TABLE OF CONTENTS
Mission Statement ........................................................ 1
Report to Shareholders ................................................... 2
Operations Review ........................................................ 5
Motor Home Product Classification ........................................ 13
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. 14
Consolidated Balance Sheets .............................................. 20
Consolidated Statements of Income ........................................ 22
Consolidated Statements of Cash Flows .................................... 23
Consolidated Statements of Changes in Stockholders'
Equity .............................................................. 24
Report of Independent Auditors............................................. 25
Selected Financial Data .................................................. 26
Notes to Consolidated Financial Statements................................. 28
Common Stock Data.......................................................... 39
Cash Dividends Per Share................................................... 39
Interim Financial Information ............................................ 39
Shareholder Information .................................................. 40
Directors and Officers .............................................Inside Back
Cover
CORPORATE PROFILE
Winnebago Industries, Inc., headquartered in Forest City, Iowa, is the
leading United States (U.S.) manufacturer of motor homes, self-contained
recreation vehicles used primarily in leisure travel and outdoor recreation
activities. The Company builds quality motor homes with state-of-the-art
computer-aided design and manufacturing systems on automotive-styled assembly
lines. The Company's products are subjected to what the Company believes is the
most rigorous testing in the RV industry. These vehicles are sold through
dealers under the Winnebago(R), Itasca(R), Rialta(R) and Ultimate(R) brand
names. The Company markets its recreation vehicles on a wholesale basis to a
diversified dealer organization located throughout the U.S., and to a limited
extent, in Canada. As of August 31, 2002, the motor home dealer organization in
the U.S. and Canada included approximately 295 dealer locations. Motor home
sales by Winnebago Industries represented at least 89 percent of its revenues in
each of the past five fiscal years. In addition, the Company's subsidiary,
Winnebago Acceptance Corporation, engages in floor plan financing for a limited
number of the Company's dealers. Other products manufactured by the Company
consist principally of a variety of component parts for other manufacturers.
Winnebago Industries was incorporated under the laws of the state of Iowa
on February 12, 1958, and adopted its present name on February 28, 1961.
RECENT FINANCIAL PERFORMANCE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL 2002 FISCAL 2001 2002 TO 2001
(53 WEEKS) (52 WEEKS) % OF CHANGE
Net Revenues $828,403 $675,927 22.6%
Gross Profit $119,538 $ 87,366 36.8%
Operating Income $ 81,197 $ 55,474 46.4%
Net Income $ 54,671 $ 42,704 28.0%
Diluted Income Per Share $ 2.68 $ 2.03 32.0%
Diluted Weighted Average Outstanding
Shares 20,384 21,040 (3.1%)
WINNEBAGO INDUSTRIES, INC.
MISSION STATEMENT
Winnebago Industries, Inc. is the leading United States manufacturer of
motor homes and related products and services. Our mission is to continually
improve our products and services to meet or exceed the expectations of our
customers. We emphasize employee teamwork and involvement in identifying and
implementing programs to save time and lower production costs while maintaining
the highest quality of products. These strategies allow us to prosper as a
business with a high degree of integrity and to provide a reasonable return for
our shareholders, the ultimate owners of our business.
VALUES
How we accomplish our mission is as important as the mission itself.
Fundamental to the success of the Company are these basic values we describe as
the four Ps:
PEOPLE -- Our employees are the source of our strength. They provide our
corporate intelligence and determine our reputation and vitality. Involvement
and teamwork are our core corporate values.
PRODUCTS -- Our products are the end result of our teamwork's combined efforts,
and they should be the best in meeting or exceeding our customers' expectations.
As our products are viewed, so are we viewed.
PLANT -- We believe our facilities to be the most technologically advanced in
the RV industry. We continue to review facility improvements that will increase
the utilization of our plant capacity and enable us to build the best quality
product for the investment.
PROFITABILITY -- Profitability is the ultimate measure of how efficiently we
provide our customers with the best products for their needs. Profitability is
required to survive and grow. As our respect and position within the marketplace
grows, so will our profit.
GUIDING PRINCIPLES
QUALITY COMES FIRST -- To achieve customer satisfaction, the quality of our
products and services must be our number one priority.
CUSTOMERS ARE CENTRAL TO OUR EXISTENCE -- Our work must be done with our
customers in mind, providing products and services that meet or exceed the
expectations of our customers. We must not only satisfy our customers, we must
also surprise and delight them.
CONTINUOUS IMPROVEMENT IS ESSENTIAL TO OUR SUCCESS -- We must strive for
excellence in everything we do: in our products, in their safety and value, as
well as in our services, our human relations, our competitiveness and our
profitability.
EMPLOYEE INVOLVEMENT IS OUR WAY OF LIFE -- We are a team. We must treat each
other with trust and respect.
DEALERS AND SUPPLIERS ARE OUR PARTNERS -- The Company must maintain mutually
beneficial relationships with dealers, suppliers and our other business
associates.
INTEGRITY IS NEVER COMPROMISED -- The Company must pursue conduct in a manner
that is socially responsible and that commands respect for its integrity and for
its positive contributions to society.
[PLOT POINTS CHARTS]
WINNEBAGO INDUSTRIES'
NET REVENUES
(DOLLARS IN MILLIONS)
1998 1999 2000 2001 2002
------ ------ ------ ------ ------
$529.4 $671.6 $747.6 $675.9 $828.4
WINNEBAGO INDUSTRIES'
NET INCOME PER DILUTED SHARE
(DOLLARS)
1998 1999 2000 2001 2002
----- ----- ----- ----- ----
$1.00 $1.96 $2.20 $2.03 $2.68
1
TO MY FELLOW SHAREHOLDERS:
Leadership is the focus of our 2002 Annual Report. Of course, leadership
comes in many forms and we will detail Winnebago Industries' many leadership
qualities and their benefit to our shareholders throughout this report.
We were extremely pleased with the record revenues and earnings posted for
Winnebago Industries during fiscal 2002.
The Company's revenues for fiscal 2002 (53 weeks) were a record $828.4
million, a 22.6 percent increase compared to revenues of $675.9 million for the
previous fiscal year (52 weeks).
Net income and diluted income per share for fiscal 2002 were a record $54.7
million, or $2.68 per share, increases of 28 percent and 32 percent,
respectively, compared to net income of $42.7 million and diluted income per
share of $2.03 for the previous fiscal year, which includes a $4.5 million one
time tax benefit (or 21 cents per diluted share).
Definitely, a lot of hard work by our employees and our dealers proved
successful in a less than ideal economic environment.
Starting in 1997, we challenged ourselves to be the most profitable U.S.
public company in the recreation vehicle (RV) industry. We measure profitability
by using four guidelines: Return on Assets (ROA), Return on Equity (ROE),
Operating Income as a percent of revenues and Net Income as a percent of
revenues. We have highlighted these statistics in our last two Annual Reports
because of their importance as a means to measure ourselves against our
competitors. Winnebago Industries and the other public motor home manufacturers
used in this analysis account for approximately 75 percent of all U.S. Class A
and C motor home sales. The graphs shown demonstrate that we not
COMPETITIVE COMPARISON
(Information obtained from last 12 months public filings)
[BAR CHARTS]
RV INDUSTRY
RETURN ON EQUITY RETURN ON ASSETS
---------------- ----------------
WINNEBAGO INDUSTRIES, INC. 28.2% 15.9%
COACHMEN INDUSTRIES, INC. 1.2% 0.8%
THOR INDUSTRIES, INC. 18.5% 12.7%
FLEETWOOD ENTERPRISES, INC. (18.7)% (4.1)%
MONACO COACH CORPORATION 16.1% 8.5%
NATIONAL RV HOLDINGS, INC. (12.3)% (9.2)%
OPERATING INCOME NET INCOME
---------------- ----------
WINNEBAGO INDUSTRIES, INC. 9.8% 6.6%
COACHMEN INDUSTRIES, INC. 0.5% 0.4%
THOR INDUSTRIES, INC. 6.6% 4.1%
FLEETWOOD ENTERPRISES, INC. (3.1)% (1.8)%
MONACO COACH CORPORATION 5.4% 3.1%
NATIONAL RV HOLDINGS, INC. (7.7)% (4.8)%
2
only met our goal of being the most profitable public RV company, but that we
are leading the RV industry in profitability by substantial margins.
Furthermore, Winnebago Industries has a strong balance sheet, no long-term
debt and all recent expansions have been paid for with available cash.
But this financial success was only a portion of Winnebago Industries'
achievements during fiscal 2002. We are also the sales leader in the motor home
market. According to Statistical Surveys, Inc., an independent retail reporting
service, Winnebago Industries' retail market share of the total U.S. Class A and
C motor home market leads the industry at 21.0 percent for the calendar year to
date through August, compared to 18.8 percent for the same period in calendar
2001. This upward trend began in calendar year 1997 when Winnebago Industries'
share of the Class A and C retail market was 15.8 percent as of the end of the
year.
Winnebago Industries believes that it also leads the industry in RV
manufacturing technology. By utilizing the latest technology for the production
of our motor homes, we are able to increase quality, while maximizing the
productivity of our workforce and facilities.
An annual dealer satisfaction index (DSI) survey by the Recreation Vehicle
Dealers Association also shows that Winnebago Industries is viewed by its
dealers as the leader in the RV industry. This DSI survey rates manufacturers
based on the quality of their sales, product, management and
service/warranty/support. Winnebago Industries was the only public RV company to
receive the award this year, and has earned this recognition every year since
the award's inception in 1996.
The RV market and Winnebago Industries' long-term future look bright.
Demographics are in our favor as our target market of consumers age 50 and older
is expected to increase for the next 30 years. In addition to growth due to the
aging of the baby boom generation, a study conducted by the University of
Michigan for the RV industry shows that the age of people interested in
purchasing RVs is also expanding to include younger buyers under 35 years of age
as well as older buyers over age 75 who are staying healthy and active much
later in life. This study also shows an increased interest in owning RVs by a
larger percentage of all U.S. households.
In the near term, the current low interest rates are very favorable for
continued growth of the RV market. Approximately two-thirds of our customers
finance their motor home purchase, due to the tax incentive that allows the
deduction of interest on a mortgage loan as many motor
[PHOTO]
CAPTION: WINNEBAGO INDUSTRIES' CORPORATE HEADQUARTERS IN FOREST CITY, IOWA
3
homes qualify as a second home.
Depressed consumer confidence levels and
a weak economy continue to be challenges to the
RV industry. In spite of these issues, our market [PHOTO]
share gains and an overall increase in interest CAPTION: BRUCE D. HERTZKE
in our motor homes required us to run our factory
on overtime from January through September of 2002
to meet demand for the Company's motor homes. In
order to continue to grow with the market, we are
currently building a state-of-the-art manufacturing
facility in Charles City, Iowa, to build Class C
motor homes. This will thereby enable us to increase
our Class A motor home production in Forest City.
Motor home production in the new facility is
anticipated to begin by early 2003 with a ramp-up of
production throughout the remainder of fiscal 2003.
This is the largest expansion to date for Winnebago
Industries and will increase our capacity by
approximately 30 percent. The additional capacity
will help us meet the expected increased demand
for our motor homes.
While the RV industry continues to be a very competitive market, Winnebago
Industries believes that it has the leadership qualities necessary to continue
to grow and enhance our shareholder value well into the future.
/s/ BRUCE D. HERTZKE
Bruce D. Hertzke
Chairman of the Board,
Chief Executive Officer and
President
November 25, 2002
[PLOT POINTS CHART]
WINNEBAGO INDUSTRIES'
PEOPLE OVER THE AGE OF 55
(Population in Millions)
1997 2005 2010 2015 2020 2030
---- ---- ---- ---- ---- ----
55.9 65.8 74.8 85.2 94.9 105.7
[PHOTO]
CAPTION: 2003 WINNEBAGO ADVENTURER
4
[PHOTO]
CAPTION: WINNEBAGO INDUSTRIES' 2003 MOTOR HOME FAMILY INCLUDES:
(LEFT TO RIGHT) RIALTA, WINNEBAGO MINNIE, ITASCA SUNCRUISER,
AND THE TOP OF THE LINE ULTIMATE FREEDOM.
[PLOT POINTS CHART]
WINNEBAGO INDUSTRIES'
CLASS A & C RETAIL MARKET SHARE
As reported by Statistical Surveys, Inc. for calendar 2002 - August
1997 1998 1999 2000 2001 2002
-August
------------------------------------------------------------
15.8% 16.2% 16.4% 17.1% 19.1% 21.0%
OPERATIONS REVIEW
MARKET LEADERSHIP
Winnebago Industries strengthened its market leadership role in fiscal
2002. The Company has a proud history of manufacturing RVs for 44 years.
Winnebago Industries now chooses to focus on the motorized portion of the RV
market because we believe it to be the most profitable segment of the RV
industry.
