10-K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended August 29, 2015; or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________________ to _______________________
Commission File Number 001‑06403


WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Iowa
 
42-0802678
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
 
 
P.O. Box 152, Forest City, Iowa
 
50436
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (641) 585‑3535
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock ($.50 par value)
 
The New York Stock Exchange, Inc.
 
 
Chicago Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer o      Accelerated Filer x       Non-accelerated filer o        Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
Aggregate market value of the common stock held by non-affiliates of the registrant: $621,119,096 (26,760,840 shares at the closing price on the New York Stock Exchange of $23.21 on February 27, 2015).
Common stock outstanding on October 13, 2015: 26,982,249 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement relating to the registrant's December 2015 Annual Meeting of Shareholders, scheduled to be held December 15, 2015, are incorporated by reference into Part II and Part III of this Annual Report on Form 10-K where indicated.
 


Winnebago Industries, Inc.
2015 Form 10-K Annual Report
Table of Contents

 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
 
Item 15.


ii
Table of Contents

Glossary


The following terms and abbreviations appear in the text of this report and are defined as follows:
AOCI
Accumulated Other Comprehensive Income (Loss)
Apollo
Apollo Motorhome Holidays, LLC
Amended Credit Agreement
Credit Agreement dated as of May 28, 2014 by and between Winnebago Industries, Inc and Winnebago of Indiana, LLC, as Borrowers, and General Electric Capital Corporation, as Agent
ARS
Auction Rate Securities
ASC
Accounting Standards Codification
ASP
Average Sales Price
ASU
Accounting Standards Update
COLI
Company Owned Life Insurance
Credit Agreement
Credit Agreement dated as of October 31, 2012 by and between Winnebago Industries, Inc. and Winnebago of Indiana, LLC, as Borrowers, and General Electric Capital Corporation, as Agent (as amended May 28, 2014)
EPS
Earnings Per Share
ERP
Enterprise Resource Planning
FASB
Financial Accounting Standards Board
FIFO
First In, First Out
GAAP
Generally Accepted Accounting Principles
GECC
General Electric Capital Corporation
IRS
Internal Revenue Service
IT
Information Technology
LIBOR
London Interbank Offered Rate
LIFO
Last In, First Out
MVA
Motor Vehicle Act
NMF
Non-Meaningful Figure
NOL
Net Operating Loss
NYSE
New York Stock Exchange
OCI
Other Comprehensive Income
OEM
Original Equipment Manufacturing
OSHA
Occupational Safety and Health Administration
ROE
Return on Equity
ROIC
Return on Invested Capital
RV
Recreation Vehicle
RVIA
Recreation Vehicle Industry Association
SEC
U.S. Securities and Exchange Commission
SERP
Supplemental Executive Retirement Plan
SIR
Self-Insured Retention
Stat Surveys
Statistical Surveys, Inc.
SunnyBrook
SunnyBrook RV, Inc.
Towables
Winnebago of Indiana, LLC, a wholly-owned subsidiary of Winnebago Industries, Inc.
US
United States of America
XBRL
eXtensible Business Reporting Language
YTD
Year to Date



iii
Table of Contents

WINNEBAGO INDUSTRIES, INC.
FORM 10‑K
Report for the Fiscal Year Ended August 29, 2015
Forward-Looking Information
Certain of the matters discussed in this Annual Report on Form 10-K are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. A number of factors could cause actual results to differ materially from these statements, including, but not limited to, increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increase in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to mergers and acquisitions activities, business interruptions, any unexpected expenses related to ERP and strategic sourcing projects, and other factors which may be disclosed throughout this Annual Report on Form 10-K. Although we believe that the expectations reflected in the "forward-looking statements" are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Undue reliance should not be placed on these "forward-looking statements," which speak only as of the date of this report. We undertake no obligation to publicly update or revise any "forward-looking statements," whether as a result of new information, future events or otherwise, except as required by law or the rules of the NYSE. We advise you, however, to consult any further disclosures made on related subjects in future quarterly reports on Form 10-Q and current reports on Form 8-K that are filed or furnished with the SEC.

PART I

Item 1. Business

General
The "Company," "Winnebago Industries," "we," "our" and "us" are used interchangeably to refer to Winnebago Industries, Inc. and its subsidiary, Winnebago of Indiana, LLC, as appropriate in the context.
Winnebago Industries, Inc., headquartered in Forest City, Iowa, is a leading United States manufacturer of RVs used primarily in leisure travel and outdoor recreation activities.
As a result of our motorhome manufacturing capabilities, equipment and facilities, we use our incremental capacity to manufacture product for outside customers. Other products manufactured by us consist primarily of OEM parts, including extruded aluminum and other component products for other manufacturers and commercial vehicles.
We own facilities in Middlebury, Indiana, where we manufacture travel trailers and fifth wheel RVs.
We were incorporated under the laws of the state of Iowa on February 12, 1958, and adopted our present name on February 28, 1961. Our executive offices are located at 605 West Crystal Lake Road in Forest City, Iowa. Our telephone number is (641) 585-3535.
Available Information
Our website, located at www.wgo.net, provides additional information about us. On our website, you can obtain, free of charge, this and prior year Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all of our other filings with the SEC. Our recent press releases are also available on our website. Our website also contains important information regarding our corporate governance practices. Information contained on our website is not incorporated into this Annual Report on Form 10-K. You may also read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website that contains reports, proxy statements and other information that is filed electronically with the SEC. The website can be accessed at www.sec.gov.


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Table of Contents

Principal Products
We have one reportable segment, the RV market. We design, develop, manufacture and market motorized and towable recreation products along with supporting products and services. Net revenues by major product classes were as follows:
 
Year Ended (1)
(In thousands)
August 29, 2015
 
August 30, 2014
 
August 31, 2013
 
August 25, 2012
 
August 27, 2011
Motorhomes (2)
$
872,915

89.4
%
 
$
853,488

90.3
%
 
$
718,580

89.5
%
 
$
496,193

85.3
%
 
$
456,337

91.9
%
Towables (3)
71,684

7.3
%
 
58,123

6.1
%
 
54,683

6.8
%
 
56,784

9.8
%
 
16,712

3.4
%
Other manufactured products
31,906

3.3
%
 
33,552

3.6
%
 
29,902

3.7
%
 
28,702

4.9
%
 
23,369

4.7
%
Total net revenues
$
976,505

100.0
%
 
$
945,163

100.0
%
 
$
803,165

100.0
%
 
$
581,679

100.0
%
 
$
496,418

100.0
%
(1) 
The fiscal year ended August 31, 2013 contained 53 weeks; all other fiscal years contained 52 weeks.
(2) 
Includes motorhome units, parts and services
(3) 
Includes towable units and parts.
 
Motorhomes, parts and service. A motorhome is a self-propelled mobile dwelling used primarily as temporary living quarters during vacation and camping trips, or to support some other active lifestyle. The RVIA classifies motorhomes into three types, all of which we manufacture and sell under the Winnebago brand name, which are defined as follows:
Type
Description
Winnebago products offerings
Class A
Conventional motorhomes constructed directly on medium- and heavy-duty truck chassis, which include the engine and drivetrain components. The living area and driver's compartment are designed and produced by the motorhome manufacturer.
Gas: Adventurer, Brave, Sightseer, Suncruiser, Sunova, Sunstar, Sunstar LX, Tribute, Vista, Vista LX
Diesel: Ellipse, Ellipse Ultra, Forza, Grand Tour, Journey, Meridian, Reyo, Solei, Tour, Via
Class B
(gas and diesel)
Panel-type vans to which sleeping, kitchen, and/or toilet facilities are added. These models may also have a top extension to provide more headroom.

Winnebago Touring Coach (Era, Travato)
Class C
(gas and diesel)
Motorhomes built on van-type chassis onto which the motorhome manufacturer constructs a living area with access to the driver's compartment.

Aspect, Cambria, Minnie Winnie, Navion, Spirit, Trend, View, Viva!
Motorhomes generally provide living accommodations for up to seven people and include kitchen, dining, sleeping and bath areas, and in some models, a lounge. Optional equipment accessories include, among other items, generators, home theater systems, king-size beds, and UltraLeatherTM upholstery and a wide selection of interior equipment. With the purchase of any new motorhome, we offer a comprehensive 12-month/15,000-mile warranty on the coach and, for Class A and C motorhomes, a 3-year/36,000-mile structural warranty on sidewalls and floors.
Our Class A, B and C motorhomes are sold by dealers in the retail market with manufacturer's suggested retail prices ranging from approximately $70,000 to $430,000, depending on size and model, plus optional equipment and delivery charges. Our motorhomes range in length from 21 to 43 feet.
Unit sales of our motorhomes for the last five fiscal years were as follows:
 
Year Ended (1)(2)
Units
August 29, 2015
 
August 30, 2014
 
August 31, 2013
 
August 25, 2012
 
August 27, 2011
Class A
3,442

37.8
%
 
4,466

51.0
%
 
3,761

55.1
%
 
2,579

55.6
%
 
2,436

55.4
%
Class B
991

10.9
%
 
751

8.6
%
 
372

5.5
%
 
319

6.9
%
 
103

2.3
%
Class C
4,664

51.3
%
 
3,538

40.4
%
 
2,688

39.4
%
 
1,744

37.6
%
 
1,856

42.2
%
Total motorhomes
9,097

100.0
%
 
8,755

100.0
%
 
6,821

100.0
%
 
4,642

100.0
%
 
4,395

100.0
%
(1) 
The fiscal year ended August 31, 2013 contained 53 weeks; all other fiscal years contained 52 weeks.
(2) 
Percentages may not add due to rounding differences.
Motorhome parts and service activities represent revenues generated by service work we perform for retail customers at our Forest City, Iowa facility as well as revenues from sales of RV parts. As of August 29, 2015, our parts inventory was approximately $3.0 million and is located in a 450,000-square foot warehouse with what we believe to be among the most sophisticated distribution and tracking systems in the industry. Our competitive strategy is to provide proprietary manufactured parts through our dealer network, which we believe increases customer satisfaction and the value of our motorhomes.



