10-K 1 wgo201310-k.htm FORM 10-K FOR YEAR ENDED AUGUST 31, 2013 2013 10-K

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended August 31, 2013; or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________________ to _______________________
Commission File Number 001‑06403
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Iowa
 
42-0802678
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
 
 
P.O. Box 152, Forest City, Iowa
 
50436
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (641) 585‑3535
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock ($.50 par value)
 
The New York Stock Exchange, Inc.
 
 
Chicago Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o      Accelerated Filer x       Non-accelerated filer o        Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
Aggregate market value of the common stock held by non-affiliates of the registrant: $539,981,520 (27,705,568 shares at the closing price on the New York Stock Exchange of $19.49 on March 1, 2013).
Common stock outstanding on October 15, 2013: 27,877,224 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement relating to the registrant's December 2013 Annual Meeting of Shareholders, scheduled to be held December 17, 2013, are incorporated by reference into Part II and Part III of this Annual Report on Form 10-K where indicated.
 



Winnebago Industries, Inc.
2013 Form 10-K Annual Report
Table of Contents

 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
 
Item 15.


ii


Glossary


The following terms and abbreviations appear in the text of this report and are defined as follows:
AOCI
Accumulated Other Comprehensive Income (Loss)
ARS
Auction Rate Securities
ASC
Accounting Standards Codification
ASP
Average Sales Price
ASU
Accounting Standards Update
CCMF
Charles City Manufacturing Facility
COLI
Company Owned Life Insurance
Credit Agreement
Credit Agreement dated as of October 31, 2012 by and between Winnebago Industries, Inc. and Winnebago of Indiana, LLC, as Borrowers, and General Electric Capital Corporation, as Agent
DCF
Discounted Cash Flow
EBITDA
Earnings Before Interest, Tax, Depreciation, and Amortization
EPS
Earnings Per Share
FASB
Financial Accounting Standards Board
FIFO
First In, First Out
GAAP
Generally Accepted Accounting Principles
GECC
General Electric Capital Corporation
IRS
Internal Revenue Service
LIBOR
London Interbank Offered Rate
LIFO
Last In, First Out
Loan Agreement
Loan and Security Agreement dated October 13, 2009 by and between Winnebago Industries, Inc. and Wells Fargo Bank, National Association, as successor to Burdale Capital Finance, Inc., as Agent
MVA
Motor Vehicle Act
NMF
Non-Meaningful Figure
NOL
Net Operating Loss
NYSE
New York Stock Exchange
OCI
Other Comprehensive Income
OEM
Original Equipment Manufacturing
OSHA
Occupational Safety and Health Administration
ROE
Return on Equity
ROIC
Return on Invested Capital
RV
Recreation Vehicle
RVIA
Recreation Vehicle Industry Association
SEC
U.S. Securities and Exchange Commission
SERP
Supplemental Executive Retirement Plan
SIR
Self-Insured Retention
Stat Surveys
Statistical Surveys, Inc.
SunnyBrook
SunnyBrook RV, Inc.
Towables
Winnebago of Indiana, LLC, a wholly-owned subsidiary of Winnebago Industries, Inc.
US
United States of America
Wells Fargo
Wells Fargo Bank, National Association
XBRL
eXtensible Business Reporting Language



iii


WINNEBAGO INDUSTRIES, INC.
FORM 10‑K
Report for the Fiscal Year Ended August 31, 2013
Forward-Looking Information
Certain of the matters discussed in this Annual Report on Form 10-K 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, 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 and other factors which may be disclosed throughout this Annual Report on Form 10-K. 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. We advise you, however, to consult any further disclosures made on related subjects in future quarterly reports on Form 10-Q and current reports on Form 8-K that are filed or furnished with the SEC.

PART I

Item 1. Business

General
The "Company," "Winnebago Industries," "we," "our" and "us" are used interchangeably to refer to Winnebago Industries, Inc. and its subsidiary, Winnebago of Indiana, LLC, as appropriate in the context.
Winnebago Industries, Inc., headquartered in Forest City, Iowa, is a leading United States manufacturer of RVs used primarily in leisure travel and outdoor recreation activities. We sell motorhomes through independent dealers under the Winnebago, Itasca and Era brand names.
On December 29, 2010 we purchased substantially all of the assets of SunnyBrook, a manufacturer of travel trailers and fifth wheel RVs. The aggregate consideration paid was $4.7 million, net of cash acquired, including the repayment of $3.3 million of SunnyBrook commercial and shareholder debt on the closing date. Also on December 29, 2010, we entered into a five-year operating lease agreement for the SunnyBrook facilities. The operations of Towables are included in our consolidated operating results from the date of its acquisition. Towables will continue to manufacture products under the SunnyBrook brands. In addition, Towables has broadened its product line by including Winnebago brand trailer and fifth wheel products. The primary reason for the acquisition was diversification outside of the motorized market while utilizing the Winnebago brand strength in the towable market allowing for the potential of revenue and growth.
Other products manufactured by us consist primarily of OEM parts, including extruded aluminum and other component products for other manufacturers and commercial vehicles.
We were incorporated under the laws of the state of Iowa on February 12, 1958, and adopted our present name on February 28, 1961. Our executive offices are located at 605 West Crystal Lake Road in Forest City, Iowa. Our telephone number is (641) 585-3535.
Available Information
Our website, located at www.winnebagoind.com, provides additional information about us. On our website, you can obtain, free of charge, this and prior year Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all of our other filings with the SEC. Our recent press releases are also available on our website. Our website also contains important information regarding our corporate governance practices. Information contained on our website is not incorporated into this Annual Report on Form 10-K. You may also read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website that contains reports, proxy statements and other information that is filed electronically with the SEC. The website can be accessed at www.sec.gov.


1


Principal Products
Net revenues by major product classes were as follows:
 
Year Ended (1)
(In thousands)
August 31, 2013
 
August 25, 2012
 
August 27, 2011
 
August 28, 2010
 
August 29, 2009
Motorhomes (2)
$
718,580

89.5
%
 
$
496,193

85.3
%
 
$
456,337

91.9
%
 
$
428,932

95.4
%
 
$
191,178

90.4
%
Towables (3)
54,683

6.8
%
 
56,784

9.8
%
 
16,712

3.4
%
 

%
 

%
Other manufactured products
29,902

3.7
%
 
28,702

4.9
%
 
23,369

4.7
%
 
20,552

4.6
%
 
20,341

9.6
%
Total net revenues
$
803,165

100.0
%
 
$
581,679

100.0
%
 
$
496,418

100.0
%
 
$
449,484

100.0
%
 
$
211,519

100.0
%
(1) 
The fiscal year ended August 31, 2013 contained 53 weeks; all other fiscal years contained 52 weeks.
(2) 
Includes motorhome units, parts, and service.
(3) 
Includes towable units and parts.
 
Motorhomes, parts and service. A motorhome is a self-propelled mobile dwelling used primarily as temporary living quarters during vacation and camping trips, or to support some other active lifestyle. The RVIA classifies motorhomes into three types which are defined as follows:
Class A models are conventional motorhomes constructed directly on medium- and heavy-duty truck chassis, which include the engine and drivetrain components. The living area and driver's compartment are designed and produced by the motorhome manufacturer. We manufacture Class A motorhomes with gas and diesel engines.
Class B models are panel-type vans to which sleeping, kitchen, and/or toilet facilities are added. These models may also have a top extension to provide more headroom. We manufacture Class B motorhomes with gas and diesel engines.
Class C models are motorhomes built on van-type chassis onto which the motorhome manufacturer constructs a living area with access to the driver's compartment. We manufacture Class C motorhomes with gas and diesel engines.
We manufacture and sell Class A and C motorhomes under the Winnebago and Itasca brand names and Class B motorhomes under the Winnebago Touring Coach brand name. Our product offerings for the 2014 model year are as follows:
Type
Winnebago
Itasca
Winnebago Touring Coach
Class A (gas)
Vista, Sightseer, Adventurer
Sunstar, Sunova, Suncruiser
 
Class A (diesel)
Via, Forza, Journey, Tour
Reyo, Solei, Meridian, Ellipse
 
Class B (gas and diesel)
 
 
Travato, Era
Class C
Minnie Winnie, Minnie Winnie Premier, Access Premier,Trend, Aspect, View, View Profile
Spirit, Spirit Silver, Impulse Silver, Viva!, Cambria, Navion, Navion iQ
 
Motorhomes generally provide living accommodations for up to seven people and include kitchen, dining, sleeping and bath areas, and in some models, a lounge. Optional equipment accessories include, among other items, generators, home theater systems, king-size beds, and UltraLeatherTM upholstery and a wide selection of interior equipment. With the purchase of any new motorhome, we offer a comprehensive 12-month/15,000-mile warranty on the coach and, for Class A and C motorhomes, a 3-year/36,000-mile structural warranty on sidewalls and floors.
Our Class A, B and C motorhomes are sold by dealers in the retail market with manufacturer's suggested retail prices ranging from approximately $66,000 to $383,000, depending on size and model, plus optional equipment and delivery charges. Our motorhomes range in length from 21 to 43 feet.
Unit sales of our motorhomes for the last five fiscal years were as follows:
 
