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4-Traders Homepage  >  Equities  >  Nyse  >  Winnebago Industries, Inc.    WGO

Delayed Quote. Delayed  - 06/24 10:02:03 pm
22.56 USD   -2.55%
06/22 WINNEBAGO : Higher trailer and RV sales boosts Winnebago profit
06/22 WINNEBAGO : Announces Third-Quarter Fiscal 2016 Results
06/22 WINNEBAGO : revenue increases 2.1 percent
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WINNEBAGO : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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06/22/2016 | 11:07pm CEST
This management's discussion should be read in conjunction with the Unaudited
Consolidated Financial Statements contained in this Form 10-Q as well as the
Management's Discussion and Analysis and Risk Factors included in our Annual
Report on Form 10­K for the fiscal year ended August 29, 2015 and in Part II,
Item 1A of this Quarterly Report on Form 10-Q.

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, availability of labor, 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, business
interruptions, any unexpected expenses related to ERP 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, 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 currently
produce all of our motorhomes in vertically integrated manufacturing facilities
in Iowa and we produce all travel trailer and fifth wheel trailers in Indiana.
We are in the process of expanding some motorhome manufacturing to Junction
City, Oregon. 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 state
records, is illustrated below. Note that this data is subject to adjustment and
is continuously updated.
                                   Rolling 12 Months
                                     Through April          Calendar Year
US and Canada                        2016      2015       2015   2014   2013
Motorized A, B, C                    19.5 %     20.9 %   20.4 % 20.7 % 18.6 %

Travel trailer and fifth wheels 1.0 % 0.8 % 0.9 % 0.8 % 1.0 %

Industry Outlook Key reported statistics for the North American RV industry are as follows: • Wholesale unit shipments: RV product delivered to the dealers, which is

reported monthly by RVIA

• Retail unit registrations: consumer purchases of RVs from the dealer, which

is reported monthly by Stat Surveys




We track RV industry conditions using these key statistics to monitor trends and
evaluate and understand our performance to the overall industry. The rolling
twelve months shipment and retail information for 2016 and 2015 as noted below
illustrates that the RV industry continues to grow both at the wholesale and
retail level. We believe that retail demand is the key driver to continued
growth in the RV industry and that annual RV shipments will generally be in line
with retail registrations in the future.
                                                     US and Canada Industry
                      Wholesale Unit Shipments per RVIA             Retail 

Unit Registrations per Stat Surveys

                       Rolling 12 Months through April                   

Rolling 12 Months through April

                      2016      2015    Unit Change  % Change            2016      2015    Unit Change  % Change
Towable (1)        324,552   309,539        15,013       4.9 %        325,322   293,828        31,494      10.7 %
Motorized (2)       49,943    45,156         4,787      10.6 %         45,624    41,014         4,610      11.2 %
Combined           374,495   354,695        19,800       5.6 %        

370,946 334,842 36,104 10.8 %

(1) Towable: Fifth wheel and travel trailer products

(2) Motorized: Class A, B and C products




The most recent towable and motorized RVIA wholesale shipment forecasts for
calendar year 2016 and 2017 as noted in the table below illustrates continued
projected growth of the industry. The outlook for future growth in RV sales is
based on continued

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modest gains in job and disposable income prospects as well as low inflation,
and takes into account the impact of slowly rising interest rates, a strong U.S.
dollar and continued weakness in energy production and prices.
                                                             Calendar Year
Wholesale Unit Shipment Forecast per RVIA (1)      2017     2016  Unit Change  % Change
Towable                                         341,200  334,200        7,000     2.1 %
Motorized                                        52,500   50,900        1,600     3.1 %
Combined                                        393,700  385,100        8,600     2.2 %

(1) Prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey

     Research Center for RVIA and reported in the Roadsigns RV Summer 2016
     Industry Forecast Issue.



Company Outlook
In the first calendar quarter of 2016 the RV industry continued to experience
growth in both wholesale and retail volumes. This sustained growth has been
consistent for several years in the motorized and towable segments. We have been
able to capitalize on the industry growth to varying degrees with our towable
and motorized products while making technology and other investments that we
believe will support our growth.

