SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission file number 1-6403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0803978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 582-3535
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
There were 23,566,227 shares of $.50 par value common stock outstanding on
January 8, 1998.
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
PART I. FINANCIAL INFORMATION: (Interim period information unaudited)
Consolidated Balance Sheets 1 & 2
Unaudited Consolidated Statements of Operations 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 7 & 8
PART II. OTHER INFORMATION 9 & 10
<PAGE>
Part I Financial Information
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
NOVEMBER 29, AUGUST 30,
ASSETS 1997 1997
- ----------------------------------------------------- -------- --------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 56,972 $ 32,130
Receivables, less allowance for doubtful
accounts ($1,463 and $1,429, respectively) 22,503 31,322
Dealer financing receivables less allowance
for doubtful accounts ($189 and $155, respectively) 18,105 13,336
Inventories 53,329 53,584
Prepaid expenses 6,713 5,872
Deferred income taxes 4,917 4,917
-------- --------
Total current assets 162,539 141,161
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,167 1,167
Buildings 38,563 42,455
Machinery and equipment 66,499 66,142
Transportation equipment 4,968 5,004
-------- --------
111,197 114,768
Less accumulated depreciation 78,364 81,175
-------- --------
Total property and equipment, net 32,833 33,593
-------- --------
LONG-TERM NOTES RECEIVABLE, less allowances
($1,488 and $1,465, respectively) 5,653 5,692
-------- --------
INVESTMENT IN LIFE INSURANCE AND
OTHER LONG-TERM INVESTMENTS 18,773 17,641
-------- --------
DEFERRED INCOME TAXES, NET 14,900 14,900
-------- --------
OTHER ASSETS 487 488
-------- --------
TOTAL ASSETS $235,185 $213,475
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements.
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
NOVEMBER 29, AUGUST 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997
- ------------------------------------------------- -------- --------
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ -- $ 695
Accounts payable, trade 20,561 20,471
Income tax payable 14,203 --
Accrued expenses:
Insurance 3,360 2,687
Product warranties 3,953 3,329
Vacation liability 3,352 3,012
Promotional 3,339 2,508
Other 7,891 8,524
-------- --------
Total current liabilities 56,659 41,226
-------- --------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 49,260 48,367
-------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares 12,930 12,927
Additional paid-in capital 23,152 23,109
Reinvested earnings 97,517 92,179
-------- --------
133,599 128,215
Less treasury stock, at cost 4,333 4,333
-------- --------
Total stockholders' equity 129,266 123,882
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $235,185 $213,475
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements.
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------
November 29, November 30,
1997 1996
-------- --------
<S> <C> <C>
Net revenues $125,896 $113,892
Cost of goods sold 107,473 98,813
-------- --------
Gross profit 18,423 15,079
-------- --------
Operating expenses:
Selling and delivery 5,729 6,338
General and administrative 5,266 4,885
-------- --------
Total operating expenses 10,995 11,223
-------- --------
Operating income 7,428 3,856
Financial income 613 369
-------- --------
Income from continuing operations before income taxes 8,041 4,225
Provision for taxes 2,703 1,519
-------- --------
Income from continuing operations 5,338 2,706
Discontinued operations:
Gain from sale of discontinued Cycle-Sat subsidiary
(includes a loss on operations of $160 net of applicable
income tax credits of $123 and a gain on disposal of
$16,632 net of income taxes of $13,462) -- 16,472
-------- --------
Net income $ 5,338 $ 19,178
======== ========
Income per common share:
Income from continuing operations $ .21 $ .11
Gain from sale of discontinued Cycle-Sat subsidiary -- .65
-------- --------
Net income $ .21 $ .76
======== ========
Weighted average number of
shares of common stock
outstanding 25,481 25,379
======== ========
</TABLE>
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Dollars in thousands
Increase (decrease) in cash and cash equivalents THIRTEEN WEEKS ENDED
-------------------------
November 29, November 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,338 $ 19,178
Adjustments to reconcile net income
to net cash from operating activities:
Pre-tax gain on sale of Cycle-Sat subsidiary -- (29,811)
Depreciation and amortization 1,369 1,665
Realized and unrealized gains on investments, net -- (120)
Proceeds from sale of trading securities -- 3,707
Other 60 (112)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 7,987 (960)
Decrease in inventories 255 11,824
Increase in accounts payable and accrued expenses 16,128 11,661
Increase in postretirement benefits 915 339
Other -- (2,194)
-------- --------
Net cash provided by operating activities 32,052 15,177
-------- --------
Cash flows provided (used) by investing activities:
Gross proceeds from the sale of Cycle-Sat subsidiary* -- 55,883
Investments in marketable securities (813) --
Purchases of property and equipment (687) (1,106)
Investments in dealer receivables (13,899) (9,128)
Collections of dealer receivables 9,096 9,807
Other (258) (72)
-------- --------
Net cash (used) provided by investing activities (6,561) 55,384
-------- --------
Cash flows used by financing activities and capital transactions:
Payment of long-term debt of discontinued operation -- (13,220)
Payments of long-term debt (695) (1,779)
Other 46 261
-------- --------
Net cash used by financing activities and
capital transactions (649) (14,738)
-------- --------
Net increase in cash and cash equivalents 24,842 55,823
Cash and cash equivalents - beginning of period 32,130 797
-------- --------
Cash and cash equivalents - end of period $ 56,972 $ 56,620
======== ========
</TABLE>
* Includes $7,590 paid to the minority shareholders
subsequent to November 30, 1996.
