UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 13, 2003
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WINNEBAGO INDUSTRIES, INC.
--------------------------
(Exact Name of Registrant as Specified in Charter)
IOWA 001-06403 42-0802678
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
P.O. BOX 152
FOREST CITY, IOWA 50436
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 641-585-3535
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ITEM 5. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information contained in this Item 12 is being furnished pursuant to
and in accordance with SEC Release Nos. 33-8216 and 34-47583.
The information, including exhibits attached hereto, in this Current
Report, or third quarter earnings release and the written transcript of
the earnings conference call, is being furnished and shall not be deemed
"filed" for the purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that
Section. The information in this Current Report shall not be incorporated
by reference into any registration statement or other document pursuant to
the Securities Act of 1933, except as otherwise expressly stated in such
filing.
Attached and incorporated herein by reference as Exhibit 99.1 is a copy of
the press release of Winnebago Industries, Inc., dated June 13, 2003,
reporting Winnebago Industries, Inc.'s financial results for the third
quarter and nine months ended May 31, 2003. Attached and incorporated
herein by reference as Exhibit 99.2 is a copy of the written transcript of
Winnebago Industries, Inc.'s earnings conference call held on June 13,
2003.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release of Winnebago Industries, Inc.
dated June 13, 2003.
99.2 Written transcript of earnings conference call held on
June 13, 2003.
SIGNATURE
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 hereunto duly authorized.
Dated: June 17, 2003
By: /s/ Bruce D. Hertzke
--------------------
Name: Bruce D. Hertzke
Title: Chief Executive Officer
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
99.1 Press release of Winnebago Industries, Inc. dated June 13, 2003.
99.2 Written transcript of earnings conference call held on June 13, 2003.
CONTACT: PAGE 1 OF 5
Contact: Sheila Davis, PR/IR Manager, 641-585-6803, sdavis@winnebagoind.com
WINNEBAGO INDUSTRIES REPORTS THIRD QUARTER RESULTS
AND RECORD NINE MONTHS REVENUE
FOREST CITY, IOWA, June 13, 2003 - Winnebago Industries, Inc. (NYSE: WGO), today
reported net income from continuing operations of $9.0 million for the third
quarter ended May 31, 2003 versus $17.7 million for the third quarter of fiscal
2002. On a diluted per share basis, the Company earned 48 cents from continuing
operations for the third quarter of fiscal 2003 versus 88 cents for the third
quarter last year. Net income from Winnebago Acceptance Corporation operations,
which were discontinued during the quarter was $.3 million, or two cents per
diluted share, for the third quarter ended May 31, 2003 versus $.4 million, or
two cents per diluted share for the third quarter of fiscal 2002.
Revenues from continuing operations for the third quarter of fiscal 2003
were $200.2 million versus $245.9 million for the same quarter last year.
Net income from continuing operations for the first 39 weeks of fiscal 2003
was $36.8 million, versus $36.9 million for the first 40 weeks of fiscal 2002.
On a diluted per share basis, the Company earned $1.94 from continuing
operations for the first 39 weeks of fiscal 2003 versus $1.78 for the first 40
weeks of fiscal 2002. Net income from discontinued operations for the first 39
weeks of fiscal 2003 was $1.2 million, or six cents per diluted share, versus
$1.3 million, or six cents per diluted share for the first 40 weeks of fiscal
2002.
Revenues from continuing operations for the first 39 weeks of fiscal 2003
were a record $619.5 million versus $605.1 million for the first 40 weeks of
fiscal 2002.
"Revenues and earnings for the third quarter were impacted primarily by
lower sales volume. Due to the lower volume, we reduced production schedules to
better align Company and dealer inventory levels with retail demand
expectations, decreasing plant efficiencies," said Winnebago Industries'
Chairman, CEO and President Bruce Hertzke. "Also contributing, but to a lesser
degree, were incentive programs needed to move out final 2003 inventory and
start-up expenses for our new Charles City Motor Home Manufacturing Facility."
"The comparison with last year's third quarter reflects the operation of
the Company's factories on four-day work weeks for the first six weeks of the
quarter versus running on an overtime basis during the third quarter last year,"
said Hertzke. "Also our fiscal year to date through the end of the third quarter
was a traditional 39-week period this year versus a 40-week period in fiscal
2002."
Hertzke continued, "Shipments for the Company's motor homes slowed during
the third quarter as a result of dealers choosing to trim inventory levels due
to low consumer confidence levels, uncertainty about the war in Iraq and the
coming model year changeover. The third quarter was also impacted by competitive
programs within the motor home industry."
