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 February 27, 1999
-------------------------------------------------
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 22,189,005 shares of $.50 par value common stock outstanding on April
5, 1999.
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets (Interim period information unaudited) 1 & 2
Unaudited Consolidated Statements of Earnings 3
Unaudited Consolidated Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of Financial Condition and Results 7 - 10
of Operations
PART II. OTHER INFORMATION 11 - 13
</TABLE>
<PAGE>
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
FEBRUARY 27, AUGUST 29,
ASSETS 1999 1998
- ----------------------------------------------------- ----------- ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 35,689 $ 53,859
Receivables, less allowance for doubtful
accounts ($1,298 and $1,582, respectively) 29,895 22,025
Dealer financing receivables, less allowance
for doubtful accounts ($182 and $78, respectively) 29,490 12,782
Inventories 59,856 55,433
Prepaid expenses 14,414 3,516
Deferred income taxes 6,906 6,906
-------- --------
Total current assets 176,250 154,521
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,158 1,158
Buildings 40,234 38,779
Machinery and equipment 73,137 69,095
Transportation equipment 5,101 5,047
-------- --------
119,630 114,079
Less accumulated depreciation 83,486 81,167
-------- --------
Total property and equipment, net 36,144 32,912
-------- --------
LONG-TERM NOTES RECEIVABLE, less allowances
($240 and $973, respectively) 1,923 5,396
-------- --------
INVESTMENT IN LIFE INSURANCE 22,834 21,226
-------- --------
DEFERRED INCOME TAXES, NET 16,309 16,071
-------- --------
OTHER ASSETS 365 486
-------- --------
TOTAL ASSETS $253,825 $230,612
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
1
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
<TABLE>
<CAPTION>
FEBRUARY 27, AUGUST 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- -------------------------------------------------------- ------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 24,067 $ 24,461
Income tax payable 21,694 12,623
Accrued expenses:
Insurance 3,473 3,566
Product warranties 5,753 5,260
Vacation liability 3,608 3,343
Promotional 4,547 2,236
Other 10,599 11,113
-------- --------
Total current liabilities 73,741 62,602
-------- --------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 54,338 51,487
-------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: issued 25,871,000 and 25,865,000 12,935 12,932
shares, respectively
Additional paid-in capital 22,364 22,507
Reinvested earnings 129,047 111,665
-------- --------
164,346 147,104
Less treasury stock, at cost 38,600 30,581
-------- --------
Total stockholders' equity 125,746 116,523
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $253,825 $230,612
======== ========
</TABLE>
See Unaudited Condensed Notes to Consolidated Financial Statements
2
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
================================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------------- -----------------------------
February 27, February 28, February 27, February 28,
1999 1998 1999 1998
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net revenues $154,132 $118,709 $311,796 $244,605
Cost of goods sold 129,763 104,354 262,551 211,827
-------- -------- -------- --------
Gross profit 24,369 14,355 49,245 32,778
-------- -------- -------- --------
Operating expenses:
Selling and delivery 5,494 4,190 10,596 9,919
General and administrative 4,289 4,446 9,983 9,712
-------- -------- -------- --------
Total operating expenses 9,783 8,636 20,579 19,631
-------- -------- -------- --------
Operating income 14,586 5,719 28,666 13,147
Financial income 565 771 1,146 1,384
-------- -------- -------- --------
Pre-tax income 15,151 6,490 29,812 14,531
Provision for taxes 5,197 2,140 10,209 4,843
-------- -------- -------- --------
Net income $ 9,954 $ 4,350 $ 19,603 $ 9,688
======== ======== ======== ========
Earnings per common share (Note 7):
Basic $ .45 $ .18 $ .88 $ .39
Diluted $ .45 $ .18 $ .88 $ .39
Weighted average common shares outstanding (Note 7):
