Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2013 Winnebago Earnings Conference Call. My name is Jackie and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now like to turn the presentation over to Ms. Sheila Davis, Public Relations and Investor Relations Manager. Please proceed.

Thank you, Jackie. Good morning, and welcome to Winnebago Industries conference call to review the company's results for the fourth quarter and fiscal 2013 ended August 31, 2012. Conducting the call today are Randy Potts, Chairman of the Board, Chief Executive Officer and President; and Sarah Nielsen, Vice President and Chief Financial Officer. I trust each of you have received a copy of the news release with our earnings results this morning. This call is being broadcast live on our website at winnebagoind.com. A replay of the call will be available on our website at approximately 12:00 noon Central 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. Before we start, it's my duty to inform you that this presentation may contain certain forward-looking statements within 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 identified in our 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'll now turn the call over to Randy Potts. Randy?

Thanks, Sheila. I think all will agree that we knocked it out of the park in our fourth quarter. We delivered nearly 30% more motor home and towable units in the fourth quarter of fiscal '13 than the fourth quarter of last year. In fact, we had over 36% growth during the fourth quarter year-over-year in nearly all motorized categories, as well as in the travel trailer segment of towables. And on an annual basis, fiscal '13 deliveries were the highest we've experienced in 5 years. This growth was driven by having fresh new products that meet our customers needs in addition to having a great environment for growth within the RV industry. We've introduced a number of new and innovative products within the past few months, some of which are just now going into production. We talked previously about the new entry-level Forza and Solei that are in the sweet spot of the fastest-growing segment of the Class A diesel market. We introduced the first 34T floor plan this summer and now begun to build a new 38R floor plan. Early results show that these products are being accepted well by both our dealers and retail consumers. We're also introducing the first motor homes to be built on the new Ram ProMaster chassis in both Class B and Class C product lines. We've always prided ourselves on being first to market with innovative new chassis offerings, and both of these product lines provide Winnebago Industries with tremendous potential for market share growth. The Class B Travato, as well as the Class C Trend and Viva! are all very fuel-efficient and maneuverable with unique floor plans and storage opportunities. Due to the great acceptance of our products in the marketplace, we've had 6 consecutive quarters of increased sales backlog. But we're not standing still. We'll continue to be in the forefront of new product development. In addition to the success we've had in the RV segment, we continue to move forward with our Metro transit bus project and received Best of Show (sic) [Best in Show] award at the recent BusCon show in Chicago. We're building relationships through our distributor, and we feel confident these will provide us with solid business going forward. In addition, we signed a brand licensing agreement with Brandgenuity that will enable us to leverage our well-known Winnebago name for products in new categories, including camping gear, apparel, outdoor furniture and more. We're very excited about opportunities that await us in the year to come and believe we have even further growth potential in fiscal '14. With that, I'll turn the call over to Sarah for the financial review.

Thank you, Randy. I'm pleased to review the financial performance of the company's fourth quarter of fiscal 2013. Net revenues for the fourth quarter were $214.2 million, approximately a 32% increase from the fourth quarter of fiscal 2012. The primary growth in revenue was a result of a significant increase in motor home deliveries. Compared to the year-ago quarter, our operating margins expanded by 320 basis points from 4% to 7.2%. Our business model delivered increased profitability via improved gross margins and leverage within our SG&A line. Key factors that positively impacted our margins relates better variable and fixed cost absorption due to firmer pricing associated with the new product offerings, purchasing leverage achieved through increased volume and relatively low commodity pressures. The fourth quarter of fiscal 2013 was an exclamation point to a very successful and profitable 2013 for Winnebago Industries. During the year, we experienced significant growth in both the top and bottom lines. Net revenues grew by over 38%, and our operating profit grew from $9.5 million in 2012 to over $44 million in 2013, a 366% increase. There are numerous reasons that influenced our success in 2013, but the key driver was our ability to execute on our legacy business strategy, deliver quality motor homes that present a high-value proposition to our dealers and retail consumers. In fiscal 2013, we also made considerable advancements in creating future growth opportunities for the business. Substantial changes were made in our towable operations this past year. These efforts allowed us to achieve our goal of an operationally break-even fourth quarter. Excluding noncash charges related to the accelerated amortization of several intangible assets, our towable operations made a small operating profit in the fourth quarter of the year. The towable portion of our business also generated nearly $5 million of…

[Operator Instructions] And our first question comes from the line of Greg Badishkanian with Citigroup.

