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

Thank you, Derek. Good morning, and welcome to Winnebago Industries conference call to review the company's results for the third quarter of fiscal 2013 ended June 1, 2013. Conducting the call today are Randy Potts, Chairman of the Board, Chief Executive Officer and President; and Sarah Nielsen, Vice President, 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 11:00 a.m. 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 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, and welcome everybody to our conference call today. We had another great quarter and experienced growth in nearly every aspect of our business. The continuing strong demand for our motorized products has produced very positive comparisons with our financial performance of a year ago. Motor home shipments for the quarter were the highest we've experienced in 5 years with an increase of 55% compared to the same period last year. In addition, retail demand for our motorized products has grown throughout the year with a 27% increase when comparing the first 3 fiscal quarters of 2013 to fiscal '12. Dealer inventory has increased by 36% when comparing the same time periods. We believe the level of dealer inventory is good and well aligned with current market conditions. Having our dealers appropriately stocked with fresh product is an important driver of retail activity, ultimately leading to increased wholesale orders. Our motorized sales order backlog has grown in each of the last 6 consecutive quarters. At the end of the third quarter, it had grown in every motorized category and was up 130% year-over-year. This is a reflection of our dealer networks' confidence in our motor home products, as well as their confidence in the overall industry as they prepare for the summer season. Increased demand for our motor homes continues to be driven by the introduction of exciting and innovative new products, our well-earned reputation for producing quality RVs and the financial stability of our company. As a result of this improved demand, we've been increasing our production throughout the past 9 months. When measured as units produced per production day, our production in the third quarter of fiscal '13 increased nearly 48% compared to the units produced per production day in the same quarter last year. We also made progress at Towables during the third quarter. We had good response to new products that were introduced at our Dealer Days event in late April, as evidenced by the increase in sales order backlog compared to the second quarter of fiscal '13. We believe the RV market will continue to grow as the U.S. economy recovers. The most recent RV industry forecast by Dr. Curtin of the University of Michigan Consumer Survey Research Center, shows continued growth throughout calendar year 2013 and '14. We'll continue to introduce innovative new products that enable us to be in the forefront of the upcoming growth trend. And now, 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 third quarter of fiscal 2013. Net revenues for the third quarter were $218.2 million, approximately a 40% increase from the third quarter of fiscal 2012. The primary growth in revenue was a result of a 54% increase in motor home deliveries, offset by a 3.7% decrease in selling price. Compared to the year-ago quarter, our gross margins expanded from 7.8% to 9.7%. More importantly, our operating income dollars grew by over 190%. On a year-to-date basis, our operating income has grown nearly 10x compared to a year ago. One factor that assisted in the growth of operating income in the quarter was a low level of sales incentives as compared to a year ago. This was marginally offset by the seasonal mix that historically occurs in our fiscal third quarter. During the third quarter, rental and value-priced products accounted for nearly 17% of our net revenue dollars. While the rental sales are generally a once-a-year phenomenon, the increase in value-priced product volume appears to be a trend. We anticipated this shift and fully intend to capitalize on this dynamic going forward. As you may recall, a year ago, we introduced a value-priced Class A gas product that retailed for $69,900. This was well received at the retail and wholesale level and has been a large component of our financial performance over the last 12 months. To further exploit the shift in the industry, we introduced a value-priced Class C product last fall and additional offerings in the Class A diesel and Class C products at our third quarter Dealer Days event. Generally speaking, value price and rental products achieve a lower gross margin, therefore, even as our net revenue grew on a consecutive-quarter basis, our gross margin…

[Operator Instructions] Our first question is from the line of Kathryn Thompson, Thompson Research Group.

Just going back to the margin impact that you talked about in your prepared comments. How much have you -- if you're looking in terms of just buckets on a percentage basis or if you wanted to give out in terms basis points, how much was related to the Towable segment that you referred to versus trying to keep up with production demand on the motorized side? And it doesn't sound like discounting was an impact in the quarter. But if you could help us understand really what was -- what were the big drivers and how will that change going forward?

