SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required) for the fiscal year ended August 27, 1994; or
( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) For the transition period from
_____________________ to _______________________
Commission File Number 1-6403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0802678
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 152, Forest City, Iowa 50436
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 582-3535
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
--------------------- ---------------------------------
Common Stsock ($.50) par value) The New York Stock Exchange, Inc.
Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Annual Report on Form 10-K or any
amendment to this Annual Report on Form 10-K _X_ .
Aggregate market value of the common stock held by non-affiliates of the
Registrant on October 17, 1994: $105,696,399 (13,421,765 shares at closing price
on New York Stock Exchange of $7.875).
Common stock outstanding on November 14, 1994, 25,242,203 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Winnebago Industries, Inc. Annual Report to Shareholders for the fiscal
year ended August 27, 1994, portions of which are incorporated by reference
into Part II hereof.
2. The Winnebago Industries, Inc. Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held December 14, 1994, portions of which are
incorporated by reference into Part III hereof.
WINNEBAGO INDUSTRIES, INC.
FORM 10-K
Report for the Fiscal Year Ended August 27, 1994
PART I
ITEM 1. Business
GENERAL
Winnebago Industries, Inc. is a leading U.S. manufacturer of motor homes,
self-contained recreation vehicles used primarily in leisure travel and outdoor
recreation activities. Motor home and van conversion sales by the Company
represented more than 80 percent of its revenues in each of the past five fiscal
years. The Company's motor homes are sold through dealer organizations primarily
under the Winnebago, Itasca, Vectra, Rialta and Luxor brand names.
During fiscal 1994, 1993 and 1992, other products manufactured by the Company
consisted principally of extruded aluminum and a variety of component products
for other manufacturers. Service revenues during fiscal 1994, 1993 and 1992
consisted principally of revenues from satellite courier and tape duplication
services. Service revenues, in fiscal 1994 and 1993 also includes revenues from
floor plan financing of dealer inventories of the Company's products.
Additionally in fiscal years prior to 1994, service revenues included revenues
from contract assembly of a variety of electronic products.
The Company was incorporated under the laws of the state of Iowa on February 12,
1958, and adopted its present name on February 28, 1961. The Company's executive
offices are located at 605 West Crystal Lake Road in Forest City, Iowa. Unless
the context indicates otherwise, the term "Company" refers to Winnebago
Industries, Inc. and its subsidiaries.
PRINCIPAL PRODUCTS
The Company determined it was appropriate to define its operations into three
business segments for fiscal 1994, (See Note 19, "Business Segment Information"
in the Company's Annual Report to Shareholders for the year ended August 27,
1994). However, during each of the last five fiscal years, at least 88% of the
revenues of the Company were derived from recreational vehicle products.
The following table sets forth the respective contribution to the Company's net
revenues by product class for each of the last five fiscal years (dollars in
thousands):
Fiscal Year Ended (1)
August 27, August 28, August 29, August 31, August 25,
1994 1993 1992 1991 1990
Motor Homes $ 385,319 $ 326,861 $ 245,908 $ 180,878 $ 286,713
85.2% 85.1% 83.4% 81.2% 86.2%
Other Recreation
Vehicle Revenues (2) 21,903 17,655 17,126 15,586 22,039
4.8% 4.6% 5.8% 7.0% 6.6%
Other Manufactured Products
Revenues (3) 25,184 20,344 18,090 13,974 11,423
5.6% 5.3% 6.1% 6.3% 3.4%
Total Manufactured
Products Revenues 432,406 364,860 281,124 210,438 320,175
95.6% 95.0% 95.3% 94.5% 96.2%
Service Revenues (4) 19,710 19,223 13,870 12,210 12,658
4.4% 5.0% 4.7% 5.5% 3.8%
Total Net Revenues $ 452,116 $ 384,083 $ 294,994 $ 222,648 $ 332,833
100.0% 100.0% 100.0% 100.0% 100.0%
(1) The fiscal year ended August 31, 1991 contained 53 weeks; all other fiscal
years in the table contained 52 weeks.
(2) Primarily recreation vehicle related parts and service and van conversions.
(3) Principally sales of extruded aluminum and component products for other
manufacturers.
(4) Principally Cycle-Sat, Inc. (Cycle-Sat) revenues from satellite courier and
tape duplication services. Also includes in years prior to August 27, 1994,
North Iowa Electronics, Inc. (NIE) revenues from contract assembly of a
variety of electronic products; and in years ended August 27, 1994, August
28, 1993 and August 25, 1990, Winnebago Acceptance Corporation (WAC)
revenues from dealer financing.
Unit sales of the Company's principal recreation vehicles for the last five
fiscal years were as follows:
Fiscal Year Ended (1)
August 27, August 28, August 29, August 31, August 25,
1994 1993 1992 1991 1990
Motor Homes
Class A 6,820 6,095 4,161 2,814 4,613
Class B 376 - - - - - - - - - - - -
Class C 1,862 1,998 2,425 2,647 3,820
Total 9,058 8,093 6,586 5,461 8,433
Van Conversions (2) 1,020 1,103 876 842 1,789
(1) The fiscal year ended August 31, 1991 contained 53 weeks; all other fiscal
years in the table contained 52 weeks.
(2) Subsequent to August 27, 1994, the Company discontinued its van conversion
operations.
The primary use of recreation vehicles for leisure travel and outdoor recreation
has historically led to a peak retail selling season concentrated in the spring
and summer months. The Company's sales of recreation vehicles are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory. The Company has generally manufactured recreation
vehicles during the entire year, both for immediate delivery and for inventory
to satisfy the peak selling season. During fiscal years when interest rates are
high and/or market conditions are uncertain, the Company attempts to maintain a
lower level of inventory of recreation vehicles. Order backlog information is
not deemed significant to understand the Company's business.
Presently, the Company meets its working capital and capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally and funds from agreements with financial institutions. Since March
26, 1992, the Company has had a financing and security agreement with
NationsCredit Corporation, formerly Chrysler First Commercial Corporation.
Additionally, on February 24, 1994, the Company and Cycle-Sat entered into a
$3,000,000 line of credit with Firstar Bank Cedar Rapids. (See Note 8, Notes
Payable, in the Company's Annual Report to Shareholders for the year ended
August 27, 1994.)
RECREATION VEHICLES
MOTOR HOMES - A motor home is a self-propelled mobile dwelling used primarily as
a temporary dwelling during vacation and camping trips.
Among the Recreation Vehicle Industry Association (RVIA) classifications of
motor homes, Winnebago currently manufactures and sells three types:
Class A models are conventional motor homes constructed directly on
medium-duty truck chassis which include the engine and drive components.
The living area and driver's compartment are designed and produced by the
recreation vehicle manufacturer.
Class B models are a panel-type truck to which sleeping, kitchen and toilet
facilities are added. These models also have a top extension added to them
for more head room.
Class C models are mini motor homes built on van-type chassis onto which
the manufacturer constructs a living area with access to the driver's
compartment. Certain models of the Company's Class C units include van-type
driver's compartments built by the Company.
The Company currently manufactures and sells motor homes primarily under the
Winnebago, Itasca, Vectra, Rialta and Luxor brand names. The Class A and Class C
motor homes generally provide living accommodations for four to seven persons
and include kitchen, dining, sleeping and bath areas, and in some models, a
lounge. Optional equipment accessories include, among other items, air
conditioning, electric power plant, stereo system and a wide selection of
interior equipment.
A subsidiary, Winnebago Industries Europe GmbH, a wholly-owned subsidiary, was
formed in fiscal 1992 to expand the Company's presence in Europe. (See Note 19,
Business Segment Information, in the Company's Annual Report to Shareholders for
the year ended August 27, 1994.)
Except for the Company's new Rialtas, the Company's motor homes are sold with a
basic warranty against defects in workmanship or materials for a period of 12
months or 15,000 miles, whichever occurs first. The Company's new Rialtas are
sold with a basic warranty package for a period of 24 months or 24,000 miles,
whichever occurs first. At the expiration of the basic warranty period, the
first owner receives a 36-month or 36,000-mile, whichever occurs first,
structure warranty against delamination on the sidewalls and back walls. This
36-month or 36,000-mile extension does not apply to the Winnebago Warrior and
Itasca Passage models.
The Company's motor homes are sold by dealers in the retail market at prices
ranging from approximately $32,000 to more than $170,000, depending on size and
model, plus optional equipment and delivery charges.
The Company currently manufactures Class A and Class C motor homes ranging in
length from 23 to 37 feet and 21 to 29 feet, respectively. The Company's Class B
motor homes are 17 feet in length.
COMPONENT PARTS AND ACCESSORIES - The Company manufactures or purchases
component parts and accessory items primarily for its and, to a lesser extent,
other recreation vehicle manufacturers' units. These parts and accessories are
sold to distributors, manufacturers and dealers.
NON-RECREATION VEHICLE ACTIVITIES
OEM - Original equipment manufacturer sales of component parts such as aluminum
extrusions, metal stamping, rotational moldings, vacuum formed plastics and
fiberglass to outside manufacturers.
CYCLE-SAT, INC. - Through the use of the latest innovations in satellite, fiber
optic and digital technologies, Cycle-Sat has grown to become a leading
high-speed distributor of television and radio commercials. To this end,
Cycle-Sat employs a satellite-assisted duplication center in Memphis, Tennessee
and a patented satellite network in place at approximately 545 television
stations in the U.S. and Canada. The Company's patented Cyclecypher equipment
allows the direct and automatic distribution of television commercials and
traffic instructions to specific television and radio stations. Ancillary
services include audio and video post production services and the operation of
two satellite news gathering vehicles, which are leased to provide spot news
coverage of sports events and for corporate videoconferences.
WINNEBAGO ACCEPTANCE CORPORATION - Prior to the sale of its dealer floor plan
receivables in February 1990, WAC provided financing for selected Winnebago
dealers for floor plan and rental units. Subsequent to the February 1990 sale of
its dealer floor plan receivables, WAC has only engaged in floor plan financing
for a limited number of dealers during fiscal years 1993 and 1994.
DISCONTINUED ACTIVITIES - The Company discontinued its van conversion operations
subsequent to August 27, 1994.
The Company sold a majority of the assets of North Iowa Electronics, Inc., a
contract assembler of a variety of electronic products, on August 8, 1993. See
Note 3 in the Company's Annual Report to Shareholders for the year ended August
27, 1994.
On September 20, 1991, the Company discontinued its Commercial Vehicle Division
operations (manufacturing of route delivery vans). See Note 2 in the Company's
Annual Report to Shareholders for the year ended August 27, 1994.
PRODUCTION
The Company's Forest City facilities have been designed to provide vertically
integrated production line manufacturing. The Company also operates a fiberglass
manufacturing facility in Hampton, Iowa, and a sewing operation in Lorimor,
Iowa. The Company manufactures the majority of the components utilized in its
motor homes, with the exception of the chassis, engines, auxiliary power units
and appliances.
Most of the raw materials and components utilized by the Company are obtainable
from numerous sources. The Company believes that substitutes for raw materials
and components, with the exception of chassis, would be obtainable with no
material impact on the Company's operations. The Company purchases Class A and C
chassis and engines from General Motors Corporation - Chevrolet Division and
Ford Motor Company; Class C chassis and engines from Volkswagen of America,
Inc.; and Class A chassis and engines from Oshkosh Truck Corporation and Spartan
Motors, Inc. Only two vendors accounted for as much as five percent of the
Company's purchases in fiscal 1994, General Motors Corporation and Ford Motor
Company (approximately 17 percent, in the aggregate).
Class B chassis and engines from Volkswagen of America, Inc. are utilized in the
Company's EuroVan Camper.
Motor home bodies are made principally of Thermo-Panel materials: the lamination
of aluminum and/or fiberglass, extruded polystyrene foam and plywood into
lightweight rigid structural panels by a process developed by the Company. These
panels are cut to form the floor, roof and sidewalls. Additional structural
strength is provided by Thermo-Steel(R) construction, which combines
Thermo-Panel materials and a framework of heavy gauge steel reinforcement at
structural stress points. The body is designed to meet rigid Winnebago safety
standards, with most models subjected to computer stress analysis. Certain
models of motor homes are made in part of other materials such as aluminum,
fiberglass and plastic.
The Company manufactures tip-out windows, lavatories, and all of the doors,
cabinets, shower pans, waste holding tanks, wheel wells and sun visors used in
its recreation vehicles. In addition, the Company produces most of the doors,
bucket seats, upholstery items, lounge and dinette seats, seat covers,
mattresses, decorator pillows, curtains and drapes.
The Company produces substantially all of the raw, anodized and powder-painted
aluminum extrusions used for interior and exterior trim in its recreation
vehicles. The Company also sells aluminum extrusions to over 130 customers.
DISTRIBUTION AND FINANCING
The Company markets its recreation vehicles on a wholesale basis to a broadly
diversified dealer organization located throughout the United States and, to a
limited extent, in Canada and other foreign countries. Foreign sales, including
Canada, were less than ten percent of net revenues in fiscal 1994. As of August
27, 1994, the motor home dealer organization included approximately 325 dealers,
compared to approximately 310 dealers at August 28, 1993. During fiscal 1994, 13
dealers accounted for approximately 25 percent of motor home unit sales, and
only one dealer accounted for more than four percent (4.3%) of motor home unit
sales.
The Company has sales agreements with dealers which are renewed on an annual or
bi-annual basis. Many of the dealers are also engaged in other areas of
business, including the sale of automobiles, and many dealers carry one or more
competitive lines. The Company continues to place high emphasis on the
capability of its dealers to provide complete service for its recreation
vehicles. Dealers are obligated to provide full service for owners of the
Company's recreation vehicles, or in lieu thereof, to secure such service at
their own expense from other authorized firms.
At August 27, 1994, the Company had a staff of 34 people engaged in field sales
and service to the motor home dealer organization.
The Company advertises and promotes its products through national RV magazines
and cable TV networks and on a local basis through trade shows, television,
radio and newspapers, primarily in connection with area dealers.
Substantially all sales of recreation vehicles to dealers are made on cash
terms. Most dealers are financed on a "floor plan" basis under which a bank or
finance company lends the dealer all, or substantially all, of the purchase
price, collateralized by a lien upon, or title to, the merchandise purchased.
Upon request of a lending institution financing a dealer's purchases of the
Company's products, and after completion of a credit investigation of the dealer
involved, the Company will execute a repurchase agreement. These agreements
provide that, in the event of default by the dealer on the dealer's agreement to
pay the lending institution, the Company will repurchase the financed
merchandise. The agreements provide that the Company's liability will not exceed
100 percent of the invoice price and provide for periodic liability reductions
based on the time since the date of the invoice. The Company's contingent
liability on all repurchase agreements was approximately $118,954,000 and
$101,445,000 at August 27, 1994 and August 28, 1993, respectively. Included in
these contingent liabilities are approximately $36,231,000 and $27,758,000,
respectively, of certain dealer receivables subject to recourse, (See Note 11 in
the Company's Annual Report to Shareholders for the year ended August 27, 1994).
The Company's contingent liability under repurchase agreements varies
significantly from time to time, depending upon seasonal shipments, competition,
dealer organization, gasoline supply and availability of bank financing.
Since fiscal 1984, the Company has made available to retail customers a retail
financing program which provides loans with up to 15-year terms for motor home
financing at favorable rates through participation with a financial institution.
The Company, from time to time, offers retail financing incentives in the form
of lower interest rates to attract customers to purchase motor homes.
COMPETITION
The recreation vehicle market is highly competitive, both as to price and
quality of the product. The Company believes its principal marketing advantages
are the quality of its products, its dealer organization, its warranty and
service capability and its marketing techniques. The Company also believes that
its prices are competitive with those of units of comparable size and quality.
The Company is a leading manufacturer of motor homes. For the 12 months ended
August 31, 1994, RVIA reported factory shipments of 36,300 Class A motor homes
and 16,900 Class C motor homes. Unit sales of such products by the Company for
the last five fiscal years are shown elsewhere in this report. The Company is
not a significant factor in the markets for its other recreation vehicle
products and its non-recreation vehicle products and services, except for the
markets serviced by Cycle-Sat, which is a major factor in the satellite courier
and tape duplication business.
REGULATION, TRADEMARKS AND PATENTS
The plumbing, heating and electrical systems manufactured and installed in all
of the Company's motor homes are manufactured and installed to meet National
Fire Protection Association 501C (American National Standards Institute 119.2)
as well as Federal Motor Vehicle Safety Standards applicable to motor homes. A
variety of other federal and state regulations pertaining to safety in
recreation vehicles have been adopted or are proposed from time to time. The
Company believes that it is in compliance with all such existing regulations and
while it is not able to predict what effect the adoption of any such future
regulations will have on its business, it is confident of its ability to equal
or exceed any reasonable safety standards.
The Company has several registered trademarks, including Winnebago, Itasca,
Chieftain, Minnie Winnie, Brave, Passage, Sunrise, Adventurer, Spirit,
Suncruiser, Sundancer, Sunflyer, Warrior, Elante', Vectra, Thermo-Panel and
Thermo-Steel, .
RESEARCH AND DEVELOPMENT
During fiscal 1994, 1993 and 1992, the Company spent approximately $1,704,000,
$1,077,000 and $1,820,000, respectively, on research and development activities.
These activities involved the equivalent of 30, 17 and 34 full-time employees
during fiscal 1994, 1993 and 1992, respectively. Figures for fiscal 1992 have
been restated to exclude expenses for the discontinued Commercial Vehicle
Division.
HUMAN RESOURCES
As of September 1, 1994, 1993 and 1992, the Company employed approximately
3,150, 2,770 and 2,530 persons, respectively. Of these, approximately 2,300,
2,090 and 1,820 persons, respectively, were engaged in manufacturing and
shipping functions. None of the Company's employees are covered under a
collective bargaining agreement.
ITEM 2. Properties
The Company's manufacturing, maintenance and service operations are conducted in
multi-building complexes, containing an aggregate of approximately 1,417,000
square feet in Forest City, Iowa. The Company also owns 698,000 square feet of
warehouse facilities located in Forest City. The Company leases approximately
235,000 square feet of its unoccupied manufacturing facilities in Forest City to
others. In fiscal 1989, the Company purchased a 308,000 square foot shopping
mall on 30 acres in Temple, Texas. At August 27, 1994, a customer service
facility operation occupied approximately 75,000 square feet of the mall and the
Company had leased a majority of the remainder of the mall to various retail
stores. The Company also leases a manufacturing facility and a storage facility
in Hampton, Iowa (74,000 square feet and 10,000 square feet) and a manufacturing
facility in Lorimor, Iowa (17,200 square feet). Leases on the above facilities
expire at various dates, the earliest of which is March, 1996. In fiscal 1993,
Winnebago Industries Europe GmbH purchased a distribution and service facility
in Kirkel, Germany. The facility has approximately 16,700 square feet and is
located on approximately six acres of land. The Company also owns a 14,400
square foot facility in Forest City which is leased to Cycle-Sat. The Company's
facilities in Forest City are located on approximately 784 acres of land, all
owned by the Company.
Most of the Company's buildings are of steel or steel and concrete construction
and are fire resistant with high-pressure sprinkler systems, dust collector
systems, automatic fire doors and alarm systems. The Company believes that its
facilities and equipment are well maintained, in excellent condition, suitable
for the purposes for which they are intended and adequate to meet the Company's
needs for the foreseeable future.