Basic 22,145 24,179 22,184 24,830
Diluted 22,317 24,366 22,387 24,989
</TABLE>
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
<PAGE>
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Dollars in thousands TWENTY-SIX WEEKS ENDED
---------------------------
February 27, February 28,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,603 $ 9,688
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,754 2,754
Other 296 529
Change in assets and liabilities:
(Increase) decrease in receivable and other assets (19,045) 1,956
(Increase) decrease in inventories (4,423) 53
Increase in accounts payable and accrued expenses 2,068 23,783
Increase in income taxes payable 9,071 - - -
Increase in postretirement benefits 2,592 1,554
Other (238) - - -
-------- --------
Net cash provided by operating activities 12,678 40,317
-------- --------
Cash flows used by investing activities:
Purchases of property and equipment (6,216) (2,086)
Investments in dealer receivables (50,104) (25,939)
Collections of dealer receivables 33,292 22,420
Other 2,560 (2,850)
-------- --------
Net cash used by investing activities (20,468) (8,455)
-------- --------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (8,975) (17,600)
Payments of long-term debt - - - (695)
Payment of cash dividends (2,221) (2,548)
Other 816 220
-------- --------
Net cash used by financing activities and
capital transactions (10,380) (20,623)
-------- --------
Net (decrease) increase in cash and cash equivalents (18,170) 11,239
Cash and cash equivalents - beginning of period 53,859 32,130
-------- --------
Cash and cash equivalents - end of period $ 35,689 $ 43,369
======== ========
</TABLE>
See Unaudited Condensed Notes to Consolidated Financial Statements.
4
<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 February 27, 1999, the consolidated results of
operations for the 26 and 13 weeks ended February 27, 1999 and February
28, 1998, and the consolidated cash flows for the 26 weeks ended February
27, 1999 and February 28, 1998. The results of operations for the 26
weeks ended February 27, 1999, 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):
<TABLE>
<CAPTION>
February 27, August 29,
1999 1998
------------ ----------
<S> <C> <C>
Finished goods.................. $ 20,619 $ 24,147
Work in process................. 19,005 15,328
Raw materials................... 38,118 33,384
---------- ----------
77,742 72,859
LIFO reserve.................... (17,886) (17,426)
---------- ----------
$ 59,856 $ 55,433
========== ==========
</TABLE>
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 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 February 27, 1999, the Company was in
compliance with these covenants. There were no outstanding borrowings
under the line of credit at February 27, 1999 or August 29, 1998.
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 $185,136,000 and
$132,540,000 under repurchase agreements with lending institutions as of
February 27, 1999 and August 29, 1998, respectively. Included in these
contingent liabilities as of February 27, 1999 and August 29, 1998 are
approximately $7,175,000 and $18,623,000, 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
(dollars in thousands):
TWENTY-SIX WEEKS ENDED
-----------------------------
February 27, February 28,
1999 1998
------------ ------------
Interest $ 91 $ 236
Income taxes 11,670 2,120
5
<PAGE>
6. On September 28, 1998, the Company completed the $36,500,000 repurchase
of outstanding shares of its common stock authorized by the Board of
Directors on December 29, 1997. Under this repurchase program, 3,612,660
shares were repurchased for an aggregate consideration of $36,499,018. A
voluntary program for shareholders owning fewer than 100 shares of the
Company's common stock was initiated in November, 1998 in which these
shareholders could conveniently sell all their shares or purchase enough
additional shares to increase their holdings to 100 shares. A total of
60,823 shares were repurchased from 40 percent of eligible shareholders
at a cost of approximately $834,000, an average of $13.72 per share. This
program was completed in February, 1999.
