UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q
(Mark One)
☒FORM 10-Q

(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 25, 2023
For the quarterly period ended February 24, 2018or
or
☐
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number: 001-06403

winnebagoindlogor.jpg
wgo-20230225_g1.jpg
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
IowaMinnesota42-0802678
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
P. O. Box 152, Forest City, Iowa13200 Pioneer TrailEden PrairieMinnesota5043655347
(Address of principal executive offices)(Zip Code)
(641) 585-3535952-829-8600
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.50 par value per shareWGONew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒No o☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerx
Accelerated filero
 Non-accelerated filero
Smaller reporting companyo
Emerging growth companyo
Large Accelerated Filer ☒    Accelerated Filer ☐    Non-accelerated filer ☐
    Smaller Reporting Company ☐        Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐No x☒
The number
As of March 16, 2023, there were 30,556,243 shares of common stock, par value $0.50 per share, outstanding March 21, 2018 was 31,659,393.

outstanding.



Winnebago Industries, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended February 25, 2023

Table of Contents

3
23
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Income and Comprehensive Income
23
Condensed Consolidated Balance Sheets
34
Condensed Consolidated Statements of Cash Flows
45
Condensed Consolidated Stockholders' StatementStatements of Changes in Shareholders' Equity
57
Notes to Condensed Consolidated Financial Statements
69
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 OperationsOperations.
1823
2834
2934
Item 1.
Legal Proceedings
2935
35
2935
2935
Exhibits
SIGNATURES
3136


Glossary


The following terms and abbreviations appear in the text of this report and are defined as follows:
ABLCredit 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
AOCIAccumulated Other Comprehensive Income (Loss)
ASCAccounting Standards Codification
ASPAverage Sales Price
ASUAccounting Standards Update
Blocker CorporationSP GE VIII - B GD RV Blocker Corporation
Credit AgreementCollective reference to the ABL and Term Loan
EBITDAEarnings Before Interest, Tax, Depreciation and Amortization
EPSEarnings Per Share
ERPEnterprise Resource Planning
FASBFinancial Accounting Standards Board
FIFOFirst In, First Out
GAAPGenerally Accepted Accounting Principles
Grand DesignGrand Design RV, LLC
IRSInternal Revenue Service
LIFOLast In, First Out
LIBORLondon Interbank Offered Rate
MotorizedBusiness segment including motorhomes and other related manufactured products
NYFRBNew York Federal Reserve Bank
NYSENew York Stock Exchange
OCIOther Comprehensive Income
OctaviusOctavius Corporation, a wholly-owned subsidiary of Winnebago Industries, Inc.
RVRecreation Vehicle
RVIARecreation Vehicle Industry Association
SECUS Securities and Exchange Commission
Securities Purchase AgreementPurchase Agreement dated as of November 8, 2016 between Winnebago Industries, Inc. and Grand Design RV, LLC
SERPSupplemental Executive Retirement Plan
SG&ASelling, General and Administrative Expenses
Stat SurveysStatistical Surveys, Inc.
Tax ActThe Tax Cuts and Jobs Act
Term LoanLoan 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
TowableBusiness segment including products that are not motorized and are towable by another vehicle
USUnited States of America
XBRLeXtensible Business Reporting Language
37



