Good day, ladies and gentlemen, and welcome to the Third Quarter 2016 Winnebago Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this call is being recorded. I would now like to introduce your host for today’s conference, Don Heidemann, Treasurer and Director of Finance. Please go ahead.

Thank you. Good morning, and welcome to Winnebago Industries’ conference call to review the Company’s results for the fiscal 2016 third quarter, which ended May 28, 2016. Conducting the call with me today will be Michael Happe, President and Chief Executive Officer and Sarah Nielsen, Vice President and Chief Financial Officer. This call is being broadcast live on our website at investor.wgo.net and a replay of the call will be available on our website at approximately 1:00 PM Central Time today. The news release with our third quarter earnings results was posted on our website earlier this morning. If you have any questions about accessing this information, please call our Investor Relations department at 641-585-6160 following today’s conference call. Certain statements made during today’s conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under the securities laws and involve a number of risks and uncertainties. As a result, the Company cautions you that forward-looking statements are inherently uncertain and a number of factors many of which are beyond the Company’s control could cause actual results to differ materially from these statements. 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. With that said, I would now like to turn the call over to our President and CEO, Michael Happe. Mike?

Thank you, Don, and good morning everyone. I hope you are all well. It has been just over five months since having the privilege of joining the Winnebago Industries team this last January. The learning curve here within the company and within the recreation vehicle industry has been steep to travel. But it has been a great journey of discovery today. While many have commented to me that this is a product business, I have also found that it is a people business exhibited by the passion of our Winnebago employees that they have with their craft, the dedication of our channel partners to exceed customer expectations, and the loyalty and validity our end customers have for the RV lifestyle and the Winnebago products they use. This energy provides the strong foundation for future growth. Further observations of the opportunities and challenges facing Winnebago in the future will be shared during the back half of this call. I will deliver here an overview of the key drivers of Winnebago’s third quarter. Our CFO, Sarah Nielsen, will follow by diving deeper into the details of our Q3 financials. First though, I would like to remind the investor community of the four important strategic initiatives that are very much active and present today in fiscal 2016. Some of these are providing immediate value to Winnebago’s market and financial results, but all of these are very much setting the stage for more accelerated success in the future. First we continue to spend significant resources on the implementation of a new ERP system, which will empower our employees to make more timely effective business decisions and be more productive. As many of you know, these transformative systems implementation really forces to think through the creation of improved future state business process. Secondly, our purchasing…

Thanks, Mike, and hello everyone. Year-over-year third -quarter operating income improved 28% and net income increased by 26% on a 2% improvement in revenues. The improved bottom-line results was impart driven by a third consecutive quarter of gross margin expansion, as well as lower operating expenses. Revenues improved 2.1% year-over-year, a result of higher overall volumes, partially offset by lower ASPs due to product mix including the exit from aluminum extrusion sales. As noted in our press release, towables unit volume increased over 62% and motorized unit volume increased over 12%. The increased motorized volume primarily relates to our heightened focus on higher manufacturing throughput. Clearly, we have made progress on this front delivering more units by reducing the time it takes to produce these units as motorhome revenues grew 3.5% in the quarter. Also contributing to revenue growth this quarter was a continued strong results from our towables group where revenues grew 27.6% over last year. As we are not labor constrained at towables, we believe we can continue to generate above market unit growth in this category. Both motorhome and towables ASPs declined in the third quarter compared to the prior year, a result of product mix an increase in lower price units as well as a decrease in our higher end products. Third quarter gross margin expanded approximately 50 basis points year-over-year due to improved overall product mix which includes our exit of selling aluminum extrusion products. We also benefited from our strategic sourcing project in the quarter. Partially offsetting these positives in the quarter was a continued unfavorable trends and warranty expense. As we have previously discussed, we believe our efforts to increase in trail unit inspection and streamline our product quality processes will have a positive effect on warranty expense in future quarters. As I…

