Winnebago Industries Inc (WGO) 2005 Q4 法說會逐字稿

Good morning. My name is Leigh and I will be your conference facilitator. At this time, I would like to welcome everyone to the Winnebago Industries fiscal 2005 year end results conference call. On lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. (Operator Instructions) I would now like to introduce Sheila Davis, Public Relations and Investor Relations Manager. Please go ahead.

Thank you Leigh. Good morning and welcome to the Winnebago Industries conference call to review the Company's results for the fourth quarter and fiscal 2005 ended August 27, 2005. Conducting the call today are Bruce Hertzke, Winnebago Industries’ Chairman of the Board and Chief Executive Officer and Ed Barker, President and Chief Financial Officer.

I trust each of you have received a copy of the news release about our earnings this morning. This call is being broadcast live on our website at winnebagoind.com, as well as at Vcall.com. A replay of the call will be available at each site at approximately 1:00 PM Eastern time today. If you have any questions about accessing any of this information, please call our investor relations department at 641-585-6803 following the conference call today.

Before we start, let me offer the following cautionary note. This presentation contains forward-looking statements with the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements. These factors are contained in the Company's filings with the Securities and Exchange Commission over the last 12 months, copies of which are available from the SEC or from the Company upon request. I will now turn the call over to Bruce Hertzke.

Thank you, Sheila. Good morning and welcome to our conference call this morning. I will briefly review a few of the highlights of our fourth quarter of fiscal 2005 and then Ed Barker, our President and Chief Financial Officer, will review our financials with you.

It is important to note that Winnebago Industries' results for the fiscal 2005 represent the second-best year in the Company's 47-year history. While revenues and earnings were lower than last year, I am still extremely proud of the performance of the Company.

The fourth quarter results were negatively impacted primarily by lower motor home deliveries and the shift to lower-priced Class C and entry-level Class A motor homes, offset in part by lower incentive compensation expenses. In the first half of calendar 2005, we saw an industry-wide oversupply of motor homes in the market caused by manufacturers producing to a higher level than the retail soul (ph) of the market.

On a brighter note, deliveries of the new Winnebago View and Navion Class C motor homes continued to be strong. We believe these new innovative products have had a positive impact in our Class C market share.

Our sales order backlog was 2059 units at August 27, 2005, 19% lower than the backlog of 2541 units shipped one year ago. This backlog of 2059 units however is 35% higher than the backlog of 1523 at the end of the third quarter at May 28, 2005. The backlog is lower this year due to a weaker demand of motor homes driven by lower consumer confidence, primarily due because of the volatility of our economy and higher cost of fuel.

We anticipate these factors, along with continued shift in product mix, to continue into fiscal 2006 and as a result we have adjusted factory output to meet the current market environment. Our production schedules have been reduced through a combination of shortened workweeks and reduced workforces to reflect some of the softness of our market.

In our Board meeting yesterday, the Board declared a quarterly cash dividend of $0.09 a share payable on January 9, 2006 to shareholders of record as of December 9, 2005. At this time, I will turn the call over to Ed for some financial review.

Good morning. I'm pleased to review with you the revenues and earnings performance for the Company's fourth quarter and fiscal 2005 year. Revenues for the fourth quarter of fiscal 2005 ended August 27, 2005 were 231.5 million compared to revenues of 283 million for the fourth quarter of fiscal 2004. Operating income for the fourth quarter was 23 million or 10% of revenues compared to 29 million or 10.3% of revenues for the fourth quarter last year.

