SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
___
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 1, 2001
------------------------------------------------March 2, 2002
-------------------------------------------------
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: (641) 585-3535
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 20,717,08818,764,093 shares of $.50 par value common stock outstanding on January 10,April
11, 2002.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheets (Interim period information
unaudited) 1 & 2
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Condensed Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial
Statements 5 - 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 1112
Independent Accountants' Report 1213
PART II. OTHER INFORMATION 13 & 14 - 16
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
December 1, AugustMARCH 2, AUGUST 25,
ASSETS 20012002 2001
- ------------------------------------------------------ ------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 115,494134,477 $ 102,280
Receivables, less allowance for doubtful
accounts ($299353 and $244, respectively) 12,22521,763 21,571
Dealer financing receivables, less allowance
for doubtful accounts ($102112 and $117, respectively) 35,50838,180 40,263
Inventories 81,47483,131 79,815
Prepaid expenses 4,1233,675 3,604
Prepaid taxes 4,500 - - -
Deferred income taxes 6,723 6,723
------------ ------------
Total current assets 255,547292,449 254,256
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Land 1,0291,018 1,029
Buildings 46,05546,180 45,992
Machinery and equipment 82,76984,103 82,182
Transportation equipment 5,5575,634 5,482
------------ ------------
135,410136,935 134,685
Less accumulated depreciation 89,32990,875 88,149
------------ ------------
Total property and equipment, net 46,08146,060 46,536
------------ ------------
INVESTMENT IN LIFE INSURANCE 22,64223,136 22,223
------------ ------------
DEFERRED INCOME TAXES, NET 21,495 21,495
------------ ------------
OTHER ASSETS 7,7668,329 7,412
------------ ------------
TOTAL ASSETS $ 353,531391,469 $ 351,922
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
December 1, AugustMARCH 2, AUGUST 25,
LIABILITIES AND STOCKHOLDERS' EQUITY 20012002 2001
- ------------------------------------------------------- ------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 28,60344,694 $ 40,678
Income tax payable 8,69512,149 4,938
Accrued expenses:
Insurance 4,6205,686 4,567
Product warranties 7,8397,763 8,072
Accrued compensation 10,77713,711 13,730
Promotional 4,8007,011 3,181
Other 4,6775,013 4,842
------------ ------------
Total current liabilities 70,01196,027 80,008
------------ ------------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 66,04067,284 64,450
------------ ------------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: issued 25,888,000 and 25,886,000
shares, respectively 12,944 12,943
Additional paid-in capital 24,53125,714 22,261
Reinvested earnings 244,842252,223 234,139
------------ ------------
282,317290,881 269,343
Less treasury stock, at cost 64,83762,723 61,879
------------ ------------
Total stockholders' equity 217,480228,158 207,464
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 353,531391,469 $ 351,922
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
================================================================================
In thousands except per share data
FOURTEEN WEEKS ENDEDIN THOUSANDS EXCEPT PER SHARE DATA
TWENTY-SEVEN TWENTY-SIX
THIRTEEN WEEKS ENDED DECEMBER 1, NOVEMBER 25,WEEKS ENDED WEEKS ENDED
--------------------------- ------------ ------------
MARCH 2, FEBRUARY 24, MARCH 2, FEBRUARY 24,
2002 2001 20002002 2001
------------ ------------ ------------ ------------
Net revenues $ 179,113184,169 $ 164,167142,531 $ 363,282 $ 306,698
Cost of goods sold 153,570 141,920160,117 125,529 313,687 267,449
------------ ------------ ------------ ------------
Gross profit 25,543 22,24724,052 17,002 49,595 39,249
------------ ------------ ------------ ------------
Operating expenses:
Selling 6,128 6,1035,607 5,306 11,735 11,409
General and administrative 4,104 2,7645,031 3,146 9,135 5,910
------------ ------------ ------------ ------------
Total operating expenses 10,232 8,86710,638 8,452 20,870 17,319
------------ ------------ ------------ ------------
Operating income 15,311 13,38013,414 8,550 28,725 21,930
Financial income 892 971912 901 1,804 1,872
------------ ------------ ------------ ------------
Income before tax and cumulative effect of a change in
accounting principle 16,203 14,351income taxes 14,326 9,451 30,529 23,802
Provision for taxes 5,493 4,7554,878 3,267 10,371 8,022
------------ ------------ ------------ ------------
Income before cumulative effect of a change in
accounting principle 10,710 9,5969,448 6,184 20,158 15,780