2

Table of Contents
PART I. FINANCIAL INFORMATION


Item 1. Condensed Consolidated Financial Statements


Winnebago Industries, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months EndedSix Months Ended
(in millions, except per share data)February 25,
2023		February 26,
2022		February 25,
2023		February 26,
2022
Net revenues$866.7 $1,164.7 $1,818.9 $2,320.5 
Cost of goods sold719.9 948.1 1,511.7 1,874.5 
Gross profit146.8 216.6 307.2 446.0 
Selling, general, and administrative expenses66.2 71.8 136.9 146.7 
Amortization3.8 8.0 7.6 16.2 
Total operating expenses70.0 79.8 144.5 162.9 
Operating income76.8 136.8 162.7 283.1 
Interest expense, net5.3 10.3 11.2 20.6 
Non-operating loss1.8 6.5 2.1 12.8 
Income before income taxes69.7 120.0 149.4 249.7 
Provision for income taxes16.9 28.8 36.4 58.9 
Net income$52.8 $91.2 $113.0 $190.8 
Earnings per common share:
Basic$1.73 $2.75 $3.71 $5.75 
Diluted$1.52 $2.69 $3.25 $5.58 
Weighted average common shares outstanding:
Basic30.5 33.1 30.5 33.2 
Diluted35.5 33.9 35.5 34.2 
  Three Months Ended Six Months Ended
(In thousands, except per share data) February 24,
2018		 February 25,
2017		 February 24,
2018		 February 25,
2017
Net revenues $468,359
 $370,510
 $918,380
 $615,818
Cost of goods sold 400,698
 321,194
 787,888
 537,627
Gross profit 67,661
 49,316
 130,492
 78,191
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
Amortization of intangible assets 1,933
 10,367
 3,988
 12,418
Total SG&A 32,410
 20,940
 64,065
 31,416
Operating income 35,251
 28,376
 66,427
 46,775
Interest expense 4,918
 5,178
 9,699
 6,306
Non-operating expense (income) 11
 4
 (112) (83)
Income before income taxes 30,322
 23,194
 56,840
 40,552
Provision for income taxes 8,234
 7,916
 16,794
 13,536
Net income $22,088
 $15,278
 $40,046
 $27,016
         
Income per common share:        
Basic $0.70
 $0.48
 $1.27
 $0.91
Diluted $0.69
 $0.48
 $1.26
 $0.91
         
Weighted average common shares outstanding:        
Basic 31,654
 31,577
 31,634
 29,707
Diluted 31,854
 31,686
 31,852
 29,827
         
Dividends paid per common share $0.20
 $0.10
 $0.20
 $0.20
         
Net income $22,088
 $15,278
 $40,046
 $27,016
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)
Total other comprehensive income (loss) 1,290
 (7,852) 1,930
 (11,875)
Comprehensive income $23,378
 $7,426
 $41,976
 $15,141


See notesThe accompanying Notes to condensedConsolidated Financial Statements are an integral part of these consolidated financial statements.

3

Table of Contents
Winnebago Industries, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except per share data)February 25,
2023		August 27,
2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents$229.3 $282.2 
Receivables, less allowance for doubtful accounts ($0.5 and $0.6, respectively)281.3 254.1 
Inventories, net540.4 525.8 
Prepaid expenses and other current assets38.5 31.7 
Total current assets1,089.5 1,093.8 
Property, plant, and equipment, net310.4 276.2 
Goodwill484.2 484.2 
Other intangible assets, net464.8 472.4 
Investment in life insurance29.0 28.6 
Operating lease assets42.2 41.1 
Deferred income tax assets, net6.1 — 
Other long-term assets19.2 20.4 
Total assets$2,445.4 $2,416.7 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$165.0 $217.5 
Income taxes payable— 0.7 
Accrued expenses:
Accrued compensation42.4 71.6 
Product warranties113.7 127.9 
Self-insurance21.4 21.4 
Promotional36.1 21.5 
Accrued interest and dividends4.6 13.0 
Other current liabilities51.9 48.5 
Total current liabilities435.1 522.1 
Long-term debt, net591.0 545.9 
Deferred income tax liabilities, net— 6.1 
Unrecognized tax benefits6.0 5.7 
Long-term operating lease liabilities41.7 40.4 
Deferred compensation benefits, net of current portion8.2 8.1 
Other long-term liabilities26.1 25.4 
Total liabilities1,108.1 1,153.7 
Contingent liabilities and commitments (Note 11)
Shareholders' equity:
Preferred stock, par value $0.01: 10.0 shares authorized; Zero shares issued and outstanding— — 
Common stock, par value $0.50: 120.0 shares authorized; 51.8 shares issued25.9 25.9 
Additional paid-in capital193.9 256.3 
Retained earnings1,671.0 1,537.5 
Accumulated other comprehensive loss(0.4)(0.5)
Treasury stock, at cost: 21.2 and 21.5 shares, respectively(553.1)(556.2)
Total shareholders' equity1,337.3 1,263.0 
Total liabilities and shareholders' equity$2,445.4 $2,416.7 
(In thousands, except per share data)February 24,
2018		 August 26,
2017
Assets   
Current assets:   
Cash and cash equivalents$27,443
 $35,945
Receivables, less allowance for doubtful accounts ($174 and $183)157,425
 124,539
Inventories178,046
 142,265
Prepaid expenses and other assets9,788
 11,388
Total current assets372,702
 314,137
Property, plant and equipment, net78,798
 71,560
Other assets:   
Goodwill244,684
 242,728
Other intangible assets, net224,452
 228,440
Investment in life insurance27,921
 27,418
Deferred income taxes9,813
 12,736
Other assets6,956
 5,493
Total assets$965,326
 $902,512
    
