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Winnebago Produces 400,000th Motorhome

Forest City, Iowa-based Winnebago Industries Inc. recently posted a milestone with the production of its 400,000th motorhome, serving as a prelude to the company’s marking of its 50th anniversary with several events planned for 2008.
Pictured here are Winnebago’s most senior employees based on years of service with the company, as well as Chairman of the Board and CEO Bruce Hertzke and President Bob Olson. Employees and the departments they represent are pictured from left to right: Hertzke; Keith Farland, accounting; Bob Eames, customer service; Joe Biretz, customer service; Harlan Rodberg, motorhome plant; Francis Oborny, customer service; Ken Gremmer, chassis weld; Irv Larson, maintenance; Elsie Felland, treasury; Lanny Jenkins, Creative Aluminum Products Co. (CAPCO); Bernie Kofron, customer service; and Olson.
The news comes in the wake of Winnebago’s release of its fiscal 2008 first quarter earnings last Thursday (Dec. 20). The company reported a 6.6% increase in sales for the quarter ending Dec. 1 and a 25.5% hike in profits. Management attributed the gains to customers buying more profitable high-end motorhomes and the company spending less on promotions. The quarter also included an extra week compared to the previous year.
John Diffendal of BB&T Capital Markets said he slightly lowered his earnings forecast for Winnebago in the current quarter but concluded, “Still, we see the company as a solid, core RV holding, especially for an eventual recovery in the RV market once the consumer becomes more positive on discretionary purchases.”
Diffendal noted that “while better Class A mix has helped recent quarters, the first-quarter backlog composition raises mixed concerns looking forward. Class A unit backlogs sagged 26.5%, with diesels off 35.8% and Class A gas down 18.7%. On the other hand, Class C backlogs popped 49.2%, allowing total unit backlogs to increase by 5%.”
He cited management’s statement in the investors conference call that some of the orders from November’s National RV Trade Show were included in this year’s totals – perhaps 70% of what will be received – compared to zero inclusion in last year’s end of quarter totals.
Part of Class A’s decline reflects the fact that new products have pushed into the marketplace lowering backlogs, Diffendal said. “But we are a little concerned that retail turns of new offerings may be disappointing – especially in the diesel market where management is looking to raise share and provide growth,” he added. “Still, there is nothing in the reported backlog for the new Class B entry Era, which could be a hot new entry.”
The new B product, which Winnebago said will achieve 22 mpg, will hit dealer lots in late February and early March.
Craig Kennison of Robert Baird & Co. said Winnebago “reported a mixed quarter that essentially met expectations. On balance, retail demand and gross margin fell shy of our forecast, but dealer orders were surprisingly strong and management remains committed to repurchasing stock.”
On the backlog issue, Kennison said, “The strength in the backlog is surprising given that dealer inventory is running slightly above expectations. It is possible that dealer demand for the new Era Class B product boosted orders.”
He noted that Winnebago plans to grow its diesel share by introducing more products at the low end of the market. These new products will complement its current offerings in the fast-growing low-to-mid price point segment. “We expect increased competition at the low end of the diesel market, but believe Winnebago can successfully gain share as it pursues the lower price points more aggressively,” he said.
He further noted that among its top competitors, “Winnebago produces some of the strongest financial metrics including: return on equity of 18%, return on assets of 10%, operating margin of 6% and net income margin of 5%.”
Looking to the current quarter, historically the company’s weakest period, analysts’ per-share earnings consensus is 26 cents. The company is operating at about a 55% utilization of capacity in the current quarter.

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