SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 27, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________
Commission file number 1-6403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0803978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 582-3535
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____.
There were 25,338,042 shares of $.50 par value common stock outstanding on July
6, 1995.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
PART I. FINANCIAL INFORMATION: (Interim period information unaudited)
Consolidated Balance Sheets 1 & 2
Unaudited Consolidated Statements of Operations 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations 7 - 9
PART II. OTHER INFORMATION 10 & 11
PART I FINANCIAL INFORMATION
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
ASSETS May 27, 1995 August 27, 1994
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 2,118 $ 847
Marketable securities 2,623 3,301
Receivables, less allowance for doubtful
accounts ($1,586 and $1,545, respectively) 36,010 36,602
Dealer financing receivables less allowance
for doubtful accounts ($309 and $279, respectively) 8,643 8,565
Prepaid income taxes 6,498 - - -
Inventories 68,389 55,450
Prepaid expenses 3,815 3,870
Deferred income taxes 6,581 2,252
Total current assets 134,677 110,887
PROPERTY AND EQUIPMENT, at cost
Land 1,562 1,539
Buildings 42,218 40,905
Machinery and equipment 78,668 75,139
Transportation equipment 7,958 7,985
130,406 125,568
Less accumulated depreciation 87,456 83,970
Total property and equipment, net 42,950 41,598
LONG-TERM NOTES RECEIVABLE, less allowances
($950 and $2,024, respectively) 2,228 4,884
INVESTMENT IN LIFE INSURANCE 16,320 15,479
NET DEFERRED INCOME TAXES 5,720 4,049
OTHER ASSETS 14,785 4,851
TOTAL ASSETS $ 216,680 $ 181,748
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
LIABILITIES AND STOCKHOLDERS' EQUITY May 27,1995 August 27, 1994
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,876 $ 2,504
Notes payable 3,000 2,300
Accounts payable, trade 21,733 24,985
Accrued expenses:
Insurance 4,472 4,175
Product warranties 3,844 3,557
Vacation liability 3,600 3,241
Promotional 6,284 2,111
Other 8,149 9,491
Total current liabilities 54,958 52,364
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 13,248 4,140
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 44,812 43,391
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,181 2,143
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,915 12,911
Additional paid-in capital 23,675 24,175
Reinvested earnings 70,490 49,270
107,080 86,356
Less treasury stock, at cost 5,599 6,646
Total stockholders' equity 101,481 79,710
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 216,680 $ 181,748
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands except per share data
Thirteen Weeks Ended Thirty-Nine Weeks Ended
May 27, May 28, May 27, May 28,
1995 1994 1995 1994
Revenues:
Manufactured products $ 118,338 $ 125,208 $ 354,066 $ 319,049
Services 6,755 4,458 17,234 14,174
Total net revenues 125,093 129,666 371,300 333,223
Costs and Expenses:
Cost of manufactured products 101,304 105,983 303,619 273,789
Cost of services 3,980 2,554 10,176 8,177
Selling and delivery 7,265 6,898 19,937 19,144
General and administrative 6,470 5,929 18,494 18,708
Other (income) expense (62) 189 45 359
Minority interest in net income
of consol. subsidiary 15 20 38 105
Total costs and expenses 118,972 121,573 352,309 320,282
Operating income 6,121 8,093 18,991 12,941
Financial income (expense) 457 (758) 1,281 (583)
Income from operations
before income taxes* 6,578 7,335 20,272 12,358
Provision (credit) for income taxes - - - - - - (6,000) - - -
Income from operations* 6,578 7,335 26,272 12,358
Cumulative effect of change
in accounting principle - - - - - - - - - (20,420)
Net income (loss) $ 6,578 $ 7,335 $ 26,272 $ (8,062)
Income (loss) per common share:
Income from operations* $ .26 $ .29 $ 1.04 $ .49
Cumulative effect of change
in accounting principle - - - - - - - - - (.81)
Net income (loss) $ .26 $ .29 $ 1.04 $ (.32)
Weighted average number of
shares of common stock
outstanding 25,317 25,209 25,268 25,170
* Before Cumulative Effect of Change in Accounting Principle.
