EXHIBIT 13
2004 Annual Report
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[WINNEBAGO LOGO]
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TABLE OF CONTENTS
Mission Statement .........................................................1
Report to Shareholders ....................................................2
Operations Review .........................................................6
Motor Home Product Classification ........................................13
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ..............................................14
Consolidated Balance Sheets ..............................................22
Consolidated Statements of Income ........................................24
Consolidated Statements of Cash Flows ....................................25
Consolidated Statements of Changes
in Stockholders' Equity ................................................26
Notes to Consolidated Financial Statements ...............................27
Report of Independent Registered Public
Accounting Firm ........................................................36
Interim Financial Information ............................................37
11-Year Selected Financial Data ..........................................38
Shareholder Information ..................................................40
Common Stock Data ........................................................40
Cash Dividends Paid Per Share ............................................40
Directors and Officers ....................................Inside Back Cover
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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 (RV) 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) and Rialta(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 28, 2004, the motor home dealer organization in the U.S. and Canada
included approximately 310 dealer locations. Motor home sales by Winnebago
Industries represented at least 92 percent of its revenues in each of the past
five fiscal years. 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)
(Adjusted for 2-for-1 stock split - March 5, 2004)
2004 TO 2003
FISCAL 2004 FISCAL 2003 % CHANGE
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Net Revenues $ 1,114,154 $ 845,210 32%
Gross Profit $ 162,169 $ 113,378 43%
Operating Income $ 110,798 $ 77,294 43%
Net Income $ 70,641 $ 49,884 42%
Diluted Income Per Share $ 2.03 $ 1.33 53%
Diluted Weighted Average Outstanding Shares 34,789 37,636 (8)%
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.
[GRAPH]
NET REVENUES
(Dollars in Millions)
$436.5 $527.3 $668.7 $743.7 $671.7 $825.3 $845.2 $1,114.2
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1997 1998 1999 2000 2001 2002 2003 2004
[GRAPH]
NET INCOME
PER DILUTED SHARE
(Dollars)
$0.45 $0.50 $0.98 $1.10 $1.02 $1.34 $1.33 $2.03
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1997 1998 1999 2000 2001 2002 2003 2004
1
[PHOTO]
TO OUR FELLOW SHAREHOLDERS:
By all measures, fiscal 2004 was a year in which we surpassed all of Winnebago
Industries' previous financial records.
Revenues for fiscal 2004 were a record $1.1 billion, a 32 percent
increase compared to $845.2 million for the previous fiscal year. This was the
first time in the Company's history that revenues surpassed the significant
billion dollar mark.
Net income for fiscal 2004 was a record $70.6 million, a 42 percent
increase compared to $49.9 million for fiscal 2003. On a diluted per share
basis, the Company earned a record $2.03 a share, a 53 percent increase compared
to $1.33 a share for fiscal 2003. Included in fiscal 2003 net income was $1.2
million from discontinued operations, or three cents a share.
LONG-TERM GROWTH TRENDS
Even while surpassing these records, we believe the best is yet to
come. The long-term outlook for motor home sales continues to be favorable. The
current demographic trends should drive growth going forward, due pri-
[GRAPH]
PEOPLE OVER
THE AGE OF 55
(Population in Millions)
55.9 65.8 74.8 85.2 94.9 105.7
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1997 2005 2010 2015 2020 2030
marily to the graying of America. While we have discussed this trend many times,
it certainly bears repeating. Over 80 percent of our retail customers are over
age 50. And according to 2004 information from the U.S. Census Bureau, over
350,000 people turn age 50 in the United States each month. That's an additional
four million potential customers each year. This trend should drive growth of
the RV industry for the next three decades.
[GRAPH]
CONSUMER DEMOGRAPHIC PROFILE
UNIVERSITY OF MICHIGAN
(Broadening of the Motor Home Market with more younger and older buyers)
0.3% 1.5% 2.2% 4.1% 4.1% 1.9%
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15-34 35-44 45-54 55-64 65-74 75 +
According to the 2001 University of Michigan "RV Consumer Demographic
Profile," a study of the RV consumer, the age at which the motor home consumer
is purchasing motor homes is also broadening. For instance, the study shows that
motor home buyers are entering the market earlier than in the past, younger than
35 years old. At the same time, there is also growth in the market of people
over the age of 65.
MARKET SHARE GROWTH
In addition to these growth trends for the RV industry, Winnebago
Industries has grown its share of the motor home market, particularly in the
Class A diesel segment of
2
the industry. The successful launch of the 2004 Winnebago Vectra(R), Itasca
Horizon(R) and Meridian(TM), and the redesigned Winnebago Journey(R) in the fall
of 2003, provided significant momentum for our growth in the Class A diesel
market throughout the year. According to Statistical Surveys, Inc., an
independent retail reporting service, Winnebago Industries' Class A diesel
retail market share grew to 14.3 percent calendar year to date through August
2004 compared to 8.9 percent for the same period in calendar 2003.
According to Statistical Surveys, Inc., Winnebago Industries' retail
market share of the total Class A and C motor home market combined leads the
industry at 19.2 percent for calendar year to date through August 2004,
[GRAPH]
RETURN ON EQUITY
(Competitive comparison information obtained
from last 12 months public filings.)
34.3% 22.9% 14.3% 4.9% -6.5% -8.6%
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WGO THO MNC COA NVH FLE
[GRAPH]
RETURN ON ASSETS
(Competitive comparison information obtained
from last 12 months public filings.)
18.3% 15.5% 7.8% 3.5% -1.7% -3.9%
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WGO THO MNC COA FLE NVH
[GRAPH]
RETURN ON INVESTED CAPITAL
(Competitive comparison information obtained
from last 12 months public filings.)
35.4% 31.5% 8.7% 3.4% -2.7% -8.4%
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WGO THO MNC COA FLE NVH
compared to 19.1 percent for the same period in calendar 2003.
Also, in a survey of our dealers this spring, 41 percent indicated that
they were in the planning phases or have recently completed major expansion
projects. We consider that great news for continued growth for Winnebago
Industries.
PROFITABILITY
But while market share is certainly important, we have made a point of
stating for each of the last four years that our primary goal is to be the most
profitable public company in the RV industry. We measure our profitability by
using five guidelines: Return on Assets (ROA), Return on
[GRAPH]
OPERATING INCOME
(Competitive comparison information
obtained from last 12 months public filings.)
(Expressed as a percent of Net Revenues)
9.9% 7.4% 5.0% 2.1% 1.7% -1.9%
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WGO THO MNC COA FLE NVH
[GRAPH]
NET INCOME
(Competitive comparison information
obtained from last 12 months public filings.)
(Expressed as a percent of Net Revenues)
6.3% 4.8% 3.1% 1.6% -0.7% -1.3%
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WGO THO MNC COA FLE NVH
[BAR CHART LEGEND IS COLOR-CODED]
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WINNEBAGO INDUSTRIES, INC.
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THOR INDUSTRIES, INC.
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MONACO COACH CORPORATION
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COACHMEN INDUSTRIES, INC.
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FLEETWOOD ENTERPRISES, INC.
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NATIONAL RV HOLDINGS, INC.
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3
Equity (ROE), Return on Invested Capital (ROIC), Operating Margin as a percent
of sales and Net Profit Margin as a percent of sales; because of their
importance as a means to measure our performance compared to our major
competitors. Winnebago Industries and the other five public motor home
manufacturers used in this analysis accounted for over 70 percent of all Class A
and C motor home sales during the 12 months ended August 2004. The graphs on
page 3 demonstrate that we continue to lead the RV industry in profitability in
all of these measurements.
RETURN PROFITS TO SHAREHOLDERS
We believe it is important to use our profits first for future product
development and the expansion of our business. Beyond that, we believe cash
dividends and repurchasing our common stock are both extremely effective ways to
return profits to our shareholders.
On October 20, 2003, Winnebago Industries repurchased 2,900,000 shares
of stock for $22.06 per share (adjusted for the 2-for-1 stock split on March 5,
2004) from Hanson Capital Partners, LLC, which is owned and controlled by the
family of Company founder John K. Hanson and his wife, Luise. In June 2004, the
Board of Directors also announced the Company's ninth stock repurchase program,
authorizing the purchase of Winnebago Industries' common stock for an aggregate
price of up to $30 million. The Company had repurchased 116,800 shares as of
August 28, 2004 under that authorization for an aggregate price of approximately
$3.4 million.
These nine stock repurchase programs, beginning in December 1997
through August 28, 2004, have resulted in the repurchase of 20.9 million shares
(adjusted for the 2-for-1 stock split) of common stock for an aggregate price of
$251.7 million during that time.
During fiscal 2004, Winnebago Industries repurchased approximately 3.4
million shares of common stock (adjusted for the 2-for-1 stock split) for an
aggregate price of approximately $77.7 million. As of August 28, 2004, there
were approximately 33.6 million shares outstanding.
In addition to the repurchase of the Company's stock, Winnebago
Industries doubled the annual cash dividend in fiscal 2004 by paying five cents
a share (adjusted for the 2-for-1 stock split) to our shareholders on a
quarterly basis, rather than semi-annually. In fiscal 2004, we paid a total of
20 cents a share annually, compared to the previous annual dividend of 10 cents
a share (adjusted for the 2-for-1 stock split). In August 2004, the Board of
Directors increased the dividend by an additional 40 percent by increasing the
quarterly dividend to seven cents a share, which annualized would amount to a
total of 28 cents a share during fiscal 2005.
ECONOMIC GROWTH
In 2004, RV sales continued to benefit from the low interest rate
environment. Interest rates, while rising, remain at relatively low historic
levels. Retail customers financing their motor home purchase recently have been
financing at rates ranging from 5.25 to 6.5 percent, near 40-year lows. Given
that fact, we believe that the slow measured interest rate increases as
indicated by the Federal Reserve Bank will not have an impact on RV sales for
quite some time. We also believe that the recent increase in interest rates is
an indication of a growing economy. Approximately two thirds of our customers
currently finance their motor home purchase. Motor homes also qualify as a
second home for tax purposes if the owner meets the specified criteria.
Another positive economic factor was the rise in con-
[PHOTO]
WINNEBAGO INDUSTRIES' PERSONNEL AT THE GROUND BREAKING CEREMONY FOR THE
COMPANY'S NEW SHIPOUT FACILITY.
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sumer confidence levels, which according to "The Conference Board" were higher
at 92.8 percent in October 2004, compared to 81.7 percent in October 2003.
FACILITY GROWTH
In order to continue to grow with the expanding motor home market, we
completed a state-of-the-art manufacturing facility in Charles City, Iowa in
2003 to build Class C motor homes. Just one year later, this facility operated
at over 80 percent of capacity. This Class C production facility enabled us to
produce additional Class A models in our Forest City facility, which essentially
increased our production capacity for both Class A and Class C motor homes. This
manufacturing facility expansion also contributed to our successful results in
fiscal 2004, which enabled us to provide motor homes to our dealers in a timely
manner.
A recently completed $4.5 million expansion at our Charles City
Hardwoods operation doubled the size of that facility and significantly
increased our hardwood cabinetry capacity. This will allow us to keep up with
the increased demand for solid wood cabinetry in high-end products.
We also broke ground for a new $2.3 million Shipout facility in October
2004. The 49,000 square foot, state-of-the-art facility will include 25
workstations for pre-delivery inspections, as well as a water test booth, an
undercoating bay and an alignment and road test station. Efficiencies will be
accomplished through the consolidation of these operations within the new
facility. The new Shipout facility also provides material flow efficiencies as
it is located near the corridor used for shipping motor homes to our full-body
paint supplier and our drive-away company for final delivery to our dealers.
PROMISING FUTURE
I'd like to thank our entire Winnebago Industries team for their hard
work in making 2004 a record-breaking year. We have a tremendous team of
hard-working individuals who have helped Winnebago Industries achieve these
outstanding results. As a team, we will continue to focus on profitability and
the development of innovative, high quality products.
The future indeed looks promising. We have tremendous growth
opportunities through the graying of America, the broadening of the ages of our
motor home buyers and the growth in uses for our motor homes for active outdoor
and leisure lifestyles. All of these factors promise to create abundant
opportunities for our employees, dealers, suppliers, and for you, our
shareholders.
[PHOTO]
/s/ Bruce D. Hertzke
Bruce D. Hertzke
Chairman of the Board,
Chief Executive Officer and
President
November 10, 2004
5
OPERATIONS REVIEW
RV industry revenues were $9.6 billion in calendar 2003 from the sale of new
RVs. Sixty percent (or $5.8 billion) of these revenues were from motorized RVs
(motor homes) versus other RV products such as towables. Winnebago Industries
has chosen to focus on the motor home segment because of the fact that motor
homes account for the majority of all RV revenues in the United States and
because we believe through product development, there are further growth
opportunities available in this segment.
Winnebago Industries leads the industry in the retail sale of Class A
and C motor homes combined with 19.2 percent market share calendar year to date
through August 2004. The Company has a broad motor home lineup of Winnebago,
Itasca, and Rialta brand motor homes for 2005. Total motor home offerings from
Winnebago Industries increased to 91 innovative models, approximately 35 percent
of which are new for 2005.
[GRAPH]
RV INDUSTRY CLASS A & C
RETAIL MARKET SHARE
(Unit volume as reported by Statistical Surveys, Inc. 2004/Aug.)