Year Ended (1)(2)
Units
August 31, 2013
 
August 25, 2012
 
August 27, 2011
 
August 28, 2010
 
August 29, 2009
Class A
3,761

55.1
%
 
2,579

55.6
%
 
2,436

55.4
%
 
2,452

55.3
%
 
822

37.4
%
Class B
372

5.5
%
 
319

6.9
%
 
103

2.3
%
 
236

5.3
%
 
149

6.8
%
Class C
2,688

39.4
%
 
1,744

37.6
%
 
1,856

42.2
%
 
1,745

39.4
%
 
1,225

55.8
%
Total motorhomes
6,821

100.0
%
 
4,642

100.0
%
 
4,395

100.0
%
 
4,433

100.0
%
 
2,196

100.0
%
(1) 
The fiscal year ended August 31, 2013 contained 53 weeks; all other fiscal years contained 52 weeks.
(2) 
Percentages may not add due to rounding differences.
Motorhome parts and service activities represent revenues generated by service work we perform for retail customers at our Forest City, Iowa facility and parts we sell to our dealers. As of August 31, 2013, our parts inventory was approximately $2.6 million and is

2


located in a 450,000-square foot warehouse with what we believe to be among the most sophisticated distribution and tracking systems in the industry. Our competitive strategy is to provide proprietary manufactured parts through our dealer network, which we believe increases customer satisfaction and the value of our motorhomes.
Towable RVs. A towable is a non-motorized vehicle that connects to a ball hitch mounted on the tow vehicle and is used as temporary living quarters for recreational travel. We manufacture and sell conventional travel trailers which are towed by means of a hitch attached to the frame of the towing vehicle and fifth wheel trailers which are constructed with a raised forward section that is connected to the vehicle with a special fifth wheel hitch.
Our towable product offerings for the 2014 model year are as follows:
Type
Sunnybrook
Winnebago
Travel trailer
Sunset Creek, Remington MicroLite, Remington Ultra Lite, Remington XLT
ONE, Minnie, Ultra
Fifth wheel
Raven, Remington
Lite Five
Our travel trailers and fifth wheels are sold by dealers in the retail market with manufacturer's suggested retail prices ranging from approximately $18,000 to $56,000, depending on size and model, plus optional equipment and delivery charges. Our towables range in length from 18 to 37 feet. All new units purchased receive a comprehensive 12-month warranty. Unit sales of our towables were 2,038 travel trailers and 497 fifth wheels in Fiscal 2013, 1,372 travel trailers and 966 fifth wheels in Fiscal 2012 and 575 travel trailers and 194 fifth wheels in Fiscal 2011.
Other Manufactured Products. We manufacture aluminum extrusions which are sold to approximately 70 customers. To a limited extent, we manufacture other component parts sold to outside manufacturers. We also manufacture commercial vehicles which are motorhome shells, primarily custom designed for the buyer's special needs and requirements, such as law enforcement command centers and mobile medical and dental clinics. These commercial vehicles are sold through our dealer network. We've also begun manufacturing transit buses which we believe complement our motorized vehicle line-up. Our buses are sold through a single dealer.

Production
We generally produce motorhomes and towables to order from dealers. We have some ability to increase our capacity by scheduling overtime and/or hiring additional production employees or to decrease our capacity through the use of shortened workweeks and/or reducing head count. We have long been known as an industry leader in innovation as each year we introduce new or redesigned products. These changes generally include new floor plans and sizes as well as design and decor modifications.
Our motorhomes are produced in the state of Iowa at two different campuses. Our Forest City facilities are vertically integrated and provide mechanized assembly line manufacturing. We also operate an assembly plant and a hardwood cabinet products manufacturing facility in Charles City, Iowa. Our motorhome bodies are made from various materials and structural components which are typically laminated into rigid, lightweight panels. Body designs are developed with computer aided design and manufacturing and subjected to a variety of tests and evaluations to meet our standards and requirements. We manufacture a number of components utilized in our motorhomes, with the principal exceptions being chassis, engines, generators and appliances.
Most of our raw materials such as steel, aluminum, fiberglass and wood products are obtainable from numerous sources. Certain parts, especially motorhome chassis, are available from a small group of suppliers. We are currently purchasing Class A and C chassis from Ford Motor Company, Mercedes-Benz USA (a Daimler company) and Mercedes-Benz Canada (a Daimler company) and Class A chassis from Freightliner Custom Chassis Corporation (a Daimler company). Class B chassis are purchased from Mercedes-Benz USA, Mercedes-Benz Canada and Chrysler Group, LLC. Class C chassis are also purchased from Chrysler Group, LLC. In Fiscal 2013, only three vendors, Ford Motor Company, Freightliner Custom Chassis Corporation and Mercedes-Benz (USA and Canada combined) individually accounted for more than 10% of our raw material purchases and approximating 44% in the aggregate.

Our towables are produced at an assembly plant located in Middlebury, Indiana. The majority of components are comprised of frames, appliances and furniture and are purchased from suppliers.
Backlog
The approximate revenue of our motorhome backlog was $346.7 million and $163.7 million as of August 31, 2013 and August 25, 2012, respectively. The approximate revenue of our towable backlog was $4.7 million and $8.8 million as of August 31, 2013 and August 25, 2012, respectively. A more detailed description of our motorhome and towable order backlog is included in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."


3


Distribution and Financing
We market our RVs on a wholesale basis to a diversified independent dealer organization located throughout the US and, to a limited extent, in Canada. Foreign sales, including Canada, were 10% or less of net revenues during each of the past three fiscal years. See Note 15 to our Financial Statements of this Annual Report on Form 10-K.
As of August 31, 2013 and August 25, 2012, our motorhome dealer organization in the US and Canada included approximately 245 and 235 dealer locations, respectively. We have a number of dealers that carry our Winnebago, Itasca and Winnebago Touring Coach brands; we count each motorhome dealer location only once regardless of how many of our brands are offered at each such dealer location. Our towable dealer organization consisted of 272 and 232 dealer locations as of August 31, 2013 and August 25, 2012, respectively, across the US and Canada. Many of our towable dealerships also carry more than one of the towable product lines, but each dealership is counted only once in the number of towable dealer locations. One of our dealer organizations accounted for 26.5% of our net revenue for Fiscal 2013, as they sold our products in 68 of their dealership locations across 26 US states. A second dealer organization accounted for 12.3% of our net revenue for Fiscal 2013, as they sold our products in 11 dealership locations across 3 US states.
We have sales and service agreements with dealers which generally have a term of ten years but are subject to annual review. Many of the dealers are also engaged in other areas of business, including the sale of automobiles, trailers or boats, and many dealers carry one or more competitive lines of recreation vehicles. We continue to place high emphasis on the capability of our dealers to provide complete service for our recreation vehicles. Dealers are obligated to provide full service for owners of our recreation vehicles or, in lieu thereof, to secure such service from other authorized providers.
We advertise and promote our products through national RV magazines, the distribution of product brochures, the Go RVing national advertising campaign sponsored by RVIA, direct-mail advertising campaigns, various national promotional opportunities and on a local basis through trade shows, television, radio and newspapers, primarily in connection with area dealers.
Recreation vehicle sales to dealers are made on cash terms. Most dealers are financed on a "floorplan" basis under which a bank or finance company lends the dealer all, or substantially all, of the purchase price, collateralized by a security interest in the merchandise purchased. As is customary in the recreation vehicle industry, we typically enter into a repurchase agreement with a lending institution financing a dealer's purchase of our product upon the lending institution's request and after completion of a credit check of the dealer involved. Our repurchase agreements provide that for up to 18 months after a unit is financed, in the event of default by the dealer on the agreement to pay the lending institution and repossession of the unit(s) by the lending institution, we will repurchase the financed merchandise. Our maximum exposure for repurchases varies significantly from time to time, depending upon general economic conditions, seasonal shipments, competition, dealer organization, gasoline availability and access to and the cost of financing. See Note 11.

Competition
The RV market is highly competitive with many other manufacturers selling products which compete directly with our products. Some of our competitors are much larger than us most notably in the towable RV market, which may provide them additional purchasing power. The competition in the RV industry is based upon design, price, quality and service of the products. We believe our principal competitive advantages are our brand strength, product quality and our service after the sale. We also believe that our motorhome products have historically commanded a price premium as a result of these competitive advantages.

Seasonality

The primary use of RVs for leisure travel and outdoor recreation has historically led to a peak retail selling season concentrated in the spring and summer months. Our sales of RVs are generally influenced by this pattern in retail sales, but can also be affected by the level of dealer inventory. Our products are generally manufactured against orders from dealers.

Regulations and Trademarks
We are subject to a variety of federal, state and local laws and regulations, including the MVA, under which the National Highway Traffic Safety Administration may require manufacturers to recall recreation vehicles that contain safety-related defects, and numerous state consumer protection laws and regulations relating to the operation of motor vehicles, including so-called "Lemon Laws." We are also subject to regulations established by OSHA. Our facilities are periodically inspected by federal and state agencies, such as OSHA. We are a member of RVIA, a voluntary association of RV manufacturers which promulgates RV safety standards. We place an RVIA seal on each of our RVs to certify that the RVIA standards have been met. We believe that our products and facilities comply in all material respects with the applicable vehicle safety, consumer protection, RVIA and OSHA regulations and standards.
Our operations are subject to a variety of federal and state environmental laws and regulations relating to the use, generation, storage, treatment, emission and disposal of hazardous materials and wastes and noise pollution. We believe that we currently are in compliance with applicable environmental laws and regulations in all material aspects.

