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 December 2, 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 25,345,993 shares of $.50 par value common stock outstanding on
January 11, 1996.
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
<TABLE>
<CAPTION>
ASSETS DECEMBER 2, AUGUST 26,
1995 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 18,674 $ 8,881
Marketable securities 2,356 2,144
Receivables, less allowance for doubtful
accounts ($692 and $1,184, respectively) 30,055 37,807
Dealer financing receivables less allowance
for doubtful accounts ($314 and $255, respectively) 12,301 9,345
Inventories 56,196 53,161
Prepaid expenses 4,139 3,342
Deferred income taxes 6,224 6,224
Total current assets 129,945 120,904
PROPERTY AND EQUIPMENT, at cost
Land 1,507 1,512
Buildings 43,101 43,014
Machinery and equipment 78,779 77,998
Transportation equipment 7,963 7,965
131,350 130,489
Less accumulated depreciation 88,515 87,511
Total property and equipment, net 42,835 42,978
LONG-TERM NOTES RECEIVABLE, less allowances
($1,406 and $950, respectively) 2,473 2,465
INVESTMENT IN LIFE INSURANCE 15,708 15,942
DEFERRED INCOME TAXES, NET 14,107 14,107
INTANGIBLE AND OTHER ASSETS 14,646 15,234
TOTAL ASSETS $219,714 $211,630
</TABLE>
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
LIABILITIES AND STOCKHOLDERS' EQUITY DECEMBER 2, AUGUST 26,
1995 1995
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,908 $ 3,564
Notes payable 4,300 4,000
Dividend payable 2,534 --
Accounts payable, trade 25,036 22,581
Income tax payable 1,758 --
Accrued expenses:
Insurance 5,295 4,620
Product warranties 3,117 3,184
Vacation liability 3,626 3,287
Promotional 2,642 1,916
Other 7,361 8,058
Total current liabilities 58,577 51,210
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES 11,955 12,678
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 46,071 45,223
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,172 2,071
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,917 12,915
Additional paid-in capital 23,691 23,658
Reinvested earnings 69,896 69,440
106,504 106,013
Less treasury stock, at cost 5,565 5,565
Total stockholders' equity 100,939 100,448
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $219,714 $211,630
See Unaudited Condensed Notes to Consolidated Financial Statements
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS EXCEPT PER SHARE DATA
FOURTEEN THIRTEEN WEEKS
WEEKS ENDED ENDED
December 2, November 26,
1995 1994
Revenues:
Manufactured products $ 113,385 $ 124,458
Services 8,593 6,301
Total net revenues 121,978 130,759
Costs and Expenses:
Cost of manufactured products 97,766 107,001
Cost of services 4,997 3,473
Selling and delivery 6,809 6,078
General and administrative 7,672 6,404
Total costs and expenses 117,244 122,956
Operating income 4,734 7,803
Financial income (expense) 14 (194)
Income before taxes 4,748 7,609
Provision for taxes 1,758 - - -
Net income $ 2,990 $ 7,609
Income per common share:
Net income $ .12 $ .30
Weighted average number of
shares of common stock
outstanding 25,346 25,242
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 FOURTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
December 2, November 26,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,990 $ 7,609
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 2,518 1,990
Realized and unrealized losses on investments, net 40 423
Investments in trading securities (2,103) (855)
Proceeds from sale of trading securities 1,851 754
Minority shareholders' portion of consolidated
subsidiary's net income 101 146
Other 313 190
Change in assets and liabilities:
Decrease in accounts receivable 7,759 55
(Increase) decrease in inventories (3,072) 1,301
Increase in accounts payable and accrued expenses 5,489 363
Increase in postretirement benefits 848 589
Other (797) (13)
Net cash provided by operating activities 15,937 12,552
Cash flows used by investing activities:
Purchases of property and equipment (2,197) (2,133)
Investments in dealer receivables (10,719) (8,131)
Collections of dealer receivables 7,708 6,753
Other 408 (1)
Net cash used by investing activities (4,800) (3,512)
Cash flows used by financing activities and capital transactions:
Payments of long-term debt and capital leases (1,379) (615)
Other 35 29
Net cash used by financing activities and
capital transactions (1,344) (586)
Net increase in cash and cash equivalents 9,793 8,454
Cash and cash equivalents - beginning of period 8,881 847
Cash and cash equivalents - end of period $ 18,674 $ 9,301
</TABLE>
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 December 2, 1995, the consolidated results of
operations for the 14 weeks ended December 2, 1995 and the 13 weeks ended
November 26, 1994, and the consolidated cash flows for the 14 weeks ended
December 2, 1995 and the 13 weeks ended November 26, 1994.
