In the modern world, people have become busier. Recreation as well as traveling have become important parts of life. When it is time for recreation, one company that comes to mind is Winnebago Industries Inc. (WGO, Financial). Winnebago – "The Most Recognized Name in Motor Homes" – is a leading U.S. manufacturer of recreation vehicles, used primarily in leisure travel and outdoor recreation activities.
Winnebago motor home owners take extra comfort on their many adventures knowing they are backed by the industry's best service after the sale. From extensive warranties to 24-hour roadside assistance, Winnebago has the dedication to get you to your destination. For more than 50 years, Winnebago Industries has been the industry standard for quality and innovation. Today, Winnebago Industries is the leading United States manufacturer of motor homes and related products and services.
Overall Winnebago is a solid company backed by good fundamentals and huge cash flows. The company’s strength is in multiple areas such as large market size and opportunity, improved demand, improving financials, strong financial returns and a healthy balance sheet. Winnebago’s vertical integration contributes to operational excellence.
It posted solid fourth-quarter results. Time is on this company's side. This leading manufacturer will continue the trend and won’t let its valued investors down in the long run.
Sarah Nielsen, chief financial officer, commented, “Fiscal 2015 results were driven by strong performance in our class B and C motorized products as well as significantly improved results from the towables group, where both revenue and operating income grew. During the year we made considerable progress on both of our strategic initiatives and saw early benefits from our strategic sourcing project, which we anticipate will enhance gross margin by up to 50 basis points in Fiscal 2016. Additionally, we continued our efforts to improve labor capacity within motorized through the purchase of a facility in Waverly, Iowa. In Fiscal 2016, we will be exiting our bus and aluminium extrusion operations, which we believe will improve profitability and should add production capacity for our higher margin motor home business."
Nielsen added, “Our operating cash flow doubled during the fourth quarter and is up by 95% for the full year of Fiscal 2015. We are pleased with this performance particularly during a period where we have made significant long-term investments aimed at benefiting the company in the future.”
(Source: Company Website)
Strong fourth quarter
Revenues during the fourth quarter ended Aug. 29 were $251.0 million (an increase of 2.1% from $245.9 million during the prior year quarter).
Operating income was $16.9 million during the quarter ($18.3 million in the prior year quarter).
Net income during the quarter was $11.7 million, or 43 cents per diluted share, ($12.9 million, or 48 cents per diluted share in the prior year quarter).
Fourth-quarter gross margin improved sequentially from the third quarter due in part to improved manufacturing efficiencies within the motorized group.
Operating expenses increased in the current quarter due to incremental general and administrative expenses associated with two previously disclosed strategic initiatives related to ERP implementation and strategic sourcing as well as costs related to a retirement agreement with the company’s former CEO.
Year over year, motor home retail registrations increased 28% in the Fiscal 2015 fourth quarter and 16% on a rolling 12-month basis, while towable retail registrations increased 21% in the Fiscal 2015 fourth quarter and 14% on a rolling 12-month basis, based on internally reported retail information.
Dividend
The company declared an 11% increase to the quarterly cash dividend to 10 cents per share.
Strong attributes of the fourth quarter
- The company is benefiting from investment in an ERP system and strategic sourcing project.
- Improved efficiencies.
- Healthy balance sheet.
Focus
The company is currently focusing on the following:
- Solid pricing power.
- Continual innovation.
- Investment in research and development.
- It has a robust pipeline.
- It is constantly evolving.
- Committed to quality.
Opportunities for the company
- Capacity for additional volume unit.
- Strong brand equity.
- RV markets continue to recover.
- Margin expansion opportunities.
- New products provide avenues for additional growth.
On a concluding note
The company experienced six consecutive quarters of profitability, including growth in both revenues and operating income. With a lineup of industry-leading recreation vehicles, coupled with favorable consumer demand and RVIA’s current projection for further industry growth through calendar 2016, the company is well-positioned to generate improved financial results.
The new products have really sparked a growing trend of buyers who want to enjoy the RV lifestyle but also want an easy-to-drive, fuel-efficient and highly maneuverable full-featured motorhomes. According to Statistical Surveys Inc., 5,441 motor homes were retailed in the compact motor home category in calendar 2014, 2,382 (43.8%) of which were Winnebago motor homes. Since 2006, 27,939 have been retailed in the compact motor home category, 13,750 (49.2%) of which were Winnebago products.
Disclosure: I do not hold any position in the company.