The Company has grown its retail market share of Class A and C motor homes
from 15.8 percent for the 1997 calendar year to 21.0 percent year to date
through August 2002. Also, Winnebago Industries grew its market share by 11.4
percent when compared to the same period last year.
This growth in market share has come in large part from the introduction of
innovative new products. Winnebago Industries currently manufactures four brands
of motor homes: Winnebago, Itasca, Rialta and Ultimate. In total, 65 percent of
Winnebago Industries' model lineup was new for 2002, including four brand new
product lines: the affordable Class A Winnebago Sightseer(TM) and Itasca
Sunova(TM) and the fuel-efficient Class C Winnebago Vista(R) and Itasca
Sunstar(R). In addition to the four models mentioned above, the 2002 model
lineup also included the redesigned Winnebago Chieftain(R) and Itasca
Sunflyer(R). These high-line gas motor homes feature luxurious offerings in each
of their four floorplans and spaciousness with a dual slideout design.
The Company's expanded product offerings created broader exposure for its
products at dealerships and the
[PHOTO]
CAPTION: WINNEBAGO SIGHTSEER
5
[PLOT POINTS CHART]
WINNEBAGO INDUSTRIES'
CLASS C RETAIL MARKET SHARE
As reported by Statistical Surveys, Inc. for Calendar 2002 - August
1997 1998 1999 2000 2001 2002
-August
------------------------------------------------------------
20.1% 22.7% 22.7% 21.4% 25.2% 26.0%
[PHOTO]
CAPTION: ITASCA SPIRIT
Company believes this allowed it to reach more customers. These new product
lines also created additional opportunities for current owners of Winnebago
Industries' products or other brands in the RV industry to trade up or down.
Consumers often want the latest and greatest offerings available in the
marketplace and we intend to continue to develop new motor home models that will
provide them with that opportunity.
The Company introduced its new 2003 motor home lineup to dealers during its
annual Dealer Days event in Las Vegas in July. Judging from the order input
during and following this event, Winnebago Industries' new motor home lineup was
accepted extremely well. Winnebago Industries' motor home sales order backlog at
the end of the fourth quarter on August 31, 2002 was 3,248 units, a 103.3
percent increase, compared to 1,598 units on order at the end of the fourth
quarter last year.
Winnebago Industries' new lineup includes 76 innovative models for 2003.
CLASS C LEADERSHIP
Winnebago Industries has been the top selling Class C motor home
manufacturer since 1998 and continues to expand on its Class C market share
lead.
The comprehensive Class C lineup from Winnebago Industries includes the
unique, fuel-efficient, Rialta, Vista and Sunstar that are all built on the
front-wheel drive Volkswagen(R) chassis. Winnebago Industries has an exclusive
contract with Volkswagen of America to utilize its chassis for the U.S. motor
home market.
More traditional-styled Class C products include the Winnebago Minnie(R)
and Minnie Winnie(R), as well as the Itasca Spirit(R) and Sundancer(R), which
are built on Ford(R) and/or Chevrolet(R) chassis.
The Minnie, Minnie Winnie, Spirit and Sundancer models all feature a new
advanced radius-style roof design for 2003, which maximizes headroom and
provides improved insulation and water runoff.
CLASS A
Winnebago Industries has experienced solid growth in both the Class A gas
and diesel motor home markets, gaining 36.7 percent and 153.7 percent,
respectively, since 1997.
Class A gas models include the Winnebago Sightseer, Brave(R), Adventurer(R)
and Chieftain, as well as the Itasca Sunova, Sunrise(R), Suncruiser(R) and
Sunflyer models, which are built on Ford(R) and/or Workhorse(TM) chassis.
New to the market last year, the entry-level Winnebago Sightseer and Itasca
Sunova were extremely well received. Winnebago Industries expanded the Sightseer
and Sunova lineup with the introduction of a new 33-foot model in each line for
2003.
The best selling Class A motor home line in the industry, the Winnebago
Adventurer and Itasca Suncruiser, have new 37-foot models as well as two
redesigned models, the most popular floorplan, 35U, and the 38G, for 2003.
Diesel Class A models include the Winnebago Journey(R) and Journey DL and
Itasca Horizon(R) motor homes that are built on Freightliner(R) chassis, while
the Ultimate Advantage(R) and Ultimate Freedom(R) motor homes are built on
Spartan(R) chassis.
The Company introduced new 39-foot models for 2003 in the Winnebago Journey
DL and Itasca Horizon line featuring a 330 hp Caterpillar(R) diesel engine on a
27,910-lb.
6
[PHOTO]
CAPTION: ITASCA HORIZON
[PLOT POINT CHARTS]
WINNEBAGO INDUSTRIES'
CLASS A RETAIL MARKET SHARE
As reported by Statistical Surveys, Inc. for calendar 2002 - August
1997 1998 1999 2000 2001 2002
-August
------------------------------------------------------------
14.1% 13.6% 13.9% 15.3% 16.7% 18.7%
WINNEBAGO INDUSTRIES'
CLASS A - GAS VS DIESEL RETAIL MARKET SHARE
As reported by Statistical Surveys, Inc. for calendar 2002 - August
1997 1998 1999 2000 2001 2002
-August
------------------------------------------------------------
GAS 17.7% 17.2% 16.1% 19.4% 21.7% 24.2%
DIESEL 4.1% 4.5% 8.7% 8.9% 9.5% 10.4%
Freightliner chassis with a front galley/sofa slideout and a rear bed
slideout. The bedroom also features a convenient second lavatory with dresser.
The Company also introduced its first motor homes with triple slideouts in
the Ultimate Advantage and Ultimate Freedom lines for 2003. The Ultimate
Advantage 40K and the Ultimate Freedom KD both feature two slideouts in the
front portion of the motor home and one in the bedroom, while the Ultimate
Freedom ED model features a galley/sofa slideout in the front and two slideouts
in the rear bedroom. The bedroom features a bed slideout on the passenger side,
as well as a unique lavatory/dresser slideout on the driver's side of the motor
home.
LEADERSHIP IN FEATURE INNOVATION
Once again, Winnebago Industries shows its innovation with new motor home
features in 2003.
The full comfort BenchMark(TM) dinette provides abundant storage and easily
converts into a comfortable bed. With its sprung seat cushions for added
comfort, BenchMark also features attractive fabrics and spacious storage. The
seat cushions open fully to reveal maximum access to storage space - perfect for
blankets, pillows, games and anything you need to access quickly and easily.
Exclusive to Winnebago Industries, the new Sleep Number Bed(R) by Select
Comfort(TM) is featured on select 2003 motor homes. This queen-size bed features
dual hand held remotes so you can quickly and independently adjust the mattress
firmness level to your ideal level of comfort and support. The Sleep Number Bed
is the "Key to a Perfect
[PHOTO]
[LOGO] CAPTION: BENCHMARK FULL COMFORT DINETTE.
7
[PHOTO]
CAPTION: THE SLEEP NUMBER BED IS EXCLUSIVE TO WINNEBAGO INDUSTRIES
FOR SELECT MOTOR HOMES IN 2003
Night's Sleep(TM)."
Helping make communication easy, select Winnebago Industries' motor homes
feature two-way radios with a docking/charging station.
Unique to the industry, the diesel-powered motor homes from Winnebago
Industries feature an improved chassis manifold air supply with a detachable
50-foot hose that provides a ready source of compressed air for pumping up
anything from beach toys to tires.
The innovative TripTek(TM) system, which monitors the engine and provides a
predeparture checklist that appears on the rearview monitor system, is also
available on select Winnebago Industries' diesel-powered motor homes.
Sturdy powered sunvisors are also featured in 2003. The driver is able to
control both front visors, with the passenger also able to control the visor on
his or her side. The sunvisors are featured on the Company's higher-line
products, such as the Winnebago Chieftain, Itasca Sunflyer and its diesel
powered motor homes.
Select Winnebago Industries' motor homes also feature an attractive, new
base coat/clear coat full-body paint, providing a low maintenance, high-gloss
automotive finish with maximum durability and the highest chip resistance
available.
Other unique features to Winnebago Industries' motor homes include the RV
Radio(TM), TrueAir(TM) Residential Air Conditioning System, StoreMore(R)
Slideout System and the OnePlace(TM) Systems Center.
The Company is committed to aggressive new product development and has
made significant capital expenditures to reach that goal. As an example, by
replacing 60 Cad PCs with high-end workstations, adding a laser scanner to the
design studio and adding gigabyte Ethernet to the local area network
infrastructure within this last fiscal year, the Company increased efficiency in
the design process.
COMMERCIAL AND SPECIALTY VEHICLES
Winnebago Industries believes that it leads the RV industry in the
construction of commercial and specialty vehicles, manufacturing a broad range
of products.
The Commercial Vehicle Division offers several models that can be custom
designed for a wide variety of applications including medical, dental, law
enforcement and computer training.
The Specialty Vehicle Department is responsible for the
[PHOTO] [PHOTO]
CAPTION: 2003 ULTIMATE FREEDOM CAPTION: 2003 RIALTA
8
sale of Ability Equipped(TM) motor homes that are custom-built for individuals
with special mobility needs. Ability Equipped motor homes can be outfitted with
wider entrance doors, wheelchair lifts, roll-in showers, hand driving controls
and other equipment needed to make them wheelchair accessible.
OEM
Winnebago Industries manufactures the majority of the parts used in its
motor homes (with the exception of the chassis, engines, auxiliary power units
and appliances), allowing the Company to maintain strict quality standards,
design parts to unique motor home needs and easily facilitate parts replacement
for future needs. Winnebago Industries is able to maximize its production
capacity through the sale of original equipment manufacturing (OEM) components,
while providing the added benefit of low-cost component parts, contributing to
the Company's leadership position in the industry with the highest ROE, ROA, Net
Income as a percent of revenues and Operating Income as a percent of revenues in
the industry. Winnebago Industries generated revenues of $25 million from the
sale of OEM components in fiscal 2002.
The largest portion of OEM revenues were generated by Winnebago Industries'
Creative Aluminum Products Company (CAPCO), which produces aluminum extrusion
products, primarily for the RV and home building industries.
[PHOTO]
CAPTION: ALUMINUM EXTRUSION PARTS
MARKETING OPPORTUNITIES
Winnebago Industries is able to leverage its strong brand name with
excellent marketing opportunities. These opportunities continue to maximize our
brand strength while further positioning us as the industry leader.
The Winnebago Adventurer is featured in the upcoming Jack Nicholson film,
ABOUT SCHMIDT, due to be released nationwide on January 3, 2003. The New Line
Cinema film chronicles the life of Warren Schmidt, played by Nicholson, as he
attempts to find meaning in his life after his retirement as an insurance
actuary and the death of his wife. Warren sets out on a series of exploits in
his Adventurer with the ultimate destination to attend the wedding of his
daughter,
[PHOTO]
CAPTION: JACK NICHOLSON AND HIS WINNEBAGO ADVENTURER IN "ABOUT SCHMIDT."
9
Jeannie, played by Hope Davis, and soon-to-be son-in-law, Randall, an
underachieving waterbed salesman played by Dermot Mulroney. The film also stars
Kathy Bates and Howard Hesseman as the free-spirited in-laws and is directed by
Oscar-nominated director Alexander Payne.
Winnebago Industries participated in a media tour sponsored by the
Recreation Vehicle Industry Association (RVIA) during fiscal 2002. During their
third season touring as RVIA spokespersons, Brad and Amy Herzog used a 2002
Winnebago Adventurer for their "Baby Makes Three in an RV" tour. Traveling with
their young son, Luke, the Herzogs reinforced the ease, cost savings and comfort
that RV travel offers for young families.
Winnebago Industries also provided several motor homes during fiscal 2002
for "Biff Henderson's America" segments that appeared on the CBS LATE SHOW WITH
DAVID LETTERMAN TV show. The Company worked closely with RVIA, CBS and
Letterman's staff to support these humorous Charles Kuralt style segments.
JEOPARDY and the WHEEL OF FORTUNE TV shows also utilize Winnebago Braves as
their contestant search vehicles. In addition, Winnebago Industries motor homes
have been offered as grand prizes for the WHEEL OF FORTUNE and THE PRICE IS
RIGHT TV shows.
[PHOTO]
CAPTION: UP TO SIX WINNEBAGO INDUSTRIES MOTOR HOMES WILL BE GIVEN AWAY IN THIS
NEVADA SWEEPSTAKES PROMOTION.