2
Table of Contents

Towables. A towable is a non-motorized vehicle that is designed to be towed by passenger automobiles, pickup trucks, SUVs or vans and is used as temporary living quarters for recreational travel. The RVIA classifies towables in four types: conventional travel trailers, fifth wheels, folding campers trailers and truck campers; we manufacture and sell conventional travel trailers and fifth wheels under the Winnebago brand name, which are defined as follows:
Type
Description
Winnebago product offerings
Travel trailer
Conventional travel trailers are towed by means of a hitch attached to the frame of the vehicle.
Minnie, Micro Minnie, Ultralite, Spyder
Fifth wheel
Fifth wheel trailers are constructed with a raised forward section that is connected to the vehicle with a special fifth wheel hitch.
Voyage, Latitude, Destination, Scorpion
Unit sales of our towables for the last five fiscal years were as follows:
 
Year Ended (1)(2)
 
 
 
 
 
 
Units
August 29, 2015
 
August 30, 2014
 
August 31, 2013
 
August 25, 2012
 
August 27, 2011
Travel trailer
2,182

81.7
%
 
2,052

81.8
%
 
2,038

80.4
%
 
1,372

58.7
%
 
575

74.8
%
Fifth wheel
488

18.3
%
 
457

18.2
%
 
497

19.6
%
 
966

41.3
%
 
194

25.2
%
Total towables
2,670

100.0
%
 
2,509

100.0
%
 
2,535

100.0
%
 
2,338

100.0
%
 
769

100.0
%
(1) 
The fiscal year ended August 31, 2013 contained 53 weeks; all other fiscal years contained 52 weeks.
(2) 
Percentages may not add due to rounding differences.
Other Manufactured Products. As a result of our motorhome manufacturing capabilities, equipment and facilities, we use our incremental capacity to manufacture product for outside customers. Notably, we manufacture aluminum extrusions which are sold to approximately 75 customers. To a limited extent, we manufacture other component parts sold to outside manufacturers. We also manufacture commercial vehicles which are motorhome shells, primarily custom designed for the buyer's special needs and requirements, such as law enforcement command centers, mobile medical clinics and mobile office space. These commercial vehicles are sold through our dealer network. In addition, we also provide commercial vehicles as bare shells to third-party upfitters for conversion at their facilities. We are a manufacturer of commercial transit buses that are sold to both public and private transportation agencies for use in community based transit programs, para transit applications, hospitality shuttles, car rental shuttles, airport shuttles, and other various applications. Our transit buses are marketed under the trade name Metro, Metro Link, and Metro Connect and distributed to a nationwide dealer network through our exclusive distribution partner, Metro Worldwide. In Fiscal 2016 we plan to exit our bus and aluminum extrusion operations and focus our efforts on our higher margin motorhome business, which we believe will both add production capacity and improve profitability.

Production
We generally produce motorhomes and towables to order from dealers. We have some ability to increase our capacity by scheduling overtime and/or hiring additional production employees or to decrease our capacity through the use of shortened workweeks and/or reducing head count. We have long been known as an industry leader in innovation as each year we introduce new or redesigned products. These changes generally include new floor plans and sizes as well as design and decor modifications.
Our motorhomes are produced in the state of Iowa at four different campuses. Our Forest City facilities are vertically integrated and provide mechanized assembly line manufacturing for Class A and C motorhomes. We assemble Class B motorhomes in our Lake Mills facilities. Hardwood cabinet, countertop and compartment door products are manufactured at our Charles City campus. Wire harness fabrication is in the process of being transferred to our recently acquired facility in Waverly. Our motorhome bodies are made from various materials and structural components which are typically laminated into rigid, lightweight panels. Body designs are developed with computer aided design and manufacturing and subjected to a variety of tests and evaluations to meet our standards and requirements. We manufacture a number of components utilized in our motorhomes, with the principal exceptions being chassis, engines, generators and appliances.
Most of our raw materials such as steel, aluminum, fiberglass and wood products are obtainable from numerous sources. Certain parts, especially motorhome chassis, are available from a small group of suppliers. We are currently purchasing Class A and C chassis from Ford Motor Company, Mercedes-Benz USA (a Daimler company) and Mercedes-Benz Canada (a Daimler company) and Class A chassis from Freightliner Custom Chassis Corporation (a Daimler company). Class B chassis are purchased from Mercedes-Benz USA, Mercedes-Benz Canada, FCA US, LLC and FCA Canada, Inc.. Class C chassis are also purchased from FCA US, LLC and FCA Canada, Inc. In Fiscal 2015, only two vendors, Ford Motor Company and Mercedes-Benz (USA and Canada) individually accounted for more than 10% of our raw material purchases and approximating 33% in the aggregate.

Our towables are produced at an assembly plant located in Middlebury, Indiana. The majority of components are comprised of frames, appliances and furniture and are purchased from suppliers.

3
Table of Contents

Backlog
The approximate revenue of our motorhome backlog was $156.4 million and $172.6 million as of August 29, 2015 and August 30, 2014, respectively. The approximate revenue of our towable backlog was $6.2 million and $3.8 million as of August 29, 2015 and August 30, 2014, respectively. A more detailed description of our motorhome and towable order backlog is included in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Distribution and Financing
We market our RVs on a wholesale basis to a diversified independent dealer network located throughout the US and, to a limited extent, in Canada. Foreign sales, including Canada, were 8% or less of net revenues during each of the past three fiscal years. See Note 14 to our Financial Statements of this Annual Report on Form 10-K.
As of August 29, 2015, our RV dealer network in the US and Canada included 292 motorized and 136 towable physical dealer locations, 123 of these locations carried both Winnebago motorized and towable product. With respect to product line points of distribution (number of product lines offered at each dealer location) as of August 29, 2015 there were 2,626 motorized points of distribution and 774 towable product line points of distribution.
One of our dealer organizations accounted for 17.9% of our net revenue for Fiscal 2015, as this dealer sold our products in 75 of their dealership locations across 28 US states. A second dealer organization accounted for 15.0% of our net revenue for Fiscal 2015, as this dealer sold our products in 11 dealership locations across 4 US states.
We have sales and service agreements with dealers which are subject to annual review. Many of the dealers are also engaged in other areas of business, including the sale of automobiles, trailers or boats, and many dealers carry one or more competitive lines of RVs. We continue to place high emphasis on the capability of our dealers to provide complete service for our RVs. Dealers are obligated to provide full service for owners of our RVs or, in lieu thereof, to secure such service from other authorized providers.
We advertise and promote our products through national RV magazines, the distribution of product brochures, the Go RVing national advertising campaign sponsored by RVIA, direct-mail advertising campaigns, various national promotional opportunities and on a local basis through trade shows, television, radio and newspapers, primarily in connection with area dealers.
RV sales to dealers are made on cash terms. Most dealers are financed on a "floorplan" basis under which a bank or finance company lends the dealer all, or substantially all, of the purchase price, collateralized by a security interest in the merchandise purchased. As is customary in the RV industry, we typically enter into a repurchase agreement with a lending institution financing a dealer's purchase of our product upon the lending institution's request and after completion of a credit check of the dealer involved. Our repurchase agreements provide that for up to 18 months after a unit is financed, in the event of default by the dealer on the agreement to pay the lending institution and repossession of the unit(s) by the lending institution, we will repurchase the financed merchandise. Our maximum exposure for repurchases varies significantly from time to time, depending upon general economic conditions, seasonal shipments, competition, dealer organization, gasoline availability and access to and the cost of financing. See Note 10.

Competition
The RV market is highly competitive with many other manufacturers selling products which compete directly with our products. Some of our competitors are much larger than us, most notably in the towable RV market, which may provide these competitors additional purchasing power. The competition in the RV industry is based upon design, price, quality and service of the products. We believe our principal competitive advantages are our brand strength, product quality and our service after the sale. We also believe that our motorhome products have historically commanded a price premium as a result of these competitive advantages.

Seasonality

The primary use of RVs for leisure travel and outdoor recreation has historically led to a peak retail selling season concentrated in the spring and summer months and lower sales during winter months. Our sales of RVs are generally influenced by this pattern in retail sales, but sales can also be affected by the level of dealer inventory. As a result, RV sales are historically lowest during our second fiscal quarter, which ends in February.

Regulations and Trademarks
We are subject to a variety of federal, state and local laws and regulations, including the MVA, under which the National Highway Traffic Safety Administration may require manufacturers to recall RVs that contain safety-related defects, and numerous state consumer protection laws and regulations relating to the operation of motor vehicles, including so-called "Lemon Laws." We are also subject to regulations established by OSHA. Our facilities are periodically inspected by federal and state agencies, such as OSHA. We are a member of RVIA, a voluntary association of RV manufacturers which promulgates RV safety standards. We place an RVIA seal on each of our RVs to certify that the RVIA standards have been met. We believe that our products and facilities comply in all material respects with the applicable vehicle safety, consumer protection, RVIA and OSHA regulations and standards.