Liabilities and Stockholders' Equity   
Current liabilities:   
Accounts payable$99,727
 $79,194
Current maturities of long-term debt—
 2,850
Income taxes payable2,792
 7,450
Accrued expenses:   
Accrued compensation25,407
 24,546
Product warranties34,988
 30,805
Self-insurance9,124
 6,122
Promotional11,136
 6,560
Accrued interest2,255
 3,128
Other10,161
 6,503
Total current liabilities195,590
 167,158
Non-current liabilities:   
Long-term debt, less current maturities271,102
 271,726
Unrecognized tax benefits1,668
 1,606
Deferred compensation benefits, net of current portion18,907
 19,270
Other250
 1,078
Total non-current liabilities291,927
 293,680
Stockholders' equity:   
Capital stock common (par value $0.50;
authorized 60,000 shares, issued 51,776 shares)
25,888
 25,888
Additional paid-in capital80,721
 80,401
Retained earnings712,809
 679,138
Accumulated other comprehensive income (loss)907
 (1,023)
Treasury stock, at cost (20,117 and 20,183 shares)(342,516) (342,730)
Total stockholders' equity477,809
 441,674
Total liabilities and stockholders' equity$965,326
 $902,512

See notesThe accompanying Notes to condensedConsolidated Financial Statements are an integral part of these consolidated financial statements.

4
Table of Contents
Winnebago Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
(in millions)February 25,
2023		February 26,
2022
Operating activities
Net income$113.0 $190.8 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation13.3 10.8 
Amortization7.6 16.2 
Non-cash interest expense, net— 7.3 
Amortization of debt issuance costs1.5 1.2 
Last in, first-out expense1.7 2.8 
Stock-based compensation6.5 6.9 
Deferred income taxes(1.5)(2.0)
Contingent consideration fair value adjustment2.0 12.9 
Other, net— 2.2 
Change in operating assets and liabilities, net of assets and liabilities acquired
Receivables, net(27.2)(123.6)
Inventories, net(16.3)(109.3)
Prepaid expenses and other assets0.4 5.6 
Accounts payable(50.1)26.7 
Income taxes and unrecognized tax benefits(5.4)(7.9)
Accrued expenses and other liabilities(28.7)5.5 
Net cash provided by operating activities16.8 46.1 
Investing activities
Purchases of property, plant, and equipment(49.4)(43.4)
Acquisition of business, net of cash acquired— (228.2)
Other, net0.8 (0.2)
Net cash used in investing activities(48.6)(271.8)
Financing activities
Borrowings on long-term debt1,808.5 1,943.6 
Repayments on long-term debt(1,808.5)(1,943.6)
Payments of cash dividends(16.8)(12.0)
Payments for repurchases of common stock(4.9)(64.2)
Other, net0.6 2.1 
Net cash used in financing activities(21.1)(74.1)
Net decrease in cash and cash equivalents(52.9)(299.8)
Cash and cash equivalents at beginning of period282.2 434.6 
Cash and cash equivalents at end of period$229.3 $134.8 
5
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:
   
