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| WGO > SEC Filings for WGO > Form 10-Q on 4-Jan-2013 | All Recent SEC Filings |
4-Jan-2013
Quarterly Report
Forward-Looking Information
Certain of the matters discussed in this Quarterly Report on Form 10-Q are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. A number of factors could cause actual results to differ materially from these statements, including, but not limited to, 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, availability of chassis and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to mergers and acquisitions activities and other factors which may be disclosed throughout this
report. Although we believe that the expectations reflected in the "forward-looking statements" are reasonable, we cannot guarantee future results, or levels of activity, performance or achievements. Undue reliance should not be placed on these "forward-looking statements," which speak only as of the date of this report. We undertake no obligation to publicly update or revise any "forward-looking statements" whether as a result of new information, future events or otherwise, except as required by law or the rules of the NYSE.
Executive Overview
Winnebago Industries, Inc. is a leading US manufacturer of RVs with a proud
history of manufacturing RV products for more than 50 years. We produce all of
our motorhomes in vertically integrated manufacturing facilities in Iowa and we
produce all travel trailer and fifth wheels ("towables") in Indiana. We
distribute our products primarily through independent dealers throughout the US
and Canada, who then retail the products to the end consumer.
Our retail unit market share, as reported by Stat Surveys based on official
state records, is illustrated below. Note that this data is subject to
adjustment and is continuously updated.
Through October 31 Calendar Year
US Retail Motorized: 2012 2011 2011 2010 2009
Class A gas 23.5 % 22.1 % 22.2 % 23.7 % 22.9 %
Class A diesel 19.3 % 17.5 % 17.6 % 15.2 % 11.4 %
Total Class A 21.8 % 20.1 % 20.2 % 19.5 % 16.6 %
Class C 17.9 % 17.1 % 17.5 % 17.9 % 22.7 %
Total Class A and C 20.1 % 18.8 % 19.0 % 18.8 % 19.1 %
Class B 16.2 % 6.3 % 7.7 % 15.6 % 18.1 %
Through October 31 Calendar Year
Canadian Retail Motorized: 2012 2011 2011 2010 2009
Class A gas 15.3 % 17.1 % 16.5 % 14.9 % 13.8 %
Class A diesel 17.0 % 18.1 % 18.0 % 9.9 % 7.0 %
Total Class A 15.9 % 17.5 % 17.1 % 12.6 % 10.0 %
Class C 14.6 % 16.0 % 15.9 % 13.8 % 9.5 %
Total Class A and C 15.2 % 16.7 % 16.5 % 13.2 % 9.8 %
Class B 12.3 % 6.1 % 7.1 % 4.8 % 2.3 %
Through October 31 Calendar Year
US Retail Towables: 2012 2011 2011
Travel trailer 0.8 % 0.6 % 0.6 %
Fifth wheel 1.1 % 0.5 % 0.5 %
Total towables 0.9 % 0.6 % 0.6 %
Through October 31 Calendar Year
Canadian Retail Towables: 2012 2011 2011
Travel trailer 0.6 % 0.5 % 0.5 %
Fifth wheel 1.6 % 0.6 % 0.6 %
Total towables 0.8 % 0.5 % 0.5 %
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Presented in fiscal quarters, certain key metrics are shown below:
Class A, B & C Motorhomes Travel Trailers & Fifth Wheels
As of Quarter End As of Quarter End
Wholesale Retail Dealer Order Wholesale Retail Dealer Order
(In units) Deliveries Registrations Inventory Backlog Deliveries Registrations Inventory Backlog
Q2 2011 909 796 2,179 957 85 100 905 151
Q3 2011 1,283 1,394 2,068 642 326 203 1,028 164
Q4 2011 1,088 1,198 1,958 681 358 420 966 293
Q1 2012 1,040 1,053 1,945 618 435 255 1,146 460
Rolling 12 months 4,320 4,441 1,204 978
(Dec 2010-Nov 2011)
Q2 2012 1,001 872 2,074 1,004 562 332 1,376 417
Q3 2012 1,280 1,414 1,940 1,235 646 652 1,370 505
Q4 2012 1,321 1,334 1,927 1,473 695 700 1,365 411
Q1 2013 1,534 1,416 2,045 2,118 557 367 1,555 687
Rolling 12 months 5,136 5,036 2,460 2,051
(Dec 2011-Nov 2012)
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Highlights of our most recent quarter:
Motorized performance:
• We continued to see growing demand for our product during the first quarter
of Fiscal 2013 at the wholesale and retail level, as evidenced by the
sequential increase of our wholesale deliveries and retail registrations in
the table above for the two most recent quarters. We began increasing our
weekly production rate this past summer and continued to do so during the
fall in response to the growing demand. The ramp up in our production has
been accomplished through a combination of overtime and hiring incremental
hourly employees; it also required ordering larger quantities of materials.