In the first nine months of Fiscal 2016 we achieved strong results in our
towables division, where our shipments grew much faster than the industry as a
result of greater penetration of our new products and further expansion of our
distribution base. We believe we can continue to achieve growth in excess of the
overall towables market projections for the remainder of Fiscal 2016.

In the motorized business, however, we did not achieve unit growth commensurate
with the industry. While we had a strong fiscal third quarter where our
deliveries grew by 12.4%, fiscal year to date our deliveries have grown at a
slower rate than the industry as a whole as we are still facing manufacturing
capacity challenges and losing retail market share in select product categories.
Our overall motorized market share has moved from 20.9% to 19.5% when comparing
shipments during the twelve month trailing periods ended April 2015 to April
2016.

In part, the motorized market share decline has been influenced by limited
production capacity within our North Iowa facilities. In recent quarters, we
have begun to make investments in unlocking further capacity via improved
operational processes and adding new facilities. While these investments have
not been fully realized to date, we have taken near term actions to maximize the
profitability of the motorized product with improved mix, cost containment
efforts and pricing initiatives.

As a result of the actions taken within our motorized and towable products, we
have seen similar changes to the backlog volumes at the end of our fiscal third
quarter.

Towable backlog grew 130.2% on a unit basis, which is driven by the expansion of our distribution base and the new products that were mentioned earlier.

The motorized unit backlog decreased by 33.6% on a unit basis when compared to the third quarter of Fiscal 2015. Several factors contributed as follows: • In prior years, we have hosted a dealer event in our fiscal third quarter

that historically would generate substantial motorized sales orders. This

year, we elected to reallocate some of these marketing dollars to other

programs which occur later in the year and thus we believe these programs

will generate sales orders in future quarters.

• Another factor was related to the timing of when certain rental units were

delivered. In the third quarter of Fiscal 2015, a portion of our rental

business was still in the backlog count as the units were delivered in the

fourth quarter of Fiscal 2015. This year, all of our rental volume was

delivered in the third quarter.

• Lastly, we have begun to see some modest improvement from the operational

improvement efforts that started in January. In the quarter, these

operational improvements allowed us to more quickly deliver motorized units

to our dealer network and thus further reduced the backlog. We believe it is

critical to timely satisfy dealer demand and we will continue to work on

    reducing product throughput time.




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                                                                      As Of
                                                                               (Decrease)       %
Backlog (1)                                 May 28, 2016     May 30, 2015       Increase     Change
Motorhomes (in units)                              1,513            2,279           (766 )    (33.6 )%
Motorhomes (approximate revenues in
thousands)                                       134,495   $      196,915     $  (62,420 )    (31.7 )%

Towables (in units)                                  412              179            233      130.2  %
Towables (approximate revenues in
thousands)                                 $       8,058   $        4,512   

$ 3,546 78.6 %

(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.


A key metric used to evaluate motorized dealer inventory levels is the retail
turn rate (12 month retail volume/current dealer inventory). At the end of the
third quarter of Fiscal 2016 the retail turn rate was 2.0 turns for motorized
product. Historically turn rates above 2.0 have been an indication of a balanced
dealer inventory, thus we believe motorized dealer inventory levels are in
alignment with retail demand.

In order to generate sales growth, we are expanding our Towables distribution
base and thus our dealer inventory has increased. As shown below, dealer
inventory for Towables increased 29.3% in the last year. Based upon the strong
sales growth already demonstrated and based upon the age of the dealer
inventory, we believe that dealer inventory for towable products is reasonable.
                                        As Of
                        May 28,  May 30,                 %
Unit Dealer Inventory     2016     2015     Increase  Change
Motorhomes                4,585    4,501          84    1.9 %
Towables                  2,358    1,823         535   29.3 %



