Winnebago Industries, Inc.

Table of Contents



~~Glossary~~PART I.			1FINANCIAL INFORMATION.		3

~~PART I~~Item 1.	~~FINANCIAL INFORMATION~~			2
~~Item 1.~~	Condensed Consolidated Financial ~~Statements (Unaudited)~~Statements.	3
			Condensed Consolidated Statements of Income and Comprehensive Income		23
			Condensed Consolidated Balance Sheets		34
			Condensed Consolidated Statements of Cash Flows		45
			Condensed Consolidated Statements of Changes in Stockholders' ~~Statement of~~ Equity		57
			Notes to Condensed Consolidated Financial Statements		69
			~~Note 1: Basis of Presentation~~Item 2.	6
	~~Note 2: Business Combination, Goodwill and Other Intangible Assets~~	7
	~~Note 3: Business Segments~~	10
	~~Note 4: Concentration Risk~~	11
	~~Note 5: Derivatives, Investments and Fair Value Measurements~~	11
	~~Note 6: Inventories~~	12
	~~Note 7: Property, Plant and Equipment~~	13
	~~Note 8: Warranty~~	13
	~~Note 9: Long-Term Debt~~	13
	~~Note 10: Employee and Retiree Benefits~~	14
	~~Note 11: Shareholders' Equity~~	15
	~~Note 12: Contingent Liabilities and Commitments~~	15
	~~Note 13: Income Taxes~~	16
	~~Note 14: Earnings Per Share~~	17
	~~Note 15: Accumulated Other Comprehensive Income (Loss)~~	17
~~Item 2.~~	Management's Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.	1827
Item 3.			Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.		2837
Item 4.			Controls and ~~Procedures~~Procedures.		2938

PART IIII.			OTHER ~~INFORMATION~~INFORMATION.
~~Item 1.~~	~~Legal Proceedings~~	2939
Item 1A			~~Risk Factors~~1.	29Legal Proceedings.		39
Item 1A.			Risk Factors.		39
Item 2.			Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.		2941
Item 6.			~~Exhibits~~	30Exhibits.

~~SIGNATURES~~		3142

~~Glossary~~

~~The following terms and abbreviations appear in the text of this report and are defined as follows:~~



~~ABL~~		Credit Agreement dated as of November 8, 2016 among Winnebago Industries, Inc., Winnebago of Indiana, LLC, Grand Design RV, LLC, the other loan parties thereto and JPMorgan Chase Bank, N.A. as Administrative Agent
~~AOCI~~ SIGNATURES			~~Accumulated Other Comprehensive Income (Loss)~~
~~ASC~~	~~Accounting Standards Codification~~
~~ASP~~	~~Average Sales Price~~
~~ASU~~	~~Accounting Standards Update~~
~~Blocker Corporation~~	~~SP GE VIII - B GD RV Blocker Corporation~~
~~Credit Agreement~~	~~Collective reference to the ABL and Term Loan~~
~~EBITDA~~	~~Earnings Before Interest, Tax, Depreciation and Amortization~~
~~EPS~~	~~Earnings Per Share~~
~~ERP~~	~~Enterprise Resource Planning~~
~~FASB~~	~~Financial Accounting Standards Board~~
~~FIFO~~	~~First In, First Out~~
~~GAAP~~	~~Generally Accepted Accounting Principles~~
~~Grand Design~~	~~Grand Design RV, LLC~~
~~IRS~~	~~Internal Revenue Service~~
~~LIFO~~	~~Last In, First Out~~
~~LIBOR~~	~~London Interbank Offered Rate~~
~~Motorized~~	~~Business segment including motorhomes and other related manufactured products~~
~~NYFRB~~	~~New York Federal Reserve Bank~~
~~NYSE~~	~~New York Stock Exchange~~
~~OCI~~	~~Other Comprehensive Income~~
~~Octavius~~	~~Octavius Corporation, a wholly-owned subsidiary of Winnebago Industries, Inc.~~
RV	~~Recreation Vehicle~~
~~RVIA~~	~~Recreation Vehicle Industry Association~~
~~SEC~~	~~US Securities and Exchange Commission~~
~~Securities Purchase Agreement~~	~~Purchase Agreement dated as of November 8, 2016 between Winnebago Industries, Inc. and Grand Design RV, LLC~~
~~SERP~~	~~Supplemental Executive Retirement Plan~~
~~SG&A~~	~~Selling, General and Administrative Expenses~~
~~Stat Surveys~~	~~Statistical Surveys, Inc.~~
~~Tax Act~~	~~The Tax Cuts and Jobs Act~~
~~Term Loan~~	Loan Agreement dated as of November 8, 2016 and as amended on December 8, 2017 among Winnebago Industries, Inc., Octavius Corporation, the other loan parties thereto and JPMorgan Chase Bank, N.A. as Administrative Agent
~~Towable~~	~~Business segment including products that are not motorized and are towable by another vehicle~~
US	~~United States of America~~
~~XBRL~~	~~eXtensible Business Reporting Language~~ 43

Table of Contents

PART I. FINANCIAL ~~INFORMATION~~INFORMATION.

Item 1. Condensed Consolidated Financial ~~Statements~~Statements.

Winnebago Industries, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)


													Three Months Ended						Six Months Ended
	Three Months Ended					Six Months Ended
(In thousands, except per share data)	February 24, 2018		February 25, 2017			February 24, 2018			February 25, 2017
(in thousands, except per share data)												(in thousands, except per share data)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Net revenues	$	468,359	$	370,510		$	918,380		$	615,818		Net revenues	$	626,810	$	432,690	$	1,215,268	$	926,338
Cost of goods sold	400,698		321,194			787,888			537,627			Cost of goods sold	547,028		366,261		1,056,873		788,913
Gross profit	67,661		49,316			130,492			78,191			Gross profit	79,782		66,429		158,395		137,425
SG&A:
Selling	12,209		9,553			24,343			15,423
General and administrative	18,268		12,540			35,684			22,446
Postretirement health care benefit income	—		(11,983		)	—			(24,796		)
Transaction costs	—		463			50			5,925
Selling, general, and administrative expenses												Selling, general, and administrative expenses	42,164		35,259		93,269		70,971
Amortization of intangible assets	1,933		10,367			3,988			12,418			Amortization of intangible assets	7,974		2,267		11,588		4,926
Total SG&A	32,410		20,940			64,065			31,416
Total operating expenses												Total operating expenses	50,138		37,526		104,857		75,897
Operating income	35,251		28,376			66,427			46,775			Operating income	29,644		28,903		53,538		61,528
Interest expense	4,918		5,178			9,699			6,306			Interest expense	8,651		4,346		14,700		8,847
Non-operating expense (income)	11		4			(112		)	(83		)
Non-operating income												Non-operating income	(270)		(207)		(386)		(970)
Income before income taxes	30,322		23,194			56,840			40,552			Income before income taxes	21,263		24,764		39,224		53,651
Provision for income taxes	8,234		7,916			16,794			13,536			Provision for income taxes	3,995		3,166		7,888		9,892
Net income	$	22,088	$	15,278		$	40,046		$	27,016		Net income	$	17,268	$	21,598	$	31,336	$	43,759

Income per common share:												Income per common share:
Basic	$	0.70	$	0.48		$	1.27		$	0.91		Basic	$	0.51	$	0.68	$	0.95	$	1.39
Diluted	$	0.69	$	0.48		$	1.26		$	0.91		Diluted	$	0.51	$	0.68	$	0.95	$	1.38

Weighted average common shares outstanding:												Weighted average common shares outstanding:
Basic	31,654		31,577			31,634			29,707			Basic	33,614		31,577		32,840		31,572
Diluted	31,854		31,686			31,852			29,827			Diluted	33,918		31,724		33,143		31,755

Dividends paid per common share	$	0.20	$	0.10		$	0.20		$	0.20

Net income	$	22,088	$	15,278		$	40,046		$	27,016		Net income	$	17,268	$	21,598	$	31,336	$	43,759
Other comprehensive income (loss):												Other comprehensive income (loss):
Amortization of prior service credit (net of tax of $0, $7,495, $0 and $15,409)	—		(12,177		)	—			(25,035		)
Amortization of net actuarial loss (net of tax of $2, $2,932, $6 and $5,968)	7		4,764			13			9,696
Plan amendment (net of tax of $0, $0, $0 and $2,402)	—		—			—			3,903
Change in fair value of interest rate swap (net of tax of $448, $270, $835 and $270)	1,283		(439		)	1,917			(439		)
Amortization of net actuarial loss (net of tax of $3, $2, $5, and $5)												Amortization of net actuarial loss (net of tax of $3, $2, $5, and $5)	8		8		16		16
Interest rate swap activity (net of tax of $—, $206, $22, and $213)												Interest rate swap activity (net of tax of $—, $206, $22, and $213)	—		(634)		(68)		(656)
Total other comprehensive income (loss)	1,290		(7,852		)	1,930			(11,875		)	Total other comprehensive income (loss)	8		(626)		(52)		(640)
Comprehensive income	$	23,378	$	7,426		$	41,976		$	15,141		Comprehensive income	$	17,276	$	20,972	$	31,284	$	43,119

See ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except per share data)	February 24, 2018			August 26, 2017
(in thousands, except per share data)							(in thousands, except per share data)	February 29, 2020		August 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	27,443		$	35,945		Cash and cash equivalents	$	122,939	$	37,431
Receivables, less allowance for doubtful accounts ($174 and $183)	157,425			124,539
Inventories	178,046			142,265
Receivables, less allowance for doubtful accounts ($381 and $160, respectively)							Receivables, less allowance for doubtful accounts ($381 and $160, respectively)	182,475		158,049
Inventories, net							Inventories, net	237,808		201,126
Prepaid expenses and other assets	9,788			11,388			Prepaid expenses and other assets	20,883		14,051
Total current assets	372,702			314,137			Total current assets	564,105		410,657
Property, plant and equipment, net	78,798			71,560
Property, plant, and equipment, net							Property, plant, and equipment, net	169,840		127,572
Other assets:							Other assets:
Goodwill	244,684			242,728			Goodwill	348,860		274,931
Other intangible assets, net	224,452			228,440			Other intangible assets, net	415,285		256,082
Investment in life insurance	27,921			27,418			Investment in life insurance	27,231		26,846
Deferred income taxes	9,813			12,736
Operating lease assets							Operating lease assets	30,460		—
Other assets	6,956			5,493			Other assets	16,146		8,143
Total assets	$	965,326		$	902,512		Total assets	$	1,571,927	$	1,104,231

Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:							Current liabilities:
Accounts payable	$	99,727		$	79,194		Accounts payable	$	99,211	$	81,635
Current maturities of long-term debt	—			2,850
Income taxes payable	2,792			7,450

Accrued expenses:							Accrued expenses:
Accrued compensation	25,407			24,546			Accrued compensation	28,639		20,328
Product warranties	34,988			30,805			Product warranties	60,211		44,436
Self-insurance	9,124			6,122			Self-insurance	15,639		13,820
Promotional	11,136			6,560			Promotional	13,761		10,896
Accrued interest	2,255			3,128			Accrued interest	747		4,059
Other	10,161			6,503			Other	18,773		13,678
Current maturities of long-term debt							Current maturities of long-term debt	13,668		8,892
Total current liabilities	195,590			167,158			Total current liabilities	250,649		197,744
Non-current liabilities:							Non-current liabilities:
Long-term debt, less current maturities	271,102			271,726			Long-term debt, less current maturities	451,134		245,402
Deferred income taxes							Deferred income taxes	17,057		12,032
Unrecognized tax benefits	1,668			1,606			Unrecognized tax benefits	6,253		3,591
Operating lease liabilities							Operating lease liabilities	27,882		—
Deferred compensation benefits, net of current portion	18,907			19,270			Deferred compensation benefits, net of current portion	12,166		12,878
Other	250			1,078			Other	5,262		372
Total non-current liabilities	291,927			293,680			Total non-current liabilities	519,754		274,275
Contingent liabilities and commitments (Note 12)							Contingent liabilities and commitments (Note 12)
Stockholders' equity:							Stockholders' equity:
Capital stock common (par value $0.50; authorized 60,000 shares, issued 51,776 shares)	25,888			25,888
Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-0							Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-0	—		—
Common stock, par value $0.50: Authorized-60,000 shares; Issued-51,776 shares							Common stock, par value $0.50: Authorized-60,000 shares; Issued-51,776 shares	25,888		25,888
Additional paid-in capital	80,721			80,401			Additional paid-in capital	200,751		91,185
Retained earnings	712,809			679,138			Retained earnings	890,994		866,886
Accumulated other comprehensive income (loss)	907			(1,023		)
Treasury stock, at cost (20,117 and 20,183 shares)	(342,516		)	(342,730		)
Accumulated other comprehensive loss							Accumulated other comprehensive loss	(543)		(491)
Treasury stock, at cost: 18,153 and 20,262 shares, respectively							Treasury stock, at cost: 18,153 and 20,262 shares, respectively	(315,566)		(351,256)
Total stockholders' equity	477,809			441,674			Total stockholders' equity	801,524		632,212
Total liabilities and stockholders' equity	$	965,326		$	902,512		Total liabilities and stockholders' equity	$	1,571,927	$	1,104,231

See ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019
Operating activities:
Net income	$	31,336	$	43,759
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	7,720		6,268
Amortization of intangible assets	11,588		4,926
Non-cash interest expense, net	4,182		—
Amortization of debt issuance costs	1,457		790
Last-in, first-out expense	664		1,029
Stock-based compensation	3,640		4,605
Deferred income taxes	576		346
Other, net	252		(170)
Change in assets and liabilities:
Receivables	11,734		(15,355)
Inventories	45,275		4,488
Prepaid expenses and other assets	(4,081)		(4,926)
Accounts payable	4,688		11,992
Income taxes and unrecognized tax benefits	(966)		(15,216)
Accrued expenses and other liabilities	1,099		9,402
Net cash provided by operating activities	119,164		51,938

Investing activities:
Purchases of property and equipment	(19,057)		(23,366)
Acquisition of business, net of cash acquired	(264,280)		(702)
Other, net	179		1,044
Net cash used in investing activities	(283,158)		(23,024)

Financing activities:
Borrowings on credit agreement	1,112,294		218,720
Repayments of credit agreement	(1,112,294)		(233,922)
Proceeds from issuance of convertible senior notes	300,000		—
Purchase of convertible note hedge	(70,800)		—
Proceeds from issuance of warrants	42,210		—
Payments on long-term debt	(2,750)		—
Payments of offering costs	(10,761)		—
Payments of cash dividends	(7,174)		(6,713)
Payments for repurchase of common stock	—		(6,620)
Other, net	(1,223)		296
Net cash provided by (used in) financing activities	249,502		(28,239)

Net increase (decrease) in cash and cash equivalents	85,508		675
Cash and cash equivalents at beginning of period	37,431		2,342
Cash and cash equivalents at end of period	$	122,939	$	3,017

Table of Contents

Six Months Ended
(In thousands) February 24,
2018 February 25,
2017
Operating activities:
Net income $ 40,046
$ 27,016
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 4,328
3,428
Amortization of intangible assets 3,988
12,418
Amortization of debt issuance costs 826
485
LIFO expense 598
598
Stock-based compensation 3,553
1,539
Deferred income taxes 2,080
6,857
Deferred compensation expense and postretirement benefit income 578
(24,034 )
Other (498 ) (452 )
Change in assets and liabilities:
Inventories (36,379 ) (11,232 )
Receivables, prepaid and other assets (31,096 ) (21,551 )
Income taxes and unrecognized tax benefits (4,510 ) (4,631 )
Accounts payable and accrued expenses 32,908
16,131
Postretirement and deferred compensation benefits (1,377 ) (1,430 )
Net cash provided by operating activities 15,045
5,142

Investing activities:
Purchases of property and equipment (11,675 ) (6,938 )
Proceeds from the sale of property 299
65
Acquisition of business, net of cash acquired —
(394,694 )
Other (18 ) 620
Net cash used in investing activities (11,394 ) (400,947 )

Financing activities:
Payments for repurchases of common stock (1,478 ) (1,365 )
Payments of cash dividends (6,375 ) (6,370 )
Payments of debt issuance costs —
(11,020 )
Borrowings on credit facility 19,700
366,400
Repayments of credit facility (24,000 ) (26,400 )
Other —
(92 )
Net cash (used in) provided by financing activities (12,153 ) 321,153

Net decrease in cash and cash equivalents (8,502 ) (74,652 )
Cash and cash equivalents at beginning of period 35,945
85,583
Cash and cash equivalents at end of period $ 27,443
$ 10,931

Supplemental cash flow disclosure:
Income taxes paid, net $ 19,290
$ 11,692
Interest paid $ 8,906
$ 1,731
Non-cash transactions:
Issuance of Winnebago common stock for acquisition of business $ —
$ 124,066
Capital expenditures in accounts payable $ 1,012
$ 322


Supplement cash flow disclosure:
Income taxes paid, net	$	7,652	$	30,262
Interest paid	$	9,938	$	7,469

Non-cash transactions:
Issuance of Winnebago common stock for acquisition of business	$	92,572	$	—
Capital expenditures in accounts payable	$	118	$	259

See ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders' ~~Statement of~~ Equity

(Unaudited)


	Three Months Ended February 29, 2020
(in thousands, except per share data)	Common Shares					Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Treasury Stock				Total Stockholders' Equity
		Number		Amount												Number	Amount
Balances at November 30, 2019	51,776	$	25,888	$	198,733	$	877,469	$	(551)	(18,177)	$	(315,930)	$	785,609
Stock-based compensation, net of forfeitures	—	—		1,830		—		—		—	8		1,838
Issuance of stock, net	—	—		188		—		—		25	430		618
Repurchase of common stock	—	—		—		—		—		(1)	(74)		(74)
Common stock dividends; $0.11 per share	—	—		—		(3,743)		—		—	—		(3,743)
Actuarial loss, net of tax	—	—		—		—		8		—	—		8
Net income	—	—		—		17,268		—		—	—		17,268
Balances at February 29, 2020	51,776	$	25,888	$	200,751	$	890,994	$	(543)	(18,153)	$	(315,566)	$	801,524

