Winnebago Industries, Inc. (WGO)

WGO 
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Winnebago Industries, Inc. (WGO)

F4Q08 Earnings Call

October 16, 2008 10:00 am ET

Executives

Robert J. Olson – Chairman, Chief Executive. Officer and President

Sarah N. Nielsen – Chief Financial Officer and VP

Raymond M. Beebe – VP, General Counsel and Secretary

William J. O'Leary – VP of Product Development

Sheila Davis – Manager of Investor Relations and PR

Analysts

[Scott Stember] - Sidoti

Kathryn Thompson - Avondale Partners

Ed Aaron - RBC Capital Markets

[Mark] - Robert W. Baird

Bob Simonson –William Blair

Barry Vogel - Vogel and Associates

Presentation

Operator

Welcome to the fourth quarter 2008 Winnebago Industries earnings conference call. (Operator Instructions) Now I would like to turn the presentation over to your host for today’s conference Sheila Davis, Public Relations and Investor Relations Manager.

Sheila Davis

To review the company’s results for the fourth quarter of fiscal 2008 end August 30 2008. Conducting the call today are Bob Olson, Winnebago Industries Chairman do the Board, Chief Executive Officer and President and Sarah Nielsen Vice President and Chief Financial Officer.

I trust each of you have received a copy of the news release with our earnings results this morning. This call is being broadcast live on our website at WinnebagoInd.com. A replay of the call will be available on our website at approximately 12 pm central time today.

If you have any questions about accessing any of this information, please call our investor relations department at 6-4-1-5-8-5-6-8-0-3 followed the conference call. Before we start let me offer the following cautionary note. This presentation contains forward-looking statements within the meaning of the private securities ligation 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. These factors are contained in the company’s filings with the Securities and Exchange Commission over the last 12 months, copies of which are available from the SEC or from the company upon request.

I will now turn the call over to Bob Olson, Bob?

Robert J. Olson

Thank you Sheila, good morning and welcome to Winnebago Industries forth quarter conference call. While our 50th anniversary was cause for celebration during fiscal year 2008 it was one of the most challenging years we have ever had.

Unfortunately the fourth quarter was even more difficult than the first nine months of fiscal 2008. Although we are pleased that fuel prices have trended lower in recent weeks, the availability of credit and rising interest rates have become major concerns for our retail customers and our dealers.

Consumer confidence was reported at historically low levels during our fourth quarter indicating consumer’s reluctance for discretionary purchases such as our products. As a result of all these negative economic factors the motor home market has declined significantly with both wholesale and retail sales declining over 50% during our fiscal fourth quarter.

On a whole sale shipment basis our RVIA’s economist Dr. [Richard Curtain] from the University of Michigan has revised the industries calendar 2008 shipment forecast downward once again to 32,500 Class A, B, and C motor homes. A 41.3% decrease from actual shipments of 55,400 motor homes in calendar 2007.

I am concerned that if dealers continue to lower their inventories as significantly as they have in the past few months, actual shipments may be even lower than Dr. [Curtain’s] latest forecast. Dealers continue to reduce their inventories in an effort to minimize their flooring costs and maximize return rate of their investment.

They are not replacing the units they retail on a one-for-one basis in an effort to lower their inventories, which means fewer orders for the manufacturer. Our dealer’s inventory of Winnebago, Itasca, and Era brand products at the end of the fourth quarter was 3,663 units.

A decrease of 18.1% from the fourth quarter last year and 15.6% less than dealer inventory at the end of the third quarter of fiscal 2008. We looked for this reduction in inventory to continue until both dealers and retail customers regain confidence in the economy.

At our last conference call in June, I mentioned my concern of an increased promotional environment if we did not have better retail activity and improved dealer confidence. Unfortunately that appears to have happened and we are seeing an increase in discounting both from a whole sale and retail perspective.

I am not sure if there is manufacturing business today that does not have multiple programs in place to help stimulate business. Some bargain buyers are taking advantage, but until retail improves and dealers gain more confidence, manufacturers profits will suffer and some may not survive, potentially resulting in more products will be available in the market place at below cost.

As a result of these negative market conditions, we experienced disappointing operating results for the fourth quarter. As we announced on June 2nd, we idled our Charles City manufacturing facility on August 1st 2008 bringing the production of Class C products back to our Four City Campus.

During the fourth quarter we reduced our workforce company-wide by approximately 600 employees which included the CCMF closure. As well as other reductions throughout the company. Since the end of the fourth quarter we have reduced our workforce by another 300 employees.

We currently have approximately 1,930 employees, a 42% decrease since August 25th 2007. It is extremely difficult to loose valuable employees but also imperative to reduce our overhead costs to more closely align ourselves to the current market. In addition, we continue to employee lean manufacturing philosophies in our processes, as well reduce budgeting expenses in light of the significant changes in our production volumes.

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