Just wondering, in terms of the backlogs, up really strong, and I'm just wondering, does that -- would that tell us that the level of discounting and promotions that you've seen through October is on the moderate side?

Absolutely, Greg. We -- I think we've been saying through this recovery that there hasn't been much pressure, at least, on us for discounting and promotions, and I think that reflects in our results. So yes, that's certainly fair to say.

Great. And also dealer inventory levels, I mean, they seem on a sales -- given the sales step-up, they seem pretty reasonable. What are they telling you about how comfortable they feel about that? And obviously, there is a backlog, so it tells you that there's -- they could use a little bit more inventory.

Yes, that definitely reflected in the order position. Our dealer inventory is very reasonable in regards to what the retail registration run rate has been. If you look back on the last year, it means that dealers are turning inventory at least 2.3x. And with retail registrations on a growth trajectory, that means more is needed in the channel and the inventory is very new and fresh, which is important as well, so that is not a metric that we look to be of concern whatsoever.

And just -- I know you don't necessarily give very specific guidance, so maybe qualitatively, if you could, how should we think about if you have another solid year, maybe not as strong as it was in fiscal 2013, but if you do see some sort of 10% to 20% sales growth, how should we think about margins and kind of levering the -- that sales growth and kind of incremental margin?

Well, what we've seen play out in this past year, as the volumes have notably increased from a production standpoint, that's provided significant leverage, and a lot of that variable margin drops to the bottom line. So there's still more opportunities on that front perspectively. When you look at our fixed cost structure, those fixed costs have come down as a percentage of revenue. When you look at -- on a fiscal year basis, we're under total fixed cost of 6% of net revenues. And a year ago, at this time, they were over 7%. So fixed is an opportunity, but we're also seeing the mixed dynamic create in a different profile depending on where the demand is with the product and we've offered a lot of exciting new products to the market that we're really starting to deliver now in fiscal '14. So those margin profiles are going to be a part of our future. So there's opportunities for further leverage with further volume increases, and opportunities in regards to new products in the marketplace.

Right. That's helpful. So there's no maybe stepped-up level of investment somewhere that's going to eat into potential upside to profits. If you continue to see strong sales growth, you'll still be able to leverage it like you have this year, right?

That's fair. We always have an R&D investment on an annual basis, and we've done a lot and that's reflective of the products we're bringing to the marketplace. But we're pretty excited about the outlook.

And your next question comes from the line of Morris Ajzenman.

Just curious, our government finally came together and made an agreement last night. And have you seen any changes -- and again, this would just be in the interim, short-term phenomena, but the consumer reacting to that, have you seen anything in October? I know numbers aren't out there, but any sort of reverberation from that?

I can't say that we've tied anything directly to that. I think if it were to create a dramatic rise in interest rates that could affect business, a certain percent of our retail buyers borrow the money to make the purchase. If it were to affect the value of stocks, if it were to affect the stock market, that would potentially affect people sense of wealth and that could have an effect. But none -- neither of those things are happening at this point. So I think the answer is no.

And switching gears, chassis. How long do you think this shortage allocation plays out or continues?

We're -- the plan is that it should clear up over the winter. Our supplier has a plan to increase production. The unknown is, if demand continues to increase, will their production increase satisfy that? And we simply don't know that. But we are assured that more chassis will be available midwinter.

Okay. And the last question, again, jumping around. For the fiscal year, albeit you're generating cash in the fourth quarter, but for the full year and for good reason, working capital was up $28 million, so you didn't generate that much free cash flow. How does that play out for this coming year? Again, it's all dependent on top line growing, but if top line grows moderately, whatever that means, how should we look at working capital for fiscal '14 versus fiscal '13?