	Six Months Ended February 29, 2020
(in thousands, except per share data)	Common Shares					Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Treasury Stock				Total Stockholders' Equity
		Number		Amount												Number	Amount
Balances at August 31, 2019	51,776	$	25,888	$	91,185	$	866,886	$	(491)	(20,262)	$	(351,256)	$	632,212
Stock-based compensation, net of forfeitures	—	—		3,624		—		—		—	17		3,641
Issuance of stock, net	—	—		(2,031)		—		—		153	2,649		618
Issuance of stock for acquisition	—	—		57,811		—		—		2,000	34,761		92,572
Repurchase of common stock	—	—		—		—		—		(44)	(1,737)		(1,737)
Common stock dividends; $0.22 per share	—	—		—		(7,228)		—		—	—		(7,228)
Actuarial loss, net of tax	—	—		—		—		16		—	—		16
Interest rate swap activity, net of tax	—	—		—		—		(68)		—	—		(68)
Equity component of convertible senior notes and offering costs, net of tax of $20,840	—	—		61,335		—		—		—	—		61,335
Convertible note hedge purchase, net of tax of $17,417	—	—		(53,383)		—		—		—	—		(53,383)
Warrant transactions	—	—		42,210		—		—		—	—		42,210
Net income	—	—		—		31,336		—		—	—		31,336
Balances at February 29, 2020	51,776	$	25,888	$	200,751	$	890,994	$	(543)	(18,153)	$	(315,566)	$	801,524

	Three Months Ended February 23, 2019
(in thousands, except per share data)	Common Shares					Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Treasury Stock				Total Stockholders' Equity
		Number		Amount												Number	Amount
Balances at November 24, 2018	51,776	$	25,888	$	88,288	$	787,794	$	878	(20,178)	$	(346,370)	$	556,478
Stock-based compensation, net of forfeitures	—	—		2,117		—		—		1	16		2,133
Issuance of restricted stock	—	—		(769)		—		—		45	769		—
Issuance of stock under ESPP	—	—		46		—		—		15	250		296
Repurchase of common stock	—	—		—		—		—		(175)	(5,672)		(5,672)
Common stock dividends; $0.11 per share	—	—		—		(3,541)		—		—	—		(3,541)
Actuarial loss, net of tax	—	—		—		—		8		—	—		8
Interest rate swap activity, net of tax	—	—		—		—		(634)		—	—		(634)
Net income	—	—		—		21,598		—		—	—		21,598
Balances at February 23, 2019	51,776	$	25,888	$	89,682	$	805,851	$	252	(20,292)	$	(351,007)	$	570,666

Table of Contents

Three Months Ended Six Months Ended
(In thousands) February 24,
2018 February 25,
2017 February 24,
2018 February 25,
2017
Common stock and paid-in capital
Balance, beginning of period $ 105,928
$ 104,829
106,289
58,605
Issuance of common stock (403 ) (436 ) (1,568 ) 44,983
Stock-based compensation expense 1,084
700
1,888
1,505
Balance, end of period 106,609
105,093
106,609
105,093

Retained earnings
Balance, beginning of period 693,909
629,099
679,138
620,546
Net income 22,088
15,278
40,046
27,016
Common stock dividends (3,188 ) (3,185 ) (6,375 ) (6,370 )
Balance, end of period 712,809
641,192
712,809
641,192

Accumulated comprehensive income (loss)
Balance, beginning of period (383 ) 6,952
(1,023 ) 10,975
Other comprehensive income (loss) 1,290
(7,852 ) 1,930
(11,875 )
Balance, end of period 907
(900 ) 907
(900 )

Treasury stock

Balance, beginning of period (342,823 ) (343,421 ) (342,730 ) (421,767 )
Issuance of common stock 422
698
1,692
80,362
Common stock repurchased (115 ) (47 ) (1,478 ) (1,365 )
Balance, end of period (342,516 ) (342,770 ) (342,516 ) (342,770 )
Total stockholders' equity $ 477,809
$ 402,615
477,809
402,615
Winnebago Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity (continued)

(Unaudited)


	Six Months Ended February 23, 2019
(in thousands, except per share data)	Common Shares					Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Treasury Stock				Total Stockholders' Equity
		Number		Amount												Number	Amount
Balances at August 25, 2018	51,776	$	25,888	$	86,223	$	768,816	$	892	(20,243)	$	(347,374)	$	534,445
Stock-based compensation, net of forfeitures	—	—		4,565		—		—		3	57		4,622
Issuance of restricted stock	—	—		(1,152)		—		—		156	2,680		1,528
Issuance of stock under ESPP	—	—		46		—		—		15	250		296
Repurchase of common stock	—	—		—		—		—		(223)	(6,620)		(6,620)
Common stock dividends; $0.21 per share	—	—		—		(6,724)		—		—	—		(6,724)
Actuarial loss, net of tax	—	—		—		—		16		—	—		16
Interest rate swap activity, net of tax	—	—		—		—		(656)		—	—		(656)
Net income	—	—		—		43,759		—		—	—		43,759
Balances at February 23, 2019	51,776	$	25,888	$	89,682	$	805,851	$	252	(20,292)	$	(351,007)	$	570,666

See ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1: 1: Basis of Presentation

~~The "Company,~~

Unless the context otherwise requires, the use of the terms "Winnebago," "WGO," "we," "us," and "our" ~~and "us" are used interchangeably~~in these Notes to ~~refer~~Condensed Consolidated Financial Statements refers to Winnebago Industries, Inc. and its wholly-owned ~~subsidiaries, as appropriate in~~subsidiaries.

In the ~~context.~~

~~We were incorporated under the laws~~opinion of the state of Iowa on February 12, 1958 and adopted our present name on February 28, 1961. Our primary offices are located at 605 West Crystal Lake Road in Forest City, Iowa. Our telephone number is (641) 585-3535; our website is www.winnebagoind.com. Our common stock trades on the NYSE under the symbol “WGO.”

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In our opinion,management, the accompanying ~~unaudited condensed consolidated financial statements~~Condensed Consolidated Financial Statements contain all adjustments ~~consisting~~necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring ~~accruals, necessary~~adjustments, except as noted in these Notes to ~~present fairly our consolidated financial position as of~~ ~~February 24, 2018~~ ~~and the consolidated~~Condensed Consolidated Financial Statements.

Interim results ~~of income and comprehensive income, consolidated cash flows and consolidated statement of equity for the first six months of~~ ~~Fiscal 2018~~ ~~and~~ ~~2017. The consolidated statements of income and comprehensive income for the first three months and six months of Fiscal 2018~~ are not necessarily indicative of the results to be expected for the full year. ~~These~~The interim ~~financial statements~~Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited ~~consolidated financial statements and notes thereto appearing~~Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017.~~31, 2019.

Fiscal Period

We follow a 52-/53-week fiscal year, ending the last Saturday in August. ~~Both~~ Fiscal ~~2018~~2020 is a 52-week year, while Fiscal 2019 was a 53-week year. The extra (53rd) week in Fiscal 2019 was recognized in our fourth quarter.

Subsequent Events

In preparing the accompanying unaudited Condensed Consolidated Financial Statements, we evaluated subsequent events for potential recognition and ~~Fiscal 2017 are 52-week years.~~disclosure through the date of this filing. There were no material subsequent events, except for the items described below.

Dividend

On March 17, 2020, our Board of Directors declared a quarterly cash dividend of $0.11 per share payable on April 29, 2020 to common stockholders of record at the close of business on April 15, 2020.

Interest Rate Swap

On March 2, 2020, the Company entered into an interest rate swap agreement for an incremental notional amount of $25 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings. The interest rate swap had a fair value of zero at inception, is effective March 4, 2020 and has been designated as a cash flow hedge. The interest rate swap agreement, with a maturity date of March 4, 2025, converts the Company's interest rate payments on $25 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate of 1.364%.

On March 6, 2020, the Company entered into an additional interest rate swap agreement for an incremental notional amount of $25 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings. The interest rate swap had a fair value of zero at inception, is effective March 10, 2020 and has been designated as a cash flow hedge. The interest rate swap agreement, with a maturity date of March 4, 2025, converts the Company's interest rate payments on an incremental $25 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate of 1.265%.

COVID-19

In March 2020, the World Health Organization declared the outbreak of coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States. On March 23, 2020, the Company announced that it would temporarily suspend production at its facilities anticipated to last through April 12, 2020. While the Company expects this matter to negatively impact its results of operations, the extent to which the coronavirus may impact its liquidity, financial condition, and results of operations is uncertain.

Recently Adopted Accounting Pronouncements

~~In March 2016,~~

We adopted Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), as of September 1, 2019, using the ~~FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspects~~modified retrospective basis as of the ~~accounting for employee share-based payment transactions, including~~beginning of the ~~accounting for~~period of adoption. In addition, we elected the ~~related income taxes, forfeitures, statutory tax withholding requirements~~package of practical expedients permitted under the transition guidance with the new standard, which among other things, allowed us to carry forward the historical lease classification, and ~~classification~~we elected the hindsight practical expedient. Adoption of the new standard resulted in the ~~statement~~recording of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016 (our Fiscal 2018), including interim periods within those annual reporting periods. We adopted this ASU in the interim quarterly reporting period ended November 25, 2017. Amendments requiring recognitionnet lease assets and lease liabilities of ~~excess tax benefits~~$33.8 million and ~~tax deficiencies in the statement~~$33.4 million, respectively, as of ~~income~~September 1, 2019. The standard did not materially impact our consolidated net earnings and comprehensive income resulted in $0.6 million of excess tax benefits recorded as a reduction of income tax expense upon adoption for the three months ended November 25, 2017. The reduction in income tax expense also reduced the effective tax rate by 2.2% and added $0.02 to income per share for the quarter ended November 25, 2017. Amendments related to the presentation of excess tax benefits and employee taxes paid when an employer withholds shares to meet the minimum statutory withholding requirement requiredhad no ~~change to the statement of cash flows. There were no material impacts on the consolidated financial statements of the Company which adopted a policy of accounting for forfeitures when they occur.~~

~~In July 2015, the FASB issued ASU 2015-11,~~ ~~Inventory (Topic 330)~~,which requires inventory measured using any method other than LIFO or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than at the lower of cost or market. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory method is unchanged. ASU 2015-11 is effective prospectively for fiscal years beginning after December 15, 2016 (our Fiscal 2018), including interim periods within those annual reporting periods. We adopted this ASU on August 27, 2017, and there was no material impact on our ~~consolidated financial statements.~~cash flows.

~~New Accounting Pronouncements~~

Table of Contents

~~In May 2014,~~The following table details line items impacted by the ~~FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606), which establishes a comprehensive new model for the recognition~~adoption of revenue from contracts with customers. This model is based on the core principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities have the option of using either retrospective transition or a modified approach in applying the new standard. The standard is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2017 (our Fiscal 2019).

We have performed an evaluation that included a review of representative contracts with key customers and the performance obligations contained therein, as well as a review of our commercial terms and practices across each of our segments. Based on our preliminary review, we do not expect adoption to have a material impact on our consolidated financial statements but further work to substantiate this preliminary conclusion is underway. We will determine the transition method to apply and the implications of using either the full retrospective or modified retrospective approach after this additional work is concluded.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842), which requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The new~~

standard is effective retrospectively or on a modified retrospective basis for fiscal years beginning after December 15, 2018 (our Fiscal 2020), including interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU ~~on our consolidated financial statements.~~within the Condensed Consolidated Balance Sheets as of September 1, 2019:

~~In August 2016,~~


(in thousands)	August 31, 2019 As Reported		ASU 2016-02 Adjustment on September 1, 2019		September 1, 2019 As Adjusted
Assets
Other intangible assets, net	$	256,082	$	(1,310)	$	254,772
Operating lease assets	—		33,811		33,811
Total assets	$	1,104,231	$	32,501	$	1,136,732

Liabilities and Stockholders' Equity
Accrued expenses: Other	$	13,678	$	1,258	$	14,936
Total current liabilities	197,744		1,258		199,002
Operating lease liabilities	—		31,243		31,243
Total non-current liabilities	274,275		31,243		305,518
Total liabilities and stockholders' equity	$	1,104,231	$	32,501	$	1,136,732

Also, in the ~~FASB issued ASU 2016-15,~~ ~~Classification~~first quarter of ~~Certain Cash Receipts and Cash Payments (Topic 230)~~, which provides guidance for eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective retrospectively for annual reporting periods beginning after December 15, 2017 (our Fiscal 2019), including interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and do not expect adoption to have a material impact.

~~In August 2017, the FASB issued~~2020, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815), which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. The adoption of this standard did not materially impact our Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU ~~2017-12~~2016-13, Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments, and has since issued additional amendments. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The standard is effective for annual reporting periods beginning after December 15, ~~2018~~2019 (our Fiscal ~~2020)~~2021), including interim periods within those annual reporting periods. ~~Early adoption is permitted.~~ We ~~are currently evaluating~~expect to adopt the ~~impact of adopting this ASU on our consolidated financial statements.~~

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement—Reporting Comprehensive Income (Topic 220),~~ which allows for a reclassification of stranded tax effects from the Tax Cuts and Job Act from accumulated other comprehensive income to retained earnings. This ASU is effective for fiscal years beginning after December 15, 2018 (our Fiscal 2020). We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and do not expect adoption to have a material impact.

~~Reporting Segments~~

We have two reporting segments: (1) Motorized products and services and (2) Towable products and services. We aggregate two operating segments into the Towable reporting segment based upon their similar products, customers, distribution methods, production processes and economic characteristics. We adopted a new ~~corporate allocation policy~~guidance in the first quarter of Fiscal ~~2018 that identifies shared costs~~2021, and ~~allocates them~~we do not expect a material impact to our consolidated financial statements.

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740):Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the ~~operating segments.~~general principles of Topic 740. The ~~cost drivers selected as~~standard is effective for annual reporting periods beginning after December 15, 2020 (our Fiscal 2022), including interim periods within those annual reporting periods. We expect to adopt the ~~basis for allocation are the most appropriate drivers for the type of cost being allocated. All corporate expenses are allocated to the operating segments. Previous to~~new guidance in the first quarter of Fiscal ~~2018, costs were~~2022, and we do not ~~allocated and were borne by the segment in which the costs originated. See~~ expect a material impact to our consolidated financial statements.

Note 3:2: Business ~~Segments.~~Combinations

~~Subsequent Event~~Newmar Corporation

On ~~March 14, 2018 our Board~~November 8, 2019, pursuant to the terms of ~~Directors declared~~the Stock Purchase Agreement dated September 15, 2019 (the "Purchase Agreement"), Winnebago completed the acquisition of 100% of Newmar Corporation, Dutch Real Estate Corp., New-Way Transport, and New-Serv (collectively “Newmar”). Newmar is a leading manufacturer of Class A and Super C motorized recreation vehicles that are sold through an established network of independent authorized dealers throughout North America.

The following table summarizes the total consideration paid for Newmar, noting that it is subject to purchase price adjustments as stipulated in the Purchase Agreement:


(in thousands)	November 8, 2019
Cash	$	267,749
Winnebago Industries shares: 2,000,000 at $46.29	92,572
Total	$	360,321

The cash ~~dividend~~portion of ~~$0.10 per share as~~the purchase price of the acquisition and certain transaction expenses were funded through the private placement of convertible senior notes (as further described in Note ~~11.~~

~~Note 2: Business Combination, Goodwill~~9, Long-Term Debt) and ~~Other Intangible Assets~~

~~We acquired 100%~~cash on hand. The stock consideration was discounted by 7.0% due to lack of marketability because of the ~~ownership interests~~one year lock-up restrictions.

Table of ~~Grand Design on November 8, 2016 in accordance with the Securities Purchase Agreement for an aggregate purchase price of $520.5 million, which was paid in cash and Winnebago shares as follows:~~

Contents

(In thousands, except shares and per share data) November 8,
2016
Cash $ 396,442
Winnebago shares: 4,586,555 at $27.05 per share 124,066
Total $ 520,508

The ~~cash portion was funded from cash on hand and borrowings under our ABL and Term Loan agreements. The stock was valued using our closing share price on the date of closing.~~

~~The acquisition has been accounted for in accordance with ASC 805,~~ ~~Business Combinations, using the acquisition method of accounting. Under the acquisition method of accounting, the~~ total purchase price was allocated to the net tangible and intangible assets of ~~Grand Design~~Newmar acquired, based on their fair values at the date of the acquisition. ~~The~~We believe that the information provides a reasonable basis for estimating the fair values, but we are waiting for additional information necessary to finalize the working capital adjustment as defined in the purchase agreement and the amounts related to income taxes. Thus, the preliminary measurements of fair value reflected are subject to change. We expect to finalize the valuation and complete the purchase price allocation ~~was finalized during~~no later than one year from the ~~first quarter of Fiscal 2018.~~acquisition date. The ~~final allocation of~~following table summarizes the ~~purchase price~~preliminary fair values assigned to the Newmar net assets acquired and ~~liabilities assumed is shown in~~ the ~~following table.~~determination of net assets:


(in thousands)	November 8, 2019
Cash	$	3,469
Accounts receivable	37,147
Inventories	82,621
Prepaid expenses and other assets	9,586
Property, plant, and equipment	31,143
Goodwill	73,929
Other intangible assets	172,100
Total assets acquired	409,995
Accounts payable	14,023
Accrued compensation	4,306
Product warranties	15,147
Promotional	3,593
Other	11,637
Deferred tax liabilities	968
Total liabilities assumed	49,674
Total purchase price	$	360,321

(In thousands) November 8,
2016
Cash $ 1,748
Accounts receivable 32,834
Inventories 15,300
Prepaid expenses and other assets 3,037
Property, plant and equipment 8,998
Goodwill 243,456
Other intangible assets 253,100
Total assets acquired 558,473

Accounts payable 11,163
Accrued compensation 3,615
Product warranties 12,904
Promotional 3,976
Other 1,496
Deferred tax liabilities 4,811
Total liabilities assumed 37,965
Total purchase price $ 520,508

The acquisition of 100% of the ownership interests of Grand Design occurred in two steps: (1) direct purchase of 89.34% of Grand Design member interests and (2) simultaneous acquisition of the remaining 10.66% of Grand Design member interests via the purchase of 100% of the shares of Blocker Corporation, which held the remaining 10.66% of the Grand Design member interests. We agreed to acquire Blocker Corporation as part of the Securities Purchase Agreement, and we did not receive a step-up in basis for 10.66% of the Grand Design assets. As a result, we established certain deferred tax liabilities on the opening balance sheet that relate to Blocker Corporation.