7. The following table reflects the calculation of basic and diluted
earnings per share for the 13 and 26 weeks ended February 27, 1999 and
February 28, 1998:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------------------- -------------------------------------
FEBRUARY 27, FEBRUARY 28, FEBRUARY 27, FEBRUARY 28,
IN THOUSANDS EXCEPT PER SHARE DATA 1999 1998 1999 1998
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE - BASIC:
Net income $ 9,954 $ 4,350 $ 19,603 $ 9,688
----------------- ----------------- ----------------- ----------------
Weighted average shares outstanding 22,145 24,179 22,184 24,830
----------------- ----------------- ----------------- ----------------
Earnings per share - basic $ .45 $ .18 $ .88 $ .39
----------------- ----------------- ----------------- ----------------
EARNINGS PER SHARE - ASSUMING DILUTION:
Net income $ 9,954 $ 4,350 $ 19,603 $ 9,688
----------------- ----------------- ----------------- ----------------
Weighted average shares outstanding 22,145 24,179 22,184 24,830
Dilutive impact of options outstanding 172 187 203 159
----------------- ----------------- ----------------- ----------------
Weighted average shares & potential
dilutive shares outstanding 22,317 24,366 22,387 24,989
----------------- ----------------- ----------------- ----------------
Earnings per share - assuming dilution $ .45 $ .18 $ .88 $ .39
----------------- ----------------- ----------------- ----------------
</TABLE>
There were options to purchase 14,000 shares of common stock outstanding
at a price of $15.1875 per share during the 13 weeks ended February 27,
1999 and options to purchase 10,000 shares of common stock outstanding at
a price of $10.00 per share during the 13 weeks ended February 28, 1998,
these options were not included in the computation of diluted earnings
per share because the options' exercise price was greater than the
average market price of the common shares.
8. The Company was required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" at the
beginning of fiscal 1999. The statement requires companies to disclose
comprehensive income and its components in their financial statements.
The Company has no items of comprehensive income other than net income.
6
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended February 27, 1999 Compared to Thirteen Weeks Ended February
28, 1998
Net revenues for the 13 weeks ended February 27, 1999 were $154,132,000 an
increase of $35,423,000 or 29.8 percent from the 13 week period ended February
28, 1998. Motor home shipments (Class A and C) were 2,285 units, an increase of
276 units, or 13.7 percent, during the second quarter of fiscal 1999 compared to
the second quarter of fiscal 1998. The difference in percentages when comparing
the percent increase in revenue dollars for the second quarter of fiscal 1999 to
the percent increase in unit shipments for the second quarter of fiscal 1999 was
caused by the shipments of more units with slide-out features and the Company's
new high-line (Ultimate) unit. Market conditions for the Company's motor home
products as well as in the recreation vehicle industry in general continue to
remain very favorable due to low interest rates, low fuel prices, and very high
consumer confidence levels. As of April 5, 1999, the Company's order backlog of
Class A and Class C motor homes was approximately 3,100 orders compared to
approximately 1,400 orders at the same time last year. 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.
Gross profit, as a percent of net revenues, was 15.8 percent for the 13 weeks
ended February 27, 1999 compared to 12.1 percent for the 13 weeks ended February
28, 1998. The Company's favorable product mix change and increased volume of
motor homes during the second quarter of fiscal 1999 resulted in the improved
margin percentage.
Selling and delivery expenses were $5,494,000 or 3.6 percent of net revenues
during the second quarter of fiscal 1999 compared to $4,190,000 or 3.5 percent
of net revenues during the second quarter of fiscal 1998. The increase in
dollars can be attributed primarily to reduced promotional expense recorded
during the second quarter of fiscal 1998. To a lesser extent, the Company
recorded more advertising expenses during the second quarter of fiscal 1999 than
it did during the second quarter of fiscal 1998.
General and administrative expenses were $4,289,000 or 2.8 percent of net
revenues during the 13 weeks ended February 27, 1999 compared to $4,446,000 or
3.7 percent of net revenues during the 13 weeks ended February 28, 1998. The
decreases in both dollars and percentages in general and administrative expenses
when comparing the two quarters were due primarily to monies the Company
received and recorded during the second quarter of fiscal 1999 on a previously
fully-reserved receivable that was repaid to the Company. Partially offsetting
these decreases were increases in the Company's employee incentive programs
during the second quarter of fiscal 1999 when compared to the second quarter of
fiscal 1998.
The Company had net financial income of $565,000 for the second quarter of
fiscal 1999 compared to net financial income of $771,000 for the comparable
quarter of fiscal 1998. During the 13 weeks ended February 27, 1999, the Company
recorded $554,000 of net interest income and gains of $11,000 in foreign
currency transactions. During the 13 weeks ended February 28, 1998, the Company
recorded $711,000 of net interest income and gains of $60,000 in foreign
currency transactions.