Net income for the fourth quarter was 15.4 million compared to 19 million for the same period last year. On a diluted per share basis, the Company earned $0.46 for the fourth quarter of fiscal 2005 compared to $0.55 a share for the same quarter last year. Revenues for fiscal 2005 were 992.0 million compared to revenues of 1.1 billion for fiscal 2004. Operating income for fiscal 2005 was 98.3 million or 9.9% of revenues compared to 110.8 million or 9.9% of revenues last year. Net income for fiscal 2005 was 65.1 million compared to 70.6 million for the same period last year. For fiscal 2005, the Company earned $1.92 per diluted share compared to $2.03 for fiscal 2004. The Company finished the year with 112.6 million in cash and short-term investments. Cash generated by operating activities during the fiscal year were 79.6 million. The uses of cash during the year were 10.1 million for capital expenditures and 10 million for the payment of cash dividends.

Winnebago has increased its dividend by 29% for fiscal 2006. The Company now pays $0.09 a share on a quarterly basis which annualized would amount to $0.36 a share during fiscal 2006 compared to $0.07 a share quarterly for a total of $0.28 per share during fiscal 2005.

Winnebago Industries also continues to repurchase the Company's stock. During fiscal 2005, Winnebago Industries has repurchased 860,321 shares for an aggregate price of approximately 27 million. The Company currently has an open authorization for $30 million for stock repurchases. I will now turn the call back over to Bruce.

Thank you, Ed. Motor homes are a luxury item, so we expect to continue to see cyclical swings in demand for our products. However, we continue to believe in the growth of our industry and Winnebago Industries. Fiscal 2005's performance was again a great year for us. With our new product lines, we look forward to a better economy and higher consumer confidence when Winnebago can continue its growth plans. At this time, I will turn the call over to the operator for any questions and answer portion of the meeting.

(Operator Instructions) Scott Stember, Sidoti & Company.

Good morning guys. Do you have the ASPs for agencies and maybe break out these by diesel and gas?

I do, Scott. Our ASPs for the fourth quarter of 2005 were Class Cs $58,470; Class A gas $84,863; and Class A diesel $156,898.

Okay. And can you talk about whether there was any remaining discounting going on in the quarter, and if so can you quantify it and if it was on '05 or '06 product?

We did have as we went into June after our third quarter, there were a few remaining '05s Scott which were discounted. It was not a significant amount, but we did have some cleanup that occurred in June.

So the '06's are moving without discounting right now?

For the most part, that's correct.

Okay. And could you maybe quantify how many production days you had in the quarter versus last year?

We had available 59 which was -- this year we did have Memorial Day fall in the fourth quarter, so there were 59 of the 65 available. Keep in mind that we take normally one week off for plant vacation, and of course the Memorial Day holiday. We did actually work 53 actually production days. We took an additional week off in July to adjust our factory schedule.

Okay. Going forward, could you talk about where your capacity utilization is now that you have right-sized your staff a bit?

I hear you Scott, I don't know what that background noise is. On a going-forward basis, we are constantly adjusting that. We have certainly strong demand in some of our product lines, particularly in our new View and Navion product lines, particularly in the value side of the business in Class A's. Demand is weaker as we go up the price ladder, particularly in diesel area, Scott. Utilization during the fourth quarter of our capacity was about 69%. We don't really give forward guidance on where we're setting our schedule because it's constantly changing. It's one of those situations we simply work on on a week-to-week basis.

And could you also talk about options expense, whether you guys will be recording it in fiscal 2006 and maybe quantify what you think the number would be?

We do. Starting in the first quarter of fiscal 2006, we do have to adopt a FAS 123 R. We estimate that to be approximately $0.08 to $0.09 per share.

And that would be broken out evenly across the quarters probably?

Yes, Scott. And again, it's going to be dependent on obviously the amount of stock exercise, but that can change, particularly with the current weakness in the stock. Some of these options may be underwater, so that's just a guest on our part.

Okay. And I guess just generally, Bruce, could you just comment on where you see dealer incentive in the inventories right now? Obviously you guys look like you're in decent shape, you're down slightly from a year ago. But could you just make some general comments as we go into '06, your comfort level where dealer inventories are right now, particularly (indiscernible)?