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands
Increase (decrease) in cash and cash equivalents Thirty-Nine Weeks Ended
May 27,1995 May 28,1994
Cash flows from operating activities:
Net income (loss) $ 26,272 $ (8,062)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Cumulative effect of change in accounting principle - - - 20,420
Employee stock bonus plan - - - 437
Depreciation and amortization 6,166 5,804
Deferred income taxes (6,000) - - -
Realized and unrealized (losses) gains on investments, net (355) 276
Postretirement benefits other than pensions 1,421 3,149
Minority shareholders' portion of consolidated
subsidiary 38 105
Other 819 99
Change in assets and liabilities:
Decrease in accounts receivable 1,267 271
Increase in inventories (12,939) (5,966)
Increase (decrease) in accounts payable and accrued expenses 1,222 (4,262)
Decrease in other categories, net (6,443) (2,646)
Net cash provided by operating activities 11,468 9,625
Cash flows from investing activities:
Investments in marketable securities (3,135) (8,945)
Proceeds from the sale of marketable securities 4,168 7,231
Purchases of property and equipment (8,216) (6,565)
Investments in dealer receivables (25,607) (26,338)
Proceeds from dealer receivables 25,474 25,283
Investment in other assets and notes receivable (12,074) (4,205)
Other 3,214 842
Net cash used by investing activities (16,176) (12,697)
Cash flows from financing activities and capital transactions:
Net increase in notes payable - - - 2,130
Payments of long-term debt (1,399) (1,389)
Proceeds from issuance of long-term debt 11,879 858
Payments of cash dividends (5,052) - - -
Other 551 365
Net cash provided by financing activities and
capital transactions 5,979 1,964
Net increase (decrease) in cash and cash equivalents 1,271 (1,108)
Cash and cash equivalents - beginning of period 847 11,238
Cash and cash equivalents - end of period $ 2,118 $ 10,130
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of May 27, 1995, the consolidated results of
operations for the 13 and 39 weeks ended May 27, 1995 and May 28, 1994, and
the consolidated cash flows for the 39 weeks ended May 27, 1995 and May 28,
1994.
2. The results of operations for the 39 weeks ended May 27, 1995, are not
necessarily indicative of the results to be expected for the full year.
Service revenues, in the Consolidated Statements of Operations, consist of
revenues generated by Cycle-Sat, Inc. (Cycle-Sat) and Winnebago Acceptance
Corporation (WAC), subsidiaries of the Company.
3. Inventories are valued at the lower of cost or market, with cost being
determined under the last-in, first-out (LIFO) method and market defined as
net realizable value.
Inventories are composed of the following (dollars in thousands):
May 27, August 27,
1995 1994
Finished Goods.................... $ 29,914 $ 21,675
Work In Process................... 13,621 13,807
Raw Materials..................... 39,525 33,800
83,060 69,282
LIFO Reserve...................... 14,671 13,832
$ 68,389 $ 55,450
4. 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% 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
including maintenance of minimum net worth, working capital and debt to
equity ratio. As of May 27, 1995, the Company was in compliance with these
covenants. There were no outstanding borrowings under the line of credit at
May 27, 1995 or August 27, 1994.