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Table of Contents

Our operations are subject to a variety of federal and state environmental laws and regulations relating to the use, generation, storage, treatment, emission, labeling, and disposal of hazardous materials and wastes and noise pollution. We believe that we currently are in compliance with applicable environmental laws and regulations in all material aspects.
We have several registered trademarks associated with our motorhomes and towable products which include: Winnebago, Adventurer, Aspect, Brave, Cambria, Chalet, Destination, Ellipse, Era, Forza, Fuse, Itasca, Journey, Latitude, Meridian, Micro Minnie, Minnie, Minnie Winnie, Navion, Outlook, Reyo, Scorpion, Sightseer, Solei, Spirit, Spyder, Suncruiser, Sunova, Sunstar, Tour, Travato, Trend, Tribute, Via, View, Vista, Viva!, Voyage, and Winnebago Touring Coach. We believe that our trademarks and trade names are significant to our business and we have in the past and will in the future vigorously protect them against infringement by third parties. We are not dependent upon any patents or technology licenses of others for the conduct of our business.

Research and Development
Research and development expenditures are expensed as incurred. During Fiscal 2015, 2014 and 2013, we spent approximately $3.9 million, $4.3 million and $3.4 million, respectively on research and development activities.

Human Resources
At the end of Fiscal 2015, 2014 and 2013, we employed approximately 2,900, 2,850 and 2,680 persons, respectively. None of our employees are covered under a collective bargaining agreement. We believe our relations with our employees are good.

Executive Officers of the Registrant
Name
Office (Year First Elected an Officer)
Age
Robert J. Olson
Interim Chief Executive Officer (August 6 - September 24, 2015)
64
Lawrence A. Erickson
Chairman of the Board, Interim Chief Executive Officer (2015)
66
S. Scott Degnan
Vice President, Sales and Product Management (2012)
50
Steven R. Dummett
Vice President, Product Development (2015)
60
Scott C. Folkers
Vice President, General Counsel & Secretary (2012)
53
Daryl W. Krieger
Vice President, Manufacturing (2010)
52
Sarah N. Nielsen
Vice President, Chief Financial Officer (2005)
42
Bret A. Woodson
Vice President, Administration (2015)
45
Donald L. Heidemann
Treasurer and Director of Finance (2007)
43

Officers are elected annually by the Board of Directors. There are no family relationships between or among any of the Corporate Officers or Directors of the Company.
Mr. Olson was appointed Interim CEO in August 2015 and separated from service on September 24, 2015. Most recently, he served on our Board of Directors until December of 2014. He had been employed by Winnebago for over 40 years, retiring in 2012. During his employment, he served in various management positions within Winnebago including general manager of fabrication, vice president of manufacturing and senior vice president of operations. He served as CEO and President of the Company from 2007 to 2011, and Chairman of the Board from 2008 to 2012.
Mr. Erickson, was elected Chairman of the Board in August 2015 and was appointed Interim CEO on September 25, 2015. Mr Erickson, a retired business executive, is a former Senior Vice President and CFO of Rockwell Collins. He has served as a Lead Director of our Board since 2011.
Mr. Degnan joined Winnebago Industries in May 2012, as Vice President of Sales and Product Management. Prior to joining Winnebago Industries, Mr. Degnan served as vice president of sales for Riverside, California's MVP RV from 2010 to 2012. He also previously served in management and sales positions with Coachmen RV from 2008 to 2010, with National RV from 2007 to 2008, and Fleetwood Enterprises from 1987 to 2007.
Mr. Dummett has over 30 years of experience with Winnebago Industries. He was elected to the position of Vice President, Product Development in January, 2015. Prior to that time, he served as Design Engineering Manager from 2010 to 2015, and as Project Engineering Coordinator and Product Designer.
Mr. Folkers joined Winnebago Industries in August 2010, as assistant general counsel. He was elected to the position of Vice President, General Counsel and Secretary in June 2012. Prior to joining Winnebago Industries, Mr. Folkers was employed as in‑house counsel for John Morrell & Co., in Sioux Falls, SD from 1998 to 2010. Mr. Folkers is a member of the Iowa Bar Association.

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Table of Contents

Mr. Krieger has over 30 years of experience with Winnebago Industries. He has been Vice President, Manufacturing since May 2010. Prior to that time, he served as Director of Manufacturing from November 2009 to May 2010 and General Manager - Fabrication from February 2002 to November 2009.
Ms. Nielsen has ten years of experience with Winnebago Industries. She has been Vice President and Chief Financial Officer since November 2005. Ms. Nielsen joined the Company in August 2005 as Director of Special Projects and Training. Prior to joining Winnebago Industries, she was employed as a senior audit manager at Deloitte & Touche LLP, where she worked from 1995 to 2005. Ms. Nielsen is a Certified Public Accountant.
Mr. Woodson joined Winnebago Industries in January 2015 as Vice President, Administration. Prior to joining Winnebago Industries, Mr. Woodson had been employed by Corbion from 2007 to 2014 and Sara Lee from 1999 to 2007 and has over 22 years of business and human resources experience.
Mr. Heidemann has eight years of experience with Winnebago Industries. He was elected to the position of Treasurer in August 2007 and added Director of Finance responsibilities in August 2011.  Prior to joining Winnebago Industries, Mr. Heidemann served in various treasury positions for Select Comfort Corporation from 2003 to July 2007 and served in various treasury positions for Rent-A-Center Incorporated from 1998 to 2003.
Item 1A. Risk Factors
The following risk factors should be considered carefully in addition to the other information contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face, but represent the most significant risk factors that we believe may adversely affect the RV industry and our business, operations or financial position. The risks and uncertainties discussed in this report are not exclusive and other risk factors that we may consider immaterial or do not anticipate may emerge as significant risks and uncertainties.
Risks Related to Our Business
Competition
The market for RVs is very competitive. Competition in this industry is based upon price, design, value, quality and service. There can be no assurance that existing or new competitors will not develop products that are superior to our RVs or that achieve better consumer acceptance, thereby adversely affecting our market share, sales volume and profit margins. Some of our competitors are much larger than us, most notably in the towable RV market, which may provide them additional purchasing power. These competitive pressures may continue to have a material adverse effect on our results of operations.
Hiring Constraints
Our operations are dependent upon attracting and retaining skilled employees. Our motorhome operation is located in northern Iowa, a largely rural area. If we are unable to hire enough skilled employees to meet production demands or are unable to hire, motivate, retain and promote skilled personnel in all levels of our organization, we may be unable to develop and distribute products as effectively as might otherwise be achieved.
General Economic Conditions and Certain Other External Factors
Companies within the RV industry are subject to volatility in operating results due primarily to general economic conditions because the purchase of an RV is often viewed as a consumer luxury purchase. Specific factors affecting the RV industry include:
•
overall consumer confidence and the level of discretionary consumer spending;
•
employment trends;
•
the adverse impact of global tensions on consumer spending and travel-related activities; and
•
adverse impact on margins of increases in raw material costs which we are unable to pass on to customers without negatively affecting sales.

Dependence on Credit Availability and Interest Rates to Dealers and Retail Purchasers
Our business is affected by the availability and terms of the financing to dealers. Generally, RV dealers finance their purchases of inventory with financing provided by lending institutions. Three financial flooring institutions held 67% of our total financed dealer inventory dollars that were outstanding at August 29, 2015. In the event that any of these lending institutions limit or discontinue dealer financing, we could experience a material adverse effect on our results of operations. In April 2015, General Electric (“GE”), announced its intention to sell the majority of GE Capital, including GE Commercial Distribution Finance, a major provider of floorplan financing for RV dealers. The ultimate outcome and impact of a sale or divestiture of GE Capital by GE is currently unknown.
Our business is also affected by the availability and terms of financing to retail purchasers. Retail buyers purchasing a motorhome or towable may elect to finance their purchase through the dealership or a financial institution of their choice. Substantial increases in interest rates or decreases in the general availability of credit for our dealers or for the retail purchaser may have an adverse impact upon our business and results of operations.