The benefit of the increased production in the first quarter of Fiscal 2013
is evident in our improved operating results, notably due to better
absorption of our overhead costs.
• In comparison, we experienced a dramatically different environment one year ago during the first quarter of Fiscal 2012. Demand was very weak and as a result we had multiple shortened work weeks during that quarter, thus production was 64% lower than the first quarter of Fiscal 2013. Conversely, the first quarter of Fiscal 2013 benefited from an additional week of operating performance as the first quarter of Fiscal 2013 was 14-week quarter.
Towables performance:
• Towables generated an operating loss of $1.4 million in the first quarter of
Fiscal 2013 compared to an operating loss of $219,000 in the first quarter of
Fiscal 2012. The two most significant issues that negatively impacted
Towables' operating performance during the first quarter of Fiscal 2013 were
increased warranty expense and unfavorable overhead variances due to lower
production. Significant changes were made throughout the quarter in key
management positions to address the recent performance problems.
Industry Outlook
Key statistics for the motorhome industry are as follows:
US and Canada Industry Class A, B & C Motorhomes
Wholesale Shipments(1) Retail Registrations(2)
Calendar Year Calendar Year
Increase Increase
(In units) 2011 2010 (Decrease) Change 2011 2010 (Decrease) Change
Q1 6,900 5,800 1,100 19.0 % 5,100 5,000 100 2.0 %
Q2 7,800 7,700 100 1.3 % 8,200 8,400 (200 ) (2.4 )%
Q3 5,300 6,200 (900 ) (14.5 )% 6,100 6,100 - - %
Q4 4,800 5,500 (700 ) (12.7 )% 4,600 4,600 - - %
Total 24,800 25,200 (400 ) (1.6 )% 24,000 24,100 (100 ) (0.4 )%
(Decrease) Increase
(In units) 2012 2011 Increase Change 2012 2011 (Decrease) Change
Q1 6,900 6,900 - - % 5,700 5,100 600 11.8 %
Q2 7,700 7,800 (100 ) (1.3 )% 8,200 8,200 - - %
Q3 6,700 5,300 1,400 26.4 % 6,900 6,100 800 13.1 %
October 2,500 1,900 600 31.6 % 1,800 1,800 - - %
November 2,300 1,400 900 64.3 % (4) 1,500
December 2,100 (3) 1,500 600 40.0 % (4) 1,300
Q4 6,900 (3) 4,800 2,100 43.8 % (4) 4,600
Total 28,200 (3) 24,800 3,400 13.7 % 24,000
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(1) Class A, B and C wholesale shipments as reported by RVIA, rounded to the nearest hundred.
(2) Class A, B and C retail registrations as reported by Stat Surveys for the US and Canada combined, rounded to the nearest hundred.
(3) December 2012 Class A, B and C wholesale shipments are based upon the forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the RoadSigns RV Winter 2012 Industry Forecast Issue. The revised RVIA annual 2012 wholesale shipment forecast was 27,300 (prior to actual October and November shipments being available) and the annual forecast for 2013 is 28,400.
(4) Stat Surveys has not issued a projection for 2012 retail demand for this period.
The size of the motorized retail market in calendar years 2008 through 2012 has been less than half of what the industry norms had been prior to the recession.
