SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) for the fiscal year ended August 29, 1998;
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------------- -------------------------------------
Common Stock ($.50 par value) The New York Stock Exchange, Inc.
Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Annual Report on Form
10-K or any amendment to this Annual Report on Form 10-K _____.
Aggregate market value of the common stock held by non-affiliates of the
Registrant on November 16, 1998: $146,822,876 (13,737,813 shares at closing
price on New York Stock Exchange of $10.6875).
Common stock outstanding on November 16, 1998, 22,123,944 shares.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. The Winnebago Industries, Inc. Annual Report to Shareholders for the fiscal
year ended August 29, 1998, portions of which are incorporated by reference
into Part II hereof.
2. The Winnebago Industries, Inc. Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held January 20, 1999, portions of which are
incorporated by reference into Part III hereof.
<PAGE>
WINNEBAGO INDUSTRIES, INC.
FORM 10-K
Report for the Fiscal Year Ended August 29, 1998
PART I
ITEM 1. Business
GENERAL
Winnebago Industries, Inc. is a leading U.S. manufacturer of motor homes,
self-contained recreation vehicles used primarily in leisure travel and outdoor
recreation activities. Motor home sales by the Company represented more than 87
percent of its revenues in each of the past five fiscal years. The Company's
motor homes are sold through dealer organizations primarily under the Winnebago,
Itasca, Vectra, Rialta and Luxor brand names.
Other products manufactured by the Company consist principally of extruded
aluminum, commercial vehicles, and a variety of component products for other
manufacturers. Finance revenues consisted of revenues from floor plan unit
financing for a limited number of the Company's dealers.
The Company was incorporated under the laws of the state of Iowa on February 12,
1958, and adopted its present name on February 28, 1961. The Company's executive
offices are located at 605 West Crystal Lake Road in Forest City, Iowa. Unless
the context indicates otherwise, the term "Company" refers to Winnebago
Industries, Inc. and its subsidiaries.
1
<PAGE>
PRINCIPAL PRODUCTS
The Company determined it was appropriate to define its operations into two
business segments for fiscal 1998 (See Note 16, "Business Segment Information"
in the Company's Annual Report to Shareholders for the year ended August 29,
1998). However, during each of the last five fiscal years, at least 91% of the
revenues of the Company were derived from recreational vehicle products.
The following table sets forth the respective contribution to the Company's net
revenues by product class for each of the last five fiscal years (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended (1)
------------------------------------------------------------------------------------
August 29, August 30, August 31, August 26, August 27,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Motor Homes (Class A and C) .... $ 468,004 $ 381,191 $ 432,212 $ 402,435 $ 385,319
89.1% 87.0% 89.2% 87.5% 88.9%
Other Recreation
Vehicle Revenues (2) ...... 18,014 19,771 17,166 19,513 21,903
3.5% 4.5% 3.5% 4.2% 5.1%
Other Manufactured Products
Revenues (3) .............. 37,000 35,750 34,020 36,961 25,184
7.0% 8.2% 7.0% 8.0% 5.8%
------------ ------------ ------------ ------------ ------------
Total Manufactured
Products Revenues .. 523,018 436,712 483,398 458,909 432,406
99.6% 99.7% 99.7% 99.7% 99.8%
Finance Revenues (4) ........... 2,076 1,420 1,406 1,220 831
.4% .3% .3% .3% .2%
------------ ------------ ------------ ------------ ------------
Total Net Revenues ............. $ 525,094 $ 438,132 $ 484,804 $ 460,129 $ 433,237
100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
(1) The fiscal year ended August 31, 1996 contained 53 weeks; all other fiscal
years in the table contained 52 weeks. All years prior to fiscal 1998 are
appropriately restated to exclude the Company's discontinued Cycle-Sat,
Inc. (Cycle-Sat) subsidiary's revenues from satellite courier and tape
duplication services.
(2) Primarily EuroVan Campers, recreation vehicle related parts and recreation
vehicle service revenue.
(3) Primarily sales of extruded aluminum, commercial vehicles and component
products for other manufacturers.
(4) Winnebago Acceptance Corporation (WAC) revenues from dealer financing.
Unit sales of the Company's principal recreation vehicles for the last five
fiscal years were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended (1)
-----------------------------------------------------------------
August 29, August 30, August 31, August 26, August 27,
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit Sales:
Class A .............................. 5,381 4,834 5,893 5,993 6,820
Class C .............................. 3,390 2,724 2,857 2,853 1,862
--------- --------- --------- --------- ---------
Total Motor Homes .............. 8,771 7,558 8,750 8,846 8,682
Class B Conversions (EuroVan Camper) . 978 1,205 857 1,014 376
</TABLE>
(1) The fiscal year ended August 31, 1996 contained 53 weeks; all other fiscal
years in the table contained 52 weeks.
2
<PAGE>
The primary use of recreation vehicles for leisure travel and outdoor recreation
has historically led to a peak retail selling season concentrated in the spring
and summer months. The Company's sales of recreation vehicles are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory.
The Company's products are generally manufactured against orders from the
Company's dealers. As of August 29, 1998, the Company's backlog of orders for
Class A and Class C motor homes was approximately 1,700 units compared to
approximately orders for 1,300 units August 30, 1997. The Company includes in
its backlog all accepted purchase orders from dealers shippable within the next
six months. Orders in backlog can be canceled at the option of the purchaser at
any time without penalty and, therefore, backlog may not necessarily be a
measure of future sales.
Presently, the Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally. Since March 26, 1992, the Company has had a financing and security
agreement with Nations Bank Specialty Lending Unit (formerly NationsCredit
Corporation) (See Note 7, "Notes Payable" in the Company's Annual Report to
Shareholders for the year ended August 29, 1998).
RECREATION VEHICLES
MOTOR HOMES - A motor home is a self-propelled mobile dwelling used primarily as
a temporary dwelling during vacation and camping trips.
Recreation Vehicle Industry Association (RVIA) classifies motor homes into three
types (Class A, Class B and Class C). The Company currently manufactures Class A
and Class C motor homes and converts Class B motor homes.
Class A models are conventional motor homes constructed directly on medium-duty
truck chassis which include the engine and drivetrain components. The living
area and driver's compartment are designed and produced by the recreation
vehicle manufacturer.
Class B models are panel-type trucks to which sleeping, kitchen and toilet
facilities are added. These models also have a top extension added to them for
more head room.
Class C models are mini motor homes built on van-type chassis onto which the
manufacturer constructs a living area with access to the driver's compartment.
Certain models of the Company's Class C units include van-type driver's
compartments built by the Company.
The Company currently manufactures and sells Class A and Class C motor homes
primarily under the Winnebago, Itasca, Vectra, Rialta and Ultimate brand names.
These motor homes generally provide living accommodations for four to seven
persons and include kitchen, dining, sleeping and bath areas, and in some
models, a lounge. Optional equipment accessories include, among other items, air
conditioning, electric power plant, stereo system and a wide selection of
interior equipment. The Company converts Class B motor homes under the EuroVan
Camper brand name, which are distributed through the Volkswagen dealer
organization.
The Company offers, with the purchase of any new Winnebago, Itasca, Vectra or
Ultimate motor home, a comprehensive 12-month/15,000-mile warranty, a
3-year/36,000-mile warranty on sidewalls, floors and slide-out room assemblies,
and a 10-year fiberglass roof warranty. The Rialta has a 2-year/24,000-mile
warranty. The EuroVan Camper has a 2-year/ 24,000-mile warranty on the
conversion portion of the unit. Estimated warranty costs are provided at the
time of sale of the warranted products. Estimates of future warranty costs are
based on prior experience and known current events.
The Company's Class A and Class C motor homes are sold by dealers in the retail
market at prices ranging from approximately $45,000 to more than $225,000,
depending on size and model, plus optional equipment and delivery charges.
The Company currently manufactures Class A and Class C motor homes ranging in
length from 26 to 40 feet and 22 to 31 feet, respectively. Class B motor homes
converted by the Company (EuroVan Camper) are 17 feet in length.
3
<PAGE>
NON-RECREATION VEHICLE ACTIVITIES
OEM, COMMERCIAL VEHICLES, AND OTHER PRODUCTS
OEM - Original equipment manufacturer sales of component parts such as aluminum
extrusions, metal stamping, rotational moldings, vacuum formed plastics,
fiberglass components, panel lamination, electro-deposition painting of steel
and sewn or upholstered items to outside manufacturers.
Commercial Vehicles - Commercial vehicles sales are custom shells primarily
designed for the buyer's special needs and requirements.
Other Products - Sales of molded plastic docks for marine applications.
WINNEBAGO ACCEPTANCE CORPORATION (WAC) - WAC engages in floor plan and rental
unit financing for a limited number of the Company's dealers.
DISCONTINUED ACTIVITIES -
On November 19, 1996, the Company sold all of the assets of its Cycle-Sat
subsidiary, a distributor of satellite courier and tape duplication services, to
Vyvx, Inc., a subsidiary of The Williams Companies, Inc., Tulsa, Oklahoma. See
Note 2, "Discontinued Operations - Sale of Cycle-Sat Subsidiary" in the
Company's Annual Report to Shareholders for the year ended August 29, 1998.
4
<PAGE>
PRODUCTION
The Company's Forest City facilities have been designed to provide vertically
integrated production line manufacturing. The Company also operates a fiberglass
manufacturing facility in Hampton, Iowa, a sewing operation in Lorimor, Iowa and
a chassis modification facility in Charles City, Iowa. At August 29, 1998, the
Company was in the process of setting up a cabinet door manufacturing facility
in Charles City, Iowa. The Company manufactures the majority of the components
utilized in its motor homes, with the exception of the chassis, engines,
auxiliary power units and appliances.
Most of the raw materials and components utilized by the Company are obtainable
from numerous sources. The Company believes that substitutes for raw materials
and components, with the exception of chassis, would be obtainable with no
material impact on the Company's operations. Certain components, however, are
produced by only a small group of quality suppliers which have the capacity to
supply large quantities on a national basis. This is especially true in the case
of motor home chassis, where Ford Motor Company and General Motors Corporation
are the dominant suppliers. Shortages, production delays or work stoppages by
the employees of such suppliers could have a material adverse effect on the
Company's business. The inability of the Company to obtain an adequate chassis
supply could have a material adverse effect on the Company's results of
operations. The Company purchases Class A and C chassis from General Motors
Corporation - Chevrolet Motor Division and Ford Motor Company; Class C chassis
from Volkswagen of America, Inc.; and Class A chassis from Freightliner Custom
Chassis Corporation. Class B chassis from Volkswagen of America, Inc. are
utilized in the Company's Rialta motor home and the EuroVan Camper. Only two
vendors accounted for as much as five percent of the Company's purchases in
fiscal 1998, Ford Motor Company and General Motors Corporation (approximately 32
percent, in the aggregate).
On September 3, 1998, General Motors (GM) announced that it will discontinue the
manufacture of its motor home chassis products. GM has signed a letter of intent
with Union City Body Company (UCBC) of Union City, Indiana to sell certain
assets used for chassis production. GM plans to cease chassis production by the
end of 1998. Upon closing of the sale transaction, UCBC will produce its own
version of chassis products. UCBC has informed the Company that it expects to
begin production of chassis in the first quarter of 1999. A transition team
comprised of key GM and UCBC representatives has been formed to assure an
orderly business transition. The Company has placed orders with GM which will
allow it to basically have chassis available for its fiscal 1999 production
schedule. The Company uses current GM chassis in approximately 25 percent of its
products. The Company is currently working with UCBC but at this time does not
know what effect this sale transaction will have on its future results of
operations.
Motor home bodies are made from various materials and structural components
which are typically laminated into rigid, lightweight panels. Body designs are
developed with computer design and analysis, and subjected to a variety of tests
and evaluations to meet Company standards and requirements.
The Company manufactures picture windows, lavatories, and all of the doors,
cabinets, shower pans, waste holding tanks, wheel wells and sun visors used in
its recreation vehicles. In addition, the Company produces most of the bucket
seats, upholstery items, lounge and dinette seats, seat covers, mattresses,
decorator pillows, curtains and drapes.
The Company produces substantially all of the raw, liquid-painted and
powder-coated aluminum extrusions used for interior and exterior trim in its
recreation vehicles. The Company also sells aluminum extrusions to over 120
customers.
DISTRIBUTION AND FINANCING
The Company markets its recreation vehicles on a wholesale basis to a broadly
diversified dealer organization located throughout the United States and, to a
limited extent, in Canada. Foreign sales, including Canada, were less than five
percent of net revenues in fiscal 1998. As of August 29, 1998 and August 30,
1997, the motor home dealer organization in the United States and Canada
included approximately 350 and 340 dealers, respectively. During fiscal 1998, 13
dealers accounted for approximately 25 percent of motor home unit sales, and
only one dealer accounted for more than four percent (4.4%) of motor home unit
sales.
5
<PAGE>
Winnebago Industries Europe GmbH, a wholly owned subsidiary, was sold in August
1997 (See Note 16, "Business Segment Information," in the Company's Annual
Report to Shareholders for the year ended August 29, 1998). All international
sales (except Canada) are now handled by five distributors who market the
Company's recreation vehicles within eight foreign countries.
The Company has sales agreements with dealers which are renewed on an annual or
bi-annual basis. Many of the dealers are also engaged in other areas of
business, including the sale of automobiles, and many dealers carry one or more
competitive lines. The Company continues to place high emphasis on the
capability of its dealers to provide complete service for its recreation
vehicles. Dealers are obligated to provide full service for owners of the
Company's recreation vehicles, or in lieu thereof, to secure such service at
their own expense from other authorized firms.
At August 29, 1998, the Company had a staff of 33 people engaged in field sales
and service to the motor home dealer organization.
The Company advertises and promotes its products through national RV magazines
and cable TV networks and on a local basis through trade shows, television,
radio and newspapers, primarily in connection with area dealers.
Substantially all sales of recreation vehicles to dealers are made on cash
terms. Most dealers are financed on a "floor plan" basis under which a bank or
finance company lends the dealer all, or substantially all, of the purchase
price, collateralized by a lien upon, or title to, the merchandise purchased.
Upon request of a lending institution financing a dealer's purchases of the
Company's products, and after completion of a credit investigation of the dealer
involved, the Company will execute a repurchase agreement. These agreements
provide that, in the event of default by the dealer on the dealer's agreement to
pay the lending institution, the Company will repurchase the financed
merchandise. The agreements provide that the Company's liability will not exceed
100 percent of the invoice price and provide for periodic liability reductions
based on the time since the date of the invoice. The Company's contingent
liability on all repurchase agreements was approximately $132,540,000 and
$115,637,000 at August 29, 1998 and August 30, 1997, respectively. Included in
these contingent liabilities are approximately $18,623,000 and $24,868,000,
respectively, of certain dealer receivables subject to recourse (See Note 10,
"Contingent Liabilities and Commitments" in the Company's Annual Report to
Shareholders for the year ended August 29, 1998). The Company's contingent
liability under repurchase agreements varies significantly from time to time,
depending upon seasonal shipments, competition, dealer organization, gasoline
supply and availability of bank financing.
COMPETITION
The recreation vehicle market is highly competitive, both as to price and
quality of the product. The Company believes its principal marketing advantages
are the quality of its products, its dealer organization, its warranty and
service capability and its marketing techniques. The Company also believes that
its prices are competitive with the competitions' units of comparable size and
quality.
The Company is a leading manufacturer of motor homes. For the 12 months ended
August 31, 1998, Recreation Vehicle Industry Association (RVIA) reported factory
shipments of 41,200 Class A motor homes, 3,600 Class B motor homes and 15,600
Class C motor homes. Unit sales of such products by the Company for the last
five fiscal years are shown on page 2 of this report. The Company has numerous
competitors and potential competitors in this industry. The five largest
manufacturers represented approximately 71 percent of the Class A motor home and
Class C motor home market for the 12 months ended August 31, 1998, including the
Company's sales, which represented 16 percent of the market. As the Company does
not manufacture Class B motor homes but only completes a conversion package on
these units, the Class B motor home comparison is not included in this report.
The Company is not a significant factor in the markets for its other recreation
vehicle products and its non-recreation vehicle products and services.
6
<PAGE>
REGULATION, TRADEMARKS AND PATENTS
The Company is subject to a variety of federal, state and local regulations,
including the National Traffic and Motor Vehicle Safety Act, under which the
National Highway Traffic Safety Administration may require manufacturers to
recall recreational vehicles that contain safety-related defects, and numerous
state consumer protection laws and regulations relating to the operation of
motor vehicles, including so-called "Lemon Laws." The Company is subject to
regulations promulgated by the Occupational Safety and Health Administration
(OSHA). The Company's facilities are periodically inspected by federal or state
agencies, such as OSHA, concerned with workplace health and safety. The Company
believes that its products and facilities comply in all material respects with
the applicable vehicle safety, consumer protection, RVIA and OSHA regulations
and standards. Amendments to any of these regulations and the implementation of
new regulations, however, could significantly increase the cost of
manufacturing, purchasing, operating or selling the Company's products and could
have a material adverse effect on the Company's results of operations. The
failure of the Company to comply with present or future regulations could result
in fines being imposed on the Company, potential civil and criminal liability,
suspension of sales or production, or cessation of operations. In addition, a
major product recall could have a material adverse effect on the Company's
results of operations.
The Company's operations are subject to a variety of federal and state
environmental regulations relating to the use, generation, storage, treatment,
emission and disposal of hazardous materials and wastes and noise pollution.
Although the Company believes that it is currently in material compliance with
applicable environmental regulations, the failure of the Company to comply with
present or future regulations could result in fines being imposed on the
Company, potential civil and criminal liability, suspension of production or
operations, alterations to the manufacturing process, or costly cleanup or
capital expenditures.
The Company has several registered trademarks, including Winnebago, Itasca,
Minnie Winnie, Brave, Chieftain, Sunrise, Adventurer, Spirit, Sunflyer,
Suncruiser, Sundancer, Vectra Grand Tour, Luxor, Rialta and Minnie.
RESEARCH AND DEVELOPMENT
During fiscal 1998, 1997 and 1996, the Company spent approximately $1,128,000,
$1,695,000 and $801,000, respectively, on research and development activities.
These activities involved the equivalent of 16, 24 and 12 full-time employees
during fiscal 1998, 1997 and 1996, respectively.
HUMAN RESOURCES
As of September 1, 1998, 1997 and 1996, the Company employed approximately
3,010, 2,830 and 3,150 persons, respectively. Of these, approximately 2,410,
2,270 and 2,250 persons, respectively, were engaged in manufacturing and
shipping functions. None of the Company's employees are covered under a
collective bargaining agreement.
7
<PAGE>
ITEM 2. Properties
The Company's manufacturing, maintenance and service operations are conducted in
multi-building complexes owned by the Company, containing an aggregate of
approximately 1,452,000 square feet in Forest City, Iowa. The Company also owns
698,000 square feet of warehouse facilities located in Forest City. The Company
leases approximately 235,000 square feet of its unoccupied manufacturing
facilities in Forest City to others. The Company also owns a manufacturing
facility (74,000 square feet) in Hampton, Iowa. The Company leases a storage
facility (25,000 square feet) in Hampton, Iowa and a manufacturing facility
(17,200 square feet) in Lorimor, Iowa. Subsequent to fiscal year end, the
Company purchased a 50,000 square foot manufacturing facility and entered into
an agreement to lease a 10,000 square foot manufacturing facility both in
Charles City, Iowa. Leases on the above leased facilities expire at various
dates, the earliest of which is January 1, 1999. The Company's facilities in
Forest City are located on approximately 780 acres of land, all owned by the
Company.
Most of the Company's buildings are of steel or steel and concrete construction
and are protected from fire with high-pressure sprinkler systems, dust collector
systems, automatic fire doors and alarm systems. The Company believes that its
facilities and equipment are well maintained, in excellent condition, suitable
for the purposes for which they are intended and adequate to meet the Company's
needs for the foreseeable future.