Well, we definitely had an investment this past year in inventories in light of the increase of our business, and depending on the growth that is continued to be experienced on a prospective basis, that could require more inventories at a higher level. But we do see that there's an opportunity to have a stronger free cash flow environment in fiscal 2014 in light of what we've invested this past year.

Let me ask one last follow-up to that and I'll get back in queue on the cash flow perspective. Let's take an assumption. Let's say revenues hypothetically were up 10% fiscal '14 versus '13, with a 10% gain, what sort of change would you sort of extrapolate working capital would have?

Well, maybe I'll approach that a little bit differently. When you look at fiscal 2013, and I'll just use cash generated by operating activities, we had net income over $30 million and 1/3 of that flowed through in regards to operating activity. On a go-forward basis, I think there's an opportunity, not necessarily 1:1 in light of where the growth is on the revenue side and net income, but I think a more significant portion of net income should flow through down to operating activities and what we saw this past year. However, when you look at investing in ourselves, we invested over $4 million in CapEx this past year. And if you look at the last 5 years, we haven't collectively invested a lot in PP&E from a Winnebago total standpoint, and we are looking at that being a need in regards to our cash for 2014. We're anticipating that we could be spending CapEx in the range of $10 million this next year, so that would be an investing activity that's fair to consider outside of cash flows from operations. But -- and then we used that, as I touched upon on my opening remarks this past 12 months, almost $13 million from a financing standpoint in our activities on the cash flow, buying back stock. That remains to be seen as to how that will play out this next year. But the increase in our inventories this past year was a function of such substantial growth, and I don't expect that we should have that phenomenon play out nearly to that degree on a go-forward basis.

And our next question comes from the line of Kathryn Thompson with Thompson Research Group.

A first question for me, could you give a little bit more granularity for the driver of gross margin expansion in the quarter? How much was due to pure volume growth versus mix, and maybe under getting a better sense of overall mix in terms of pricing? And then also, to what extent towables also contributed or didn't contribute to gross margins?

Kathryn, from a margin standpoint, you look at on a year-over-year basis, the fourth quarter expansion was 190 basis points. And if you look at the 2 key drivers that really were a function of that, probably almost 70% of that was a reduction and a variable cost and the remainder was our fixed component. Now we have an element of cost you could attribute in our variable costs that are more fixed-like because it's people-related. And as you look at benefits, health care, et cetera, there are some fixed component there. But we saw upside in the fourth quarter that was a function of inflation that didn't occur. We've been looking at inflation to be an assumption in our pricing, and it hasn't yet materialized, so that was a positive. The mix of the products can move the material content around, but that was a key part of why the variable cost dropped. Now from the standpoint of our increase in production, we sold a lot more units, and at that same time, that's exactly what the production schedule has increased by and we're continuing to see that leverage play out in better absorption on the fixed cost front. So that's still a key reason if you want attribute about 30% of the improvement there. But the new products that we're introducing to the marketplace are a facet as well in relation to we're establishing the price points, and there's, on a go-forward basis, some products that we're bringing that is entirely new. And until our competition catches up to that, we kind of set that stage.

And kind of pulling the string on that new product in the backlog, could you talk about the margin profile of the current backlog? Is it a similar profile to the products you sold in the quarter, or is there any change in terms of higher mix of products with higher margins?

There -- from a backlog standpoint, I think there's some upside opportunity when you look at what is in the backlog. There's a lot of new offerings there as I was mentioning, and Randy touched upon it in regards to the products and the standpoint of what we're building on, the ProMaster chassis and then also our new product offering in the lower-priced diesel segment. And so there's, let's say, approximately 20% of our backlog relates to new products on a go-forward basis that a lot of that is in production and being shipped now into the marketplace here in this first quarter. So I don't -- there's not a very significant movement in the margin profile. Going back now into Q3, we had more of the Class C rental kinds of products sold there. So in the third quarter, I would say that there was a different margin profile at that time. But in quarter 4 and then going forward in quarter 1 and even into quarter 2, because we're defining our backlog to be product will ship in the next 6 months, not necessarily all in the next quarter, I don't think you'll see a really dramatic shift, but there are some opportunities for us there.