Depreciation4,328
 3,428
Amortization of intangible assets3,988
 12,418
Amortization of debt issuance costs826
 485
LIFO expense598
 598
Stock-based compensation3,553
 1,539
Deferred income taxes2,080
 6,857
Deferred compensation expense and postretirement benefit income578
 (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 expenses32,908
 16,131
Postretirement and deferred compensation benefits(1,377) (1,430)
Net cash provided by operating activities15,045
 5,142
    
Investing activities:   
Purchases of property and equipment(11,675) (6,938)
Proceeds from the sale of property299
 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 facility19,700
 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 period35,945
 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
Supplemental Disclosures
Income taxes paid, net$42.0 $71.3 
Interest paid12.1 11.9 
Non-cash investing and financing activities
Issuance of common stock for acquisition of business$— $22.0 
Capital expenditures in accounts payable4.5 1.1 
Increase in lease assets in exchange for lease liabilities:
Operating leases3.5 17.2 
Finance leases— 1.7 
See notesThe accompanying Notes to condensedConsolidated Financial Statements are an integral part of these consolidated financial statements.

6
Table of Contents

Winnebago Industries, Inc.
Condensed Consolidated Stockholders' StatementStatements of Changes in Shareholders' Equity
(Unaudited)
Three Months Ended February 25, 2023
(in millions, except per share data)Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balances at November 26, 202251.8 $25.9 $191.2 $1,626.7 $(0.5)(21.3)$(554.7)$1,288.6 
Stock-based compensation— — 3.5 — — — — 3.5 
Issuance of stock for employee benefit and stock-based awards, net— — (0.8)— — 0.1 2.0 1.2 
Repurchase of common stock— — — — — — (0.4)(0.4)
Common stock dividends; $0.27 per share— — — (8.5)— — — (8.5)
Total comprehensive income— — — — 0.1 — — 0.1 
Net income— — — 52.8 — — — 52.8 
Balances at February 25, 202351.8 $25.9 $193.9 $1,671.0 $(0.4)(21.2)$(553.1)$1,337.3 
Three Months Ended February 26, 2022
(in millions, except per share data)Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balances at November 27, 202151.8 $25.9 $233.8 $1,272.7 $(0.5)(18.5)$(372.6)$1,159.3 
Stock-based compensation— — 4.2 — — — — 4.2 
Issuance of stock for employee benefit and stock-based awards, net— — 0.2 — — 0.1 0.7 0.9 
Repurchase of common stock— — — — — (0.6)(40.5)(40.5)
Common stock dividends; $0.18 per share— — — (6.1)— — — (6.1)
Net income— — — 91.2 — — — 91.2 
Balances at February 26, 202251.8 $25.9 $238.2 $1,357.8 $(0.5)(19.0)$(412.4)$1,209.0 
Six Months Ended February 25, 2023
(in millions, except per share data)Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balances at August 27, 202251.8 $25.9 $256.3 $1,537.5 $(0.5)(21.5)$(556.2)$1,263.0 
Adoption of Accounting Standards Update (ASU) 2020-06— — (62.0)29.0 — — — (33.0)
Stock-based compensation— — 6.5 — — — — 6.5 
Issuance of stock for employee benefit and stock-based awards, net— — (6.9)— — 0.4 8.0 1.1 
Repurchase of common stock— — — — — (0.1)(4.9)(4.9)
Common stock dividends: $0.27 per share— — — (8.5)— — — (8.5)
Total comprehensive income— — — — 0.1 — — 0.1 
Net income— — — 113.0 — — — 113.0 
Balances at February 25, 202351.8 $25.9 $193.9 $1,671.0 $(0.4)(21.2)$(553.1)$1,337.3 
7
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
Six Months Ended February 26, 2022
(in millions, except per share data)Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balances at August 28, 202151.8 $25.9 $218.5 $1,173.0 $(0.5)(18.7)$(360.0)$1,056.9 
Stock-based compensation— — 6.9 — — — — 6.9 
Issuance of stock for employee benefit and stock-based awards, net— — (1.9)— — 0.2 4.5 2.6 
Issuance of stock for acquisition— — 14.7 — — 0.4 7.3 22.0 
Repurchase of common stock— — — — — (0.9)(64.2)(64.2)
Common stock dividends; $0.18 per share— — — (6.1)— — — (6.1)
Other— — — 0.1 — — — 0.1 
Net income— — — 190.8 — — — 190.8 
Balances at February 26, 202251.8 $25.9 $238.2 $1,357.8 $(0.5)(19.0)$(412.4)$1,209.0 

