Q3 2020 Winnebago Industries Inc Earnings Call

[music].

At this time, all participate more than one in listen only mode.

After the speakers presentation, there will be a question answer session.

Ask a question during the session you would need to press Star then one on your telephone.

Please be advised of today's conference is being recorded if you acquire any further assistance. Please press Star then zero.

I'd now like the hand, the copper so to your speaker today.

James Stewart Director of Investor Relations. Please go ahead.

Thank you operator, and good morning, everyone.

Joining us today to discuss fiscal year, 23rd quarter earnings results I'm joined on the call today by Michael Happy President and Chief Executive Officer, and Brian Hughes, Vice President and Chief Financial Officer.

This call is being broadcast live on our website at Investor got WG, Oh Dot net and a replay of the call will be available on our website later today.

The news release with our third quarter results issued in posted two or let's say earlier this morning.

Before we start I'd like to remind you that certain statements made during today's conference call regarding Winnebago industries and its operations, maybe considered forward looking statements under securities laws.

The company cautions you that forward looking statements involve a number of risks and 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 FCC filings, which I encourage you to read.

With that I would now like to turn the call over to our President and CEO, Michael Happy Mike.

[noise]. Thank you, Steve and good morning to everyone on today's call.

It's hard to believe how much has transpired in the last three months since we held a similar event.

We sincerely hope that each of you on your families. This morning are staying safe and healthy during these unique times and we especially appreciate your interest in Winnebago industries and taking the time to join US This morning.

Today, I will briefly share with you at Winnebago industries has been doing relative to covert 19.

And then provide an overview of our third quarter results.

And our perspective on the balance of our fiscal year 2020.

I'll, then turn the call over to Brian Hughes, who will provide more details on the financial results.

I will then returned to offer some closing comments before we conclude the call with our Q a day session.

Before we begin todays discussion I would like to offer a variety of thanks relative to our ongoing navigation of the Corona virus pandemic.

First Brian and I want to thank our more than 5000 employees in the Winnebago industries family of brands for their impressive response to the coal that 19 environment. As we continue the process of returning to work in a thoughtful and safe manner.

In the face of uncertainty and dynamic market conditions, our teammates continued to demonstrate resilience determination and care daily as we balance productivity and efficiency was safety and health.

There have been countless moments of inspiration as our employees make cost mass phase shields contribute to fellow employee assistance funds and engage our communities with acts of charity to help their neighbors.

In the face of these challenges that commitment and dedication of our team have been a central to our ongoing pursuit of the vision to make Winnebago industries, a leading provider of outdoor lifestyle solutions a reality.

Secondly, we would like to thank the first responders healthcare providers public health officials and local leaders in the communities our employees live work and plant.

These stakeholders have played a vital role in ensuring that the counties cities and towns we call home are navigating through this pandemic crisis as effectively as possible and ensuring that those most vulnerable to this challenging virus are protected and cared for as much as possible. They.

Thank you to these everyday heroes.

Now prior to the impact of covert 19, Winnebago industries was well on its way to driving strong financial results for fiscal year 2020.

Building on the momentum we had created the last several years.

As we discussed on our last call in mid March as covert 19 related stay at home orders were put in place across the country. We began to witness significant disruptions across most of our dealer network supply chain and to our end consumers.

In response, we took immediate and decisive actions to control costs and maintain our financial strength and flexibility by making the tough but necessary decision. The week of March 20, Threerd to temporarily suspend most production activities across all our facility.

These.

At one point in time, we have more than 4000 employees. Unfortunately furlough.

Beginning with our specialty vehicles and Chris craft businesses in mid April our full portfolio of Winnebago industries businesses eventually resume production activities in a disciplined and graduated manner during the month of bad.

As consumers began to emerge from stay at home orders and as other covert 19 related constraints were lifted that affected our dealer networks. Our company started the process of adapting to new safety protocols and establishing a new normal operationally as we return to work.

The most important aspect of this new reality has been to ensure the health and safety of our employees and other key stakeholders as we work to ramp up production across our portfolio.

This includes educating and training our employees on best practices to prevent the spread of the Corona virus inside and outside the workplace and developing a longer term plan to manage through potential future waves of the pandemic.

This is a daily battle to guard against social complacency, and fatigue, along with inconsistent outside leadership messaging and roll modeling to embrace the proper protocols that keep our employees and their families safe.

Along with our Vice President of an enterprise operations, Chris West I have had the opportunity now to visit almost all of our facilities across the company to witness firsthand, how our employee health protocols are being blended with the productivity needed to meet rising demand.

In fact, I hit the road in one of our Winnebago branded class B vans for the trip to Indiana last month experiencing the feeling so many Americans are now demanded of being outdoors in a safe manner.

During this period, we also developed a comprehensive plan to help US identified Kobin 19 related supply chain risks and mitigating activities to help our brands manage through the disruption on a sustained basis.

Coordination and close communication with our vendors and supply chain partners allowed us to stay in lockstep throughout this process and was a key element in our successful restart in may.

While still managing through some delivery challenges here and there most of our supply chain remains reliably reliable currently.

We're also using the crisis proactively as well to continue to improve the efficiency of our operations.

Recommit to higher levels of disciplined and production planning versus confirmed orders and rightsizing, our fixed cost to our future business prospects and profitability aspirations.

We have also remained in close contact with our dealers to monitor and assess how the pandemic impacted their businesses and what changes in consumer buying behaviors. They are at or seen in real time.

Our dealers have been truly extra ordinary during these last 100 days facing what appeared to be initially and existential crisis in April adapting quickly to engaging consumers in a digital fashion to meet available demand and then ramping up safely with their teams to me what has now emerge.

As an unexpected but highly welcomed strong wave of first time, our beers and voters this late spring and summer.

We continue to work hard every day to serve the needs of our dealers in a surprise relative fashion.

And we want to say thank you to those channel partners for their continued support of our brands.

Finally, we continue to prioritize a disciplined approach to our financial management of the company as we closely followed the market to stay ahead of any significant disruptions.

As the impact of Coven 19 continues to evolve we are confident that we have sufficient cash on hand and liquidity to navigate the crisis, while remaining committed to keeping our teams safe as we continue to support our dealer partners and consumers. We are also highly aware of the debt structure we have.

If you're at the company and are working diligently with Brian's leadership to ensure that our future leveraged strategy is considerate of any profitable growth opportunities, but he is especially designed to navigate any unanticipated businesses disruptions that could occur in the future.

Undoubtedly the past few months had been a challenging time for everyone in the outdoors industry and for Winnebago industries specifically.

Our entire third quarter really straddled the worst of the Pandemics impact to date within the US I believe we're the first RV company to report for the month of March through May If you break down RV industry performance on a monthly basis in March we saw a 20.2% decline in retail.

Well sales compared to the prior year and most notable was April where the industry experienced a 53% retail decline over the prior year period.

I will speak in more detail in the closing comments sections, but we have seen an incredible rebound in retail demand and dealer demand since early med across all our businesses as you can see by the backlog numbers referenced in our release in fact, we received this morning, our latest retail for the for the latest week.

In June and its as high a cop percentages, we have seen in the recovery today.

We have continued to revise our production rates on various productive product lines to ensure that we can meet that demand that a disciplined safe manner in future quarters. We believe the current momentum in the marketplace is seasonally sustainable for the remainder of our fiscal year and potentially through the rest of the calendar year.