Key statistics for the towable industry are as follows:
US and Canada Travel Trailer & Fifth Wheel Industry
Wholesale Shipments(1) Retail Registrations(2)
Calendar Year Calendar Year
Increase
(In units) 2011 2010 (Decrease) Change 2011 2010 Increase Change
Q1 54,100 49,300 4,800 9.7 % 33,700 31,100 2,600 8.4 %
Q2 66,000 62,300 3,700 5.9 % 79,200 69,400 9,800 14.1 %
Q3 47,500 48,600 (1,100 ) (2.3 )% 63,000 57,200 5,800 10.1 %
Q4 45,300 38,900 6,400 16.5 % 30,000 28,300 1,700 6.0 %
Total 212,900 199,100 13,800 6.9 % 205,900 186,000 19,900 10.7 %
(In units) 2012 2011 Increase Change 2012 2011 Increase Change
Q1 60,400 54,100 6,300 11.6 % 39,100 33,700 5,400 16.0 %
Q2 71,100 66,000 5,100 7.7 % 83,900 79,200 4,700 5.9 %
Q3 56,600 47,500 9,100 19.2 % 67,100 63,000 4,100 6.5 %
October 21,400 16,300 5,100 31.3 % 14,300 13,300 1,000 7.5 %
November 17,500 14,400 3,100 21.5 % (4) 9,200
December 15,300 (3) 14,600 700 4.8 % (4) 7,500
Q4 54,200 (3) 45,300 8,900 19.6 % (4) 30,000
Total 242,300 (3) 212,900 29,400 13.8 % 205,900
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(1) Towable wholesale shipments as reported by RVIA, rounded to the nearest hundred.
(2) Towable retail registrations as reported by Stat Surveys for the US and Canada combined, rounded to the nearest hundred.
(3) December 2012 towable wholesale shipments are based upon the forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the RoadSigns RV Winter 2012 Industry Forecast Issue. The revised annual
2012 wholesale shipment forecast was 235,700 (prior to actual October and
November shipments being available) and the annual forecast for 2013 is 249,000.
(4) Stat Surveys has not issued a projection for 2012 retail demand for this
period.
The towable retail market has not been as negatively impacted in recent years as the motorized market. The size of the towable market was nearly nine times larger than the motorized market on a unit basis in Calendar 2011. This is primarily due to the fact that average price of a towable unit is considerably less than a motorhome.
Company Outlook
Based on our profitable operating results in recent years, we believe that we
have demonstrated our ability to maintain our liquidity, cover operations costs,
recover fixed assets, and maintain physical capacity at present levels. Now that
we have entered into the towable market, we have the potential to grow revenues
and earnings in a market significantly larger than the motorized market.
As evidenced in the following table, our sales order backlog at the end of the first quarter of Fiscal 2013 significantly increased as compared to the end of the first quarter of Fiscal 2012. It has also increased sequentially from the end of Fiscal 2012 fourth quarter, as previously illustrated. We believe the increase is a result of the positive dealer response to our new 2013 model year products and increased retail registration activity of our products this past summer and fall.
As a result of the improved demand, we have been increasing our production throughout the past six months. We plan to continue to increase our weekly production schedule in the second quarter of Fiscal 2013 to meet the growing demand for our products, while managing constraints as they present themselves in relation to labor and component parts.
Our motorized sales order backlog of 2,118 as of December 1, 2012 represents
orders to be shipped in the next two quarters. Notably, there are a few key
reasons that these orders will not all be delivered in the second quarter of
Fiscal 2013:
• Timing of new model production: Production of a new Class C model for
which orders were taken at the National RV Show at the end of our first
fiscal quarter starts in February of 2013 (the last month of our second
fiscal quarter), thus a portion of our sales order backlog will not be
through the production process and sold until our third fiscal quarter.
• Chassis availability: Due to the limited availability of Class A gas chassis, a portion of our sales order backlog will not be produced and sold until our third fiscal quarter of Fiscal 2013.
• Fewer production days in our second quarter: Production is shut down over the holidays and to perform a physical inventory observation, thus there are 57 days of production in the second quarter. In comparison, there were 67 production days in our first fiscal quarter which did include one additional week as Fiscal 2013 is a 53-week year.
• Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty.
We believe that the level of our dealer inventory at the end of the first quarter of Fiscal 2013 is lower than what it should be given the improved retail demand and increased sales order backlog of our product.
