SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
_____
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 29, 1999
-------------------------------------------------
OR
_____
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 1-6403
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WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-0803978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 152, Forest City, Iowa 50436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (515) 582-3535
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
There were 22,280,811 shares of $.50 par value common stock outstanding on July
2, 1999.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO REPORT ON FORM 10-Q
Page Number
PART I. FINANCIAL INFORMATION: -----------
Consolidated Balance Sheets (Interim period information unaudited) 1 & 2
Unaudited Consolidated Statements of Earnings 3
Unaudited Consolidated Statements of Cash Flows 4
Unaudited Condensed Notes to Consolidated Financial Statements 5 & 6
Management's Discussion and Analysis of Financial Condition and Results 7 - 10
of Operations
PART II. OTHER INFORMATION 11 - 13
Part I Financial Information
Item 1.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MAY 29, AUGUST 29,
ASSETS 1999 1998
- ----------------------------------------------------- ---------- ----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 56,452 $ 53,859
Receivables, less allowance for doubtful
accounts ($1,172 and $1,582, respectively) 28,607 22,025
Dealer financing receivables, less allowance
for doubtful accounts ($182 and $78, respectively) 29,612 12,782
Inventories 63,022 55,433
Prepaid expenses 3,969 3,516
Deferred income taxes 6,906 6,906
---------- ----------
Total current assets 188,568 154,521
---------- ----------
PROPERTY AND EQUIPMENT, at cost
Land 1,158 1,158
Buildings 40,614 38,779
Machinery and equipment 72,393 69,095
Transportation equipment 5,221 5,047
---------- ----------
119,386 114,079
Less accumulated depreciation 82,253 81,167
---------- ----------
Total property and equipment, net 37,133 32,912
---------- ----------
LONG-TERM NOTES RECEIVABLE,
less allowances for doubtful accounts
($266 and $973, respectively) 1,915 5,396
---------- ----------
INVESTMENT IN LIFE INSURANCE AND
OTHER LONG-TERM INVESTMENTS 23,447 21,226
---------- ----------
DEFERRED INCOME TAXES, NET 16,309 16,071
---------- ----------
OTHER ASSETS 365 486
---------- ----------
TOTAL ASSETS $ 267,737 $ 230,612
========== ==========
See Unaudited Condensed Notes to Consolidated Financial Statements
1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
MAY 29, AUGUST 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
- ------------------------------------------------------------ ---------- ----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable, trade $ 26,614 $ 24,461
Income tax payable 11,944 12,623
Accrued expenses:
Insurance 3,688 3,566
Product warranties 6,437 5,260
Vacation liability 3,906 3,343
Promotional 6,248 2,236
Other 12,482 11,113
---------- ----------
Total current liabilities 71,319 62,602
---------- ----------
POSTRETIREMENT HEALTH CARE AND DEFERRED
COMPENSATION BENEFITS 55,528 51,487
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock, common, par value $.50; authorized
60,000,000 shares: outstanding 25,876,000 and 25,865,000
shares, respectively 12,937 12,932
Additional paid-in capital 22,133 22,507
Reinvested earnings 143,658 111,665
---------- ----------
178,728 147,104
Less treasury stock, at cost 37,838 30,581
---------- ----------
Total stockholders' equity 140,890 116,523
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 267,737 $ 230,612
========== ==========
See Unaudited Condensed Notes to Consolidated Financial Statements
2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
------------------------ ------------------------
May 29, May 30, May 29, May 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net revenues $ 191,546 $ 150,515 $ 503,342 $ 395,120
Cost of goods sold 157,804 129,610 420,355 341,437
---------- ---------- ---------- ----------
Gross profit 33,742 20,905 82,987 53,683
---------- ---------- ---------- ----------
Operating expenses:
Selling and delivery 5,997 4,645 16,593 14,564
General and administrative 6,129 6,029 16,112 15,741
---------- ---------- ---------- ----------
Total operating expenses 12,126 10,674 32,705 30,305
---------- ---------- ---------- ----------
Operating income 21,616 10,231 50,282 23,378
Financial income 670 860 1,816 2,244
---------- ---------- ---------- ----------
Pre-tax income 22,286 11,091 52,098 25,622
Provision for taxes 7,675 3,757 17,884 8,600
---------- ---------- ---------- ----------
Net income $ 14,611 $ 7,334 $ 34,214 $ 17,022
========== ========== ========== ==========
Earnings per common share (Note 7):
- -----------------------------------
Basic $ .66 $ .31 $ 1.54 $ .70
Diluted $ .65 .31 $ 1.52 $ .69
Weighted average common shares outstanding (Note 7):
- ----------------------------------------------------
Basic 22,190 23,642 22,186 24,434
Diluted 22,517 23,912 22,483 24,630
See Unaudited Condensed Notes to Consolidated Financial Statements.
