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Winnebago Industries' (WGO) CEO Michael Happe on Q4 2016 Results - Earnings Call Transcript - Seeking Alpha

Part of it is a comparison in relation to last year. The annual RVIA show in Louisville is less than 50 days away and it will be great to see two strong brands in the convention center that will contribute strongly to our enterprise’s future. Our investment in a VP for strategic planning and business development, Ashis Bhattacharya, has already paid off with the pending addition of Grand Design to the portfolio. We have spoken with many industry stakeholders about the Grand Design acquisition and almost all have validated that it appears to be a strong cultural and strategic fit for both parties. The announcement of our agreement to acquire Grand Design, validates our intention to be a stronger, full-line RV manufacturer. Those come at different price points and certainly the unit capacity would depend on some of the market demand. No, I don't think the shipment cycle -- again remember that's obviously largely determined by retail demand. Obviously there's been some competitive consolidation are going to make some of the backlogs apples to oranges within the industry. Is there some kind of negative feedback you're getting from your dealer network that’s caused you to say that. I know several of the rental companies in North America continue to look to expand their presence. Backlog certainly can signal a strong demand for your products. There’s more opportunity as it relates to strategic sourcing, the warranty topic that we touched upon earlier, the operational projects that Mike touched upon. We will look for more intimate opportunities to listen to dealer principals, sales managers, and service leaders. Today, we’d like to further focus on the business strategy, market reaction, and integration related to this opportunity. One, I do think our overall dealer relationships are good in total. Before I turn the call back over to Mike, I just wanted to review the transaction costs associated with the acquisition of Grand Design. Our teams have been in constant contact with our dealer networks, clarifying the anticipated benefits and highlighting what will or what won't change in our go to market strategies. If that’s late November it will be less, but we believe they can absolutely continue to exceed the market growth rate by a significant amount, but at some point that CAGR becomes a little bit more difficult for them to comp. We appreciate those partnerships, and so we will continue to work on giving them the products they need to grow. We are making important strides with the work needed to ramp up output from our new Oregon manufacturing and service facility. We feel very confident that they can continue to exceed the towables market growth significantly. And then when that's fully ramped, what your capacity might look like in 2018. Thank you for that question as well. We think we need to put appropriate prioritization on deleveraging with the cash flow that will be generated from the new consolidated company. We covered many details surrounding this transaction on our call last week, and in several one on one discussions that followed. But we think that there is significant opportunity for us on a number of different fronts, be it with the market growth or with us executing and taking share. Towables’ wholesale deliveries and retail registrations both improved more than 50% for the quarter. And yes, you can probably infer through my comments in the script that we will be trying to make sure that our brand is relevant and appealing to customers across the whole of that demographic segment. I think referenced it a couple of times, didn't have it this year. I think they’re in a really good shape right now. I wish it was higher because our retail -- I wish our retail was higher. But the key -- I guess the key comparison is it’s very similar to a year ago. Good question because right, it is up a little bit and we are watching that because as you know, at some point that can get stagnant on you if that rise is too far ahead of retail. Thanks for your time this morning and I will now turn the line back over to the operator for any questions. In fiscal 2017, we anticipate a higher effective tax rate, a range of 33. 5% to 34. 5% when considering the accretive impact of brand design to our overall consolidated result. The news release with our fourth quarter earnings results was posted on our website earlier this morning. However I will speak directly this morning to two areas of our business that stand out in terms of areas for improvement in the future. The seeding of common language around purpose, vision, mission, values and guiding principles is candidly foundational work that must be and now has been done for the whole of our team to be aligned in the future about how we will treat each other... Now, to be clear, we want to keep inventory in the field certainly in that -- we’ve stated before that minimum two tons range and we’d like for that to be closer to two and a half over time. Part of the challenge for me is, I’ve only been a part of this company for roughly nine months now and don't have the history that the others do here about those events. The other thing that obviously we're going to be focused on is appropriate deleveraging in the future. I can tell you right now we have made no decisions about whether to have a dealer event in the future. But if we were to make a decision on that event, we'd certainly have to communicate the timing especially to the dealers. I’m showing no further questions at this time, I'd like to turn the call back over to Don Heidemann for closing remarks. I want to be clear, I don't think our dealer relationships are in a bad position at all. At the same time, as many of you know who cover other companies in other sectors, too high of a backlog can be a function of some manufacturing challenges capacity wise, and so it’s a balance. We'll see that on the towable side too in the future with Grand Design. The financing companies are a little smarter certainly than they were back ’08 and ’09. But we're not seeing any significant signs that the macro metrics are providing significant headwinds. The teams put on a nice show there and were able to gather the orders on both sides, motorized and towables that we were looking. The Minnie Plus is also a new line up of travel trailers, which already includes the Micro Minnie and the Minnie Lines. What's exciting though is as we talked about in the past, that facility is a much better facility for us to do work in the 45 foot segment of the diesel category, which we've largely been absent from in the future. When the gas prices begin to go up, they probably affect usage at this price, at the price because where they're at a little bit more than buying. Thank you to everyone for joining us today as we reviewed our fourth quarter fiscal results. And then Mike, last one from me if I can stick one more in. This has do with the overall, the dealer environment inventory levels. In recent calls, we have focused the 4 strategic initiatives that consist of a combination of immediate impact items, as well as investments which should set the stage for more accelerated success in the future. And when you look at 2016 in total, we've expensed approximately $5. 9 million inside the year, which was in comparison to 2015 up quite a ways. Scott Degnan has made the move internally to our towables leadership position in Indiana and has begun to make further necessary changes to strengthen that business. I mean we’re at the right direction versus climbing back to even versus a year ago. Our results increased demand for the lower priced units, in particular our Winnie Drop product line. Now we're moving toward the close of this transaction in a managed, yet expeditious manner, paying particular attention to the financing structure and the details of our future balance sheet. Concerning revenues, our towables business continues to gain momentum with each and every month and quarter. That was where we saw the significant increase inside the quarter compared to last year. If you have any questions about accessing this information, please call our Investor Relations department at 641-585-6160 following today’s conference call. New floorplans within our Forza diesel product series are also gaining momentum, and improving our value based diesel options. But I've also been very clear with the team as to the type of event that I would be looking for in the future. That is probably an answer that is evolving in terms of the mix of products that we intend to make and maybe I'll try to be as transparent as possible about some of the activities. As I’m getting used to the cadence, we’ll wait for the team’s recommendation on that on whether we choose to do that this year and or at some other point in the future. We’ll let you know if we make a decision at some point in the future, but as of right now we have not made a decision on that yet. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. Within the last several weeks, our latest DLT addition, Vice President of Operations and Manufacturing, Chris West has begun and immediately started prioritizing a long list of operational excellence opportunities that are present here. We are especially seeing strong end customer demand for our travel trailer lines, specifically the many branded products. It was fairly similar to last year same quarter in relation to the expense flowing through from a DNA standpoint, so it wasn't a significant delta. The Winnie Drop 170K is Winnebago’s newest entry to our retro teardrop travel trailer lineup. Thanks for that and I know that production capacity has been somewhat constrained for a variety of reasons, but you do plan to ramp in Oregon and do other things to increase capacity. On their seasonality elements of that, that play out during the course of the year, but on a rolling 12 month basis we're seeing that it in line. Their care for each other and their customers, is similar to that of Winnebago. It was up approximately 4%. And on the towables side we saw our AFPs drop on really a mixed shift because of the Winnie Drop product line. From a towable standpoint, ASPs declined in the fourth quarter compared to the prior year. Yes, I did state that since the end of August, we have improved our backlog position around 50% versus that August 2016 number that we shared in the release and that is primarily a function of the activity at the Elkhart Open House. We have some West Coast retail shows going on as well, where we're engaging some of our larger dealers on the West Coast. We’re probably not all the way there, but I mean it's not -- if the backlog at the end of August was down, I think it was 35% or whatever that number was. But specifically to our operations that we reported on today, we are very focused on continuing to drive margin on expansion in a number of those areas you touched upon. The improved bottom line result was in part driven by a fourth consecutive quarter of gross margin expansion. So we're not comfortable probably getting into a future trend of giving you a backlog update at every earnings call as of that particular day. Winnebago Industries, Inc. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL... First I guess when we talk about where we are from an industry standpoint, and looking at that survey, in the month of August, this was recently released, so we're still digesting that information from an external perspective. We continue to work with them on the products that are necessary for them to drive more business on their side as well. It puts us very comparatively to the backlog position that we had roughly a year ago at this time. So a lot of numbers are certainly going to have an impact on a percentage increase, notably in the towables side because how large the market is and how much growth there has been. We continue to see strong results from our towables group where revenues grew 16. 6% over last year. One was more of a supply side operation and the bus side was certainly more of a all-good forward looking. The timing of the close will dictate any impact on the first quarter as we close the schedule for November, but if that's early November it will be a little bit more material. We are extremely excited that it will also be a financially accretive opportunity for Winnebago’s shareholders. And lastly, we will continue to make the changes and investment necessary to expand our company's presence in the towables segment of the RV industry. We’ve reinstituted some practices which -- dealer councils and the like, which we think can be really effective in the future at listening to their needs and then creating strategies that address those. Later in the call and certainly probably as part of the Q&A, we will provide some additional color as to our progress since that announcement toward the close of this deal late in our first quarter. And financially, the acquisition should result in new topline growth opportunities, immediate enhancement of our margin profile in fiscal 2017, and bottom line accretion that will benefit both the shareholder, but also the business. Within both motorized and towables, we continue to believe that there is an alignment between retail demand and our dealer inventory as well. It's something that we certainly look at with our sales teams and we're pleased to say this morning that the trend is better as of today. Our efforts to increase internal unit trail unit inspection and streamline our product quality processes are starting to have a positive impact on warranty expenses. The dealers are unfortunately at times with certain models probably choosing to stock a competitive model until we get our lineup stronger and can compete for that position in their lots again. But as we become more precise with our marketing and product segmentation efforts, we must ensure that our flagship brand is both relevant and alluring to customers across the whole of the RV demographic spectrum, and that we have unique positions... We look forward to speaking with you again as we review our first quarter of fiscal 2017 results on Wednesday December 21, 2016. Thank you very much. But motorized specifically, one of the highlights I noted was in the Class B and C categories. The factors that are probably more important to actual purchases of RVs are things like consumer confidence, the wealth effect, but also the ability to access financing and we're not seeing any significant signs of financing tightening. Our product line continues to evolve positively and we are focused on expanding our dealer network in terms of both quantity and quality of channel partners. One, I think you kind of called out in terms of the gross margin improvement in the quarter, warranty was a positive there. Our time for sales ordered to invoice has decreased and we are meeting our dealers’ needs in a more timely manner. Thanks for the color, but I guess the reason I'm asking is just given there were some shift in dealer facing events this year, I'm trying to figure out how do we look at this on an apples to apples basis. I mean it was very helpful to the company when the recession hit in 2008 and 2009. Sarah, Don and their colleagues did a tremendous job helping the company ultimately survive. We continue to have both self-imposed, but also market imposed pressure on our Class A shipments. From a brand perspective, we have added the hottest set of product labels in the towables category, and a legitimate complementary brand in Grand Design that has miles of runway. Our strategic sourcing initiative has been extended into our towables business, and is now working more closely with our product design and development functions as well. We will continue to rationalize our existing vertical integration and make sure that those operations are efficient, and if they're not efficient we'll certainly explore whether there are some more economical opportunities to buy from on the outside. We pay attention to that very carefully, both the macro number but also the field inventory numbers by model and the ageing inventory. 2017 should bring some fresh new strategies as to how we tell our Winnebago brand story. I’ll give you a little color on the field inventory size specific to some of our classes. As you might expect, our inventory is down in the field on the class A size in part because our retail is down. The class C side, again it really goes back to what’s retailing well. Continued increased focus on higher levels of manufacturing output also translated to more efficiency in our motorhome shipments. Not all of those rental companies have presence especially some of them on the East Coast as an example, and you'll probably see some more of that from their end, which undoubtedly would flow to us we hope with some increased demand in the future,... Now, obviously we're going to keep a lot of that confidential so we can work on the strategies that we think are advantageous to us. Maybe here is [indiscernible] I’ll answer the question this morning. We have invested in focused general manager leadership within our motorhome division and added a talented experienced senior executive in Brian Hazelton, to focus and lead our upcoming resurgence in that core category. Our sales teams, the folks that have served our dealers for years on the sales and service side are doing an excellent job and I just want to be clear. The Winnebago brand is definitely very healthy with our traditional core customers, those being especially those baby boomers. We have an office in the Twin Cities, in a suburb of the Twin Cities south where several of the new leadership members that we've added they have a desk at, is probably the best way I'll say it right now, but as they travel, they're learning their... Now, that doesn't mean that our brand awareness is deficient, but the study really looks at a whole number of factors about what our brand means to different demographics and different segments. I have asked the team to take a look at that and make a recommendation to me as to whether at this point in time we think it would be a productive event to have. That’s evolving right now and with a new VP of manufacturing and operations joining us, that’s certainly a topic we're going to be spending a lot more time on to understand what our runway is within those facilities that I just mentioned. I think there's probably -- with different leadership periods, there's probably maybe a different opinion on that, but I can tell you it's not one which is overly aggressive. Increases in other costs such as professional fees and personnel related costs were primarily offset by costs related to a retirement agreement with the company’s former CEO that occurred last year. In addition to the strong results, our own Winnebago branded towables division is now delivering. Moving to our balance sheet and cash flow, I would like to highlight that cash generation from operations is up 17% year to date, primarily related to improved working capital. Before we head into the Q&A, I would like to end by thanking our employees in Winnebago for handling so professionally all the change that has been thrown at them in the last nine months. We will work to ensure they trust our commitment to this industry, and our passion for improving our business, by providing products and services that enhance their bottom line as well. class A motorized shipments and our overall motorized backlog. Towables backlog position is very strong, and so the teams are very focused on that. As I look at our class A line, I’m not dismayed by the amount of inventory out there relative to our retail trend. And while we are cautiously optimistic about the stability of the RV market here for the next several years, we think it's appropriate to our shareholders, but also candidly to put ourselves back in position maybe to invest organically, but also... More than 10 all new motorhome and towable models and or floor plans were on hand as we displayed the whole of our lineups to our dealers. Earlier on in my tenure with Winnebago, it became apparent that we needed to both accelerate the growth of our towables business, and explore any consolidation plays that were available to be made. The shipment cycle probably -- I mean it won't be dramatically different in fiscal 2017 from fiscal 2016. I think your comments are right in the sense of there are industry events. My final comment on our organic activity has to do with our renewed focus on dealer relationships, and bringing stronger new products new to market. So I think kind of big picture there’s the enhancements to margins from the acquisition, but there's also opportunities on just a base core business that