19.2% 17.9% 11.6% 11.2% 8.6% 4.4%
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WGO FLE THO MNC COA NVH
CLASS C OFFERINGS
Since 1998, Winnebago Industries has held the largest market share of
any Class C motor home manufacturer. Winnebago Industries continues to have the
best selling Class C models in the industry with market share of 20.3 percent
calendar year to date through August 2004. The lower-profile Winnebago
Aspect(TM) and Itasca Cambria(TM) are brand new entries for 2005. They are easy
to maneuver with a sleek 95-inch width and make towing a breeze with a 5,000-lb.
towing capacity. The Aspect and Cambria feature an aerodynamic front-end design
that complements the clean lines of the Ford(R) cab and stylized rear cap. Both
are offered in two innovative floorplans, the 23D and 26A. The 26A features a
unique U-shaped dinette that readily converts to a large, comfortable bed.
[PHOTO]
2005 WINNEBAGO ASPECT
And speaking of aerodynamic, the Rialta is a unique Class C motor home
built on the fuel-efficient, front-wheel-drive Volkswagen(R) chassis. The Rialta
is available in three floorplans and provides fuel economy and maneuverability
unparalleled within the RV industry.
The affordable Winnebago Minnie(R) and Itasca Spirit(R), Winnebago
Industries' most popular Class C motor homes, both offer a new 26A floorplan
with a front slideout and unique rear trunk, as well as a new dual-slide 27L
floorplan. The Minnie and Spirit lines have expanded to 10
[PHOTO]
2005 WINNEBAGO MINNIE 26A
floorplans each for 2005, ranging from 22- to 32-feet in length.
Winnebago Industries' top-of-the-line Class C motor homes, the
Winnebago Minnie Winnie(R) and Itasca Sundancer(R) each feature three models in
27-, 30- and 31-foot lengths. The Minnie Winnie and Sundancer feature numerous
upgrades for 2005 including stylish exterior designs incorporating more paint
and standard wheel liners.
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[PHOTO]
2005 ITASCA SUNOVA(R)
CLASS A GAS
Winnebago Industries also leads the industry in the retail sale of
Class A gas-powered motor homes with 22.6 percent market share year to date
through August 2004. The affordable Winnebago Sightseer(R) and Itasca Sunova(R)
lines each feature a new 29R dual-slide and a 34A triple-slide floorplan for
2005, now offering six floorplans ranging in length from 27- to 35-feet. The
Sightseer and Sunova feature new front-end styling with composite headlights for
2005 and also have additional high-end features available, such as roof air
conditioning with a heat pump for cold weather, a front 24-inch TV, home theater
sound system with recessed speakers, 300-watt inverter and day/night pleated
shades.
The all-new Voyage(TM) joins the Winnebago lineup for 2005. Offered in
six floorplans, the Voyage includes two triple slides, the 35A and 38J. The 38J
includes two opposing flat-floor StoreMore(R) sliderooms. The Itasca Sunrise(R)
also has new 35A and 38J triple slide floorplans. Both the Voyage and Sunrise
offer six floorplans, ranging from 31- to 38-feet in length.
[PHOTO]
ENTERTAINMENT CENTER
The Winnebago Adventurer(R) is the top selling Class A motor home in
America. The Winnebago Adventurer and Itasca Suncruiser(R), each offer full-body
paint for 2005, moving this high-line diesel feature into the gas-powered motor
home lineup. The Adventurer and Suncruiser each feature seven floorplans ranging
from 33- to 38-feet in length. Two floorplans are new for 2005, the 35A and 38J
triple-slide floorplans, while the 37B dual-slide floorplan has been redesigned.
[PHOTO]
2005 WINNEBAGO ADVENTURER
7
CLASS A DIESEL
The diesel market is the fastest growing segment of the RV industry and
accounted for 44.4 percent of all Class A motor homes sold calendar year to date
through August. During the 2004 model year, Winnebago Industries aggressively
pursued the diesel market through the introduction of the Winnebago Vectra and
Itasca Horizon, as well as the redesigned Winnebago Journey and Itasca Meridian.
The new products were tremendously successful, moving the Company from fourth
place in retail sales with 9.4 percent market share during calendar 2003 to
third place with 14.3 percent market share through August 2004. In addition, the
Winnebago Journey was the best-selling diesel Class A motor home in the industry
calendar year to date through August 2004.
Great values in the marketplace, the Winnebago Journey and the Itasca
Meridian are value-priced diesel-pusher products that each offer five floorplans
ranging from 32- to 39-feet in length. The Journey and Meridian both feature a
new 39F triple-slide floorplan with two opposing flat-floor StoreMore slides in
the front living room.
[PHOTO]
2005 ITASCA HORIZON
The Winnebago Vectra and Itasca Horizon were extremely well accepted
when introduced in 2004. These models are built on the Evolution(TM) Chassis, a
Winnebago Industries exclusive, developed in conjunction with Freightliner(R)
Custom Chassis Corp. This chassis creates a strong, durable platform for the
Vectra and Horizon with more usable storage than in a conventional raised rail
chassis, cross-coach storage on most models, as well as excellent driving
performance and comfort. The Vectra and Horizon are offered in five double,
triple and quad-slide floorplans ranging from 36- to 40-feet in length. New
floorplans for 2005 include the new 36RD and 40FD quad-slide floorplans with two
opposing StoreMore sliderooms that feature a flat-floor design in the front
living area.
The Vectra and Horizon 40AD and 40KD models feature new side-hinged
valance doors for easier access to gear stored under non-StoreMore sliderooms.
Other new features for 2005 include: optional automatic leveling jacks, rear
bedroom deluxe sound system (standard on the Horizon and optional on the
Vectra), totally enclosed slideout room awnings and new drawers with dovetail
joint construction available on the Horizon in exchange for the washer/dryer
option. The 2005 Vectra and Itasca Horizon feature a unique exterior
entertainment center on certain models that offer a flat-screen TV that swivels
for optimum viewing.
NEW WINNEBAGO INDUSTRIES
MOTOR HOME FEATURES
Winnebago Industries not only offers a host of new models for 2005,
there's also a long list of new product features:
o TrueLevel(TM) Holding Tank Monitoring System - incorporates minus
detector cell technology to ensure accurate fresh and wastewater
tank level readings. Minus detector cells are located on the
outside of the tank and produce a microelectrical field that
detects liquid levels. Since liquid does not come in contact with
the sensors, there is no chance of corrosion that may occur with
conventional sensor systems. The TrueLevel system is standard on
all 2005 Winnebago and Itasca motor homes.
o Upgrades to the RV Radio(R) - A steering wheel remote allows you
to easily adjust the radio while driving. A separate handheld
remote provides added convenience when parked.
[PHOTO]
o New flush-mount dual-pane windows are available on most models. o
Child seat tether anchor offered for 2005.
o Additional seat belt locations in many models for 2005 offer
improved seating flexibility when traveling. o SleepNumber(R) Bed
by Select Comfort(R) is now offered with wall-mounted
controllers. A king size with pillowtop mattress is optional on
the Winnebago Vectra and Itasca Horizon 40KD model.
o Full-Body Paint Has Expanded - Now optional on the Winnebago
Adventurer and Itasca Suncruiser and is available on all
Winnebago and Itasca Class A diesel motor homes. Lower valance
paint is also now offered on the Winnebago Minnie and Itasca
Spirit.
[PHOTO]
2005 WINNEBAGO ADVENTURER
8
o Stainless steel appliances and nickel hardware packages are now
available on the Winnebago Adventurer, Journey and Vectra and
standard on the Itasca Suncruiser, Meridian and Horizon. A
stainless steel package is also available on the Itasca Sunrise.
[PHOTO]
o Expanded wood choices available: Honey Cherry and Sierra Maple
added to select product series.
o New legless table design used for all dinettes and optional
dining/computer modules on the Winnebago Vectra and Itasca
Horizon.
o Unique pullout island design has been enhanced with an adjustable
shelf, pullout silverware tray and new latch.
[PHOTO]
2005 WINNEBAGO ADVENTURER 35A
o Winnebago Industries' exclusive Trimline(TM) center console is
standard on all Winnebago and Itasca Class C products in 2005. It
features dual cup holders, a storage tray with coin holders and a
large tip-out storage compartment. Best of all, its sleek design
permits easier access to the living area from the cab and you
won't find it on any other manufacturers' coach.
o Dual fuel fills on all Winnebago and Itasca diesel motor homes.
[PHOTO]
o Entertainment - Some units have as many as three TVs inside. (For
example, the Adventurer/Suncruiser 37B has three flat-screen TVs
available for optimum viewing throughout the coach.) Remote
extenders allow consumers to control the combination DVD/VCR unit
located in the front living area from the bedroom for added
viewing convenience on most Class A models.
QUALITY AND TECHNOLOGY GO HAND IN HAND
Beyond product development, Winnebago Industries' quality and service
are extremely important. Consumers today are expecting an ever higher level of
quality in their products and services. Fortunately, Winnebago Industries had
that figured out long ago. Not only is Winnebago Industries the top-selling
motor home manufacturer in the industry, we believe we are also the leader in
quality.
Winnebago Industries considers the annual Dealer Satisfaction Index
(DSI) survey by the Recreation Vehicle Dealers Association (RVDA) to be a great
measurement tool for not only product quality, but also the quality of our
sales, management, service, warranty and support processes. The DSI survey
results are very important to us because they provide an annual benchmark that
shows how our dealer partners perceive the Company and our products. The Company
received the Quality Circle Award from RVDA as a result of our high scores in
this DSI survey. We have received this award for all eight years of the award's
existence, the only manufacturer to have achieved this distinction.
Winnebago Industries was also pleased to be named the "Most Admired" RV
manufacturer in America according to a poll conducted by RVBUSINESS.com.
According to RVBUSINESS.com, nearly 300 industry professionals, including
dealers, suppliers and other manufacturers, par-
[PHOTO]
CHARLES CITY MOTOR HOME MANUFACTURING FACILITY
9
[PHOTOS]
(picture one)
EXPANSION OF THE CHARLES CITY HARDWOOD FACILITY PROVIDES FOR A BRIGHT, CLEAN
EFFICIENT WORK AREA. THE MACHINE IN THE FOREGROUND AUTOMATICALLY DETERMINES THE
MOST PARTS POSSIBLE FROM A PARTICULAR PIECE OF WOOD, CUTS THOSE PARTS AND SORTS
THE CUT PIECES.
(picture two)
HARDWOOD RAISED PANEL INSERTS ARE CREATED.
(picture three)
WITH THIS MACHINE AN OPERATOR CAN SET UP ONE JOB WHILE THE AUTOMATED ROUTER IS
WORKING ON ANOTHER PROJECT.
ticipated in the mid-August online survey. Winnebago Industries was ranked the
"most admired" by nearly a third of the survey respondents with the next highest
ranked company receiving 15 percent of the vote. Winnebago Industries won the
highest marks according to RVBUSINESS.COM not only for the quality of its units,
but also for the caliber of its aftermarket service and dealer support.
Winnebago Industries is able to deliver high quality motor homes
because of our dedicated work force, as well as our technologically advanced
manufacturing systems. Winnebago Industries has a long history of employing
capital for technological equipment in order to make our manufacturing
operations more efficient and productive, while increasing the quality of the
Company's products.
On March 13, 2003, the first motor home (Winnebago Minnie 24V) rolled
off the assembly in our new Charles City Manufacturing Facility. Recently the
plant was running at over 80 percent of production capacity. With the exception
of the Rialta and some Winnebago Aspect and Itasca Cambria products, this plant
now produces all of the Company's Class C motor homes. This new facility
effectively increased Winnebago Industries' production capacity by approximately
30 percent, enabling the Company to better respond to changes in demand by its
dealers.
During fiscal 2004, Winnebago Industries completed a $4.3 million
Hardwoods Facility expansion in Charles City, Iowa, doubling the size of the
facility to 100,000 square feet. The facility was expanded to meet increased
demand for hardwood components in the Company's motor homes. A cabinet frame
finish system was added to the facility, allowing for more efficient staining
and finishing of larger cabinet frame components. In addition to
[PHOTO]
FINN POWER(R) AUTOMOATED METAL SHEAR
hardwood cabinetry and components, a panel lamination area also has been added
to the Charles City Hardwoods Facility, which supplies cabinetry components for
both Class C and Class A manufacturing in Charles City, as well as panels for
some units manufactured in Forest City.
Also during Fiscal 2004, the Company installed a new Finn Power automated
metal shear that performs both metal shearing and punching operations
simultaneously. It automatically loads material, punches, shears, sorts scrap
and conveys completed parts to the operator.
10
Other new equipment includes a new robotic welder, which allows the
operator to position parts to be welded into one fixture while the robot is
welding parts in the second fixture. The net result is higher quality welded
aluminum components that are produced more efficiently. In October 2004,
Winnebago Industries also broke ground for a new $2.3 million Shipout facility.
As mentioned in the Letter to Shareholders earlier in this report, this
49,000-square-foot facility will replace the current Shipout facility and will
feature state-of-the-art equipment. It is also geographically located within the
plant facilities to maximize work flow efficiency.
In addition to Winnebago Industries' recent expansions, the Company's
paint contractor has also greatly expanded to accommodate Winnebago Industries'
increased needs for graphic paint treatments and full-body paint. Since starting
operations in Forest City in 2002, the Company's paint contractor has continued
to expand their Forest City operations, having more than doubled their original
facilities. They also built a new paint facility in Charles City to accommodate
Winnebago Industries' motor homes that require paint treatments there. Their new
50,000-square foot facility in Charles City has been in operation since early
August, while a new "finish" facility is scheduled to be completed in Forest
City before the end of calendar 2004.