4


We have several registered trademarks associated with our motorhomes which include: Access, Adventurer, Aspect, Cambria, Chalet, Destination, Ellipse, Era, Impulse, Itasca, Journey, Latitude, Meridian, Navion, Outlook, Reyo, Rialta, Sightseer, Spirit, Suncruiser, Sundancer, Sunova, Sunrise, Sunstar, Tour, Vectra, Via, View, Vista, Voyage, and Winnebago. Winnebago of Indiana, LLC also has several registered trademarks associated with their towable products which include: Bristol Bay, Brookside, Sunnybrook, Sunset Creek, West Pointe, and Raven. We believe that our trademarks and trade names are significant to our business and we will vigorously protect them against infringement. We are not dependent upon any patents or technology licenses of others for the conduct of our business.

Research and Development
Research and development expenditures are expensed as incurred. During Fiscal 2013, 2012 and 2011, we spent approximately $3.8 million, $3.4 million and $3.3 million, respectively on research and development activities.

Human Resources
At the end of Fiscal 2013, 2012 and 2011, we employed approximately 2,680, 2,380 and 2,130 persons, respectively. None of our employees are covered under a collective bargaining agreement. We believe our relations with our employees are good.

Executive Officers of the Registrant
Name
Office (Year First Elected an Officer)
Age
Randy J. Potts (1)
Chairman of the Board, Chief Executive Officer and President (2006)
54
S. Scott Degnan
Vice President, Sales and Product Management (2012)
48
Scott C. Folkers
Vice President, General Counsel & Secretary (2012)
51
Robert L. Gossett
Vice President, Administration (1998)
62
Daryl W. Krieger
Vice President, Manufacturing (2010)
50
Sarah N. Nielsen
Vice President, Chief Financial Officer (2005)
40
William J. O'Leary
Vice President, Product Development (2001)
64
Donald L. Heidemann
Treasurer and Director of Finance (2007)
41
(1) Director
Officers are elected annually by the Board of Directors. There are no family relationships between or among any of the Corporate Officers or Directors of the Company.
Mr. Potts has over 30 years of experience with Winnebago Industries. He has been Chairman of the Board since January 2012, Chief Executive Officer since June 2011, and President since January 2011. Prior to that time, he served as Senior Vice President, Strategic Planning from November 2009 to June 2011, Vice President, Manufacturing from October 2006 to November 2009, Director of Manufacturing from February 2006 to October 2006 and as General Manager of Manufacturing Services from November 2000 to February 2006.
Mr. Degnan joined Winnebago Industries in May 2012, as Vice President of Sales and Product Management. Prior to joining Winnebago Industries, Mr. Degnan served as vice president of sales for Riverside, California's MVP RV from 2010 to 2012. He also previously served in management and sales positions with Coachmen RV from 2008 to 2010, with National RV from 2007 to 2008, and Fleetwood Enterprises from 1987 to 2007.
Mr. Folkers joined Winnebago Industries in August 2010, as assistant general counsel. He was elected to the position of Vice President, General Counsel and Secretary in June 2012. Prior to joining Winnebago Industries, Mr. Folkers was employed as in‑house counsel for John Morrell & Co., in Sioux Falls, SD from 1998 to 2010. Mr. Folkers is a member of the Iowa Bar Association.
Mr. Gossett has over 14 years of experience with Winnebago Industries. He has been Vice President, Administration since joining the Company in 1998.
Mr. Krieger has over 29 years of experience with Winnebago Industries. He has been Vice President, Manufacturing since May 2010. Prior to that time, he served as Director of Manufacturing from November 2009 to May 2010 and General Manager - Fabrication from February 2002 to November 2009.
Ms. Nielsen has eight years of experience with Winnebago Industries. She has been Vice President and Chief Financial Officer since November 2005. Ms. Nielsen joined the Company in August 2005 as Director of Special Projects and Training. Prior to joining Winnebago Industries, she was employed as a senior audit manager at Deloitte & Touche LLP, where she worked from 1995 to 2005. Ms. Nielsen is a Certified Public Accountant.
Mr. O'Leary has over 41 years of experience with Winnebago Industries. He has been Vice President, Product Development since 2001.

5


Mr. Heidemann has six years of experience with Winnebago Industries. He was elected to the position of Treasurer in August 2007 and added Director of Finance responsibilities in August 2011.  Prior to joining Winnebago Industries, Mr. Heidemann served in various treasury positions for Select Comfort Corporation from 2003 to July 2007 and served in various treasury positions for Rent-A-Center Incorporated from 1998 to 2003.
Item 1A. Risk Factors
The following risk factors should be considered carefully in addition to the other information contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face, but represent the most significant risk factors that we believe may adversely affect the RV industry and our business, operations or financial position. The risks and uncertainties discussed in this report are not exclusive and other risk factors that we may consider immaterial or do not anticipate may emerge as significant risks and uncertainties.
Risks Related to Our Business
Competition
The market for recreation vehicles is very competitive. Competition in this industry is based upon price, design, value, quality and service. There can be no assurance that existing or new competitors will not develop products that are superior to our recreation vehicles or that achieve better consumer acceptance, thereby adversely affecting our market share, sales volume and profit margins. Some of our competitors are much larger than us, most notably in the towable recreation vehicle market, which may provide them additional purchasing power. These competitive pressures may continue to have a material adverse effect on our results of operations.
General Economic Conditions and Certain Other External Factors
Companies within the recreation vehicle industry are subject to volatility in operating results due primarily to general economic conditions because the purchase of an RV is often viewed as a consumer luxury purchase. Specific factors affecting the recreation vehicle industry include:
overall consumer confidence and the level of discretionary consumer spending;
employment trends;
the adverse impact of global tensions on consumer spending and travel-related activities; and
adverse impact on margins of increases in raw material costs which we are unable to pass on to customers without negatively affecting sales.

Dependence on Credit Availability and Interest Rates to Dealers and Retail Purchasers
Our business is affected by the availability and terms of the financing to dealers. Generally, recreation vehicle dealers finance their purchases of inventory with financing provided by lending institutions. Two financial flooring institutions held 80% of our total financed dealer inventory dollars that were outstanding at August 31, 2013. In the event that either or both of these lending institutions limit or discontinue dealer financing, we could experience a material adverse effect on our results of operations. Our business is also affected by the availability and terms of financing to retail purchasers. Retail buyers purchasing a motorhome or towable may elect to finance their purchase through the dealership or a financial institution of their choice. Substantial increases in interest rates or decreases in the general availability of credit for our dealers or for the retail purchaser may have an adverse impact upon our business and results of operations.
Cyclicality and Seasonality
The recreation vehicle industry has been characterized by cycles of growth and contraction in consumer demand, reflecting prevailing economic and demographic conditions, which affect disposable income for leisure-time activities. Consequently, the results for any prior period may not be indicative of results for any future period.
Seasonal factors, over which we have no control, also have an effect on the demand for our products. Demand in the recreation vehicle industry generally declines over the winter season, while sales are generally highest during the spring and summer months. Also, unusually severe weather conditions in some markets may impact demand. Our business also does well when the US housing market is strong and our business weakens when the US housing market weakens.
Potential Loss of a Large Dealer Organization
One of our dealer organizations accounted for 26.5% of our net revenue for Fiscal 2013, as they sold our products in 68 of their dealership locations across 26 US states. A second dealer organization accounted for 12.3% of our net revenue for Fiscal 2013, as they sold products in 11 of their dealership locations across 3 US states. The loss of either or both of these dealer organizations could have a significant adverse effect on our business. In addition, deterioration in the liquidity or creditworthiness of either of both of these dealers could negatively impact our sales and could trigger repurchase obligations under our repurchase agreements.

