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 November 26, 1994
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 42-0802678
(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
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 25,242,203 shares of $.50 par value common stock outstanding on
January 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 & 8
PART II. OTHER INFORMATION 9 & 10
PART I FINANCIAL INFORMATION
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
November 26, August 27,
ASSETS 1994 1994
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 9,301 $ 847
Marketable securities 2,979 3,301
Receivables, less allowance for doubtful
accounts ($1,585 and $1,545, respectively) 36,506 36,602
Dealer financing receivables less allowance
for doubtful accounts ($313 and $279, respectively) 9,910 8,565
Inventories 54,149 55,450
Prepaid expenses 3,883 3,870
Deferred income taxes 2,252 2,252
Total current assets 118,980 110,887
PROPERTY AND EQUIPMENT, at cost
Land 1,536 1,539
Buildings 41,102 40,905
Machinery and equipment 75,592 75,139
Transportation equipment 7,926 7,985
126,156 125,568
Less accumulated depreciation 84,618 83,970
Total property and equipment, net 41,538 41,598
LONG-TERM NOTES RECEIVABLE, less allowances
($1,110 and $2,024, respectively) 5,066 4,884
INVESTMENT IN LIFE INSURANCE 15,569 15,479
NET DEFERRED INCOME TAXES 4,049 4,049
OTHER ASSETS 4,667 4,851
TOTAL ASSETS $ 189,869 $ 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 November 26, August 27,
1994 1994
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,275 $ 2,504
Notes payable 2,300 2,300
Accounts payable, trade 25,515 24,985
Accrued expenses:
Insurance 4,471 4,175
Product warranties 3,608 3,557
Vacation liability 3,467 3,241
Promotional 2,960 2,111
Other 7,902 9,491
Total current liabilities 52,498 52,364
LT DEBT AND CAPITAL LEASE OBLIGATIONS 3,754 4,140
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 43,980 43,39
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,289 2,143
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,913 12,911
Additional paid-in capital 24,202 24,175
Reinvested earnings 56,879 49,270
93,994 86,356
Less treasury stock, at cost 6,646 6,646
Total stockholders' equity 87,348 79,710
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 189,869 $ 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
November 26, November 27,
1994 1993
Revenues:
Manufactured products $ 124,458 99,589
Service 6,301 4,967
Total net revenues 130,759 104,556
Costs and Expenses:
Cost of manufactured products 107,001 85,516
Cost of services 3,473 2,887
Selling and delivery 6,078 6,026
General and administrative 6,277 6,414
Other (income) expense (19) 76
Minority interest in net income
of consol. subsidiary 146 60
Total costs and expenses 122,956 100,979
Operating income 7,803 3,577
Financial (expense) income (194) 165
Income before taxes 7,609 3,742
Provision (credit) for taxes -- --
Income before cumulative effect of
changes in accounting principle 7,609 3,742
Cumulative effect of change
in accounting principle -- (20,420)
Net income (loss) $ 7,609 (16,678)
Income (loss) per common share:
Income before cumulative effect of
changes in accounting principle $ .30 .15
Cumulative effect of change
in accounting principle -- (.81)
Net income (loss) $ .30 (.66)
Weighted average number of
shares of common stock
outstanding 25,242 25,137
See Unaudited Condensed Notes to Consolidated Financial Statements.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Dollars in thousands
Increase (decrease) in cash and cash equivalents Thirteen Weeks Ended
November 26, November 27,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,609 $(16,678)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Cumulative effect of change in accounting principle -- 20,420
Depreciation and amortization 1,990 1,880
Employee stock bonus plan -- 437
Realized and unrealized losses (gains) on investments, net 423 (69)
Postretirement benefits other than pensions 589 1,406
Minority shareholders' portion of consolidated
subsidiary's net income 146 60
Other 190 37
Change in assets and liabilities:
Decrease in accounts receivable 55 4,691
Decrease (increase) in inventories 1,301 (3,729)
Increase (decrease) in accounts payable and accrued expenses 363 (8,305)
Increase in other categories (13) (1,385)
Net cash provided (used) by operating activities 12,653 (1,235)
Cash flows from investing activities:
Investments in marketable securities (855) (2,930)
Proceeds from the sale of marketable securities 754 2,377
Purchases of property and equipment (2,133) (2,626)
Investments in dealer receivables (8,131) (8,770)
Proceeds from dealer receivables 6,753 5,919
Other (1) (1,025)
Net cash used by investing activities (3,613) (7,055)
Cash flows from financing activities and capital transactions:
Proceeds from issuance of long-term debt -- 807
Payments of long-term debt (615) (318)
Other 29 28
Net cash (used) provided by financing activities and
capital transactions (586) 517
Net increase (decrease) in cash and cash equivalents 8,454 (7,773)
Cash and cash equivalents - beginning of period 847 11,238
Cash and cash equivalents - end of period $ 9,301 $ 3,465
See Unaudited Condensed Notes to Consolidated Financial Statements.