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Cyclicality and Seasonality
The RV industry has been characterized by cycles of growth and contraction in consumer demand, reflecting prevailing economic and demographic conditions, which affect disposable income for leisure-time activities. Consequently, the results for any prior period may not be indicative of results for any future period.
Seasonal factors, over which we have no control, also have an effect on the demand for our products. Demand in the RV industry generally declines over the winter season, while sales are generally highest during the spring and summer months. Also, unusually severe weather conditions in some markets may impact demand. Our business also does well when the US housing market is strong and our business weakens when the US housing market weakens.
Potential Loss of a Large Dealer Organization
One of our dealer organizations accounted for 17.9% of our net revenue for Fiscal 2015, as they sold our products in 75 of their dealership locations across 28 US states. A second dealer organization accounted for 15.0% of our net revenue for Fiscal 2015, as they sold products in 11 of their dealership locations across 4 US states. The loss of either or both of these dealer organizations could have a significant adverse effect on our business. In addition, deterioration in the liquidity or creditworthiness of either or both of these dealers could negatively impact our sales and could trigger repurchase obligations under our repurchase agreements.
Potential Repurchase Liabilities
In accordance with customary practice in the RV industry, upon request we enter into formal repurchase agreements with lending institutions financing a dealer's purchase of our products. In these repurchase agreements we agree, in the event of a default by an independent dealer in its obligation to a lender and repossession of the unit(s) by the lending institution, to repurchase units at declining prices over the term of the agreements, which can last up to 18 months. The difference between the gross repurchase price and the price at which the repurchased product can then be resold, which is typically at a discount to the gross repurchase price, represents a potential expense to us. In certain instances, we also repurchase inventory from our dealers due to state law or regulatory requirements that govern voluntary or involuntary terminations. We also have agreed to repurchase certain units that we sell to a rental company. If we are obligated to repurchase a substantially larger number of RVs in the future, this would increase our costs and could have a material adverse effect on our results of operations, financial condition, and cash flows.
Fuel Availability and Price Volatility
Gasoline or diesel fuel is required for the operation of motorized RVs. There can be no assurance that the supply of these petroleum products will continue uninterrupted or that the price or tax on these petroleum products will not significantly increase in the future. RVs, however, are not generally purchased for fuel efficiency. Fuel shortages and substantial increases in fuel prices have had a material adverse effect on the RV industry as a whole in the past and could have a material adverse effect on us in the future.
Dependence on Suppliers
Most of our RV components are readily available from numerous sources. However, a few of our components are produced by a small group of suppliers. In the case of motorhome chassis, Ford Motor Company, Freightliner Custom Chassis Corporation, Mercedes-Benz (USA and Canada) and FCA (US and Canada) are our major suppliers. Our relationship with our chassis suppliers is similar to our other supplier relationships in that no special contractual commitments are engaged in by either party. This means that we do not have minimum purchase requirements and our chassis suppliers do not have minimum supply requirements. Our chassis suppliers also supply to our competitors. Historically, chassis suppliers resort to an industry-wide allocation system during periods when supply is restricted. These allocations have been based on the volume of chassis previously purchased. Sales of motorhomes rely on chassis supply and are affected by shortages from time to time. Decisions by our suppliers to decrease production, production delays, or work stoppages by the employees of such suppliers, or price increases could have a material adverse effect on our ability to produce motorhomes and ultimately, on our results of operations, financial condition and cash flows.
Warranty Claims
We receive warranty claims from our dealers in the ordinary course of our business. Although we maintain reserves for such claims, which to date have been adequate, there can be no assurance that warranty expense levels will remain at current levels or that such reserves will continue to be adequate. A significant increase in warranty claims exceeding our current warranty expense levels could have a material adverse effect on our results of operations, financial condition and cash flows.
In addition to the costs associated with the contractual warranty coverage provided on our products, we also occasionally incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions. Although we estimate and reserve for the cost of these service actions, there can be no assurance that expense levels will remain at current levels or such reserves will continue to be adequate.


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Table of Contents

Protection of our Brand
We believe that one of the strengths of our business is our brand which is widely known around the world. We vigorously defend our brand and our other intellectual property rights against third parties on a global basis. We have, from time to time, had to bring claims against third parties to protect or prevent unauthorized use of our brand. If we are unable to protect and defend our brand or other intellectual property, it could have a material adverse affect on our results or financial condition.
Product Liability
We are subject, in the ordinary course of business, to litigation including a variety of warranty, "Lemon Law" and product liability claims typical in the RV industry. Although we have an insurance policy with a $35 million limit covering product liability, we are self-insured for the first $2.5 million of product liability claims on a per occurrence basis, with a $6.0 million aggregate. We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us, which may have a material adverse effect on our results of operations and financial condition. Any increase in the frequency and size of these claims, as compared to our experience in prior years, may cause the premium that we are required to pay for insurance to rise significantly. Product liability claims may also cause us to pay punitive damages, not all of which are covered by our insurance. In addition, if product liability claims rise to a level of frequency or size that are significantly higher than similar claims made against our competitors, our reputation and business may be harmed.
Information Systems and Web Applications
We rely on our information systems and web applications to support our business operations, including but not limited to procurement, supply chain, manufacturing, distribution, warranty administration, invoicing and collection of payments. We use information systems to report and audit our operational results. Additionally, we rely upon information systems in our sales, marketing, human resources and communication efforts. Due to our reliance on our information systems, our business processes may be negatively impacted in the event of substantial disruption of service. Further, misuse, leakage or falsification of information could result in a violation of privacy laws and damage our reputation which could, in turn, have a negative impact on our results.
Data Security
We have security systems in place with the intent of maintaining the physical security of our facilities and protecting our customers', clients' and suppliers' confidential information and information related to identifiable individuals against unauthorized access through our information systems or by other electronic transmission or through the misdirection, theft or loss of physical media. These include, for example, the appropriate encryption of information. Despite such efforts, we are subject to breach of security systems which may result in unauthorized access to our facilities or the information we are trying to protect. Because the technologies used to obtain unauthorized access are constantly changing and becoming increasingly more sophisticated and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement sufficient preventative measures. If unauthorized parties gain physical access to one of our facilities or electronic access to our information systems or such information is misdirected, lost or stolen during transmission or transport, any theft or misuse of such information could result in, among other things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers and clients that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for damages related to the theft or misuse of such information, any of which could have a material adverse effect on our business.
Government Regulation
We are subject to numerous federal, state and local regulations. Some regulations govern the manufacture and sale of our products, including the provisions of the MVA, and the safety standards for RVs and components which have been established under the Motor Vehicle Act by the Department of Transportation. The MVA authorizes the National Highway Traffic Safety Administration to require a manufacturer to recall and repair vehicles which contain certain hazards or defects. Any major recalls of our vehicles, voluntary or involuntary, could have a material adverse effect on our results of operations, financial condition and cash flows. While we believe we are substantially in compliance with the foregoing laws and regulations as they currently exist, amendments to any of these regulations or the implementation of new regulations could significantly increase the cost of manufacturing, purchasing, operating or selling our products and could have a material adverse effect on our results of operations, financial condition, and cash flows. In addition, our failure to comply with present or future regulations could result in fines being imposed on us, potential civil and criminal liability, suspension of sales or production or cessation of operations.
We are also subject to federal and numerous state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, including so-called "Lemon Laws." Federal and state laws and regulations also impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles, including motorhomes that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions.
Failure to comply with NYSE and SEC laws or regulations could have an adverse impact on our business. Additionally, amendments to these regulations and the implementation of new regulations could increase the cost of manufacturing, purchasing, operating or selling our products and therefore could have an adverse impact on our business.

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Table of Contents

The SEC adopted rules pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act setting forth new disclosure requirements concerning the use or potential use of certain minerals, deemed conflict minerals (tantalum, tin, gold and tungsten), that are mined from the Democratic Republic of Congo and adjoining countries. These requirements necessitate due diligence efforts on our part to assess whether such minerals are used in our products in order to make the relevant required disclosures that began in May 2014. We incurred costs and diverted internal resource to comply with these new disclosure requirements, including for diligence to determine the sources of those minerals that may be used or necessary to the production of our products. Compliance costs may increase in future periods. We may face reputational challenges that could impact future sales if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products.
Finally, federal and state authorities also have various environmental control standards relating to air, water, noise pollution and hazardous waste generation and disposal which affect us and our operations. Failure by us to comply with present or future laws and regulations could result in fines being imposed on us, potential civil and criminal liability, suspension of production or operations, alterations to the manufacturing process, or costly cleanup or capital expenditures, any or all of which could have a material adverse effect on our results of operations.

Risks Related to Our Company

Anti-takeover Effect
Provisions of our articles of incorporation, by-laws, the Iowa Business Corporation Act and provisions in our credit facilities and certain of our compensation programs that we may enter into from time to time could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. The combination of these provisions effectively inhibits a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.

Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
Our principal manufacturing, maintenance and service operations are conducted in multi-building complexes owned or leased by us. The following sets forth our material facilities as of August 29, 2015:
Location
Facility Type/Use
# of
Buildings
Owned or
Leased
Square
Footage
Forest City, Iowa
Manufacturing, maintenance, service and office
32

Owned
1,546,000

Forest City, Iowa
Warehouse
3

Owned
459,000

Charles City, Iowa
Manufacturing
2

Owned
161,000

Waverly, Iowa
Manufacturing
1

Owned
33,000

Middlebury, Indiana
Manufacturing and office
4

Owned
277,000

Lake Mills, Iowa
Manufacturing
1

Leased
96,000

 
 
43

 
2,572,000

The facilities that we own in Forest City and Charles City are located on a total of approximately 310 acres of land. Most of our buildings are of steel or steel and concrete construction and are protected from fire with high‑pressure sprinkler systems, dust collector systems, automatic fire doors and alarm systems. We believe that our facilities and equipment are well maintained, in excellent condition and suitable for the purposes for which they are intended.
In May 2015, we purchased a building and approximately 9 acres of land in Waverly, Iowa. This plant is being utilized for wire harness fabrication.
In April 2015, we purchased facilities consisting of four buildings and approximately 30 acres of land located in Middlebury, Indiana. Prior to purchase we had leased this facility. The buildings are being utilized to assemble towables.
In November 2013, we entered into a five-year lease with the city of Lake Mills, IA for a manufacturing plant with two options to renew for five years each. This plant is being utilized to assemble Class B product.
Under terms of our credit facility, as further described in Note 7, we have encumbered substantially all of our real property for the benefit of the lender under such facility.

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Table of Contents

Item 3. Legal Proceedings
We are involved in various legal proceedings which are ordinary and routine litigation incidental to our business, some of which are covered in whole or in part by insurance. We believe, while the final resolution of any such litigation may have an impact on our results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on our financial position, results of operations, or liquidity.

Item 4. Mine Safety Disclosure

Not Applicable.