6


Potential Repurchase Liabilities
In accordance with customary practice in the RV industry, upon request we enter into formal repurchase agreements with lending institutions financing a dealer's purchase of our products. In these repurchase agreements we agree, in the event of a default by an independent dealer in its obligation to a lender and repossession of the unit(s) by the lending institution, to repurchase units at declining prices over the term of the agreements, which can last up to 18 months. The difference between the gross repurchase price and the price at which the repurchased product can then be resold, which is typically at a discount to the gross repurchase price, represents a potential expense to us. In certain instances, we also repurchase inventory from our dealers due to state law or regulatory requirements that govern voluntary or involuntary terminations. If we are obligated to repurchase a substantially larger number of RVs in the future, this would increase our costs and could have a material adverse effect on our results of operations, financial condition, and cash flows.
Fuel Availability and Price Volatility
Gasoline or diesel fuel is required for the operation of motorized recreation vehicles. There can be no assurance that the supply of these petroleum products will continue uninterrupted or that the price or tax on these petroleum products will not significantly increase in the future. RVs, however, are not generally purchased for fuel efficiency. Fuel shortages and substantial increases in fuel prices have had a material adverse effect on the recreation vehicle industry as a whole in the past and could have a material adverse effect on us in the future.
Dependence on Suppliers
Most of our RV components are readily available from numerous sources. However, a few of our components are produced by a small group of suppliers. In the case of motorhome chassis, Ford Motor Company, Freightliner Custom Chassis Corporation and Mercedes-Benz (USA and Canada) are our major suppliers. Our relationship with our chassis suppliers is similar to our other supplier relationships in that no special contractual commitments are engaged in by either party. This means that we do not have minimum purchase requirements and our chassis suppliers do not have minimum supply requirements. Our chassis suppliers also supply to our competitors. Historically, chassis suppliers resort to an industry-wide allocation system during periods when supply is restricted. These allocations have been based on the volume of chassis previously purchased. Sales of motorhomes rely on chassis supply and are affected by shortages. Decisions by our suppliers to decrease production, production delays, or work stoppages by the employees of such suppliers could have a material adverse effect on our ability to produce motorhomes and ultimately, on our results of operations, financial condition and cash flows.
Warranty Claims
We receive warranty claims from our dealers in the ordinary course of our business. Although we maintain reserves for such claims, which to date have been adequate, there can be no assurance that warranty expense levels will remain at current levels or that such reserves will continue to be adequate. A significant increase in warranty claims exceeding our current warranty expense levels could have a material adverse effect on our results of operations, financial condition and cash flows.
In addition to the costs associated with the contractual warranty coverage provided on our products, we also occasionally incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions. Although we estimate and reserve for the cost of these service actions, there can be no assurance that expense levels will remain at current levels or such reserves will continue to be adequate.
Product Liability
We are subject, in the ordinary course of business, to litigation including a variety of warranty, "Lemon Law" and product liability claims typical in the recreation vehicle industry. We have an insurance policy covering product liability, however, we are self-insured for a portion of product liability claims. We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us, which may have a material adverse effect on our results of operations and financial condition. Any increase in the frequency and size of these claims, as compared to our experience in prior years, may cause the premium that we are required to pay for insurance to rise significantly. Product liability claims may also cause us to pay punitive damages, not all of which are covered by our insurance. In addition, if product liability claims rise to a level of frequency or size that are significantly higher than similar claims made against our competitors, our reputation and business may be harmed.
Information Systems and Web Applications
We rely on our information systems and web applications to support our business operations, including but not limited to procurement, supply chain, manufacturing, distribution, warranty administration, invoicing and collection of payments. We use information systems to report and audit our operational results. Additionally, we rely upon information systems in our sales, marketing, human resources and communication efforts. Due to our reliance on our information systems, our business processes may be negatively impacted in the event of substantial disruption of service. Further, misuse, leakage or falsification of information could result in a violation of privacy laws and damage our reputation which could, in turn, have a negative impact on our results.

7


Government Regulation
We are subject to numerous federal, state and local regulations. Some regulations govern the manufacture and sale of our products, including the provisions of the MVA, and the safety standards for recreation vehicles and components which have been established under the Motor Vehicle Act by the Department of Transportation. The MVA authorizes the National Highway Traffic Safety Administration to require a manufacturer to recall and repair vehicles which contain certain hazards or defects. Any major recalls of our vehicles, voluntary or involuntary, could have a material adverse effect on our results of operations, financial condition and cash flows. While we believe we are substantially in compliance with the foregoing laws and regulations as they currently exist, amendments to any of these regulations or the implementation of new regulations could significantly increase the cost of manufacturing, purchasing, operating or selling our products and could have a material adverse effect on our results of operations, financial condition, and cash flows. In addition, our failure to comply with present or future regulations could result in fines being imposed on us, potential civil and criminal liability, suspension of sales or production or cessation of operations.
We are also subject to federal and numerous state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, including so-called "Lemon Laws." Federal and state laws and regulations also impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles, including motorhomes that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions.
Failure to comply with NYSE and SEC laws or regulations could have an adverse impact on our business. Additionally, amendments to these regulations and the implementation of new regulations could increase the cost of manufacturing, purchasing, operating or selling our products and therefore could have an adverse impact on our business.
Recently, the SEC adopted new rules pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act setting forth new disclosure requirements concerning the use or potential use of certain minerals, deemed conflict minerals (tantalum, tin, gold and tungsten), that are mined from the Democratic Republic of Congo and adjoining countries. These new requirements will necessitate due diligence efforts on our part to assess whether such minerals are used in our products in order to make the relevant required disclosures beginning in May 2014. There will be costs associated with complying with these new disclosure requirements, including for diligence to determine the sources of those minerals that may be used or necessary to the production of our products. We may face reputational challenges that could impact future sales if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products.
Finally, federal and state authorities also have various environmental control standards relating to air, water, noise pollution and hazardous waste generation and disposal which affect us and our operations. Failure by us to comply with present or future laws and regulations could result in fines being imposed on us, potential civil and criminal liability, suspension of production or operations, alterations to the manufacturing process, or costly cleanup or capital expenditures, any or all of which could have a material adverse effect on our results of operations.

Risks Related to Our Company

Anti-takeover Effect
Provisions of our articles of incorporation, by-laws, the Iowa Business Corporation Act and provisions in our credit facilities and certain of our compensation programs that we may enter into from time to time could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. The combination of these provisions effectively inhibits a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.

Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
Our principal manufacturing, maintenance and service operations are conducted in multi-building complexes owned or leased by us. The following sets forth our material facilities as of August 31, 2013:
Location
Facility Type/Use
# of Buildings
Owned or Leased
Square
Footage
Forest City, Iowa
Manufacturing, maintenance, service and office
30

Owned
1,558,000

Forest City, Iowa
Warehouse
4

Owned
702,000

Charles City, Iowa
Manufacturing
2

Owned
161,000

Middlebury, Indiana
Manufacturing and office
4

Leased
277,000

 
 
40

 
2,698,000


8


The facilities that we own in Forest City and Charles City are located on approximately 450 acres of land. We lease 244,000 square feet of our warehouse facilities in Forest City to others. Most of our buildings are of steel or steel and concrete construction and are protected from fire with high‑pressure sprinkler systems, dust collector systems, automatic fire doors and alarm systems. We believe that our facilities and equipment are well maintained, in excellent condition and suitable for the purposes for which they are intended.
In January 2011, we entered into a five-year lease agreement with FFT Land Management for real property consisting of four buildings and approximately 30 acres of land located in Middlebury, Indiana. The buildings are being utilized to manufacture towable trailers. See Note 19.
In the first quarter of Fiscal 2013, property in Hampton, Iowa, an asset held for sale, was sold for $550,000 in gross proceeds resulting in a loss of $28,000 not including previous impairments. See Note 6.
Under terms of our credit facility, as further described in Note 8, we have encumbered substantially all of our real property for the benefit of the lender under such facility.
Item 3. Legal Proceedings
We are involved in various legal proceedings which are ordinary and routine litigation incidental to our business, some of which are covered in whole or in part by insurance. We believe, while the final resolution of any such litigation may have an impact on our results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on our financial position, results of operations, or liquidity.

Item 4. Mine Safety Disclosure

Not Applicable.

PART II

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the New York and Chicago Stock Exchanges with the ticker symbol of WGO.
Below are the New York Stock Exchange high, low and closing prices of Winnebago Industries, Inc. common stock for each quarter of Fiscal 2013 and Fiscal 2012:
Fiscal 2013
High
Low
Close
 
Fiscal 2012
High
Low
Close
First Quarter
$
14.49

$
10.99

$
14.22

 
First Quarter
$
8.95

$
6.02

$
6.07

Second Quarter
20.10

13.53

19.49

 
Second Quarter
10.51

6.15

9.44

Third Quarter
22.34

16.72

20.76

 
Third Quarter
10.65

8.14

9.08

Fourth Quarter
25.15

19.33

22.27

 
Fourth Quarter
11.46

8.50

11.01

 
Holders
Shareholders of record as of October 15, 2013: 3,278
Dividends Paid Per Share
On October 15, 2008, our Board of Directors suspended future cash dividend payments in order to conserve capital and to maintain liquidity. No dividends have been paid since the first quarter of Fiscal 2009.
Our credit facility, as further described in Note 8, also contains covenants that limit our ability, among other things, to pay cash dividends without the consent of Wells Fargo, as Agent and the lenders thereunder, in their sole discretion.
Issuer Purchases of Equity Securities
Our credit facility, as further described in Note 8, contains covenants that limits our ability, among other things, except for limited purchases of our common stock from employees, to make distributions or payments with respect to or purchases of our common stock without consent of the lenders.
On December 19, 2007, the Board of Directors authorized the repurchase of outstanding shares of our common stock, depending on market conditions, for an aggregate consideration of up to $60 million. There is no time restriction on this authorization. During Fiscal 2013, approximately 882,000 shares were repurchased under the authorization, at an aggregate cost of approximately $12.7 million, or $14.40 per share. Approximately 21,000 of these shares were repurchased from employees who vested in Winnebago

9


Industries shares during the fiscal year and elected to pay their payroll tax via delivery of common stock as opposed to cash. As of August 31, 2013, there was approximately $39.9 million remaining under this authorization.
This table provides information with respect to purchases by us of shares of our common stock during each fiscal month of the fourth quarter of Fiscal 2013:
Period
Total Number
of Shares
Purchased
Average Price
Paid per Share
Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value
of Shares That May Yet Be
Purchased Under the
Plans or Programs
06/02/13 - 07/06/13

$


(1)
 