On January 31, 1995, the Company and Cycle-Sat amended the line of credit
with Firstar Bank Cedar Rapids (Firstar) originally dated February 24,
1994. Terms of the amended agreement limit the amount advanced to the
lesser of $4,500,000 or the sum of the base of 80 percent of Cycle-Sat's
eligible accounts receivable and 50 percent of its inventory. The agreement
contains restrictive covenants related to the maintenance of a minimum
tangible net worth and other operating and debt ratios as defined in the
agreement. As of May 27, 1995, Cycle-Sat was in compliance with these
covenants. Borrowings under the line of credit are secured by Cycle-Sat's
accounts receivable and inventories and have been guaranteed by the
Company. The line of credit expires February 1, 1996. The outstanding
balance under the line of credit at May 27, 1995 was $3,000,000 with an
interest rate of 7.8125 percent per annum (90-day LIBOR plus 1.5 percent)
and at August 27, 1994, $2,300,000 with an interest rate of 9.0 percent per
annum. As of May 27, 1995, Cycle-Sat had $1,036,000 of unused borrowings
available.
5. It is customary practice for companies in the recreation vehicle industry
to enter into repurchase agreements with lending institutions which have
provided wholesale floor plan financing to dealers. The Company's
agreements provide for the repurchase of its products from the financing
institution in the event of repossession upon a dealer's default. The
Company was contingently liable for approximately $147,248,000 and
$118,954,000 under repurchase agreements with lending institutions as of
May 27, 1995, and August 27, 1994, respectively. Included in these
contingent liabilities are approximately $49,497,000 and $36,231,000,
respectively, of certain dealer receivables subject to recourse agreements
with ITT Commercial Finance Corporation, NationsCredit and John Deere
Credit, Inc.
6. Fiscal year-to-date the Company paid cash for the following (dollars in
thousands):
Thirty-Nine Weeks Ended
May 27, May 28,
1995 1994
Interest $1,023 $ 870
Income Taxes 6,989 2,809
7. At May 27, 1995, Postretirement Health Care and Deferred Compensation
Benefits included postretirement benefits related to health care and other
benefits of $24,148,000 and deferred compensation of $20,664,000.
Net postretirement benefit cost for the 13 and 39 weeks ended May 27, 1995
consisted of the following components:
Thirteen Thirty-Nine
Weeks Weeks
Service cost - benefits
earned during the period $ 262,000 $ 785,000
Interest cost on accumulated
postretirement benefit obligation 292,000 878,000
Amortization of (gain)/loss (95,000) (285,000)
$ 459,000 $ 1,378,000
8. At August 27, 1994, the Company had a valuation allowance of $15,400,000
related to its deferred tax assets due to uncertainty as to future
utilization of those assets. During 1995, the valuation allowance has been
reduced as income is earned. In addition, in the second quarter of fiscal
1995, the Company recognized a tax benefit of $6,000,000 due to continued
trend of earnings which increased the likelihood that the Company will
realize its gross deferred tax assets in the future thus eliminating the
need for a portion of the valuation allowance. Future changes in the
valuation allowance will depend upon future operating results.
A reconciliation of the expected income tax provision at Federal statutory
rates with the amount provided for the 13 and 39 weeks ended May 27, 1995
is as follows (dollars in thousands):
Thirteen Thirty-Nine
Weeks Weeks
U.S. Federal Statutory Rate $ 2,302 $ 7,095
Other (65) (224)
Reduction of Valuation Allowance (2,237) (12,871)
TOTAL $ -- $ (6,000)
For the 13 and 39 weeks ended May 28, 1994, the tax expense associated with
the current income was equal to the reduction of the valuation allowance.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 27, 1995 Compared to Thirteen Weeks Ended May 28, 1994
Net revenues of manufactured products for the 13 weeks ended May 27, 1995
decreased $6,870,000 or 5.5 percent from the 13 week period ended May 28, 1994.
Motor home shipments decreased by 261 units or 10.3 percent during the 13 weeks
ended May 27, 1995 when compared to the third quarter of fiscal 1994. The
reduction in Company's revenues during the third quarter of fiscal l995 when
compared to the third quarter of fiscal 1994 were a result of an industry-wide
softness in motor home sales activity due in part to interest rate increases.
