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 24, 2001
-------------------------------------------------
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
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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 20,525,160 shares of $.50 par value common stock outstanding on
April 6, 2001.
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 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 11
PART II. OTHER INFORMATION 12- 14
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
FEBRUARY 24, AUGUST 26,
ASSETS 2001 2000
- -------------------------------------------------- ------------ ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 58,034 $ 51,443
Receivables, less allowance for doubtful
accounts ($1,100 and $1,168, respectively) 17,605 32,045
Dealer financing receivables, less allowance
for doubtful accounts ($33 and $27, respectively) 37,867 32,696
Inventories 89,160 85,707
Prepaid expenses 4,201 3,952
Deferred income taxes 7,675 7,675
-------- --------
Total current assets 214,542 213,518
-------- --------
PROPERTY AND EQUIPMENT, at cost
Land 1,138 1,138
Buildings 45,920 45,219
Machinery and equipment 81,067 78,099
Transportation equipment 5,504 5,414
-------- --------
133,629 129,870
Less accumulated depreciation 87,113 84,415
-------- --------
Total property and equipment, net 46,516 45,455
-------- --------
INVESTMENT IN LIFE INSURANCE 21,636 21,028
-------- --------
DEFERRED INCOME TAXES, NET 20,635 20,635
-------- --------
OTHER ASSETS 7,814 8,050
-------- --------
TOTAL ASSETS $311,143 $308,686
======== ========
See Unaudited Condensed Notes to Consolidated Financial Statements
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
FEBRUARY 24, AUGUST 26,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
- ------------------------------------------------------------------- --------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 21,478 $ 26,212
Income tax payable 13,917 10,381
Accrued expenses:
Insurance 5,109 5,384
Product warranties 7,230 8,114
Accrued compensation 9,958 13,924
Promotional 6,354 3,145
Other 3,855 4,675
-------- --------
Total current liabilities 67,901 71,835
-------- --------
POSTRETIREMENT HEALTH CARE AND DEFERRED 63,610 61,942
COMPENSATION BENEFITS -------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: issued 25,882,000 and 25,878,000
shares, respectively 12,941 12,939
Additional paid-in capital 21,822 21,994
Reinvested earnings 208,225 195,556
-------- --------
242,988 230,489
Less treasury stock, at cost 63,356 55,580
-------- --------
Total stockholders' equity 179,632 174,909
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $311,143 $308,686
======== ========
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
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------- --------------------------
February 24, February 26, February 24, February 26,
2001 2000 2001 2000
--------- --------- --------- ---------
Net revenues $ 142,531 $ 189,568 $ 306,698 $ 374,514
Cost of goods sold 125,365 160,997 267,049 316,794
--------- --------- --------- ---------
Gross profit 17,166 28,571 39,649 57,720
--------- --------- --------- ---------
Operating expenses:
Selling 5,470 5,723 11,809 12,212
General and administrative 3,146 5,845 5,910 10,445
--------- --------- --------- ---------
Total operating expenses 8,616 11,568 17,719 22,657
--------- --------- --------- ---------
Operating income 8,550 17,003 21,930 35,063
Financial income 901 905 1,872 1,558
--------- --------- --------- ---------
Income before tax and cumulative effect of a
change in accounting method 9,451 17,908 23,802 36,621
Provision for taxes 3,267 6,057 8,022 12,389
--------- --------- --------- ---------
Income before cumulative effect of a change in
accounting method 6,184 11,851 15,780 24,232
Cumulative effect on prior years of the accounting
method change -- -- (1,050) --
--------- --------- --------- ---------
Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232
========= ========= ========= =========
Earnings per share - basic (Note 8):
Income before cumulative effect of change in
accounting method $ .30 $ .54 $ .76 $ 1.10
Cumulative effect on prior years of the
accounting method change -- -- (.05) --
--------- --------- --------- ---------
Net income $ .30 $ .54 $ .71 $ 1.10
========= ========= ========= =========
Number of shares used in per share calculations -
basic (Note 8) 20,576 21,765 20,839 21,946
========= ========= ========= =========
Earnings per share - diluted (Note 8):
Income before cumulative effect of a change in
accounting method $ .30 $ .54 $ .75 $ 1.08
Cumulative effect on prior years of the
accounting method change -- -- (.05) --
--------- --------- --------- ---------
Net income $ .30 $ .54 $ .70 $ 1.08
========= ========= ========= =========
Number of shares used in per share calculations -
diluted (Note 8) 20,882 22,134 21,082 22,339
========= ========= ========= =========
Proforma information for the adoption of SAB101
Net revenues $ 142,531 $ 183,004 $ 306,698 $ 370,100
Net income 6,184 11,216 15,780 23,652
Earnings per share - basic .30 .52 .76 1.08
