WINNEBAGO INDUSTRIES INC - FORM 8-K - EX-99.1 - EXHIBIT - June 26, 2014

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News Release
 


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

Winnebago Industries Announces Third Quarter Fiscal 2014 Results

Strongest Quarterly Revenues Since 2005 Contributes to Operating Income
Growth of 52% and Earnings Per Share Growth of 56%

FOREST CITY, IOWA, June 26, 2014 - Winnebago Industries, Inc. (NYSE:WGO), a leading United States (U.S.) recreation vehicle manufacturer, today reported financial results for the Company's third quarter fiscal period ended May 31, 2014.

Third-Quarter Fiscal 2014 Results
Revenues for the Fiscal 2014 third quarter were $247.7 million, an increase of 13.5%, versus $218.2 million for the Fiscal 2013 third quarter. Comparing the Fiscal 2014 third quarter to the same period of Fiscal 2013, operating income rose 52.1% to $15.6 million, net income grew 48.6% to $11.4 million, and diluted earnings per share increased 55.6% to $0.42 from $0.27.

Year over year, third quarter earnings growth was driven by higher motorhome unit sales, gross margin improvement, operating expense leverage, and in part a significant improvement in towables operating income. Motorhome unit growth of 17.8% was partially offset by lower motorhome average selling prices (ASP) of 4.1% as a result of product mix, leading to motorhome revenue growth of 13.6%. Additionally, third-quarter towable unit deliveries grew 2.0% and towable ASP increased 11.5%, contributing to towable revenue growth of 11.9% compared to the same period of last year.

Gross profit as a percentage of revenues improved to 10.7% in the Fiscal 2014 third quarter compared to 9.7% in the same period of Fiscal 2013, an improvement of 100 basis points. The increase was primarily attributable to greater delivery volumes, favorable product mix and year-over-year price changes.
 
Fiscal 2014 third quarter operating expenses as a percentage of revenues were favorably leveraged given virtually flat year-over- year operating expenses, combined with higher revenues, to contribute 60 basis points to the improvement in operating income margin.

Based on internally reported retail information, the Company has shown a 60% increase in motorhome retail registrations in the third quarter of Fiscal 2014 compared to the same period last year, and a 34% year-over-year increase on a rolling 12-month basis.

First Nine-Month Fiscal 2014 Results
Revenues for the 39 weeks of Fiscal 2014 were $699.2 million, an increase of 18.7%, from $588.9 million for the 40 weeks of Fiscal 2013. Comparing the first nine months of Fiscal 2014 to the same period of Fiscal 2013, operating income rose 57.0% to $45.6 million, net income grew 50.6% to $32.1 million, and diluted earnings per share increased 52.6% to $1.16 from $0.76.

Management Comments
Chairman, CEO and President Randy Potts commented, “Driven by strong demand for our products, we achieved the highest quarterly revenue figure since 2005, which led to substantial year-over-year profit growth in the third quarter. This was in spite of not including revenue of approximately $18 million related to certain rental units subject to repurchase option. During the quarter our team operated efficiently and effectively to successfully meet increased demand for our rental units all while maintaining deliveries with our other customers. We are very pleased with our retail growth during the quarter, which is driven by increased rental sales and increased retail consumer demand.

"At our Dealer Days event this April, we introduced several new products and floorplans that were well received by our dealer partners. As evidenced by continued strength in our dealer and retail demand, we believe we will continue to capitalize on future growth opportunities."

Chief Financial Officer Sarah Nielsen added, “We generated nearly $40 million in operating cash flow during the third quarter driven by profitability and positive changes in working capital. With over $50 million in cash and no debt, our balance sheet is in a strong position."





Conference Call
Winnebago Industries, Inc. will conduct a conference call to discuss third-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
 
May 31, 2014
 
June 1, 2013
Net revenues
$
247,747

 
100.0
%
 
$
218,199

 
100.0
%
Cost of goods sold
221,266

 
89.3
%
 
197,002

 
90.3
%
Gross profit
26,481

 
10.7
%
 
21,197

 
9.7
%
Operating expenses
 
 
 
 
 
 
 
Selling
4,887

 
2.0
%
 
4,857

 
2.2
%
General and administrative
6,005

 
2.4
%
 
6,092

 
2.8
%
Total operating expenses
10,892

 
4.4
%
 
10,949

 
5.0
%
Operating income
15,589

 
6.3
%
 
10,248

 
4.7
%
Non-operating income
735

 
0.3
%
 
144

 
0.1
%
Income before income taxes
16,324

 
6.6
%
 
10,392

 
4.8
%
Provision for taxes
4,939

 
2.0
%
 
2,731

 
1.3
%
Net income
$
11,385

 
4.6
%
 
$
7,661

 
3.5
%
Income per common share:
 
 
 
 
 
 
 
Basic
$
0.42

 
 
 
$
0.27

 
 
Diluted
$
0.42

 
 
 
$
0.27

 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
27,209

 
 
 
27,987

 
 
Diluted
27,319

 
 
 
28,087

 
 
Percentages may not add due to rounding differences.


