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 31, 1997
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 25,469,453 shares of $.50 par value common stock outstanding on July
10, 1997.
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
MAY 31, AUGUST 31,
ASSETS 1997 1996
- ------------------------------------------------------ -------- ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 46,026 $ 797
Marketable securities -- 4,316
Receivables, less allowance for doubtful
accounts ($1,424 and $702, respectively) 28,779 30,029
Dealer financing receivables less allowance
for doubtful accounts ($184 and $197, respectively) 10,512 11,491
Inventories 52,524 63,103
Prepaid expenses 3,082 3,253
Deferred income taxes 6,343 6,343
Current assets of discontinued operations -- 7,285
-------- --------
Total current assets 147,266 126,617
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,500 1,501
Buildings 44,055 43,952
Machinery and equipment 67,455 67,456
Transportation equipment 5,084 7,878
-------- --------
118,094 120,787
Less accumulated depreciation 82,500 80,858
-------- --------
Total property and equipment, net 35,594 39,929
-------- --------
LONG-TERM NOTES RECEIVABLE, less allowances
($1,197 and $797, respectively) 3,918 3,918
-------- --------
INVESTMENT IN LIFE INSURANCE 17,267 16,821
-------- --------
DEFERRED INCOME TAXES, NET 14,548 14,548
-------- --------
OTHER ASSETS 3,501 3,906
-------- --------
LONG-TERM ASSETS OF DISCONTINUED OPERATIONS -- 14,857
-------- --------
TOTAL ASSETS $222,094 $220,596
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MAY 31, AUGUST 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ----------------------------------------------------------------------- -------- ----------
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 153 $ 1,866
Accounts payable, trade 19,906 20,232
Current liabilities of discontinued operations -- 17,532
Provision for loss on disposal of electronic component assembly segment -- 4,074
Income tax payable 4,760 --
Accrued expenses:
Insurance 2,913 2,947
Product warranties 3,526 3,489
Vacation liability 3,166 3,116
Promotional 6,467 2,193
Other 9,306 9,013
-------- --------
Total current liabilities 50,197 64,462
-------- --------
LONG-TERM DEBT 1,403 1,692
-------- --------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 47,965 46,937
-------- --------
MINORITY INTEREST IN DISCONTINUED OPERATIONS -- 2,194
-------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,927 12,920
Additional paid-in capital 23,187 23,723
Reinvested earnings 90,902 74,221
-------- --------
127,016 110,864
Less treasury stock, at cost 4,487 5,553
-------- --------
Total stockholders' equity 122,529 105,311
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $222,094 $220,596
======== ========
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 THIRTY-NINE FORTY
WEEKS ENDED WEEKS ENDED WEEKS ENDED
--------------------- ----------- -----------
May 31, June 1, May 31, June 1,
1997 1996 1997 1996
-------- -------- -------- --------
Net revenues $117,226 $144,363 $336,820 $364,259
Cost of goods sold 101,046 124,171 295,362 314,576
-------- -------- -------- --------
Gross profit 16,180 20,192 41,458 49,683
-------- -------- -------- --------
Operating expenses:
Selling and delivery 6,998 6,314 19,999 17,892
General and administrative 3,668 6,433 15,419 17,506
-------- -------- -------- --------
Total operating expenses 10,666 12,747 35,418 35,398
-------- -------- -------- --------
Operating income 5,514 7,445 6,040 14,285
Financial income, net 350 271 1,464 978
-------- -------- -------- --------
Pre-tax income from continuing operations 5,864 7,716 7,504 15,263
Provision for taxes 2,144 2,322 4,752 4,999
-------- -------- -------- --------
Income from continuing operations 3,720 5,394 2,752 10,264
Discontinued operations:
Income from discontinued Cycle-Sat operations
(less applicable income tax provisions of $8 and
$165, respectively) -- 17 -- 375
Gain from sale of discontinued Cycle-Sat subsidiary
(includes a loss on operations of $160 less
applicable income tax credits of $123 and a
gain on disposal of $16,632 after income taxes
of $13,462) -- -- 16,472 --
Net income $ 3,720 $ 5,411 $ 19,224 $ 10,639
======== ======== ======== ========
Net income per common share:
Continuing operations $ .15 $ .21 $ .11 $ .41
Discontinued operations -- -- -- .01
Gain from sale of Cycle-Sat -- -- .65 --
-------- -------- -------- --------
Net income $ .15 $ .21 $ .76 $ .42
======== ======== ======== ========
Weighted average number of
shares of common stock
outstanding 25,460 25,352 25,423 25,348
======== ======== ======== ========
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 equivalent THIRTY-NINE FORTY
WEEKS ENDED WEEKS ENDED
----------- -----------
May 31, June 1,
1997 1996
-------- --------
Cash flows from operating activities:
Net income $ 19,224 $ 10,639