ERP
In the second quarter of Fiscal 2015 the Board of Directors approved the
strategic initiative of implementing an ERP system to replace our legacy
business applications. During the first nine months of Fiscal 2016, the system
went "live" for Finance, the Towables operation and the human resources/payroll
areas. The next phase of implementation will involve enabling ERP functionality
across the manufacturing and operations of the motorhome business. As we gain
more experience and expertise with the new ERP toolset and access to data that
the new ERP platform affords, we will continue to identify, and in some cases
quantify, optimization opportunities in our supply chain, engineering,
manufacturing and other business areas. There have been no material changes to
the expected cost of implementation or timing from the disclosures made in the
first quarter of Fiscal 2016. We still plan that this project will be completed
in Fiscal 2017. The following table illustrates the project costs to date and
total anticipated spending:
                  Fiscal           Fiscal 2016                 Cumulative           Total Planned
(In thousands)     2015        Q1       Q2       Q3        Investment to Date         Investment
Capitalized      $ 3,291    $ 1,412  $ 1,798  $ 1,898    $     8,399  (1)   54 %   $        15,000
Expensed           2,528      1,363    1,432    1,742          7,065        46 %            10,000
Total            $ 5,819    $ 2,775  $ 3,230  $ 3,640    $    15,464       100 %   $        25,000

(1) During the first nine months of Fiscal 2016, we placed in service $5.7 million of our cumulative capitalized investment. These capitalized investments are amortized over a 10-year life.

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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:
                                                        Three Months Ended
(In thousands, except
percent                    May 28,        % of         May 30,        % of         Increase        %
and per share data)          2016     Revenues(1)        2015     Revenues(1)     (Decrease)     Change
Net revenues             $  272,077        100.0 %   $  266,510        100.0 %   $     5,567       2.1  %
Cost of goods sold          241,820         88.9 %      238,327         89.4 %         3,493       1.5  %
Gross profit                 30,257         11.1 %       28,183         

10.6 % 2,074 7.4 %


Selling                       4,770          1.8 %        5,150          1.9 %          (380 )    (7.4 )%
General and
administrative                4,894          1.8 %        6,453          2.4 %        (1,559 )   (24.2 )%
Impairment of fixed
asset                             -            - %          462          0.2 %          (462 )  (100.0 )%
Operating expenses            9,664          3.6 %       12,065          

4.5 % (2,401 ) (19.9 )%


Operating income             20,593          7.6 %       16,118          6.0 %         4,475      27.8  %
Non-operating income             77            - %            -            - %            77     100.0  %
Income before income
taxes                        20,670          7.6 %       16,118          6.0 %         4,552      28.2  %
Provision for taxes           6,232          2.3 %        4,616          1.7 %         1,616      35.0  %
Net income               $   14,438          5.3 %   $   11,502          4.3 %   $     2,936      25.5  %

Diluted income per
share                    $     0.53                  $     0.43                  $      0.10      23.3  %
Diluted average shares
outstanding                  27,004                      27,030                          (26 )    (0.1 )%


(1) Percentages may not add due to rounding differences.
Motorhome unit deliveries and ASP, net of discounts, consisted of the following:
                                                      Three Months Ended
                              May 28,   Product      May 30,   Product      (Decrease)      %
                               2016    Mix % (1)      2015    Mix % (1)      Increase     Change
Class A                           654      22.4 %        886      34.1 %          (232 ) (26.2 )%
Class B                           334      11.5 %        270      10.4 %            64    23.7  %
Class C                         1,929      66.1 %      1,440      55.5 %           489    34.0  %
Total motorhome deliveries      2,917     100.0 %      2,596     100.0 %           321    12.4  %

ASP:
Motorhome ASP                $ 83,758               $ 91,007               $    (7,249 )  (8.0 )%

(1) Percentages may not add due to rounding differences.


