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 27, 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 -------- 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 22,189,005 shares of $.50 par value common stock outstanding on April 5, 1999.
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO REPORT ON FORM 10-Q <TABLE> <CAPTION> Page Number ----------- <S> <C> 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 </TABLE>
Part I Financial Information Item 1. WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in thousands FEBRUARY 27, AUGUST 29, ASSETS 1999 1998 - ----------------------------------------------------- ----------- ---------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 35,689 $ 53,859 Receivables, less allowance for doubtful accounts ($1,298 and $1,582, respectively) 29,895 22,025 Dealer financing receivables, less allowance for doubtful accounts ($182 and $78, respectively) 29,490 12,782 Inventories 59,856 55,433 Prepaid expenses 14,414 3,516 Deferred income taxes 6,906 6,906 -------- -------- Total current assets 176,250 154,521 -------- -------- PROPERTY AND EQUIPMENT, at cost Land 1,158 1,158 Buildings 40,234 38,779 Machinery and equipment 73,137 69,095 Transportation equipment 5,101 5,047 -------- -------- 119,630 114,079 Less accumulated depreciation 83,486 81,167 -------- -------- Total property and equipment, net 36,144 32,912 -------- -------- LONG-TERM NOTES RECEIVABLE, less allowances ($240 and $973, respectively) 1,923 5,396 -------- -------- INVESTMENT IN LIFE INSURANCE 22,834 21,226 -------- -------- DEFERRED INCOME TAXES, NET 16,309 16,071 -------- -------- OTHER ASSETS 365 486 -------- -------- TOTAL ASSETS $253,825 $230,612 ======== ======== See Unaudited Condensed Notes to Consolidated Financial Statements 1
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in thousands <TABLE> <CAPTION> FEBRUARY 27, AUGUST 29, LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 - -------------------------------------------------------- ------------ ---------- (Unaudited) <S> <C> <C> CURRENT LIABILITIES Accounts payable, trade $ 24,067 $ 24,461 Income tax payable 21,694 12,623 Accrued expenses: Insurance 3,473 3,566 Product warranties 5,753 5,260 Vacation liability 3,608 3,343 Promotional 4,547 2,236 Other 10,599 11,113 -------- -------- Total current liabilities 73,741 62,602 -------- -------- POSTRETIREMENT HEALTH CARE AND DEFERRED COMPENSATION BENEFITS 54,338 51,487 -------- -------- STOCKHOLDERS' EQUITY Capital stock, common, par value $.50; authorized 60,000,000 shares: issued 25,871,000 and 25,865,000 12,935 12,932 shares, respectively Additional paid-in capital 22,364 22,507 Reinvested earnings 129,047 111,665 -------- -------- 164,346 147,104 Less treasury stock, at cost 38,600 30,581 -------- -------- Total stockholders' equity 125,746 116,523 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $253,825 $230,612 ======== ======== </TABLE> See Unaudited Condensed Notes to Consolidated Financial Statements 2
WINNEBAGO INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS ================================================================================ IN THOUSANDS EXCEPT PER SHARE DATA <TABLE> <CAPTION> THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED ----------------------------- ----------------------------- February 27, February 28, February 27, February 28, 1999 1998 1999 1998 ------------ ------------ ------------- ------------ <S> <C> <C> <C> <C> Net revenues $154,132 $118,709 $311,796 $244,605 Cost of goods sold 129,763 104,354 262,551 211,827 -------- -------- -------- -------- Gross profit 24,369 14,355 49,245 32,778 -------- -------- -------- -------- Operating expenses: Selling and delivery 5,494 4,190 10,596 9,919 General and administrative 4,289 4,446 9,983 9,712 -------- -------- -------- -------- Total operating expenses 9,783 8,636 20,579 19,631 -------- -------- -------- -------- Operating income 14,586 5,719 28,666 13,147 Financial income 565 771 1,146 1,384 -------- -------- -------- -------- Pre-tax income 15,151 6,490 29,812 14,531 Provision for taxes 5,197 2,140 10,209 4,843 -------- -------- -------- -------- Net income $ 9,954 $ 4,350 $ 19,603 $ 9,688 ======== ======== ======== ======== Earnings per common share (Note 7): Basic $ .45 $ .18 $ .88 $ .39 Diluted $ .45 $ .18 $ .88 $ .39 Weighted average common shares outstanding (Note 7): Basic 22,145 24,179 22,184 24,830 Diluted 22,317 24,366 22,387 24,989 </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 27, February 28, 1999 1998 ------------ ------------ <S> <C> <C> Cash flows from operating activities: Net income $ 19,603 $ 9,688 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,754 2,754 Other 296 529 Change in assets and liabilities: (Increase) decrease in receivable and other assets (19,045) 1,956 (Increase) decrease in inventories (4,423) 53 Increase in accounts payable and accrued expenses 2,068 23,783 Increase in income taxes payable 9,071 - - - Increase in postretirement benefits 2,592 1,554 Other (238) - - - -------- -------- Net cash provided by operating activities 12,678 40,317 -------- -------- Cash flows used by investing activities: Purchases of property and equipment (6,216) (2,086) Investments in dealer receivables (50,104) (25,939) Collections of dealer receivables 33,292 22,420 Other 2,560 (2,850) -------- -------- Net cash used by investing activities (20,468) (8,455) -------- -------- Cash flows used by financing activities and capital transactions: Payments for purchase of common stock (8,975) (17,600) Payments of long-term debt - - - (695) Payment of cash dividends (2,221) (2,548) Other 816 220 -------- -------- Net cash used by financing activities and capital transactions (10,380) (20,623) -------- -------- Net (decrease) increase in cash and cash equivalents (18,170) 11,239 Cash and cash equivalents - beginning of period 53,859 32,130 -------- -------- Cash and cash equivalents - end of period $ 35,689 $ 43,369 ======== ======== </TABLE> 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 February 27, 1999, the consolidated results of operations for the 26 and 13 weeks ended February 27, 1999 and February 28, 1998, and the consolidated cash flows for the 26 weeks ended February 27, 1999 and February 28, 1998. The results of operations for the 26 weeks ended February 27, 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): <TABLE> <CAPTION> February 27, August 29, 1999 1998 ------------ ---------- <S> <C> <C> Finished goods.................. $ 20,619 $ 24,147 Work in process................. 19,005 15,328 Raw materials................... 38,118 33,384 ---------- ---------- 77,742 72,859 LIFO reserve.................... (17,886) (17,426) ---------- ---------- $ 59,856 $ 55,433 ========== ========== </TABLE> 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 February 27, 1999, the Company was in compliance with these covenants. There were no outstanding borrowings under the line of credit at February 27, 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 $185,136,000 and $132,540,000 under repurchase agreements with lending institutions as of February 27, 1999 and August 29, 1998, respectively. Included in these contingent liabilities as of February 27, 1999 and August 29, 1998 are approximately $7,175,000 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): TWENTY-SIX WEEKS ENDED ----------------------------- February 27, February 28, 1999 1998 ------------ ------------ Interest $ 91 $ 236 Income taxes 11,670 2,120 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. 7. The following table reflects the calculation of basic and diluted earnings per share for the 13 and 26 weeks ended February 27, 1999 and February 28, 1998: <TABLE> <CAPTION> THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED -------------------------------------- ------------------------------------- FEBRUARY 27, FEBRUARY 28, FEBRUARY 27, FEBRUARY 28, IN THOUSANDS EXCEPT PER SHARE DATA 1999 1998 1999 1998 ----------------- ----------------- ----------------- ---------------- <S> <C> <C> <C> <C> EARNINGS PER SHARE - BASIC: Net income $ 9,954 $ 4,350 $ 19,603 $ 9,688 ----------------- ----------------- ----------------- ---------------- Weighted average shares outstanding 22,145 24,179 22,184 24,830 ----------------- ----------------- ----------------- ---------------- Earnings per share - basic $ .45 $ .18 $ .88 $ .39 ----------------- ----------------- ----------------- ---------------- EARNINGS PER SHARE - ASSUMING DILUTION: Net income $ 9,954 $ 4,350 $ 19,603 $ 9,688 ----------------- ----------------- ----------------- ---------------- Weighted average shares outstanding 22,145 24,179 22,184 24,830 Dilutive impact of options outstanding 172 187 203 159 ----------------- ----------------- ----------------- ---------------- Weighted average shares & potential dilutive shares outstanding 22,317 24,366 22,387 24,989 ----------------- ----------------- ----------------- ---------------- Earnings per share - assuming dilution $ .45 $ .18 $ .88 $ .39 ----------------- ----------------- ----------------- ---------------- </TABLE> There were options to purchase 14,000 shares of common stock outstanding at a price of $15.1875 per share during the 13 weeks ended February 27, 1999 and options to purchase 10,000 shares of common stock outstanding at a price of $10.00 per share during the 13 weeks ended February 28, 1998, these options 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