See Unaudited Condensed Notes to Consolidated Financial Statements.
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of November 29, 1997, the consolidated results of
operations for the 13 weeks ended November 29, 1997 and November 30,
1996, and the consolidated cash flows for the 13 weeks ended November 29,
1997 and November 30, 1996. The results of operations for the 13 weeks
ended November 29, 1997, are not necessarily indicative of the results to
be expected for the full year.
2. Inventories are valued at the lower of cost or market, with cost being
determined under the last-in, first-out (LIFO) method and market defined
as net realizable value.
Inventories are composed of the following (dollars in thousands):
November 29, August 30,
1997 1997
------------- ------------
Finished goods............ $ 26,681 $ 27,577
Work in process........... 14,757 13,842
Raw materials............. 29,887 29,907
------------- ------------
71,325 71,326
LIFO reserve.............. (17,996) (17,742)
============= ============
$ 53,329 $ 53,584
============= ============
3. Since March 1992, the Company has had a financing and security agreement
with NationsCredit Corporation (NationsCredit). Terms of the agreement
limit borrowings to the lesser of $30,000,000 or 75 percent of eligible
inventory (fully manufactured recreation vehicles and motor home chassis
and related components). Borrowings are secured by the Company's
receivables and inventory. Borrowings under the agreement bear interest
at the prime rate, as defined in the agreement, plus 50 basis points. The
line of credit is available through March 31, 1998, and continues during
successive one-year periods unless either party provides at least
90-days' notice prior to the end of the one-year period to the other
party that they wish to terminate the line of credit. The agreement also
contains certain restrictive covenants including maintenance of minimum
net worth, working capital and current ratio. As of November 29, 1997,
the Company was in compliance with these covenants. There were no
outstanding borrowings under the line of credit at November 29, 1997 or
August 30, 1997.
4. It is customary practice for companies in the recreation vehicle industry
to enter into repurchase agreements with lending institutions which have
provided wholesale floor plan financing to dealers. The Company's
agreements provide for the repurchase of its products from the financing
institution in the event of repossession upon a dealer's default. The
Company was contingently liable for approximately $133,017,000 and
$115,637,000 under repurchase agreements with lending institutions as of
November 29, 1997 and August 30, 1997, respectively. Included in these
contingent liabilities as of November 29, 1997 and August 30, 1997 are
approximately $24,577,000 and $24,868,000, respectively, of certain
dealer receivables subject to recourse agreements with NationsCredit and
Green Tree Financial Corporation.
5. For the periods indicated, the Company paid cash for the following
s (dollars in thousands):
THIRTEEN WEEKS ENDED
----------------------------------------
November 29, November 30,
1997 1996
------------------ -----------------
Interest $ 118 $ 186
Income taxes 20 4
<PAGE>
6. On December 29, 1997, the Company repurchased 1,920,600 shares of
Common Stock from the Estate of John K. Hanson. The shares were
repurchased for an aggregate purchase price of $17,000,000 ($8.85125
per share).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen weeks ended November 29, 1997 compared to thirteen weeks ended November
30, 1996
Net revenues for the 13 weeks ended November 29, 1997 were $125,896,000, an
increase of $12,004,000, or 10.5 percent from the 13 week period ended November
30, 1996. Motor home shipments (Class A and C) were 2,062 units, an increase of
104 units, or 5.3 percent, during the first quarter of fiscal 1998 compared to
the first quarter of fiscal 1997. Revenues increased by a larger percentage than
unit sales in the first quarter of fiscal 1998 due to increased sales of higher
priced Class A motor homes. The Company is encouraged by dealer reception to its
1998 products. Taking into account the order backlog the Company has on hand at
this time, the Company is experiencing one of the best new product launches in
its history.
Gross profit, as a percent of net revenues, was 14.6 percent for the 13 weeks
ended November 29, 1997 compared to 13.2 percent for the 13 weeks ended November
30, 1996. This increase can be attributed primarily to the motor home product
mix change experienced during the first quarter of 1998 compared to the first
quarter of fiscal 1997.
Selling and delivery expenses were $5,729,000 or 4.6 percent of net revenues
during the first quarter of fiscal 1998 compared to $6,338,000 or 5.6 percent of
net revenues during the first quarter of fiscal 1997. The decrease in dollars
and percentage can be attributed primarily to the Company's decision to sell its
wholly owned subsidiary and European distributor, Winnebago Industries Europe,
GmbH (WIE) during fiscal 1997. Also contributing to the decreases were lower
advertising expenses. Increased sales volume contributed to the decrease in
percentage.