In addition to productivity growth through technology, Winnebago
Industries has also experienced an increase in productivity from the
implementation of Lean Manufacturing, a systematic approach of identifying and
eliminating waste (non-value added activities) through continuous organization
and processes improvement. An example of the value of implementing Lean
Manufacturing philosophies, is a value-stream mapping project conducted by our
Purchasing Department for the procurement of exterior graphics that cut
lead-time nearly in half.
SALES AND MARKETING
Winnebago Industries sells its motor homes on a wholesale basis to a
diversified dealer organization located primarily throughout the United States
and Canada. We believe that we can continue to grow our business by providing
what the Company believes to be the most extensive sales support and service
support throughout the RV industry to its dealers and retail customers. This
support is provided through a variety of methods, including hands-on training
and support materials.
Winnebago Industries promotes its products through a vast array of
sales and marketing programs, including advertising and public relations
promotions. Advertising opportunities include a variety of informative ads
placed in RV publications, as well as co-op advertising support for the
Company's dealers, brochures, decor books, television footage, Website support
and direct marketing campaigns
[PHOTOS]
(picture one)
ABOVE: STEVE BRACKEY, SENIOR PRODUCT TRAINER, MAKES A POINT TO SALES
PROFESSIONALS DURING SALES TRAINING SESSION.
(picture two)
AT THE RIGHT: PRODUCT TRAINING MANAGER DICK MILTENBERGER DISCUSSES THE SMART
STORAGE DESIGN USED ON THIS WINNEBAGO INDUSTRIES CLASS C MOTOR HOME.
that are extremely effective at reaching existing RV enthusiasts.
Other marketing opportunities include test drives for automotive,
outdoor and travel writers, as well as for television programs and movies. A
2005 Winnebago Journey is now a featured "star" in a new syndicated daily
television program, titled Pat Croce - Moving In. Winnebago Industries also
continues to utilize promotional opportunities for the Company's products with
TV shows such as The Wheel of Fortune, Jeopardy, The Price is Right, the Late
Show with David Letterman and HGTV's RV 2004. In addition, Winnebago Industries
participates in RVIA
[PHOTO]
11
sponsored tours to promote the RV lifestyle such as the "RV History Tour" with
David Woodworth, a well-known RV historian who used an Itasca Horizon in
calendar 2004 and Brad and Amy Herzog and their two young sons who recently
promoted family RVing while traveling in a Winnebago Adventurer. These
promotional opportunities provide great exposure for Winnebago Industries'
products to a variety of large consumer audiences.
The Winnebago-Itasca Travelers' (WIT) Club also continues to be a great
marketing tool for the Company. Caravans, rallies and tours are held frequently
throughout the year to provide WIT Club members with a way to use their motor
homes, remain active and keep in touch with their club-member friends. Active
involvement in the WIT Club has also resulted in increased owner loyalty.
[PHOTOS]
(picture one)
BRAD AND AMY HERZOG FAMILY>
(picture two)
DAVID WOODWORTH
(picture three)
2004 WIT GRAND NATIONAL RALLY.
12
MOTOR HOME PRODUCT CLASSIFICATION
[ARTWORK]
CLASS A MOTOR HOMES
These are conventional motor homes constructed directly on medium and heavy-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, Voyage, Adventurer, Journey and Vectra; Itasca Sunova, Sunrise,
Suncruiser, Meridian and Horizon. The Company manufactures Class A motor homes
with gas, diesel and diesel pusher offerings. A diesel pusher is a motor home
with a diesel engine in the rear of the unit.
[ARTWORK]
CLASS C MOTOR HOMES
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 Aspect, Minnie
and Minnie Winnie; Itasca Cambria, Spirit and Sundancer; and Rialta.
[WINNEBAGO LOGO]
WINNEBAGO INDUSTRIES
MOTOR HOME FAMILY TREE
Winnebago Industries manufactures two brands of Class A and
three brands of Class C motor homes. Listed below are the brand names
and model designations of the Company's 2005 product line.
[WINNEBAGO LOGO] [ITASCA LOGO] [RIALTO LOGO]
- Aspect - Cambria - Rialta
- Minnie - Spirit
- Minnie Winnie - Sundancer
- Sightseer - Sunova
- Voyage - Sunrise
- Adventurer - Suncruiser
- Journey* - Meridian*
- Vectra* - Horizon*
*Diesel
13
[PHOTO]
MINNIE
- ------
SPIRIT
------
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" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended,
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 and other key component parts, sales order cancellations, slower than
anticipated sales of new or existing products, new product introductions by
competitors, 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.
REVENUE. Generally, revenues for motor homes are recorded when all of the
following conditions are met: an order for a product has been received from a
dealer; written or verbal approval for payment has been received from the
dealer's floorplan financing institution; and the product is delivered to the
dealer who placed the order. Sales are generally made to dealers who finance
their purchases under floorplan financing arrangements with banks or finance
companies.
Revenues for the Company's original equipment manufacturing (OEM) components and
recreation vehicle related parts are recorded as the products are shipped from
the Company's location. The title of ownership transfers on these products as
they leave the Company's location due to the freight terms of F.O.B. - Forest
City, Iowa.
WARRANTY. The Company offers with the purchase of any new Winnebago or Itasca
motor home, a comprehensive 12-month/15,000-mile warranty and a
3-year/36,000-mile warranty on sidewalls, floors, and slideout room assemblies.
The Rialta has a 2-year/24,000-mile warranty. Estimated costs related to product
warranty are accrued at the time of sale and included in cost of sales.
Estimates of future warranty costs are based upon past warranty claims and unit
sales history and adjusted as required to reflect actual costs incurred, as
information becomes available. An increase in dealership labor rates, the cost
of parts or the frequency of claims could have an adverse impact on our
operating results for the period or periods in which such claims or additional
costs materialize. In addition to the costs associated with the contractual
warranty coverage provided on our motor homes, we also incur costs as a result
of additional service actions not covered by our warranties, including product
recalls and customer satisfaction actions. Additional service actions include
costs related to product recalls and other service actions outside the
contractual warranty coverage. The Company estimates the cost of these service
actions using past claim rate experiences and the estimated cost of the repairs.
Estimated costs will be accrued at the time the service action is implemented
and included in cost of sales in the Company's statements of income and as other
accrued expenses in the Company's balance sheet. (See Note 4 to the Company's
2004 Consolidated Financial Statements.)
14
[PHOTO]
ASPECT
- ------
CAMBRIA
-------
REPURCHASE COMMITMENTS. Companies in the recreation vehicle industry enter into
repurchase agreements with lending institutions which have provided wholesale
floorplan financing to dealers. 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 also 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. These repurchase obligations generally expire upon the
earlier to occur of (i) the dealer's sale of the financed unit or (ii) one year
from the date of the original invoice. The Company's ultimate contingent
obligation under these repurchase agreements are reduced by the proceeds
received upon the resale of any repurchased unit. The gross repurchase
obligation will vary depending on the season and the level of dealer
inventories. Past losses under these agreements have not been significant and
lender repurchase obligations have been funded out of working capital. (See Note
6 to the Company's 2004 Consolidated Financial Statements.)
OTHER. The Company has reserves for other loss exposures, such as litigation,
taxes, product liability, worker's compensation, employee medical claims,
inventory and accounts receivable. The Company also has loss exposure on loan
guarantees. 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.
OVERVIEW
Motorized RV revenues represented 60 percent of the RV industry in calendar
2003. For this reason and because we believe there are further growth
opportunities in this segment, Winnebago Industries has continued to focus on
the motorized segment of the RV industry. The continuation of an improved RV
market and positive acceptance of our new motor home products have been
reflected in increased market share and higher production rates resulting in
record earnings in fiscal 2004.
Winnebago Industries manufactures and sells a variety of motor homes throughout
the United States and Canada, as well as retail parts and accessories.
Recreation vehicle classifications are based upon standards established by the
Recreation Vehicle Industry Association or RVIA. The only types of recreation
vehicles that we produce are Class A and Class C motor homes.
Winnebago Industries leads the RV industry in the combined retail sale of Class
A and Class C motor homes with a retail market share of 19.2 percent for
calendar year-to-date through August 2004.
While market share is important, the Company has made a point of stating that
its primary goal is to be the most profitable public company in the RV industry.
The Company measures profitability by using five guidelines: Return on Average
Total Assets (ROA), Return on Average Net Equity (ROE), Return on Average
Invested Capital (ROIC), operating margin as a percent of sales and net profit
margin as a percent of sales. Because of their importance, the Company continues
to use these guidelines as a measure to compare to our major competitors (see
page 3 of the Letter to the Shareholders). The graphs demonstrate that the
Company leads the RV industry in profitability in all of these measurements.
15
[PHOTO]
MINNIE WINNIE
- -------------
SUNDANCER
---------
RESULTS OF OPERATIONS
FISCAL 2004 COMPARED TO FISCAL 2003
The following is an analysis of changes in key items included in the
consolidated statements of income for the 52-week period ended August 28, 2004
compared to the 52-week period ended August 30, 2003.
COMPARISON OF
FIFTY-TWO WEEKS ENDED FIFTY-TWO WEEKS ENDED
AUGUST 28, 2004 TO AUGUST 28, AUGUST 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) AUGUST 30, 2003 2004 2003
-------------------------------------------------------------------------
(ADJUSTED FOR THE 2-FOR-1 STOCK SPLIT ON INCREASE %
MARCH 5, 2004) (DECREASE) CHANGE % OF NET REVENUES
-------------------------------------------------------------------------
Net revenues $ 268,944 31.8% 100.0% 100.0%
Cost of goods sold 220,153 30.1 85.4 86.6
-------------------------------------------------------------------------
Gross profit 48,791 43.0 14.6 13.4
Selling 1,011 5.1 1.9 2.4
General and administrative 14,276 87.4 2.7 1.9
-------------------------------------------------------------------------
Operating income 33,504 43.3 10.0 9.1
Financial income 37 2.6 0.1 0.2
Provision for taxes 11,632 38.8 3.8 3.5
-------------------------------------------------------------------------
Net income before discontinued operations 21,909 45.0 6.3 5.8
Discontinued operations (1,152) (100.0) - - - 0.1
-------------------------------------------------------------------------
Net income $ 20,757 41.6 6.3 5.9
=========================================================================
Diluted earnings per share $ .70 52.6%
====================================
Fully diluted average shares outstanding (2,847) (7.6%)
====================================
Net revenues for the 52 weeks ended August 28, 2004 increased 31.8 percent to
$1.1 billion compared to $845.2 million for the fiscal year ended August 30,
2003. Unit deliveries consisted of the following:
FIFTY-TWO WEEKS ENDED FIFTY-TWO WEEKS ENDED %
AUGUST 28, 2004 AUGUST 30, 2003 INCREASE CHANGE
--------------------------------------------------------------------------------------
Class A motor homes (gas) 5,277 5,152 125 2.4%
Class A motor homes (diesel) 2,831 1,553 1,278 82.3%
Class C motor homes 4,408 4,021 387 9.6%
--------------------------------------------------------------------------------------
Total deliveries 12,516 10,726 1,790 16.7%
--------------------------------------------------------------------------------------
Revenues increased 31.8 percent during the fiscal year ended August 28, 2004,
while unit deliveries increased 16.7 percent. The 82.3 percent increase in
diesel deliveries, traditionally a higher priced unit, as well as the overall
increase in total motor home volume, were the primary reasons for the
differences in the percentage increase in revenues and unit deliveries.
Gross profit as a percentage of net revenues was higher during the 52 weeks
ended August 28, 2004 (14.6 percent) when compared to the comparable period
ended August 30, 2003 (13.4 percent). Favorably impacting gross profit in the
period ended August 28, 2004, was a 20.4 percent increase in production volume
which resulted in improved manufacturing efficiencies and lower fixed costs per
unit of production.
Selling expenses increased 5.1 percent when comparing fiscal 2004 ($20.8
million) to fiscal 2003 ($19.8 million). The increase in dollars can be
attributed primarily to higher incentive payments to the Company's field sales
force. As a percentage of net revenues, selling expenses decreased to 1.9
percent during fiscal 2004 from 2.4 percent during fiscal 2003, caused primarily
by advertising costs.
General and administrative expenses increased 87.4 percent during the 52 weeks
ended August 28, 2004, to $30.6
16
[PHOTO]
SIGHTSEER
- ---------
SUNOVA
------
million, constituting 2.7 percent of net revenues, compared to $16.3 million,
constituting 1.9 percent of net revenues, for the 52 weeks ended August 30,
2003. The increases in percentage and dollars were due primarily to a $7.3
million deferred compensation settlement (See Note 6 to the Company's 2004
Consolidated Financial Statements), an increase of approximately $4.4 million in
management incentive programs and an increase of approximately $1.8 million in
product liability costs.
The overall effective income tax rate decreased to 37.1 percent for fiscal 2004
from 38.1 percent for fiscal 2003. The decrease was primarily due to a decrease
in non- deductible losses in the Winnebago Health Care Management Company.