The Nevada Commission on Tourism is continuing a three-year campaign that
will award up to six Winnebago Industries motor homes as grand prizes throughout
the duration of the sweepstakes to the year 2003. The $1 million campaign
prominently features a Winnebago Adventurer in the promotional material.
This continued exposure in the media is immeasurable in terms of continued
brand recognition.
SALES AND SERVICE SUPPORT
Winnebago Industries continues to support
the most comprehensive sales and service support
programs in the RV industry for its dealers and [PHOTO/LOGO]
retail customers. The Company believes that providing 20/20 VISION
quality product and service support to our dealers WINNEBAGO
through hands-on training and support materials, such INDUSTRIES
as our on-line WIN NET information system, will ensure
that our retail customers are more satisfied; thus,
ensuring long-term growth and profitability.
Winnebago Industries also prides itself on providing
the highest level of warranty, parts and service programs
in the industry and conducts extensive service training
for its dealers. In the past few years, Winnebago
Industries has implemented industry-leading programs like [PHOTO/LOGO]
the 40 percent warranty parts markup program, TripSaver TRIP SAVER
Emergency Warranty Parts Shipments and the enhanced FAST TRACK PARTS
WIN NET on-line data entry system that provides Winnebago
Industries' dealers with instant access to service, parts
and warranty information.
To ensure that our sales and service programs are effective, we continually
monitor our customers' satisfaction levels through surveys. From this data,
Winnebago Industries has developed a Customer Satisfaction Index (CSI) that is
used to shape our sales and service programs and to reward our most effective
dealers. In 1986, Winnebago Industries initiated the first dealer recognition
program within the RV industry. This "Circle of Excellence Award" recognized 162
dealers with this top honor for the 2002 model year, including six dealers who
have achieved this exclusive status each year since the program was initiated 16
years ago, as well as 21 first-time winners.
WIT
The Winnebago-Itasca Travelers (WIT) Club is very important to Winnebago
Industries, particularly as club members have proven themselves to be extremely
loyal, repeat buyers of the Company's products. The WIT Club enables the Company
to stay connected with our Winnebago, Itasca, Rialta and Ultimate motor home
owners and provides added benefits to these owners as well. Caravans, rallies
and tours held frequently throughout the year provide WIT Club members with a
way to use their motor homes, remain active and keep in touch with their
club-member friends. Winnebago Industries encourages its dealers to actively
participate in local chapters by offering complimentary memberships to new
purchasers and to host "Show & Tell" events on the dealership lots. The WIT Club
10
[PHOTO]
CAPTION: WIT MEMBERS IN NEARLY 1,500 WINNEBAGO INDUSTRIES MOTOR
HOMES PARTICIPATED IN THE 2002 WIT GRAND NATIONAL RALLY
FOR THIS ANNUAL EVENT IN FOREST CITY, IOWA
also provides member benefits such as a monthly magazine, professional trip
routing, purchasing and service discounts, mail forwarding and various types of
insurance.
TECHNOLOGY LEADER
Winnebago Industries believes that it is the most technologically advanced
RV manufacturer in the industry, and the Company remains on the cutting edge in
terms of computerized equipment at all of its facilities. An additional $11
million was spent on capital expenditures in fiscal 2002 to upgrade
manufacturing equipment and expand manufacturing capabilities in order to
increase productivity and improve the quality of Winnebago Industries' products.
The Company's new motor home manufacturing facility currently under
construction will be a state-of-the-art facility that will utilize the latest
computer technology, such as computer numerically controlled routers for the
manufacture of Winnebago Industries' Class C motor homes.
[PHOTO]
CAPTION: COMPUTER NUMERICALLY CONTROLLED (CNC) ROUTER.
QUALITY LEADERSHIP
Winnebago Industries believes that its high degree of technology, as well
as the advanced sales and service programs and aftermarket support we provide
our dealers and retail customers, are greatly responsible for our quality
leadership within the RV industry.
The Company was pleased to again receive the Quality Circle Award from the
Recreation Vehicle Dealers' Association (RVDA). Quality Circle status is the
result of outstanding ratings on the RVDA's annual Dealer Satisfaction Index
survey. One of 32 companies which qualified for consideration based upon an
adequate number of responses, Winnebago Industries was the only public motor
home manufacturer to be rated high enough by dealers to receive the Quality
Circle Award. Winnebago Industries was also the only public motor home
manufacturer to have won this award each year since it was instituted six years
ago. The Company is particularly proud of the response to the last question on
the survey that names Winnebago Industries with an industry leading figure of
[PHOTO]
CAPTION: QUALITY CIRCLE AWARDS FROM RVDA
11
91.7 percent on the topic of "Product Valuable for Dealership's Success."
[BAR CHART]
2001 RVDA - DSI
Product Valuable for Dealerships' Success
Winnebago 91.7%
Sunline 90.0%
Carriage 87.8%
Newmar 84.5%
Lance 84.3%
K-Z, Inc. 84.1%
Holiday Rambler 84.0%
Western RV 81.3%
Monoco 80.3%
Jayco 79.0%
Sunnybrook 78.9%
Viking 78.8%
Tiffin 74.8%
Skyline 73.2%
Average 73.0%
R-Vision 72.8%
Coachman RV 72.0%
PRODUCTIVITY
Winnebago Industries has committed to Lean Manufacturing philosophies.
Lean Manufacturing is a systematic approach of identifying and eliminating waste
(nonvalue-added activities) through continuous organization and processes
improvement. There are a series of seven workshops involved in the Lean
Manufacturing process. Approximately 1,300 employees have attended the first
workshop which involves employees learning the basic fundamentals of Lean
Manufacturing. Another 500 employees have attended the second workshop on
workplace organization and standardization.
Implementation of Lean Manufacturing in our Lorimor soft goods facility
resulted in a 34 percent reduction in the number of machines needed, elimination
of 5-10 hours of overtime per employee per week, reduction in work space, waste
and inventory, as well as improved material flow.
LEADERSHIP SUMMARY
Winnebago Industries is the leading motor home manufacturer in the RV
industry. Demographic trends indicate that the RV industry's target market will
grow for the next 30 years. Winnebago Industries' brand recognition and
recognition as a top quality manufacturer lead us to believe that the Company
will continue to be a leader in the industry. Through the development of
innovative new products, quality improvement and plant expansion, Winnebago
Industries believes it will continue to grow in market share and volume. While
it is important to be in the leading position in sales within the industry, it
is also the Company's continued goal to remain the most profitable public
company in the industry. Winnebago Industries strongly believes it has the
leadership position necessary to deliver the best results for its shareholders.
[PHOTO]
CAPTION: CONSTRUCTION OF THE NEW MOTOR HOME MANUFACTURING FACILITY IN CHARLES
CITY, IOWA IS SCHEDULED TO BE COMPLETED IN EARLY CALENDAR 2003.
12
MOTOR HOME PRODUCT CLASSIFICATION
CLASS A MOTOR HOMES
These are conventional motor homes constructed directly on medium-duty truck
chassis which include the engine and drivetrain components. The living area and
the driver's compartment are designed and produced by the motor home
manufacturer. Class A motor homes from Winnebago Industries include: Winnebago
Sightseer, Brave, Adventurer, Chieftain, Journey and Journey DL; Itasca Sunova,
Sunrise, Suncruiser, Sunflyer and Horizon; and Ultimate Advantage and Ultimate
Freedom.
CLASS B VAN CAMPERS
These are panel-type trucks to which sleeping, kitchen, and/or toilet facilities
are added. These models also have a top extension to provide more headroom.
Winnebago Industries converts the EuroVan Camper, which is distributed by
Volkswagen of America and Volkswagen of Canada.
CLASS C MOTOR HOMES (MINI)
These are mini motor homes built on a van-type chassis onto which the motor home
manufacturers construct a living area with access to the driver's compartment.
Class C motor homes from Winnebago Industries include: Winnebago Vista, Minnie
and Minnie Winnie; Itasca Sunstar, Spirit and Sundancer; and Rialta.
[LOGO]
WINNEBAGO INDUSTRIES
MOTOR HOME FAMILY TREE
Winnebago Industries manufactures four brands of Class A and C motor homes.
Listed below are the brand names and model designations of the Company's 2003
product line.
[LOGO] [LOGO] [LOGO] [LOGO]
WINNEBAGO ITASCA RIALTA ULTIMATE
* Vista * Sunstar * Rialta * Ultimate Advantage
* Minnie * Spirit * Ultimate Freedom
* Minnie Winnie * Sundancer
* Sightseer * Sunova
* Brave * Sunrise
* Adventurer * Suncruiser
* Chieftain * Sunflyer
* Journey/Journey DL * Horizon
13
[PHOTO]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Certain of the matters discussed in this Annual 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, reactions
to actual or threatened terrorist attacks, availability and price of fuel, a
significant increase in interest rates, a slowdown in the economy, availability
of chassis, slower than anticipated sales of new or existing products, new
product introductions by competitors, collections of dealer financing
receivables and other factors which may be disclosed throughout this Annual
Report. Any forecasts and projections in this report are "forward looking
statements," and are based on management's current expectations of the Company's
near-term results, based on current information available pertaining to the
Company, including the aforementioned risk factors; actual results could differ
materially. The Company undertakes no obligation to publicly update or revise
any forward looking statements whether as a result of new information, future
events or otherwise, except as required by law or the rules of the New York
Stock Exchange.
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 requires us to make assumptions, estimates and judgments that affect the
amounts reported. Many of these policies are straightforward. There are,
however, some policies that are critical because they are important in
determining the financial condition and results of operations. These policies
are described below and 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 offers to its customers a variety of warranties on its products
ranging from 1 to 10 years in length. Estimated costs related to product
warranty are accrued at the time of sale and included in cost of sales.
Estimated costs are based upon past warranty claims and unit sales history and
adjusted as required to reflect actual costs incurred, as information becomes
available.
Beginning in fiscal year 2001, revenue was recorded by the Company upon
receipt of products by Winnebago Industries dealers rather than upon shipment as
in prior years. This change in accounting principle was made to implement the
Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No.
101, as amended. SAB No. 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and
determinable; and (4) collectability is reasonably assured. 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.
The Company has reserves for other loss exposures, such as product
liability, litigation and accounts receivable. The Company also has loss
exposure on loan guarantees and repurchase agreements (see Note 6 of Condensed
Notes to
14
[PHOTO] [PHOTO]
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.
GENERAL
The primary use of recreation vehicles (RVs) for leisure travel and outdoor
recreation has historically led to a peak retail selling season concentrated in
the spring and summer months. The Company's sales of RVs are generally
influenced by this pattern in retail sales, but can also be affected by the
level of dealer inventory. The Company's products are generally manufactured
against orders from the Company's dealers and from time to time to build
inventory to satisfy the peak selling season.
RESULTS OF OPERATIONS
FISCAL 2002 COMPARED TO FISCAL 2001
Net revenues for recreation vehicles and other manufactured products were
$825,269,000 for fiscal 2002 (53 weeks), an increase of $153,583,000, or 22.9
percent, from fiscal 2001 (52 weeks). Motor home shipments (Class A and C)
during fiscal 2002 were 11,054 units, an increase of 1,978 units, or 21.8
percent, compared to fiscal 2001. The Company's increase in revenues during
fiscal 2002 reflects low interest rates, an increase in market share, continued
acceptance of the Company's new products, solid performance by the Company's
dealers and a high quality reputation of the Company's products.
Net revenues for dealer financing at Winnebago Acceptance Corporation (WAC)
were $3,134,000 for fiscal 2002, a decrease of $1,107,000 or 26.1 percent from
fiscal 2001. Decreased revenues for dealer financing reflect a significant
decrease in interest rates partially offset by higher average outstanding dealer
receivable balances when comparing fiscal 2002 to fiscal 2001.
Cost of manufactured products, as a percent of manufactured product
revenues, was 85.9 percent for fiscal 2002, compared to 87.6 percent for fiscal
2001. The Company's lower cost of manufacturing during fiscal 2002 can be
attributed to increased volume of motor home production and deliveries to
dealers.
Selling expenses increased by $1,321,000 to $19,606,000 comparing fiscal
2002 to fiscal 2001 but decreased as a percentage of net revenues to 2.4 percent
from 2.7 percent. The increase in dollars can be attributed primarily to
increases in advertising expenses and salesperson incentive compensation. The
increased sales volume during fiscal 2002 contributed to the decrease in
percentage.
General and administrative expenses increased by $5,128,000 to $18,735,000
and to 2.3 percent of net revenues compared to 2.0 percent for fiscal 2001. The
increases in dollars and percentage when comparing the two fiscal year-end
periods were primarily due to increases in employee incentive programs and to a
lesser extent increased legal reserves.