"I am extremely proud that Winnebago Industries remained solidly profitable
during the quarter in spite of decreased volume, increased competitive pressures
and start-up expenses from our new Charles City Motor Home Manufacturing
Facility," said Hertzke. "Winnebago Industries continues to have a solid balance
sheet, an extremely positive cash flow, no debt, and a great name and reputation
for product quality and customer service. We will continue to manage our
business to achieve high profitability levels within the RV industry."
Winnebago Industries is the top selling motor home manufacturer with 18.4
percent of the combined Class A and C market calendar year to date through
April.
For the third quarter ended May 31, 2003, Winnebago Industries reported
factory shipments of 2,601 units, comprised of 1,465 Class A and 1,136 Class C
motor homes compared to 3,355 units, comprised of 1,965 Class A and 1,390 Class
C motor homes, for the third quarter last year. Class A motor home shipments
included 397 diesel units compared to 489 diesel units in the third quarter last
year.
Winnebago Industries' motor home sales order backlog at the end of the
third quarter on May 31, 2003 was 1,419 units, comprised of 941 Class A and 478
Class C motor homes, versus 2,689 units,
CONTACT: PAGE 2 OF 5
comprised of 1,721 Class A and 968 Class C motor homes, on order at the end of
the third quarter last year.
Dealer inventory levels of the Company's products were 4,561 on May 31, 2003,
compared to 4,271 units at that time last year.
In March, the Company's Board of Directors announced the Company's eighth stock
repurchase program, authorizing the purchase of outstanding shares of Winnebago
Industries' common stock for an aggregate price of up to $20 million. During the
third quarter ended May 31, 2003, Winnebago Industries repurchased 345,899
shares for an aggregate price of approximately $9.7 million. Currently,
outstanding shares are approximately 18,142,000.
Winnebago Industries will host a live webcast to review third quarter results
today, June 13, 2003, at 10 a.m. EST. The webcast will be available on the
Company's website at www.winnebagoind.com or at
www.shareholder.com/winnebago/medialist.cfm. It will be archived and available
for 90 days.
ABOUT WINNEBAGO INDUSTRIES
Winnebago Industries, Inc. is the leading manufacturer of motor homes,
self-contained recreation vehicles used primarily in leisure travel and outdoor
recreation activities. The Company builds quality motor homes under the
Winnebago, Itasca, Rialta and Ultimate brand names with state-of-the-art
computer-aided design and manufacturing systems on automotive-styled assembly
lines. The Company's common stock is listed on the New York, Chicago and Pacific
Stock Exchanges and traded under the symbol WGO. Options for the Company's
common stock are traded on the Chicago Board Options Exchange. For access to
Winnebago Industries investor relations material, to add your name to an
automatic email list for Company news releases or for information on a
dollar-based stock investment service for the Company's stock, visit,
www.winnebagoind.com/investor_relations.htm.
This press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that forward-looking statements are inherently uncertain. A number of
factors could cause actual results to differ materially from these statements,
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, sales order
cancellations, slower than anticipated sales of new or existing products, new
products introduced by competitors and other factors. Additional information
concerning certain risks and uncertainties that could cause actual results to
differ materially from that projected or suggested is contained in the Company's
filings with the Securities and Exchange Commission (SEC) over the last 12
months, copies of which are available from the SEC or from the Company upon
request.