The reduction in unit shipments reflects a larger reduction, as a percentage, as
the Company's shipments have shifted to larger units during fiscal 1995. Demands
for the Company's products should improve when interest rates trend downward and
become more stable in the future.
Service revenues for the 13 weeks ended May 27, 1995 increased $2,297,000 or
51.5 percent from the 13 weeks ended May 28, 1994. This increase is attributed
to increased revenues ($2,166,000 or 50.7 percent) by Cycle-Sat due to the
recent acquisition of the majority of the assets of the T.F.I. Division of MPO
Videotronics (T.F.I.).
Cost of manufactured products, as a percent of manufactured product revenue, was
85.6 percent for the 13 weeks ended May 27, 1995 compared to 84.6 percent for
the 13 weeks ended May 28, 1994. This increase is attributed to a reduction in
the production volume.
Cost of services, as a percent of service revenue, increased to 58.9 percent
from 57.3 percent when comparing the 13 weeks ended May 27, 1995 to the 13 weeks
ended May 28, 1994. This increase in percentage is attributed primarily to an
increase in Cycle-Sat's operating costs associated with the distribution of
commercials.
Selling and delivery expenses increased by $367,000 to 5.8 percent of net
revenue from 5.3 percent of net revenue when comparing the 13 weeks ended May
27, 1995 to the 13 weeks ended May 28, 1994. The primary reason for the increase
in dollars was an increase in the Company's promotional and advertising
expenses.
General and administrative expenses increased by $541,000 to 5.2 percent of net
revenue from 4.6 percent of net revenue when comparing the 13 weeks ended May
27, 1995 to the 13 weeks ended May 28, 1994. The primary reasons for the
increase in general and administrative expenses were increased costs incurred by
Cycle-Sat and by the Company's increases in provisions for product liability
expense during the thirteen weeks ended May 27, l995 when compared to the 13
weeks ended May 28, 1994.
The Company had net financial income of $457,000 for the 13 weeks ended May 27,
1995 compared to expense of $758,000 for the comparable period of fiscal 1994.
The Company recorded $72,000 of realized and unrealized gains compared to
$360,000 of losses in its marketable securities portfolio during the third
quarters of fiscal 1995 and 1994, respectively. The Company recorded $233,000 of
net interest expense during the 13 weeks ended May 27, 1995 compared to net
interest expense of $322,000 during the comparable period of fiscal 1994. Also
recorded were foreign exchange translation gains of $438,000 and losses of
$62,000 for the 13 week periods ended May 27, 1995 and May 28, 1994,
respectively.
For the 13 weeks ended May 27, 1995, the Company reported net income of
$6,578,000 or $.26 per share which included net income of $58,000 from Cycle-Sat
operations. For the 13 weeks ended May 28, 1994, the Company reported net income
of $7,335,000 or $.29 per share which included income of $80,000 from Cycle-Sat
operations.
Thirty-Nine Weeks Ended May 27, 1995 Compared to Thirty-Nine Weeks Ended May 28,
1994
Net revenues of manufactured products for the 39 weeks ended May 27, 1995
increased $35,017,000 or 11.0 percent from the 39 weeks ended May 28, 1994.
Motor home shipments increased by 352 units or 5.4 percent during the 39 weeks
ended May 27, 1995 when compared to the 39 weeks ended May 28, 1994. This growth
in the Company's revenues is attributed to the strong demand for the Company's
1995 model year products during the first half of the 1995 fiscal year.
Service revenues for the 39 weeks ended May 27, 1995 increased $3,060,000 or
21.6 percent from the 39 weeks ended May 28, 1994. This increase can be
attributed to an increase in revenues from established customers, revenues
generated with new customers and revenues generated through the recent
acquisition of T.F.I.
Cost of manufactured products, as a percent of manufactured product revenue, was
85.8 percent for both 39 week periods ending May 27, 1995 and May 28, 1994.
