SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 24, 2001 ------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number 1-6403 ------ WINNEBAGO INDUSTRIES, INC. (Exact name of registrant as specified in its charter) IOWA 42-0803978 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 152, Forest City, Iowa 50436 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (641) 585-3535 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___. There were 20,525,160 shares of $.50 par value common stock outstanding on April 6, 2001.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO REPORT ON FORM 10-Q Page Number ----------- PART I. FINANCIAL INFORMATION: Consolidated Balance Sheets (Interim period information unaudited) 1 & 2 Unaudited Consolidated Statements of Income 3 Unaudited Consolidated Condensed Statements of Cash Flows 4 Unaudited Condensed Notes to Consolidated Financial Statements 5 - 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 11 PART II. OTHER INFORMATION 12- 14
Part I Financial Information Item 1. WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in thousands FEBRUARY 24, AUGUST 26, ASSETS 2001 2000 - -------------------------------------------------- ------------ ---------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 58,034 $ 51,443 Receivables, less allowance for doubtful accounts ($1,100 and $1,168, respectively) 17,605 32,045 Dealer financing receivables, less allowance for doubtful accounts ($33 and $27, respectively) 37,867 32,696 Inventories 89,160 85,707 Prepaid expenses 4,201 3,952 Deferred income taxes 7,675 7,675 -------- -------- Total current assets 214,542 213,518 -------- -------- PROPERTY AND EQUIPMENT, at cost Land 1,138 1,138 Buildings 45,920 45,219 Machinery and equipment 81,067 78,099 Transportation equipment 5,504 5,414 -------- -------- 133,629 129,870 Less accumulated depreciation 87,113 84,415 -------- -------- Total property and equipment, net 46,516 45,455 -------- -------- INVESTMENT IN LIFE INSURANCE 21,636 21,028 -------- -------- DEFERRED INCOME TAXES, NET 20,635 20,635 -------- -------- OTHER ASSETS 7,814 8,050 -------- -------- TOTAL ASSETS $311,143 $308,686 ======== ======== See Unaudited Condensed Notes to Consolidated Financial Statements 1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in thousands FEBRUARY 24, AUGUST 26, LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000 - ------------------------------------------------------------------- -------- (Unaudited) CURRENT LIABILITIES Accounts payable, trade $ 21,478 $ 26,212 Income tax payable 13,917 10,381 Accrued expenses: Insurance 5,109 5,384 Product warranties 7,230 8,114 Accrued compensation 9,958 13,924 Promotional 6,354 3,145 Other 3,855 4,675 -------- -------- Total current liabilities 67,901 71,835 -------- -------- POSTRETIREMENT HEALTH CARE AND DEFERRED 63,610 61,942 COMPENSATION BENEFITS -------- -------- STOCKHOLDERS' EQUITY Capital stock, common, par value $.50; authorized 60,000,000 shares: issued 25,882,000 and 25,878,000 shares, respectively 12,941 12,939 Additional paid-in capital 21,822 21,994 Reinvested earnings 208,225 195,556 -------- -------- 242,988 230,489 Less treasury stock, at cost 63,356 55,580 -------- -------- Total stockholders' equity 179,632 174,909 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $311,143 $308,686 ======== ======== See Unaudited Condensed Notes to Consolidated Financial Statements 2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME ================================================================================ IN THOUSANDS EXCEPT PER SHARE DATA <TABLE> <CAPTION> THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ------------------------- -------------------------- February 24, February 26, February 24, February 26, 2001 2000 2001 2000 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net revenues $ 142,531 $ 189,568 $ 306,698 $ 374,514 Cost of goods sold 125,365 160,997 267,049 316,794 --------- --------- --------- --------- Gross profit 17,166 28,571 39,649 57,720 --------- --------- --------- --------- Operating expenses: Selling 5,470 5,723 11,809 12,212 General and administrative 3,146 5,845 5,910 10,445 --------- --------- --------- --------- Total operating expenses 8,616 11,568 17,719 22,657 --------- --------- --------- --------- Operating income 8,550 17,003 21,930 35,063 Financial income 901 905 1,872 1,558 --------- --------- --------- --------- Income before tax and cumulative effect of a change in accounting method 9,451 17,908 23,802 36,621 Provision for taxes 3,267 6,057 8,022 12,389 --------- --------- --------- --------- Income