Cumulative effect on prior years of the accountingchange in principle, change --net of taxes - - - - - - - - - (1,050)
------------ ------------ ------------ ------------
Net income $ 10,7109,448 $ 8,5466,184 $ 20,158 $ 14,730
============ ============ ============ ============
Earnings per share-basicshare - basic (Note 8):
- ------------------------------------
Income before cumulative effect of change in
accounting principle $ .46 $ .30 $ .97 $ .76
Cumulative effect of change in accounting
principle - - - - - - - - - (.05)
------------ ------------ ------------ ------------
Income per share $ .46 $ .30 $ .97 $ .71
============ ============ ============ ============
Earnings per share - diluted (Note 8):
- --------------------------------------
Income before cumulative effect of a change in
accounting principle $ .52.45 $ .45.30 $ .95 $ .75
Cumulative effect on prior years of the accounting
principle change -- (.05)
------------ ------------
Net income $ .52 $ .40
============ ============
Number of shares used in per share
calculations-basic 20,674 21,101
============ ============
Earnings per share-diluted (Note 8):
Income before cumulative effect of a change in accounting
principle $ .51 $ .45
Cumulative effect on prior years of the accounting
principle change --- - - - - - - - - (.05)
------------ ------------ Net income------------ ------------
Income per share $ .51.45 $ .40.30 $ .95 $ .70
============ ============ Number============ ============
Weighted average shares of shares used in per share
calculations-diluted 21,103 21,280common stock outstanding:
Basic 20,760 20,576 20,715 20,839
============ ============ ============ ============
Diluted 21,215 20,882 21,157 21,082
============ ============ ============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
TWENTY-SEVEN TWENTY-SIX
Dollars in thousands
FOURTEEN THIRTEEN WEEKS ENDED WEEKS ENDED
DECEMBER 1, NOVEMBER 25,------------ ------------
MARCH 2, FEBRUARY 24,
2002 2001 2000
------------ ------------
Cash flows from operating activities:
Net income as shown on the statements of income $ 10,71020,158 $ 8,54614,730
(page 3)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,048 1,7913,961 3,636
Tax benefit of stock options 3,008 - - -
Other (55) 11786 106
Change in assets and liabilities:
Decrease(Increase) decrease in receivable and other assets 8,884 16,112(374) 14,099
Increase in inventories (1,662) (5,561)
(Decrease) increase(3,316) (3,453)
Increase (decrease) in accounts payable and accrued expenses (13,757) 1,4288,808 (7,470)
Increase in income taxes payable 5,435 3,2965,719 3,536
Increase in postretirement benefits 1,825 2,3233,238 3,862
------------ ------------
Net cash provided by operating activities 13,428 28,05241,288 29,046
------------ ------------
Cash flows provided (used)used by investing activities:
Purchases of property and equipment (1,671) (2,971)(3,666) (4,795)
Investments in dealer receivables (16,958) (24,254)(52,795) (52,392)
Collections of dealer receivables 21,730 18,99854,887 47,220
Other (943) (1,325)(2,037) (2,481)
------------ ------------
Net cash provided (used)used by investing activities 2,158 (9,552)(3,611) (12,448)
------------ ------------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (4,078) (8,317)(9,300)
Payment of cash dividends (7) (7)(2,075) (2,062)
Proceeds from issuance of common and treasury stock 1,713 589673 1,355
------------ ------------
Net cash used by financing activities and
capital transactions (2,372) (7,735)(5,480) (10,007)
------------ ------------
Net increase in cash and cash equivalents 13,214 10,76532,197 6,591
Cash and cash equivalents - beginning of period 102,280 51,443
------------ ------------
Cash and cash equivalents - end of period $ 115,494134,477 $ 62,20858,034
============ ============
See Unaudited Condensed Notes to Consolidated Financial Statements.
4
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of December 1, 2001,March 2, 2002, the consolidated results of
operations for the 27 and 13 weeks ended March 2, 2002 and the 26 and 13
weeks ended February 24, 2001, and the consolidated cash flows for the 1427
weeks ended December
1, 2001March 2, 2002 and the 1326 weeks ended November 25, 2000.February 24, 2001. The
statement of income for the 1427 weeks ended December 1, 2001,March 2, 2002, is not
necessarily indicative of the results to be expected for the full year. The
balance sheet data as of August 25, 2001 was derived from audited financial
statements, but does not include all disclosures contained in the Company's
Annual Report to Shareholders for the year ended August 25, 2001. These
interim consolidated financial statements should be read in conjunction
with the audited financial statements and notes thereto appearing in the
Company's Annual Report to Shareholders for the year ended August 25, 2001.