The goodwill, recognized in our Motorhome segment, is primarily attributable to the value of the workforce, reputation of founders, customer and dealer growth opportunities, and expected synergies. Key areas of cost synergies include increased purchasing power for raw materials and supply chain consolidation. Goodwill is expected to be mostly deductible for tax purposes. ~~As of February 24, 2018, goodwill increased $2.0 million as compared to the end of Fiscal 2017. The increase is due to the final purchase price adjustment made for taxes.~~

The ~~allocation~~following table summarizes the other intangible assets acquired:


($ in thousands)	November 8, 2019		Useful Life-Years
Trade name	$	98,000	Indefinite
Dealer network	64,000		12.0
Backlog	8,800		0.5
Non-compete agreements	1,300		5.0

The fair value of the ~~purchase price to the net assets acquired~~trade name and liabilities assumed resulted in the recognition of intangible assets with fair value on the closing date of November 8, 2016 and amortization accumulated from the closing date through February 24, 2018 as follows:

February 24, 2018 August 26, 2017
(In thousands)
Weighted
Average
Life-Years
Cost
Accumulated
Amortization
Cost
Accumulated
Amortization
Trade name Indefinite $ 148,000
$ —
$ 148,000
$ —
Dealer network 12.0 80,500
8,693
80,500
5,348
Backlog 0.5 18,000
18,000
18,000
18,000
Non-compete agreements 4.0 4,600
1,637
4,600
1,116
Leasehold interest-favorable 8.1 2,000
318
2,000
196
Total 253,100
$ 28,648
253,100
$ 24,660
Accumulated amortization (28,648 ) (24,660 )
Net book value of intangible assets $ 224,452
$ 228,440

~~We used the~~dealer network were estimated using an income ~~approach to value certain intangible assets.~~approach. Under the income approach, an intangible ~~asset’s~~asset's fair value is equal to the present value of the future economic benefits to be derived from ownership of the asset. ~~We used~~The fair value of the trade name was estimated using an income approach, ~~known as~~specifically the relief from royalty ~~method to value the trade name.~~method. The relief from royalty method is based on the hypothetical royalty stream that would be received if we were to license the trade name and iswas based on expected ~~revenues from such license.~~revenues. The fair value of the ~~dealer network~~trade name was estimated using an income approach, ~~known as~~specifically the cost to recreate/cost ~~savings~~saving method. This method uses the replacement of the asset as an indicator of the fair value of the asset. The useful life of the ~~intangible assets~~intangibles was determined considering the ~~period of~~ expected cash flows used to measure the fair value of the intangible assets adjusted ~~as appropriate~~ for the entity-specific factors including legal, regulatory, contractual, competitive, economic or other factors that may

limit the useful life of ~~the~~ intangible assets.

~~For~~ On the ~~six months ended February 24, 2018 and February 25, 2017, amortization of~~acquisition date, amortizable intangible assets ~~charged to operations~~ ~~was~~ ~~$4.0 million~~ ~~and~~ ~~$12.4 million, respectively. The weighted average remaining amortization period for intangible assets as~~had a weighted-average useful life of ~~February 24, 2018 was approximately 10.6 years. Remaining estimated aggregate annual amortization expense by fiscal year is as follows:~~approximately 10.5 years.

Table of Contents

(In thousands) Amount
Remainder of 2018 $ 3,866
2019 7,733
2020 7,733
2021 7,733
2022 7,106
Thereafter 42,281

~~Within the Towable segment, the~~The results of ~~Grand Design's~~Newmar's operations have been included in our ~~consolidated financial statements~~Condensed Consolidated Financial Statements from the close of the ~~acquisition.~~acquisition within the Motorhome segment. The following table provides net revenues and operating income ~~(which includes amortization expense)~~ from the ~~Grand Design business~~Newmar operating segment included in our consolidated results ~~during the six months ended February 24, 2018 and February 25, 2017~~ following the November 8, ~~2016~~2019 closing date:


	Three Months Ended		Six Months Ended
(in thousands)	February 29, 2020		February 29, 2020
Net revenues	$	138,416	$	174,079
Operating loss	2,551		3,863

Six Months Ended
(In thousands) February 24,
2018 February 25,
2017
Net revenues $ 450,708
$ 169,421
Operating income 55,254
6,759

~~Unaudited~~The following unaudited pro forma information ~~has been prepared~~represents our results of operations as if the Fiscal 2020 acquisition of Newmar had ~~taken place~~occurred at the beginning of Fiscal 2019:


	Three Months Ended						Six Months Ended
(in thousands, except per share data)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Net revenues	$	626,810	$	579,163	$	1,368,527	$	1,242,949
Net income	23,361		15,841		40,561		26,511
Income per share - basic	$	0.69	$	0.47	$	1.23	$	0.79
Income per share - diluted	$	0.69	$	0.47	$	1.21	$	0.79

The unaudited pro forma data above includes the following significant non-recurring adjustments made to account for certain costs which would have changed if the acquisition of Newmar had occurred at the beginning of Fiscal 2019:


	Three Months Ended						Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Amortization of intangibles (1 year or less useful life)⁽¹⁾	$	8,023	$	(4,400)	$	10,274	$	(13,610)
Amortization of intangibles⁽²⁾	(6)		(1,394)		(1,059)		(2,789)
Expenses related to business combination (transaction costs)⁽³⁾	—		(648)		9,950		(11,254)
Interest to reflect new debt structure⁽⁴⁾	(304)		(4,624)		(3,671)		(9,170)
Taxes related to the adjustments to the pro forma data and to the income of Newmar⁽⁵⁾	(1,619)		1,530		(2,452)		4,585

(1) Includes amortization adjustments for our backlog intangible asset and our fair-value inventory adjustment.

(2) Includes amortization adjustments for our dealer network and non-compete intangible assets.

(3) Pro forma transaction costs include $0.6 million incurred prior to the acquisition.

(4) Includes adjustments for cash and non-cash interest expense as well as deferred financing costs. Refer to Note 9, Long-Term Debt, for additional information on ~~August 30, 2015.~~ the Company's new debt structure as a result of the acquisition.

(5) Calculated using our U.S. federal statutory rate of 21.0%.

The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transaction actually taken place ~~on August 30, 2015,~~at the beginning of Fiscal 2019, and the unaudited pro forma information does not purport to be indicative of future financial operating results. The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition. ~~Unaudited pro forma information is as follows:~~

Six Months Ended
(In thousands, except per share data) February 24,
2018
February 25, 2017⁽¹⁾
Net revenues $ 918,380
$ 711,485
Net income 40,155
41,153
Income per share - basic 1.27
1.30
Income per share - diluted 1.26
1.30

⁽¹⁾ ~~Net income and income per share include~~Transaction costs related to the ~~increased benefit of $16.3 million, net of tax, associated with the termination of the postretirement health care plan in Fiscal 2017.~~

~~The unaudited pro forma data above includes the following significant non-recurring adjustments made to account for certain costs, which would have changed if the~~Newmar acquisition ~~of Grand Design had been completed on August 30, 2015:~~

Six Months Ended
(In thousands) February 24,
2018 February 25,
2017
Amortization of intangibles (1 year or less useful life) $ (122 ) $ (10,376 )
Increase in amortization of intangibles —
1,551
Expenses related to business combination (transaction costs) ⁽¹⁾
(50 ) (5,982 )
Interest to reflect new debt structure —
3,672
Taxes related to the adjustments to the pro forma data and to the income of Grand Design 64
8,303

⁽¹⁾ ~~Pro forma transaction costs include $0.1 million incurred by Grand Design prior to acquisition.~~

~~We incurred approximately $6.9~~were $10.6 million, of ~~acquisition-related costs to date, of~~ which ~~$0.1 million and $5.9~~$10.0 million were expensed during the ~~six months ended February 24, 2018~~first quarter of Fiscal 2020 and ~~February 25, 2017, respectively.~~$0.6 million were expensed during the fourth quarter of Fiscal 2019. Transaction costs are included in Selling, general, and administrative expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Note 3: Business Segments

~~We report segment information based on the "management" approach defined in ASC 280,~~ ~~Segment Reporting. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.~~

We have ~~two~~6 operating segments: 1) Grand Design towables, 2) Winnebago towables, 3) Winnebago motorhomes, 4) Newmar motorhomes, 5) Chris-Craft marine, and 6) Winnebago specialty vehicles. We evaluate performance based on each operating segment's Adjusted EBITDA, as defined below, which excludes certain corporate administration expenses and non-operating income and expense.

Table of Contents

Our 2 reportable ~~segments: (1) Motorized~~segments include: 1) Towable (comprised of products which are not motorized and are generally towed by another vehicle as well as other related manufactured products and ~~services~~services), which is an aggregation of the Grand Design towables and ~~(2) Towable products~~the Winnebago towables operating segments and ~~services. The Motorized segment includes all~~2) Motorhome (comprised of products that include a motorized chassis as well as other related manufactured ~~products.~~ products and services), which is an aggregation of the Winnebago motorhomes and Newmar motorhomes operating segments.

The Corporate / All Other category includes the Chris-Craft marine and Winnebago specialty vehicles operating segments as well as expenses related to certain corporate administration expenses for the oversight of the enterprise. These expenses include items such as corporate leadership and administration costs.

Identifiable assets of the reportable segments exclude general corporate assets, which principally consist of cash and cash equivalents and certain deferred tax balances. The general corporate assets are included in the Corporate / All Other category.

Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our CODM relies on internal management reporting that analyzes consolidated results to the net earnings level and operating segment's Adjusted EBITDA. Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors the performance of, the consolidated enterprise, the Towable segment, ~~includes all products that are not motorized and are generally towed by another vehicle.~~

~~We organize our business reporting on a product basis. Each reportable segment is managed separately to better align to our customers, distribution partners~~ and the ~~unique market dynamics of the product groups. We aggregate two~~Motorhome segment. The operating ~~segments into the Towable reporting segment based upon~~segments' management have responsibility for operating decisions, allocating resources, and assessing performance within their ~~similar products, customers, distribution methods, production processes and economic characteristics.~~respective segments. The accounting policies of both reportable segments are the same and are described in Note 1: 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017.~~31, 2019.

Subsequent to the acquisition of Grand Design in Fiscal 2017, management re-evaluated the manner in which corporate expenses were allocated to the reportable segments. A new corporate allocation policy was adopted in the first quarter of Fiscal 2018 that identifies shared costs and allocates them to the operating segments based on a cost driver most appropriate for the type of cost being allocated. For example, certain costs were allocated based on the financial size of the operating segment, while other costs, where appropriate, were allocated based on the headcount in the operating segments since headcount was deemed the appropriate driver for those types of expenses. Prior year segment information has been restated to conform to the current reporting segment presentation. All corporate expenses were allocated to the operating segments. Assets presented by reportable segment exclude certain corporate assets that cannot reasonably be allocated to the reportable segments. These unallocated corporate assets include cash and deferred tax assets.

We evaluate the performance of our reportable segments based on Adjusted EBITDA. EBITDA ~~after corporate allocations.~~is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as ~~earnings~~net income before interest expense, provision for income taxes, depreciation and amortization expense, and other adjustments made in order to present comparable results from period to period. Examples of items excluded from Adjusted EBITDA include ~~the postretirement health care benefit income resulting from the plan amendments over the past several years~~acquisition-related fair-value inventory step-up, acquisition-related costs, restructuring expenses, and ~~the transaction costs related to our acquisition of Grand Design.~~

non-operating income.

The following table shows information by ~~reporting~~reportable segment:


	Three Months Ended						Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Net Revenues
Towable	$	283,463	$	250,691	$	624,713	$	543,524
Motorhome	325,542		164,662		551,433		345,990
Corporate / All Other	17,805		17,337		39,122		36,824
Consolidated	$	626,810	$	432,690	$	1,215,268	$	926,338

Adjusted EBITDA
Towable	$	34,746	$	33,638	$	70,531	$	64,466
Motorhome	14,946		4,359		24,277		16,335
Corporate / All Other	(4,263)		(3,509)		(7,331)		(7,860)
Consolidated	$	45,429	$	34,488	$	87,477	$	72,941

Capital Expenditures
Towable	$	5,640	$	7,648	$	9,666	$	16,525
Motorhome	5,372		2,198		7,612		5,390
Corporate / All Other	1,421		749		1,779		1,451
Consolidated	$	12,433	$	10,595	$	19,057	$	23,366

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Three Months Ended Six Months Ended
(In thousands) February 24,
2018 February 25,
2017 February 24,
2018 February 25,
2017
Net revenues
Motorized $ 202,001
$ 198,936
$ 392,357
$ 394,061
Towable 266,358
171,574
526,023
221,757
Consolidated $ 468,359
$ 370,510
$ 918,380
$ 615,818

Adjusted EBITDA
Motorized $ 4,044
$ 10,838
$ 7,199
$ 21,954
Towable 35,338
18,233
67,594
21,796
Consolidated $ 39,382
$ 29,071
$ 74,793
$ 43,750

Capital expenditures
Motorized $ 1,633
$ 1,730
$ 4,740
$ 4,531
Towable 4,685
1,646
6,935
2,407
Consolidated $ 6,318
$ 3,376
$ 11,675
$ 6,938

Total assets
Motorized $ 304,623
$ 283,035
$ 304,623
$ 283,035
Towable 618,636
581,863
618,636
581,863
Unallocated corporate assets 42,067
29,823
$ 42,067
$ 29,823
Consolidated $ 965,326
$ 894,721
$ 965,326
$ 894,721


(in thousands)	February 29, 2020		August 31, 2019
Total Assets
Towable	$	687,718	$	628,994
Motorhome	653,014		332,157
Corporate / All Other	231,195		143,080
Consolidated	$	1,571,927	$	1,104,231

Reconciliation of net income to consolidated Adjusted EBITDA:


	Three Months Ended						Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Net income	$	17,268	$	21,598	$	31,336	$	43,759
Interest expense	8,651		4,346		14,700		8,847
Provision for income taxes	3,995		3,166		7,888		9,892
Depreciation	4,134		3,099		7,720		6,268
Amortization of intangible assets	7,974		2,267		11,588		4,926
EBITDA	42,022		34,476		73,232		73,692
Acquisition-related fair-value inventory step-up	3,634				4,810		—
Acquisition-related costs	—		—		9,950		—
Restructuring expenses	43		219		(129)		219
Non-operating income	(270)		(207)		(386)		(970)
Adjusted EBITDA	$	45,429	$	34,488	$	87,477	$	72,941

Three Months Ended Six Months Ended
(In thousands) February 24,
2018 February 25,
2017 February 24,
2018 February 25,
2017
Net income $ 22,088
$ 15,278
$ 40,046
$ 27,016
Interest expense 4,918
5,178
9,699
6,306
Provision for income taxes 8,234
7,916
16,794
13,536
Depreciation 2,198
1,848
4,328
3,428
Amortization of intangible assets 1,933
10,367
3,988
12,418
EBITDA 39,371
40,587
74,855
62,704
Postretirement health care benefit income —
(11,983 ) —
(24,796 )
Transaction costs —
463
50
5,925
Non-operating expense (income) 11
4
(112 ) (83 )
Adjusted EBITDA $ 39,382
$ 29,071
$ 74,793
$ 43,750

~~Note 4~~: ~~Concentration Risk~~

During the first six months of Fiscal 2018, no dealer organization accounted for 10% or more of our consolidated revenues. One of our dealer organizations, La Mesa RV Center, Inc., accounted for 13.7% of our consolidated net revenues for the first six months of ~~Fiscal 2017~~. A second dealer organization, FreedomRoads, LLC, accounted for 11.8% of our consolidated net revenues for the first six months of Fiscal 2017. These dealers declined on a relative basis due to the growth of other dealers and a shift in dealer mix attributable to the addition of Grand Design revenue.

Note 5: 4: Derivatives, Investments, and Fair Value Measurements

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

We account for fair value measurements in accordance with ~~ASC~~Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measurement, and expands disclosure about fair value measurement. The fair value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:

Level 1 - Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2 - Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

•Quoted prices for similar assets or liabilities in active markets;

•Quoted prices for identical or similar assets in nonactive markets;

•Inputs other than quoted prices that are observable for the asset or liability; and

•Inputs that are derived principally from or corroborated by other observable market data.