Turning now to our consolidated results for the third quarter, which again span. The most intense portion of the coven 19 pandemic to date in the US consolidated revenues for Winnebago industries were $402.5 million for the third quarter of fiscal 2020 down approximately 24% versus.

The same period in fiscal 2019.

Excluding neumar consolidated revenues were $314.5 million down approximately 41%.

Even while dealing with the impacts of Cobot 19, our Grand design business Neumar branded motor homes in our Winnebago branded class B products. All continued to build on their trend of gaining market share our ability to outperform the market is consistent with trends we were seeing prior to the pandemic and we are.

Optimistic that we will continue to do so in the final quarter of the fiscal year 2020.

Year to date operating cash flow was $162 million, an increase of 96% versus the same period in fiscal 2019 as a result of implementing measures to preserve cash, including taking advantage of our highly variable cost structure curtailing, our capital sped and executive and.

Floyd compensation cuts, we have been able to grow our cash levels in the quarter another $30 million to an end of may position of approximately $152 million.

As important our 193 million dollar ABL facility remains on tap now, let us turn to the segments in more detail in the towable segment revenues of $189 million for the quarter were down 46% from the prior year period, primarily driven by the suspend.

For the manufacturing and the disruption of consumer buying patterns related to the covert pandemic. The appeal of our Grand design at Winnebago branded Towables products has allowed us to once again outpaced the industry and gain retail market share.

Adjusted EBITDA margin was 8.7% in the quarter, largely reflecting de leverage and cost impacts related to covert.

Towable backlog for the quarter increased approximately 87% in units over the prior year period, reflecting a strong rebounded dealer demand in may since April was the period, most impacted by cobot driven by strong retail sales recovery in may.

In recent quarters, our multi branded portfolio has proven to be resilience and successful in gaining towable share regardless of market conditions. While there is clearly uncertainty regarding near term industry and consumer dynamics. We are confident in our long term prospects to grow the business and to increase share demand for.

Our towables lineup remains strong and reflects the continued to appeal of our brands with consumers now, let us turn to the motor home segment with our refreshed lineup of high quality motorized Rvs and the addition of new Mars premium brand to our portfolio, we are positioned to more effectively compete.

In the high end motor home market and our motor home segment is more balanced and competitive than ever the acquisition of new Maher has already resulted in gains towards restoring our motor home business to a leadership position by adding it's highly respected luxury brand to our portfolio. Despite.

Challenges posed by the covert 19 pandemic the integration of new Maher into the Winnebago industries portfolio is proceeding as planned.

The company remains focused on ensuring that neumar further expands its industry leading position in the high end motor home market.

In terms of segment results third quarter Motor home segment revenues were up approximately 27% from the prior year period, excluding neumar organic revenues decreased approximately 28% again due to the coal that 19 related impacts we have discussed.

Adjusted EBITDA margin decrease the negative 5.3% in the quarter largely due to de leverage and cost impacts related to covert partially offset by the addition of neumar and the mix in the Winnebago branded portfolio driven by strength in our class B motor homes.

Our motor home backlog increased approximately 99% in units from the prior year due to the addition of Neumar.

But also a strong rebounded dealer demand in May since April was the period, most impacted by cobot driven by strong retail sales in may.

The cobot impact to our business was material it poses a threat to our employees health it forced us to suspend operations and it demanded that we take swift action to preserve our liquidity.

During this time, we also took a hard look at our fixed cost structure in the Winnebago branded motor home business. The result of this review led to an eventual severance in other words permanent removal of some winnebago motor home personnel, the $1.4 million restructuring charges noted in our EBITDA to adjusted EBITDA.

Reconciliation.

As many of you may recall, we announced the closure of our junction city manufacturing facility at around this time last year that decision was made in the interest of cost savings to help improve the overall profitability of the motor home segment ongoing annual savings of $4 million are expected starting in fiscal year 2021.

Our new diesel line in Forest City, Iowa is nearly complete with new production plant for first quarter of our upcoming fiscal year 2021.

Several weeks ago, we made the decision to complete the process and close the junction City factory service operation.

We have worked with dealers in the Pacific Northwest region to take in customers, who would have otherwise used our service facility in Oregon and provide them an alternate high quality experience.

While these decisions are always hard we believe we continue to make the right decisions in the long term interest and health of our motor home segment.

With that overview I will now turn the call over to our Chief Financial Officer, Brian Hughes to review, our fiscal 2023rd quarter financials in more detail Brian.

Thanks, Mike and good morning, everyone as Mike mentioned earlier, the coated 19 pandemic and the related shutdown of our operations in the quarter combined with the disruption to consumer purchasing pattern.

All weighed heavily on our third quarter results for fiscal 2020.

I'll repeat a few of the key financial metrics that Mike already stated earlier.

Consolidated revenues in the third quarter were 402.5 million, a decrease of 23.9% compared to $528.9 million for the fiscal 2019 period.

Excluding neumar, we saw topline organic revenues declined 40.5% versus the same period last year.

Gross profit was 32 million down from $86.6 million in the fiscal 2019 period gross profit margin decreased 840 basis points in the quarter due to deleverage and mix as more profitable towable segment load more than the motor home business.

Good also impacted by the mix shift from the new more acquisition.

SG in a included amortization for new Maher of 4.7 million in the quarter.

The amortization related to new more in Q4 will be approximately 1.4 million.

We have historically discussed in public forum, the variable nature of our cost structure.

Estimating that it was approximately 85% variable 15% fixed.

The highly variable nature of our cost structure with substantiate in the range of 85% through our third quarter results.

We were also able to favourably impact our fixed costs through certain cost containment measures.

The operating income line showed a loss of 8.2 million for the third quarter compared to operating income of 49 million in the third quarter of 2019.

We had a net loss of 12.4 million in third quarter compared to net income of 36.2 million in the third quarter of last year.

Reported net loss per diluted share with 37 cents.

Compared to reported earnings per diluted share of $1.14 in the same period last year.

We have provided adjusted EPS performance as a comparable metric to clearly illustrate our performance.

Adjusted net loss per diluted share with 26 cents in the third quarter.

Compared to adjusted earnings per share of $1.14 in the same period last year.

Excluding approximately 3.3 million or 10 cents per share of noncash interest.

$1.4 million or four cents per share restructuring costs.

And a favorable 200000 or one cents per share true up of Neumar related acquisition costs.

These adjustments when netted for the respective tax impacts total in 11 cents difference between our reported diluted EPS and our adjusted diluted EPS.

Consolidated adjusted EBITDA was 4.1 million for the quarter compared to 55.9 million last year.

The decrease of 92.7%.

Now turning to the individual segment.

Starting with the Towable segment revenues for the third quarter were 188.9 million.

Down from 346.8 million in fiscal 2019, primarily driven by the suspension and manufacturing and the disruption to consumer buying patterns due to cope in 19.

Our total lineup resilience and popularity with consumers in particular Grand design as again enabled the brand to gain market share. Despite cobot 19 related impacts to consumer buying behavior.

Winnebago industries unit share of the North American total market on a trailing three month basis through April 2020, excluding folding in truck campers was 10.7% an increase of 2.0 share points over the same period in 2019.

Segment adjusted EBITDA for the third quarter was 16.5 million down 71.2% from 57.2 million in the prior year.

Adjusted EBITDA margin was 8.7% in the quarter driven lower versus the prior year period of 16.5% by deleverage caused by the Cobot Cupid 19 pandemic.

Turning to the motor home segment.