before cumulative effect of a change in accounting method 6,184 11,851 15,780 24,232 Cumulative effect on prior years of the accounting method change -- -- (1,050) -- --------- --------- --------- --------- Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232 ========= ========= ========= ========= Earnings per share - basic (Note 8): Income before cumulative effect of change in accounting method $ .30 $ .54 $ .76 $ 1.10 Cumulative effect on prior years of the accounting method change -- -- (.05) -- --------- --------- --------- --------- Net income $ .30 $ .54 $ .71 $ 1.10 ========= ========= ========= ========= Number of shares used in per share calculations - basic (Note 8) 20,576 21,765 20,839 21,946 ========= ========= ========= ========= Earnings per share - diluted (Note 8): Income before cumulative effect of a change in accounting method $ .30 $ .54 $ .75 $ 1.08 Cumulative effect on prior years of the accounting method change -- -- (.05) -- --------- --------- --------- --------- Net income $ .30 $ .54 $ .70 $ 1.08 ========= ========= ========= ========= Number of shares used in per share calculations - diluted (Note 8) 20,882 22,134 21,082 22,339 ========= ========= ========= ========= Proforma information for the adoption of SAB101 Net revenues $ 142,531 $ 183,004 $ 306,698 $ 370,100 Net income 6,184 11,216 15,780 23,652 Earnings per share - basic .30 .52 .76 1.08 Earnings per share - diluted .30 .51 .75 1.06 </TABLE> See Unaudited Condensed Notes to Consolidated Financial Statements. ================================================================================ 3
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> Dollars in thousands TWENTY-SIX WEEKS ENDED --------------------------- February 24, February 26, 2001 2000 -------- -------- <S> <C> <C> Cash flows from operating activities: Net income as defined on the statements of income $ 14,730 $ 24,232 (page 3) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,636 3,144 Other 106 177 Change in assets and liabilities: Decrease (increase) in receivable and other assets 14,099 (13,381) (Increase) decrease in inventories (3,453) 4,522 Decrease in accounts payable and accrued expenses (7,470) (7,443) Increase in income taxes payable 3,536 12,608 Increase in postretirement benefits 3,862 2,966 -------- -------- Net cash provided by operating activities 29,046 26,825 -------- -------- Cash flows used by investing activities: Purchases of property and equipment (4,795) (7,147) Investments in dealer receivables (52,392) (53,635) Collections of dealer receivables 47,220 46,978 Other (2,481) (2,040) -------- -------- Net cash used by investing activities (12,448) (15,844) -------- -------- Cash flows used by financing activities and capital transactions: Payments for purchase of common stock (9,300) (14,490) Payment of cash dividends (2,062) (2,189) Other 1,355 1,036 -------- -------- Net cash used by financing activities and capital transactions (10,007) (15,643) -------- -------- Net increase (decrease) in cash and cash equivalents 6,591 (4,662) Cash and cash equivalents - beginning of period 51,443 48,160 -------- -------- Cash and cash equivalents - end of period $ 58,034 $ 43,498 ======== ======== </TABLE> See Unaudited Condensed Notes to Consolidated Financial Statements. 4
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the consolidated financial position as of February 24, 2001, the consolidated results of operations for the 26 and 13 weeks ended February 24, 2001 and February 26, 2000, and the consolidated cash flows for the 26 weeks ended February 24, 2001 and February 26, 2000. The statement of income for the 26 weeks ended February 24, 2001, is not necessarily indicative of the results to be expected for the full year. The balance sheet data as of August 26, 2000 was derived from audited financial statements, but does not include all disclosures contained in the Company's Annual Report to Shareholders for the year ended August 26, 2000. These interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto appearing in the Company's Annual Report to Shareholders for the year ended August 26, 2000. NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS On August 27, 2000, the Company adopted the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101 - REVENUE RECOGNITION IN FINANCIAL STATEMENTS, which the SEC staff issued in December 1999. SAB No. 101 sets forth the SEC's views concerning revenue recognition, which the effect on the Company was to begin recording revenue upon receipt of products by Winnebago Industries' dealers rather than upon shipment by the Company. This