WINNEBAGO INDUSTRIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED 39 WEEKS 40 WEEKS
5/31/2003 6/1/2002 5/31/2003 6/1/2002
-------- -------- -------- --------
Net revenues $200,211 $245,912 $619,516 $605,121
Cost of goods sold 177,065 209,381 534,930 523,068
-------- -------- -------- --------
Gross profit 23,146 36,531 84,586 82,053
-------- -------- -------- --------
Operating expenses
Selling 4,652 4,257 13,407 13,567
General and administrative 4,251 5,689 12,287 14,796
-------- -------- -------- --------
Total operating expenses 8,903 9,946 25,694 28,363
-------- -------- -------- --------
Operating income 14,243 26,585 58,892 53,690
Financial income 306 623 1,001 2,641
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CONTACT: PAGE 3 OF 5
Pre-tax income 14,549 27,208 59,893 56,331
Provision for taxes 5,554 9,523 23,129 19,402
-------- -------- -------- --------
Income from continuing operations 8,995 17,685 36,764 36,929
Income from discontinued operations
(net of taxes) 334 409 1,152 1,323
-------- -------- -------- --------
Net income $ 9,329 $ 18,094 $ 37,916 $ 38,252
======== ======== ======== ========
Income per share (basic)
From continuing operations $ 0.49 $ 0.91 $ 1.98 $ 1.82
From discontinued operations 0.02 0.02 0.06 0.06
-------- -------- -------- --------
Net income $ 0.51 $ 0.93 $ 2.04 $ 1.88
======== ======== ======== ========
Number of shares used in per share
calculations - basic 18,257 19,552 18,586 20,337
======== ======== ======== ========
Income per share (diluted)
From continuing operations $ 0.48 $ 0.88 $ 1.94 $ 1.78
From discontinued operations 0.02 0.02 0.06 0.06
-------- -------- -------- --------
Net income $ 0.50 $ 0.90 $ 2.00 $ 1.84
======== ======== ======== ========
Number of shares used in per share
calculations-diluted 18,549 19,995 18,925 20,779
======== ======== ======== ========
WINNEBAGO INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MAY 31, 2003 AUG. 31, 2002
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(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 92,747 $ 42,225
Receivables 24,898 28,375
Inventories 115,084 113,654
Other 11,919 11,221
Net assets of discontinued operations 624 38,121
-------- --------
Total current assets 245,272 233,596
Property and equipment, net 63,879 48,927
Deferred income taxes 23,626 22,438
Investment in life insurance 22,371 23,474
Other assets 11,731
8,642
-------- --------
Total assets $366,879 $337,077
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 48,132 $ 44,230
Income taxes payable 827 2,610
CONTACT: PAGE 4 OF 5
Accrued expenses 46,124 41,761
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Total current liabilities 95,083 88,601
Post retirement health care and
deferred compensation benefits 72,835 68,661
Stockholders' equity 198,961 179,815
-------- --------
Total liabilities and stockholders' equity $366,879 $337,077
======== ========
WINNEBAGO INDUSTRIES INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
39 WEEKS 40 WEEKS
5/31/2003 6/1/2002
--------- ---------
Cash flows from operating activities
Net income as shown on the statement of income $ 37,916 $ 38,252
Income from discontinued operations (1,152) (1,323)
--------- ---------
Income from continuing operations 36,764 36,929
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 6,395 5,906
Tax benefit of stock options 955 3,292
Other 205 165
Change in assets and liabilities
Decrease (increase) in receivable and other assets 3,994 (1,911)
Increase in inventories (1,430) (16,561)
Increase in deferred income taxes (2,502) (1,537)
Increase in accounts payable and accrued expenses 8,265 17,355
(Decrease) increase in income taxes payable (1,783) 6,431
Increase in postretirement benefits 3,680 4,075
--------- ---------
Net cash provided by continuing operations 54,543 54,144
Net cash provided by discontinued operations 234 301
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Net cash provided by operating activities 54,777 54,445
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Cash flows provided by (used in) investing activities
Purchases of property and equipment (21,539) (5,418)
Other (1,414) (2,099)
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Net cash used in continuing operations (22,953) (7,517)
Net cash provided by discontinued operations 38,423 2,529
--------- ---------
Net cash provided by (used in) investing activities 15,470 (4,988)
--------- ---------
Cash flows used in financing activities and capital transactions
Payments for purchase of common stock (20,221) (81,778)
Payment of cash dividends (1,887) (2,075)
Proceeds from issuance of common and treasury stock 2,383 4,317
--------- ---------
Net cash used in financing activities and capital transactions (19,725) (79,536)
--------- ---------
Net increase (decrease) in cash and cash equivalents 50,522 (30,079)
CONTACT: PAGE 5 OF 5
Cash and cash equivalents-beginning of period 42,225 102,280
--------- ---------
Cash and cash equivalents-end of period $ 92,747 $ 72,201
========= =========
# # #
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 1
WINNEBAGO INDUSTRIES
MODERATOR: SHEILA DAVIS
JUNE 13, 2003
9:00 A.M. CT
Operator: Good day and welcome, everyone, to the Winnebago Industries Third
Quarter 2003 Earnings Results Conference Call. This call is being
recorded. With us today is the Chairman, President and Chief Executive
Officer, Mr. Bruce Hertzke, and Senior Vice President and Chief
Financial Officer, Mr. (Ed Barker). At this time for opening remarks
and introductions, I'd like to turn the call over to the Public
Relations and Investor Relations Manager, Ms. Sheila Davis. Please go
ahead, ma'am.
Sheila Davis: Thank you, Lisa. I'd like to welcome you once again to the
Winnebago Industries Conference Call and to review the company's
results for the third quarter and first nine months of fiscal 2003
ended May 31. Before we start, let me offer the following cautionary
note. This presentation contains forward looking statements within the
meaning of the private securities litigation reform act of 1995.