$
41,442,000

 
07/07/13 - 08/03/13
10,000

$
24.01

10,000


 
$
41,202,000

 
08/04/13 - 08/31/13
55,600

$
23.02

55,600

 
 
$
39,922,000

 
Total
65,600

$
23.17

65,600

(1)
 
$
39,922,000

 
Equity Compensation Plan Information
The following table provides information as of August 31, 2013 with respect to shares of our common stock that may be issued under our existing equity compensation plans:
 
(a)
(b)
(c)
(Adjusted for the 2-for-1 Stock
Split on March 5, 2004)
Plan Category
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
 Warrants and Rights
Weighted Average
Exercise Price of
Outstanding Options,
 Warrants and Rights
Number of Securities
 Remaining Available for
Future Issuance Under Equity
 Compensation Plans
 (Excluding Securities
 Reflected in (a))
Equity compensation plans
  approved by shareholders
664,994

(1) 
$
29.83

2,857,171

(2) 
Equity compensation plans not
  approved by shareholders (3)
111,700

(4) 
 
12.89


(5) 
Total
776,694

 
$
27.39

2,857,171

 
(1) 
This number includes 552,902 stock options granted under the 2004 Incentive Compensation Plan, as amended (the "Plan"). Also included are 112,092 options granted under the 1997 Stock Option Plan.
(2) 
This number represents stock options available for grant under the Plan as of August 31, 2013. The Plan replaced the 1997 Stock Option Plan effective January 1, 2004. No new grants may be made under the 1997 Stock Option Plan. Any stock options previously granted under the 1997 Stock Option Plan will continue to be exercisable in accordance with their original terms and conditions.
(3) 
Our sole equity compensation plan not previously submitted to our shareholders for approval is the Directors' Deferred Compensation Plan, as amended. The Board of Directors may terminate the Directors' Deferred Compensation Plan at any time. If not terminated earlier, the Directors' Deferred Compensation Plan will automatically terminate on June 30, 2023. For a description of the key provisions of the Directors' Deferred Compensation Plan, see the information in our Proxy Statement for the Annual Meeting of Shareholders scheduled to be held December 17, 2013 under the caption "Director Compensation," which information is incorporated by reference herein.
(4) 
Represents shares of common stock issued to a trust which underlie stock units, payable on a one-for-one basis, credited to stock unit accounts as of August 31, 2013 under the Directors' Deferred Compensation Plan.
(5) 
The table does not reflect a specific number of stock units which may be distributed pursuant to the Directors' Deferred Compensation Plan. The Directors' Deferred Compensation Plan does not limit the number of stock units issuable thereunder. The number of stock units to be distributed pursuant to the Directors' Deferred Compensation Plan will be based on the amount of the director's compensation deferred and the per share price of our common stock at the time of deferral.


10


Performance Graph
The following graph compares our five-year cumulative total shareholder return (including reinvestment of dividends) with the cumulative total return on the Standard & Poor's 500 Index and a peer group. The peer group companies consisting of Thor Industries, Inc., Polaris Industries, Inc. and Brunswick Corporation were selected by us as they also manufacture recreation products. It is assumed in the graph that $100 was invested in our common stock, in the Standard & Poor's 500 Index and in the stocks of the peer group companies on August 30, 2008 and that all dividends received within a quarter were reinvested in that quarter. In accordance with the guidelines of the SEC, the shareholder return for each entity in the peer group index has been weighted on the basis of market capitalization as of each annual measurement date set forth in the graph.
 
Base Period
 
Company/Index
8/30/08
8/29/09
 
8/28/10
 
8/27/11
 
8/25/12
 
8/31/13
Winnebago Industries, Inc.
100.00

103.44

 
80.56

 
63.56

 
101.03

 
204.36

S&P 500 Index
100.00

82.41

 
86.99

 
98.07

 
120.11

 
142.18

Peer Group
100.00

92.57

 
113.89

 
156.35

 
237.56

 
366.45


Item 6. Selected Financial Data
 
Fiscal Years Ended
(In thousands, except EPS)
08/31/13
 
8/25/12 (1)
 
08/27/11
 
08/28/10
 
8/29/09 (1)
Income statement data:
 
 
 
 
 
 
 
 
 
Net revenues
$
803,165

 
$
581,679

 
$
496,418

 
$
449,484

 
$
211,519

Net income (loss)
31,953

 
44,972

 
11,843

 
10,247

 
(78,766
)
 
 
 
 
 
 
 
 
 
 
Per share data:
 
 
 
 
 
 
 
 
 
Net income (loss) - basic
1.14

 
1.54

 
0.41

 
0.35

 
(2.71
)
Net income (loss) - diluted
1.13

 
1.54

 
0.41

 
0.35

 
(2.71
)
Dividends declared and paid per common share

 

 

 

 
0.12

 
 
 
 
 
 
 
 
 
 
Balance sheet data:
 
 
 
 
 
 
 
 
 
Total assets
309,145

 
286,072

 
239,927

 
227,357

 
220,466

(1) In Fiscal 2009 we established a valuation allowance of $45.3 million on our deferred tax assets. In Fiscal 2012, we determined we no longer needed the valuation allowance and re-established $39.0 million of deferred tax assets.



11


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in eight sections:

Our MD&A should be read in conjunction with the Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

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 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 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.
 
 
Through August 31
 
Calendar Year
US Retail Motorized:
 
2013
2012
 
2012
2011
2010
Class A gas
 
22.2
%
22.9
%
 
24.2
%
22.2
%
23.7
%
Class A diesel
 
17.4
%
20.0
%
 
19.4
%
17.6
%
15.2
%
Total Class A
 
20.3
%
21.7
%
 
22.2
%
20.2
%
19.5
%
Class C
 
16.3
%
17.2
%
 
18.3
%
17.4
%
17.9
%
Total Class A and C
 
18.4
%
19.6
%
 
20.5
%
19.0
%
18.8
%
 
 
 
 
 
 
 
 
Class B
 
17.4
%
16.9
%
 
17.6
%
7.9
%
15.6
%
 
 
 
 
 
 
 
 
 
 
Through July 31
 
Calendar Year
Canadian Retail Motorized:
 
2013
2012
 
2012
2011
2010
Class A gas
 
14.0
%
14.6
%
 
15.3
%
16.5
%
14.9
%
Class A diesel
 
15.4
%
15.9
%
 
17.3
%
18.0
%
9.9
%
Total Class A
 
14.5
%
15.0
%
 
16.1
%
17.1
%
12.6
%
Class C
 
11.7
%
13.1
%
 
14.9
%
15.9
%
13.8
%
Total Class A and C
 
12.8
%
14.0
%
 
15.5
%
16.5
%
13.2
%
 
 
 
 
 
 
 
 
Class B
 
20.2
%
11.5
%
 
12.7
%
7.1
%
4.8
%
 
 
US
 
Canadian
 
 
Through July 31
 
Calendar Year
 
Through July 31
 
Calendar Year
Retail Towables:
 
2013
2012
 
2012
2011
 
2013
2012
 
2012
2011
Travel trailer
 
0.9
%
0.8
%
 
0.8
%
0.6
%
 
0.8
%
0.5
%
 
0.6
%
0.5
%
Fifth wheel
 
0.8
%
1.0
%
 
1.1
%
0.5
%
 
1.2
%
1.3
%
 
1.5
%
0.6
%
Total towables
 
0.9
%
0.8
%
 
0.9
%
0.6
%
 
0.9
%
0.7
%
 
0.9
%
0.5
%




12


Presented in fiscal quarters, certain key metrics are shown below:
 
 
Class A, B & C Motorhomes
 
Travel Trailers & Fifth Wheels
 
 
 
 
As of Quarter End
 
 
 
As of Quarter End
 
 
Wholesale
Retail
Dealer
Order
 
Wholesale
Retail
Dealer
Order
(In units)
 
Deliveries
Registrations
Inventory
Backlog
 
Deliveries
Registrations
Inventory
Backlog
Q1
 
1,040

1,053

1,945

618

 
435

255

1,146

460

Q2
 
1,001

872

2,074

1,004

 
562

332

1,376

417

Q3
 
1,280

1,414

1,940

1,237

 
646

652

1,370

505

Q4
 
1,321

1,334

1,927

1,473

 
695

700

1,365

411

Fiscal 2012
 
4,642

4,673

 
 
 
2,338

1,939

 
 
 
 
 
 
 
 
 
 
 
 
 
Q1
 
1,534

1,416

2,045

2,118

 
557

367

1,555

687

Q2
 
1,419

1,072

2,392

2,752

 
548

328

1,775

381

Q3
 
1,978

1,736

2,634

2,846

 
713

846

1,642

443

Q4
 
1,890

1,870

2,654

3,409

 
717

748

1,611

221

Fiscal 2013
 
6,821

6,094





 
2,535

2,289

 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in units
 
2,179

1,421

727

 
 
197

350

246

 
Percentage increase
 
46.9
%
30.4
%
37.7
%
 
 
8.4
%
18.1
%
18.0
%
 
Highlights of Fiscal 2013:
Consolidated revenues, gross profit, and operating income were significantly higher for Fiscal 2013 as compared to Fiscal 2012. Quarterly results for the past two fiscal years are illustrated as follows:
(In thousands)
Revenues
 