Well, our inventory we feel is very appropriate. It's down a little bit, but we've also -- I believe you're well aware of the fact that we have some new product lines all the way from the diesel category with our new line of diesels that we introduced at our dealer days this year and with the new View and Navion. And so while our other product lines are down, which I think it probably reflects the economy and the dealer confidence level, we are very pleased with the reception that we've received so far with our other new product lines, such as the View and Navion and our new Tour and Ellipse motor homes in the diesel area. So again, we think that we are very appropriately -- at a very appropriate level for dealer inventory.

Okay. And last question with regards to all of the talk about talk about FEMA and the ordering of units for the displaced down in the Gulf area. Is it safe to assume that you guys have seen little or any benefit from this?

We have seen some different companies and a little bit of a business from probably more on an individual basis rather than a big FEMA contract. And we have seen some rental programs that some dealers have set up that have given us some business, again more in the Class C's than the lower A area. But we don't have any big numbers to report by any means because of FEMA.

That's all I have, guys. Thank you very much.

Craig Kennison, Robert W. Baird.

Good morning, everyone. Congratulations on the excellent margin despite the sales decline. It's impressive. Just following up on Scott's question -- how many available days are there, Ed, in Q1?

We have 63 -- excuse me, 62. We are two days down for Thanksgiving and one day for Labor Day, so there's 62 available production days.

Okay, thank you that's helpful. And then during the quarter, we read in the newspapers that there was a workforce reduction at Winnebago. Could you discuss just the timing of that and the financial impact, whether there was any at all in the third quarter and what the impact would be in the fourth quarter?

We did at the end of August partially because we had seen weakness in the market, partially because on a going-forward basis. On a seasonal basis, we start to slow down as a company once we get into the better fall market. Did kind of had to right-size our workforce the last week of August. We did lay off 171 employees, some of which were in Forest City and in Charles City. Some of the Charles City people have been called back. We currently have about 137 people still on layoff status, but that is kind of where our headcount adjustment is right now. We continue, keep in mind, not only to use shortened workweeks but also unfortunately this situation where we had to right-size our workforce to maybe get away from continued shortened workweeks to adjust to the market conditions. In terms of the financial impact on that, it did not have a significant impact on fourth quarter results.

Is it fair to assume that you would be taking off a few days in the fiscal first quarter?

Again, we continue to adjust our workforce as well as take time off as appropriate to adjust to what we believe to be the market demand, Craig. So given the current market environment, particularly in the consumer confidence side of the business, I think that's probably the direction we're looking at.

And where will any cost savings appear from the headcount reduction? Is that gross margin?

Well, we are simply trying to make sure that we don't have any excess cost in the Company. As market demands go up and down, we have to adjust our workforce accordingly. And that's really kind of what we're doing is that these workforce and schedule adjustments are appropriate given the level of demand for the product, particularly in light of the consumer confidence environment that has been kind of created as we believe to be because of higher energy costs.

And Ed, in the past you have been willing to provide your thoughts as far as gross margin for the subsequent few quarters. Last quarter in the first and second quarter, you did 15 and 12% for gross margin; that's a wide range. Any thought going forward this year?

One of the things we do see going forward here is certainly our view on Navion is selling very well. But as we indicated in our earnings announcement, we do see, and it certainly is reflected in the back page in our order backlog, you see that there's softness in our order backlog in our Class A business, more strength in our Class C business. So we have a bit of a mix rotation to Class C products which will weaken margins. On a going forward basis, I think that 12 to 13% area given the current market environment, particularly the demand for the Class C and the value side of the business, is probably a more appropriate level of expectations.

And that includes the impact of FASB 123?

Well, that's on a gross profit basis.

I'm sorry; where would the FASB be included?

That would be down in G&A. If.

Finally, obviously your sell into the channel of your Tour Ellipse platform has been healthy. Any sense so far of the sell-through?

