Interview with: Bruce D. Hertzke, Chairman and CEO - featuring: their motor homes, self-contained recreation vehicles sold through dealers under the WinnebagoŽ and ItascaŽ brand names and used primarily in leisure travel and outdoor recreation activities.

Winnebago Industries, Inc. (WGO-NYSE)

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Customers are finding Winnebago Industries’ new motor hone more appealing because of its fuel efficiency and its maneuverability due to its smaller design with contemporary styling

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Consumer Goods
Recreational Vehicles

Winnebago Industries, Inc.

PO Box 152
Forest City, IA 50436

Phone: 641-585-3535

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Bruce D. Hertzke
Chairman and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
Published - April 12, 2007

Bruce D. Hertzke

Chairman of the Board and CEO
Winnebago Industries, Inc.

Bruce Hertzke started on the motor home assembly line at Winnebago Industries in 1971. While the hourly assembly position wasn’t exactly what Hertzke had in mind when graduating from Iowa Lakes Community College with an Associate of Arts degree in Business Administration, it was his only job offer at the time. Being an astute accountant, he knew an entry-level job was better than no job at all.

Hertzke was a quick study and quickly climbed the job ladder, working his way through various manufacturing positions and a few years in design and development. Hertzke then served as Vice President of Operations for 7 years and was in charge of 18 sub-assembly and final assembly plants. In December of 1997, Hertzke was elected to the position of Chairman and Chief Executive Officer and in 1998 assumed the additional position of President. Hertzke is currently Chairman of the Recreation Vehicle Industry Association. He received the Entrepreneur of the Year Award 2004for Iowa/Nebraska by Ernst & Young, LLP and is a recipient of the Newsmaker of the Year Award from RVBusiness Magazine in 1999, 2003 and 2004.

Winnebago Industries is the nation’s leading motor home manufacturer, growing its market share to the #1 position for the last six years after falling to second place for 20 years. Winnebago Industries is the only RV manufacturer to be recognized with the Quality Circle Award by the Recreation Vehicle Dealers Association in each of the last 11 years for the Company’s superior products, sales and service programs. The Company has a strong balance sheet, no debt, and one of the highest Return on Assets, Return on Equity, Return on Invested Capital, Operating Margin as a percent of revenues and Net Profit Margin as a percent of revenues of the major public RV manufacturers.

Company Profile:

Winnebago Industries, Inc., headquartered in Forest City, Iowa, is the leading United States (U.S.) manufacturer of motor homes, self-contained recreation vehicles used primarily in leisure travel and outdoor recreation activities. The Company builds quality motor homes with state-of-the-art computer-aided design and manufacturing systems on automotive-styled assembly lines. The Company's products are subjected to what the Company believes is the most rigorous testing in the RV industry. These vehicles are sold through dealers under the WinnebagoŽ and ItascaŽ brand names. The Company markets its recreation vehicles on a wholesale basis to a diversified dealer organization located throughout the U.S., and to a limited extent, in Canada. As of August 26, 2006, the motor home dealer organization in the United States and Canada included approximately 290 dealer locations. Motor home sales by Winnebago Industries represented at least 93 percent of its revenues in each of the past five fiscal years. Other products manufactured by the Company consist principally of a variety of component parts for other manufacturers.

Winnebago Industries was incorporated under the laws of the state of Iowa on February 12, 1958, and adopted its present name on February 28, 1961.

CEOCFO: Mr. Hertzke, what was your vision when you became CEO of Winnebago Industries and what is it today?
Mr. Hertzke: “When I became CEO at Winnebago Industries, Winnebago was actually in the number two position in the industry in market share. We were actually satisfied with the number two position and our goal wasn’t necessarily to be number one in the industry, but it was to be a high quality company that is very profitable. When we achieved that goal, we also regained the number one position in our industry.”

CEOCFO: What is the industry like today?
Mr. Hertzke: “The RV industry has always been cyclical. We have very good times and times where the economy, gas prices and interest rates, will affect our business. We see movement up and down both in our industry. However, in 2004, our industry experienced the biggest year in the last 25-year history of the RV industry and Winnebago Industries was very proud to be part of very significant growth during that period of time.”

