Winnebago Industries, Inc. (WGO)

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Winnebago Industries, Inc. (WGO)

F2Q09 Earnings Call

March 19, 2009; 10:00 am ET


Robert Olson - Chairman, Chief Executive. Officer and President

Sarah Nielsen - Chief Financial Officer and Vice President

Sheila Davis - Manager of Investor Relations, Public Relations


Katherine Thompson - Avondale Partners

Craig Kennison - Robert W. Baird

Scott Stember - Sidoti & Company

Barry Vogel - Barry Vogel & Associates

Richard Cain - Unidentified Company



Good day ladies and gentlemen and welcome to the Winnebago second quarter 2009 earnings conference call. My name is Onika and I will be your operator for today. At this time, all participants are in a listen-only mode. (Operator Instructions)

At this time, I would now like to turn the call over to Sheila Davis, Public Relations and Investor Relations Manager. Please proceed.

Sheila Davis

Thank you, Onika. Good morning and welcome to the Winnebago Industries Incorporated Conference Call to review the company’s results for the second quarter of fiscal year 2009, and February 28, 2009.

Inducting the call today are Bob Olson, Winnebago Industries Chairman of 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 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 641-585-6803 following the conference call. Before we start, it is my responsibility to inform you this presentation may contain certain 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. These factors are identified in our 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’ll now turn the call over to Bob Olson.

Robert Olson

Thank you Sheila, good morning and welcome to Winnebago Industries Second Quarter Conference Call. With the continued news of troubled banks, home for closures, stock market volatility, government bailouts, and unemployment rates rising, consumer confidence levels continue to fall to record levels.

Unfortunately, the nation’s economy has not improved as many of these same topics were discussed during our last call. These issues resulted in continued deterioration in the marketplace and resulted in our second quarter of fiscal 2009 being negatively impacted.

Our second fiscal quarter is historically the most difficult of all quarters, due to its seasonality with the Christmas and New Year’s holidays typically reduced demand for our products and the fact that we incur higher utility and maintenance costs during this quarter.

Lower Motor Home shipment volumes increased incentives and a less favorable mix of products sold resulted in lower revenues and a loss for the quarter. Obviously, depressed economic conditions in what is turning out to be the number one issue in our industry today, a difficult credit environment, continues to negatively impact our business.

While we were pleased that motor homes were included in the federal stimulus package, as well as the Federal Reserve’s health program, we are not yet seeing that these programs are working as intended. Again, I repeat, credit at both the wholesale and retail levels remain the number one issue facing our industry today.

Although this has been a difficult quarter not only for us, but the entire RV industry, we did benefit from lowering our inventories and obtaining a $9.1 million no net cost loan from UBS, which was secured by our auction rate securities held with them. Sarah will get into more detail about the financials in just a moment.

From a fiscal quarter perspective, dealers have continued to reduce their inventories due to lack of available floor planning and financing for the new product. Consequently, inventory at Winnebago industries products on our dealer partners’ lots has declined 11% sequentially since last quarter and 40% as compared to a year ago.

The decline in the net worth of the buying public is also a growing concern. As consumers heal their personal balance sheets with increased saving, they are delaying their purchase of discretionary products such as motor homes. As a result of the decrease demand at the retail level and decreased orders from the industries dealers, wholesale shipments for motor homes have declined dramatically with the decline accelerating throughout the past few months.

Wholesale shipments of Class A and Class C motor homes industry-wide declined 49.5% for calendar year 2008, 75.2% for the fourth calendar quarter of 2008, and 80.6% for the month of January, 2009. Retail sales while not as drastic are still down considerably with a decline of 41.6% for calendar year 2008, 54.8% for the fourth calendar quarter of 2008, and 58.4% for the month of January.

RVI’s economist Dr. Rich Curtin from the University of Michigan has revised the industry’s calendar 2009 shipment forecast downward in his latest forecast to 14,100 Class A, B, and C motor homes for 2009, a 51% decrease from actual shipments of 28,300 motor homes in calendar 2008.

This forecast is by far the lowest we have on record for the industry, with data available back to 1971. We continue to see a very active promotional environment in the marketplace, both from a wholesale and retail perspective, with some manufacturers selling the low cost for the benefit of cash flow. It’s extremely challenging to compete profitably in a market of this nature.

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