Cost of services, as a percent of service revenues, increased to 59.0 percent
from 57.7 percent when comparing the 39 weeks ended May 27, 1995 to the 39 weeks
ended May 28, 1994. This increase in percentage can be attributed primarily to
an increase in Cycle-Sat's operating costs associated with the distribution of
commercials.
Selling and delivery expenses increased by $793,000 but decreased to 5.4 percent
of net revenues from 5.7 percent of net revenues when comparing the 39 weeks
ended May 27, 1995 to the comparable period of fiscal 1994. This increase in
dollars can be attributed primarily to increases in the Company's promotional
and advertising expenses.
General and administrative expenses decreased by $214,000 when comparing
year-to-date fiscal 1995 to fiscal 1994. The decrease when comparing the two
periods can be attributed primarily to a reduction in the Company's cost for
postretirement benefits offset partially by increases in costs incurred by
Cycle-Sat and in the Company's provisions for product liability expenses.
The Company had other expense of $45,000 during the 39 weeks ended May 27, 1995
compared to expense of $359,000 during the 39 weeks ended May 28, 1994. The
primary reason for the decrease when comparing the two periods was an increase
in lease income from the Company's public warehousing activities.
The Company had net financial income of $1,281,000 for the 39 weeks ended May
27, 1995 compared to expense of $583,000 for the comparable period of fiscal
1994. The Company recorded foreign exchange translation gains of $706,000 during
the 39 weeks ended May 27, 1995 compared to losses of $35,000 during the 39
weeks ended May 28, 1994. Recorded during the 39 weeks ended May 27, 1995 was
$355,000 of realized and unrealized gains in the Company's marketable securities
portfolio compared to losses of $276,000 during the 39 weeks ended May 28, 1994.
The Company also recorded $3,000 and $257,000 of net interest expense during
year-to-date fiscal periods ended May 27, 1995 and May 28, 1994, respectively.
For the 39 weeks ended May 27, 1995, the Company reported net income of
$26,272,000 or $1.04 per share which included a $6,000,000 credit for income
taxes and income of $195,000 ($.01 per share) from Cycle-Sat operations. For the
39 weeks ended May 28, 1994, the Company reported income from operations of
$12,358,000 or $.49 per share which included income of $420,000 ($.02 per share)
from Cycle-Sat operations.
In fiscal 1994, the Company was required to adopt the 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. With the adoption of FASB No. 106, the 39 weeks
ended May 28, 1994 net loss was $8,062,000 or $.32 per share.
LIQUIDITY AND FINANCIAL CONDITION
Presently, the Company meets its working capital and capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally and funds from agreements with financial institutions.
At May 27, 1995, working capital was $79,719,000 an increase of $21,196,000 from
the amount at August 27, 1994. The Company's principal sources and uses of cash
during the 39 weeks ended May 27, 1995 are set forth in the unaudited
consolidated condensed statement of cash flows for that period.
Principal expected demands at May 27, 1995 on the Company's liquid assets for
the remainder of fiscal 1995 include approximately $1,900,000 for capital
expenditures consisting primarily of building additions, tooling, equipment
replacement and new equipment.
Based upon available cash, marketable securities and financing resources,
described in Note 4, management believes that the Company has adequate sources
of funds to meet its remaining fiscal 1995 cash requirements.
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) No exhibits are being filed as a part of this report.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
(Registrant)
Date July 6, 1995 /s/ Fred G. Dohrmann
Fred G. Dohrmann
President and Chief Executive Officer
Date July 6, 1995 /s/ Ed F. Barker
Ed F. Barker
Vice President, Controller and Chief
Financial Officer
5
1,000
3-MOS
AUG-26-1995
MAY-27-1995
2,118
2,623
46,548
1,895
68,389
134,677
130,406
87,456
216,680
54,958
0
12,915
0
0
88,566
216,680
125,093
125,093
105,284
105,284
13,688
0
(457)
6,578
0
6,578
0
0
0
6,578
.26
0