For fiscal 2002, the Company had net financial income of $2,859,000
compared to net financial income of $3,754,000 during fiscal 2001. When
comparing the two fiscal years, the average available cash for investing during
fiscal 2002 was larger than the average available cash during fiscal 2001.
However, the average rate the Company earned on investments was significantly
lower than the average rate earned during the fiscal 2001 period.
The effective income tax rate increased from 26.1 percent in fiscal 2001 to
35.0 percent in fiscal 2002. The primary reason for the increase was due to a
$4.5 million tax benefit recorded in fiscal 2001 in connection with the
expiration of certain tax statutes and a higher provision for state
15
[PHOTO] [PHOTO]
income taxes in 2002.
For fiscal 2001, the Company adopted Staff Accounting Bulletin (SAB) No.
101 issued by the SEC in December 1999. SAB No. 101 set forth the views of the
SEC staff concerning revenue recognition. As a result of SAB No. 101, the
Company began recording revenue upon receipt of products by the Company's
dealers rather than upon shipment by the Company. Adoption of SAB No. 101 during
the 52 weeks ended August 25, 2001 required an adjustment of $1,050,000 to net
income, or $.05 per diluted share, in the Company's first quarter 2001 results,
which is reflected as a cumulative effect adjustment in the fiscal 2001
statement of income.
For the 53 weeks ended August 31, 2002, the Company had net income of
$54,671,000, or $2.68 per diluted share, compared to the 52 weeks ended August
25, 2001 net income of $42,704,000, or $2.03 per diluted share. Net income and
diluted income per share for fiscal 2002 increased 43.1 percent and 47.3
percent, respectively, compared to the prior year proforma results of $38.2
million net income and $1.82 per diluted share, which excludes the $4.5 million
one time tax benefit. The differences in percentages when comparing net income
to net earnings per share were primarily due to a lower number of outstanding
shares of the Company's common stock during the 53 weeks ended August 31, 2002
due to the Company's buyback of 2,412,000 shares during fiscal 2002. (See Note
13 to the Company's 2002 Consolidated Financial Statements.)
FISCAL 2001 COMPARED TO FISCAL 2000
Net revenues for recreation vehicles and other manufactured products were
$671,686,000 for fiscal 2001, a decrease of $72,043,000, or 9.7 percent, from
fiscal 2000. Motor home shipments (Class A and C) during fiscal 2001 were 9,076
units, a decrease of 1,440 units, or 13.7 percent, compared to fiscal 2000. The
percentage decrease in net revenues was less than the percentage decrease in
motor home unit sales because the Company's fiscal 2001 sales, as a percentage
of total unit sales, contained relatively more higher-priced units with slideout
features as well as diesel-powered Class A vehicles. The Company's net revenues
during fiscal 2001 reflected the decline in consumer confidence levels and a
slowdown in the economy. The Company's performance within the RV industry in
fiscal 2001 was a result of the excellent acceptance of its new products, solid
performance of its dealer partners, brand recognition and strong quality
reputation.
Net revenues for dealer financing at WAC were $4,241,000 for fiscal 2001,
an increase of $333,000, or 8.5 percent, from fiscal 2000. Increased revenues
for dealer financing reflected an increase in dealer receivable balances and, to
a lesser extent, an increase in interest rates charged when comparing fiscal
2001 to fiscal 2000.
Cost of manufactured products, as a percent of manufactured product
revenues, was 87.6 percent for fiscal 2001 compared to 86.2 percent for fiscal
2000. The Company's higher costs of manufacturing products during 2001 can be
attributed to lower volume of production and deliveries to dealers.
Selling expenses decreased by $438,000 to $18,285,000 comparing fiscal 2001
to fiscal 2000 but increased as a percentage of net revenues to 2.7 percent from
2.5 percent. The decrease in dollars can be attributed primarily to reductions
in salesperson incentive compensation. Decreased sales volume during fiscal 2001
contributed to the increase in percentage.
General and administrative expenses decreased by $3,515,000 to $13,607,000
and to 2.0 percent of net revenues from 2.3 percent when comparing fiscal 2001
to fiscal 2000. Lower payments for employee incentive programs and reduced
product liability costs were primary reasons for the decreases in both dollars
and percentages.
16
[PHOTO]
For fiscal 2001, the Company had net financial income of $3,754,000
compared to net financial income of $3,338,000 during fiscal 2000. When
comparing the two periods, the increase was due primarily to larger cash
balances available for investing during fiscal 2001.
The effective income tax rate decreased from 34.6 percent in fiscal 2000 to
26.1 percent in fiscal 2001. The primary reason for the decrease in fiscal 2001
was due to the Company recording a $4.5 million tax benefit in connection with
the expiration of certain tax statutes.
For fiscal 2001, the Company had income before cumulative effect of a
change in accounting principle (SAB No. 101) of $43,754,000, or $2.08 per
diluted share. The comparable results for fiscal 2000 was net income of
$48,399,000, or $2.20 per diluted share.
As a result of SAB No. 101, the Company began recording revenue upon the
dealers' receipt of products rather than upon shipment by the Company. Adoption
of SAB No. 101 during fiscal 2001 required an adjustment of $1,050,000 to net
income, or $.05 per diluted share, in the Company's first quarter 2001 results,
which is reflected as a cumulative effect adjustment in the fiscal 2001
statement of income.
For fiscal 2001, the Company had net income of $42,704,000, or $2.03 per
diluted share compared to fiscal 2000 net income of $48,399,000, or $2.20 per
diluted share. Proforma results, excluding the $4.5 million one time tax benefit
for fiscal year 2001, were $38.2 million net income and $1.82 per diluted share.
Net income and earnings per diluted share for the proforma 2001 results
decreased 21.1 percent and 17.3 percent, respectively, compared to fiscal 2000.
The differences in percentages when comparing net income to net earnings per
share was primarily due to a lower number of outstanding shares of the Company's
common stock during the 52 weeks ended August 25, 2001. (See Note 13 to the
Company's 2002 Consolidated Financial Statements.)
ANALYSIS OF FINANCIAL CONDITION,
LIQUIDITY AND RESOURCES
The Company generally meets its working capital, capital equipment and cash
requirements with funds generated from operations.
At August 31, 2002, working capital was $144,995,000, a decrease of
$29,253,000 from the amount at August 25, 2001. Cash provided by operations was
$36,790,000, $81,912,000 and $51,412,000 during fiscal years ended August 31,
2002, August 25, 2001 and August 26, 2000, respectively. Operating cash flows
were provided in fiscal 2002 primarily by income generated from operations. Cash
flows used by investing activities were $11,176,000, $19,717,000 and $25,255,000
in fiscal 2002, 2001 and 2000, respectively. Cash flows used by investing
activities primarily include investments in capital expenditures. Capital
expenditures were $10,997,000 in fiscal 2002, $9,089,000 in fiscal 2001 and
$14,548,000 in fiscal 2000. Net cash used by financing activities was
$85,669,000 in fiscal 2002, $11,358,000 in fiscal 2001 and $22,874,000 in fiscal
2000. Cash used by financing activities in fiscal 2002, 2001 and 2000 was
primarily to repurchase shares of the Company's common stock at a cost of
$86,072,000, $10,686,000 and $19,726,000, respectively. (See Consolidated
Statements of Cash Flows.)
The Company's sources of liquidity consisted principally of cash and cash
equivalents in the amount of $42,225,000 at August 31, 2002 compared to
$102,280,000 at August 25, 2001. (See Consolidated Statements of Cash Flows.)
Principal expected demands at August 31, 2002 on the Company's liquid
assets for fiscal 2003 include capital expenditures of approximately $23,000,000
and approximately $1,800,000 of cash dividends, based on the cash dividend
described in the following sentence. On October 9, 2002, the Board of Directors
declared a cash dividend of $.10 per common
17
[PHOTO]
share payable January 6, 2003 to shareholders of record on December 6, 2002.
Also, on June 19, 2002, the Board of Directors authorized the repurchase of
outstanding shares of the Company's common stock, depending on market
conditions, for an aggregate purchase price of up to $15,000,000. As of October
4, 2002, 119,900 shares had been repurchased for an aggregate consideration of
approximately $4,294,000 under this authorization.
Management currently expects its cash on hand and funds from operations to
be sufficient to cover both short-term and long-term operating requirements.
NEW ACCOUNTING
PRONOUNCEMENTS
On August 27, 2000, the Company adopted 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 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 is reflected as a cumulative
effect adjustment in the fiscal 2001 statement of income.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 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 Intangible 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 will adopt
these statements on September 1, 2002, the beginning of the first quarter of the
Company's 2003 fiscal year. Management believes that neither SFAS No. 141 or 142
will affect the Company's consolidated financial statements because it does not
have any acquisitions pending, goodwill or other intangible assets.
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires 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 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.
The Company adopted Emerging Issues Task Force (EITF) Issue No. 01-9,
Accounting for Consideration Given by a Vendor to a Customer or a Reseller of
the Vendor's Products, at the beginning of the third quarter of fiscal 2002.
This guidance was effective for periods beginning after December 15, 2001. EITF
No. 01-9 requires that certain payments to customers for cooperative advertising
and certain sales incentive offers that were historically classified in selling
expense be shown as a reduction in net revenues. The adoption of this new
accounting policy had no impact on previously reported operating income, net
income, or
18
[PHOTO] [PHOTO]
earnings per share.
In July 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES. This standard reviews the accounting for
certain exit costs and disposal activities currently set forth in EITF Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
The principal change of the new statement is that it now requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred versus the date of commitment to an exit plan.
This statement is effective for exit and disposal activities initiated after
December 31, 2002. The Company does not believe adoption of this standard will
significantly affect the Company's financial condition or operating results.
IMPACT OF INFLATION
Historically, the impact of inflation on the Company's operations has not
been significantly detrimental, as the Company has usually been able to adjust
its prices to reflect the inflationary impact on the cost of manufacturing its
products. The inability of the Company to successfully offset increases in
manufacturing costs could have a material adverse effect on the Company's
results of operations.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As of August 31, 2002, the Company had an investment portfolio of fixed
income securities, which are classified as cash and cash equivalents of
$42,225,000, of which $36,084,000 are fixed income investments that are subject
to interest rate risk and a 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.
As of August 31, 2002, the Company had dealer-financing receivables in the
amount of $37,880,000. Interest rates charged on these receivables vary based on
the prime rate.
COMPANY OUTLOOK
Long-term demographics are favorable to the Company, as the target market
of consumers age 50 and older is anticipated to nearly double within the next 30
years. In addition, a 2001 "RV Consumer Demographic Study" conducted by the
University of Michigan for the RV industry, found the age of people interested
in purchasing recreation vehicles is expanding to include younger buyers as well
as older buyers. The study also found an increased interest in owning RVs
generally by a larger percentage of all U.S. households. Order backlog for the
Company's Class A and Class C motor homes was 3,248 orders at August 31, 2002,
1,598 orders at August 25, 2001 and 1,355 orders at August 26, 2000. 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 option of the purchaser at any time without penalty and, therefore, backlog
may not necessarily be a measure of future sales.
19
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS) AUGUST 31, 2002 AUGUST 25, 2001
- -------------------------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 42,225 $102,280
Receivables, less allowance for doubtful accounts 28,616 21,571
($120 and $244, respectively)
Dealer financing receivables, less allowance for doubtful 37,880 40,263
accounts ($96 and $117, respectively)
Inventories 113,654 79,815
Prepaid expenses 4,314 3,604
Deferred income taxes 6,907 6,723
----------------------------
Total current assets 233,596 254,256
----------------------------
Property and equipment, at cost
Land 972 1,029
Buildings 47,953 45,992
Machinery and equipment 86,744 82,182
Transportation equipment 5,641 5,482
----------------------------
141,310 134,685
Less accumulated depreciation 92,383 88,149
----------------------------
Total property and equipment, net 48,927 46,536
----------------------------
Investment in life insurance 23,602 22,223
----------------------------
Deferred income taxes 22,438 21,495
----------------------------
Other assets 8,514 7,412
----------------------------
Total assets $337,077 $351,922
----------------------------
See notes to consolidated financial statements.
