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 June 1, 1996
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 25,353,222 shares of $.50 par value common stock outstanding on July
10, 1996.
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WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
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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
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Part I Financial Information
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WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
ASSETS JUNE 1, 1996 AUGUST 26, 1995
------ ------------ ---------------
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 14,675 $ 8,881
Marketable securities 5,940 2,144
Receivables, less allowance for doubtful
accounts ($957 and $1,184, respectively) 34,331 37,807
Dealer financing receivables less allowance
for doubtful accounts ($281 and $255, respectively) 12,378 9,345
Inventories 55,829 53,161
Prepaid expenses 7,436 3,342
Deferred income taxes 6,224 6,224
-------- --------
Total current assets 136,813 120,904
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,500 1,512
Buildings 43,435 43,014
Machinery and equipment 80,706 77,998
Transportation equipment 7,944 7,965
-------- --------
133,585 130,489
Less accumulated depreciation 90,187 87,511
-------- --------
Total property and equipment, net 43,398 42,978
-------- --------
LONG-TERM NOTES RECEIVABLE, less allowances
($1,406 and $950, respectively) 3,422 2,465
-------- --------
INVESTMENT IN LIFE INSURANCE 16,885 15,942
-------- --------
DEFERRED INCOME TAXES, NET 14,107 14,107
-------- --------
INTANGIBLE AND OTHER ASSETS 14,439 15,234
-------- --------
TOTAL ASSETS $229,064 $211,630
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
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WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 1, 1996 AUGUST 26, 1995
- ------------------------------------ ------------ ---------------
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Current maturities of long-term debt $ 4,246 $ 3,564
Notes payable 4,215 4,000
Dividend payable 2,535 --
Accounts payable, trade 21,451 22,581
Income tax payable 5,164 --
Accrued expenses:
Insurance 6,329 4,620
Product warranties 3,593 3,184
Vacation liability 3,704 3,287
Promotional 5,637 1,916
Other 8,708 8,058
-------- --------
Total current liabilities 65,582 51,210
-------- --------
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES 10,046 12,678
-------- --------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 47,683 45,223
-------- --------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 2,188 2,071
-------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,920 12,915
Additional paid-in capital 23,723 23,658
Reinvested earnings 72,475 69,440
-------- --------
109,118 106,013
Less treasury stock, at cost 5,553 5,565
-------- --------
Total stockholders' equity 103,565 100,448
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $229,064 $211,630
======== ========
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See Unaudited Condensed Notes to Consolidated Financial Statements
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WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN WEEKS ENDED FORTY/THIRTY-NINE WEEKS ENDED
-------------------- -----------------------------
June 1, May 27, June 1, May 27,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Manufactured products $ 144,038 $ 118,338 $ 363,203 $ 354,066
Services 7,459 6,755 23,874 17,234
--------- --------- --------- ---------
Total net revenues 151,497 125,093 387,077 371,300
--------- --------- --------- ---------
Costs and Expenses:
Cost of manufactured products 124,171 101,304 314,576 303,619
Cost of services 4,275 3,980 13,888 10,176
Selling and delivery 6,711 7,265 19,015 19,937
General and administrative 8,561 6,423 23,838 18,577
--------- --------- --------- ---------
Total costs and expenses 143,718 118,972 371,317 352,309
--------- --------- --------- ---------
Operating income 7,779 6,121 15,760 18,991
Financial (expense) income (38) 457 43 1,281
--------- --------- --------- ---------
Income before taxes 7,741 6,578 15,803 20,272
Provision (credit) for taxes 2,330 -- 5,164 (6,000)
--------- --------- --------- ---------
Net income $ 5,411 $ 6,578 $ 10,639 $ 26,272
========= ========= ========= =========
Net income per common share $ .21 $ .26 $ .42 $ 1.04
========= ========= ========= =========
Weighted average number of
shares of common stock
outstanding 25,352 25,317 25,348 25,268
========= ========= ========= =========
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See Unaudited Condensed Notes to Consolidated Financial Statements.