Towables unit deliveries and ASP, net of discounts, consisted of the following:
                                                    Three Months Ended
                            May 28,   Product      May 30,   Product       Increase       %
                             2016    Mix % (1)      2015    Mix % (1)     (Decrease)    Change
Travel trailer                1,042      86.5 %        598      80.6 %           444    74.2  %
Fifth wheel                     163      13.5 %        144      19.4 %            19    13.2  %
Total towable deliveries      1,205     100.0 %        742     100.0 %           463    62.4  %

Towables ASP               $ 21,177               $ 26,909               $    (5,732 ) (21.3 )%

(1) Percentages may not add due to rounding differences.

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Net revenues consisted of the following:

                                                     Three Months Ended
                                   May 28,              May 30,           Increase       %
(In thousands)                       2016                 2015           (Decrease)    Change
Motorhomes (1)                $ 245,785   90.3 %   $ 237,548   89.1 %   $     8,237     3.5  %
Towables (2)                     25,394    9.3 %      19,902    7.5 %         5,492    27.6  %
Other manufactured products         898    0.3 %       9,060    3.4 %        (8,162 ) (90.1 )%
Total net revenues            $ 272,077  100.0 %   $ 266,510  100.0 %   $     5,567     2.1  %


(1)  Includes motorhome units, parts and services.


(2)  Includes towable units and parts.



Motorhome net revenues increased $8.2 million or 3.5% in the third quarter of
Fiscal 2016, attributed primarily to a 12.4% increase in unit deliveries, most
notably in our Class C rental products. The 8.0% decrease in ASP was a result of
both an increase in the lower priced rental units as well as a decrease in our
high-end Class A products.

The increase in Towables revenues of $5.5 million or 27.6% was attributed to a
62.4% increase in unit deliveries partially offset by a decrease in ASP of 21.3%
as compared to the third quarter of Fiscal 2015. The decrease in ASP was
primarily a result of a shift to lower priced towable products.

Revenues from other manufactured products decreased by $8.2 million as we have exited sales to outside aluminum customers to maximize our labor resources.


Cost of goods sold was $241.8 million, or 88.9% of net revenues for the third
quarter of Fiscal 2016 compared to $238.3 million, or 89.4% of net revenues for
the same period a year ago due to the following:
•   Total variable costs (materials, direct labor, variable overhead, delivery

expense and warranty), as a percent of net revenues, decreased from 84.1% to

83.5%, primarily due to our strategic sourcing initiative resulting in lower

raw material costs and favorable product mix in part due to our decision to

exit other manufactured products markets, partially offset by higher warranty

expense.

• Fixed overhead (manufacturing support labor, depreciation and facility costs)

and research and development-related costs increased slightly from 5.3% to

5.4% of net revenues.

• All factors considered, gross profit increased from 10.6% to 11.1% of net

revenues.



Selling expenses were $4.8 million and $5.2 million, or 1.8% and 1.9% of net
revenues in the third quarter of Fiscal 2016 and Fiscal 2015, respectively. The
decrease in the third quarter of Fiscal 2016 was primarily due to reduced
advertising and product promotion expenses as compared to the prior year.
General and administrative expenses were $4.9 million and $6.5 million, or 1.8%
and 2.4% of net revenues in the third quarter of Fiscal 2016 and Fiscal 2015,
respectively. Decreases in the third quarter of Fiscal 2016 were primarily
related to the favorable legal settlement of $2.75 million discussed in Note 9
and increased amortization of postretirement health care prior service benefit
due to the plan amendment discussed in Note 7. These expense decreases were
partially offset by increased ERP expenses of $1.1 million in Fiscal 2016.
During the third quarter of Fiscal 2015 we recorded an asset impairment of
$462,000 when we offered the corporate plane for sale.
The overall effective income tax rate for the third quarter of Fiscal 2016 was
30.2% compared to the effective tax rate of 28.6% for the same period in Fiscal
2015. The increase in effective rate is due to the reduction in the amount of
the Domestic Production Activities Deduction applicable in Fiscal 2016 as
compared Fiscal 2015. This increase was partially offset in the third quarter of
2016 by a favorable retroactive tax credit. Our effective tax rate is expected
to be higher in future quarters without the benefit of this retroactive credit.
Net income and diluted income per share were $14.4 million and $0.53 per share,
respectively, for the third quarter of Fiscal 2016. In the third quarter of
Fiscal 2015, net income was $11.5 million and diluted income was $0.43 per
share.