That was very helpful. And then finally, when you look at statistical surveys and understanding that we know all the shortcomings of some of the data that happens with statistical surveys, but nonetheless, it is something that we, in the industry, use to track industry retail sales. And it appears that your Class A retail sales, the momentum wasn't as large as some of your peers in July and August. It would raise the question of how much discounting from some of those peers there were. Could you maybe give a little bit more color on why the delta, the potential cause and what we can expect going forward?

Kathryn, I think there's a few things at play there. One of them I addressed in my mentioning of our new offerings in the entry-level diesel pusher products. That's a market that, really, until we came out with this offering, we just -- we didn't participate in that market at all, and that market grew very fast in this last year. So that is a big part of it. And we're really seeing good success with our new products in that market and we think we're going to plug those holes. But that's certainly a piece of it. Another piece of it has to do with this supply constraint of gas A -- Class A gas chassis. We -- I think most everybody in the business right now is selling everything they can get their hands on. And there was a smart play by one of our competitors to buy some chassis from another competitor that was recently sold. So I think they got a boost out of that, and they were able to put more Class A gas products on the market than we were. I don't know that it really has anything to do with discounting. I truly don't know. I suspect it doesn't because the market is very strong right now and those products are in demand. So I think those are the 2 main drivers. Last, I appreciate you prefacing the question with some uncertainty about the stats because there are a lot of things that play out there. There are times that survey underrepresents what we really see was retailed, and then there's times that it overrepresents it, and those differences are constantly in play. So you do have to give it some time to kind of smooth out because it does catch-up over time.

Okay. For what it's worth, our dealer surveys are not showing above normal discounting at all from [indiscernible].

Yes, that's what I would expect, too.

And our next question comes from the line of Greg -- Craig Kennison with Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Maybe Sarah, I'll start with you. Could you give us the ASP by category for each unit?

Certainly. I'll start on the motorized side in the fourth quarter. Our Class A gas average selling price was $91,807 compared to $90,701 last year, so we were up 1.2%. From a Class A diesel standpoint, $190,774 versus $199,975, so we saw a 4.6% decrease in our average selling price on Class A diesel that's strictly driven by mix. So our blended Class A average selling price was $124,297 compared to $125,852 last year, so down 1.2%. On the Class C front, our average selling price was $73,186 as compared to $78,658, so we saw a 7% decline there. And again, very much a function of mix and new product offerings at a lower price point. Our blended A&C average selling price was $106,683 as compared to $106,385 a year ago, which is down 4.4%. From a Class B standpoint, our average selling price was $79,045 versus $76,380, so that was up 3.5%. So our blended motorized ASP was $100,377 versus $104,023. And then on the towables side, our travel trailer ASP inside the fourth quarter was $19,947 versus $18,557, so that was up 7.5%. And our fifth wheel ASP was $28,131 as compared to $29,504, so down 4.7%. The ASP blended then for travel trailers was $21,226 versus $22,510 last year. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Great. And then, Randy, could you help us understand the backlog? Obviously, it's a huge backlog. And in a perfect world, you'd likely want to produce more units. I'm trying to understand what your primary constraint is. Is it that you can't get enough chassis? Or that even if you did have enough chassis, you wouldn't really have the people to produce enough units per day to meet that demand?