We continue to review the retail acceptance of our new product. The thing that's hard to determine in a slower market like this exactly how well it is performing. And we just introduced this in August at our dealer days and we really don't have a -- we are still filling some of the dealers with pipe sales, what we call for their products. So I think it's going to have to probably be another three to six months before we can give you an accurate read on exactly how well the acceptance of that new diesel line products are doing.

Terrific. Congratulations again on the strong margin.

John Diffendal, BB&T Capital Markets.

Good morning. I wonder if you could quantify the G&A impact when you say the lower incentive compensation, at least relative to last year?

We probably would not like here to do that. One of the things the NYSC requirement is, is if we quantify it on the call, we need to quantify it also in the body of the release. So I think we'll decline from identifying how much that was. It is obviously in terms of the order comparison to last year, the most substantial impact is the volume, John. To a much lesser extent is mix and lower incentive compensation expenses. Our incentive compensation for our company is geared on earnings growth. When we don't grow our earnings, and we did last year of course, those incentive compensation bonuses are not paid to the employees.

And you had some adjustment I guess in the third quarter, right?

That is correct.

So at least from a magnitude standpoint, was it greater in the fourth quarter or anything that cleaned up earlier quarters that's there or anything else that we need to know about the G&A number being as low as it was?

It was a little more significant in the fourth quarter, mainly because there is a holdback. If we make all four quarters and then at the end of the fourth quarter we also pay a holdback. So as we accrue that through the year, which we did do pretty good in the first half of the year, but we did have to relinquish any holdback because we did not make in all four quarters. So it is to some degree a little bit greater in the fourth quarter than it was in the third.

I see. And you mentioned that you didn't see discounting, that you'd said the generally (indiscernible) lease in some segments. Is there any segment of your business that is seeing some level of discounting, like low-end diesels or whatever?

I think, John, I think in a tough environment like this, we continue to see some discounting out there with a lot of our (ph) competitors without a doubt. Again, Winnebago's strategy is that we will never say we won't participate in discount programs or have show specials. But again, our objective is to continue to focus in trying to maintain decent margin and profit percents.

Great, thank you.

Andrew Hudson, RBC Capital Markets.

Thank you, good morning. I have a question -- if you look at this quarter compared to the two years ago quarter, the August of '03, your units were down about 13% and -- but EPS was up about 45% and I think you had about 200 basis points in margins. Can you kind of walk us through how this happens? I know some of it may be mix, but can you just kind of walk us through this a little bit?

From two years ago?

Yes.

That could be difficult. I don't even have the information in front of me. The only thing I would suggest is that, I guess I'm a little bit at a loss. I would have to look at that John or Andrew and maybe get back to you on that. I'm just not prepared to discuss -- it wouldn't be from my perspective. I would probably say something that wasn't accurate anyway.

Okay. And I guess if you look -- in the past, you've kind of described your business in like a 9 to 11% operating margin depending on the cycle.

That's correct.

In a pretty tough environment, you reported kind of a 10% margin. Are you thinking of that any differently now?

Well certainly, 123R will have an impact on it. We talked about that here a few minutes ago on that particular line. Additionally, we are seeing this shift from a mix shift to Class C's that will also have a negative impact also on the operating line. So certainly in the near-term, there's going to be some risk at going below that range.

Okay. And then just lastly, your Class C has (indiscernible) a little bit. I was wondering if you're going to have any constraints on the supply side there?

Not that we are aware of right now.

Okay, thanks very much.

Alvin Concepcion (ph), Citigroup.

Good morning. Just a quick question. You mentioned gross margins that you think would be in the 12 to 13% range. What sort of retail sales are assuming to get to that?

We don't really give guidance in terms of what we think retail sales are going to be.

I think -- because in your previous -- the last time you guys did that, you mentioned gross margins could be in the 14% range assuming flat retail sales.