See notesThe accompanying Notes to condensedConsolidated Financial Statements are an integral part of these consolidated financial statements.

8

Table of Contents
Winnebago Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(All amounts are in millions, except share and per share data, unless otherwise designated)

Note 1: 1.    Basis of Presentation

The "Company,consolidated financial statements include the accounts of Winnebago Industries, Inc. and its wholly owned subsidiaries. Significant intercompany account balances and transactions have been eliminated.

The use of the terms "Winnebago Industries," "Winnebago," "we," "our""our," and "us" are used interchangeably to referin this Quarterly Report on Form 10-Q, unless the context otherwise requires, refers to Winnebago Industries, Inc. and its wholly-owned subsidiaries, as appropriate in the context.wholly owned subsidiaries.


We were incorporated under the laws 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 accompanyinginterim unaudited condensed consolidated financial statements have beenincluded herein are prepared pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”). The information furnished in these consolidated financial statements includes normal recurring adjustments, unless noted otherwise in the Notes to Consolidated Financial Statements, and reflects all adjustments that are, in management’s opinion, necessary for a fair presentation of such financial statements. The consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). GAAP requires us to make estimates and assumptions that affect amounts reported. Certain information and footnote disclosures normally included in financial statements 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 behave been condensed or omitted. In our opinion, the accompanying unaudited condensedomitted pursuant to SEC rules and regulations.

The consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly our consolidated financial position as of February 24, 2018 and the consolidated 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 interim financial statementsincluded in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto appearingincluded in our Annual Report on Form 10-K for the fiscal year ended August 26, 2017.

Fiscal Period
We follow a 52-/53-week27, 2022 filed with the SEC. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year ending August 26, 2023.

Comprehensive Income
Comprehensive income refers to the last Saturdaychange in August. Bothstockholders’ equity from transactions and other events and circumstances from non-owner sources. As of February 25, 2023 and February 26, 2022, the difference between comprehensive income and net income was not material.

Change in Presentation
In the first quarter of Fiscal 20182023, we changed our presentation in tables from thousands to millions, unless otherwise designated. As a result, certain rounding adjustments have been made to prior period disclosed amounts in order to conform to the current year presentation. In addition, certain prior period amounts may not recalculate due to rounding. These changes were not significant, and Fiscal 2017 are 52-week years.no other updates were made to previously reported financial information.


Subsequent Events
In preparing the accompanying unaudited consolidated financial statements, we have evaluated subsequent events for potential recognition and disclosure through the date of this filing noting no material subsequent events.

Recently Adopted Accounting Pronouncements
In March 2016,August 2020, the FASBFinancial Accounting Standards Board ("FASB") issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for the related income taxes, forfeitures, statutory tax withholding requirements2020-06, Debt - Debt with Conversion and classification in the statement 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 recognition of excess tax benefitsOther Options (Subtopic 470-20) and tax deficiencies in the statement of income 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 required 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.

New Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which establishes a comprehensive new model for the recognition 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.

In August 2016, the FASB issued ASU 2016-15, Classification 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 ASU 2017-12, Derivatives and Hedging (Topic 815),- Contracts in Entity's Own Equity (Subtopic 815-40) which improvesreduces the financial reportingnumber of hedging relationshipsmodels used to better portrayaccount for convertible instruments, amends diluted earnings per share ("EPS") calculations for convertible instruments, and amends the economic results ofrequirements for a contract (or embedded derivative) that is potentially settled in an entity's risk management activitiesown shares to be classified in its financial statements. ASU 2017-12 is effectiveequity. Certain disclosure requirements were also added to increase transparency and decision-usefulness regarding a convertible instrument's terms and features. Additionally, the if-converted method must be used for annual reporting periods beginning after December 15, 2018 (our Fiscal 2020), including interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluatingconvertible instruments in diluted EPS as opposed to 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.treasury stock method. We adopted athe new corporate allocation policyguidance in the first quarter of Fiscal 2018 that identifies shared costs2023 using the modified retrospective approach, resulting in a decrease to additional paid-in capital of $62.0 million, an increase to long-term debt of $43.8 million, a decrease in the deferred income tax liability of $10.8 million, and allocates theman increase to beginning retained earnings of $29.0 million. In addition, the adoption of the amended guidance reduced our non-cash interest expense by $3.7 million (pre-tax) for the three months ended February 25, 2023 and $7.3 million (pre-tax) for the six months ended February 25, 2023. The if-converted method will be used prospectively to calculate the impact of our convertible instruments on diluted EPS. Under the if-converted method, the 4.7 million shares underlying our convertible instruments are assumed to have been outstanding at the beginning of the reporting period, and any interest expense related to these instruments is excluded from the calculation of diluted EPS. Refer to Note 15 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for more information on the change from the treasury stock method to the operating segments. The cost drivers selected as the basis for allocation are the most appropriate drivers for the typeif-converted method.

9
Table of cost being allocated. All corporate expenses are allocated to the operating segments.  Previous to the first quarter of Fiscal 2018, costs were not allocated and were borne by the segment in which the costs originated. See Contents
Note 3:2. Business Segments.Combinations

Subsequent Event
On March 14, 2018 our Board of Directors declared a cash dividend of $0.10 per share as further described in Note 11.

Note 2: Business Combination, Goodwill and Other Intangible Assets

We acquiredAugust 31, 2021, we purchased 100% of the ownershipequity interests of Grand Design on November 8, 2016 in accordance with the Securities Purchase AgreementBarletta Boat Company, LLC and Three Limes, LLC (collectively, "Barletta"), a manufacturer of high-quality, premium pontoon boats that are sold through a network of independent authorized dealers.

We acquired Barletta for an aggregatea purchase price of $520.5$286.3 million, including cash payments of $240.1 million, $25.0 million in common stock issued to the sellers (subject to a discount noted below), and contingent consideration from earnout provisions. The common stock fair value included in the purchase price reflects a 12% discount, due to the lack of marketability as these are unregistered shares that have a one-year lockup restriction, which was paidreduced the value of the common stock to $22.0 million. The contingent consideration includes both a potential stock payout as well as a potential cash payment based on achievement of certain financial performance metrics over the next few years. The maximum payout under the earnout is $50.0 million in cash and Winnebago shares$15.0 million in stock if all metrics are achieved. The fair value of the earnout as follows:
(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
of August 31, 2021 was $24.2 million. As of February 25, 2023 and August 27, 2022, the fair value of the earnout was $41.8 million and $39.8 million, respectively. 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 priceof the earnout liability that will be settled within a year is included in other current liabilities on the dateConsolidated Balance Sheets, and the remaining earnout liability is included in other long-term liabilities on the Consolidated Balance Sheets. As of closing.February 25, 2023 and August 27, 2022, $21.9 million and $21.3 million was included in other current liabilities, respectively, and $19.9 million and $18.5 million was included in other long-term liabilities on the Consolidated Balance Sheets, respectively.