Level 3 - Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at February ~~24, 2018~~29, 2020 and August ~~26, 2017~~31, 2019 according to the valuation techniques we used to determine their fair values:


										Fair Value at		Fair Value Hierarchy
			Fair Value Measurements Using Inputs Considered As
(In thousands)	Fair Value at February 24, 2018		Level 1 Quoted Prices in Active Markets for Identical Assets		Level 2 Significant Other Observable Inputs		Level 3 Significant Unobservable Inputs
(in thousands)									(in thousands)	February 29, 2020		Level 1		Level 2		Level 3
Assets that fund deferred compensation:									Assets that fund deferred compensation:
Domestic equity funds	$	1,580	$	1,546	$	34	$	—	Domestic equity funds	$	435	$	343	$	92	$	—
International equity funds	176		157		19		—		International equity funds	100		34		66		—
Fixed income funds	176		83		93		—		Fixed income funds	173		52		121		—
Interest rate swap contract	1,924		—		1,924		—
Total assets at fair value	$	3,856	$	1,786	$	2,070	$	—	Total assets at fair value	$	708	$	429	$	279	$	—

Six Months Ended
February 24, 2018 February 25, 2017
(In thousands)
Defined
Benefit
Pension
Items

Interest
Rate
Swap
Total
Defined
Benefit
Pension
Items

Interest
Rate
Swap
Total
Balance at beginning of period $ (509 ) $ (514 ) $ (1,023 ) $ 10,975
$ —
$ 10,975

OCI before reclassifications —
1,917
1,917
3,903
(439 ) 3,464
Amounts reclassified from AOCI 13
—
13
(15,339 ) —
(15,339 )
Net current-period OCI 13
1,917
1,930
(11,436 ) (439 ) (11,875 )

Balance at end of period $ (496 ) $ 1,403
$ 907
$ (461 ) $ (439 ) $ (900 )

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Reclassifications out of AOCI in net periodic benefit costs, net of tax, were:


		Three Months Ended						Six Months Ended
(in thousands)	Location on Consolidated Statements of Income and Comprehensive Income	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Amortization of net actuarial loss	SG&A	$	8	$	8	$	16	$	16

Three Months Ended Six Months Ended
(In thousands)
Location on Consolidated Statements
of Income and Comprehensive Income
February 24,
2018 February 25,
2017 February 24,
2018 February 25,
2017
Amortization of prior service credit Cost of goods sold $ —
$ (12,177 ) $ —
$ (25,035 )
Amortization of net actuarial loss Cost of goods sold 7
4,764
13
9,696
Total reclassifications $ 7
$ (7,413 ) $ 13
$ (15,339 )

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.

~~This section~~

Unless the context otherwise requires, the use of the terms "Winnebago," "we," "us," and "our" refers to Winnebago Industries, Inc. and its wholly-owned subsidiaries.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations, and liquidity are discussed in order of magnitude.

Our MD&A should be read in conjunction with ~~the unaudited consolidated financial statements contained in this Form 10-Q as well as the Management's Discussion and Analysis and Risk Factors included in~~ our Annual Report on Form ~~10‑K~~10-K for the fiscal year ended August ~~26, 2017~~31, 2019 (including the information presented therein under Risk Factors), as well as our reports on Forms 10-Q and ~~in Part II, Item 1A of this Quarterly Report on Form 10-Q.~~

~~Forward-Looking Information~~

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to, increases in interest rates, availability of credit, low consumer confidence, availability of labor, significant increase in repurchase obligations, inadequate liquidity or capital resources, availability and price of fuel, a slowdown in the economy, increased material and component costs, availability of chassis8-K and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, the effect of global tensions, integration of operations relating to merger and acquisition activities generally, business interruptions, any unexpected expenses related to ERP, risk related to compliance with debt covenants and leverage ratios, and other factors. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in our filings with the SEC over the last 12 months, copies of whichpublicly available information. All amounts herein are available from the SEC or from us upon request. We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release or to reflect any changes in expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.unaudited.

Overview

Winnebago Industries, Inc. is aone of the leading ~~US manufacturer of RVs~~U.S. manufacturers with a ~~proud history~~diversified portfolio of ~~manufacturing RV~~recreation vehicles ("RV"s) and marine products ~~for 60 years.~~used primarily in leisure travel and outdoor recreation activities. We ~~currently~~ produce ~~a large majority of~~ our ~~motorhomes in vertically integrated manufacturing facilities~~motorhome units in Iowa and ~~we produce all of~~Indiana; our ~~travel trailer~~towable units in Indiana; and ~~fifth wheel trailers~~our marine units in ~~Indiana. We are in the process of expanding some motorhome manufacturing to Junction City, Oregon.~~Florida. We distribute our RV and marine products primarily through independent dealers throughout the USU.S. and Canada, who then retail the products to the end consumer. We also distribute our marine products internationally through independent dealers, who then retail the products to the end consumer.

~~Significant Transaction~~

Non-GAAP Reconciliation

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"), as well as certain adjusted or non-GAAP financial measures such as EBITDA and Adjusted EBITDA. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation and amortization expense, and other adjustments made in order to present comparable results from period to period.

These non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, have been provided as information supplemental and in addition to the financial measures presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein. The non-GAAP financial measures presented may differ from similar measures used by other companies.

Refer to the Results of Operations - First Six Months of Fiscal 2020 Compared to the First Six Months of Fiscal 2019 for a detailed reconciliation of items that impacted EBITDA and Adjusted EBITDA. We have included these non-GAAP performance measures as a comparable measure to illustrate the effect of non-recurring transactions occurring during the reported periods and to improve comparability of our results from period to period. We believe Adjusted EBITDA provides meaningful supplemental information about our operating performance because these measures exclude amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted EBITDA include acquisition-related fair-value inventory step-up, acquisition-related costs, restructuring expenses, and non-operating income.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to competitors and peers; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in its assessments of performance and in forecasting and budgeting for our company; (d) to evaluate potential acquisitions; and (e) to ensure compliance with covenants and restricted activities under the terms of our debt agreements. We believe these non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry.

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Business Combinations

Newmar Corporation

On November 8, ~~2016,~~2019, we ~~acquired all~~completed the acquisition of Newmar Corporation, Dutch Real Estate Corp, New-Way Transport, and New-Serv (collectively "Newmar") for total consideration of $360.3 million, which consisted of $267.7 million in cash, subject to purchase price adjustments as stipulated in the ~~issued~~Purchase Agreement, and ~~outstanding capital~~2.0 million shares of Winnebago common stock that were valued at $92.6 million ($46.29 per share discounted at 7.0% due to lack of ~~towable RV manufacturer Grand Design for an aggregate~~marketability because of one year lock-up restrictions). The cash portion of the purchase price of ~~$520.5 million. This~~the acquisition ~~was~~and certain transaction expenses were funded ~~from our~~through the private placement of $300.0 million in aggregate principal amount of 1.5% convertible senior notes due 2025 ("Convertible Notes") (as further described in Note 9, Long-Term Debt) and cash on ~~hand, $353.0 million from asset-based revolving~~hand. Newmar is a leading manufacturer of Class A and ~~term loan credit facilities,~~Super C motorized recreation vehicles that are sold through an established network of independent authorized dealers throughout North America.

Reportable Segments

We have six operating segments: 1) Grand Design towables, 2) Winnebago towables, 3) Winnebago motorhomes, 4) Newmar motorhomes, 5) Chris-Craft marine, and 6) Winnebago specialty vehicles. We evaluate performance based on each operating segment's Adjusted EBITDA, as defined below, which excludes certain corporate administration expenses and non-operating income and expense.

Our two reportable segments include: 1) Towable (comprised of products which are not motorized and are generally towed by another vehicle as well as ~~stock consideration, as~~other related manufactured products and services), which is ~~more fully described in Note 2 and Note 9 to~~an aggregation of the ~~Condensed Consolidated Financial Statements. We purchased~~ Grand Design ~~to significantly expand our existing towable RV product offerings~~towables and ~~dealer base~~the Winnebago towables operating segments and ~~acquire additional talent in the RV industry.~~

~~With the acquisition~~2) Motorhome (comprised of Grand Design in the first quarter of Fiscal 2017, we expanded the number of reporting segments to two: (1) Motorized products and services and (2) Towable products and services. The Motorized segment includes all products that include a motorized chassis as well as other related manufactured ~~products.~~ products and services), which is an aggregation of the Winnebago motorhomes and Newmar motorhomes operating segments.

The ~~Towable segment~~Corporate / All Other category includes ~~all products that are not motorized~~the Chris-Craft marine and ~~are generally towed by another vehicle.~~Winnebago specialty vehicles operating segments as well as expenses related to certain corporate administration expenses for the oversight of the enterprise. These expenses include items such as corporate leadership and administration costs.

Industry Trends

Key reported statistics for the North American RV industry are as follows:

•Wholesale unit shipments: RV product delivered to the dealers, which is reported monthly by ~~RVIA~~the Recreation Vehicle Industry Association ("RVIA")

•Retail unit registrations: consumer purchases of RVs from dealers, which is reported by Stat Surveys

We track RV ~~industry~~Industry conditions using these key statistics to monitor trends and evaluate and understand our performance relative to the overall industry. The following is an analysis of changes in these key statistics for the rolling 12 months through January as of 2020 and 2019:


	US and Canada Industry
	Wholesale Unit Shipments per RVIA								Retail Unit Registrations per Stat Surveys
	Rolling 12 Months through January								Rolling 12 Months through January
	2020	2019	Unit Change	% Change		2020	2019	Unit Change	% Change
Towable⁽¹⁾	357,358	399,987	(42,629)	(10.7)	%	391,382	418,956	(27,574)	(6.6)	%
Motorhome⁽²⁾	46,280	55,683	(9,403)	(16.9)	%	51,531	57,635	(6,104)	(10.6)	%
Combined	403,638	455,670	(52,032)	(11.4)	%	442,913	476,591	(33,678)	(7.1)	%

(1) Towable: Fifth wheel and travel trailer products.

(2) Motorhome: Class A, B, and C products.

The rolling twelve months ~~shipment~~shipments for 2020 and 2019 reflect a contraction in shipments as dealers have rationalized inventory during the last twelve months. The rolling twelve months retail information for ~~2017~~2020 and ~~2016, as noted below,~~2019 illustrates that ~~the RV industry continues to grow~~retail sales remain at ~~the wholesale and retail level.~~healthy levels. We believe ~~that~~ retail demand is the key driver to continued growth in the industry.

US and Canada Industry
Wholesale Unit Shipments per RVIA Retail Unit Registrations per Stat Surveys
Rolling 12 Months through January Rolling 12 Months through January
2018
2017
Unit Change % Change 2018
2017
Unit Change % Change
Towable ⁽¹⁾
437,229
364,642
72,587
19.9 % 394,114
351,769
42,345
12.0 %
Motorized ⁽²⁾
63,529
55,391
8,138
14.7 % 57,506
50,657
6,849
13.5 %
Combined 500,758
420,033
80,725
19.2 % 451,620
402,426
49,194
12.2 %

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⁽¹⁾	~~Towable: Fifth wheel and travel trailer products~~


⁽²⁾	~~Motorized: Class A, B and C products~~

The most recent ~~towable and motorized~~ RVIA wholesale shipment forecasts for calendar year ~~2017 and 2018,~~2020, as noted in the table below, ~~illustrates continued projected growth~~indicate that industry shipments are expected to remain relatively flat in 2020.


	Calendar Year
Wholesale Unit Shipment Forecast per RVIA⁽¹⁾	2020 Forecast	2019 Forecast (Most Likely)	Unit Change	% Change
Aggressive	420,200	406,100	14,100	3.5	%
Most likely	410,100	406,100	4,000	1.0	%
Conservative	380,300	406,100	(25,800)	(6.4)	%

(1) Prepared by Dr. Richard Curtin of the ~~industry. The outlook~~University of Michigan Consumer Survey Research Center for ~~future growth~~RVIA and reported in the Roadsigns RV sales is based on continued modest gains in job and disposable income prospects as well as low inflation, and takes into account the impact of slowly rising interest rates, a strong US dollar and continued weakness in energy production and prices.Spring 2020 Industry Forecast Issue.

Calendar Year
Wholesale Unit Shipment Forecast per RVIA⁽¹⁾
2018 2017
Unit
Change
%
Change
Towable 459,000
429,500
29,500
6.9 %
Motorized 67,900
62,700
5,200
8.3 %
Combined 526,900
492,200
34,700
7.0 %


⁽¹⁾	Forecast prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the Roadsigns RV Spring 2018 Industry Forecast Issue. Unit forecasts exclude folding camper and truck camper categories.

Market Share

Our retail unit market share, as reported by Stat Surveys based on state records, is illustrated below. Note that this data is subject to adjustment and is continuously updated.


	Rolling 12 Months through January						Calendar Year
US and Canada	2020⁽¹⁾		2019		2019		2018		2017
Travel trailer and fifth wheels	9.4	%	7.8	%	9.3	%	7.8	%	6.1	%
Motorhome A, B, C	16.5	%	15.7	%	15.5	%	15.6	%	16.3	%
Total market share	10.2	%	8.8	%	10.0	%	8.7	%	7.4	%

Rolling 12 Months
Through January
Calendar Year
2018 2017 2017 2016 2015
Motorized A, B, C 16.3% 17.8% 16.2% 18.0% 20.5 %
Travel trailer and fifth wheels 6.2%
1.7%⁽¹⁾
6.1%
1.7%⁽¹⁾
0.9 %


⁽¹⁾	~~Includes retail unit market share for Grand Design since acquisition on November 8, 2016.~~

(1) Includes retail unit market share for Newmar since its acquisition on November 8, 2019.

~~Debt Repricing~~

Effective December 8, 2017, we amended our Credit Agreement to reprice $260.0 million of Term Loan debt. The revised interest rate is LIBOR plus 3.5%, down from the previous rate of LIBOR plus 4.5%. Prior to this repricing, $19.7 million was drawn on our ABL and the proceeds from the ABL borrowing were used to voluntarily pay down our Term Loan. Various other amendments were made to our ABL providing us with reduced borrowing costs and facility fees under the ABL. The requirement to hedge a portion of the Term Loan floating rate interest exposure was also removed from the ABL providing greater flexibility under the Credit Agreement.

Facility Expansion

~~During Fiscal 2017,~~Due to the rapid growth in our ~~Board of Directors approved two large~~Towable segment, we have implemented facility expansion projects in ~~the fast growing Towable segment.~~our Grand Design towables and Winnebago towables operating segments. The Grand Design towables expansion project consisted of ~~two~~three new production ~~facilities. The first~~facilities--two were completed in Fiscal 2018 and one was completed ~~in January 2018 and we have seen an increase in units produced~~ during the second quarter of Fiscal ~~2018.~~2020. The ~~second building~~facility expansion in the ~~Grand Design expansion project is expected to be~~Winnebago towables division was completed in the third quarter of Fiscal ~~2018. The facility expansion in the Winnebago-branded Towable division is expected to be completed in early Fiscal~~ 2019.

~~ERP~~Enterprise Resource Planning System

In the second quarter of Fiscal 2015, our Board of Directors approved the strategic initiative of implementing an ~~ERP~~enterprise resource planning ("ERP") system to replace our legacy business applications. The new ERP platform will provide better support for our changing business needs and

plans for future growth. Our initial cost estimates have grown for additional needs of the business, such as ~~the acquisition of the Junction City, Oregon plant and~~ the opportunity to integrate the ERP system with additional manufacturing systems. The project includes software, external implementation assistance, and increased internal staffing directly related to this initiative. We anticipate that approximately 40% of the cost will be expensed in the period incurred and 60% will be capitalized and depreciated over its useful life.

The following table illustrates the cumulative project costs:


	Six Months Ended		Fiscal Year														Cumulative Investment
(in thousands)	February 29, 2020		2019		2018		2017		2016		2015
Capitalized	$	791	$	3,875	$	5,941	$	1,881	$	7,798	$	3,291	$	23,577	57.4	%
Expensed	599		3,709		2,107		2,601		5,930		2,528		17,474		42.6	%
Total	$	1,390	$	7,584	$	8,048	$	4,482	$	13,728	$	5,819	$	41,051	100.0	%

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Fiscal 2018 Fiscal Fiscal Fiscal Cumulative
(In thousands) Q2 Q1 2017 2016 2015 Investment
Capitalized $ 1,271
$ 1,416
$ 1,881
$ 7,798
$ 3,291
$ 15,657
57 %
Expensed 420
387
2,601
5,930
2,528
11,866
43 %
Total $ 1,691
$ 1,803
$ 4,482
$ 13,728
$ 5,819
$ 27,523
100 %

In May of 2017, our Board of Directors approved continued investment in the ERP system and a change in implementation partner. The project is proceeding and the benefits are expected to be realized over the next several years. Total project costs are expected to be approximately $38.0 million.

~~Consolidated~~ Results of Operations

- Current Quarter Compared to the Comparable Prior Year Quarter ~~Last Year~~

Consolidated Performance Summary

The following is an analysis of changes in key items included in the consolidated statements of income and comprehensive income for the three months ended February ~~24, 2018~~29, 2020 compared to the three months ended February ~~25, 2017:~~23, 2019:


	Three Months Ended
(in thousands, except percent and per share data)	February 29, 2020		% of Revenues⁽¹⁾		February 23, 2019		% of Revenues⁽¹⁾		$ Change		% Change
Net revenues	$	626,810	100.0	%	$	432,690	100.0	%	$	194,120	44.9	%
Cost of goods sold	547,028		87.3	%	366,261		84.6	%	180,767		49.4	%
Gross profit	79,782		12.7	%	66,429		15.4	%	13,353		20.1	%
Selling, general, and administrative expenses	42,164		6.7	%	35,259		8.1	%	6,905		19.6	%
Amortization of intangible assets	7,974		1.3	%	2,267		0.5	%	5,707		251.7	%
Total operating expenses	50,138		8.0	%	37,526		8.7	%	12,612		33.6	%
Operating income	29,644		4.7	%	28,903		6.7	%	741		2.6	%
Interest expense	8,651		1.4	%	4,346		1.0	%	4,305		99.1	%
Non-operating income	(270)		—	%	(207)		—	%	63		30.4	%
Income before income taxes	21,263		3.4	%	24,764		5.7	%	(3,501)		(14.1)	%
Provision for income taxes	3,995		0.6	%	3,166		0.7	%	829		26.2	%
Net income	$	17,268	2.8	%	$	21,598	5.0	%	$	(4,330)	(20.0)	%

Diluted income per share	$	0.51			$	0.68			$	(0.17)	(25.0)	%
Diluted average shares outstanding	33,918				31,724				2,194		6.9	%

Three Months Ended
(In thousands, except percent
and per share data)
February 24,
2018
% of
Revenues⁽¹⁾
February 25,
2017
% of
Revenues⁽¹⁾

Increase
(Decrease)
%
Change
Net revenues $ 468,359
100.0 % $ 370,510
100.0 % $ 97,849
26.4 %
Cost of goods sold 400,698
85.6 % 321,194
86.7 % 79,504
24.8 %
Gross profit 67,661
14.4 % 49,316
13.3 % 18,345
37.2 %

Selling 12,209
2.6 % 9,553
2.6 % 2,656
27.8 %
General and administrative 18,268
3.9 % 12,540
3.4 % 5,728
45.7 %
Postretirement health care benefit income —
— % (11,983 ) (3.2 )% 11,983
(100.0 )%
Transaction costs —
— % 463
0.1 % (463 ) (100.0 )%
Amortization of intangible assets 1,933
0.4 % 10,367
2.8 % (8,434 ) (81.4 )%
Total general and administrative 20,201
4.3 % 11,387
3.1 % 8,814
77.4 %
Total SG&A 32,410
6.9 % 20,940
5.7 % 11,470
54.8 %

Operating income 35,251
7.5 % 28,376
7.7 % 6,875
24.2 %
Interest expense 4,918
1.1 % 5,178
1.4 % (260 ) (5.0 )%
Non-operating expense 11
— % 4
— % 7
175.0 %
Income before income taxes 30,322
6.5 % 23,194
6.3 % 7,128
30.7 %
Provision for income taxes 8,234
1.8 % 7,916
2.1 % 318
4.0 %
Net income $ 22,088
4.7 % $ 15,278
4.1 % $ 6,810
44.6 %

Diluted income per share $ 0.69
$ 0.48
$ 0.21
43.8 %
Diluted average shares outstanding 31,854
31,686
168
0.5 %

⁽¹⁾ Percentages may not add due to rounding differences.