we're going to continue to be working on. Okay, thank you. We like that field inventory has creeped up on negative retail and macro, well not really but then we have to go into the details and look at where it’s happening and I feel more comfortable when I look at where it’s happening. One, certainly welcoming and appropriately integrating the Grand Design business into the Winnebago family. We’re seeing success in the Bs and Cs and the softness on the A side and there's a lot of activity on that front for the teams incorporated in the motorized side B working on and they are to make a difference on a go forward basis. Our towable backlog remains strong as of today and our motorized backlog position has improved substantially with 50% more orders in hand today than at the end of August 45 days ago. We want the dealers to have great turns with Winnebago products. We have been very pointedly and diligently upgrading, repositioning and adding new talent on the executive leadership team here at Winnebago. We're going to do everything we can to balance Don and his team at Grand Design driving their differentiated model to the market, but also looking for some appropriate synergies and best practices that can help our enterprise as a whole. I think that was in regards to dealer relations, and I was a little surprised to hear that because I thought your dealer relations were excellent. So when you put that aside and that being rate neutral in of itself, the fact that we're going to be adding the accretive element of Grand Design to the overall operations drives up the pretax number and that has an impact of our existing... I wish I could answer it specifically, but we're really just trying to make sure it's healthy enough for the retail demand and the shipment demand that we see ahead of us. Okay, thanks for the color there, and then just a couple questions for Sarah. But if you look at a rolling 12 month basis, big picture you have retail and wholesale very much in staff, which first and foremost we think is an important element of some having the retail pull through on the wholesale side. Was there any kind of one time or any kind of accrual reversal of the accrual in the fourth quarter that we should look at as more onetime in nature, understanding that you probably accrue at a lower rate going forward as well. While most successful organizations have this already in place, Winnebago in fact did not have such a document that could serve as the North Star for our work ahead in the years to come. As a result, the Company cautions you that forward-looking statements are inherently uncertain and a number of factors, many of which are beyond the Company’s control, could cause actual results to differ materially from these statements. In fact pilot units are rolling off the Oregon assembly line in this past fourth quarter and currently, and we expect to see significant production volume in the back half of our fiscal 2017 year. As we near an election date in early November, there's no doubt that I think consumers are certainly with all discretionary purchases, maybe just taking a look at what's going to happen here in the next couple of months but again, we believe as... I have participated in seasonal and cyclical industries in my career in the past and we will very carefully in the future hopefully make sure our balance sheet has the ability to survive significant market or industry recessionary events. Now, while not a material factor on our recent fiscal 2016 fourth quarter motorized shipments, we are undoubtedly focused on improving upon the motorized backlog position that you all saw at the end of August. Good day, ladies and gentlemen, and welcome to the Winnebago Fourth Quarter 2016 Earnings Conference Call. I want to work on some things that are very important to our dealers and how they're successful, but if we brought that back, that would potentially be something that would potentially influence the timing on some orders too, so good question. Leadership matters and we will not rest until we have the right talent in place across the whole of the business model to compete for ultimate leadership in the industries that we compete in. Our recent investments in an operational assessment of... We are very pleased that the RV industry is attracting a younger buyer and that those buyers are using our products for different lifestyle choices, like more outdoor activities, biking, hiking, kayaking, all of that, and we intend to make sure... We want them to make increasingly better margins we hope in the future on Winnebago products. Our View and Navion products have retailed very well in fiscal year ’16 and at the end of ’16, the inventory was up there as well. I mean should we see a material change in kind of the cadence of your wholesale shipments throughout the year relative to the years prior. However motorized unit backlog decreased year over year, influenced by several factors similar to what we have previously discussed. I say executives plural because I'm assuming we’ll obviously add with a successful close, Don Clark to that in addition to Scott Degnan who leads our Winnebago towables business. The class B and C is really where the increase in inventory is in the field, but it’s very specific to some of the new models that we’ve been bringing out here recently. I think we've referenced that -- now, this isn't necessarily the demand number, but I think we've referenced approximately 500 units of production annually that we can get to in that facility without too much problem. Total revenue improved in the fourth quarter despite Winnebago’s exit in our aluminum extrusion OEM and bus operations, both of which had previously lower margins. And lastly, we are nearing the final stages of our search for a new Chief Information Officer, who will not only help bring home the ERP implementation project, but as importantly, provide functional leadership in building the data driven decision... As a result, we ended the year with a cash balance of over $85 million, up over $15 million from a year ago. While a dealer meeting is sometimes viewed as a big event and I’m sure as you are asking what would be expense related to that and timing, if it generated any orders, there are other means to obviously strengthen our dealer relationship as well. We are happy to report that we are not seeing any significant negative trends in ageing inventory within our dealer base, which is probably a comment that is helpful for you all on the industry health as much as Winnebago. It probably would not be surprising for you to hear and others that we’re probably not quite as strong with those customers that A, are in the towables market, and B that are probably a little bit younger. I would say I’d have to look at this morning's numbers, but as of yesterday as I said, we had improved significantly since the end of August and we were around last year's last number. We also very much look forward to welcoming Don Clark, Ron and Bill Fenech and the entire Grand Design team to the Winnebago family in November. As a reminder though, we began the fiscal fourth quarter with a little over 1,500 units in motorized backlog and delivered over 2,400 units within the quarter. We’ve been excited about a product called the Travato in class B. Our retail is just fantastic on the Travato and our inventory is up significantly on the Travato as our dealers embrace that. Working with our board of directors, our executive leadership team and with many key employees throughout the organization, we recently unveiled a new vision statement for Winnebago Industries. So some of that has some impact on the timing of the numbers, but we're again pleased to report that we're in much better position today, but we aspire to be even stronger in the future. From a motorized standpoint inside the quarter based on our internal retail staff, we were down slightly, a little over 4% inside the quarter and for the year we are flat. So for a little while in the future, we're probably going to be fragmented across a number of locations and then I guess there are some decisions in the future to be made about whether we want to consolidate any of that in a specific location. But Don and his team have done a great job and I don't want to underestimate their potential in the future, but we’ll give you more color I'm sure in future calls. If I go back the prior few quarters, it looks like warranty has been a headwind of 50 basis points year to date going into the quarter. By acquiring the fastest growing manufacturer of towable RVs in Grand Design, we will immediately enhance our product penetration in the towable segment with a suite of some of the industry’s strongest towable floorplans. Certain statements made during today’s conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under the securities laws and involve a number of risks and uncertainties. Just one question from us that was touched on during the prepared remarks, but to dig a little deeper on the puts and takes of the overall sustainability of gross margin given some of the factors such as the ongoing internal improvements and... Gross profit improved for the fourth consecutive quarter due to product mix, improved manufacturing utilization, continued benefits from our strategic sourcing initiative, and the transition out of the defunct businesses previously mentioned. The general belief within the RV industry, and I don't think this is just Winnebago’s, is that the gas prices currently are at a place where they would have to rise very significantly to probably impact both buying and usage. And we’ll be challenging our product development teams, our product managers to ride those cash cows, but also to address any units or models that need some margin improvement efforts. So in the last few months the SSI data shows the acceleration of industry retail in the year-over-year basis from say double digit to mid-single digit. Net net it sounds like we should be assuming an acceleration from the 90 basis point improvement in gross margin seen in fiscal ’16, but can you provide any more color or detail particularly in light of Grand Design as to how we should think about... I will start with an overview of the key drivers of Winnebago’s fiscal 2016 fourth quarter and full year, and then our CFO, Sarah Nielsen will follow by diving deeper into the details of our financial results. We are distinctly