Thanks, Sarah. I would like to start our final section here this morning with a brief overview of the recently issued RVIA economic impact study called RVs Move America. We will then review some highlights further in the towables and motorized businesses as we close out the fiscal 2016 year. And finally, I would like to return to the observation themes I shared in the last earnings call and provide an update and a review of some recent activities. We have now as an industry seen seven consecutive years of growth and according to many signs are posed for another year of growth in 2017. The industry is approaching the 400,000 unit mark in this calendar year which is quite amazing when you consider the impact of the recession in 2008 and 2009 had on the RV business. Through the recent economic study, we learned the following. Nearly 23,000 RV related businesses create an overall impact of nearly $50 billion here in the United States. The RV industry directly employs over 155,000 Americans, paying $8 billion in direct wages. $9 million typically middle-class families own an RV and use them at over 16,000 private and public camp grounds in the US. RV owners age 35 to 54 posted the largest percentage gains in ownership over the past decade. The average age of an RV owner continues to fall. Overall, we remain pleased with the state of the industry. Like our competitors and all other industry stakeholders, we recognize the historical cyclicality of this industry and we’ll continue to keep a prudent eye on the future. The appropriateness of the investments we are making here and the health of the retail environment including dealer inventory levels. The challenge for Winnebago Industries is to continue growing our share in the towable segment…

[Operator Instructions] Our first question comes from the line of Craig Kennison with Robert W. Baird. Your line is open.

Good morning and thanks for taking my questions. Mike, I want to thank you for that framework. It’s quite helpful and I also want to be an advocate as you think about disclosure going forward for maintaining what I think is the best-in-class disclosure and hope you continue that. My question is, on the rental business. I think last year, you shipped 375 rental units in Q3. What was that number this year and what is left to ship based on that order?

Good morning, Craig. This is Sarah. As it relates to our rental business, as we’ve highlighted it’s an accelerated from the standpoint of – from activity in Q3 versus Q3 and Q4 for some of the sizable components of our business. And as we shared on our call last quarter, the overall volume of our rental business was growing this year as compared to last year in that 15% to 20% range.

Is there a way or are you willing to share what the actual number was, so we can kind of forecast the rental units going forward?

Well, from the standpoint of – it’s a relevant and I guess in a couple of ways, but I appreciate your question, as we highlighted in our press release, it has an impact to our backlog with the acceleration of the units from that perspective and also strong growth in our overall fee volume inside the quarter is in great part a function of our increased rental in this year and the movement of a bit of that from Q4 to Q3. But from a competitive standpoint, that’s – by the few remarks I just want to highlight as it relates to our rental business.

Okay, thanks. And then, just on the credit side, do you have a feel for the credit profile of your customer? We’ve seen some evidence of softness within the sub-prime credit here but it’s my impression that your exposure with that demographic is limited.

I agree that, but it’s correct concluding that it’s in our opinion as well. When you look at the segmentation of our typical consumer, it’s going to be that 55 plus. Now when we certainly have product categories that are appealing to younger consumers and as Mike highlighted with the information in the RVs Move America, the overall size is moving that and that age is decreasing. But, we definitely have a strong amount of the retail consumers in that 55 plus and our typical Winnebago customers are very strong on the credit worthiness evaluations based on what we hear from our partners in the deploying side and based on the surveys we often do with our consumers.

Thanks. I will get back in the queue.

Thanks.

Thank you. Our next question comes from the line of Kathryn Thompson with Thompson Research Group. Your line is open. Kathryn, check your mute button.

Hello.

Yes, we can hear you.

Hey, this is Xu Wenjun sitting in for Kathryn. I just have a quick question on the motorized division. Can you provide more color on this quarter’s Class A unit deliveries? And what type of products are selling better within diesel and gas and could you frame more color on the movements within the current motorized backlog excluding the impact from rental shipments?

Well, from the standpoint of shipments, you know, look, the mix of the products been, because of the very strong amount of rental business and continued strength in the B, that is where you are going to see the growth inside of Q3 as compared to the last year. But, Mike touched upon some of the new product offerings that we see successful in the market in the Class A gas piece of our business and we are going to be continuing to bring the market new floor plans and products on an effective basis. But we definitely were devoting lot of our production capacity inside of Q3 related to the B and C in light of the strong demand we had in those segments. And then, as it relates to your backlog question, I kind of touched upon three key things and in regards to overall backlog that I think are important. And you touched upon one of them and it’s rental had a little bit of an impact on when you look on a year-over-year basis, but also a function of – we are more efficiently increasing our products and that allowed us to deliver more inside the quarter and helped pullback backlog down in that regard. And then, also, on a year-over-year basis, we had our dealer day event a year ago and we did not elect to have that event this year really chose to spend some of our market dollars in different ways and that’s a comparison or a difference in regards to impacts on our backlog year-over-year as well.

Okay, that’s helpful. Thanks. And in your prepared remarks, you mentioned product mix and the strategic sourcing initiative benefit gross margin. Could you provide more details on the contribution of these factors to margin expansion this quarter? And also for the strategic sourcing initiative any guidance on how that would benefit in the coming year with the expansion, the acceleration that you mentioned in the call?