CEOCFO: What is new and exciting?
Mr. Hertzke: “The RV industry used to be sell to people who had retired, maybe go camping, go south for the winter and stay in their motor homes. Today we are seeing a lot of different types of buyers; we are seeing a lot of people that are buying motor homes to go to NASCAR races and different sporting events, tail-gaiting, and football games. We are seeing them used out west to tow dune buggies, dirt bikes and four-wheelers to the dessert. They live in them while they play with their toys out in the dessert. In addition, we are seeing people who are actually conducting businesses in their motor homes, attending dog and horse shows, going to different events using motorized RVs today a lot more than what we have seen in the past. Therefore, our market has grown along with the market of baby boomers, which has definitely helped our industry also.”

CEOCFO: What are some of the new offerings that Winnebago Industries is putting forth?
Mr. Hertzke: “About a year-and-a-half ago, Winnebago Industries came out with a new motor home on the Dodge Sprinter chassis from DaimlerChrysler Motors Company; it had the Mercedes-Benz diesel engine in it and it gets 17 to 19 miles per gallon. Therefore, it is a fuel efficient yet a classy motor home that has been very successful for Winnebago Industries. That product has continued to help us expand to even some new horizons of new customer bases.”

CEOCFO: Is it primarily the fuel efficiency part of it that people are interested in or are there other aspects that makes it successful?
Mr. Hertzke: “The fuel efficiency is part of the reason why customers are finding our new motor home appealing, but the other thing is that it is a very contemporary design. Our new motor home is more of a European style design with curved cabinetry. We have even had customers downsize from larger motor homes into this vehicle because it is a little smaller motor home that is easier to maneuver and drive. Therefore, we have given it several different characteristics that have appealed to the public.”

CEOCFO: You also have some new Class-A offerings?
Mr. Hertzke: “At the Louisville show the first week of December, Winnebago Industries introduced a new Pusher unit available with either a gas or diesel engine in the rear of the coach. We are one of the first companies that has come out with giving the customer a choice whether they would like a gas pusher motor home or a diesel pusher motor home. It allows them to look at the floor plans and then make their choice between engine and drive-train.”

CEOCFO: What do most people choose?
Mr. Hertzke: “Right now we are selling just a little bit higher in diesel than we are in gas, but we have seen interest in both categories.”

CEOCFO: You have some additional new products as well?
Mr. Hertzke: “Each year we go through our entire product line. It is not uncommon for us to change 30 to 40% of our product lines each year. We have also introduced a new Vista and Sunstar, which is a lower priced Class-A; more toward the entry level in the Class-A segment. We introduced that and we started shipping to the marketplace late last winter and early spring, so that product is already out in the marketplace.”

CEOCFO: Do you maintain inventory of motor homes or are they all built to order?
Mr. Hertzke: “We try to build to order, but we will build a little bit of open stock to balance out production during the slower winter months. We focus on building to order, because Winnebago Industries has over 90 different floor plans, brands, models of RVs and we need an indication of exactly what the market wants.”

CEOCFO: Why do people choose Winnebago?
Mr. Hertzke: “Winnebago Industries is a quality organization. The Recreation Vehicle Dealers Association has a rating system called the DSI (Dealer Satisfaction Index), which rates RV companies on 20 to 23 different categories and we are rated by all the dealers across the United States. This isn’t our rating that we are saying that we are good, but the dealers across the US continue to say that for 11 years in a row Winnebago Industries has won the Quality Circle Award that is presented by the Recreational Vehicle Dealer Association to the manufacturers in the industry who have the highest DSI score. We are extremely proud of this achievement; particularly since our number one and number two competitors have never won this award.”

CEOCFO: What do you know that they do not, or what are you able to implement?
Mr. Hertzke: “I wish I could tell you that we do not have any problems. We do however focus on trying to be the very best, not only in just building the unit upfront, but parts and service support, and for taking care of the customer after the sale. We have a 24-hour delivery system in place to deliver parts to our dealers. We also provide training to the dealers and the service techs, so that we can help those people do a better job out in the field. You have to do all these things if you want to be classified in a good high quality company.”

CEOCFO: Do you see the need to be in additional dealerships or further expansion into Canada; what is ahead?
Mr. Hertzke: “Winnebago is always looking to see how else we can continue to expand our markets and grow and much of it could be in different product lines. We have a very good strong dealer body right now, but that doesn’t mean you don’t look for other ways in which you try to expand into the market. There may be some different product lines or something new that we continue to research and see if we can bring it to the market that will allow us to go into a different niche of the market or expand in some other areas.”