ITEM 3. Legal Proceedings
The Company is involved in various legal proceedings which are ordinary routine
litigation incident to its business, many of which are covered in whole or in
part by insurance. While it is impossible to estimate with certainty the
ultimate legal and financial liability with respect to this litigation,
management is of the opinion that while the final resolution of any such
litigation may have an impact on the Company's consolidated results for a
particular reporting period, the ultimate disposition of such litigation will
not have any material adverse effect on the Company's financial position,
results of operations or liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
8
<PAGE>
Executive Officers of the Registrant
<TABLE>
<CAPTION>
NAME OFFICE (YEAR FIRST ELECTED AN OFFICER) AGE
- --------------------- ------------------------------------------------------------------- ---
<S> <C> <C>
Bruce D. Hertzke + Chairman of the Board, Chief Executive Officer and President (1989) 47
Edwin F. Barker Vice President, Chief Financial Officer (1980) 51
Raymond M. Beebe Vice President, General Counsel & Secretary (1974) 56
Ronald D. Buckmeier Vice President, Product Development (1997) 51
Brian J. Hrubes Controller (1996) 47
James P. Jaskoviak Vice President, Sales and Marketing (1994) 46
Robert J. Olson Vice President, Manufacturing (1996) 47
Joseph L. Soczek, Jr. Treasurer (1996) 55
</TABLE>
+ Director
Officers are elected annually by the Board of Directors. All of the foregoing
officers have been employed by the Company as officers or in other responsible
positions for at least the last five years.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Reference is made to information concerning the market for the Company's common
stock, cash dividends and related stockholder matters on page 36 of the
Company's Annual Report to Shareholders for the year ended August 29, 1998,
which information is incorporated by reference herein. On October 15, 1998, the
Board of Directors declared a cash dividend of $.10 per common share payable
January 11, 1999 to shareholders of record on December 11, 1998. The Company
paid dividends of $.20 per common share during fiscal years 1998 and 1997.
ITEM 6. Selected Financial Data
Reference is made to the information included under the caption "Selected
Financial Data" on page 1 of the Company's Annual Report to Shareholders for the
year ended August 29, 1998, which information is incorporated by reference
herein.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made to the information under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages 13
through 17 of the Company's Annual Report to Shareholders for the year ended
August 29, 1998, which information is incorporated by reference herein.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
ITEM 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company which appear on pages 18
through 33 and the report of the independent accountants which appears on page
34, and the supplementary data under "Interim Financial Information (Unaudited)"
on page 35 of the Company's Annual Report to Shareholders for the year ended
August 29, 1998, are incorporated by reference herein.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
9
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Reference is made to the table entitled Executive Officers of the Registrant in
Part One of this report and to the information included under the caption
"Election of Directors" in the Company's Proxy Statement for the Annual Meeting
of Shareholders scheduled to be held January 20, 1999, which information is
incorporated by reference herein.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires the Company's officers and directors and persons who beneficially
own more than 10 percent of the Company's common stock (collectively "Reporting
Persons") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Reporting Persons are required by the SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received or written representations from certain
Reporting Persons that no Forms 5 were required for those persons, the Company
believes that, during fiscal year 1998, all the Reporting Persons complied with
all applicable filing requirements, except that Mr. Jerry N. Currie, a director
of the Company, inadvertently omitted to file a Form 4 reporting the March, 1998
exercise of options to purchase 1,500 shares of Common Stock. Mr. Frederick M.
Zimmerman, a director of the Company, inadvertently omitted to file a Form 4 for
fiscal 1994 reporting the purchase of 100 shares of Common Stock.
ITEM 11. Executive Compensation
Reference is made to the information included under the caption "Executive
Compensation" in the Company's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held January 20, 1999, which information is
incorporated by reference herein.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the share ownership information included under the caption
"Voting Securities and Principal Holders Thereof" in the Company's Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held January
20, 1999, which information is incorporated by reference herein.
ITEM 13. Certain Relationships and Related Transactions
Reference is made to the information included under the caption "Certain
Transactions with Management" in the Company's Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held January 20, 1999, which information
is incorporated by reference herein.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. The consolidated financial statements of the Company are
incorporated by reference in ITEM 8 and an index to financial
statements appears on page 13 of this report.
2. Consolidated Financial Statement Schedules
Winnebago Industries, Inc. and Subsidiaries
PAGE
----
Report of Independent Auditors on Supplemental Financial
Schedule 14
II. Valuation and Qualifying Accounts 15
10
<PAGE>
All schedules, other than Schedule II, are omitted because of the
absence of the conditions under which they are required or because
the information required is shown in the consolidated financial
statements or the notes thereto.
(a) 3. Exhibits
See Exhibit Index on page 16.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of
the period covered by this report.
UNDERTAKING
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form S-8 Nos. 2-40316
(which became effective on or about June 10, 1971), 2-82109 (which became
effective on or about March 15, 1983), 33-21757 (which became effective on or
about May 31, 1988), 33-59930 (which became effective on or about March 24,
1993) and 333-31595 (which became effective on or about July 18, 1997).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ Bruce D. Hertzke
------------------------------------
Chairman of the Board
Date: November 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on, November 23, 1998, by the following persons on behalf
of the Registrant and in the capacities indicated.
SIGNATURE CAPACITY
--------- --------
Chairman of the Board, Chief Executive
/s/ Bruce D. Hertzke Officer, President and Director
- --------------------------------- (Principal Executive Officer)
Bruce D. Hertzke
/s/ Edwin F. Barker Vice President, Chief Financial Officer
- --------------------------------- (Principal Financial Officer)
Edwin F. Barker
/s/ Gerald E. Boman Director
- ---------------------------------
Gerald E. Boman
/s/ Jerry N. Currie Director
- ---------------------------------
Jerry N. Currie
/s/ Fred G. Dohrmann Director
- ---------------------------------
Fred G. Dohrmann
/s/ John V. Hanson Director
- ---------------------------------
John V. Hanson
/s/ Gerald C. Kitch Director
- ---------------------------------
Gerald C. Kitch
/s/ Richard C. Scott Director
- ---------------------------------
Richard C. Scott
/s/ Joseph M. Shuster Director
- ---------------------------------
Joseph M. Shuster
/s/ Frederick M. Zimmerman Director
- ---------------------------------
Frederick M. Zimmerman
/s/ Francis L. Zrostlik Director
- ---------------------------------
Francis L. Zrostlik
Controller
/s/ Brian J. Hrubes (Principal Accounting Officer)
- ---------------------------------
Brian J. Hrubes
12
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES *PAGE
- ------------------------------------------- -----
Independent Auditors' Report 34
Consolidated Balance Sheets 18 - 19
Consolidated Statements of Earnings 20
Consolidated Statements of Cash Flows 21
Consolidated Statements of Changes in Stockholders' Equity 22
Notes to Consolidated Financial Statements 23 - 33
* Refers to respective pages in the Company's 1998 Annual Report to
Shareholders, a copy of which is attached hereto, which pages are
incorporated herein by reference.
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Winnebago Industries, Inc.
Forest City, Iowa
We have audited the consolidated financial statements of Winnebago Industries,
Inc. and subsidiaries (the Company) as of August 29, 1998 and August 30, 1997
and for each of the three years in the period ended August 29, 1998 and have
issued our report thereon dated October 21, 1998. Such consolidated financial
statements and report are included in your fiscal 1998 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the consolidated financial statement schedule of Winnebago Industries, Inc. and
subsidiaries, as listed in Item 14(a)2. This consolidated financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
- -----------------------------
Deloitte & Touche LLP
Minneapolis, Minnesota
October 21, 1998
14
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
=================================================================================================================================
(Dollars in thousands)
-----------------------------------------------------------------------------------------------
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F
- -------------------------------- -------------- --------------------------------- ------------- ------------ ---------------
ADDITIONS
(REDUCTIONS)
BALANCE AT
BEGINNING OF CHARGED TO COST BAD DEBTS DEDUCTIONS BALANCE AT END
PERIOD AND DESCRIPTION PERIOD AND EXPENSES RECOVERIES CHARGE-OFFS OTHER* OF PERIOD
- -------------------------------- -------------- ----------------- -------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended August 29, 1998:
Allowance for doubtful
accounts receivable $ 1,429 $ 367 $ - - - $ 214 $ - - - $ 1,582
Allowance for doubtful
dealer receivables 155 (6) - - - 71 - - - 78
Allowance for excess and
obsolete inventory 814 1,443 - - - 1,554 - - - 703
Allowance for doubtful
notes receivable 1,465 (492) - - - - - - - - - 973
Year Ended August 30, 1997:
Allowance for doubtful
accounts receivable 702 730 1 4 - - - 1,429
Allowance for doubtful
dealer receivables 197 (160) 118 - - - - - - 155
Allowance for excess and
obsolete inventory 569 1,319 - - - 1,074 - - - 814
Allowance for doubtful
notes receivable 797 668 - - - - - - - - - 1,465
Year Ended August 31, 1996:
Allowance for doubtful
accounts receivable 1,128 359 - - - 329 (456) 702
Allowance for doubtful
dealer receivables 255 (70) 29 17 - - - 197
Allowance for excess and
obsolete inventory 669 1,301 - - - 1,401 - - - 569
Allowance for doubtful
notes receivable 950 (324) - - - 285 456 797
</TABLE>
* Includes transfers of reserves from doubtful dealer receivables to doubtful
accounts and from doubtful accounts to long-term notes receivable.
15
<PAGE>
EXHIBIT INDEX
3a. Articles of Incorporation previously filed with the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 27, 1988
(Commission File Number 1-6403), and incorporated by reference herein.
3b. Amended Bylaws of the Registrant.
4a. Restated Inventory Floor Plan Financing Agreement between Winnebago
Industries, Inc. and NationsCredit Corporation previously filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended August
27, 1994 (Commission File Number 1-6403), and incorporated by reference
herein and the First Amendment dated October 31, 1995 thereto.
4b. Restated Financing and Security Agreement dated July 6, 1995 between
Winnebago Industries, Inc. and NationsCredit Commercial Corporation
previously filed with the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 26, 1995 (Commission File Number 1-6403),
and incorporated by reference herein.
10a. Winnebago Industries, Inc. Stock Option Plan for Outside Directors
previously filed with the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 29, 1992 (Commission File Number 1-6403),
and incorporated by reference herein.
10b. Amendment to Winnebago Industries, Inc. Deferred Compensation Plan
previously filed with the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 26, 1995 (Commission File Number 1-6403),
and incorporated by reference herein.
10c. Amendment to Winnebago Industries, Inc. Profit Sharing and Deferred
Savings and Investment Plan previously filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 26, 1995
(Commission File Number 1-6403), and incorporated by reference herein.
10d. Winnebago Industries, Inc. Book Unit Rights Plan previously filed with
the Registrant's Annual Report on Form 10-K for the fiscal year ended
August 29, 1987 (Commission File Number 1-6403), and incorporated by
reference herein.
10e. Winnebago Industries, Inc. 1987 Non-Qualified Stock Option Plan
previously filed with the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 29, 1987 (Commission File Number 1-6403),
and incorporated by reference herein.
10f. Winnebago Industries, Inc. RV Incentive Compensation Plan.
10g. Winnebago Industries, Inc. Employee's Stock Bonus Plan and Trust
Agreement previously filed with the Registrant's Annual Report on Form
10-K for the fiscal year ended August 31, 1996 (Commission File Number
1-6403) and incorporated by reference herein.
10h. Winnebago Industries, Inc. Directors' Deferred Compensation Plan
previously filed with the Registrant's Annual Report on Form 10-K for
the fiscal year ended August 30, 1997 (Commission File Number 1-6403)
and incorporated by reference herein.
10i. Winnebago Industries, Inc. 1997 Stock Option Plan previously filed with
the Registrant's Annual Report on Form 10-K for the fiscal year ended
August 30, 1997 (Commission File Number 1-6403) and incorporated by
reference herein.
10j. Winnebago Industries, Inc. Executive Share Option Plan.
13. Winnebago Industries, Inc. Annual Report to Shareholders for the year
ended August 29, 1998.
21. List of Subsidiaries.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
16
EXHIBIT 3b.
BY-LAWS
OF
WINNEBAGO INDUSTRIES, INC.
AS AMENDED
ARTICLE I. OFFICES
The principal office of the Corporation in the State of Iowa, shall
be located in the City of Forest City, County of Winnebago, State of Iowa.
The Corporation may have such other offices, either within or
without of the State of Iowa, as the Board of Directors may designate or as the
business of the Corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting
The Annual Meeting of the Shareholders shall be held on a date in
the month of January of each year, commencing with the January, 1999 meeting, to
be annually set by the Board of Directors with written notice thereof to be
given not less than ten (10) days prior thereto by the Secretary, to be held in
Forest City, Iowa, at such place as may be designated by the Board of Directors,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting.
Section 2. Notice of Shareholder Business and Nominations
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any shareholder of the Corporation who was a shareholder of
record at the time of giving of notice provided for in this Section 2 who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 2.
(2) For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to clause (c) of Section 2(1) of
these By-laws, the shareholder must have given timely notice thereof in writing
to the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareholder action. To be timely, a shareholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 90th day nor earlier
than the close of business on the 120th day prior to the first anniversary of
the preceding year's annual meeting of shareholders; provided however, that in
the event that the date of the annual meeting to which such shareholder's notice
relates is more than 30 days before or more than 60 days after such anniversary
date, notice by the shareholder to be timely must be so delivered not earlier
than the close of business on the 120th day prior to such annual meeting and not
<PAGE>
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such annual meeting is first made by the Corporation. In no event
shall the public announcement of an adjournment of an annual meeting commence a
new time period for the giving of a shareholder's notice as described above.
Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934 as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
shareholder and such beneficial owner.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers
The business and affairs of this Corporation shall be managed by its
Board of Directors.
Section 2. Number, Tenure and Qualifications
The number of directors constituting the Board of Directors of the
Corporation shall be ten (10) until increased or decreased by proper amendment
thereto. Each director shall hold office until the next annual meeting of the
shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Iowa nor shareholders of the
Corporation.
Section 3. Regular Meetings
The regular meeting of the Board of Directors shall be held without
other notice than these By-Laws, immediately after, and at the same place as,
the Annual Meeting of the Shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Iowa, for
the holding of additional regular meetings without other notice than such
resolution.
Section 4. Special Meetings
Special meetings of the Board of Directors may be called by or at
the request of the President or any one director. The persons or person
authorized to call special meetings of the Board of Directors may fix the time
for holding any special meetings of the Board of Directors so called, but the
place shall be the same as the regular meeting place unless another place is
unanimously agreed upon at the time and ratified by appropriate resolution.
Section 5. Notice of Meetings
Notice of any special meeting of the Board of Directors shall be
given at least five (5) days
<PAGE>
previously thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with sufficient postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company; any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the expressed purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 6. Committees
The Board of Directors may, by resolution adopted by a majority of
the whole board, designate from among its members an Executive Committee and one
or more other committees. Any such committee, to the extent provided in the
resolution, shall have and may exercise all the authority of the Board of
Directors; provided, however, that no such committee shall have such authority
in reference to any matter for which such authority is specifically reserved to
the full Board of Directors by the terms of the Iowa Business Corporation Act,
as amended. Each such committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
ARTICLE IV. OFFICERS
Section 1. Number
The officers of the Corporation shall be a President, Vice
President, a Secretary and a Treasurer. Such other officers, assistant officers
and acting officers as may be deemed necessary, may be elected or appointed by
the Board of Directors. Any two or more offices may be held by the same person
if so nominated and elected.
Section 2. Election and Term of Office
The officers of the Corporation to be elected by the Board of
Directors shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. The
officers of the Corporation shall hold office until their successors are chosen
and qualify or until their death or resignation. Any officer elected by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors in office. Any vacancy occurring in any
office in the Corporation shall be filled by the Board of Directors.
ARTICLE V. FISCAL YEAR
The fiscal year of this Corporation shall begin on the 1st day of
September and end on the last day of August, in each year.
ARTICLE VI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws
may be adopted by the Board of Directors at any regular or special meeting of
the Board of Directors.
EXHIBIT 10f.
RV OFFICER INCENTIVE COMPENSATION PLAN
GROUP A - OFFICER
FISCAL PERIOD 1998-1999
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
PURPOSE
The purpose of this plan is to provide greater incentive to employees in officer
positions, who contribute to the success of the Company, by enabling them to
participate in that success, and to aid in attracting and retaining employees
who will contribute to the progress and profitability of the Company.
It is the purpose of this plan to attract, obtain, develop, motivate, and retain
capable officer personnel, stimulate constructive and imaginative thinking, and
otherwise contribute to the growth and profits of the corporation
ADMINISTRATION
The plan prior to each new fiscal year must meet the approval of the Human
Resource Committee of the Board of Directors. The Human Resource Committee may
establish such rules and regulations as it deems necessary for proper
administration of this plan and may amend or revoke any rule or regulation so
established.
PARTICIPANTS
Recommendation of a participant must be made by the President of Winnebago
Industries, Inc.
MINIMUM QUALIFICATIONS REQUIRED OF PARTICIPANTS:
1. Participant must be an officer with specific responsibilities which can
impact the corporation
2. Participants must be employed for the entire fiscal year to be eligible for
the bonus and in addition, participant must be employed at the time the
bonus is paid except as waived by the Human Resource Committee.
NATURE OF THE PLAN
The incentive award is based on the performance of the CORPORATION.
This is a bonus based upon the Company's attainment of a predetermined profit
goal for the fiscal quarter. The profit goal is to be recommended by the Human
Resource Committee and approved by the Board of Directors each quarter at the
beginning of the fiscal quarter.
<PAGE>
Officer Incentive Compensation Plan
Page Two
The profit goal, for purposes of this plan, will be the "Incentive Compensation
Profit" which shall mean the combined gross income from the operation of the
Company less the combined expenses, deductions and credits of the Company
attributable to such operations. In computing the incentive compensation profit,
no deduction shall be taken or allowance made for federal or state income taxes,
or any expenses associated with retirement plans or incentive compensation
plans. Incentive awards are determined in proportion to the actual operating
profit generated for the quarter in relation to the profit goal that was set. If
the operating profit achieved is less than 80 percent of goal set, no bonus is
paid and the maximum bonus paid at 120 percent of the profit goal.
METHOD OF PAYMENT
The quarterly amount of a participant's incentive compensation for the quarter
shall be the percentage of the total amount of base salary received by the
individual the fiscal quarter when he was a participant in the plan. 60% of the
quarterly amount of the earned bonus will be paid within 45 days after the close
of the fiscal quarter and the remainder of the bonus due will be paid after the
books have been audited at the end of the fiscal year providing the Company has
made its objective in each quarter. Bonuses will be paid as follows:
NUMBER OF QUARTERS AMOUNT OF THE BONUS
OBJECTIVE WAS MADE HOLDBACK TO BE PAID
------------------------- -------------------------
1 25%
2 50%
3 75%
4 100%
The attached quarterly bonus formula developed for the Officers Group I of
Winnebago Industries provides a 40 percent bonus calculation for a 100 percent
achievement of operating profit.
A participant must be employed by Winnebago Industries on August 28, 1999 to be
eligible for any previous quarterly or holdback allocations.
Approved By:
Bruce D. Hertzke Dated
- ------------------------------------ --------------------------------
C.E.O. & Chairman of the Board
Gerald C. Kitch Dated
- ------------------------------------ --------------------------------
Chairman, Human Resource Committee
of the Winnebago Board of Directors
<PAGE>
RV EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION PLAN
GROUP B - EXECUTIVE
FISCAL PERIOD 1998-1999
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
PURPOSE
The purpose of this plan is to provide greater incentive to employees in
managerial positions, who contribute to the success of the Company, by enabling
them to participate in that success, and to aid in attracting and retaining
employees who will contribute to the progress and profitability of the Company.
It is the purpose of this plan to attract, obtain, develop, motivate, and retain
capable managerial personnel, stimulate constructive and imaginative thinking,
and otherwise contribute to the growth and profits of the corporation.
ADMINISTRATION
The plan prior to each new fiscal year must meet the approval of the Human
Resource Committee of the Board of Directors. The Human Resource Committee may
establish such rules and regulations as it deems necessary for proper
administration of this plan and may amend or revoke any rule or regulation so
established.
