In this globalized world, people have become busier. Recreation, as well as traveling, has become a part of life. When recreation is the subject, 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 recreational vehicles, which are used primarily in leisure travel and outdoor recreational activities.
Headquartered in Forest City, Iowa, this company and its subsidiary build quality motor homes, travel trailers, fifth-wheel products and transit buses which are sold through independent dealers under the Winnebago, Itasca and Era brand names. The company markets its recreational vehicles on a wholesale basis to a diversified dealer organization located throughout the U.S. and Canada. Other products manufactured by the company consist primarily of original equipment manufacturing (OEM) parts, including extruded aluminum and other component products for other manufacturers and commercial vehicles.
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 U.S. manufacturer of motor homes and related products and services.
It posted solid first-quarter results. Time is in favor of this company; it will continue this trend and won’t let its valued investors down in the long run. 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 healthy balance sheet. Winnebago’s vertical integration contributes to operational excellence.
First-quarter results
Revenues for the Fiscal 2016 first quarter, ended Nov. 28, 2015, were $214.2 million, which was a decrease of 4.5%, from the $224.4 million for the prior year period.
Operating income was $12.8 million for the current quarter ($14.4 million in the prior year quarter).
Fiscal 2016 first-quarter net income was $8.6 million, or 32 cents per diluted share, compared to $9.9 million, or 37 cents per diluted share, in the prior year period.
First quarter gross margin increased 90 basis points year over year due in part to improved motorized product mix, a greater contribution from towables, lower workers’ compensation expense and the realization of cost-saving benefits related to the company’s strategic sourcing initiative. The improvement was partly offset by continued labor-related manufacturing inefficiencies and unfavorable trends in warranty expense.
Compared to Fiscal 2015, operating expenses increased in the Fiscal 2016 first quarter due mainly to $1.4 million incremental general and administrative expenses associated with the company’s ERP implementation.
First-quarter Fiscal 2016 consolidated revenues decreased due primarily to lower motorized unit shipments of 5.4%, driven by reduced throughput due to manufacturing inefficiencies and a heightened focus on quality. However, towable revenues grew 24.1%, due to higher towables unit volume of 49.5%, partly offset by lower average selling price (ASP) of 17.5%.
Year over year, motor home retail registrations increased 3% in the Fiscal 2016 first quarter and 12% on a rolling 12-month basis while towable retail registrations increased 10% in the Fiscal 2016 first quarter and 12% on a rolling 12-month basis, based on internally reported retail information.
Dividend
On Dec. 16, 2015, the company’s board of directors approved a quarterly cash dividend of 10 cents per share payable on Jan. 27 to common stockholders of record at the close of business on Jan. 13.
(Source: Company’s Website)
Strong attributes of first quarter
- The company is benefiting from investment in an ERP system and strategic sourcing project.
- Improved efficiencies.
- Healthy balance sheet.
- Bookings were strong leading into the Louisville RVIA show.
- First quarter gross margin was the company's highest since the fourth quarter of Fiscal 2013. This increase is largely due to continued double-digit revenue growth and significantly higher margin within towables, along with improved motorized product mix.
Management
On Dec. 21, 2015, the company announced the appointment of Michael J. Happe as its president and chief executive officer and a member of its board of directors, effective Jan. 18. Happe will succeed outgoing interim CEO Larry A. Erickson. Erickson will remain chairman of Winnebago's board of directors.
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
With market share of 43.2% in calendar 2014 in this segment, Winnebago has essentially created a new market for customers interested in compact, fuel efficient motor homes.
The company experienced many consecutive quarters of profitability, including growth in both revenues and operating income. With a lineup of industry leading recreational 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 motor home. 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.