Well, from a margin standpoint, as I indicated and as we shared in our press release, as well and Mike touched upon it, the three key drivers we want to focus and talk about are the improvements in our product mix and that the function in the RV categories and as well as not producing aluminum extrusion selling that product to the end customers which had a positive impact, product mix in that regard. And secondly, it was a function of strategic sourcing and then, the third piece was partially impacts that are offsetting these positive drivers was elevated warranties. So that was the one, two and three key items driving, what’s happened inside the quarter and those are the key pieces of information we like to externally share.

Okay, and then any guidance on what the coming year – you mentioned that you will expend accelerating to other departments over the coming months?

I will comment on that. As I think Sarah and Don in past calls when the strategic sourcing initiative was launched, shared some initial goals and I think we are very much on target to – at the end of this fiscal year to reach those goals. The sourcing team has done a tremendous job. What I can tell you, the targets for the future are being still finalized, probably that’s a function of me pushing that team even further. I anticipate that the results in this future year will be similar to hopefully even a little better. But we just have not finalized sort of the final targets that as we talked about we are in the midst of finalizing our fiscal year 2017 plan at the present time. So, but we are very optimistic that the strategic sourcing initiative can continue to have a net accretive impact on gross profit and margin improvement in this organization.

Okay, thank you so much. That’s all my questions today.

Thank you. Our next question comes from the line of Gerrick Johnson with BMO Capital Markets. Your line is open.

Thank you. Good morning. Sarah, you talked about unit growth in motorized and increase in deliveries there coming from better efficiency, getting product to the plant more quickly. Was there any benefit to that you can talk about from the aluminum extrusion business getting out of that and in transitioning wire harnesses to Waverly and then, maybe still incremental benefit from Lake Mills? And then related to that, in the quarter, was there incremental expense from any of those initiatives also including Oregon that won’t be repeated going forward?

The first part of your question, we definitely look at the exit from aluminum extrusions to be part of our product mix. So we felt really of categorizing that from the standpoint of the contribution from a total standpoint the mix of what we delivered from motorized plus the fact that we transitioned out of that lower margin business this all collectively all of that is what we are attributing a piece of the market expansion from a product mix perspective. But from the key point on some of your other parts of the question – from a Waverly standpoint, that has been ongoing throughout the year expanding that labor base and training those people and getting better effects. It’s a very complicated process. Mike had an opportunity to go see how complex that is in regards to what we down there and so we continue to train and we would need to do that here in Forest City and expand and hire people in Waverly. So, that’s just kind of part of the business now ongoing. Lake Mills, where we produce B’s products and do some other things. That’s significant part of our opportunity as we continue to maximize on our market share and demand from a Class B standpoint and so, key part of what you see in our results for the quarter. No, I guess, specifics to highlight beyond that. And then, from the Oregon perspective, we really had our sizable investment in Q2 when we purchased the facilities and there are efforts going on as it relates to readying the facilities to produce the product and we are doing some pilot units right now. But we are really staging all those kinds of expenses that’s being lined with the overall timetable which Mike touched upon. So, and so that will be the key points I would make as it relates to Oregon.

Okay. All right. Thank you. And, could you talk about the dollar amount of the legal benefit was from the litigation? And also what were you spending per quarter on litigation that kind of goes away?

As I mentioned, it’s been a litigation case out there for a number of years and in certain instances we had more expenses in the years and others. The settlement was $2.75 million and collectively this fiscal year, we had invested legal fees of $200,000 to $250,000 in that case. In past years, as I mentioned, it’s kind of ebb and flowed. But really happy to have that behind us and concentrate on the future as opposed to spending time and energy on that specific case.

Okay. So, the $2.7 million is the benefit in G&A and that’s part of the reason why it goes from $6.5 million to $4.9 million

Yes, yes.

Okay. Okay.

As I highlighted, offsetting that some degree is the elevated ERP expense this year compared to last year in the same quarter.

Sure, that's something we had modeled, but I had not modeled the $2.7 million gain. So, that's what I was getting at. But thank you for that, Sarah, appreciate it.

Oh, you are welcome.

Thank you. Our next question comes from the line of Michael Swartz with SunTrust. Your line is open.

Hey, good morning everyone. Maybe just to add on Gerrick’s last question. Are there any benefits going forward from the settlement in Australia or is this both kind of the bulk of EMEA in the third quarter?

Well, I would say from a legal standpoint, the case in our opinion should be closed now at this point.