I think the only guidance that Winnebago has given in the past, in stronger markets we believe that we can get closer to this 14, 15. In weaker markets, it's going to be lower than that. And naturally, retail demand will determine that for us. If we get very good retail and we pick up business and we can fill in some extra capacity, that's going to improve for the Company's bottom line. And if it stays weak, it will probably drop in spikes (ph) slightly.

Okay, thank you.

Chess Greeley (ph), Kramer Rosenthal (ph).

I wondered if you could talk a little bit more about the cash on the balance sheet. Clearly, D&A covers CapEx, the fourth quarter wasn't that active in the buyback, but this is an area in the past where you have been. And especially given your comments on FAS 123, seems like a pretty good opportunity to take some shares in here and at least offset that impact.

Well certainly, we have more cash on the balance sheet than we probably would ideally like to have. We have in the past exercised our stock repurchase authorizations fairly consistently and we continue to think we will go forward on that same strategy. I think it's just a matter of where we feel comfortable buying stock is where boils it boils down to. I don't think you're going to see the Company change that perspective, so you will see us at an appropriate time probably exercise that repurchase authorization.

Do you have a feel for what an appropriate level of cash on the balance sheet is?

Somewhere between 40 and 50 million is probably adequate.

Eric Elbell, Fenimore Asset Management.

Good morning guys. A couple of quick one I think. Number one, I just wanted to confirm the number you gave for the ASP for the Class A diesel. There was a little background noise when you stated that number.

$156,898.

Okay, great. Secondly, just again back on the G&A question, just take a crack at it from a little different direction. Can you talk about any other areas where you cut back or maybe not even cut back, but just kind of held the line or were pretty stringent during the quarter outside of the incentive comp?

Naturally -- this is Bruce speaking -- naturally any time we face a downturn like this and you go through layoffs, you look at just controlling all your expenses in the corporation. And I'm very fortunate to have a very experienced management team that averages over 25 years of experience in this industry and we have seen the ups and downs and we've been through it before. And our objective is just to manage properly while we have a little slower period of time. So we've done a lit of adjustments and changes that we have needed to do because of the slower production rates and the slower (indiscernible) -- and that's all of an (ph) opportunity to fill up our production schedule.

Okay. Third, do you have any guidance you're willing to provide for what you might think to spend on CapEx going forward?

Our CapEx budget for next year is right around $10 million.

Okay. And then lastly, just wanted to also come back to the topic of -- (indiscernible) attack it from a couple of different ways here, just in terms of what's going on in the industry. You mentioned you believe that your inventories at dealers are very appropriate. And then you mentioned a minute ago that you are still seeing some discounting or some activity from competitors. But so taking those comments and then just if you can just expand on those in a broad sense in terms of what you're feeling or what you're seeing just in terms of industry strength, I mean what's going on out there in a bigger picture. I mean, where are we sort of in the inventory correction cycle and how dealers are behaving and feeling and so on?

I can tell you that you know, again, we feel our inventory is at a very appropriate level. In fact, we're looking for the economy to pick up at some point in time and it will give us an opportunity to increase that and increase some of our new product line inventories also.

As far as the industry, there is no industry number on dealer inventories, but I can tell you, this is just my personal feeling, is that I believe inventories are definitely more appropriate or more in line and appropriate today than they were 60 days, 90 days ago in the middle of summer when all of the manufacturers were continuing to clean out their '05's and introduce some of their '06 products. I have nothing -- I have no data or that I know of no data that is available for that, and these are my feelings. I think everybody in the industry is just waiting for when the consumer confidence improves and the market takes off again because we continue to see these cycles over this many years that myself and the staff have been here. And when it turns, we think we'll have a very good opportunity to resume growth.

Okay, thank you very much.

Sean Nicholson, Kennedy Capital.

I just had a quick -- most of my questions actually were answered. But is there a timeframe on the stock buyback? Is it just all this whole year or --?

No, that's an open-ended authorization.

You will see over the last several years, whenever we complete a stock buyback, we will then have a Board of Directors meeting and ask for an additional authorization, and we always have a news release when we complete one or we have a new one that is approved.