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WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands FORTY THIRTY-NINE
WEEKS ENDED
--------------------------
June 1, 1996 May 27, 1995
------------ ------------
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Cash flows from operating activities:
Net income $ 10,639 $ 26,272
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 7,173 6,166
Deferred income taxes -- (6,000)
Realized and unrealized gains on investments, net (381) (355)
Investments in trading securities (10,157) (3,135)
Proceeds from the sale of trading securities 6,742 4,168
Minority shareholders' portion of consolidated
subsidiary's net income 117 38
Other 216 819
Change in assets and liabilities:
Decrease in accounts receivable 2,939 1,267
Increase in inventories (2,308) (12,939)
Increase in accounts payable and accrued expenses 5,582 1,222
Increase in postretirement benefits 2,460 1,421
Other 1,479 (6,443)
-------- --------
Net cash provided by operating activities 24,501 12,501
-------- --------
Cash flows used by investing activities:
Purchases of property and equipment (6,693) (8,216)
Investments in dealer receivables (32,822) (25,607)
Collections of dealer receivables 29,775 25,474
Other (2,030) (8,860)
-------- --------
Net cash used by investing activities (11,770) (17,209)
-------- --------
Cash flows used by financing activities and capital transactions:
Payments of long-term debt and capital leases (3,128) (1,399)
Payments of cash dividends (5,070) (5,052)
Proceeds from issuance of long-term debt 1,000 11,879
Other 261 551
-------- --------
Net cash (used) provided by financing activities and
capital transactions (6,937) 5,979
-------- --------
Net increase in cash and cash equivalents 5,794 1,271
Cash and cash equivalents - beginning of period 8,881 847
-------- --------
Cash and cash equivalents - end of period $ 14,675 $ 2,118
======== ========
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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 June 1, 1996, the consolidated results of
operations for the 40 and 13 weeks ended June 1, 1996 and the 39 and 13
weeks ended May 27, 1995, and the consolidated cash flows for the 40
weeks ended June 1, 1996 and the 39 weeks ended May 27, 1995.
2. The results of operations for the 40 weeks ended June 1, 1996, 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):
June 1, August 26,
1996 1995
------- -------
Finished Goods ..... $20,741 $19,855
Work In Process .... 15,008 14,223
Raw Materials ...... 36,446 34,704
------- -------
72,195 68,782
LIFO Reserve ....... 16,366 15,621
------ ------
$55,829 $53,161
======= =======
4. Since March 1992, the Company has had a financing and security agreement
with NationsCredit Corporation (NationsCredit) a NationsBank Company.
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 covenants including maintenance of
minimum net worth, working capital and current ratio. As of June 1, 1996,
the Company was in compliance with these covenants. There were no
outstanding borrowings under the line of credit at June 1, 1996 or August
26, 1995.
The Company and Cycle-Sat maintain a line of credit with Firstar Bank
Cedar Rapids (Firstar). 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 June 1, 1996 and August 26,
1995). The agreement contains certain restrictive 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 January 31, 1997. The outstanding balance under the line
of credit was $4,215,000 at June 1, 1996 and $4,000,000 at August 26,
1995. As of June 1, 1996, Cycle-Sat had exceeded the available borrowing
limit by $356,000 which constitutes an event of default under the
agreement.
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 $142,270,000 and
$120,487,000 under repurchase agreements with lending institutions as of
June 1, 1996, and August 26, 1995, respectively. Included in these
contingent liabilities are approximately $34,672,000 and $37,616,000,
respectively, of certain dealer receivables subject to recourse
agreements with NationsCredit and John Deere Credit, Inc.
6. For the 40 weeks ended June 1, 1996 and the 39 weeks ended May 27, 1995
the Company paid cash for the following (dollars in thousands):
Forty Thirty-Nine
Weeks Ended Weeks Ended
------------------ -------------------
June 1, May 27,
1996 1995
------------------ -------------------
Interest $ 1,511 $ 1,023
Income Taxes 3,335 6,989
7. At June 1, 1996, Postretirement Health Care and Deferred Compensation
Benefits included postretirement benefits related to health care and
other benefits of $26,499,000 and deferred compensation of $21,184,000.
Net postretirement benefit cost for the 13 and 40 weeks ended June 1,
1996 consisted of the following components:
Thirteen Forty
Weeks Weeks
---------- ------
Service cost - benefits earned
during the period $ 366 $ 1,125
Interest cost on accumulated
postretirement benefit obligation 380 1,166
Amortization of (gain)/loss (30) (93)
------- -------
$ 716 $ 2,198
======= =======
8. The Company has guaranteed certain debt obligations of an unaffiliated
party totaling $4,500,000. The unaffiliated party is currently
experiencing financial difficulties. The Company, at this time, is unable
to reasonably estimate the loss, if any, it will incur with respect to
this contingency.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended June 1, 1996 Compared to Thirteen Weeks Ended May 27, 1995
Net revenues of manufactured products for the 13 weeks ended June 1, 1996
increased $25,700,000 or 21.7 percent from the 13 weeks ended May 27, 1995.