aware of the market share dilution occurring currently, especially on the lower end of the space, but we are also committed to providing our end customers and dealers a new Class A gas offering that while it competes for... This new vision provides a strong base for future growth and highlights the passion our Winnebago employees have for their craft, the dedication of our channel partners to exceed customer expectations and the loyalty and zealotry our end customers... While possessing some of the best sales people in the RV industry, it has become apparent to me that senior leadership at Winnebago can do a much better job in supporting those sales teams, by forming stronger, more strategic relationships with... I know everybody looks at it. We do too, and we don't want to discount it when it doesn't look favorable for us. We also don't want to overly emphasize it when it does look favorable. The law of numbers starts to factor in at some point based on their size, but I would tell you that we're pretty comfortable with their growth in that high single digit, low double digit range going forward in the future, but we’re probably not... The recent Open House event for RV dealers in Elkhart , Indiana several weeks ago, provided a significant step forward on this topic as both of our sales teams motorized and towables exceeded our pre-event dealer order targets. We're not going to let geographic location get in the way of acquiring the right talent and we're very focused on some more supporting the communities that our existing employees live and work in. Hi thanks, good morning. Towable backlog grew over 98% year over year on a unit basis, driven by an expansion of our distribution base and new products. That will be a mix of class A gas and class B products. We spoke with many of you last Monday, October 3, about the definitive purchase agreement that Winnebago Industries has signed to acquire Grand Design, one of the industry's fastest growing RV companies. And so I think it's multifaceted on a really higher amount a year ago, and also we're seeing some of the fruits of the efforts that we put in the past, this past year. Winnebago has the whole game scale, possesses a broader catalog of products, and mitigates a bit of cyclicality pressure to do a much more balanced portfolio in terms of motorhomes, versus towable sales. We anticipate fiscal 2017 to be a year where the opening of our new manufacturing facility in Junction City, Oregon and the subsequent freed up capacity in our Forest City, Iowa campus, can materially loosen the production constraints around our... The national dealer meeting that this company had historically held annually before I arrived at the company and we did not have one this year, in 2016, but we reserve the right to bring that back in the future as we work on strength and... As we close the books on a productive fiscal 2016 year, we're already underway obviously in fiscal 2017. My remaining comments this morning will focus first on several of the important seeds of change that have been planted in the last nine... Revenues improved year-over-year as a result of higher overall volume, partially offset due to the exit from aluminum extrusion sales, which negatively impacted our fourth quarter revenue by $5. 4 million. I think our class B position has certainly helped us as a fast mover in North America there, but yes, we did look at that and we have work to do across the board, but we want to make sure we're very relevant to the younger customers. Both class C and class B categories experienced a 10%-plus improvement in ASPs in the fourth quarter. But we feel better about the backlog position on motorhome improving, but very candidly we continue to have significant work to do to make sure that that backlog is consistently healthy throughout the whole of the year. We have been releasing new competitively priced floor plans of our opening price Vista line in recent weeks, and will continue to tweak and improve that product brand’s offering, including another new model which we will showcase in Louisville. At the same time, as we improve our manufacturing efficiency, as Sarah indicated, we will be sort of less dependent within the quarters on the backlogs that we report, because we’ll also be capturing retail orders consistently, and filling those... Fourth quarter operating expenses increased due to higher selling and advertising expense, in part due to increased marketing costs, as well higher G&A expenses related to increased bonuses compared to the prior year. Motorhome ASPs improved in the fourth quarter, as we saw improved mix in our class B and C units. We are pleased that in our fiscal fourth quarter, Winnebago’s revenue, gross margin, and net income all improved, driven by an internal climate of positive change and renewed determination by our employees to return this company's market and... Year-over-year fourth quarter operating income improved 11. 7% and net income increased by 12. 2% on a 4. 9% improvement in revenue. They can do that themselves, but I want them to know and I certainly want our employees to know that we're going to be relentlessly focused on listening to not only our end customers’ needs and problems, but our dealers’ needs and problems as well... We incurred $355,000 of related transaction expenses in our fourth fiscal quarter, which reduced EPS by approximately $0. 01. We are estimating that the total transaction expenses will be approximately $18 million in fiscal 2017. At this point in... We continue to believe that there is upside and runway on future gross profit improvement for Winnebago due to planned product line improvements, continued sourcing traction, and especially operational excellence initiatives that are just now... The overall effect of income tax rate for the fourth quarter of fiscal 2016 was essentially flat compared to the same period in fiscal 2015. For the full year, the overall effective income tax rate was 31. 3% compared to 30. 8% last year. Both employee bases are excited and the Winnebago team is preparing for how we best support and continue to empower Don Clark and the Grand Design business team and their unique business model in the years ahead. We really saw an elevated level of warranty spend a year ago in our fourth quarter and there was a recall we also expensed and accrued for in Q4 2015. And so that was really probably the beginning of some escalated warranty expenses that we've... I think if you back out the impact of the rental orders, retail registrations, we are looking at three straight quarters of decline and then you have the inventory up at the end of the year 6. 7%. I know there’s a lot of moving parts with the mix... I will tell you we are spending a significant amount of time, especially those of us that are new to the company and the industry, at gaining credibility and trust with the dealer community and letting them know that we’re certainly committed to... As noted in our earnings release this morning, towable unit volume increased over 57%, and motorized unit volume increased 3%. The increased motorized volume primarily relates to our heightened focus on higher manufacturing throughput, as... We have chosen to manage our Class A production to ensure balance with the momentum of our Class C products. And so again, we're always going to keep our eyes open as to what's out there because there are deals that are small that you could potentially make, but I just want everybody to be rest assured that we're going to be very, very focused on doing... Winnebago was late to the product management model within the RV industry, and we're really just now beginning to gain some momentum with these leaders and their teams in driving differentiated new products to the market. From a product line standpoint, what I'm excited about is as we increase an ability within our culture with the new ERP systems to get more data, we’ll be able to be more precise about within our product line, exactly where we're making money and... Fourth quarter gross margin expanded approximately 90 basis points year-over-year due to improved overall product mix, which includes our exit from aluminum and extrusion product sales. Good morning, and welcome to Winnebago Industries’ conference call to review the Company’s results for the fiscal 2016 fourth quarter and full year, which ended August 27, 2016. Conducting the call with me today will be Michael Happe, President... The Winnebago Paseo is the latest addition to our market leading class B line up. Built on the Ford transit van chassis, the Paseo further elevates our company's class B product offerings, featuring off the grid camping capabilities, and an... On the motorized side, revenues also increased as our wholesale deliveries increased 3% year over year in the quarter, due to continued strong demand from the channel and our Class B and C product lines. Internally and concurrently, our product management and engineering resources are hard at work on multiple future new Class A series that should make Winnebago significantly more competitive in both the Class A gas and diesel categories. I will tell you though, I think they can be stronger and we are hearing from our dealer base that they would like more access to senior management, that they would like senior management to be more in touch with their goals and their business and... And when we look into this next fiscal year, we're still looking to have ERP costs part of fiscal 2017. The objective is that we're going to finalize all the last pieces of this inside of this next fiscal year. On the operation side of our business, while a leader in the RV industry in terms of the quality of the products being produced, we have untapped levels of capacity, quality, efficiency and employee satisfaction that we will immediately begin work... The last thing I'll note is with our increasing class B growing business that we are working very diligently on class B capacity expansion as well, and we feel that we can do a lot of that within our existing facilities in North Iowa, specifically... Source:

Winnebago Industries' (WGO) CEO Michael Happe on Q1 2017 Results - Earnings Call Transcript - Seeking Alpha