Well, when I look at the third quarter compared to last year's third quarter and we look at the expansion in margins and the key contributing factors quantified on a percentage basis, about half of the improvement is a function of lower incentives and half of the improvement is a function of higher volumes and better fixed cost leverage or absorption. So that being said, when we look on a sequential basis, the key drivers for having a fairly constant margin between second and third was a function of the mix of what we sold and rental being in that category and also new product introductions at that value priced segment of the business. Now on a prospective basis, we're not going to have rental. That, for us, is typically a one-quarter dynamic. We've had a lot of new product also introduced that we highlighted at our Dealer Day event. Some of those products really start from a production standpoint inside our fourth quarter, so those are more products that will be delivered in quarters 1 and forward of fiscal '14 in material numbers. But I guess, those would maybe be the first comments I would make in response to your questions. And I don't know if I covered it sufficiently for you. I'll let you follow-up.

Yes, no, no, that helps. And how have you been in terms of -- I know that labor had been an issue just get -- in other words, getting enough labor to meet demand. Do you feel like you're up to speed on the labor side?

Kathryn, yes, we're right where we need to be. Labor's always a challenge when you're growing. And I think there might have been some perception out there that it was a bigger challenge than it was. We did find the people we needed to achieve the production rates we had scheduled. We worked a lot of overtime and we have hired a lot of people. But we're at a -- we're fully staffed at this point for the production rate that we plan to have through the summer.

Okay. Are there -- have there been any changes in order rates over the past 30 days with the greater discussion of rising interest rates in the market?

No, we haven't really seen a change from the standpoint of the orders from the dealers. That's been consistent and the mix as well has been fairly consistent. So we haven't seen that impact the order volume.

Your next question is from the line of Craig Kennison, Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Maybe start with the backlog, Randy, it's a huge number. Can you ship all of that product in Q4 or do you not just have the production capacity to do so?

It isn't so much a production capacity issue, Craig, as it is some supply constraints. We've spoken to this in the past that there's a few industry constraints, most notable for gas A body chassis, so that's an industry-wide ongoing concern. The dealer bodies know that, so I think that certainly drives some aggressive order placement. So there's a few other less significant types of constraints. But the Ford gas A chassis would be the biggest one. There's no question, but that, if there were a larger supply of those chassis, we'd be at higher production rates right now to build those out. We wouldn't sit on them.

And I'd also follow up -- maybe just to add to that, Craig. In regards to new product introductions, that also impacts the timing of when we would be shipping products. And when you look in the Class A diesel segment, a portion of those orders reflect great interest in a product that we showed at that event. That production, is starting here in the coming weeks after the 4th of July holiday. And so that is really going to be a quarter 1 impact for us and prospectively. And we also showed a new Class B product, which production starts late enough where that really can impact our Q4 deliveries. So there's a impact, I would say, in a lot of the different categories in our backlog for different reasons that are indications of why the backlog is as large as it is. Great interest in -- to Randy's point, it does create a dynamic where a lot more dealers put their orders in to have a spot in line, as well as the interest in new things that we have shown them. When I look back at the backlog at the end of our second quarter, we shipped a little over 70% of that inside of Q3. And we faced a lot of those a similar challenges a quarter ago. That really hasn't been any significant change in the Ford Class A chassis constraint for us.

Another thing that enters into that, Craig, is some dealers place forward orders and they might not want. But even though we could build it today, they may not want it for a few months. So we're not going to build it ahead of time. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's all excellent. Is there anything that you would say that's artificial then about the backlog? In other words, dealers know they can place the order today just to get in line. Maybe to improve their priority in line, they may over order and knowing that they can cancel at a future date.

Well, that's always a concern. We haven't seen anything like that. And looking at the size of our order bank and the quality of the orders, the types of products that are being ordered and what our sales are and where the market seems to be going, I don't have any reason to be concerned about that. But yes, it could happen.