20
(DOLLARS IN THOUSANDS) AUGUST 31, 2002 AUGUST 25, 2001
- ----------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, trade $ 44,230 $ 40,678
Income taxes payable 2,610 4,938
Accrued expenses:
Accrued compensation 18,673 13,730
Product warranties 8,151 8,072
Insurance 5,967 4,567
Promotional 4,499 3,181
Other 4,471 4,842
----------------------------
Total current liabilities 88,601 80,008
----------------------------
Postretirement health care and deferred
compensation benefits 68,661 64,450
----------------------------
Contingent liabilities and commitments
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 25,740 22,261
Reinvested earnings 284,856 234,139
----------------------------
323,540 269,343
Less treasury stock, at cost 143,725 61,879
----------------------------
Total stockholders' equity 179,815 207,464
----------------------------
Total liabilities and stockholders' equity $337,077 $351,922
----------------------------
21
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED
AUGUST 31, AUGUST 25, AUGUST 26,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2002(1) 2001 2000
- --------------------------------------------------------------- ------------------ ----------------- -----------------
Revenues
Manufactured products $ 825,269 $ 671,686 $ 743,729
Dealer financing 3,134 4,241 3,908
----------------------------------------------------
Total net revenues 828,403 675,927 747,637
----------------------------------------------------
Costs and expenses
Cost of manufactured products 708,865 588,561 641,138
Selling 19,606 18,285 18,723
General and administrative 18,735 13,607 17,122
----------------------------------------------------
Total costs and expenses 747,206 620,453 676,983
----------------------------------------------------
Operating income 81,197 55,474 70,654
Financial income 2,859 3,754 3,338
----------------------------------------------------
Income before income taxes 84,056 59,228 73,992
Provision for taxes 29,385 15,474 25,593
----------------------------------------------------
Income before cumulative effect of change in
accounting principle 54,671 43,754 48,399
Cumulative effect of change in accounting principle,
net of taxes -- (1,050) --
----------------------------------------------------
Net income $ 54,671 $ 42,704 $ 48,399
----------------------------------------------------
Earnings per common share (basic)
Income before cumulative effect of change in
accounting principle $ 2.74 $ 2.11 $ 2.23
Cumulative effect of change in accounting principle -- (.05) --
----------------------------------------------------
Income per share (basic) $ 2.74 $ 2.06 $ 2.23
----------------------------------------------------
Earnings per common share (diluted)
Income before cumulative effect of change in
accounting principle $ 2.68 $ 2.08 $ 2.20
Cumulative effect of change in accounting principle -- (.05) --
----------------------------------------------------
Income per share (diluted) $ 2.68 $ 2.03 $ 2.20
----------------------------------------------------
Weighted average shares of common stock outstanding
Basic 19,949 20,735 21,680
----------------------------------------------------
Diluted 20,384 21,040 22,011
----------------------------------------------------
See notes to consolidated financial statements.
(1) Year ended August 31, 2002 contained 53 weeks; all other fiscal years
contained 52 weeks.
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
AUGUST 31, AUGUST 25, AUGUST 26,
(IN THOUSANDS) 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 54,671 $ 42,704 $ 48,399
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 7,879 7,380 6,622
(Gain) loss on disposal of property, leases and
other assets (202) 325 350
(Credit) provision for doubtful receivables (46) 34 203
Tax benefit of stock options 3,349 1,209 --
Change in assets and liabilities
(Increase) decrease in receivables and other assets (7,766) 10,956 702
(Increase) decrease in inventories (33,839) 5,892 1,324
Increase in deferred income taxes (1,127) (1,499) (2,674)
Increase (decrease) in accounts payable and
accrued expenses 10,921 13,616 (8,306)
(Decrease) increase in income taxes payable (2,328) (3,852) 180
Increase in postretirement benefits 5,278 5,147 4,612
-----------------------------------------------------
Net cash provided by operating activities 36,790 81,912 51,412
-----------------------------------------------------
Cash flows from investing activities
Purchases of property and equipment (10,997) (9,089) (14,548)
Proceeds from sale of property and equipment 929 338 531
Investments in dealer receivables (114,737) (114,907) (103,125)
Collections of dealer receivables 117,202 107,261 95,061
Investments in other assets (3,573) (3,320) (3,724)
Proceeds from other assets -- -- 550
-----------------------------------------------------
Net cash used in investing activities (11,176) (19,717) (25,255)
-----------------------------------------------------
Cash flows from financing activities and capital transactions
Payments for purchase of common stock (86,072) (10,686) (19,726)
Payments of cash dividends (3,954) (4,121) (4,324)
Proceeds from issuance of common and treasury stock 4,357 3,449 1,176
-----------------------------------------------------
Net cash used in financing activities and capital transactions (85,669) (11,358) (22,874)
-----------------------------------------------------
Net (decrease) increase in cash and cash equivalents (60,055) 50,837 3,283
Cash and cash equivalents at beginning of year 102,280 51,443 48,160
-----------------------------------------------------
Cash and cash equivalents at end of year $ 42,225 $ 102,280 $ 51,443
-----------------------------------------------------
See notes to consolidated financial statements.
23
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
COMMON SHARES ADDITIONAL TREASURY STOCK
(AMOUNTS IN THOUSANDS ----------------------- PAID-IN REINVESTED ------------------------
EXCEPT PER SHARE DATA) NUMBER AMOUNT CAPITAL INCOME NUMBER AMOUNT
- --------------------------------------------------------------------------------------------------------------------------------
Balance, August 28, 1999 25,874 $ 12,937 $ 21,907 $ 151,482 3,575 $ 36,942
Proceeds from the sale of common
stock to employees 4 2 77 -- -- --
Net cost of treasury stock issued for
stock options exercised -- -- (194) -- (66) (729)
Issuance of stock to officers -- -- 204 -- (32) (359)
Payments for purchase of common stock -- -- -- -- 1,127 19,726
Cash dividends on common stock -
$.20 per share -- -- -- (4,325) -- --
Net income -- -- -- 48,399 -- --
----------------------------------------------------------------------------------
Balance, August 26, 2000 25,878 12,939 21,994 195,556 4,604 55,580
Proceeds from the sale of common
stock to employees 8 4 94 -- -- --
Net cost of treasury stock issued for
stock options exercised -- -- (1,069) -- (313) (3,773)
Issuance of stock to officers -- -- 33 -- (51) (614)
Tax benefit due to sale of common
stock to employees -- -- 1,209 -- -- --
Payments for purchase of common stock -- -- -- -- 883 10,686
Cash dividends on common stock -
$.20 per share -- -- -- (4,121) -- --
Net income -- -- -- 42,704 -- --
----------------------------------------------------------------------------------
Balance, August 25, 2001 25,886 12,943 22,261 234,139 5,123 61,879
Proceeds from the sale of common
stock to employees 2 1 49 -- -- --
Net cost of treasury stock issued for
stock options exercised -- -- (453) -- (280) (3,650)
Issuance of stock to officers -- -- 534 -- (45) (576)
Tax benefit due to sale of common
stock to employees -- -- 3,349 -- -- --
Payments for purchase of common stock -- -- -- -- 2,412 86,072
Cash dividends on common stock -
$.20 per share -- -- -- (3,954) -- --
Net income -- -- -- 54,671 -- --
----------------------------------------------------------------------------------
Balance, August 31, 2002 25,888 $ 12,944 $ 25,740 $ 284,856 7,210 $ 143,725
----------------------------------------------------------------------------------
See notes to consolidated financial statements.
24
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REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Winnebago Industries, Inc.
Forest City, Iowa
We have audited the consolidated balance sheets of Winnebago Industries, Inc.
and subsidiaries (the Company) as of August 31, 2002 and August 25, 2001, and
the related consolidated statements of income, cash flows, and changes in
stockholders' equity for each of the three years in the period ended August 31,
2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of August 31, 2002
and August 25, 2001; and the results of its operations and its cash flows for
each of the three years in the period ended August 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
October 4, 2002
25
SELECTED FINANCIAL DATA
AUG. 31, AUG. 25, AUG. 26, AUG. 28,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2002(2) 2001(3) 2000 1999
- ------------------------------------------------------------------------------------------------------
FOR THE YEAR
Net revenues(4) $ 828,403 $ 675,927 $ 747,637 $ 671,653
Income before taxes 84,056 59,228 73,992 66,609
Pretax profit % of revenue 10.1% 8.8% 9.9% 9.9%
Provision for income taxes (credits) $ 29,385 $ 15,474 $ 25,593 $ 22,349
Income tax rate 35.0% 26.1% 34.6% 33.6%
Income from continuing operations $ 54,671 $ 43,754 $ 48,399 $ 44,260
Gain on sale of Cycle-Sat subsidiary -- -- -- --
(Loss) income from discontinued operations -- -- -- --
Cum. effect of change in accounting principle -- (1,050) -- --
----------------------------------------------------
Net income (loss) $ 54,671 $ 42,704 $ 48,399 $ 44,260
Income per share
Continuing operations
Basic $ 2.74 $ 2.11 $ 2.23 $ 1.99
Diluted 2.68 2.08 2.20 1.96
Discontinued operations
Basic -- -- -- --
Diluted -- -- -- --
Cum. effect of change in accounting principle
Basic -- (.05) -- --
Diluted -- (.05) -- --
----------------------------------------------------
Net income per share
Basic $ 2.74 $ 2.06 $ 2.23 $ 1.99
Diluted 2.68 2.03 2.20 1.96
----------------------------------------------------
Weighted average common shares
outstanding (in thousands)
Basic 19,949 20,735 21,680 22,209
Diluted 20,384 21,040 22,011 22,537
----------------------------------------------------
Cash dividends per share $ .20 $ .20 $ .20 $ .20
Book value 9.63 9.99 8.22 6.69
Return on assets (ROA) 15.9% 12.9% 16.3% 17.1%
Return on equity (ROE) 28.2% 22.3% 29.8% 33.3%
Unit Sales
Class A 6,725 5,666 6,819 6,054
Class C 4,329 3,410 3,697 4,222
----------------------------------------------------
Total Class A & C Motor Homes 11,054 9,076 10,516 10,276
Class B Conversions (EuroVan Campers) 763 703 854 600
AT YEAR END
Total assets $ 337,077 $ 351,922 $ 308,686 $ 285,889
Stockholders' equity 179,815 207,464 174,909 149,384
Working capital 144,995 174,248 141,683 123,720
Long-term debt -- -- -- --
Current ratio 2.6 to 1 3.2 to 1 3.0 to 1 2.5 to 1
Number of employees 3,685 3,325 3,300 3,400
(1) Certain prior periods' information has been reclassified to conform to the
current year-end presentation. These reclassifications have no impact on net
income as previously reported.
(2) The fiscal years ended August 31, 2002 and August 31, 1996 contained 53
weeks; all other fiscal years contained 52 weeks.
26
AUG. 29, AUG. 30, AUG. 31, AUG. 26, AUG. 27, AUG. 28,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996(2) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR
Net revenues(4) $ 529,363 $ 437,961 $ 487,545 $ 462,760 $ 436,870 $ 368,255
Income before taxes 35,927 6,992 21,063 20,006 15,264 11,018
Pretax profit % of revenue 6.8% 1.6% 4.3% 4.3% 3.5% 3.0%
Provision for income taxes (credits) $ 11,543 $ 416 $ 6,639 ($7,912) ($1,312) $ (1,087)
Income tax rate 32.1% 5.9% 31.5% (39.5%) (8.6%) (9.9%)
Income from continuing operations $ 24,384 $ 6,576 $ 14,424 $ 27,918 $ 16,576 $ 12,105
Gain on sale of Cycle-Sat subsidiary -- 16,472 -- -- -- --
(Loss) income from discontinued operations -- -- (2,039) (162) 869 (2,827)
Cum. effect of change in accounting principle -- -- -- -- (20,420) --
-------------------------------------------------------------------------------
Net income (loss) $ 24,384 $ 23,048 $ 12,385 $ 27,756 $ (2,975) $ 9,278
Income per share
Continuing operations
Basic $ 1.01 $ .26 $ .57 $ 1.11 $ .66 $ .48
Diluted 1.00 .26 .57 1.10 .65 .48
Discontinued operations
Basic -- .65 (.08) (.01) .03 (.11)
Diluted -- .64 (.08) (.01) .03 (.11)
Cum. effect of change in accounting principle
Basic -- -- -- -- (.81) --
Diluted -- -- -- -- (.80) --
-------------------------------------------------------------------------------
Net income per share
Basic $ 1.01 $ .91 $ .49 $ 1.10 $ (.12) $ .37
Diluted 1.00 .90 .49 1.09 (.12) .37
-------------------------------------------------------------------------------
Weighted average common shares
outstanding (in thousands)
Basic 24,106 25,435 25,349 25,286 25,187 25,042
Diluted 24,314 25,550 25,524 25,462 25,481 25,307
-------------------------------------------------------------------------------
Cash dividends per share $ .20 $ .20 $ .30 $ .30 $ -- $ --
Book value 5.11 4.86 4.15 3.96 3.16 3.26
Return on assets (ROA) 11.0% 10.6% 5.7% 14.1% (1.8%) 6.3%
Return on equity (ROE) 20.3% 20.1% 12.0% 30.8% (3.7%) 12.1%
Unit Sales
Class A 5,381 4,834 5,893 5,993 6,820 6,095
Class C 3,390 2,724 2,857 2,853 1,862 1,998
-------------------------------------------------------------------------------
Total Class A & C Motor Homes 8,771 7,558 8,750 8,846 8,682 8,093
Class B Conversions (EuroVan Campers) 978 1,205 857 1,014 376 --
AT YEAR END
Total assets $ 230,612 $ 213,475 $ 220,596 $ 211,630 $ 181,748 $157,050
Stockholders' equity 116,523 123,882 105,311 100,448 79,710 81,693
Working capital 92,800 99,935 62,155 69,694 58,523 44,669
Long-term debt -- -- 1,692 3,810 2,693 633
Current ratio 2.5 to 1 3.4 to 1 2.0 to 1 2.4 to 1 2.1 to 1 1.9 to 1
Number of employees 3,010 2,830 3,150 3,010 3,150 2,770
(3) Includes a noncash after-tax cumulative effect of change in accounting
principle of $1.1 million expense or $.05 per share due to the adoption of SAB
No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS.