PARTICIPANTS
Recommendation of a participant must be made by the Vice President that has the
responsibility for the specific unit or group which the proposed participant is
a member. The Vice President must justify direct dependence of recommended
employee's influence, performance and achievements, which could determine the
success of that unit or group and employee must be considered a direct link to
the success and profitability of the corporation.
MINIMUM QUALIFICATIONS REQUIRED OF PARTICIPANTS:
1. Participant must be in Labor Grade Number 70 or above.
2. Participant must be in the capacity of a staff supervisor or manager of a
specific unit or group with specific responsibilities which can impact the
corporation.
3. Participants must be employed for the entire fiscal year to be eligible for
the bonus and in addition, participant must be employed at the time the
bonus is paid except as waived by the Human Resource Committee.
Appointment of participants to the "Executive Management Incentive Compensation
Plan" will be recommended by the President to the Human Resource Committee for
approval based on meeting the aforementioned qualifications and upon
recommendation of the respective Vice President.
NATURE OF THE PLAN
The incentive award is based on the performance of the CORPORATION.
This is a bonus based upon the Company's attainment of a predetermined profit
goal for the fiscal quarter. The profit goal is to be recommended by the Human
Resource Committee and approved by the Board of Directors each quarter at the
beginning of the fiscal quarter.
<PAGE>
Executive Management Incentive Compensation Plan
Page Two
The profit goal, for purposes of this plan, will be the "Incentive Compensation
Profit" which shall mean the combined gross income from the operation of the
Company less the combined expenses, deductions and credits of the Company
attributable to such operations. In computing the incentive compensation profit,
no deduction shall be taken or allowance made for federal or state income taxes,
or any expenses associated with retirement plans or incentive compensation
plans. Incentive awards are determined in proportion to the actual operating
profit generated for the quarter in relation to the profit goal that was set. If
the operating profit achieved is less than 80 percent of goal set, no bonus is
paid and the maximum bonus paid at 120 percent of the profit goal.
METHOD OF PAYMENT
The quarterly amount of a participant's incentive compensation for the quarter
shall be the percentage of the total amount of base salary received by the
individual the fiscal quarter when he was a participant in the plan. 60% of the
quarterly amount of the earned bonus will be paid within 45 days after the close
of the fiscal quarter and the remainder of the bonus due will be paid after the
books have been audited at the end of the fiscal year providing the Company has
made its objective in each quarter. Bonuses will be paid as follows:
NUMBER OF QUARTERS AMOUNT OF THE BONUS
OBJECTIVE WAS MADE HOLDBACK TO BE PAID
------------------------- -------------------------
1 25%
2 50%
3 75%
4 100%
The attached quarterly bonus formula developed for the Executive Group II of
Winnebago Industries provides a 30 percent bonus calculation for a 100 percent
achievement of operating profit.
A participant must be employed by Winnebago Industries on August 28, 1999 to be
eligible for any previous quarterly or holdback allocations.
Approved By:
Bruce D. Hertzke August 13, 1998
- ------------------------------------ --------------------------------
Bruce D. Hertzke Dated
C.E.O. & Chairman of the Board
Gerald C. Kitch October 14, 1998
- ------------------------------------ --------------------------------
Gerald C. Kitch Dated
Chairman, Human Resource Committee
of the Winnebago Board of Directors
<PAGE>
RV MANAGEMENT INCENTIVE COMPENSATION PLAN
GROUP C - MANAGEMENT
FISCAL PERIOD 1998-1999
WINNEBAGO INDUSTRIES, INC.
FOREST CITY, IOWA
PURPOSE
The purpose of this plan is to provide greater incentive to employees in
managerial positions, who contribute to the success of the Company, by enabling
them to participate in that success, and to aid in attracting and retaining
employees who will contribute to the progress and profitability of the Company.
It is the purpose of this plan to attract, obtain, develop, motivate, and retain
capable managerial personnel, stimulate constructive and imaginative thinking,
and otherwise contribute to the growth and profits of the corporation
ADMINISTRATION
The plan prior to each new fiscal year must meet the approval of the Human
Resource Committee of the Board of Directors. The Human Resource Committee may
establish such rules and regulations as it deems necessary for proper
administration of this plan and may amend or revoke any rule or regulation so
established.
PARTICIPANTS
Recommendation of a participant must be made by the Vice President member that
has the responsibility for the specific unit or group which the proposed
participant is a member. The Vice President must justify direct dependence of
recommended employee's influence, performance and achievements, which could
determine the success of that unit or group and employee must be considered a
direct link to the success and profitability of the corporation.
MINIMUM QUALIFICATIONS REQUIRED OF PARTICIPANTS:
1. Participant must be in the capacity of a manager of a specific unit or
group with budget responsibilities and specific responsibilities which
significantly can impact the corporation.
2. Participants must be employed for the entire fiscal year to be eligible for
the bonus and in addition, participant must be employed at the time the
bonus is paid except as waived by the Human Resource Committee.
Appointment of participants to the "Management Incentive Compensation Plan" will
be recommended by the President to the Human Resource Committee for approval
based on meeting the aforementioned qualifications and upon recommendation of
the respective Vice President.
NATURE OF THE PLAN
The incentive award is based on the performance of the CORPORATION.
This is a bonus based upon the Company's attainment of a predetermined profit
goal for the fiscal quarter. The profit goal is to be recommended by the Human
Resource Committee and approved by the Board of Directors each quarter at the
beginning of the fiscal quarter.
<PAGE>
Management Incentive Compensation Plan
Page Two
The profit goal, for purposes of this plan, will be the "Incentive Compensation
Profit" which shall mean the combined gross income from the operation of the
Company less the combined expenses, deductions and credits of the Company
attributable to such operations. In computing the incentive compensation profit,
no deduction shall be taken or allowance made for federal or state income taxes,
or any expenses associated with retirement plans or incentive compensation
plans.
METHOD OF PAYMENT
The quarterly amount of a participant's incentive compensation for the quarter
shall be the percentage of the total amount of base salary received by the
individual the fiscal quarter when he was a participant in the plan. 60% of the
quarterly amount of the earned bonus will be paid within 45 days after the close
of the fiscal quarter and the remainder of the bonus due will be paid after the
books have been audited at the end of the fiscal year providing the Company has
made its objective in each quarter. Bonuses will be paid as follows:
NUMBER OF QUARTERS AMOUNT OF THE BONUS
OBJECTIVE WAS MADE HOLDBACK TO BE PAID
------------------------- -------------------------
1 25%
2 50%
3 75%
4 100%
A participant must be employed by Winnebago Industries on August 28, 1999 to be
eligible for any previous quarterly or holdback allocations.
Incentive awards are determined in proportion to the actual operating profit
generated for the quarter in relation to the profit goal that was set. If the
operating profit achieved is less than 80 percent of goal set, no bonus is paid
and the maximum bonus paid at 120 percent of the profit goal.
The attached quarterly bonus formula developed for the Management Group III of
Winnebago Industries provides a 20 percent bonus calculation for a 100 percent
achievement of operating profit.
Approved By:
Bruce D. Hertzke August 13, 1998
- ------------------------------------ --------------------------------
Bruce D. Hertzke Dated
C.E.O. & Chairman of the Board
Gerald C. Kitch October 14, 1998
- ------------------------------------ --------------------------------
Gerald C. Kitch Dated
Chairman, Human Resource Committee
of the Winnebago Board of Directors
EXHIBIT 10j.
WINNEBAGO INDUSTRIES, INC.
EXECUTIVE SHARE OPTION PLAN
ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the Plan is to provide stock options to
certain key individuals, commensurate with their contributions to the success of
the Employer, in a form that will provide incentives and rewards for superior
performance, encourage the recipients to continue in the employment of the
Employer, and allow the recipients to diversify their investment portfolios.
1.2 INTENT. The Plan is intended to be a nonqualified stock option plan
within the meaning of Section 83 of the Code. The Plan is not intended to be a
plan covered by the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. As used herein, the following capitalized words and
phrases shall have the respective meanings set forth below
"BENEFICIARY" means the person or persons designated by a Participant,
pursuant to Section 3.7, to exercise an Option after the Participant's death.
"BOARD OF DIRECTORS" or "BOARD" means the board of directors of the
Employer.
"CHANGE OF CONTROL" means the time when (i) any person, either
individually or together with such persons' affiliates or associates, shall have
become the beneficial owner, directly or indirectly, of at least 30% of the
outstanding stock of the Company and there shall have been a public announcement
of such occurrence by the Company or such person, or (ii) individuals who shall
qualify as Continuing Directors shall have ceased for any reason to constitute
at least a majority of the Board of Directors of the Company; provided, however,
that in the case of either clause (i) or (ii) a Change of Control shall not be
deemed to have occurred if the event shall have been approved prior to the
occurrence thereof by a majority of the Continuing Directors who shall then be
members of such Board of Directors, and that in the case of clause (i), a Change
of Control shall not be deemed to have occurred upon the transfer of stock of
the Company by gift or bequest from one Hanson Family Member to another Hanson
Family Member or to an Affiliate of the Hanson Family Member. For the purpose of
this definition:
(a) "Continuing Director" means any member of the Board of
Directors of the Company, while such person is a member of the Board,
who is not an affiliate or associate of any Acquiring Person or of any
such Acquiring Person's affiliate or associate and was a member of the
Board prior to the time when such Acquiring Person shall have become
an Acquiring Person, and any successor of a Continuing Director, while
such successor is a member of the Board who is not an Acquiring Person
or any affiliate or associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any affiliate
or associate of such Acquiring Person and is recommended or elected to
succeed the Continuing Director by a majority of the Continuing
Directors.
(b) "Acquiring Person" means any person or group of affiliates or
associates who acquires the beneficial ownership, directly or
indirectly, of 20% or more of the outstanding stock of the Company if
such acquisition occurs following the date of this Agreement.
1
<PAGE>
(c) "Affiliate" means a person that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified.
(d) "Associate" means (1) any corporation or organization (other
than the Company or a majority-owned subsidiary of the Company) of
which such person is an officer or partner or is, directly or
indirectly the beneficial owner of ten percent (10%) or more of any
class of equity securities, (2) any trust or fund in which such person
has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, (3) any relative
or spouse of such person, or any relative of such spouse, or (4) any
investment company for which such person or any affiliate of such
person serves as investment advisor. No pension, profit-sharing, stock
bonus, Employee Stock ownership plan or other retirement plan intended
to be qualified under Section 401(a) of the Internal Revenue Code
established by the Company or any subsidiary shall be deemed an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
In addition, stock held by such a plan shall not be treated as
outstanding in determining ownership percentages in Sections 11.1(i)
or 11.2(b) above.
(e) "Hanson Family Member" means John K. Hanson and Luise V.
Hanson, the executors or administrators of their estates, their lineal
descendants, the spouses of their lineal descendants, and the John K.
and Luise V. Hanson Foundation.
"CODE" means the Internal Revenue Code of 1986, any amendments
thereto, and any regulations or rulings issued thereunder.
"COMMITTEE" means the Winnebago Compensation Committee appointed in
accordance with Section 6.1.
"EFFECTIVE DATE" means April 1, 1997.
"EMPLOYEE" means any key individual, including but not limited to a
person in an executive position with the Employer, who is employed by the
Employer.
"EMPLOYER" means Winnebago Industries, Inc. and any successor thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, any
amendments thereto, and any regulations or rulings issued thereunder.
"EXERCISE DATE" means, with respect to any Option, the date on which
the Option is exercised by a Participant.
"EXERCISE PERIOD" means the period during which a Participant may
exercise an Option, as determined under Section 4.1.
"EXERCISE PRICE" means the price to be paid by a Participant to
exercise an Option, as determined under Section 3.3.
"FAIR MARKET VALUE" means the closing price of a share of Stock
reflected in the consolidated trading tables of The Wall Street Journal
(presently the NYSE-Composite Transactions), or other recognized market
source, as determined by the Committee, on the applicable date of reference
hereunder, or if there is no sale on such date, then the closing price on
the last previous day on which a sale is reported.
"GRANT DATE" means, with respect to any Option, the date on which the
Option Agreement is executed by the Employer and the Participant.
2
<PAGE>
"OPTION" means the right of a Participant, granted by the Employer in
accordance with Section 3.2, to purchase Stock from the Employer at the
Exercise Price.
"OPTION AGREEMENT" means an agreement setting forth the terms of an
Option executed by the Employer and a Participant pursuant to Section 3.2.
"PARTICIPANT" means any Employee who has been designated by the Human
Resources Committee of the Board of Directors of the Employer and who has
been granted Options in accordance with the Plan and whose Options have not
been exercised in full.
"PLAN" means the Winnebago Industries, Inc. Executive Share Option
Plan, as set forth herein and from time to time amended.
"STOCK" means shares of common or preferred stock of a corporation
listed on a national securities exchange (exclusive of the stock of
Winnebago Industries, Inc.) or NASDAQ, or shares of a regulated investment
company designated by the Committee as subject to purchase through the
exercise of an Option.
"TERMINATION OF EMPLOYMENT" means an Employee's separation from the
service of the Employer (including all subsidiaries and affiliates of the
Employer) by reason of resignation, discharge, death or other termination.
The Committee may, in its discretion, determine whether any leave or other
absence from service constitutes a Termination of Employment for purposes
of the Plan.
"TRUST" means the trust established pursuant to Article VII to hold
the Stock that is subject to purchase through the exercise of an Option.
"TRUST AGREEMENT" means an agreement setting forth the terms of the
Trust established pursuant to Article VII.
"TRUST FUND" means the Stock subject to an Option that is held in the
Trust.
"TRUSTEE" means the persons or institution acting as trustee of the
Trust.
2.2 HEADINGS. The headings of Articles, Sections and Paragraphs are solely
for convenience of reference. If there is any conflict between such headings and
the text of this Plan, the text shall control.
2.3 GENDER. Unless the context clearly requires a different meaning, all
pronouns shall refer indifferently to persons of any gender.
2.4 SINGULAR AND PLURAL. Unless the context clearly requires a different
meaning, singular terms shall also include the plural and vice versa.
ARTICLE III
OPTION GRANT
3.1 ELIGIBILITY. Options may be granted to any Employee selected by the
Committee from the key Employees of the Employer who have the capability of
making a substantial contribution to the success of the Employer. In making this
selection and in determining the form and amount of Options, the Committee shall
consider any factors that it deems relevant, including the individual's
functions, responsibilities, value of services to the Employer and past and
potential contributions to the Employer's profitability and growth.
3
<PAGE>
3.2 GRANT OF OPTIONS. Options may be granted by the Committee at any time
on or after the Effective Date and prior to the termination of the Plan. Options
shall become effective upon the execution by Employer and the Participant of an
Option Agreement specifying the Stock, the number of shares subject to the
Option, the Exercise Price, and such other terms and in such form as the
Committee may from time to time determine in accordance with the Plan.
3.3 EXERCISE PRICE. The Exercise Price shall be initially determined by
the Committee but shall be no less than 25 percent and no more than 100 percent
of the Fair Market Value of the Stock on the Grant Date. The Exercise Price
shall be subsequently adjusted so that in the event of a stock dividend, stock
split, reverse stock split, rights offering, return of capital distribution,
recapitalization or similar transaction that materially affects the Fair Market
Value of the Stock, the Committee shall adjust the Exercise Price so that it
retains the same ratio to the Fair Market Value of the Stock as existed
immediately before such transaction, or as otherwise provided in the Option
Agreement.
3.4 CONDITIONS OF GRANT. As a condition to the grant of a Stock Option,
the Committee may, in its discretion, require a Participant to enter into one or
more of the following agreements with the Employer on or before the Grant Date:
(a) A covenant not to compete with the Employer, which shall become
effective on the date of Termination of Employment of the Participant with
the Employer and which shall contain such terms and conditions as may be
required by the Committee.
(b) An agreement to remain in the employ of the Employer for at least
six months after the Grant Date of an Option.
3.5 STOCK TO BE HELD IN TRUST. Upon the grant of an Option, the Employer
shall acquire the Stock and contribute it to the Trust as soon as practicable
after the Grant Date. At the time contributed to the Trust, the Stock shall not
be subject to any security interest, whether or not perfected, or to any option
or contract under which any other person may acquire any interest in it, except
as otherwise provided in Section 7.2 and Section 12 of the Trust Agreement.
3.6 SUBSTITUTION OF ASSETS HELD IN TRUST. The Committee may, in its
discretion, after consultation with the Participant, substitute Stock of equal
Fair Market Value for any Stock subject to purchase through the exercise of an
Option.
3.7 DESIGNATION OF BENEFICIARY. As soon as practicable after the grant of
an Option, the Participant shall designate one or more Beneficiaries and
successor Beneficiaries, and may change a Beneficiary designation at any time,
by filing the prescribed form with the Committee. The consent of the
Participant's current Beneficiary shall not be required for a change of
Beneficiary. No Beneficiary shall have any rights under the Plan or an Option
Agreement during the lifetime of the Participant, except as may otherwise be
provided in Section 3.9.
(a) The Beneficiary of a Participant who dies without having
designated a Beneficiary in accordance with this Section 3.7 and who is
lawfully married on the date of death shall be the Participant's surviving
spouse.
(b) The Beneficiary of any other Participant who dies without having
designated a beneficiary in accordance with this Section 3.7 shall be the
Participant's estate.
3.8 GENERAL NON-TRANSFERABILITY. No Option granted under this Plan may be
transferred, assigned, or alienated (whether by operation of law or otherwise),
except as provided herein, and no Option shall be subject to execution,
attachment or similar process. An Option may be exercised only by the
Participant (or the Participant's Beneficiary pursuant to Section 3 7).
4
<PAGE>
ARTICLE IV
OPTION EXERCISE
4.1 EXERCISE PERIOD. A Participant may exercise all or any portion of an
Option at any time during the period beginning six months after the Grant Date
and ending on the earlier of:
(a) twelve months after the Participant's date of death, and
(b) fifteen years after the Grant Date.
4.2 OPTION EXERCISE. A Participant (or the Participant's Beneficiary
pursuant to Section 3.7) may exercise all or any portion of an Option by giving
written notice to the Committee and tendering full payment of the Exercise Price
by bank certified or cashiers check on or before the date of exercise.
4.3 DELIVERY OF STOCK. On the date of exercise, or as soon as practicable
thereafter (but in no event later than five business days after the date of
exercise), the Employer shall deliver or cause to be delivered the Stock then
being purchased to the Participant (or the Participant's Beneficiary pursuant to
Section 3.7). In the event that the listing, registration or qualification of
the Option or the Stock on any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary as a condition of, or in connection with, the exercise of the Option,
then the Option shall not be exercised in whole or in part until such listing,
registration, qualification, consent or approval has been effected or obtained.
4.4 TAX WITHHOLDING. Whenever Stock is to be delivered upon exercise of an
Option under the Plan, the Employer shall require as a condition of such
delivery (a) the cash payment by the Participant of an amount sufficient to
satisfy all federal, state and local tax withholding, requirements related
thereto, (b) the withholding of such amount from any Stock to be delivered to
the Participant, (c) the withholding of such amount from compensation otherwise
due to the Participant, or (d) any combination of the foregoing, at the election
of the Participant with the consent of the Employer. Such election shall be made
before the date on which the amount of tax to be withheld is determined by the
Employer, and such election shall be irrevocable.
4.5 ADDITIONAL WITHHOLDING. With the consent of the Employer, the
Participant may elect a greater amount of withholding, not to exceed the
estimated amount of the Participant's total tax liability with respect to the
delivery of Stock under the Plan. Such election shall be made at the same time
and in the same manner as provided under Section 4.4.
4.6 FAILURE TO EXERCISE. No Option shall be exercised, in whole or in
part, after the end of the Exercise Period and the Employer shall have no
obligation to deliver or cause to be delivered to the Participant (or the
Participants Beneficiary or Assignee) the Stock subject to such Option.
ARTICLE V
AMENDMENT OR TERMINATION
5.1 PLAN AMENDMENT. The Board may, from time to time in its discretion,
amend any provision of the Plan, in whole or in part, with respect to any
Participant or group of Participants. Such amendment shall be effective as of
the date specified therein and shall be binding upon the Committee, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan.