And then, Mike, you’ve talked about working on unlocking trapped capacity in your business. Our backlog on motorized while still down from a year ago single-digit percentages was significantly healthier at the end of Q1 F17 than at the end of Q4 F2016 where we faced a 30% negative deficit. We really have to make sure that in a new manufacturing environment that we get the quality right. And I can't share details but we realize that our existing product isn't going to be the only answer to attacking that in the future. Well, certainly, our balance sheet has changed significantly in this quarter. We have always presented a fair amount of motorized and towable data and will now add adjusted EBITDA as our main measure of operating performance. And, you can see in our cash flow, where we started on this fiscal year. So now, we won't begin to get overly confident because that business has dropped precipitously for us and whether we have found bottom or not and we're starting to kind of rise from that, as I said, is yet to be seen. Obviously that expands I guess our opportunity from a liquidity standpoint either for some of the topics that Mike touched upon strategically or we also have debt pay down priorities as well. In my opinion at the current time, capacity is not an issue for the motorized side of our business. But we are also being very careful to further empower and enable Don Clark and his team to continue their upward and impressive momentum in the market. The integration of Grand Design is well underway. And we can't do anything about the past, but we are starting to show some signs of life there that we hope in future calls that you'll see some of the financial traction from too. So those are just two examples but as we look to really transform our motorized manufacturing and supply chain processes there are other instances as well. Another change I think in the tenor of our conversations and probably something I pushed is to the team is, this facility could be used in the future for other things. This starts with a strong leadership team which has been in transition since earlier this calendar year. Such non-GAAP financial measures should not be considered superior to as a substitute for or as an alternative to the GAAP financial measures presented in the news release. And year-to-date, fiscally, two of them are positive from a retail standpoint. And that's a function of the backlog intangible that was established that has a very, very short life. You've obviously got Oregon in there, incremental CapEx from Grand Design. We are providing non-GAAP performance measures in our press release today of EBITDA and adjusted EBITDA as a comparable measure to clearly illustrates the effect of all the items I just reviewed. So we like, I'm sure, [indiscernible] and others are, remain optimistic that there are cautiously several more years of RV upside here, unless of course some of the geopolitical or macroeconomic factors are wildly different. Well, we closed, it was a little under three weeks remaining in the quarter on that acquisition. So from that standpoint there is significant amount of business combination disclosures that we'll be filing when we release our 10-Q which is planned for next week. So I think you'll see us focus here especially in fiscal 17 on execution and integration and starting to pay down the debt that we have incurred. You can find affordable entry points, product wise, to the RV lifestyle, not only in motorized, but also in towables. From a G&A standpoint, there is certainly some evolution of the G&A spend to the topic you and Mike were just discussing on from a senior leadership standpoint. I actually have confidence that we can make whatever product is needed to compete at those price points and potentially be marginally profitable there. This quarter also additionally reflects our desire to both maintain ongoing important investments for the Company's future and further clean the slate in terms of legacy policies. I’ll try to be as objective as possible, but we feel very positive about the dealer sentiment towards our company right now. With the addition of our Oregon plant, which is coming out of the gates here concurrently as I mentioned with production of the first set of diesel models that are moving out there. And as I come into this company and it's been almost a year now, we continue to not have some of the dashboard reporting, some of the exception reporting. I mean would it, because it seems like West Coast production is that such a premium right now in the towable side. Overall, the towable market segment has experienced rapid growth over the past several years. And I guess, net of any impact that you guys are making internally with corporate development and et cetera, would that be still the case where you expect the combination of the two to have a higher margin profile going forward. Jeff will be instrumental in modernizing our IT infrastructure, co-leading our EPR project to successful implementation, building a business intelligence culture and working with engineering on technology that faces the customers and betters their... We have much, much work to do to continue to earn their business and we are committed to seeing our dealers succeed. And we're still very committed to Junction City Oregon being the primary home of most of our diesel line in the future. And so for the full year, we’ll be almost 25 million of amortization expense. Even where fuel prices are today and where interest rates are today, it's very affordable for people to use and to gain access to the RV lifestyle. So, we'll continue to keep updating that each quarter as we have better visibility on a go forward basis. And so from a revenue standpoint, as we've highlighted, that was 25. 8 million of incremental revenues. Over the past fifteen years, we have made many changes to this program as it was a significant unfunded obligation and as a result we also had numerous communications with our planned participants throughout this time frame. And I guess if the team can prove that that facility can be accretive in quality and profitability with other non-diesel lines, then we’ll take a look at that. The news release with our first quarter earnings results was posted to our website earlier this morning. From a Grand Design standpoint now that we have incorporated the segment disclosure it's going to be a combination of the two. And then second to what extent is capacity an issue for you as you move forward in other words are you enable to ship as many products as you'd like to based on some of that capacity constrained. One is we have to make high quality products and two, we have to make money. Thanks again to everyone for joining us today as we reviewed our first quarter fiscal 2017 results. A little bit too late for my taste coming into the business this year, but nonetheless we'll get there. People that are even more active from an outdoor exploration standpoint, folks that are using RVs for more weekend trips, folks that are using RVs for tailgating, for travel youth tournaments, there's any number of increasing use cases. And as we highlighted from a revenue standpoint, we saw the strong impact to our quarter just with three weeks of that flow through. I mean, when we put an operating system in such as the Microsoft Dynamics AX platform that we're working on today, no doubt that will be the engine that will be able to collect the information that's being generated by our business. And I will just tell you very honestly on this Wednesday morning that we've made no commitments to bring other lines of product out there. We've retailed several units and that will be a gradual ramp up week over week, month over month throughout the year. We've been very focused on getting the right senior leaders into the business to complement the industry talent and the experience we have. We now have a company with greater scale, a more balanced portfolio, another other strong brand, a strength and leadership team and a resolve to deliver increased value to our shareholders in the future. Before I conclude I want to recap just a few items, we will see one more quarter impacted by our termination of the post-retirement health care plan. I will begin this morning's call with an overview of the key performance drivers for our first quarter and then Sarah Nielsen will dive deeper into the details of our Q1 financial results. There are cost efficient ways to present again business intelligence to decision makers, so that they can use those to make better decisions. Our amortization expense for the remainder of 2017 as I previously mentioned is expected to be approximately 22. 6 million which will be weighted most heavily towards the second and third quarters. And three, we will do all of this with a common focus on providing dealers and end-customers with the highest levels of quality and service which leads to a great experience and lifetime brand advocates ultimately resulting in long-term value for... But the critical information and the framework that we’ll use on a go-forward basis we'll be breaking out the two segments as we shared this morning. First, we incurred 5. 5 million of transaction costs related to the acquisitions that were immediately expensed or $0. 13 per diluted share net of tax. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. Based on the allocation of the purchase price to the net assets acquired and the liabilities assumed, using outside valuation experts, we established intangible assets with a definite lives of 105 million which included dealer network, outstanding... Amortization expense related to these intangibles with $2. 1 million in the quarter or $0. 05 per diluted share net of tax. That team had a fantastic Open House event in September in Indiana followed by excellent showings at RVIA in Louisville and then retail events this fall in Hershey, Pennsylvania and Pomona, California showcasing the new interior and exterior... So we're having some very good conversations with dealers at multiple levels in their businesses, whether it's the principals, the general managers, sales or service managers. I mean either reinvesting in the business to drive future growth or obviously dropping it to the bottom line to improve our profitability. And each quarter, as we file our Q, we update our range if you will in relation to what we anticipate the year to look like. The Imagine line of Grand Design travel trailers is gaining momentum as well. This is definitely an interesting area where we are looking at it and in our motorized business, we continue to work with our key chassis partners, Ford, Mercedes, Freightliner and others. With that initial overview I will now turn the call over to Sarah Nielsen who will review our first quarter fiscal 2017 financial results in more detail. We will look to drive higher levels of manufacturing productivity, efficiency, quality, safety, employee satisfaction and margin enhancement in the future. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL... I just want to make sure is clear because we have a lot of expense yet to be incurred in Q2 and Q3 notably, well in excess of $10 million a quarter. But I think the industry's doing a very good job marketing to some of the younger generation of current or prospective RV customers and really appealing to different use cases. In the second quarter of fiscal 2017 we expect the $12 million benefit related to this line item. Towable deliveries grew at a rate in excess of recent industry trends as a result of the greater penetration of our new products and further expansion in our distribution base. And then as we have some time here to do some business development work internally, we’ll hope to put ourselves in a better position in the future to potentially be active again in adding to the portfolio. And we are not pleased that the margins in the motorized side were what they were in this quarter and we will be working with that team to again realize stronger performance there in the future. Financing companies are continuing to be careful, but you can get into RVs today through financing mechanisms and I think the industry has done a good job in two areas. Our topline results benefited from approximately three weeks of Grand Design, which contributed $25. 8 million of revenue. For the balance of 2017, we will remain focused on driving increased profitability, net the expenses from the Grand Design transaction. And one of the things that we need to spend more time on in this company from a talent development standpoint are some of the other levels of leadership within the company. Turning to our balance sheet, you will see several changes in Q1 related to the Grand Design acquisition and benefit plan termination. All of these will take time to improve the processes and drive the waste out, but I'm not going to sit here today and say that our motorized performance which continues to be relatively steady and not growing at the rate that we'd like it to be... I mentioned the team from Grand Design and Don Clark and his two co-founders [indiscernible] these are all very talented, smart, successful RV professionals. Now, we are bringing a new sense of new business development ambition to the company. The remaining amortization expense to be incurred in fiscal 2017 is 22. 6 million which will be heavily weighted to our second and third quarters due to the accelerated amortization of the backlog. We look forward to speaking with all of you again as we review our second quarter fiscal 2017 results on Wednesday, March 22, 2017. Thank you very much and happy holidays to everyone. And that's just one example where if we can dramatically cut down on the missing parts within the assembly line process, we can dramatically increase efficiency on the line and output. But we're also going to be looking at some different layers of the organization as well to make sure that we have the right talent in the right places there. So I can't answer your comments specifically other than, I think, that's sort of an ongoing journey and we reserve the right to have the talent we think is needed to compete and I'm excited about the blend that we have going on here. Obviously, I can’t and won't give you specific Q2 retail information other than I'll say this that the retail momentum that we described in this call on the motorized side is continuing. Winnebago Industries, Inc. We expect that we will incur additional transaction related costs in our second quarter as we complete the required associated SEC filings but don't anticipate that these remaining costs will be material. Segment adjusted EBITDA was down 14. 5% on incrementally higher expenses related to workers' compensation and costs associated with ramping up the new Oregon production facility. But I think mentally, we're thinking about those possibilities differently than we were a year ago. Also significantly impacting the quarter were a number of Grand Design acquisition related expenses. On the Grand Design side, we continue to see very solid shipment in retail momentum. We will however also give ourselves the permission to have profitable growth streams to our portfolio in the future if they fit the lens we are beginning to develop from a new business development standpoint around the outdoor lifestyle arena. I am also especially proud of the Grand Design team for receiving the 2016 RVDA Dealer Satisfaction award which they have won every year since their organization was founded. And it's a combination too of incorporating from a Grand Design standpoint that incrementally changes anything on the go forward basis, but that's the thought process that we have right now of the level of investment. This acquisition strengthens Winnebago culturally, strategically and financially. And we feel that a general sentiment is that the dealer base is optimistic about where Winnebago is headed now. We have introduced at least three new floor plans within our Vista series here over the last three or four months. Thank you Sarah, before we turn to the Q&A section I just wanted to take a few moments to highlight the progress we have made toward bringing to life someday our strategic visions and some of the exciting initiatives we have in store for the... The expected final impact of the plan terminations to the remainder of fiscal 2017 is an additional $12 million of post retirement health care benefit income in our second quarter. There are lots of moving pieces happening at Winnebago Industries. And as you can imagine for a company that's had most of its motorized manufacturing in north Iowa for most of its life, there are certain complexities with the supply chain and moving production to the West Coast that we've been able to work through. During the quarter, we successfully completed our transformative acquisition of Grand Design, which significantly expanded our penetration within the attractive still growing towables market segment. And we'll certainly match that to the demand that's appropriate for the Winnebago diesel models that are out there. In fact, we have three active lines of class A gas products. We anticipate that our annual effective tax rate for the remainder of the year will be close to 34% when considering the accretive impact of Grand Design to our overall consolidated results. And our dealers are receptive to the increased value that they're seeing on that particular class A gas series. We’ve spent a lot of money on a recent acquisition and have a leverage ratio a little bit over two right now that we want to bring down certainly in the next couple of years to something that starts with a one and then probably following that... And as you obviously saw this year, we made a very conscious decision to change the balance sheet in order to fund the acquisition of what we think was a, hopefully, will be a great acquisition. Culturally Grand Design brings a similar passion for how to serve our customers with high quality products and a customer service experience that exceeds expectations. So a very similar level of investments quarter over quarter. Chris West has responsibility for Winnebago branded manufacturing, supply chain, quality, safety and lean value streams. However, we are confident that we will realize the increasing benefits from the profitability of the Grand Design line in future quarters. I'd like to thank them for again their hard work wish them a very Merry Christmas and a happy holidays and also like to thank all of you for your time today and wish you happy holidays as well. Ashis Bhattacharya, who is on the call with us this morning, certainly hired in part to help us be more active in that arena, we've expressed a desire to maybe even explore some areas outside of the RV arena, but all of them have to be any... And there are certainly activities underway to increase the competitiveness of our Class A gas line in the future. One, we will continue to invest in our future by strengthening our core products, look for additional ways to leverage our strong brands and investigate expansion into new markets. We continue to feel as if we can keep up with the strong demand expected in the future in the Grand Design RV business. Jeff is already developed strong instincts about the necessary improvements to increase the probability of success with our ERP project and increase its future positive impact to the business. So those are the two key drivers on the motorized side that impacted margins and we certainly saw really positive performance on the towable side of the business. Gross profit overall for Winnebago Industries was steady for the quarter. That was well over 40%. So a small piece of the operational activity in the quarter, but impactful and we're excited about the impact it will have for the remainder of the year. As a result, the Company cautions you that forward-looking statements are inherently uncertain and a number of factors, many of which are beyond the Company’s control could cause actual results to differ materially from these statements. We're looking the total year to be in that range of 15 million to 17 million. I guess the way that I'll answer that is, we'll continue to put together the team that we think is needed to take the business to where we desire, not where it's at today. You have also heard me speak before about our desire to build a performance culture at Winnebago one with greater accountability and passion to drive out waste but constantly increase and create customer value. In addition, we recently welcomed two other new Winnebago executive leaders in Jeff Kubacki, Chief Information Officer and Chris West, Vice President of Operations. So historically, we had, prior and this is going back quite a few years now, but we would have a depreciation expense that was similar to what we would be investing on an annual basis and we're certainly not at that equilibrium at this point, but... So stay tuned as those results happen or don't happen, but yes, that's a big focus here at Winnebago is increasing gross profitability. And as Mike also highlighted, we're all very cognizant of having to fund and provide benefits for all of the talent that they're really focused on be it operationally or from an IT standpoint or in all areas of the business, from finance, et cetera. But still great performance from our existing Winnebago branded towables in for - performance as well. First quarter operating income was 18. 