================================================================================
3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Dollars in thousands THIRTY-NINE WEEKS ENDED
-------------------------
May 29, May 30,
1999 1998
---------- ----------
Cash flows from operating activities:
Net income $ 34,214 $ 17,022
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,212 4,143
Other 545 1,431
Change in assets and liabilities:
Increase in receivable and other assets (24,877) (2,287)
(Increase) decrease in inventories (7,589) 2,950
Increase in accounts payable and accrued expenses 9,396 9,028
Increase in income taxes payable 16,746 20,100
Increase in postretirement benefits 3,609 2,559
Other (238) --
---------- ----------
Net cash provided by operating activities 36,018 54,946
---------- ----------
Cash flows used by investing activities:
Purchases of property and equipment (8,711) (3,194)
Investments in dealer receivables (74,494) (44,559)
Collections of dealer receivables 57,560 40,601
Other 2,067 (4,126)
---------- ----------
Net cash used by investing activities (23,578) (11,278)
---------- ----------
Cash flows used by financing activities and capital transactions:
Payments for purchase of common stock (8,975) (19,572)
Payments of long-term debt -- (695)
Payment of cash dividends (2,221) (2,548)
Other 1,349 1,285
---------- ----------
Net cash used by financing activities and
capital transactions (9,847) (21,530)
---------- ----------
Net increase in cash and cash equivalents 2,593 22,138
Cash and cash equivalents - beginning of period 53,859 32,130
---------- ----------
Cash and cash equivalents - end of period $ 56,452 $ 54,268
========== ==========
See Unaudited Condensed Notes to Consolidated Financial Statements.
4
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position as of May 29, 1999, the consolidated results of
operations for the 39 and 13 weeks ended May 29, 1999 and May 30, 1998,
and the consolidated cash flows for the 39 weeks ended May 29, 1999 and
May 30, 1998. The results of operations for the 39 weeks ended May 29,
1999, are not necessarily indicative of the results to be expected for
the full year.
2. Inventories are valued at the lower of cost or market, with cost being
determined under the last-in, first-out (LIFO) method and market defined
as net realizable value.
Inventories are composed of the following (dollars in thousands):
May 29, August 29,
1999 1998
---------- ----------
Finished goods................ $ 21,659 $ 24,147
Work in process............... 19,028 15,328
Raw materials................. 40,504 33,384
---------- ----------
81,191 72,859
LIFO reserve.................. (18,169) (17,426)
---------- ----------
$ 63,022 $ 55,433
========== ==========
3. Since March, 1992, the Company has had a financing and security agreement
with NationsCredit Corporation (NationsCredit). Terms of the agreement
limit borrowings to the lesser of $30,000,000 or 75 percent of eligible
inventory (fully manufactured recreation vehicles and motor home chassis
and related components). Borrowings are secured by the Company's
receivables and inventory. Borrowings under the agreement bear interest
at the prime rate, as defined in the agreement, plus 50 basis points. The
line of credit is available and continues during successive one-year
periods unless either party provides at least 90-days' notice prior to
the end of the one-year period to the other party that they wish to
terminate the line of credit. The agreement also contains certain
restrictive covenants including maintenance of minimum net worth, working
capital and current ratio. As of May 29, 1999, the Company was in
compliance with these covenants. There were no outstanding borrowings
under the line of credit at May 29, 1999 or August 29, 1998.
