WINNEBAGO INDUSTRIES INC - FORM 8-K - EX-99.1 - EXHIBIT - March 27, 2014

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News Release
 


Contact: Sheila Davis - PR/IR Mgr. - 641-585-6803 - sdavis@wgo.net

Winnebago Industries Announces Second-Quarter Fiscal 2014 Results

Revenue Increased 29%, Contributing to Earnings Per Share Growth of 59%
Despite Weather-Related Challenges

FOREST CITY, IOWA, March 27, 2014 - Winnebago Industries, Inc. (NYSE:WGO), a leading United States (U.S.) recreation vehicle manufacturer, today reported financial results for the Company's second quarter fiscal period ended March 1, 2014.

Second-Quarter Fiscal 2014 Results
Revenues for the Fiscal 2014 second quarter were $228.8 million, an increase of 29.2%, versus $177.2 million for the Fiscal 2013 second quarter. Comparing the Fiscal 2014 second quarter to the same period of Fiscal 2013, operating income rose 58.2% to $14.0 million, net income grew 52.6% to $9.6 million, and diluted earnings per share increased 59.1% to $0.35 from $0.22.

Earnings growth in the second quarter was driven by motorhome unit growth, coupled with gross margin improvement and incremental leverage of operating expenses. However, the improvement in earnings was mitigated due to various factors, including severe winter weather conditions that caused inefficiencies and brought about greater expenses.

Revenue growth in the second quarter was primarily comprised of motorhome unit growth of 44.8%, partially offset by lower motorhome average selling prices (ASPs) of 9.8% as a result of product mix. Year over year, second-quarter Class A unit deliveries grew 26.8%, Class B unit deliveries improved 108.4% and Class C unit deliveries increased 62.4%.

Additionally, second-quarter towable unit deliveries grew 4.9% and towable ASPs improved 9.4%, contributing to towable revenue growth of 15.4% and a positive earnings contribution. Year-over-year, second-quarter travel trailer towable unit deliveries increased 5.7% and fifth wheel towable unit deliveries increased 1.8%.
  
Gross profit as a percentage of revenues improved to 10.0% in the Fiscal 2014 second quarter compared to 9.7% in the same period of Fiscal 2013, an improvement of 30 basis points. The increase was primarily attributable to greater delivery volumes, partially offset by higher costs due to weather-related production delays, a temporary component outsourcing program, and higher utility expenses.

Operating expenses as a percentage of revenues were leveraged during the quarter and contributed 50 basis points to the improvement in operating income margin, when excluding a gain on a sale of real estate of $629,000.

As previously announced, Winnebago received a large incremental rental order from Apollo Motorhome Holidays, an RV rental company, to be delivered during the Company’s Fiscal 2014 third quarter. The order is for approximately 500 units, however, Winnebago has contractually agreed to repurchase up to two thirds of the units at specified prices after one season of rental use. Therefore, only one third of the order will be reported as typical motorhome sales during the third quarter. The other two thirds of the units will be accounted for as lease revenue on a straight line basis over the period the units are held by Apollo due to the repurchase option. As a result, only one third of these units are reported in unit order backlog as of March 1, 2014.

First Six-Months Fiscal 2014 Results
Revenues for the 26 weeks of Fiscal 2014 were $451.5 million, an increase of 21.8%, from $370.7 million for the 27 weeks of Fiscal 2013. The sales growth was primarily comprised of motorhome unit growth of 37.5%, partially offset by lower motorhome ASPs of 10.0% as a result of product mix. Comparing the first half of Fiscal 2014 to the same period of Fiscal 2013, operating income rose 59.6% to $30.0 million, net income grew 51.6% to $20.7 million, and diluted earnings per increased 54.2% to $0.74 from $0.48.





Share Repurchase Update
During the Fiscal 2014 second quarter, the Company repurchased 615,715 shares of its common stock for approximately $15.9 million, at an average price of $25.86 per share. At March 1, 2014, the Company had authority to repurchase shares worth up to $18.4 million remaining under its stock repurchase program, which has no time restriction.

Management Comments
Chairman, CEO and President Randy Potts commented, “We achieved strong results for the quarter, notwithstanding challenges associated with the severe winter weather. Although we scheduled four additional production days to satisfy motorized backlog, the severe weather conditions caused numerous work delays and closures at both our Iowa and Indiana facilities, which led to the loss of multiple production days, and contributed to increased expenses due to inefficiencies that limited margin expansion and earnings growth. The improved results are testimony to the hard work of our team and improved dealer and retail consumer demand for our products.