Earnings per share - diluted .30 .51 .75 1.06
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands TWENTY-SIX WEEKS ENDED
---------------------------
February 24, February 26,
2001 2000
-------- --------
Cash flows from operating activities:
Net income as defined on the statements of income $ 14,730 $ 24,232
(page 3)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,636 3,144
Other 106 177
Change in assets and liabilities:
Decrease (increase) in receivable and other assets 14,099 (13,381)
(Increase) decrease in inventories (3,453) 4,522
Decrease in accounts payable and accrued expenses (7,470) (7,443)
Increase in income taxes payable 3,536 12,608
Increase in postretirement benefits 3,862 2,966
-------- --------
Net cash provided by operating activities 29,046 26,825
-------- --------
Cash flows used by investing activities:
Purchases of property and equipment (4,795) (7,147)
Investments in dealer receivables (52,392) (53,635)
Collections of dealer receivables 47,220 46,978
Other (2,481) (2,040)
-------- --------
Net cash used by investing activities (12,448) (15,844)
-------- --------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (9,300) (14,490)
Payment of cash dividends (2,062) (2,189)
Other 1,355 1,036
-------- --------
Net cash used by financing activities and
capital transactions (10,007) (15,643)
-------- --------
Net increase (decrease) in cash and cash equivalents 6,591 (4,662)
Cash and cash equivalents - beginning of period 51,443 48,160
-------- --------
Cash and cash equivalents - end of period $ 58,034 $ 43,498
======== ========
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 February 24, 2001, the consolidated results of
operations for the 26 and 13 weeks ended February 24, 2001 and February 26,
2000, and the consolidated cash flows for the 26 weeks ended February 24,
2001 and February 26, 2000. The statement of income for the 26 weeks ended
February 24, 2001, is not necessarily indicative of the results to be
expected for the full year. The balance sheet data as of August 26, 2000
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 26, 2000. 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 26, 2000.
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's views concerning revenue
recognition, which the effect on the Company was to begin recording revenue
upon receipt of products by Winnebago Industries' dealers rather than upon
shipment by the Company. This change required an adjustment to retained
earnings 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. Pro forma information for the 13 and 26 weeks ended February 26,
2000 is disclosed on the Company's Unaudited Consolidated Statements of
Income (page 3 of this report).
On August 27, 2000, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, as amended by SFAS No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE
INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES. It requires that all
derivatives, including those embedded in other contracts, be recognized as
either assets or liabilities and that those financial instruments be
measured at fair value. The accounting for changes in the fair value of
derivatives depends on their intended use and designation. Management has
reviewed the requirements of SFAS No. 133 and has determined that they have
no freestanding or embedded derivatives. All contracts that contain
provisions meeting the definition of a derivative also meet the
requirements of, and have been designated as, normal purchases or sales.
The Company's policy is to not use freestanding derivatives and to not
enter into contracts with terms that cannot be designated as normal
purchases or sales.
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):
February 24, August 26,
2001 2000
--------- ---------
Finished goods........ $ 36,855 $ 28,286
Work in process....... 22,425 19,577
Raw materials......... 52,203 59,674
--------- ---------
111,483 107,537
LIFO reserve.......... (22,323) (21,830)
--------- ---------
$ 89,160 $ 85,707
========= =========
5
NOTE 4: NOTES PAYABLE
On October 19, 2000, the Company entered into an unsecured Credit Agreement
with Wells Fargo Bank Iowa, National Association as amended. The Credit
Agreement provides the Company with a line of credit of $20,000,000 until
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
matters, 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
February 24, 2001, the Company was in compliance with these financial
covenants. There were no outstanding borrowings under the line of credit at
February 24, 2001.
NOTE 5: CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for companies in the recreation vehicle industry
to enter into repurchase agreements with lending institutions which have
provided wholesale floor plan financing to dealers. 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 $251,540,000 and
$219,873,000 under repurchase agreements with lending institutions as of
February 24, 2001 and August 26, 2000, respectively. Included in these
contingent liabilities as of February 24, 2001 and August 26, 2000 are
approximately $1,633,000 and $6,846,000, 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).