ITEM 3. Legal Proceedings
On April 23, 1991, the Federal Trade Commission ("FTC") issued to the Company
Civil Investigative Demands to produce documents and answers to written
interrogatories in connection with an investigation of whether the Company
engaged in deceptive practices in selling approximately 7,800 diesel powered
LeSharo and Phasar motor homes and Centauri and utility vans which were produced
between 1983 and 1986. After narrowing the FTC's Civil Investigative Demands
through a motion to quash and subsequent stipulated order, the Company produced
responsive documents at its corporate offices in December, 1991 and January,
1992. The Company had no further contact with the FTC for approximately 26
months when the Company's FTC Counsel in Washington, D.C. received a letter
dated March 22, 1994 from the FTC staff in which it was suggested that the FTC
staff had concluded that the Company had engaged in violations of Section 5 of
the FTC Act in connection with the marketing and sale of certain of the diesel
and gasoline LeSharo and Phasar motor homes and Centauri and utility vans. The
FTC staff letter also suggested a willingness to pursue consent negotiations
with the Company or otherwise that the FTC staff would be preparing a
recommendation to the commission that it issue a complaint against the Company
seeking consumer redress and other equitable relief. Any recommendation made by
the FTC staff would have to be approved by the Commission itself. If the FTC
should decide to issue such a complaint, the Company believes it would have
meritorious defenses to the same and further believes that the FTC would have
several significant hurdles to overcome including the statute of limitations
issues. Contemporaneously, the Company has contacted Regie Nationale Des Unises
Renault, the manufacturer of a majority of the component parts under
investigation by the FTC, relative to the most recent action taken by the FTC's
staff.
In addition to the foregoing, the Company is involved in various legal
proceedings which are ordinary routine litigation incident to its business, many
of which are covered in whole or in part by insurance. Counsel for the Company
based on his present knowledge of pending legal proceedings and after
consultation with trial counsel, has advised the Company that, while the outcome
of such litigation is uncertain, he is of the opinion that it is unlikely that
these proceedings will result in any recovery which will materially exceed the
Company's reserve for estimated losses. On the basis of such advice, Management
is of the opinion that the pending legal proceedings will not have any material
adverse effect on the Company's financial position, results of operations or
liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Executive Officers of the Registrant
NAME OFFICE (YEAR FIRST ELECTED AN OFFICER) AGE
John K. Hanson + Chairman of the Board (1958) 81
Fred G. Dohrmann + President & Chief Executive Officer (1989) 62
Raymond M. Beebe Vice President, General Counsel & Secretary (1974) 52
Edwin F. Barker Vice President, Controller & Chief Financial Officer (1980) 47
Jerome V. Clouse Vice President, Treasurer & International Development (1980) 51
Sharon L. Hansen Vice President, Administration (1989) 57
Bruce D. Hertzke Vice President, Operations (1989) 43
Paul D. Hanson Vice President, Strategic Planning (1993) 48
James P. Jaskoviak Vice President, Sales and Marketing (1994) 42
+ Director
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Reference is made to information concerning the market for the Company's common
stock and related stockholder matters on page 14 and the inside back cover of
the Company's Annual Report to Shareholders for the year ended August 27, 1994,
which information is incorporated by reference herein. The Company has not paid
any dividends during fiscal years 1994, 1993 or 1992 but in October, 1994, the
board declared a $.10 per common share dividend to shareholders of record as of
December 5, 1994.
ITEM 6. Selected Financial Data
Reference is made to the information included under the caption "Selected
Financial Data" on page 10 of the Company's Annual Report to Shareholders for
the year ended August 27, 1994, which information is incorporated by reference
herein.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Reference is made to the information under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 11
through 13 of the Company's Annual Report to Shareholders for the year ended
August 27, 1994, which information is incorporated by reference herein.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company and the report of the
independent accountants which appear on pages 15 through 32, and the
supplementary data under "Interim Financial Information (Unaudited)" on page 10
of the Company's Annual Report to Shareholders for the year ended August 27,
1994, are incorporated by reference herein.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Reference is made to the information included under the caption "Election of
Directors" in the Company's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held December 14, 1994, which information is
incorporated by reference herein.
Officers are elected annually by the Board of Directors. All of the foregoing
officers have been employed by the Company as officers or in other responsible
positions for at least the last five years.
The only executive officers of the Company who are related are John K. Hanson
and Paul D. Hanson. Paul D. Hanson is the son of John K. Hanson.
ITEM 11. Executive Compensation
Reference is made to the information included under the caption "Executive
Compensation" in the Company's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held December 14, 1994, which information is
incorporated by reference herein.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the share ownership information included under the caption
"Voting Securities and Principal Holders Thereof" in the Company's Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held December
14, 1994, which information is incorporated by reference herein.
ITEM 13. Certain Relationships and Related Transactions
Reference is made to the information included under the caption "Certain
Transactions with Management" in the Company's Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held December 14, 1994, which
information is incorporated by reference herein.
PART IV
ITEM 14. Exhibits, Consolidated Financial Statement Schedules and Reports on
Form 8-K
(a) 1. The consolidated financial statements of the Company are incorporated by
reference in ITEM 8 and an index to financial statements appears on page
13 of this report.
2. Consolidated Financial Statement Schedules Winnebago Industries, Inc.
and Subsidiaries
Page
Report of Independent Public Accountants on
Supplemental Financial Schedules 14
V. Property and Equipment 15
VI. Accumulated Depreciation of Property and Equipment 16
VIII. Valuation and Qualifying Accounts 17
IX. Short-Term Borrowings 18
All schedules, other than those indicated above, are omitted because
of the absence of the conditions under which they are required or
because the information required is shown in the consolidated
financial statements or the notes thereto.
(a) 3. Exhibits
See Exhibit Index on page 19.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
UNDERTAKING
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form S-8 Nos. 2-40316
(which became effective on or about June 10, 1971), 2-73221 (which became
effective on or about August 5, 1981), 2-82109 (which became effective on or
about March 15, 1983), 33-21757 (which became effective on or about May 31,
1988), and 33-59930 (which became effective on or about March 24, 1993):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnifi-cation by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
By /s/ John K. Hanson
Chairman of the Board
Date: November 16, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on November 16, 1994, by the following persons on behalf
of the Registrant and in the capacities indicated.
SIGNATURE TITLE
John K. Hanson Chairman of the Board and Director
Fred G. Dohrmann President, Chief Executive Officer and Director
Edwin F. Barker Vice President, Controller and Chief Financial Officer
Gerald E. Boman Director
Keith D. Elwick Director
David G. Croonquist Director
Joseph M. Shuster Director
Frederick M. Zimmerman Director
Francis L. Zrostlik Director
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES *Page
Independent Auditors' Report 32
Consolidated Balance Sheets 16 - 17
Consolidated Statements of Operations 15
Consolidated Statements of Changes in
Stockholders' Equity 19
Consolidated Statements of Cash Flows 18
Notes to Consolidated Financial Statements 20 - 31
* Refers to respective pages in the Company's 1994 Annual Report to
Shareholders, a copy of which is attached hereto, which pages are
incorporated herein by reference.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Winnebago Industries, Inc.
Forest City, Iowa
We have audited the consolidated financial statements of Winnebago Industries,
Inc. and subsidiaries (the Company) as of August 27, 1994 and August 28, 1993
and for each of the three years in the period ended August 27, 1994 and have
issued our report thereon dated October 21, 1994 which report includes an
explanatory paragraph as the Company changed its method of accounting due to
required new accounting standards for individual deferred compensation contracts
during the year ended August 29, 1992, changed its method of accounting for
income taxes during the year ended August 28, 1993, and changed its method of
accounting for postretirement health care and other benefits during the year
ended August 27, 1994; such consolidated financial statements and report are
included in your fiscal 1994 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedules of Winnebago Industries, Inc. and subsidiaries, listed in
Item 14(a) 2. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
October 21, 1994
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY AND EQUIPMENT
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Balance at
Beginning of Additions at Balance at
Classifications Period Cost Retirements Transfers End of Period
Year Ended August 27, 1994:
Land $ 2,153 $ - - - $ 28 $ (586) $ 1,539
Buildings 38,373 1,922 3 613 40,905
Machinery and equipment 72,505 6,597 3,936 (27) 75,139
Transportation equipment 5,609 3,458 1,082 - - - 7,985
$ 118,640 $ 11,977 $ 5,049 $ - - - $ 125,568
Year Ended August 28, 1993:
Land $ 1,273 $ 920 $ 40 $ - - - $ 2,153
Buildings 38,591 522 740 - - - 38,373
Machinery and equipment 70,257 5,943 3,627 (68) 72,505
Transportation equipment 5,525 286 304 102 5,609
$ 115,646 $ 7,671 $ 4,711 $ 34 $ 118,640
Year Ended August 29, 1992:
Land $ 1,278 $ - - - $ 5 $ - - - $ 1,273
Buildings 40,164 377 1,950 - - - 38,591
Machinery and equipment 70,305 2,716 2,764 - - - 70,257
Transportation equipment 5,445 414 398 64 5,525
$ 117,192 $ 3,507 $ 5,117 $ 64 $ 115,646
Depreciation of property and equipment is computed by the straight-line method
on the cost of the assets, less allowance for salvage value where appropriate,
at rates based upon their estimated service lives. The estimated service lives
used in the above schedule are buildings 10-45 years, machinery and equipment
3-10 years and transportation equipment 3-6 years.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(Dollars in thousands)
Column Column Column Column Column Column
A B C D E F
Additions
Balance at Charged to Balance at
Beginning Cost and End of
of Period Expenses Retirements Transfers Period
Classifications
Year Ended August 27, 1994:
Buildings $ 20,174 $ 1,454 $ - - - $- - - $ 21,628
Machinery and equipment 56,994 5,834 3,939 - - - 58,889
Transportation equipment 3,844 460 851 - - - 3,453
$ 81,012 $ 7,748 $ 4,790 $- - - $ 83,970
Year Ended August 28, 1993:
Buildings $ 19,067 $ 1,531 $ 424 $- - - $ 20,174
Machinery and equipment 54,777 5,882 3,728 63 56,994
Transportation equipment 3,747 354 257 - - - 3,844
$ 77,591 $ 7,767 $ 4,409 $ 63 $ 81,012
Year Ended August 29, 1992:
Buildings $ 19,341 $ 1,677 $ 1,951 $- - - $ 19,067
Machinery and equipment 51,113 6,105 2,441 - - - 54,777
Transportation equipment 3,773 316 342 - - - 3,747
$ 74,227 $ 8,098 $ 4,734 $- - - $ 77,591
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Column Column Column Column Column Column
A B C D E F
Additions
Balance at Charged to Balance
Beginning Cost and Bad Debts Deductions at End
Period and Description of Period Expenses Re-coveries Charge-Offs Other* of Period
Year Ended August 27, 1994:
Allowance for doubtful
accounts receivable 2,798 (443) - - - 260 (550) 1,545
Allowance for doubtful
dealer receivables 290 (40) 29 - - - - - - 279
Allowance for excess and
obsolete inventory 939 1,051 - - - 620 - - - 1,370
Allowance for doubtful
notes receivable 1,362 122 210 220 550 2,024
Year Ended August 28, 1993:
Allowance for doubtful
accounts receivable $ 1,146 $ 540 $ 1 $ 273 $ 1,384 $ 2,798
Allowance for doubtful
dealer receivables - - - 113 3 143 317 290
Allowance for excess and
obsolete inventory 1,562 777 - - - 1,400 - - - 939
Allowance for doubtful
notes receivable 1,427 843 - - - 232 (676) 1,362
Year Ended August 29, 1992:
Allowance for doubtful
accounts receivable 998 756 12 120 (500) 1,146
Allowance for excess and
obsolete inventory 1,450 1,432 - - - 1,320 - - - 1,562
Allowance for finished
goods valuation 268 - - - - - - 268 - - - - - -
Allowance for doubtful
notes receivable 771 156 - - - - - - 500 1,427
* Includes transfers of reserves from doubtful dealer receivables to doubtful
accounts and from doubtful accounts to long-term notes receivable.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Weighted
Maximum Amount Average Amount Average
Weighted Outstanding Outstanding Interest
Period and Category of Aggregate Balance at Average during the during the Rate during
Short-Term Borrowings End of Period Interest Rate Period Period (1) the Period
(2)
Year Ended August 27, 1994:
NationsCredit $ - - - - - -% $ 7,000 $ 951 6.1%
Firstar Bank 2,300 9.0% 2,300 1,030 8.4%
Year Ended August 28, 1993:
NationsCredit - - - - - -% 10,500 3,937 7.1%
Year Ended August 29, 1992:
ITT - - - - - -% 2,509 96 10.7%
Chrysler First - - - - - -% 3,000 173 6.7%
(1) Total of daily outstanding principal balances divided by days in the year.
(2) Actual interest divided by the average amount outstanding.
EXHIBIT INDEX
3a. Articles of Incorporation previously filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 27, 1988, and
incorporated by reference herein.
3b. Amended Bylaws of the Registrant.
4a. Amendment to Inventory Floor Plan Financing Agreement between Winnebago
Industries, Inc. and NationsCredit Corporation.
4b. Financing and Security Agreement dated March 26, 1992, between Winnebago
Industries, Inc. and NationsCredit Corporation (formerly Chrysler First
Commercial Corporation) previously filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 29, 1992 and amended
on the Registrant's Quarterly Reports on Form 10-Q for the quarters ended
May 29, 1993 and February 26, 1994, and incorporated by reference herein.
4c. Line of Credit Agreement dated February 24, 1994, among Winnebago
Industries, Inc., Cycle-Sat and Firstar Bank Cedar Rapids previously filed
with the Registrant's quarterly report on Form 10-Q for the quarter ended
February 26, 1994, and incorporated by referenced herein.
10a. Winnebago Industries, Inc. Stock Option Plan for Outside Directors
previously filed with the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 29, 1992, and incorporated by reference herein.
10b. Winnebago Industries, Inc. Deferred Compensation Plan previously filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
2, 1991, and incorporated by reference herein.
10c. Winnebago Industries, Inc. Profit Sharing and Deferred Saving Investment
Plan previously filed with the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 31, 1985 and incorporated by reference herein.
10d. Winnebago Industries, Inc. Book Unit Rights Plan previously filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
29, 1987, and incorporated by reference herein.
10e. Winnebago Industries, Inc. 1987 Non-Qualified Stock Option Plan previously
filed with the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 29, 1987, and incorporated by reference herein.
10f. Winnebago Industries, Inc. RV Incentive Compensation Plan.
13. Winnebago Industries, Inc. Annual Report to Shareholders for the year ended
August 27, 1994.
21. List of Subsidiaries.
23. Consent of Independent Accountants.
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 December of each year, commencing with the December, 1987 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.
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 eight (8) until increased or decreased by proper amendment
hereto. 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.
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 Meeting
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.
RESTATED INVENTORY FLOOR-PLAN FINANCE AGREEMENT
THIS RESTATED INVENTORY FLOOR-PLAN FINANCE AGREEMENT is made and entered
into this 27th day of October , 1994, between WINNEBAGO INDUSTRIES, INC., an
Iowa corporation, with its principal place of business at 605 West Crystal Lake
Road, Forest City, Iowa 50436 ("Client"), and NATIONSCREDIT COMMERCIAL
CORPORATION, a North Carolina corporation, assignee of Chrysler First Commercial
Corporation and Winnebago Acceptance Corporation, a North Carolina corporation,
with their principal place of business at 1105 Hamilton Street, Allentown,
Pennsylvania 18101 (collectively referred to as "NationsCredit").
RECITALS
A. Client manufactures motorized recreational vehicles under various brand
names, including but not limited to "Winnebago", "Itasca", "Vectra", "Luxor",
and "Rialta" ("Product").
B. Client and Chrysler First Commercial Corporation ("Chrysler First")
entered into a Finance Agreement dated March 26, 1992 (the "Finance Agreement"),
pursuant to which Chrysler First and/or a wholly-owned subsidiary thereof agreed
to provide financing and other credit services to Dealers of Client approved by
NationsCredit and advance money to Client for the sale of new recreation
vehicles manufactured by Client;
C. As part of the sale of substantially all of the assets of Chrysler First
to NationsCredit Corporation on February 1, 1993, NationsCredit succeeded to the
rights and assumed the obligations of Chrysler First under the terms of the
Finance Agreement;
D. NationsCredit through one or more wholly-owned subsidiaries is agreeable
to continue providing such financing and other credit services to Client
pursuant to the terms and conditions set forth in the Inventory Floor Plan
Finance Agreement as amended and restated herein;
NOW THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, Client and NationsCredit hereby amend and
restate the Agreement as follows:
1. DEFINITIONS
(a) "Accounting Month" shall mean the period from the last Friday of a
calendar month to and including the last Thursday of the following calendar
month. If a calendar month ends on Thursday, then the accounting month for the
next successive period shall be from the first Friday of a calendar month to and
including the last Thursday of the same calendar month.
(b) "Agreement" shall mean this Restated Inventory Floor-Plan Finance
Agreement.
(c) "Dealer" shall mean any Dealer of Client who is recommended to
NationsCredit by Client in writing for financing (by NationsCredit) of purchases
of Eligible Products and who is approved and accepted by NationsCredit for such
financing. To be approved by NationsCredit for financing of used Product, a
Dealer must be a (i) seller of Client's Product and (ii) have an approved line
of credit for the purchase of new Product, which line has been utilized for such
Purchases.
(d) "Eligible Products" shall mean (i) new Product purchased by a
Dealer from Client for resale to retail customers and for which Client receives
payment from NationsCredit, (ii) new Product purchased by a Dealer from Client
for rental to customers and for which Client receives payment from
NationsCredit, or (iii) used Product acquired by a Dealer as trades on the
purchase of new Product which are to be held in Dealer's inventory for future
resale and not for rental or lease.
(e) "Finance Transactions" shall mean the obligations of Dealers to
repay NationsCredit (i) for advances of money made by NationsCredit to Client on
behalf of Dealers for the financing of sales of Eligible Products by Client to
its Dealers, and (ii) advances of money made by NationsCredit to qualified
Dealers for the acquisition of used Eligible Product by a Dealer from a retail
customer which are acquired as trades upon the purchase by the customer of new
Eligible Product. Unless otherwise indicated, the term Finance Transactions
shall include Rental Transactions.
(f) "Loan Agreement" means the Financing and Security Agreement dated
March 26. 1992. between Client and NationsCredit.
(g) "Loss" or "Losses" shall mean any unpaid principal amounts owing to
NationsCredit, plus accrued and unpaid charges, on any Finance Transaction in
default because the Eligible Products are not found in the possession of the
defaulting Dealer or, in the case of Rental Transactions, because the Finance
Transactions are in default in their repayment schedule or are "sold and
unpaid".
(h) "Prime Rate" shall be the Prime Rate as announced by NationsBank of
North Carolina N.A. on the last day of an Accounting Month effective for
outstanding balances in the successive Accounting Month. When a change in the
Prime Rate is announced, a change will take effect as of the first day of the
successive Accounting Month. The new Prime Rate will apply to new advances as
well as to existing balances from the first day of the Accounting Month in which
the new Prime Rate is effective.