4. It is customary practice for companies in the recreation vehicle industry
to enter into repurchase agreements with lending institutions which have
provided wholesale floor plan financing to dealers. The Company's
agreements provide for the repurchase of its products from the financing
institution in the event of repossession upon a dealer's default. The
Company was contingently liable for approximately $198,448,000 and
$132,540,000 under repurchase agreements with lending institutions as of
May 29, 1999 and August 29, 1998, respectively. Included in these
contingent liabilities as of May 29, 1999 and August 29, 1998 are
approximately $8,409,000 and $18,623,000, respectively, of certain dealer
receivables subject to recourse agreements with NationsCredit and Green
Tree Financial Corporation.
5. For the periods indicated, the Company paid cash for the following
(dollars in thousands):
THIRTY-NINE WEEKS ENDED
--------------------------
May 29, May 30,
1999 1998
--------- ---------
Interest $ 97 $ 364
Income taxes 18,800 6,849
5
6. On September 28, 1998, the Company completed the $36,500,000 repurchase
of outstanding shares of its common stock authorized by the Board of
Directors on December 29, 1997. Under this repurchase program, 3,612,660
shares were repurchased for an aggregate consideration of $36,499,018. A
voluntary program for shareholders owning fewer than 100 shares of the
Company's common stock was initiated in November, 1998 in which these
shareholders could conveniently sell all their shares or purchase enough
additional shares to increase their holdings to 100 shares. A total of
60,823 shares were repurchased from 40 percent of eligible shareholders
at a cost of approximately $834,000, an average of $13.72 per share. This
program was completed in February, 1999.
On June 17, 1999, the Board of Directors authorized the repurchase of
outstanding shares of the Company's common stock for an aggregate
purchase price of up to $15,000,000.
7. The following table reflects the calculation of basic and diluted
earnings per share for the 13 and 39 weeks ended May 29, 1999 and May 30,
1998:
IN THOUSANDS EXCEPT PER SHARE DATA
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------ ------------------------
MAY 29, MAY 30, MAY 29, MAY 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
EARNINGS PER SHARE - BASIC:
- --------------------------
Net income $ 14,611 $ 7,334 $ 34,214 $ 17,022
---------- ---------- ---------- ----------
Weighted average shares outstanding 22,190 23,642 22,186 24,434
---------- ---------- ---------- ----------
Earnings per share - basic $ .66 $ .31 $ 1.54 $ .70
---------- ---------- ---------- ----------
EARNINGS PER SHARE - ASSUMING DILUTION:
- --------------------------------------
Net income $ 14,611 $ 7,334 $ 34,214 $ 17,022
---------- ---------- ---------- ----------
Weighted average shares outstanding 22,190 23,642 22,186 24,434
Dilutive impact of options outstanding 327 270 297 196
---------- ---------- ---------- ----------
Weighted average shares & potential
dilutive shares outstanding 22,517 23,912 22,483 24,630
---------- ---------- ---------- ----------
Earnings per share - assuming dilution $ .65 $ .31 $ 1.52 $ .69
---------- ---------- ---------- ----------
There were options to purchase 14,000 shares of common stock outstanding
at a price of $15.375 per share during the 13 weeks ended May 29, 1999
which were not included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market
price of the common shares.
8. The Company was required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" at the
beginning of fiscal 1999. The statement requires companies to disclose
comprehensive income and its components in their financial statements.
The Company has no items of comprehensive income other than net income.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended May 29, 1999 Compared to Thirteen Weeks Ended May 30, 1998
Net revenues for the 13 weeks ended May 29, 1999 were $191,546,000 an increase
of $41,031,000 or 27.3 percent from the 13 week period ended May 30, 1998. Motor
home shipments (Class A and C) were 2,981 units, an increase of 427 units, or
16.7 percent, during the third quarter of fiscal 1999 compared to the third
quarter of fiscal 1998. The difference in percentages when comparing the percent
increase in revenue dollars for the third quarter of fiscal 1999 to the percent
increase in unit shipments for the third quarter of fiscal 1999 was caused by
the shipments of more units with slide-out features and the demand for the
Company's new high-line (Ultimate) unit. Market conditions for the Company's
motor home products as well as in the recreation vehicle industry in general
continue to remain very favorable due to low interest rates, low fuel prices,
and very high consumer confidence levels. As of May 29, 1999, the Company's
order backlog of Class A and Class C motor homes was approximately 2,200 orders,
an increase of 170 percent, when compared to the orders on hand at the close of
the third quarter in fiscal 1998. The Company includes in its backlog all
accepted purchase orders from dealers shippable within the next six months.