Okay.

Our team worked hard obviously to put ourselves in a very positive position to be able to negotiate a favorable settlement. We felt very strongly about our position in that particular case. What it will now benefit for us in the future is, it will remove some uncertainty in the market around the ownership of the brand. And it will allow us to very candidly probably work with our partners in that market to refresh our strategy and find ways how to hopefully accelerate market share and growth in the future. So, we certainly are hopeful that there will be some financial benefits down the road that will be related to the resolution of this case and again, we are very excited to have the exclusive rights of the Winnebago brand again in the market.

Okay. Thanks. And then, and just moving on another question, over the past couple of years, you guys have reallocated a lot of your resources, capacity towards Class B. When we think about the new facility in Oregon starting up and I think you said, it maybe more of a full ramp late fiscal 2017, how do you talk to dealers about that? I mean, obviously, you’ve lost some shelf space for Class A, but I guess, what’s your comfort level in recapturing that longer-term?

Well, I think, let’s beyond – I think, any time you lose market share, it is – it’s not an ideal situation and it takes some work and some cost to get that back. So I don’t think anybody here at Winnebago is overly pleased with some of the retraction of our Class A market share. Now, there are several factors to that. One is, as our competitors are being extremely proactive and aggressive in terms of some very aggressive price points within the Class A gas segment. Winnebago historically has not been known as the – probably the low cost leader from a manufacturing standpoint and we have continued to try to provide great value on our products and high quality. And so that market trend driven by our fierce competitors to offering increased value on the lower price points of Class A gas is something organizationally that we are trying to figure out how to respond to in a profitable way. The second element to our Class A erosion is certainly due to some of the transition related between opening the Oregon facility. Our diesel strategy is in a state of transition right now. We have some diesel models which certainly have great value in the market and our customers enjoy using. But we have significant plans to upgrade and refresh our diesel line up going forward and as we transition some of those products out of Forest City into the Junction City plant, there will be a period of time where we are just not able to serve the market from a quantity standpoint as well as we probably historically have. But, the long-term story here is very positive with Junction City. It has benefits in many ways. It hopefully will provide us certainly increased capacity that…

Thanks for the color. Then just one final question on the towable side, given the growth we’ve seen there for the past, call it, two years, I mean, where are you from a capacity standpoint right now in towables?

We have significant capacity left with our existing facility. I would tell you our ambitions for that business certainly exceeds the capacity we currently own. But, I would tell you right now for the next several years, we think we have the capacity, we know we have the capacity to drive our shares up significantly. So, I mean, that’s an active topic. One, as I’ve come into the company that I’ve asked and I want to make sure that we are providing that business unit the resources to grow. But that – we don’t overbuild too quickly that we utilize the capacity we have and then appropriately time any expansion needed. Again, we have capacity there and we plan on filling it and finding ways to make more units in the future when we reach that point.

All right. That’s it for me. Thanks for the color, Mike.

Thank you.

Thank you. Our next question comes from the line of Tristan Thomas with Sidoti & Company. Your line is open.

Good morning.

Good morning.

Good morning.

I just had one quick question for you. I was just curious with the industry really benefiting from the first time buyers. I mean, when do you expect they’ll return to the RV market for their second purchase? And then, what do you do specifically to make sure you capture that?

That’s a great question. First of all, I think the answer to your first question is, it probably depends on what they buy. We are excited to see more millennials entering the market. I think there is an article in the New York Post recently on that regard. Obviously, those customers probably have a little less discretionary income and maybe somebody on the more experienced side entering the market. And so, therefore, they are probably gravitating some of the lower priced units are starting in the towables category and growing up. I will tell you though, I think one of the reasons why the Class B segment is growing overall in the industry and within Winnebago is that some of those first time users are looking for a different type of product to be more mobile. They are not looking to take the product and set it at a camp ground for two weeks or two months. They want to go biking or kayaking or hiking and they want a compact unit that can get to a site that’s close to where their outdoor activity is. And so, I haven’t been in the industry long enough, Tristan to fully understand some of the products life cycles, but we will work aggressively here to first of all serve them with a high quality product and a high quality service experience in combination with our dealers. But, as we gain their information through retail registration and other means, we will work to create a – both an emotional bond with them in terms of their experience, but also let them know what other products are available for them to step up. But, I am sure we have more work to do there. That’s a great question and one I am glad you raised.