(i) "Rental Transactions" shall mean those Finance Transactions where
the Dealer's obligation to repay NationsCredit is for new Eligible Products
intended to be rented to retail customers.
2. COMPENSATION OF NATIONSCREDIT
(a) Finance charges to Client and Dealers, terms of payment by Client
and Dealers and all other terms with respect to all Finance Transactions shall
be as agreed upon from time to time by NationsCredit and Client.
Beginning rates, terms and fees shall be as follows:
(i) NationsCredit will receive Prime Rate minus 2.00% per annum
computed on the average daily outstanding balances due
NationsCredit on Finance Transactions for new Eligible
Product that are not Rental Transactions.
(ii) A monthly service fee, in an amount equal to 3.5% per annum
(calculated on a 30-day period) computed upon the average
daily outstanding balances in any month due NationsCredit
from Dealers under the Finance Program. The average daily
outstanding balances shall be arrived at by computing the
daily outstanding balances adding each day's balance for any
given accounting month and dividing the sum by the number of
days in that accounting month.
(iii) All charges shall be billed monthly to the Client and/or
Dealers and payable upon receipt on the basis of a 360 day
year for the actual number of days elapsed. Monthly charges
shall be calculated by multiplying the corresponding daily
rate by the number of days in the Accounting Month,
multiplying the resulting product by the average daily
balance of all Finance Transactions. The average daily
balance shall be computed by adding the ending balance for
each day in the Accounting Month and dividing the sum by the
number of days in that Accounting Month.
(iv) Notwithstanding changes in the Prime Rate which may
fluctuate from time to time, the minimum Prime Rate to be
used in calculating charges shall be 6.5% per annum.
(c) Client will pay to NationsCredit a fee of Forty-five Dollars
($45.00) for each Dealer visited by a NationsCredit representative for the
purpose of obtaining signed documents pursuant to 3(b) of this Agreement. This
fee may be increased from time to time at the sole discretion of NationsCredit.
3. NATIONSCREDIT'S OBLIGATIONS
(a) NationsCredit agrees to finance the purchase of Eligible Products
by Dealers .
(b) NationsCredit will supply to Client a security agreement in
substantially the form attached hereto as Exhibit A and all other forms required
to be signed by Dealers prior to NationsCredit's entering into any Finance
Transactions. If used Eligible Product is to be financed for the Dealer, the
security agreement will be in substantially the form of Exhibit B attached
hereto. Upon the agreement of the parties, NationsCredit will attempt to obtain
from Dealers a signed security agreement and all other forms required to be
signed by Dealers in consideration of the payment of the fees set forth in
paragraph 2(c).
(c) NationsCredit agrees to review the recommendation of Client for
approval of any dealer proposed by Client for financing by NationsCredit of
Eligible Products. NationsCredit shall have the ultimate right to approve or
disapprove any such recommendations, to determine and establish credit lines and
limits for any proposed dealer and to terminate or reduce any previously
approved credit line for any Dealer without in any way diminishing the liability
of Client for Losses or to repurchase Eligible Products.
(d) NationsCredit will promptly advance funds by wire transfer to
Client on behalf of any Dealer in an amount equal to the net invoice price of
each unit of new Eligible Product(s) shown on copies of invoices submitted to
it; provided, however, that NationsCredit may deduct from the proceeds of those
advances any amounts owing to it by Client pursuant to this Agreement, the Loan
Agreement between NationsCredit and Client, or any other agreement between the
parties.
NationsCredit will advance funds to Dealers and/or to any lien
holders on the Dealers behalf for the purchase of used Eligible Product upon
receipt from the Dealer of a request for an advance in writing with such
information and representations as shall be required by NationsCredit.
(e) NationsCredit will provide the following administrative, accounting
and information services for Client in connection with all Finance Transactions.
(i) Accounting
Establish accounting records for each Dealer to record all
sales made by Client to that Dealer pursuant to the Finance
Program, payments made by Dealer on its purchases under the
Finance Program, and other appropriate debits and credits;
and, generally, keeping those data records necessary to
service the Finance Program.
(ii) Billing
Mail or deliver to each Dealer a statement reflecting debits
and credits on the Dealer's account promptly following the
first business day of each Accounting Month, and such other
statements as required from time to time to reflect any
payment then due or to become due on that account.
(iii) Reports
Produce reports for each Dealer as it generates in the
normal course of conducting its business for service only
clients and which are being produced currently by
NationsCredit's data processing system ("NationsCredit's
System").
(iv) Provide access to its host computer so that Client can have
access to all of the information regarding all Dealer
accounts at the same time such information is available to
NationsCredit provided Client bears all out-of-pocket costs.
(f) NationsCredit will use reasonable efforts to collect outstanding
Finance Transactions. Those efforts shall consist of sending notices and making
demands for payment upon Dealers as NationsCredit shall determine to be
necessary in its discretion. NationsCredit shall not be required, prior to
making demand upon Client for payment of Losses, nor as a condition to Client's
liability, to commence litigation for the collection of any Finance Transactions
outstanding with any Dealer in default or to enforce or attempt to enforce any
rights it may have as a secured creditor holding a security interest in Eligible
Products, its proceeds or any other collateral.
(g) NationsCredit shall not be required to repossess or attempt to
repossess any Eligible Products, proceeds or other collateral constituting
security for Finance Transactions, but NationsCredit will, at the request of
Client, proceed with the Client to repossess or attempt to repossess by
providing personnel or other facilities whenever it is in a position to do so.
(h) NationsCredit will commence in its name proceedings to obtain
possession of Eligible Products by replevin or similar litigation upon the
request of Client whenever a repossession of Eligible Products is not possible
to be made peaceably.
(i) NationsCredit will take all steps necessary in order to perfect its
security interest in new Eligible Products, including searching to ascertain
whether any Dealer had previously granted a security interest in the Eligible
Products to third persons, notifying the holders of any such security interests
of NationsCredit's intention to take a purchase money security interest in
Eligible Products, filing of financing statements covering the Eligible Products
where required and notifying the Client that it may then ship new Eligible
Product to its Dealer. In the State of Louisiana, NationsCredit will take all
steps necessary to obtain a security interest in or lien upon new Eligible
Products provided, however, NationsCredit will not obtain a first purchase more
security interest requiring notification to prior filed parties or
subordinations by prior filed collateral chattel mortgagees unless it may agree
to do so, in writing, separate and apart from this Agreement. NationsCredit
makes no warranties or representations that it will prevail in the enforcement
of a security interest in Eligible Products which are the subject of the Rental
Transactions or used Eligible Product which is the subject of a Finance
Transaction. For the purposes of this subsection, NationsCredit shall be
entitled to rely on the accuracy and completeness of all information concerning
any Dealer submitted by Client to NationsCredit.
Prior to advancing on used Eligible Product, NationsCredit will obtain
termination or subordination of any prior filed financing statements with a
collateral description which would include used Eligible Product. NationsCredit
will attempt to obtain the certificate of title for each unit of used Eligible
Product which may show as owner either the Dealer's customers from whom the unit
was purchased as a trade, or the Dealer, with all liens released. NationsCredit
will not be required to determine whether the Dealer has complied with any state
certificate of title laws necessary to have a valid title issued.
(j) NationsCredit will make or cause to be made a physical inspection
of Eligible Products constituting inventory of each Dealer with whom it shall
have outstanding Finance Transactions including but not limited to, Eligible
Product which is the subject of a Rental Transaction and which is on Dealer's
premises. Inspections shall be once each thirty (30) days plus a grace period of
fifteen (15) days, but in any event not less than ten (10) times per year.
NationsCredit's duties shall consist of verifying the physical presence at the
location of Dealer of all items of Eligible Products included in any outstanding
Finance Transactions, and if any items are not present, demanding payment for
them from the Dealer. NationsCredit may, but shall not be required, to inspect
the Dealer's business records or to otherwise determine or verify the status of
any item of Eligible Product if it is present on the Dealer's premises.
NationsCredit will not perform the inventory inspection services for Dealers
located in Alaska and Hawaii; however, NationsCredit will arrange for inspection
by a third party contractor with all costs of such inspection services
reimbursed by Client. Client agrees to waive any claim against NationsCredit
arising out of the inspection services performed by the third party contractor.
In the case of new Eligible Product that was acquired by Client's Dealer for
rental or was converted into a Rental Transaction, and such item is not present
on the Dealer's premises at the time of an inventory inspection, NationsCredit
may, but shall not be required to, obtain a copy of the rental agreement entered
into between the Dealer and its customer for that Product. NationsCredit shall
have no obligation whatsoever to determine the genuineness or validity of any
rental agreement.
(k) NationsCredit will monitor the insurance coverage to assure that
personal property insurance is being maintained on the Eligible Product by
Dealers and that no lapses occur; if lapses occur, NationsCredit may, but shall
not be required, to obtain insurance coverage for such premiums to the Dealer as
may be required. In the event that these premiums are not paid by the Dealer,
NationsCredit will notify Client of the Dealer's default. Client agrees that any
accrued and unpaid premiums shall be the responsibility of Client pursuant to
Section 5.
(I) NationsCredit agrees to finance Rental Transactions as follows:
(i) The invoices submitted for new Eligible Product intended to
be rented to a retail customer must be noted as "rental" and
the Rental Transaction is to be repayable in twelve (12)
substantially equal and consecutive monthly installments of
principal plus interest, after which period any remaining
principal balance and accrued and unpaid charges shall be
immediately due and payable in full.
(ii) A Rental Transaction will mature and any remaining principal
balance, accrued interest, and charges will be immediately
due and payable in full upon (1) the sale of the Eligible
Product which is the subject of the Rental Transaction; or
(2) upon NationsCredit's physical verification that the
mileage of the Eligible Product has reached 25,000 miles, or
(iii)At the election of the Dealer and with the prior approval of
NationsCredit, a Finance Transaction for new Eligible
Product may be converted into a Rental Transaction upon (1)
written notification by Dealer to NationsCredit of Dealer's
intent to convert new Eligible Product to a Rental
Transaction; and (2) delivery of the Certificate of Title
showing NationsCredit as the first lienholder on the
Eligible Product; and (3) delivery of evidence of liability
insurance with respect to rental of the Eligible Product to
a customer. NationsCredit will not be required to determine
whether the Dealer has complied with any state certificate
of title laws necessary to have a valid title issued or
state insurance laws necessary to have required insurance
coverage. Upon rental the Dealer shall pay for the same in
accordance with the terms of Rental Transactions which are
contained herein. Once converted, the Rental Transaction may
not revert to a Finance Transaction which is not a Rental
Transaction. To evidence the conversion of a Finance
Transaction to a Rental Transaction, NationsCredit and
Client shall require the Dealer promptly to send any rental
agreements entered into by them with customers to the
NationsCredit service location as designated by
NationsCredit. In the event any Dealer fails to do so, and
it is discovered by NationsCredit at the time of its next
physical inspection of that Dealer's inventory that any unit
of Eligible Product is missing and has not been paid for,
and for which NationsCredit has not theretofore received a
rental agreement covering the same, payment therefor shall
be due in full. The only form of rental agreement which
shall be considered acceptable by NationsCredit for the
purpose of this paragraph shall be agreed upon in writing by
Client and NationsCredit and shall be the only form so
considered acceptable.
4. OBLIGATIONS OF CLIENT
(a) Client shall submit its recommendation to NationsCredit for credit
lines to be approved or disapproved by NationsCredit for proposed Dealers whom
Client wishes NationsCredit to finance. As part of those recommendations, Client
will submit credit information and history, financial statements, and any other
information NationsCredit shall require for its review.
(b) With respect to any shipment of new Eligible Products to any Dealer
that Client wishes to become the subject of a Finance Transaction, Client shall
send a copy of the invoice(s) representing such shipment(s) to NationsCredit,
which invoice(s) shall contain the model, serial number and total purchase price
to the Dealer for each unit of new Eligible Products. In addition to the
foregoing information, if new Eligible Products are to become the subject of a
Rental Transaction, the invoice copy sent to NationsCredit shall be noted
"Rental" and shall include a statement of the terms of payment due by Dealers.
If used Eligible Product is to be the subject of a Finance Transaction, Client
agrees that the terms of the financing including the advance amount and the
rates of charges, shall be determined by NationsCredit in its sole discretion.
(c) Client shall submit to NationsCredit a Security Agreement properly
signed by the Dealer in the form attached hereto as Exhibit "A" or "B" and such
other documents as NationsCredit may require unless NationsCredit agrees to
obtain such pursuant to paragraph 3(b).
(d) It shall be Client's obligation to repossess any Eligible Products
found in the possession of a defaulting Dealer and be responsible for its resale
or disposition, until its repurchase from NationsCredit as provided in Section
5. Client agrees that it acts as NationsCredit's agent or as its bailee in
arranging for repossession, storage, repair, shipment, or acting in any way with
respect to the Eligible Product.
(e) As to any items of Eligible Product which NationsCredit repossesses or
otherwise for any reason acts to protect a security interest in Eligible Product
against third parties, Client will pay to NationsCredit any out-of-pocket
expenses NationsCredit incurs in repossessing or protecting such claim,
including but not limited to handling, moving and storage expenses, reasonable
attorney's fees and court costs.
(f) Client agrees to pay all NationsCredit's filing and recording fees,
attorney's fees and costs which relate to the perfection of a first purchase
money security interest in Louisiana on Eligible Product; and all taxes or
stamps for recording purposes wherever required.
(g) Client will communicate to Dealers all rates and terms that have been
agreed upon from time to time between NationsCredit and Client and shall be
responsible to obtain from Dealers their agreement to pay the same.
(h) Client agrees that as long as there are any Finance Transactions
outstanding, it will furnish NationsCredit:
(i) Annual Report. Within one hundred twenty (120) days after the
close of each fiscal year end of the Client, a copy of an annual audit
report of the Client, prepared on a consolidated basis and in conformity
with generally accepted accounting principles applied on a consistent
basis, and duly certified by independent certified public accountants of
recognized standing.
(ii) Interim Reports. Within forty-five (45) days after each quarter,
except the last quarter of each fiscal year of the Client, a copy of an
unaudited financial statement of the Client, prepared in the same manner as
the audit report referred to above and consisting of at least a balance
sheet as of the close of that quarter and statements of earnings and their
source and the application of funds for that quarter and for the period
from the beginning of that fiscal year to the close of that quarter.
(i) Client agrees to change the name of its subsidiary "Winnebago
Acceptance Corporation" so that the name becomes available for use by
NationsCredit where required. Client authorizes NationsCredit to use the name
"Winnebago" for purposes of executing its obligations under this Agreement, and
authorizes its continued use by NationsCredit until all transactions and
obligations under the Agreement are satisfied by Client.
5. LIABILITY OF CLIENT
(a) Following the default of any Dealer in the payment of any Finance
Transaction, Client will repurchase from NationsCredit any Eligible Products
found in the possession of the defaulting Dealer for an amount equal to the
unpaid principal balance, plus all accrued and unpaid charges and insurance
premiums owing on the related Finance Transactions. There shall be no limit to
this repurchase obligation.
(b) All Finance Transactions entered into by NationsCredit shall be with
full recourse to Client so that following the default of any Dealer in payment
of any amounts required to be paid by the Dealer, and following reasonable
efforts by NationsCredit to collect same without having to resort to litigation,
Client shall pay to NationsCredit on demand all Losses of NationsCredit.
(c) In the event that NationsCredit files an action against a Dealer or any
other party (other than the Client) which may be directly or contingently liable
for payment of the Finance Transaction, Client will pay all of NationsCredit's
out-of-pocket expenses, fees and costs incurred. If NationsCredit is made a
party to any action brought by a third party against the Client, Client will
defend NationsCredit and hold it harmless from any judgment, claim or expense
which it might suffer as a result of the action (unless such judgment, claim or
expense is determined to be due to NationsCredit's failure to perform its duties
and responsibilities under this Agreement). Client also agrees to pay any
attorney's fees and court costs incurred by NationsCredit in enforcing Client's
obligations under this Agreement.
6. NATURE AND SCOPE OF CLIENT'S LIABILITY FOR LOSSES
(a) This Section 6 and Section 5 shall establish, determine and control
Client's liability for Losses in respect to all Finance Transactions.
Client's liability for Losses and its obligation to repurchase Eligible
Products shall not be avoided or limited for any reason, including,
without limitation, usury, or any other defenses to payment claimed or
alleged by any defaulting Dealer.
(b) Client waives presentment for payment, acceptance, protest and notice
of protest and all other notices to which it might be entitled by law,
except as provided in this Agreement. NationsCredit may compromise or
adjust the amounts due upon any Finance Transactions and upon the
Eligible Products to which they relate only with the written approval
of Client if Client is not then in breach of its obligations hereunder
or under the Loan Agreement. In the event Client is in breach of its
obligations hereunder or under the Loan Agreement, NationsCredit may so
compromise or adjust without affecting Client's liability for Losses or
to repurchase Eligible Products which shall continue unaffected
thereby.
7. RESERVE ACCOUNT
An account shall be established by NationsCredit (the "Reserve
Account") and credits and charges shall be made in accordance with the
following:
(a) NationsCredit will credit the Reserve Account in an amount equal to all
charges collected from Dealers in excess of the charges due NationsCredit set
forth in Section 2.
(b) Any amounts required to be paid by Client may be charged by
NationsCredit against any balance in the Reserve Account. However, the Reserve
Account shall in no manner affect the liability of Client to pay Losses of
NationsCredit, nor shall NationsCredit debit the account for Losses as may be
owing by Client so long as Client is not in default with respect to its
obligation to pay NationsCredit's Losses or to perform its obligations under
this Finance Agreement or is not in default under the Loan Agreement.
(c) NationsCredit shall provide Client with a monthly report of any credits
or charges to the Reserve Account.
8. SUBROGATION
In the event Client is required to pay NationsCredit any amount by reason
of any default by a Dealer in meeting obligations to NationsCredit and upon
Client's payment in full of all of such obligations, Client shall be subrogated
to all rights which NationsCredit may have against such Dealer under any Finance
Transaction covering such obligations and NationsCredit shall execute without
recourse, any assignment or other documents as may be reasonably required by
Client.
9. ASSIGNMENT
This Agreement shall not be assigned by either party without written
consent of the other provided, however, that NationsCredit may assign this
Agreement in whole or in part to the corporation created pursuant to 3(j) or to
any affiliated company or wholly owned subsidiary of NationsCredit without the
written consent of the Client.
10. TERM AND TERMINATION
The term of this Agreement shall be three (3) years from March 26, 1992 to
March 25, 1995, and shall thereafter continue from year to year, provided,
however, that either party may terminate this agreement at any time after the
initial three (3) year term by giving the other party one hundred eighty (180)
days written notice of such termination. Termination of this Agreement shall not
affect obligations existing between the parties at the time of termination.
11. AUTOMATIC TERMINATION AND BUYOUT
This Agreement will terminate immediately and without notice upon the
occurrence of any of the following:
(a) Client defaults in the prompt payment of any amounts when due under
this Agreement or any other agreement between the parties;
(b) Client defaults or there occurs an event which with the passage of time
will constitute a default under the Loan Agreement between NationsCredit and
Client.