Our motor home revenues were 203.6 million for the quarter up 43.4 million or 27.1% over the same period last year.

Excluding new modern motor home revenues were 115.6 million during the third quarter driven by market share gains from the rebel trovato bolt in the recently introduced Solus brand in our market leading class B lineup.

But this was more than offset by the volume impact of coping 19.

Segment adjusted EBITDA was a loss of 10.8 million for the third quarter down from 0.4 million in fiscal 2019.

Adjusted EBITDA margin was negative, 5.3%, primarily driven by deleverage and cost impacts related to covert 19, partially offset by the addition in new Mark and mix in the Winnebago branded portfolio driven by strength in our class B motor homes.

Turning to our balance sheet as yet as of the end of the third quarter. The company had outstanding debt of 465 million net of the convertible note discount of 77.6 million in debt issuance costs of 10.9 million.

Working capital was 299.8 million.

Our current net debt to adjusted EBITDA ratio was 2.5 time higher than our previous quarter end and higher than our targeted ranges 0.9 times the 1.5 times.

This ratio was impacted by the lower adjusted EBITDA results. This quarter that were driven by the unprecedented series event related to the cobot 19 pandemic.

On the other hand cash flow from operations was 162.4 million for the nine month of fiscal 2020, an increase of 79.6 million over the same period in fiscal 2019, driven by favorable changes in working capital.

Our disciplined approach to preserving cash during this period was critical.

Taking advantage of our highly variable cost structure implementing other cost containment measures and eliminating discretionary spending was all highly effective.

As Mike mentioned cash on hand at the end of the quarter Rose to 152 point.

152.5 million, which was 30 million or 24.4% higher than the pre cobot February balance of 122 million.

We think the positive evolution of our cash balance during third quarter to be a good demonstration of the resilience of our business model and speaks well of our team's ability to react in the face of a crisis.

The effective income tax rate for the third quarter was 25.3% compared to 19.4% for the same period in fiscal 2019.

The increase was primarily due to a pre tax loss in the current quarter and a favorable impact in the prior year of R&D tax credit.

We expect our annual effective tax rate to be approximately 19% on the under the current tax code and before consideration of any discrete tax items that could occur in Q4.

On May 19, 2020, our board of directors approved the quarterly cash dividend of 11 cents per share payable on July Onest 2022, common stockholders of record at the close of business on June 17th 2020.

Before I turn the call back over to Mike I want to reiterate our commitment to ensuring that we maintain sufficient liquidity going forward as mentioned we ended the third quarter with approximately $153 million of cash and we have access to a 193 million.

Now that remains untapped.

We are confident that the combination of our cash position and our ABL will provide winnebago industries with sufficient liquidity to allow us to navigate our go forward obligations.

We also work with our strategic banking partners on an ongoing basis to evaluate our current debt portfolio and determine alternative to optimize our capital structure.

That concludes my review of our quarterly financials and with that I will now turn the call back to Mike to provide some closing comments Mike.

Thanks, Brian.

I would like to conclude our comments this morning with our views of the health of the broader outdoor and specifically RV market. Some thoughts on the Companys financial outlook for the balance of the fiscal year.

And a comment on an area Winnebago industries is committed to improving.

Despite our third quarter financial results being significantly impacted by Coven 19, we were pleased with the relative performance of our diverse and balanced portfolio. During this unprecedented market cycle.

We learned a great deal in this short period. It has served as a catalyst to reinforce the strengths of our business model in terms of our manufacturing processes supply chain relationships variable cost model dealer partnerships and especially the resilience of our premium brands we.

We have much work to do to continue to realize organic potential competitively financially and culturally.

But we have designed a solid foundation from which to develop a stronger future.

Now it is no surprise to any of you on the call, but all recent than current indicators signal a very strong recovery for outdoor recreation product demand is in process. This summer.

From camping in our views to fishing boats consumer interest in the outdoors and investments in these discretionary durable goods products have been robust.

There have been much discussion about the influx of new consumers to these outdoor spaces. Both in terms of purchases, but also in the more experienced total rental and sharing sides of the outdoor business.

As the states continue to carefully manage the openness of their communities and activities Americans are voting with their wallet and time that the outdoors is the place to be.

Extra ordinary and safe experiences with select family and friends in the outdoors.

These are positive developments for our industries in the short term and as importantly set the stage for possible continued healthy market conditions for our products in 2021 as well.

Today's customers are tomorrow's advocates.

During the month of May RV retail results turned positive year over year for our company.

And that momentum has only continued to six sequentially decrease into June.

As has our backlog position.

While travel trailers in the towable segment in class fees in the motor home segment have certainly led the way. We are also seen our other product categories grow in the right direction as well our luxury brands, new bar and Chris craft have seen some of their strongest retail in order weeks in men.

Murray occur in recent times.

This is not only a first time buyer and value buyer market at present, we are seeing aspiration all in step up buying occur as well.

All our businesses our scrutinizing their robust backlogs.

Production plans lead times for delivery and adjusting rates and schedules as necessary to safely meet demand in the future.

There is no one answer as to what our production rates are or will be in the future as they continue to be very dynamic and disciplined relative to what's happening in the market.

The outlook for the RV industry, certainly has been volatile. These past several months. The next several months will witness Oems and suppliers trying to keep pace with dealer demand as a result of consumers flocking to the RV space and dealers trend to shore up low inventory levels.

Dealer inventories were further improved by the OEM shutdown period in April and have continued to stay low as retail trends have in some markets overwhelmed lot inventory at some retailers.

We are not seen signs of dealers looking to abnormally increase their inventory levels above and beyond current retail trends.

We anticipate that the industry should see collective positive retail trends for most of the remainder of calendar year 2020.

With wholesale shipments trending slightly above retail in the summer in early fall period as dealers work to elevate inventories a bit.

The weight of this trend will favor the towable segment versus the broader motor home segment, but there should be winners in both categories.

We believe that our brands at Winnebago industries can collectively continue to take market share. However, we cannot comment at this time on what a reasonable overperformance number arrange might be given the volatility of the market.

And we see no systemic reason that our business within our business that says profitability will not return to where we wanted to be pre covert 19.

It will take time, but it can and it will return to those levels that we see stable healthy market conditions in the quarters ahead.

We do recognize that the challenges the country is facing related the Corona virus are still driving a degree of uncertainty around an economic recovery.

Many of you are aware of the increasing number of daily cases occurring in many states around the use.

Please note and understand that any unforeseen economic impact would most definitely changed the perspectives I just shared such as a second wave of coal bid that may have an impact like what we saw before.

We are especially focused within our workplace on how to identify possible cobot cases or exposure to covert cases as quickly as possible and we execute appropriate contact tracing and quarantining if necessary to mitigate the possibility of an outbreak in our facilities and keep our teams safe.

And we know that the variable cost management playbook that Brian described can be turned to again by our businesses if necessary.

In closing on our business, we remain focused on safely returning to full operations across all of our campuses in doing so the health and safety at Winnebago industries employees and our business partners will remain a top priority for our management team, we are committed to being decisive in taking.

The necessary actions to protect our employees.

Our commitment to our core strategic enterprise priorities remains intact and we are focused on ensuring we continued to provide innovative and high quality products to our channel partners across all our brands. We are proactively taking steps to adapt to this evolving situation and are looking to not only survive the current and.

Firemen, but to thrive and what is for all of us a new normal going forward.

As mentioned earlier this new normal will require us to be diligent on how we manage our expense structure and our ongoing liquidity.