For the second quarter ended February 27, 1999, the Company had net income of
$9,954,000, or $.45 per diluted share, compared to the second quarter ended
February 28, 1998's net income of $4,350,000, or $.18 per diluted share. Net
income increased by 128.8 percent when comparing the second quarter of fiscal
1999 to the second quarter of fiscal 1998 but increased by 150.0 percent on a
per diluted share basis when comparing the two quarters due to fewer shares of
the Company' s common stock being outstanding during the second quarter of
fiscal 1999. See Notes 6 and 7.
7
<PAGE>
Twenty-Six Weeks Ended February 27, 1999 Compared to Twenty-Six Weeks Ended
February 28, 1998
Net revenues for the 26 weeks ended February 27, 1999 were $311,796,000, an
increase of $67,191,000, or 27.5 percent from the 26 week period ended February
28, 1998. Motor home shipments (Class A and C) were 4,751 units, an increase of
680 units, or 16.7 percent, during the 26 weeks ended February 27, 1999 when
compared to the 26 weeks ended February 28, 1998. The difference in percentages
when comparing the percent increase in revenue dollars for the first half of
fiscal 1999 to the percent increase in unit shipments for the first half of
fiscal 1999 was caused by the shipments of more units with slide-out features
and the Company's new high-line (Ultimate) unit. Industry demand for motorized
recreation vehicles remained strong during the 26 weeks ended February 27, 1999
and the Company's 1999 products continued to be well received by dealers and
retail customers.
Gross profit, as a percent of net revenues, was 15.8 percent for the 26 weeks
ended February 27, 1999 compared to 13.4 percent for the 26 weeks ended February
28, 1998. The Company's favorable product mix change and increased volume of
motor homes during the first 26 weeks of fiscal 1999 were the primary causes of
the improved margin percentage.
Selling and delivery expenses were $10,596,000 or 3.4 percent of net revenues
during the first half of fiscal 1999 compared to $9,919,000 or 4.1 percent of
net revenues during the first half of fiscal 1998. The increase in dollars can
be attributed primarily to reduced promotional expense recorded during the 26
weeks ended February 28, 1998. To a lesser extent, the Company recorded more
advertising expenses during the 26 weeks ended February 27, 1999. Partially
offsetting increases in dollars was a decrease in the reserve for losses on
certain dealer receivables subject to full recourse to the Company recorded
during the 26 weeks ended February 27, 1999. Increased sales volume, during the
26 weeks ended February 27, 1999, contributed to the decrease in percentage.
General and administration expenses were $9,983,000 or 3.2 percent of net
revenues during the 26 weeks ended February 27, 1999 compared to $9,712,000 or
4.0 percent of net revenues during the 26 weeks ended February 28, 1998.
Increases in the Company's employee incentive programs during the first half of
fiscal 1999 primarily contributed to the dollar increase when comparing the two
six-month periods. Partially offsetting the dollar increase in general and
administrative expenses was monies the Company received and recorded during the
six months ended February 27, 1999 on a previously fully reserved receivable
that was repaid to the Company. Increased sales volume, during the 26 weeks
ended February 27, 1999, contributed to the decrease in percentage.
The Company had net financial income of $1,146,000 for the 26 weeks ended
February 27, 1999 compared to net financial income of $1,384,000 for the 26
weeks ended February 28, 1998. During the 26 weeks ended February 27, 1999, the
Company recorded $1,205,000 of net interest income and losses of $59,000 in
foreign currency transactions. During the 26 weeks ended February 28, 1998, the
Company recorded $1,371,000 of net interest income and gains of $13,000 in
foreign currency transactions.
For the first half of fiscal 1999, the Company recorded net income of
$19,603,000, or $.88 per diluted share, compared to the first half of fiscal
1998's net income of $9,688,000, or $.39 per diluted share. Net income increased
by 102.3 percent when comparing the first half of fiscal 1999 to the first half
of fiscal 1998 but increased by 125.6 percent on a per diluted share basis when
comparing the two twenty-six week periods due to fewer shares of the Company's
common stock being outstanding during the first half of fiscal 1999. See Notes 6
and 7.