We've seen such a good increase in the retail registration activity on our product specifically that also helps support where the backlog is at. The dealer inventory out there in the channel is so fresh. And the growth that we've seen in recent months is completely supportable. And really, it could move upward based on the growing retail demand. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And then just, again, a follow up on the point you made, Sarah. To what extent is the backlog comprised of new products that really didn't exist a year ago? So not existing orders that are growing because of a strong appetite, but demand for new products that didn't exist.

I can probably easily give you a metric that relates to products that we just showed at our Dealer Day event and it's probably 8% of our backlog would be in those categories. But it would grow if I would incorporate the Minnie Winnie that we showed late last fall, and that's in the C category. I mean, we've been producing that and expanding floor plans. And a year ago, when we introduced some of the new offerings in the Class A gas segment, we'd also expand upon that. But if we just concentrate on very, very new product that we showed in the recent event, it's under 10%. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And I think I heard you correctly that some of that backlog is comprised of products that you will not ship until after the fourth quarter?

Yes. Notably for the new offerings, it's not going to be a quarter 4 shipment in just in light of the production starts. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: That's all helpful. Shifting gears, if I may, to ASPs. Could you provide the ASPs for motor homes and Towables by category?

Certainly. From a Class A gas perspective, our ASP was $90,038 as compared to $93,611 a year ago. So that's down almost 4%, very much impacted by new offerings that we have in that category. On the Class A diesel side, it was fairly flat, $197,832 versus $197,514, so it was up only up 0.2%. Our Class A gas, in total, based on the mix of what we sold averaged or -- I'm sorry, Class A category in total was $125,602 as compared to $132,083. So all a function of that Class A gas impact, that's down about 3.6%. Our Cs remained fairly flat, $70,161 versus $70,008. And then our A C mix in total was $97,699 versus $103,505, so that's down 5.6%. From a Class B perspective, our average was $77,900 versus $76,204, so that was up over 2%. And all in, we saw an ASP of $97,906 versus $101,650. On the Towables side, our travel trailer ASP was $20,033 versus $21,051. So that's down almost 5%, very much influenced by the minis in its popularity. From a fiscal perspective, it was $28,217 versus $30,150, and that was down over 6%. So the blended ASP for all of the Towables shipped in the quarter was $21,479 versus $25,122, down 14.5%. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: And a couple of other questions, if I may. Just a point of clarification on rental units, when you ship those into the channel, they're immediately essentially sold and they don't qualify as inventory for the dealer in that metric that you report, is that correct?

Right. They are immediately retailed. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Got it. That is helpful. And then Sarah, getting back to the margin question and what Kathryn had to say there as well, can you help us understand your fixed versus your variable margin within cost of goods sold today?

Yes. In the quarter that we're reporting, our fixed costs as a percentage of revenue were 5.7%. And a year ago, the same quarter, it was 6.6%. So as I touched upon, that was half of the reason we saw such improvement on our margins year-over-year. We'll be filing our Q, as planned, tomorrow. So we go into great detail on our variable and our fixed costs there. But those added volumes in this fiscal year have really been a pretty significant contributing factor to a lower level of our fixed costs, and that's positively impacting the margins.

Your next question is from the line of David Whiston, Morningstar.

I guess, first, on auction rate securities, is -- can you talk a little bit about that market? Is it getting better, given the sale? And do you think you can sell the rest of them in the next 12 months?

Yes. We were happy to see the activity. So the short-term investments that we reported have all been redeemed here inside of June. And there is some other momentum going on in that category, so I think it's reasonable that we could have the rest of the long term, which is, as we presented, about $4.4 million work through inside of 12 months and maybe even faster than that.

Great. What was the capacity utilization for the quarter?

Around -- a little less than 70% is where we would place it.

Okay. And somewhat related to that is staffing. You said earlier today that you are adequately staffed for now. But last quarter, we talked about on the assembly, you are one shift with overtime. So at what point with the backlog and your utilization would you ever want to just go 2 shifts straight time in assembly and no overtime there?