Certain prior year balances have been reclassified to conform to the
current year presentation. These reclassifications had no impact on
previously reported net income.
NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS
On August 27, 2000, the Company adopted the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101 - REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, which the SEC staff issued in December
1999. SAB No. 101 sets forth the SEC'sSEC staff's views concerning revenue
recognition. As a result of SAB No. 101 the Company began recording revenue
upon receipt of products by Winnebago Industries' dealers rather than upon
shipment by the Company. This change required an adjustment to net income in
the Company's first quarter 2001 results, which reflects the cumulative
effect on the prior year's results due to the application of SAB No. 101.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) N0.No. 141, "Business
Combinations." SFAS No. 141 establishes new standards for accounting and
reporting requirements for business combinations and requires that the
purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method will
be prohibited. In July 2001, the FASB also issued SFAS No. 142, "Goodwill
and Other Tangible Assets." SFAS No. 142 establishes new standards for
goodwill acquired in a business combination and eliminates amortization of
goodwill and instead sets forth methods to periodically evaluate goodwill
for impairment. The Company expects to adopt these statements on September
1, 2002, the first quarter of the Company's fiscal 2003. Management does
not believe that either SFAS No. 141 or 142 will have a material impact on
the Company's consolidated financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requriedrequired entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. Also, in September 2001, the FASB issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," it retains many of the fundamental provisions of
that statement. The Company is required to adopt SFAS Nos. 143 and 144 in
fiscal 2003. The Company is reviewing the impact of SFAS Nos. 143 and 144,
and does not believe adoption of either of these new standards will have a
material affect on the Company's financial statements.
5
NOTE 3: INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined under the last-in, first-out (LIFO) method and market defined as
net realizable value.
Inventories are composed of the following (dollars in thousands):
December 1,March 2, August 25,
2002 2001
2001
---------- ---------------------- ------------
Finished goods...........goods ......... $ 32,39533,234 $ 36,930
Work in process.......... 21,018process ........ 23,921 21,725
Raw materials............ 51,512materials .......... 49,752 44,232
---------- ----------
104,925------------ ------------
106,907 102,887
LIFO reserve............. (23,451)reserve ........... (23,776) (23,072)
---------- ---------------------- ------------
$ 81,47483,131 $ 79,815
========== ====================== ============
NOTE 4: LINE OF CREDIT
On October 19, 2000, the Company entered into an unsecured Credit Agreement
with Wells Fargo Bank Iowa, National Association, as amended. The Credit
Agreement providesprovided the Company with a line of credit of $20,000,000 until$20,000,000. The
Company did not renew this agreement when it expired on January 31, 2002, at an interest rate of either (1) a variable rate per
annum of one percent below the Bank's prime rate in effect from time to
time or (2) a fixed rate per annum determined by the Bank to be one percent
above LIBOR, as selected by the Company in accordance with the Credit
Agreement. The Credit Agreement contains covenants that, among other
things, impose certain limitations on mergers, transfers of assets and
encumbering or otherwise pledging the Company's assets. In addition, the
Company is required to satisfy certain financial covenants and tests
relating to tangible net worth, total liabilities and current ratio. As of
December 1, 2001, the Company was in compliance with these financial
covenants. There were no outstanding borrowings under the line of credit at
December 1, 2001. The Company has no plans to renew this agreement.2002.
NOTE 5: CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for companiesmanufacturers in the recreation vehicle
industry to enter into repurchase agreements with lending institutions
which have provided wholesale floor planfloorplan 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 $226,809,000$242,910,000 and
$216,784,000 under repurchase agreements with lending institutions as of
December 1, 2001March 2, 2002 and August 25, 2001, respectively. Included in these
contingent liabilities as of December 1, 2001March 2, 2002 and August 25, 2001 are
approximately $1,997,000$517,000 and $3,276,000, respectively, of certain dealer
receivables subject to recourse agreements with Bank of America Specialty
Group (formerly NationsBank Specialty Lending Unit) and Conseco Finance Servicing Group (formerly Green Tree Financial)Group.
During the second quarter of fiscal 2002, the Company guaranteed certain
interest bearing debt obligations of an unaffiliated vendor to a bank
totaling an amount of up to but not to exceed $700,000 and agreed to pledge
a $500,000 certificate of deposit to said bank. Mr. John V. Hanson, a
director of the Company, is also a director of the bank and its parent and
owns approximately 33.3 percent of record and beneficially of the parent's
outstanding stock. Mary Jo Boman, the wife of Gerald E. Boman, a director
of the Company, is a director of the bank and its parent and owns
approximately 33.3 percent of record and beneficially of the parent's
outstanding stock. The Company believes that this obligation will be repaid
and has therefore provided no reserve for this contingency at March 2,
2002.