(4) Net revenues for fiscal 2002 required adoption of EITF No. 01-9 ACCOUNTING
FOR CONSIDERATION GIVEN BY A VENDOR FOR A CUSTOMER (INCLUDING A RESELLER OF THE
VENDOR'S PRODUCT) which requires the reduction of net revenues by certain
payments to customers for certain sales incentive offers and fiscal 2001
required adoption of EITF 00-10 related to shipping and handling fees and costs.
27
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES
Winnebago Industries, Inc.'s (the Company) operations are conducted
predominantly in two industry segments: the manufacture and sale of recreation
vehicles and other manufactured products, and floor plan financing for selected
Winnebago, Itasca, Rialta, and Ultimate dealers. The recreation vehicle market
is highly competitive, both as to price and quality of the product. The Company
believes its principal marketing advantages are its brand name recognition, the
quality of its products, its dealer organization, its warranty and service
capability and its marketing techniques. The Company also believes that its
prices are competitive with the competition's units of comparable size and
quality.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
parent company and subsidiary companies. All material intercompany balances and
transactions with subsidiaries have been eliminated.
STATEMENTS OF CASH FLOWS. For purposes of these statements, cash equivalents
primarily consisted of commercial paper, tax-exempt money market preferreds, and
variable rate auction preferred stock with an original maturity of three months
or less. For cash equivalents, the carrying amount is a reasonable estimate of
fair value.
FISCAL PERIOD. The Company follows a 52/53-week fiscal year period. The
financial statements for fiscal 2002 are based on a 53-week period; the others
are on a 52-week basis.
REVENUE RECOGNITION. The Company adopted Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition, as of the beginning of fiscal 2001. This accounting
principle requires the Company to recognize revenue upon delivery of products to
the dealer, which is when title passes, instead of when shipped by the Company.
Interest income from dealer floor plan receivables is recorded on the accrual
basis in accordance with the terms of the loan agreements.
SHIPPING REVENUES AND EXPENSES. Shipping revenues for products shipped are
included within sales, while shipping expenses are included within cost of goods
sold, in accordance with Emerging Issues Task Force (EITF) No. 00-10, Accounting
for Shipping and Handling Fees and Costs.
CONSIDERATIONS GIVEN BY THE COMPANY TO ITS DEALERS. Certain payments to
customers for cooperative advertising and certain sales incentive offers are
shown as a reduction in net revenues, in accordance with EITF No. 01-9,
Accounting for Consideration Given by a Vendor to a Customer or a Reseller of
the Vendor's Products. Cooperative advertising expense and sales incentives were
previously reported as selling expense. Prior period expenses have been
reclassified, which had no effect on previously reported net income.
INVENTORIES. Inventories are valued at the lower of cost or market, with cost
being determined by using the last-in, first-out (LIFO) method and market
defined as net realizable value.
PROPERTY AND EQUIPMENT. Depreciation of property and equipment is computed using
the straight-line method on the cost of the assets, less allowance for salvage
value where appropriate, at rates based upon their estimated service lives as
follows:
ASSET CLASS ASSET LIFE
- --------------------------------------------------------------------------------
Buildings 10-30 yrs.
Machinery and equipment 3-10 yrs.
Transportation equipment 3-6 yrs.
Management periodically reviews the carrying values of long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. In performing the review for
recoverability, management estimates the nondiscounted future cash flows
expected to result from the use of the asset and its eventual disposition.
PROVISION FOR WARRANTY CLAIMS. Estimated warranty costs are provided at the time
of sale of the warranted products. Estimates of future warranty costs are based
on prior experience and known current events.
INCOME TAXES. The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. This Statement
requires recognition of deferred assets and liabilities for the expected future
tax consequences of events that have been
28
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included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the differences between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the years in which the differences are expected to reverse.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. 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 enter into contracts with terms that cannot be designated as normal
purchases or sales.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. The allowance for doubtful accounts is based on
previous loss experience. Additional amounts are provided through charges to
income as management believes necessary after evaluation of receivables and
current economic conditions. Amounts which are considered to be uncollectible
are charged off and recoveries of amounts previously charged off are credited to
the allowance upon recovery.
RESEARCH AND DEVELOPMENT. Research and development expenditures are expensed as
incurred. Development activities generally relate to creating new products and
improving or creating variations of existing products to meet new applications.
During fiscal 2002, 2001 and 2000, the Company spent approximately $3,190,000,
$3,397,000 and $3,374,000, respectively, on research and development activities.
INCOME PER COMMON SHARE. Basic income per common share is computed by dividing
net income by the weighted average common shares outstanding during the period.
Diluted income per common share is computed by dividing net income by the
weighted average common shares outstanding plus the incremental shares that
would have been outstanding upon the assumed exercise of dilutive stock options
(See Note 13).
FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS. All financial instruments are
carried at amounts believed to approximate fair value.
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
RECLASSIFICATIONS. Certain prior year information has been reclassified to
conform to the current year presentation. This reclassification had no affect on
net income or stockholders' equity as previously reported.
NOTE 2: DEALER FINANCING RECEIVABLES
Dealer floor plan receivables are collateralized by recreation vehicles and are
due upon the dealer's sale of the vehicle, with the entire balance generally due
at the end of one year. At August 31, 2002 and August 25, 2001, the Company had
a concentration of credit risks whereby $37,388,000 and $39,243,000,
respectively, of dealer financing receivables were due from one dealer.
NOTE 3: INVENTORIES
Inventories consist of the following:
AUGUST 31, AUGUST 25,
(DOLLARS IN THOUSANDS) 2002 2001
- ----------------------------------------------------
Finished goods $ 48,037 $ 36,930
Work-in-process 26,995 21,725
Raw materials 62,194 44,232
-----------------------
137,226 102,887
LIFO reserve (23,572) (23,072)
-----------------------
$ 113,654 $ 79,815
-----------------------
The above value of inventories, before reduction for the LIFO reserve,
approximates replacement cost at the respective dates.
29
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NOTE 4: NOTES PAYABLE
Short-term lines of credit and related borrowings outstanding at fiscal year-end
are as follows:
AUGUST 31, AUGUST 25,
(DOLLARS IN THOUSANDS) 2002 2001
- ----------------------------------------------------
Available credit lines $ -- $ 20,000
Outstanding -- --
Interest rate -- 4.52%
On October 19, 2000, the Company entered into an unsecured credit agreement with
Wells Fargo Bank Iowa, National Association. The credit agreement provided the
Company with a line of credit of $20,000,000 until January 31, 2002. There were
no outstanding borrowings under the credit agreement during fiscal 2002 or 2001.
The Company did not renew this agreement when it expired on January 31, 2002.
NOTE 5: EMPLOYEE RETIREMENT PLANS
The Company has a qualified profit sharing and contributory 401(k) plan for
eligible employees. The plan provides for contributions by the Company in such
amounts as the Board of Directors may determine. Contributions to the plan in
cash for fiscal 2002, 2001 and 2000 were $2,668,000, $2,283,000 and $2,685,000,
respectively.
The Company also has a nonqualified deferred compensation program which permits
key employees to annually elect (via individual contracts) to defer a portion of
their compensation until their retirement. The retirement benefit to be provided
is based upon the amount of compensation deferred and the age of the individual
at the time of the contracted deferral. An individual generally vests at the
later of age 55 and five years of service since the deferral was made. For
deferrals prior to December 1992, vesting occurs at the later of age 55 and five
years of service from first deferral or 20 years of service. Deferred
compensation expense was $1,642,000, $1,659,000 and $1,645,000, in fiscal 2002,
2001 and 2000, respectively. Total deferred compensation liabilities were
$24,711,000 and $24,646,000 at August 31, 2002 and August 25, 2001,
respectively.
To assist in funding the deferred compensation liability, the Company has
invested in corporate-owned life insurance policies. The cash surrender value of
these policies (net of borrowings of $14,825,000 and $13,637,000 at August 31,
2002 and August 25, 2001, respectively) are presented as assets of the Company
in the accompanying consolidated balance sheets.
The Company provides certain health care and other benefits for retired
employees who have fulfilled eligibility requirements at age 55 with 15 years of
continuous service. Retirees are required to pay a monthly premium for medical
coverage based on years of service at retirement and then current age. The
Company's postretirement health care plan currently is not funded. The status of
the plan is as follows:
AUGUST 31, AUGUST 25,
(DOLLARS IN THOUSANDS) 2002 2001
- ---------------------------------------------------------
Change in benefit obligation
Accumulated benefit
obligation, beginning of
year $ 41,179 $ 36,925
Actuarial loss 6,675 1,225
Interest cost 2,836 2,750
Service cost 2,079 1,955
Net benefits paid (571) (587)
Plan amendment (7,230) (1,089)
-----------------------
Benefit obligation, end of
year $ 44,968 $ 41,179
-----------------------
Funded status
Accumulated benefit
obligation in excess of
plan assets $ 44,968 $ 41,179
Unrecognized cost
Net actuarial loss (9,463) (2,777)
Prior service cost 8,445 1,402
-----------------------
Accrued benefit cost $ 43,950 $ 39,804
-----------------------
The discount rate used in determining the accumulated postretirement benefit
obligation was 6.75 percent at August 31, 2002 and 7.0 percent at August 25,
2001. The average assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligations as of August 31, 2002 was 9.4
percent, decreasing each successive year until it reaches 5.0 percent in 2023
after which it remains constant.
30
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Net postretirement benefit expense for the fiscal years ended August 31, 2002,
August 25, 2001 and August 26, 2000 consisted of the following components:
(DOLLARS IN AUG. 31, AUG. 25, AUG. 26,
THOUSANDS) 2002 2001 2000
- ------------------------------------------------------------
Components of net
periodic benefit
cost
Interest cost $ 2,836 $ 2,750 $ 1,953
Service cost 2,079 1,955 1,714
Net amortization
and deferral (193) (65) (129)
-----------------------------------
Net periodic
benefit cost $ 4,722 $ 4,640 $ 3,538
-----------------------------------
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one percentage point change in assumed
health care cost trend rates would have the following effects:
ONE ONE
PERCENTAGE PERCENTAGE
POINT POINT
(DOLLARS IN THOUSANDS) INCREASE DECREASE
- -----------------------------------------------------
Effect on total of
service and interest
cost components $ 1,401 $ (1,034)
Effect on postretirement
benefit obligation $ 11,369 $ (8,535)
Summary of postretirement health care and deferred compensation benefits at
fiscal year-end are as follows:
(DOLLARS IN AUG. 31, AUG. 25,
THOUSANDS) 2002 2001
- -----------------------------------------------------
Accrued benefit cost $ 43,950 $ 39,804
Deferred compensation
liability 24,711 24,646
----------------------
Total postretirement
health care and
deferred compensation
benefits $ 68,661 $ 64,450
----------------------
NOTE 6: CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for companies in the recreation vehicle industry to
enter into repurchase agreements with lending institutions which have provided
wholesale floor plan financing to dealers. Most dealers are financed on a "floor
plan" basis under which a bank or finance company lends the dealer all, or
substantially all, of the purchase price, collateralized by a lien upon, or
title to, the merchandise purchased. Upon request of a lending institution
financing a dealer's purchases of the Company's products, and after completion
of a credit investigation of the dealer involved, the Company will execute a
repurchase agreement. These agreements provide that, in the event of default by
the dealer on the agreement to pay the lending institution, the Company will
repurchase the financed merchandise. The agreements provide that the Company's
liability will not exceed 100 percent of the dealer invoice and provide for
periodic liability reductions based on the time since the date of the original
invoice. The Company's contingent obligations under these repurchase agreements
are reduced by the proceeds received upon the sale of any repurchased unit. The
Company's contingent liability on all repurchase agreements was approximately
$245,828,000 and $216,784,000 at August 31, 2002 and August 25, 2001,
respectively. The Company's losses under repurchase agreements were
approximately $81,000, $197,000, and $282,000 during fiscal 2002, 2001 and 2000,
respectively.