Yes, we've never run multiple shifts in final assembly. In the way our manufacturing organization is set up and the nature of the product would make that very difficult. We do run multiple shifts in many of the support areas, and we already do run multiple shifts in select areas. So we've always measured our plant capacity in a single shift in the final assembly area. So over time, maximum staffing, single shift, final assembly is really how we calculate our capacity. And beyond that, we would have to find other facilities, or as we have in the past, to expand final assembly capacity.

And I would add too, the production run rate that we are at and have been at, essentially for the last 6 months now, the greatest opportunity with the demand would be in the Class A gas category of product, which we don't have the chassis to support increasing that run rate. And the additional demand in some of the other product categories are a function of new products, which based on the timing of when we'll launch them, we're producing those as soon and as quickly as we can. But based on how that is laid into the schedule, it wouldn't, at this point, require -- we couldn't support running faster than we are today. So I wanted maybe just to add that in regards to why we're running at the levels we are right now.

Okay, that's helpful. Just finally on mix, the Class C you had a higher mix in the quarter relative to where it's been for the year-to-date. I know you talked at the beginning of the call about the value product, but you made it seem like that was more in the Class A segment. So can you just talk about why C was higher in Q3?

Well, the value-priced product does affect the C categories, too, notably in a product we introduced in the last year, our -- the micro -- the Minnie Winnie and the Spirit, those are full-sized C body products designed to make us more competitive in that market, and they are proving to be very popular. And we're rolling out new floorplans as the year goes on. In the third quarter, we were just in the process of introducing our third floorplan, and ultimately, we'll have more floorplans than that. So I think that probably had the effect that you're looking for.

And we also had rental product that was sold inside the quarter that was in the Class C category. So that is another element of why the C deliveries were up sequentially.

But again, that was -- that is a third quarter phenomenon. The popularity of the Minnie and Spirit product, we expect to be ongoing.

Okay. And just one more question, probably for either of you. Now that we're well into summer, obviously, it's been a very tremendous improvement year-over-year in your deliveries. But can you say it was better than expected or about where you expected?

Well, I guess that you'd have to reflect back on when the expectation was made. A year ago, we were really starting to see an improvement in the market last summer. I think we went on record as saying that even last summer and last fall, we reacted to the market change and the success of our products in the market with a little bit of a guarded optimism and we probably -- we had an opportunity to be more aggressive than we were. But of course, you never quite know how to react to those changes. So I think by the time we got into the fall and winter, the signs were certainly more positive, the order outlook was more solid and stronger, and we were really starting to hit it hard. And that's why we talked to some of the labor constraints that we did in the spring, because we did go through quite a growth spurt there. Things are pretty stable right now. You're going into a slower season, but we are bringing a lot of new products on that, that as Sarah mentioned, are going to keep us busy. So we continue to be optimistic.

[Operator Instructions] Your next question is from the line of Barry Vogel from Barry Vogel and Associates.

Great job, you're really doing very well with your product innovation and you seem to be scoring across the board. You did mention, Sarah, $11.2 million share buyback. Was that since you've started it or was that for the first 9 months of this year?

The first 9 months of this year.

And how many shares did you purchase?

On a cumulative basis...

I mean, just for the 9 months, for the 9 months.

I'll have to do the quick math here. When I look at -- why don't you let -- you go on the next question. I'll make sure I have that answer for you.

Okay. The next question is -- concerns your investments in Towables. And I noticed, and again, even though it's a small -- well, it's infinitesimal part of the business and the fact that you're losing money every quarter. But it was done, I believe, and Randy correct me if I'm wrong, to get another leg into the business with obviously the largest part of the RV Business, which is Towables. And so can you give us an assessment of where you are at this time? And in light of the fact this was some decent deterioration in your backlog numbers, I believe, based on your figures in your press release, fifth wheel backlogs were down 59% from last year at this time, and fifth wheel shipments were down 56% from the third quarter of fiscal '13. So I'm wondering, going forward, what's your outlook now in terms of getting that to become a decent profit contributor?