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Thirteen Weeks Ended February 27, 1999 Compared to Thirteen Weeks Ended February 28, 1998 Net revenues for the 13 weeks ended February 27, 1999 were $154,132,000 an increase of $35,423,000 or 29.8 percent from the 13 week period ended February 28, 1998. Motor home shipments (Class A and C) were 2,285 units, an increase of 276 units, or 13.7 percent, during the second quarter of fiscal 1999 compared to the second quarter of fiscal 1998. The difference in percentages when comparing the percent increase in revenue dollars for the second quarter of fiscal 1999 to the percent increase in unit shipments for the second quarter of fiscal 1999 was caused by the shipments of more units with slide-out features and 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 April 5, 1999, the Company's order backlog of Class A and Class C motor homes was approximately 3,100 orders compared to approximately 1,400 orders at the same time last year. 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 15.8 percent for the 13 weeks ended February 27, 1999 compared to 12.1 percent for the 13 weeks ended February 28, 1998. The Company's favorable product mix change and increased volume of motor homes during the second quarter of fiscal 1999 resulted in the improved margin percentage. Selling and delivery expenses were $5,494,000 or 3.6 percent of net revenues during the second quarter of fiscal 1999 compared to $4,190,000 or 3.5 percent of net revenues during the second quarter of fiscal 1998. The increase in dollars can be attributed primarily to reduced promotional expense recorded during the second quarter of fiscal 1998. To a lesser extent, the Company recorded more advertising expenses during the second quarter of fiscal 1999 than it did during the second quarter of fiscal 1998. General and administrative expenses were $4,289,000 or 2.8 percent of net revenues during the 13 weeks ended February 27, 1999 compared to $4,446,000 or 3.7 percent of net revenues during the 13 weeks ended February 28, 1998. The decreases in both dollars and percentages in general and administrative expenses when comparing the two quarters were due primarily to monies the Company received and recorded during the second quarter of fiscal 1999 on a previously fully-reserved receivable that was repaid to the Company. Partially offsetting these decreases were increases in the Company's employee incentive programs during the second quarter of fiscal 1999 when compared to the second quarter of fiscal 1998. The Company had net financial income of $565,000 for the second quarter of fiscal 1999 compared to net financial income of $771,000 for the comparable quarter of fiscal 1998. During the 13 weeks ended February 27, 1999, the Company recorded $554,000 of net interest income and gains of $11,000 in foreign currency transactions. During the 13 weeks ended February 28, 1998, the Company recorded $711,000 of net interest income and gains of $60,000 in foreign currency transactions. For the second quarter ended February 27, 1999, the Company had net income of $9,954,000, or $.45 per diluted share, compared to the second quarter ended February 28, 1998's net income of $4,350,000, or $.18 per diluted share. Net income increased by 128.8 percent when comparing the second quarter of fiscal 1999 to the second quarter of fiscal 1998 but increased by 150.0 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 second quarter of fiscal 1999. See Notes 6 and 7. 7
Twenty-Six Weeks Ended February 27, 1999 Compared to Twenty-Six Weeks Ended February 28, 1998 Net revenues for the 26 weeks ended February 27, 1999 were $311,796,000, an increase of $67,191,000, or 27.5 percent from the 26 week period ended February 28, 1998. Motor home shipments (Class A and C) were 4,751 units, an increase of 680 units, or 16.7 percent, during the 26 weeks ended February 27, 1999 when compared to the 26 weeks ended February 28, 1998. The difference in percentages when comparing the percent increase in revenue dollars for the first half of fiscal 1999 to the percent increase in unit shipments for the first half of fiscal 1999 was caused by the shipments of more units with slide-out features and the Company's new high-line (Ultimate) unit. Industry demand for motorized recreation vehicles remained strong during the 26 weeks ended February 27, 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 15.8 percent for the 26 weeks ended February 27, 1999 compared to 13.4 percent for the 26 weeks ended February 28, 1998. The Company's favorable product mix change and increased volume of motor homes during the first 26 weeks of fiscal 1999 were the primary causes of the improved margin percentage. Selling and delivery expenses were $10,596,000 or 3.4 percent of net revenues during the first half of fiscal 1999 compared to $9,919,000 or 4.1 percent of net revenues during the first half of fiscal 1998. The increase in dollars can be attributed primarily to reduced promotional expense recorded during the 26 weeks ended February 28, 1998. To a lesser extent, the Company recorded more advertising expenses during the 26 weeks ended February 27, 1999. Partially offsetting increases in dollars was a decrease in the reserve for losses on certain dealer receivables subject to full recourse to the Company recorded during the 26 weeks ended February 27, 1999. Increased sales volume, during the 26 weeks ended February 27, 1999, contributed to the decrease in percentage. General and administration expenses were $9,983,000 or 3.2 percent of net revenues during the 26 weeks ended February 27, 1999 compared to $9,712,000 or 4.0 percent of net revenues during the 26 weeks ended February 28, 1998. Increases in the Company's employee incentive programs during the first half of fiscal 1999 primarily contributed to the dollar increase when comparing