change required an adjustment to retained earnings in the Company's first quarter 2001 results, which reflects the cumulative effect on the prior year's results due to the application of SAB No. 101. Pro forma information for the 13 and 26 weeks ended February 26, 2000 is disclosed on the Company's Unaudited Consolidated Statements of Income (page 3 of this report). On August 27, 2000, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as amended by SFAS No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES. It requires that all derivatives, including those embedded in other contracts, be recognized as either assets or liabilities and that those financial instruments be measured at fair value. The accounting for changes in the fair value of derivatives depends on their intended use and designation. Management has reviewed the requirements of SFAS No. 133 and has determined that they have no freestanding or embedded derivatives. All contracts that contain provisions meeting the definition of a derivative also meet the requirements of, and have been designated as, normal purchases or sales. The Company's policy is to not use freestanding derivatives and to not enter into contracts with terms that cannot be designated as normal purchases or sales. NOTE 3: INVENTORIES Inventories are valued at the lower of cost or market, with cost being determined under the last-in, first-out (LIFO) method and market defined as net realizable value. Inventories are composed of the following (dollars in thousands): February 24, August 26, 2001 2000 --------- --------- Finished goods........ $ 36,855 $ 28,286 Work in process....... 22,425 19,577 Raw materials......... 52,203 59,674 --------- --------- 111,483 107,537 LIFO reserve.......... (22,323) (21,830) --------- --------- $ 89,160 $ 85,707 ========= ========= 5
NOTE 4: NOTES PAYABLE On October 19, 2000, the Company entered into an unsecured Credit Agreement with Wells Fargo Bank Iowa, National Association as amended. The Credit Agreement provides the Company with a line of credit of $20,000,000 until January 31, 2002, at an interest rate of either (1) a variable rate per annum of one percent below the Bank's prime rate in effect from time to time or (2) a fixed rate per annum determined by the Bank to be one percent above LIBOR, as selected by the Company in accordance with the Credit Agreement. The Credit Agreement contains covenants that, among other matters, impose certain limitations on mergers, transfers of assets and encumbering or otherwise pledging the Company's assets. In addition, the Company is required to satisfy certain financial covenants and tests relating to tangible net worth, total liabilities and current ratio. As of February 24, 2001, the Company was in compliance with these financial covenants. There were no outstanding borrowings under the line of credit at February 24, 2001. NOTE 5: CONTINGENT LIABILITIES AND COMMITMENTS It is customary practice for companies in the recreation vehicle industry to enter into repurchase agreements with lending institutions which have provided wholesale floor plan financing to dealers. The Company's agreements provide for the repurchase of its products from the financing institution in the event of repossession upon a dealer's default. The Company was contingently liable for approximately $251,540,000 and $219,873,000 under repurchase agreements with lending institutions as of February 24, 2001 and August 26, 2000, respectively. Included in these contingent liabilities as of February 24, 2001 and August 26, 2000 are approximately $1,633,000 and $6,846,000, respectively, of certain dealer receivables subject to recourse agreements with Bank of America Specialty Group (formerly NationsBank Specialty Lending Unit) and Conseco Finance Servicing Group (formerly Green Tree Financial). NOTE 6: SUPPLEMENTAL CASH FLOW DISCLOSURE For the periods indicated, the Company paid cash for the following (dollars in thousands): Twenty-Six Weeks Ended ------------------------------ February 24, February 26, 2001 2000 ------------- ------------ Interest $ -- $ 129 Income taxes 3,000 13,205 NOTE 7: REPURCHASE OF OUTSTANDING STOCK On March 8, 2001, the Company completed the repurchase of outstanding shares of its common stock authorized by the Board of Directors on March 15, 2000. Under this repurchase program, 1,163,766 shares were repurchased for an aggregate consideration of approximately $14,999,000. On March 14, 2001, the Board of Directors authorized the repurchase of outstanding shares of the Company's common stock for an aggregate purchase price of up to $15,000,000. 6