5
<PAGE>
5.2 PLAN TERMINATION. The Plan shall terminate on the fifteenth
anniversary of the Effective Date or such earlier date as the Board may
determine in its discretion. Such termination shall be effective as of the date
determined by the Board and shall be binding upon the Committee, all
Participants and Beneficiaries, and all other persons claiming an interest under
the Plan. Options shall continue to be exercisable after the effective date of
such termination, and may be exercised in accordance with Article IV, but no new
Options shall be granted.
5.3 AMENDMENT OF OPTIONS. An Option may be amended by the Committee at any
time if the Committee determines that an amendment is necessary or advisable as
a result of:
(a) any addition to or change in the Code or ERISA, a federal or state
securities law or any other law or regulation, which occurs after the Grant
Date and by its terms applies to the Option;
(b) any substitution of stock held in Trust pursuant to Section 3.6;
(c) any Plan amendment pursuant to Section 5.1, or Plan termination
pursuant to Section 5.2, provided that the amendment does not materially
affect the terms, conditions and restrictions applicable to the Option; or
(d) any circumstances not specified in Paragraphs (a), (b). or (c),
with the consent of the Participant.
5.4 CHANGE OF CONTROL. Notwithstanding any other provision of the Plan or
an Option Agreement, in the event of a Change of Control:
(a) the Participant shall not be required to remain in the employ of
the Employer for at least six months after the Grant Date of an Option
under Section 3.4(b);
(b) the Exercise Period under Section 4.1 shall not end prior to six
months after such Change of Control;
(c) an Option Agreement shall not be amended by the Committee under
Section 5.3 for any reason without the consent of the Participant; and
(d) an Option may be terminated by the Committee on any date after a
Change of Control, in its sole discretion and without the consent of the
Participant, if the Committee makes a cash payment to the Participant on
such date in an amount equal to the Fair Market Value of the Stock subject
to such Option, reduced by the Exercise Price, and multiplied by the number
of shares subject to such Option.
ARTICLE VI
ADMINISTRATION
6.1 THE COMMITTEE. The Plan shall be administered by a Committee
consisting of one or more persons appointed by the Board of Directors. The
Committee shall act by a majority of its members at the time in office and may
take action either by vote at a meeting or by consent in writing without a
meeting.
(a) The Board may remove any member of the Committee at any time, with
or without cause, and may fill any vacancy. If a vacancy occurs, the
remaining member or members of the Committee shall have full authority to
act.
(b) Any member of the Committee may resign by written resignation
delivered to the Board. Any such resignation shall become effective upon
its receipt by the Board or on such other date as agreed to by the Board
and the resigning member.
6
<PAGE>
6.2 POWERS OF THE COMMITTEE. In carrying out its duties with respect to
the general administration of the Plan, the Committee shall have, in addition to
any other powers conferred by the Plan or by law, the following powers:
(a) to determine eligibility to participate in the Plan and
eligibility to receive Options;
(b) to grant Options, and to determine the form, amount and timing of
such Options;
(c) to determine the terms and provisions of the Option Agreements,
and to modify such Option Agreements as provided in Section 5.3;
(d) to substitute stock held in Trust as provided in Section 3.6;
(e) to maintain all records necessary for the administration of the
Plan;
(f) to prescribe, amend, and rescind rules for the administration of
the Plan to the extent not inconsistent with the terms thereof;
(g) to appoint such individuals and subcommittees as it deems
desirable for the conduct of its affairs and the administration of the
Plan;
(h) to employ counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the Plan; and
(i) to perform any other acts necessary, and proper for the conduct of
its affairs and the administration of the Plan, except those reserved by
the Board.
6.3 DETERMINATIONS BY THE COMMITTEE. The Committee shall interpret and
construe the Plan and the Option Agreements. and its interpretations and
determinations shall be conclusive and binding on all Participants,
Beneficiaries and an other persons claiming an interest under the Plan or any
Option Agreement. The Committee's interpretations and determinations under the
Plan and the Option Agreements need not be uniform and may be made by it
selectively among Participants, Beneficiaries and any other persons whether or
not they are similarly situated.
6.4 INDEMNIFICATION OF THE COMMITTEE. The Employer shall indemnify and
hold harmless each member of the Committee against any and all expenses and
liabilities arising out of such member's action or failure to act in such
capacity excepting only expenses and liabilities arising out of such member's
own willful misconduct or gross negligence.
(a) Expenses and liabilities against which a member of the Committee
is indemnified hereunder shall include, without limitation, the amount of
any settlement or judgment, costs, counsel fees and related charges
reasonably incurred in connection with a claim asserted or a proceeding
brought against him or the settlement thereof.
(b) This right of indemnification shall be in addition to any other
rights to which any member of the Committee may be entitled.
(c) The Employer may, at its own expense, settle any claim asserted or
proceeding brought against any member of the Committee when such settlement
appears to be in the best interests of the Employer.
6.6 EXPENSES OF THE COMMITTEE. The members of the Committee shall serve
without compensation for services as such. All expenses of the Committee shall
be paid by the Employer.
7
<PAGE>
ARTICLE VII
TRUST PROVISIONS
7.1 ESTABLISHMENT OF THE TRUST. The Trust shall be established to hold all
Stock contributed by the Employer pursuant to Section 3.5. Except as otherwise
provided in Section 7.2, and Section 12 of the Trust Agreement, the Trust shall
be irrevocable and no portion of the Trust Fund shall be used for any purpose
other than the delivery of Stock pursuant to the exercise of an Option, and the
payment of expenses of the Plan and Trust.
7.2 TRUST STATUS. The Trust is intended to be a grantor trust, within the
meaning of Section 671 of the Code, of which the Employer is the grantor, and
this Plan is to be construed in accordance with that intention. Notwithstanding
any other provision of this Plan, the Trust Fund shall remain the property of
the Employer and shall be subject to the claims of its creditors in the event of
its bankruptcy or insolvency. No Participant shall have any priority claim on
the Trust Fund or any security interest or other right superior to the rights of
a general creditor of the Employer.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 GOVERNING LAW. Except to the extent preempted by federal law, the
construction and operation of the Plan shall be governed by the laws of the
State of Iowa without regard to the choice of law principles of such state.
8.2 SEVERABILITY. If any provision of this Plan is held illegal or invalid
by any court or governmental authority for any reason, the remaining provisions
shall remain in full force and effect and shall be construed and enforced in
accordance with the purposes of the Plan as if the illegal or invalid provision
did not exist.
8.3 NO OBLIGATION TO EXERCISE. The granting of an Option shall impose no
obligation upon a Participant to exercise such Option.
8.4 NO RIGHTS OF SHAREHOLDER. Neither the Participant or, a Beneficiary
shall be, or shall have any of the rights and privileges of, a stockholder with
respect to any Stock purchasable or issuable upon the exercise of an Option,
prior to the date of exercise of such Option.
8.5 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in the Plan shall
be deemed to give any person the right to be retained in the employ of the
Employer, or to interfere with the right of the Employer to discharge any person
at any time without regard to the effect that such discharge shall have upon
such person's rights or potential rights, if any, under the Plan. The provisions
of the Plan are in addition to, and not a limitation on, any rights that a
Participant may have against the Employer by reason of any employment or other
agreement with the Employer.
8.6 NOTICES. Unless otherwise specified in an Option Agreement, any notice
to be provided under the Plan to the Committee shall be mailed (by certified
mail, postage prepaid) or delivered to the Committee in care of the Employer at
its executive offices, and any notice to the Participant shall be mailed (by
certified mail, postage prepaid) or delivered to the Participant at the current
address shown on the payroll records of the Employer. No notice shall be binding
on the Committee until received by the Committee, and no notice shall be binding
on the Participant until received by the Participant.
8
EXHIBIT 13
WINNEBAGO INDUSTRIES, INC.
1998 ANNUAL REPORT
[PHOTO]
40 YEARS
[LOGO] WINNEBAGO INDUSTRIES
1958-1998
<PAGE>
CORPORATE PROFILE
Incorporated under the laws of the State of Iowa on February 12, 1958, Winnebago
Industries, Inc. celebrated its 40th Anniversary during fiscal 1998. The Company
adopted its present name on February 28, 1961. Winnebago Industries is a leading
United States manufacturer of motor homes, self-contained recreation vehicles
used primarily in leisure travel and outdoor recreation activities. These
vehicles are sold through dealer organizations primarily under the Winnebago(R),
Itasca(R), Vectra(R), Rialta(R), and Ultimate(TM) brand names. the Company
markets its recreation vehicles on a wholesale basis to a broadly diversified
dealer organization located throughout the United States, and to a limited
extent, in Canada. As of August 29, 1998, the motor home dealer organization in
the United States and Canada included approximately 350 dealers. Motor home
sales by Winnebago Industries represented more than 87 percent of its revenues
in each of the past five years. In addition, the Company's subsidiary, Winnebago
Acceptance Corporation (WAC), engages in floor plan and rental unit financing
for a limited number of the Company's dealers.
The Company builds quality motor homes with state-of-the-art computer-aided
design and manufacturing systems on automotive-styled assembly lines. Other
products manufactured by the Company consist principally of a variety of
component products for other manufacturers. The motor homes and component parts
conform to what the Company believes to be the most rigorous testing in the RV
industry.
TABLE OF CONTENTS
Selected Financial Data ................................... 1
Report of Shareholders .................................... 2
Operations Review ......................................... 4
Motor Home Product Classification ......................... 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................ 13
Consolidated Balance Sheets ............................... 18
Consolidated Statements of Earnings ....................... 20
Consolidated Statements of Cash Flows ..................... 21
Consolidated Statements of Changes in Stockholders' Equity 22
Notes to Consolidated Financial Statements ................ 23
Independent Auditors' Report .............................. 34
Net Revenues by Major Product Class ....................... 35
Interim Financial Information ............................. 35
Shareholder Information ................................... 36
Directors and Officers ............................ Inside Back Cover
ABOUT THE COVER
FRONT COVER: More than two years in development, the 1999 Ultimate Advantage was
designed by Winnebago Industries to meet the market demand for luxurious
rear-engine diesel motor homes.
BACK COVER: Pictured clockwise from the top are the following 1999 Winnebago
Industries' motor homes: Itasca Spirit 3IT, Winnebago Brave 32T, Vectra Grand
Tour 37B, Ultimate Freedome 38KD, Itasca Suncruiser 33B.
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) AUG. 29, AUG. 30, AUG. 31, AUG. 26, AUG. 27,
1998 1997(1) 1996(1)(2) 1995(1) 1994(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues
Manufactured products $ 523,018 $ 436,712 $ 483,398 $ 458,909 $ 432,406
Dealer financing 2,076 1,420 1,406 1,220 831
Total net revenues 525,094 438,132 484,804 460,129 433,237
Income before taxes 35,927 6,992 21,063 20,006 15,264
Provision (credit) for income taxes 11,543 416 6,639 (7,912) (1,312)
Income from continuing operations 24,384 6,576 14,424 27,918 16,576
(Loss) income from discontinued operations -- -- (2,039) (162) 869
Gain on sale of Cycle-Sat subsidiary -- 16,472 -- -- --
Cumulative effect of accounting change -- -- -- -- (20,420)
Net income (loss) 24,384 23,048 12,385 27,756 (2,975)
Earnings (loss) per share:
Continuing operations:
Basic 1.01 .26 .57 1.11 .66
Diluted 1.00 .26 .57 1.10 .65
Discontinued operations and
accounting change effect:
Basic -- .65 (.08) (.01) (.78)
Diluted -- .64 (.08) (.01) (.77)
- ---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) per share:
Basic $ 1.01 $ .91 $ .49 $ 1.10 $ (.12)
Diluted 1.00 .90 .49 1.09 (.12)
- ---------------------------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding (in thousands):
Basic 24,106 25,435 25,349 25,286 25,187
Diluted 24,314 25,550 25,524 25,513 25,546
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends per share: $ .20 $ .20 $ .30 $ .30 $ --
BALANCE SHEET
Total assets $ 230,612 $ 213,475 $ 220,596 $ 211,630 $ 181,748
Stockholders' equity 116,523 123,882 105,311 100,448 79,710
Working capital 91,919 99,935 62,155 69,694 58,523
Long-term debt $ -- $ -- $ 1,692 $ 3,810 $ 2,693
Current ratio 2.5 to 1 3.4 to 1 2.0 to 1 2.4 to 1 2.1 to 1
Unit Sales:
Class A 5,381 4,834 5,893 5,993 6,820
Class C 3,390 2,724 2,857 2,853 1,862
Total Motor Homes 8,771 7,558 8,750 8,846 8,682
Class B Conversions (EuroVan Campers) 978 1,205 857 1,014 376
</TABLE>
(1) Restated to reflect Cycle-Sat, Inc. and North Iowa Electronics, Inc. as
discontinued operations.
(2) The fiscal year ended August 31, 1996 contained 53 weeks, all other fiscal
years contained 52 weeks.
[BAR CHART]
TOTAL NET REVENUES
(dollars in millions)
1998 $525.1
1997 $438.1
1996 $484.8
[BAR CHART]
INCOME FROM CONTINUING
OPERATIONS
(dollars in millions)
1998 $24.4
1997 $ 6.6
1996 $14.4
[BAR CHART]
INCOME PER DILUTED SHARE
FROM CONTINUING OPERATIONS
(dollars)
1998 $1.00
1997 $0.26
1996 $0.57
1
<PAGE>
[PHOTO]
CAPTION:
300,000TH
NOT ONLY DID WINNEBAGO
INDUSTRIES CELEBRATE ITS 40TH
ANNIVERSARY THIS YEAR, THE
COMPANY ALSO MANUFAC-
TURED ITS 300,000TH MOTOR
HOME (1998 WINNEBAGO
CHIEFTAIN 34WY) DURING FIS-
CAL 1998. COMPANY
EMPLOYEES ARE SHOWN
ABOVE WITH WINNEBAGO
INDUSTRIES CHAIRMAN, CHIEF
EXECUTIVE OFFICER AND
PRESIDENT, BRUCE HERTZKE
(RIGHT).
DEAR FELLOW SHAREHOLDERS:
As we celebrated our 40th anniversary this year, it was gratifying to
reflect on our humble beginnings, as well as our vast accomplishments to date.
We've come a long way from being a small start-up business manufacturing travel
trailers in 1958 to the world-renowned recreation vehicle manufacturer we are
today. We wish to thank our employees and shareholders for their contributions
in making Winnebago Industries the successful company that it is today.
FINANCIAL RESULTS
Fiscal 1998 would have been an exceptionally exciting year even without the
anniversary celebration. For the first time in our Company's history, net
revenues for Winnebago Industries exceeded the half billion dollar mark. Net
revenues of $525 million for fiscal 1998 exceeded fiscal 1997 net revenues by
19.8 percent.
Income from continuing operations for fiscal 1998 nearly quadrupled when
compared to the previous year due to several factors, the most significant of
which was the outstanding acceptance of our 1998 and 1999 motor homes by both
wholesale and retail customers, as well as very favorable market conditions.
According to the latest report by Statistical Surveys Inc., a national retail
reporting service, our motor home sales have outperformed the motor home
industry by 12 percent since the beginning of calendar 1998 through August. In
addition, the recreation vehicle market in general has enjoyed a year of growth
that was stimulated by favorable interest rates, lower fuel prices and high
consumer confidence levels.
NEW PRODUCT DEVELOPMENT
Fiscal 1998 results represent the first full year of our strategy of
refocusing on our core business of manufacturing quality motor homes. Product
development has been a top priority throughout the past two model years,
providing us with the best motor home lineup in Winnebago Industries' history.
In fact, over 75 percent of our 1999 motor home offerings are dramatically
redesigned or completely new compared to our 1997 offerings. The Company's new
1999 products were extremely well received by dealers at our Dealer Days event
in August 1998, where the brand new top-of-the-line Ultimate motor home series
was introduced. As a result of the acceptance of our 1999 lineup, order backlog
for the Company's 1999 motor homes (Class A and C) has hit an all-time high of
approximately 2,500 orders on hand, as of November 10, 1998, approximately 75
percent ahead of orders on hand at that date last year.
EXPANSION
Winnebago Industries will continue to aggressively search out ways of
increasing production capacity. Towards this end, we will open a third satellite
manufacturing facility in Charles City, Iowa in January, 1999. Approximately 60
miles from our corporate headquarters in Forest City, this new facility will
manufacture cabinet components. In addition, Winnebago Industries also assumed
control and purchased the assets of the Charles City location of North East
Machine and Tool Co., doing business as North East Valve. Previously used to
modify chassis for select models of the Company's motor homes, this facility now
customizes the new Ulti-BayTM chassis for Winnebago Industries' new 1999
Ultimate AdvantageTM and Ultimate FreedomTM motor homes which are described
later in this report. The idea of operating satellite facilities is not new to
Winnebago Industries. Our two existing satellite facilities in Hampton and
Lorimor, Iowa, have been in place for approximately 15 years and have proven
themselves as great assets for the Company.
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[PHOTO]
1999 WINNEBAGO
MINNIE 31C
Additional methods of expanding production capacity will also be
implemented, such as increased capital expenditures on equipment and technology.
One such example is a new laser cutting system installed in our metal stamping
area that effectively produces as many parts as previously manufactured by both
a metal stamping press and a shear and reduces labor by 25 percent.
BRAND AWARENESS
In addition, we will continue to further our goal of expanding the
well-known Winnebago brand name beyond traditional motor homes in the RV
category. An independent study of nearly 2,000 random U.S. households was
conducted this year in which the Winnebago name dominated the brand awareness in
RVs with a 90 percent awareness level. We currently have licensing agreements
utilizing the Winnebago brand name for Winnebago Truck Campers by Sun-Lite,
Inc., Winnebago Conversion Vehicles by Choo Choo Customs Group, Inc., Winnebago
Park Model Homes by Chariot Eagle, Inc. and Winnebago Tents by Avid Outdoor.
Winnebago Industries will continue to maximize its brand name equity by
aggressively exploring licensing opportunities.
INCREASED SHAREHOLDER VALUE
We were also able to greatly increase shareholder value in fiscal 1998.
Winnebago Industries' stock price increased from $8 3/8 at the beginning of
fiscal 1998 to a close of $11 1/8 at fiscal year end, an increase in value of
32.8 percent. This reflects the stock market's confidence in the Company's
abilities to achieve its financial and market share goals. Announced in December
1997, Winnebago Industries repurchased 3,612,600 shares of the Company's stock
which was completed in September 1998. The repurchase shows the confidence we
have in our Company's stock. The net effect of the repurchase was a decrease in
shares outstanding, which in turn provides a greater return per share for the
Company's shareholders.
OUTLOOK
An expanding number of RV owners are contributing to a rise in RV travel
across the country. Overall, motor homes are increasingly in demand as baby
boomers begin to turn 50 years old. According to a study by the University of
Michigan, the number of people aged 55 to 64 - prime ages for RVing - will grow
by 8 million over the next 12 years. This survey also tells us one of four, or
25 percent, of the people asked, said they had plans to buy an RV in the future.
This means more people choosing the RV lifestyle than ever before.
These are exciting times. Enormous opportunities lie ahead for us. To meet
the challenges of the next 40 years and beyond, we will continue to work not
only harder, but smarter, to be able to continue to further increase our
production capacity, market share, financial results, and ultimately our value
for every Winnebago Industries shareholder.
/s/ Bruce D. Hertzke
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer and President
December 1, 1998
[PHOTO]
CAPTION: BRUCE D. HERTZKE
WINNEBAGO INDUSTRIES'
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
3
<PAGE>
OPERATIONS REVIEW
NEW PRODUCTS
Continuing the Company's emphasis on new product development, Winnebago
Industries, Inc. is introducing additional new and redesigned motor homes for
1999. Throughout the past two model years new product development has led to
over 75 percent of Winnebago Industries' 1999 motor homes being introduced as
dramatically redesigned or completely new compared to the Company's 1997
offerings. This new product development has led our motor home sales (Class A
and C) to outperform the motor home industry in retail sales by 12 percent since
the beginning of calendar 1998 through August. Winnebago Industries currently
builds five brands of motor homes: Winnebago, Itasca, Rialta, Vectra and the new
Ultimate series.