Investors are cautioned that forward looking statements are inherently
uncertain. A number of factors could cause actual results to differ
materially from these statements. These factors are contained in the
company's filings with the Securities and Exchange Commission over the
last 12 months, copies of which are available from the SEC or from the
company upon request. I'll now turn the call over to Bruce Hertzke.
Bruce.
Bruce Hertzke: Thank you, Sheila. Good morning. I'd like to welcome everybody
to our company conference call this morning. I will briefly review a
few highlights at Winnebago Industries, and
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 2
then, (Ed Barker), our Senior Vice President and Chief Financial
Officer, will review our financial information with you.
Each of you should have received a copy of our company's earnings
released this morning. I'm proud of the fact that Winnebago Industries
remains solidly profitable during the quarter in spite of decreased
volume, increased competitive pressure from incentives in the
marketplace and startup expenses from our new Charles City Motorhome
Manufacturing facilities. And, in spite of what were results, it was
still a record for the company's first nine months in terms of revenue.
Shipments for the company, motorhomes, were slower because of dealers
trimming their inventory levels due to low consumer confidence and the
uncertainty of the war in Iraq and the coming changeover of our new
2004 models. Winnebago Industries remains the top selling motorhome
manufacturer in the industry with 18.4 percent of the class A and class
C market share calendar year to date through April. However, sales of
our products within the third quarter were impacted by current
competitive nature of our business. As we have pointed out in the last
three annual reports, Winnebago Industries' goal is to remain the most
profitable in the RV industry. While we certainly enjoyed being the top
selling motorhome manufacturer, our priority is to remain the RV
industry leader in profitability for our shareholders.
We're also very bullish on the future growth of Winnebago Industries
and the entire RV industries. Motorhomes are growing in popularity. The
baby boomer generation is entering the prime market at a rate of over 4
million people per year. We are seeing the age of our consumers
purchasing motorhomes broadening. Our buyers are staying more active
and healthy later in life so that the age of purchasing of power has --
their purchasing of motorhomes has extended later in life in addition
to a new growing number of younger buyers coming into our market. As a
result of this anticipated increase and demand of our products, we have
completed our largest expansion to date in Charles City, Iowa. We began
producing class C motorhomes in our new Charles City facility in March
and had their grand opening on May 9. We are currently building
approximately 30 units per week in this new facility and will ramp up
as the market dictates.
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 3
At this time, I'll turn it over to (Ed Barker) for the financial
review. (Ed).
(Ed Barker): Thank you, Bruce. Winnebago Industries today reported net
income from continuing operations of 9 million for the third quarter
ended May 31st, 2003 versus 17.7 million for the third quarter of
fiscal 2002. On a diluted per share basis, the company earned 48 cents
from continuing operations with third quarter of fiscal 2003 versus 88
cents for the third quarter last year. Net income from Winnebago
Acceptance Corporation Operations, which were discontinued during the
quarter, were .3 million or two cents per diluted share for the third
quarter ended May 31, 2003 versus .4 million or two cents per diluted
share for the third quarter of fiscal 2002. Revenues from continuing
operations for the third quarter of fiscal 2003 were 200.2 million
versus 245.9 million for the same quarter last year. Net income from
continuing operations for the first 39 weeks of fiscal 2003 was 36.8
million versus 36.9 million for the first 40 weeks of fiscal 2002. On a
diluted per share basis, the company earned $1.94 from continuing
operations for the first 39 weeks of fiscal 2003 versus $1.78 for the
first 40 weeks of fiscal 2002. Net income from discontinued operations
for the first 39 weeks of fiscal 2003 was 1.2 million or six cents per
share versus 1.3 million or six cents per diluted share for the first
40 weeks of fiscal 2002. Revenues from continuing operations for the
first 39 weeks of fiscal 2003 were a record 619.5 million versus 605.1
million for the first 40 weeks of fiscal 2002.
Turning to the balance sheet, the company's cash balance during the
quarter did increase $53 million. This was primarily due from the sale
and collection of 42.3 million in Winnebago Acceptance Corporation
receivables, a decrease in our inventory balance of 12 million offset
by 4 million in capital expenditures and 9.7 million from stock
repurchases under the company stock repurchase program. We did this
quarter increased our coverage in terms of financial disclosure by
including, and we will continue that in subsequent quarters, a
statement of cash flow so that you can more timely take a look at the
company's financial statement. With that, I'll turn the call back to
Bruce.
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 4
Bruce Hertzke: At this time I'll turn the call over to the operator for
question and answer portion of the call.