In February 2002, the Company entered into a repurchase agreement with
Transamerica Commercial Finance Corporation, Canada (Transamerica). The
agreement provides for the repurchase by the Company from Transamerica of
rental units upon default by one of the Company's Canadian dealers under a
financing agreement with Transamerica. As of March 2, 2002, there have
been no rental transactions between Transamerica and such dealer.
6
NOTE 6: SUPPLEMENTAL CASH FLOW DISCLOSURE
For the periods indicated, the Company paid cash for the following (dollars
in thousands):
Fourteen ThirteenTwenty-Seven Twenty-Six
Weeks Ended Weeks Ended
December 1, November 25,------------ ------------
March 2, February 24,
2002 2001 2000
------------ ------------
Interest $ --- - - $ --- - -
Income taxes $ -- $ --
6
4,500 3,000
NOTE 7: REPURCHASE OF OUTSTANDING STOCK
On March 14, 2001, the Board of Directors authorized the repurchase of
outstanding shares of the Company's common stock for an aggregate purchase
price of up to $15,000,000. As of December 1, 2001,March 2, 2002, 218,000 shares had been
repurchased for an aggregate consideration of approximately $4,491,000
under this authorization.
On April 5, 2002, pursuant to an authorization of the Board of Directors,
the Company repurchased 2,100,000 shares of common stock from Hanson
Capital Partners, LLC ("HCP"). HCP is a Delaware limited liability company
whose members are the Luise V. Hanson Qualified Terminable Interest
Property Marital Deduction Trust (the "QTIP Trust"), which has a 34.9
percent membership interest in HCP, and the Luise V. Hanson Revocable
Trust, dated September 22, 1984 (the "Revocable Trust"), which has a 65.1
percent membership interest in HCP. John V. Hanson, a director of the
Company, Mary Jo Boman, the wife of Gerald E. Boman, a director of the
Company, Paul D. Hanson and Bessemer Trust Company, N.A. act as co-trustees
under the QTIP Trust. Mrs. Luise V. Hanson is trustee of the Revocable
Trust. As a result of the foregoing, Mrs. Hanson is a controlling person of
the Company. Mrs. Hanson is the mother of John V. Hanson, Mary Joan Boman
and Paul D. Hanson and the mother-in-law of Gerald E. Boman. The shares
were repurchased for an aggregate purchase price of $77,700,000 ($37 per
share). The Company utilized its cash on hand to pay the purchase price of
the stock.
NOTE 8: INCOME PER SHARE
The following table reflects the calculation of basic and diluted earnings
per share for the 1413 and 1327 weeks ended December 1,March 2, 2002 and the 13 and 26
weeks ended February 24, 2001 and November 25,
2000:
Fourteen Thirteen
Weeks Ended Weeks Ended
December 1, November 25,
In(in thousands except per share data 2001 2000data):
TWENTY-SEVEN TWENTY-SIX
THIRTEEN WEEKS ENDED WEEKS ENDED WEEKS ENDED
---------------------------- ------------ ------------
MARCH 2, FEBRUARY 24, MARCH 2, FEBRUARY 24,
2002 2001 2002 2001
------------ ------------ ------------ ------------
EARNINGS PER SHARE - BASIC:
---------------------------
Net income $ 9,448 $ 6,184 $ 20,158 $ 14,730
------------ ------------ ------------ ------------
Weighted average shares outstanding 20,760 20,576 20,715 20,839
------------ ------------ ------------ ------------
Earnings per share - basic $ .46 $ .30 $ .97 $ .71
------------ ------------ ------------ ------------
EARNINGS PER SHARE - ASSUMING DILUTION:
---------------------------------------
Net income $ 9,448 $ 6,184 $ 20,158 $ 14,730
------------ ------------ ------------ ------------
Weighted average shares outstanding 20,760 20,576 20,715 20,839
Dilutive impact of options outstanding 455 306 442 243
------------ ------------ ------------ ------------
Weighted average shares & potential
dilutive shares outstanding 21,215 20,882 21,157 21,082
------------ ------------ ------------ ------------
Earnings per share - assuming dilution $ .45 $ .30 $ .95 $ .70
------------ ------------ ------------ ------------
Earnings per share - basic:
---------------------------
Net income $ 10,710 $ 8,546
------------ ------------
Weighted average shares outstanding 20,674 21,101
------------ ------------
Earnings per share - basic $ .52 $ .40
------------ ------------
Earnings per share - assuming dilution:
---------------------------------------
Net income $ 10,710 $ 8,546
------------ ------------
Weighted average shares outstanding 20,674 21,101
Dilutive impact of options outstanding 429 179
------------ ------------
Weighted average shares & potential
dilutive shares outstanding 21,103 21,280
------------ ------------
Earnings per share - assuming dilution $ .51 $ .40
------------ ------------
There were options to purchase 14,000166,800 shares of common stock outstanding
at a price of $15.375 per share, 166,800 shares of common stock at a price of
$18.50 per share,and 14,000 shares of common stock at a price of
$19.71875 per share and 290,000 shares of common stock at a price of $12.4375 per share
during the 13 weeks ended November 25, 2000.February 24, 2001.