NOTE 8: INCOME PER SHARE The following table reflects the calculation of basic and diluted earnings per share for the 13 and 26 weeks ended February 24, 2001 and February 26, 2000: <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------------- --------------------------- February 24, February 26, February 24, February 26, In thousands except per share data 2001 2000 2001 2000 -------- -------- -------- -------- <S> <C> <C> <C> <C> Earnings per share - basic: Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232 -------- -------- -------- -------- Weighted average shares outstanding 20,576 21,765 20,839 21,946 Earnings per share - basic $ .30 $ .54 $ .71 $ 1.10 -------- -------- -------- -------- Earnings per share - assuming dilution: Net income $ 6,184 $ 11,851 $ 14,730 $ 24,232 -------- -------- -------- -------- Weighted average shares outstanding 20,576 21,765 20,839 21,946 Dilutive impact of options outstanding 306 369 243 393 -------- -------- -------- -------- Weighted average shares & potential dilutive shares outstanding 20,882 22,134 21,082 22,339 -------- -------- -------- -------- Earnings per share - assuming dilution $ .30 $ .54 $ .70 $ 1.08 -------- -------- -------- -------- </TABLE> NOTE 9: BUSINESS SEGMENT INFORMATION The Company defines its operations into two business segments: Recreational vehicles and other manufactured products and dealer financing. Recreation vehicles and other manufactured products includes all data relative to the manufacturing and selling of the Company's Class A, B and C motor home products as well as sales of component products for other manufacturers and recreation vehicle related parts and service revenue. Dealer financing includes floorplan and rental unit financing for a limited number of the Company's dealers. Management focuses on operating income as a segment's measure of profit or loss when evaluating a segment's financial performance. Operating income is before interest expense, interest income, and income taxes. A variety of balance sheet ratios are used by management to measure the business. Maximizing the return from each segment's assets excluding cash and cash equivalents is the primary focus. Identifiable assets are those assets used in the operations of each industry segment. General corporate assets consist of cash and cash equivalents, deferred income taxes and other corporate assets not related to the two business segments. General corporate income and expenses include administrative costs. Inter-segment sales and expenses are not significant. For the 26 weeks ended February 24, 2001 and February 26, 2000, the Company's segment information is as follows: <TABLE> <CAPTION> Recreation Vehicles & Other Manufactured Dealer General (dollars in thousands) Products Financing Corporate Total -------------------------------- -------- -------- -------- -------- <S> <C> <C> <C> <C> 26 Weeks Ended February 24, 2001 Net revenues $304,458 $ 2,240 $ -- $306,698 Operating income (loss) 20,162 2,219 (451) 21,930 Identifiable assets 182,192 38,750 90,201 311,143 26 Weeks Ended February 26, 2000 Net revenues $372,719 $ 1,795 $ -- $374,514 Operating income (loss) 33,808 1,739 (484) 35,063 Identifiable assets 183,520 32,466 86,905 302,891 </TABLE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Thirteen Weeks Ended February 24, 2001 Compared to Thirteen Weeks Ended February 26, 2000 Net revenues for recreation vehicles and other manufactured products for the 13 weeks ended February 24, 2001 were $141,320,000, a decrease of $47,323,000, or 25.1 percent from the 13-week period ended February 26, 2000. Motor home unit sales (Class A and C) were 1,804 units, a decrease of 788 units, or 30.4 percent, during the second quarter of fiscal 2001 compared to the second quarter of fiscal 2000. The percentage decrease in net revenues in the second quarter of fiscal 2001 was less than the percentage decrease in motor home unit sales for that period as a result of the Company's sales of more units, as a percentage of the total unit sales, with the higher-priced slideout option during the second quarter of fiscal 2001. Current economic conditions such as higher interest rates and a decline in consumer confidence levels contributed to reductions in unit sales, which resulted in reductions in the Company's net revenues. The Company's expectations for the current fiscal year remain below the past two fiscal year levels as a result of these factors. However, the long-term outlook for motor home sales continues to appear very favorable. Demographic studies for the United States show continued growth of the recreation vehicle