~~Consolidated net~~

Net revenues increased ~~$97.8 million or 26.4%~~ in the second quarter of Fiscal ~~2018~~2020 compared to the second quarter of Fiscal ~~2017. This increase was~~2019 primarily due to ~~an increase in volume in~~ our ~~Towable segment.~~acquisition of Newmar and organic growth.

Gross profit ~~increased $18.3 million in the~~ ~~second quarter~~ of ~~Fiscal 2018~~ ~~compared to the same period a year ago due to a decrease in manufacturing costs~~ as a ~~percent~~percentage of revenue due to our Towable segment volume growth and cost savings initiatives. This was partially offset by margin pressure in the Motorized segment due to ongoing expenses related to the ramp up of our West Coast production facility and costs associated with new product start up.

~~Selling expenses were $12.2 million and $9.6 million, or~~ ~~2.6%~~ ~~and~~ ~~2.6%~~ ~~of net revenues, in the~~ ~~second quarter~~ of ~~Fiscal 2018~~ ~~and~~ ~~Fiscal 2017, respectively. Selling expenses are largely variable and proportional to revenues.~~

~~General and administrative expenses were $20.2 million and $11.4 million, or 4.3% and 3.1% of net revenues in the~~ ~~second quarter~~ of ~~Fiscal 2018~~ ~~and~~ ~~Fiscal 2017, respectively.~~ ~~Fiscal 2017~~ ~~results of operations in the~~ ~~second quarter~~ ~~were impacted by the increased benefit of $12.0 million due to the termination of the postretirement health care plan. This benefit was partially offset in the~~ ~~second quarter~~ of ~~Fiscal 2017~~ by $0.5 million of transaction-related expenses and $10.4 million of expense related to amortization of definite-lived intangible assets. The remainder of the increase from 2017 to 2018 is related to investments in the business.

~~Interest expense~~ decreased ~~$0.3 million~~ in the second quarter of Fiscal ~~2018. This decrease is related~~2020 compared to ~~the amendment to our Credit Agreement that occurred during~~ the second quarter of Fiscal ~~2018. This amendment resulted~~2019 primarily due to a change in mix as a ~~decrease~~result of our acquisition of Newmar and the impact of Newmar inventory step-up.

Operating expenses increased in the second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 due to incremental amortization related to the purchase accounting for Newmar, normal operating expenses of Newmar and organic growth in the Towable segment.

Interest expense increased in the second three months of Fiscal 2020 compared to the second three months of Fiscal 2019 primarily due to the additional interest ~~rate spread by 1.0% on~~expense related to the ~~Term Loan and 0.25% on~~Convertible Notes issued in connection with the ~~ABL. See Analysis~~acquisition of ~~Financial Condition, Liquidity, and Resources and Note 9 for further information.~~Newmar.

The ~~overall~~ effective ~~income~~ tax rate increased to 18.8% for the second quarter of Fiscal ~~2018 was 27.2%~~2020 compared to ~~the effective tax rate of 34.1% for the same period in Fiscal 2017. The effective tax rate~~12.8% for the second quarter of Fiscal ~~2018 was favorably impacted by the enactment of the Tax Act. This decrease was~~2019 due primarily ~~due~~ to the ~~decrease~~favorable impact in the ~~Federal rate as a result~~prior year of ~~the Tax Act, which was partially offset by the associated remeasurement of our deferred tax assets~~research and an increase in state tax rate. The current year rate also benefited from the adoption of ASU 2016-09 related to share-based compensation as discussed in Note 1 to the Condensed Consolidated Financial Statements.development credits.

Net income and diluted income per share ~~were $22.1 million and $0.69 per share, respectively, for the~~ ~~second quarter~~ of ~~Fiscal 2018. In the~~ ~~second quarter~~ of ~~Fiscal 2017~~, net income was $15.3 million and diluted income was $0.48 per share. The increase in net income and diluted income per share is due primarily to the Towable segment contribution to net income. In addition, FY2017 results of operationsdecreased in the second quarter ~~was impacted by~~of Fiscal 2020 compared to the ~~increased benefit~~second quarter of ~~$12.0 million~~Fiscal 2019 primarily due to incremental non-cash interest expense due to our convertible debt, impact of Newmar inventory step-up and amortization and a favorable credit in the ~~termination~~prior year related to research and development credits offset by improved profitability in our organic business.

Table of ~~the postretirement health care plan.~~Contents

Non-GAAP Reconciliation

We have provided the following non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein. The non-GAAP financial measures presented below may differ from similar measures used by other companies.

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the three months ended February ~~24, 2018~~29, 2020 and February ~~25, 2017.~~23, 2019:


	Three Months Ended
(in thousands)	February 29, 2020		February 23, 2019
Net income	$	17,268	$	21,598
Interest expense	8,651		4,346
Provision for income taxes	3,995		3,166
Depreciation	4,134		3,099
Amortization of intangible assets	7,974		2,267
EBITDA	42,022		34,476
Acquisition-related fair-value inventory step-up	3,634		—
Acquisition-related costs	—		—
Restructuring expenses	43		219
Non-operating income	(270)		(207)
Adjusted EBITDA	$	45,429	$	34,488

Three Months Ended
(In thousands) February 24,
2018 February 25,
2017
Net income $ 22,088
$ 15,278
Interest expense 4,918
5,178
Provision for income taxes 8,234
7,916
Depreciation 2,198
1,848
Amortization of intangible assets 1,933
10,367
EBITDA 39,371
40,587
Postretirement health care benefit income —
(11,983 )
Transaction costs —
463
Non-operating expense 11
4
Adjusted EBITDA $ 39,382
$ 29,071

Reportable Segment Performance Summary

We have provided non-GAAP performance measures of EBITDA and Adjusted EBITDA as a comparable measure to illustrate items impacting current results which are not expected to impact future performance. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. We believe EBITDA and Adjusted EBITDA provide meaningful supplemental information about our operating performance because each measure excludes amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from

Towable

~~Adjusted EBITDA include the postretirement health care benefit income from terminating the plan and transaction costs related to our acquisition of Grand Design.~~

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to competitors and peers that publish similar measures; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of our Board of Directors to enable our Board of Directors to have the same measurement basis of operating performance as is used by management in its assessments of performance and in forecasting and budgeting for our company; and, (d) to evaluate potential acquisitions. We believe these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry.

~~Segment Results of Operations~~

The following is an analysis of key changes in our ~~Motorized~~Towable segment for the three months ended February ~~24, 2018~~29, 2020 compared to the three months ended February ~~25, 2017:~~23, 2019:

Motorized
(In thousands, except units) Three Months Ended
Feb 24,
2018
% of
Revenue
Feb 25,
2017
% of
Revenue

Increase
(Decrease)
%
Change
Net revenues $ 202,001
$ 198,936
$ 3,065
1.5 %
Adjusted EBITDA 4,044
2.0 % 10,838
5.4 % (6,794 ) (62.7 )%

Unit deliveries Feb 24,
2018
Product
Mix % ⁽¹⁾
Feb 25,
2017
Product
Mix % ⁽¹⁾

Increase
(Decrease)
%
Change
Class A 881
39.9 % 800
38.0 % 81
10.1 %
Class B 411
18.6 % 376
17.8 % 35
9.3 %
Class C 918
41.5 % 931
44.2 % (13 ) (1.4 )%
Total motorhomes 2,210
100.0 % 2,107
100.0 % 103
4.9 %

Motorhome ASP $ 90,018
$ 94,379
$ (4,361 ) (4.6 )%

As Of
Backlog ⁽²⁾
Feb 24,
2018 Feb 25,
2017
Increase
(Decrease)
%
Change
Units 3,053
2,143
910
42.5 %
Dollars $ 276,231
$ 191,522
$ 84,709
44.2 %

Dealer Inventory
Units 4,827
5,068
(241 ) (4.8 )%


	Three Months Ended
(in thousands, except ASP)	February 29, 2020		% of Revenues		February 23, 2019		% of Revenues		$ Change		% Change
Net revenues	$	283,463			$	250,691			$	32,772	13.1	%
Adjusted EBITDA	34,746		12.3	%	33,638		13.4	%	1,108		3.3	%

Average Selling Price ("ASP")⁽¹⁾	32,638				33,003				(365)		(1.1)	%

	Three Months Ended
Unit deliveries	February 29, 2020		Product Mix⁽²⁾		February 23, 2019		Product Mix⁽²⁾		Unit Change		% Change
Travel trailer	5,446		62.4	%	4,543		59.8	%	903		19.9	%
Fifth wheel	3,287		37.6	%	3,053		40.2	%	234		7.7	%
Total towables	8,733		100.0	%	7,596		100.0	%	1,137		15.0	%

⁽¹⁾ Average selling price excludes off-invoice dealer incentives.

(2) Percentages may not add due to rounding differences.

Net revenues increased in the second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 due to volume growth in excess of industry trends. Our Towable market share increased from 7.8% to 9.4% when comparing shipments during the twelve-month trailing periods ended January 2019 and January 2020.

Adjusted EBITDA increased in the second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 due to organic growth offset slightly by higher costs as a result of the start-up of new capacity.

Table of Contents

Motorhome

The following is an analysis of key changes in our Motorhome segment for the three months ended February 29, 2020 compared to the three months ended February 23, 2019:


	Three Months Ended
(in thousands, except ASP)	February 29, 2020		% of Revenues		February 23, 2019		% of Revenues		$ Change		% Change
Net revenues	$	325,542			$	164,662			$	160,880	97.7	%
Adjusted EBITDA	14,946		4.6	%	4,359		2.6	%	10,587		242.9	%

ASP⁽¹⁾	145,554				92,560				52,994		57.3	%

	Three Months Ended
Unit deliveries	February 29, 2020		Product Mix⁽²⁾		February 23, 2019		Product Mix⁽²⁾		Unit Change		% Change
Class A	843		37.7	%	529		29.0	%	314		59.4	%
Class B	784		35.0	%	613		33.6	%	171		27.9	%
Class C	612		27.3	%	683		37.4	%	(71)		(10.4)	%
Total motorhomes	2,239		100.0	%	1,825		100.0	%	414		22.7	%

(1) ASP excludes off-invoice dealer incentives.

(2) Percentages may not add due to rounding differences.

Net revenues increased in the second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 due to our acquisition of Newmar and a favorable mix.

Adjusted EBITDA increased in the second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 due to an increase from our acquisition of Newmar and a favorable mix.

Table of Contents

Results of Operations - First Six Months of Fiscal 2020 Compared to the First Six Months of Fiscal 2019

Consolidated Performance Summary

The following is an analysis of changes in key items included in the consolidated statements of income and comprehensive income for the six months ended February 29, 2020 compared to the six months ended February 23, 2019:


	Six Months Ended
(in thousands, except percent and per share data)	February 29, 2020		% of Revenues⁽¹⁾		February 23, 2019		% of Revenues⁽¹⁾		$ Change		% Change
Net revenues	$	1,215,268	100.0	%	$	926,338	100.0	%	$	288,930	31.2	%
Cost of goods sold	1,056,873		87.0	%	788,913		85.2	%	267,960		34.0	%
Gross profit	158,395		13.0	%	137,425		14.8	%	20,970		15.3	%
Selling, general, and administrative expenses	93,269		7.7	%	70,971		7.7	%	22,298		31.4	%
Amortization of intangible assets	11,588		1.0	%	4,926		0.5	%	6,662		135.2	%
Total operating expenses	104,857		8.6	%	75,897		8.2	%	28,960		38.2	%
Operating income	53,538		4.4	%	61,528		6.6	%	(7,990)		(13.0)	%
Interest expense	14,700		1.2	%	8,847		1.0	%	5,853		66.2	%
Non-operating income	(386)		—	%	(970)		(0.1)	%	(584)		(60.2)	%
Income before income taxes	39,224		3.2	%	53,651		5.8	%	(14,427)		(26.9)	%
Provision for income taxes	7,888		0.6	%	9,892		1.1	%	(2,004)		(20.3)	%
Net income	$	31,336	2.6	%	$	43,759	4.7	%	$	(12,423)	(28.4)	%

Diluted income per share	$	0.95			$	1.38			$	(0.43)	(31.2)	%
Diluted average shares outstanding	33,143				31,755				1,388		4.4	%

(1) Percentages may not add due to rounding differences.

Net revenues increased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 primarily due to our acquisition of Newmar and organic growth.

Gross profit as a percentage of revenue decreased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 due primarily to the impact of Newmar inventory step-up and a change in mix as a result our acquisition of Newmar.

Operating expenses increased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 due to acquisition related costs and incremental amortization related to the purchase accounting for Newmar, normal operating expenses of Newmar, and organic growth in the Towable segment.

Interest expense increased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 primarily due to the additional interest expense related to the Convertible Notes issued in connection with the acquisition of Newmar.

Non-operating income decreased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 due to company-owned life insurance benefits in the prior year.

The effective tax rate increased to 20.1% for the first six months of Fiscal 2020 compared to 18.4% for the first six months of Fiscal 2019 due primarily to a favorable credit in the prior year related to research and development credits.

Net income and diluted income per share decreased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 primarily due to the acquisition-related costs for Newmar and the additional interest expense related to our Convertible Notes.

Table of Contents

Non-GAAP Reconciliation

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the six months ended February 29, 2020 and February 23, 2019:


	Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019
Net income	$	31,336	$	43,759
Interest expense	14,700		8,847
Provision for income taxes	7,888		9,892
Depreciation	7,720		6,268
Amortization of intangible assets	11,588		4,926
EBITDA	73,232		73,692
Acquisition-related fair-value inventory step-up	4,810		—
Acquisition-related costs	9,950		—
Restructuring expenses	(129)		219
Non-operating income	(386)		(970)
Adjusted EBITDA	$	87,477	$	72,941

Reportable Segment Performance Summary

Towable

The following is an analysis of key changes in our Towable segment for the six months ended February 29, 2020 compared to the six months ended February 23, 2019 and as of February 29, 2020 compared to February 23, 2019:


	Six Months Ended
(in thousands, except ASP)	February 29, 2020		% of Revenues		February 23, 2019		% of Revenues		$ Change		% Change
Net revenues	$	624,713			$	543,524			$	81,189	14.9	%
Adjusted EBITDA	70,531		11.3	%	64,466		11.9	%	6,065		9.4	%

ASP⁽¹⁾	32,836				32,008				828		2.6	%

	Six Months Ended
Unit deliveries	February 29, 2020		Product Mix⁽²⁾		February 23, 2019		Product Mix⁽²⁾		Unit Change		% Change
Travel trailer	11,782		60.9	%	10,379		61.1	%	1,403		13.5	%
Fifth wheel	7,550		39.1	%	6,602		38.9	%	948		14.4	%
Total towables	19,332		100.0	%	16,981		100.0	%	2,351		13.8	%

($ in thousands)	February 29, 2020				February 23, 2019				Change		% Change
Backlog⁽³⁾
Units	9,790				8,002				1,788		22.3	%
Dollars	$	330,738			$	285,391			$	45,347	15.9	%
Dealer Inventory
Units	19,731				19,141				590		3.1	%

(1) ASP excludes off-invoice dealer incentives.

(2) Percentages may not add due to rounding differences.

(3) We include in our backlog all accepted orders from dealers to generally be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

~~Motorized net~~

Table of Contents

Net revenues increased ~~$3.1 million or 1.5%~~ in the ~~second quarter~~first six months of Fiscal ~~2018 as~~2020 compared to the ~~second quarter~~first six months of Fiscal ~~2017. This was primarily~~2019 due to an increase in ~~the amount of units sold.~~unit deliveries.

~~Motorized unit deliveries~~Adjusted EBITDA increased ~~by 4.9%~~ in the ~~quarter. The unit growth we have generated has been~~first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 due to an increase in ~~our Class B and entry-level Class A products, which have~~net revenues offset slightly by higher costs as a ~~lower ASP. Additionally, we~~result of the start-up of new capacity.

We have seen an increase in the volume and dollar value of backlog ~~volumes by 42.5% in the second quarter~~as of ~~Fiscal 2018~~February 29, 2020 compared to February 23, 2019 due ~~largely~~ to ~~the introduction of new products. Dealer inventory declined as a result of the~~our strong ~~demand for our~~market share growth and new product ~~introductions as demonstrated by the increase in backlog.~~introduction.