Our unit order backlog was as follows:
As Of
Increase %
(In units) December 1, 2012 November 26, 2011 (Decrease) Change
Class A gas 884 41.7 % 213 34.5 % 671 315.0 %
Class A diesel 389 18.4 % 172 27.8 % 217 126.2 %
Total Class A 1,273 60.1 % 385 62.3 % 888 230.6 %
Class B 111 5.2 % 47 7.6 % 64 136.2 %
Class C 734 34.7 % 186 30.1 % 548 294.6 %
Total motorhome backlog(1) 2,118 100.0 % 618 100.0 % 1,500 242.7 %
Travel trailer 557 81.1 % 280 60.9 % 277 98.9 %
Fifth wheel 130 18.9 % 180 39.1 % (50 ) (27.8 )%
Total towable backlog(1) 687 100.0 % 460 100.0 % 227 49.3 %
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Approximate backlog revenue in thousands Motorhome $ 226,457 $ 70,546 $ 155,911 221.0 % Towable $ 14,049 $ 10,381 $ 3,668 35.3 %
(1) We include in our backlog all accepted purchase orders from dealers to be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.
Results of Operations
Current Quarter Compared to the Comparable Quarter Last Year
The following is an analysis of changes in key items included in the statements
of operations:
Quarter Ended
(In thousands, except
percent December 1, % of November 26, % of %
and per share data) 2012 Revenues(1) 2011 Revenues(1) Increase Change
Net revenues $ 193,554 100.0 % $ 131,837 100.0 % $ 61,717 46.8 %
Cost of goods sold 172,807 89.3 % 123,341 93.6 % 49,466 40.1 %
Gross profit 20,747 10.7 % 8,496 6.4 % 12,251 144.2 %
Selling 4,961 2.6 % 4,162 3.2 % 799 19.2 %
General and
administrative 5,812 3.0 % 3,707 2.8 % 2,105 56.8 %
Loss on assets held for
sale 28 - % - - % 28 NMF
Operating expenses 10,801 5.6 % 7,869 6.0 % 2,932 37.3 %
Operating income 9,946 5.1 % 627 0.5 % 9,319 NMF
Non-operating income 614 0.3 % 257 0.2 % 357 138.9 %
Income before income
taxes 10,560 5.5 % 884 0.7 % 9,676 NMF
Provision (benefit) for
taxes 3,169 1.6 % (151 ) (0.1 )% 3,320 NMF
Net income $ 7,391 3.8 % $ 1,035 0.8 % $ 6,356 NMF
Diluted income per
share $ 0.26 $ 0.04 $ 0.22 NMF
Diluted average shares
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(1) Percentages may not add due to rounding differences. Unit deliveries and ASP, net of discounts, consisted of the following:
Quarter Ended
December 1, Product November 26, Product Increase %
(In units) 2012 Mix % (1) 2011 Mix % (1) (Decrease) Change
Motorhomes:
Class A gas 620 40.4 % 381 36.6 % 239 62.7 %
Class A diesel 345 22.5 % 232 22.3 % 113 48.7 %
Total Class A 965 62.9 % 613 58.9 % 352 57.4 %
Class B 90 5.9 % 79 7.6 % 11 13.9 %
Class C 479 31.2 % 348 33.5 % 131 37.6 %
Total motorhome deliveries 1,534 100.0 % 1,040 100.0 % 494 47.5 %
ASP (in thousands) $ 112 $ 108 $ 3 3.2 %
Towables:
Travel trailer 408 73.2 % 267 61.4 % 141 (11.3 )%
Fifth wheel 149 26.8 % 168 38.6 % (19 ) 52.8 %
Total towable deliveries 557 100.0 % 435 100.0 % 122 28.0 %
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ASP (in thousands) $ 21 $ 23 $ (1 ) (5.0 )%
(1) Percentages may not add due to rounding differences.