Our disciplined approach to managing our manufacturing production rates to retail demand, maintaining a highly variable cost structure and evolving and strengthening our balance sheet gives us strength and positions us well to create shareholder value as we come to the end of fiscal 2020 and move into 2021.

One last overall comment.

As many of you know we have a small office in the twin cities area of Minneapolis and Saint Paul.

This region has garnered much attention this summer with the senseless and tragic death of George Floyd in our community.

And while less than 2% of our total Winnebago industries employees live and work in the twin cities area.

Thus systemic issue of racial and justice and discrimination is present across all the geographic communities. Our company has a presence and and is relevant to all Americans.

It is unacceptable and we together as citizens and neighbors must make positive peaceful change in the right direction.

We are extremely proud of the progress we have made at Winnebago industries to improve our business from a strategic and financial perspective, I firmly believe we are better in many dimensions than we have ever been.

We are attracting more consumers than ever to our brands and that end customer base is becoming increasingly diverse the outdoors is appealing to people of various backgrounds and it must appeals of people of various backgrounds going forward.

But this alone is not enough.

In early June our leadership issued statements to our employees and publicly on our corporate website that essentially said, we can and we must do better.

Leadership, and especially me need to do a much better job as business leaders and community members in accelerating and improved culture of diversity and inclusion within our company.

Our progress in this arena has not been strong enough yet amidst all of our other priorities.

Our employees, our talented and engaged caring and determined.

But we can and will improve in how our leadership team and all our value teammates across the enterprise.

Better reflect our evolving customer base.

How we ensure a work environment, which provides equitable opportunities to all employees to reach their potential and we provide a healthy environment for the unique opinions and background for those that are present on our team.

We look forward to humbly listening and learning.

To partnering and planet.

And putting words in the action in the future in our company.

My hope is that our peers in the outdoor industry will commit with us at Winnebago industries to do the same.

Doing better and together elevating our industries, but importantly, strengthening our unity in the communities.

There is much work to do.

But I would be remiss in not mentioning this critical subject. This morning, as an imperative now going forward.

Thanks, very much for your time and thanks again to the Winnebago industries team for their tremendous work.

I will now turn the line back over to the operator to take questions.

Thank you as Green line going to ask the question you only need to pass Star then one on your telephone to withdraw your question. Please press the pound pool.

Our first question comes from the line Craig Kennison with Baird. Your line is now open.

Hey, Thanks for taking my questions I wanted to ask Mike If you could put a numerical estimate on.

Retail growth in May and June for either Winnebago or the industry.

Yes, good morning, Craig.

I am a bit nervous and giving you that numerical estimate because of how dynamic things continue to be in some of the uncertainty about what the future could be I can I can share with you and everyone else on the call this little bit.

Our April retail drop was relatively similar to the rest of the industry.

In fact, there wasn't as future gap in performance as we've seen in past months within our our company and that to us essentially indicated that because especially of the disruption to businesses and consumers will stay at home orders.

Let the drop in retail was pretty equitable across the industry.

However, we did see beginning in late April and especially the first week of May.

A significant and steady recovery sequentially throughout that month.

And it continues into the month of June and as I mentioned early in my comments. This morning, we just received retail for.

Weekend during this last Saturday or Sunday, and it was our highest comp.

Year over year that we've seen in the recovery.

I would share with you. This that I think the industry has a chance in the month of May too.

Be around even.

In retail performance, we'll see what the US OSI reports say when they come out.

And in the month of June I believe that retail performance for the industry will be solidly in the up double digit range.

I don't want to comment much further probably pass.

June or July.

As I also commented I do believe that the retail momentum can sustain itself through the summer.

And im hopeful that the retail momentum can positively comps through the rest of the calendar year I think we're all a bit nervous about potentially the fall and winter as it pertains to.

The impacts of ongoing.

Evolution of the of the virus and and may be flu conditions as well.

We do believe that wholesale shipments will.

In over a period of time exceed retail.

As dealers begin to stock inventory at a little bit higher level as as Oems catch up to the retail demand as well so.

But they were a little Leary right now Craig to give you an estimate numerically on what the future will be.

But I do believe June as an example will be up double digits for the industry in retail and I believe Winnebago industries performance will continue to show.

A market share advantage when those numbers are reported in the future.

Thank you and then as a follow up maybe I'm sure you're seeing an influx of first time buyers Im wondering if you can quantify.

The mix of first time buyers in specifically what.

Winnebago can do to convert those people who seem to be testing. This industry is the lifestyle and convert them into permanent long term customers.

Yes, the topic of first time buyers has certainly been one that has been visible within the industry and in the media and.

We do believe it's a real phenomenon.

We do not.

Track that specifically on our retail registration cards.

This is probably challenged us that we can do a better job in that area our feedback on.

New first time buyers.

In the industry is mostly anecdotal as we talk to our.

As we talked to our dealers around the country and as you can imagine they have a good idea of that and at a specialty presents itself when a consumer doesnt come in talking about trading in a unit or trading up from a unit.

We have a broad lineup as you all know we sell everything from 20000 dollar travel trailers to 1.2 million dollar in a luxury rvs and three quarter million dollar boats and so that the percentage of first time buyers varies by product segment within our business.

But on average we believed in past years that that has tended to run around 30% to 35%.

Of the buyers in the past several years have been first time buyers, we believe in several categories.

Especially on the in the Towable segment.

That number has increased materially potentially closer.

To 45, or 50% and maybe even higher in some of the lower price point categories, It's not that high though on some of the higher price.

Or potentially motor home categories. So again, the number for us is a blend of different.

Factors, but I definitely believe that it is trending higher we believe that's a good thing in the short term certainly with the retail demand were seeing but we.

I'll answer your second question here, we believe that can be a very positive thing in the future as well if we can get these consumers to stick in the the are being or the boating lifestyle.

The best thing that Winnebago industries can do.

To ensure that the consumers stay in the the lifestyle is to build a high quality product.

And we believe that's one of our differentiating elements of our business model versus.

Most of our competition, we certainly fall down at times, but.

But we believe a high majority of the time, we produce a quality products that are our customers can count on.

The second thing we can do is worked very carefully with our dealers and closely with our dealers to ensure that the service experience when something does go wrong.

As a satisfactory one for that in consumer and that ranges.

From everything from technician training to available documentation on.

The components within our products to especially delivering parts on a timely manner to our dealers.

So I believe we build a high quality product, which I believe our brands too and we can partner with our dealers to offer an acceptable service experience that will continue to see a majority of those consumers like we have in the last decade stay in the lifestyle.

Great. Thanks, Mike.

Correct.

Thank you. Our next question comes on the line of Scott Stember with CL King Your line is now open.

Great. Thanks, guys for taking my questions.

Good morning, Scott Scott.

Maybe you could talk about the core Winnebago motorized product.

Yes.

And sees.

You talked about it you alluded to the fact that.

Through the to the fact that it seems.

That part of the business was also recovering right now maybe just talk about again, how cesar doing in recent weeks and gas A's and traditional winnebago.

Diesel.

Yes.

So first of all.

Scott I do want to address class sees if you look at the.

The supplemental information with our release. This morning, you will see in the motorized segment. They a significant drop on class season, I want to point out that.

Certainly the volume this year is not only impacted by you know what what transpired in the quarter relative to covert 19, but we also saw a pretty significant shift in rental order disruption.

In the quarter as well the majority of our class of our rental business historically has been classy business.