Net income and earnings per diluted share increased by 41.6 percent and 52.6
percent, respectively, when comparing the 52 weeks ended August 28, 2004 to the
52 weeks ended August 30, 2003. The difference in percentages was primarily due
to a lower number of outstanding shares of the Company's common stock during the
52 weeks ended August 28, 2004, as a result of common stock repurchased by the
Company. (See Consolidated Statements of Changes in Stockholder's Equity on page
26 of the Company's 2004 Consolidated Financial Statements.)
FISCAL 2003 COMPARED TO FISCAL 2002
The following is an analysis of changes in key items included in the
consolidated statements of income for the 52-week period ended August 30, 2003
compared to the 53-week period ended August 31, 2002.
COMPARISON OF
FIFTY-TWO WEEKS ENDED FIFTY-TWO FIFTY-THREE
AUGUST 30, 2003 TO WEEKS ENDED WEEKS ENDED
FIFTY-THREE WEEKS ENDED AUGUST 30, AUGUST 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) AUGUST 31, 2002 2003 2002
--------------------------------------------------------------------------
(ADJUSTED FOR THE 2-FOR-1 STOCK SPLIT ON INCREASE %
MARCH 5, 2004) (DECREASE) CHANGE % OF NET REVENUES
--------------------------------------------------------------------------
Net revenues $ 19,941 2.4% 100.0% 100.0%
Cost of goods sold 22,967 3.2 86.6 85.9
--------------------------------------------------------------------------
Gross profit (3,026) (2.6) 13.4 14.1
Selling 147 0.7 2.4 2.4
General and administrative (2,396) (12.8) 1.9 2.2
--------------------------------------------------------------------------
Operating income (777) (1.0) 9.1 9.5
Financial income (1,854) (57.0) 0.2 0.4
Provision for taxes 1,530 5.4 3.5 3.5
--------------------------------------------------------------------------
Net income before discontinued operations (4,161) (7.9) 5.8 6.4
Discontinued operations (626) (35.2) 0.1 0.2
--------------------------------------------------------------------------
Net income $ (4,787) (8.8) 5.9 6.6
==========================================================================
Diluted earnings per share $ (.01) (0.7%)
==============================
Fully diluted average shares outstanding (3,132) (7.7%)
==============================
Net revenues for the 52 weeks ended August 30, 2003 increased 2.4 percent to
$845.2 million compared to $825.3 million for the 53 weeks ended August 31,
2002. Unit deliveries consisted of the following:
FIFTY-TWO WEEKS ENDED FIFTY-THREE WEEKS ENDED INCREASE %
AUGUST 30, 2003 AUGUST 31, 2002 (DECREASE) CHANGE
--------------------------------------------------------------------------------------
Class A motor homes (gas) 5,152 5,058 94 1.9%
Class A motor homes (diesel) 1,553 1,667 (114) (6.8%)
Class C motor homes 4,021 4,329 (308) (7.1%)
--------------------------------------------------------------------------------------
Total deliveries 10,726 11,054 (328) (3.0%)
--------------------------------------------------------------------------------------
17
[PHOTOS]
VOYAGE
- ------
SUNRISE
-------
Revenues increased 2.4 percent during the fiscal year ended August 30, 2003, but
unit deliveries decreased by 3.0 percent. Revenues increased in fiscal 2003,
despite a decrease in unit deliveries from fiscal 2002 as a result of a higher
average selling price per unit in fiscal 2003.
Gross profit as a percentage of net revenues was lower during the 52 weeks ended
August 30, 2003 (13.4%) when compared to the 53 weeks ended August 31, 2002
(14.1%). The primary reasons for the lower gross profit during fiscal 2003 were
lower production unit volume in relation to fixed manufacturing costs and
start-up costs of the new production facility in Charles City, Iowa.
Selling expenses increased 0.7 percent when comparing the 52 weeks ended August
30, 2003 ($19.8 million) to the 53 weeks ended August 31, 2002 ($19.6 million).
The increase can be attributed primarily to higher advertising costs.
General and administrative expenses decreased 12.8 percent during the 52 weeks
ended August 30, 2003 to $16.3 million from $18.7 million for the 53 weeks ended
August 31, 2002. The dollar decrease when comparing the two periods was
primarily due to decreases of approximately $3.3 million in management bonus
programs offset partially by an increase in legal reserves of approximately
$800,000.
Financial income decreased 57.0 percent during the 52 weeks ended August 30,
2003 to $1.4 million from $3.3 million for the 53 weeks ended August 31, 2002.
The decrease in financial income during fiscal 2003 was due to the average
available cash for investing being lower than the average available cash during
fiscal 2002. Also, the average rate the Company earned on investments during
fiscal 2003 was significantly lower than the average rate earned during fiscal
2002 due to a lower interest rate environment.
The overall effective income tax rate increased to 38.1 percent for fiscal 2003
from 35.0 percent for fiscal 2002. The increase in the effective tax rate was
caused primarily by losses in the Winnebago Health Care Management Company,
which were not deductible for tax purposes due to a change in the Company's tax
planning, increased state taxes and a reduction of tax-exempt financial income
during fiscal 2003.
During fiscal 2003, the Company sold its dealer financing receivables in
Winnebago Acceptance Corporation (WAC) to GE Commercial Distribution Finance
Corporation. With the sale of its WAC receivables, the Company discontinued
dealer financing operations of the WAC subsidiary. Therefore, WAC's operations
were accounted for as discontinued operations in the accompanying consolidated
financial statements. Income from discontinued operations (net of taxes) for the
52 weeks ended August 30, 2003 was $1.2 million or $.03 per diluted share,
compared to income of $1.8 million or $.04 per diluted share, for the 53 weeks
ended August 31, 2002.
Net income and earnings per diluted share decreased by 8.8 percent and 0.7
percent, respectively, when comparing the 52 weeks ended August 30, 2003 to the
53 weeks ended August 31, 2002. The difference in percentages when comparing net
income to net earnings per diluted share was primarily due to a lower number of
outstanding shares of the Company's common stock during the 52-week period ended
August 30, 2003 due to the Company's repurchase of shares during fiscal 2003 and
2002.
ANALYSIS OF FINANCIAL CONDITION,
LIQUIDITY AND RESOURCES
The Company meets its working capital, capital equipment and other cash
requirements with funds generated from operations.
At August 28, 2004, working capital was $164,791,000, a decrease of $100,000
from August 30, 2003's amount of $164,891,000.
18
[PHOTOS]
ADVENTURER
- ----------
SUNCRUISER
----------
Net cash provided by operating activities for the 52 weeks ended August 28, 2004
was $66.7 million compared to $63.0 million for the 52 weeks ended August 30,
2003. The major items affecting cash from operations were as follows:
August 28, August 30,
(In thousands) 2004 2003
- --------------------------------------------------------------------------------
Cash provided by:
Net income $70,641 $48,732
Decrease in raw
material and work
in process inventory 6,322 - - -
Increase in post-
retirement benefits 12,061 4,884
Decrease in finished
goods inventory - - - 11,897
Cash used by:
Increase in finished
goods inventory (22,773) - --
Increase in receivables
and other assets (16,764) (1,825)
Increase in raw material
and work in process
inventory - - - (12,525)
Discontinued operations - - - 234
Other 17,197 11,619
-------------------------------
Total $66,684 $63,016
===============================
Changes in cash flows from operating activities for the year ended August 28,
2004 were due primarily to:
Decreases in raw material and work in process as the Company brought back in
line its chassis inventory.
Increases in postretirement benefits due to the deferred compensation settlement
(see Note 6 to the Company's 2004 Consolidated Financial Statements) and
increases in the 2004 accrued postretirement benefit.
Increased finished goods inventory primarily due to more diesel units in the
Company's closing period inventory count.
Increases in receivables and other assets due to a larger number than usual of
unit deliveries being processed at the end of the last month of fiscal 2004.
Changes in cash flows from operating activities for the year ended August 30,
2003 were due primarily to:
Decreases in finished goods inventory due to more deliveries than production
during the fourth quarter of fiscal 2003.
Increases in raw material and work in process inventory due to the start-up of
the Company's Charles City, Iowa production facility.
The primary uses of cash for investing activities were for capital equipment
requirements of $10.6 million for the 52-week period ended August 28, 2004,
$12.9 million less than the usage of $23.5 million during the 52-week period
ended August 30, 2003. Fiscal 2003 included the completion of the production
assembly facility in Charles City, Iowa.
Primary uses of cash in financing activities for the period ended August 28,
2004 were $77.7 million for the repurchases of the Company's common stock and
payments of $6.9 million in dividends. Primary uses of cash in financing
activities for the period ended August 30, 2003 were $20.2 million for the
Company's common stock repurchases and the $3.7 million payment of dividends.
(See Consolidated Statements of Cash Flows).
On August 28, 2004 the Company's cash and cash equivalents balance was $75.5
million. Estimated demands at August 28, 2004 on the Company's liquid assets for
fiscal 2005 include $11.4 million for capital expenditures, primarily for
production equipment, and $9.4 million for payments of cash dividends. On June
16, 2004, the Board of Directors authorized the repurchase of outstanding shares
of the Company's common stock, depending on market conditions, for an aggregate
of up to $30 million. As of August 28, 2004, 116,800 shares had been repurchased
for an aggregate consideration of approximately $3.4 million 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 operation requirements.
19
[PHOTOS]
JOURNEY
- -------
MERIDIAN
--------
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company's principal contractual obligations and commitments as of August 28,
2004 were as follows:
(IN THOUSANDS) PAYMENTS DUE BY PERIOD
---------------------------------------------------------------------------------------
FISCAL FISCAL MORE THAN
CONTRACTUAL OBLIGATIONS TOTAL FISCAL 2005 2006-2007 2008-2009 5 YEARS
- ----------------------- ---------------------------------------------------------------------------------------
Operating leases (2) $ 1,224 $ 441 $ 675 $ 86 $ 22
Postretirement obligations (1) 13,742 698 1,800 2,333 8,911
---------------------------------------------------------------------------------------
Total contractual cash obligations $ 14,966 $ 1,139 $ 2,475 $ 2,419 $ 8,933
=======================================================================================
(IN THOUSANDS) AMOUNT OF COMMITMENT EXPIRATION BY PERIOD
---------------------------------------------------------------------------------------
FISCAL FISCAL MORE THAN
CONTRACTUAL COMMITMENTS TOTAL FISCAL 2005 2006-2007 2008-2009 5 YEARS
- ----------------------- ---------------------------------------------------------------------------------------
Guarantees (2) $ 695 $ 369 $ 203 $ 123 $ - - -
Repurchase obligations (2) 289 289 - - - - - - - - -
---------------------------------------------------------------------------------------
Total commitments $ 984 $ 658 $ 203 $ 123 $ - - -
---------------------------------------------------------------------------------------
(1) See Note 5 to the Company's 2004 Consolidated Financial Statements.
(2) Amounts represent management's best estimate of the fair value of
guarantees and loss on repurchase obligations. Total for repurchase
obligations were $357,168,000 and financial guarantee obligations were
$1,939,000 at August 28, 2004. See Note 6 to the Company's 2004
Consolidated Financial Statements.
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46 ("FIN 46") "Consolidation of Variable Interest Entities,"
which addresses the reporting and consolidation of variable interest entities as
they relate to a business enterprise. This interpretation incorporates and
supersedes the guidance set forth in Accounting Research Bulletin (ARB) No. 51,
"Consolidated Financial Statements." It requires the consolidation of variable
interest entities into the financial statements of a business enterprise if that
enterprise holds a controlling interest in other means than the traditional
voting majority. The FASB has amended FIN 46, now known as FIN 46 Revised
December 2003 (FIN 46R). The adoption of FIN 46R had no impact on the Company's
financial condition or operating results.
In January 2004, the FASB issued FASB Staff Position (FSP) FAS 106-1, Accounting
and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (Act). The Act introduced a
prescription drug benefit and federal subsidy to sponsors of retiree health care
benefit plans. The Act permits a sponsor of a postretirement health care plan
that provides a prescription drug benefit to make a one-time election to defer
recognition of the effects of the Act in accounting for its retiree healthcare
benefit plans until authoritative guidance on accounting for subsidies provided
by the Act is issued. Statements of Accounting Standards (SFAS) No. 106,
"Employers Accounting for Postretirement Benefits Other Than Pension," requires
enacted changes in relevant laws to be considered in current period measurements
of postretirement benefit costs and accumulated postretirement benefit
obligation. The Company provides prescription drug benefits to certain eligible
retirees and elected the one-time deferral of accounting for the effects of the
Act in the second quarter of 2004.
In May 2004, the FASB issued FSP FAS 106-2 to provide guidance on accounting for
the effects of the Act and supersedes FSP FAS 106-1. This FSP is effective for
the first interim or annual period beginning after June 15, 2004. In addition,
this FSP requires employers to provide certain future disclosures in their
financial statements regarding the effect of the Act and the related subsidy on
postretirement health obligations and net periodic postretirement benefit cost.
The Company's accrued costs and liabilities for these benefits do not reflect
any amount associated with the subsidy because the Company has concluded the
plan is not likely eligible to receive the subsidy due to a plan amendment made
in September 2004.
20
[PHOTOS]
VECTRA
- ------
HORIZON
-------
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
product. In recent months, the costs of a number of raw materials and component
parts utilized in manufacturing the Company's motor homes have increased. While
the Company has been able to pass on these increases, in the event the Company
is unable to continue to do so, these increases or future increases in
manufacturing costs could have a material adverse effect on the Company's
results of operations.