These options were not included in the computation of diluted earnings per
share because the options'option's exercise price was greater than the average
market price of the common stock.
7
NOTE 9: BUSINESS SEGMENT INFORMATION
The Company defines its operations into two business segments: Recreational
vehicles and other manufactured products, and dealer financing. Recreation
vehicles and other manufactured products includes all data relating to the
manufacturing and selling of the Company's Class A, B and C motor home
products as well as sales of component products for other manufacturers and
recreation vehicle related parts and service revenue. Dealer financing
includes floorplan, used and rental unit financing for a limited number of
the Company's dealers. Management focuses on operating income as a
segment's measure of profit or loss when evaluating a segment's financial
performance. Operating income is before interest expense, interest income,
and income taxes. A variety of balance sheet ratios are used by management
to measure the business. Maximizing the return from each segment's assets
excluding cash and cash equivalents is the primary focus. Identifiable
assets are those assets used in the operations of each industry segment.
General corporate assets consist of cash and cash equivalents, deferred
income taxes and other corporate assets not related to the two business
segments. General corporate income and expenses include administrative
costs. Inter-segment sales and expenses are not significant.
7
For the 1427 weeks ended December 1, 2001March 2, 2002 and the 1326 weeks ended November 25,
2000,February 24,
2001, the Company's segment information is as follows:
RECREATION
VEHICLES & OTHER
MANUFACTURED DEALER GENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1427 Weeks Ended December 1,March 2, 2002
Net revenues $ 361,634 $ 1,648 $ - - - $ 363,282
Operating income 27,752 630 343 28,725
Identifiable assets 182,137 38,483 170,849 391,469
26 Weeks Ended February 24, 2001
Net revenues $ 178,168304,458 $ 9452,240 $ --- - - $ 179,113306,698
Operating income (loss) 14,674 944 (307) 15,31120,162 658 1,110 21,930
Identifiable assets 170,266 35,838 147,427 353,531
13 Weeks Ended November 25, 2000
Net revenues $ 163,138 $ 1,029 $ -- $ 164,167
Operating income (loss) 12,484 1,022 (126) 13,380
Identifiable assets 182,171 38,634 94,402 315,207182,192 38,750 90,201 311,143
Certain prior year information has been reclassified to conform to the
current year presentation.
8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Certain of the matters discussed in this report are "forward looking
statements"statements," as defined in the Private Securities Litigation Reform Act of 1995,
which involve risks and uncertainties, including, but not limited to, reactions
to actual or threatened terrorist attacks, the availability and price of fuel, a
significant increase in interest rates, a further slowdown in the economy, availability
of chassis, slower than anticipated sales of new or existing products, new
product introductionsproducts introduced by competitors, order cancellations by the
Company's dealers, collections of dealer receivables and other
factors which may be disclosed throughout this 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.
CRITICAL ACCOUNTING POLICIES
In preparing the consolidated financial statements, we follow accounting
principles generally accepted in the United States of America, which in many
cases require us to make assumptions, estimates and judgments that affect the
amounts reported. Many of these policies are straightforward. There are,
however, a few policies that are critical because they are important in
determining the financial condition and results of operations and they can be
difficult to apply. These policies were selected because they involve additional
management judgment due to the sensitivity of the methods, assumptions and
estimates necessary in determining the related income statement, asset and/or
liability amounts.
The Company had reserves for numerous loss exposures, such as product liability,
litigation and accounts receivable. The Company also has loss exposure on loan
guarantees and repurchase agreements (see Note 5 of Unaudited Condensed Notes to
Consolidated Financial Statements). Establishing loss reserves for these matters
requires the use of estimates and judgment in regards to risk exposure and
ultimate liability. The Company estimates losses under the programs using
consistent and appropriate methods; however, changes in assumptions could
materially affect the Company's recorded liabilities for loss.