Operator: Thank you. Today's question and answer session will be conducted
electronically. In order to ask a question, please press the star key
followed by the digit one on your touch-tone telephone. If you are on a
speakerphone, please make sure that your mute function is turned off to
allow your signal to reach our equipment. Once again, that's star one
to ask a question. We'll go first to Scott Stember with Fidelity.
Scott Stember: Good morning, guys.
Bruce Hertzke: Good morning, Scott.
Scott Stember: Bruce, can you talk about the production in the quarter? Last
quarter you indicated you that were going to have about six less work
days in the quarter. Could you talk to what the effect -- whether there
was more than that, whether there were any additional Fridays taken
off?
Bruce Hertzke: Yes. Where we were, we announced at the end of our second quarter
that we were going to have those six days off this quarter.
Scott Stember: Right.
Bruce Hertzke: That is exactly what we did do. There were no extended time
periods. We took those six Fridays off and right after that we went
back and currently we're back to our normal 40 day -- or 40 hour
workweek.
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 5
Scott Stember: OK. And could you maybe talk about with the new facility up
and running, maybe talk about what your capacity utilization is and if
you could break it out with the main facility versus the new facility
or just in total?
Bruce Hertzke: OK. Last year it (did find), if you remember, Winnebago
Industries during the third quarter, we were on overtime for the entire
quarter, all 13 weeks. We were either 45 or 50 hour workweeks and we
were probably at 100 -- probably you'd classify it at 105 percent
capacity at that point in time. Currently, at our new facility and the
added capacity, we're probably at about 75 to 80 percent capacity.
Scott Stember: OK. And just a couple of follow-up questions. Could you maybe
talk about what you're seeing in June so far as far as the order
picture and maybe just talk about retail trends maybe for the quarter
and in June.
Bruce Hertzke: Yes. I can give you some general (time in) charts. Two
thousand and four products we started in late May and in June and so we
have cleaned out our 2003 products and we are, you know, we're in
process of now taking orders and selling 2004. I think the only comment
that I can make just general or comment, everything seems to be being
accepted very well and naturally we're seeing the order input increase
because of our new products offering and dealers during the last
quarter, as we stated in our news release, had taken their inventories
down.
Scott Stember: OK. And just maybe some general flavor on the general -- the
retail. I know you guys track your retail internally also, any general
flavor on what's going on right now?
Bruce Hertzke: Well, the latest staff survey just came out of April just this
week and I think you'll see that our industry overall is down like a
half of one percent and I believe that everybody -- I also just came
back from an RVIA meeting. I believe everybody really feels that our
industry weathered the whole spring quite well considering we were in a
war. We were in a low consumer confidence
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 6
period. We had gas prices jumping all over and that our market held up
this good, I think, everybody felt very good that our industry is
remaining very strong and I think we at Winnebago industries definitely
feel that.
Scott Stember: Alright. And just one last question, (Ed), maybe could you just
quantify maybe some of the startup costs that you had for the new
facility?
(Ed Barker): Yes, Scott. Our startup costs for the Charles City Facility
before the quarter ran about $262 thousand. That was on top of, of
course, the fixed overhead of our new Charles City Facility, which ran
slightly under a half a million dollars, but so for the quarter, about
three quarters of a million dollars was cost impact of our Charles City
Facility.
Scott Stember: That's all I have for now. Thanks.
Bruce Hertzke: Thank you.
Operator: We'll go next to Jeff Tryka with Delafield Hambrecht.
Jeff Tryka: Good morning, guys.
(Ed Barker): Good morning.
Bruce Hertzke: Good morning.
Jeff Tryka: A couple questions for you. One, if you could kind of
characterize the gross margin impact from the Charles City plant. We
have pretty big drop in gross margins and just wanted to see, you know,
how much of this is due to Charles City versus just, you know, the six
days that you took off during the quarter.
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 7
(Ed Barker): Well, I think, and as I mentioned to Scott, the cost impact at
the gross profit level of Charles City is about three quarters of a
million dollars. The rest of that, and a substantial part of the
reduction and gross profit, really comes from the fact that we operated
our factory at a lot less than we did last year in terms of capacity
utilization and efficiencies associated with working almost half a
quarter on a four day work week is the primary drivers there.
Jeff Tryka: OK. And looking kind of broader at the industry, are there any
particular areas of concern either by product line -- I know we've
heard some issues in the industry where there's been some pressure on
pricing and discounting for the high end gas class As and I just want
to know if you'd comment to see where you see things in the industry.