Adjustments to reconcile net income
to net cash from operating activities:
Pre-tax gain on sale of Cycle-Sat subsidiary (29,811) --
Depreciation and amortization 5,437 4,947
Realized and unrealized gains on investments, net (137) (381)
Investments in trading securities -- (10,157)
Proceeds from sale of trading securities 4,453 6,742
Other 1,130 279
Change in assets and liabilities:
Decrease in accounts receivable 1,273 2,461
Decrease (increase) in inventories 10,569 (2,301)
Increase in accounts payable and accrued expenses 3,898 11,740
Increase in postretirement benefits 1,028 2,432
Other (2,194) (4,765)
-------- --------
Net cash provided by operating activities 14,870 21,636
-------- --------
Cash flows provided (used) by investing activities:
Gross proceeds from the sale of Cycle-Sat subsidiary 55,883 --
Payment to minority shareholder for sale of Cycle-Sat (7,160) --
Purchases of property and equipment (3,125) (5,168)
Investments in dealer receivables (28,782) (32,822)
Collections of dealer receivables 29,191 29,775
Other 1,580 (1,204)
-------- --------
Net cash provided (used) by investing activities 47,587 (9,419)
-------- --------
Cash flows used by financing activities and capital transactions:
Payment of long-term debt of discontinued operation (13,220) --
Payments of long-term debt and capital leases (2,002) (941)
Payment of cash dividends (2,542) (5,070)
Other 536 83
-------- --------
Net cash used by financing activities and
capital transactions (17,228) (5,928)
-------- --------
Net increase in cash and cash equivalents 45,229 6,289
Cash and cash equivalents - beginning of period 797 8,508
-------- --------
Cash and cash equivalents - end of period $ 46,026 $ 14,797
======== ========
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 31, 1997, the consolidated results of
operations for the 39 and 13 weeks ended May 31, 1997 and the 40 and 13
weeks ended June 1, 1996, and the consolidated cash flows for the 39
weeks ended May 31, 1997 and the 40 weeks ended June 1, 1996. The results
of operations for the 39 weeks ended May 31, 1997, are not necessarily
indicative of the results to be expected for the full year.
2. 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 31, August 31,
1997 1996
------------- -------------
Finished goods............... $ 25,815 $ 28,228
Work in process.............. 13,856 13,915
Raw materials................ 30,145 37,537
------------- -------------
69,816 79,680
LIFO reserve................. (17,292) (16,577)
------------- -------------
$ 52,524 $ 63,103
============= =============
3. Since March 1992, the Company has had a financing and security agreement
with NationsCredit Corporation (NationsCredit). Terms of the agreement
limit borrowings to the lesser of $30,000,000 or 75 percent of eligible
inventory (fully manufactured recreation vehicles and motor home chassis
and related components). Borrowings are secured by the Company's
receivables and inventory. Borrowings under the agreement bear interest
at the prime rate, as defined in the agreement, plus 50 basis points. The
line of credit is available through March 31, 1998, 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 also
contains certain restrictive covenants including maintenance of minimum
net worth, working capital and current ratio. As of May 31, 1997, the
Company was in compliance with these covenants. There were no outstanding
borrowings under the line of credit at May 31, 1997 or August 31, 1996.
4. 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 $147,345,000 and
$129,135,000 under repurchase agreements with lending institutions as of
May 31, 1997 and August 31, 1996, respectively. Included in these
contingent liabilities as of May 31, 1997 and August 31, 1996 are
approximately $33,297,000 and $33,216,000, respectively, of certain
dealer receivables subject to recourse agreements with NationsCredit and
Green Tree Financial Corporation.
5. Fiscal year-to-date the Company paid cash for the following (dollars in
thousands):
Thirty-Nine Forty
Weeks Ended Weeks Ended
----------- -----------
May 31, June 1,
1997 1996
----------- -----------
Interest $ 522 $ 1,511
Income taxes 14,035 3,335
6. The Company, as a result of the continuing sluggish RV market conditions
in central Europe, decided to close the rental and retail operations of
its subsidiary, Winnebago Industries Europe GmbH (WIE), located in
Kirkel, Germany. The 39 weeks ended May 31, 1997 were negatively impacted
by charges aggregating $5 million as a result of this decision. The $5
million of charges are principally reflected in cost of goods sold,
selling expenses and general and administrative expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 31, 1997 Compared to Thirteen Weeks Ended June 1, 1996
Net revenues for the 13 weeks ended May 31, 1997 were $117,226,000, a decrease
of $27,137,000, or 18.8 percent from the 13 week period ended June 1, 1996.