Okay, well that's all I had. Everything else is answered.

Thank you.

Gary McDaniel, Standard & Poor's.

Would you consider moving to a significantly higher dividend payment to work toward the cash balance that you feel is more appropriate for the business, or do you think buybacks are the way you'd like to do that?

I think over the last several years, we've kind of established -- three years ago, we doubled our dividend. Two years ago, we increased our dividend 40%. This year, we increased it 29%. We have looked at increasing that from the same hand because of the volatility and the cyclical business we're in. We also think the stock buyback is pretty appropriate to be used for our shareholders because our stock does move around. And if you look over the last six years, we've had opportunities just about all of the time in which we could get in and have an opportunity to buy some stock at what we feel is a depressed price of our stock, and so it continues to give us opportunities.

And what prices would you be more interested in doing those buybacks at?

What's that?

What are the prices that you would get really be interested in doing the buyback?

We never disclose any type of prices. The bottom line is, the Board of Directors have authorized Ed Barker and myself to review this and buy back at what we feel are appropriate levels according to the market conditions.

Okay. When you do next quarter start breaking -- start expensing the options rather, will that be included in G&A, or will you break that out separately for us?

It will be included in G&A expense.

Okay. And just a couple more questions here. Inventory as a percent of 12-month trailing sales is at the highest level on record, receivables are at the highest since 2001 and working capital in general is at the highest since 2002. What explains this situation, how concerned are you about it and what can be done to address it?

We did have a bit of a spike in our accounts receivable at year end. That also was a similar situation a year ago. Part of that is explained by the fact that our 2006 products are introduced at dealer days, which is essentially about the first of August. And we do, once the dealers see that product, have somewhat of a rise in sales and shipments during the month of August which is a bit abnormal in terms of when you look at it on a month-to-month basis going through the year.

In terms of inventory, we did bring our inventories down from 130 million to 120 million. We do believe, given the level of business going forward, that it is probably appropriate to continue to work to try to reduce inventory, particularly in the finished goods area on a going-forward basis this winter also. But we are taking a look at those.

And one last question here. Financing income relative to operating income, it was 2.7% of operating income for the year and 3.2 for the quarter. It's the highest level at least by my calculation since 2002. What explains this and how should we look at it? Do you think that this is a good thing or a bad thing? How should we look at it?

I guess we have a probably little more cash than we'd ideally like to have, I made a comment earlier. The reason it's -- our financial income was up for two reasons. First of all, we're carrying a little bit more cash than we probably historically have in the past, plus short rates. That cash is invested in short-term securities. The short rates certainly are much stronger today than they were six months ago or certainly a year ago. So those are the two reasons why we're seeing financial income higher.

Okay, thanks gentleman.

John Diffendal, BB&T Capital Markets.

Thanks. I just want to be clear Ed on your gross margin guidance of 12 to 13%. Are you saying that that's what you think that that area will be bouncing around during the quarters this year and that by -- at the end of the year, we'll have a number that will fall within that range; in other words, the whole fiscal year will be somewhere in that range?

You know, John, I wish I could tell you what the whole fiscal year's going to end up. I am not that smart unfortunately. We did indicate in the call and particularly -- and I think it's -- or I should say on the news release, and it certainly is in the backlog. You can see that our backlog is much more weighted right now to Class C book of business. We've talked about that our margins in the Class C market segment are not as strong. They're anywhere from 250 to 400 basis points weaker than Class A margins. And in light of the fact that where our current backlog is, it's reasonable to expect some downward decline in our gross profit number. I think that's a near-term situation. Where this market goes to, whether or not we -- when consumer confidence comes back and we see I think a stronger demand for our Class A in gas and Class A diesel business, we could see that mix of product improve and go back to where it has been in the past. We are just not that smart enough to figure out where we are at. I guess my comments in regards to that 12 to 13% is really for the quarter we're in, the first quarter of '06. And where it goes from here, we'll just have to see what the market demand is.