[PHOTO]
1999 ULTIMATE
FREEDOM 40JD
ULTIMATE
Leading the new product introduction for 1999 is the Ultimate series, a
new generation of diesel pusher motor homes. The new Ultimate Advantage and
Ultimate Freedom models are wide-body, bus-style Class A luxury coaches
featuring the all-new Ulti-Bay chassis, a brand new foundation and construction
that is unique to the industry. Knowing that premium coaches such as these
needed to maximize storage, designers from Winnebago Industries and Freightliner
Custom Chassis Corp. worked together for over two years to develop this new rear
engine diesel pusher chassis.
The new Ulti-Bay chassis is the ultimate in storage design, providing more
efficiencies in terms of material use and space utilization. Freightliner
provides the front and rear sections of the chassis, while Winnebago Industries
completes the mid-section structure of the chassis and body with tall, extremely
spacious storage compartments in the area normally claimed by chassis rails. The
new Ulti-Bay design centralizes exterior storage and provides a tremendous
increase in easily accessible storage space - up to 184.5 cubic feet of exterior
storage space is available.
Winnebago Industries' largest and most luxurious coaches, the Ultimate
Advantage and Ultimate Freedom are both available in 38- and 40-foot models
featuring Winnebago Industries' patented StoreMoreTM Hydraulic Slideout System
with an innovative kitchen/sofa slideout room extension.
The StoreMore system, featured on most of Winnebago Industries' slideout
models, includes spacious interior storage, as well as roomy exterior
compartments that extend outward with the room for easy access to stored items.
The exterior StoreMore compartments on the Ultimate series are also lighted and
full-height for excellent usability.
VECTRA GRAND TOUR
The all-new 1999 Vectra Grand Tour(R) has been totally redesigned for those
who want big bus, diesel pusher class features in a gas-powered, front engine
vehicle. Both the 37B and 39Y models feature new spa-
4
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[PHOTO]
1999 VECTRA GRAND
TOUR 37B
cious slideout room extensions: a front kitchen/sofa slide with the StoreMore
Hydraulic Slideout System and a rear bedroom slide on the passenger side.
All Ultimate and Vectra series models feature Coleman high-efficiency
central air conditioning systems that are integrated with a ceiling distribution
system. This true central air conditioning system is virtually invisible inside
and out, and quietly distributes cool air throughout the motor homes. Most other
motor homes from Winnebago Industries also feature the dampening, directional
ceiling ducting of the roof air conditioning.
CHIEFTAIN AND SUNFLYER
Loaded with some of the most innovative and functional amenities found in
the RV industry, the Winnebago Chieftain(R) and Itasca Sunflyer(R) were
exceptionally well received when introduced in fiscal 1998. We introduced these
motor homes last year with three models, then supplemented them during the year
with two additional models featuring double slideouts when the new increased
gross vehicle weight rating chassis offerings became available from Ford and
Chevrolet. For 1999, Winnebago Industries is introducing additional floorplans.
Most Chieftain and Sunflyer models include a galley/couch slideout with the
StoreMore Hydraulic Slideout System, while the new 35U and 35C feature a
dinette/couch slideout, also with the StoreMore system. In addition to the
dinette/couch slideout, the new 35U features a unique bed/wardrobe slideout
where a side-facing, queen size bed and mirrored wardrobe move out to create
approximately 132 cubic feet of additional living space.
ADVENTURER AND SUNCRUISER
The Winnebago Adventurer(R) and Itasca Suncruiser(R) are the most popular
motor home products offered by Winnebago Industries. Redesigned in the 1998
model year, the 1999 model offerings were enhanced with a variety of slideout
models, including a redesigned 37-foot model that represents one of the best
values in the marketplace for a vehicle of its size. For 1999, an
Adventurer/Suncruiser rear engine diesel pusher model is also offered that
features exceptional offerings at an exceptional value.
New features included on all the Class A models mentioned above are the
new Tri/Mark KeyOneTM system and the PowerLineTM Energy Management System. The
KeyOne system is a convenience that allows for the use of just one key to open
all lockable compartment, entrance and fuel doors. The PowerLine system is a
fully automatic system that monitors the usage of 120-volt electrical power when
utilizing 30-amp service and redistributes the power as needed.
[PHOTO]
1999 WINNEBAGO
ADVENTURER 35C
5
<PAGE>
BRAVE AND SUNRISE
The Winnebago Brave(R) and Itasca Sunrise(R) motor homes have also been
enhanced for 1999. The objective was to create a look that said "value" to the
consumer while retaining the existing positioning in the marketplace. Two
distinct product lines are now offered in each: the entry-level Brave SE and
Sunrise SE and the full-basement Brave and Sunrise models. The 35C model has an
available dinette/couch slideout featuring the StoreMore Hydraulic Slideout
System that increases the living space by 20 square feet. The Brave and Sunrise
32T and 35C models also offer the optional energy efficient roof air
conditioners with the PowerLine Energy Management System.
[PHOTO]
1999 WINNEBAGO
MINNIE WINNIE 30V
MINNIE WINNIE AND SUNDANCER
Winnebago Industries Class C motor homes have continued to gain market
share in the retail market for the last four years. Winnebago Industries' retail
share in the Class C market was 22.1 percent this calendar year through August
compared to just 12.2 percent in calendar 1994, an increase of 81 percent. We
anticipate that we will continue to perform well in the marketplace due to
ongoing product improvement.
The Winnebago Minnie Winnie(R) and Itasca Sundancer(R) lines feature three
widebody, basement models for 1999, including the new 30V model with
galley/lounge slideout, greatly enhancing the amount of livable space inside.
MINNIE AND SPIRIT
The Winnebago Minnie(R) and Itasca Spirit(R) products have continued
their solid performance in the marketplace. For 1999 we'll continue to position
them as value offerings in the entry-level Class C market with seven models
ranging from 22 to 31 feet in length. The Minnie and Spirit lineup also include
standard dinette/couch slideout models featuring the StoreMore Hydraulic
Slideout System.
[PHOTO]
1999 RIALTA QD
RIALTA
The Rialta(R) from Winnebago Industries continues to offer a unique niche
market for Winnebago Industries because this type of Class C product is simply
not available anywhere else. The Rialta offers fuel efficiency,
front-wheel-drive maneuverability and multi-purpose usability. The new 1999
Rialta provides upscale amenities and a new model, bringing total available
floorplans to four. With the new floorplan, the 22HD, we were able to combine
some of the best features of the other available floorplans, while adding more
interior storage and new features such as a larger refrigerator that haven't
previously been offered.
6
<PAGE>
EUROVAN CAMPER
The EuroVan Camper project has also been very successful. Winnebago
Industries produces the camper portion of this Class B motor home which is
marketed through a select group of Volkswagen of America and Volkswagen of
Canada dealers. Year to date, it is a leader in Class B sales in the United
States.
COMMERCIAL VEHICLES
The Commercial Vehicle Division has developed several models specifically
designed to target several popular customizing markets. These include the new
Med One(R) (medical), Dental One(R) (dental), The Protector(R) (law
enforcement), Suite One(R) (limousine), and Ability Equipped(R)(handicap
accessible). The Ability Equipped models have increased in volume by 25 percent
since last year and growth of an additional 25 percent is anticipated in the
coming year. Also, the Executive Suite will be introduced at the annual RV Trade
Show this month in Louisville, Kentucky. This Rialta-based shell is customized
as a mobile office for business purposes.
[PHOTO]
1998 WINNEBAGO-ITASCA
TRAVELERS' CLUB GRAND
NATIONAL RALLY
WIT
The Winnebago-Itasca Travelers (WIT) Club is comprised of owners of
Winnebago Industries products. Membership is an excellent way for owners to stay
active and in touch with their friends through participation in local, state and
special interest clubs in addition to the international organization. The WIT
Club also conducts caravans, rallies and tours throughout North America.
Membership benefits include a monthly magazine, professional trip routing,
purchasing and service discounts, mail forwarding, and the opportunity for
Premium Road Service and various types of insurance.
WIT members have proven themselves to be loyal customers of Winnebago
Industries' products and consequently repurchase our products at a much higher
rate than the general population.
OEM
Winnebago Industries generated $30.2 million in revenue in fiscal 1998 from
the sale of original equipment manufacturing (OEM) components, compared to
revenues of $29 million in fiscal 1997. The sale of OEM components to a wide
array of outside companies allows the Company to maximize use of Winnebago
Industries' production capacity, while affording us the added benefit of low
cost component parts. This in turn helps keep our motor home prices as
competitive as possible.
Winnebago Industries' Creative Aluminum Products Company (CAPCO), which
produces aluminum extrusion products for the Company as well as for a variety of
outside companies, is our largest OEM facility. CAPCO accounts for approximately
88 percent of Winnebago Industries' current OEM business. OEM revenues are also
generated from the sale of thermoformed and rotocast plastics, fiberglass
components, panel lamination, electro-deposition painting of steel and sewn or
upholstered items.
7
<PAGE>
SERVICE
Winnebago Industries recognizes that good quality products are our most
critical element. But along with that, it is the Company's long-standing
strategy to provide quality support services that make us most effective at the
dealer level and inevitably make our retail customers more satisfied. Because of
that strategy, Winnebago Industries is an industry leader in customer
satisfaction and has developed one of the most comprehensive warranty programs
in the industry. This provides the Company with an important market advantage
when selling our motor homes. With the purchase of any new Winnebago, Itasca,
Vectra or Ultimate motor home, Winnebago Industries offers a comprehensive
12-month/15,000-mile bumper-to-bumper warranty, a 3-year/36,000-mile sidewall
and slideout room assemblies warranty, and a 10-year fiberglass roof warranty.
Rialta models have a 2-year/24,000-mile basic transferable warranty with a
5-year/50,000-mile drive-train warranty.
Every new owner also automatically receives a free one-year membership in
Winnebago Industries' Premium Roadside Assistance program offering 24-hour
customer and emergency service in addition to jump-starting engines, fuel
delivery, lockout and tire changing services.
[PHOTO]
WINNEBAGO INDUSTRIES'
SERIVCE TRAINING
CLASSROOM
Experienced service advisors respond to inquiries from prospective
customers, answer questions pertaining to Winnebago Industries produced vehicles
and work with the owner and dealership personnel to expedite repairs.
Winnebago Industries now offers a parts program, making the Company's
outstanding service and warranty programs even better. The "Trip Saver" program
is designed to get customers back on the road quicker. With Trip Saver, a part
needed to repair a condition that impairs the use or safety of the motor home
during the new vehicle warranty period, will be shipped by air from the Company
within 24 hours. A similar service called "Sale Saver" was extended to dealers
in 1998. In order to save a sale, the dealer can request parts be shipped by air
from the Company within 24 hours.
Winnebago Industries' dealers have many other market advantages such as
access to a computerized network for filing warranty claims and parts ordering,
the most extensive service literature in the RV industry, hands-on sales and
service training, microfiche parts catalog and parts shipping advantages. The
Company's dealers will soon be able to order replacement parts, as well as enter
and access warranty claims online via the Internet. Scheduled to be up and
running by January 1, 1999, the new Internet system replaces a dial-up network,
is extremely user friendly and will provide Winnebago Industries' dealers with
instant access to information.
Winnebago Industries has always been a leader in dealer communications,
service and warranty. This capability represents yet another extension of
Winnebago Industries' commitment to its dealer network. By
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<PAGE>
[PHOTO]
WINNEBAGO
INDUSTRIES' HOME
PAGE
providing access to our warranty and parts systems through the Internet, we will
be able to provide more timely information, as well as demonstrate our
commitment to their success.
In addition to the on-line warranty and parts ordering system, Winnebago
Industries' website (www.winnebagoind.com) now provides a dealer locator system.
This new system locates the two nearest dealers for any one or more motor home
lines by entering a zip code or Canadian province.
The new dealer locator system is an additional dealer benefit and sales
tool. After reviewing motor home information on the website, the new system
allows interested customers to easily find their closest Winnebago Industries'
dealers so that they can plan their next motor home shopping trip to actually
kick the tires and experience the motor home for themselves.
EXCELLENCE IN QUALITY
Quality continues to be of vital importance to Winnebago Industries. The
Company believes its employees to be critical to the total quality process. The
Cost Savings Suggestion Program is designed to reward employees for suggesting
improvements to the Company's motor home products or internal processes that
result in cost and/or time savings. Since the program was initiated seven years
ago, over 2,300 ideas have been implemented, resulting in an annualized cost
savings of more than $4 million. This program had its most successful year ever
in fiscal 1998, with over 450 employee suggestions implemented and a payout to
employees of approximately $70,000.
This cost savings program is designed to help the Company control costs and
thereby improve financial performance. It also means striving to build high
quality products that represent the greatest value for the dollar to our
customers.
"QUALITY IS A JOURNEY -- NOT A DESTINATION"
Winnebago Industries adopted the motto, "Quality is a Journey - Not a
Destination" in 1997 and it continues to be important in the manufacturing
process today. We continue to be pleased with the results of our quality
efforts, however, we will never be completely satisfied. We will continue to
look for ways to make our products and services better.
TECHNOLOGY
Technology has played a great part in the drive for quality and increased
productivity. The high level of technology at Winnebago Industries provides
employees with the tools necessary to do their jobs better and to maximize
quality and efficiency. The Company's investment in advanced technology is
on-going to assure our customers of top-quality products in the future.
9
<PAGE>
An example of new technology making productivity and quality improvements
during fiscal 1998 was the installation of a new laser cutting tool. This new
laser tool increases accuracy and reduces labor by 25 percent, while enabling us
to produce the same output on this one machine as is produced by both a metal
stamping press and a cutting machine together. This laser cutting tool was
purchased for additional capacity, while a second laser cutting tool will be
added in December, 1998 that will actually replace a metal stamping press and
cutting machine.
[PHOTO]
LASER
CUTTING TOOL
An additional computer numerically controlled (CNC) router was installed
this year for the purpose of routing motor home back walls. Due to the
productivity and quality benefits of CNC routers, this is the ninth CNC router
to be installed within the last several years. Other new equipment includes a
computerized milling machine that increases our tooling capacity for cutting
wood patterns for molded parts, as well as a new full body paint system that
allows us to paint full body paint schemes on motor homes such as the new
Ultimate Advantage and Ultimate Freedom with high-quality base coat/clear coat
finishes. In addition, a new rotational molding machine will be installed in
December to meet the additional demands for rotational molded products.
We will continue to focus on new technologies that will translate into
better quality due to improved accuracy, improved fit and finish; faster
processes and an improved environment.
RVDA QUALITY CIRCLE AWARD
The technology improvements are an indication of Winnebago Industries'
commitment to the total quality process needed to market Winnebago Industries'
motor homes. That commitment to our dealers and retail customers was proven with
the vote of confidence from our dealer body.
The Dealer Satisfaction Index (DSI) conducted by the Recreation Vehicle
Dealer Association annually rates manufacturers' performance in five key
categories: sales agreement quality, product competitiveness, sales support,
aftermarket and management. RVDA recently announced that our dealers ranked
Winnebago Industries as one of only six "Quality Circle Award" winners in the
industry, and one of only three motor home manufacturers to win the award. Even
more significant is that Winnebago Industries was one of only two motor home
manufacturers to receive this honor in both 1996 and 1997.
[PHOTO]
RVDA QUALITY
CIRCLE AWARD
10
<PAGE>
We feel very strongly about maintaining these high confidence levels, and
will continue to strive for excellence in our dealer and retail customer
relations.
CSI
Sales and aftermarket support are the backbone of Winnebago Industries'
business philosophy. We also pay close attention to the Customer Satisfaction
Index (CSI) data as it is collected from our retail customers. This information
allows us to monitor what the end-user thinks about our Company, our dealers and
the product itself. The CSI data is the same information we use to determine our
"Circle of Excellence Award" winners. The data shows a continued growth in our
customers' level of satisfaction with their Winnebago Industries' motor home.
Results from the "satisfied" respondents (including "completely satisfied,"
"very satisfied," and "somewhat satisfied"), has risen consistently each year,
with a new high last year of 95.2 percent. These are numbers we are extremely
proud of because it means our strategy is working.
The 1998 CSI program had 149 dealers achieve the Circle of Excellence
status, the largest number of winning dealers for any given year. Seven of those
dealers have earned this prestigious award each year since its inception in
1986.
[GRAPHIC]
SINCE 1986
CIRCLE OF EXCELLENCE
[LOGO]
WINNEBAGO INDUSTRIES
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<PAGE>
MOTOR HOME PRODUCT CLASSIFICATION
[GRAPHIC: SILHOUETTE OF A CLASS A MOTOR HOME]
CLASS A MOTOR HOMES
These are conventional motor homes constructed directly on medium-duty truck
chassis which include the engine and drivetrain components. The living area of
the driver's compartments are designed and produced by Winnebago Industries,
Inc. Class A motor homes from Winnebago Industries include: Winnebago Brave,
Adventurer, and Chieftain; Itasca Sunrise, Suncruiser, and Sunflyer; Vectra
Grand Tour; and Ultimate Advantage and Freedom.
[GRAPHIC: SILHOUETTE OF A VAN CAMPER]
CLASS B VAN CAMPERS
These are panel-type trucks to which sleeping, kitchen, and toilet facilities
are added. These models also have a top extension to provide more headroom.
Winnebago Industries converts the EuroVan Camper, which is distributed by
Volkswagen of America and Volkswagen of Canada.
[GRAPHIC: SILHOUETTE OF A CLASS C MOTOR HOME]
CLASS C MOTOR HOMES (MINI)
These are mini motor homes built on a van-type chassis onto which Winnebago
Industries constructs a living area with access to the driver's compartment.
Class C motor homes from Winnebago Industries include: Winnebago Minnie and
Minnie Winnie; Itasca Spirit and Sundancer; and Rialta.
WINNEBAGO INDUSTRIES
MOTOR HOME FAMILY TREE
Winnebago Industries manufactures five brands of Class A and C motor homes.
Listed below are the brand names and model designations of the Company's 1999
product line.
[LOGO] [LOGO] [LOGO] [LOGO] [LOGO]
WINNEBAGO ITASCA RIALTA VECTRA ULTIMATE
- - Minnie - Spirit - Vectra Grand Tour - Ultimate Advantage
- - Minnie Winnie - Sundancer - Ultimate Freedom
- - Brave - Sunrise
- - Adventurer - Suncruiser
- - Chieftain - Sunflyer
OTHER RELATED PRODUCTS:
WINNEBAGO CONVERSION VEHICLES -- Licensed truck and van conversions manufactured
and marketed by Choo Choo Customs Group, Inc.
WINNEBAGO TRUCK CAMPERS -- Licensed hard and soft side truck campers
manufactured and marketed by Sun-Lite, Inc.
WINNEBAGO PARK HOMES -- Licensed products manufactured and marketed by Chariot
Eagle, Inc.
WINNEBAGO TENTS -- Licensed products manufactured and marketed by Avid Outdoor.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The primary use of recreation vehicles (RVs) for leisure travel and outdoor
recreation has historically led to a peak retail selling season concentrated in
the spring and summer months. The Company's sales of RVs are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory. The Company has generally manufactured RVs during the
entire year, both for immediate delivery and for inventory to satisfy the peak
selling season.
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
Net revenues for manufactured products were $523,018,000 for fiscal 1998, an
increase of $86,306,000, or 19.8 percent, from fiscal 1997. Motor home shipments
(Class A and C) during fiscal 1998 were 8,771 units, an increase of 1,213 units,
or 16.0 percent, compared to fiscal 1997. Fiscal 1998 results represent the
first full year that the Company's strategy of refocusing on its core business
of manufacturing quality motor homes has been in place. Product development has
been a top priority throughout the past two model years and the Company brought
to the market in fiscal 1998 its most extensive new product lineup in its
history. Over one half of the Company's 1998 products featured new or
significantly redesigned models. The Recreation Vehicle Industry Association
(RVIA) reported factory shipments (Class A and C) for the industry increased by
13.1 percent during the Company's 1998 fiscal year. In comparison, the Company's
shipments increased by 16.0 percent. The Company continues to have a strong
share in the Class C market with shipments at 21.7 percent of the total market
during the 1998 fiscal year compared to 20.5 percent in fiscal 1997. Management
believes that the Company's long-term prospects remain bright as the Company
continues to develop products to meet the increasing demands of the "baby boom"
market segment. As of August 29, 1998, the Company's backlog of orders was
approximately 1,700 orders compared to approximately 1,300 orders at August 30,
1997. The Company's 1999 products were extremely well received by its dealers at
the Company's annual Dealer Days event. As a result of this reception,
outstanding orders for the Company's 1999 products have hit an all-time high of
approximately 2,500 orders on hand as of November 10, 1998, compared to
approximately 1,400 orders on hand at that date last year.