(c) Client sustains a substantial adverse change in its financial condition
as determined by NationsCredit in its sole discretion, or sells, leases,
transfers or otherwise disposes of substantially all of its assets, or
consolidates with or merges with any other entity, or permits any other entity
to consolidate or merge into Client;
(d) Client or NationsCredit commences a case or an order of relief is
entered under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy, insolvency, or
other similar law; or the consent by either of them to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Client or NationsCredit or of any
substantial part of their property, or the making by either of them of any
assignment for the benefit of creditors, or the failure of Client or
NationsCredit generally to pay their debts as such debts become due, or the
taking of corporate action by Client or NationsCredit in furtherance of any of
the foregoing.
Upon termination due to the occurrence of events set forth above,
Client shall purchase from NationsCredit all Finance Transactions for the
present balance outstanding plus accrued charges and insurance fees, all as
reflected on the Statements of Account of NationsCredit. NationsCredit shall
execute such bills of sale and assignment as shall be necessary to complete such
sale.
12. REMEDIES AND WAIVERS
Both NationsCredit and Client shall have the right to enforce any remedies
available to it under this Agreement partially, successively or concurrently and
any such action shall not prevent NationsCredit from pursuing any further remedy
it may have hereunder or by law. No delay or failure on the part of
NationsCredit to exercise any right or remedy hereunder upon any default or
breach by Client of any provision hereof shall be considered to be an
abandonment thereof so long as Client's default or breach continues, nor shall
any waiver of a single default or breach be deemed a waiver of any subsequent
default or breach.
13. NOTICES
Any notice of demand required to be given or made in writing pursuant to
this Agreement shall be given by certified mail, postage prepaid, addressed to
the parties at their respective addresses shown on page 1 of this Agreement.
14. ENTIRE AGREEMENT
This Agreement is being entered into by the parties at the same time as a
Loan Agreement is being entered into by the parties which will relate to some
terms and conditions of the relationship between Client and NationsCredit.
However, this Agreement and all Addendums attached hereto constitute the entire
agreement between the parties with respect to the financing of Client's Dealers
and supersedes all prior agreements whether written or oral with respect thereto
and shall not be modified orally. This Agreement shall in all respects be
governed by the laws of the Commonwealth of Pennsylvania.
15. JURISDICTION
The parties agree that the courts of the Commonwealth of Pennsylvania,
including the U. S. District Court for the Eastern District of Pennsylvania,
shall have jurisdiction to hear and determine any claim, dispute or demand
pertaining to this Agreement and they expressly submit and consent to such
jurisdiction.
16. WAIVER OF JURY TRIALS
Trial by jury in any suit, action or proceeding arising on, out of, under,
or by reason of or relating in any way to this Agreement or any transaction
under it, or concerning the validity, interpretation, or enforcement of this
Agreement between the parties, is hereby waived by each of them.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year at the beginning and this Agreement shall be effective as of that
date.
NATIONSCREDIT COMMERCIAL WINNEBAGO INDUSTRIES, INC.
CORPORATION
By By
Print Name C. Thomas Anderson Print Name Fred G. Dohrmann
Title Senior Vice President Title President and Chief Executive
Officer
WINNEBAGO ACCEPTANCE CORPORATION
By
Print Name C. Thomas Anderson
Title Senior Vice President
CERTIFICATE
I, Raymond M. Beebe, Secretary of Winnebago Industries, Inc., an lowa
corporation, DO HEREBY CERTIFY that the following resolutions were duly adopted
at a meeting of the Board of Directors of the Corporation on the 20th day of
October , 1994, and that said resolutions have not been amended or rescinded and
are in full force and effect:
RESOLVED, that Fred G. Dohrmann*, who is President & CEO of this
corporation, is hereby authorized, directed and instructed for and on
behalf of this corporation to deliver to NationsCredit Commercial
Corporation the foregoing agreement under the terms of which certain
commitments are being made by the corporation for, inter alia, the
repurchase of certain merchandise and the payment of losses of
NationsCredit Commercial Corporation.
FURTHER RESOLVED, that the President, or any Vice President, or the
Treasurer of this corporation are authorized to execute any and all other
instruments and documents necessary to desirable to consummate this
transaction and to fulfill its intended purposes. All instruments and
documents shall contain such terms, conditions, warranties and waivers as
said officers in their discretion deem necessary or desirable in the
interest of this corporation; and the execution of any instrument or
document by said officers shall be conclusive proof of the approval of all
of the terms and conditions thereof for and on behalf of the corporation.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of
Winnebago !Industries, Inc., this 27th day of October, 1994.
(Seal)
Secretary
* Fill in name of individual who will sign agreement and his title. (Must be
President, Vice President or Treasurer of corporation.)
Secretary of corporation must fill in his/her name in first line, fill in dates
(must be dated before agreement is dated), sign this certificate and affix the
corporate seal.
October 20, 1994
RV OFFICER INCENTIVE COMPENSATION PLAN
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
PURPOSE
The purpose of this plan is to provide greater incentive to employees in officer
positions, who contribute to the success of the Company, by enabling them to
participate in that success, and to aid in attracting and retaining employees
who will contribute to the progress and profitability of the Company.
It is the purpose of this plan to attract, obtain, develop, motivate, and retain
capable officer personnel, stimulate constructive and imaginative thinking, and
otherwise contribute to the growth and profits of the corporation.
ADMINISTRATION
The plan prior to each new fiscal year must meet the approval of the Human
Resource Committee of the Board of Directors. The Human Resource Committee may
establish such rules and regulations as it deems necessary for proper
administration of this plan and may amend or revoke any rule or regulation so
established.
PARTICIPANTS
Recommendation of a participant must be made by the President of Winnebago
Industries, Inc.
MINIMUM QUALIFICATIONS REQUIRED OF PARTICIPANTS:
1. Participant must be an officer with specific responsibilities which can
impact the corporation
2. Participants must be employed for the entire fiscal year to be eligible for
the bonus and in addition, participant must be employed at the time the
bonus is paid except as waived by the Human Resource Committee.
NATURE OF THE PLAN
The incentive award is based on the performance of the CORPORATION.
This is a bonus based upon the Company's attainment of a predetermined profit
goal for the fiscal quarter. The profit goal is to be recommended by the Human
Resource Committee and approved by the Board of Directors each quarter at the
beginning of the fiscal quarter.
The profit goal, for purposes of this plan, will be the "Incentive Compensation
Profit" which shall mean the combined gross income from the operation of the
Company less the combined expenses, deductions and credits of the Company
attributable to such operations. In computing the incentive compensation profit,
no deduction shall be taken or allowance made for federal or state income taxes,
or any expenses associated with retirement plans or incentive compensation
plans. Incentive awards are determined in proportion to the actual operating
profit generated for the quarter in relation to the profit goal that was set. If
the operating profit achieved is less than 80 percent of goal set, no bonus is
paid and the maximum bonus paid at 120 percent of the profit goal.
METHOD OF PAYMENT
The quarterly amount of a participant's incentive compensation for the quarter
shall be the percentage of the total amount of base salary received by the
individual the fiscal quarter when he was a participant in the plan. 60% of the
quarterly amount of the earned bonus will be paid within 45 days after the close
of the fiscal quarter and the remainder of the bonus due will be paid after the
books have been audited at the end of the fiscal year providing the Company has
made its objective in each quarter. Bonuses will be paid as follows:
Number of Quarters Amount of the Bonus
Objective was made Holdback to be Paid
1 25%
2 50%
3 75%
4 100%
A participant who leaves the Company for any reason will forfeit all rights to
incentive payments that particular fiscal quarter and fiscal year.
October 20, 1994
RV EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION PLAN
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
PURPOSE
The purpose of this plan is to provide greater incentive to employees in
managerial positions, who contribute to the success of the Company, by enabling
them to participate in that success, and to aid in attracting and retaining
employees who will contribute to the progress and profitability of the Company.
It is the purpose of this plan to attract, obtain, develop, motivate, and retain
capable managerial personnel, stimulate constructive and imaginative thinking,
and otherwise contribute to the growth and profits of the corporation.
ADMINISTRATION
The plan prior to each new fiscal year must meet the approval of the Human
Resource Committee of the Board of Directors. The Human Resource Committee may
establish such rules and regulations as it deems necessary for proper
administration of this plan and may amend or revoke any rule or regulation so
established.
PARTICIPANTS
Recommendation of a participant must be made by the Vice President that has the
responsibility for the specific unit or group which the proposed participant is
a member. The Vice President must justify direct dependence of recommended
employee's influence, performance and achievements, which could determine the
success of that unit or group and employee must be considered a direct link to
the success and profitability of the corporation.
MINIMUM QUALIFICATIONS REQUIRED OF PARTICIPANTS:
1. Participant must be in Labor Grade Number 70 or above.
2. Participant must be in the capacity of a staff supervisor or manager of a
specific unit or group with specific responsibilities which can impact the
corporation.
3. Participants must be employed for the entire fiscal year to be eligible for
the bonus and in addition, participant must be employed at the time the
bonus is paid except as waived by the Human Resource Committee.
Appointment of participants to the "Executive Management Incentive Compensation
Plan" will be recommended by the President to the Human Resource Committee for
approval based on meeting the aforementioned qualifications and upon
recommendation of the respective Vice President.
NATURE OF THE PLAN
The incentive award is based on the performance of the CORPORATION.
This is a bonus based upon the Company's attainment of a predetermined profit
goal for the fiscal quarter. The profit goal is to be recommended by the Human
Resource Committee and approved by the Board of Directors each quarter at the
beginning of the fiscal quarter.
The profit goal, for purposes of this plan, will be the "Incentive Compensation
Profit" which shall mean the combined gross income from the operation of the
Company less the combined expenses, deductions and credits of the Company
attributable to such operations. In computing the incentive compensation profit,
no deduction shall be taken or allowance made for federal or state income taxes,
or any expenses associated with retirement plans or incentive compensation
plans. Incentive awards are determined in proportion to the actual operating
profit generated for the quarter in relation to the profit goal that was set. If
the operating profit achieved is less than 80 percent of goal set, no bonus is
paid and the maximum bonus paid at 120 percent of the profit goal.
METHOD OF PAYMENT
The quarterly amount of a participant's incentive compensation for the quarter
shall be the percentage of the total amount of base salary received by the
individual the fiscal quarter when he was a participant in the plan. 60% of the
quarterly amount of the earned bonus will be paid within 45 days after the close
of the fiscal quarter and the remainder of the bonus due will be paid after the
books have been audited at the end of the fiscal year providing the Company has
made its objective in each quarter. Bonuses will be paid as follows:
Number of Quarters Amount of the Bonus
Objective was made Holdback to be Paid
1 25%
2 50%
3 75%
4 100%
A participant who leaves the Company for any reason will forfeit all rights to
incentive payments that particular fiscal quarter and fiscal year.
October 20, 1994
RV MANAGEMENT INCENTIVE COMPENSATION PLAN
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
PURPOSE
The purpose of this plan is to provide greater incentive to employees in
managerial positions, who contribute to the success of the Company, by enabling
them to participate in that success, and to aid in attracting and retaining
employees who will contribute to the progress and profitability of the Company.
It is the purpose of this plan to attract, obtain, develop, motivate, and retain
capable managerial personnel, stimulate constructive and imaginative thinking,
and otherwise contribute to the growth and profits of the corporation
ADMINISTRATION
The plan prior to each new fiscal year must meet the approval of the Human
Resource Committee of the Board of Directors. The Human Resource Committee may
establish such rules and regulations as it deems necessary for proper
administration of this plan and may amend or revoke any rule or regulation so
established.
PARTICIPANTS
Recommendation of a participant must be made by the Vice President member that
has the responsibility for the specific unit or group which the proposed
participant is a member. The Vice President must justify direct dependence of
recommended employee's influence, performance and achievements, which could
determine the success of that unit or group and employee must be considered a
direct link to the success and profitability of the corporation.
MINIMUM QUALIFICATIONS REQUIRED OF PARTICIPANTS:
1. Participant must be in the capacity of a manager of a specific unit or
group with budget responsibilities and specific responsibilities which
significantly can impact the corporation.
2. Participants must be employed for the entire fiscal year to be eligible
for the bonus and in addition, participant must be employed at the time
the bonus is paid except as waived by the Human Resource Committee.
Appointment of participants to the "Management Incentive Compensation Plan" will
be recommended by the President to the Human Resource Committee for approval
based on meeting the aforementioned qualifications and upon recommendation of
the respective Vice President.
NATURE OF THE PLAN
The incentive award is based on the performance of the CORPORATION.
This is a bonus based upon the Company's attainment of a predetermined profit
goal for the fiscal quarter. The profit goal is to be recommended by the Human
Resource Committee and approved by the Board of Directors each quarter at the
beginning of the fiscal quarter.
The profit goal, for purposes of this plan, will be the "Incentive Compensation
Profit" which shall mean the combined gross income from the operation of the
Company less the combined expenses, deductions and credits of the Company
attributable to such operations. In computing the incentive compensation profit,
no deduction shall be taken or allowance made for federal or state income taxes,
or any expenses associated with retirement plans or incentive compensation
plans.
METHOD OF PAYMENT
The quarterly amount of a participant's incentive compensation for the quarter
shall be the percentage of the total amount of base salary received by the
individual the fiscal quarter when he was a participant in the plan. 60% of the
quarterly amount of the earned bonus will be paid within 45 days after the close
of the fiscal quarter and the remainder of the bonus due will be paid after the
books have been audited at the end of the fiscal year providing the Company has
made its objective in each quarter. Bonuses will be paid as follows:
Number of Quarters Amount of the Bonus
Objective was made Holdback to be Paid
1 25%
2 50%
3 75%
4 100%
A participant who leaves the Company for any reason will forfeit all rights to
incentive payments that particular fiscal quarter and fiscal year.
Incentive awards are determined in proportion to the actual operating profit
generated for the quarter in relation to the profit goal that was set. If the
operating profit achieved is less than 80 percent of goal set, no bonus is paid
and the maximum bonus paid at 120 percent of the profit goal.
October 20, 1994
RV INCENTIVE COMPENSATION PLAN
QUARTERLY BONUS FORMULA
1995 FISCAL
Percent of Bonus % Percent of Bonus %
Operating Profit Officer & Exc. Management Operating Profit Officer & Exc. Management
80.0 7.50 5.0 100.0 30.00 20.0
80.7 8.25 5.5 100.7 30.75 20.5
81.3 9.00 6.0 101.3 31.50 21.0
82.0 9.75 6.5 102.0 32.25 21.5
82.7 10.50 7.0 102.7 33.00 22.0
83.3 11.25 7.5 103.3 33.75 22.5
84.0 12.00 8.0 104.0 34.50 23.0
84.7 12.75 8.5 104.7 35.25 23.5
85.3 13.50 9.0 105.3 36.00 24.0
86.0 14.25 9.5 106.0 36.75 24.5
86.7 15.00 10.0 106.7 37.50 25.0
87.3 15.75 10.5 107.3 38.25 25.5
88.0 16.50 11.0 108.0 39.00 26.0
88.7 17.25 11.5 108.7 39.75 26.0
89.3 18.00 12.0 109.3 40.50 27.0
90.0 18.75 12.5 110.0 41.25 27.5
90.7 19.50 13.0 110.7 42.00 28.0
91.3 20.25 13.5 111.3 42.75 28.5
92.0 21.00 14.0 112.0 43.50 29.0
92.7 21.75 14.5 112.7 44.25 29.5
93.3 22.50 15.0 113.3 45.00 30.0
94.0 23.25 15.5 114.0 45.75 30.5
94.7 24.00 16.0 114.7 46.50 31.0
95.3 24.75 16.5 115.3 47.25 31.5
96.0 25.50 17.0 116.0 48.00 32.0
96.7 26.25 17.5 116.7 48.75 32.5
97.3 27.00 18.0 117.3 49.50 33.0
98.0 27.75 18.5 118.0 50.25 33.5
98.7 28.50 19.0 118.7 51.00 34.0
99.3 29.25 19.5 119.3 51.75 34.5
120.0 52.50 35.0
WINNEBAGO INDUSTRIES, INC.
1994 ANNUAL REPORT
CORPORATE PROFILE
Winnebago Industries, Inc., headquartered in Forest City, Iowa, is a leading
United States manufacturer of motor homes, self-contained recreation vehicles
used primarily in leisure travel and outdoor recreation activities. Motor home
and van conversion sales represent more than 80 percent of the Company revenues.
These vehicles are sold through dealer organizations primarily under the
Winnebago(R), Itasca(R), Elante'(R), Vectra(R), Rialta(TM) and Luxor(TM) brand
names. The Company markets its recreation vehicles on a wholesale basis to a
broadly diversified organization of approximately 325 dealers located throughout
the United States, and to a limited extent, in Canada and other foreign
countries.
Winnebago Industries also owns an 80 percent interest in Cycle-Sat, Inc., a
telecommunications service firm that is a leading distributor of television and
radio commercials using satellite, fiber optic and digital technologies. In
addition to Cycle-Sat, service revenue includes floor plan financing of dealer
inventories of the Company's products provided by the Company's subsidiary,
Winnebago Acceptance Corporation. In fiscal years prior to 1994, service
revenues also included revenues from the Company's subsidiary, North Iowa
Electronics, Inc., which was sold during fiscal 1993.
MOTOR HOME PRODUCT CLASSIFICATION
The principal kinds of recreation vehicles manufactured by the Company in fiscal
1994 include:
CLASS A MOTOR HOMES
These are conventional motor homes constructed directly on medium-duty truck
chassis which include the engine and drivetrain components. The living area and
driver's compartment are designed and produced by Winnebago Industries, Inc.
Class A Motor Homes from Winnebago Industries include: Winnebago Brave(R),
Warrior(R), Chieftain(R) and Adventurer(R); Itasca Sunrise(R), Suncruiser(R) and
Passage(R); Elante'(R); Vectra(R); and Luxor(TM).
CLASS B VAN CAMPERS
A panel-type truck to which Winnebago Industries adds any two of the following
conveniences: sleeping, kitchen and toilet facilities, also 110-volt electrical
hook-up, fresh water storage, city water hook-up and a top extension to provide
more head room. The Class B Van Camper from Winnebago Industries is the EuroVan
Camper manufactured for Volkswagen of America.
CLASS C MOTOR HOMES (MINI)
These are mini motor homes built on van-type chassis onto which Winnebago
Industries constructs a living area with access to the driver's compartment.
Class C Motor Homes from Winnebago Industries include: Winnebago Minnie 300(TM)
and Minnie Winnie(R); Itasca Spirit(R) and Sundancer(R); and the new Rialta(TM).
VAN CONVERSIONS
The Company converted conventional vans manufactured by all major U.S. suppliers
by adding custom interiors, custom exterior decor and, in some versions,
additional windows and vents.
ABOUT THE COVER
Depicted on the cover is the exterior graphics design from the 1994 Winnebago
Adventurer motor home. Much time, energy and thought goes into each and every
design, so we thought it would be of interest to readers to view this unique
artwork.
