated statements of income for the 13-week and
40-week periods ended June 1, 2002 and 13-week and 39-week periods ended May 26,
2001 and the consolidated condensed statements of cash flows for the 40-week
period ended June 1, 2002 and the 39-week period ended May 26, 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.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Minneapolis, Minnesota
July 12, 2002
13
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.
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 July 12, 2002
------------------------- ----------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, and President
(Principal Executive Officer)
Date July 12, 2002
------------------------- ----------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
15