NOTE 6: SUPPLEMENTAL CASH FLOW DISCLOSURE
For the periods indicated, the Company paid cash for the following (dollars
in thousands):
Twenty-Six Weeks Ended
------------------------------
February 24, February 26,
2001 2000
------------- ------------
Interest $ -- $ 129
Income taxes 3,000 13,205
NOTE 7: REPURCHASE OF OUTSTANDING STOCK
On March 8, 2001, the Company completed the repurchase of outstanding
shares of its common stock authorized by the Board of Directors on March
15, 2000. Under this repurchase program, 1,163,766 shares were
repurchased for an aggregate consideration of approximately $14,999,000.
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.
6
NOTE 8: INCOME PER SHARE
The following table reflects the calculation of basic and diluted
earnings per share for the 13 and 26 weeks ended February 24, 2001 and
February 26, 2000:
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------- ---------------------------
February 24, February 26, February 24, February 26,
In thousands except per share data 2001 2000 2001 2000
-------- -------- -------- --------
Earnings per share - basic:
Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232
-------- -------- -------- --------
Weighted average shares outstanding 20,576 21,765 20,839 21,946
Earnings per share - basic $ .30 $ .54 $ .71 $ 1.10
-------- -------- -------- --------
Earnings per share - assuming dilution:
Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232
-------- -------- -------- --------
Weighted average shares outstanding 20,576 21,765 20,839 21,946
Dilutive impact of options outstanding 306 369 243 393
-------- -------- -------- --------
Weighted average shares & potential
dilutive shares outstanding 20,882 22,134 21,082 22,339
-------- -------- -------- --------
Earnings per share - assuming dilution $ .30 $ .54 $ .70 $ 1.08
-------- -------- -------- --------
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 relative 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 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.
For the 26 weeks ended February 24, 2001 and February 26, 2000, the
Company's segment information is as follows:
Recreation Vehicles &
Other Manufactured Dealer General
(dollars in thousands) Products Financing Corporate Total
-------------------------------- -------- -------- -------- --------
26 Weeks Ended February 24, 2001
Net revenues $304,458 $ 2,240 $ -- $306,698
Operating income (loss) 20,162 2,219 (451) 21,930
Identifiable assets 182,192 38,750 90,201 311,143
26 Weeks Ended February 26, 2000
Net revenues $372,719 $ 1,795 $ -- $374,514
Operating income (loss) 33,808 1,739 (484) 35,063
Identifiable assets 183,520 32,466 86,905 302,891
7
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended February 24, 2001 Compared to Thirteen Weeks Ended February
26, 2000
Net revenues for recreation vehicles and other manufactured products for the 13
weeks ended February 24, 2001 were $141,320,000, a decrease of $47,323,000, or
25.1 percent from the 13-week period ended February 26, 2000. Motor home unit
sales (Class A and C) were 1,804 units, a decrease of 788 units, or 30.4
percent, during the second quarter of fiscal 2001 compared to the second quarter
of fiscal 2000. The percentage decrease in net revenues in the second quarter of
fiscal 2001 was less than the percentage decrease in motor home unit sales for
that period as a result of the Company's sales of more units, as a percentage of
the total unit sales, with the higher-priced slideout option during the second
quarter of fiscal 2001. Current economic conditions such as higher interest
rates and a decline in consumer confidence levels contributed to reductions in
unit sales, which resulted in reductions in the Company's net revenues.
The Company's expectations for the current fiscal year remain below the past two
fiscal year levels as a result of these factors. However, the long-term outlook
for motor home sales continues to appear very favorable. Demographic studies for
the United States show continued growth of the recreation vehicle industry's
prime target market for the next 30 years. Order backlog for the Company's Class
A and Class C motor homes was approximately 1,550 and 2,500 orders at February
24, 2001 and February 26, 2000, respectively. 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.
Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC) were
$1,211,000 for the 13 weeks ended February 24, 2001; an increase of $286,000, or
30.9 percent from the 13-week period ended February 26, 2000. Increased revenues
for dealer financing reflect an increase in dealer receivable balances and to a
lesser extent, an increase in interest rates charged when comparing the second
quarter of fiscal 2001 to the second quarter of fiscal 2000.
Gross profit, as a percent of net revenues, was 12.0 percent for the 13 weeks
ended February 24, 2001 compared to 15.1 percent for the 13 weeks ended February
26, 2000. The Company's lower volume of production and sales resulted in the
lower margins.
Selling expenses were $5,470,000, or 3.8 percent of net revenues during the
second quarter of fiscal 2001 compared to $5,723,000, or 3.0 percent of net
revenues during the second quarter of fiscal 2000. The decrease in dollars can
be attributed primarily to a reduction in incentives paid to the Company's
outside sales staff and to a reduction in Company sponsored promotional
programs; these reductions were partially offset by increases in Company
advertising costs. The increase in percentage was caused by the decreased sales
volume during the second quarter of fiscal 2001.