the two six-month periods. Partially offsetting the dollar increase in general and administrative expenses was monies the Company received and recorded during the six months ended February 27, 1999 on a previously fully reserved receivable that was repaid to the Company. Increased sales volume, during the 26 weeks ended February 27, 1999, contributed to the decrease in percentage. The Company had net financial income of $1,146,000 for the 26 weeks ended February 27, 1999 compared to net financial income of $1,384,000 for the 26 weeks ended February 28, 1998. During the 26 weeks ended February 27, 1999, the Company recorded $1,205,000 of net interest income and losses of $59,000 in foreign currency transactions. During the 26 weeks ended February 28, 1998, the Company recorded $1,371,000 of net interest income and gains of $13,000 in foreign currency transactions. For the first half of fiscal 1999, the Company recorded net income of $19,603,000, or $.88 per diluted share, compared to the first half of fiscal 1998's net income of $9,688,000, or $.39 per diluted share. Net income increased by 102.3 percent when comparing the first half of fiscal 1999 to the first half of fiscal 1998 but increased by 125.6 percent on a per diluted share basis when comparing the two twenty-six week periods due to fewer shares of the Company's common stock being outstanding during the first half of fiscal 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. 8
At February 27, 1999, working capital was $102,509,000, an increase of $10,590,000 from the amount at August 29, 1998. The Company's principal uses of cash during the 26 weeks ended February 27, 1999 were $50,104,000 of dealer receivable investments and $8,975,000 for the repurchase of shares of the Company's Common Stock. The Company's principal sources of cash during the 26 weeks ended February 27, 1999 was cash flow from operations and the collection of $33,292,000 in dealer receivables. The Company's sources and uses of cash during the 26 weeks ended February 27, 1999 are set forth in the unaudited consolidated statement of cash flows for that period. Principal known demands at February 27, 1999 on the Company's liquid assets for the remainder of fiscal 1999 include approximately $3,250,000 of capital expenditures (primarily equipment replacement) and $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 Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997 and was adopted by the Company at the beginning of fiscal 1999. The statement requires companies to disclose comprehensive income and its components in their financial statements. This statement had no material impact on the Company's financial statements. Segment Disclosures SFAS No. 131, "Disclosures about Segments 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 2000. This statement requires that an entity recognize 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. 9
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 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. 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. 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 the 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 third 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 will be 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 $265,000 has been expensed ($15,000 in fiscal 1999). Any remaining costs incurred by the Company for the Y2K project will be absorbed in existing budgets. The failure to correct a material Y2K problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's operations. The Company's Y2K project is expected to significantly reduce its level of uncertainty about the Y2K problem and in particular, about the Y2K compliance and readiness of its material external agents. 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 Other Information Item 4 Submission of Matters to a Vote of Security Holders (a) The annual meeting of shareholders was held January 20, 1999. (b) The breakdown of votes for the election of eight directors was as follows*: <TABLE> <CAPTION> VOTES CAST FOR AUTHORITY WITHHELD -------------------- -------------------------- <S> <C> <C> Gerald E. Boman 19,301,781 65,127 Jerry N. Currie 19,303,093 63,815 Fred G. Dohrmann 19,278,342 88,566 John V. Hanson 19,295,915 70,993 Bruce D. Hertzke 19,297,058 69,850 Gerald C. Kitch 19,304,766 62,142 Richard C. Scott 19,305,939 60,969 Frederick M. Zimmerman 19,305,347 61,561 </TABLE> * There were no broker non-votes. 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 April 6, 1999 /s/ Bruce D. Hertzke -------------------- ------------------------------------------------ Bruce D. Hertzke Chairman of the Board, Chief Executive Officer, and President (Principal Executive Officer) Date April 6, 1999 /s/ Edwin F. Barker -------------------- ------------------------------------------------ Edwin F. Barker Vice President - Chief Financial Officer (Principal Financial Officer) 12
EXHIBIT INDEX 3b. Amended Bylaws of the Registrant. 10k. Winnebago Industries, Inc. Officers' Long-Term Incentive Plan, Fiscal Three-Year Period, 1999, 2000 and 2001. 13