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Nine Months of Fiscal 2016 Compared to the Comparable Nine Months of Fiscal 2015
The following is an analysis of changes in key items included in the statements
of operations:
                                                        Nine Months Ended
(In thousands, except
percent                    May 28,        % of         May 30,        % of        (Decrease)       %
and per share data)          2016     Revenues(1)        2015     Revenues(1)      Increase      Change
Net revenues             $  711,972        100.0 %   $  725,456        100.0 %   $   (13,484 )    (1.9 )%
Cost of goods sold          631,191         88.7 %      648,629         89.4 %       (17,438 )    (2.7 )%
Gross profit                 80,781         11.3 %       76,827         10.6 %         3,954       5.1  %

Selling                      14,714          2.1 %       14,703          2.0 %            11       0.1  %
General and
administrative               19,212          2.7 %       19,154          2.6 %            58       0.3  %
Impairment of fixed
assets                            -            - %          462          0.1 %          (462 )  (100.0 )%
Operating expenses           33,926          4.8 %       34,319          4.7 %          (393 )    (1.1 )%

Operating income             46,855          6.6 %       42,508          5.9 %         4,347      10.2  %
Non-operating income            194            - %           35            - %           159     454.3  %
Income before income
taxes                        47,049          6.6 %       42,543          5.9 %         4,506      10.6  %
Provision for taxes          14,699          2.1 %       13,050          1.8 %         1,649      12.6  %
Net income               $   32,350          4.5 %   $   29,493          4.1 %   $     2,857       9.7  %

Diluted income per
share                    $     1.20                  $     1.09                  $      0.11      10.1  %
Diluted average shares
outstanding                  27,029                      27,042                          (13 )       -  %


(1) Percentages may not add due to rounding differences. Unit deliveries and ASP, net of discounts, consisted of the following:

                                                      Nine Months Ended
                              May 28,   Product      May 30,   Product      (Decrease)      %
                               2016    Mix % (1)      2015    Mix % (1)      Increase     Change
Class A                         2,241      32.6 %      2,623      39.0 %          (382 ) (14.6 )%
Class B                           831      12.1 %        735      10.9 %            96    13.1  %
Class C                         3,799      55.3 %      3,373      50.1 %           426    12.6  %
Total motorhome deliveries      6,871     100.0 %      6,731     100.0 %           140     2.1  %

Motorhome ASP                $ 92,384               $ 96,086               $    (3,702 )  (3.9 )%

(1) Percentages may not add due to rounding differences.


Towables unit deliveries and ASP, net of discounts, consisted of the following:
                                                    Nine Months Ended
                            May 28,   Product      May 30,   Product       Increase       %
                             2016    Mix % (1)      2015    Mix % (1)     (Decrease)    Change
Travel trailer                2,562      86.1 %      1,567      82.8 %           995    63.5  %
Fifth wheel                     413      13.9 %        326      17.2 %            87    26.7  %
Total towable deliveries      2,975     100.0 %      1,893     100.0 %         1,082    57.2  %

Towables ASP               $ 21,173               $ 26,007               $    (4,834 ) (18.6 )%

(1) Percentages may not add due to rounding differences.

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Net revenues consisted of the following:

                                                     Nine Months Ended
                                   May 28,              May 30,          (Decrease)     %
(In thousands)                       2016                 2015            Increase    Change
Motorhomes (1)                $ 639,984   89.9 %   $ 652,919   90.0 %   $  (12,935 )  (2.0 )%
Towables (2)                     62,811    8.8 %      48,859    6.7 %       13,952    28.6  %
Other manufactured products       9,177    1.3 %      23,678    3.3 %      (14,501 ) (61.2 )%
Total net revenues            $ 711,972  100.0 %   $ 725,456  100.0 %   $  (13,484 )  (1.9 )%

(1) Includes motorhome units, parts and services.