General and administrative expenses were $3,146,000, or 2.2 percent of net
revenues during the 13 weeks ended February 24, 2001 compared to $5,845,000, or
3.1 percent of net revenues during the 13 weeks ended February 26, 2000. The
decreases in dollars and percentage when comparing the two quarters were
primarily due to reductions in employee incentive programs and lower legal and
insurance costs.
The Company had net financial income of $901,000 for the second quarter of
fiscal 2001 compared to net financial income of $905,000 for the comparable
quarter of fiscal 2000. 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. During the 13 weeks ended February 26, 2000, the Company
recorded $909,000 of net interest income and losses of $4,000 in foreign
currency transactions. The increase in interest income when comparing the two
periods was due primarily to larger cash balances available for investing during
the second quarter of fiscal 2001.
8
The effective income tax rate increased to 34.6 percent during the second
quarter of fiscal 2001 from 33.8 percent during the second quarter of fiscal
2000. The primary reason for the increase was due to higher state income taxes
during the second quarter of fiscal 2001.
For the second quarter of fiscal 2001, the Company had net income of $6,184,000,
or $.30 per diluted share compared to the second quarter of fiscal 2000's net
income of $11,851,000, or $.54 per diluted share. Net income and earnings per
diluted share decreased by 47.8 percent and 44.4 percent, respectively, when
comparing the second quarter of fiscal 2001 to the second quarter of fiscal
2000. The difference in percentages when comparing the net income to the net
earnings per share was due primarily to a lower number of outstanding shares of
the Company's common stock at February 24, 2001 (see Note 7).
Twenty-Six Weeks Ended February 24, 2001 Compared to Twenty-Six Weeks Ended
February 26, 2000
Net revenues for manufactured products for the 26 weeks ended February 24, 2001
were $304,458,000, a decrease of $68,261,000, or 18.3 percent from the 26-week
period ended February 26, 2000. Motor home unit sales (Class A and C) were 4,001
units, a decrease of 1,216 units, or 23.3 percent during the 26 weeks ended
February 24, 2001 when compared to the 26 weeks ended February 26, 2000. The
percentage decrease in net revenues during the first half of fiscal 2001 was
less than the percentage decrease in motor home unit sales for that period as a
result of the Company's sales of more units, as a percentage of the total unit
sales, with the higher-priced slideout option during the first half of fiscal
2001. The Company's expectations for the remainder of the fiscal year remain
below prior year levels due to current economic conditions. However, the
long-term outlook for motor home sales continues to appear very favorable.
Demographic studies for the United States show continued growth of the
recreation vehicle industry's prime target market for the next 30 years.
Net revenues for dealer financing of WAC were $2,240,000 for the 26 weeks ended
February 24, 2001, an increase of $445,000 or 24.8 percent from the 26-week
period ended February 26, 2000. Increased revenues for dealer financing reflect
an increase in interest rates charged and to a lesser extent an increase in
dealer receivable balances when comparing the first half of fiscal 2001 to the
first half of fiscal 2000.
Gross profit, as a percent of net revenue, was 12.9 percent for the 26 weeks
ended February 24, 2001 compared to 15.4 percent for the 26 weeks ended February
26, 2000. The Company's lower volume of production and sales of motor homes
resulted in the lower margins.
Selling expenses were $11,809,000, or 3.9 percent of net revenues during the
first six months of fiscal 2001 compared to $12,212,000, or 3.3 percent of net
revenues during the first six months of fiscal 2000. The decrease in dollars can
be attributed primarily to a reduction in incentives paid to the Company's
outside sales staff and to a reduction in Company sponsored promotional programs
as well as to reductions in advertising expenses. The increase in percentage was
caused by the decreased sales volume during the first six months of fiscal 2001.
General and administrative expenses were $5,910,000, or 1.9 percent of net
revenue during the 26 weeks ended February 24, 2001 compared to $10,445,000, or
2.8 percent of net revenues during the 26 weeks ended February 26, 2000. The
decreases in dollars and percentage when comparing the two periods were
primarily due to reductions in employee incentive programs and lower insurance
and legal costs.
The Company had net financial income of $1,872,000 for the first half of fiscal
2001 compared to net financial income of $1,558,000 for the comparable period of
fiscal 2000. During the first half of fiscal 2001, the Company recorded
$1,869,000 of net interest income and gains of $3,000 in foreign currency
transactions. During the first half of fiscal 2000, the Company recorded
$1,535,000 of net interest income and gains of $23,000 in foreign currency
transactions. The increase in interest income when comparing the two periods was
due primarily to higher rates of return earned on available invested cash and
larger cash balances during the first half of fiscal 2001.