RESULTS OF OPERATION
FourteenOPERATIONS
Thirteen Weeks Ended December 1, 2001March 2, 2002 Compared to Thirteen Weeks Ended November
25, 2000February 24,
2001
Net revenues for recreation vehicle and other manufactured products for the 1413
weeks ended December 1, 2001March 2, 2002 were $178,168,000,$183,465,000, an increase of $15,030,000,$42,145,000, or 9.229.8
percent from the 13-week period ended November 25, 2000.February 24, 2001. Motor home unit sales
(Class A and C) were 2,317 units,2,448, an increase of 120644 units, or 5.535.7 percent, during
the firstsecond quarter of fiscal 2002 compared to the firstsecond quarter of fiscal 2001.
The percentage increase in net revenuesrevenue dollars in the firstsecond quarter of fiscal
2002 was greaterlower than the percentage increase in motor home unit sales for that
period as a result of the excellent acceptance of the Company's salesnew lower priced
2002 motor homes in the Class A and Class C segments. The Company believes that
lower interest rates and more favorable general economic conditions contributed
to the improvement in revenues.
Net revenues for dealer financing of more units,Winnebago Acceptance Corporation (WAC) were
$704,000 for the 13 weeks ended March 2, 2002; a decrease of $507,000 or 41.9
percent from the 13-week period ended February 24, 2001. A significant reduction
in interest rates and to a much lesser extent, a reduction in average borrowings
contributed to the decrease when comparing the two quarters.
Gross profit, as a percentagepercent of net revenues, was 13.1 percent for the total unit sales, with13 weeks
ended March 2, 2002 compared to 11.9 percent for the higher-priced slideout feature as
well as the13 weeks ended February 24,
2001. The Company's gross profit was higher priced diesel powered chassisdue primarily to increased volumes
of motor home production and shipments.
9
Selling expenses were $5,607,000 or 3.0 percent of net revenues during the
firstsecond quarter of fiscal 2002 compared to $5,306,000 or 3.7 percent of net
revenues during the second quarter of fiscal 2001. The increase in dollars when
comparing the two quarters resulted from primarily larger advertising expenses
during the second quarter of fiscal 2002. Increased sales volume was the primary
cause of the reduction in percentage during the second quarter of fiscal 2002.
General and administrative expenses were $5,031,000 or 2.7 percent of net
revenues during the 13 weeks ended March 2, 2002 compared to $3,146,000 or 2.2
percent of net revenues during the 13 weeks ended February 24, 2001. The
increases in dollars and percentage when comparing the two quarters were
primarily due to increases in employee incentive programs and to a lesser extent
increased legal reserves.
The Company had net financial income of $912,000 for the second quarter of
fiscal 2002 compared to net financial income of $901,000 for the comparable
quarter of fiscal 2001. During the 13 weeks ended March 2, 2002, the Company
recorded $918,000 of net interest income and losses of $6,000 in foreign
currency transactions. During the 13 weeks ended February 24, 2001, the Company
recorded $917,000 of net interest income and losses of $16,000 in foreign
currency transactions. When comparing the two quarters, the average available
cash for investing during the second quarter of fiscal 2002 was approximately
twice as much as was available during the second quarter of fiscal 2001.
However, the average rate the Company earned on its permitted investments, under
the Company's investment policy, was approximately 50 percent of the average
rate earned during the second quarter of fiscal 2001.
The effective income tax rate decreased to 34.0 percent during the second
quarter of fiscal 2002 from 34.6 percent during the second quarter of fiscal
2001.
For the second quarter of fiscal 2002, the Company had net income of $9,448,000,
or $.45 per diluted share compared to the second quarter of fiscal 2001's net
income of $6,184,000, or $.30 per diluted share. Net income and earnings per
diluted share increased by 52.8 percent and 50.0 percent, respectively, when
comparing the second quarter of fiscal 2002 to the second quarter of fiscal
2001.
Twenty-Seven Weeks Ended March 2, 2002 Compared to Twenty-Six Weeks Ended
February 24, 2001
Net revenues for manufactured products for the 27 weeks ended March 2, 2002 were
$361,634,000, an increase of $57,176,000, or 18.8 percent from the 26-week
period ended February 24, 2001. Motor home unit sales (Class A and C) were 4,765
units, an increase of 764 units, or 19.1 percent during the 27 weeks ended March
2, 2002 when compared to the 26 weeks ended February 24, 2001. The Company feels
the increases and growth were the result of the excellent acceptance of its new
products and the continued reduction of interest rates.
Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC)WAC were $945,000$1,648,000 for the 1427 weeks ended
December 1, 2001;March 2, 2002; a decrease of $84,000$591,000 or 8.226.4 percent from the 13-week26-week period
ended November 25, 2000.February 24, 2001. Decreased revenues for dealer financing reflect a
decrease of approximately 33% in interest rates partially offset by higher average borrowings when
comparing the first quarter of27 weeks ended March 2, 2002 to the first quarter of26 weeks ended February 24,
2001.
Gross profit, as a percent of net revenues,revenue, was 14.313.7 percent for the 1427 weeks
ended December 1, 2001March 2, 2002 compared to 13.612.8 percent for the 1326 weeks ended November 25,
2000.February 24,
2001. The Company's higher margins were due primarily to increased volumevolumes of
motor home production and shipments.
Selling expenses were $6,128,000$11,735,000, or 3.43.2 percent of net revenues during the first
quarter of fiscal27
weeks ended March 2, 2002 compared to $6,103,000$11,409,000, or 3.7 percent of net
revenues during the first quarter of fiscal26 weeks ended February 24, 2001. The small increase in selling
expense dollars when comparing the two quartersperiods consisted primarily of larger
promotional program expenses offset by reductions inhigher
advertising expenses during the first quarter of fiscal 2002. The increased2002 period. Increased sales volume causedwas
the primary cause of the reduction in percentage during the first quarter of fiscal 2002.2002 period.
General and administrative expenses were $4,104,000$9,135,000 or 2.32.5 percent of net
revenues during the 1427 weeks ended December 1, 2001March 2, 2002 compared to $2,764,000$5,910,000, or 1.7 percent1.9
of net revenues during the 1326 weeks ended November 25, 2000.February 24, 2001.
10
The increases in dollars and percentage when comparing the two quartersperiods were
primarily due to increases in employee incentive programs and to a lesser extent
increased legal reserves,
and an increase in general spending caused by the 14 weeks of activity during
the first quarter of fiscal 2002 versus 13 weeks during the first quarter of
fiscal 2001.
9
reserves.
The Company had net financial income of $892,000$1,804,000 for the first quarter of fiscal27 weeks ended March
2, 2002 compared to net financial income of $971,000$1,872,000 for the comparable quarter of
fiscal26 weeks ended
February 24, 2001. During the 14 weeks ended December 1, 2001,fiscal 2002 period, the Company recorded
$908,000$1,826,000 of net interest income and losses of $16,000$22,000 in foreign currency
transactions. During the 13 weeks ended November 25, 2000,fiscal 2001 period, the Company recorded $952,000$1,869,000 of
net interest income and gains of $19,000$3,000 in foreign currency transactions. The decrease in interest income whenWhen
comparing the two periods, the average available cash for investing during
fiscal 2002 was due primarily to lower rates of returnapproximately twice as much as was available during fiscal 2001.
However, the average rate the Company earned on available invested cashits permitted investments, under
the Company's investment policy, was approximately 50 percent of the average
rate earned during the first quarter of fiscal 2002.2001 period.
The effective income tax rate increased to 33.934.0 percent during the first quarter
of fiscal27 weeks
ended March 2, 2002 from 33.133.7 percent during the first quarter of fiscal26 weeks ended February 24,
2001. The primary reason for the increase was due to higher provisions for state
income taxes during the first quarter of fiscal27 weeks ended March 2, 2002.
At the start of the first quarter of fiscal 2001, the Company elected to adopt SAB No. 101 issued by
the SEC in December 1999. SAB No. 101 setsset forth the views of the SEC staff
concerning revenue recognition, the effectrecognition. As a result of which onSAB No. 101, the Company is
to recordbegan
recording revenue upon deliveryreceipt of products toby the Company's dealers rather than
upon shipment by the Company. Adoption of SAB No. 101 during the 1326 weeks ended
November 25,
2000February 24, 2001 resulted in a negative adjustment to the Company's income of
$1,050,000, or $.05 per diluted share.
For the first quarter of fiscal27 weeks ended March 2, 2002, the Company had net income of $10,710,000,$20,158,000,
or $.51$.95 per diluted share compared to the first quarter of fiscal26 weeks ended February 24, 2001's net
income of $8,546,000,$14,730,000, or $.40$.70 per diluted share. Net income and earnings per
diluted share increased by 25.336.9 percent and 27.535.7 percent, respectively, when
comparing the first quarter of fiscal 2002 period to the first quarter of fiscal 2001.2001 period.