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally.
8
<PAGE>
At February 27, 1999, working capital was $102,509,000, an increase of
$10,590,000 from the amount at August 29, 1998. The Company's principal uses of
cash during the 26 weeks ended February 27, 1999 were $50,104,000 of dealer
receivable investments and $8,975,000 for the repurchase of shares of the
Company's Common Stock. The Company's principal sources of cash during the 26
weeks ended February 27, 1999 was cash flow from operations and the collection
of $33,292,000 in dealer receivables. The Company's sources and uses of cash
during the 26 weeks ended February 27, 1999 are set forth in the unaudited
consolidated statement of cash flows for that period.
Principal known demands at February 27, 1999 on the Company's liquid assets for
the remainder of fiscal 1999 include approximately $3,250,000 of capital
expenditures (primarily equipment replacement) and $2,200,000 of cash dividends
declared by the Board of Directors on March 18, 1999 (payable on July 2, 1999 to
shareholders of record as of June 4, 1999).
Management currently expects its cash on hand and funds from operations to be
sufficient to cover both short-term and long-term operating requirements.
ACCOUNTING CHANGES
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997 and was
adopted by the Company at the beginning of fiscal 1999. The statement requires
companies to disclose comprehensive income and its components in their financial
statements. This statement had no material impact on the Company's financial
statements.
Segment Disclosures
SFAS No. 131, "Disclosures about Segments of and Enterprise and Related
Information" was issued in June 1997 and will be adopted by the Company in the
fourth quarter of 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 will be adopted by the Company in the
fourth quarter of 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.
Accounting for 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 effects of SFAS No.
131, SFAS No. 132 or SFAS No. 133. 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.
9
<PAGE>
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.
YEAR 2000 (Y2K) COMPLIANCE
The Company has conducted a comprehensive review of its computer systems that
could be affected by the "Year 2000" issue and began an implementation plan in
1996 to resolve this issue. The Company decided to make corrections for
compliance by programming rather than through file conversion. The program
corrections were completed in May 1998. All programs are tested individually and
in the systems test mode. For all practical purposes the Company has completed
this testing and believes it is Y2K compliant. The Company will continue to test
personal computers used within the Company on an individual basis and expects to
have this testing completed during the third quarter of the Company's 1999
fiscal year.
The Company's Plant Engineering and Maintenance Department was charged with the
assessment and remediation of any Y2K problems in 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 and is on schedule.
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 responses will be monitored and the
Purchasing Department will contact any major supplier that has reported they may
have a problem with being Y2K compliant by the start of the calendar year 2000.
The largest exposure appears to be the Company's interface with chassis
manufacturers for order processing. The Company believes these order processing
systems to be year 2000 compliant based on statements from representatives of
the companies involved. The chassis suppliers have also advised the Company that
the chassis are year 2000 compliant.
The Company does not believe that possible noncompliance with Y2K issues by its
dealers will have a material impact on the ability of its dealers to purchase
and sell products of the Company.
The total cost associated with the modifications required to be Y2K compliant
are not expected to exceed $300,000 of which approximately $265,000 has been
expensed ($15,000 in fiscal 1999). Any remaining costs incurred by the Company
for the Y2K project will be absorbed in existing budgets.
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. 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.
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."
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
10
<PAGE>
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held January 20, 1999.
(b) The breakdown of votes for the election of eight directors was as
follows*:
<TABLE>
<CAPTION>
VOTES CAST FOR AUTHORITY WITHHELD
-------------------- --------------------------
<S> <C> <C>
Gerald E. Boman 19,301,781 65,127
Jerry N. Currie 19,303,093 63,815
Fred G. Dohrmann 19,278,342 88,566
John V. Hanson 19,295,915 70,993
Bruce D. Hertzke 19,297,058 69,850
Gerald C. Kitch 19,304,766 62,142
Richard C. Scott 19,305,939 60,969
Frederick M. Zimmerman 19,305,347 61,561
</TABLE>
* There were no broker non-votes.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on page 13.