FINANCIAL HIGHLIGHTS
Fiscal year ended Percent
(dollars in thousands, except per share data) August 27, 1994 August 28, 1993 Change
STATEMENT OF OPERATIONS
Manufactured products revenues $432,406 $364,860 18.5%
Service revenues 19,710 19,223 2.5
Income before cumulative effect of accounting change 17,445 9,278 88.0
Cumulative effect of accounting change (20,420) -- --
Net income (loss)(2,975) 9,278 Income (loss) per common share:
Income before cumulative effect of accounting change .69 .37 86.5
Net income (loss) (.12) .37
Weighted average number of shares and
equivalents outstanding 25,187,000 25,042,000
Balance Sheet
Working capital $ 58,523 $ 44,669 31.0
Current ratio 2.1 to 1 1.9 to 1
Total assets $183,959 $157,050 17.1
Long-term debt $ 4,140 $ 3,183 30.1
Stockholders' equity $ 79,710 $ 81,693 (2.4)
Other Statistics
Motor home unit sales
Class A 6,820 6,095 11.9
Class B 376 -- --
Class C 1,862 1,998 (6.8)
Total 9,058 8,093 11.9
Van conversion sales 1,020 1,103 (7.5)
[GRAPH] TOTAL NET REVENUES (IN MILLIONS) for the years 1992-$295, 1993-$384
and 1994-$452
[GRAPH] INCOME (LOSS) (IN MILLIONS) for the years 1992*-$(1.8), 1993-$9.3 and
1994*-$17.4
[GRAPH] INCOME (LOSS) PER SHARE for the years 1992*-$(.07), 1993-$.37 and
1994*-$69
*Before cumulative effect of accounting changes and discontinued operations.
LETTER TO SHAREHOLDERS
TO OUR SHAREHOLDERS
Fiscal 1994 was a record year for revenues and the third year of improved
operating performance for Winnebago Industries. This achievement reflects our
continuing, relentless commitments to quality, value and broadening the
Winnebago Industries line of motor homes. We have also built a solid foundation
for growth at Cycle-Sat, our telecommunications subsidiary. This rapidly growing
business was profitable in 1994, and we feel it is poised for significant
growth.
FINANCIAL RESULTS
For the year ended August 27, 1994, revenues increased 18 percent to a record
$452.1 million, while income before the cumulative effect of a required
accounting change increased 88 percent to $17.4 million, or 69 cents per share.
This compares to net income of $9.3 million, or 37 cents per share, for fiscal
1993.
In the first quarter of fiscal 1994, the Company adopted the remaining portions
of Financial Accounting Standards Board (FASB) No. 106, which relates to health
care and to other benefits provided to retirees. (Certain provisions of FASB No.
106 were adopted in fiscal 1992.) The cumulative effect of this required change
was a one-time, non-cash earnings reduction of $20.4 million, or 81 cents per
share. In the fourth quarter, the Company recognized a tax credit of $1.3
million, or 5 cents per share, as a result of the Company's improved operating
results which increases the likelihood of the Company realizing its tax assets.
After the recognition of tax credit and the accounting principle change, the
fiscal 1994 net loss was $3.0 million, or 12 cents per share.
[GRAPH] MOTOR HOME REGISTRATIONS TOTAL INDUSTRY (UNITS IN THOUSANDS) for the
fiscal years 1992-39.1, 1993-40.3 and 1994-47.0.
OPERATING REVIEW
Sales of manufactured products, primarily motor homes, increased 19 percent to
$432.4 million. This strong gain was achieved despite a fourth-quarter shortage
of Class C chassis and parts for our new Rialta motor home. According to
Statistical Surveys, Inc., Winnebago Industries achieved a 16.8 percent share of
the motor home market for calendar 1994 through August 31, 1994, giving us a
strong number two market share, more than twice the level of our next closest
competitor. In addition, we are pleased to report that Winnebago motor homes are
the top selling brand in the world.
Winnebago Industries' strong motor home performance reflects a fundamental
commitment to quality and value, and to building strong dealer and consumer
relationships. We involve our employees in continuously seeking ways to reduce
cost without sacrificing quality. In addition, our emphasis on quality helped
significantly reduce warranty expense, as a percent of recreation vehicle
revenues, in each of the last five fiscal years.
In the second half of the year, we introduced three motor home models that
should add incremental volume in 1995. They are the EuroVan Camper, sold through
VW distributors, the upscale Luxor and the all-new fuel efficient
front-wheel-drive Rialta.
We also took important steps to expand our presence in Europe, a larger market
than the United States. In March, we held a grand opening of a new sales,
service and technical facility near Saarbrucken, Germany.
Cycle-Sat achieved a 27 percent increase in sales to $18.9 million, and a $3.0
million improvement in operating profit to $1.1 million. The subsidiary was
profitable in each quarter of fiscal 1994 and particularly benefitted from
strong movie promotion on television during the summer of 1994. Cycle-Sat
completed performance testing of its new Flat Antenna, for which it has
exclusive North American marketing and worldwide manufacturing rights. We have
received our first order for this product for home and business applications.
GROWTH STRATEGIES
Our fundamental growth strategies are clear and straightforward. We will work
to:
* Increase our motor home market share by maintaining an emphasis on quality
and value, and by building strong dealer and consumer relationships.
* Involve our employees in identifying and implementing programs that keep
Winnebago Industries a low-cost motor home producer without sacrificing
quality.
* Develop motor homes that suit a range of lifestyles across a broad spectrum
of price points.
* Increase our presence in promising overseas markets, such as Europe and
Japan.
* Expand the scope of Cycle-Sat's business to
increase its sales and profitability.
The objective of these strategies is to increase shareholder value
significantly. This is a fundamental goal of Winnebago Industries' management.
MANAGEMENT
We continued to strengthen our management team. The Company's board of directors
named Fred Dohrmann chief executive officer. Fred is a long-time Winnebago
employee who understands the importance of providing consumers with "best-buy"
products. Francis Zrostlik, president/director of Stellar Industries and a
member of the board from 1979 to 1986, was re-elected a director, bringing the
board to eight members.
OUTLOOK
We enter 1995 with a strong lineup of motor home models that have received
excellent dealer and consumer acceptance. In addition to new models, we have
incorporated significant new design, interior and engineering features on many
current models. While it is too early to predict what 1995 will bring, we are
encouraged by long-term motor home trends. Buyers age 50 and older are
increasing, and we are seeing more younger buyers, 35 to 49, purchasing motor
homes for weekend and vacation travel. We also look forward to a good year at
Cycle-Sat. Thank you for your support and interest in Winnebago. Sincerely,
John K. Hanson Fred G. Dohrmann
Chairman of the Board President and
Chief Executive Officer
November 3, 1994
[PHOTO]
[CAPTION: Winnebago Industries' executive management team is shown with a new
1995 wide-body Winnebago Adventurer. Shown from left to right are: Bruce
Hertzke, Jim Jaskoviak, Jerry Clouse, Ray Beebe, Ed Barker, President and Chief
Executive Officer Fred Dohrmann, Chairman John K. Hanson, Sharon Hansen, and
Paul Hanson. (See inside back cover for details on these Company officers.)]
REVIEW OF OPERATIONS
Over the past three years, a strengthening economy and changing demographics of
motor home buyers have fueled growth in the recreation vehicle (RV) industry.
Sales of Class A and conventional Class C (excluding micro-mini) Winnebago
Industries motor homes rose during fiscal 1994. This increase was led by the
conventional Class C segment during fiscal 1994 which recorded a gain of 26.5
percent in retail sales volume and 28.5 percent in wholesale sales volume
compared to the same period a year ago.
Extensive consumer research revealed that demographics for motor home buyers are
changing. Traditionally, buyers are aged 50 and older, with time and money to
enjoy leisure travel and outdoor recreation. Today, more "baby boomers," aged 35
to 49, are purchasing vehicles for weekend and vacation travel. Our new 1995
motor homes were developed to delight all customers, including younger and
first-time buyers. Models were updated with more modern conveniences and
comforts, while price-points were broadened within product lines. The new models
have been enthusiastically received, with initial dealer orders in fiscal 1995
significantly ahead of last year.
[PHOTO]
[CAPTION: A leader in innovation, Winnebago Industries has a patent pending on
the Itasca Suncruiser's unique new hydraulic room extension design. The
slide-out on this Suncruiser 34RQ model provides an open and spacious living
area for full-time active enjoyment.]
We have purposefully worked to differentiate models within our 1995 Class A
line, beginning with redesigns of our Winnebago and Itasca models. The Winnebago
Adventurer was remodeled as a wide-body unit (approximately 102 inches wide),
lending itself to increased design flexibility. Available in five models,
including a rear engine diesel pusher, the Adventurer ranges from 30 to 34 feet
in length.
The 1995 Itasca Suncruiser is the first motor home in the RV industry to offer a
new hydraulic room extension system from HWH Corporation, expanding the width of
the motor home by nearly three feet. Available on three of the six Suncruiser
models, the slider portion is approximately 13 feet long and provides for an
open and spacious living area.
Another Class A motor home, the mid-priced, bus-styled Vectra, now has five
popular models, ranging from 31 to 37 feet in length.
The Winnebago Brave and the Itasca Sunrise motor homes, our most popular models,
were expanded to include new 1995 diesel pusher models, offering the long-term
economic advantages of increased fuel mileage and engine longevity, as well as
floor plan flexibility and added space for the driver and copilot.
The Winnebago Warrior and Itasca Passage are economical introductions to the RV
lifestyle. With three floor plans from 23 to 25 feet in length, the Warrior and
Passage contain all the necessities for a comfortable vacation in a compact,
efficient layout.
The Luxor, a new premium motor home, was introduced late in fiscal 1994. The
opulent vehicle is our top-of-the-line entry into the wide-body, bus-styled
market. Strong initial orders indicate the success of this model.
Several changes were made in our 1995 conventional Class C lineup as well. The
new fuel-efficient, front-wheel-drive Rialta motor home was introduced in
limited quantities late in fiscal 1994. The Rialta utilizes a cab and drivetrain
components from Volkswagen AG in Germany, provided under an exclusive contract
with Volkswagen United States, Inc. This compact, multi-purpose vehicle has
distinctive European styling and uni-body construction.
Other Class C products include Winnebago Minnie 300 and Itasca Spirit lines
which feature four models in different configurations ranging from 21 feet to
nearly 29 feet in length. The upgraded Winnebago Minnie Winnie and Itasca
Sundancer lines are available in three models, including two wide-body designs
for 1995. Our Class C market share should benefit as production of the Rialta,
classified as a low-profile Class C, continues to expand.
In developing the Rialta project, part of our agreement with Volkswagen involved
production of a EuroVan Camper conversion package for Volks-wagen AG.
Approximately 120 Volkswagen dealers have signed agreements to sell and service
the new pop-top EuroVan Camper for the U.S. market.
CUSTOMER DRIVEN
A "Customer Driven" attitude at Winnebago Industries fosters a strong, lasting
relationship with dealers and retail customers. We are committed to developing
products that satisfy customers needs and achieve high quality standards.
[PHOTO]
[CAPTION: The Rialta, a revolutionary new front-wheel-drive motor home was
introduced by Winnebago Industries offering fuel efficiency, aerodynamic styling
and full motor home features. The Rialta is a multi-purpose, compact vehicle
just under 21 feet in length.]
Employees have been empowered to take pride in the products they are
manufacturing though involvement in action teams, quality circles and
cost-saving suggestion programs. This has made a significant impact on the
quality of our products. Over the past five years, warranty expenses have been
dramatically reduced as a percentage of revenues and Winnebago Industries has
won more "Best Buy" awards from Consumers Digest magazine than any other motor
home manufacturer.
Our dealers also are encouraged to suggest quality and product improvement
ideas. A dealer council was created for Winnebago and Itasca, representing the
dealers currently selling and servicing Winnebago Industries products. In fiscal
1994, every dealer was presented with a free membership in the Winnebago-Itasca
Travelers (WIT) Club to encourage them to actively participate in WIT
activities.
Owners of new or used Winnebago Industries vehicles are eligible for membership
in the many chapters of the WIT Club. Members may participate in numerous
national, state, local and special motor home rallies, caravans and other events
throughout the year. In addition, they are entitled to special discounts and
services such as mail forwarding, trip routing and emergency road service. With
approximately 12,000 members internationally, the club has proven to be a
valuable sales tool, fostering fellowship between its members and the Company.
We celebrated the 25th anniversary of the WIT Club during the Grand National
Rally in Forest City, Iowa, this past summer.
A separate owner's club also was created especially for race fans. Stock car
racing is the largest spectator sport in the United States, attracting thousands
of RV travellers each year. Winnebago Industries and the National Association
for Stock Car Auto Racing (NASCAR) signed a three-year agreement making
Winnebago "The Official Motor Home of NASCAR" and giving us the rights to use
NASCAR official status in advertising and promotions. Members of our "Winnebago
Motorsports Team" are eligible to park in "Winnebago Pit Road," preferred
camping locations at racing events which feature special activities such as
celebrity autograph sessions and seminars.
[PHOTO]
[CAPTION: The Luxor is the most luxurious motor home Winnebago Industries has
ever produced. From the fine leather upholstery to the solid brass fixtures, the
Luxor has the decor and features found in premium high-line motor homes.]
EXPANDING INTERNATIONALLY
The improving international economy helped Winnebago Industries' overseas
growth. Each of the Company's major international representatives has moved
their operations to better facilitate access to our customers and provide room
for further growth.
To strengthen its presence in continental Europe, Winnebago Industries Europe
GmbH moved into a 6.5 acre complex near Saarbrucken, Germany. In addition to
office and warehousing space, the facility has garages for modification of motor
homes to meet the technical requirements of each European country.
Mitsubishi Corporation, our Japanese distributor, moved their RV offices to a
prime sales location in Tokyo. In addition, Dudley's American Motorhomes Ltd.,
our distributor in the United Kingdom and Ireland, purchased a new, much larger
facility on 6.5 acres of land near Ducklington.
ADDITIONAL WINNEBAGO PRODUCTS
Law enforcement agencies find that mobile command units are useful in
maintaining visibility in neighborhoods. Many service providers ranging from
medical clinics to hair salons are going to their customers rather than having
their customers come to them. As a result, we expanded production of commercial
vehicles, especially customized motor home shells, for a wide variety of
applications.
The name "Winnebago" has become a household word and, as such, has a high
intrinsic value. To capitalize on the franchise value of the name, we license
its use on products such as tents, camping equipment, shoes, clothing and toys.
We even developed a collector card series, offering a glimpse into memorable
events and products from Winnebago Industries' history.
OTHER MANUFACTURING
Original equipment manufacturer (OEM) sales of component parts, such as aluminum
extrusions, metal stampings, rotational moldings, vacuum-formed plastics and
fiberglass, to outside manufacturers continued to increase. Growth of 24 percent
was realized in fiscal 1994, with sales of $24.0 million versus $19.4 million
for the prior year, providing $2.8 million of operating income for fiscal 1994.
Over the past four years, OEM sales have more than doubled.
[PHOTO]
[CAPTION: The new EuroVan Camper is based on Volkswagen's extended wheel-base
EuroVan and is being converted by Winnebago Industries. It sleeps four and
includes a stove, large cabinets, refrigerator, pop-top roof, propane heater and
more.]
CYCLE-SAT, INC.
By using the latest innovations in satellite, fiber optic and digital
technologies, Cycle-Sat has grown to become a leading high-speed distributor of
television and radio commercials. Today, Cycle-Sat serves more than 625
advertising agencies and corporate clients by distributing commercials and
airing instructions to approximately 545 television stations in the United
States and Canada.
Advertising agencies that need additional time to edit a commercial and
corporations that distribute commercials to one or more television stations
within several hours of airing particularly appreciate Cycle-Sat's service and
speed. On the receiving end, traffic coordinators at television stations
appreciate Cycle-Sat's technology. Instead of handling tape boxes or matching
spot commercials with broadcast instructions, the coordinators just pull the
commercials and traffic instructions from the satellite feed.
Fiscal 1994 was a year of strong growth and profitability for Cycle-Sat. Sales
grew 27 percent to $18.9 million. This growth, along with the fixed nature of
many of Cycle-Sat's costs, raised its operating profit to $1.1 million, an
improvement of $3.0 million.
Fourth quarter sales were particularly strong, benefitting from television
commercials previewing a record number of upcoming movies. During the year, 19
television stations joined the Cycle-Sat network.
Since its inception, Cycle-Sat has embraced technologies and business practices
to better serve its expanding customer base. The company's patented Cyclecypher
equipment allows the direct and automatic distribution of television commercials
and traffic instructions to specific television and radio stations. This unique
satellite shuttle service operates 24 hours a day, seven days per week and
offers point-to-point video information delivery in two hours or less.
[GRAPH] CYCLE-SAT NET REVENUE (IN MILLIONS) for the years 1992-$10.2, 1993-$14.8
and 1994-$18.9
[GRAPH] CYCLE-SAT OPERATING PROFIT (LOSS) (IN MILLIONS) for the years
1992-$(3.6), 1993-$(1.9) and 1994-$1.1
FLAT ANTENNA
This year, independent performance testing was successfully completed on
Cycle-Sat's new Flat Antenna. This revolutionary engineering approach allows
businesses and individuals to receive satellite signals with performance
comparable to the one-meter parabolic industry standard. Cycle-Sat has received
its first order for the Flat Antenna, for which it has exclusive North American
marketing and worldwide manufacturing rights and is providing units for
evaluation to prospective customers.
The Flat Antenna mounts flush along the side or top of a structure, thus
reducing the chance of wind damage and eliminating the need for building
permits. The antenna can be painted with non-metallic paint to blend into the
background. The antenna need not directly face the satellite as with parabolic
dishes. And due to its narrow band frequency and frequency selective focusing
characteristics, the Flat Antenna is less susceptible to ground-based
interference.
[PHOTO]
[CAPTION: The Cycle-Sat Flat Antenna is truly a revolutionary antenna design.
Completely flat and extremely thin, it does not need to directly face the
transmitting satellite to provide signal reception. Only the Low Noise Block
Downconverter and support arms protrude from the roof line or wall surface. This
reduces wind effect on the antenna while providing superior aesthetic benefits,
particularly where local building codes restrict antenna installations.]
[PHOTO]
[CAPTION: Made of high-quality, exterior-grade molded plastic, the Flat Antenna
is very lightweight and its low structural profile often reduces the need for a
heavy mounting frame. The antenna can often be configured for simultaneous
multi-satellite receptions.]
[PHOTO]
[CAPTION: Cycle-Sat has two technical operations centers, one in Memphis, Tenn.,
and a second in Forest City, Iowa. In addition to operating a continuous
satellite shuttle service, the centers offer closed captioning, as well as
post-production services, including editing and tagging television and radio
commercials.]