Bruce Hertzke: As far as on the product lines, we really don't. I can tell
you that we're very pleased to our reception of the product. The only
thing that had created some pressure in the inventory is the pricing. I
think everybody was anxious to displace their 2003 models and get on to
2004 and so we went through a period where it was definitely increased
incentives out there.
Jeff Tryka: OK. And last question, if you could comment on your inventory
levels, both your internal inventory in terms of finished goods as well
as where you see dealer inventories. Are they still too high or, you
know, are they coming back into where they should be or what?
Bruce Hertzke: Dealer inventories have come down substantially in this last
quarter. They were, you know, at the end of February, they had pretty
well wrapped up for the spring markets and then we hit the war and the
consumer confidence and gas prices and a few things like that that
really we were very pleased that retail continued to happen, but we
definitely see some hesitation in the dealer not to want to take any
more 2003 because he also knew that it was just a matter of a couple of
months and he would be going into 2004 product and so they definitely
held off buying new products and I'm sure they did that with ours and a
lot of the people in the industry. And
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 8
then, the competitive pressures, you know, just who wanted to get their
products the most at what cost and I think we all had to participate
some.
Jeff Tryka: In terms of your own inventory levels at the corporate level?
Bruce Hertzke: As Ed said, you'll see that we actually brought our inventory
down around $12 million. You know, we actually -- you know, we were
gearing up for the spring also and we ended up reducing our inventory
by over $12 million, too.
Jeff Tryka: OK. Is that mostly on the finished goods line?
Bruce Hertzke: Yes.
Jeff Tryka: OK. And now, basically in previous comments, I just wanted to verify
that there is -- you don't have any remaining 2003 inventory left?
Bruce Hertzke: At the end of 2003 we had a -- or at the end of our third quarter
we had - (Ed's) digging out the numbers. We had approximately about
237 at that point in time.
Jeff Tryka: OK.
Bruce Hertzke: And I'm happy to say that basically we got just a handful left.
Jeff Tryka: OK. Great.
Bruce Hertzke: There is only two or three or four, you know, that we continue
to work on that we're showing off, but they're pretty much cleaned up
now.
WINNEBAGO INDUSTRIES
Moderator: Sheila Davis
06-13-03/9:00 a.m. CT
Confirmation # 447822
Page 9
Jeff Tryka: Great. Thanks very much, guys.
Bruce Hertzke: Thank you.
Operator: We'll go next to Barry Vogel with Barry Vogel and Associates.
Barry Vogel: Good morning, ladies and gentlemen.
Bruce Hertzke: Good morning, Barry.
(Ed Barker): Good morning, Barry.
Barry Vogel: Going back to that discounting, were you forced during the
quarter to discount more aggressively than you might have been doing a
couple of months ago?
Bruce Hertzke: Without a doubt. The bottom line is the 2003 product,
everybody in our industry wanted to clean up their product and get on
to 2004 and we had to participate somewhat into that also.
Barry Vogel: Now, I know you've done a better job than some of your
competitors in terms of you didn't have to discount as early as they
did for different reasons, but are some of your competitors still
discounting going into the fourth quarter?
Bruce Hertzke: I think that's a fair analysis. Yes, we know of a few programs
that our competitors still have. Naturally, we really don't want to
play in that arena. We think our 2004 product will -- we're hoping that
we can just stay away from that.
Barry Vogel: But are you -- are you now being forced as the '04 models begin to
be produced?
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Bruce Hertzke: Currently we have -- we do not have the programs -- any programs
in '04.
Barry Vogel: So you have no discounting right now?
Bruce Hertzke: On '04s.
Barry Vogel: On '04s.
Bruce Hertzke: We have a few '03s, as I mentioned before, that we are cleaning
up, but we have -- we are not in that in '04.
Barry Vogel: OK. And I have a couple of little questions for (Ed). Your tax rate
for the year, what is your best guesstimate right now?
(Ed Barker): 38.6 percent.
Barry Vogel: OK. And your capital expenditures, what are you looking at for this
year?
(Ed Barker): We're looking at an additional five million for the fourth quarter,
Barry, that will bring it to 26.5 million.
Barry Vogel: And your (DNA) for the year?
(Ed Barker): 8.8 million.
Barry Vogel: And if you had it -- if you needed to guess about what your
capital requirements would be for next year, what would be your best
guess today?
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(Ed Barker): Right around 10 million.
Barry Vogel: 10 million. And as far as your stock buy-back program, how much do
you have left on your current authorization?
(Ed Barker): Approximately 10 million.
Barry Vogel: Thank you very much. You guys have done a great job.
(Ed Barker): Thank you, Barry.