Well, Barry, I guess I'll speak to the bigger picture and then let Sarah talk about a few of the details, as she's very involved in that Towable segment or piece of our business now. We are disappointed with where we're at. We were planning to be profitable at this point. We're not giving up, as you said, it is a very big opportunity a lot -- many of the pieces of our strategy have worked very well. It, most notably, the Winnebago-branded product had been very well received by the dealers. We had good momentum, 1.5 years, 2 years into it, we lost that, it's our own fault. The Towable change -- and this kind of ties into that -- I'm sorry, the fifth wheel change and this kind of ties into that. We had a lot of momentum with a new product we introduced called the Raven line, and we just didn't stay on top of it. And we had a lot of missteps there. We are committed to getting it right and participating in that great opportunity, so that's where I see it from the top. And I'll let Sarah speak to more detail. But...

Well, the first thing I would highlight is that we showed a lot of new Towable product at the Dealer Day event in late April in categories that covers both fifth wheels and the Winnebago-branded product and in our SunnyBrook-branded product. And we saw our order position sequentially from Q2 to Q3 grow in light of what we showed to the dealers and their interest in that product. So we did see a positive, a sequential impact. But you're right, on a year-over-year basis, it is lower. Part of the contributing factor to the weaker fifth wheel performance relates to the Raven, that Randy touched upon, where we had quality issues and production issues in one specific plant that caused a lot of our financial challenges in the first half of this year. And we talked about this event last quarter as well, and one of the actions that we took to improve upon that and change course was to idle that plant where the production problems were. And we've hired a new plant manager, and now production is resuming here in the fourth quarter. So part of our decline in deliveries and in our ASPs for Towables has been kind of a period of time where we were not producing the product and we had a little bit of a void on some of that category that would satisfy the fifth wheel demand on the SunnyBrook side. On the Winnebago side, too, we've really refreshed the fifth wheel offerings that we have there. But a lot of time and energy had been put into this in the last 4 or 5 to 6 months. Johnny Hernandez is working really hard with the team there and we're starting to see some of the efforts really take shape and turnaround some of the trends that we had seen. Our goal is still to operationally breakeven in the fourth quarter. And have 2014, have this be an accretive profitable piece of our business for the consolidated results.

I think the good news, Barry, is we know what went wrong, we know what we need to do to get it right. So it's not a mystery and we're going to keep working at it.

Also to follow up to your question on how many shares purchased this -- or this fiscal year, we purchased approximately 817,000 shares this year at an average -- a little under $14 a share.

Yes, going forward, it looks to me like you're going to generate significant excess cash as long as the business continues to move forward, and you have a great balance sheet, obviously. So does your appetite end at a certain price point for the shares?

Well, we still have a buyback authorization in place that gives us a lot of room to continue to purchase. And we're going to use the methodology that we put into place almost a year ago now, basically laying out a grid based on our forward outlook. And I anticipate we will continue to be active. But it's more opportunistic and it's not necessarily at a predetermined dollar amount in any one quarter.

So with the stock at $19 or $20 -- I'm not sure exactly where it is right now, this second -- would that -- is it conceivable, given your feelings of your forward-looking outlook that you just mentioned, and your cash generation, your great balance sheet, that you could buy some shares at $19 or $20?

Yes, Barry.

Okay, that's pretty good. Oh, I know what I want I want. What's your new estimate of CapEx this year on D&A?

We're looking at CapEx coming a little bit lower for the fiscal year than we had commented on last quarter. I think it will be in the $5 million range. And depreciation, slightly less than that for the year. We only have one quarter left, and we're in the middle of planning for 2014 in detail and we can share that with you at our October conference call on those numbers for the next fiscal year.

At this time, I'm showing no further questions in queue. I would like to turn the conference back over to Mr. Randy Potts for any closing remarks.

Thank you. The RV market continues to rebound, creating growth opportunities for us within both the motor home and Towable businesses. We're pleased with the progress we've made within the last year and remain focused on continuing that successful trend profitably. Thank you for joining our call this morning. We look forward to talking with you again on Thursday, October 17, when we report our results for the fourth quarter and fiscal 2013. Thanks again.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.