Orders in backlog can be canceled at the option of the purchaser at any time
without penalty and, therefore, backlog may not necessarily be a measure of
future sales.
Gross profit, as a percent of net revenues, was 17.6 percent for the 13 weeks
ended May 29, 1999 compared to 13.9 percent for the 13 weeks ended May 30, 1998.
The Company's gross profit percentage increased as a result of higher volume of
motor homes and favorable product mix change during the third quarter of fiscal
1999.
Selling and delivery expenses were $5,997,000 or 3.1 percent of net revenues
during the third quarter of fiscal 1999 compared to $4,645,000 or 3.1 percent of
net revenues during the third quarter of fiscal 1998. The increase in dollars
can be attributed primarily to the Company's increased advertising expenses
during the third quarter of fiscal 1999. The difference is also partially
attributed to a reclassification to general and administrative expenses of
approximately $570,000 in the Company's dealer recourse reserve during the third
quarter of fiscal 1998.
General and administrative expenses were $6,129,000 or 3.2 percent of net
revenues during the 13 weeks ended May 29, 1999 compared to $6,029,000 or 4.0
percent of net revenues during the 13 weeks ended May 30, 1998. The increase in
dollars can be attributed to increases in the Company's employee incentive
programs during the third quarter of fiscal 1999, partially offset by a
reclassification and increase in bad debt reserves recorded during the third
quarter of fiscal 1998. Increased sales volume during the third quarter of
fiscal 1999 contributed to the decrease in percentage.
The Company had net financial income of $670,000 for the third quarter of fiscal
1999 compared to net financial income of $860,000 for the comparable quarter of
fiscal 1998. During the 13 weeks ended May 29, 1999, the Company recorded
$639,000 of net interest income and gains of $31,000 in foreign currency
transactions. During the 13 weeks ended May 30, 1998, the Company recorded
$719,000 of net interest income and gains of $141,000 in foreign currency
transactions.
For the third quarter ended May 29, 1999, the Company had net income of
$14,611,000, or $.65 per diluted share, compared to the third quarter ended May
30, 1998's net income of $7,334,000, or $.31 per diluted share. Net income
increased by 99.2 percent when comparing the third quarter of fiscal 1999 to the
third quarter of fiscal 1998 but increased by 109.7 percent on a per diluted
share basis when comparing the two quarters due to fewer shares of the Company's
common stock being outstanding during the third quarter of fiscal 1999. See
Notes 6 and 7.
7
Thirty-Nine Weeks Ended May 29, 1999 Compared to Thirty-Nine Weeks Ended May 30,
1998
Net revenues for the 39 weeks ended May 29, 1999 were $503,342,000, an increase
of $108,222,000, or 27.4 percent from the 39 week period ended May 30, 1998.
Motor home shipments (Class A and C) were 7,732 units, an increase of 1,107
units, or 16.7 percent, during the 39 weeks ended May 29, 1999 when compared to
the 39 weeks ended May 30, 1998. The differences in percentages when comparing
the percent increase in revenue dollars for the 39 weeks ended May 29, 1999 to
the percent increase in unit shipments for the 39 weeks ended May 29, 1999 was
caused by the shipments of more units with slide-out features and the demand for
the Company's new high-line (Ultimate) unit. Industry demand for motorized
recreation vehicles remained strong during the 39 weeks ended May 29, 1999 and
the Company's 1999 products continued to be well received by dealers and retail
customers.
Gross profit, as a percent of net revenues, was 16.5 percent for the 39 weeks
ended May 29, 1999 compared to 13.6 percent for the 39 weeks ended May 30, 1998.
The Company's gross profit percentage increased as a result of higher volume of
motor homes and favorable product mix change during the 39 weeks ended May 29,
1999.