PART II

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the New York and Chicago Stock Exchanges with the ticker symbol of WGO.
Below are the New York Stock Exchange high, low and closing prices of Winnebago Industries, Inc. common stock for each quarter of Fiscal 2015 and Fiscal 2014:
Fiscal 2015
High
Low
Close
 
Fiscal 2014
High
Low
Close
First Quarter
$
25.79

$
20.25

$
25.18

 
First Quarter
$
31.80

$
21.26

$
30.96

Second Quarter
26.44

18.82

23.21

 
Second Quarter
32.41

23.18

26.66

Third Quarter
24.26

20.00

21.73

 
Third Quarter
28.85

22.68

24.76

Fourth Quarter
24.73

18.98

20.42

 
Fourth Quarter
26.69

22.80

24.73

 
Holders
Shareholders of record as of October 13, 2015: 2,989
Dividends Paid Per Share
Date Paid
 
Amount
November 26, 2014
 
$
0.09

February 4, 2015
 
0.09

May 6, 2015
 
0.09

August 5, 2015
 
0.09

Total
 
$
0.36

On October 14, 2015, our Board of Directors declared a cash dividend of $0.10 per outstanding share of common stock. The Board currently intends to continue to pay quarterly cash dividends payments in the future; however, declaration of future dividends, if any, will be based on several factors including our financial performance, outlook and liquidity.
Our credit facility, as further described in Note 7, contains covenants that limit our ability to pay certain cash dividends without impacting financial ratio covenants.   
Issuer Purchases of Equity Securities
Our credit facility, as further described in Note 7, contains covenants that limits our ability, among other things, except for limited purchases of our common stock from employees, to make distributions or payments with respect to or purchases of our common stock without consent of the lenders.
On December 19, 2007, the Board of Directors authorized the repurchase of outstanding shares of our common stock, depending on market conditions, for an aggregate consideration of up to $60 million. There is no time restriction on this authorization. During Fiscal 2015, approximately 300,000 shares were repurchased under the authorization, at an aggregate cost of approximately $6.5 million, or $21.75 per share. Approximately 90,000 of these shares were repurchased from employees who vested in Winnebago Industries shares during the fiscal year and elected to pay their payroll tax via delivery of common stock as opposed to cash. As of August 29, 2015, there was approximately $7.1 million remaining under this authorization.

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Table of Contents

This table provides information with respect to purchases by us of shares of our common stock during each fiscal month of the fourth quarter of Fiscal 2015:
Period
Total Number
of Shares
Purchased
Average Price
Paid per Share
Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value
of Shares That May Yet Be
Purchased Under the
Plans or Programs
05/31/15 - 07/04/15
—

$
—

—

 
 
$
7,417,000

 
07/05/15 - 08/01/15
—

$
—

—

 
 
$
7,417,000

 
08/02/15 - 08/29/15
16,815

$
21.05

16,815

 
 
$
7,063,000

 
Total
16,815

$
21.05

16,815

 
 
$
7,063,000

 
Equity Compensation Plan Information
The following table provides information as of August 29, 2015 with respect to shares of our common stock that may be issued under our existing equity compensation plans:
 
(a)
(b)
(c)

Plan Category
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
 Warrants and Rights
Weighted Average
Exercise Price of
Outstanding Options,
 Warrants and Rights
Number of Securities
 Remaining Available for
Future Issuance Under Equity
 Compensation Plans
 (Excluding Securities
 Reflected in (a))
Equity compensation plans
  approved by shareholders - 2004 Plan (1)
167,394

 
$
28.30

—

 
Equity compensation plans
  approved by shareholders - 2004 Plan (2)
95,020

 
$
20.04

—

 
Equity compensation plans
  approved by shareholders - 2014 Plan
68,400

(3) 
$
21.93

3,185,937

(4) 
Equity compensation plans not
  approved by shareholders (5)
96,611

(6) 
$
13.81

—

(7) 
Total
427,425

 
$
22.17

3,185,937

 
(1) 
This number represents stock options granted under the 2004 Incentive Compensation Plan, as amended ("2004 Plan") which will continue to be exercisable in accordance with their original terms and conditions. No new grants may be made under the 2004 Plan.
(2) 
This number represents unvested share awards granted under the 2004 Plan. No new grants may be made under the 2004 Plan.
(3) This number represents unvested stock awards granted under the 2014 Omnibus Equity, Performance Award, and Incentive Compensation Plan, as amended ("2014 Plan"). The 2014 Plan replaced the 2004 Plan effective January 1, 2014.
(4) 
This number represents stock options available for grant under the 2014 Plan as of August 29, 2015.
(5) 
Our sole equity compensation plan not previously submitted to our shareholders for approval is the Directors' Deferred Compensation Plan, as amended ("Directors' Plan"). The Board of Directors may terminate the Directors' Plan at any time. If not terminated earlier, the Directors' Plan will automatically terminate on June 30, 2023. For a description of the key provisions of the Directors' Plan, see the information in our Proxy Statement for the Annual Meeting of Shareholders scheduled to be held December 15, 2015 under the caption "Director Compensation," which information is incorporated by reference herein.
(6) 
Represents shares of common stock issued to a trust which underlie stock units, payable on a one-for-one basis, credited to stock unit accounts as of August 29, 2015 under the Directors' Plan.
(7) 
The table does not reflect a specific number of stock units which may be distributed pursuant to the Directors' Plan. The Directors' Plan does not limit the number of stock units issuable thereunder. The number of stock units to be distributed pursuant to the Directors' Plan will be based on the amount of the director's compensation deferred and the per share price of our common stock at the time of deferral.


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Table of Contents

Performance Graph
The following graph compares our five-year cumulative total shareholder return (including reinvestment of dividends) with the cumulative total return on the Standard & Poor's 500 Index and a peer group. The peer group companies consisting of Thor Industries, Inc., Polaris Industries, Inc. and Brunswick Corporation were selected by us as they also manufacture recreation products. It is assumed in the graph that $100 was invested in our common stock, in the Standard & Poor's 500 Index and in the stocks of the peer group companies on August 28, 2010 and that all dividends received within a quarter were reinvested in that quarter. In accordance with the guidelines of the SEC, the shareholder return for each entity in the peer group index has been weighted on the basis of market capitalization as of each annual measurement date set forth in the graph.
 
Base Period
 
Company/Index
8/28/10
8/27/11
 
8/25/12
 
8/31/13
 
8/30/14
 
8/29/15
Winnebago Industries, Inc.
100.00

78.90

 
125.41

 
253.68

 
281.70

 
236.56

S&P 500 Index
100.00

112.74

 
138.07

 
163.44

 
204.71

 
207.40

Peer Group
100.00

137.27

 
208.57

 
321.74

 
404.75

 
403.90


Item 6. Selected Financial Data
 
Fiscal Years Ended
(In thousands, except EPS)
8/29/15
 
8/30/14
 
8/31/13
 
8/25/12 (1)
 
8/27/11
Income statement data:
 
 
 
 
 
 
 
 
 
Net revenues
$
976,505

 
$
945,163

 
$
803,165

 
$
581,679

 
$
496,418

Net income
41,210

 
45,053

 
31,953

 
44,972

 
11,843

 
 
 
 
 
 
 
 
 
 
Per share data:
 
 
 
 
 
 
 
 
 
Net income - basic
1.53

 
1.64

 
1.14

 
1.54

 
0.41

Net income - diluted
1.52

 
1.64

 
1.13

 
1.54

 
0.41

Dividends declared and paid per common share
0.36

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
Balance sheet data:
 
 
 
 
 
 
 
 
 
Total assets
362,174

 
358,302

 
309,145

 
286,072

 
239,927

(1) In Fiscal 2012 we recorded a non-cash tax benefit of $37.7 million through the reduction of our Fiscal 2009 deferred tax asset valuation allowance.
 
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in eight sections:
•
•
•
•
•
•
•
•

Our MD&A should be read in conjunction with the Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Executive Overview
Winnebago Industries, Inc. is a leading US manufacturer of RVs with a proud history of manufacturing RV products for more than 50 years. We produce all of our motorhomes in vertically integrated manufacturing facilities in Iowa and we produce all travel trailer and fifth wheel trailers in Indiana. We distribute our products primarily through independent dealers throughout the US and Canada, who then retail the products to the end consumer.

Our retail unit market share, as reported by Stat Surveys based on state records, is illustrated below. Note that this data is subject to adjustment and is continuously updated.
 
 
Rolling 12 Months Through July
 
Calendar Year
US and Canada
 
2015
2014
 
2014
2013
2012
Motorized A, B, C
 
20.8
%
20.7
%
 
20.7
%
18.6
%
19.8
%
 
 
 
 
 
 
 
 
Travel trailer and fifth wheels
 
0.9
%
0.9
%
 
0.8
%
1.0
%
0.9
%

Presented in fiscal quarters, certain key metrics are shown below:
 
 
Class A, B & C Motorhomes
 
Travel Trailers & Fifth Wheels
 
 
 
 
As of Quarter End
 
 
 
As of Quarter End
 
 
Wholesale
Retail
Dealer
Order
 
Wholesale
Retail
Dealer
Order
(In units)
 
Deliveries
Registrations
Inventory
Backlog
 
Deliveries
Registrations
Inventory
Backlog
Q1
 
2,005

1,524

3,135

3,534

 
484

504

1,591

151

Q2
 
2,055

1,283

3,907

2,900

 
575

394

1,772

206

Q3 (1)
 
2,331

2,783

3,798

2,357

 
727

724

1,775

303

Q4
 
2,364

2,183

3,979

1,899

 
723

777

1,721

163

Fiscal 2014
 
8,755

7,773

 
 
 
2,509

2,399

 
 
 
 
 
 
 
 
 
 
 
 
 
Q1
 
2,031

1,818

4,192

2,122

 
546

585

1,682

154

Q2
 
2,104

1,518

4,778

2,275

 
605

410

1,877

130

Q3
 
2,596

2,873

4,501

2,279

 
742

796

1,823

179

Q4
 
2,366

2,795

4,072

1,754

 
777

937

1,663

248

Fiscal 2015
 
9,097

9,004

 
 
 
2,670

2,728

 
 
 
 
 
 
 
 
 
 
 
 
 
Unit change
 
342

1,231

93

 
 
161

329

(58
)
 
Percentage change
 
3.9
%
15.8
%
2.3
%
 
 
6.4
%
13.7
%
(3.4
)%
 
(1) 
An additional 343 units were delivered but not included in wholesale deliveries as presented in the table above as the units were subject to repurchase option. These units were included as retail registrations, not in dealer inventory, as the units were immediately placed into rental service once delivered. See Note 4 to the financial statements.