Motorized segment Adjusted EBITDA decreased $6.8 million or 62.7%. This reduction was due to costs associated with ongoing expenses related to the ramp-up of our West Coast production facility and costs associated with new product start-up.Motorhome

The following is an analysis of key changes in our ~~Towable~~Motorhome segment for the ~~three~~six months ended February ~~24, 2018~~29, 2020 compared to the ~~three~~six months ended February ~~25, 2017:~~23, 2019 and as of February 29, 2020 compared to February 23, 2019:


																Six Months Ended
Towable
(In thousands, except units)	Three Months Ended
	Feb 24, 2018		% of Revenue		Feb 25, 2017		% of Revenue			Increase			% Change
(in thousands, except ASP)															(in thousands, except ASP)	February 29, 2020		% of Revenues		February 23, 2019		% of Revenues		$ Change		% Change
Net revenues	$	266,358			$	171,574				$	94,784		55.2	%	Net revenues	$	551,433			$	345,990			$	205,443	59.4	%
Adjusted EBITDA	35,338		13.3	%	18,233		10.6		%	17,105			93.8	%	Adjusted EBITDA	24,277		4.4	%	16,335		4.7	%	7,942		48.6	%

Unit deliveries	Feb 24, 2018		Product Mix % ⁽¹⁾		Feb 25, 2017		Product Mix % ⁽¹⁾			Increase (Decrease)			% Change
Travel trailer	5,083		59.9	%	3,046		56.3		%	2,037			66.9	%
Fifth wheel	3,398		40.1	%	2,365		43.7		%	1,033			43.7	%
Total towables	8,481		100.0	%	5,411		100.0		%	3,070			56.7	%

Towable ASP	$	31,648			$	32,310				$	(662	)	(2.0	)%
ASP⁽¹⁾															ASP⁽¹⁾	129,344				95,620				33,724		35.3	%

					As Of											Six Months Ended
Unit deliveries															Unit deliveries	February 29, 2020		Product Mix⁽²⁾		February 23, 2019		Product Mix⁽²⁾		Unit Change		% Change
Class A															Class A	1,242		30.1	%	951		26.1	%	291		30.6	%
Class B															Class B	1,593		38.7	%	1,332		36.6	%	261		19.6	%
Class C															Class C	1,286		31.2	%	1,361		37.3	%	(75)		(5.5)	%
Total motorhomes															Total motorhomes	4,121		100.0	%	3,644		100.0	%	477		13.1	%

($ in thousands)															($ in thousands)	February 29, 2020				February 23, 2019				Change		% Change
Backlog ⁽²⁾⁽³⁾					Feb 24, 2018		Feb 25, 2017			Increase			% Change
Units					9,342		8,490			852			10.0	%	Units	2,856				1,882				974		51.8	%
Dollars					$	302,630	$	261,995		$	40,635		15.5	%	Dollars	$	394,570			$	169,581			$	224,989	132.7	%

Dealer Inventory															Dealer Inventory
Units					15,728		9,216			6,512			70.7	%	Units	5,507				4,812				695		14.4	%

⁽¹⁾ ASP excludes off-invoice dealer incentives.

(2) Percentages may not add due to rounding differences.

⁽²⁾(3) We include in our backlog all accepted orders from dealers to generally be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

~~Towable net~~Net revenues increased ~~$94.8 million or 55.2% in the second quarter of Fiscal 2018 as compared to the second quarter of Fiscal 2017. This increase was driven by strong organic growth.~~

Towable unit deliveries grew by 56.7% in the quarter primarily due to volume growth in excess of recent industry trends. Our Towable market share increased from 1.7% to 6.2% when comparing shipments during the twelve-month trailing periods ended January 2017 and January 2018. The decrease in Towable ASP is due to a mix change for the second quarter of Fiscal 2018 compared to the same period in Fiscal 2017. Backlog volumes increased by 10.0% in the second quarter of Fiscal 2018.

Towable segment Adjusted EBITDA increased $17.1 million due primarily to the organic volume growth. Shipments grew faster than the industry as a result of greater penetration of our new products and further expansion of our distribution base. In addition to the growth in the Towable segment, profitability has increased due to the leverage of higher volume on the fixed cost components of our business as well as effective cost-savings initiatives.

~~Consolidated Results of Operations~~

~~First Six Months of Fiscal 2018 Compared to the Comparable Six Months of Fiscal 2017~~

~~The following is an analysis of changes in key items included in the statements of income and comprehensive income:~~

Six Months Ended
(In thousands, except percent
and per share data)
February 24,
2018
% of
Revenues⁽¹⁾
February 25,
2017
% of
Revenues⁽¹⁾

Increase
(Decrease)
%
Change
Net revenues $ 918,380
100.0 % $ 615,818
100.0 % $ 302,562
49.1 %
Cost of goods sold 787,888
85.8 % 537,627
87.3 % 250,261
46.5 %
Gross profit 130,492
14.2 % 78,191
12.7 % 52,301
66.9 %

Selling 24,343
2.7 % 15,423
2.5 % 8,920
57.8 %
General and administrative 35,684
3.9 % 22,446
3.6 % 13,238
59.0 %
Postretirement health care benefit income —
— % (24,796 ) (4.0 )% 24,796
(100.0 )%
Transaction costs 50
— % 5,925
1.0 % (5,875 ) (99.2 )%
Amortization of intangible assets 3,988
0.4 % 12,418
2.0 % (8,430 ) (67.9 )%
Total general and administrative 39,722
4.3 % 15,993
2.6 % 23,729
148.4 %
Total SG&A 64,065
7.0 % 31,416
5.1 % 32,649
103.9 %

Operating income 66,427
7.2 % 46,775
7.6 % 19,652
42.0 %
Interest Expense 9,699
1.1 % 6,306
1.0 % 3,393
53.8 %
Non-operating income (112 ) — % (83 ) — % (29 ) 34.9 %
Income before income taxes 56,840
6.2 % 40,552
6.6 % 16,288
40.2 %
Provision for income taxes 16,794
1.8 % 13,536
2.2 % 3,258
24.1 %
Net income $ 40,046
4.4 % $ 27,016
4.4 % $ 13,030
48.2 %

Diluted income per share $ 1.26
$ 0.91
$ 0.35
38.5 %
Diluted average shares outstanding 31,852
29,827
2,025
6.8 %

⁽¹⁾ ~~Percentages may not add due to rounding differences.~~

~~Consolidated net revenues increased $302.6 million or 49.1%~~ in the first six months of Fiscal ~~2018 over the first six months of Fiscal 2017. This was primarily due to the acquisition of Grand Design and strong volume growth in our Towable segment.~~

~~Gross profit increased $52.3 million for the first six months of~~ ~~Fiscal 2018~~ ~~compared to the first six months of~~ ~~Fiscal 2017~~ ~~due to the Towable segment, which operates at a higher gross profit, growing faster than the Motorized segment, and also due to effectiveness of cost savings initiatives.~~

~~Selling expenses were $24.3 million and $15.4 million, or 2.7% and 2.5% of net revenues, in the first six months of Fiscal 2018 and Fiscal 2017~~, ~~respectively. The increase was primarily due to a mix change driven by volume growth in our Towable segment.~~

~~General and administrative expenses were $39.7 million and $16.0 million, or 4.3% and 2.6% of net revenues, in the first six months of~~ ~~Fiscal 2018~~ ~~and~~ ~~Fiscal 2017, respectively. This increase was due primarily to additional general and administrative expenses related to the fiscal year 2017 acquisition of Grand Design. Additionally,~~ ~~Fiscal 2017~~ ~~results of operations were impacted by the increased benefit of $24.8 million associated with the termination of the postretirement health care plan. This benefit was partially offset in~~ ~~Fiscal 2017~~ ~~by $5.9 million of Grand Design transaction-related expenses and $12.4 million of expense related to amortization of definite-lived intangible assets, also related to the acquisition of Grand Design.~~

~~Interest expense increased $3.4 million in the first six months of Fiscal 2018 compared to the first six months of~~ ~~Fiscal 2017~~. This increase is related to the ABL and Term Loan agreements associated with the acquisition of Grand Design. See Analysis of Financial Condition, Liquidity, and Resources and Note 9 for further information.

The overall effective income tax rate for the first six months of Fiscal 2018 was 29.5% compared to the effective income tax rate of 33.4% for the first six months of Fiscal 2017. The effective rate for the first six months of Fiscal 2018 was favorably impacted by the enactment of the Tax Act. This decrease was primarily due to the decrease in the Federal rate as a result of the Tax Act, which was partially offset by the associated remeasurement of our deferred tax assets and an increase in state tax rate.

~~Net income and diluted income per share were $40.0 million and $1.26 per share, respectively, for the first six months of~~ ~~Fiscal 2018. In the first six months of~~ ~~Fiscal 2017, net income and diluted net income per share was~~ ~~$27.0 million~~ ~~and~~ ~~$0.91, respectively.~~

~~Non-GAAP Reconciliation~~

~~The following table reconciles net income to consolidated Adjusted EBITDA for the six months ended February 24, 2018 and February 25, 2017.~~

Six Months Ended
(In thousands) February 24,
2018 February 25,
2017
Net income $ 40,046
$ 27,016
Interest expense 9,699
6,306
Provision for income taxes 16,794
13,536
Depreciation 4,328
3,428
Amortization of intangible assets 3,988
12,418
EBITDA 74,855
62,704
Postretirement health care benefit income —
(24,796 )
Transaction costs 50
5,925
Non-operating income (112 ) (83 )
Adjusted EBITDA $ 74,793
$ 43,750

We have provided non-GAAP performance measures of EBITDA and Adjusted EBITDA as a comparable measure to illustrate items impacting current results that are not expected to impact future performance. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. We believe EBITDA and Adjusted EBITDA provide meaningful supplemental information about our operating performance because each measure excludes amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted EBITDA include the postretirement health care benefit income from terminating the plan and transaction costs related to our acquisition of Grand Design.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to competitors and peers that publish similar measures; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of our Board of Directors to enable our Board of Directors to have the same measurement basis of operating performance as is used by management in its assessments of performance and in forecasting and budgeting for our company; and, (d) to evaluate potential acquisitions. We believe these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry.

~~Segment Results of Operations~~

~~The following is an analysis of key changes in our Motorized segment:~~

Motorized
(In thousands, except units) Six Months Ended
Feb 24,
2018
% of
Revenue
Feb 25,
2017
% of
Revenue
Decrease
%
Change
Net revenues $ 392,357
$ 394,061
$ (1,704 ) (0.4 )%
Adjusted EBITDA 7,199
1.8 % 21,954
5.6 % (14,755 ) (67.2 )%

Unit deliveries Feb 24,
2018
Product
Mix % ⁽¹⁾
Feb 25,
2017
Product
Mix % ⁽¹⁾

Increase
(Decrease)
%
Change
Class A 1,604
37.9 % 1,466
35.7 % 138
9.4 %
Class B 781
18.5 % 677
16.5 % 104
15.4 %
Class C 1,844
43.6 % 1,964
47.8 % (120 ) (6.1 )%
Total motorhomes 4,229
100.0 % 4,107
100.0 % 122
3.0 %

Motorhome ASP $ 90,604
$ 94,704
$ (4,100 ) (4.3 )%

As Of
Backlog ⁽²⁾
Feb 24,
2018 Feb 25,
2017
Increase
(Decrease)
%
Change
Units 3,053
2,143
910
42.5 %
Dollars $ 276,231
$ 191,522
$ 84,709
44.2 %

Dealer Inventory
Units 4,827
5,068
(241 ) (4.8 )%

⁽¹⁾ ~~Percentages may not add due to rounding differences.~~

⁽²⁾ We include in our backlog all accepted orders from dealers to generally be shipped within the next six months. Orders in backlog can be cancelled or postponed at the option of the dealer at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

~~Motorized net revenues decreased $1.7 million or 0.4% in the first six months of Fiscal 2018 as~~2020 compared to the first six months of Fiscal ~~2017. This was primarily~~2019 due to ~~lower ASP on~~ the ~~mix~~acquisition of ~~units sold.~~Newmar and an increase in the organic ASP.

~~Motorized unit deliveries grew by 3.0%~~Adjusted EBITDA increased in the first six months which is lower than recent industry growth. Our overall motorized market share moved from 17.8% to 16.3% when comparing shipments during the twelve-month trailing periods ended January 2017 and January 2018 due to a mix change from our Class C products to our Class B and entry-level Class A products.

Motorized segment Adjusted EBITDA decreased $14.8 million or 67.2%. This reduction was due to lower revenues as well as ongoing expenses related to the ramp up of our West Coast production facility and costs associated with new product start-up.

~~The following is an analysis of key changes in our Towable segment:~~

Towable
(In thousands, except units) Six Months Ended
Feb 24,
2018
% of
Revenue
Feb 25,
2017
% of
Revenue
Increase
%
Change
Net revenues $ 526,023
$ 221,757
$ 304,266
137.2 %
Adjusted EBITDA 67,594
12.9 % 21,796
9.8 % 45,798
210.1 %

Unit deliveries Feb 24,
2018
Product
Mix % ⁽¹⁾
Feb 25,
2017
Product
Mix % ⁽¹⁾
Increase
%
Change
Travel trailer 10,432
60.8 % 4,555
61.4 % 5,877
129.0 %
Fifth wheel 6,725
39.2 % 2,868
38.6 % 3,857
134.5 %
Total towables 17,157
100.0 % 7,423
100.0 % 9,734
131.1 %

Towables ASP $ 31,096
$ 30,291
$ 805
2.7 %

As Of
Backlog ⁽²⁾
Feb 24,
2018 Feb 25,
2017 Increase
%
Change
Units 9,342
8,490
852
10.0 %
Dollars $ 302,630
$ 261,995
$ 40,635
15.5 %

Dealer Inventory
Units 15,728
9,216
6,512
70.7 %

⁽¹⁾ ~~Percentages may not add due to rounding differences.~~

~~Towable net revenues increased $304.3 million in the first six months~~of Fiscal ~~2018 as~~2020 compared to the first six months of Fiscal ~~2017. This was~~2019 primarily due to our Newmar acquisition.

We have seen an increase in the ~~fiscal year 2017~~backlog volumes as of February 29, 2020 compared to February 23, 2019 due to our acquisition of ~~Grand Design in November 2016~~Newmar and ~~organic volume growth.~~

~~Towable unit deliveries grew by 131.1% in the first six months of Fiscal 2018 primarily~~ due to ~~the acquisition~~new product introductions.

Table of Grand Design and also due to Towable growth in excess of recent industry trends. With the addition of Grand Design in Fiscal 2017, our Towable market share increased from 1.7% to 6.2% when comparing shipments during the twelve-month trailing periods ended January 2017 and January 2018.Contents

Towable segment Adjusted EBITDA increased $45.8 million due to the favorable impact of organic growth. We achieved strong results in our Towable segment, where shipments grew much faster than the industry as a result of greater penetration of our new products and further expansion of our distribution base, as well as higher gross profit from cost savings initiatives.

Analysis of Financial Condition, Liquidity, and Resources

Cash ~~and~~Flows

The following table summarizes our cash ~~equivalents decreased $8.5 million~~ ~~during~~flows from operations for the ~~first~~ six months of ~~Fiscal 2018~~ended February 29, 2020 and ~~totaled~~ ~~$27.4 million~~ ~~as of~~ February ~~24, 2018. Significant liquidity events that occurred during~~23, 2019:


	Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019
Total cash provided by (used in):
Operating activities	$	119,164	$	51,938
Investing activities	(283,158)		(23,024)
Financing activities	249,502		(28,239)
Net increase (decrease) in cash and cash equivalents	$	85,508	$	675

Operating Activities

Cash provided by operating activities increased for the ~~first~~ six months of ~~Fiscal 2018~~ ~~were:~~

~~Generated net income of~~ ~~$40.0 million~~

~~Total borrowings at~~ended February ~~24, 2018 were $279.7 million, and we have an additional $105.3 million available~~29, 2020 compared to ~~borrow under~~ the ~~revolving credit agreement, subject~~six months ended February 23, 2019 primarily due to ~~sufficient borrowing base~~

~~Net repayment of $4.3 million of debt ($24.0 million repayments less $19.7 million borrowings)~~

~~Increase~~favorable changes in ~~payables of $32.9 million~~working capital, partially offset by ~~increases~~Newmar acquisition-related costs.

Investing Activities

Cash used in ~~receivables, prepaid~~investing activities increased for the six months ended February 29, 2020 compared to the six months ended February 23, 2019 primarily due to our acquisition of Newmar.

Financing Activities

Cash provided by financing activities increased for the six months ended February 29, 2020 compared to the six months ended February 23, 2019 primarily due to the issuance of Convertible Notes issued in the first quarter of Fiscal 2020 to finance our acquisition of Newmar.

Debt and ~~other assets~~Capital

As of ~~$31.1 million~~

~~Increase in inventory of $36.4 million~~

~~As described in Note 9, our Credit Agreement at~~ February ~~24, 2018 consisted~~29, 2020, we have a debt agreement that consists of a $300.0 million term loan agreement ("Term ~~Loan~~Loan") and a ~~$125.0~~$192.5 million asset-based revolving credit facility ("ABL ~~with JPMorgan Chase.~~

~~We filed a registration statement~~Credit Facility") (collectively, the "Credit Agreements"). During the first quarter of Fiscal 2020, we issued the Convertible Notes, which were used to partially fund the Newmar acquisition. Refer to Note 9, Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form ~~S-3, which was declared effective by~~10-Q for additional details. As of February 29, 2020, we had no borrowings against the SEC on April 25, 2016. Subject to market conditions, we have the ability to offer and sell up to $35.0 million of our common stock in one or more offerings pursuant to the registration statement. The registration statement will be available for three years from its effective date. We currently have no plans to offer and sell the common stock registered under the registration statement, however, it does provide another potential source of liquidity to raise capital if we need it, in addition to other alternatives already in place.ABL.