Selling and delivery expenses were $16,593,000 or 3.3 percent of net revenues
during the 39 weeks ended May 29, 1999 compared to $14,564,000 or 3.7 percent of
net revenues during the 39 weeks ended May 30, 1998. The increase in dollars can
be attributed primarily to increases in advertising as well as to an increase in
delivery expense during the 39 weeks ended May 29, 1999 when compared to the
comparable period of fiscal 1998. Increased sales volume, during the 39 weeks
ended May 29, 1999, contributed to the decrease in percentage.
General and administrative expenses were $16,112,000 or 3.2 percent of net
revenues during the 39 weeks ended May 29, 1999 compared to $15,741,000 or 4.0
percent of net revenues during the 39 weeks ended May 30, 1998. Increases in the
Company's employee incentive programs during the fiscal 1999 period primarily
contributed to the dollar increase when comparing the two nine-month periods.
Partially offsetting the dollar increase in general and administrative expenses
was monies the Company received and recorded during the 39 weeks ended May 29,
1999 on a previously fully reserved receivable that was repaid to the Company.
Increased sales volume, during the 39 weeks ended May 29, 1999, contributed to
the decrease in percentage.
The Company had net financial income of $1,816,000 for the 39 weeks ended May
29, 1999 compared to net financial income of $2,244,000 for the 39 weeks ended
May 30, 1998. During the 39 weeks ended May 29, 1999, the Company recorded
$1,844,000 of net interest income and losses of $28,000 in foreign currency
transactions. During the 39 weeks ended May 30, 1998, the Company recorded
$2,090,000 of net interest income and gains of $154,000 in foreign currency
transactions.
For the nine-month period of fiscal 1999, the Company recorded net income of
$34,214,000, or $1.52 per diluted share, compared to the nine-month period of
fiscal 1998's net income of $17,022,000, or $.69 per diluted share. Net income
increased by 101.0 percent when comparing the two nine-month periods but
increased by 120.3 percent on a per diluted share basis when comparing the two
nine-month periods due to fewer shares of the Company's common stock being
outstanding during the 39 week period ended May 29, 1999. See Notes 6 and 7.
LIQUIDITY AND FINANCIAL CONDITION
The Company meets its working capital requirements, capital equipment
requirements and cash requirements of subsidiaries with funds generated
internally. At May 29, 1999, working capital was $117,249,000, an increase of
$25,330,000 from the amount at August 29, 1998. The Company's principal use of
cash during the 39 weeks ended May 29, 1999 were an increase of $74,494,000 of
dealer receivables, $8,975,000 for the repurchase of shares of the Company's
common stock, and $8,711,000 for
8
purchases of property and equipment. The Company's principal sources of cash
during the 39 weeks ended May 29, 1999 was cash flow from operations and the
collection of $57,560,000 in dealer receivables. The Company's sources and uses
of cash during the 39 weeks ended May 29, 1999 are set forth in the unaudited
consolidated statement of cash flows for that period.
Principal known demands at May 29, 1999 on the Company's liquid assets for the
remainder of fiscal 1999 include approximately $1,500,000 of capital
expenditures (primarily equipment replacement) and approximately $2,200,000 of
cash dividends declared by the Board of Directors on March 18, 1999 (payable on
July 2, 1999 to shareholders of record as of June 4, 1999).
Management currently expects its cash on hand and funds from operations to be
sufficient to cover both short-term and long-term operating requirements.
ACCOUNTING CHANGES
Segment Disclosures
SFAS No. 131, "Disclosures about Segment of and Enterprise and Related
Information" was issued in June 1997 and will be adopted by the Company in the
fourth quarter of fiscal 1999. The statement establishes standards, which
redefine how operating segments are determined, and requires public companies to
report financial and descriptive information about reportable operating
segments.
Pension and Other Postretirement Benefits Disclosure
SFAS No. 132, "Employer's Disclosure About Pensions and Other Postretirement
Benefits" was issued in February 1998 and will be adopted by the Company in the
fourth quarter of fiscal 1999. The statement revises employer' s disclosures
about pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans.