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Table of Contents

Highlights of Fiscal 2015:
Consolidated revenues, gross profit, and operating income were comparable for Fiscal 2015 as compared to Fiscal 2014. Quarterly results for the past two fiscal years are illustrated as follows:
(In thousands)
Revenues
 
Gross Profit
 
Gross Margin
 
Operating
Income
 
Operating
Margin
2015
2014
 
2015
2014
 
2015
2014
 
2015
2014
 
2015
2014
Q1
$
224,403

222,670

 
$
24,386

$
25,962

 
10.9
%
11.7
%
 
$
14,442

$
16,006

 
6.4
%
7.2
%
Q2
234,543

228,811

 
24,258

22,845

 
10.3
%
10.0
%
 
11,948

14,036

 
5.1
%
6.1
%
Q3
266,510

247,747

 
28,183

26,481

 
10.6
%
10.7
%
 
16,118

15,589

 
6.0
%
6.3
%
Q4
251,049

245,935

 
28,053

28,709

 
11.2
%
11.7
%
 
16,911

18,278

 
6.7
%
7.4
%
Total
$
976,505

$
945,163

 
$
104,880

$
103,997

 
10.7
%
11.0
%
 
$
59,419

$
63,909

 
6.1
%
6.8
%
  
Operational and financial performance:
•
Our motorized wholesale deliveries increased by approximately 4% in Fiscal 2015 as compared to Fiscal 2014. In recent years we have sold more units to dealers than our dealer network could sell to the public as dealers restocked their inventories to meet the growing retail demand. Dealer inventory remained relatively flat when comparing Fiscal 2015 to Fiscal 2014 as we believe we have now reached equilibrium where dealers will accept one new wholesale for each unit retailed.
•
Our Towables operations generated operating income of $2.6 million in Fiscal 2015 compared to operating income of $1.3 million in Fiscal 2014. Towable net revenue experienced growth of approximately 23%, this was a significant driver in the doubling of the operating income. Net revenue growth was enhanced in part by the introduction of our Toy Hauler products along with the increase in our dealer network. The growth in operating income was aided by the operating leverage within the business model and a reduction in our raw materials.
•
The continued strong financial performance of our business has allowed us to make substantial investments in Fiscal 2015 related to two strategic initiatives to support our operations and strengthen our foundation for success for the future. These initiatives are discussed in more detail in the Company Outlook section.
Industry Outlook
Key statistics for the motorhome industry are as follows:
 
US and Canada Industry Class A, B & C Motorhomes
 
Wholesale Shipments(1)
 
Retail Registrations(2)
 
Calendar Year
 
Calendar Year
(In units)
2014

 
2013

Increase
Change
 
2014

 
2013

Increase
Change
Q1
11,125

 
8,500

2,625

30.9
 %
 
8,076

 
7,147

929

13.0
 %
Q2
12,203

 
10,972

1,231

11.2
 %
 
12,511

 
10,909

1,602

14.7
 %
Q3
10,704

 
9,469

1,235

13.0
 %
 
10,740

 
9,125

1,615

17.7
 %
Q4
9,919

 
9,391

528

5.6
 %
 
7,605

 
6,281

1,324

21.1
 %
Total
43,951

 
38,332

5,619

14.7
 %
 
38,932

 
33,462

5,470

16.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
(In units)
2015

 
2014

Increase
(Decrease)
Change
 
2015

 
2014

Increase
(Decrease)
Change
Q1
11,963

1

11,125

838

7.5
 %
 
9,128

 
8,076

1,052

13.0
 %
Q2
12,751

 
12,203

548

4.5
 %
 
14,011

 
12,511

1,500

12.0
 %
July
3,172

 
3,201

(29
)
(.9
)%
 
4,194

 
4,300

(106
)
(2.5
)%
August
3,904

 
3,964

(60
)
(1.5
)%
 
 
(4
)
4,149





September
3,764

(3)

3,539

225

6.4
 %
 
 
(4
)
4,062

 
 
Q3
10,840

(3)

10,704

136

1.3
 %
 
 
(4
)
10,740

 
 
Q4
10,400

(3)

9,919

481

4.8
 %
 
 
(4
)
7,605

 
 
Total
45,954

(3) 

43,951

2,003

4.6
 %
 


 
38,932




 
 
 
 
 
 
 
 
 
 
 
 
July YTD growth
27,886

 
26,529

1,357

5.1
 %
 
27,333

 
24,887

2,446

9.8
 %
(1) 
Class A, B and C wholesale shipments as reported by RVIA.
(2) 
Class A, B and C retail registrations as reported by Stat Surveys for the US and Canada combined.
(3) 
Monthly and quarterly 2015 Class A, B and C wholesale shipments are based upon the forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the RV RoadSigns Fall 2015 Industry Forecast Issue. The revised RVIA annual 2015 wholesale shipment forecast is 47,000 and the annual forecast for 2016 is 48,600, an increase of 3.4%.
(4) 
Stat Surveys has not issued a projection for 2015 retail demand for this period.


14
Table of Contents

Key statistics for the towable industry are as follows:
 
US and Canada Travel Trailer & Fifth Wheel Industry
 
Wholesale Shipments(1)
 
Retail Registrations(2)
 
Calendar Year
 
Calendar Year
(In units)
2014

 
2013

Increase
Change
 
2014

 
2013

Increase
Change
Q1
75,458

 
66,745

8,713

13.1
 %
 
46,140

 
42,987

3,153

7.3
%
Q2
85,648

 
79,935

5,713

7.1
 %
 
100,168

 
94,717

5,451

5.8
%
Q3
65,543

 
61,251

4,292

7.0
 %
 
87,872

 
79,805

8,067

10.1
%
Q4
72,289

 
60,104

12,185

20.3
 %
 
42,838

 
37,054

5,784

15.6
%
Total
298,938

 
268,035

30,903

11.5
 %
 
277,018

 
254,563

22,455

8.8
%
 
 
 
 
 
 
 
 
 
 
 
 
(In units)
2015

 
2014

Increase
(Decrease)
Change
 
2015

 
2014

Increase
Change
Q1
81,759

 
75,458

6,301

8.4
 %
 
54,157

 
46,140

8,017

17.4
%
Q2
88,988

 
85,648

3,340

3.9
 %
 
110,725

 
100,168

10,557

10.5
%
   July
22,937

 
23,691

(754
)
(3.2
)%
 
35,948

 
29,707

6,241

21.0
%
   August
22,584

 
21,370

1,214

5.7
 %
 
 
(4
)
35,827




   September
21,417

(3
)
20,482

935

4.6
 %
 
 
(4
)
34,634

 
 
Q3
66,938

(3
)
65,543

1,395

2.1
 %
 
 
(4
)
87,872

 
 
Q4
69,800

(3
)
72,289

(2,489
)
(3.4
)%
 
 
(4
)
42,838

`

 
Total
307,485

(3
)
298,938

8,547

2.9
 %
 


 
277,018




 
 
 
 
 
 
 
 
 
 
 
 
July YTD growth
193,684
 
184,797

8,887

4.8
 %
 
200,830

 
176,015

24,815

14.1
%
(1) 
Towable wholesale shipments as reported by RVIA.
(2) 
Towable retail registrations as reported by Stat Surveys for the US and Canada combined.
(3) 
Monthly and quarterly 2015 towable wholesale shipments are based upon the forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the RV RoadSigns Fall 2015 Industry Forecast Issue. The revised annual 2015 wholesale shipment forecast is 314,200 and the annual forecast for 2016 is 322,300, an increase of 2.6%.
(4) 
Stat Surveys has not issued a projection for 2015 retail demand for this period.

Company Outlook
Based on our profitable operating results in recent years, we believe that we have demonstrated our ability to maintain our liquidity, cover operations costs, recover fixed assets, and maintain physical capacity at present levels. Now that we have entered into the towable market, we are attempting to grow revenues and earnings in a market significantly larger than the motorized market.

Our motorized production facilities are located in largely rural areas of northern Iowa. In addition, the unemployment rate in these areas is currently low. These factors limit our ability to increase motorized production volumes at a more rapid pace even if motorized demand justified increased production. To the extent that we have been able to increase the production rate, we have also incurred incremental operating expenses associated with overtime and workers compensation expense. To overcome these labor shortages we recently began expanding within the state of Iowa. In Fiscal 2014 we leased an additional manufacturing facility in Lake Mills which is now in production. In the third quarter of Fiscal 2015 we purchased a separate facility in Waverly, which will be ready for production later this calendar year. These expansions are intended to facilitate the increased production rate and to reach additional labor markets.

