FOREST CITY, Iowa – Winnebago Industries, Inc. (NYSE:WGO), the leading United States motor home manufacturer, today reported financial results for the Company’s fourth quarter and fiscal year ended August 29, 2009.
Revenues for the fourth quarter ended August 29, 2009 were $59.5 million versus $85.3 million for the fourth quarter last year. The Company reported an operating loss of $9.2 million for the quarter versus an operating loss of $18.9 million for the fourth quarter of fiscal 2008. Included in the operating loss for the quarter was a non-cash charge of $855,000 related to the asset impairment of the Hampton, Iowa fiberglass facility during the quarter. Net loss for the fourth quarter was $50.2 million versus $12.7 million for the fourth quarter of fiscal 2008. On a diluted per share basis, the Company had a net loss of $1.73 for the fourth quarter of fiscal 2009 versus a net loss of 44 cents for the fourth quarter last year. The net loss for the quarter included a non-cash charge of $41.1 million, or $1.41 per diluted share, related to the establishment of a full valuation allowance against its deferred tax assets. Details of this charge are discussed elsewhere in this news release. Excluding these non-cash charges, the Company’s tax-benefited net loss for the fourth quarter would have been $5.4 million, or 19 cents per diluted share.
The fourth quarter was negatively impacted by lower motor home deliveries resulting in a reduction in plant utilization. Revenues were also negatively impacted by a continuation of wholesale and retail product incentives, but benefited from a better mix of Class A diesel products. There was a positive benefit to cost of goods sold, however, from the liquidation of last-in, first-out (LIFO) inventory values due to a significant reduction of inventory levels. This had the effect of decreasing gross deficit by $2.9 million.
Revenues for the 52 weeks of fiscal 2009 were $211.5 million versus $604.4 million for the 53 weeks of fiscal 2008. Net loss for fiscal 2009 was $78.8 million versus net income of $2.8 million for 2008. On a diluted per share basis, the Company had a net loss of $2.71 for fiscal 2009, versus earnings of 10 cents for 2008. Excluding non-cash charges, the Company’s tax-benefited net loss for fiscal 2009 would have been $37.2 million, or $1.28 per diluted share.
“While fiscal 2009 was one of the most challenging in our 51 year history and in the history of the RV industry, we have taken many necessary steps to preserve adequate liquidity, manage our balance sheet and costs, and maintain our ability to make investments in products and processes important to our long term growth and profitability,” said Winnebago Industries’ Chairman, CEO and President Bob Olson. “As an example, we increased our cash flow by dramatically cutting our inventories by 58 percent from the end of fiscal 2008 to the end of fiscal 2009.”
“Just as important as managing our balance sheet and costs for today’s market, however, is planning for growth once the economy recovers,” continued Olson. “Research and product development was a top priority, with over 50 percent of our lineup new or redesigned for the 2010 model year. From top to bottom, we raised the bar in creating innovative products with exciting floorplans and features with an emphasis on form, function and styling.”
According to Statistical Surveys, Inc., the retail reporting service for the RV industry, Winnebago Industries’ gained market share in the combined Class A and C markets with 19.1 percent for the first eight months of calendar 2009, compared to 18.5 percent for the same period last year.
“We are pleased with our market share gains and believe we have further opportunities to gain share going forward with our innovative new products,” said Olson. “As testament to the appeal of our new motor home offerings, our sales order backlog was 940 motor homes at August 29, 2009, an increase of approximately 58 percent compared to the end of fiscal 2008; and an increase of 146 percent from May 30, 2009, the end of our third quarter. We have seen particular strength in the backlog for our Class A gas and diesel products.”
“Nevertheless, the economic environment and the level of retail demand remain uncertain. Additionally, credit availability remains difficult on both the wholesale and retail level,” said Olson. “Floor plan lending institutions continue to manage dealer inventories very closely with an emphasis on the aging of inventory and the number of times a dealer turns his inventory each year. As a result, dealer inventory declined 54 percent during fiscal 2009, to 1,694 motor homes as of August 29, 2009. Since retail sales have been much higher than wholesale shipments throughout the past year, we believe dealer inventory is very close to reaching the bottom, and our dealer partners will need to start to replenish soon to satisfy retail demand going forward. The increase in our sales order backlog referenced above may also be a sign that the replenishment process is now beginning.”
Deferred Tax Asset Valuation Allowance
At the end of the third quarter of fiscal 2009, the Company’s ability to claim refunds of taxes previously paid was exhausted due to the size of our operating losses at that time. During the fourth quarter of fiscal 2009 the Company discontinued recording tax benefits related to current operating losses. In conjunction with the decision to discontinue recording tax benefits for operating losses, a valuation allowance was recorded against all other future tax benefits that had previously been recognized. The decision not to reflect these deferred tax assets in the financial statements is in accordance with the applicable accounting rules; however, it has no impact on cash flow. The Company has recorded a tax refund receivable related to the fiscal 2009 operating losses of $17.4 million which is expected to be received in the second quarter of fiscal 2010. The economic benefit of the future tax deductions has not been lost and when the Company returns to profitability the tax deductions will be taken and the benefits will be recorded.
New Credit Facility
On October 13, 2009, the revolving credit facility with Wells Fargo Bank, National Association was terminated in accordance with the underlying agreement and concurrently, the Company entered into a new $20.0 million credit facility, based on accounts receivable and inventory, with Burdale Capital Finance, Inc. as Agent. The new credit facility provides increased financial flexibility for the Company with a three year term, and the ability to borrow up to $12.5 million without financial covenant restrictions, if there is adequate asset coverage. Subject to certain provisions, the facility also includes an option that can be exercised to increase the facility size up to $50.0 million. This potential additional borrowing capacity may be beneficial to the Company if inventory levels need to substantially increase as a result of product demand.
Non-GAAP Financial Measures
Management has included non-GAAP financial measures in this release of net loss excluding non-cash charges. We believe that our net loss financial measures presented with these adjustments best reflect our ongoing performance and business operations during the periods presented. Management believes that this information allows investors to make a more meaningful comparison of the financial results over different periods of time.