Net revenues consisted of the following:
Quarter Ended
December 1, November 26, %
(In thousands) 2012 2011 Increase Change
Motorhomes (1) $ 169,995 87.8 % $ 111,668 84.7 % $ 58,327 52.2 %
Towables (2) 12,071 6.2 % 10,081 7.6 % 1,990 19.7 %
Motorhome parts and services 3,833 2.0 % 3,637 2.8 % 196 5.4 %
Other manufactured products 7,655 4.0 % 6,451 4.9 % 1,204 18.7 %
Total net revenues $ 193,554 100.0 % $ 131,837 100.0 % $ 61,717 46.8 %
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(1) Motorhome unit revenue less discounts, sales promotions and incentives, and accrued loss on repurchase adjustments.
(2) Includes towable units and parts.
The increase in motorhome net revenues of $58.3 million or 52.2% was attributed primarily to a 47.5% increase in unit deliveries, as well as an increase in motorhome ASP of 3.2% and the additional week in the first quarter of Fiscal 2013 as compared to the first quarter of Fiscal 2012.
Towables revenues were $12.1 million in the first quarter of Fiscal 2013, compared to $10.1 million in the first quarter of Fiscal 2012. The increase was due to increased unit deliveries.
Cost of goods sold was $172.8 million, or 89.3% of net revenues for the first
quarter of Fiscal 2013 compared to $123.3 million, or 93.6% of net revenues for
the first quarter of Fiscal 2012 due to the following:
• Total variable costs (materials, direct labor, variable overhead, delivery
expense and warranty), as a percent of net revenues, decreased to 83.7% this
year from 85.2% last year which was primarily due to lower material costs and
greater production efficiencies due to increased production levels.
• Fixed overhead (manufacturing support labor, depreciation and facility costs) and research and development-related costs decreased to 5.6% of net revenues compared to 8.4% for Fiscal 2012. This difference was primarily due to higher plant utilization due to the additional week in the first quarter of Fiscal 2013 and significantly higher production run rates in Fiscal 2013.
• All factors considered, gross profit increased from 6.4% to 10.7% of net revenues.
Selling expenses increased $799,000, or 19.2%, in the first quarter of Fiscal
2013. The expense increase was primarily due to advertising expenses associated
with the timing of our Louisville show falling in the first quarter of Fiscal
2013 and increased sales compensation expense. As a percent of net revenues,
selling expenses were 2.6% and 3.2% in the first quarter of Fiscal 2013 and
Fiscal 2012, respectively.
General and administrative expenses increased $2.1 million, or 56.8% in the
first quarter of Fiscal 2013. This increase was due primarily to increases of
$1.5 million in incentives accrued under annual and long-term bonus plans,
$248,000 in stock-based compensation expense associated with the stock grant
awarded in the first quarter of Fiscal 2013, and $232,000 in legal expenses. As
a percent of net revenues, general and administrative expenses were 3.0% and
2.8% in the first quarter of Fiscal 2013 and Fiscal 2012, respectively.
During the first quarter of Fiscal 2013 we realized a loss of $28,000 on the
sale of an idled manufacturing facility (Hampton). See Note 6.
Non-operating income increased $357,000 or 138.9%, in the first quarter of
Fiscal 2013. This difference is primarily due to increased proceeds from COLI
policies of $331,000.
The overall effective income tax provision rate for the first quarter of Fiscal
2013 was 30.0% compared to the tax benefit rate of (17.1)% for the first quarter
of Fiscal 2012. The increase in tax rate for the first quarter of Fiscal 2013
most notably is a result of a higher level of pretax book income earned during
the quarter. We also had a reduced level (in comparison to book income) of
benefits recorded for uncertain tax positions during the quarter. Most notably,
our effective tax benefit rate for the first quarter of Fiscal 2012 was
positively impacted by the relationship of tax-exempt income in relation to book
income. The tax-exempt income is primarily tax-free investment income from
investments in life insurance assets and ARS. In addition, we recorded tax
benefits in the quarter associated with reductions to reserves for uncertain tax
positions.
Net income and diluted income per share were $7.4 million and $0.26 per share,
respectively, for the first quarter of Fiscal 2013. In the first quarter of
Fiscal 2012, the net income was $1,035,000 and diluted income was $0.04 per
share. The impact of stock repurchases since July, 2012 on diluted net income
per share was an increase of $0.01 for the first quarter of Fiscal 2013. See
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