Another very quick comment on that, there is a lender survey that the RV industry provides and you have some key financial lenders that put together quite a bit of RV specific information and one of the things that we look to the – maybe a approximately how long people own their units that might not be their first one that it’s a stat on how long that loan is on the book and so, it definitely has moved from different points based on growth and tracks and a lot of times by a lot of the history we’ve seen that four to six year timeframe. But that’s a – kind of an average across the spectrum and that’s focused on new loans and you have a lot of used activity going on out there as well. So there is a lot of ways to evaluate this and – but, yes, good question.

I have just one other quick question. With the – not doing the dealer event, what are you allocating those marketing dollars for?

One of the things that we did inside this third quarter was a counsel meeting event with the key dealer partners and a couple of other things as that’s playing out and we also touched upon in our prepared remarks on the brand vitality study that’s going to be done here in our fourth quarter. So, it’s a collection of different items that we are looking to fit those dollars to.

And I will say in the future, and Sarah and Don here in the room have certainly more experience about the former ways we’ve engaged our channel partners, but I would say, the dealer day’s event was potentially a part. Now, we are not saying that we will or we won’t have a similar event in 2017, but I think the team felt through 2016 that we can take a break from that. We are increasing our presence at the Open House in Indiana later this fall. That’s growing as an important event. But we are taking a step back and reevaluating, especially whether towables division growing, how we can engage our dealers either together or separate in some ways. And our competitors do any number of activities themselves and dealers find us sometimes split between ourselves and some of our competitors, but it’s a topic that we continue to discuss here and we’ll give you an update in the future if some of the strategies that would require material investment, so.

Okay, thanks. I look forward to those future updates.

Thank you. Our next question comes from the line of Matthew Paige with Gabelli & Company. Your line is open.

Good morning. Do you have what your towables sales would have been on a same-store basis?

No, that’s not an information you would have historically are concerned that these are publicly shared.

Okay, but, could you speak to maybe the number of distribution points that you have in the towables side of the business?

All right. Well, from the standpoint of on what’s evolving there is, as Mike touched upon, there is a couple ways of approaching it. It’s a combination of adding the right covers of our product categories and physical dealer locations. And so, inside the quarter and inside this past year, we’ve been turning upon them on both and so we had adequate representations geographically and on a product basis. So that’s been a catalyst for our growth and when you look at it on a percentage basis, we are talking double-digit increase inside the year and those would be maybe some of the key things I would highlight in relation to the dealer.

And one other thing I’ll add is, and I think your question ultimately gets to this is, we are very carefully watching retail velocity and dealer inventory in terms on the towables business. And, I guess, one of the good things about being one of the emerging brands and players in that space is that, we are finding more outlets and for folks dealers to take products. That being said, we want to make sure that, we manage an appropriate level of turns in that business. The motorized side has tended to be more the two range and towables maybe more in the 2, 2.5 range and we are probably on the higher side of that number a little bit. But, I think we definitely want to make sure that retail – our retail increase continues to exceed our field inventory increase. And so that we ultimately increase our turns as we grow this business, because that’s not just good for Winnebago, that’s ultimately good for our dealers, hopefully advantages us, we can create that retail velocity.

Okay, and then, maybe changing gears a little bit, could, you know, now that you spend, what you said about five months on the job, could you maybe define some of what your cash flow priorities are and where do acquisitions potentially fit in, especially as you look to grow the towables business?

Well, that’s a fair question. My comments obviously talked about being pleased with the strengthening balance sheet that we have here at the company. It was good to begin with when I joined the team in mid-January, arguably, appropriately conservative given the cyclical nature of the industry. That being said, we need to be very focused on generating positive strong cash flow, so that we can build up a reserve of – a minimum cash there that we can use to profitably fund growth in the business. We’ve also been very conservative on the long-term debt side, almost non-existent, if not non-existent currently. And we certainly have explored some conversations out of my curiosity to externally and internally to understand what level of appetite there would be for – if we wanted to tap into that from a capital access as well. But, the arrival of our new Vice President of Strategic Planning and Business Development certainly signals that we are going to spend some more time at this company trying to get ahead of the business. We do have ambitions to grow within the industry. Certainly I am intrigued is that potentially by whether some of our core competencies would extend outside the industry as well, but the work there is very early. And we want to be in a position with our balance sheet to be active. I’d like to preferably be proactive and find the right opportunities as opposed to being reactive and as many of you know, when you are reactive at times, that’s a different situation in terms of the value, you can sometimes get on external opportunities. So, stay tuned obviously. We can’t comment on some of the specific things we are thinking about, but, just we are looking to grow.