Gross Profit
 
Gross Margin
 
Operating
Income (Loss)
 
Operating Margin
2013
2012
 
2013
2012
 
2013
2012
 
2013
2012
 
2013
2012
Q1
$
193,554

$
131,837

 
$
20,747

$
8,496

 
10.7
%
6.4
%
 
$
9,946

$
627

 
5.1
%
0.5
 %
Q2
177,166

131,600

 
17,191

6,846

 
9.7
%
5.2
%
 
8,872

(1,164
)
 
5.0
%
(0.9
)%
Q3
218,199

155,709

 
21,197

12,071

 
9.7
%
7.8
%
 
10,248

3,527

 
4.7
%
2.3
 %
Q4
214,246

162,533

 
25,496

16,267

 
11.9
%
10.0
%
 
15,332

6,536

 
7.2
%
4.0
 %
Total
$
803,165

$
581,679

 
$
84,631

$
43,680

 
10.5
%
7.5
%
 
$
44,398

$
9,526

 
5.5
%
1.6
 %
  
Motorized performance:
Fiscal 2013 motorhome deliveries increased by approximately 47% as compared to Fiscal 2012. In addition delivery retail demand for our motorized products grew over 30% as compared to Fiscal 2012. As a result, dealer inventory grew by nearly 38% when comparing the same time periods. We view this as a reflection of our dealer network's confidence in our products and the overall industry. Our belief of improving dealer confidence is further supported by the continued growth in our sales order backlog. As noted in the above table, our backlog reached 3,409 at the end of the fiscal year. This is the first time our backlog has been in excess of 3,000 since the fourth quarter of Fiscal 2002.
The continuing strong demand for our motorized products has led to enhanced financial performance. The sales pricing environment has firmed as compared to a year ago and the incremental volume has provided operating leverage in multiple areas. Approximately 17% of the incremental motorhome revenue flowed through to the operating profit line.
Towables performance:
Towables generated an operating loss of $3.5 million in Fiscal 2013 compared to an operating loss of $744,000 in Fiscal 2012. Excluding non-cash expense of approximately $550,000 related to the acceleration of acquisition related intangible assets (see further discussion at Note 7), Towables was operationally break-even in the fourth quarter of Fiscal 2013.
The two most noteworthy issues that negatively impacted Towables' operating performance during Fiscal 2013 were increased warranty expense due to escalating negative claim experience and unfavorable overhead variances due to lower production. Significant changes were made in the first half of Fiscal 2013 in key management positions to address the recent performance problems. Notably, a new Towables president was named in January 2013 and leadership responsibilities of warranty and service were centralized to our company headquarters in Iowa to better leverage our expertise in these areas. During February 2013, production was idled in one of the assembly plants where production issues had been pervasive and only a small core group of employees were retained to train and work in the other assembly plant that has not experienced similar issues. Production resumed in this plant during the fourth quarter of Fiscal 2013.

13


During Fiscal 2013, the Winnebago towable branded products experienced triple digit growth in both wholesale shipments and retail registrations. This growth is attributed to a concerted effort to update existing Winnebago product lines and through the introduction of a new line of Ultralite travel trailers that have successfully penetrated the fastest growing segment in the towable market. The SunnyBrook products have now been realigned with a renewed focus on primary large volume product segments. As a result of this new strategy, we have discontinued several models and focused the three SunnyBrook brands to more effectively penetrate specific segments of the market.
Industry Outlook
Key statistics for the motorhome industry are as follows:
 
US and Canada Industry Class A, B & C Motorhomes
 
Wholesale Shipments(1)
 
Retail Registrations(2)
 
Calendar Year
 
Calendar Year
(In units)
2012

 
2011

(Decrease)
Increase
Change
 
2012

 
2011

Increase
(Decrease)
Change
Q1
6,869

 
6,888

(19
)
(0.3
)%
 
5,706

 
5,114

592

11.6
%
Q2
7,707

 
7,868

(161
)
(2.0
)%
 
8,206

 
8,140

66

0.8
%
Q3
6,678

 
5,267

1,411

26.8
 %
 
6,916

 
6,102

814

13.3
%
Q4
6,944

 
4,807

2,137

44.5
 %
 
4,922

 
4,623

299

6.5
%
Total
28,198

 
24,830

3,368

13.6
 %
 
25,750

 
23,979

1,771

7.4
%
 
 
 
 
 
 
 
 
 
 
 
 
(In units)
2013

 
2012

Increase
Change
 
2013

 
2012

Increase
Change
Q1
8,500

 
6,869

1,631

23.7
 %
 
7,127

 
5,706

1,421

24.9
%
Q2
10,972

 
7,707

3,265

42.4
 %
 
10,747

 
8,206

2,541

31.0
%
July
2,850

 
1,955

895

45.8
 %
 
3,272

 
2,538

734

28.9
%
August
3,302

 
2,455

847

34.5
 %
 
2,424

(4
)
2,287





September
3,138

(3)
2,268

870

38.4
 %
 
 
(5
)
2,091

 
 
Q3
9,290

(3)
6,678

2,612

39.1
 %
 
 
(5
)
6,916

 
 
Q4
8,500

(3)
6,944

1,556

22.4
 %
 
 
(5
)
4,922

 
 
Total
37,262

(3) 
28,198

9,064

32.1
 %
 


 
25,750




(1) 
Class A, B and C wholesale shipments as reported by RVIA, rounded to the nearest hundred.
(2) 
Class A, B and C retail registrations as reported by Stat Surveys for the US and Canada combined, rounded to the nearest hundred.
(3) 
Monthly and quarterly 2013 Class A, B and C wholesale shipments for September and the third and fourth calendar quarters are based upon the forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the RoadSigns RV Fall 2013 Industry Forecast Issue. The revised RVIA annual 2013 wholesale shipment forecast is 37,100 and the annual forecast for 2014 is 38,700.
(4) 
U.S. retail registrations for Class A, B and C for August, 2013. Canadian retail registrations are not yet available.
(5) 
Stat Surveys has not issued a projection for 2013 retail demand for this period.


14


Key statistics for the towable industry are as follows:
 
US and Canada Travel Trailer & Fifth Wheel Industry
 
Wholesale Shipments(1)
 
Retail Registrations(2)
 
Calendar Year
 
Calendar Year
(In units)
2012

 
2011

Increase
Change
 
2012

 
2011

Increase
Change
Q1
60,402

 
54,132

6,270

11.6
 %
 
39,093

 
33,698

5,395

16.0
%
Q2
71,095

 
65,987

5,108

7.7
 %
 
83,990

 
79,155

4,835

6.1
%
Q3
56,601

 
47,547

9,054

19.0
 %
 
67,344

 
63,014

4,330

6.9
%
Q4
54,782

 
45,266

9,516

21.0
 %
 
32,469

 
30,044

2,425

8.1
%
Total
242,880

 
212,932

29,948

14.1
 %
 
222,896

 
205,911

16,985

8.2
%
 
 
 
 
 
 
 
 
 
 
 
 
(In units)
2013

 
2012

Increase
(Decrease)
Change
 
2013

 
2012

Increase
Change
Q1
66,745

 
60,402

6,343

10.5
 %
 
42,710

 
39,093

3,617

9.3
%
Q2
79,935

 
71,095

8,840

12.4
 %
 
93,826

 
83,990

9,836

11.7
%
   July
22,083

 
19,654

2,429

12.4
 %
 
30,455

 
25,707

4,748

18.5
%
   August
20,797

 
20,963

(166
)
(.8
)%
 
 
(4
)
24,003




   September
18,634

(3
)
15,984

2,650

16.6
 %
 
 
(4
)
17,634

 
 
Q3
61,514

(3
)
56,601

4,913

8.7
 %
 
 
(4
)
67,344

 
 
Q4
57,000

(3
)
54,782

2,218

4.0
 %
 
 
(4
)
32,469

 
 
Total
265,194

(3
)
242,880

22,314

9.2
 %
 


 
222,896




(1) 
Towable wholesale shipments as reported by RVIA, rounded to the nearest hundred.
(2) 
Towable retail registrations as reported by Stat Surveys for the US and Canada combined, rounded to the nearest hundred.
(3) 
Monthly and quarterly 2013 towable wholesale shipments for September and the third and fourth calendar quarters are based upon the forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the RoadSigns RV Fall 2013 Industry Forecast Issue. The revised annual 2013 wholesale shipment forecast is 267,700 and the annual forecast for 2014 is 281,100.
(4) 
Statistical Surveys has not issued a projection for 2013 retail demand for this period.

Company Outlook
Based on our profitable operating results in recent years, we believe that we have demonstrated our ability to maintain our liquidity, cover operations costs, recover fixed assets, and maintain physical capacity at present levels. Now that we have entered into the towable market, we are attempting to grow revenues and earnings in a market significantly larger than the motorized market.

As evidenced in the table below, our motorhome sales order backlog at the end of Fiscal 2013 significantly increased as compared to the end of Fiscal 2012. It has also increased sequentially from the end of our Fiscal 2013 third quarter, as previously illustrated. We believe the increase is a result of the positive dealer response to our new 2014 model year products introduced in late spring and increased retail registration activity of our products this past summer. We expect to continue to increase production during Fiscal 2014 to meet the growing demand for our products, while managing constraints as may occur in relation to labor and component parts.