And that was disrupted pretty significantly in this quarter in fact, we had several rental players who.

Cancelled or pushed out some orders there.

Now as I look at recent.

Class C retail.

For the Winnebago brand.

The numbers are the numbers are significantly better at retail than what you see in the report that we released today for the third quarter.

Our retail increases.

In the month of May late May into June on class Cds are solidly favorable by double digit percentages.

At retail positive ones.

So that that category is certainly healthy we believe in the market currently.

And we believe that our shipments.

Well recover from the low level that we experienced in the third quarter.

We also have the introduction of several super see models from our new Neumar business that are happening as we speak as well and we are beginning to retail those in the marketplace as well here in the last 30 to 45 days.

The motor home business has definitely been slower in recovering at retail then towables here in the last six to seven weeks. However, it is beginning to recover very nicely.

And I'll just shared this data points that.

The new more business had perhaps one of its highest single weeks of retail in recent memory a long time here just recently.

Earlier this month.

Our Chris craft business, just to give you an idea as to the sort of the luxury brands rebounding our Chris craft.

May retail was the highest it's been since we've owned Chris graft in a single month and it was higher than any other months that they're aware of here in the last five leases. So while the recoveries started with those value products in those opening price point products.

We are beginning to see.

Consumers across the spectrum begin to begin to step up I think the health of the stock market and the equities market. Scott has been quite helpful. With the class a segment and some of the recovery. We're now starting to see there I think.

People with balances certainly retirement portfolios investment portfolios.

Our more comfortable with the status of the market and willing to make investments now in some of those high end motor home or both segments.

Given increased confidence in how the market has performed.

Got it and when factoring in some of the restructuring.

You guys alluded to earlier, maybe talk about where do you see motor home profit going.

Going forward.

Are there any incremental savings from some of these.

These maneuvers that we should look outward.

Well, we've highlighted and mentioned again today the savings you'll see from the decision on junction city.

And I also commented generally that we don't see anything systemically within our business that says we cant returned to the profitability levels that we had projected going into the pandemic.

As you all know we've been working on motor homes segment competitiveness and profitability for some time and we continue to make the moves that we think are right for that business that includes.

Increasing the percentage of variable cost in that business versus fixed which means we've been addressing the fixed element of the business and very candidly as I also indicated we are also scrutinizing the amount of labor, we need in that business as our manufacturing continuous improvement initiatives have taken hold.

And productivity increases we have strong goals for profitability to improve in the Winnebago branded motor home segment, and if you will recall the new Maher business brings accretive profitability in the motor home segment and once again, we get back to some semblance of of us.

Stability and normalcy, there as well, we think you'll continue to see the profitability of that segment.

Improve could it ever reached the level of Towables.

Segment, that's probably a more difficult challenge.

But Scott we see no reason why we can't again as things start to stabilize here. We don't see any reason why we can't get back to continuing to improve the profitability of our motor home segment.

Got it and just one last quick question New product development for 2000 were product into the introductions for 2021, how will that be done this year will there be an open house.

I know discussions are ongoing within the industry about the open house event in September in Elkhart.

And I don't think anything has been completely finalized our firmed up but I.

I would imagine communication around that timing topic will be forthcoming here and in future weeks.

We are evaluating obviously our presence in all retail or trade shows this summer and fall to make sure that our employees, who represent our brands and certainly our dealers and our end consumers can be safe in those environments.

We have not taken our foot off the pedal on new product development at Winnebago industries in the last 100 days that was one of the decisions. We've made very early on with our business unit leaders was that we'll do everything we can obviously to manage the business financially in a.

An exhaustive manner.

But that we wanted to stay aggressive on the product development side.

So we're not seeing delays in new product introductions in the coming months or the next fiscal year or two as a result of the pandemic.

If anything I would tell you have conversations I've had with a few of our business leaders and in the last week I think the creative juices are flowing about how we can.

How we can design some new products that take advantage of.

The new consumers coming into the outdoor space.

And what those consumers are generally looking forward. So so we continue to be optimistic about our ability to bring.

Hi value innovative products to the market.

Got it that's all I have thank you. Thank you Scott.

Okay.

Thank you. Our next question comes on the line as Steve O'hara with Sidoti and company. Your line is now open.

Hi, Thanks for taking my question.

On Wednesday morning, Steve.

Good morning, just I'm curious about you know class B, and obviously that was pretty strong in the quarter.

In terms of units.

I mean is or I guess I can understand why class they would be up with new mark coming in.

You explain class C class B seemed very strong relative to even told bull.

I mean, I know thats been a.

Now stand out for you guys, but was there something else going on in the quarter that kind of let you or made you able to keep producing where you couldn't others or.

Can you just tell me what happened there. Thank you.

Yes, Steve. Thank you for the question and good morning.

You'll recall, there's probably two factors at play here and the being transparent on one of them. If you recall and I'm sure. Many dual on the line today.

We had been experiencing some significant chassis availability issues.

A year ago and for periods are.

Even leading up to that.

And those that those availability issues a year ago are probably impart embedded in the numbers that you see in the release of for third quarter last year.

We have been seen better chassis availability and class B as we began the calendar year 2020.

And in our third quarter fiscal 2020.

We had the ability to make product and retail demand was significant especially in the wholesale demand was significant especially in the month of March and May when we were shipping product. We believe that the majority of the the increase though is driven by.

The competitiveness of the line, we have some great products in the the trovato the rebel.

The introduction of our new pop top camper van Solus has been ahead.

The van I drove to Indiana was the bolt.

That was a great experience.

So we continue to execute well with our dealers on a line of vans that.

Resonate very well with consumers and we know that this is becoming a more crowded segment.

And others in the industry certainly have aspirations to compete well in this arena.

But our team is very focused and I can only tell you that there are.

Significant new products in the pipeline ill that are coming to.

Attempt to sustain our level of competitiveness going forward.

Okay, and then maybe last one if I could squeeze one more in.

In terms of the outbreak and your restarting of facilities things like that.

He was talking about whether you've had outbreaks at facilities.

And then how long does it take the kind of.

Yes operations back up to the new normal once again, if you have an outbreak in a facility.

And just obviously you got to start up against slowly I would think and how will you think about that process, maybe going forward I think it's something it's probably going to be witness a long time.

Or at least for the next six months would say at least.

And the cost surrounding that.

Obviously, there is a human costs, but I guess, maybe just on the business cost. Thank you.

Yeah, I'll talk about of the process of keeping our employees say from the NASS, Brian to comment on any of the costs relative to covert 19 that we've been seen in the business but.

Steve I want to thank you for the question because.

I want to reiterate to everyone that this is the most important topic in our business right now.

I know many of you all well certainly want to know if weekend.

Meet the demand and capture.

Maximum revenue.

But our number one imperative here at the company right now is making sure that our employees are safe and it has to be going forward and so it does affect everything we're doing right now we've been very fortunate we've had some tremendous leaders.

Of different work streams within the company, who have been guiding us through the protocols necessary to keep our employees safe.

We have more than 4000 manufacturing employees.

Our office environment is and by the way most of those 4000 manufacturing employees are coming to work every day trying to help us meet that demand.

Our office employees.

Our less consistently in the office because many of them can do their work from home and we continue to embrace allowing them to do that.

But every day is a battle in the plans to make sure that we adhere to the protocols and we.

We have we have done a myriad of things obviously PE is in place.

At our employees are required to where in the manufacturing environment Warren common spaces in the office.

