Report To Shareholders
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300,000th Not only did Winnebago Industries celebrate its 40th anniversary this year, the Company also manufactured its 300,000th motor home (1998 Winnebago Chieftain 34WY) during fiscal 1998. Company employees shown with Winnebago Industries Chairman, Chief Executive Officer and President, Bruce Hertzke (right). |
As we celebrated our 40th Anniversary this year, it was gratifying to reflect on our humble beginnings, as well as our vast accomplishments to date. We've come a long way from being a small start-up business manufacturing travel trailers in 1958 to the world-renowned recreation vehicle manufacturer we are today. We wish to thank our employees and shareholders for their contributions in making Winnebago Industries the successful company that it is today.
Financial Results
Fiscal 1998 would have been an exceptionally exciting year even without the anniversary celebration. For the first time in our Company's history, net revenues for Winnebago Industries exceeded the half billion dollar mark. Net revenues of $525 million for fiscal 1998 exceeded fiscal 1997 net revenues by 19.8 percent.
Income from continuing operations for fiscal 1998 nearly quadrupled when compared to the previous year due to several factors, the most significant of which was the outstanding acceptance of our 1998 and 1999 motor homes by both wholesale and retail customers, as well as very favorable market conditions. According to the latest report by Statistical Surveys Inc., a national retail reporting service, our motor home sales have outperformed the motor home industry by 12 percent since the beginning of calendar 1998 through August. In addition, the recreation vehicle market in general has enjoyed a year of growth that was stimulated by favorable interest rates, lower fuel prices and high consumer confidence levels.
New Product Development
Fiscal 1998 results represent the first full year of our strategy of refocusing on our core business of manufacturing quality motor homes. Product development has been a top priority throughout the past two model years, providing us with the best motor home lineup in Winnebago Industries' history. In fact, over 75 percent of our 1999 motor home offerings are dramatically redesigned or completely new compared to our 1997 offerings. The Company's new 1999 products were extremely well received by dealers at our Dealer Days event in August 1998, where the brand new top-of-the-line Ultimate motor home series was introduced. As a result of the acceptance of our 1999 lineup, order backlog for the Company's 1999 motor homes (Class A and C) has hit an all-time high of approximately 2,500 orders on hand, as of November 10, 1998, approximately 75 percent ahead of orders on hand at that date last year.
Expansion
Winnebago Industries will continue to aggressively search out ways of increasing production capacity. Towards this end, we will open a third satellite manufacturing facility in Charles City, Iowa in January, 1999. Approximately 60 miles from our corporate headquarters in Forest City, this new facility will manufacture cabinet components. In addition, Winnebago Industries also assumed control and purchased the assets of the Charles City location of North East Machine and Tool Co., doing business as North East Valve. Previously used to modify chassis for select models of the Company's motor homes, this facility now customizes the new Ulti-Bay™ chassis for Winnebago Industries' new 1999 Ultimate AdvantageÔ and Ultimate Freedom™ motor homes which are described later in this report. The idea of operating satellite facilities is not new to Winnebago Industries. Our two existing satellite facilities in Hampton and Lorimor, Iowa, have been in place for approximately 15 years and have proven themselves as great assets for the Company.
Additional methods of expanding production capacity will also be implemented, such as increased capital expenditures on equipment and technology. One such example is a new laser cutting system installed in our metal stamping area that effectively produces as many parts as previously manufactured by both a metal stamping press and a shear and reduces labor by 25 percent.
1999 Winnebago Minnie 31C
Brand Awareness
In addition, we will continue to further our goal of expanding the well-known Winnebago brand name beyond traditional motor homes in the RV category. An independent study of nearly 2,000 random U.S. households was conducted this year in which the Winnebago name dominated the brand awareness in RVs with a 90 percent awareness level. We currently have licensing agreements utilizing the Winnebago brand name for Winnebago Truck Campers by Sun-Lite, Inc., Winnebago Conversion Vehicles by Choo Choo Customs Group, Inc., Winnebago Park Model Homes by Chariot Eagle, Inc. and Winnebago Tents by Avid Outdoor. Winnebago Industries will continue to maximize its brand name equity by aggressively exploring licensing opportunities.
Increased Shareholder Value
We were also able to greatly increase shareholder value in fiscal 1998. Winnebago Industries' stock price increased from $8 3/8 at the beginning of fiscal 1998 to a close of $11 1/8 at fiscal year end, an increase in value of 32.8 percent. This reflects the stock market's confidence in the Company's abilities to achieve its financial and market share goals. Announced in December 1997, Winnebago Industries repurchased 3,612,600 shares of the Company's stock which was completed in September 1998. The repurchase shows the confidence we have in our Company's stock. The net effect of the repurchase was a decrease in shares outstanding, which in turn provides a greater return per share for the Company's shareholders.
Outlook
An expanding number of RV owners are contributing to a rise in RV travel across the country. Overall, motor homes are increasingly in demand as baby boomers begin to turn 50 years old. According to a study by the University of Michigan, the number of people aged 55 to 64 – prime ages for RVing – will grow by 8 million over the next 12 years. This survey also tells us one of four, or 25 percent, of the people asked, said they had plans to buy an RV in the future. This means more people choosing the RV lifestyle than ever before.
These are exciting times. Enormous opportunities lie ahead for us. To meet the challenges of the next 40 years and beyond, we will continue to work not only harder, but smarter, to be able to continue to further increase our production capacity, market share, financial results, and ultimately our value for every Winnebago Industries shareholder.
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Bruce D. Hertzke |
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December 1, 1998