Accounting for Derivative Instruments and Hedging Activities
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in June 1998 and must be adopted by the Company no later than fiscal
2001. This statement requires that an entity recognizes all derivatives as
either assets or liabilities in the statement of financial position and measure
these instruments at fair value.
The Company has not completed the process of evaluating the effects of SFAS No.
131, SFAS No. 132 or SFAS No. 133. Since all these pronouncements, except for
SFAS No. 133, relate primarily to changes in disclosure requirements, the
Company does not believe the new requirements will significantly affect its
financial condition or operating results.
FORWARD LOOKING INFORMATION
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties, including, but not limited to availability of chassis, demand
from customers, effects of competition, the general state of the economy,
interest rates, consumer confidence, changes in the product or customer mix or
revenues and in the level of operating expenses and other factors which may be
disclosed throughout this Form 10-Q. Any forecasts and projections in this
report are "forward looking statements," and are based on management's current
expectations of the Company's near term results, based on current information
available pertaining to the Company, including the aforementioned risk factors.
Actual results could differ materially.
9
YEAR 2000 (Y2K) COMPLIANCE
The Company has conducted a comprehensive review of its computer systems that
could be affected by the "Year 2000" issue and began an implementation plan in
1996 to resolve this issue. As the Company was reviewing its needs to be Y2K
compliant the Company discovered that software systems, for its Finance and
Human Resources needs were already Y2K compliant. With respect to other systems,
the Company decided to make corrections for compliance by programming rather
than through file conversion. The program corrections were completed in May
1998. All programs are tested individually and in a systems test mode. For all
practical purposes the Company has completed this testing and believes it is Y2K
compliant. The Company will continue to test personal computers used within the
Company on an individual basis and expects to have this testing completed during
the fourth quarter of the Company's 1999 fiscal year.
The Company's Plant Engineering and Maintenance Department was charged with the
assessment and remediation of any Y2K problems in plant production equipment and
in any building infrastructure equipment. Each machine will be checked
individually and steps taken at that time to update for Y2K compliance. The
completion of this project is scheduled for July 1999 and is on schedule.
The Company's Purchasing and Information Systems Departments have contacted all
of the Company's major suppliers to determine their readiness for their
compliance with the Y2K issue. The responses are being monitored and the
Purchasing Department will contact any major supplier that has reported they may
have a problem with being Y2K compliant by the start of the calendar year 2000.
The largest exposure appears to be the Company's interface with chassis
manufacturers for order processing. The Company believes these order processing
systems to be year 2000 compliant based on statements from representatives of
the companies involved. The chassis suppliers have also advised the Company that
the chassis are year 2000 compliant.
The Company does not believe that possible noncompliance with Y2K issues by its
dealers will have a material impact on the ability of its dealers to purchase
and sell products of the Company.
The total cost associated with the modifications required to be Y2K compliant
are not expected to exceed $300,000 of which approximately $280,000 has been
expensed ($30,000 in fiscal 1999).
At this time, the Company believes it has addressed all Y2K issues that may
arise, therefore, no contingency plan has been developed. If during the
Company's in-house testing or if information is received from an outside source
that they would be unable to be Y2K compliant, the Company will then develop an
appropriate contingency plan to address Y2K problems that may arise.
Readers are cautioned that forward-looking statements contained in the Y2K
update should be read in conjunction with the Company's disclosures under the
heading: "FORWARD LOOKING INFORMATION."
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
10
Part II
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on page 13.
(b) The Company did not file any reports on Form 8-K during the
period covered by this report.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
------------------------------------------
(Registrant)
Date July 2, 1999 /s/ Bruce D. Hertzke
------------------ ------------------------------------------
Bruce D. Hertzke
Chairman of the Board, Chief Executive
Officer, and President
(Principal Executive Officer)
Date July 2, 1999 /s/ Edwin F. Barker
------------------ ------------------------------------------
Edwin F. Barker
Vice President - Chief Financial Officer
(Principal Financial Officer)
12
EXHIBIT INDEX
10j. Amended and restated Winnebago Industries, Inc. Executive Share Option
Plan.
27 Financial Data Schedule.
13