We obviously are asking our employees to be incredibly honest with us about how how they're feeling how their health has been who they have been exposed to temperature checks are required in all parts of our business.

Work has been redesign workstations to create more social distancing to reduce the amount of time that people are spending potentially in close proximity to their teammates in many areas we're tracking.

People's movements to ensure that we know who they are in touch with and I don't mean that.

The way that advanced privacy, but we want to know for employees are in close contact with in the work environment. So that is a case develops that we can make sure that we understand who might have been exposed I'm happy to report that the number of cases, and Winnebago industries relative to our employees, but relative.

To what we're seeing in the geographic areas that we have a presence it tends to be running.

Much better than what the local communities have been seen and the answer to your question is no we have not seen any outbreaks.

In a particular area of the company that has caused us to shut that area or department down for an extended period of time, if we do have someone who test positive for cobot or we suspect.

Maybe maybe at risk of having the virus there are significant protocols for sanitization in cleaning in the area that that employ was at but.

As you can imagine.

No.

We have separate and distinct facilities. So we're further dispersed even within a campus.

And that also.

Helped to mitigate that risk of contagion.

And so a just a one other comment there as it relates to the cost ongoing you know, it's really limited going forward here to the P.P.E. or the the unprotected equipment that we're issuing employees, which is is pretty de minimis.

The work flow itself that Mike referenced has not reduced our productivity or in a in said another way our number of units produced per day. So we have not introduced inefficiencies in that regard either and so when I look at the the all in costs.

Go forward, it's really pretty immaterial, Steve and I don't expect to a margin impact and notable margin impact.

As a result of costs that weve introduced to help keep our people safe.

Okay, all right. Thanks.

Very good color I appreciate it.

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

Hey, good morning Guy.

Mike just wanted to start with some comments that you made earlier should maybe little clarification on how you're thinking about retail for the remainder of the calendar year or the calendar year in total one.

Just trying to understand that when you said positive re talking about for the remainder of the calendar year are you, saying for the.

Calendar year in its entirety was that in industry number or or Winnebago number that you were discussing.

Yeah, I am hopeful that.

Industry retail for the remainder of our fiscal year and for the remainder of the calendar year will be positive I'd have to go back whiskey is here or do the math on the whole of those periods, but I believe that the industry retail for the remainder of our fiscal year and the calendar 2020 should be positive.

And as I mentioned in my answer to Craig's question.

You know in the short term here we are seeing.

No retail running at.

Significantly double digit it'll higher level in the in this years period than a year ago and so I also indicated that I believe Winnebago industries can continue to compete effectively and hopefully gained share in those two periods as well the rest of our fiscal year and.

The rest of our calendar year, we've had a lot of conversation with analysts for other stakeholders as to whether there will be pressure on winnebagos market share performance, given we have less of a presence in the opening price point segments, the the travel trailer segments, especially and.

We'll see how that how that turns out but we also has some areas where like class fees and some others, where we think a fifth wheels. We we have been outperforming so we'll see what the net is going forward. So Mike I hope. That's that's helpful. I as I indicated earlier I'm, a little leery to sit here to.

Today I'll tell you exactly you know we're running a variety of models you know high medium low here at our company no RV I has started to go that direction as well what their models.

We with every week that passes that we continued to see great retail demand.

I have become more optimistic that that that environment can be sustained for a longer period going forward, but I think it's premature for us to comment on what 2021 will look like when there are still some pretty significant macroeconomic challenges ahead of this country.

And I think the calendar third and fourth quarters and Ah. This health crisis has not completely played itself out yet as well so but our backlogs would certainly indicate increased confidence from dealers that the future market environment is gonna be strong.

That's helpful and then perfect segue. This <unk>. The other question I had just clarification was that you made the comment your backlog was higher at current than what we saw in the into may and any any quantification or from a relative standpoint, what that looks like today.

More higher [laughter], no we won't share a specific number but it's been like retail lets just continue to increase with every week as the dealers continue to try to place products and I know many of you are probably wondering how our lead times are too.

Tort dealers they vary by category.

But we are now seen you know.

The lead times to meet some of the you know the latest orders in the backlog.

Those are those are pretty extended now you know into in some cases on some products for three or four month range. So all of the OEM is working with our suppliers are trying to carefully certainly ramp up safely.

Production rates, where appropriate it does vary by product segment and line across the company and.

I will give our suppliers a lot of credit that they continue to do a very good job and giving us timely deliveries on most of our components.

We continue to see hiccups here or there but.

Everybody is trying to work safely.

And in the RV a boat industry meet this rising tide.

Thanks, Mike.

Thank you.

Thank you my next question.

A question comes from the line of Brad Andreas with Keybanc capital. Your line is not open.

Hey, Good morning, Mike just a question on the sustainability of this demand you mentioned earlier, so I think many of us its compared the demand to the multiyear growth that happen I'm around the September 2001 time frame and all the airline.

Peanut that caused.

Oh, I guess do you think that using history in that context is a fair analog for thinking about demand sustainability here.

Yeah. Thank you Brett good morning, I certainly wasn't in the RV industry. During the time period that you referenced I know some people that were and the they educate me frequently on on some of that history.

I do believe there are some really positive dynamics that lead to a probability for sustainment going forward.

Some of them are unique to this time and you referenced you know one of them in the sense of you know people getting on airplanes. A cruise ships are staying in hotels. The interest from the can from the in the consumer is is definitely lower than it has then potentially sense on.

Fortunately 911, but even in today's environment, it's different than 911, and why we're starting to see some appetite for traveling in those waste come back slowly.

Many surveys and studies in the last 30 to 45 days have shown that camping fishing RV boating are definitely been preferred as this year's flavor and maybe next year's flavor.

For the way of family and individuals will spend their discretionary a time interest rates a fuel prices you know again the stability. It seems that has returned to the stock market Theres a lot of really positive signs from an economic indicators standpoint truck sales are recovering.

You know so.

That all seems to bode well.

That being said as I continue to mention uncertainty around the health crisis and some of the other shoes that may be yet to fall in terms of the American economy, you know remain potentially in front of us, but yes as I just said I'm.

I'm increasingly optimistic that this recovery has has legs and the other thing that I know it will be touched on with you. All is the field inventory position in the dealer base is in really good position right now relative to what appears to be future retail demand and obvious.

For the industry worked on that during the back half of 2018, and 19 going into calendar 2020, I think the industry was in a much better position field inventory wise with the dealers and when the OEM shutdown for four to six weeks in April and retail kept going albeit at a at a much.

Lower level during that time period, you saw another chunk of inventory get sucked out of the field and so with retail coming back faster dealers are clamoring for product as they should be and.

Long term, there's a chance for dealer inventories and turns.

To be at a at a level where.

Some careful restocking of the dealer base will happen. In addition to just meeting retail demand right now so for all those reasons I am optimistic about the RV industry and the boating industry here for for the foreseeable future and these first time buyers could be a wave that sets the industry up for for good years go.

Going forward as well as they potentially step up.

Brian and I are cautiously.

Monitoring the macro.

Economic and health environment to continue relays continuously monitor if there any disruptive trends.

That could blow what I just set up we hope that's not the case, but I think we have to be honest that anything can happen considering what we went through in March and April.

Alright, thank you.

Thank you next question comes from the line Fred Lightning with Wolfe Research Your line open.

Hey, guys. Good morning, just on the supply chain side, I think that Mike you had mentioned some delivery challenges in your prepared remarks, but it seems like the supply chain holding up and you touched on sort of the class B chassis situation, but can you just talk about overall chassis availability in sort of the broader motorized segment are you seeing any issues.