(2) Includes towable units and parts.




The decrease in motorhome net revenues of $12.9 million or 2.0% was attributed
primarily to a decrease of 3.9% in ASP partially offset by a 2.1% increase in
unit deliveries in the first nine months of Fiscal 2016 as compared to the first
nine months of Fiscal 2015.

Towables revenues increased 28.6%, and were $62.8 million in the first nine
months of Fiscal 2016, compared to $48.9 million in the first nine months of
Fiscal 2015. The increase in revenues was a result of a 57.2% increase in unit
deliveries, partially offset by a 18.6% decrease in ASP.

Revenues from other manufactured products decreased by $14.5 million as we have exited sales outside aluminum customers to maximize our labor resources.


Cost of goods sold was $631.2 million, or 88.7% of net revenues for the first
nine months of Fiscal 2016 compared to $648.6 million, or 89.4% of net revenues
for the first nine months of Fiscal 2015 due to the following:
•   Total variable costs (materials, direct labor, variable overhead, delivery

expense and warranty), as a percent of net revenues, decreased to 83.3% in

Fiscal 2016 compared to 84.1% in Fiscal 2015 primarily due to improved

pricing, favorable product mix in part due to our decision to exit other

manufactured products markets and cost savings related to our strategic

sourcing project, partially offset by higher warranty expense.

• Fixed overhead (manufacturing support labor, depreciation and facility costs)

and research and development-related costs were flat at 5.3% of net revenues

in both Fiscal 2016 and Fiscal 2015.

• All factors considered, gross profit increased to 11.3% from 10.6% of net

revenues.



Selling expenses were flat at $14.7 million in the first nine months of Fiscal
2016 and Fiscal 2015, and were 2.1% of net revenues in Fiscal 2016 compared to
2.0% in Fiscal 2015.
General and administrative expenses were 2.7% and 2.6% of net revenues in the
first nine months of Fiscal 2016 and Fiscal 2015, respectively. General and
administrative expenses increased $58,000, or 0.3% in the first nine months of
Fiscal 2016 compared to the same period in Fiscal 2015. The legal settlement
previously discussed and increased amortization of postretirement health care
prior service benefit due to the plan amendment decreased expenses and were
offset by increases in ERP and wage related expenses.
As described above, during the third quarter of Fiscal 2015 we recorded an asset
impairment of $462,000 when we offered the corporate plane for sale.
The overall effective income tax rate for the first nine months of Fiscal 2016
was 31.2% compared to the effective income tax rate of 30.7% for the first nine
months of Fiscal 2015. The increase in effective rate is due to the reduction in
the amount of the Domestic Production Activities Deduction applicable in Fiscal
2016 as compared Fiscal 2015. This increase was partially offset in the first
nine months of Fiscal 2016 by a favorable retroactive tax credit. Our effective
tax rate is expected to be higher in future periods without the benefit of this
retroactive tax credit.
Net income and diluted income per share were $32.4 million and $1.20 per share,
respectively, for the first nine months of Fiscal 2016. In the first nine months
of Fiscal 2015, net income was $29.5 million and diluted net income was $1.09
per share.

Other Balance Sheet Changes

In the first quarter of Fiscal 2016 we reduced our postretirement health care
liability with a plan amendment. This resulted in a $28.6 million reduction in
the postretirement health care liability, a $10.9 million decrease in our
deferred tax assets and a $17.7 million increase in AOCI.