"The Winnebago brand was recognized as the number one selling motorhome brand in 2013 by Statistical Surveys and has received this outstanding recognition every year since motorhome retail registrations were first reported in 1974. With favorable demand for our strong product lineup, including several new product introductions, we are optimistic for continued growth within the motorhome market."

Chief Financial Officer Sarah Nielsen said, “Our operating cash flow for the second quarter was impacted by a receivables increase of approximately $27 million. The harsh winter weather conditions caused significant disruptions to our independent transportation company, which prevented them from delivering product timely to our dealers, and as a result increased our receivables. We anticipate positive operating cash flow in the third quarter as those receivables are reduced.”

Conference Call
Winnebago Industries, Inc. will conduct a conference call to discuss second-quarter results at 9 a.m. Central Time today. Members of the news media, investors and the general public are invited to access a live broadcast of the conference call via the Investor Relations page of the Company's website at http://www.wgo.net/investor.html. The event will be archived and available for replay for the next 90 days.

About Winnebago Industries
Winnebago Industries, Inc., "The Most Recognized Name in Motorhomes®", is a leading U.S. manufacturer of recreation vehicles, which are used primarily in leisure travel and outdoor recreation activities. The Company and its subsidiary build quality motorhomes, travel trailers, fifth wheel products and transit buses under the Winnebago, Itasca, Winnebago Touring Coach, SunnyBrook and Metro brand names. Winnebago Industries has received the Quality Circle Award from the Recreation Vehicle Dealers Association every year since 1996. The Company's common stock is listed on the New York and Chicago Stock Exchanges and traded under the symbol WGO. Options for the Company's common stock are traded on the Chicago Board Options Exchange. For access to Winnebago Industries' investor relations material or to add your name to an automatic email list for Company news releases, visit, http://www.wgo.net/investor.html.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to availability of chassis and other key component parts, increases in interest rates, availability of credit, low consumer confidence, significant increase in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, a breach of our information technology systems, the effect of global tensions, integration of operations relating to mergers and acquisitions activities and other factors. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company's filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or from the Company upon request. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained in this release or to reflect any changes in the Company's expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.
# # #





Winnebago Industries, Inc.
Consolidated Statements of Operations
(In thousands, except percent and per share data)
(Unaudited)

 
Three Months Ended
 
March 1, 2014
 
March 2, 2013
Net revenues
$
228,811

 
100.0
 %
 
$
177,166

 
100.0
 %
Cost of goods sold
205,966

 
90.0
 %
 
159,975

 
90.3
 %
Gross profit
22,845

 
10.0
 %
 
17,191

 
9.7
 %
Operating expenses
 
 
 
 
 
 
 
Selling
4,489

 
2.0
 %
 
3,831

 
2.2
 %
General and administrative
4,949

 
2.2
 %
 
4,488

 
2.5
 %
Gain on sale of real estate
(629
)
 
(0.3
)%
 
—

 
—
 %
Total operating expenses
8,809

 
3.8
 %
 
8,319

 
4.7
 %
Operating income
14,036

 
6.1
 %
 
8,872

 
5.0
 %
Non-operating expense
(74
)
 
—
 %
 
(19
)
 
—
 %
Income before income taxes
13,962

 
6.1
 %
 
8,853

 
5.0
 %
Provision for taxes
4,369

 
1.9
 %
 
2,568

 
1.4
 %
Net income
$
9,593

 
4.2
 %
 
$
6,285

 
3.5
 %
Income per common share:
 
 
 
 
 
 
 
Basic
$
0.35

 
 
 
$
0.22

 
 
Diluted
$
0.35

 
 
 
$
0.22

 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
27,595

 
 
 
28,084

 
 
Diluted
27,724

 
 
 
28,191

 
 
Percentages may not add due to rounding differences.