There was some your suppliers.

Yes, I will confirm your initial.

Part of your question, which supply chain availability broadly.

Is hanging in there.

With respect to the people in the trenches at our company that.

That manage the production Oh process and work with our suppliers on a daily basis. There are there are hiccups that we manage through and work through respectfully with our suppliers, but the supply chain by and large has done a good job, helping us recover the area that we have seen the most disruption and continues to be.

Motorized chafee's and it has varied from manufactured to manufacture.

The supplier that had given us a lot of issues a year and a half ago on class B vans.

Has has improved in their availability to our company.

We have seen unfortunately, though some other suppliers on motorized chassis is has some challenges restarting their businesses, especially if they have operations in Mexico.

Either for parts or components for those traffic is already have their assembling those traffic is in their entirety in that region and so.

The auto industry, probably came out of the blocks a little bit slower than some of the other RV suppliers and for that reason we've had some production disruptions here in the last of three to four weeks relative to motorized chassis, but I don't view those as.

Again, systemic or things that will be structurally issues for a long period of time I think there there are a transitional challenges everybody's trying to.

Restart their business and match production to what what they're seeing demand wise in the market.

Okay, Great. That's that's really helpful. And this is sort of a follow up to a few other questions I'm going to ask getting a slightly different way I mean, if we look at the positive retail commentary that youve given on today's call lot of first time buyers and trying to category I mean, how should we be thinking about wholesale production for the industry relative to that prior peak in terms of justice.

For 500000 units are we talking about.

5% about that 10% about bad if we want to stream the dream what could that look like you think what the overall industry.

Yes, I respect the question ill.

And I know, we all remember the year that the industry shipped over 500000 units.

I'm not sure all of those 500000 units were responsibly ship to the market, but if we continue to see the RV lifestyle, especially in favor versus other means of travel or vacationing and I know what's been discussed in the last.

Month or two as well this continued trend in and work from anywhere work from the road using these products for multiple use cases, you can certainly make you can certainly make a case that you're you can see a very healthy wholesale environment for the next several years.

Hi, we're not going to come anywhere close to 500000 units for calendar year 2020 as an industry.

And.

But is there possibility of the health environment improves and.

The economic environment continues to improve that the industry can return to those levels someday, we'll certainly that would be a halt but.

But I think our company is staying very focused on first and foremost safety secondly product quality, a third matching product our production rates to demand and trying to.

You know increase our output.

On the products that are moving in the market. So we're gonna we're not going to take advantage of this opportunity to push products on dealers that they don't what we're not going to make open production.

With that doesn't have a name on it.

You know and hope itself.

We're going to continue to stay disciplined that may put our company at a slight disadvantage.

In this environment of losing some shipment chair.

But I believe over the long term, we'll continue to perform well at retail and and that pull environment will.

I will lead us to the right number from a shipment standpoint, but in spirit I agree with the optimism, but I think it's going to I think it's going to take a little while to get to a back half a million units of our we shipped a year.

Perfect. Thanks, so much.

Thank you. Our next question comes from the line right, So winning with Jefferies. Your line open.

Hi, Good morning, guys good morning grip.

A little bit I guess sort of more dive into the new consumer and you look at the average new buyer and you sort of compare them to the legacy RV buyer is this huh.

A higher FICO score consumer or lower our these people who might have previously spent their vacation dollars doing something else and are now shipped into this lifestyle or are these.

People, who are now maybe ceiling liquid given stimulus tax and becoming window with money in their pocket from that source.

Yeah, Brett Thanks for the question I'm not sure we know enough about the first time buyers to answer all of those questions that are that you listed there.

I my personal opinion is that they are trending to be a little bit younger a there tend to be more family oriented I don't think we're seeing people use government stimulus checks.

To get into the lifestyle I think those checks for those of folks have received them were used more pragmatically for current that are current living expenses.

We have seen retail finance companies.

The extremely thorough.

In the credit worthiness of the consumers, but yet we're seeing significant retail happening and so those retail finance entities are lending money to.

To those people that are looking to buy so.

I just don't know, we know enough yet as to exactly the composition, but I'm I'm thinking a little bit younger a little bit more family oriented and people that definitely have the ability to make it down payment or the credit nature to to get into the industry, Brian would you comment.

On any of the the retail financing environment that you've been able to learn from our.

You know about two is somewhat anecdotal, but what we're hearing is that the availability of credit is still certainly there I'm not hearing of instances where.

People are being turned away from a retail sale because they couldn't get a credit that finalized, but as you kind of alluded to Mike. We are hearing I'm, you know expectations on slightly higher credit scores and then probably even more relevant a longer process as.

The the providers of credit I'm focused on validation of employment and and ongoing.

Financial stability of the applicants so.

Those are really the anecdotal comments that were hearing.

Okay, and I guess, the timing you talked about your lead times in some categories getting extent sort of three four months.

What point in the summer I know, it's pushing into July so those would maybe be the libert early fall do either the consumers or the dealers start to get concerned about either missing. The use in 2020 are holding inventory from the dealer standpoint into the fall like when do we think and maybe it's extended this time because it's such a.

Shifting to cycle, but at what point do you think you're going to see a sort of a seasonal slowdown in that order book, just given that the delivery timing and the coming winter.

Yeah, I think it's a really interesting question because.

Many of US believed the timing of the the Experian show season for camping and outdoor activities is going to be extended this year.

You know in some parts of the country, it's a relatively short window.

You know here in Minnesota, you've got about 12, good weekends from end of May to the beginning of September to fit a lot of your outdoor activity.

But I believe you're going to see across the country people spending more time outdoors for longer periods of time and later into the calendar year and we're hopeful that because of that you will you will see consumers.

The open about.

You know being able to take product later in the calendar year than they generally have so so we'll see how that seasonality curve, maybe adjust out in calendar year 2020, because of what's happening I believe it will materially.

Okay away did a study that they released in early may that that hits. It at that I believe so so we don't know yet, but when you start seeing lead times for products that are three three to four months, you're the dealers definitely get anxious as as they should.

Because of the consumers are anxious to hear those you know those lead times as well. So so there'll be some natural tension with that there will probably governed a little bit of the the retail growth and I'm sure. All companies like ours will continue to try to find ways to safely lower those those lead times as we can.

The more sustainable. This is you know you will certainly start to see Oems consider.

More significant capital investments and and capacity adjustments going forward, but.

Again, we're hoping for a long outdoor season in 2020, and if we do not have an immunization drug before we hit 2021, we're hopeful that.

We're hopeful that the outdoor season gets going early in calendar year 2021, and last for a long time in that period as well.

Okay, great. Thank you.

Thank you.

Thank you our next question from the line from David.

Morningstar. Your line is now open.

Thanks, Good morning, Mike is it sounds like you're.

Maybe a bit more cautiously I have a bit more caution then your initial outlook on unit demand for the rest of the your implied.

And unemployment to me.

I mean, baskin scenario, probably goes down and then.

High single digits from here and I guess I know you've got premium brands second principally due to it to a point, but just I mean, how sustainable.

It is all this given unemployment staying in and that hot and that's why we've had an impact consumer confidence now.

Yeah, I mean again, that's that's the right question to ask David and good morning.

We're monitoring that carefully I think what will be important in determining the relevance of the unemployment level.

To our business will be what that unemployment pool looks like.