Motor home shipments increased by 382 units or 16.8 percent during the 13 weeks
ended June 1, 1996 when compared to the third quarter of fiscal 1995. In the
Company's opinion, the Company's strong results for the third fiscal quarter of
1996 is a direct result of the quality of its products. The Company is
cautiously optimistic about the remainder of fiscal 1996.
Service revenues for the 13 weeks ended June 1, 1996 increased $704,000 or 10.4
percent from the comparable period of fiscal 1995. Cycle-Sat recorded revenues
of $7,134,000, an increase of $699,000 or 10.9 percent primarily due to
increased revenues generated through the acquisition by Cycle-Sat of the TFI
division of MPO Videotronics (TFI) during the third quarter of fiscal 1995.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.2 percent for the 13 weeks ended June 1, 1996 compared to 85.6 percent
for the 13 weeks ended May 27, 1995. This percentage increase was primarily
caused by lower margins realized by the Company on its manufactured products.
Cost of services, as a percent of service revenues, decreased during the third
quarter of fiscal 1996 to 57.3 percent from 58.9 percent during the third
quarter of fiscal 1995. This percentage decrease is attributed to the increase
in Cycle-Sat's revenues and the fixed costs of its operations remaining
relatively constant.
Selling and delivery expenses decreased by $554,000 to $6,711,000 comparing the
13 weeks ended June 1, 1996 to the 13 weeks ended May 27, 1995 and decreased as
a percentage of net revenues to 4.4 percent from 5.8 percent. The decreases in
dollars and percentage primarily reflects decreases in the Company's promotional
and advertising costs.
General and administrative expenses increased by $2,138,000 to $8,561,000
comparing the 13 weeks ended June 1, 1996 to the 13 weeks ended May 27, 1995 and
increased as a percentage of net revenues to 5.7 percent from 5.1 percent. The
increases in dollars and percentage primarily reflect increases in the Company's
provisions for its retirement programs and bad debts reserves and by increased
spending by Cycle-Sat.
The Company had net financial expense of $38,000 for the third quarter of fiscal
1996 compared to net financial income of $457,000 for the comparable quarter of
fiscal 1995. During the 13 weeks ended June 1, 1996, the Company recorded
realized and unrealized gains in its marketable securities portfolio of
$232,000, foreign currency translation losses of $153,000 and $117,000 of
interest expense. During the 13 weeks ended May 27, 1995, the Company recorded
$74,000 of realized and unrealized gains in its marketable securities portfolio,
$616,000 of foreign currency translation gains, and interest expense of
$233,000.
For the 13 weeks ended June 1, 1996, the Company reported net income of
$5,411,000 or $.21 per share which consisted primarily of income from
manufactured products operations of $5,156,000 ($.20 per share) and from
Cycle-Sat operations of $11,000. For the 13 weeks ended May 27, 1995, the
Company reported net income of $6,578,000 or $.26 per share which consisted
primarily of income from manufactured products operations of $6,056,000 ($.24
per share) and income from Cycle-Sat operations of $58,000.
Due to the trend of earnings Winnebago Industries has realized the past three
years, the Company has fully reflected the benefit of prior tax losses that had
existed. The 13 weeks ended June 1, 1996 reflect the impact of income tax
expense of $2,330,000 compared with $0 income tax expense for the comparable
period of fiscal 1995.
Forty Weeks Ended June 1, 1996 Compared to Thirty-Nine Weeks Ended May 27, 1995
Net revenues of manufactured products for the 40 weeks ended June 1, 1996
increased $9,137,000 or 2.6 percent from the 39 weeks ended May 27, 1995. Motor
home shipments decreased by 227 units or 3.3 percent during the 40 weeks ended
June 1, 1996 when compared to the 39 weeks ended May 27, 1995. The increase in
the Company's revenues is attributed to the strong quarter the Company had
during the third quarter of fiscal 1996. Even though the third quarter of fiscal
1996 showed an increase in revenues, the year-to-date unit sales were down when
compared to last year due to a product mix change more heavily weighed to more
expensive units with a slide-out feature.