Motor home shipments (Classes A and C) were 2,019 units, a decrease of 639
units, or 24.0 percent, during the third quarter of fiscal 1997 compared to the
third quarter of fiscal 1996. Results for the quarter were negatively impacted
by the performance of the Company's Class A motor home products in the
marketplace and by the softness in the motor home segment of the RV market.
Management believes that long-term prospects remain bright as the Company
continues to develop products to meet the increasing demands of the "baby boom"
market segment. Evidencing this demand, the Company's Class C products have
continued to gain RV market share for the past 26 consecutive months.
Gross profit, as a percent of net revenues, was 13.8 percent for the 13 weeks
ended May 31, 1997 compared to 14.0 percent for the 13 weeks ended June 1, 1996.
This decrease can be attributed primarily to the reduced sales volume.
Selling and delivery expenses were $6,998,000 or 6.0 percent of net revenues
during the third quarter of fiscal 1997 compared to $6,314,000 or 4.4 percent of
net revenues during the third quarter of fiscal 1996. The increases in dollars
and percentage are due to increases in product promotional expenses.
General and administrative expenses decreased by $2,765,000 to $3,668,000 when
comparing the 13 weeks ended May 31, 1997 to the 13 weeks ended June 1, 1996 and
decreased as a percentage of net revenues to 3.1 percent from 4.5 percent. The
decreases in dollars and percentage were caused primarily by a reduction in the
postretirement benefit obligation caused by revisions in certain assumptions
used in estimating the cost of the Company's postretirement health care plan
which caused an unrecognized net gain that will be amortized over the average
remaining service period of active plan participants (estimated at 18 years).
Also contributing to the decrease in general and administrative expenses when
comparing the two periods were other reductions in the Company's overall
compensation and bonus expenses during the 13 weeks ended May 31, 1997.
The Company had net financial income of $350,000 for the third quarter of fiscal
1997 compared to net financial income of $271,000 for the comparable quarter of
fiscal 1996. During the 13 weeks ended May 31, 1997, the Company recorded
$617,000 of interest income and losses of $267,000 in foreign currency
transactions. During the 13 weeks ended June 1, 1996, the Company recorded
$232,000 of realized and unrealized gains in its trading securities portfolio,
$192,000 of interest income and losses of $153,000 in foreign currency
transactions.
For the 13 weeks ended May 31, 1997, the Company had income from continuing
operations before taxes of $5,864,000 and a provision for taxes of $2,144,000
resulting in net income of $3,720,000 or $.15 per share. For the comparable
period of fiscal 1996, the Company had pre-tax income of $7,716,000 from
continuing operations and a provision for taxes of $2,322,000 resulting in
income from continuing operations of $5,394,000 and income from discontinued
Cycle-Sat operations of $17,000 (net of income tax provisions of $8,000)
resulting in net income of $5,411,000 or $.21 per share.
Thirty-Nine Weeks Ended May 31, 1997 Compared to Forty Weeks Ended June 1, 1996
Net revenues for the 39 weeks ended May 31, 1997 were $336,820,000, a decrease
of $27,439,000, or 7.5 percent from the 40 week period ended June 1, 1996. Motor
home shipments (Classes A and C) were 5,805 units, a decrease of 785 units, or
11.9 percent, during the 39 weeks ended May 31, 1997 when compared to the 40
weeks ended June 1, 1996. The average sales price of motor home shipments
increased during the period ended May 31, 1997 when compared to the period ended
June 1, 1996 which accounted for the revenue percentage difference compared to
the unit percentage difference. Other manufactured products revenues for the 39
weeks ended May 31, 1997 increased when compared to the 40 weeks ended June 1,
1996 which also contributed to the percentage difference discussed previously.
Gross profit, as a percent of net revenues, was 12.3 percent for the 39 weeks
ended May 31, 1997 compared to 13.6 percent for the 40 weeks ended June 1, 1996.
This decrease can be attributed primarily to reductions in the valuation of the
units and parts inventories at WIE, by an increase in discount programs to sell
specific units in the U.S. marketplace and by reduced sales volume.
Selling and delivery expenses were $19,999,000, or 5.9 percent of net revenues
during the 39 weeks ended May 31, 1997 compared to $17,892,000, or 4.9 percent
of net revenues during the 40 weeks ended June 1, 1996. The increases in dollars
and percentage are due to the increase in product promotion expenses and
increased spending at WIE.
General and administrative expenses decreased to $15,419,000, or 4.6 percent of
net revenues for the 39 weeks ended May 31, 1997 compared to $17,506,000, or 4.8
percent of net revenues for the 40 weeks ended June 1, 1996. The decreases were
primarily caused by decreases in the Company's compensation and bonus expenses,
product liability reserves and previously discussed reductions in the
postretirement benefits. Partially offsetting these decreases were increases in
the legal reserve and the allowance for doubtful receivable at WIE and an
increase in the bad debt reserve at the Company's finance subsidiary, Winnebago
Acceptance Corporation.