LIQUIDITY AND FINANCIAL CONDITION
The Company generally meets its working capital, capital equipment and cash
requirements with funds generated from operations.
At December 1, 2001,As of March 2, 2002, working capital was $185,536,000,$196,422,000, an increase of
$11,288,000$22,174,000 from the amount at August 25, 2001. The Company's principal uses of
cash during the 1427 weeks ended December 1, 2001March 2, 2002 were $4,078,000 for the purchase of
shares of the Company's Common Stock, and $1,671,000$3,666,000 for the purchase of property
and equipment.equipment and $2,075,000 for the payment of cash dividends. The Company's
sources and uses of cash during the 1427 weeks ended December 1, 2001March 2, 2002 are set forth
in the unaudited consolidated condensed statement of cash flows for that period.
Principal known demands at December 1, 2001March 2, 2002 on the Company's liquid assets for the
remainder of fiscal 2002 include capital expenditures of approximately
$10,000,000$14,000,000 and the paymentspayment of cash dividends.
Management currently expects its cash on hand and funds from operations to be
sufficient to cover both short-term and long-term operating requirements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 1, 2001,March 2, 2002, the Company hadhas an investment portfolio of fixed income
securities, which are classified as cash and cash equivalents of $115,494,000.$134,477,000.
These securities, like all fixed income investments, are subject to interest
rate risk and will decline in value if market interest rates increase. However,
the Company has the ability to hold its fixed income investments until maturity
(which approximates 45 days) and, therefore, the Company would not expect to
recognize an adverse impact in income or cash flows in such an event.
10
As of December 1, 2001,March 2, 2002, the Company hadhas dealer-financing receivables in the amount
of $35,508,000.$38,180,000. Interest rates charged on these receivables vary based on the
prime rate.
11
COMPANY OUTLOOK
Studies show that the Company's prime target market of people 50 years of age
and older will continue to increase by over 4 million a year through the year
2030. Order backlog for the Company's Class A and Class C motor homes was
approximately 1,5803,200 orders on December 1, 2001,at March 2, 2002, an increase of 11.3106.5 percent over
sales order backlog of 1,420approximately 1,550 orders at February 24, 2001. The
Company includes in its backlog all accepted purchase orders from dealers
shippable within the next six months. Orders in backlog can be canceled or
postponed at the endoption of the first quarter last year.
11purchaser at any time without penalty and,
therefore, backlog may not necessarily be a measure of future sales.
12
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of
Winnebago Industries, Inc.
Forest City, Iowa
We have reviewed the accompanying condensed consolidated balance sheet of
Winnebago Industries, Inc. and subsidiaries (the Company) as of December 1,
2001,March 2, 2002,
and the related condensed consolidated statements of income and cash flows for
the 14-week13-week and 27-week periods ended March 2, 2002 and 13-week and 26-week
periods ended December 1, 2001 and November 25,
2000, respectively.February 24, 2001. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America
(generally accepted auditing standards), the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of August 25, 2001,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated October 3, 2001, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of August 25, 2001 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Deloitte & Touche LLP
Minneapolis, Minnesota
January 10,April 8, 2002
1213
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held January 15, 2002.
(b) The breakdown of votes for the election of three directors was as
follows*:
Votes Cast For Authority Withheld
-------------- ------------------
Gerald E. Boman (2005) 19,479,389 36,142
Jerry N. Currie (2005) 19,495,995 19,537
Frederick M. Zimmerman (2005) 19,495,459 20,072
* There were no broker non-votes.
( ) Represents year of Annual Meeting that individual's term will
expire.
Item 6 Exhibits and Reports on Form 8-K
(a) No exhibits are being filed as a part of this report.Exhibits - See Exhibit Index on page 16.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
1314
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 10,April 11, 2002 ---------------------/s/ Bruce D. Hertzke
---------------------- ----------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, and President
(Principal Executive Officer)
Date January 10,April 11, 2002 ---------------------/s/ Edwin F. Barker
---------------------- ----------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
1415
EXHIBIT INDEX
3b. Amended Bylaws of the Registrant.
4b. Letter of Intent dated March 1, 2002 among Winnebago Industries, Inc.,
Forest City Economic Development, and CDI, LLC.
10v. Agreement dated March 13, 2002 between Winnebago Industries, Inc. and
Bruce D. Hertzke.
16