2. The results of operations for the 14 weeks ended December 2, 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):
December 2, August 26,
1995 1995
Finished Goods $ 23,072 $ 19,855
Work In Process 16,276 14,223
Raw Materials 32,712 34,704
72,060 68,782
LIFO Reserve 15,864 15,621
$ 56,196 $ 53,161
4. Since March 1992, the Company has had a financing and security agreement
with NationsCredit Corporation (NationsCredit) formerly Chrysler First
Commercial Corporation.
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 pursuant to 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,
1997, 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 December 2, 1995, the Company was in compliance with these covenants.
There were no outstanding borrowings under the line of credit at December
2, 1995 or August 26, 1995.
The Company and Cycle-Sat maintain a line of credit with Firstar Bank
Cedar Rapids. Terms of the agreement limit the amount advanced to the
lesser of $4,500,000 or the sum of 80 percent of Cycle-Sat's eligible
accounts receivable and 50 percent of its inventory. Borrowings pursuant
to the agreement bear interest at the 90-day LIBOR rate, plus 150 basis
points. (7.4 percent per annum at December 2, 1995 and August 26, 1995)
and contains certain restrictive covenants as defined in the agreement.
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 was $4,300,000 at December 2, 1995 and $4,000,000 at
August 26, 1995. As of December 2, 1995, Cycle-Sat had $150,000 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 $123,221,000 and
$120,487,000 under repurchase agreements with lending institutions as of
December 2, 1995, and August 26, 1995, respectively. Included in these
contingent liabilities are approximately $38,345,000 and $37,616,000,
respectively, of certain dealer receivables subject to recourse
agreements with NationsCredit and John Deere Credit, Inc.
6. Fiscal year-to-date the Company paid cash for the following (dollars in
thousands):
Fourteen Thirteen
Weeks Ended Weeks Ended
December 2, November 26,
1995 1994
Interest $ 449 $ 219
Income Taxes 20 693
7. At December 2, 1995, Postretirement Health Care and Deferred Compensation
Benefits included postretirement benefits related to health care and
other benefits of $25,136,000 and deferred compensation of $20,935,000.
Net postretirement benefit cost for the 14 weeks ended December 2, 1995
consisted of the following components:
Fourteen
Weeks
Service cost - benefits earned during the period $ 393,000
Interest cost on accumulated postretirement
benefit obligation 407,000
Amortization of (gain)/loss (32,000)
$ 768,000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fourteen Weeks Ended December 2, 1995 Compared to Thirteen Weeks Ended November
26, 1994
Net revenues of manufactured products for the 14 weeks ended December 2, 1995
were $113,385,000, a decrease of $11,073,000, or 8.9 percent, from the 13 week
period ended November 26, 1994. Motor home shipments (Classes A, B and C) were
2,287 units, a decrease of 354 units, or 13.4 percent, during the first quarter
of fiscal 1996 compared to the first quarter of fiscal 1995. The Company
experienced a reduction in revenues and number of motor home shipments which the
Company believes was the result of increased interest rates and lower consumer
confidence in the economy during the first quarter of fiscal 1996. With the
Federal Reserve Board's recent decision to lower interest rates, the Company
believes the economy will continue to grow at a moderate rate and this growth
will be beneficial to Winnebago Industries and the RV industry as a whole.
Service revenues were $8,593,000 for the 14 weeks ended December 2, 1995 an
increase of $2,292,000, or 36.4 percent from the comparable period of fiscal
1995. Cycle-Sat recorded revenues of $8,243,000, an increase of $2,205,000, or
36.5 percent, primarily due to increased revenues generated through the
acquisition by Cycle-Sat of the TFI division of MPO Videotronics during the
third quarter of fiscal 1995.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.2 percent for the 14 weeks ended December 2, 1995 compared to 86.0
percent for the 13 weeks ended November 26, 1994. This percentage increase was
primarily caused by lower motor home production volume.
