During a conference call this morning (June 14), Winnebago Industries Inc. management elaborated on the company’s strong third-quarter performance while shedding little new light on the offer from North Street Capital LP to purchase the company’s shares.
When asked about the $121 million offer first made public last month, Randy Potts, chairman, president and CEO, stated, “No change there.” On May 18, Winnebago released a statement saying they’ve reviewed the offer with its board and determined that so far there’s not sufficient information to deem the offer as credible.
Regarding its third quarter, Winnebago said results were boosted by significant growth from its towable division coupled with improved margins compared to the year-ago period. The Forest City, Iowa-based builder reported a 14.9% increase in third-quarter revenue to $155.7 million while more than tripling net income to $3.9 million.
In the question and answer period, officials had these additional comments:
• Winnebago began the new model year in much better condition than past years and reported a good response to 2013 motorized and towable products during its Dealer Days event (the first such event in four years) held last month in Las Vegas. Potts said dealer response was strong toward Winnebago’s new value-priced Class A gas models introduced at the show. “We are no longer in survival mode,” Potts said. Due to strong backlogs, the company has made moves to step up production in the coming weeks, and Potts is optimistic about the remainder of the fiscal year. “The ongoing strength of our product line is driving backlog,” he added. The company spent approximately $600,000 to promote and stage its Dealer Days event.
• Winnebago plans a greater presence at the Elkhart Open House event in September and is now formulating its plans, Potts said.
• In terms of retail sales on the motorized side on a region-by-region basis, Potts said Winnebago “continues to see challenges on the West Coast,” as it has for the past several quarters. He said the company’s new towable line, which became profitable for the first time in the third quarter, lacks “a stable enough footprint to draw any conclusions.”
• Asked about the market for used motorhomes, Potts said his only evidence is anecdotal. “With that said, the used market is strong and some dealers do very well with it and they’re looking for used products for their lots.”
• On the subject of price discounting, the company has not returned to the pre-recession levels. As a percentage of net revenue, that figure is currently around 4% of net revenue versus 2% before the recession.
When pressed by a later questioner on North Street’s proposal to use Winnebago facilities in Forest City for the final assembly of trucks and autos should the board go in that direction, Potts stated, “It would depend on a multitude of factors. One should not assume the facilities we have here are suitable for building automobiles. That is a gross assumption pretty much in and of itself.”
Potts also addressed questions about the utilization of Winnebago’s more than 1 million square feet of manufacturing space in Iowa. The present utilization rate of its capacity was placed at around 45%, according to company estimates. Investors contend that higher utilization would lead to higher profit margins and improve the value of Winnebago shares.
Potts explained that the 45% figure is not across the board, that some portions of Winnebago’s facilities are at full capacity now and if it reached 100% utilization, some component manufacturing would have to be outsourced. Reaching full utilization of a single shift would yield somewhere between 10,000 and 12,000 motorhomes annually, Potts estimated.
As Winnebago continues to improve operations and its cash flow, one investor asked how this additional cash, now at $80 million, would be used.
Potts said, “Reinvestment (in the facilities), diversification, stock buybacks and cash dividends are all possibilities and high on our list.” The subject will be discussed at next week’s Winnebago board meeting, he added.
Click here to read an earlier report on Winnebago’s third quarter results.