It's just sort of based on where you are going forward, that's where you are?

When you look at that backlog, there is going to be some downward pressure on our gross profits (multiple speakers).

I just want to be clear.

I'm glad you clarified it.

I appreciate that. And then you mentioned you brought some employees back. I assume that was -- and maybe I'm wrong here -- but it was due to on the C side, and didn't you say you brought them back in Charles City, or I may have misheard that?

That is correct, John. We didn't -- we had I think about 12 of those 171 people that were laid off temporarily in Charles City. We have because of again a pretty decent demand in our Class C business brought those people back to work down there.

And even though the View and the Navion are actually in the other plants?

That's correct.

Thank you very much.

Justin Hughes, Philadelphia Financial.

Good morning and thank you (indiscernible).

Could you to speak up? We cannot hear you.

Sorry. I just wanted to follow-up on the G&A. (indiscernible) the magnitude of the year-over-year decline, and you said that performance-based depending on earnings-per-share growth. If we look out to next year (inaudible) some options (inaudible) growth, that G&A number go lower?

It possibly could. It possibly could go lower. I don't think a lot lower, but obviously depending upon what kind of a year we have, we could see continued weakness in incentive compensation expense category. Obviously, that's going to be offset potentially by the fact that we are going to have to expense stock options.

Okay. So there is a still some incentive compensation in there (multiple speakers) come out at a flat to down earnings number?

That's correct. We didn't have a bad year. We had a very good year, we just -- the way our program is structured is that it basically rewards the employees for growth. And we had growth certainly in the first half or we have had a good strong first half of the year. It was the third and fourth quarters where we saw considerable weakness on a comparison basis.

Okay. This quarter did not have a reversal on the accrual, did it; it just had a lower accrual?

It just had a lower accrual and we did -- I talked about this holdback portion of it. They way that kind of works is you earn so much in compensation for the quarter, but part of that is held back at the end of the year and is given to you if you make all four quarters. So that typical is adjusted at the end of the fourth quarter. There was a small adjustment for the reversal of the holdback in the fourth quarter.

(multiple speakers) a small portion of it was a reversal, but net-net, it was still a positive number?

Right.

Okay, thank you.

Scott Coleman, Credence Capital.

Hi. Congratulations on managing your business so well through a tough time.

Thank you, we appreciate it.

It's mighty impressive, you guys are great. A couple of questions. Components or parts and getting parts this past quarter as hurricanes seem to mess up a lot of different transportation and things moving around the country. And then going forward, how are you seeing that? Are you having any problems getting any parts? And second, would you say that the mix shift to Class C is from higher energy prices or from people just trying to spend less? Where do you see this mix shift coming from?

The first part of your question, as far as on materials, we do not see any issues, any problems in materials on the material front. Now I have heard a little bit in the industry that maybe some FEMA trailers or different things like that could experience something like that, but we have definitely not seen anything that should affect any of our motorhome production.

Back on the mix shift, I guess the public is just buying more Class C's of our products and it seems like that has been a stronger market. Now I don't know if some of those are being bought because of the hurricanes down south where people are using them, that that has picked up the market a little bit, but it seems like it's pretty much across the United States. And then we also have our new product lines, the View and Navion. And as we continue to introduce that product to the marketplace, that has been very, very successful for Winnebago Industries. And I think that's why we say that we have seen that product segment increase a lot more than our high line segment.

Okay, thanks.

Thank you.

Ladies and gentlemen, this does conclude the allotted time for today's Q&A session. Are there any closing remarks?

I would just like to thank everyone for joining us on Winnebago Industries' fourth quarter fiscal 2005 conference call today and we look forward to talking to you again in December when we report our first quarter of fiscal 2006 results. Thank you.

Ladies and gentlemen, again thank you for your participation in today's conference. This does conclude the call. You may now disconnect.