industry's prime target market for the next 30 years. Order backlog for the Company's Class A and Class C motor homes was approximately 1,550 and 2,500 orders at February 24, 2001 and February 26, 2000, respectively. The Company includes in its backlog all accepted purchase orders from dealers shippable within the next six months. Orders in backlog can be canceled at the option of the purchaser at any time without penalty and, therefore, backlog may not necessarily be a measure of future sales. Net revenues for dealer financing of Winnebago Acceptance Corporation (WAC) were $1,211,000 for the 13 weeks ended February 24, 2001; an increase of $286,000, or 30.9 percent from the 13-week period ended February 26, 2000. Increased revenues for dealer financing reflect an increase in dealer receivable balances and to a lesser extent, an increase in interest rates charged when comparing the second quarter of fiscal 2001 to the second quarter of fiscal 2000. Gross profit, as a percent of net revenues, was 12.0 percent for the 13 weeks ended February 24, 2001 compared to 15.1 percent for the 13 weeks ended February 26, 2000. The Company's lower volume of production and sales resulted in the lower margins. Selling expenses were $5,470,000, or 3.8 percent of net revenues during the second quarter of fiscal 2001 compared to $5,723,000, or 3.0 percent of net revenues during the second quarter of fiscal 2000. The decrease in dollars can be attributed primarily to a reduction in incentives paid to the Company's outside sales staff and to a reduction in Company sponsored promotional programs; these reductions were partially offset by increases in Company advertising costs. The increase in percentage was caused by the decreased sales volume during the second quarter of fiscal 2001. General and administrative expenses were $3,146,000, or 2.2 percent of net revenues during the 13 weeks ended February 24, 2001 compared to $5,845,000, or 3.1 percent of net revenues during the 13 weeks ended February 26, 2000. The decreases in dollars and percentage when comparing the two quarters were primarily due to reductions in employee incentive programs and lower legal and insurance costs. The Company had net financial income of $901,000 for the second quarter of fiscal 2001 compared to net financial income of $905,000 for the comparable quarter of fiscal 2000. During the 13 weeks ended February 24, 2001, the Company recorded $917,000 of net interest income and losses of $16,000 in foreign currency transactions. During the 13 weeks ended February 26, 2000, the Company recorded $909,000 of net interest income and losses of $4,000 in foreign currency transactions. The increase in interest income when comparing the two periods was due primarily to larger cash balances available for investing during the second quarter of fiscal 2001. 8
The effective income tax rate increased to 34.6 percent during the second quarter of fiscal 2001 from 33.8 percent during the second quarter of fiscal 2000. The primary reason for the increase was due to higher state income taxes during the second quarter of fiscal 2001. For the second quarter of fiscal 2001, the Company had net income of $6,184,000, or $.30 per diluted share compared to the second quarter of fiscal 2000's net income of $11,851,000, or $.54 per diluted share. Net income and earnings per diluted share decreased by 47.8 percent and 44.4 percent, respectively, when comparing the second quarter of fiscal 2001 to the second quarter of fiscal 2000. The difference in percentages when comparing the net income to the net earnings per share was due primarily to a lower number of outstanding shares of the Company's common stock at February 24, 2001 (see Note 7). Twenty-Six Weeks Ended February 24, 2001 Compared to Twenty-Six Weeks Ended February 26, 2000 Net revenues for manufactured products for the 26 weeks ended February 24, 2001 were $304,458,000, a decrease of $68,261,000, or 18.3 percent from the 26-week period ended February 26, 2000. Motor home unit sales (Class A and C) were 4,001 units, a decrease of 1,216 units, or 23.3 percent during the 26 weeks ended February 24, 2001 when compared to the 26 weeks ended February 26, 2000. The percentage decrease in net revenues during the first half of fiscal 2001 was less than the percentage decrease in motor home unit sales for that period as a result of the Company's sales of more units, as a percentage of the total unit sales, with the higher-priced slideout option during the first half of fiscal 2001. The Company's expectations for the remainder of the fiscal year remain below prior year levels due to