We believe that the level of our dealer inventory at the end of Fiscal 2013 is reasonable given the improved retail demand and increased sales order backlog of our product.


15


Our unit order backlog was as follows:
 
As Of
(In units)
August 31, 2013
 
August 25, 2012
 
Increase (Decrease)
%
Change
Class A gas
1,405

41.6
%
 
642

43.6
%
 
763

118.8
 %
Class A diesel
607

18.0
%
 
333

22.6
%
 
274

82.3
 %
Total Class A
2,012

59.5
%
 
975

66.2
%
 
1,037

106.4
 %
Class B
300

8.9
%
 
118

8.0
%
 
182

154.2
 %
Class C
1,068

31.6
%
 
380

25.8
%
 
688

181.1
 %
Total motorhome backlog(1)
3,380

100.0
%
 
1,473

100.0
%
 
1,907

129.5
 %
 
 
 
 
 
 
 
 
 
Travel trailer
180

81.4
%
 
306

74.5
%
 
(126
)
(41.2
)%
Fifth wheel
41

18.6
%
 
105

25.5
%
 
(64
)
(61.0
)%
Total towable backlog(1)
221

100.0
%
 
411

100.0
%
 
(190
)
(46.2
)%
 
 
 
 
 
 
 
 
 
Approximate backlog revenue in thousands
 
 
 
 
 
 
 
Motorhome
$
346,665

 
 
$
163,725

 
 
$
182,940

111.7
 %
Towable
$
4,744

 
 
$
8,776

 
 
$
(4,032
)
(45.9
)%
(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 canceled 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.

Impact of Inflation
Materials cost is the primary component in the cost of our products. Historically, the impact of inflation on our operations has not been significantly detrimental, as we have usually been able to adjust our prices to reflect the inflationary impact on the cost of manufacturing our products. While we have historically been able to pass on these increased costs, in the event we are unable to continue to do so due to market conditions, future increases in manufacturing costs could have a material adverse effect on our results of operations.

Results of Operations
Fiscal 2013 Compared to Fiscal 2012
The following is an analysis of changes in key items included in the statements of operations for the fiscal year ended August 31, 2013 compared to the fiscal year ended August 25, 2012:
 
Year Ended
(In thousands, except percent and per share data)
August 31,
2013
% of
Revenues(1)
August 25,
2012
% of
Revenues(1)
Increase
(Decrease)
%
Change
Net revenues
$
803,165

100.0
%
$
581,679

100.0
 %
$
221,486

38.1
 %
Cost of goods sold
718,534

89.5
%
537,999

92.5
 %
180,535

33.6
 %
Gross profit
84,631

10.5
%
43,680

7.5
 %
40,951

93.8
 %
 
 
 
 
 
 
 
Selling
18,318

2.3
%
16,837

2.9
 %
1,481

8.8
 %
General and administrative
21,887

2.7
%
17,267

2.7
 %
4,620

26.8
 %
Assets held for sale impairment
28

%
50

 %
(22
)
NMF

Operating expenses
40,233

5.0
%
34,154

5.9
 %
6,079

17.8
 %
 
 
 
 
 
 
 
Operating income
44,398

5.5
%
9,526

1.6
 %
34,872

NMF

Non-operating income
696

0.1
%
581

0.1
 %
115

19.8
 %
Income before income taxes
45,094

5.6
%
10,107

1.7
 %
34,987

NMF

Provision (benefit) for taxes
13,141

1.6
%
(34,865
)
(6.0
)%
48,006

(137.7
)%
Net income
$
31,953

4.0
%
$
44,972

7.7
 %
$
(13,019
)
(28.9
)%
Diluted income per share
$
1.13

 
$
1.54

 
$
(0.41
)
(26.6
)%
Diluted average shares outstanding
28,170

 
29,207

 




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

16


Unit deliveries and ASP, net of discounts, consisted of the following:
 
Year Ended
(In units)
August 31,
2013
Product
Mix % (1)
August 25,
2012
Product
Mix % (1)
Increase
(Decrease)
%
Change
Motorhomes:
 
 
 
 
 
 
Class A gas
2,446

35.9
%
1,648

35.5
%
798

48.4
 %
Class A diesel
1,315

19.3
%
931

20.1
%
384

41.2
 %
Total Class A
3,761

55.1
%
2,579

55.6
%
1,182

45.8
 %
Class B
372

5.5
%
319

6.9
%
53

16.6
 %
Class C
2,688

39.4
%
1,744

37.6
%
944

54.1
 %
Total motorhome deliveries
6,821

100.0
%
4,642

100.0
%
2,179

46.9
 %
 
 
 
 
 
 
 
ASP (in thousands) (1)
$
105

 
$
105

 
$
(1
)
(0.9
)%
 
 
 
 
 
 
 
Towables:
 
 
 
 
 
 
Travel trailer
2,038

80.4
%
1,372

58.7
%
666

48.5
 %
Fifth wheel
497

19.6
%
966

41.3
%
(469
)
(48.6
)%
Total towable deliveries
2,535

100.0
%
2,338

100.0
%
197

8.4
 %
 
 
 
 
 
 
 
ASP (in thousands)(1)
$
21

 
$
24

 
$
(3
)
(10.5
)%
(1) Percentages and dollars may not add due to rounding differences.

Net revenues consisted of the following:
 
Year Ended
(In thousands)
August 31, 2013
 
August 25, 2012
 
Increase
(Decrease)
%
Change
Motorhomes (1)
$
718,580

89.5
%
 
$
496,193

85.3
%
 
$
222,387

44.8
 %
Towables (2)
54,683

6.8
%
 
56,784

9.8
%
 
(2,101
)
(3.7
)%
Other manufactured products
29,902

3.7
%
 
28,702

4.9
%
 
1,200

4.2
 %
Total net revenues
$
803,165

100.0
%
 
$
581,679

100.0
%
 
$
221,486

38.1
 %
(1) 
Includes motorhome units, parts and service
(2) 
Includes towable units and parts

The increase in motorhome net revenues of $222.4 million or 44.8% was primarily attributed to a 46.9% increase in unit deliveries driven by higher dealer and retail consumer demand when compared to Fiscal 2012. ASP decreased 0.9% in Fiscal 2013.

Towables revenues were $54.7 million in Fiscal 2013 compared to revenues of $56.8 million in Fiscal 2012. Although towable unit deliveries increased by 8.4%, the growth was more than offset by an ASP decline of 10.5%.

Cost of goods sold was $718.5 million, or 89.5% of net revenues for Fiscal 2013 compared to $538.0 million, or 92.5% of net revenues for Fiscal 2012 due to the following:
Total variable costs (materials, direct labor, variable overhead, delivery expense and warranty), as a percent of net revenues, decreased to 83.9% this year from 85.3% mainly due to decreased material costs and increased operating efficiencies.
Fixed overhead (manufacturing support labor, depreciation and facility costs) and research and development-related costs decreased to 5.7% of net revenues compared to 7.1%. The difference was due primarily to increased revenues in Fiscal 2013.
All factors considered, gross profit increased from 7.5% to 10.4% of net revenues.
Selling expenses decreased to 2.3% from 2.9% of net revenues in Fiscal 2013 and Fiscal 2012, respectively. However, selling expenses increased $1.5 million, or 8.8%, in Fiscal 2013. The expense increase was primarily due to increased wage-related expenses of $680,000 and advertising expenses of $440,000.
General and administrative expenses were 2.7% and 3.0% of net revenues in Fiscal 2013 and Fiscal 2012, respectively. General and administrative expenses increased $4.6 million, or 26.8%, in Fiscal 2013. This increase was due primarily to an increase of $3.7 million in wage-related expenses. We also recorded approximately $550,000 additional amortization on our Towables intangible assets (see Note 7).
During the first quarter of Fiscal 2013 we realized a loss of $28,000 on the sale of our Hampton, Iowa property. See Note 6.

17


Non-operating income increased $115,000 or 19.8%, in Fiscal 2013. This difference is primarily due to decreased line of credit expenses and was partially offset by lower investment income. We also received proceeds from COLI policies in both Fiscal 2013 and Fiscal 2012. See Note 13.

The overall effective income tax rate for this year was an expense of 29.1% compared to a benefit of (345.0)% last year. The following table breaks down the two aforementioned tax rates:
 
Year Ended
 
August 31, 2013
 
August 25, 2012
(In thousands)
Amount
Effective
Rate
 
Amount
Effective
Rate
Tax expense on current operations
$
13,551

30.0
 %
 
$
2,914

28.8
 %
Valuation allowance
73

0.2
 %

(37,681
)
(372.8
)%
Uncertain tax positions settlements and adjustments
(483
)
(1.1
)%
 
(159
)
(1.6
)%
Amended tax returns

 %
 
61

0.6
 %
Total provision (benefit) for taxes
$
13,141

29.1
 %
 
$
(34,865
)
(345.0
)%

Tax expense on current operations
The primary reason for the increase in the overall effective tax expense rate on current operations was due to higher pretax income from operations compared to the prior year. Significant permanent deductions include domestic production activities deduction, income tax credits and tax-free income from COLI and student loan-related tax exempt securities. For further discussion of income taxes (which includes a reconciliation of the US statutory income tax rate to our effective tax rate), see Note 12.

