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On Thursday, Winnebago Industries (NYSE:WGO) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Kathryn Thompson – TRG Thompson Research Group: You had some nice improvement in gross margins from the last quarter to this quarter, how much of the improvement was driven by volume or lower raw materials or lower discounting? Just roughly in those three buckets, what were – how did it really split up in terms of the overall improvement in gross margins?
Sarah N. Nielsen – VP and CFO: Kathryn, when you look at the gross profit, the key point and I briefly touched up on it most notably was our fixed cost absorption, because we were producing more in light of our increased demand that’s evident in the backlog that most notably derived more margin impact from a discounting perspective at the revenue live it is very much equal and not a factor in any improvement either on a year-over-year basis or on a quarter basis. From an ASP perspective that also helps to some degree and we also did receive some benefit from an efficiency perspective on the labor side, but most notably it is in the fixed cost absorption.
Kathryn Thompson – TRG Thompson Research Group: So, really lower discounting didn’t necessarily help margins?
Sarah N. Nielsen – VP and CFO: That wasn’t a factor for us in this third quarter comparing year-over-year or sequentially.
Kathryn Thompson – TRG Thompson Research Group: Maybe you can give an update on discounting trends?
Sarah N. Nielsen – VP and CFO: Discounting trends; we definitely had the seasonality in the third quarter associated with any rental volume and that is similar what we typically see in our third quarter on year-over-year basis. From the standpoint of demand and interest, as Randy touched upon in our new model year product, the interest is evident and very high in light of where our backlog order position is at. So, I don’t have any specific examples of…
Kathryn Thompson – TRG Thompson Research Group: The backlogs aren’t necessarily driven by discounts maybe?
Sarah N. Nielsen – VP and CFO: No, I don’t have that perspective.
Kathryn Thompson – TRG Thompson Research Group: I understand you had Dealer Days and that contributed to outsized backlogs. To the best of your ability if you were to peel back the Dealer Days or maybe separate what’s driving the outsized backlogs? In other words, if we had a 90% plus increase in backlogs, you didn’t have Dealer Days, it would have been up like 30%? Maybe if you can help us understand how to think about that backlog number on a more normalized basis, understanding that we really haven’t had normal four or five years?
Randy J. Potts – Chairman, CEO and President: Dealer Days, we had a very strong order position in motorized going into Dealer Days. So, Dealer Days I guess from a historical perspective wasn’t – we didn’t expect that to be in the same scale of an order taking event that it historically was. I think the change in the business climate has really – have has dealers ordering when they need product and not necessarily wafting for events like that. So, it was a great event. It was a good opportunity to build relationships with our dealers, but it is the business, the ongoing strength of our product line that is driving the backlog, not specifically that event.
Kathryn Thompson – TRG Thompson Research Group: Finally, any comment on the North Street Capital bid?
Randy J. Potts – Chairman, CEO and President: No change to report there.
The Towable Market:
Scott Stember – Sidoti and Company: So, do you have the breakout of ASPs by category?
Sarah N. Nielsen – VP and CFO: I’m going to give you a comparison on a year-over-year quarterly basis. So, when you look at the overall motorized as a business, as I mentioned in my prepared remarks, we are up 7.5%. In the gas category we saw our ASPs move up about 2.3%. Our ASPs in this quarter were 93,611 versus 91,521. From a Class A diesel standpoint, it was more notable, we were up 6% year-over-year. The ASP for the quarter was 197,514 as compared to 186,283. So, total Class A as combined was up 6.6%. The average ASP in the quarter was 130, 283 versus 122, 255. From a Class C perspective, we were up 3.1%, 70,008 versus 67,925 and then from a Class B perspective, we were up 6.3%. Class B for the quarter was 76,204 versus 71,674, and that all averages in to an ASP for the quarter of 101,650 as compared to 94,563. Just so, I don’t forget, to the last quarter, I stopped at motorized, on the towable side, I also I wanted to give you the breakout there. I mentioned there of 16.2%. Our average towable ASP for the quarter was 25,122 versus 21,614. We do break those out into travel trailer and fifth wheel. Our travel trailer was up most notably 14.7% at 21,051 versus 18,361 and fifth wheel was 30,150 versus 29,640, which was up 1.7%.
Scott Stember – Sidoti and Company: Maybe, you guys could talk about the towable segment, you had tremendous growth in your backlog and shipments over a year ago, could you maybe talk about as far as your dealer network, how much, is there any channel still going on essentially filling these dealers with new products and just maybe give us a better sense at retail what you’re seeing?
Randy J. Potts – Chairman, CEO and President: Absolutely, there is channel sale. I mean that was one of our initial opportunities is growing the dealer base. There really was no dealer base for Winnebago towables as there were no Winnebago towables so that’s been a substantial part of the business and then as new products are developed as we said this Remington line that we introduced at Dealer Days and the Winnebago Minnie line that creates additional business and there is just a lot more of those kinds of opportunities in the towable market being as big as that market is for new products to come out of that facility. As far as retail, I think about all I could really offer there is that, we think we are getting good pull through of the products that are going to the dealers. It isn’t strictly a channel sales scenario, naturally the products has to be pull-throughed at the retail level and I think we are satisfied if that’s occurring.
Scott Stember – Sidoti and Company: Can you maybe touch on the discounting that you are seeing on the towable side?
Sarah N. Nielsen – VP and CFO: Well, we have an advantage you could maybe argue because so much of what we are doing is new and that creates a demand that that helps negate discounting pressure so it’s not a significant factor for us yet at this point.
Scott Stember – Sidoti and Company: Could you maybe talk about this year with towables, you have more pronounced presence at the Open House event?
Randy J. Potts – Chairman, CEO and President: We are formulating that strategy as we speak. We do plan to have a larger presence, but I would expect it to be in the scale of the operation we have.
Scott Stember – Sidoti and Company: Last question, what was the capacity utilization this year in this quarter?
Randy J. Potts – Chairman, CEO and President: In motorized it’s about 45%.
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