Service revenues for the 40 weeks ended June 1, 1996 increased $6,640,000 or
38.5 percent from the 39 weeks ended May 27, 1995. Cycle-Sat recorded revenues
of $22,818,000, an increase of $6,510,000, or 39.9 percent, primarily due to
increased revenues as a result of the acquisition by Cycle-Sat of TFI.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.6 percent for the 40 weeks ended June 1, 1996 compared to 85.8 percent
for the 39 weeks ended May 27, 1995. This percentage increase was primarily
caused by lower motor home production volume.
Cost of services, as a percent of service revenues, decreased to 58.2 percent
from 59.0 percent when comparing the 40 weeks ended June 1, 1996 to the 39 weeks
ended May 27, 1995. This percentage decrease is attributed to the increase in
Cycle-Sat's sales while its fixed costs remained constant.
Selling and delivery expenses decreased by $922,000 to $19,015,000 comparing the
40 weeks ended June 1, 1996 to the 39 weeks ended May 27, 1995 and decreased as
a percentage of net revenues to 4.9 percent from 5.4 percent. The decreases in
dollars and percentage primarily reflects decreases in the Company's promotional
and advertising costs and net delivery expenses.
General and administrative expenses increased by $5,261,000 to $23,838,000
comparing the 40 weeks ended June 1, 1996 to the 39 weeks ended May 27, 1995 and
increased as a percentage of net revenues to 6.2 percent from 5.0 percent. The
increases in dollars and percentage were caused primarily by increases in the
Company's provisions for its retirement programs, provisions for product
liability expenses and increases in Cycle-Sat's spending.
The Company had net financial income of $43,000 for the 40-week period ended
June 1, 1996 compared to net financial income of $1,281,000 for the nine months
ended May 27, 1995. During the 40 weeks ended June 1, 1996, the Company recorded
realized and unrealized gains in its marketable securities portfolio of
$381,000, interest expense of $262,000 and foreign currency translation losses
of $76,000. During the 39 weeks ended May 27, 1995, the Company recorded
realized and unrealized gains in its marketable securities portfolio of
$355,000, interest expense of $3,000, and foreign currency translation gains of
$929,000.
For the 40 weeks ended June 1, 1996, the Company reported net income of
$10,639,000 or $.42 per share which consisted primarily of income from
manufactured products operations of $9,498,000 ($.37 per share) and from
Cycle-Sat operations of $233,000 ($.01 per share). For the 39 weeks ended May
27, 1995, the Company reported net income of $26,272,000 or $1.04 per share
which consisted primarily of income from manufactured products operations of
$18,719,000 ($.74 per share), $6,000,000 ($.24 per share) credit for income
taxes and income of $195,000 ($.01 per share) from Cycle-Sat operations.
The results of the 40 weeks ended June 1, 1996 reflect the impact of income tax
expense of $5,164,000, compared with a $6,000,000 credit for income taxes for
the 39 weeks ended May 27, 1995.
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
borrowed under agreements with financial institutions.
At June 1, 1996, working capital was $71,231,000, an increase of $1,537,000 from
the amount at August 26, 1995. The Company's principal sources and uses of cash
during the 40 weeks ended June 1, 1996 are set forth in the unaudited
consolidated condensed statement of cash flows for that period
Principal known demands at June 1, 1996 on the Company's liquid assets for the
remainder of fiscal 1996 include approximately $1,850,000 of capital
expenditures (primarily equipment replacements) for manufactured product
operations and approximately $1,300,000 of capital expenditures for an Uplink
Encoding System for the Digital Cypher Transmission System which will be used by
Cycle-Sat.
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) 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, 1996 /s/ Fred G. Dohrmann
Fred G. Dohrmann
President and Chief Executive Officer
Date July 10, 1996 /s/ Ed F. Barker
Ed F. Barker
Vice President, Controller and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> JUN-01-1996
<CASH> 14,675
<SECURITIES> 5,940
<RECEIVABLES> 47,947
<ALLOWANCES> 1,238
<INVENTORY> 55,829
<CURRENT-ASSETS> 136,813
<PP&E> 133,585
<DEPRECIATION> 90,187
<TOTAL-ASSETS> 229,064
<CURRENT-LIABILITIES> 65,582
<BONDS> 0
0
0
<COMMON> 12,920
<OTHER-SE> 90,645
<TOTAL-LIABILITY-AND-EQUITY> 229,064
<SALES> 151,497
<TOTAL-REVENUES> 151,497
<CGS> 128,446
<TOTAL-COSTS> 128,446
<OTHER-EXPENSES> 15,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 7,741
<INCOME-TAX> 2,330
<INCOME-CONTINUING> 5,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,411
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