 
Nine Months(1) Ended
 
May 31, 2014
 
June 1, 2013
Net revenues
$
699,228

 
100.0
 %
 
$
588,919

 
100.0
%
Cost of goods sold
623,940

 
89.2
 %
 
529,784

 
90.0
%
Gross profit
75,288

 
10.8
 %
 
59,135

 
10.0
%
Operating expenses
 
 
 
 
 
 
 
Selling
13,709

 
2.0
 %
 
13,649

 
2.3
%
General and administrative
16,577

 
2.4
 %
 
16,392

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

 
—
%
Total operating expenses
29,657

 
4.2
 %
 
30,069

 
5.1
%
Operating income
45,631

 
6.5
 %
 
29,066

 
4.9
%
Non-operating income
752

 
0.1
 %
 
739

 
0.1
%
Income before income taxes
46,383

 
6.6
 %
 
29,805

 
5.1
%
Provision for taxes
14,259

 
2.0
 %
 
8,468

 
1.4
%
Net income
$
32,124

 
4.6
 %
 
$
21,337

 
3.6
%
Income per common share:
 
 
 
 
 
 
 
Basic
$
1.17

 
 
 
$
0.76

 
 
Diluted
$
1.16

 
 
 
$
0.76

 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
27,552

 
 
 
28,128

 
 
Diluted
27,666

 
 
 
28,218

 
 
Percentages may not add due to rounding differences.

(1) The nine months ended May 31, 2014 and June 1, 2013 contained 39 weeks and 40 weeks, respectively.





Winnebago Industries, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
May 31,
2014
 
August 31,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
50,490

 
$
64,277

Receivables, net
56,333

 
29,145

Inventories
117,735

 
112,541

Net investment in operating leases
16,479

 
—

Prepaid expenses and other assets
7,121

 
8,277

Income taxes receivable and prepaid
385

 
1,868

Deferred income taxes
7,348

 
7,742

Total current assets
255,891

 
223,850

Total property and equipment, net
22,665

 
20,266

Long-term investments
—

 
2,108

Investment in life insurance
24,793

 
25,051

Deferred income taxes
24,540

 
25,649

Goodwill
1,228

 
1,228

Other assets
11,217

 
10,993

Total assets
$
340,334

 
$
309,145

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
31,229

 
$
28,142

Operating lease repurchase obligations
16,050

 
—

Other accrued expenses
46,118

 
42,212

Total current liabilities
93,397

 
70,354

Long-term liabilities:
 
 
 
Unrecognized tax benefits
3,228

 
3,988

Postretirement health care and deferred compensation benefits
59,219

 
64,074

Total long-term liabilities
62,447

 
68,062

Stockholders' equity
184,490

 
170,729

Total liabilities and stockholders' equity
$
340,334

 
$
309,145







Winnebago Industries, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Nine Months (1) Ended
 
May 31,
2014
 
June 1,
2013
Operating activities:
 
 
 
Net income
$
32,124

 
$
21,337

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
2,962

 
3,190

LIFO expense
934

 
438

Stock-based compensation
1,694

 
1,258

Deferred income taxes including valuation allowance
464

 
(1,243
)
Postretirement benefit income and deferred compensation expenses
(752
)
 
259

Provision for doubtful accounts
1

 
62

Gain on sale of property
(712
)
 
(34
)
Gain on life insurance
(726
)
 
(536
)
Increase in cash surrender value of life insurance policies
(651
)
 
(853
)
Change in assets and liabilities:
 
 
 
Inventories
(6,128
)
 
(26,295
)
Receivables, prepaid and other assets
(26,349
)
 
(10,819
)
Investment in operating leases, net of repurchase obligations
(429
)
 
—

Income taxes and unrecognized tax benefits
1,986

 
(234
)
Accounts payable and accrued expenses
8,851

 
9,895

Postretirement and deferred compensation benefits
(3,080
)
 
(3,359
)
Net cash provided by (used in) operating activities
10,189

 
(6,934
)
 
 
 
 
Investing activities:
 
 
 
Proceeds from the sale of investments, at par
2,350

 
250

Proceeds from life insurance
1,737

 
1,004

Purchases of property and equipment
(7,005
)
 
(3,322
)
Proceeds from the sale of property
2,403

 
637

Payments of COLI borrowings
—

 
(1,371
)
Other
(1,123
)
 
692

Net cash used in investing activities
(1,638
)
 
(2,110
)
 
 
 
 
Financing activities:
 
 
 
Payments for purchase of common stock
(24,324
)
 
(11,123
)
Proceeds from exercise of stock options
2,080

 
—

Other
(94
)
 
(94
)
Net cash used in financing activities
(22,338
)
 
(11,217
)
 
 
 
 
Net decrease in cash and cash equivalents
(13,787
)
 
(20,261
)
Cash and cash equivalents at beginning of period
64,277

 
62,683

Cash and cash equivalents at end of period
$
50,490

 
$
42,422

 
 
 
 
Supplemental cash flow disclosure:
 
 
 
Income taxes paid, net of refunds
$
11,814

 
$
9,946


(1) The nine months ended May 31, 2014 and June 1, 2013 contained 39 weeks and 40 weeks, respectively.