</TABLE>
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 November 26, 1994, and results of operations and
cash flows for the 13 weeks ended November 26, 1994 and November 27, 1993.
2. The results of operations for the 13 weeks ended November 26, 1994, 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):
November 26, August 27,
1994 1994
Finished Goods $ 17,369 $ 21,675
Work In Process 13,407 13,807
Raw Materials 37,327 33,800
68,103 69,282
LIFO Reserve 13,954 13,832
$ 54,149 $ 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 in the
agreement including maintenance of minimum net worth, working capital and
debt to equity ratio. As of November 26, 1994, the Company was in
compliance with these covenants. There were no outstanding borrowings under
the line of credit at November 26, 1994 or August 27, 1994.
The Company and Cycle-Sat entered into a $3,000,000 line of credit with
Firstar Bank Cedar Rapids (Firstar) 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. As of November
26, 1994, Cycle-Sat was in compliance with this covenant. 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 January 31, 1995. The outstanding balance under the line of credit
at November 26, 1994 was $2,300,000 with an interest rate of 9.75 percent
per annum and at August 27, 1994 $2,300,000 with an interest rate of 9.0
percent per annum. As of November 26, 1994, Cycle-Sat had $700,000 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 $125,910,000 and
$118,954,000 under repurchase agreements with lending institutions as of
November 26, 1994, and August 27, 1994, respectively. Included in these
contingent liabilities are approximately $44,606,000 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):
Thirteen Weeks Ended
November 26, November 27,
1994 1993
Interest $ 219 $ 56
Income Taxes 693 1,406
7. At November 26, 1994, Postretirement Health Care and Deferred Compensation
Benefits included postretirement benefits related to health care and other
benefits of $23,357,000 and deferred compensation of $20,623,000.
Net postretirement benefit cost for the 13 weeks ended November 26, 1994
consisted of the following components:
Thirteen
Weeks
Service cost - benefits earned during the period $ 262,000
Interest cost on accumulated postretirement benefit obligation 293,000
Amortization of (gain)/loss (95,000)
$ 460,000
8. At August 27, 1994, the Company had net operating loss carryforwards for
financial reporting purposes of approximately $44,000,000 which will, if
unused, expire at various times in fiscal years 2006 through 2008. The
Company's use of the net operating loss carryforwards offset its income
taxes otherwise required during the first quarter of fiscal 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended November 26, 1994 Compared to Thirteen Weeks Ended November
27, 1993.
Net revenues of manufactured products for the 13 weeks ended November 26, 1994
increased $24,869,000 or 25.0 percent from the 13 week period ended November 27,
1993. Motor home shipments increased by 352 units or 17.1 percent during the 13
weeks ended November 26, 1994 when compared to the first quarter of fiscal 1994.
The growth in revenues is attributed to the excellent acceptance of the
Company's 1995 model year products especially the higher-priced Class A models.
The Company is optimistic about the outlook for the remainder of the 1995 fiscal
year due to the strong current forward order position; however, continued
increases in interest rates by the Federal Reserve Board, could have a
detrimental affect on the Company's revenue growth.
Service revenues for the 13 weeks ended November 26, 1994 increased $1,334,000
or 26.9 percent from the 13 weeks ended November 27, 1993. The increase is
attributed to an increase in revenues from established customers as well as
revenues generated with new customers by Cycle-Sat, Inc.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.0 percent for the 13 weeks ended November 26, 1994 compared to 85.9
percent for the 13 weeks ended November 27, 1993.
Cost of services increased by $586,000 but as a percent of service revenue
decreased to 55.1 percent from 58.1 percent when comparing the 13 weeks ended
November 26, 1994 to the 13 weeks ended November 27, 1993. This decrease in
percentage when comparing the two periods can be attributed primarily to the
increase in Cycle-Sat revenues.