It's a real mix of things, Craig. The chassis constraint is certainly one of them. We are building, as it pertains to Class A gas chassis, we're really hand-to-mouth with the supplier, we're building on those chassis as soon as they arrive, always pushing for more. But it is also true that if they all arrived on our doorstep in the next month, then -- I mean, if the entire backlog of chassis supply arrive on our doorstep in the next month, we couldn't respond to that. It simply can't move the business that fast. So both of those are very real. But there's other things going on. Some orders are forward-placed by dealers. They just -- they know that the market has become more robust, so they're reserving their place in line, they're placing orders for future delivery. So some of that is intentional. And I don't have in front of me exactly what percent of the backlog that is, but it is a piece of it. Another piece of it is chassis, I don't want to say constraints, but some of our chassis that -- well the sprinter chassis that come from Europe, we have to have pretty long forward order positions on those. Those chassis have a long lead time because they are built in Europe. And so in a growing market, we're always trying to catch-up with that, too, and that's not to say that they can't produce more. But we're using more than we would have anticipated possibly 6 months ago and so on. So that's another piece of it. There's certainly a lot of pieces to it.

And the one thing I would want to add is, as it relates to the new product developments or the new product launches, that creates pretty specific timing on our side based on all the things that have to happen to start up a new product.

That's a very good point.

And so when you look at Class A diesel, our new offering there, the Forza and the Solei, we have a strong backlog position in diesel because there's great demand and interest in that new product offering, and we began production of that in September.

Yes. So it's basically the pipe fill phenomenon that the orders are there and we have to ramp-up production on those new products to fill them. So...

And there is an element, when you look at the Class C order position or backlog position, our Trend and Viva!, is a new product offering there, which is also very, very much on our side, timing of -- as soon as we can have that product in our production schedule, we're building that, but it's a planned process.

Yes, and we're just beginning production of those products on that ProMaster chassis.

And then the last component would be the Travato, which is a Class B product, same dynamic. And that's -- both the Travato and the Trend are a good portion of the orders that we have on hand at the end of August that you're seeing. And so we're planning, from a labor standpoint, to have all the people we need when we need them based on what we know we can build due to timing of the product launches, and then also considering the constraints on the Ford that Randy already covered. So at this point, we haven't had a labor constraint that has impacted us from a production perspective. We have adequate supply from -- on a resource standpoint. It's more timing of new product launches and one particular constraint. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's really helpful. And as we look at your sort of daily production, if you will, do you see any changes in what you're capable of producing on a daily basis? I know the mix of A&C, for example, can vary and that can vary your daily production level. But are you staffed today the way you've been staffed for the last few months in order to produce roughly the same number of units on a daily basis?

No, our employment level continues to climb gradually as we've increased production. And I don't want to look too far ahead, but that will be our goal as the market continues to come back to heal. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And then just as you look at the production mix, sometimes we would look to the backlog to say that'll be a rough mix of what your production will be. But Randy, based on your comment that there are some forward orders from dealers trying to get a spot in line, is it probably the case that your A backlog is a little bit over-representative of what you're producing from a mix standpoint?

The gas A backlog is probably the furthest out, yes. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And then my last question, Sarah, any LIFO impact on gross margin in the quarter?

That's -- it's a very fair question. We do that analysis on an annual basis and yes, there was a LIFO impact. It's very similar actually to what we experienced a year ago in the same quarter. So on a year-over-year basis, not a notable item. But on a sequential basis, a relevant component. Kind of a similar to some of the commentary I had on my previous question, the material side of our cost structure, we have not seen inflation on a year-over-year basis. And then adding to that, the lower costs associated with us on a standard, variable and fixed overhead perspective and our average hourly rate with hiring more newer employees, all in, we have a deflation environment year-over-year. So when you look at an annual basis, we had a LIFO reduction in our reserve of over $1 million. So very fair question.

[Operator Instructions] And our next question comes from the line of David Whiston with Morningstar.

Can you say what your capacity utilization was for the quarter?

We currently calculate it at just a little over 70% utilization, roughly 70%, maybe slightly north.

And maybe just to say for informational purposes, similar to what we've said on previous conference calls, that's a physical plant look at our capacity, but we are working -- from the standpoint of our labor resources, everyone is working and there's a lot of areas working overtime. So we are utilizing all of the facilities. But we have the ability to run faster on a prospective basis if we continue to see the ramp, and that is the goal and objective based on the demand we see out there.

Yes, we use the final assembly process, our final assembly lines as our constraint. That's how we measure it.