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Analysis of Financial Condition, Liquidity and Resources
Cash and cash equivalents increased $1.0 million during the first nine months of
Fiscal 2016 and totaled $71.3 million as of May 28, 2016. Significant liquidity
events that occurred during the first nine months of Fiscal 2016 were:
• Generation of net income of $32.4 million


• Purchases of property and equipment of $19.9 million

• Increase in inventory of $19.3 million

• Dividend payments of $8.2 million




We have the ability to borrow $35.0 million through our Amended Credit Agreement
with Wells Fargo Capital Finance, a revolving credit facility based on our
eligible inventory and certain receivables. In addition, the Amended Credit
Agreement also includes a framework to expand the size of the facility up to
$50.0 million, based on mutually agreeable terms at the time of the expansion.
We are in compliance with all material terms in the Amended Credit Agreement and
have no outstanding borrowings at May 28, 2016.
We filed a Registration Statement on Form S-3, which was declared effective by
the SEC on April 25, 2016. Subject to market conditions, we have the ability to
offer and sell up to $35.0 million of our common stock in one or more offerings
pursuant to the Registration Statement. The Registration Statement will be
available for use for three years from its effective date. We currently have no
plans to offer and sell the common stock registered under the Registration
Statement; however, it does provide another potential source of liquidity to
raise capital if we need it, in addition to the alternatives already in place.
Working capital at May 28, 2016 and August 29, 2015 was $180.7 million and
$184.6 million, respectively, a decrease of $3.9 million. We currently expect
cash on hand, cash collected on receivables, funds generated from operations and
the availability under the Amended Credit Agreement to be sufficient to cover
both short-term and long-term operating requirements for the next 12 months. We
anticipate capital expenditures in the fourth quarter of Fiscal 2016 to be
approximately $4 - $6 million as we continue to invest in our ERP system and
West Coast capacity expansion investments.
We made share repurchases of $3.1 million in the first nine months of Fiscal
2016. If we believe the common stock is trading at attractive levels and
reflects a prudent use of our capital, subject to compliance with the Amended
Credit Agreement, we may purchase additional shares in the remainder of Fiscal
2016. At May 28, 2016 we have $4.0 million remaining on our board repurchase
authorization. See Part II, Item 2 of this Form 10-Q.
Operating Activities
Cash provided by operating activities was $31.7 million for the nine months
ended May 28, 2016 compared to $18.6 million for the nine months ended May 30,
2015. In Fiscal 2016 the combination of net income of $32.4 million and changes
in non-cash charges (e.g., depreciation, LIFO, stock-based compensation,
deferred income taxes) provided $38.7 million of operating cash. Changes in
assets and liabilities (primarily an increase in inventories) used $6.9 million
of operating cash in the first nine months ended May 28, 2016. In the nine
months ended May 30, 2015, the combination of net income of $29.5 million and
changes in non-cash charges (e.g., depreciation, LIFO, stock-based compensation,
deferred income taxes) provided $37.5 million of operating cash. Changes in
assets and liabilities (primarily an increase in inventories and a decrease in
accrued expenses) used $19.0 million of operating cash.
Investing Activities
Cash used in investing activities of $19.5 million for the nine months ended
May 28, 2016 was due primarily to capital expenditures of $19.9 million.
Approximately $9.7 million was invested in property in Oregon that we intend to
use to expand motorhome manufacturing and approximately $8.4 million was
invested in ERP. In the nine months ended May 30, 2015, cash used in investing
activities of $13.7 million was due primarily to capital expenditures of $14.2
million.
Financing Activities
Cash used in financing activities of $11.2 million for the nine months ended
May 28, 2016 was primarily due to $8.2 million for the payment of dividends and
$3.1 million in repurchases of our stock. Cash used in financing activities of
$13.5 million for the nine months ended May 30, 2015 was primarily due to $6.2
million for repurchases of our stock and $7.3 million for payments of dividends.

Significant Accounting Policies


We describe our significant accounting policies in Note 1, Summary of
Significant Accounting Policies, of the Notes to Consolidated Financial
Statements included in our Annual Report on Form 10-K for the fiscal year ended
August 29, 2015. We discuss our critical accounting estimates in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, in our Annual Report on Form 10-K for the fiscal year ended
August 29, 2015. We refer to these disclosures for a detailed explanation of our
significant accounting policies and critical accounting estimates. There has
been no significant change in our significant accounting policies or critical
accounting estimates since the end of Fiscal 2015.

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