COMPANY OUTLOOK
Long-term growth demographics are favorable for the Company as its target market
of consumers age 50 and older is expected to increase for the next 30 years. In
addition to growth in the target market due to the aging of the baby boom
generation, a study conducted in 2001 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.
Order backlog for the Company's motor homes was as follows:
AUGUST 28, AUGUST 30, INCREASE %
UNITS 2004 2003 (DECREASE) CHANGE
- ----- -------------------------------------------------------------------------
Class A motor homes (gas) 1,187 1,172 15 1.3%
Class A motor homes (diesel) 614 612 2 0.3%
Class C motor homes 740 848 (108) (12.7%)
-------------------------------------------------------------------------
Total backlog 2,541 2,632 (91) (3.5%)
=========================================================================
Total approximate revenue dollars (in thousands) $220,000 $200,000 $20,000 10.0%
=========================================================================
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 an accurate measure of future sales.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of August 28, 2004, the Company had an investment portfolio of short-term
investments, which are classified as cash and cash equivalents of $75.6 million,
of which $68.4 million 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.
CONTROLS AND PROCEDURES
The Company has established disclosure controls and procedures, which are
designed to ensure that information required to be disclosed in reports filed or
submitted under the Securities Exchange Act of 1934 are recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
The Company's Chief Executive Officer and its Chief Financial Officer evaluated
the effectiveness of the Company's disclosure controls, and procedures as of the
end of the period covered by this Annual Report. Based on their evaluation, they
concluded that its disclosure controls and procedures were effective in
achieving the objectives for which they were designed.
Furthermore, there have been no changes in the Company's internal controls over
financial reporting during the fiscal year covered by this Annual Report that
have materially affected, or are reasonably likely to material affect, its
internal control over financial reporting.
21
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS) AUGUST 28, 2004 AUGUST 30, 2003
- ----------------------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 75,545 $ 99,381
Receivables, less allowance for doubtful accounts
($161 and $134, respectively) 46,112 30,885
Inventories 130,733 114,282
Prepaid expenses and other assets 4,814 4,816
Deferred income taxes 12,865 7,925
-------------------------------------------
Total current assets 270,069 257,289
-------------------------------------------
Property and equipment, at cost
Land 1,000 999
Buildings 57,029 55,158
Machinery and equipment 99,511 94,208
Transportation equipment 9,349 9,218
-------------------------------------------
166,889 159,583
Less accumulated depreciation 102,894 96,265
-------------------------------------------
Total property and equipment, net 63,995 63,318
-------------------------------------------
Investment in life insurance 22,863 22,794
-------------------------------------------
Deferred income taxes 25,166 22,491
-------------------------------------------
Other assets 12,463 11,570
-------------------------------------------
Total assets $394,556 $377,462
===========================================
See notes to consolidated financial statements.
22
(DOLLARS IN THOUSANDS) AUGUST 28, 2004 AUGUST 30, 2003
- ----------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, trade $ 46,659 $ 52,239
Income taxes payable 4,334 - - -
Accrued expenses
Accrued compensation 21,217 15,749
Product warranties 13,356 9,755
Self-insurance 6,483 5,087
Promotional 5,885 4,599
Other 7,344 4,969
-------------------------------------------
Total current liabilities 105,278 92,398
-------------------------------------------
Postretirement health care and deferred
compensation benefits 87,403 74,438
-------------------------------------------
Contingent liabilities and commitments
Stockholders' equity
Capital stock common, par value $.50;
authorized 60,000,000 shares, issued
51,776,000 shares and
25,888,000 shares, respectively 25,888 12,944
Additional paid-in capital 14,570 25,969
Reinvested earnings 392,430 331,039
-------------------------------------------
432,888 369,952
Less treasury stock, at cost 231,013 159,326
-------------------------------------------
Total stockholders' equity 201,875 210,626
-------------------------------------------
Total liabilities and stockholders' equity $394,556 $377,462
===========================================
23
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002 (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Net revenues $ 1,114,154 $ 845,210 $ 825,269
Cost of goods sold 951,985 731,832 708,865
----------------------------------------------------------------------------
Gross profit 162,169 113,378 116,404
----------------------------------------------------------------------------
Operating expenses
Selling 20,764 19,753 19,606
General and administrative 30,607 16,331 18,727
----------------------------------------------------------------------------
Total operating expenses 51,371 36,084 38,333
----------------------------------------------------------------------------
Operating income 110,798 77,294 78,071
Financial income 1,436 1,399 3,253
----------------------------------------------------------------------------
Pre-tax income 112,234 78,693 81,324
Provision for taxes 41,593 29,961 28,431
----------------------------------------------------------------------------
Income from continuing operations 70,641 48,732 52,893
Income from discontinued operations
(net of taxes of $619 and $954, respectively) - - - 1,152 1,778
----------------------------------------------------------------------------
Net income $ 70,641 $ 49,884 $ 54,671
----------------------------------------------------------------------------
Income per common share (basic)(2)
From continuing operations $ 2.06 $ 1.32 $ 1.33
From discontinued operations - - - .03 .04
----------------------------------------------------------------------------
Income per share (basic) $ 2.06 $ 1.35 $ 1.37
----------------------------------------------------------------------------
Income per common share (diluted)
From continuing operations $ 2.03 $ 1.30 $ 1.30
From discontinued operations - - - .03 .04
----------------------------------------------------------------------------
Income per share (diluted) $ 2.03 $ 1.33 $ 1.34
----------------------------------------------------------------------------
Weighted average shares of
common stock outstanding(2)
Basic 34,214 36,974 39,898
----------------------------------------------------------------------------
Diluted 34,789 37,636 40,768
----------------------------------------------------------------------------
See notes to consolidated financial statements.
(1) Year ended August 31, 2002 contained 53 weeks; all other fiscal years
contained 52 weeks.
(2) Income per share calculations and weighted average shares outstanding have
been restated to record the effect of the 2-for-1 stock split on March 5,
2004.
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 70,641 $ 49,884 $ 54,671
Income from discontinued operations - - - (1,152) (1,778)
----------------------------------------------------------------------------
Income from continuing operations,
net of cumulative effect 70,641 48,732 52,893
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 9,628 8,786 7,879
Tax benefit of stock options 2,573 1,356 3,349
Loss (gain) on disposal of property, leases
and other assets 584 122 (202)
Provision (credit) for doubtful receivables 73 54 (46)
Change in assets and liabilities
Increase in receivables and other assets (16,764) (1,825) (8,085)
Increase in inventories (16,451) (628) (33,839)
Increase in deferred income taxes (7,615) (1,071) (1,127)
Increase in accounts payable and
accrued expenses 6,195 6,407 10,921
Increase (decrease) in income taxes payable 5,759 (4,035) (2,328)
Increase in postretirement benefits 12,061 4,884 5,278
----------------------------------------------------------------------------
Net cash provided by continuing operations 66,684 62,782 34,693
Net cash provided by discontinued operations - - - 234 319
----------------------------------------------------------------------------
Net cash provided by operating activities 66,684 63,016 35,012
----------------------------------------------------------------------------
Cash flows from investing activities
Purchases of property and equipment (10,588) (23,487) (10,997)
Proceeds from sale of property and equipment 201 190 929
Investments in other assets (579) (2,353) (3,573)
Proceeds from life insurance death benefits 60 931 - - -
----------------------------------------------------------------------------
Net cash used in continuing operations (10,906) (24,719) (13,641)
Net cash provided by discontinued operations - - - 39,288 4,243
----------------------------------------------------------------------------
Net cash (used in) provided by investing activities (10,906) 14,569 (9,398)
----------------------------------------------------------------------------
Cash flows from financing activities
and capital transactions
Payments for purchase of common stock (77,668) (20,221) (86,072)
Payments of cash dividends (6,899) (3,701) (3,954)
Proceeds from issuance of common
and treasury stock 4,953 3,493 4,357
----------------------------------------------------------------------------
Net cash used in financing activities and
capital transactions (79,614) (20,429) (85,669)
----------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (23,836) 57,156 (60,055)
Cash and cash equivalents at beginning of year 99,381 42,225 102,280
----------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 75,545 $ 99,381 $ 42,225
----------------------------------------------------------------------------
See notes to consolidated financial statements.
(1) Year ended August 31, 2002 contained 53 weeks; all other years contained
52 weeks.
25
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL TOTAL
(AMOUNTS IN THOUSANDS COMMON SHARES PAID-IN REINVESTED TREASURY STOCK STOCKHOLDERS'
EXCEPT PER SHARE DATA) NUMBER AMOUNT CAPITAL EARNINGS NUMBER AMOUNT EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, August 25, 2001 25,886 $12,943 $22,261 $234,139 5,123 $61,879 $207,464
Proceeds from the sale of common
stock to employees 2 1 49 - - - - - - - - - 50
Net cost of treasury stock issued
for stock options exercised - - - - - - (453) - - - (280) (3,650) 3,197
Issuance of stock to officers
and directors - - - - - - 534 - - - (45) (576) 1,110
Tax benefit due to sale of common
stock to employees - - - - - - 3,349 - - - - - - - - - 3,349
Payments for purchase of
common stock - - - - - - - - - - - - 2,412 86,072 (86,072)
Cash dividends on common
stock - $.10 per share(1) - - - - - - - - - (3,954) - - - - - - (3,954)
Net income - - - - - - - - - 54,671 - - - - - - 54,671
--------------------------------------------------------------------------------------------
Balance, August 31, 2002 25,888 12,944 25,740 284,856 7,210 143,725 179,815
Net cost of treasury stock issued
for stock options exercised - - - - - - (1,396) - - - (210) (4,277) 2,881
Issuance of stock to officers
and directors - - - - - - 269 - - - (17) (343) 612
Tax benefit due to sale of
common stock to employees - - - - - - 1,356 - - - - - - - - - 1,356
Payments for purchase of
common stock - - - - - - - - - - - - 676 20,221 (20,221)
Cash dividends on common stock -
$.10 per share(1) - - - - - - - - - (3,701) - - - - - - (3,701)
Net income - - - - - - - - - 49,884 - - - - - - 49,884
--------------------------------------------------------------------------------------------
Balance, August 30, 2003 25,888 12,944 25,969 331,039 7,659 159,326 210,626
Net cost of treasury stock issued
for stock options exercised - - - - - - (1,074) - - - (520) (5,939) 4,865
Issuance of stock to directors - - - - - - 46 - - - (4) (42) 88
Tax benefit due to sale of
common stock to employees - - - - - - 2,573 - - - - - - - - - 2,573
Payments for purchase of
common stock - - - - - - - - - - - - 3,401 77,668 (77,668)
Cash dividends paid and
accrued on common stock -
$.27 per share(1) - - - - - - - - - (9,250) - - - - - - (9,250)
Stock split -
2-for-1 - March 5, 2004 25,888 12,944 (12,944) - - - 7,659 - - - - - -
Net income - - - - - - - - - 70,641 - - - - - - 70,641
--------------------------------------------------------------------------------------------
Balance, August 28, 2004 51,776 $25,888 $14,570 $392,430 18,195 $231,013 $201,875
============================================================================================
(1) Adjusted for 2-for-1 stock split on March 5, 2004.
See notes to consolidated financial statements.
26
[PHOTO]
RIALTA
------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND
SIGNIFICANT ACCOUNTING POLICIES
Winnebago Industries, Inc. (the Company) is the leading U.S. manufacturer of
motor homes, self-contained recreation vehicles used primarily in leisure travel
and outdoor recreation activities. 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.
CASH AND CASH EQUIVALENTS. The Company has a cash management program which
provides for the investment of excess cash balances in short-term fixed type
investments. These consist of money market securities, tax-exempt money market
preferreds, variable rate auction preferred stock and debt instruments with a
maturity of less than 365 days. The Company holds its fixed income investments
on average less than 90 days.
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. Generally, revenues for motor homes are recorded when all
of the following conditions are met: an order for a product has been received
from a dealer; written or verbal approval for payment has been received from the
dealer's floorplan financing institution; and the product is delivered to the
dealer who placed the order. Sales are generally made to dealers who finance
their purchases under floorplan financing arrangements with banks or finance
companies.
Revenues for the Company's original equipment manufacturing (OEM) components and
recreation vehicle related parts are recorded as the products are shipped from
the Company's location. The title of ownership transfers on these products as
they leave the Company's location due to the freight terms of F.O.B. - Forest
City, Iowa.
Certain payments to customers for cooperative advertising and certain sales
incentive offers are shown as a reduction in net revenues, in accordance with
Emerging Issues Task Force (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 to fiscal 2002.
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 EITF No. 00-10, Accounting for Shipping and Handling
Fees and Costs.
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.
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 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
27
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.
LEGAL. The Company's accounting policy regarding litigation expense is to accrue
for the estimated defense costs and for any potential exposure if the Company is
able to assess the risk of an adverse outcome and the possible magnitude
thereof.
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 2004, 2003 and 2002, the Company spent approximately $3,655,000,
$3,464,000 and $3,190,000, respectively, on research and development activities.
STOCK SPLIT. On January 14, 2004, the Board of Directors approved a 2-for-1
stock split of the Company's common stock effective on March 5, 2004 to
shareholders of record on February 20, 2004. The stock split was effected in the
form of a 100 percent stock dividend. Income per share calculations and weighted
average shares outstanding for all the years presented have been restated to
record the effect of the stock split.
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 12 to the Company's 2004 Consolidated Financial Statements.)