Cost of manufactured products, as a percent of manufactured product revenues,
was 86.2 percent for fiscal 1998, compared to 88.3 percent for fiscal 1997. The
Company's increased volume of production and sales of motor homes resulted in
the improved margins as well as lower discount allowances during fiscal 1998.
Selling and delivery expenses decreased by $5,934,000 to $21,197,000 comparing
fiscal 1998 to fiscal 1997 and decreased as a percentage of net revenues to 4.0
percent from 6.2 percent. The decreases in dollars and percentage can be
attributed primarily to significant decreases in promotional costs during fiscal
1998 when compared to fiscal 1997. Increased sales volume during fiscal 1998,
also contributed to the decrease in percentage. Due to the closing and sale of
WIE in fiscal 1997, this former subsidiary had no impact on the Company's
results during fiscal 1998.
General and administrative expenses decreased by $327,000 to $19,986,000
comparing fiscal 1998 to fiscal 1997 and decreased as a percentage of net
revenues to 3.8 percent from 4.6 percent. Increases in the Company's employee
bonus programs and reserves for product liability costs during fiscal 1998
partially offset the WIE effect when comparing the two fiscal years. Increased
sales volume, during fiscal 1998, contributed to the decrease in percentage.
For fiscal 1998, the Company had net financial income of $2,950,000 compared to
net financial income of $1,844,000 during fiscal 1997. During fiscal 1998, the
Company recorded $2,892,000 of net interest and dividend income and gains of
$58,000 in foreign currency transactions. During fiscal 1997, the Company
recorded $2,258,000 of net interest and dividend income, $137,000 of realized
and unrealized gains in its trading
13
<PAGE>
securities portfolio, and losses of $551,000 in foreign currency transactions,
relating to transactions by the Company with WIE and by WIE with dealers located
in foreign countries other than Germany.
For fiscal 1998, the Company had income from continuing operations before taxes
of $35,927,000 compared to $6,992,000 for fiscal 1997. The 1998 effective tax
rate was 32.1 percent, consistent with management's expectations. During fiscal
1997, a tax loss from the closing and sale of WIE resulted in a tax credit of
approximately $3,700,000. This tax credit reduced the Company's effective tax
rate on continuing operations to 5.9 percent for fiscal 1997.
During fiscal 1997, the Company completed the sale of its 80 percent owned
subsidiary, Cycle-Sat, Inc., for approximately $57,000,000 which resulted in an
after-tax gain of $16,472,000 or $.64 per diluted share (See Note 2 to the
Company's 1998 Consolidated Financial Statements).
For fiscal 1998, the Company had net income of $24,384,000, or $1.00 per diluted
share, compared to fiscal 1997's net income of $23,048,000, or $.90 per diluted
share.
FISCAL 1997 COMPARED TO FISCAL 1996
Net revenues for manufactured products were $436,712,000 for fiscal 1997, a
decrease of $46,686,000, or 9.7 percent, from fiscal 1996. Motor home shipments
(Class A and C) during fiscal 1997 were 7,558 units, a decrease of 1,192 units,
or 13.6 percent, compared to fiscal 1996. Fiscal 1997 revenues for manufactured
products were negatively impacted by the performance of the Company's Class A
motor home products in the marketplace. The Company's Class A motor home product
shipments decreased by 18.0 percent during fiscal 1997 when compared to fiscal
1996 whereas the RVIA factory shipment numbers for the comparable period showed
an increase of 8.2 percent. The Company's 1997 Class A products were not as well
received in the marketplace as had been expected. Therefore, the Company,
recognizing its weakness in the Class A market, concentrated on intensive
product development.
Cost of manufactured products, as a percent of manufactured product revenues,
was 88.3 percent for fiscal 1997 compared to 86.3 percent for fiscal 1996. This
increase can be attributed primarily to reduced sales volume in Class A motor
homes and an increase in sales discounts offered during fiscal 1997.
Selling and delivery expenses increased by $1,841,000 to $27,131,000 comparing
fiscal 1997 to fiscal 1996 and increased as a percentage of net revenues to 6.2
percent from 5.2 percent. The increases in dollars and percentage were due to
increases in product promotional expenses.
General and administrative expenses decreased by $1,261,000 to $20,313,000
comparing fiscal 1997 to fiscal 1996 but increased in fiscal 1997, as a
percentage of net revenues, to 4.6 percent from 4.5 percent in fiscal 1996. The
decrease in dollars was caused primarily by a decrease in the Company's product
liability costs and by a reduction in the Company's overall compensation and
bonus expenses during fiscal 1997. The increase in percentage was attributed
primarily to the reduced sales volume.
For fiscal 1997, the Company had net financial income of $1,844,000, due to
investment income from higher cash balances maintained by the Company, a result
of the Cycle-Sat sale, compared to net financial income of $354,000 during
fiscal 1996. During fiscal 1997, the Company recorded $2,258,000 of net interest
and dividend income, $137,000 of realized and unrealized gains in its trading
securities portfolio, and losses of $551,000 in foreign currency transactions,
relating to transactions by the Company with WIE and by WIE with dealers located
in foreign countries other than Germany. During fiscal 1996, the Company
recorded $930,000 of net interest and dividend income, $350,000 of realized and
unrealized losses in its trading securities portfolio, and losses of $226,000 in
foreign currency transactions, relating to the Company's investment in European
operations caused by the weakening of the U.S. dollar against European
currencies.
For fiscal 1997, the Company had income from continuing operations before taxes
of $6,992,000 compared to $21,063,000 for fiscal 1996. The tax loss from the
closing and sale of the Company's European subsidiary, WIE, resulted in a tax
credit of approximately $3,700,000. The tax credit reduced the effective tax
rate on continuing operations to 5.9 percent for the year.
14
<PAGE>
During fiscal 1997, the Company completed the sale of Cycle-Sat for
approximately $57,000,000 which resulted in an after-tax gain of $16,472,000 or
$.64 per diluted share (See Note 2 to the Company's 1998 Consolidated Financial
Statements).
For fiscal 1997, the Company had net income of $23,048,000, or $.90 per diluted
share, compared to fiscal 1996's net income of $12,385,000, or $.49 per diluted
share.
ANALYSIS OF FINANCIAL CONDITION,
LIQUIDITY AND RESOURCES
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally.
At August 29, 1998, working capital was $91,919,000, a decrease of $8,016,000
from the amount at August 30, 1997. Cash provided by operations was $61,962,000,
$5,215,000 and $17,258,000 during fiscal years ended August 29, 1998, August 30,
1997 and August 31, 1996, respectively. Operating cash flows were considerably
higher in fiscal 1998, due primarily to an increase in income from continuing
operations for the fiscal year, reductions in the Company's receivable balances
and increases in the Company's current payables. Cash flows used by investing
activities was $7,795,000 and $14,950,000 in fiscal 1998 and fiscal 1996,
respectively, compared to cash flows provided by investing activities of
$46,678,000 during fiscal 1997. Cash flows used by investing activities
primarily include investments in dealer receivables, long-term notes receivable
and capital expenditures. Capital expenditures were $5,567,000 in fiscal 1998,
$4,438,000 in fiscal 1997 and $10,463,000 in fiscal 1996. Cash provided by
investing activities for fiscal 1997 was due primarily to the proceeds the
Company received from the sale of the Cycle-Sat subsidiary. Net cash used by
financing activities was $32,438,000 in fiscal 1998, $20,560,000 in fiscal 1997
and $10,019,000 in fiscal 1996. The increase in cash used by financing
activities in fiscal 1998 related to continuing operations was due primarily to
the repurchase of shares of the Company's Common Stock at a cost of $28,358,000.
(See Consolidated Statements of Cash Flows.)
The Company's sources of liquidity consisted principally of cash and cash
equivalents in the amount of $53,859,000 at August 29, 1998 compared to
$32,130,000 at August 30, 1997.
The Company also has available a line of credit for $30,000,000 (or 75 percent
of eligible inventory, whatever is less) through a financing and security
agreement with Nations Bank Specialty Lending Unit (formerly NationsCredit
Corporation). The Company did not borrow under this line of credit during fiscal
1998 or fiscal 1997. (See Note 7 to the Company's 1998 Consolidated Financial
Statements.)
Principal expected demands at August 29, 1998 on the Company's liquid assets for
fiscal 1999 include approximately $8,500,000 of capital expenditures (primarily
equipment replace-ments), approximately $8,000,000 (transactions completed in
September, 1998) to repurchase outstanding shares of the Company's common stock,
which completes the December 29, 1997 Board of Directors' authorization to
repurchase up to $36,500,000 of the Company's common stock, and payments of cash
dividends.
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.
ACCOUNTING CHANGES
EARNINGS PER SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," was issued in February 1997 and was adopted by the Company in fiscal
1998. The adoption of SFAS No. 128 did not have a significant impact on the
calculation of earnings per share. (See Note 17 to the Company's 1998
Consolidated Financial Statements.)
COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997 and must
be adopted by the Company no later than fiscal 1999. The statement requires
companies to disclose comprehensive income and its components in their financial
statements.
15
<PAGE>
SEGMENT DISCLOSURES
SFAS No. 131, "Disclosures about Segments of and Enterprise and Related
Information" was issued in June 1997 and must be adopted by the Company no later
than fiscal 1999. The statement establishes standards which redefine how
operating segments are determined and requires public companies to report
financial and descriptive information about reportable operating segments.
PENSION AND OTHER POSTRETIREMENT BENEFITS DISCLOSURE
SFAS No. 132, "Employer's Disclosure About Pensions and Other Postretirement
Benefits" was issued in February 1998 and must be adopted by the Company no
later than fiscal 1999. The statement revises employer's disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans.
RECOGNITION OF DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998 and must be adopted by the Company no later than fiscal
2000. This statement requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure these
instruments at fair value.
The Company has not completed the process of evaluating the effect of SFAS No.
130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments
of and Enterprise and Related Information," SFAS No. 132, "Employer's Disclosure
About Pensions and Other Postretirement Benefits," and SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." Since all these
pronouncements except for SFAS No. 133, relate primarily to changes in
disclosure requirements, the Company does not believe the new requirements will
significantly affect its financial condition or operating results.
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
Annual Report. 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.
IMPACT OF INFLATION
Historically, the impact of inflation on the Company's operations has not been
significantly detrimental, as the Company has usually been able to adjust its
prices to reflect the inflationary impact on the cost of manufacturing its
products. The inability of the Company to successfully offset increases in
manufacturing costs could have a material adverse effect on the Company's
results of operations.
YEAR 2000 (Y2K) COMPLIANCE
INTRODUCTION
The term "year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers as the year 2000 is approached and
reached. These problems generally arise from the fact that most computer
hardware and software have historically used only two digits to identify the
year in a date.
Y2K BACKGROUND
The Company's overall goal is to be Y2K ready. "Y2K ready" means that critical
systems, devices, applications or business relationships have been evaluated and
are expected to be suitable for continued use into and beyond the Y2K, or
contingency plans are in place. The Company started its Y2K project in 1996.
16
<PAGE>
Y2K PROJECT
The Company's Y2K project is divided into four major steps: 1) Strategy for
compliance; 2) Inventory and assessment; 3) Remediation; and 4) System testing.
1. The Company decided to make the corrections for compliance by programming
rather than through file conversion.
2. Using its chosen method of correction, management determined that
approximately 25 percent of its current Information Systems Department's
available time would be required to complete the Y2K project by mid-year 1998.
3. The Company's programs' corrections were completed in May 1998.
4. All programs were tested individually and are presently in the systems test
mode. The testing is scheduled for completion by January 1999.
The Company's Plant Engineering and Maintenance Department was charged with the
assessment and remediation of any Y2K problems in its plant production equipment
and in any building infrastructure equipment. Each machine will be checked
individually and steps taken at that time to update for Y2K compliance. The
completion of this project is scheduled for July 1999.
The Company's Purchasing and Information Systems Departments have contacted all
of the Company's major suppliers to determine their readiness for their
compliance with the Y2K issue.
The Company is not aware of any date sensitive chips in the component parts of
its products that could cause a problem with the units in the field when the
date of January 1, 2000 is reached.
COSTS
The total cost associated with the modifications are not expected to exceed
$300,000 of which approximately $250,000 has been expensed as of August 29,
1998. Any remaining costs incurred by the Company for the Y2K project will be
absorbed in existing budgets.
RISKS
The failure to correct a material Y2K problem could result in an interruption
in, or a failure of, certain normal business activities or operations. Such
failures could materially and adversely affect the Company's operations. Due to
the general uncertainty inherent in the Y2K problem, resulting in part from the
uncertainty of the Y2K readiness of the Company's third-party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of Y2K failures will have a material impact on the Company's
operations. The Company's Y2K project is expected to significantly reduce its
level of uncertainty about the Y2K problem and in particular, about the Y2K
compliance and readiness of its material external agents. The Company believes
that, with the completion of its Y2K project as scheduled, the possibility of
significant interruptions of normal operations should be reduced.
CONTINGENCY
At this time, the Company believes it has addressed all Y2K issues that may
arise, therefore, no contingency plan has been developed. If during the
Company's in-house testing or if information is received from an outside source
that they would be unable to be Y2K compliant, the Company will then develop an
appropriate contingency plan to address Y2K problems that may arise.
Readers are cautioned that forward-looking statements contained in the Y2K
update should be read in conjunction with the Company's disclosures under the
heading: "FORWARD-LOOKING INFORMATION."
17
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 29, AUGUST 30,
(DOLLARS IN THOUSANDS) 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 53,859 $ 32,130
Receivables, less allowance for doubtful accounts
($1,582 and $1,429, respectively) 22,025 31,322
Dealer financing receivables, less allowance for doubtful
accounts ($78 and $155, respectively) 12,782 13,336
Inventories 55,433 53,584
Prepaid expenses 3,516 5,872
Deferred income taxes 6,906 4,917
- ----------------------------------------------------------------------------------------
Total current assets 154,521 141,161
- ----------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, at cost
Land 1,158 1,167
Buildings 38,779 42,455
Machinery and equipment 69,095 66,142
Transportation equipment 5,047 5,004
- ----------------------------------------------------------------------------------------
114,079 114,768
Less accumulated depreciation 81,167 81,175
- ----------------------------------------------------------------------------------------
Total property and equipment, net 32,912 33,593
- ----------------------------------------------------------------------------------------
LONG-TERM NOTES RECEIVABLE, less allowances
($973 and $1,465, respectively) 5,396 5,692
- ----------------------------------------------------------------------------------------
INVESTMENT IN LIFE INSURANCE 21,226 17,641
- ----------------------------------------------------------------------------------------
DEFERRED INCOME TAXES, NET 16,071 14,900
- ----------------------------------------------------------------------------------------
OTHER ASSETS 486 488
- ----------------------------------------------------------------------------------------
TOTAL ASSETS $ 230,612 $ 213,475
- ----------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
AUGUST 29, AUGUST 30,
(DOLLARS IN THOUSANDS) 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ -- $ 695
Accounts payable, trade 24,461 20,471
Income taxes payable 12,623 --
Accrued expenses:
Insurance 3,566 2,687
Product warranties 5,260 3,329
Vacation liability 3,343 3,012
Promotional 2,236 2,508
Other 11,113 8,524
- -------------------------------------------------------------------------------------
Total current liabilities 62,602 41,226
- -------------------------------------------------------------------------------------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 51,487 48,367
- -------------------------------------------------------------------------------------
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Capital stock common, par value $.50; authorized
60,000,000 shares, outstanding 25,865,000 and
25,854,000 shares, respectively 12,932 12,927
Additional paid-in capital 22,507 23,109
Reinvested earnings 111,665 92,179
- -------------------------------------------------------------------------------------
147,104 128,215
Less treasury stock, at cost 30,581 4,333
- -------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 116,523 123,882
- -------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 230,612 $ 213,475
- -------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 29, AUGUST 30, AUGUST 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations
Revenues
Manufactured products $ 523,018 $ 436,712 $ 483,398
Dealer financing 2,076 1,420 1,406
- -------------------------------------------------------------------------------------------------------------
Total net revenues 525,094 438,132 484,804
- -------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of manufactured products 450,934 385,540 417,231
Selling and delivery 21,197 27,131 25,290
General and administrative 19,986 20,313 21,574
- -------------------------------------------------------------------------------------------------------------
Total costs and expenses 492,117 432,984 464,095
- -------------------------------------------------------------------------------------------------------------
Operating income 32,977 5,148 20,709
Financial income 2,950 1,844 354
- -------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 35,927 6,992 21,063
Provision for taxes 11,543 416 6,639
- -------------------------------------------------------------------------------------------------------------
Income from continuing operations 24,384 6,576 14,424
Discontinued operations
Income from operations of discontinued Cycle-Sat
subsidiary (net of applicable income tax
provision of $261) -- -- 593
Gain on sale of Cycle-Sat subsidiary
(net of applicable income tax provision of $13,339) -- 16,472 --
Loss from the disposal of discontinued operations
(net of applicable income tax credit of $1,157) -- -- (2,632)
- -------------------------------------------------------------------------------------------------------------
Net income $ 24,384 $ 23,048 $ 12,385
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Continuing operations:
Basic $ 1.01 $ .26 $ .57
Diluted 1.00 .26 .57
Discontinued operations:
Basic -- .65 (.08)
Diluted -- .64 (.08)
Net earnings per share:
- -------------------------------------------------------------------------------------------------------------
Basic $ 1.01 $ .91 $ .49
Diluted 1.00 .90 .49
- -------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding
(in thousands):
Basic 24,106 25,435 25,349
Diluted 24,314 25,550 25,524
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 29, AUGUST 30, AUGUST 31,
(DOLLARS IN THOUSANDS) 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 24,384 $ 23,048 $ 12,385
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 5,582 6,468 9,700
(Gain) loss on disposal of property, leases and other assets (45) 577 503
Provision (credit) for doubtful receivables 692 1,238 (637)
Pre-tax gain on sale of Cycle-Sat subsidiary -- (29,811) --
Realized and unrealized (gains) and losses on trading
securities, net -- (137) 350
Purchases of trading securities -- -- (10,789)
Proceeds from sale of trading securities -- 4,453 8,267
Provision for loss on disposal of electronic component
assembly segment -- (4,074) 4,074
Other 400 -- --
Change in assets and liabilities:
Decrease (increase) in receivables and other assets 10,585 (4,027) 1,462
(Increase) decrease in inventories (1,849) 9,519 (10,023)
Increase (decrease) in accounts payable and
accrued expenses 9,448 (2,349) 459
Increase in income taxes payable 12,623 -- --
(Decrease) increase in deferred income taxes (3,160) 1,074 (560)
Increase in postretirement benefits 3,302 1,430 1,845
Other -- (2,194) 222
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 61,962 5,215 17,258
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (5,567) (4,438) (10,463)
Proceeds from sale of property and equipment 313 4,498 591
Investments in dealer receivables (54,268) (38,228) (41,003)
Collections of dealer receivables 54,828 36,543 38,915
Investments in long-term notes receivable and other assets (5,708) (4,131) (3,883)
Proceeds from long-term notes receivable and other assets 2,607 2,889 893
Proceeds from sale of Cycle-Sat subsidiary -- 57,000 --
Payments to minority shareholder from sale of Cycle-Sat -- (7,160) --
Other -- (295) --
- --------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (7,795) 46,678 (14,950)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities and capital transactions:
Payments for purchase of common stock (28,358) -- --
Payment of long-term debt of discontinued operations (695) (13,220) --
Net proceeds from notes payable -- -- 215
Payments of cash dividends (4,898) (5,090) (7,604)
Payments of long-term debt and capital leases -- (2,863) (4,596)
Proceeds from issuance of long-term debt -- -- 1,884
Proceeds from issuance of common and treasury stock 1,513 613 82
- --------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities and capital transactions (32,438) (20,560) (10,019)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 21,729 31,333 (7,711)
Cash and cash equivalents at beginning of year 32,130 797 8,508
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 53,859 $ 32,130 $ 797
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
21
<PAGE>
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON SHARES ADDITIONAL TREASURY STOCK
(AMOUNTS IN THOUSANDS ------------- PAID-IN REINVESTED --------------
EXCEPT PER SHARE DATA) NUMBER AMOUNT CAPITAL EARNINGS NUMBER AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 26, 1995 25,829 $ 12,915 $ 23,658 $ 69,440 488 $ 5,565
Proceeds from the sale of common
stock to employees 11 5 65 -- (1) (12)
Cash dividends on common stock -
$.30 per share -- -- -- (7,604) -- --
Net income -- -- -- 12,385 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 1996 25,840 12,920 23,723 74,221 487 5,553
Proceeds from the sale of common
stock to employees 14 7 (614) -- (107) (1,220)
Cash dividends on common stock -
$.20 per share -- -- -- (5,090) -- --
Net income -- -- -- 23,048 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, August 30, 1997 25,854 12,927 23,109 92,179 380 4,333
Proceeds from the sale of common
stock to employees 11 5 (602) -- (225) (2,110)
Payments for purchase of common stock -- -- -- -- 2,897 28,358
Cash dividends on common stock -
$.20 per share -- -- -- (4,898) -- --
Net income -- -- -- 24,384 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, August 29, 1998 25,865 $ 12,932 $ 22,507 $ 111,665 3,052 $ 30,581
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
In fiscal 1998, the Company's operations were conducted predominantly in two
industry segments: the manufacture and sale of recreation vehicles and other
manufactured products, and floor plan financing for selected Winnebago, Itasca,
Vectra, Rialta, and Luxor dealers. The recreation vehicle market is highly
competitive, both as to price and quality of the product. The Company believes
its principal marketing advantages are the quality of its products, its dealer
organization, its warranty and service capability and its marketing techniques.