In addition to finding alternative locations, we are re-evaluating the manner in which we deploy labor in our Forest City facility. We are in the process of exiting our bus and aluminum extrusion operation. Both of these operations provided very low margins while consuming production labor. We have decided it is in our best interest to redeploy these labor hours to the higher margin motorized operations. We expect to have both bus and aluminum extrusion operations exited by the end of the second fiscal quarter of 2016.

Fiscal 2016 is a year in which we expect to continue investing and rebuilding for Winnebago’s future. We anticipate flat to modest motorized deliveries growth, which is in line with RVIA’s projection of 3% growth for the industry. We’ve taken steps to improve motorized labor efficiency and expect to see modest improvement in Fiscal 2016. In Towables, we anticipate building on our Fiscal 2015 results, with continued penetration of our new products and further expansion of our distribution base. We believe we can again achieve growth in excess of the overall towables market projections for Fiscal 2016.


15
Table of Contents

Our unit order backlog was as follows:
 
As Of
(In units)
August 29, 2015
 
August 30, 2014
 
Increase
(Decrease)

%
Change
Class A gas
400

22.8
%
 
338

17.8
%
 
62

18.3
 %
Class A diesel
143

8.2
%
 
302

15.9
%
 
(159
)
(52.6
)%
Total Class A
543

31.0
%
 
640

33.7
%
 
(97
)
(15.2
)%
Class B
291

16.6
%
 
323

17.0
%
 
(32
)
(9.9
)%
Class C
920

52.5
%
 
936

49.3
%
 
(16
)
(1.7
)%
Total motorhome backlog(1)
1,754

100.0
%
 
1,899

100.0
%
 
(145
)
(7.6
)%
 
 
 
 
 
 
 
 
 
Travel trailer
236

95.2
%
 
134

82.2
%
 
102

76.1
 %
Fifth wheel
12

4.8
%
 
29

17.8
%
 
(17
)
(58.6
)%
Total towable backlog(1)
248

100.0
%
 
163

100.0
%
 
85

52.1
 %
 
 
 
 
 
 
 
 
 
Approximate backlog revenue in thousands
 
 
 
 
 
 
 
Motorhome
$
156,353

 
 
$
172,575

 
 
$
(16,222
)
(9.4
)%
Towable
$
6,171

 
 
$
3,750

 
 
$
2,421

64.6
 %
(1) 
We include in our backlog all accepted purchase orders from dealers to be shipped within the next six months. Orders in backlog can be canceled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

Our unit dealer inventory was as follows:
 
August 29,
2015
August 30,
2014
 
Increase
(Decrease)
%
Change
Motorhomes
4,072

3,979

 
93

2.3
 %
Towables
1,663

1,721

 
(58
)
(3.4
)%

We believe that the level of our dealer inventory at the end of Fiscal 2015 is reasonable given the improved retail demand and current sales order backlog of our product. A key metric used to evaluate dealer inventory levels is the retail turn rate (12 month retail volume/current deliver inventory). At the end of Fiscal 2015 the retail turn rate was over 2.2 turns which we feel reflects the alignment between retail demand and our dealers' inventory.

At the December 2014 Board of Directors meeting, two strategic initiatives were approved and, as a result, commenced in the second quarter of Fiscal 2015. Both of these projects represent significant investments that we believe will contribute to our future success.

•
The first strategic initiative relates to the execution of an ERP system implementation which will replace our in-house developed financial and operational systems. The new ERP platform will provide better support for our changing business needs and plans for future growth. In addition to supply chain optimization opportunities and lower overall operating costs, the new system will provide more recent and relevant data which will allow us to more quickly react to production and other business changes and in some cases, allow us to be proactive in our response to market trends and opportunities. Our current cost estimate for this project is $12 - $16 million to be completed over a three-year time frame which includes software, external implementation as assistance and increased internal staffing directly related to this initiative. We anticipate that approximately 40% of the cost will be immediately expensed over the life of the project and 60% will be capitalized. As components of the ERP are placed in service, we will amortize over a 10-year life. The following table illustrates the project costs in Fiscal 2015:
 
 
 
Fiscal 2015
 
 
(In thousands)
 
Q2
Q3
Q4
 YTD
 
 
Capitalized
 
$
537

$
884

$
1,870

$
3,291

 
 
Expensed
 
652

611

1,265

2,528

(1)
 
Total
 
$
1,189

$
1,495

$
3,135

$
5,819

 
(1) Of the $2.5 million expensed in Fiscal 2015, $2.2 million was incremental and related to external implementation assistance.
 
We estimate that an additional $6 - $10 million in project costs will be incurred in Fiscal 2016 and Fiscal 2017, most of which will be incurred in the next 12 months.

•
The second initiative is a strategic sourcing project with the objective of obtaining long-term material cost savings through standardizing our purchasing processes, optimizing our supplier relationships and improving our current sourcing methodologies. We engaged external support with deep domain expertise to help us launch the project and incurred $1.6 million in general and administrative expenses for this assistance in Fiscal 2015, of which $370,000 was incurred in the fourth

16
Table of Contents

quarter. We expect to incur approximately $200,000 of incremental general and administrative expense in Fiscal 2016 related to this project, which is less than what was originally planned, as project management will be fully transitioned to internal resources in the first quarter. When all commodities have been through the strategic sourcing process (expected by June 2016), we anticipate this project will provide gross margin expansion of 30 to 50 basis points.

Impact of Inflation
Materials cost is the primary component in the cost of our products. Historically, the impact of inflation on our operations has not been significantly detrimental, as we have historically been able to adjust our prices to reflect the inflationary impact on the cost of manufacturing our products. While we have historically been able to pass on these increased costs, in the event we are unable to continue to do so due to market conditions, future increases in manufacturing costs could have a material adverse effect on our results of operations.

Results of Operations
Fiscal 2015 Compared to Fiscal 2014
The following is an analysis of changes in key items included in the statements of operations for the fiscal year ended August 29, 2015 compared to the fiscal year ended August 30, 2014:
 
Year Ended
(In thousands, except percent and per share data)
August 29,
2015
% of
Revenues(1)
August 30,
2014
% of
Revenues(1)
Increase
(Decrease)
%
Change
Net revenues
$
976,505

100.0
%
$
945,163

100.0
 %
$
31,342

3.3
 %
Cost of goods sold
871,625

89.3
%
841,166

89.0
 %
30,459

3.6
 %
Gross profit
104,880

10.7
%
103,997

11.0
 %
883

0.8
 %
 
 
 
 
 
 
 
Selling
19,161

2.0
%
18,293

1.9
 %
868

4.7
 %
General and administrative
25,838

2.6
%
22,424

2.4
 %
3,414

15.2
 %
Impairment (gain on sale) on fixed assets
462

—
%
(629
)
(0.1
)%
1,091

NMF

Operating expenses
45,461

4.7
%
40,088

4.2
 %
5,373

13.4
 %
 
 
 
 
 
 
 
Operating income
59,419

6.1
%
63,909

6.8
 %
(4,490
)
(7.0
)%
Non-operating income
115

—
%
768

0.1
 %
(653
)
(85.0
)%
Income before income taxes
59,534

6.1
%
64,677

6.8
 %
(5,143
)
(8.0
)%
Provision for taxes
18,324

1.9
%
19,624

2.1
 %
(1,300
)
(6.6
)%
Net income
$
41,210

4.2
%
$
45,053

4.8
 %
$
(3,843
)
(8.5
)%
Diluted income per share
$
1.52

 
$
1.64

 
$
(0.12
)
(7.3
)%
Diluted average shares outstanding
27,051

 
27,545

 




(1) Percentages may not add due to rounding differences.

17
Table of Contents


Motorhome unit deliveries and ASP, net of discounts, consisted of the following:
 
Year Ended
 
August 29,
2015
Product
Mix % (1)
August 30,
2015 (2)
Product
Mix % (1)
Increase
(Decrease)
%
Change
Unit deliveries:
 
 
 
 
 
 
Class A gas
2,337

25.7
%
3,056

34.9
%
(719
)
(23.5
)%
Class A diesel
1,105

12.1
%
1,410

16.1
%
(305
)
(21.6
)%
Total Class A
3,442

37.8
%
4,466

51.0
%
(1,024
)
(22.9
)%
Class B
991

10.9
%
751

8.6
%
240

32.0
 %
Class C
4,664

51.3
%
3,538

40.4
%
1,126

31.8
 %
Total motorhome unit deliveries
9,097

100.0
%
8,755

100.0
%
342

3.9
 %
 
 
 
 
 
 
 
ASP:
 
 
 
 
 
 
Class A gas
$
96,949

 
$
94,630

 
$
2,319

2.5
 %
Class A diesel
196,073

 
180,218

 
15,855

8.8
 %
Total Class A
128,771

 
121,652

 
7,119

5.9
 %
Class B
75,575

 
71,417

 
4,158

5.8
 %
Class C
73,895

 
69,920

 
3,975

5.7
 %
Total motorhome ASP
$
94,841

 
$
96,437

 
$
(1,596
)
(1.7
)%
(1) Percentages and dollars may not add due to rounding differences.
(2) An additional 343 motorhomes were delivered in Fiscal 2014 but not included in wholesale deliveries as presented in the table above as the units were subject to repurchase option. See Note 4.