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 effect on
net income or stockholders' equity as previously reported.
NEW ACCOUNTING PRONOUNCEMENTS. See page 20 of the Company's 2004 Consolidated
Financial Statements.
ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company adopted SFAS No. 123,
Accounting for Stock-Based Compensation in fiscal 1997. 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 2004, 2003 and
2002 income and income per share would have been changed to the pro forma
amounts indicated as follows:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(ADJUSTMENTS HAVE BEEN RECORDED TO REFLECT THE
2-FOR-1 STOCK SPLIT ON MARCH 5, 2004) 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------
Net income
As reported $ 70,641 $ 49,884 $ 54,671
Pro forma 67,409 47,850 52,881
Income per share (basic)
As reported $ 2.06 $ 1.35 $ 1.37
Pro forma 1.97 1.29 1.33
Income per share (diluted)
As reported $ 2.03 $ 1.33 $ 1.34
Pro forma 1.94 1.27 1.30
28
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:
2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Dividend yield .72% .78% .87%
Risk-free interest rate 2.81% 2.99% 3.22%
Expected life 4 years 4 years 5 years
Expected volatility 48.19 - 48.54% 49.25% 55.82%
Estimated fair value of options granted per share $10.04 $7.12 $5.04
NOTE 2: DISCONTINUED OPERATIONS
On April 24, 2003 the Company sold its dealer financing receivables in Winnebago
Acceptance Corporation (WAC) to GE Commercial Distribution Finance Corporation
for approximately $34 million and recorded no gain or loss as the receivables
were sold at book value. With the sale of its WAC receivables, the Company has
discontinued dealer financing operations of WAC. Therefore, WAC's operations
were accounted for as discontinued operations in the accompanying consolidated
financial statements.
YEAR ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) ---------------------------------------------
(ADJUSTMENTS HAVE BEEN RECORDED TO REFLECT THE 2-FOR-1 AUGUST 30, AUGUST 31,
STOCK SPLIT ON MARCH 5, 2004) 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Winnebago Acceptance Corporation
Net revenues $ 1,940 $ 3,134
---------------------------------------------
Income before income taxes 1,771 2,732
---------------------------------------------
Net income 1,152 1,778
=============================================
Income per share - basic $ .03 $ .04
=============================================
Income per share - diluted $ .03 $ .04
=============================================
Weighted average common shares outstanding
Basic 36,974 39,898
=============================================
Diluted 37,636 40,768
=============================================
NOTE 3: INVENTORIES
Inventories consist of the following:
AUGUST 28, AUGUST 30,
(DOLLARS IN THOUSANDS) 2004 2003
- ---------------------------------------------------------------------------
Finished goods $ 58,913 $ 36,140
Work-in-process 47,337 47,098
Raw materials 51,675 56,382
------------------------------------
157,925 139,620
LIFO reserve (27,192) (25,338)
------------------------------------
$ 130,733 $ 114,282
------------------------------------
The above value of inventories, before reduction for the LIFO reserve,
approximates replacement cost at the respective dates.
NOTE 4: WARRANTY
Winnebago provides its Winnebago and Itasca motor home customers a comprehensive
12-month/15,000-mile warranty, and a 3-year/36,000-mile warranty on sidewalls,
floors, and slideout room assemblies. Rialta motor home customers are provided a
2-year/24,000-mile warranty. The Company records a liability based on its
estimate of the amounts necessary to settle future and existing claims on
products sold as of the balance sheet date. Changes in the Company's product
warranty liability during fiscal years ended August 28, 2004 and August 30, 2003
are as follows:
AUGUST 28, AUGUST 30,
(DOLLARS IN THOUSANDS) 2004 2003
- ---------------------------------------------------------------------------
Balance at beginning of year $ 9,755 $ 8,151
Provision 16,200 13,085
Claims paid (12,599) (11,481)
------------------------------------
Balance at end of year $ 13,356 $ 9,755
====================================
In addition to the costs associated with the contractual warranty coverage
provided on our motor homes, we also incur costs as a result of additional
service actions not covered by our warranties, including product recalls and
customer satisfaction actions. Additional service actions include costs related
to product recalls and other service actions outside the contractual warranty
coverage. The Company estimates the cost of these service actions using past
claim rate experiences and the estimated cost of the repairs. Estimated costs
will be accrued at the time the service action is implemented and included in
cost of sales in the Company's consolidated statements of income and as other
accrued expenses in the Company's consolidated balance sheet.
29
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 2004, 2003 and 2002 were $3,189,000, $2,809,000 and $2,668,000,
respectively.
The Company also has a nonqualified deferred compensation program which
permitted key employees to annually elect (via individual contracts) to defer a
portion of their compensation until their retirement. The plan has been closed
to any additional deferrals since January 2001. 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 $7,669,000, $1,629,000 and $1,642,000 in fiscal 2004,
2003 and 2002, respectively. (See Note 6 to the Company's 2004 Consolidated
Financial Statements regarding the Sanft deferred compensation settlement.)
Total deferred compensation liabilities were $25,702,000 and $19,540,000 at
August 28, 2004 and August 30, 2003, 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 $17,866,000 and $16,498,000 at August 28, 2004 and August 30,
2003, respectively) are presented as assets of the Company in the accompanying
consolidated balance sheets.
In addition, the Company has a non-qualified share option program which permits
participants in the Executive Share Option Plan (the "Plan") to choose to
exchange a portion of their salary or other eligible compensation for options on
selected mutual funds. Total Plan assets are presented as other assets and total
Plan liabilities as postretirement health care and deferred compensation
benefits of the Company in the accompanying consolidated balance sheets. Such
assets on August 28, 2004 and August 30, 2003 were $11,116,000 and $9,700,000,
respectively, and the liabilities were $8,333,000 and $7,050,000, respectively.
The Company provides certain health care and other benefits for retired
employees, hired before April 1, 2001, 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 Company uses a September 1 measurement date
for this plan. The status of the plan is as follows:
AUG. 28, AUG. 30,
(DOLLARS IN THOUSANDS) 2004 2003
- ----------------------------------------------------------------------------
Change in benefit obligation
Accumulated benefit
obligation, beginning of year $58,560 $44,968
Actuarial loss 6,899 9,294
Interest cost 3,787 3,017
Service cost 2,536 1,973
Net benefits paid (874) (692)
Plan amendment (40,414) - - -
-----------------------------
Benefit obligation, end of year $30,494 $58,560
-----------------------------
Funded status
Accumulated benefit
obligation in excess of
plan assets $30,494 $58,560
Unrecognized cost
Net actuarial loss (24,517) (18,423)
Prior service cost 47,391 7,711
-----------------------------
Accrued benefit cost $ 53,368 $ 47,848
-----------------------------
Effective September 2004, the Company amended its postretirement health care
benefit by establishing a maximum employer contribution amount which resulted in
a $40,414,000 reduction of the accumulated postretirement benefit obligation.
This amendment will significantly reduce the net postretirement health care
expense in subsequent fiscal years.
The discount rate used in determining the accumulated postretirement benefit
obligation was 6.0 percent at August 28, 2004 and 6.5 percent at August 30,
2003. The average assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligations as of August 28, 2004 was 9.2
percent, decreasing each successive year until it reaches 4.9 percent in 2013
after which it remains constant.
Net postretirement benefit expense for the fiscal years ended August 28, 2004,
August 30, 2003 and August 31, 2002 consisted of the following components:
(DOLLARS IN AUG. 28, AUG. 30, AUG. 31,
THOUSANDS) 2004 2003 2002
- -------------------------------------------------------------------------------
Components of net
periodic benefit cost
Interest cost $ 3,787 $ 3,017 $ 2,836
Service cost 2,536 1,973 2,079
Net amortization
and deferral 71 (399) (193)
----------------------------------------------
Net periodic
benefit cost $ 6,394 $ 4,591 $ 4,722
----------------------------------------------
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:
30
ONE ONE
PERCENTAGE PERCENTAGE
POINT POINT
(DOLLARS IN THOUSANDS) INCREASE DECREASE
- -------------------------------------------------------------------------------
Effect on total of service
and interest cost
components $ 1,668 $ (1,262)
Effect on postretirement
benefit obligation $ 256 $ (312)
Expected future benefit payments for postretirement health care are as follows:
(DOLLARS IN THOUSANDS)
YEAR ENDED AMOUNT
- --------------------------------------------------------------------------------
2005 $ 698
2006 835
2007 965
2008 1,098
2009 1,235
2010 - 2014 8,911
The expected benefits have been estimated based on the same assumptions used to
measure the Company's benefit obligation as of August 28, 2004 and include
benefits attached to estimated future employee's services.
Summary of postretirement health care and deferred compensation benefits at
fiscal year-end are as follows:
AUGUST 28, AUGUST 30,
(DOLLARS IN THOUSANDS) 2004 2003
- ----------------------------------------------------------------------------
Accrued benefit cost $ 53,368 $ 47,848
Deferred compensation
liability 25,702 19,540
Executive share option
plan liability 8,333 7,050
----------------------------------
Total postretirement health
care and deferred
compensation benefits $ 87,403 $ 74,438
==================================
NOTE 6: CONTINGENT LIABILITIES AND COMMITMENTS
REPURCHASE 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' motor homes 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
security interest in the merchandise purchased. These repurchase 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. These repurchase obligations expire
upon the earlier to occur of (i) the dealer's sale of the financed unit or (ii)
one year from the date of the original invoice. The Company's contingent
obligations under these repurchase agreements are reduced by the proceeds
received upon the resale of any repurchased unit. The Company's contingent
liability on these repurchase agreements was approximately $355,396,000 and
$245,701,000 at August 28, 2004 and August 30, 2003, respectively. The Company's
losses under repurchase agreements were approximately $0, $129,000 and $81,000
during fiscal 2004, 2003 and 2002, 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 $0 and $898,000 at August 28, 2004 and August 30, 2003,
respectively. The Company did not incur any losses under these recourse
agreements during fiscal 2004, 2003, and 2002.
The Company also entered into a repurchase agreement on February 1, 2002 with a
banking institution which calls for a liability reduction of 2 percent of the
original invoice every month for 24 months, at which time the repurchase
obligation terminates. The Company's contingent liability under this agreement
was approximately $1,772,000 and $2,366,000 at August 28, 2004 and August 30,
2003, respectively. The Company did not incur any losses under this repurchase
agreement during fiscal 2004, 2003, and 2002.
The Company records an estimated expense and loss reserve in each accounting
period based upon its extensive history and experience of its repurchase
agreements with the lenders of the Company's dealers. As of August 28, 2004,
historical data shows that approximately 1.0 percent of the outstanding
repurchase liability is potentially repurchased and the estimated loss reserve
of approximately 8.0 percent of such repurchase is established on loss history
of the repurchased products. Upon resale of the repurchased units, the Company
does not record the transaction as revenue. The difference between the
repurchase price and the net proceeds received from reselling the units is
charged against the Company's reserve for losses on repurchases. See above for
amounts of losses experienced.
GUARANTEES
During the second quarter of fiscal 2002, the Company entered into a five-year
services agreement (the "Agreement") with an unaffiliated third-party paint
supplier (the "Supplier") and the Forest City Economic Development, Inc., an
Iowa nonprofit corporation (the "FCED"), requiring the Supplier to provide RV
paint services to the Company. Three of Winnebago's officers have board seats on
the 20-member FCED board. The FCED constructed and debt financed a paint
facility on its land adjoining the Company's Forest City manufacturing plant for
the
31
Supplier and the Supplier leases the land and facility from the FCED under a
lease that expires in August 2012. In the event of termination of the Agreement
by any of the parties involved before September 1, 2007, the rights and
obligations of the Supplier under the lease would be transferred to the Company.
As of August 28, 2004, the Supplier is current with its lease payment
obligations to the FCED with approximately $3,713,000 remaining to be paid
through August 2012. Also, under the terms of the Agreement in the event of a
default by the Supplier, the Company would be obligated to purchase from the
Supplier approximately $750,000 of equipment installed in the paint facility at
net book value and is obligated to assume payment obligations for approximately
$45,000 in capital equipment leases.
Also in the second quarter of fiscal 2002, the Company guaranteed $700,000 of
the FCED's $2,200,000 bank debt for the construction of the paint facility
leased by the Supplier. The Company also pledged a $500,000 certificate of
deposit to the bank to collateralize a portion of its $700,000 guarantee.
During the first quarter of fiscal 2004, the debt obligations for the FCED's
paint facility were renegotiated from $2,200,000 to $2,925,000 and as part of
this transaction, the Company executed a new guaranty whereby the amount of the
guarantee was reduced from $700,000 to $500,000 with the Company continuing to
agree to pledge a $500,000 certificate of deposit to the bank. The term of the
guarantee coincides with the payment of the first $500,000 of lease obligations
of the Supplier scheduled to be paid by February 2006. As a result of the new
guarantee, the Company recorded a $500,000 liability in the first quarter of
fiscal 2004 which will be amortized as the FCED makes its monthly debt payments
funded by monthly lease payments from the Supplier. The balance of the guarantee
as of August 28, 2004 was approximately $380,000.