 
Six Months(1) Ended
 
March 1, 2014
 
March 2, 2013
Net revenues
$
451,481

 
100.0
 %
 
$
370,720

 
100.0
%
Cost of goods sold
402,674

 
89.2
 %
 
332,782

 
89.8
%
Gross profit
48,807

 
10.8
 %
 
37,938

 
10.2
%
Operating expenses
 
 
 
 
 
 
 
Selling
8,822

 
2.0
 %
 
8,792

 
2.4
%
General and administrative
10,572

 
2.3
 %
 
10,300

 
2.8
%
(Gain) loss on sale of real estate
(629
)
 
(0.1
)%
 
28

 
—
%
Total operating expenses
18,765

 
4.2
 %
 
19,120

 
5.2
%
Operating income
30,042

 
6.7
 %
 
18,818

 
5.1
%
Non-operating income
17

 
—
 %
 
595

 
0.2
%
Income before income taxes
30,059

 
6.7
 %
 
19,413

 
5.2
%
Provision for taxes
9,320

 
2.1
 %
 
5,737

 
1.5
%
Net income
$
20,739

 
4.6
 %
 
$
13,676

 
3.7
%
Income per common share:
 
 
 
 
 
 
 
Basic
$
0.75

 
 
 
$
0.49

 
 
Diluted
$
0.74

 
 
 
$
0.48

 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
27,723

 
 
 
28,196

 
 
Diluted
27,850

 
 
 
28,280

 
 
Percentages may not add due to rounding differences.

(1) The six months ended March 1, 2014 and March 2, 2013 contained 26 weeks and 27 weeks, respectively.





Winnebago Industries, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
March 1,
2014
 
August 31,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
16,258

 
$
64,277

Receivables, net
69,628

 
29,145

Inventories
124,289

 
112,541

Prepaid expenses and other assets
8,029

 
8,277

Income taxes receivable and prepaid
1,061

 
1,868

Deferred income taxes
8,264

 
7,742

Total current assets
227,529

 
223,850

Total property and equipment, net
20,411

 
20,266

Long-term investments
—

 
2,108

Investment in life insurance
25,587

 
25,051

Deferred income taxes
24,087

 
25,649

Goodwill
1,228

 
1,228

Other assets
10,284

 
10,993

Total assets
$
309,126

 
$
309,145

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
28,867

 
$
28,142

Accrued expenses
40,769


42,212

Total current liabilities
69,636

 
70,354

Long-term liabilities:
 
 
 
Unrecognized tax benefits
3,641

 
3,988

Postretirement health care and deferred compensation benefits
59,611

 
64,074

Total long-term liabilities
63,252

 
68,062

Stockholders' equity
176,238

 
170,729

Total liabilities and stockholders' equity
$
309,126

 
$
309,145







Winnebago Industries, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six Months (1) Ended
 
March 1,
2014
 
March 2,
2013
Operating activities:
 
 
 
Net income
$
20,739

 
$
13,676

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
1,966

 
2,178

LIFO expense
608

 
551

Stock-based compensation
1,388

 
996

Deferred income taxes including valuation allowance
(152
)
 
(1,550
)
Postretirement benefit income and deferred compensation expenses
(405
)
 
284

(Benefit) provision for doubtful accounts
(1
)
 
6

Gain on sale of property
(702
)
 
(26
)
Gain on life insurance
—

 
(509
)
Increase in cash surrender value of life insurance policies
(440
)
 
(547
)
Change in assets and liabilities:
 
 
 
Inventories
(12,356
)
 
(37,401
)
Receivables, prepaid and other assets
(40,056
)
 
(6,334
)
Income taxes and unrecognized tax benefits
1,269

 
1,618

Accounts payable and accrued expenses
536

 
3,052

Postretirement and deferred compensation benefits
(1,924
)
 
(2,136
)
Net cash used in operating activities
(29,530
)
 
(26,142
)
 
 
 
 
Investing activities:
 
 
 
Proceeds from the sale of investments, at par
2,350

 
250

Proceeds from life insurance
—

 
974

Purchases of property and equipment
(3,772
)
 
(2,443
)
Proceeds from the sale of property
2,392

 
614

Payments of COLI borrowings
—

 
(1,371
)
Other
(105
)
 
151

Net cash provided by (used in) investing activities
865

 
(1,825
)
 
 
 
 
Financing activities:
 
 
 
Payments for purchase of common stock
(21,484
)
 
(8,367
)
Proceeds from exercise of stock options
2,080

 
—

Other
50

 
(114
)
Net cash used in financing activities
(19,354
)
 
(8,481
)
 
 
 
 
Net decrease in cash and cash equivalents
(48,019
)
 
(36,448
)
Cash and cash equivalents at beginning of period
64,277

 
62,683

Cash and cash equivalents at end of period
$
16,258

 
$
26,235

 
 
 
 
Supplemental cash flow disclosure:
 
 
 
Income taxes paid, net of refunds
$
8,200

 
$
5,670


(1) The six months ended March 1, 2014 and March 2, 2013 contained 26 weeks and 27 weeks, respectively.





