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Winnebago profit falls, beats forecasts

October 13, 2005

NEW YORK (Reuters) – Recreational vehicle maker Winnebago
Industries Inc. on Thursday reported a sharp decline in
quarterly profit as high fuel prices and low consumer
confidence hurt sales, but the results beat Wall Street
forecasts and pushed shares up 3 percent.

While Winnebago said it relied less on customer incentives,
it reported sharp sales drops across its line of motor homes,
especially large “Class A” vehicles.

“Motor homes are a luxury item and we expect to see
continued cyclical swings in demand,” Chairman and Chief
Executive Bruce Hertzke said on a conference call with
analysts.

“Everybody in the industry is waiting for consumer
confidence to improve and the market to take off again,” he
added. “When it turns, we’ll have a good opportunity to resume
growth.”

Net income fell to $15.4 million, or 46 cents per share, in
the fiscal fourth quarter ended August 27, from $19 million, or
55 cents a share, a year earlier.

Analysts on average had expected 42 cents per share,
according to Reuters Estimates.

Revenue fell 18 percent to $231.5 million, below analysts’
average forecast of $236 million.

“We’ve been seeing weakness in the RV market for the better
part of this year, so we’re not surprised to see a down
earnings quarter,” said analyst Edward Aaron of RBC Capital
Markets. “What we tend to see in the RV market during periods
of weakness is relative strength at the value end of the
market.”

Aaron has a “sector perform” rating on Winnebago shares and
a $36 price target.

Winnebago delivered 2,551 vehicles during the quarter, a 17
percent drop. Deliveries of Class A gas-powered vehicles fell
20 percent, while Class A diesel vehicle deliveries fell 36
percent.

By contrast, deliveries of Class C vehicles — smaller,
lower-margin motor homes built atop a van-type chassis — were
down just 2.5 percent.

The company said it expected the shift in its product mix,
and the trend toward weaker consumer confidence, to continue
into 2006 and said it has cut production to reflect lower
demand.

The Forest City, Iowa-based company said its sales order
backlog fell to 2,059 units from 2,541 a year earlier. The
decrease was “due to lower consumer confidence levels, driven
primarily by the volatility of fuel costs,” Hertzke said on the
analyst call.

He added, “We anticipate these factors, along with a
continued shift in product mix, to continue into fiscal 2006.”

The company has cut production to better reflect demand,
Hertzke said, including the layoff of about 170 workers.

Winnebago’s report came a day after rival Thor Industries
Inc. reported higher quarterly profits and sales despite a soft
recreational vehicle market. Unlike Thor, Winnebago did not
benefit from the need for temporary housing in the wake of
hurricanes Katrina and Rita.

“We don’t have any big numbers to report because of FEMA,”
Hertzke said, referring to the Federal Emergency Management
Agency.

Separately, Winnebago did not rule out using more price
discounts to drive sales, but executives said they prefer to
focus on maintaining profit margins.

Shares of Winnebago were up 90 cents at $28.50 in morning
trade on the New York Stock Exchange.

The shares are down 27 percent since the start of the year,
underperforming rivals Fleetwood Enterprises Inc. and Thor. But
Winnebago shares have fared better than Monaco Coach Corp.,
which is down 35 percent year-to-date.




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