During the second quarter of fiscal 2004, the Company entered into a five-year
limited guarantee agreement ("Guarantee Agreement") with a leasing corporation
("Landlord") and previously discussed paint Supplier. The Landlord financed debt
for the construction of a paint facility on land adjoining the Company's Charles
City manufacturing plant for the Supplier. The Landlord and the Supplier have
signed a ten-year lease agreement which commenced on August 1, 2004. The
Guarantee Agreement states that the Company will guarantee the first 60 monthly
lease payments (totaling approximately $1,559,000). In the event of rental
default before August 2009 and the Supplier's failure to correct the default,
the Landlord shall give the Company (Guarantor) written notice of its intent to
terminate said lease. At the time of this notification, the Company will have
various options that it must exercise in a timely manner. As of August 28, 2004,
the Supplier is current with its lease payment obligations to the Landlord. As
of August 28, 2004, approximately $315,000 has been recorded by the Company as
the estimated fair value for the guarantee.
SELF-INSURANCE.
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. In the event that the annual aggregate
of the self-insured retention is exhausted by payment of claims and defense
expenses, a deductible of $250,000, excluding defense expenses, is applicable to
each and every claim covered under this policy. Included in self-insurance on
the Company's consolidated balance sheet along with product liability is
workman's compensation reserves which carries a stop-loss of $750,000 and
employee medical claim reserves which includes medical claims incurred but not
reported.
LITIGATION.
The Company has settled all claims raised in a lawsuit titled Sanft, et al vs.
Winnebago Industries, Inc., et al involving 21 participants in the Winnebago
Industries, Inc. Deferred Compensation Plan and the Winnebago Industries, Inc.
Deferred Incentive Formula Bonus Plan (the "Plans"). The Plaintiffs were seeking
to negate certain amendments made to the Plans in 1994 which reduced the
benefits which some participants would receive under the Plans. The settlement
will result in a partial reinstatement of the alleged lost benefits and had a
present value cost to the Company of approximately $5,300,000. Additionally, the
Company has voluntarily decided to provide the same benefits to an additional 22
non-plaintiff participants in the Plans and this resulted in an additional
present value cost to the Company of approximately $2,040,000. The total pre-tax
charge, which was recorded in the third quarter of fiscal 2004, was $7,340,000,
which on an after tax basis equated to approximately $4,590,000, or
approximately 13 cents per diluted share. The Company paid out approximately
$1,767,000 during the fourth fiscal quarter with the balance of the settlement
to be paid out in monthly increments over an indeterminable period.
Reference is also made to Item 3 (Legal Proceedings) in the Company's Annual
Report on Form 10-K for the year ended August 30, 2003 for a description of
certain litigation entitled Jody Bartleson, et al vs. Winnebago Industries,
Inc., et al which is incorporated herein by reference. It was therein noted that
Magistrate Judge Paul A. Zoss had entered an Order Approving an Amendment to the
Complaint whereby Plaintiffs' counsel sought to add a claim under the Iowa Wage
Payment Collection Act. Chief Judge Mark W. Bennett subsequently reversed Judge
Zoss' ruling with the net result being that this lawsuit has remained an "opt
in" class action with the 21 participants. The Company believes that it has
meritorious defenses to the Plaintiffs' substantive claims. As of August 28,
2004 the Company had accrued estimated legal fees for the defense of this 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.
32
The Company is also involved in various other legal proceedings which are
ordinary routine litigation incident to its business, some 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.
LEASE COMMITMENTS.
The Company leases certain facilities and equipment under operating leases.
Lease expense was $609,000 for 2004, $556,000 for 2003 and $820,000 for 2002.
Minimum future lease commitments under noncancelable lease agreements in excess
of one year as of August 28, 2004 are as follows (in thousands):
2005 $ 441
2006 408
2007 267
2008 66
2009 20
Thereafter 22
----------
Total $ 1,224
----------
NOTE 7: INCOME TAXES
The components of the provision for income taxes are as follows:
YEAR ENDED
(DOLLARS IN THOUSANDS) AUG. 28, 2004 AUG. 30, 2003 AUG. 31, 2002
- ------------------------------------------------------------------------------------------------
Current
Federal $ 46,688 $ 29,516 $ 28,712
State 2,521 1,515 846
------------------------------------------------------------
49,209 31,031 29,558
Deferred (7,616) (1,070) (1,127)
------------------------------------------------------------
Total provision $ 41,593 $ 29,961 $ 28,431
------------------------------------------------------------
The following is a reconciliation of the U.S. statutory tax rate to the
effective income tax rates (benefit) provided:
YEAR ENDED
AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 1.8 1.4 0.7
Non-deductible losses 1.1 2.6 - - -
Other (0.1) 0.1 (0.1)
Foreign sales corporation/extraterritorial income (0.2) (0.2) (0.1)
Increase in cash surrender value (0.5) (0.4) (0.5)
Death benefits - - - (0.4) - - -
-------------------------------------------------------------------------
Total 37.1% 38.1% 35.0%
-------------------------------------------------------------------------
Significant items comprising the Company's net deferred tax assets are as
follows:
AUGUST 28, 2004 AUGUST 30, 2003
(DOLLARS IN THOUSANDS) ASSETS LIABILITIES TOTAL TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
Current
Warranty reserves $ 4,675 $ - - - $ 4,675 $ 3,379
Carry forward tax credits 2,289 - - - 2,289 - - -
Self-insurance reserve 2,269 - - - 2,269 1,314
Miscellaneous reserves 2,175 (419) 1,756 1,584
Accrued vacation 1,876 - - - 1,876 1,648
------------------------------------------------------------------------------
Subtotal 13,284 (419) 12,865 7,925
------------------------------------------------------------------------------
Noncurrent
Postretirement health care benefits 18,670 - - - 18,670 16,671
Deferred compensation 13,657 - - - 13,657 11,417
Property and equipment - - - (7,161) (7,161) (5,597)
------------------------------------------------------------------------------
Subtotal 32,327 (7,161) 25,166 22,491
------------------------------------------------------------------------------
Total $ 45,611 $ (7,580) $ 38,031 $ 30,416
------------------------------------------------------------------------------
33
NOTE 8: FINANCIAL INCOME AND EXPENSE
The following is a reconciliation of financial income (expense):
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income from investments and receivables $ 945 $ 966 $ 711
Dividend income 579 502 2,726
(Loss) gains on foreign currency transactions (8) (69) 62
Interest expense (80) - - - (246)
----------------------------------------------------------------------
Total financial income $ 1,436 $ 1,399 $ 3,253
----------------------------------------------------------------------
NOTE 9: STOCK BASED COMPENSATION PLANS
The Company's 1992 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 terminated
this plan on December 17, 1997 as to future grants. There were options for
10,000 shares outstanding at August 28, 2004. Future grants of options to
outside directors are made under the Company's 2004 Incentive Compensation Plan
described below.
The Winnebago Industries, Inc. 2004 Incentive Compensation Plan (the "Plan")
authorizes the Human Resources Committee of the Board of Directors of the
Company to grant stock options, stock appreciation rights, stock awards, cash
awards and performance awards to employees. The Plan also allows the Company to
provide equity compensation to non-employee members of its Board of Directors.
The Plan was approved by the Company's shareholders on January 13, 2004. No more
than 4,000,000 shares of common stock may be issued under the Plan, and no more
than 2,000,000 (adjusted for the 2-for-1 stock split on March 5, 2004) of those
shares may be used for awards other than stock options or stock appreciation
rights. Shares subject to awards that are forfeited, terminated, expire
unexercised, settled in cash, exchanged for other awards, tendered to satisfy
the purchase price of an award, withheld to satisfy tax obligations or otherwise
lapse again become available for awards. The grant price of an option under the
Plan may not be less than the fair market value of the common stock subject to
such option. The term of any options granted under the Plan may not exceed 10
years from the date of the grant.
The Plan replaced the 1997 Stock Option Plan. No new grants may be made from the
1997 Stock Option Plan on or after January 1, 2004. Any stock options previously
granted under the 1997 Stock Option Plan shall continue to vest and/or be
exercisable in accordance with their original terms and conditions.
A summary of stock option activity for fiscal 2004, 2003 and 2002 is as follows:
2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
WTD. WTD. WTD.
(ADJUSTED FOR PRICE AVG. PRICE AVG. PRICE AVG.
2-FOR-1 STOCK SPLIT ON PER EXERCISE PER EXERCISE PER EXERCISE
MARCH 5, 2004) SHARES SHARE PRICE/SH SHARES SHARE PRICE/SH SHARES SHARE PRICE/SH
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at
beginning of year 1,296,738 $ 3 - $20 $ 11.19 1,349,008 $ 3 - $20 $ 7.79 1,576,336 $ 3 - $10 $ 6.26
Options granted 458,000 26 - 35 27.30 397,600 18 - 19 18.29 331,900 11 - 20 11.57
Options exercised (519,698) 3 - 27 9.36 (420,802) 4 - 11 6.85 (559,228) 4 - 10 5.72
Options canceled - - - - - - - - - (29,068) 6 - 19 13.45 - - - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 1,235,040 $ 3 - $35 $17.93 1,296,738 $ 3 - $20 $11.19 1,349,008 $3 - $20 $7.79
- ----------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 521,400 $ 3 - $35 $12.53 586,604 $ 3 - $20 $8.41 604,542 $3 - $20 $6.95
- ----------------------------------------------------------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
August 28, 2004:
RANGE OF NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING AT REMAINING YEARS AVERAGE EXERCISABLE AT AVERAGE
PRICES AUGUST 28, 2004 OF CONTRACTUAL LIFE EXERCISE PRICE AUGUST 28, 2004 EXERCISE PRICE
- ---------------------------------------------------------------------------------------------------------------------------------
$ 3.59 - $ 7.69 192,562 5 $ 5.75 192,562 $ 5.75
9.00 - 10.81 267,198 6 10.17 175,798 9.83
18.25 - 19.74 320,280 8 18.41 94,040 18.78
26.50 - 34.86 455,000 9 27.30 59,000 32.73
-------------------------------------------------------------------------------------------------------
1,235,040 8 $ 17.93 521,400 $ 12.53
34
NOTE 10: SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the year for:
YEAR ENDED
(DOLLARS IN THOUSANDS) AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Income taxes $ 40,575 $ 34,109 $ 29,306
Interest 80 - - - 246
NOTE 11: NET REVENUES BY MAJOR PRODUCT CLASS
FISCAL YEAR ENDED (1) (2)
(DOLLARS IN THOUSANDS) AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002 AUGUST 25, 2001 AUGUST 26, 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Class A & C motor homes $1,070,264 $801,027 $773,125 $624,110 $690,022
96.1% 94.8% 93.7% 92.9% 92.8%
Other recreation vehicle revenues (3) 15,199 17,285 20,486 17,808 18,813
1.3% 2.0% 2.5% 2.7% 2.5%
Other manufactured products revenues (4) 28,691 26,898 31,658 29,768 34,894
2.6% 3.2% 3.8% 4.4% 4.7%
-----------------------------------------------------------------------------------------
Total net revenues $1,114,154 $845,210 $825,269 $671,686 $743,729
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.
(2) The fiscal year ended August 31, 2002 contained 53 weeks; all other fiscal
years contained 52 weeks.
(3) Primarily recreation vehicle related parts and recreation vehicle service
revenue.
(4) Primarily sales of extruded aluminum, commercial vehicles, and component
products for other manufacturers.
NOTE 12: 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)
(ADJUSTED FOR THE 2-FOR-1
STOCK SPLIT ON MARCH 5, 2004) AUGUST 28, 2004 AUGUST 30, 2003 AUGUST 31, 2002(1)
- --------------------------------------------------------------------------------------------------------------------------------
Income per share - basic
Income from continuing operations $ 70,641 $ 48,732 $ 52,893
Income from discontinued operations
(net of taxes) - - - 1,152 1,778
--------------------------------------------------------------------------
Net income $ 70,641 $ 49,884 $ 54,671
--------------------------------------------------------------------------
Weighted average shares outstanding 34,214 36,974 39,898
--------------------------------------------------------------------------
Net income per share - basic $ 2.06 $ 1.35 $ 1.37
--------------------------------------------------------------------------
Income per share - assuming dilution
Income from continuing operations $ 70,641 $ 48,732 $ 52,893
Income from discontinued operations
(net of taxes) - - - 1,152 1,778
--------------------------------------------------------------------------
Net income $ 70,641 $ 49,884 $ 54,671
--------------------------------------------------------------------------
Weighted average shares outstanding 34,214 36,974 39,898
Dilutive impact of options outstanding 575 662 870
--------------------------------------------------------------------------
Weighted average shares and potential
dilutive shares outstanding 34,789 37,636 40,768
--------------------------------------------------------------------------
Net income per share - assuming dilution $ 2.03 $ 1.33 $ 1.34
--------------------------------------------------------------------------
(1) Fiscal year ended August 31, 2002 contained 53 weeks; all other fiscal
years contained 52 weeks.