Winnebago Industries, Inc.
Deliveries
 
Quarter Ended
 
Change
(In units)
March 1,
2014
Product
Mix % (1)
 
March 2,
2013
Product
Mix % (1)
 
Units
%
Class A gas
589

28.7
%
 
503

35.4
%
 
86

17.1
%
Class A diesel
456

22.2
%
 
321

22.6
%
 
135

42.1
%
Total Class A
1,045

50.9
%
 
824

58.1
%
 
221

26.8
%
Class B
198

9.6
%
 
95

6.7
%
 
103

108.4
%
Class C
812

39.5
%
 
500

35.2
%
 
312

62.4
%
Total motorhomes
2,055

100.0
%
 
1,419

100.0
%
 
636

44.8
%
 
 
 
 
 
 
 
 
 
Travel trailer
463

80.5
%
 
438

79.9
%
 
25

5.7
%
Fifth wheel
112

19.5
%
 
110

20.1
%
 
2

1.8
%
    Total towables
575

100.0
%
 
548

100.0
%
 
27

4.9
%
(1) Percentages may not add due to rounding differences.
 
Six Months(1) Ended
 
Change
(In units)
March 1,
2014
Product
Mix % (2)
 
March 2,
2013
Product
Mix % (1)
 
Units

%
Class A gas
1,299

32.0
%
 
1,123

38.0
%
 
176

15.7
 %
Class A diesel
853

21.0
%
 
666

22.6
%
 
187

28.1
 %
Total Class A
2,152

53.0
%
 
1,789

60.6
%
 
363

20.3
 %
Class B
300

7.4
%
 
185

6.3
%
 
115

62.2
 %
Class C
1,608

39.6
%
 
979

33.2
%
 
629

64.2
 %
Total motor homes
4,060

100.0
%
 
2,953

100.0
%
 
1,107

37.5
 %
 
 
 
 
 
 
 
 
 
Travel trailer
870

82.2
%
 
846

76.6
%
 
24

2.8
 %
Fifth wheel
189

17.8
%
 
259

23.4
%
 
(70
)
(27.0
)%
Total towables
1,059

100.0
%
 
1,105

100.0
%
 
(46
)
(4.2
)%
(1) The six months ended March 1, 2014 and March 2, 2013 contained 26 weeks and 27 weeks, respectively.  
(2) Percentages may not add due to rounding differences.
Backlog
 
As Of
 
Change
 
March 1, 2014
 
March 2, 2013
 
 
 
 
Units
% (1)
 
Units
% (1)
 
Units
%
Class A gas
1,129

38.9
%
 
1,216

44.2
%
 
(87
)
(7.2
)%
Class A diesel
274

9.4
%
 
375

13.6
%
 
(101
)
(26.9
)%
Total Class A
1,403

48.4
%
 
1,591

57.8
%
 
(188
)
(11.8
)%
Class B
274

9.4
%
 
121

4.4
%
 
153

126.4
 %
Class C
1,223

42.2
%
 
1,040

37.8
%
 
183

17.6
 %
Total motorhome backlog(2)
2,900

100.0
%
 
2,752

100.0
%
 
148

5.4
 %
 
 
 
 
 
 
 
 
 
Travel trailer
169

82.0
%
 
325

85.3
%
 
(156
)
(48.0
)%
Fifth wheel
37

18.0
%
 
56

14.7
%
 
(19
)
(33.9
)%
    Total towable backlog (2)
206

100.0
%
 
381

100.0
%
 
(175
)
(45.9
)%
 
 
 
 
 
 
 
 
 
Total approximate backlog revenue dollars (in 000's):
 
 
 
 
 
 
Motorhome
$
260,095

 
 
$
277,270

 
 
$
(17,175
)
(6.2
)%
Towable
4,853

 
 
8,105

 
 
(3,252
)
(40.1
)%
(1) 
Percentages may not add due to rounding differences.
(2) 
Our backlog includes all accepted orders from dealers to be shipped within the next six months. Orders in backlog can be canceled or postponed at the option of the purchaser and, therefore, backlog may not necessarily be an accurate measure of future sales.
Dealer Inventory
 
Units As Of
 
Change
 
March 1,
2014
 
March 2,
2013
 
Units
%
Motorhomes
3,907

 
2,392

 
1,515

63.3
 %
Towables
1,772

 
1,775

 
(3
)
(0.2
)%







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