4 million, up over 44%. Net income was 11. 7 which increased 37% and diluted earnings per share of $0. 42 improved 31% over the prior year. Lastly, interest expense of $1. 1 million or $0. 03 per diluted share net of tax is related to the newly established asset base loan and term loan agreements as we borrowed 353 million on November 8 to fund the acquisition. While this growth remains below industry levels, we are continuing to introduce new models within our current opening price point series the Vista. But we do believe that we are putting the Winnebago train back on the tracks and moving productively forward hopefully in a net positive way. In some ways, at Winnebago, we continue to run the business with a cockpit instrument panel that doesn't have all the readings yet on it. And so we'll do that carefully. Good day, ladies and gentlemen, and welcome to the Winnebago First Quarter 2017 Earnings Conference Call. Anecdotally, the feedback from the dealer community is that all recognized changes happening at Winnebago Industries and that we are headed in the right direction to ultimately better serve their needs. Towable segment adjusted EBITDA was 4. 7 million which increased by 3. 6 million over the prior year. That was the out years, starting after 2017 and inside the remainder of 2017 in this fiscal year, that's an important piece. And we are starting to change that, I don't want to overemphasize any optimism here but this was the first quarter that we had seen positive retail in Class A gas in quite some time. But it's good to see that we think we're getting some early feedback in the retail environment, but also with orders on some of this improved class A product. As we previously noted, on an organic basis, Winnebago branded towable revenue grew over 44% in the quarter. The useful lives ranged from less than one year for the backlog to 12 years for the dealer network. We received strong positive feedback from our dealers during the Louisville event and our accelerating plans to improve our Class A value with even newer product in the future. As I mentioned earlier, the RVIA show recently concluded and both Winnebago and Grand Design head strong showings. And toward the end of the quarter we were encouraged by the material improvement in retail registrations and backlog for the Class A gas product line. Now that being said, I think as we’ve stepped back and looked at our motorized production strategy in Iowa, we've said we can probably keep a few of our diesels a little bit longer in Iowa because of the quality of work that's happening. Now I'm not suggesting that will always happen in the future but that's a good sign that potentially some of the work we've been doing on introducing extended and lower price floor plans in the Vista series are working. This strong demand is welcomed as we continue our progress in expanding the quantity and quality of our Winnebago branded towables dealer base. Overall, we are working hard to ensure our motorized products meet evolving customer trends and are committed to delivering more consistent levels of product quality and service to build on our recent retail momentum. From a Winnebago motorized standpoint and our West Coast facility, as I indicated, we are beginning formal production out there of one of our diesel models. Strategically the acquisition demonstrates Winnebago’s commitment to enhancing its relevance and share in the towables market, broadening our product lineup and our dealer relationships. But we will continue to try to improve our class A gas position because we certainly know that our friends at the two other large manufacturers in this industry have done very well there. Our ability to compete at some of the value price points that have emerged during this RV recovery, especially in the motorized side on Class A gas, in my opinion is probably more of a design and consumer insights challenge versus a manufacturing... As illustrated in our consolidated statement of income, there are a number of significant items positively and negatively impacting our first quarter of fiscal 2017 which I'd like to cover in more detail as well as provide context as to how these... But as we've also commented, we had strong revenue growth on our towable Winnebago branded product. I was just wondering if you could talk about, if you’ve seen anything else from a cadence standpoint in the motorhome business towards the, in the month of November or maybe if you can talk about what retail trends look like over the only 3. 5 weeks. Our travel trailer line though has a lot of momentum on the Winnebago branded side, the Winnie Drop, the mini franchise, micro-mini, mini pluses, those are all doing very well. We also recently unveiled our Winnebago Era product which is an industry first in featuring a slide room that houses a standard power Murphy bed that folds down as needed to form a continuous sleeping space. Financially, Winnebago will ultimately become at least 40% larger and materially more profitable, especially so after first year transaction expenses and purchase accounting items happen. I can highlight certain spots, in terms of product, our towable line on the Winnebago branded side is getting better. I will tell you, we will still have Winnebago diesel models that are still being made in Forest City for some time, including our lower priced Forza line, which will remain in Iowa for some time here in the future. And whether it's other lines of motorized products that make sense for that facility or it is any of our towables line, I think we’ll take those on a case by case basis. We believe we can continue to achieve growth in excess of the overall total market projections for the remainder of fiscal 2017. The addition of Grand Design resulted in the nearly 20% higher ASP in the quarter, primarily due to a greater... Winnebago Industries’ fiscal 2017 first quarter will be remembered as one of significant change in the right direction for the company. When I talk about business intelligence, what I mean is ultimately applications that give our decision makers and our needle movers in the enterprise the information they need to make the right decision more efficiently and to drive the business... Our West Coast manufacturing and service start-up continues and we have begun actual production of the first line of diesel products that have been initiated in Oregon. The strength of our Winnebago branded lineup was on display at this year's RVIA show in Louisville, Kentucky in November, where one of our voyage models, the fifth wheel trailers were formally recognized as a hot new product. Before we start, I’d like to remind you that certain statements made during today’s conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under the securities laws and involve a number of... We're very focused on getting the diesel production set up and these are highly complex products and a different supply chain that we're having to set up versus what we have in Iowa. I mean I think the initial, part of the initial talk about Grand Design was that higher margins would kind of boost the overall margin profile of Winnebago. And we have just moved into a new production facility in Indiana which will increase capacity by 75% for the Imagine line and gives a little breathing room as well to the other products in their own manufacturing facilities. You asked about some of the reasons, maybe I feel confident that we can unlock capacity in motorized in the future and I'll just mention a few of them and try not to get into the weeds but there are some material inefficiencies that are happening... The Grand Design team is already bringing immense energy to the Winnebago culture and we are looking forward to foster the sharing of best practices as appropriate while taking further advantage of our increased scale talent and customer confidence. On the motorized side, as I mentioned earlier, we walked away very pleased with the amount of orders that we took on our class A gas Vista series and I know we've been battling and not winning in that environment. Our results from the first quarter demonstrate our continued momentum on this path, especially the announcement and close of the acquisition of Grand Design RV that happened within the quarter. And this year, it was approximately 1. 2 million compared to last year of 1. 4 million. So with that business and the Grand Design team has done a good job of this through the years, we will work carefully with Don and his team to make sure that we continue to have the capacity to keep up with their rapid growth. Customers have responded particularly well to our new Winnebago branded towables product offerings including our entry level Winnie Drop travel trailer which has shown specific appeal to younger more active customers. This addition of Grand Design provides Winnebago with an opportunity to continue to fund overall change in our business and concurrently provide our shareholders with a greater return. We'd like employees to join Winnebago Industries and spend their entire career if not the majority of their career with us. When we see material turnover within the manufacturing environment that in my opinion is higher than it needs to be that... Now before I open it up to questions, I would like to end by thanking all of our employees at Winnebago Industries for their hard work during the quarter and also welcome the Grand Design employees to our family. Consolidated revenues were $245. 3 million, an increase of 14. 