Cost of services, as a percent of service revenues, increased during the first
quarter of fiscal 1996 to 58.2 percent from 55.1 percent during the first
quarter of fiscal 1995. This increase is attributed to higher labor costs at
Cycle-Sat which raised its cost of services percentage to 60.3 percent in the
first quarter of fiscal 1996 from 57.1 percent during the first quarter of
fiscal 1995.
Selling and delivery expenses increased by $731,000 to $6,809,000 comparing the
14 weeks ended December 2, 1995 to the 13 weeks ended November 26, 1994 and
increased as a percentage of net revenues to 5.6 percent from 4.6 percent. The
increases in dollars and percentage primarily reflects increases in the
Company's promotional and advertising costs and an increase in spending by
Winnebago Industries Europe GmbH (WIE).
General and administrative expenses increased by $1,268,000 to $7,672,000
comparing the 14 weeks ended December 2, 1995 to the 13 weeks ended November 26,
1994 and increased as a percentage of net revenues to 6.3 percent from 4.9
percent. The increases in dollars and percentage was caused primarily by
increased spending by Cycle-Sat and increases in the Company's provisions for
product liability expenses.
The Company had net financial income of $14,000 for the first quarter of fiscal
1996 compared to net financial expense of $194,000 for the comparable quarter of
fiscal 1995. During the 14 weeks ended December 2, 1995, the Company recorded
foreign currency transaction gains of $109,000, interest expense of $55,000 and
$40,000 of realized and unrealized losses in its trading securities portfolio.
During the 13 weeks ended November 26, 1994, the Company recorded $423,000 of
realized and unrealized losses in its trading securities portfolio, interest
income of $124,000 and foreign currency transaction gains of $106,000.
For the 14 weeks ended December 2, 1995, the Company reported net income of
$2,990,000 or $.12 per share which consisted primarily of income from
manufactured products operations of $2,412,000 ($.10 per share) and income from
Cycle-Sat operations of $196,000 ($.01 per share). This quarter's results
reflect the impact of income tax expense of $1,758,000 for the first time since
fiscal 1992 as the Company has used all benefits which had existed from prior
tax losses. For the 13 weeks ended November 26, 1994, the Company reported net
income of $7,609,000 or $.30 per share which consisted primarily of income from
manufactured products operations of $6,402,000 ($.25 per share) and income from
Cycle-Sat operations of $624,000 ($.02 per share).
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 December 2, 1995, working capital was $71,368,000, an increase of $1,674,000
from the amount at August 26, 1995. The Company's principal sources and uses of
cash during the 14 weeks ended December 2, 1995 are set forth in the unaudited
consolidated condensed statement of cash flows for that period.
Principal known demands at December 2, 1995 on the Company's liquid assets for
the remainder of fiscal 1996 include approximately $5,310,000 of capital
expenditures (primarily equipment replacements) and $2,534,000 of cash dividends
declared by the Board of Directors on October 19, 1995 (payable December 4,
1995).
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.
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule (For SEC use only)
(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 12, 1996 /s/ Fred G. Dohrmann
Fred G. Dohrmann
President and Chief Executive Officer
Date January 12, 1996 /s/ Ed F. Barker
Ed F. Barker
Vice President, Controller and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> DEC-02-1995
<CASH> 18,674
<SECURITIES> 2,356
<RECEIVABLES> 43,362
<ALLOWANCES> 1,006
<INVENTORY> 56,196
<CURRENT-ASSETS> 129,945
<PP&E> 131,350
<DEPRECIATION> 88,515
<TOTAL-ASSETS> 219,714
<CURRENT-LIABILITIES> 58,577
<BONDS> 0
<COMMON> 12,917
0
0
<OTHER-SE> 88,022
<TOTAL-LIABILITY-AND-EQUITY> 219,714
<SALES> 121,978
<TOTAL-REVENUES> 121,978
<CGS> 102,763
<TOTAL-COSTS> 102,763
<OTHER-EXPENSES> 14,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14)
<INCOME-PRETAX> 4,748
<INCOME-TAX> 1,758
<INCOME-CONTINUING> 2,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,990
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