General and administrative expenses increased by $381,000 to $5,266,000
comparing the 13 weeks ended November 29, 1997 to the 13 weeks ended November
30, 1996 but decreased as a percentage of net revenues to 4.2 percent from 4.3
percent. The increase in dollars was caused primarily by an increase in the
Company's product liability costs during fiscal 1998 offset partially by the
elimination of WIE general and administrative costs due to the sale in fiscal
1997. The reduction in percentage was caused by the increased sales volume.
The Company had net financial income of $613,000 for the first quarter of fiscal
1998 compared to net financial income of $369,000 for the comparable quarter of
fiscal 1997. During the 13 weeks ended November 29, 1997, the Company recorded
$660,000 of interest income and $47,000 of losses in foreign currency
transactions. During the 13 weeks ended November 30, 1996, the Company recorded
$309,000 of interest income, $121,000 of realized and unrealized gains in its
trading securities portfolio and $61,000 of losses in foreign currency
transactions.
For the 13 weeks ended November 29, 1997, the Company had income from continuing
operations before taxes of $8,041,000 and a provision for taxes of $2,703,000
resulting in income from continuing operations of $5,338,000 or $.21 per share.
For the 13 weeks ended November 30, 1996, the Company had income from continuing
operations before taxes of $4,225,000 and a provision for taxes of $1,519,000
resulting in income from continuing operations of $2,706,000 or $.11 per share.
For the 13 weeks ended November 30, 1996, the Company recorded a gain from the
sale of the discontinued Cycle-Sat subsidiary of $16,472,000 (net of income
taxes of $13,462,000), or $.65 per share.
During the 13 weeks ended November 30, 1997, the Company had net income of
$5,338,000, or $.21 per share, compared to $19,178,000, or $.76 per share for
the 13 weeks ended November 29, 1996.
<PAGE>
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital and capital equipment requirements and
cash requirements of subsidiaries with funds generated internally and funds from
agreements with financial institutions.
At November 29, 1997, working capital was $105,880,000, an increase of
$5,945,000 from the amount at August 30, 1997. The Company's principal sources
and uses of cash during the 13 weeks ended November 29, 1997 are set forth in
the unaudited consolidated condensed statement of cash flows for that period.
Principal known demands at November 29, 1997 on the Company's liquid assets for
the remainder of fiscal 1998 include approximately $3,600,000 of capital
expenditures (primarily equipment replacement) and $2,500,000 of cash dividends
declared by the Board of Directors on October 16, 1997 (paid January 5, 1998).
Subsequent to the first quarter of fiscal 1998, the Company's Board of Directors
authorized the repurchase of outstanding shares of the Company's Common Stock
for an aggregate purchase price of up to $36,500,000; $17,000,000 was applied to
the purchase of 1,920,600 shares of Common Stock from the Estate of John K.
Hanson on December 29, 1997. The remaining $19,500,000 may be used by the
Company to make open-market purchases of its Common Stock from time to time over
the next 18 months.
Management currently expects its cash on hand, funds from operations and
borrowings available under existing credit facilities to be sufficient to cover
both short-term and long-term operating requirements.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," was issued in February, 1997 and will be adopted by the Company in the
second quarter of fiscal 1998. The adoption of SFAS No. 128 is not expected to
have a significant impact on the calculation of earnings per share.
FORWARD LOOKING INFORMATION
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties, including, but not limited to demand from customers, effects of
competition, the general state of the economy, interest rates, consumer
confidence, changes in the product or customer mix or revenues and in the level
of operating expenses and other factors which may be disclosed throughout this
Form 10-Q. Any forecasts and projections in this report are "forward looking
statements," and are based on management's current expectations of the Company's
near-term results, based on current information available pertaining to the
Company, including the aforementioned risk factors. Actual results could differ
materially.
<PAGE>
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) No exhibits are being filed as a part of this report.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
----------------------------------------
(Registrant)
Date January 8, 1998 /s/ Fred G. Dohrmann
---------------------- ----------------------------------------
Fred G. Dohrmann
Chairman of the Board and Chief
Executive Officer
Date January 8, 1998 /s/ Edwin F. Barker
---------------------- ----------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-29-1998
<PERIOD-END> NOV-29-1997
<CASH> 56,972
<SECURITIES> 0
<RECEIVABLES> 42,260
<ALLOWANCES> 1,652
<INVENTORY> 53,329
<CURRENT-ASSETS> 162,539
<PP&E> 111,197
<DEPRECIATION> 78,364
<TOTAL-ASSETS> 235,185
<CURRENT-LIABILITIES> 56,659
<BONDS> 0
0
0
<COMMON> 12,930
<OTHER-SE> 116,336
<TOTAL-LIABILITY-AND-EQUITY> 235,185
<SALES> 125,896
<TOTAL-REVENUES> 125,896
<CGS> 107,473
<TOTAL-COSTS> 107,473
<OTHER-EXPENSES> 10,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (613)
<INCOME-PRETAX> 8,041
<INCOME-TAX> 2,703
<INCOME-CONTINUING> 5,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,338
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