Selling and delivery expenses increased by $52,000 but decreased to 4.6 percent
of net revenues from 5.8 percent of net revenues when comparing the 13 weeks
ended November 26, 1994 to the comparable period of fiscal 1994. The decrease in
percentage can be attributed to the significant increase in revenues.
General and administrative expenses decreased by $137,000 to 4.8 percent of net
revenues from 6.1 percent of net revenues when comparing the 13 weeks ended
November 26, 1994 to the 13 weeks ended November 27, 1993. The decrease in
dollars when comparing the two periods can be attributed primarily to a
reduction in the Company's cost for retiree benefit programs and to costs for
legal expenses. The decrease in percentage can be attributed to the significant
increase in revenues.
The Company had other income of $19,000 during the 13 weeks ended November 26,
1994 compared to other expense of $76,000 during the 13 weeks ended November 27,
1993. The primary reason for the change when comparing the two periods was an
increase in lease income from the Company's public warehousing activities.
The Company had net financial expense of $194,000 during the first quarter of
fiscal 1995 compared to income of $165,000 during the first quarter of fiscal
1994. The Company recorded $423,000 of realized and unrealized losses compared
to $69,000 of gains in its marketable securities portfolio during the first
quarters of fiscal 1995 and 1994, respectively. The Company recorded $106,000 of
foreign exchange gains, primarily due to the translations of Winnebago
Industries, Europe GmbH operations, compared to $5,000 of losses during the
first quarters of fiscal 1995 and 1994, respectively.
For the 13 weeks ended November 26, 1994, the Company realized income from
operations of $7,609,000 or $.30 per share which included income of $624,000
($.02 per share) from Cycle-Sat operations. For the 13 weeks ended November 27,
1993, the Company realized income before the cumulative effect of an accounting
change of $3,742,000 or $.15 per share which included income of $241,000 ($.01
per share) from Cycle-Sat operations.
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. With the adoption of FASB No. 106, the 13
weeks November 27, 1993 net loss was $16,678,000 or $.66 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 November 26, 1994, working capital was $66,482,000, an increase of $7,959,000
from the amount at August 27, 1994. The Company's principal sources and uses of
cash during the 13 weeks ended November 26, 1994 are set forth in the unaudited
consolidated condensed statement of cash flows for that period.
Principal expected demands at November 26, 1994 on the Company's liquid assets
for the remainder of fiscal 1995 include approximately $6,500,000 for capital
expenditures consisting primarily of tooling, equipment replacement and new
equipment. Also during fiscal 1995, as previously announced by the Company in
December, 1994, Cycle-Sat expects to complete the acquisition of T.F.I. a
private company headquartered in California. The Company expects to finance the
acquisition through a new agreement with Firstar Bank and terms provided by
T.F.I. which aggregate $10,000,000. The agreement will be guaranteed by the
Company.
Based upon available cash, marketable securities and financing resources,
described in Note 4 as supplemented by the discussion in the preceding
paragraph, management believes that the Company has adequate sources of funds to
meet its remaining fiscal 1995 cash requirements. However, any significant
adverse events in the market for motor homes or in the economy could have a
significant effect on the Company's future 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 January 9, 1995 /s/ Fred G. Dohrmann
Fred G. Dohrmann
President and Chief Executive Officer
Date January 9, 1995 /s/ Ed F. Barker
Ed F. Barker
Vice President, Controller and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<FISCAL-YEAR-END> AUG-26-1995
<PERIOD-END> NOV-26-1994
<PERIOD-TYPE> QTR-1
<CASH> 9,301
<SECURITIES> 2,979
<RECEIVABLES> 48,314
<ALLOWANCES> 1,898
<INVENTORY> 54,149
<CURRENT-ASSETS> 118,980
<PP&E> 126,156
<DEPRECIATION> 84,618
<TOTAL-ASSETS> 192,080
<CURRENT-LIABILITIES> 52,498
<BONDS> 0
<COMMON> 12,913
0
0
<OTHER-SE> 74,435
<TOTAL-LIABILITY-AND-EQUITY> 192,080
<SALES> 130,759
<TOTAL-REVENUES> 130,759
<CGS> 110,474
<TOTAL-COSTS> 110,474
<OTHER-EXPENSES> 12,482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 194
<INCOME-PRETAX> 7,609
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,609
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
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