SELECTED FINANCIAL DATA
Fiscal year ended(1)
August 27, August 28, August 29, August 31, August 25,
(dollars in thousands, except per share data) 1994 1993 1992 1991 1990
STATEMENT OF OPERATIONS
Net revenues $ 452,116 $384,083 $ 294,994 $ 222,648 $ 332,833
Income (loss) from continuing operations 17,445 9,278 (1,769) (16,271) (14,566)
Loss from discontinued operations -- -- (1,026) (13,110) (3,269)
Cumulative effect of accounting change (20,420) -- (7,774) -- --
Net income (loss) (2,975) 9,278 (10,569) (29,381) (17,835)
Per share data:
Income (loss) from continuing operations .69 .37 (.07) (.65) (.59)
Loss from discontinued operations -- -- (.04) (.53) (.13)
Cumulative effect of accounting change (.81) -- (.31) -- --
Net income (loss) (.12) .37 (.42) (1.18) (.72)
Cash dividends -- -- -- -- .10
Balance Sheet
Total assets $ 183,959 $157,050 $ 139,761 $ 135,132 $ 198,394
Long-term debt 4,140 3,183 3,113 3,938 3,550
Stockholders' equity 79,710 81,693 72,078 82,584 111,162
Working capital 58,523 44,669 37,424 35,442 60,267
Current ratio 2.1 to 1 1.9 to 1 1.8 to 1 1.9 to 1 1.9 to 1
(1) The fiscal year ended August 31, 1991 contains 53 weeks; all other fiscal
years in the table contain 52 weeks.
This selected financial data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and Notes thereto which appear elsewhere in
this report.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
(dollars in thousands, except per share data) Quarter ended
FISCAL 1994 November 27, 1993 February 26, 1994 May 28, 1994 August 27, 1994
Net revenues $ 104,556 $99,001 $129,666 $118,893
Operating income 3,577 1,271 8,093 3,853
Income from continuing operations(2) 3,742 1,281 7,335 5,087
Net (loss) income (16,678) 1,281 7,335 5,087
Income from continuing operations per share(2) .15 .05 .29 .20
Net (loss) income per share (.66) .05 .29 .20
(2) Before cumulative effect of accounting change.
The Company recognized a tax credit of $1.3 million in the fourth quarter ended
August 27, 1994, as a result of the Company's improved operating results which
increases the likelihood of the Company realizing its tax assets.
Quarter ended
FISCAL 1993 November 28, 1992 February 27, 1993 May 29, 1993 August 28, 1993
Net revenues $83,416 $ 77,462 $115,915 $107,290
Operating income 939 (717) 4,562 3,503
Net income 1,117 407 4,579 3,175
Net income per share .04 .02 .18 .13
In the fourth quarter ended August 28, 1993, the Company recorded expense of
$1,555,000 as a result of the Spectrum motor home recall.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The primary use of recreation vehicles for leisure travel and outdoor recreation
has historically led to a peak retail selling season concentrated in the spring
and summer months. The Company's sales of recreation vehicles are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory. The Company has generally manufactured recreation
vehicles during the entire year, both for immediate delivery and for inventory
to satisfy the peak selling season. During fiscal years when interest rates are
high and/or market conditions are uncertain, the Company attempts to maintain a
lower level of inventory of recreation vehicles.
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Net revenues for manufactured products for fiscal 1994 increased $67,546,000, or
18.5 percent, from fiscal 1993. Motor home shipments (Class A, B and C)
increased by 965 units, or 11.9 percent, during fiscal 1994 when compared to
fiscal 1993. The relatively higher growth in dollar sales is due to an increase
in volume of higher-priced Class A models. The Company anticipates demand for
its RV products will continue to grow in fiscal 1995 due to continued acceptance
of the new models in the Company's RV products lineup.
Service revenues for fiscal 1994 increased $487,000, or 2.5 percent, from fiscal
1993. Cycle-Sat, Inc. (Cycle-Sat) recorded revenues of $18,900,000, an increase
of $4,042,000, or 27.2 percent, due to increased revenues from established
customers as well as revenues generated with new customers. Negatively impacting
fiscal 1994 service revenues, was the absence of revenues of NIE (an electronic
component assembly business), which was sold during August 1993.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.0 percent for fiscal 1994 compared to 86.7 percent during fiscal 1993.
This decrease primarily reflects a shift in shipments to a more favorable
product mix and to an increase in motor home production volume.
Cost of services, as a percent of service revenues, decreased during fiscal 1994
to 58.2 percent from 76.1 percent during fiscal l993. This percentage decrease
can be attributed to the increase in Cycle-Sat revenues and to a reduction in
lease expense at Cycle-Sat due to a renegotiation of its satellite lease
agreement.
Selling and delivery expenses increased $5,007,000 to $26,882,000 and, as a
percentage of net revenues, to 5.9 percent from 5.7 percent when comparing
fiscal 1994 to fiscal 1993. The increases can be attributed primarily to
increased promotional and advertising expenses.
General and administrative expenses increased by $1,148,000 to $24,536,000 when
comparing fiscal 1994 to fiscal 1993, but decreased as a percentage of net
revenues to 5.4 percent from 6.1 percent. The increase in dollars primarily
reflects an increase in the Company's product liability settlements and
increased spending by Cycle-Sat.
Other expense was $262,000 in fiscal 1994 compared to $188,000 in fiscal 1993.
The primary reasons for the change when comparing the two periods were an
expiration of leases which generated lease income for Winnebago Acceptance
Corporation (WAC) during fiscal 1993 offset partially by reduced costs incurred
by the Company under its repurchase agreements with lending institutions who
have provided wholesale floor plan financing to the Company's dealers.
For fiscal 1994, the Company had a net financial expense of $661,000 compared to
$96,000 during fiscal 1993. During fiscal 1994, the Company recorded an interest
payment to the Internal Revenue Service of $419,000 relating to the resolution
of pending income tax return issues and $395,000 of realized and unrealized
losses in its marketable securities portfolio. During fiscal 1993, the Company
recorded a consolidated foreign exchange loss of $245,000, principally due to
Winnebago Industries, Europe (WIE) operations and interest expense of $598,000.
Partially offsetting this was income from interest and dividends of $442,000 and
realized gains of $355,000 in the Company's marketable securities portfolio.
For fiscal 1994, the Company reported income before the cumulative effect of an
accounting change of $17,445,000 which consisted primarily of income from RV
operations of $13,800,000 and from Cycle-Sat operations of $695,000. Credit for
income taxes of $1,312,000 is the result of the increased likelihood of the
Company realizing a portion of the deferred tax assets in the future because of
improved earnings. In fiscal 1994, the Company was required to adopt the
remaining portion of FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" related to health care and other
benefits. This change in accounting principle resulted in a cumulative non-cash
charge at the beginning of fiscal 1994 of $20,420,000, or $.81 per share.
For fiscal 1993, the Company reported net income of $9,278,000 which consisted
primarily of income from RV operations of $11,922,000 and a loss from Cycle-Sat
operations of $2,021,000. Credit for income taxes of $1,087,000 was the result
of an IRS settlement. During fiscal year 1993, taxable income was offset by net
operating loss carryforwards.
For fiscal 1994, the Company had a net loss of $2,975,000, or $.12 per share,
compared to fiscal 1993's net income of $9,278,000, or $.37 per share.
FISCAL 1993 COMPARED TO FISCAL 1992
Net revenue for manufactured products for fiscal 1993 increased $83,736,000, or
29.8 percent, from fiscal 1992. Motor home shipments (Class A and C) increased
by 1,507 units, or 22.9 percent, during fiscal 1993 when compared to fiscal
1992. This growth in sales is due to an increase in the market share of
Winnebago products and an increase in the overall market for Class A and C motor
homes. Additionally, the Company's expansion of product lines led to the most
complete motor home lineup in the Company's history and resulted in a more
favorable sales mix including a greater proportion of larger units.
Service revenues for fiscal 1993 increased $5,353,000, or 38.6 percent, from
fiscal 1992. This increase can be attributed primarily to Cycle-Sat, due to
increased revenues from established customers as well as revenues generated with
new customers.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.7 percent for fiscal 1993 compared to 88.8 percent during fiscal 1992.
This decrease primarily reflects an increase in motor home volume.
Cost of services, as a percent of service revenue, decreased during the 1993
fiscal year to 76.1 percent from 94.9 percent during the 1992 fiscal year. This
percentage decrease reflects an increase in revenue at Cycle-Sat in relation to
Cycle-Sat's fixed costs.
Selling and delivery expenses increased $3,184,000 to $21,875,000, but decreased
as a percentage of net revenues to 5.7 percent from 6.3 percent. The increase in
dollars primarily reflects increased promotional and advertising expenses. The
decrease in percentage primarily reflects an increase in fiscal 1993 revenues.
General and administrative expenses increased by $6,535,000 to $23,388,000 and,
as a percentage of net revenues, to 6.1 percent from 5.7 percent when comparing
fiscal 1993 to fiscal 1992. The increases primarily reflect the Company
reinstating its matching contribution to its 401(k) program, bad debt provisions
recorded by WAC and increased spending by Cycle-Sat.
Other expense (income) resulted in an expense of $188,000 in fiscal 1993
compared to income of $952,000 in fiscal 1992. The primary reasons for the
change from income to expense when comparing the two periods were a reduction in
lease income in fiscal 1993 and increased costs incurred by the Company under
its repurchase agreements with lending institutions who have provided wholesale
floor plan financing to the Company's dealers.
For fiscal 1993, the Company had a net financial expense of $96,000 compared to
$585,000 during fiscal 1992. During fiscal 1993, the Company recorded a
consolidated foreign exchange loss of $245,000, principally due to WIE
operations and interest expense of $598,000. Partially offsetting this was
income from interest and dividends of $442,000 and realized gains of $355,000 in
the Company's marketable securities portfolio. During fiscal 1992, the Company
recorded realized losses of $592,000 in its marketable securities portfolio and
interest expense of $403,000, offset by income from interest and dividends of
$384,000.
For fiscal 1993, the Company reported net income of $9,278,000 which consisted
primarily of income from RV operations of $11,922,000 and a loss from Cycle-Sat
operations of $2,021,000. Credit for income taxes of $1,087,000 was the result
of an IRS settlement. During fiscal year 1993, taxable income was offset by net
operating loss carryforwards.
For fiscal 1992, the Company reported a net loss of $1,769,000 from continuing
operations, which consisted primarily of income from RVoperations of $1,742,000
and a loss from Cycle-Sat operations of $4,169,000. Also in fiscal 1992, the
Company recorded a loss from discontinued operations of $1,026,000. In fiscal
1992, the Company was required to adopt FASB Statement No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions," with respect to
individual deferred compensation contracts. This change in accounting principle
resulted in a cumulative non-cash charge as of the beginning of fiscal 1992 of
$7,774,000, or $.31 per share, and increasing the fiscal 1992 loss from
continuing operations and net loss by $1,360,000, or $.05 per share.
For fiscal 1993, the Company had net income of $9,278,000, or $.37 per share,
compared to a fiscal 1992 net loss of $10,569,000, or $.42 per share.
ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY AND RESOURCES
FISCAL 1994 CHANGES IN FINANCIAL CONDITION
The Company meets its working capital and capital equipment requirements and
cash requirements of subsidiaries with funds generated internally and funds from
agreements with financial institutions.
At August 27, 1994, working capital was $58,523,000, an increase of $13,854,000
from the amount at August 28, 1993. Cash provided by operations during fiscal
1994 was $3,409,000. During fiscal 1994, cash flows used by investing activities
was $15,756,000 including investments in dealer receivables, long-term notes
receivables and capital expenditures. In fiscal 1994, capital expenditures were
$9,532,000 compared to $7,671,000 in fiscal 1993.
The Company's sources of liquidity at August 27, 1994 consisted principally of
cash and marketable securities in the amount of $4,148,000. The Company has
available a $12,000,000 (or 75 percent of eligible inventory, whichever is less)
line of credit through a financing and security agreement with NationsCredit
Corporation. Additionally, Cycle-Sat has a $3,000,000 (or the sum of the base of
75 percent of Cycle-Sat eligible accounts receivable and 50 percent of its
inventory, whichever is less) line of credit with Firstar Bank Cedar Rapids, NA.
Principal expected demands at August 27, 1994 on the Company's liquid assets for
fiscal 1995 include approximately $10,350,000 of capital expenditures (primarily
equipment replacements), payments on maturities of long-term debt and the
payment of cash dividends.
Based on expected cash generated from operations in fiscal 1995 and the above
cash and financing resources available, management believes that the Company has
adequate sources of financing to finance its 1995 cash requirements.
IMPACT OF INFLATION
Historically, the impact of inflation on the Company's operations has not been
significantly detrimental, as the Company has usually been able to adjust its
prices to reflect the inflationary impact on the cost of manufacturing its
products.
NET REVENUES BY MAJOR PRODUCT CLASS
Fiscal year ended(1)
August 27, August 28, August 29, August 31, August 25,
(dollars in thousands) 1994 1993 1992 1991 1990
Motor homes $385,319 $326,861 $245,908 $180,878 $286,713
85.2% 85.1% 83.4% 81.2% 86.2%
Other recreation vehicle revenues(2) 21,903 17,655 17,126 15,586 22,039
4.8% 4.6% 5.8% 7.0% 6.6%
Other manufactured products revenues(3) 25,184 20,344 18,090 13,974 11,423
5.6% 5.3% 6.1% 6.3% 3.4%
Total manufactured products revenues 432,406 364,860 281,124 210,438 320,175
95.6% 95.0% 95.3% 94.5% 96.2%
Service revenues(4) 19,710 19,223 13,870 12,210 12,658
4.4% 5.0% 4.7% 5.5% 3.8%
Total revenues $452,116 $384,083 $294,994 $222,648 $332,833
100.0% 100.0% 100.0% 100.0% 100.0%
(1) The fiscal year ended August 31, 1991 contains 53 weeks; all other fiscal
years in the table contain 52 weeks.
(2) Primarily recreation vehicle related parts and service and van conversions.
(3) Principally sales of extruded aluminum and component products for other
manufacturers.
(4) Principally Cycle-Sat revenues from satellite courier and tape duplication
services. Also includes in years prior to August 27, 1994, NIE revenues
from contract assembly of a variety of electronic products; and in years
ended August 27, 1994, August 28, 1993 and August 25, 1990, WAC revenues
from dealer financing.
COMMON STOCK DATA
The Company's common stock is listed on the New York, Chicago and Pacific Stock
Exchanges.
Ticker symbol: WGO
Shareholders of record as of October 17, 1994: 13,072
Shares outstanding at year-end: 25,238,988
Below are the New York Stock Exchange high, low and closing prices of Winnebago
Industries, Inc. stock for each quarter of fiscal 1994 and fiscal 1993.
FISCAL 1994 High Low Close FISCAL 1993 High Low Close
First Quarter $ 8.875 $ 6.75 $ 8.25 First Quarter $8.125 $5.125 $7.875
Second Quarter 13.625 8.25 12.625 Second Quarter 9.50 6.75 7.375
Third Quarter 13.875 10.75 11.875 Third Quarter 8.00 5.625 7.00
Fourth Quarter 11.875 8.375 10.25 Fourth Quarter 9.25 6.50 8.75
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended
(dollars in thousands, except per share data) August 27, 1994 August 28, 1993 August 29, 1992
Revenues
Manufactured products $ 432,406 $ 364,860 $ 281,124
Service 19,710 19,223 13,870
Total net revenues 452,116 384,083 294,994
Costs and expenses
Cost of manufactured products 371,995 316,230 249,498
Cost of services 11,473 14,620 13,165
Selling and delivery 26,882 21,875 18,691
General and administrative 24,536 23,388 16,853
Other expense (income) 262 188 (952)
Minority interest in net income (loss)
of consolidated subsidiary 174 (505) (1,173)
Total costs and expenses 435,322 375,796 296,082
Operating income (loss) 16,794 8,287 (1,088)
Financial expense (661) (96) (585)
Income (loss) from continuing
operations before income taxes 16,133 8,191 (1,673)
(Credit) provision for taxes (1,312) (1,087) 96
Income (loss) from continuing operations 17,445 9,278 (1,769)
Loss from discontinued operations -- -- (1,026)
Cumulative effect of accounting changes (note 1) (20,420) -- (7,774)
Net income (loss) $ (2,975) $ 9,278 $ (10,569)
Income (loss) per share:
Continuing operations $ .69 $ .37 $ (.07)
Discontinued operations -- -- (.04)
Cumulative effect of accounting change (.81) -- (.31)
Net income (loss) $ (.12) $ .37 $ (.42)
Weighted average number of shares of
stock (in thousands) 25,187 25,042 25,016
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) August 27, 1994 August 28, 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 847 $ 11,238
Marketable securities 3,301 2,309
Receivables, less allowance for doubtful accounts
($1,545 and $2,798, respectively) 36,602 29,239
Dealer financing receivables less allowance for doubtful accounts
($279 and $290, respectively) 8,565 6,742
Inventories 55,450 40,610
Prepaid expenses 3,870 3,636
Deferred income taxes 2,252 511
Total current assets 110,887 94,285
PROPERTY AND EQUIPMENT, at cost
Land 1,539 2,153
Buildings 40,905 38,373
Machinery and equipment 75,139 72,505
Transportation equipment 7,985 5,609
125,568 118,640
Less accumulated depreciation 83,970 81,012
Total property and equipment, net 41,598 37,628
LONG-TERM NOTES RECEIVABLE, less allowances
($2,024 and $1,362, respectively) 4,884 4,203
INVESTMENT IN LIFE INSURANCE 15,479 11,853
DEFERRED INCOME TAXES 6,260 2,652
OTHER ASSETS 4,851 6,429
TOTAL ASSETS $183,959 $157,050
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,504 $ 1,719
Notes payable 2,300 --
Accounts payable, trade 24,985 19,462
Accrued expenses:
Insurance 4,175 6,445
Product warranties 3,557 4,091
Vacation liability 3,241 2,864
Promotional 2,111 4,636
Other 9,491 10,399
Total current liabilities 52,364 49,616
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES 4,140 3,183
POSTRETIREMENT HEALTH CARE AND DEFERRED COMPENSATION BENEFITS 43,391 18,766
DEFERRED INCOME TAXES 2,211 1,823
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,143 1,969
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized 60,000,000 shares 12,911 12,908
Additional paid-in capital 24,175 24,811
Reinvested earnings 49,270 52,245
86,356 89,964
Less treasury stock, at cost 6,646 8,271
TOTAL STOCKHOLDERS' EQUITY 79,710 81,693
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $183,959 $157,050
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended
(dollars in thousands) August 27, 1994 August 28, 1993 August 29, 1992
Cash flows from operating activities:
Net income (loss) $ (2,975) $ 9,278 $(10,569)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Cumulative effect of accounting change 20,420 -- 7,774
Provision for disposal of Commercial Vehicle Division -- -- 416
Depreciation and amortization 7,798 7,961 8,195
Deferred income taxes (4,961) (1,340) --
Loss (gain) on disposal of property, leases and other assets (74) 630 507
(Credit) provision for doubtful receivables (546) 1,496 916
Postretirement benefits and employee stock bonus plan 4,642 2,609 2,031
Realized and unrealized (gains) and losses on investments, net 395 (305) 625
Minority interest in net income (loss) of consolidated subsidiary 174 (505) (1,173)
Other (303) 339 (68)
Change in assets and liabilities:
Increase in receivables and other assets (6,858) (1,186) (4,853)
Increase in inventories (14,758) (5,390) (3,417)
Decrease in income tax refund receivables -- -- 6,339
Increase in accounts payable and accrued expenses 455 4,333 5,063
Net cash provided by operating activities 3,409 17,920 11,786
Cash flows used by investing activities:
Investments in marketable securities (9,869) (7,922) (18,639)
Proceeds from sale of marketable securities 8,482 7,133 18,094
Purchases of property and equipment (9,532) (7,671) (3,040)
Proceeds from sale of property and equipment 801 101 252
Investments in dealer receivables (35,120) (28,424) --
Collections of dealer receivables 33,336 21,671 --
Investments in long-term notes receivables and other assets (4,930) (5,893) (3,599)
Proceeds from long-term notes receivables and other assets 1,076 294 229
Net cash used by investing activities (15,756) (20,711) (6,703)
Cash flows from financing activities and capital transactions:
Proceeds from notes payable 2,300 -- --
Payments of long-term debt (1,850) (1,528) (1,064)
Proceeds from issuance of long-term debt 952 1,934 55
Proceeds from issuance of Cycle-Sat common stock -- -- 2,500
Proceeds from issuance of common and treasury stock 554 337 63
Net cash provided by financing activities and capital transactions 1,956 743 1,554
Net (decrease) increase in cash and cash equivalents (10,391) (2,048) 6,637
Cash and cash equivalents at beginning of year 11,238 13,286 6,649
Cash and cash equivalents at end of year $ 847 $ 11,238 $ 13,286
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Shares Paid-In Reinvested Treasury Stock
(amounts in thousands) Number Amount Capital Earnings Number Amount
Balance, August 31, 1991 25,794 $12,897 $ 25,141 $ 53,536 788 $ 8,990
Proceeds from the sale of
common stock to employees 12 6 16 -- (3) (41)
Net loss -- -- -- (10,569) -- --
Balance, August 29, 1992 25,806 12,903 25,157 42,967 785 8,949
Proceeds from the sale of
common stock to employees 9 5 (346) -- (60) (678)
Net income -- -- -- 9,278 -- --
Balance, August 28, 1993 25,815 12,908 24,811 52,245 725 8,271
Proceeds from the sale of
common stock to employees 7 3 (503) -- (92) (1,055)
Contribution of treasury stock to
employee stock bonus plan -- -- (133) -- (50) (570)
Net loss -- -- -- (2,975) -- --
Balance, August 27, 1994 25,822 $12,911 $ 24,175 $ 49,270 583 $ 6,646
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
In fiscal 1994, the Company operated predominantly in three industry segments;
the manufacture and sale of recreation vehicles and other manufactured products,
the satellite courier and tape duplication business, and floor plan and rental
unit financing for selected Winnebago, Itasca, Elante', Vectra, Rialta and Luxor
dealers.
SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
parent company and subsidiary companies. All material intercompany balances and
transactions with subsidiaries have been eliminated.
In the Consolidated Statements of Operations, service revenues are generated by
the satellite courier and tape duplication business, electronic component
assembly business (which was sold August 1993), and dealer floor plan financing.
STATEMENT OF CASH FLOWS. For purposes of these statements, cash equivalents
include all liquid debt instruments purchased with an original maturity of three
months or less. For cash equivalents, the carrying amount is a reasonable
estimate of fair value.
FISCAL PERIOD. The Company follows a 52/53 week fiscal year period. The
financial statements are all based on a 52 week basis.
MARKETABLE SECURITIES. Marketable debt and equity securities are carried at the
aggregate of lower of cost or market. Net realized gains and losses on security
transactions are determined on the specific identification cost basis. The net
change in the investment valuation allowances used in the determination of net
earnings is the result of changes in the difference between aggregate cost and
market values of items still held as marketable securities at year-end of the
respective periods:
August 27, 1994 August 28, 1993
(in thousands) Cost Market Cost Market
Marketable
securities $4,106 $3,301 $2,461 $2,309
Marketable securities fair values are based on quoted market prices.
REVENUE RECOGNITION. Sales are recorded by the Company when products are shipped
to independent dealers. Interest income from dealer floor plan and rental
program notes receivable are recorded on the accrual basis in accordance with
the terms of the loan agreements. Satellite courier and tape duplication revenue
is recognized upon satellite transmission or shipment of information.
INVENTORIES. Inventories are valued at the lower of cost or market, with cost
being determined by using the last-in, first-out (LIFO) method and market
defined as net realizable value.
PROPERTY AND EQUIPMENT. Depreciation of property and equipment is computed using
the straight-line method on the cost of the assets, less allowance for salvage
value where appropriate, at rates based upon their estimated service lives.
Accelerated depreciation methods are used for tax purposes wherever permitted.
PROVISION FOR WARRANTY CLAIMS. Estimated warranty costs are provided at the time
of sale of the warranted products.
INCOME TAXES. The Company adopted the Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," effective the beginning
of fiscal 1993. This Statement requires recognition of deferred assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the differences between the
financial statements and the tax basis of assets and liabilities using enacted
tax rates in effect for the years in which the differences are expected to
reverse. Prior to fiscal 1993, the Company accounted for income taxes under the
provisions of Accounting Principles Board Opinion No. 11 (APB No. 11). The
adoption of SFAS No. 109 resulted in no cumulative effect on operations, and the
prior years' consolidated financial statements were not restated. (See note 12).
ALLOWANCE FOR DOUBTFUL ACCOUNTS. Allowance for doubtful accounts are based on
previous loss experience. Additional amounts are provided through charges to
income as management feels necessary after evaluation of receivables and current
economic conditions. Amounts which are considered to be uncollectible are
charged off and recoveries of amounts previously charged off are credited to the
allowance upon recovery.
ACCOUNTING CHANGES. During fiscal 1992, the Company adopted SFAS No. 106,
"Employers Accounting for Postretirement Benefits Other Than Pensions" with
respect to individual deferred compensation contracts. This change in accounting
principle resulted in a cumulative non-cash charge as of September 1, 1991 of
$7,774,000, or $.31 per share. In addition, as a result of the adoption of this
new standard, the loss from continuing operations and net loss for fiscal 1992
were increased by approximately $1,360,000, or $.05 per share.
In fiscal 1994, the Company was required to adopt SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" related to health
care and other benefits. SFAS No. 106 requires the Company to accrue the
estimated cost of retiree benefit payments during the years the employee
provides services. SFAS No. 106 allows recognition of the cumulative effect of
the liability in the year of adoption or the amortization of the obligation over
a period of up to 20 years. The Company elected to recognize the cumulative
effect of this obligation. The cumulative effect as of the beginning of fiscal
1994 for adopting SFAS No. 106 was an accrual of postretirement health care
costs of $20,420,000 and a decrease in net earnings of $20,420,000 ($.81 per
share), which has been included in the Company's consolidated statements of
operations for fiscal year ended August 27, 1994.
The effect of adopting SFAS No. 106 on income from operations for the fiscal
year ended August 27, 1994 was a decrease of $2,943,000 ($.12 per share). See
note 10 for further information regarding the Company's postretirement health
care costs.
In addition, there are several new accounting pronouncements which have been
issued that the Company must adopt within the next two fiscal years; however,
the Company does not believe the new accounting pronouncements will
significantly affect the Company's financial condition or operating results.
RECLASSIFICATIONS. Certain prior year information has been reclassified to
conform to the current year presentation.
NOTE 2: DISCONTINUED OPERATIONs
In September 1991, the Company adopted a formal plan to discontinue the
Commercial Vehicle Division which manufactured delivery vans and shuttle buses.
As part of such plan, the Company discontinued production during fiscal 1992.
The Company's plan to sell the operation during fiscal 1992 was not successful,
therefore, the Company decided to liquidate the assets of the Commercial Vehicle
Division and recorded a $1,026,000 charge to liquidate such assets. The net
assets were liquidated in fiscal 1994. As of August 28, 1993, other assets
included $481,000 of net assets, which primarily consisted of inventory and
equipment, associated with discontinued operations.
NOTE 3: SALE OF NORTH IOWA ELECTRONICS, INC.
In August 1993, the Company sold certain assets and liabilities of its
electronic component assembly business, North Iowa Electronics, Inc. (NIE).
Under the terms of the agreement, the net assets of NIE were sold for $100,000
in cash and a $1.6 million promissory note. The note receivable is
collateralized by receivables, inventory and fixed assets. The note has an
interest rate of 8 percent and requires monthly principal and interest payments
through March 1997 at which time the entire unpaid principal balance and
interest are due. At August 27, 1994, the promissory note receivable balance was
$1,576,000.The gain on the sale of $277,000 has been deferred until the Company
is certain the buyer can generate sufficient cash flows from operating
activities to retire the note. NIE's operations were not material in relation to
the Company's results of operations or financial condition.
NOTE 4: DEALER FINANCING RECEIVABLES
Dealer floor plan receivables are collateralized by recreation vehicles and are
due upon the dealers' sale of the vehicle with the entire balance generally due
at the end of one year. At August 27, 1994, the Company had certain
concentration of credit risks whereby $7,349,000 of dealer financing receivables
were from one dealer located on the West Coast.
Rental program receivables are collateralized by recreation vehicles and provide
for a 10 percent down payment and a 2 percent monthly reduction of the
outstanding balance with the balance due in full at the end of one year.
NOTE 5: INVENTORIES
Inventories consist of the following:
August 27, August 28,
(dollars in thousands) 1994 1993
Finished goods $21,675 $16,578
Work in process 13,807 11,051
Raw materials 33,800 26,614
69,282 54,243
LIFO reserve 13,832 13,633
$55,450 $40,610
The above value of inventories, before reduction for the LIFO reserve,
approximates replacement cost at the respective dates.
NOTE 6: GUARANTEED OPERATING LEASES
During fiscal years 1988 through 1992, Cycle-Sat entered into various
non-cancellable operating leases, of which certain leases have been guaranteed
by Winnebago Industries. These leases expire between 1994 and 1999. Rent expense
of $2,070,000, $2,218,000 and $2,939,000 was recorded under these leases during
the years ended August 27, 1994, August 28, 1993 and August 29, 1992,
respectively. Future minimum lease payments under such leases are as follows
(dollars in thousands): 1995 - $2,353; 1996 - $2,302; 1997 - $1,081; 1998 -
$214; 1999 - $26. Total future minimum lease payments are $5,976,000 of which
$1,221,000 is guaranteed by Winnebago Industries.
NOTE 7: LONG-TERM NOTES RECEIVABLE
Long-term notes receivable of $4,884,000 and $4,203,000 at August 27, 1994 and
August 28, 1993, respectively, are primarily collateralized by dealer
inventories and real estate. The notes had weighted average interest rates of
7.47 percent and 7.91 percent at August 27, 1994 and August 28, 1993,
respectively, and have various maturity dates ranging through March 1999.
NOTE 8: NOTES PAYABLE
Short-term lines of credit and related borrowings outstanding at fiscal year-end
are as follows:
Available
Credit Lines Outstanding Interest Rate
Aug. 27, Aug. 28, Aug. 27, Aug. 28, Aug. 27, Aug. 28,
(dollars in thousands) 1994 1993 1994 1993 1994 1993
Notes payable:
NationsCredit $12,000 $12,000 $ -- $ -- -- --
Firstar Bank 3,000 -- 2,300 -- 9.0% --
$15,000 $12,000 $2,300 $ --
Maximum Average Weighted Average Interest
Outstanding Outstanding Rate During Year*
Aug. 27, Aug. 28, Aug. 29, Aug. 27, Aug. 28, Aug. 29, Aug. 27, Aug. 28, Aug. 29,
(dollars in thousands) 1994 1993 1992 1994 1993 1992 1994 1993 1992
Notes payable:
ITT $ -- $ -- $2,509 $ -- $ -- $ 96 -- -- 10.7%
NationsCredit 7,000 10,500 3,000 951 3,937 173 6.1% 7.1% 6.7%
Firstar Bank 2,300 -- -- $1,030 -- -- 8.4% -- --
Total notes payable $1,981 $3,937 $269
* Based on the approximate average aggregate amount outstanding during the
year and the cost of borrowing.
The Company and Cycle-Sat entered into a $3,000,000 line of credit with Firstar
Bank Cedar Rapids dated February 24, 1994. Terms of the agreement limit the
amount advanced to the lesser of $3,000,000 or the sum of the base of 75 percent
of Cycle-Sat's eligible accounts receivable and 50 percent of its inventory. The
agreement provides for a declining interest rate based on future increases in
the tangible net worth of Cycle-Sat and contains a restrictive covenant related
to the maintenance of a minimum tangible net worth as defined in the agreement.
Cycle-Sat was in compliance with this covenant as of August 27, 1994. Borrowings
under the line of credit are secured by Cycle-Sat's accounts receivables and
inventories and have been guaranteed by the Company. The line of credit expires
January 31, 1995. The outstanding balance under the line of credit at August 27,
1994 was $2,300,000 with an interest rate of 9.0 percent per annum. As of August
27, 1994, Cycle-Sat had $573,000 of unused borrowings available.
Since March 1992, the Company has had a $12,000,000 financing and security
agreement with NationsCredit Corporation (NationsCredit) formerly Chrysler First
Commercial Corporation. Terms of the agreement limit borrowings to the lesser of
$12,000,000 or 75 percent of eligible inventory (fully manufactured recreation
vehicles ready for delivery to a dealer). Borrowings are secured by the
Company's receivables and inventory. The agreement requires a graduated interest
rate based upon the bank's reference rate as defined in the agreement. The line
of credit is available for a term of one year and continues during successive
one-year periods unless either party provides at least 90-days notice prior to
the end of the one-year period to the other party that they wish to terminate
the line of credit. The agreement prohibits any advances, loans or additional
guarantees of any obligation to any subsidiary or affiliate in excess of
$5,000,000 or $7,500,000 in the aggregate for all subsidiaries and affiliates
from the date of the agreement. The agreement also includes certain restrictive
covenants in the agreement including maintenance of minimum net worth, working
capital and debt to equity ratio. As of August 27, 1994, the Company was in
compliance with these covenants. There were no outstanding borrowings under the
line of credit at August 27, 1994 or August 28, 1993.
NOTE 9: LONG-TERM BORROWINGS AND OBLIGATIONS UNDER CAPITAL LEASES
Outstanding August 27, 1994 Outstanding August 28, 1993
Short Long Interest Short Long Interest
(dollars in thousands) Term Term Rate Term Term Rate
Long-term borrowings $ 765 $3,299 5.5-8.75% $ 117 $1,032 6.25-7.5%
Obligations under capital lease 1,739 841 8.7-14.1% 1,602 2,151 9.8-14.1%
Total debt $2,504 $4,140 $1,719 $3,183
During fiscal 1994, the Company and Winnebago RV, Inc. entered into a $2,001,000
financing agreement with 1st Source Bank for the purchase of a 1990 King Air 350
airplane. Terms of the agreement call for 35 monthly installment payments
beginning August 28, 1994, and a 36th payment to pay off the remaining principal
and interest balance of the agreement. The agreement is secured by the airplane.
The outstanding balance under this agreement at August 27, 1994 was $2,001,000
with an interest rate of 7.95 percent per annum.
During fiscal year 1993, the Company and Winnebago Industries Europe GmbH (WIE),
a wholly owned subsidiary of the Company, entered into a $1.8 million financing
arrangement with Volksbank Saarbrucken-St. Ingebert eG to finance the
acquisition and renovation of a new facility in Kirkel, Saarland, Federal
Republic of Germany. The financing arrangement includes four loans with interest
rates ranging from 5.5 percent to 8.75 percent. All four of the loans have been
advanced to WIE in the aggregate amount of $2,039,000 which require various
repayment terms through 2008. The loans are secured by real estate and
improvements of the new facility. Management believes that carrying value of the
long-term debt approximates fair value of these obligations.
During fiscal 1991 and 1990, the Company and Cycle-Sat entered into a
sale/leaseback agreements for most of Cycle-Sat's equipment which provided cash
of approximately $5,600,000 and a gain of $766,000 which is being deferred and
amortized over the terms of the respective leases. These leases have terms of 60
to 72 months, have been recorded as capital leases, and are guaranteed by the
Company. Also, during fiscal 1994, 1993 and 1992, Cycle-Sat entered into
additional capital lease arrangements for property approximating $444,000,
$842,000 and $466,000, respectively.
Assets and accumulated amortization related to capital leases were approximately
$7,606,000 and $4,978,000 at August 27, 1994 and $7,243,000 and $3,706,000 at
August 28, 1993, respectively.
Maturities of the long-term debt for the next five years are as follows (dollars
in thousands): 1995 - $2,504; 1996 - $792; 1997 - $1,869; 1998 - $176; 1999 -
$181.
NOTE 10: EMPLOYEE RETIREMENT PLANS
The Company has a qualified profit sharing and contributory 401(k) plan and a
stock bonus retirement plan for eligible employees. The plans provide for
contributions by the Company in such amounts as the Board of Directors may
determine. Contributions to the plans in cash and common stock valued at market
for fiscal years 1994, 1993 and 1992 were $1,444,000, $2,084,000 and $226,000,
respectively.
The Company has an Executive Split Dollar Life Insurance Plan. Investments in
the plan consist of life insurance policies, with the cash surrender values
recorded in the accompanying balance sheets. Upon the termination or death of a
participating executive, the Company receives its cash investment in the policy,
with any excess investment remitted directly to the policy beneficiary.
The Company also has a nonqualified deferred compensation program which permits
key employees and directors to annually elect (via individual contracts) to
defer a portion of their compensation until their retirement. The retirement
benefit to be provided is fixed based upon the amount of compensation deferred
and the age of the individual at the time of the contracted deferral. An
individual generally vests at the age of 55, with five years of service since
the first deferral was made. For deferrals prior to December 1992, vesting also
occurs after 20 years of service. Deferred compensation expense was $2,056,000,
$2,619,000 and $2,762,000 (excluding $7,774,000 of expense for cumulative effect
of accounting change) in fiscal 1994, 1993 and 1992, respectively. Total
deferred compensation liabilities were $20,322,000 and $18,766,000 at August 27,
1994 and August 28, 1993, respectively.
Also, to assist in funding the retirement benefits of the program, the Company
has invested in corporate-owned life insurance policies. The cash surrender
value of these policies are presented as assets (net of borrowings of
$3,683,000, $3,796,000 and $3,833,000 in fiscal 1994, 1993 and 1992,
respectively) of the Company in the accompanying balance sheets.
The Company provides certain health care and other benefits for certain retired
employees who have fulfilled eligibility requirements at age 55 with 15 years of
continuous service. Retirees are required to pay a monthly premium for medical
coverage based on years of service at retirement and current age. In fiscal 1993
and 1992, the Company recognized on a "pay-as-you-go" basis expense of $501,000
and $364,000, respectively, for postretirement health care benefits, which is
not comparable with current year's expenses. As discussed in note 1, the Company
implemented SFAS No. 106 as of August 29, 1993 on the immediate recognition
basis. The Company's postretirement health care plan currently is not funded.
The status of the plans is as follows:
Accumulated postretirement benefit obligation at August 27, 1994:
Retirees $ 2,336,000
Fully eligible active plan participants 2,777,000
Other active plan participants 9,651,000
14,764,000
Unrecognized net gain 8,305,000
Accrued postretirement benefit liability
recognized in financial statements $23,069,000
Net postretirement benefit expense for the fiscal year ended August 27, 1994
consisted of the following components:
Service cost-benefits earned
during the year $ 1,624,000
Interest cost on accumulated
postretirement obligation 1,319,000
$2,943,000
The assumed pre-65 and post-65 health care cost trend rates used in measuring
the accumulated postretirement benefit obligation as of August 27, 1994 was 11.1
percent and 10.4 percent, respectively for 1994, decreasing each successive year
until it reaches 5.5 percent in 2014 after which it remains constant. A
one-percentage point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
August 27, 1994 by approximately $3,383,000. The effect of this change on the
net postretirement health care cost for fiscal 1995 would be to increase it by
approximately $581,000.