You know.

And there affinity for our products and.

Certainly if you see unemployment settle in the high single digits, you know to low double digits, that's not a good place to be at long term and that's why we're just being very honest with everyone that we continue to monitor a metric like that and try to see.

What the long term impact of that could be but that being said there are less choices for people, whether they are employed or not to spend their their savings or or their discretionary income to have great memories with families and friends those that they feel comfortable hanging with and I think our industries.

Pete very well certainly our brands are usually not always the first time buyers brands, sometimes they are but sometimes we earn the second third fourth or fifth purchased and we hope once they get into our brands that there that they are here to stay so.

You know again, we believe that.

The RV and boating industry has done a good job through the years of.

Especially the RV side of keeping.

Enough value products in the product portfolio to attract buyers that have the means to invest in the lifestyle and then I think it's the discerning brands opportunity to step them up.

Either on the retail lot or in or in future years.

So again I think were more bullish.

Then what the RV a shipment forecast says I don't think we're all that different from some of the rhetoric you've heard from some of the other peers in the RV industry or boating industry about the retail environment in calendar year 2020, I think wholesale shipments will be impart dictated by Oems ability to keep.

Bob and raise production rates safely.

We're just not ready to get too far ahead of ourselves with any thoughts on calendar year 2021, quite yet, we'll probably be more comfortable on our next earnings call with some thoughts there.

Okay.

Okay. Thanks that makes sense and just one more question can you benefits more than you already are more perhaps are not from the rental and sharing market, perhaps even in the point that you.

I would want to invest in.

Digital permits doing the sharing business or start your own.

Yeah as we as we commented in our and our prepared comments that sharing economy in that rental economy is experiencing all time high interest right now I'm sure. Many of US. So you know on are listening to this call have had friends or neighbors are family members that have have looked at some of those share.

Platforms, and or went to a dealer and and rented at RV or have reservations in the later in the summer to do so.

So yes, there's there's high demand for that we believe that that's a net positive that anyone who gets exposed to our lifestyle.

In experience has a higher probability of being interested in investing in the lifestyle in a permanent way going forward used inventory is extremely low right now in the market.

Dealers that they want more used inventory they can't get their hands on enough when they have it if it flies off the shelf.

Spoke with a boat dealer recently, who had a use product where he had three customers bidding for that use product and he was able to sell that product at a higher level than what kind of the U.S book value was we're not going to share any or offer any comments on what are our business development plans would be in.

In terms of.

You know investing in platforms like that but.

We do work carefully with some of those sharing platforms and we certainly we're carefully with our dealers as to what their rental fleets could look like.

Here going forward. So we anticipate that that the whole industry will benefit from that the.

Again, we offer free.

You know a quality lineup of brands for those discerning.

People in the lifestyle and.

You know.

We think we think we can compete effectively further part of the market that we want going forward.

Okay. Thank you.

Thank you David.

Thank you. Our next question comes from the line of Tim Conder with Wells Fargo. Your line is now open.

Thank you and gentleman you've answered a lot of questions provide right a lot of detail we greatly appreciate that.

A couple delay did want to follow up on back to the chassis is.

Specifically when when do you think this will be resolved for yourselves for the industry in the any color you can.

Add there to your previous comments and then the industry Mike.

Yeah again, it sounds like the industry continues to struggle to meet current demand. So when one do we think we get to that point and then to a it sounds like you're saying please.

Just to clarify if he could that it'll be the fall before we can get to the point of rebuilding and restocking to the appropriate level in the channel.

Yes, let me start good morning, Tim Let me start with your motorized chassis question.

I think many of those issues, maybe recently behind us based on.

Some of the information I'm hearing from on our on our team that works on the Motorways chassis relationships.

We're carefully monitoring that but I I think some of the issues we had that.

Disrupted some of our production here in the last three four weeks.

Was due primarily to.

Some of the restart issues. Some of these manufacturers had coming off of their own shutdowns and especially as I indicated in an earlier comment though is that may have had a presence outside of the country that had some particular challenges in restarting operations as quickly as they would've light.

We have great relationships with those motorized chafee suppliers.

And they're doing everything they can to increase their rates and meet our demand, but it varies by supplier as to sort of the rhythm of that availability and the intensity of those challenges.

But I, but again as we sit here today.

Yeah, we don't see any catastrophic challenges there in the near future.

Yeah, I do think the Oems are racing to keep up with demand.

And.

And I can't speak for some of the other competitors in the space I just know that everyday our teams are challenging weather to our production rates are right based on mix and based on a total backlog and confirmed orders and we have continued across the board too.

Our most lines increase.

Increase our production rate pretty continuously there have been some exceptions to that as we've managed through some things.

But I would say our business unit and operations leaders are thinking more about raising rates everyday than they are about taking them backwards I do believe it's going to be later this summer or fall when some of the OEM.

Production.

Our capacity you can catch up.

You know to potentially being a position to stock back some of the inventory levels in the dealer environment to a higher level that will vary by segment that will vary by manufacturer, but I think in macro we're going to spend the majority of summer racing to keep up with retail demand with our dealers and it'll be later in the year.

And we as we see retail naturally seasonally slow unit wise that we'll be able to I think work with the dealers to reset their inventory levels to where they think they want him to be going into the back half of the year.

Okay. Okay.

And and in the gentlemen.

One last question sort of related to the portfolio and your and your balance sheet again cash flow looking good even through the the trough here of the pandemic the impact at this point. So how do you think it sounds like you're looking at other actions to further shore that up.

And then a long within context of that how do you think about your current portfolio overall.

Have a products or I should say or areas that you're that your deterrent.

Are you referring to our capital structure in that question, Tim or are well wheel and capital structure, one which are maybe.

Any considerations any color you can give at this point on that Mr. Further hone improve your balance sheet, which again you'd said into right direction definitely but also just with assets. The assets that are in the portfolio would there be any consideration to rebalancing divesting downsize.

Same.

Some areas, obviously, you're adding just any color along that line as it would relate to Neil maybe and then kind of marry the two there.

Yeah, we continue to.

All right you know monitor liquidity, certainly and we feel that we stated in her prepared comments pretty comfortable with our progress through the.

Corridor and the increasing cash we experienced in the as we've cited we also have the E mail.

Turn to you know where needed.

Yeah, I guess, the only other comment I'd make I alluded to it you know, we're always meeting with our strategic banking partners evaluating our current performance, our near term and longer term forward views of performance and cash generation monitoring with them the capital markets to to determine.

You know are there opportunities.

For us to tap into those capital market to just further improve our position both in the near term and the longer term and optimize that capital structure. So you know those conversations continue they happen live you know all along their heightened during the last 100 days, but they continue.

Even in light of you know the strengthening industry performance of late.

How that translates into our view of the portfolio in you know as you know Jim we never comment on business development activities are the funnel.

We like our portfolio of brands certainly we've made that very clear and we'll continue to evaluate as we always do how those brands are positioned in how we might.

Further strengthened the portfolio through the brands or consider other brands that might make sense, but I guess that the limit to what I would elaborate on there must Mike has something to add.

To that portfolio question Oh, alright.

Thank you.

Thank you.

Thank you. This concludes today's question and answer session I would now like to time all back the things they look for closing remarks.

Thank you operator, and thank you again, everyone for joining our call today, we really do appreciate you spending your favorite your valuable time with us and we hope that you and your family stay healthy and enjoy the outdoors. This summer every day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

[music].

[music].

[music].

[noise].