Towables unit deliveries and ASP, net of discounts, consisted of the following:
 
Year Ended
 
August 29,
2015
Product
Mix % (1)
August 30,
2014
Product
Mix % (1)
Increase
(Decrease)
%
Change
Unit deliveries:
 
 
 
 
 
 
Travel trailer
2,182

81.7
%
2,052

81.8
%
130

6.3
%
Fifth wheel
488

18.3
%
457

18.2
%
31

6.8
%
Total towable unit deliveries
2,670

100.0
%
2,509

100.0
%
161

6.4
%
 
 
 
 
 
 
 
ASP:
 
 
 
 
 
 
Travel trailer
$
21,781

 
$
19,570

 
$
2,211

11.3
%
Fifth wheel
50,399

 
40,115

 
10,284

25.6
%
Total towable ASP
$
27,012

 
$
23,312

 
$
3,700

15.9
%
(1) Percentages and dollars may not add due to rounding differences.

Net revenues consisted of the following:
 
Year Ended
(In thousands)
August 29, 2015
 
August 30, 2014
 
Increase
(Decrease)
%
Change
Motorhomes (1)
$
872,915

89.4
%
 
$
853,488

90.3
%
 
$
19,427

2.3
 %
Towables (2)
71,684

7.3
%
 
58,123

6.1
%
 
13,561

23.3
 %
Other manufactured products
31,906

3.3
%
 
33,552

3.6
%
 
(1,646
)
(4.9
)%
Total net revenues
$
976,505

100.0
%
 
$
945,163

100.0
%
 
$
31,342

3.3
 %
(1) 
Includes motorhome units, parts, and services
(2) 
Includes towable units and parts

The increase in motorhome net revenues of $19.4 million or 2.3% was primarily attributed to a 3.9% increase in unit deliveries in Fiscal 2015.
•
The increase in the incremental revenues was due to the change in our sales agreement with Apollo, a US RV rental company. During Fiscal 2015 we delivered 535 rental units to Apollo. During Fiscal 2014 we delivered 520 rental units to Apollo, of which only 177 were reported as motorhome sales; the remaining 343 were recorded as operating leases due to a repurchase obligation in Fiscal 2014.

18
Table of Contents

•
Total motorhome ASP decreased 1.7% in Fiscal 2015 due to a mix shift from higher priced Class A products to lower priced Class B and C unit sales in Fiscal 2015 although ASPs increased in every product category during the year.

Towables revenues were $71.7 million in Fiscal 2015 compared to revenues of $58.1 million in Fiscal 2014. ASP increased 15.9% and towable unit deliveries increased by 6.4%.

Cost of goods sold was $871.6 million, or 89.3% of net revenues for Fiscal 2015 compared to $841.2 million, or 89.0% of net revenues for Fiscal 2014 due to the following:
•
Total variable costs (materials, direct labor, variable overhead, delivery expense and warranty), as a percent of net revenues, increased to 84.0% from 83.7% primarily due to increased warranty expense and related warranty recall reserve and higher workers compensation expense.
•
Fixed overhead (manufacturing support labor, depreciation and facility costs) and research and development-related costs decreased to 5.2% of net revenues compared to 5.3%.
•
All factors considered, gross profit decreased from 11.0% to 10.7% of net revenues.
Selling expenses increased to 2.0% from 1.9% of net revenues in Fiscal 2015 and Fiscal 2014, respectively. The increase was due primarily to increased advertising and compensation expenses in Fiscal 2015.
General and administrative expenses were 2.6% and 2.4% of net revenues in Fiscal 2015 and Fiscal 2014, respectively. General and administrative expenses increased $3.4 million, or 15.2%, in Fiscal 2015. This increase was due primarily to expenses of $3.9 million in ERP and strategic sourcing projects, $1.6 million in increased legal and product liability expenses, $1.0 million in costs associated with the former CEO retirement agreement and was partially offset by $3.3 million in reduced management compensation expenses.
During Fiscal 2015, we recorded an asset impairment on our corporate plane of $462,000. In Fiscal 2014, we sold a warehouse facility in Forest City, Iowa, resulting in a gain of $629,000. See Note 5.
Non-operating income decreased $653,000 or 85.0%, in Fiscal 2015, primarily due to lower proceeds from COLI policies than we received in Fiscal 2014. See Note 12.

The overall effective income tax rate for Fiscal 2015 was 30.8% compared to 30.3% in Fiscal 2014. With a lower level of pre-tax book income being recorded in Fiscal 2015 compared to Fiscal 2014 the effective tax rate from operations was lower. However, this was offset by the lower level of tax planning initiatives recorded in Fiscal 2015 compared to Fiscal 2014 causing a slight increase in the effective tax rate year over year. Legislation for various applicable tax credits expired on December 31, 2014; therefore, similar to our Fiscal 2014, our projected benefits for these tax credits are limited to four months of our fiscal year. If the applicable credits are extended, this could potentially reduce our annual tax rate by approximately 0.60% to 0.90%. See Note 11.

Net income and diluted income per share were $41.2 million and $1.52 per share, respectively, for Fiscal 2015. In Fiscal 2014, the net income was $45.1 million and diluted income was $1.64 per share.


19
Table of Contents

Fiscal 2014 Compared to Fiscal 2013

The following is an analysis of changes in key items included in the statements of operations for the fiscal year ended August 30, 2014 compared to the fiscal year ended August 31, 2013:
 
Year Ended
(In thousands, except percent and per share data)
August 30,
2014
% of
Revenues(1)
August 31,
2013
% of
Revenues(1)
Increase
(Decrease)
%
Change
Net revenues
$
945,163

100.0
 %
$
803,165

100.0
%
$
141,998

17.7
 %
Cost of goods sold
841,166

89.0
 %
718,534

89.5
%
122,632

17.1
 %
Gross profit
103,997

11.0
 %
84,631

10.5
%
19,366

22.9
 %
 
 
 
 
 
 
 
Selling
18,293

1.9
 %
18,318

2.3
%
(25
)
(0.1
)%
General and administrative
22,424

2.4
 %
21,887

2.7
%
537

2.5
 %
(Gain) loss on real estate
(629
)
(0.1
)%
28

—
%
(657
)
NMF

Operating expenses
40,088

4.2
 %
40,233

5.0
%
(145
)
(0.4
)%
 
 
 
 
 
 
 
Operating income
63,909

6.8
 %
44,398

5.5
%
19,511

43.9
 %
Non-operating income
768

0.1
 %
696

0.1
%
72

10.3
 %
Income before income taxes
64,677

6.8
 %
45,094

5.6
%
19,583

43.4
 %
Provision for taxes
19,624

2.1
 %
13,141

1.6
%
6,483

49.3
 %
Net income
$
45,053

4.8
 %
$
31,953

4.0
%
$
13,100

41.0
 %
Diluted income per share
$
1.64

 
$
1.13

 
$
0.51

45.1
 %
Diluted average shares outstanding
27,545

 
28,170

 
 
 
(1) 
Percentages may not add due to rounding differences.

Motorhome unit deliveries and ASP, net of discounts, consisted of the following:
 
Year Ended
 
August 30,
2014 (1)
Product
Mix %(2)
August 31,
2013
Product
Mix %(2)
Increase
(Decrease)
%
Change
Unit deliveries:
 
 
 
 
 
 
Class A gas
3,056

34.9
%
2,446

35.9
%
610

24.9
 %
Class A diesel
1,410

16.1
%
1,315

19.3
%
95

7.2
 %
Total Class A
4,466

51.0
%
3,761

55.1
%
705

18.7
 %
Class B
751

8.6
%
372

5.5
%
379

101.9
 %
Class C
3,538

40.4
%
2,688

39.4
%
850

31.6
 %
Total motorhome unit deliveries
8,755

100.0
%
6,821

100.0
%
1,934

28.4
 %
 
 
 
 
 
 
 
ASP:
 
 
 
 
 
 
Class A gas
$
94,630

 
$
91,079

 
$
3,551

3.9
 %
Class A diesel
180,218

 
200,820

 
(20,602
)
(10.3
)%
Total Class A
121,652

 
129,449

 
(7,797
)
(6.0
)%
Class B
71,417

 
77,947

 
(6,530
)
(8.4
)%
Class C
69,920

 
73,435

 
(3,515
)
(4.8
)%
Total motorhome ASP
$
96,437

 
$
104,566

 
$
(8,129
)
(7.8
)%
(1) An additional 343 motorhomes were delivered in Fiscal 2014 but not included in wholesale deliveries as presented in the table above as the units were subject to repurchase option. See Note 4.
(2) Percentages and dollars may not add due to rounding differences.


20
Table of Contents

Towables deliveries and ASP, net of discounts, consisted of the following:
 
Year Ended
(In units)
August 30,
2014
Product
Mix %(1)
August 31,
2013
Product
Mix %(1)
Increase
(Decrease)
%
Change
Unit deliveries:
 
 
 
 
 
 
Travel trailer
2,052

81.8
%
2,038

80.4
%
14

0.7
 %
Fifth wheel
457

18.2
%
497

19.6
%
(40
)
(8.0
)%
Total towable unit deliveries
2,509

100.0
%
2,535

100.0
%
(26
)
(1.0
)%
 
 
 
 
 
 
 
ASP:
 
 
 
 
 
 
Travel trailer
$
19,570

 
$
19,560

 
$
10

0.1
 %
Fifth wheel
40,115

 
29,298

 
10,817

36.9
 %
Total towable ASP
$
23,312

 
$
21,469

 
$
1,843

8.6
 %
(1) 
Percentages and dollars may not add due to rounding differences.

Net revenues consisted of the following:
 
Year Ended