current economic conditions. However, the long-term outlook for motor home sales continues to appear very favorable. Demographic studies for the United States show continued growth of the recreation vehicle industry's prime target market for the next 30 years. Net revenues for dealer financing of WAC were $2,240,000 for the 26 weeks ended February 24, 2001, an increase of $445,000 or 24.8 percent from the 26-week period ended February 26, 2000. Increased revenues for dealer financing reflect an increase in interest rates charged and to a lesser extent an increase in dealer receivable balances when comparing the first half of fiscal 2001 to the first half of fiscal 2000. Gross profit, as a percent of net revenue, was 12.9 percent for the 26 weeks ended February 24, 2001 compared to 15.4 percent for the 26 weeks ended February 26, 2000. The Company's lower volume of production and sales of motor homes resulted in the lower margins. Selling expenses were $11,809,000, or 3.9 percent of net revenues during the first six months of fiscal 2001 compared to $12,212,000, or 3.3 percent of net revenues during the first six months of fiscal 2000. The decrease in dollars can be attributed primarily to a reduction in incentives paid to the Company's outside sales staff and to a reduction in Company sponsored promotional programs as well as to reductions in advertising expenses. The increase in percentage was caused by the decreased sales volume during the first six months of fiscal 2001. General and administrative expenses were $5,910,000, or 1.9 percent of net revenue during the 26 weeks ended February 24, 2001 compared to $10,445,000, or 2.8 percent of net revenues during the 26 weeks ended February 26, 2000. The decreases in dollars and percentage when comparing the two periods were primarily due to reductions in employee incentive programs and lower insurance and legal costs. The Company had net financial income of $1,872,000 for the first half of fiscal 2001 compared to net financial income of $1,558,000 for the comparable period of fiscal 2000. During the first half of fiscal 2001, the Company recorded $1,869,000 of net interest income and gains of $3,000 in foreign currency transactions. During the first half of fiscal 2000, the Company recorded $1,535,000 of net interest income and gains of $23,000 in foreign currency transactions. The increase in interest income when comparing the two periods was due primarily to higher rates of return earned on available invested cash and larger cash balances during the first half of fiscal 2001. The effective income tax rate during the 26 weeks ended February 24, 2001 was 33.7 percent compared to 33.8 percent during the 26 weeks ended February 26, 2000. 9
For the 26 weeks ended February 24, 2001, the Company had income before cumulative effect of a change in accounting method (SAB No. 101) of $15,780,000, or $.75 per diluted share. The comparable results for the 26 weeks ended February 26, 2000 was income of $24,232,000, or $1.08 per diluted share. The Company adopted SAB No. 101 in fiscal 2001. SAB No. 101 which was issued by the SEC in December 1999 sets forth the views of the SEC concerning revenue recognition, the effect of which on the Company is to record revenue upon receipt of products to dealers rather than upon shipment by the Company. Adoption of SAB 101 during the 26 weeks ended February 24, 2001 resulted in a decrease to the Company's income of $1,050,000, or $.05 per diluted share. For the 26 weeks ended February 24, 2001, the Company had net income of $14,730,000, or $.70 per diluted share compared to the 26 weeks ended February 26, 2000's net income of $24,232,000, or $1.08 per diluted share. Net income and earnings per diluted share decreased by 39.2 percent and 35.2 percent, respectively, when comparing the two periods. The difference in percentages when comparing the net income to the net earnings per share was due primarily to a lower number of outstanding shares of the Company's common stock at February 24, 2001 (see Note 7). LIQUIDITY AND FINANCIAL CONDITION The Company meets its working capital requirements, capital equipment requirements and cash requirements of subsidiaries with funds generated internally and funds from agreements with financial institutions. At February 24, 2001, working capital was $146,641,000, an increase of $4,958,000 from the amount at August 26, 2000. The Company's principal uses of cash during the 26 weeks ended February 24, 2001 were $9,300,000 for the purchase of shares of the Company's Common Stock, $4,795,000 for the purchase of property and equipment and dividend