The Company also believes that its prices are competitive with the competitions'
units of comparable size and quality.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
parent company and subsidiary companies. All material intercompany balances and
transactions with subsidiaries have been eliminated.
For all fiscal years presented, except fiscal 1998, the Consolidated Financial
Statements reflect the Company's Cycle-Sat and electronic component assembly
segments as discontinued operations.
STATEMENTS OF CASH FLOWS. For purposes of these statements, cash equivalents
primarily consisted of commercial paper, tax exempt money market preferreds and
variable rate auction preferred stock with an original maturity of three months
or less. For cash equivalents, the carrying amount is a reasonable estimate of
fair value.
FISCAL PERIOD. The Company follows a 52/53 week fiscal year period. The
financial statements for fiscal 1998 and 1997 are based on a 52-week period,
fiscal 1996 is on a 53-week basis.
REVENUE RECOGNITION. Sales are recorded by the Company when products are shipped
to independent dealers. Interest income from dealer floor plan receivables are
recorded on the accrual basis in accordance with the terms of the loan
agreements.
INVENTORIES. Inventories are valued at the lower of cost or market, with cost
being determined by using the last-in, first-out (LIFO) method and market
defined as net realizable value.
PROPERTY AND EQUIPMENT. Depreciation of property and equipment is computed using
the straight-line method on the cost of the assets, less allowance for salvage
value where appropriate, at rates based upon their estimated service lives.
Accelerated depreciation methods are used for tax purposes whenever permitted.
Management periodically reviews the carrying values of long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. In performing the review for
recoverability, management estimates the nondiscounted future cash flows
expected to result from the use of the asset and its eventual disposition. The
Company incurred an impairment charge of $400,000 to write down one of its
buildings to estimated net realizable value during fiscal 1998 as a result of
this review.
PROVISION FOR WARRANTY CLAIMS. Estimated warranty costs are provided at the time
of sale of the warranted products. Estimates of future warranty costs are based
on prior experience and known current events.
INCOME TAXES. The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes." This Statement requires recognition of deferred
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. Allowance for doubtful accounts are based on
previous loss experience. Additional amounts are provided through charges to
income as management believes necessary after evaluation of receivables and
current economic conditions. Amounts which are considered to be uncollectible
are charged off and recoveries of amounts previously charged off are credited to
the allowance upon recovery.
23
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expenditures are expensed as
incurred. Development activities generally relate to creating new products and
improving or creating variations of existing products, to meet new applications.
During fiscal 1998, 1997 and 1996, the Company spent approximately $1,128,000,
$1,695,000 and $801,000, respectively, on research and development activities.
EARNINGS PER COMMON SHARE. Basic earnings per common share is computed by
dividing net income by the weighted average common shares outstanding during the
period.
Diluted earnings per common share is computed by dividing net income by the
weighted average common shares outstanding plus the incremental shares that
would have been outstanding upon the assumed exercise of dilutive stock options
(See Note 17).
FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS. All financial instruments are
carried at amounts believed to approximate fair value.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS. Certain prior year information has been reclassified to
conform to the current year presentation.
NOTE 2: DISCONTINUED OPERATIONS - SALE OF CYCLE-SAT SUBSIDIARY
The Company owned an 80% interest in Cycle-Sat, Inc. (Cycle-Sat), a
telecommunications service firm that was a leading distributor of television and
radio commercials using satellite, fiber-optic and digital technologies. On
August 5, 1996 (the measurement date), the Company adopted a formal plan to sell
Cycle-Sat. Revenues applicable to Cycle-Sat for fiscal years 1997 and 1996 were
$7,073,000 and $30,235,000, respectively. Accordingly, Cycle-Sat is accounted
for as a discontinued operation in the accompanying consolidated financial
statements. On November 19, 1996, the Company sold all of the assets of
Cycle-Sat to Vyvx, Inc., a subsidiary of The Williams Companies, Inc., Tulsa,
Oklahoma for approximately $57 million. The transaction resulted in an after-tax
gain of $16.5 million or $.64 per diluted share.
NOTE 3: DISCONTINUED OPERATIONS - DISPOSAL OF ELECTRONIC COMPONENT ASSEMBLY
SEGMENT
In August 1993, the Company agreed to sell certain assets and liabilities of its
electronic component assembly business, North Iowa Electronics, Inc. (NIE) to an
unaffiliated third party (the buyer) for $100,000 in cash and a $1.6 million
promissory note. The transaction was accounted for as a transfer of net assets
with recognition of the gain ($285,000) deferred due to uncertainty surrounding
the buyer's ability to generate sufficient cash flows to retire the note.
During fiscal 1995, the Company guaranteed certain debt obligations of the buyer
totaling $4,500,000. The buyer experienced significant financial difficulties
and the Company decided, during fiscal 1996, to make no further financial
accommodations and to exit ongoing involvement with this business.
In the fourth quarter of fiscal 1996, the Company provided $4,074,000 for the
anticipated loss related to the net cost of resolution of this matter. Cash in
an amount approximating the amount provided was paid related to the guarantee to
fully resolve this matter during fiscal 1997.
NOTE 4: DEALER FINANCING RECEIVABLES
Dealer floor plan receivables are collateralized by recreation vehicles and are
due upon the dealer's sale of the vehicle, with the entire balance generally due
at the end of one year. At August 29, 1998, the Company had certain
concentration of credit risks whereby $12,408,000 of dealer financing
receivables were due from one dealer.
24
<PAGE>
NOTE 5: INVENTORIES
Inventories consist of the following:
AUGUST 29, AUGUST 30,
(DOLLARS IN THOUSANDS) 1998 1997
- --------------------------------------------------------------
Finished goods $ 24,147 $ 27,577
Work-in-process 15,328 13,842
Raw materials 33,384 29,907
- --------------------------------------------------------------
72,859 71,326
LIFO reserve 17,426 17,742
- --------------------------------------------------------------
$ 55,433 $ 53,584
The above value of inventories, before reduction for the LIFO reserve,
approximates replacement cost at the respective dates.
NOTE 6: LONG-TERM NOTES RECEIVABLE
Long-term notes receivable of $5,396,000 and $5,692,000 at August 29, 1998 and
August 30, 1997, respectively, are primarily collateralized by dealer
inventories and real estate. The notes had weighted average interest rates of
8.2 percent per annum and 8.7 percent per annum at August 29, 1998 and August
30, 1997, respectively, and have various maturity dates ranging through January
2004.
NOTE 7: NOTES PAYABLE
Short-term lines of credit and related borrowings outstanding at fiscal year-end
are as follows:
<TABLE>
<CAPTION>
AVAILABLE CREDIT LINES OUTSTANDING INTEREST RATE
------------------------------------------------------------------------------------------------
AUGUST 29, AUGUST 30, AUGUST 29, AUGUST 30, AUGUST 29, AUGUST 30,
(DOLLARS IN THOUSANDS) 1998 1997 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Notes payable:
Continuing operations $ 30,000 $ 30,000 $--- $--- 9.0% 9.0%
</TABLE>
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED AVERAGE INTEREST
OUTSTANDING OUTSTANDING RATE DURING YEAR*
---------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Notes payable:
Discontinued operations $--- $--- $4,500 $--- $--- $4,274 --- --- 7.4%
</TABLE>
*Based on the approximate average aggregate amount outstanding during the year
and the interest rate.
25
<PAGE>
Since March 1992, the Company has had a financing and security agreement with
Nations Bank Specialty Lending Unit (formerly NationsCredit 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 under the agreement bear interest at the
prime rate, as defined in the agreement, plus 50 basis points. The line of
credit is available and continues for 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 August 29, 1998, the Company
was in compliance with these covenants. There were no outstanding borrowings
under the line of credit during fiscal 1997 or fiscal 1998.
NOTE 8: LONG-TERM DEBT
At August 29, 1998, the Company had no outstanding long-term debt. Long-term
debt outstanding at August 30, 1997 was $695,000 with an interest rate of 7.5
percent per annum.
During fiscal year 1993, the Company and Winnebago Industries Europe, GmbH
(WIE), a wholly owned subsidiary of the Company, entered into a financing
arrangement with Volksbank Saarbrucken-St. Ingebert eG to finance the
acquisition and renovation of a new facility in Kirkel, Saarland, Germany. The
financing arrangement included four loans with interest rates ranging from 5.5
percent to 8.75 percent per annum. As of August 30, 1997, only one of the loans
was outstanding which had an interest rate of 7.5 percent per annum. Borrowings
under this agreement at August 30, 1997 were $695,000. The loan was guaranteed
by the Company and was secured by real estate and improvements to the new
facility. The Company sold the facility in August 1997. During fiscal 1998, the
Company paid all amounts outstanding under this agreement.
NOTE 9: EMPLOYEE RETIREMENT PLANS
The Company has a qualified profit sharing and contributory 401(k) plan and a
stock bonus retirement plan for eligible employees. The plans provide for
contributions by the Company in such amounts as the Board of Directors may
determine. Contributions to the plans in cash for fiscal years 1998, 1997 and
1996 were $1,985,000, $1,933,000 and $2,099,000, respectively.
The Company also has a non-qualified deferred compensation program which permits
key employees to annually elect (via individual contracts) to defer a portion of
their compensation until their retirement. The retirement benefit to be provided
is fixed based upon the amount of compensation deferred and the age of the
individual at the time of the contracted deferral. An individual generally vests
at the later of age 55 and five years of service since the deferral was made.
For deferrals prior to December 1992, vesting occurs at the later of age 55 and
five years of service from first deferral or 20 years of service. Deferred
compensation expense was $1,487,000, $1,558,000, and $1,556,000 in fiscal 1998,
1997 and 1996, respectively. Total deferred compensation liabilities were
$22,024,000 and $21,164,000 at August 29, 1998 and August 30, 1997,
respectively.
To assist in funding the deferred compensation liability, the Company has
invested in corporate-owned life insurance policies. The cash surrender value of
these policies (net of borrowings of $9,254,000 and $10,335,000 at August 29,
1998 and August 30, 1997, respectively) are presented as assets of the Company
in the accompanying balance sheets.
The Company has adopted a Directors' Deferred Compensation Plan which permits
non-employee directors to receive their fees and r etainers as members of the
Board of Directors and committees of the Board in a form other than as direct
payments.
The Company provides certain health care and other benefits for retired
employees who have fulfilled eligibility requirements at age 55 with 15 years of
continuous service. Retirees are required to pay a monthly premium for medical
coverage based on years of service at retirement and then current age. The
Company's postretirement health care plan currently is not funded. The status of
the plan is as follows:
26
<PAGE>
Accumulated postretirement benefit obligation at August
29, 1998 and August 30, 1997.
(DOLLARS IN AUGUST 29, AUGUST 30,
THOUSANDS) 1998 1997
- ----------------------------------------------------------
Retirees $ 4,088 $ 2,239
Fully eligible active plan
participants 5,723 3,578
Other active plan
participants 22,118 13,738
- ----------------------------------------------------------
31,929 19,555
Unrecognized prior
service cost 460 509
Unrecognized net
(loss) gain (2,926) 7,139
- ----------------------------------------------------------
Accrued postretirement
benefit liability
recognized in financial
statements $ 29,463 $ 27,203
- ----------------------------------------------------------
Net postretirement benefit expense for the fiscal years ended August 29, 1998,
August 30, 1997, and August 31, 1996 consisted of the following components:
(DOLLARS IN AUG. 29, AUG. 30, AUG. 31,
THOUSANDS) 1998 1997 1996
- -------------------------------------------------------------
Service cost-benefits
earned during
the year $1,225 $ 876 $ 947
Interest cost on
accumulated
postretirement
obligation 1,535 1,153 1,133
Net amortization
and deferral (183) (490) (416)
- -------------------------------------------------------------
$2,577 $1,539 $1,664
- -------------------------------------------------------------
The average assumed health care cost trend rate used in measuring the
accumulated post-retirement benefit obligations as of August 29, 1998 was 8.9
percent, decreasing each successive year until it reaches 4.5 percent in 2016
after which it remains constant.
A one-percentage point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
August 29, 1998 by approximately $8,455,000. The effect of this change on the
net postretirement health care cost for fiscal 1998 would be to increase it by
approximately $784,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 6.0 percent at August 29, 1998 and 7.0 percent at August 30,
1997. During fiscal 1996, the Company revised certain provisions of its
postretirement health care plan to offer different medical plan options and
revised the monthly contribution rate for retirees. The impact of these
revisions resulted in a decrease in the accumulated postretirement benefit
obligation of approximately $5,695,000 and a decrease in the previously
estimated net postretirement benefit expense for fiscal year 1996 of
approximately $1,249,000. The unrecognized net gain as of August 31, 1996 is
being amortized over the average remaining service period of active plan
participants, estimated to be 18 years. The unrecognized prior service cost is
being amortized over the average remaining years to full eligibility for
benefits of active plan participants, estimated to be 12 years.
NOTE 10: CONTINGENT LIABILITIES AND COMMITMENTS
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. Most dealers are financed on a "floor
plan" basis under which a bank or finance company lends the dealer all, or
substantially all, of the purchase price, collateralized by a lien upon, or
title to, the merchandise purchased. Upon request of a lending institution
financing a dealer's purchases of the Company's products, and after completion
of a credit investigation of the dealer involved, the Company will execute a
repurchase agreement. These agreements provide that, in the event of default by
the dealer on the agreement to pay the lending institution, the Company will
repurchase the financed merchandise. The agreements provide that the Company's
liability will not exceed 100 percent of the dealer invoice and provide for
periodic liability reductions based on the time since the date of the original
invoice. The Company's contingent obligations under these repurchase agreements
are reduced by the proceeds received upon the sale of any repurchased unit. The
Company's contingent liability on all repurchase agreements was approximately
$132,540,000 and
27
<PAGE>
$115,637,000 at August 29, 1998 and August 30, 1997, respectively. The Company's
losses under repurchase agreements were approximately $153,000, $344,000 and
$221,000 during fiscal years 1998, 1997 and 1996, respectively.
Included in these contingent liabilities are certain dealer receivables subject
to full recourse to the Company with NationsCredit and Green Tree Financial.
Contingent liabilities under these recourse agreements were $18,623,000 and
$24,868,000 at August 29, 1998 and August 30, 1997, respectively. The Company
incurred no actual losses under these recourse agreements during fiscal years
1998 and 1997 and approximately $85,000 during fiscal year 1996.
The Company self-insures for a portion of product liability claims.
Self-insurance retention liability varies annually based on market conditions
and for the past three fiscal years was at $2,500,000 per occurrence and ranged
from $6,000,000 (fiscal 1998) to $8,500,000 in aggregate per policy year.
Liabilities in excess of these amounts are the responsibility of the insurer.
The Company is involved in various legal proceedings which are ordinary routine
litigation incident to its business, many of which are covered in whole or in
part by insurance. While it is impossible to estimate with certainty the
ultimate legal and financial liability with respect to this litigation,
management is of the opinion that while the final resolution of any such
litigation may have an impact on the Company's consolidated results for a
particular reporting period, the ultimate disposition of such litigation will
not have any material adverse effect on the Company's financial position,
results of operations or liquidity.
NOTE 11: INCOME TAXES
The components of the provision for income taxes are as follows:
YEAR ENDED
(DOLLARS IN AUG. 29, AUG. 30, AUG. 31,
THOUSANDS) 1998 1997 1996
- ---------------------------------------------------------------
Continuing
operations
Current $ 14,703 $ 1,288 $ 5,707
Deferred (3,160) (872) 932
- ---------------------------------------------------------------
11,543 416 6,639
- ---------------------------------------------------------------
Discontinued
operations
Current --- 11,393 596
Deferred --- 1,946 (1,492)
- ---------------------------------------------------------------
--- 13,339 (896)
- ---------------------------------------------------------------
Total provision $ 11,543 $ 13,755 $ 5,743
- ---------------------------------------------------------------
28
<PAGE>
The following is a reconciliation of the U.S. statutory tax rate to the
effective income tax rates (benefit) provided:
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 29, 1998 AUGUST 30, 1997 AUGUST 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory rate 35.0% 35.0% 35.0%
Cash surrender value (1.2) (0.9) (2.0)
Life insurance premiums 0.2 0.3 1.9
Tax credits (1.0) (1.1) (2.2)
Net loss (income) of WIE not
included in consolidated return --- 7.3 (1.4)
Loss on sale of WIE --- (9.9) ---
State taxes, net of federal benefit 0.1 1.0 ---
Foreign sales corporation
commissions (0.5) 0.7 ---
Other (0.5) 5.0 0.4
- ----------------------------------------------------------------------------------------------------
Total 32.1% 37.4% 31.7%
- ----------------------------------------------------------------------------------------------------
Whereof:
Continuing operations 32.1% 5.9% 31.5%
Discontinued operations --- 44.7% (30.5)%
- ----------------------------------------------------------------------------------------------------
</TABLE>
The tax effect of significant items comprising the Company's net deferred tax
assets are as follows:
<TABLE>
<CAPTION>
AUGUST 29, 1998 AUGUST 30, 1997
(DOLLARS IN THOUSANDS) ASSETS LIABILITIES TOTAL TOTAL
- ----------------------------------------------------------------------------------------------------
CURRENT
<S> <C> <C> <C> <C>
Accrued vacation $ 1,199 $ -- $ 1,199 $ 1,054
Legal reserves 740 -- 740 318
Warranty reserves 1,841 -- 1,841 1,140
Bad debt reserves 859 -- 859 718
Self-insurance reserve 1,248 -- 1,248 941
Miscellaneous reserves 1,357 (338) 1,019 746
- ----------------------------------------------------------------------------------------------------
Subtotal 7,244 (338) 6,906 4,917
- ----------------------------------------------------------------------------------------------------
NONCURRENT
Postretirement health care benefits 10,312 -- 10,312 9,521
Deferred compensation 8,247 -- 8,247 7,857
Accelerated depreciation -- (2,488) (2,488) (2,478)
- ----------------------------------------------------------------------------------------------------
Subtotal 18,559 (2,488) 16,071 14,900
- ----------------------------------------------------------------------------------------------------
Total $ 25,803 $ (2,826) $ 22,977 $ 19,817
- ----------------------------------------------------------------------------------------------------
</TABLE>
In the fourth quarter of fiscal 1997, the Company recognized a tax benefit of
approximately $3,700,000 due to the sale and closing of WIE.