The effective income tax rate during the 26 weeks ended February 24, 2001 was
33.7 percent compared to 33.8 percent during the 26 weeks ended February 26,
2000.
9
For the 26 weeks ended February 24, 2001, the Company had income before
cumulative effect of a change in accounting method (SAB No. 101) of $15,780,000,
or $.75 per diluted share. The comparable results for the 26 weeks ended
February 26, 2000 was income of $24,232,000, or $1.08 per diluted share.
The Company adopted SAB No. 101 in fiscal 2001. SAB No. 101 which was issued by
the SEC in December 1999 sets forth the views of the SEC concerning revenue
recognition, the effect of which on the Company is to record revenue upon
receipt of products to dealers rather than upon shipment by the Company.
Adoption of SAB 101 during the 26 weeks ended February 24, 2001 resulted in a
decrease to the Company's income of $1,050,000, or $.05 per diluted share.
For the 26 weeks ended February 24, 2001, the Company had net income of
$14,730,000, or $.70 per diluted share compared to the 26 weeks ended February
26, 2000's net income of $24,232,000, or $1.08 per diluted share. Net income and
earnings per diluted share decreased by 39.2 percent and 35.2 percent,
respectively, when comparing the two periods. The difference in percentages when
comparing the net income to the net earnings per share was due primarily to a
lower number of outstanding shares of the Company's common stock at February 24,
2001 (see Note 7).
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally and funds from agreements with financial institutions.
At February 24, 2001, working capital was $146,641,000, an increase of
$4,958,000 from the amount at August 26, 2000. The Company's principal uses of
cash during the 26 weeks ended February 24, 2001 were $9,300,000 for the
purchase of shares of the Company's Common Stock, $4,795,000 for the purchase of
property and equipment and dividend payments of $2,062,000. The Company's
sources and uses of cash during the 26 weeks ended February 24, 2001 are set
forth in the unaudited consolidated condensed statement of cash flows for that
period.
Principal known demands at February 24, 2001 on the Company's liquid assets for
the remainder of fiscal 2001 include approximately $6,000,000 of capital
expenditures and payments of cash dividends. In addition, 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.
Management currently expects its cash on hand, funds from operations and
borrowings available under existing credit facilities to be sufficient to cover
both short-term and long-term operating requirements.
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, availability and price of fuel,
significant increase in interest rates, a general slowdown in the economy,
availability of chassis, slower than anticipated sales of new or existing
products, new product introductions by competitors, collections of dealer
receivables, and other factors which may be disclosed throughout this Form 10-Q
or in the Company's Annual Report on Form 10-K for the year ended August 26,
2000. 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.
10
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of February 24, 2001, the Company had an investment portfolio of fixed income
securities, which are classified as cash and cash equivalents of $58.0 million.
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,
and therefore, the Company would not expect to recognize an adverse impact in
income or cash flows in such an event.
As of February 24, 2001, the Company had dealer financing receivables in the
amount of $37.9 million. Interest rates charged on these receivables vary based
on the prime rate and are adjusted monthly.
11
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held January 16, 2001.
(b) The breakdown of votes for the election of two directors was
as follows*:
Votes Cast For Authority Withheld
-------------- ------------------
Joseph W. England (2004) 18,086,494 228,257
Richard C. Scott (2004) 18,103,235 211,516
* 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) Exhibits - See Exhibit Index on page 14.
(b) The Company did not file any reports on Form 8-K during the period
covered by this report.
12
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, 2001 /s/ Bruce D. Hertzke
--------------------------------
Bruce D. Hertzke
Chairman of the board, Chief
Executive Officer, and President
(Principal Executive Officer)
Date April 6, 2001 /s/ Edwin F. Barker
--------------------------------
Edwin F. Barker
Vice President -- Chief
Financial Officer
(Principal Financial Officer)
EXHIBIT INDEX
4d. First Amendment dated October 19, 2000 to the Credit Agreement between
Winnebago Industries, Inc. and Wells Fargo Bank Iowa, National
Association.
10i. Amendment to Winnebago Industries, Inc. Executive Share Option Plan.
10n. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Bruce D. Hertzke.
10o. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Edwin F. Barker.
10p. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Raymond M. Beebe.
10q. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Robert L. Gossett.
10r. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and James P. Jaskoviak.
10s. Executive Change of Control Agreement dated January 17, 2001 between
Winnebago Industries, Inc. and Robert J. Olson.