All right. Well, I appreciate the time and I am hopeful to see you guys later this year.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Morris Ajzenman with Griffin Securities. Your line is open.

Hi guys.

Good morning.

A follow-up on, during your presentation, you spoke about Class B diesel will be fully ramped up by the end of fiscal 2017. What quarters during fiscal 2017 do you think you will start to move these to dealers?

Well I think it will start at a little bit of a trickle pace in the first half of the year. As I said, we have some pilot units coming off the line currently. I am not going to share specific numbers, but those are – that’s a low amount as we try to build a robust manufacturing assembly process. The back half of the year is where we hope that production starts to ramp up and I would tell you that probably the fourth quarter is where you would see more significant volume. Now that all assumes that our operation team continues to do a good job in building the supply chain and building the assembly value chain. But, when we say we are going to ramp up to a robust schedule, that doesn’t mean that that’s the most we’ll ever make out of that facility. That means that we got a target in our mind for a certain number of units that we hope to be producing and then they all have to go through a ship out process to make sure that they are ready and of high quality to release to the market. So, those numbers in a project like this are fluid and the timing is fluid, but we are committed to trying to create an impact in this business probably late in the fiscal 2017 and we will keep you updated as to our progress there.

Thank you. So then, from a mix of quarters, how do you position yourself in the current Class A diesel offering? What do you do in I guess, this difficult environment by not having the product et cetera, et cetera. What’s done strategically for the next four quarters?

Well, let me be clear. We will still have some products. We are still making diesels here in Forest City. Some of the products that we started to make here in Forest City are first in line to move out and I get example, our Winnebago’s business in the 45 foot category has been almost non-existent in the past and we just recently have started to make some of those here in Forest City. Those will be moved out to Junction City. And so, we are really just beginning that journey, but some of the other smaller diesel units we have inventory here on the campus. Production continues here, but – and we are trying to certainly time the manufacturing transition between Forest City and Junction City to not significantly impact that market. But, our team is working closely with our channel partners to tell them what we have available. But we are also working with our channel partners to tell them what our ambitions are and what our product development engineers and our product managers are working on for the future. And so, yes, it’s not extremely steady state, but, we are very optimistic about what the end game is here.

And the current 45 foot offering, diesel offering, is it what you wanted to be as far as the product that's being offered currently at dealers. Is this still work in progress as you switch over to Oregon. How does that particular SKU play out?

So the 45 floor plan that we have shared with the retail market, that’s been a couple different venues and started our path here in Forest City. It’s a product that we are very excited about and so, I think the context of – from evolving our diesel strategy is looking at some of the segments even beyond that site point where we don’t currently have any existing products and also capitalizing as we get the facility in Oregon up and running in regards to having the production and the assembly process really fit the exact needs of this product as opposed to some of the challenges we faced in the Forest City campus with site limitations et cetera. So, I think there is opportunity in new segments for us. What we are currently offering into the marketplace where we have a lot of price points that we are hitting and covering and it’s the - ongoing product development opportunity plus in existing floor plans and in price points that we have product for and segments that we don't currently have any products.

Okay. One last question, switching gears, this is for you Sarah. The G&A, when you make the adjustments for the $2.75 million Australian settlement, it looks like year-over-year it was up mid-teen, first am I correct on that in the simple mathematic calculation and secondly if I am, why was it up that much and how would we be going forward?

Well, as I highlighted in my opening remarks, our ERP expense in the quarter is up on a year-over-year basis approximately $1.1 million and so that mitigated quite a piece of that legal settlement. So those are the two most sizable items positive and negative affecting G&A. Separate from the G&A side, obviously last year, we had the impairments of a fixed asset, some other non-cash expense that was separately highlighted, but ERP is the big driver for the year-over-year distinction.

And will that continue in the next few quarters?

We are working very hard in regards to that whole project and as I highlighted, we made significant investments in the past year-and-a-half and the project is still going to continue on into fiscal 2017 as we’ve shared previously and we are looking at the latter half of 2017 to be when – from all areas of the process are live and operational. So, yes, there is still be continued expenses associated with this both capital and immediate expense in the coming quarters.

Thank you.

Thank you

Thank you. And that is all the time we have for our Q&A portion of today’s call. I’d like to turn the call back over to Don Heidemann for any closing remarks.

Thank you for joining us today as we reviewed our third quarter financial results. We look forward to speaking with you again in the fall when we review our fourth quarter and fiscal 2016 year end results on Thursday, October 13, 2016. Thank you.

Ladies and gentlemen thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.