Other Financial Measures

Working capital at February ~~24, 2018~~29, 2020 and August ~~26, 2017~~31, 2019 was ~~$177.1~~$313.5 million and ~~$147.0~~$212.9 million,~~, respectively, an increase of~~ ~~$30.1 million~~. respectively. We currently expect cash on hand, funds generated from operations, and the borrowing available under our ABL Credit ~~Agreement to~~Facility be sufficient to cover both short-term and long-term operating requirements. ~~We will continue to invest in our current motorhome facilities and our ERP system as well as expand our Towable facilities.~~

Share ~~repurchases~~Repurchases and Dividends

We repurchase our common stock and pay dividends pursuant to programs approved by our Board of ~~$1.5 million~~Directors. Our long-term capital allocation strategy is to first fund operations and investments in growth, maintain a debt leverage ratio within our targeted zone, maintain reasonable liquidity, and then return excess cash over time to shareholders through dividends and share repurchases.

On October 18, 2017, our Board of Directors authorized a share repurchase program in the ~~first six months~~amount of $70.0 million. There is no time restriction on the authorization. In the second quarter of Fiscal ~~2018 were to satisfy tax obligations on employee equity awards as they vested.~~2020, we did not repurchase any shares under this authorization. We continually evaluate if share repurchases reflect a prudent use of our capital and, subject to compliance with our Credit ~~Agreement,~~Agreements, we may purchase shares in the ~~remainder of Fiscal 2018.~~future. At February ~~24, 2018,~~29, 2020, we have ~~$71.0~~$58.9 million remaining on our board repurchase authorization. ~~See Part II, Item 2~~

On March 17, 2020, our Board of Directors approved a quarterly cash dividend of $0.11 per share payable on April 29, 2020, to common stockholders of record at the close of business on April 15, 2020.

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Contractual Obligations and Commercial Commitments

There has been no material change in our contractual obligations other than the issuance of the Convertible Notes and in the ordinary course of business since the end of Fiscal 2019. Refer to Note 9, Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form ~~10-Q.~~

~~Operating Activities~~

~~Cash provided by operating activities was~~ ~~$15.0 million~~10-Q for additional details on the Convertible Notes, and see our Annual Report on Form 10-K for the ~~six months~~fiscal year ended ~~February 24, 2018 compared to~~ ~~$5.1 million~~August 31, 2019 for ~~the six months ended February 25, 2017. The increase in cash flow from operations in~~ ~~Fiscal 2018~~ ~~was driven by the strong net income of~~ ~~$40.0 million~~ ~~offset by an increase in receivables due to volume growth~~additional information regarding our contractual obligations and ~~an increase in inventory due to planned inventory build.~~commercial commitments.

~~Investing Activities~~

~~Cash used in investing activities of~~ ~~$11.4 million~~ for the six months ended February 24, 2018 was due primarily to capital expenditures of $11.7 million including the capacity expansions taking place in our Towable segment. In the six months ended February 25, 2017, cash used in investing activities of $400.9 million was due primarily to the acquisition of Grand Design for which we paid cash of $394.7 million, net of cash acquired, in addition to issuing Winnebago stock with a value of $124.1 million at closing.

~~Financing Activities~~

Cash used in financing activities of $12.2 million for the six months ended February 24, 2018 was primarily due to payments on the Credit Agreement of $24.0 million and $1.5 million for share repurchases and was partially offset by cash proceeds on the Credit Agreement of $19.7 million. Cash provided by financing activities of ~~$321.2 million~~ for the six months ended February 25, 2017 was primarily due to cash proceeds from the Credit Agreement of $366.4 million, partially offset by payments on the Credit Agreement of $26.4 million, $11.0 million for the payment of debt issuance costs, and $6.4 million for the payment of dividends.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 1: Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017.~~31, 2019. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017. We refer~~31, 2019. In the first quarter of Fiscal 2020, we adopted new lease accounting guidance, as described in Note 1, Basis of Presentation, and Note 10, Leases, of the Notes to ~~these disclosures for a detailed explanation of our significant accounting policies and critical accounting estimates.~~Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. There ~~has~~have been no other significant ~~change~~changes in our significant accounting policies or critical accounting estimates since the end of Fiscal ~~2017, except as disclosed in~~2019.

New Accounting Pronouncements

For a description of new applicable accounting pronouncements, see Note 1, Basis of Presentation, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Safe Harbor Statement Under the Private Securities Litigation Reform Act

Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as "anticipate," "assume," "believe," "estimate," "expect," "guidance," "intend," "outlook," "plan," "project," and other words and terms of similar meaning. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment, and other events. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, and Item 1A, Risk Factors, in Part II of this Quarterly Report on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: competition and new product introductions by competitors, our ability to attract and retain qualified personnel, increases in market compensation rates, business or production disruptions, sales order cancellations, risk related to the ~~consolidated financial statements.~~terms of our credit agreements and compliance with debt covenants and leverage ratios, stock price volatility and share dilution, disruptions or unanticipated costs from facility expansions, availability of labor, a slowdown in the economy, low consumer confidence, the effect of global tensions, increases in interest rates, availability of credit, availability of financing for RV and marine dealers, impairment of goodwill, risk related to cyclicality and seasonality of our business, slower than anticipated sales of new or existing products, integration of operations relating to merger and acquisition activities generally, our acquisition of Newmar, the possibility that the Newmar acquisition may not perform as expected or may not result in earnings growth, difficulties and expenses related to integrating Newmar into our business, possible unknown liabilities of Newmar, significant costs related to the Newmar acquisition, increased focus of management attention and resources on the acquisition of Newmar, risks related to the Convertible Notes, including our ability to satisfy our obligations under the Convertible Notes, risks related to our recent Convertible Note hedge and warrant transactions, inadequate liquidity or capital resources, inventory and distribution channel management, our ability to innovate, our reliance on large dealer organizations, significant increase in repurchase obligations, availability and price of fuel, availability of chassis and other key component parts, increased material and component costs, exposure to warranty claims, ability to protect our intellectual property, exposure to product liability claims, dependence on information systems and web applications, any unexpected expenses related to the implementation of our Enterprise Resource Planning system, impacts of public health crises, such as COVID-19, risk related to data security, governmental regulation, including for climate change, risk related to anti-takeover provisions applicable to us, and other factors. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made, and we assume no obligation to update any forward-looking statement that we may make.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.

The assets we maintain to fund deferred compensation have market risk, but we maintain a corresponding liability for these assets. The market risk is therefore borne by the participants in the deferred compensation program.

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Interest rate risk

We are exposed to market risks related to fluctuations in interest rates on the outstanding variable rate debt. As of February ~~24, 2018,~~29, 2020, we had ~~$260.0~~$257.3 million outstanding under our Term Loan, subject to variable interest rates. ~~This risk is partially mitigated through an interest rate swap contract as detailed below.~~

~~Under terms of the Credit Agreement, we were previously required to maintain interest rate swaps to manage~~For our interest rate exposure related to the variable component of interest cost on the Term Loan. In accordance with this requirement, we entered into an interest swap contract on January 23, 2017, to effectively convert $200.0 million of the Term Loan ~~balance to~~in the second quarter of Fiscal 2020, a fixed rate. The notional amount of the swap reduced to $170.0 million on December 8, 2017 and will be reduced to $120.0 million on December 10, 2018 and $60.0 million on December 9, 2019. The swap contract expires on December 8, 2020. A hypothetical one percentage point1.0% increase in interest rates ~~on the Term Loan~~ would ~~increase~~have increased our interest expense ~~(after consideration of the interest rate swap) for 2018~~ by ~~approximately $0.9 million. Due to the floor of 1.0% on LIBOR for the Term Loan,~~an estimated $2.6 million, and a 1.0% decrease ~~could only decrease to the floor for the variable rate, resulting in a decrease~~ in interest rates would have decreased our interest expense ~~(after consideration of the interest rate swap) for 2018 of $0.5~~by an estimated $2.6 million. ~~As discussed in~~For additional information, see Note ~~5: Derivatives, Investments and Fair Value Measurements, the requirement to hedge a portion of the Term Loan floating rate interest exposure was removed through an amendment to the ABL.~~

9, Long-Term Debt. For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant.

~~Derivative instruments are accounted for at fair value in accordance with ASC Topic 815,~~ ~~Derivatives and Hedging~~, and have been designated for hedge accounting. The fair value of the interest rate swap is based on observable market data (Level 2) and was $1.9 million as of February 24, 2018. The interest rate swap requires us to pay interest at a fixed rate of 1.82% through the December 8, 2020 expiration of the swap. A 1.0% increase in the interest rate would have changed the fair value of the swap as of February 24, 2018 by approximately $2.9 million and a 1.0% decrease would have changed the fair value by $3.0 million. These increases and decreases would be recorded in OCI and the hedged value on our consolidated balance sheet (currently recorded within other non-current liabilities). While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected. The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve. In reality, interest rate changes of this magnitude are rarely instantaneous or parallel.

Item 4. Controls and ~~Procedures~~Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures", as such term is defined under Securities Exchange Act of 1934, as amended ("Exchange Act") Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the ~~SEC~~Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures and believes that such controls and procedures are effective at the reasonable assurance level.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report (the "Evaluation Date"). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the Evaluation Date.

Changes in Internal Control Over Financial Reporting

We are implementing an ERP system, which is expected to improve the efficiency of certain financial and related transaction processes. The implementation of an ERP system will likely affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness. As we have completed implementation of certain phases of the ERP, internal controls over financial reporting have been tested for effectiveness with respect to the scope of the phase completed. We concluded, as part of our evaluation described in the above paragraphs, that the implementation of ERP in these circumstances has not materially affected our internal control over financial reporting. The implementation is continuing in a phased approach and will continue to be evaluated for effect on our internal control over financial reporting.

During the first quarter of Fiscal 2020, we completed the acquisition of Newmar, which represents a material change in internal control over financial reporting since management's last assessment. Prior to the acquisition, Newmar was a private company and has not been subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements to which public reporting companies may be subject. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into the acquired Newmar subsidiaries and to augment our company-wide controls to reflect the risks inherent in an acquisition of this type. Our report on our internal control over financial reporting in the Annual Report on Form 10-K for the year ending August 29, 2020 will exclude the acquired Newmar subsidiaries in order for management to have sufficient time to evaluate and implement our internal control over financial reporting.

There were no other changes in our internal control over financial reporting that occurred during the second quarter of Fiscal ~~2018~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART IIII. OTHER ~~INFORMATION~~INFORMATION.

Item 1. Legal ~~Proceedings~~Proceedings.

~~We are involved in various~~For a description of our legal proceedings, ~~that are ordinary litigation incidental~~see Note 12, Contingent Liabilities and Commitments, of the Notes to ~~our business, some of which are covered~~Condensed Consolidated Financial Statements, included in ~~whole or in part by insurance. While we believe the ultimate disposition of litigation will not have material adverse effect~~this Quarterly Report on our financial position, results of operations or liquidity, there exists the possibility that such litigation may have an impact on our results for a particular reporting period in which litigation effects become probable and reasonably estimable. Though we do not believe there is a reasonable likelihood that there will be a material change related to these matters, litigation is subject to inherent uncertainties and management’s view of these matters may change in the future.Form 10-Q.

Item 1A. Risk ~~Factors~~Factors.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form ~~10K~~10-K for the fiscal year ended August ~~26, 2017~~.31, 2019, except for the risk factors updated below:

Results of operations could be adversely affected by public health crises, in locations in which we, our customers or our suppliers operate.

We have manufacturing and other operations in locations subject to public health crises.Our suppliers and customers also have operations in locations exposed to similar dangers.A public health event could disrupt our operations, or our customers’ or suppliers’ operations and could adversely affect our results of operations and financial condition.

Our global suppliers of raw materials expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause operating results to suffer. For example, the ongoing outbreak of coronavirus disease (COVID-19) emanating from China at the beginning of 2020 may impact our suppliers’ ability to provide raw materials. Additionally, the outbreak may have an impact on the demand for large discretionary purchases such as recreation vehicles and boats. An extended plant shut-down or supply chain disruption due to COVID-19 may also impact our ability to fulfill orders.

At this point, the extent to which the coronavirus may impact our liquidity, financial condition, and results of operations is uncertain.

The terms of our Credit Agreements and other debt instruments could adversely affect our operating flexibility and pose risks of default.

We incurred substantial indebtedness to finance the acquisitions of Grand Design and Newmar. Our Credit Agreement is secured by substantially all of our assets, including cash, inventory, accounts receivable, and certain machinery and equipment. The Credit Agreement contains certain requirements, including affirmative and negative financial covenants. If we are unable to comply with these requirements and covenants, we may be restricted in our ability to pay dividends or engage in certain other business transactions, the lender may obtain control of our cash accounts, and we may experience an event of default. If a default occurs, the lenders under the Credit Agreement may elect to declare all of their respective outstanding debt, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. Under such circumstances, we may not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed on our ability to incur additional debt and to take other corporate actions might significantly impair our ability to obtain other financing.

In addition, the Credit Agreement contains certain restrictions on our ability to undertake certain types of transactions. Therefore, we may need to seek permission from our lenders in order to engage in certain corporate actions and any additional indebtedness that we may incur will need to comply with the terms of the Credit Agreement and will have its own restrictions on our ability to undertake certain types of transactions. Likewise, the Indenture related to the Convertible Notes issued to help finance the acquisition of Newmar includes certain limited covenants that could impact our ability to operate our business.

In addition, our indebtedness could:

•Make us more vulnerable to general adverse economic, regulatory, and industry conditions;

•Limit our flexibility in planning for, or reacting to, changes and opportunities in the markets in which we compete;

•Place us at a competitive disadvantage compared to our competitors that have less debt or could require us to dedicate a substantial portion of our cash flow to service our debt; and

•Restrict us from making strategic acquisitions or exploiting other business opportunities.

Various factors, including share dilution, changes to credit terms, and our ability to meet financial performance expectations, could result in a decline in our stock price.

Our stock price may fluctuate based on many factors. To partially finance our acquisition of Grand Design, we issued $124.1 million worth of common stock to the owners of Grand Design and registered these shares for resale after the transaction closed. Similarly, we issued 2.0 million shares of our common stock to the owners of Newmar. In connection with our acquisition of Newmar, we also issued $300.0 million in aggregate principal amount of 1.50% convertible senior notes due 2025. We will settle conversions of the Convertible Notes by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on the applicable conversion rate(s). Any future stock issuance by us or liquidation of stock holding by the former owners of Grand Design or Newmar or holders of the Convertible Notes may cause dilution of earnings per share or put selling pressure on our share price. Changing credit agreements and leverage ratios may also impact stock price. In general, analysts' expectations and our ability to meet those expectations quarterly may cause stock price

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fluctuations. If we fail to meet expectations related to future growth, profitability, debt repayment, dividends, share issuance or repurchase, or other market expectations, our stock price may decline significantly.

Failure to effectively manage strategic acquisitions and alliances, joint ventures, or partnerships could have a negative impact on our business.

One of our growth strategies is to drive growth through targeted acquisitions and alliances, stronger customer relations, and new joint ventures and partnerships that contribute profitable growth while supplementing our existing brands and product portfolio. On November 8, 2019, we acquired Newmar (the "Newmar Acquisition"), a leading manufacturer of Class A and Super C motorized RVs. Our ability to grow through acquisitions depends, in part, on the availability of suitable candidates at acceptable prices, terms, and conditions, our ability to compete effectively for acquisition candidates, and the availability of capital and personnel to complete such acquisitions and run the acquired business effectively. Any acquisition, alliance, joint venture, or partnership could impair our business, financial condition, reputation, and operating results. The benefits of an acquisition, including the Newmar Acquisition, or new alliance, joint venture, or partnership may take more time than expected to develop or integrate into our operations, and we cannot guarantee that previous or future acquisitions, alliances, joint ventures, or partnerships will, in fact, produce any benefits. Such acquisitions, alliances, joint ventures, and partnerships may involve a number of risks, including:

•Diversion of management’s attention;

•Disruption to our existing operations and plans;

•Inability to effectively manage our expanded operations;

•Difficulties or delays in integrating and assimilating information and financial systems, operations, and products of an acquired business or other business venture or in realizing projected efficiencies, growth prospects, cost savings, and synergies;

•Inability to successfully integrate or develop a distribution channel for acquired product lines;

•Potential loss of key employees, customers, distributors, or dealers of the acquired businesses or adverse effects on existing business relationships with suppliers, customers, distributors, and dealers;

•Adverse impact on overall profitability, if our expanded operations do not achieve the financial results projected in our valuation model;

•Inaccurate assessment of additional post-acquisition or business venture investments, undisclosed, contingent or other liabilities or problems, unanticipated costs associated with an acquisition or other business venture, and an inability to recover or manage such liabilities and costs; and

•Incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges, and write-off of significant amounts of goodwill or other assets that could adversely affect our operating results.

We may experience difficulties in integrating the operations of Newmar into our business and in realizing the expected benefits of the Newmar Acquisition.

The success of the Newmar Acquisition will depend in part on our ability to realize the anticipated business opportunities from combining the operations of Newmar with our business in an efficient and effective manner. The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures, and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the Newmar Acquisition, and could harm our financial performance. We cannot assure you that the Newmar business will perform as expected, that integration or other one-time costs will not be greater than expected, that we will not incur unforeseen obligations or liabilities, or that the rate of return from the acquisition will justify our investment. We also incurred significant costs in connection with the Newmar Acquisition, the substantial majority of which are non-recurring expenses. In addition, we expect to incur additional costs in the integration of Newmar's business and may not achieve cost synergies and other benefits sufficient to offset the incremental costs of the Newmar Acquisition. If we are unable to successfully or timely integrate the operations of Newmar with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies, and other anticipated benefits resulting from the Newmar Acquisition, and our business, results of operations, and financial condition could be materially and adversely affected.