(b) The Company did not file any reports on Form 8-K during the period
covered by this report.
11
<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 April 6, 1999 /s/ Bruce D. Hertzke
-------------------- ------------------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive Officer,
and President
(Principal Executive Officer)
Date April 6, 1999 /s/ Edwin F. Barker
-------------------- ------------------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
12
<PAGE>
EXHIBIT INDEX
3b. Amended Bylaws of the Registrant.
10k. Winnebago Industries, Inc. Officers' Long-Term Incentive Plan, Fiscal
Three-Year Period, 1999, 2000 and 2001.
13
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.
<PAGE>
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 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 Oualifications
The number of directors constituting the Board of Directors of the
Corporation shall be eight (8) 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.
<PAGE>
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 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.
<PAGE>
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 10k.
WINNEBAGO INDUSTRIES, INC.
--------------------------
OFFICERS LONG-TERM INCENTIVE PLAN
---------------------------------
FISCAL THREE-YEAR PERIOD
------------------------
1999, 2000 and 2001
-------------------
<PAGE>
WINNEBAGO INDUSTRIES, INC.
OFFICERS LONG-TERM INCENTIVE PLAN
FISCAL THREE-YEAR PERIOD 1999, 2000 AND 2001
1. PURPOSE. The purpose of the Winnebago Industries, Inc. Officers Long-Term
Incentive Plan (the "Plan") is to promote the long-term growth and
profitability of Winnebago Industries, Inc. (the "Company") by providing
its officers with an incentive to achieve long-term corporate profit
objectives and to attract and retain officers by providing such officers
with an equity interest in the Company.
2. ADMINISTRATION.
a. HUMAN RESOURCES COMMITTEE. The Plan shall be administered by a
Committee (the "Committee") appointed by the Board of Directors.
b. POWERS AND DUTIES. The Committee shall have sole discretion and
authority to make any and all determinations necessary or
advisable for administration of the Plan and may amend or revoke
any rule or regulation so established for the proper
administration of the Plan. All interpretations, decisions, or
determinations made by the Committee pursuant to the Plan shall be
final and conclusive.
c. ANNUAL APPROVAL. The Committee must approve the Plan prior to the
beginning of each new fiscal three (3) year plan period. Each year
a new plan will be established for a new three-year period.
3. PARTICIPATION ELIGIBILITY.
a. Participants must be an officer of the Company with
responsibilities that can have a real impact on the Corporation's
end results.
b. The Committee will approve all initial participation prior to the
beginning of each new program except as provided for in section c.
below.
c. The President of Winnebago Industries, Inc. will make the
determination on partial year participation due to retirement,
disability, new participants and other related partial year
participation issues necessary to maintain routine and equitable
administration of the Plan.
4. NATURE OF THE PLAN. The long-term incentive award is based upon financial
performance of the Corporation as established by the three (3) year
Management Plan. The Plan is a three (3) year (fiscal) program that
provides for an opportunity for an incentive award based on the achievement
of long-term performance results as measured at the end of the three (3)
year fiscal period.
The financial performance measurements for this Plan will be earnings per
share and return on equity of the Company for this period. These financial
performance measurements will provide an appropriate balance between
quality and quantity of earnings. The Company's formal three-year financial
plan will be the basis on which
<PAGE>
actual performance will be measured. The beginning of the fiscal year
stockholders' equity at the first year of this period will be used as the
base figure for the calculation of return on equity. Any stock repurchase
program, adopted or completed outside of the three (3) year Management Plan
will not be considered in the earnings per share and the return on equity
calculations.
5. METHOD OF PAYMENT. The long-term incentive award will be a performance
stock grant made in restricted shares of the common stock of Winnebago
Industries, Inc. The amount of the participants' long-term incentive award
for the three (3) year fiscal period shall be in direct proportion to the
financial performance expressed as a percentage (Financial Factor) against
predetermined award targets for each participant. The results for the
fiscal three (3) year period will be used in identifying the Financial
Factor to be used for that plan period when calculating the participants
long-term incentive awards.