Bruce Hertzke: Thank you, Barry.
Operator: Once again, that's star one to ask a question. We'll go next to Craig
Kennison with Robert W. Baird.
Craig Kennison: Good morning, everyone.
Bruce Hertzke: Hi, Craig.
(Ed Barker): Hi, Craig.
Craig Kennison: Thanks for that cash flow statement. First question has to
do, again, with the gross margin. Just looking at it a different way,
the gross margin is 350 basis points below where it was a year ago and
Charles City is clearly an impact, no overtime is an impact, but also
the pricing. Could you kind of quantify the pricing impact on gross
margin? I think you mentioned the other two, but how did pricing impact
gross margin?
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Bruce Hertzke: Actually, pricing we have higher ASPs, Craig, so it was really
positive by a small amount. Again, the prime drivers of gross profit
are volume, which is really the big -- the biggest of all by a long
ways. We did lose some efficiency in our manufacturing operation when
we compared this quarter to a year ago, so client efficiency was
probably the next biggest factor. As we indicated, we did have more
discounts obviously this year than a year ago simply because of the
market environment and those are kind of the main -- the main drivers
of our gross profit decline.
Craig Kennison: And then going to market share, despite some of the
discounting that has taken place here, Winnebago has been losing share,
at least this year. They're down -- you are down two percentage points
relative to a year ago. You talk about some of the dynamics there and
whether that's changed since we've seen some of the new '04 models
coming out.
Bruce Hertzke: Well, we just got the April stats survey. I don't know if you've
seen those yet.
Craig Kennison: Sure.
Bruce Hertzke: But, you know, I think what we're seeing is that there is even
a few new -- if you look at the top companies, Fleetwood is gaining a
little better market share back, but the top five company basically
we're seeing a little more pressure from some of the others in the
industry and I think it's a few low niche products that are coming out
in the marketplace and that we're just reviewing it and seeing if there
is any other areas that we need to get into, but I can tell you that
we're very pleased. We are not hearing any comments about our -- even
our 2003 product, which is mainly in the dealer's lot yet and so far
all the introductory of our 2004 products we've had some very positive
comments.
Craig Kennison: Is the primary driver of the market share loss, is it product
or is it price? Is it the floor plans you have or is it just the price
at which they're going out?
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Bruce Hertzke: I think that there is some price competitive that, you know a
lot of people are even doing retail rebates to customers, salesmanship.
There's a lot of different types of incentives and I think as 2004
comes out, hopefully everybody gets back and it's more of a normal
playing field and whoever products is the best will win the battle.
Craig Kennison: And I know you don't provide guidance, but growth margin
fluctuates quite a bit. Could you give us a sense for whether we should
be thinking closer to 15 percent or closer to the 12 percent that you
recorded recently?
(Ed Barker): Well, Craig, a lot of that is going to obviously be dictated by the
volume the market...
Craig Kennison: Right.
(Ed Barker): ... will provide us and I'm not necessarily sure your question
is related to the fourth quarter or certainly to '04. You know, I guess
the only thing I could say to help you there is the fact that if we see
a strong RV market over the next 12 months and we start to see our
volumes rise, there's no reason, if we get an improved market
conditions, we can't be towards a higher end of that range. I think in
the near term probably you may be talking more in the lower part of
that range, but again, it's -- as I think maybe is demonstrated
certainly to our investors during the third quarter when you compare
back to last year, when we run our factory at 70/75 percent versus 100
to 105 percent, the tremendous amount of leverage gives us a great lift
in our growth profit numbers, so it's going to be obviously predicated
upon what kind of a market we're in.
Craig Kennison: In your capacity in terms of units is probably 325ish?
(Ed Barker): Between 300 and 325 is a good number.
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Craig Kennison: OK. And finally, with respect to your cash position, 93
million, that's a strong number, more than really you need. Talk about
your priorities with respect to dividends and whether that's changed or
with respect to share repurchases and acquisitions. Thanks.
Bruce Hertzke: I can tell you that I have a board of directors meeting next
week and even at our last planning meeting we have talked more about
dividends. We have no comment. The only thing is I think it's fair to
say that dividends are starting to receive some more favorable
treatments and taxation. It would have been an easier decision if there
wouldn't have even been the 15 percent tax rate on it, but other than
that, I think you will continue to see us repurchase our shares and,
you know, as you can see, we authorized in March a repurchase program
and we spent about half that money just since March and we have
completed seven other complete stock buy back programs, so you know,
we'll definitely continue to utilize some of our cash that way.
Craig Kennison: Great. Thank you.
Bruce Hertzke: Thank you.