Included in these contingent liabilities are certain dealer receivables subject
to full recourse to the Company with Bank of America Specialty Group and Conseco
Financing Servicing Group. Contingent liabilities under these recourse
agreements were $1,049,000 and $3,276,000 at August 31, 2002 and August 25,
2001, respectively. The Company did not incur any actual losses under these
recourse agreements during fiscal 2002, 2001 and 2000.
The Company self-insures for a portion of product liability claims.
Self-insurance retention liability varies annually based on market conditions
and for the past five fiscal years was at $2,500,000 per occurrence and
$6,000,000 in aggregate per policy year. Liabilities in excess of these amounts
are the responsibility of the insurer.
The Company and the Winnebago Industries, Inc. Deferred Compensation Plan,
Winnebago Industries, Inc. Deferred
31
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Incentive Formula Bonus Plan and Winnebago Industries, Inc. Deferred
Compensation Plan and Deferred Bonus Plan Trust are Defendants in a purported
class action title Sanft, et al vs. Winnebago Industries, Inc., at al which was
filed in the United States District Court, Northern District of Iowa, Central
Division, on August 30, 2001 and is currently pending. The Complaint alleges a
class consisting of participants in the Winnebago Industries, Inc. Deferred
Compensation Plan and the Winnebago Industries, Inc. Deferred Incentive Formula
Bonus Plan (the "Plans") and alleges 23 separate causes of action including
declaratory and injunctive relief, Federal common law unjust enrichment, breach
of fiduciary duty and violation of ERISA vesting provisions and ERISA funding
requirements. The suit seeks to negate certain amendments made to the Plans in
1994 which reduced the benefits which some participants would receive under the
Plans. This action has not been certified as a class action. The Company
believes that the Defendants have meritorious defenses to class certification
and as to the Plaintiff's substantive claims. The Company is vigorously
defending the lawsuit and will oppose any attempt by the Plaintiffs to have the
case certified as a class action. The case is currently set for trial in June
2004. As of August 31, 2002, the Company has accrued estimated legal fees for
the defense of the case. However, no other amounts have been accrued for the
case because it is not possible at this time to properly assess the risk of an
adverse verdict or the magnitude of possible exposure.
The Company is also involved in other various legal proceedings which are
ordinary routine litigation incident to its business, many of which are covered
in whole or in part by insurance. While it is impossible to estimate with
certainty the ultimate legal and financial liability with respect to this
litigation, management is of the opinion that while the final resolution of any
such litigation may have an impact on the Company's consolidated results for a
particular reporting period, the ultimate disposition of such litigation will
not have any material adverse effect on the Company's financial position,
results of operations or liquidity.
NOTE 7: INCOME TAXES
The components of the provision for income taxes are as follows:
YEAR ENDED
(DOLLARS IN AUG. 31, AUG. 25, AUG. 26,
THOUSANDS) 2002 2001 2000
- -----------------------------------------------------------------------
Current
Federal $ 29,666 $ 16,448 $ 27,162
State 846 524 1,105
-----------------------------------
30,512 16,972 28,267
Deferred -
(principally
federal) (1,127) (1,498) (2,674)
-----------------------------------
Total provision $ 29,385 $ 15,474 $ 25,593
-----------------------------------
The following is a reconciliation of the U.S. statutory tax rate to the
effective income tax rates (benefit) provided:
YEAR ENDED
AUGUST 31, 2002 AUGUST 25, 2001 AUGUST 26, 2000
- ----------------------------------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 1.1 0.6 0.8
Life insurance premiums 0.1 0.1 0.1
Previously unrecorded tax benefits -- (7.7) --
Tax credits (0.1) (0.5) (0.3)
Foreign sales corporation commissions (0.1) (0.2) (0.2)
Cash surrender value (0.5) (0.7) (0.6)
Other (0.5) (0.5) (0.2)
-----------------------------------------------------------------
Total 35.0% 26.1% 34.6%
-----------------------------------------------------------------
32
[PHOTO]
The tax effect of significant items comprising the Company's net deferred tax
assets are as follows:
AUGUST 31, 2002 AUGUST 25, 2001
(DOLLARS IN THOUSANDS) ASSETS LIABILITIES TOTAL TOTAL
------------------------------------------------------------------
Current
Warranty reserves $ 2,847 $ -- $ 2,847 $ 2,825
Self-insurance reserve 1,544 -- 1,544 1,598
Accrued vacation 1,538 -- 1,538 1,404
Miscellaneous reserves 1,594 (616) 978 896
-----------------------------------------------------------------
Subtotal 7,523 (616) 6,907 6,723
-----------------------------------------------------------------
Noncurrent
Postretirement health care benefits 15,382 -- 15,382 13,931
Deferred compensation 10,967 -- 10,967 10,788
Property and equipment -- (3,911) (3,911) (3,224)
-----------------------------------------------------------------
Subtotal 26,349 (3,911) 22,438 21,495
-----------------------------------------------------------------
Total $ 33,872 $(4,527) $29,345 $28,218
-----------------------------------------------------------------
NOTE 8: FINANCIAL INCOME AND EXPENSE
The following is a reconciliation of financial income (expense):
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 31, 2002 AUGUST 25, 2001 AUGUST 26, 2000
- -------------------------------------------------------------------------------------------------
Dividend income $ 2,726 $ 2,488 $ 2,076
Interest income from investments and
receivables 369 1,332 1,478
Gains on foreign currency transactions 62 23 58
Interest expense (298) (89) (274)
-----------------------------------------------------
$ 2,859 $ 3,754 $ 3,338
-----------------------------------------------------
NOTE 9: REPURCHASE OF RELATED PARTY STOCK
In April 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. Mrs. Hanson is also a controlling person in the Company. Mrs.
Hanson is the mother of John V. Hanson, Mary Jo 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), plus interest in the amount of
$245,765. On the date of the share repurchase, the high and low prices of the
Company's common stock on the New York Stock Exchange were $43.70 and $42.35,
respectively. The Company utilized its cash on hand and cash becoming available
from maturing fixed income securities to pay the purchase price of the stock in
three installments with interest at the rate of 4 percent per annum on the
outstanding balance.
33
[PHOTO]
NOTE 10: STOCK OPTION PLANS
The Company's 1987 stock option plan allowed the granting of nonqualified and
incentive stock options to key employees at prices not less than 100 percent of
fair market value, determined by the mean of the high and low prices, on the
date of grant. The plan expired in fiscal 1997; however, exercisable options
representing 35,000 shares remain outstanding at August 31, 2002.
The Company's stock option plan for outside directors provided that each
director who was not a current or former full-time employee of the Company
received an option to purchase 10,000 shares of the Company's common stock at
prices equal to 100 percent of the fair market value, determined by the mean of
the high and low prices on the date of grant. The Board of Directors has
terminated this plan as to future grants. Future grants of options to outside
directors are made under the Company's 1997 stock option plan described as
follows.
The Company's 1997 stock option plan provides additional incentives to those
officers, employees, directors, advisors and consultants of the Company whose
substantial contributions are essential to the continued growth and success of
the Company's business. A total of 2,000,000 shares of the Company's common
stock may be issued or transferred or used as the basis of stock appreciation
rights under the 1997 stock option plan. The plan allows the granting of
nonqualified and incentive stock options as well as stock appreciation rights.
The plan is administered by a committee appointed by the Company's Board of
Directors. The option prices for these shares shall not be less than 85 percent
of the fair market value of a share at the time of option granting for
nonqualified stock options or less than 100 percent for incentive stock options.
The term of each option expires and all rights to purchase shares thereunder
cease ten years after the date such option is granted or on such date prior
thereto as may be fixed by the committee. Options granted under this plan become
exercisable six months after the date the option is granted unless otherwise set
forth in the agreement. Outstanding options granted to employees generally vest
in three equal annual installments provided that all options granted under the
1997 stock option plan shall become vested in full and immediately upon the
occurrence of a change in control of the Company.
A summary of stock option activity for fiscal 2002, 2001 and 2000 is as follows:
2002 2001 2000
WTD. WTD. WTD.
PRICE AVG. PRICE AVG. PRICE AVG.
PER EXERCISE PER EXERCISE PER EXERCISE
SHARES SHARE PRICE/SH SHARES SHARE PRICE/SH SHARES SHARE PRICE/SH
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at
beginning of year 788,168 $7 - $20 $ 12.51 795,514 $4 - $20 $ 10.88 680,176 $4 - $15 $ 8.56
Options granted 165,950 22 - 39 23.13 312,000 12 - 18 12.83 180,800 19 - 20 18.59
Options exercised (279,614) 8 - 19 11.44 (312,944) 4 - 19 8.64 (65,462) 6 - 10 8.15
Options canceled -- -- -- (6,402) 9 - 19 13.84 -- -- --
---------------------------------------------------------------------------------------------------------
Outstanding at
end of year 674,504 $7 - $39 $ 15.57 788,168 $7 - $20 $ 12.51 795,514 $4 - $20 $ 10.88
---------------------------------------------------------------------------------------------------------
Exercisable at
end of year 302,271 $7 - $39 $ 13.89 352,018 $7 - $20 $ 11.33 469,214 $4 - $20 $ 8.40
---------------------------------------------------------------------------------------------------------
34
[PHOTO]
The following table summarizes information about stock options outstanding at
August 31, 2002:
RANGE OF NUMBER WEIGHTED REMAINING WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING AT YEARS OF AVERAGE EXERCISABLE AT AVERAGE
PRICES AUGUST 31, 2002 CONTRACTUAL LIFE EXERCISE PRICE AUGUST 31, 2002 EXERCISE PRICE
- --------------------------------------------------------------------------------------------------------------------
$7.19 - $ 8.88 64,000 4 $ 8.16 64,000 $ 8.16
10.19 - 15.38 318,359 7 11.94 145,026 11.35
18.00 - 19.72 126,195 7 18.55 76,995 18.58
21.62 - 39.48 165,950 9 23.13 16,250 37.00
------------------------------------------------------------------------------------------------
674,504 8 $ 15.57 302,271 $ 13.89
In 1997, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. The Company has elected to continue following the accounting
guidance of Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES for measurement and recognition of stock-based transactions
with employees. No compensation cost has been recognized for options issued
under the stock option plans because the exercise price of all options granted
was not less than 100 percent of fair market value of the common stock on the
date of grant. Had compensation cost for the stock options issued been
determined based on the fair value at the grant date, consistent with provisions
of SFAS No. 123, the Company's 2002, 2001 and 2000 income and income per share
would have been changed to the pro forma amounts indicated as follows:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2002 2001 2000
- -------------------------------------------------------------------------------------------------
Net income
As reported $ 54,671 $ 42,704 $ 48,399
Pro forma 52,881 41,006 47,143
Income per share (basic)
As reported $ 2.74 $ 2.06 $ 2.23
Pro forma 2.65 1.98 2.17
Income per share (diluted)
As reported $ 2.68 $ 2.03 $ 2.20
Pro forma 2.59 1.95 2.14
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
2002 2001 2000
- -------------------------------------------------------------------------------------------------
Dividend yield .87% 1.13% 1.21%
Risk-free interest rate 3.22% 4.55% 6.92%
Expected life 5 years 5 years 5 years
Expected volatility 55.82% 49.92% 49.64%
Estimated fair value of options granted per share $10.08 $5.29 $8.30
35
[PHOTO]
NOTE 11: SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the year for:
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 31, 2002 AUGUST 25, 2001 AUGUST 26, 2000
- --------------------------------------------------------------------------------
Income taxes $ 29,306 $ 18,205 $ 28,305
Interest 246 3 249
NOTE 12: BUSINESS SEGMENT INFORMATION
The Company defines its operations into two business segments: Recreation
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
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. The accounting
policies of the segments are the same as those described in the Summary of
Significant Accounting Policies (Note 1). 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. Intersegment sales and expenses are not
significant.