CEOCFO: What would surprise people about motor homes?
Mr. Hertzke: “In the motor home industry a lot of people see them at first and say, ‘Oh what a big thing’ and act a little scared of them. What they need to do is get in, drive them and analyze them, because if you ask any American if they would like to do more traveling and see more of America, we all pretty well know what the majority of people are going to say. Everybody thinks that would be a dream comes true for them. Our motor homes are very easy to drive and you can have a lot of fun pursuing an active lifestyle and also enjoy your retirement years with them.”

CEOCFO: What is the financial picture for Winnebago today?
Mr. Hertzke: “We just ended our second quarter and we have a very strong balance sheet and approximately $167 million on hand of cash and short-term securities, making us very strong financially. Since December 1997, Winnebago Industries has repurchased about $336 million worth of our stock; which is about 40% of the company. We have been able to enhance shareholder value with that also. Winnebago has no long-term debt and everything we have at the company is totally paid for, so we are able to return some of these dollars to our shareholders through stock buy-backs. We have also had a dividend program and have been able to increase our dividends for four years straight. Our primary use for cash is for growth, such as 3 years ago, when we built a new plant that enabled us to increase production by 30 percent. When not using our cash for expansion, we look at how we can return it to the shareholders through stock buy-back and dividends,”

CEOCFO: You mentioned some new technologies earlier that you have applied to your motor homes; is there any else that we should be aware of?
Mr. Hertzke: “Yes, we are using different types of technology and curved cabinet doors rather than flat cabinet doors, different plastics and moldings for curvatures. We are looking at different improvements in fiberglass technology, plastics technology, and wood technology.”

CEOCFO: What is ahead for Winnebago?
Mr. Hertzke: “Winnebago’s main focus is to continue to be a very strong company. When I had the opportunity to take over as chairman, the objective was to be a high quality and profitable company. That objective has not changed. We continue to want to be known as a high quality company and a very profitable company that provides our shareholders a descent return. I think going to the future, naturally we would like to talk about other ways we could grow other product lines, but I don’t ever want to forget about the quality aspect and the profitability aspect.”

CEOCFO: What should potential investors know that might not jump off the page?
Mr. Hertzke: “Over the last few years we have worked very hard to communicate well with Wall Street and I think the investment community understands us better now. The toughest thing is that they need to understand that we are in a cyclical market and we will have ups and downs. There are times when we have to work overtime, and we can’t keep up and there are other times when we have to slow down to rightsize to the market. Therefore, we have to manage through this process and the good companies will be profitable in both times. We have seen a lot of the competition that have not done that and I think that is a big plus when you can invest in a company even in down times they can still make money and give descent returns to the shareholders.”

CEOCFO: You came up through the ranks; what have you learned from that that people might not realize today?
Mr. Hertzke: “Everybody talks about how important it is to work with and know people. There is no one person in any corporation that can do that much. You have to have a variety of very talented people that can be good in a lot of different areas for a company to be successful. Having the opportunity to grow up at Winnebago Industries and go through and work with a lot of these people; I’m in my 36th year at the company, it has been a real asset. Having been here this long, I know a lot of the hourly employees out on the floor to the office workers and through product development. Each area has challenges and opportunities and they are all very important for a company to be successful. The more experience you have and the opportunity that you have to work with all of them, the better you can understand them.”

CEOCFO: In closing, what should people remember most about Winnebago?
Mr. Hertzke: “I would like people to remember that Winnebago Industries is a good, solid company with good solid business people that try to run the business properly and correctly. Our vision is to build a good quality product and to make sure it is done is such a way that it is profitable and brings returns not only to the investor, but to all the employees at Winnebago Industries as well. When you have a good workforce it is always fun to share some of the rewards with them when the company does well.”


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“When I became CEO at Winnebago Industries, Winnebago was actually in the number two position in the industry in market share. We were actually satisfied with the number two position and our goal wasn’t necessarily to be number one in the industry, but it was to be a high quality company that is very profitable. When we achieved that goal, we also regained the number one position in our industry.” - Bruce D. Hertzke does not purchase or make
recommendation on stocks based on the interviews published.