The assumed discount rate used in determining the accumulated postretirement
benefit obligation upon the initial adoption of this new accounting standard at
the beginning of fiscal 1994 was 6.5 percent which was increased to 8.0 percent
at August 27, 1994 due to increasing interest rates. The approximately
$8,300,000 of unrecognized net gain at August 27, 1994 is a result of the
increase in the discount rate (approximately $5,800,000) and various other
factors such as increases in the health care premiums the Company charges
retirees (approximately $2,500,000). The unrecognized net gain will be amortized
over the average remaining service of active participants (18 years).
NOTE 11: CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for companies in the recreation vehicle industry to
enter into repurchase agreements with lending institutions which have provided
wholesale floor plan financing to dealers. Most dealers are financing on a
"floor plan" basis under which a bank or finance company lends the dealer all,
or substantially all, of the purchase price, collateralized by a lien upon, or
title to, the merchandise purchased. Upon request of a lending institution
financing a dealer's purchases of the Company's products, and after completion
of a credit investigation of the dealer involved, the Company will execute a
repurchase agreement. These agreements provide that, in the event of default by
the dealer on his agreement to pay the lending institution, the Company will
repurchase the financed merchandise. The agreements provide that the Company's
liability will not exceed 100 percent of the dealer invoice and provide for
periodic liability reduction based on the time since the date of the original
invoice. The Company's contingent liability on all repurchase agreements was
approximately $118,954,000 and $101,445,000 at August 27, 1994 and August 28,
1993, respectively. Included in these contingent liabilities are approximately
$36,231,000 and $27,758,000, respectively of certain dealer receivables subject
to recourse agreements with ITT, NationsCredit, and John Deere Credit, Inc. On
March 26, 1992, the Company entered into a three year Inventory Floor-Plan
Finance Agreement with NationsCredit, whereby NationsCredit provides financing
to certain dealers subject to NationsCredit approval and full recourse to the
Company. In accordance with the agreement during fiscal 1993, the Company was
required to maintain deposits with NationsCredit of $4,000,000. The compensating
balance earned interest at the reference rate as defined in the agreement. The
$4,000,000 compensating balance has been included in cash and cash equivalents
at August 28, 1993. As of August 27, 1994, the deposits were no longer required.
In addition, ITT and John Deere Credit, Inc. provide financing to the Company's
dealers on a partial and full recourse basis. The Company had reserves of
$1,204,000 and $993,000 at August 27, 1994 and August 28, 1993, respectively,
for losses on repurchases and dealers subject to recourse provisions.
Historically, the Company's repurchases under these agreements have been
immaterial with losses of approximately $101,000, $295,000 and $160,000 recorded
during fiscal years 1994, 1993 and 1992, respectively.
The Company purchases Class A and Class C chassis and engines from General
Motors Corporation-Chevrolet Division and Ford Motor Company; Class C chassis
and engines from Volkswagen of America, Inc.; and Class A chassis and engines
from Oshkosh Truck Corporation and Spartan Motors, Inc.
The Company self-insures for product liability claims. Self-insurance retention
liability varies annually based on market conditions and ranges from $3,000,000
to $5,000,000 per occurrence and $9,000,000 to $12,000,000 in aggregate per
year. Liabilities in excess of these amounts are the responsibility of the
co-insurer.
During fiscal 1993, the Company recalled 1989 Spectrum motor homes (86 units).
As of August 27, 1994, the Company has recorded a $2,255,000 reserve for the
motor home recall.
The Federal Trade Commission (FTC) has been conducting an investigation of the
Company's LeSharo and Phasar motor homes, Centauri vans and utility vans
produced between 1983 and 1986. If the FTC should decide to issue a complaint
and seek consumer redress and other equitable relief, the Company believes it
would have meritorious defenses to the same.
From time to time, the Company is involved in various legal proceedings which
are in the ordinary course of its business, some of which are covered in whole
or in part by insurance. Counsel for the Company, based on his present knowledge
of pending legal proceedings and after consultation with trial counsel, has
advised the Company that, while the outcome of litigation is uncertain, he is of
the opinion that it is unlikely that these proceedings will result in any
recovery which will materially exceed the Company's reserve for estimated
losses. On the basis of such advice, management is of the opinion that the
pending legal proceedings will not have any material adverse effect on the
Company's financial position, results of operations or liquidity.
NOTE 12: INCOME TAXES
The components of the provision (credit) for income taxes for continuing
operations are as follows:
Year ended
August 27, August 28, August 29,
(dollars in thousands) 1994 1993 1992
Current $ 3,649 $ 253 $96
Deferred (4,961) (1,340) --
$(1,312) $(1,087) $96
The following is a reconciliation of the U.S. statutory tax rate to the
effective income tax rates for continuing operations and before the cumulative
effect of accounting changes:
Year ended
August 27, 1994 August 28, 1993 August 29, 1992
U.S. federal statutory rate 35.0% 34.0% (34.0)%
Cash surrender value (6.6) (10.6) --
Life insurance premiums 7.4 10.6 --
Exempt investment income (1.5) -- (10.7)
Tax credits (10.8) (4.0) (21.5)
(Recorded) unrecorded tax benefits (32.5) (32.7) 80.5
Effect of minority interest .4 (1.0) (14.3)
IRS settlement -- (13.3) --
Other .5 3.7 5.7
Total (8.1)% (13.3)% 5.7%
The tax effect of significant items comprising the Company's net deferred tax
asset are as follows:
August 27, 1994 August 28,1993
--------------------------------------- --------------
(dollars in thousands) Assets Liabilities Total Total
CURRENT
Miscellaneous reserves $ 3,482 $ (201) $ 3,281 $ 2,487
Non-deductible warranty reserves 1,245 -- 1,245 1,391
Bad debt reserves 967 -- 967 1,161
Self-insurance reserve 1,088 -- 1,088 1,886
Less valuation allowance (4,329) -- (4,329) (6,414)
Subtotal 2,453 (201) 2,252 511
NONCURRENT
Postretirement health care benefits 8,074 -- 8,074 --
Deferred compensation 7,424 -- 7,424 6,675
Commercial vehicle reserve -- -- -- 1,092
Property basis differences 319 (2,211) (1,892) (1,687)
AMT credit 1,494 -- 1,494 1,340
Tax credits -- -- -- 1,630
Less valuation allowance (11,051) -- (11,051) (8,221)
Subtotal 6,260 (2,211) 4,049 829
Total $ 8,713 $(2,412) $ 6,301 $ 1,340
As discussed in note 1, in fiscal 1993, the Company adopted SFAS No. 109 which
permits the recognition of future tax benefits only to the extent that
realization of such benefits are more likely than not. The likelihood of
realizing the Company's gross deferred tax asset (and reduction of the valuation
allowance) was reviewed at the beginning of fiscal 1993 and is reviewed and
updated periodically with any required adjustments recorded in the period in
which the developments on which they are based become known.
Upon adoption of SFAS No. 109 at the beginning of fiscal 1993, the Company
recorded $16.9 million of deferred tax assets which represented future tax
benefits resulting from differences in the tax basis of assets and liabilities
versus their financial accounting basis. At the same time, the full amount of
the $16.9 million deferred tax asset was offset by recognizing a deferred tax
asset valuation allowance due to the uncertainty of realizing these future tax
benefits as a result of the Company's losses in the preceding four years.
Accordingly, there was no cumulative effect of this change in accounting
principle in fiscal 1993.
In fiscal 1994, the Company recorded a $1.3 million tax benefit due to the level
of earnings achieved in fiscal 1994 which increased the likelihood of the
Company realizing a portion of its gross deferred tax assets in the future.
During the second quarter of fiscal 1993, the Company received notice that the
Joint Committee on Taxation approved the IRS audits of the Company's tax returns
for fiscal 1986 through 1988. As a result, the Company recorded an income tax
benefit of $1,087,000 from the reversal of income tax reserves previously
recorded for the pending IRS audits. However, no additional tax benefits were
recorded in fiscal 1993 due to the continuing uncertainty of the Company's
ability to realize its deferred tax assets.
Note 13: Supplementary Income Statement Information Supplementary information
for continuing operations is as follows:
Year ended
August 27, August 28, August 29,
(dollars in thousands) 1994 1993 1992
Depreciation $7,748 $7,767 $8,098
Advertising 7,656 5,287 4,478
Maintenance and repairs 6,277 5,577 4,130
Research and development 1,704 1,077 1,820
NOTE 14: FINANCIAL INCOME AND EXPENSE
The following is a reconciliation of financial expense:
Year ended
(dollars in thousands) August 27,1994 August 28, 1993 August 29, 1992
Net realized gains (losses) on sale of marketable securities $ 257 $ 355 $(592)
Net unrealized losses on marketable equity securities (652) (50) (33)
Gains (losses) on foreign currency transactions (88) (245) 59
Interest income from investments and receivables 1,032 407 216
Dividend income 137 35 168
Interest expense (1,347) (598) (403)
$ (661) $ (96) $(585)
NOTE 15: DIVIDEND DECLARED
On October 20, 1994, the Board of Directors declared a cash dividend of $.10 per
common share payable January 6, 1995, to shareholders of record December 5,
1994.
NOTE 16: STOCK OPTION PLANS
Options to purchase common stock have been granted at 100 percent of the market
price at time of grant, generally pursuant to plans approved by the
shareholders. A summary of stock option activity for the years ended August 27,
1994, August 28, 1993 and August 29, 1992 is as follows:
1994 1993 1992
Shares Price Shares Price Shares Price
Outstanding at beginning of year 1,028,000 $4-$18 1,103,100 $4-$18 1,033,934 $4-$18
Options granted 170,000 9 10,000 9 175,000 4-5
Options exercised (92,500) 4-6 (59,500) 4-6 (3,550) 5
Options cancelled (205,000) 4-15 (25,600) 6-15 (102,284) 5-15
Outstanding at end of year 900,500 $4-$18 1,028,000 $4-$18 1,103,100 $4-$18
Options for 674,100, 817,000 and 600,100 shares at exercise prices of $4-$18
were exercisable at August 27, 1994, August 28, 1993 and August 29, 1992,
respectively
NOTE 17: SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the year for:
Year ended
(dollars in thousands) August 27,1994 August 28, 1993 August 29, 1992
Interest $ 927 $467 $576
Income taxes 4,269 242 309
NOTE 18: RELATED PARTY INFORMATION
The Company's chairman of the board and his spouse own 20 percent of the common
stock of Cycle-Sat.
During fiscal 1992, the Company and John K. Hanson made additional capital
contributions to Cycle-Sat of $10,000,000 (by conversion of previous advances to
equity) and $2,500,000, respectively.
The Company is leasing certain facilities, capital equip ment, and other items
which were acquired by the Company at an approximate aggregate cost of
$1,200,000, as of August 27, 1994, to Cycle-Sat under leases with various
expiration dates within the next two fiscal years. In addition, inter-company
advances from the Company to Cycle-Sat aggregated $0, $1,096,000 and $0 at
August 27, 1994, August 28, 1993 and August 29, 1992, respectively. Interest on
advances at August 28, 1993 was charged at prime plus 2 percent. All lease
transactions and inter-company advances are eliminated in consolidation.
NOTE 19: BUSINESS SEGMENT INFORMATION
The Company determined it was appropriate, for fiscal 1994, to define its
operations into three business segments: Recreation Vehicles and Other
Manufactured Products, which includes all data relative to the manufacturing and
selling of its recreational and other manufactured products; Satellite Courier,
which relates to Cycle-Sat's satellite courier and tape duplication business;
and Financing, which relates to the WAC subsidiary operation. Identifiable
assets are those assets used in the operations of each industry seg ment.
General Corporate assets consist of cash and cash equivalents, marketable
securities, deferred income taxes and other corporate assets. General Corporate
income and expenses include administrative costs. Inter-segment sales and
expenses are not significant.
For the years ended August 27, 1994, August 28, 1993 and August 29, 1992, the
Company's segment informa tion for continuing operations is as follows:
Recreation Vehicles
and Other Electronic
Manufactured Satellite Component General
(dollars in thousands) Products Courier Assembly(2) Financing Corporate Total
1994
Net revenues $432,406 $ 18,879 $ -- $ 831 $ -- $ 452,116
Operating profit (loss)
from continuing
operations 16,740(1) 1,139 -- NA* (1,825) 16,054
Identifiable assets 138,884 9,919 -- 11,373 23,783 183,959
Depreciation and
amortization 4,903 2,299 -- 10 586 7,798
Capital expenditures 7,923 381 -- 16 1,212 9,532
Summary information for the Germany subsidiary is as follows: Net revenues -
$3,456, Operating loss from operations - $(892), Identifiable assets - $5,939.
These amounts are included in the Recreation Vehicles and Other Manufactured
Products segment above.
1993
Net revenues $364,860 $ 14,837 $ 3,791 $ 595 -- $ 384,083
Operating profit (loss)
from continuing
operations 12,888 (1,873) (108) NA* (2,296) 8,611
Identifiable assets 110,608 10,361 --(2) 9,936 26,145 157,050
Depreciation and
amortization 4,916 2,246 92 4 703 7,961
Capital expenditures 5,979 1,288 33 17 354 7,671
Summary information for the Germany subsidiary is as follows: Net revenues -
$3,184, Operating loss from operations - $(562), Identifiable assets - $3,779.
These amounts are included in the Recreation Vehicles and Other Manufactured
Products segment above.
1992
Net revenues $281,124 $ 10,210 $ 3,649 $ 11 -- $ 294,994
Operating profit (loss)
from continuing
operations 2,879(1) (3,583) 23 NA* (1,508) (2,189)
Identifiable assets 98,013 9,412 2,211 3,479 25,881 138,996
Depreciation and
amortization 5,551 2,027 79 3 663 8,323
Capital expenditures 2,086 479 239 -- 236 3,040
In fiscal 1992, the Company formed a subsidiary in Germany to sell recreation
vehicles in Europe. Summary information for the Germany subsidiary is as
follows: Net revenues - $1,037, Operating loss from operations - $(155),
Identifiable assets - $1,902. These amounts are included in the Recreation
Vehicles and Other Manufactured Products segment above.
*Excludes financing operations as they do not report operating profit.
(1)See note 1 regarding the cumulative effect of accounting changes which
principally affect this segment.
(2)The Electronic Component Assembly segment, North Iowa Electronics, Inc., was
sold by the Company during fiscal 1993.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
We have audited the consolidated balance sheets of Winnebago Industries, Inc.,
and subsidiaries (the Company) as of August 27, 1994 and August 28, 1993 and the
related statements of operations, cash flows and changes in stockholders' equity
for each of the three years in the period ended August 27, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Winnebago Industries, Inc. and
subsidiaries at August 27, 1994 and August 28, 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
August 27, 1994 in conformity with generally accepted accounting principles.
As discussed in note 1 to the financial statements, the Company changed its
method of accounting due to required new accounting standards for individual
deferred compensation contracts during the year ended August 29, 1992, changed
its method of accounting for income taxes during the year ended August 28, 1993,
and changed its method of accounting for postretirement health care and other
benefits during the year ended August 27, 1994.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
October 21, 1994
DIRECTORS AND OFFICERS
DIRECTORS
John K. Hanson
Chairman of the Board, Winnebago Industries, Inc.
Fred G. Dohrmann
President and Chief Executive Officer, Winnebago Industries, Inc.
Gerald E. Boman
Former Senior Vice President, Winnebago Industries, Inc.
David G. Croonquist
Former Director and member of the Executive Committee,
H.B. Fuller Company
Keith D. Elwick
Former Executive Officer,
Chromalloy Farm and Industrial Equipment Co.
Joseph M. Shuster
Chairman, Teltech
Frederick M. Zimmerman
Department Chair and Director of Graduate Programs in
Manufacturing Engineering, The University of St. Thomas
Francis L. Zrostlik
President/Director, Stellar Industries
Luise V. Hanson
Director Emeritus
OFFICERS
John K. Hanson
Chairman of the Board
Fred G. Dohrmann
President and Chief Executive Officer
Edwin F. Barker
Vice President, Controller and Chief Financial Officer
Raymond M. Beebe
Vice President, General Counsel and Secretary
Jerome V. Clouse
Vice President, Treasurer and International Development
Sharon L. Hansen
Vice President, Administration
Paul D. Hanson
Vice President, Strategic Planning
Bruce D. Hertzke
Vice President, Operations
James P. Jaskoviak
Vice President, Sales and Marketing
SHAREHOLDER INFORMATION
PUBLICATIONS
A notice of Annual Meeting of Shareholders and Proxy Statement is furnished to
shareholders in advance of the annual meeting.
Copies of the Form 10-K (without exhibits), required to be filed by the Company
with the Securities and Exchange Commission, may be obtained without charge from
the corporate offices as follows:
Public Relations Department
Winnebago Industries, Inc.
P.O. Box 152
605 West Crystal Lake Road
Forest City, Iowa 50436
Telephone: (515) 582-3535
SHAREHOLDER ACCOUNT ASSISTANCE
Registration and Transfer Agent to contact for address changes, account
certificates and stock holdings:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange, P.O. Box 738
South St. Paul, Minnesota 55075-0738
Telephone: (800) 468-9716 or (612) 450-4064
ANNUAL MEETING
The Annual Meeting for shareholders will be held on Wednesday, December 14, 1994
at 7:30 p.m. (CST) in Friendship Hall, Highway 69 South, Forest City, Iowa.
AUDITOR
Deloitte & Touche LLP
400 One Financial Plaza
120 South Sixth Street
Minneapolis, Minnesota 55402-1844
Winnebago Industries, Inc.
P.O. Box 152
Forest City, Iowa 50436
Bulk Rate
U.S. Postage
PAID
Minneapolis, MN
Permit No. 43
EXHIBIT 21
List of Subsidiaries
Jurisdiction Percent
of of
Name of Corporation Incorporation Ownership
Winnebago Industries, Inc. Iowa Parent
Winnebago International Corporation Iowa 100%
Winnebago Realty Corporation Iowa 100%
Winnebago Acceptance Corporation Iowa 100%
Winnebago R.V., Inc. Delaware 100%
Winnebago Products, Inc. Iowa 100%
Winnebago Industries Europe GmbH Germany 100%
Cycle-Sat, Inc. Iowa 80%
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
2-40316, No. 2-73221, No. 2-82109, No. 33-21757, and No. 33-59930 of Winnebago
Industries, Inc. on Form S-8 of our reports dated October 21, 1994 appearing in
and incorporated by reference in the Annual Report on Form 10-K of Winnebago
Industries, Inc. for the year ended August 27, 1994.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
November 14, 1994
5
YEAR
AUG-27-1994
AUG-29-1994
847
3,301
46,991
1,824
55,450
110,887
125,568
83,970
183,959
52,364
0
12,911
0
0
66,799
183,959
452,116
452,116
383,468
383,468
51,854
0
661
16,133
(1,312)
17,445
0
0
(20,420)
(20,420)
(.12)
0