29
<PAGE>
NOTE 12: FINANCIAL INCOME AND EXPENSE
The following is a reconciliation of financial income (expense):
<TABLE>
<CAPTION>
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 29, 1998 AUGUST 30, 1997 AUGUST 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income from investments
and receivables $ 2,454 $ 2,534 $ 1,546
Dividend income 863 398 141
Interest expense (425) (674) (757)
Net realized (losses) gains on sale
of trading securities -- (995) 218
Net unrealized gains (losses)
on trading securities -- 1,132 (568)
Gains (losses) on foreign
currency transactions 58 (551) (226)
- --------------------------------------------------------------------------------------------
$ 2,950 $ 1,844 $ 354
- --------------------------------------------------------------------------------------------
</TABLE>
NOTE 13: DIVIDEND DECLARED
On October 15, 1998, the Board of Directors declared a cash dividend of $.10 per
common share payable January 11, 1999, to shareholders of record on December 11,
1998.
NOTE 14: STOCK OPTION PLANS
The Company's 1987 stock option plan allowed the granting of non-qualified and
incentive stock options to key employees at prices not less than 100 percent of
fair market value, determined by the mean of the high and low prices, on the
date of grant. The plan expired in fiscal 1997; however, exercisable options
representing 347,907 shares remain outstanding at August 29, 1998.
The Company's 1997 stock option plan provides additional incentives to those
officers, employees, directors, advisors and consultants of the Company whose
substantial contributions are essential to the continued growth and success of
the Company's business. A total of 2,000,000 shares of the Company's common
stock may be issued or transferred or used as the basis of stock appreciation
rights under the 1997 stock option plan. The plan allows the granting of
non-qualified and incentive stock options as well as stock appreciation rights.
The plan will be administered by the Company's Board of Directors or by a
committee appointed by the Board. The option prices for these shares shall not
be less than 85 percent of the fair market value of a share at the time of
option granting for non-qualified stock options or less than 100 percent for
incentive stock options. The term of each option expires and all rights to
purchase shares thereunder cease ten years after the date such option is granted
or on such date prior thereto as may be fixed by the Committee. Options granted
under this plan become exercisable six months after the date the option is
granted.
30
<PAGE>
A summary of stock option activity for fiscal years 1998, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
WTD. WTD. WTD.
PRICE AVG. PRICE AVG. PRICE AVG.
PER EXERCISE PER EXERCISE PER EXERCISE
SHARES SHARES PRICE/SH SHARES SHARES PRICE/SH SHARES SHARES PRICE/SH
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 649,500 $4 - $10 $6.53 746,000 $4 - $12 $6.56 764,000 $4 - $12 $6.02
Options granted 231,000 9 8.56 242,000 7 - 8 7.68 --- --- ---
Options exercised (218,472) 4 - 10 6.22 (107,000) 4 - 6 4.87 (1,000) 6 5.69
Options canceled (11,333) 8 7.75 (231,500) 8 - 12 10.40 (17,000) 9 - 12 10.03
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at end
of year 650,695 $4 - $9 $7.34 649,500 $4 - $10 $6.53 746,000 $4 - $12 $6.56
- ----------------------------------------------------------------------------------------------------------------------------------
Exercisable at end
of year 444,352 $4 - $9 $6.87 422,500 $4 - $10 $5.92 698,400 $4 - $12 $6.99
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding at
August 29, 1998:
<TABLE>
<CAPTION>
RANGE OF NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
PRICE AUGUST 29, 1998 CONTRACTUAL LIFE EXERCISE PRICE AUGUST 29, 1998 EXERCISE PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$4.31 - $5.69 182,500 2 $ 5.03 182,500 $ 5.03
7.19 - 7.75 188,861 8 7.67 135,407 7.64
8.56 - 9.00 279,334 8 8.62 126,445 8.70
- ----------------------------------------------------------------------------------------------------------------------------------
650,695 7 $ 7.34 444,352 $ 6.87
</TABLE>
In 1997, the Company adopted SFAS No. 123, "Accounting for Stock Based
Compensation." The Company has elected to continue following the accounting
guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" for measurement and recognition of stock-based transactions
with employees. No compensation cost has been recognized for options issued
under the stock option plans because the exercise price of all options granted
was not less than 100 percent of fair market value of the common stock on the
date of grant. Had compensation cost for the stock options issued been
determined based on the fair value at the grant date, consistent with provisions
of SFAS No. 123, the Company's 1998 and 1997 income and earnings per share would
have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA) 1998 1997
- ---------------------------------------------------------------
<S> <C> <C>
Net earnings
As reported $ 24,384 $ 23,048
Pro forma 24,055 22,884
Earnings per share (basic)
As reported $ 1.01 $ .91
Pro forma 1.00 .90
Earnings per share (diluted)
As reported $ 1.00 $ .90
Pro forma .99 .90
</TABLE>
31
<PAGE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
1998 1997
- ---------------------------------------------------------------------
Dividend yield 2.28% 3.19%
Risk-free interest rate 4.59% 6.64%
Expected life 7 years 7 years
Expected volatility 32.29% 29.27%
Estimated fair value of options
granted per share $2.86 $2.40 - $2.58
There were no options granted during fiscal 1996.
NOTE 15: SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the year for:
<TABLE>
<CAPTION>
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 29, 1998 AUGUST 30, 1997 AUGUST 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 465 $ 656 $ 2,000
Income taxes 10,599 16,426 5,085
</TABLE>
NOTE 16: BUSINESS SEGMENT INFORMATION
The Company defines its operations into two business segments: Recreation
Vehicles and Other Manufactured Products, which includes all data relative to
the manufacturing and selling of its recreational and other manufactured
products; and Dealer Financing, which relates to the WAC subsidiary operation.
Identifiable assets are those assets used in the operations of each industry
segment. General Corporate assets consist of cash and cash equivalents,
marketable securities, deferred income taxes and other corporate assets. General
Corporate income and expenses include administrative costs. Inter-segment sales
and expenses are not significant.
For the years ended August 29, 1998, August 30, 1997 and August 31, 1996, the
Company's segment information is as follows:
<TABLE>
<CAPTION>
RECREATION
VEHICLES AND OTHER
MANUFACTURED DEALER CENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
Net revenues $ 523,018 $ 2,076 $ -- $ 525,094
Operating income (loss) 32,466 1,845 (1,334) 32,977
Identifiable assets 133,835 15,441 81,336 230,612
Depreciation and amortization 5,323 5 254 5,582
Capital expenditures 5,545 19 3 5,567
1997
Net revenues from continuing
operations $ 436,712 $ 1,420 $ -- $ 438,132
Operating income (loss) from
continuing operations 6,976 736 (2,564) 5,148
Identifiable assets 136,810 16,912 59,753 213,475
Depreciation and amortization 5,797 9 662 6,468
Capital expenditures 3,982 35 421 4,438
</TABLE>
Summary information for WIE is as follows: Net revenues - $9,655, operating loss
- - $(6,376). The Company sold WIE during August, 1997. As a result of the sale,
the Company recorded a capital loss for tax purposes resulting in a tax credit
of approximately $3,700,000 due to this loss. These amounts are included in the
Recreation Vehicles and Other Manufactured Products segment above.
32
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
1996
Net revenues from continuing
operations $ 483,398 $ 1,406 $ -- $ 484,804
Operating income (loss) from
continuing operations 23,169 1,518 (3,978) 20,709
Identifiable assets 154,238 15,250 51,108 220,596
Depreciation and amortization 5,790 7 3,903 9,700
Capital expenditures 6,754 -- 3,709 10,463
</TABLE>
Summary information from WIE is as follows: Net revenues - $13,773. Operating
loss - $(238). Identifiable assets - $10,388. These amounts are included in the
Recreation Vehicles and Other Manufactured Products segment above.
NOTE 17: EARNINGS PER SHARE
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" The following table reflects
the calculation of basic and diluted earnings per share for the past three
fiscal years.
<TABLE>
<CAPTION>
(IN THOUSANDS. EXCEPT PER SHARE DATA) AUGUST 29, 1998 AUGUST 30, 1997 AUGUST 31, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per share - basic
Income from continuous operations $ 24,384 $ 6,576 $ 14,424
Income (loss) from discontinued
operations -- 16,472 (2,039)
- -----------------------------------------------------------------------------------------------------------
Net income $ 24,384 $ 23,048 $ 12,385
- -----------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 24,106 25,435 25,349
- -----------------------------------------------------------------------------------------------------------
Income per share from
continuing operations - basic $ 1.01 $ .26 $ .57
Income (loss) per share from
discontinued operations - basic -- .65 (.08)
- -----------------------------------------------------------------------------------------------------------
Net income per share $ 1.01 $ .91 $ .49
- -----------------------------------------------------------------------------------------------------------
Earnings per share - assuming dilution
Income from continuous operations $ 24,384 $ 6,576 $ 14,424
Income (loss) from discontinued
operations -- 16,472 (2,039)
- -----------------------------------------------------------------------------------------------------------
Net income $ 24,384 $ 23,048 $ 12,385
- -----------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 24,106 25,435 25,349
Dilutive impact of options outstanding 208 115 175
- -----------------------------------------------------------------------------------------------------------
Weighted average shares and potential
dilutive shares outstanding 24,314 25,550 25,524
- -----------------------------------------------------------------------------------------------------------
Income per share from continuing
operations - assuming dilution $ 1.00 $ .26 $ .57
Income (loss) per share from discontinued
operations - assuming dilution -- .64 (.08)
- -----------------------------------------------------------------------------------------------------------
Net income per share - assuming dilution $ 1.00 $ .90 $ .49
- -----------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Winnebago Industries, Inc.
Forest City, Iowa
We have audited the consolidated balance sheets of Winnebago Industries, Inc.
and subsidiaries (the Company) as of August 29, 1998 and August 30, 1997 and the
related consolidated statements of earnings, cash flows and changes in
stockholders' equity for each of the three years in the period ended August 29,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Winnebago Industries, Inc. and
subsidiaries as of August 29, 1998 and August 30, 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
August 29, 1998 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
October 21, 1998
34
<PAGE>
NET REVENUES BY MAJOR PRODUCT CLASS (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED (1)
AUGUST 29, AUGUST 30, AUGUST 31, AUGUST 26, AUGUST 27,
(DOLLARS IN THOUSANDS) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Motor homes (Class A & C) $468,004 $381,191 $432,212 $402,435 $385,319
89.1% 87.0% 89.2% 87.5% 88.9%
Other recreation vehicle revenues (2) 18,014 19,771 17,166 19,513 21,903
3.5% 4.5% 3.5% 4.2% 5.1%
Other manufactured products revenues (3) 37,000 35,750 34,020 36,961 25,184
7.0% 8.2% 7.0% 8.0% 5.8%
- ----------------------------------------------------------------------------------------------------------------------
Total manufactured products revenues 523,018 436,712 483,398 458,909 432,406
99.6% 99.7% 99.7% 99.7% 99.8%
Finance revenues (4) 2,076 1,420 1,406 1,220 831
.4% .3% .3% .3% .2%
- ----------------------------------------------------------------------------------------------------------------------
Total net revenues $525,094 $438,132 $484,804 $460,129 $433,237
100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
(1) The fiscal year ended August 31, 1996 contained 53 weeks; all other fiscal
years in the table contained 52 weeks. All years prior to fiscal 1998 are
appropriately restated to exclude the Company's discontinued Cycle-Sat
subsidiary's revenues from satellite courier and tape duplication services.
(2) Primarily EuroVan Campers, recreation vehicle related parts and recreation
vehicle service revenue.
(3) Primarily sales of extruded aluminum, commercial vehicles, and component
products for other manufacturers.
(4) WAC revenues from dealer financing.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER ENDED
NOVEMBER 29, FEBRUARY 28, MAY 30, AUGUST 29,
FISCAL 1998 1997 1998 1998 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $125,896 $118,709 $150,515 $129,974
Gross profit 18,423 14,355 20,905 20,477
Operating income 7,428 5,719 10,231 9,599
Net income 5,338 4,350 7,334 7,362
Net income per share (basic) .21 .18 .31 .32
Net income per share (diluted) .21 .18 .31 .32
</TABLE>
The Company recorded an inventory write-up of approximately $1,962,000 during
the fourth quarter of fiscal 1998 as a result of completing a physical count of
work-in-process inventories. It was not possible to identify the adjustment to
any specific period. The Company also recorded a reduction in its LIFO reserve
due to favorable prices of inventory purchased during the fourth quarter of
fiscal 1998 of approximately $1,516,000.
<TABLE>
<CAPTION>
QUARTER ENDED
NOVEMBER 30, MARCH 1, MAY 31, AUGUST 30,
FISCAL 1997 1996 1997 1997 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues from continuing operations $113,892 $105,702 $117,226 $101,312
Gross profit 15,079 10,199 16,180 11,134
Operating income (loss) from continuing
operations 3,856 (3,330) 5,514 (892)
Income (loss) from continuing operations 2,706 (3,674) 3,720 3,824
Net income (loss) 19,178 (3,674) 3,720 3,824
Income (loss) per common share (basic):
Continuing operations .11 (.15) .15 .15
Discontinued operations .65 --- --- ---
Net income (loss) .76 (.15) .15 .15
Income (loss) per common share (diluted):
Continuing operations .11 (.15) .15 .15
Discontinued operations .64 --- --- ---
Net income (loss) .75 (.15) .15 .15
</TABLE>
The Company recorded a net gain on the sale of the Cycle-Sat subsidiary of
$16,472,000 during the first quarter of fiscal 1997. The Company recorded a tax
credit of approximately $3,700,000 during the fourth quarter of fiscal 1997 due
to the closing and sale of Winnebago Industries Europe GmbH.
35
<PAGE>
SHAREHOLDER INFORMATION
PUBLICATIONS
A notice of Annual Meeting of Shareholders and Proxy Statement is furnished to
shareholders in advance of the annual meeting.
Copies of the Company's quarterly financial news releases and the annual report
on Form 10-K (without exhibits), required to be filed by the Company with the
Securities and Exchange Commission, may be obtained without charge from the
corporate offices as follows:
Public Relations Department
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, Iowa 50436-0152
Telephone: (515) 582-3535
Fax: (515) 582-6966
E-Mail: [email protected]
This annual report as well as corporate news releases may also be viewed online
in the financial section of Winnebago Industries' website:
http://www.winnebagoind.com
SHAREHOLDER ACCOUNT ASSISTANCE
Registration and Transfer Agent to contact for address changes, account
certificates and stock holdings:
Norwest Bank Minnesota, N.A.
P.O. Box 64854
St. Paul, Minnesota 55164-0854
OR
161 North Concord Exchange
South St. Paul, Minnesota 55075-1139
Telephone: (800) 468-9716 or (612) 450-4064
ANNUAL MEETING
The Annual Meeting of shareholders will be held on Wednesday, January 20, 1999,
at 7:30 p.m. (CST) in Friendship Hall, Highway 69 South, Forest City, Iowa.
AUDITOR
Deloitte & Touche LLP
400 One Financial Plaza
120 South Sixth Street
Minneapolis, Minnesota 55402-1844
COMMON STOCK DATA
The Company's common stock is listed on the New York, Chicago and Pacific Stock
Exchanges.
Ticket symbol: WGO
Shareholders of record as of November 10, 1998: 10,855
Below are the New York Stock Exchange high, low and closing prices of Winnebago
Industries, Inc. stock for each quarter of fiscal 1998 and fiscal 1997.
<TABLE>
<CAPTION>
FISCAL 1998 HIGH LOW CLOSE FISCAL 1997 HIGH LOW CLOSE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 8.50 $ 6.81 $ 7.6875 First Quarter $ 8.50 $ 7.00 $ 7.50
Second Quarter 12.00 7.375 12.00 Second Quarter 7.875 6.875 7.125
Third Quarter 13.25 10.50 11.1875 Third Quarter 7.375 6.25 6.875
Fourth Quarter 15.1875 10.75 11.125 Fourth Quarter 9.625 6.625 8.375
</TABLE>
CASH DIVIDENDS PER SHARE
FISCAL 1998 FISCAL 1997
- --------------------------------------------------------------------------------
AMOUNT DATE PAID AMOUNT DATE PAID
- ------ --------- ------ ---------
$ .10 January 5, 1998 $ .10 January 6, 1997
.10 July 6, 1998 .10 July 7, 1997
36
<PAGE>
DIRECTORS AND OFFICERS
DIRECTORS
BRUCE D. HERTZKE
Chairman of the Board, Chief Executive
Officer and President
Winnebago Industries, Inc.
GERALD E. BOMAN
Former Senior Vice President
Winnebago Industries, Inc.
JERRY N. CURRIE
President and Chief Executive Officer
CURRIES Company and GRAHAM
Manufacturing
FRED G. DOHRMANN
Former Chairman of the Board and
Chief Executive Officer
Winnebago Industries, Inc.
JOHN V. HANSON
Former President and Deputy Chairman of
the Board
Winnebago Industries, Inc.
GERALD C. KITCH
Former Executive Vice President
Pentair, Inc.
RICHARD C. SCOTT
Vice President, University Development
Baylor University
JOSEPH M. SHUSTER
Chairman, Teltech
FREDERICK M. ZIMMERMAN
Professor of Manufacturing Systems
Engineering
The University of St. Thomas
FRANCIS L. ZROSTLIK
President, Stellar Industries
LUISE V. HANSON
Director Emeritus
OFFICERS
[PHOTO]
BRUCE D. HERTZKE
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
[PHOTO]
EDWIN F. BARKER
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
[PHOTO]
RAYMOND M. BEEBE
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
[PHOTO]
RONALD D. BUCKMEIER
VICE PRESIDENT, PRODUCT DEVELOPMENT
[PHOTO]
BRIAN J. HRUBES
CONTROLLER
[PHOTO]
JAMES P. JASKOVIAK
VICE PRESIDENT, SALES AND MARKETING
[PHOTO]
ROBERT J. OLSON
VICE PRESIDENT, MANUFACTURING
JOSEPH L. SOCZEK, JR.
TREASURER
<PAGE>
WINNEBAGO INDUSTRIES, INC.
[PHOTOS: DESCRIBED ON INSIDE FRONT COVER]
EXHIBIT 21
List of Subsidiaries
JURISDICTION PERCENT
OF OF
NAME OF CORPORATION INCORPORATION OWNERSHIP
- ---------------------------------------- --------------- -----------
Winnebago Industries, Inc. Iowa Parent
Winnebago International Corporation Iowa 100%
Winnebago Health Care Management Company Iowa 100%
Winnebago Acceptance Corporation Iowa 100%
Winnebago R.V., Inc. Delaware 100%
EXHIBIT 23
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
2-40316, No. 2-82109, No. 33-21757, No. 33-59930 and No. 333-31595 of Winnebago
Industries, Inc. on Form S-8 of our reports dated October 21, 1998 appearing in
and incorporated by reference in the Annual Report on Form 10-K for Winnebago
Industries, Inc. for the year ended August 29, 1998.
/s/ Deloitte & Touche LLP
- ---------------------------
Deloitte & Touche LLP
Minneapolis, Minnesota
November 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-29-1998
<PERIOD-END> AUG-29-1998
<CASH> 53,859
<SECURITIES> 0
<RECEIVABLES> 36,467
<ALLOWANCES> 1,660
<INVENTORY> 55,433
<CURRENT-ASSETS> 154,521
<PP&E> 114,079
<DEPRECIATION> 81,167
<TOTAL-ASSETS> 230,612
<CURRENT-LIABILITIES> 62,602
<BONDS> 0
12,932
0
<COMMON> 0
<OTHER-SE> 134,172
<TOTAL-LIABILITY-AND-EQUITY> 230,612
<SALES> 525,094
<TOTAL-REVENUES> 525,094
<CGS> 450,934
<TOTAL-COSTS> 450,934
<OTHER-EXPENSES> 41,183
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,950)
<INCOME-PRETAX> 35,927
<INCOME-TAX> 11,543
<INCOME-CONTINUING> 24,384
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,384
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
</TABLE>