The long-term incentive for the officers provides for an opportunity of 25%
of the annualized base salary (Target) to be awarded in restricted stock at
100% achievement of the financial long-term objectives of earnings per
share and return on equity. The annualized base salary figure used shall be
the salary in place for each participant as of January 1999. The stock
target opportunity shall be established by dividing the base salary target
by the mean stock price as of the first business day of the three (3) year
fiscal period. The resultant stock unit share opportunity (at 100% of Plan)
will be adjusted up or down as determined by actual financial performance
expressed as a percentage (Financial Factor) at the end of the three (3)
year fiscal period.
A participant must be employed by Winnebago Industries, Inc. at the end of
the fiscal three (3) year period to be eligible for any long-term incentive
award except as waived by the Human Resource Committee for normal
retirement and disability.
6. CHANGE IN CONTROL. In the event the Company undergoes a change in control
during the fiscal three (3) year plan period including, without limitation,
an acquisition or merger involving the Corporation ("Change in Control"),
the Committee shall, prior to the effective date of the Change in Control
(the "Effective Date"), make a good faith estimate with respect to the
achievement of the financial performance through the end of the Plan three
(3) year period. In making such estimate, the Committee may compare the
achievement of the financial performance against the forecast through the
Plan three (3) year period and may consider such other factors as it deems
appropriate. The Committee shall exclude from any such estimate any and all
costs and expenses arising out of or in connection with the Change in
Control. Based on such estimate, the Committee shall make a full three (3)
year Plan award within 15 days after the Effective date to all
participants.
"CHANGE IN CONTROL" for the purposes of the Officers Long-Term Incentive
Plan shall mean the time when (i) any Person becomes an Acquiring Person,
or (ii) individuals who shall qualify as Continuing Directors of the
Company 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
<PAGE>
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 in the case of clause (i) a
Change of Control shall not be deemed to have occurred upon the acquisition
of stock of the Company by a 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 of 1986, as amended,
established by the Company or any subsidiary of the Company. (In addition,
stock held by such a plan shall not be treated as outstanding in
determining ownership percentages for purposes of this definition.)
For the purpose of the definition "Change of Control:"
(a) "Continuing Director" means (i) 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 (ii)
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 any 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 any individual or group of
Affiliates or Associates of such Person who acquires beneficial
ownership, directly or indirectly, of 20% or more of the
outstanding stock of the Company if such acquisition occurs in
whole or in part following March 17, 1999, except that the term
"Acquiring Person" shall not include a Hanson Family Member or an
Affiliate or Associate of a Hanson Family Member.
(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 corporate, partnership, limited
liability company, entity or organization (other than the Company
or a majority-owned subsidiary of the Company) of which such a
Person is an officer, director, member, or partner or is, directly
or indirectly the beneficial owner of ten percent (10%) or more of
the 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.
<PAGE>
(e) "Hanson Family Member" means John K. Hanson and Luise V. Hanson
(and the executors or administrators of their estates), their
lineal descendants (and the executors or administrators of their
estates), the spouses of their lineal descendants (and the
executors or administrators of their estates) and the John K. and
Luise V. Hanson Foundation.
(f) "Company" means Winnebago Industries, Inc., an Iowa corporation.
(g) "Person" means an individual, corporation, limited liability
company, partnership, association, joint stock company, trust,
unincorporated organization or government or political subdivision
thereof.
7. GOVERNING LAW. Except to the extent preempted by federal law, the
consideration and operation of the Plan shall be governed by the laws of
the State of Iowa.
8. EMPLOYMENT RIGHTS. Nothing in this Plan shall confer upon any employee the
right to continue in the employ of the Company, or affect the right of the
Company to terminate an employee's employment at any time, with or without
cause.
Approved by:
/s/ Bruce D. Hertzke 3/17/99
- ----------------------------------- ---------------------
Bruce D. Hertzke Dated
Chairman of the Board, CEO and President
/s/ Gerald C. Kitch 3/17/99
- ----------------------------------- ---------------------
Gerald C. Kitch Dated
Human Resources Committee Chairman
<TABLE> <S> <C>
<ARTICLE> 5
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