The Company had net financial income of $1,464,000 for the 39 weeks ended May
31, 1997 compared to net financial income of $978,000 for the forty weeks ended
June 1, 1996. During the 39 weeks ended May 31, 1997, the Company recorded
$1,562,000 of interest income, $137,000 of realized and unrealized gains in its
trading securities portfolio and losses of $235,000 in foreign currency
transactions. During the 40 weeks ended June 1, 1996, the Company recorded
$673,000 of interest income, $381,000 of realized and unrealized gains in its
trading securities portfolio and losses of $76,000 in foreign currency
transactions.
For the 39 weeks ended May 31, 1997, the Company had pre-tax income from
operations of $13,882,000 and a pre-tax loss from WIE of $6,378,000 of which
$5,000,000 was due to the write down of selected assets caused by excess
inventory buildup and the Company's decision to close the rental and retail
operations of WIE (See Note 6). The $6,378,000 pre-tax loss of WIE is considered
an operating loss of a foreign subsidiary that does not qualify for a tax
deduction, therefore, the Company was required to record a provision for taxes
of $4,752,000 resulting in income from continuing operations for the 39 weeks
ended May 31, 1997 of $2,752,000 or $.11 per share.
For the 39 weeks ended May 31, 1997, the Company recorded a gain from the sale
of the discontinued Cycle-Sat subsidiary of $16,472,000 (net of income taxes of
$13,339,000), or $.65 per share.
For the 40 weeks ended June 1, 1996, the Company reported income from
discontinued Cycle-Sat operations of $375,000 (net of income tax provisions of
$165,000), or $.01 per share.
During the 39 weeks ended May 31, 1997, the Company had net income of
$19,224,000, or $.76 per share, compared to $10,639,000 or $.42 per share for
the 40 weeks ended June 1, 1996.
LIQUIDITY AND 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 May 31, 1997, working capital was $97,069,000, an increase of $34,914,000
from the amount at August 31, 1996. The increase in the Company's working
capital was caused primarily by proceeds from the sale of the Cycle-Sat
subsidiary. The Company's principal sources and uses of cash during the 39 weeks
ended May 31, 1997 are set forth in the unaudited consolidated condensed
statement of cash flows for that period.
Principal known demands at May 31, 1997 on the Company's liquid assets for the
remainder of fiscal 1997 include approximately $5,000,000 of income taxes
partially due to the gain on the sale of Cycle-Sat, $2,500,000 of cash dividends
declared by the Board of Directors on March 20, 1997 (payable July 7, 1997) and
$1,300,000 of capital expenditures (primarily equipment replacement).
Management currently expects its cash on hand, funds from operations and
borrowings available under existing credit facilities to be sufficient to cover
both short-term and long-term operating requirements.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128, EARNINGS PER SHARE.
The objective of the statement is to simplify the standards for computing
earnings per share and make them more comparable to recently issued
international accounting standards. This statement supersedes Accounting
Principles Board (APB) Opinion No. 15, EARNINGS PER SHARE. SFAS No. 128 provides
guidance on the calculation of "basic earnings per share" which excludes
dilutive securities, and "diluted earnings per share," which gives effect to all
dilutive potential common shares outstanding during the period. The statement is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. Earlier application is not permitted. After adoption,
all prior periods presented must be restated to conform to the provisions of
this statement. Basic and diluted pro forma earnings per share computed under
the new statement for the thirteen week periods ended May 31, 1997 and June 1,
1996, the thirty-nine week period ended May 31, 1997, and the forty week period
ended June 1, 1996 would be within one cent per share of the amounts shown in
the unaudited financial statements.
FORWARD LOOKING INFORMATION
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties, including, but not limited to demand from customers, effects of
competition, the general state of the economy, interest rates, consumer
confidence, changes in the product or customer mix or revenues and in the level
of operating expenses and other factors which may be disclosed throughout this
Form 10-Q. Any forecasts and projections in this report are "forward looking
statements," and are based on management's current expectations of the Company's
near-term results, based on current information available pertaining to the
Company, including the aforementioned risk factors. Actual results could differ
materially.
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 10, 1997 /s/ Fred G. Dohrmann
-------------------- ----------------------------------------
Fred G. Dohrmann
Chairman of the Board and Chief
Executive Officer
Date July 10, 1997 /s/ Edwin F. Barker
-------------------- ----------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
5
3-MOS
AUG-30-1997
MAY-31-1997
46,026
0
30,203
1,424
52,524
147,266
118,094
82,500
222,094
50,197
0
0
0
12,927
109,602
222,094
336,820
336,820
295,362
295,362
35,418
0
(1,464)
7,504
4,752
2,752
16,472
0
0
19,224
.76
0