payments of $2,062,000. The Company's sources and uses of cash during the 26 weeks ended February 24, 2001 are set forth in the unaudited consolidated condensed statement of cash flows for that period. Principal known demands at February 24, 2001 on the Company's liquid assets for the remainder of fiscal 2001 include approximately $6,000,000 of capital expenditures and payments of cash dividends. In addition, on March 14, 2001, the Board of Directors authorized the repurchase of outstanding shares of the Company's common stock for an aggregate purchase price of up to $15,000,000. Management currently expects its cash on hand, funds from operations and borrowings available under existing credit facilities to be sufficient to cover both short-term and long-term operating requirements. FORWARD LOOKING INFORMATION Except for the historical information contained herein, certain of the matters discussed in this report are "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties, including, but not limited to, availability and price of fuel, significant increase in interest rates, a general slowdown in the economy, availability of chassis, slower than anticipated sales of new or existing products, new product introductions by competitors, collections of dealer receivables, and other factors which may be disclosed throughout this Form 10-Q or in the Company's Annual Report on Form 10-K for the year ended August 26, 2000. Any forecasts and projections in this report are "forward looking statements" and are based on management's current expectations of the Company's near-term results, based on current information available pertaining to the Company, including the aforementioned risk factors, actual results could differ materially. 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of February 24, 2001, the Company had an investment portfolio of fixed income securities, which are classified as cash and cash equivalents of $58.0 million. These securities, like all fixed income investments, are subject to interest rate risk and will decline in value if market interest rates increase. However, the Company has the ability to hold its fixed income investments until maturity, and therefore, the Company would not expect to recognize an adverse impact in income or cash flows in such an event. As of February 24, 2001, the Company had dealer financing receivables in the amount of $37.9 million. Interest rates charged on these receivables vary based on the prime rate and are adjusted monthly. 11
Part II Other Information Item 4 Submission of Matters to a Vote of Security Holders (a) The annual meeting of shareholders was held January 16, 2001. (b) The breakdown of votes for the election of two directors was as follows*: Votes Cast For Authority Withheld -------------- ------------------ Joseph W. England (2004) 18,086,494 228,257 Richard C. Scott (2004) 18,103,235 211,516 * There were no broker non-votes. ( ) Represents year of Annual Meeting that individual's term will expire. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - See Exhibit Index on page 14. (b) The Company did not file any reports on Form 8-K during the period covered by this report. 12
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WINNEBAGO INDUSTRIES, INC. -------------------------------- (Registrant) Date April 6, 2001 /s/ Bruce D. Hertzke -------------------------------- Bruce D. Hertzke Chairman of the board, Chief Executive Officer, and President (Principal Executive Officer) Date April 6, 2001 /s/ Edwin F. Barker -------------------------------- Edwin F. Barker Vice President -- Chief Financial Officer (Principal Financial Officer)
EXHIBIT INDEX 4d. First Amendment dated October 19, 2000 to the Credit Agreement between Winnebago Industries, Inc. and Wells Fargo Bank Iowa, National Association. 10i. Amendment to Winnebago Industries, Inc. Executive Share Option Plan. 10n. Executive Change of Control Agreement dated January 17, 2001 between Winnebago Industries, Inc. and Bruce D. Hertzke. 10o. Executive Change of Control Agreement dated January 17, 2001 between Winnebago Industries, Inc. and Edwin F. Barker. 10p. Executive Change of Control Agreement dated January 17, 2001 between Winnebago Industries, Inc. and Raymond M. Beebe. 10q. Executive Change of Control Agreement dated January 17, 2001 between Winnebago Industries, Inc. and Robert L. Gossett. 10r. Executive Change of Control Agreement dated January 17, 2001 between Winnebago Industries, Inc. and James P. Jaskoviak. 10s. Executive Change of Control Agreement dated January 17, 2001 between Winnebago Industries, Inc. and Robert J. Olson.