The Newmar Acquisition also involves risks associated with integrating acquired assets into existing operations which could have a material adverse effect on our business, financial condition, results of operations, and cash flows, including, among others:

•failure to implement our business plan for the combined business;

•unanticipated issues in integrating equipment, logistics, information, communications, and other systems;

•possible inconsistencies in standards, controls, contracts, procedures, and policies;

•impacts of change in control provisions in contracts and agreements;

•failure to retain key customers and suppliers;

•unanticipated changes in applicable laws and regulations;

•failure to recruit and retain key employees to operate the combined business;

•increased competition within the industries in which Newmar operates;

•difficulties in managing the expanded operations of a significantly larger and more complex combined company;

•inherent operating risks in the business;

•unanticipated issues, expenses, and liabilities;

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•additional reporting requirements pursuant to applicable rules and regulations;

•additional requirements relating to internal control over financial reporting;

•diversion of our senior management’s attention from the management of daily operations to the integration of the Newmar business;

•significant unknown and contingent liabilities we incur for which we have limited or no contractual remedies or insurance coverage;

•the assets to be acquired failing to perform as well as we anticipate; and

•unexpected costs, delays, and challenges arising from integrating the assets acquired in the Newmar Acquisition into our existing operations.

Even if we successfully integrate the assets acquired in the Newmar Acquisition into our operations, it may not be possible to realize the full benefits we anticipate or we may not realize these benefits within the expected time frame. If we fail to realize the benefits we anticipate from the Newmar Acquisition, our business, results of operations, and financial condition may be adversely affected.

Newmar may have liabilities that are not known, probable, or estimable at this time.

Following the acquisition of Newmar, Newmar became our subsidiary and remains subject to all of its liabilities. There could be unasserted claims or assessments that we failed or were unable to discover or identify in the course of performing due diligence investigations of Newmar. In addition, there may be liabilities that are neither probable nor estimable at this time that may become probable or estimable in the future. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our financial results.

Additionally, Newmar is subject to various rules, regulations, laws, and other legal requirements, enforced by governments or other public authorities. Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by any of Newmar’s directors, officers, employees, or agents could have a significant impact on Newmar’s business and reputation and could subject Newmar to fines and penalties and criminal, civil, and administrative legal sanctions, resulting in reduced revenues and profits.

The Newmar Acquisition significantly increases our goodwill and other intangible assets.

We have a significant amount, and the Newmar acquisition increased the amount of goodwill and other intangible assets on our consolidated financial statements, which are subject to impairment based upon future adverse changes in our business or prospects. The impairment of any goodwill and other intangible assets may have a negative impact on our consolidated results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.

~~On December 19, 2007, our Board of Directors authorized the repurchase of outstanding shares~~(c) Stock Repurchases

Purchases of our common stock ~~depending on market conditions, for an aggregate consideration~~during each fiscal month of ~~up to $60 million. There is no time restriction on this authorization. During~~ the second quarter of Fiscal ~~2018, 2,117 shares were repurchased under the authorization, at an aggregate cost~~2020 were:


Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs⁽²⁾
12/01/19 - 01/04/20	638	$	48.14	—	$	58,870,000
01/05/20 - 02/01/20	733	$	52.76	—	$	58,870,000
02/02/20 - 02/29/20	71	$	59.47	—	$	58,870,000
Total	1,442	$	51.04	—	$	58,870,000

(1) Shares not purchased as part of ~~approximately $0.1 million. All of these shares~~a publicly announced program were repurchased from employees who vested in Company shares ~~during the~~ ~~second quarter~~ of ~~Fiscal 2018~~ and elected to pay their payroll tax via the value of shares delivered as opposed to cash.

~~On October 18, 2017,~~(2) Pursuant to a $70.0 million share repurchase program authorized by our Board of Directors ~~authorized a share repurchase program in the amount of $70.0 million.~~on October 18, 2017. There is no time restriction on ~~this~~the authorization. ~~As of~~ ~~February 24, 2018, there was approximately $71.0 million remaining under these authorizations.~~

~~Purchases of our common stock during each fiscal month~~

Our Credit Agreements, as defined in Note 9, Long-Term Debt, of the ~~second quarter~~Notes to Condensed Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements, of ~~Fiscal 2018~~ ~~were:~~

Period
Total Number
of Shares
Purchased
Average Price
Paid per Share
Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar Value
of Shares That May Yet Be
Purchased Under the
Plans or Programs
11/26/17 - 12/30/17 926
$ 56.65
926
$ 71,051,000

12/31/17 - 01/27/18 1,191
$ 52.40
1,191
$ 70,989,000

01/28/18 - 02/24/18 —
$ —
—
$ 70,989,000

Total 2,117
$ 54.26
2,117
$ 70,989,000

~~Our Credit Agreement~~this Quarterly Report on Form 10-Q, contains restrictions that may limit our ability to make distributions or payments with respect to purchases of our common stock without consent of the lenders, except for limited purchases of our common stock from employees, in the event of a significant reduction in our EBITDA or in the event of a significant borrowing on our ~~ABL.~~ABL Credit Facility.

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Item 6. ~~Exhibits~~

Exhibits.



2.1		Stock Purchase Agreement dated as of September 15, 2019, by and among the Registrant, Octavius Corporation, Newmar Corporation, Dutch Real Estate Corp., New-Way Transport Corp., New-Serv, Inc., the shareholders of Newmar Corporation, Dutch Real Estate Corp., New-Way Transport Corp. and New-Serv, Inc. and Matthew Miller, as Sellers Agent previously filed as Exhibit 2.1 with the Registrant’s Current Report on Form 8-K dated September 15, 2019.
3a.				Articles of Incorporation of the Registrant previously filed ~~with~~as Exhibit 3a to the Registrant’s ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~fiscal year ended ~~May 27, 2000~~August 25, 2018 (Commission File Number 001-06403) and incorporated by reference herein.

3b.			Amended By-Laws of the Registrant previously filed ~~with~~as Exhibit 3.1 to the ~~Registrant’s Quarterly~~Registrant's Current Report on Form ~~10-Q for the quarter ended May 27, 2000~~8-K dated March 16, 2016 (Commission File Number 001-06403) and incorporated by reference herein.

~~10a.~~4.1			~~Executive Change of Control Agreement~~Indenture, dated November 1, 2019, by and between Winnebago Industries, Inc. and ~~Bryan L. Hughes~~U.S. Bank National Association previously filed as Exhibit 4.1 with the Registrant’s Current Report on Form 8-K dated ~~December 22, 2017 (Commission File Number 001-06403) and incorporated by reference herein.~~ October 29, 2019.
4.2				Form of 1.50% Convertible Senior Note due 2025 (included in Exhibit 4.1).
31.1				Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ~~dated March 22, 2018~~
	.
31.2				Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002 dated March 22, 2018~~
	2002.
32.1				Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 dated March 22, 2018~~
	2002.
32.2				Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 dated March 22, 2018~~2002.

101.INS*101				~~XBRL Instance Document~~The following financial statements from our Quarterly Report on Form 10-Q for the second quarter of Fiscal 2020 in Inline Extensible Business Reporting Language ("iXBRL"): (i) the Condensed Consolidated Balance Sheets at February 29, 2020, and August 31, 2019, (ii) the Condensed Consolidated Statements of Income and Comprehensive Income for the six months ended February 29, 2020, and February 23, 2019, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended February 29, 2020, and February 23, 2019, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended February 29, 2020, and February 23, 2019, and (v) the Notes to the Condensed Consolidated Financial Statements.
104
101.SCH*	~~XBRL Taxonomy Extension Schema Document~~

101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*	~~XBRL Taxonomy Extension Definitions Linkbase Document~~

101.LAB*	~~XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~The cover page from our Quarterly Report on Form 10-Q for the second quarter of Fiscal 2020 formatted in iXBRL (included as Exhibit 101).

*~~Attached as Exhibit 101 to this report are the following financial statements from our Quarterly Report on Form 10-Q for the quarter ended~~ ~~February 24, 2018~~ formatted in XBRL: (i) the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statement of Cash Flows, (iv) the Unaudited Consolidated Stockholders' Statement of Equity and (v) related notes to these financial statements. Such exhibits are deemed furnished and not filed Schedules have been omitted pursuant to ~~Rule 406T~~Item 601(b)(2) of Regulation ~~S-T.~~S-K. The Registrant hereby undertakes to furnish copies of any of the omitted schedules upon request of the U.S. Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WINNEBAGO INDUSTRIES, INC.

Date:

March 25, 2020

~~WINNEBAGO INDUSTRIES, INC.~~By

~~Date:~~

~~March 22, 2018~~

/s/ Michael J. Happe

Michael J. Happe

Chief Executive Officer, President

(Principal Executive Officer)

Date:

March ~~22, 2018~~25, 2020

/s/ Bryan L. Hughes

Bryan L. Hughes

Vice President, Chief Financial Officer

(Principal Financial and Accounting Officer)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.50 par value per share	WGO	New York Stock Exchange



~~Large accelerated filer~~x	~~Accelerated filer~~o	~~Non-accelerated filer~~o
~~Smaller reporting company~~o	~~Emerging growth company~~o


(in thousands)	February 29, 2020		August 31, 2019
Finished goods	$	62,569	$	53,417
Work-in-process	110,058		82,926
Raw materials	106,865		105,804
Total	279,492		242,147
Less last-in, first-out ("LIFO") reserve	41,684		41,021
Inventories, net	$	237,808	$	201,126



(In thousands)	February 24, 2018			August 26, 2017
Finished goods	$	43,474		$	16,947
Work-in-process	69,876			60,818
Raw materials	100,713			99,919
Total	214,063			177,684
LIFO reserve	(36,017		)	(35,419		)
Total inventories	$	178,046		$	142,265


(in thousands)	February 29, 2020		August 31, 2019
LIFO basis	$	135,437	$	184,007
First-in, first-out basis	144,055		58,140
Total	$	279,492	$	242,147



~~(Mark One)~~

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



(In thousands, except shares and per share data)	November 8, 2016
Cash	$	396,442
Winnebago shares: 4,586,555 at $27.05 per share	124,066
Total	$	520,508



		February 24, 2018					August 26, 2017
(In thousands)	Weighted Average Life-Years	Cost			Accumulated Amortization		Cost			Accumulated Amortization
Trade name	Indefinite	$	148,000		$	—	$	148,000		$	—
Dealer network	12.0	80,500			8,693		80,500			5,348
Backlog	0.5	18,000			18,000		18,000			18,000
Non-compete agreements	4.0	4,600			1,637		4,600			1,116
Leasehold interest-favorable	8.1	2,000			318		2,000			196
Total		253,100			$	28,648	253,100			$	24,660
Accumulated amortization		(28,648		)			(24,660		)
Net book value of intangible assets		$	224,452				$	228,440



(In thousands)	Amount
Remainder of 2018	$	3,866
2019	7,733
2020	7,733
2021	7,733
2022	7,106
Thereafter	42,281



				Fair Value Measurements Using Inputs Considered As
(In thousands)	Fair Value at August 26, 2017			Level 1 Quoted Prices in Active Markets for Identical Assets		Level 2 Significant Other Observable Inputs			Level 3 Significant Unobservable Inputs
Assets that fund deferred compensation:
Domestic equity funds	$	1,708		$	1,671	$	37		$	—
International equity funds	174			157		17			—
Fixed income funds	259			170		89			—
Interest rate swap contract	(828		)	—		(828		)	—
Total assets (liabilities) at fair value	$	1,313		$	1,998	$	(685	)	$	—


		February 29, 2020							August 31, 2019
($ in thousands)	Weighted Average Life-Years	Cost		Accumulated Amortization		Weighted Average Life-Years	Cost		Accumulated Amortization
Trade names	Indefinite	$	275,250			Indefinite	$	177,250
Dealer networks	12.1	159,581		$	25,903	12.2	95,581		$	20,329
Backlog	0.5	28,327		24,991		0.5	19,527		19,527
Non-compete agreements	4.3	6,647		3,626		4.1	5,347		3,077
Leasehold interest-favorable		—		—		8.1	2,000		690
Other intangible assets, gross		469,805		54,520			299,705		43,623
Less accumulated amortization		54,520					43,623
Other intangible assets, net		$	415,285				$	256,082


(in thousands)	Amount
Fiscal 2020	$	10,517
Fiscal 2021	14,361
Fiscal 2022	13,719
Fiscal 2023	13,526
Fiscal 2024	13,424
Thereafter	74,488
Total amortization expense remaining	$	140,035


(in thousands)	Classification	February 29, 2020
Assets
Operating leases	Operating lease assets	$	30,460
Finance leases	Other assets	4,686
Total lease assets		$	35,146

Liabilities
Current: Operating leases	Accrued expenses: Other	$	2,500
Current: Finance leases	Accrued expenses: Other	522
Non-Current: Operating leases	Operating lease liabilities	27,882
Non-Current: Finance leases	Non-current liabilities: Other	5,141
Total lease liabilities		$	36,045


	Operating Leases
(in thousands)	Related Party Amount		Non-Related Party Amount		Total
Fiscal 2020	$	2,864	$	1,236	$	4,100
Fiscal 2021	2,863		1,068		3,931
Fiscal 2022	2,863		759		3,622
Fiscal 2023	3,597		530		4,127
Fiscal 2024	3,963		361		4,324
Thereafter	25,064		1,359		26,423
Total future lease commitments	$	41,214	$	5,313	$	46,527



	Three Months Ended
	February 24, 2018								February 25, 2017
(In thousands)	Defined Benefit Pension Items			Interest Rate Swap		Total			Defined Benefit Pension Items			Interest Rate Swap			Total
Balance at beginning of period	$	(503	)	$	120	$	(383	)	$	6,952		$	—		$	6,952

OCI before reclassifications	—			1,283		1,283			—			(439		)	(439		)
Amounts reclassified from AOCI	7			—		7			(7,413		)	—			(7,413		)
Net current-period OCI	7			1,283		1,290			(7,413		)	(439		)	(7,852		)

Balance at end of period	$	(496	)	$	1,403	$	907		$	(461	)	$	(439	)	$	(900	)


(Mark One)

☒			~~FORM 10-Q~~



	Rolling 12 Months Through January		Calendar Year
	2018	2017	2017	2016	2015
Motorized A, B, C	16.3%	17.8%	16.2%	18.0%	20.5	%
Travel trailer and fifth wheels	6.2%	1.7%⁽¹⁾	6.1%	1.7%⁽¹⁾	0.9	%



	Fiscal 2018				Fiscal		Fiscal		Fiscal		Cumulative
(In thousands)	Q2		Q1		2017		2016		2015		Investment
Capitalized	$	1,271	$	1,416	$	1,881	$	7,798	$	3,291	$	15,657	57	%
Expensed	420		387		2,601		5,930		2,528		11,866		43	%
Total	$	1,691	$	1,803	$	4,482	$	13,728	$	5,819	$	27,523	100	%



	Three Months Ended
(In thousands, except percent and per share data)	February 24, 2018		% of Revenues⁽¹⁾		February 25, 2017			% of Revenues⁽¹⁾		Increase (Decrease)			% Change
Net revenues	$	468,359	100.0	%	$	370,510		100.0	%	$	97,849		26.4	%
Cost of goods sold	400,698		85.6	%	321,194			86.7	%	79,504			24.8	%
Gross profit	67,661		14.4	%	49,316			13.3	%	18,345			37.2	%

Selling	12,209		2.6	%	9,553			2.6	%	2,656			27.8	%
General and administrative	18,268		3.9	%	12,540			3.4	%	5,728			45.7	%
Postretirement health care benefit income	—		—	%	(11,983		)	(3.2	)%	11,983			(100.0	)%
Transaction costs	—		—	%	463			0.1	%	(463		)	(100.0	)%
Amortization of intangible assets	1,933		0.4	%	10,367			2.8	%	(8,434		)	(81.4	)%
Total general and administrative	20,201		4.3	%	11,387			3.1	%	8,814			77.4	%
Total SG&A	32,410		6.9	%	20,940			5.7	%	11,470			54.8	%

Operating income	35,251		7.5	%	28,376			7.7	%	6,875			24.2	%
Interest expense	4,918		1.1	%	5,178			1.4	%	(260		)	(5.0	)%
Non-operating expense	11		—	%	4			—	%	7			175.0	%
Income before income taxes	30,322		6.5	%	23,194			6.3	%	7,128			30.7	%
Provision for income taxes	8,234		1.8	%	7,916			2.1	%	318			4.0	%
Net income	$	22,088	4.7	%	$	15,278		4.1	%	$	6,810		44.6	%

Diluted income per share	$	0.69			$	0.48				$	0.21		43.8	%
Diluted average shares outstanding	31,854				31,686					168			0.5	%



Motorized
(In thousands, except units)	Three Months Ended
	Feb 24, 2018		% of Revenue		Feb 25, 2017		% of Revenue			Increase (Decrease)			% Change
Net revenues	$	202,001			$	198,936				$	3,065		1.5	%
Adjusted EBITDA	4,044		2.0	%	10,838		5.4		%	(6,794		)	(62.7	)%

Unit deliveries	Feb 24, 2018		Product Mix % ⁽¹⁾		Feb 25, 2017		Product Mix % ⁽¹⁾			Increase (Decrease)			% Change
Class A	881		39.9	%	800		38.0		%	81			10.1	%
Class B	411		18.6	%	376		17.8		%	35			9.3	%
Class C	918		41.5	%	931		44.2		%	(13		)	(1.4	)%
Total motorhomes	2,210		100.0	%	2,107		100.0		%	103			4.9	%

Motorhome ASP	$	90,018			$	94,379				$	(4,361	)	(4.6	)%

					As Of
Backlog ⁽²⁾					Feb 24, 2018		Feb 25, 2017			Increase (Decrease)			% Change
Units					3,053		2,143			910			42.5	%
Dollars					$	276,231	$	191,522		$	84,709		44.2	%

Dealer Inventory
Units					4,827		5,068			(241		)	(4.8	)%



Period	Total Number of Shares Purchased	Average Price Paid per Share			Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
11/26/17 - 12/30/17	926		$	56.65	926		$	71,051,000
12/31/17 - 01/27/18	1,191		$	52.40	1,191		$	70,989,000
01/28/18 - 02/24/18	—		$	—	—		$	70,989,000
Total	2,117		$	54.26	2,117		$	70,989,000