NOTE 13: 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
35
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, except as described below. 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) except as described below, to buy
1/200 of a share of a new series of preferred stock at an exercise price of
$33.625. 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, except as
described below, 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. An Amendment, dated January 13,
2003, was made to the shareholders rights plan to permit FMR Corp., its
affiliates and associates (collectively, "FMR"), to be the beneficial owner of
up to 20% of the Company's outstanding stock provided that FMR, in its filings
under the Securities Exchange Act of 1934, as amended, does not state any
present intention to hold shares of the Company's common stock with the purpose
or effect of changing or influencing control of the Company. An individual or
group that becomes the beneficial owner of 15 or 20 percent (in the case of FMR)
of the Company's common stock as a result of an acquisition of the common stock
by the Company or the acquisition by such individual or group of new-issued
shares directly from the Company, such individual's or group's ownership shall
not trigger the issuance of rights under the plan unless such individual or
group after such share repurchase or direct issuance by the Company, becomes the
beneficial owner of any additional shares of the Company's common stock.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 28, 2004 and August 30, 2003, 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 28,
2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 28, 2004
and August 30, 2003; and the results of its operations and its cash flows for
each of the three years in the period ended August 28, 2004 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
November 10, 2004
36
INTERIM FINANCIAL INFORMATION (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
FISCAL 2004 NOVEMBER 29, 2003 FEBRUARY 28, 2004 MAY 28, 2004 AUGUST 28, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Net revenues $ 254,933 $ 266,033 $ 310,186 $ 283,002
Gross profit 39,465 35,029 46,019 41,656
Operating income 29,166 24,529 28,076 29,027
-------------------------------------------------------------------------------------
Net income $ 18,067 $ 15,880 $ 17,704 $ 18,990
Net income per share (basic) $ .51 $ .47 $ .52 $ .56
Net income per share (diluted) $ .50 $ .46 $ .51 $ .55
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) QUARTER ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
AS AS
RESTATED RESTATED MAY 31, AUGUST 30,
FISCAL 2003 NOVEMBER 30, 2002 (1) MARCH 1, 2003 (1) 2003(2) 2003(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net revenues $ 233,347 $ 185,958 $ 200,211 $ 225,694
Gross profit 35,072 26,368 23,146 28,792
Operating income 25,281 19,368 14,243 18,402
Income from continuing
operations 15,878 11,891 8,995 11,968
Income from discontinued
operations 400 418 334 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 16,278 $ 12,309 $ 9,329 $ 11,968
====================================================================================================================================
Income per common
share (basic)
Continuing operations $ .43 $ .32 $ .25 $ .33
Discontinued operations .01 .01 .01 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per share
(basic) $ .44 $ .33 $ .26 $ .33
====================================================================================================================================
Income per common share
(diluted)
Continuing operations $ .42 $ .31 $ .24 $ .32
Discontinued operations .01 .01 .01 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per share
(diluted) $ .43 $ .32 $ .25 $ .32
====================================================================================================================================
(1) 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.
(2) During the third quarter of fiscal 2003, the Company discontinued dealer
financing operations of WAC. WAC's operations are accounted for as discontinued
operations in the consolidated financial statements.
37
11-YEAR SELECTED FINANCIAL DATA (1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(ADJUSTED FOR THE 2-FOR-1 STOCK SPLIT ON MARCH 5, 2004) AUG. 28, AUG. 30, AUG. 31, AUG. 25,
FOR THE YEAR 2004 2003 2002(2) 2001(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net revenues $ 1,114,154 $ 845,210 $ 825,269 $ 671,686
Income before taxes 112,234 78,693 81,324 55,754
Pretax profit % of revenue 10.1% 9.3% 9.9% 8.3%
Provision for income taxes (credits) 41,593 29,961 28,431 14,258
Income tax rate 37.1% 38.1% 35.0% 25.6%
Income from continuing operations 70,641 48,732 52,893 41,496
Gain on sale of Cycle-Sat subsidiary - - - - - - --- ---
Income (loss) from discontinued operations (4) - - - 1,152 1,778 2,258
Cum. effect of change in accounting principle - - - - - - --- (1,050)
------------------------------------------------------------------------------
Net income (loss) $ 70,641 $ 49,884 $ 54,671 $ 42,704
Income per share
Continuing operations
Basic $ 2.06 $ 1.32 $ 1.33 $ 1.00
Diluted 2.03 1.30 1.30 .99
Discontinued operations
Basic - - - .03 .04 .05
Diluted - - - .03 .04 .05
Cum. effect of change in accounting principle
Basic - - - - - - --- (.02)
Diluted - - - - - - --- (.02)
------------------------------------------------------------------------------
Net income per share
Basic $ 2.06 $ 1.35 $ 1.37 $ 1.03
Diluted 2.03 1.33 1.34 1.02
------------------------------------------------------------------------------
Weighted average common shares
outstanding (in thousands)
Basic 34,214 36,974 39,898 41,470
Diluted 34,789 37,636 40,768 42,080
------------------------------------------------------------------------------
Cash dividends paid per share $ .20 $ .10 $ .10 $ .10
Book value 6.01 5.78 4.81 5.00
Return on average assets (ROA) (6) 18.3% 14.0% 15.9% 12.9%
Return on average equity (ROE) (7) 34.3% 25.6% 28.2% 22.3%
Return on average invested capital (ROIC) (8) 35.4% 25.5% 29.1% 24.1%
Unit Sales
Class A 8,108 6,705 6,725 5,666
Class C 4,408 4,021 4,329 3,410
------------------------------------------------------------------------------
Total Class A & C Motor Homes 12,516 10,726 11,054 9,076
Class B Conversions (EuroVan Campers) - - - 308 763 703
AT YEAR END
Total assets $ 394,556 $ 377,462 $ 337,077 $ 351,922
Stockholders' equity 201,875 210,626 179,815 207,464
Market capitalization 1,071,571 898,010 713,500 581,779
Working capital 164,791 164,891 144,995 174,248
Long-term debt - - - - - - --- ---
Current ratio 2.6 to 1 2.8 to 1 2.6 to 1 3.2 to 1
Number of employees 4,220 3,750 3,685 3,325
(1) Certain prior periods' information has been reclassified to conform to the
current year-end presentation.
(2) The fiscal years ended August 31, 2002 and August 31, 1996 contained 53
weeks; all other fiscal years contained 52 weeks.
(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) Includes discontinued operations of Winnebago Acceptance Corporation for all
years presented and discontinued operations of Cycle-Sat, Inc. for fiscal years
ended August 31, 1996 through August 27, 1994.
38
AUG. 26, AUG. 28, AUG. 29, AUG. 30, AUG. 31 AUG. 26, AUG. 27,
2000 1999 1998 1997 1996(2) 1995 1994(5)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 743,729 $ 668,658 $ 527,287 $ 436,541 $ 486,139 $ 461,540 $ 436,039
70,583 62,848 33,765 5,704 19,015 17,920 13,525
9.5% 9.4% 6.4% 1.3% 3.9% 3.9% 3.1%
24,400 21,033 10,786 ($35) 5,922 ($8,642) ($1,921)
34.6% 33.5% 32.0% (.6%) 31.1% (48.2%) (14.2%)
46,183 41,815 22,979 5,739 13,093 26,562 15,446
--- - - - - - - 16,472 - - - - - - - - -
2,216 2,445 1,405 837 (708) 1,194 1,999
--- --- --- --- --- --- (20,420)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 48,399 $ 44,260 $ 24,384 $ 23,048 $ 12,385 $ 27,756 ($2,975)
$ 1.07 $ .94 $ .48 $ .11 $ .26 $ .53 $ .31
1.05 .93 .47 .11 .26 .52 .30
.05 .06 .03 .34 (.02) .02 .04
.05 .05 .03 .34 (.02) .03 .04
--- --- --- --- --- --- (.41)
--- --- --- --- --- --- (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1.12 $ 1.00 $ .51 $ .45 $ .24 $ .55 $ (.06)
1.10 .98 .50 .45 .24 .55 (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
43,360 44,418 48,212 50,870 50,698 50,572 50,374
44,022 45,074 48,628 51,100 51,048 50,924 50,962
- ------------------------------------------------------------------------------------------------------------------------------------
$ .10 $ .10 $ .10 $ .10 $ .15 $ .15 $ ---
4.11 3.35 2.55 2.43 2.08 1.98 1.58
16.3% 17.1% 11.0% 10.6% 5.7% 14.1% (1.8%)
29.8% 33.3% 20.3% 20.1% 12.0% 30.8% (3.7%)
28.2% 32.7% 19.2% 15.7% 8.2% 20.1% (2.7%)
6,819 6,054 5,381 4,834 5,893 5,993 6,820
3,697 4,222 3,390 2,724 2,857 2,853 1,862
- ------------------------------------------------------------------------------------------------------------------------------------
10,516 10,276 8,771 7,558 8,750 8,846 8,682
854 600 978 1,205 857 1,014 376
$ 308,686 $ 285,889 $ 230,612 $ 213,475 $ 220,596 $ 211,630 $ 181,748
174,909 149,384 116,523 123,882 105,311 100,448 79,710
272,733 538,322 254,137 213,472 206,373 212,358 258,952
141,683 123,720 92,800 99,935 62,155 69,694 58,523
--- --- --- --- 1,692 3,810 2,693
3.0 to 1 2.5 to 1 2.5 to 1 3.4 to 1 2.0 to 1 2.4 to 1 2.1 to 1
3,300 3,400 3,010 2,830 3,150 3,010 3,150
(5) Includes a cumulative non-cash charge of $20.4 million expense or $.80 per
diluted share due to the adoption of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" related to health care and other
benefits.
(6) ROA - Current period net income (loss) divided by average total asset
balance using current ending period and previous ending period.
(7) ROE - Current period net income (loss) divided by average equity balance
using current ending period and previous ending period.
(8) ROIC - Current period net income (loss) divided by average invested capital
using current ending period - total assets minus cash and non-interest
liabilities and previous ending period - total assets minus cash and
non-interest liabilities.
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 earnings releases, the annual report
on Form 10-K (without exhibits), the quarterly reports on Form 10-Q (without
exhibits) and current reports on Form 8-K (without exhibits) as 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
All news releases issued by the Company, reports filed by the Company with the
Securities and Exchange Commission (including exhibits) and information on the
Company's Corporate Governance Policies and Procedures may also be viewed at the
Winnebago Industries' Web Site:
http://winnebagoind.com/html/company/investorRelations.html. Information
contained on Winnebago Industries' Web Site is not incorporated into this Annual
Report or other securities filings.
SHAREHOLDER ACCOUNT ASSISTANCE
Transfer Agent to contact for address changes, account certificates and stock
holdings:
Wells Fargo Bank 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/shareownerservices
ANNUAL MEETING
The Annual Meeting of Shareholders is scheduled to be held on Tuesday, January
11, 2005, 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 ShareBuilder Corporation
through the Company's Web Site at http://winnebagoind.com/html/company/
investorRelations.html. Winnebago Industries is not affiliated with ShareBuilder
and has no involvement in the relationship between ShareBuilder and any of its
customers.
COMMON STOCK DATA
(ADJUSTED FOR THE 2-FOR-1 STOCK SPLIT ON MARCH 5, 2004)
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 2, 2004: 4,219
Below are the New York Stock Exchange high, low and closing prices of Winnebago
Industries, Inc. stock for each quarter of fiscal 2004 and fiscal 2003.
FISCAL 2004 HIGH LOW CLOSE FISCAL 2003 HIGH LOW CLOSE
- ------------------------------------------------------------------------------------------------------------------------------------
First Quarter $29.63 $22.08 $27.64 First Quarter $25.74 $17.75 $24.72
Second Quarter 37.88 27.64 33.40 Second Quarter 25.23 14.43 14.68
Third Quarter 34.95 25.10 28.40 Third Quarter 19.97 11.66 19.88
Fourth Quarter 38.37 28.09 31.91 Fourth Quarter 24.69 17.25 24.63
CASH DIVIDENDS PAID PER SHARE
FISCAL 2004 FISCAL 2003
- ----------------------------------------------------------------------------------------
AMOUNT DATE PAID AMOUNT DATE PAID
- ------ --------- ------ ---------
$.05 October 6, 2003 $.05 January 6, 2003
.05 January 5, 2004 .05 July 7, 2003
.05 April 15, 2004 --------- Total
.05 July 6, 2004 $.10
- -----------
$.20 Total
40
DIRECTORS AND OFFICERS
DIRECTORS
BRUCE D. HERTZKE (53) GERALD E. BOMAN (69) JOHN V. HANSON (62)
Chairman of the Board, Chief Former Senior Vice President Former Deputy Chairman of the Board
Executive Officer Winnebago Industries, Inc. Winnebago Industries, Inc.
and President
Winnebago Industries, Inc. JERRY N. CURRIE (59) GERALD C. KITCH (66)
President and Chief Executive Officer Former Executive Vice President
IRVIN E. AAL (65) CURRIES Company and GRAHAM Pentair, Inc.
Former General Manager Manufacturing
Case Tyler Business Unit of CNH FREDERICK M. ZIMMERMAN (68)
Global JOSEPH W. ENGLAND (64) Professor of Manufacturing Systems
Former Senior Vice President Engineering
Deere and Company The University of St. Thomas
OFFICERS
[PHOTO] [PHOTO] [PHOTO]
BRUCE D. HERTZKE (53) EDWIN F. BARKER (57) RAYMOND M. BEEBE (62)
Chairman of the Board, Senior Vice President, Vice President, General
Chief Executive Officer Chief Financial Officer Counsel and Secretary
and President
[PHOTO] [PHOTO] [PHOTO]
ROBERT L. GOSSETT (53) BRIAN J. HRUBES (53) ROGER W. MARTIN (44)
Vice President, Controller Vice President, Sales
Administration and Marketing
[PHOTO] [PHOTO] [PHOTO]
WILLIAM J. O'LEARY (55) ROBERT J. OLSON (53) JOSEPH L. SOCZEK, JR. (61)
Vice President, Vice President, Treasurer
Product Development Manufacturing
[PHOTOS]