5% year over year driven primarily by strong growth in our towables business. Our Winnebago Paseo is the latest addition to our market share leading Class B catalog built on the Ford Transit van chassis, the Paseo further elevates our market position featuring off the grid camping capabilities and an innovative floor plan. I don't wanted to sound like we're going to put eight figures of IT costs into new applications for business intelligence, but with the quality of the CIO that's been added to our team, I think that there will be some cost effective ways that we... Now ultimately we believe we get the product right, but we have too many instances where the important assembly teammate at Winnebago does not have all the parts they need to complete their task in the station that they're working on. And that... We expect this upward trend in the industry to continue and look forward to being even better positioned to compete in this growing market with the addition of the Grand Design portfolio and the emergence of the strengthening Winnebago line. The overall effect of effect of income tax rate for the first quarter of fiscal 2017 was 32. 4% compared to 33. 6% for the same period in fiscal 2016. The decrease in effective rate is due primarily to a reduction in the liability for an uncertain... Total motorized deliveries rose 4. 1% year over year with the mix shifting towards class B and C products. So by the end of the year, we will have, end of the fiscal year, end of the calendar year, we will have manufactured several hundreds of units out there, but that will be on a graduated ramp up here over the coming quarters. As you know, we're focused on the health of our full line and we think our class B and our class C products are pretty well competitively positioned. We're off to a strong start in many ways in fiscal 2017, as we continue to implement our plan to transform Winnebago Industries ultimately looking to improve our competitive position in the marketplace and drive new levels of growth and... During the quarter, we saw solid growth in Winnebago branded retail unit numbers as well, well above 50% and we continue to see an increasing healthy backlog looking forward. From a towable standpoint revenues rose nearly 200% year-over-year on the addition of 25. 8 million in revenue from the Grand Design acquisition. In this first quarter of 2017 we added not only strong operating leaders in Don Clark and Cam Boyer from Grand Design RV, but also the strategic advisory services of Grand Designs co-founders Bill and Ron Fenech. In our towable segment, the consumer demand for towable RVs remain strong contributing to solid results for both Winnebago and Grand Design branded products. And then just the last thing, Mike, you mentioned in your prepared remarks that you've seen a little bit of an uptick in the class, class A market, the diesel specifically towards the end of the quarter and I think you said the backlogs are early... The Imagine, the new facility in Middlebury, Indiana, which the grand design team is now using on their Imagine travel trailers was opened several weeks ago and they are in that facility, making product and continuing to ramp their production up.... Good morning everyone, and thank you for joining us for Winnebago Industries’ conference call to review the Company’s results for the fiscal 2017 first quarter, which ended November 26, 2016. I’m joined on the call today by Michael Happe,... Our decision to terminate this plan effective January 1, 2017 resulted in a post retirement health care benefit of $12. 8 million or $0. 31 per diluted share net of tax compared to prior year post retirement health care benefit of $1. 3 million or... As compared to our year-end balance sheet, total assets increased 492 million due mainly to the addition of 500 million in goodwill and tangibles associated with the Grand Design business, 48 million in inventory and accounts receivables acquired... It also allows some of the manufacturing space that was previously occupied by that to be utilized now by the other Grand Design lines and so we have a little bit more room for some of the other Grand Design lines to grow as well in the future. And from an overall towable standpoint as we shared from an adjusted EBITDA standpoint we had very strong growth in that segment year-over-year and a significant component of that was certainly on the Grand Design side of the fence. Our Winnebago branded towables business continued its upward trajectory with organic growth of 44% year-over-year in the quarter. With the Grand Design acquisition now complete and given the organic strong growth of our Winnebago towables business, we are now reporting our financial results on a segment basis broken into two segments motorized and towable. Well, the key things that we highlighted from a press release standpoint on the motorized side, we’re really focused from a workers' compensation perspective that were higher on a year-over-year basis as well as some of the ramp-up costs... We are doing the work necessary to build the needed connections between Grand Design’s new parent Winnebago Industries and Grand Design. So certainly going forward, capital allocation will be not only used to fund the existing business and to make sure that we're creating the products that we need to in order to compete more effectively, but as Sarah has mentioned, we would like to... Our Class B and C product lines continue to be where the traction within our motorized segment is from a shipment standpoint with strong new additions to our Class B line in particular. With respect to the motorized segment, motorized revenues were down a little over 1% year-over-year reflecting that impact of the company's exit of its aluminum extrusion business to outside customers which reduced revenues by 5 million in the... And it's great to have them on our team now, on our side and not only will they continue to use their horsepower to drive the Grand Design business forward, but we're starting to have really good conversations in educating them about the rest of... From an ERP standpoint, as Mike highlighted, we have a CIO that just recently joined and we’re very excited to have him, one of our key leaders, working from an ERP implementation perspective as we finalize the last components of the AA process... Dealers are very excited about the future for Grand Design and they won't hesitate to weigh in with Winnebago Industries if they feel the Grand Design business model is threatened in any way. And their dealers are optimistic about Grand Design and cautiously looking towards Winnebago to not only I guess support Grand Design, but to make sure that we don't negatively impact the way they go to market and that's our intention is to... Turning to motorized, revenues declined in that segment slightly year-over-year in the quarter primarily reflecting the impact of our decision to exit the aluminum extrusion business in 2016. Motorized retail registrations on a unit basis achieved... The main liabilities established due to the acquisition includes short-term debt of 7. 6 million, accounts payable and other short-term liabilities of approximately 20 million, warranty reserves of nearly 13 million, a deferred tax liability of... But I think our dealers, both on the Winnebago side, but on the Grand Design side as well, are seeing a company that's on the move and one that is going to compete feverously for their business in the future and will hopefully deliver them even... Beyond fiscal 2017, we expect amortization to be roughly 8 million annually for 2021. Our baseline expectation for interest expense for the remainder of the fiscal year which includes amortization of debt issuance cost is between 15 million to 16... We have a large new business in Grand Design to integrate, many new leaders to assimilate, a new ERP system to continue to implement, a new West Coast manufacturing location to ramp up, operational excellence initiatives to start, new product... To be fair to the dealers and do ourselves, we need to deliver on our ambitions and the things that we're talking about and I think the Grand Design acquisition in Q1 of F17 was a pretty important sort of proof point for them emotionally that... Year-over-year first quarter consolidated revenues increased nearly 15% for the quarter or 31. 1 million driven primarily by three weeks of Grand Design revenues as well as 44% increase in Winnebago branded total revenues. A bigger picture question, but as we think about the robust growth you're seeing in your Winnebago branded towable segment, obviously, there's a lot of opportunity there and then kind of think about that in respect to your commentary about for... Well, we touched upon from a motorized standpoint that's where we saw pressure on a year-over-year basis and as noted in my prepared remarks and in the earnings release year-over-year our adjusted EBITDA was lower and that was primarily a function... Thus on a comparable basis year-over-year adjusted EBITDA was 14. 7 million compared to 12. 8 million last year, an increase of nearly 15%. As Mike mentioned earlier we have begun reporting segment results for the motorized and towable segments as... Well, the expectations for both segments and the business units within the company are that everybody will be increasing their gross profitability in the future and so yes, from a mathematical standpoint here, we anticipate that Grand Design will... Source:

Ford Motorhome Chassis Sales Growth Outpacing Industry - The News Wheel

More from Ford: Could the Ford Ranger be making a U. S. comeback. “Like boats, homes and luxury cars, motorhomes – especially Class A – are big-ticket items, so when we see a continued upward trend in sales, it means people have far greater confidence to make a large, discretionary purchase. “Motorhome sales are cyclical, and correlate with improving economic performance,” said Erich Merkle, Ford sales analyst. As such, Ford has increased production of its F-53 and F-459 stripped chassis for Class A motorhomes and commercial vehicles by 33 percent in order to keep up with demand. Turns out that the motorhome business is booming, and Ford is reaping the benefits with sales of Ford motorhome chassis beating industry expectations. Through May, sales of Class A motorhomes were up 12 percent over sales through the first five months of 2013, and Class C sales were up 14 percent in the same period of time. Ford motorhome chassis sales in particular managed to outpace this impressive statistic with sales of Class A stripped chassis up 17 percent and Class C chassis up 16 percent. Ford dominates the motorhome chassis market in a manner similar to their domination of the pickup truck segment: through May, Ford controls a 63 percent market share for Class A chassis and a 72 percent market share for Class C chassis. Source:

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