Operator: Next we'll go to Ruthanne Williams with Red Chip Companies.
Ruthanne Williams: Hi. Good morning. I joined the call a few minutes late, so I
apologize if we are going over old ground. I would appreciate it if you
could break out anything possible into months as far as trends that you
may have seen in demand during and after the period of the conflict in
Iraq. And second of all, if you can share any information that you may
have gathered from your retail registrations, I would be interested to
hear that.
Bruce Hertzke: I'm going to start with retail registration first. We have the
exact data on that. Again, as I stated earlier, we've been actually
very satisfied with retail registration for the industry. Again, it's
only down a half of one percent for the industry and we think we went
through some pretty tough
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times. So we're still very positive. Again, we lost a little bit of
market share because we probably weren't as aggressive as some people
may have been, but we think that, you know, business remains very
strong, especially in these conditions. As far as the first part of
your question was on -- by a month to month basis?
Ruthanne Williams: Yes. Is there anything that you can see looking into the
month to month basis whether the fall off in demand during the quarter
may have changed during and after the period of the conflict in Iraq.
Bruce Hertzke: I think it was -- we didn't really see much difference. You
know, again, the dealers were kind of at a unique point in their
ordering because in April and May it's hard to order much product when
you know 2004 products are coming out in June, so I think it was fairly
even throughout the quarter.
Ruthanne Williams: OK. Thank you very much.
Operator: Today's final question comes from John Diffendal with BBNT Capital
Markets.
John Diffendal: Good morning.
Bruce Hertzke: Morning.
John Diffendal: Can you give us, I think in the last call you gave us average
selling prices in both the As and the Cs.
(Ed Barker): Yes. I have that, John. For the quarter, average sales price on
class Cs was $48,111. And for the As it was $92,302.
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John Diffendal: OK. And I see we're all trying to pull a little bit at
getting a sort of a clear sense of how the market sort stands today and
moving forward and obviously a lot hangs on the '04 introductions, but
can you maybe just give us some sort of anecdotal sense in your talking
with dealers and whatever, particularly related to traffic that they
may be seeing at their dealerships, you know, sort of post-war with the
war sort of over, maybe just give us a little more color on what you're
seeing.
Bruce Hertzke: Well, I think I can tell you, again, I just had the
opportunity to be with several of the industry people this last -- this
week and, you know, everybody is still very positive about the RV
industry and they continued to say everybody has been very pleased with
business considering the economic environment, and you know, it's just
been a matter that I believe dealers are now going to be a little more
optimistic to go to 2004 products. I think that we're going to see
consumers as the market continues to gain a little bit back and
consumer confidence goes back up. You know, all the trends that we have
continue to indicate that we should be heading in the right direction.
John Diffendal: And you mentioned that orders -- with the '04s that order
input rates are up. Is there any sort of hard number you can give us
relative to that?
Bruce Hertzke: No, I don't -- I can -- just like our order backlog that we
give you, we hope to -- we hope to keep that down because of we now
have two plants and we hope that we can actually be more efficient for
our dealers and get them out faster. But we definitely, you know, the
dealers went through a period where they reduced their inventory, what
I feel is pretty significantly, during this last quarter and I really
believe they are in a pretty good position to get set up for 2004 now.
John Diffendal: I mean, do you feel that -- I mean, has that inventory
problem that everybody has been dealing with, you and others as well,
completely gone at this point of the '03s going into the '04s
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or is there still some low rang? It sounds like you saying that your
As, or your '03s, are largely gone.
Bruce Hertzke: Yes. We feel that we are in good position. I guess that, you
know, I have talked to a lot of the rest of the industry people, but I
guess I don't have a clear picture to say whether I feel that they have
all their inventories under control or not.
John Diffendal: Thank you very much.
Bruce Hertzke: Thank you.
Operator: At this time I'd like to turn the call back over to Mr. Hertzke for
any additional or closing remarks.
Bruce Hertzke: Thank you. Once again I'd like to thank you for joining
Winnebago Industry Third Quarter Conference Call. In closing, I'd like
to highlight our continued optimism for the future. Winnebago
Industries has a very strong balance sheet with no debt and a large
cash balance. The demographic trends are definitely happening and we
see a broadening of age groups who are purchasing motorhomes and an
increased number of potential customers for the future. Winnebago
Industries' strong name and quality of reputation will help our future
and the leadership and profitability in the RV industry. With all this
in our favor, Winnebago Industries is well positioned for a strong
future. I'd like to thank you for joining us today. Goodbye.
Operator: This concludes today's Winnebago Conference Call. At this time, you
may disconnect.
END