Valuation allowance
During the year, adjustments to the realizable value of certain deferred tax assets were recorded. This resulted in a non-cash tax expense of $73,000 through the increase of our valuation allowance. For further discussion of deferred tax assets (which includes a table of all types of deferred tax assets), see Note 12.
At the end of the fourth quarter of Fiscal 2012, we re-established almost all remaining deferred tax assets due to the fact that we were in a three-year historical cumulative income position as opposed to a three-year historical loss position and that we had a positive future outlook. This resulted in a non-cash tax benefit of $37.7 million through the reduction of our valuation allowance. For further discussion of deferred tax assets (which includes a table of all types of deferred tax assets), see Note 12.
Uncertain tax positions settlements and adjustments
During Fiscal 2013, benefits of $483,000 were recorded as a result of adjustments to uncertain tax positions. During Fiscal 2012, benefits of $159,000 were recorded as a result of adjustments to uncertain tax positions. For further discussion of income taxes, see Note 12.
Net income and diluted income per share were $32.0 million and $1.13 per share, respectively, for Fiscal 2013. In Fiscal 2012, the net income was $45.0 million and diluted income was $1.54 per share. Net income and diluted income per share were higher in Fiscal 2012 compared to Fiscal 2013 despite a significant increase in net revenue and pre-tax income due primarily to the tax benefit realized in Fiscal 2012.


18


Fiscal 2012 Compared to Fiscal 2011

The following is an analysis of changes in key items included in the statements of operations for the fiscal year ended August 25, 2012 compared to the fiscal year ended August 27, 2011:
 
Year Ended
(In thousands, except percent and per share data)
August 25,
2012
% of
Revenues(1)
August 27,
2011
% of
Revenues(1)
Increase
(Decrease)
%
Change
Net revenues
$
581,679

100.0
 %
$
496,418

100.0
 %
$
85,261

17.2
 %
Cost of goods sold
537,999

92.5
 %
456,664

92.0
 %
81,335

17.8
 %
Gross profit
43,680

7.5
 %
39,754

8.0
 %
3,926

9.9
 %
 
 
 
 
 
 
 
Selling
16,837

2.9
 %
14,251

2.9
 %
2,586

18.1
 %
General and administrative
17,267

3.0
 %
14,263

2.9
 %
3,004

21.1
 %
Assets held for sale impairment (gain), net
50

 %
(39
)
 %
89

NMF

Operating expenses
34,154

5.9
 %
28,475

5.7
 %
5,679

19.9
 %
 
 
 
 
 
 
 
Operating income
9,526

1.6
 %
11,279

2.3
 %
(1,753
)
(15.5
)%
Non-operating income
581

0.1
 %
658

0.1
 %
(77
)
(11.7
)%
Income before income taxes
10,107

1.7
 %
11,937

2.4
 %
(1,830
)
(15.3
)%
(Benefit) provision for taxes
(34,865
)
(6.0
)%
94

 %
(34,959
)
NMF

Net income
$
44,972

7.7
 %
$
11,843

2.4
 %
$
33,129

279.7
 %
Diluted income per share
$
1.54

 
$
0.41

 
$
1.13

275.6
 %
Diluted average shares outstanding
29,207

 
29,148

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

Unit deliveries and ASP, net of discounts, consisted of the following:
 
Year Ended
(In units)
August 25,
2012
Product
Mix %(1)
August 27,
2011
Product
Mix %
(1)
Increase
(Decrease)
%
Change
Motorhomes:
 
 
 
 
 
 
Class A gas
1,648

35.5
%
1,518

34.5
%
130

8.6
 %
Class A diesel
931

20.1
%
918

20.9
%
13

1.4
 %
Total Class A
2,579

55.6
%
2,436

55.4
%
143

5.9
 %
Class B
319

6.9
%
103

2.3
%
216

209.7
 %
Class C
1,744

37.6
%
1,856

42.2
%
(112
)
(6.0
)%
Total motorhome deliveries
4,642

100.0
%
4,395

100.0
%
247

5.6
 %
 
 
 
 
 
 
 
ASP (in thousands)(1)
$
105

 
$
102

 
$
4

3.4
 %
 
 
 
 
 
 
 
Towables:
 
 
 
 
 
 
Travel trailer
1,372

58.7
%
575

74.8
%
797

138.6
 %
Fifth wheel
966

41.3
%
194

25.2
%
772

397.9
 %
Total towable deliveries
2,338

100.0
%
769

100.0
%
1,569

204.0
 %
 
 
 
 
 
 
 
ASP (in thousands)(1)
$
24

 
$
21

 
$
3

14.3
 %
(1) 
Percentages and dollars may not add due to rounding differences.


19


Net revenues consisted of the following:
 
Year Ended
(In thousands)
August 25, 2012
 
August 27, 2011
 
Increase
(Decrease)
%
Change
Motorhomes (1)
$
483,532

83.1
%
 
$
443,232

89.3
%
 
$
40,300

9.1
 %
Towables (2)
56,784

9.8
%
 
16,712

3.4
%
 
40,072

239.8
 %
Motorhome parts and services
12,661

2.2
%
 
13,105

2.6
%
 
(444
)
(3.4
)%
Other manufactured products
28,702

4.9
%
 
23,369

4.7
%
 
5,333

22.8
 %
Total net revenues
$
581,679

100.0
%
 
$
496,418

100.0
%
 
$
85,261

17.2
 %
(1) 
Includes motorhome units, parts and service
(2) 
Includes towable units and parts.

The increase in motorhome net revenues of $40.3 million or 9.1% was attributed to both a 5.6% increase in unit deliveries and an increase in motorhome ASP of 3.4% when compared to Fiscal 2011. The increase in motorhome ASP was primarily a result of more higher-priced Class A diesel units sold in Fiscal 2012.

Towables revenues were $56.8 million in Fiscal 2012. SunnyBrook, which was acquired in the second quarter of Fiscal 2011, had revenues of $16.7 million in Fiscal 2011.

Cost of goods sold was $538.0 million, or 92.5% of net revenues for Fiscal 2012 compared to $456.7 million, or 92.0% of net revenues for Fiscal 2011 due to the following:
Total variable costs (materials, direct labor, variable overhead, delivery expense and warranty), as a percent of net revenues, increased to 85.3% in Fiscal 2012 from 84.0% in Fiscal 2011 which was due to inflationary commodity pressures experienced in the first half of the fiscal year that were not passed on. Also impacting our variable costs were the following two significant items:
In Fiscal 2011, our variable costs were positively impacted by a $3.5 million favorable inventory adjustment as a result of the annual physical inventory. This adjustment in the aggregate favorably impacted our material, labor, variable overhead and fixed overhead costs by 0.7% as a percentage of net revenues in Fiscal 2011.
Our variable costs were favorably impacted by $613,000, or 0.1%, of net revenues for Fiscal 2012 due to a LIFO inventory gain as a result of deflation, as compared to LIFO inventory expense of $2.1 million, or 0.4%, of net revenues for Fiscal 2011.
Fixed overhead (manufacturing support labor, depreciation and facility costs) and research and development-related costs decreased to 7.1% of net revenues in Fiscal 2012 compared to 8.0% for Fiscal 2011. With similar spending levels, the difference was due primarily to increased revenues in Fiscal 2012.
All factors considered, gross profit decreased from 8.0% to 7.5% of net revenues.
Selling expenses increased $2.6 million, or 18.1%, in Fiscal 2012 compared to Fiscal 2011. The expense increase was primarily due to selling expenses associated with Towables and increases in advertising expenses. As a percent of net revenues, selling expenses were 2.9% in both Fiscal 2012 and Fiscal 2011.
General and administrative expenses increased $3.0 million, or 21.1%, in Fiscal 2012 compared to Fiscal 2011. This increase was due primarily to increases of $2.1 million in incentives and increases in Towable operating expenses, partially offset by a reduction of legal expenses. As a percent of net revenues, general and administrative expenses were 3.0% and 2.9% in Fiscal 2012 and Fiscal 2011, respectively.
During Fiscal 2011 we realized a gain of $644,000 on the sale of an idled assembly facility (CCMF) and recorded an impairment of $605,000 on our Hampton facility, both assets held for sale. In the fourth quarter of Fiscal 2012 we recorded an additional impairment of $50,000 on the Hampton facility. See Note 6.
Non-operating income decreased $77,000 or 11.7%, in Fiscal 2012. This difference is primarily due to lower investment income. We also received proceeds from COLI policies in both Fiscal 2012 and Fiscal 2011. See Note 13.

20



The overall effective income tax rate for this year was a benefit of (345.0)% compared to an expense of 0.8% last year. The following table breaks down the two aforementioned tax rates:
 
Year Ended
 
August 25, 2012
 
August 27, 2011
(In thousands)
Amount
Effective
Rate
 
Amount
Effective
Rate
Tax expense on current operations
$
2,914

28.8
 %
 
$
2,597

21.7
 %
Valuation allowance decrease
(37,681
)
(372.8
)%

(2,013
)
(16.8
)%
Uncertain tax positions settlements and adjustments
(159
)
(1.6
)%
 
(490
)
(4.1
)%
Amended tax returns
61

0.6
 %
 

 %
Total (benefit) provision for taxes
$
(34,865
)
(345.0
)%
 
$
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