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WINNEBAGO INDUSTRIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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03/23/2017 | 11:04am CET
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 27, 2016 and in Part II,
Item 1A of this Quarterly Report on Form 10-Q.

Forward-Looking Information

This Quarterly Report on Form 10-Q 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 increases in interest rates,
availability of credit, low consumer confidence, availability of labor,
significant increase in repurchase obligations, inadequate liquidity or capital



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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, any unexpected expenses related to ERP, risks relating to the
integration of our acquisition of Grand Design including: risks inherent in the
achievement of cost synergies and the timing thereof, risks related to the
disruption of the transaction to Winnebago and Grand Design and its management,
the effect of the transaction on Grand Design's ability to retain and hire key
personnel and maintain relationships with customers, suppliers and other third
parties, risk related to compliance with debt covenants and leverage ratios,
risks related to integration of the two companies 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
our filings with the SEC over the last 12 months, copies of which are available
from the SEC or from us upon request. We disclaim 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 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. is a leading US manufacturer of RVs with a proud
history of manufacturing RV products for more than 50 years. We currently
produce the majority 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
Significant Transaction

On November 8, 2016, we closed on the acquisition of all the issued and
outstanding capital stock of towable recreational vehicle manufacturer Grand
Design for initial consideration of $520.5 million. This acquisition was funded
from our cash on hand, $353.0 million from asset-based revolving and term loan
credit facilities, as well as stock consideration as is more fully described in
Note 2 and Note 9 to the Consolidated Financial Statements. We purchased Grand
Design to significantly expand our existing towable RV product offerings and
dealer base and acquire executive talent in the RV industry.

In the first quarter of Fiscal 2017, we revised our reporting segments.
Previously we had one reporting segment which included all recreational vehicle
products and services. With the acquisition of Grand Design in the first
quarter, we expanded the number of reporting segments to two: (1) Motorized
products and services and (2) Towable products and services. The Motorized
segment includes all products that include a motorized chassis as well as other
related manufactured products. The Towable segment includes all products which
are not motorized and are generally towed by another vehicle. Prior year segment
information has been restated to conform to the current reporting segment

Market Share

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 January               Calendar Year
US and Canada                         2017       2016       2016     2015   2014   2013
Motorized A, B, C                       17.8 %  20.2 %       18.0 % 20.5 %

20.7 % 18.6 % Travel trailer and fifth wheels 1.9% (1) 0.9 % 1.7% (1) 0.9 % 0.8 % 1.0 %

(1) Includes retail unit market share for Grand Design since acquisition on

     November 8, 2016.

Industry Trends

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 relative to the overall industry. The
rolling twelve months shipment and retail information for 2017 and 2016 as noted
in the next table 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.



Table of Contents

                                                     US and Canada Industry
                      Wholesale Unit Shipments per RVIA             Retail 

Unit Registrations per Stat Surveys

                      Rolling 12 Months through January                 

Rolling 12 Months through January

                      2017      2016    Unit Change  % Change            2017      2016    Unit Change  % Change
Towable (1)        364,642   316,808        47,834      15.1 %        344,590   311,026        33,564      10.8 %
Motorized (2)       55,391    47,856         7,535      15.7 %         50,262    45,363         4,899      10.8 %
Combined           420,033   364,664        55,369      15.2 %        

394,852 356,389 38,463 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 2017 compared to actual 2016 shipments 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 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.


Wholesale Unit Shipments per RVIA                  (1)      2016 Actual   Unit Change   % Change
Towable                                          374,400       362,685        11,715       3.2 %
Motorized                                         57,700        54,741         2,959       5.4 %
Combined                                         432,100       417,426        14,674       3.5 %

(1) Forecast prepared by Dr. Richard Curtin of the University of Michigan

Consumer Survey Research Center for RVIA and reported in the Roadsigns RV

Spring 2017 Industry Forecast Issue.

ERP System

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. The new ERP platform will provide better support for our
changing business needs and plans for future growth. Our initial cost estimates
have grown for additional needs of the business such as the acquisition of the
Junction City, Oregon plant and the opportunity to integrate the ERP system with
additional manufacturing systems. The project includes software, external
implementation assistance and increased internal staffing directly related to
this initiative. We anticipate that approximately 40% of the cost will be
expensed in the period incurred and 60% will be capitalized and depreciated over
its useful life.

The following table illustrates the cumulative project costs:

                  Fiscal     Fiscal         Fiscal 2017            Cumulative
(In thousands)     2015       2016         Q1         Q2           Investment
Capitalized      $ 3,291    $  7,798    $ 1,518    $   530    $ 13,137  (1)   56 %
Expensed           2,528       5,930      1,165        517      10,140        44 %
Total            $ 5,819    $ 13,728    $ 2,683    $ 1,047    $ 23,277       100 %

(1) $6.4 million of our cumulative capitalized investment has been placed in service and is being amortized over a 10-year life.



Table of Contents

© Edgar Online, source Glimpses

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Financials ($)
Sales 2017 1 455 M
EBIT 2017 123 M
Net income 2017 72,0 M
Finance 2017 212 M
Yield 2017 1,35%
P/E ratio 2017 12,74
P/E ratio 2018 10,74
EV / Sales 2017 0,50x
EV / Sales 2018 0,49x
Capitalization 933 M
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Winnebago Industries, Inc. Technical Analysis Chart | WGO | US9746371007 | 4-Traders
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Mean consensus OUTPERFORM
Number of Analysts 8
Average target price 34,8 $
Spread / Average Target 18%
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Michael J. Happe President, Chief Executive Officer & Director
Robert M. Chiusano Chairman
Chris West Vice President-Operations
Sarah N. Nielsen Chief Financial Officer & Vice President
Mark T. Schroepfer Independent Director
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