I guess somewhat related to that then is, I know you guys had to close some plants in the downturn. Is there a point a few years out where you think if deliveries need to get to X, that we would need to open another plant?

Well, that's certainly possible. And if and when that time comes, I think we'll try to approach it in a way that we might be more flexible than we were able to before. I know that's pretty foggy, pretty gray, but closing those plants is very painful for a number of reasons. And when the time comes to increase capacity, we're going to try to be more creative. And I know that's a very, very vague perspective, but I guess I -- what I'm trying to convey is that we're going to try to look at this business in a different way going forward. We need to be -- need to find ways to grow the business, while being more flexible to the economic cycles.

Well, that actually feeds well into my next question, which is, as growth continues to ramp up in fiscal '14, on the outside, you've got your chassis issue with the Class A constraint. But what about internally? Is there an area of your manufacturing process, your design process that's a bit of a bottleneck, or just something that you think you could do better?

Yes, we're always bumping up against constraints internally and addressing them in the best way we see fit if they are a design-related -- engineering-related constraint, as you mentioned, we'll address that, either by changing the staffing levels or potentially outsourcing that work to engineering firms, that's another way. There's temporary help available. There's a lot of ways we can address that kind of thing. As far as in the factory kind of a similar thing, we can increase capacity in some areas by adding shifts that aren't working, 3 shifts. In some cases, it's a matter of updating machinery that's more efficient. And in some cases, it's outsourcing that excess capacity. So we're keeping all those things on the plate. Again, it's all in the vein of being flexible going forward. We learned some very hard lessons in the recession.

Okay. And finally, any color on what the noticeably higher CapEx trend will be? What is that for?

Well, actually in directly attributed to Randy's comments there, there are investments we see that can help us be more efficient and eliminate labor in some of the areas from a manufacturing perspective. So we're looking at investing more in ourselves to some degree in that regard. And also on the IT front, updating systems and investing more on that -- in that area is part of our plans for 2014.

We've recognized a long-term need to modernize our IT system. It'll be an evolutionary process for us.

And our next question comes from the line of Morris Ajzenman with Griffin Securities.

As a follow-up to one of the previous questions asking about capacity utilization and throughput, et cetera. In either 1 or 2 calls in the past, you guys threw out that on a current infrastructure, potential revenues could approach at a peak, I presume, running full out about $1.1 billion in revenues, and then I think another comment was put out that you believe the industry can ultimately approach 55,000 to 60,000 units per annum. Are those numbers that you guys are still comfortable with?

Well, those industry volume numbers were based on the history of the industry. We're consistent in saying that for over 25 years prerecession, the industry was in that 55,000 to 60,000 unit market. Sarah has got her calculator out and she's checking that. First part of the question you had, I'll let Sarah handle that.

All right. When you look at the business maybe in a couple of different lights, on the motorized side, we calculate that we have the capacity, certain assumption on mix, et cetera, that we can produce in that 10,000 unit per year, maybe higher, maybe lower depending on mix. And if I just use the ASP we just highlighted at our fourth quarter average, that's $1 billion just on the motorized side. There's other revenue streams that are relevant on top of that, notably towables and other elements from a business development standpoint that we touched upon that we are concentrating efforts. So to answer simply, I think that's still a fair way to look at that. ASPs obviously can impact that up or down, and what the other revenue streams do from a growth standpoint is relevant, too.

Ladies and gentlemen, with no further questions, I would like to turn over the call to Mr. Randy Potts for closing remarks. Mr. Potts, you may proceed.

Thank you. As Sarah said earlier, we're optimistic about our future. Over the past 3 years, the industry outlook catchphrase has been, we are cautiously optimistic. Based on the results of fiscal '13 and the outlook for the future, we're ready to drop cautiously from our perspective on the future. We believe there are great opportunities for growth going forward in both our traditional RV market, as well as the new prospects provided in transit buses, licensing our name and elsewhere. We're forging new paths for success and excited about the possibilities they present. Thank you for joining our call today. We look forward to speaking with you when we report our first quarter fiscal '14 results on Thursday, December 19.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.