Winnebago Industries, Inc.
Deliveries
 
Quarter Ended
 
Change
(In units)
May 31,
2014
Product
Mix % (1)
 
June 1,
2013
Product
Mix % (1)
 
Units
%
Class A gas
786

33.7
%
 
656

33.2
%
 
130

19.8
 %
Class A diesel
280

12.0
%
 
323

16.3
%
 
(43
)
(13.3
)%
Total Class A
1,066

45.7
%
 
979

49.5
%
 
87

8.9
 %
Class B
224

9.6
%
 
78

3.9
%
 
146

187.2
 %
Class C
1,041

44.7
%
 
921

46.6
%
 
120

13.0
 %
Total motorhomes (2)
2,331

100.0
%
 
1,978

100.0
%
 
353

17.8
 %
 
 
 
 
 
 
 
 
 
Travel trailer
598

82.3
%
 
587

82.3
%
 
11

1.9
 %
Fifth wheel
129

17.7
%
 
126

17.7
%
 
3

2.4
 %
    Total towables
727

100.0
%
 
713

100.0
%
 
14

2.0
 %

 
Nine Months(3) Ended
 
Change
(In units)
May 31,
2014
Product
Mix % (1)
 
June 1,
2013
Product
Mix % (1)
 
Units

%
Class A gas
2,085

32.6
%
 
1,779

36.1
%
 
306

17.2
 %
Class A diesel
1,133

17.7
%
 
989

20.1
%
 
144

14.6
 %
Total Class A
3,218

50.4
%
 
2,768

56.1
%
 
450

16.3
 %
Class B
524

8.2
%
 
263

5.3
%
 
261

99.2
 %
Class C
2,649

41.4
%
 
1,900

38.5
%
 
749

39.4
 %
Total motor homes (2)
6,391

100.0
%
 
4,931

100.0
%
 
1,460

29.6
 %
 
 
 
 
 
 
 
 
 
Travel trailer
1,468

82.2
%
 
1,433

78.8
%
 
35

2.4
 %
Fifth wheel
318

17.8
%
 
385

21.2
%
 
(67
)
(17.4
)%
Total towables
1,786

100.0
%
 
1,818

100.0
%
 
(32
)
(1.8
)%
(1) Percentages may not add due to rounding differences.
(2) An additional 343 motorhomes were delivered in Fiscal 2014 but not included in wholesale deliveries as presented in the tables above as the units are subject to repurchase option.
(3) The nine months ended May 31, 2014 and June 1, 2013 contained 39 weeks and 40 weeks, respectively.
Backlog
 
As Of
 
Change
 
May 31, 2014
 
June 1, 2013
 
 
 
 
Units
% (1)
 
Units
% (1)
 
Units
%
Class A gas
752

31.9
%
 
1,397

49.1
%
 
(645
)
(46.2
)%
Class A diesel
280

11.9
%
 
499

17.5
%
 
(219
)
(43.9
)%
Total Class A
1,032

43.8
%
 
1,896

66.6
%
 
(864
)
(45.6
)%
Class B
264

11.2
%
 
149

5.2
%
 
115

77.2
 %
Class C
1,061

45.0
%
 
801

28.1
%
 
260

32.5
 %
Total motorhome backlog(2)
2,357

100.0
%
 
2,846

100.0
%
 
(489
)
(17.2
)%
 
 
 
 
 
 
 
 
 
Travel trailer
224

73.9
%
 
359

81.0
%
 
(135
)
(37.6
)%
Fifth wheel
79

26.1
%
 
84

19.0
%
 
(5
)
(6.0
)%
    Total towable backlog (2)
303

100.0
%
 
443

100.0
%
 
(140
)
(31.6
)%
 
 
 
 
 
 
 
 
 
Total approximate backlog revenue dollars (in 000's):
 
 
 
 
 
 
Motorhome
$
219,676

 
 
$
292,307

 
 
$
(72,631
)
(24.8
)%
Towable
6,072

 
 
9,562

 
 
(3,490
)
(36.5
)%
(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
 
May 31, 2014
 
June 1, 2013
 
Units
%
Motorhomes
3,798

 
2,634

 
1,164

44.2
%
Towables
1,775

 
1,642

 
133

8.1
%


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