For the years ended August 31, 2002, August 25, 2001 and August 26, 2000, the
Company's segment information is as follows:
RECREATION
VEHICLES & OTHER
MANUFACTURED DEALER GENERAL
(DOLLARS IN THOUSANDS) PRODUCTS FINANCING CORPORATE TOTAL
- -----------------------------------------------------------------------------------------
2002 (53 WEEKS)
Net revenues $825,269 $ 3,134 $ -- $828,403
Operating income 79,299 1,224 674 81,197
Identifiable assets 223,792 38,138 75,147 337,077
Depreciation and amortization 7,664 3 212 7,879
Capital expenditures 10,889 20 88 10,997
2001
Net revenues $671,686 $ 4,241 $ -- $675,927
Operating income 52,120 1,275 2,079 55,474
Identifiable assets 176,731 40,856 134,335 351,922
Depreciation and amortization 7,158 5 217 7,380
Capital expenditures 8,974 19 96 9,089
2000
Net revenues $743,729 $ 3,908 $ -- $747,637
Operating income 67,252 1,152 2,250 70,654
Identifiable assets 191,501 33,508 83,677 308,686
Depreciation and amortization 6,375 4 243 6,622
Capital expenditures 14,412 -- 136 14,548
36
[PHOTO]
NET REVENUES BY MAJOR PRODUCT CLASS
FISCAL YEAR ENDED(1)(2)
AUGUST 31, AUGUST 25, AUGUST 26, AUGUST 28, AUGUST 29,
(DOLLARS IN THOUSANDS) 2002 2001 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Motor homes (Class A & C) $ 773,125 $ 624,110 $ 690,022 $ 613,813 $ 470,932
93.3% 92.4% 92.3% 91.4% 89.0%
Other recreation vehicle revenues(3) 20,486 17,808 18,813 16,620 19,222
2.5% 2.6% 2.5% 2.5% 3.6%
Other manufactured products revenues(4) 31,658 29,768 34,894 38,225 37,133
3.8% 4.4% 4.7% 5.7% 7.0%
-------------------------------------------------------------------
Total manufactured products revenues 825,269 671,686 743,729 668,658 527,287
99.6% 99.4% 99.5% 99.6% 99.6%
Finance revenues(5) 3,134 4,241 3,908 2,995 2,076
.4% .6% .5% .4% .4%
-------------------------------------------------------------------
Total net revenues $ 828,403 $ 675,927 $ 747,637 $ 671,653 $ 529,363
100.0% 100.0% 100.0% 100.0% 100.0%
(1) Certain prior periods' information has been reclassified to conform to the
current year-end presentation. These reclassifications have no impact on net
income as previously reported.
(2) The fiscal year ended August 31, 2002 contained 53 weeks; all other fiscal
years contained 52 weeks.
(3) Primarily recreation vehicle related parts, EuroVan Campers (Class B motor
homes), and recreation vehicle service revenue.
(4) Primarily sales of extruded aluminum, commercial vehicles, and component
products for other manufacturers.
(5) WAC revenues from dealer financing.
NOTE 13: INCOME PER SHARE
The following table reflects the calculation of basic and diluted income per
share for the past three fiscal years:
(IN THOUSANDS, EXCEPT PER SHARE DATA) AUGUST 31, 2002(1) AUGUST 25, 2001 AUGUST 26, 2000
- ---------------------------------------------------------------------------------------------------------
Income per share - basic
Net income $54,671 $42,704 $48,399
------- ------- -------
Weighted average shares outstanding 19,949 20,735 21,680
------- ------- -------
Net income per share - basic $ 2.74 $ 2.06 $ 2.23
------- ------- -------
Income per share - assuming dilution
Net income $54,671 $42,704 $48,399
------- ------- -------
Weighted average shares outstanding 19,949 20,735 21,680
Dilutive impact of options outstanding 435 305 331
------- ------- -------
Weighted average shares and potential
dilutive shares outstanding 20,384 21,040 22,011
------- ------- -------
Net income per share - assuming dilution $ 2.68 $ 2.03 $ 2.20
------- ------- -------
(1) Fiscal year ended August 31, 2002 contained 53 weeks; all other fiscal years
contained 52 weeks.
37
[PHOTO]
NOTE 14: PREFERRED STOCK AND SHAREHOLDERS RIGHTS PLAN
The Board of Directors may authorize the issuance from time to time of preferred
stock in one or more series with such designations, preferences, qualifications,
limitations, restrictions, and optional or other special rights as the Board may
fix by resolution. In connection with the Rights Plan discussed below, the Board
of Directors has reserved, but not issued, 300,000 shares of preferred stock.
In May 2000, the Company adopted a shareholder rights plan providing for a
dividend distribution of one preferred share purchase right for each share of
common stock outstanding on and after May 26, 2000. The rights can be exercised
only if an individual or group acquires or announces a tender offer for 15
percent or more of the Company's common stock. Certain members of the Hanson
family (including trusts and estates established by such Hanson family members
and the John K. and Luise V. Hanson Foundation) are exempt from the
applicability of the Rights Plan as it relates to the acquisition of 15 percent
or more of the Company's outstanding common stock. If the rights first become
exercisable as a result of an announced tender offer, each right would entitle
the holder (other than the individual or group acquiring or announcing a tender
offer for 15 percent or more of the Company's common stock) to buy 1/100 of a
share of a new series of preferred stock at an exercise price of $67.25. The
preferred shares will be entitled to 100 times the per share dividend payable on
the Company's common stock and to 100 votes on all matters submitted to a vote
of the shareowners. Once an individual or group acquires 15 percent or more of
the Company's common stock, each right held by such individual or group becomes
void and the remaining rights will then entitle the holder to purchase the
number of common shares having a market value of twice the exercise price of the
right. In the event the Company is acquired in a merger or 50 percent or more of
its consolidated assets or earnings power are sold, each right will then entitle
the holder to purchase a number of the acquiring company's common shares having
a market value of twice the exercise price of the right. After an individual or
group acquires 15 percent of the Company's common stock and before they acquire
50 percent, the Company's Board of Directors may exchange the rights in whole or
in part, at an exchange ratio of one share of common stock per right. Before an
individual or group acquires 15 percent of the Company's common stock, the
rights are redeemable for $.01 per right at the option of the Company's Board of
Directors. The Company's Board of Directors is authorized to reduce the 15
percent threshold to no less than 10 percent. Each right will expire on May 3,
2010, unless earlier redeemed by the Company.
38
COMMON STOCK DATA
The Company's common stock is listed on the New York, Chicago and Pacific Stock
Exchanges.
Ticker symbol: WGO
Shareholders of record as of November 12, 2002: 4,922
Below are the New York Stock Exchange high, low and closing prices of Winnebago
Industries, Inc. stock for each quarter of fiscal 2002 and fiscal 2001.
FISCAL 2002 HIGH LOW CLOSE FISCAL 2001 HIGH LOW CLOSE
- --------------------------------------------------------------------------------------------------------------------
First Quarter $33.70 $17.30 $33.70 First Quarter $13.63 $10.75 $11.50
Second Quarter 48.85 32.39 47.45 Second Quarter 19.00 11.56 17.10
Third Quarter 51.43 39.35 44.40 Third Quarter 19.60 15.60 18.77
Fourth Quarter 48.60 31.85 38.19 Fourth Quarter 30.75 18.44 28.02
CASH DIVIDENDS PER SHARE
FISCAL 2002 FISCAL 2001
- --------------------------------------------------------------------------------
AMOUNT DATE PAID AMOUNT DATE PAID
- ------ --------- ------ ---------
$ .10 January 7, 2002 $ .10 January 8, 2001
.10 July 8, 2002 .10 July 9, 2001
INTERIM FINANCIAL INFORMATION (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED
DECEMBER 1, MARCH 2, JUNE 1, AUGUST 31,
FISCAL 2002 2001 2002 2002 2002
- ----------------------------------------------------------------------------------------------------------
Net revenues $177,802 $183,055 $246,636 $220,910
Gross profit 24,232 22,938 37,255 35,113
Operating income 15,311 13,414 27,289 25,183
Net income 10,710 9,448 18,094 16,419
Net income per share (basic) .52 .46 .93 .88
Net income per share (diluted) .51 .45 .90 .86
Quarter ended December 1, 2001 contained 14 weeks.
QUARTER ENDED
NOVEMBER 25, FEBRUARY 24, MAY 26, AUGUST 25,
FISCAL 2001 2000 2001 2001 2001
- ----------------------------------------------------------------------------------------------------------
Net revenues $162,702 $141,308 $195,605 $176,312
Gross profit 20,782 15,779 26,182 24,623
Operating income 13,380 8,550 18,098 15,446
Net income 8,546 6,184 12,444 15,530
Net income per share (basic) .40 .30 .61 .75
Net income per share (diluted) .40 .30 .60 .74
Quarter ended November 25, 2000 contains an adjustment of $1,050,000 for the
cumulative effect of a change in accounting principle, net of taxes.
During the quarter ended August 25, 2001, the Company recorded a $4.5 million
tax benefit in connection with the expiration of certain tax statutes.
Certain prior periods' information has been reclassified to conform to the
current year end presentation. This reclassification has no impact on net income
as previously reported.
39
SHAREHOLDER INFORMATION
PUBLICATIONS
A notice of Annual Meeting of Shareholders and Proxy Statement is furnished to
shareholders in advance of the annual meeting.
Copies of the Company's quarterly financial news releases and the annual report
on Form 10-K (without exhibits), required to be filed by the Company with the
Securities and Exchange Commission, may be obtained without charge from the
corporate offices as follows:
Sheila Davis, PR/IR Manager
Winnebago Industries, Inc.
605 W. Crystal Lake Road
P.O. Box 152
Forest City, Iowa 50436-0152
Telephone: (641) 585-3535
Fax: (641) 585-6966
E-Mail: ir@winnebagoind.com
This annual report as well as corporate news releases may also be viewed online
in the Investor Relations section of Winnebago Industries website:
http://www.winnebagoind.com
SHAREHOLDER ACCOUNT ASSISTANCE
Transfer Agent to contact for address changes, account certificates and stock
holdings:
Wells Fargo Bank Minnesota, N.A.
P.O. Box 64854
St. Paul, Minnesota 55164-0854
or
161 North Concord Exchange
South St. Paul, Minnesota 55075-1139
Telephone: (800) 468-9716 or
(651) 450-4064
Inquirees: www.wellsfargo.com/com/shareowner_services
ANNUAL MEETING
The Annual Meeting of Shareholders is scheduled to be held on Tuesday, January
14, 2003, at 7:30 p.m. (CST) in Friendship Hall, Highway 69 South, Forest City,
Iowa.
AUDITOR
Deloitte & Touche LLP
400 One Financial Plaza
120 South Sixth Street
Minneapolis, Minnesota 55402-1844
PURCHASE OF COMMON STOCK
Winnebago Industries stock may be purchased from Netstock through the Company's
website at http://www.winnebagoind.com/investor_relations.htm. Winnebago
Industries is not affiliated with Netstock and has no involvement in the
relationship between Netstock and any of its customers.
40
DIRECTORS AND OFFICERS
DIRECTORS
BRUCE D. HERTZKE (51) JOSEPH W. ENGLAND (62) RICHARD C. SCOTT (68)
Chairman of the Board, Chief Executive Former Senior Vice President Vice President, University Development
Officer and President Deere and Company Baylor University
Winnebago Industries, Inc.
JOHN V. HANSON (60) FREDERICK M. ZIMMERMAN (66)
GERALD E. BOMAN (67) Former Deputy Chairman of the Board Professor of Manufacturing Systems Engineering
Former Senior Vice President Winnebago Industries, Inc. The University of St. Thomas
Winnebago Industries, Inc.
GERALD C. KITCH (64) LUISE V. HANSON (89)
JERRY N. CURRIE (57) Former Executive Vice President Director Emeritus
President and Chief Executive Officer Pentair, Inc.
CURRIES Company and GRAHAM Manufacturing
OFFICERS
[PHOTO] [PHOTO] [PHOTO]
Bruce D. Hertzke (51) Robert L. Gossett (51) William O'Leary (53)
Chairman of the Board, Chief Executive Vice President, Administration Vice President, Product Development
Officer and President
[PHOTO] [PHOTO]
[PHOTO] Brian J. Hrubes (51) Robert J. Olson (51)
Edwin F. Barker (55) Controller Vice President, Manufacturing
Vice President, Chief Financial Officer
[PHOTO] [PHOTO]
[PHOTO] James P. Jaskoviak (50) Joseph L. Soczek, Jr. (59)
Raymond M. Beebe (60) Vice President, Sales and Marketing Treasurer
Vice President, General Counsel and
Secretary