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 acquired net tangible and intangible assets of Grand Design acquired,Barletta, based on their preliminary fair values at the date of the acquisition. This resulted in the recognition of goodwill of $136.1 million and other intangible assets of $111.4 million. Goodwill from the Barletta acquisition is recognized in our Marine segment. The other intangible assets acquired include a trade name, dealer network, and backlog. The trade name has an indefinite life, while the dealer network is being amortized on a straight line basis over 12 years. The backlog, which was being amortized over 10 months, was fully amortized as of August 27, 2022. We finalized the allocation of the purchase price allocation was finalizedin the third quarter of Fiscal 2022.

Total transaction costs related to the Barletta acquisition were $3.1 million, of which $2.4 million were expensed during the first quarter of Fiscal 2018. The final allocation of the purchase price to assets acquired2022. Transaction costs were included in selling, general and liabilities assumed is shownadministrative expenses in the following table.accompanying Consolidated Statements of Income.


(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 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 of the purchase price to the net assets acquired 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 income approach to value certain intangible assets.  Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. We used the income approach known as the relief from royalty method to value the trade name. 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 is based on expected revenues from such license. The fair value of the dealer network was estimated using an income approach known as the cost to recreate/cost savings 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 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 the six months ended February 24, 2018 and February 25, 2017, amortization of intangible assets charged to operations was $4.0 million and $12.4 million, respectively. The weighted average remaining amortization period for intangible assets as of February 24, 2018 was approximately 10.6 years. Remaining estimated aggregate annual amortization expense by fiscal year is as follows:
(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 results of Grand Design's operations have been included in our consolidated financial statements from the close of the acquisition. The following table provides net revenues and operating income (which includes amortization expense) from the Grand Design business included in our consolidated results during the six months ended February 24, 2018 and February 25, 2017 following the November 8, 2016 closing date:
  Six Months Ended
(In thousands) February 24,
2018		 February 25,
2017
Net revenues $450,708
 $169,421
Operating income 55,254
 6,759

Unaudited pro forma information has been prepared as if the acquisition had taken place on August 30, 2015. 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, 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 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 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 million of acquisition-related costs to date, of which $0.1 million and $5.9 million were expensed during the six months ended February 24, 2018 and February 25, 2017, respectively.


Note 3:3.    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 twoseven operating segments: 1) Grand Design towables, 2) Winnebago towables, 3) Winnebago motorhomes, 4) Newmar motorhomes, 5) Chris-Craft marine, 6) Barletta marine and 7) Winnebago specialty vehicles. Financial performance is evaluated based on each operating segment's Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined below, which excludes certain corporate administration expenses and non-operating income and expense.

Our three reportable segments: (1) Motorizedsegments are: Towable (an aggregation of the Grand Design towables and the Winnebago towables operating segments); Motorhome (an aggregation of the Winnebago motorhomes and Newmar motorhomes operating segments); and Marine (an aggregation of the Chris-Craft marine and Barletta marine operating segments). Towable is comprised of non-motorized products and services and (2) Towablethat are generally towed by another vehicle, along with other related manufactured products and services. The Motorized segment includes allMotorhome is comprised of products that include a motorized chassis, along with other related manufactured products and services. Marine is comprised of products that include boats, along with other related manufactured products and services.

The Corporate / All Other category includes the Winnebago specialty vehicles operating segment as well as othercertain corporate administration expenses related manufactured products. 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 dynamicsoversight of the product groups. We aggregate twoenterprise, 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 Executive Officer (the Chief Operating Decision Maker ("CODM")) regularly reviews consolidated financial results in their entirety and operating segment financial information through Adjusted EBITDA and has ultimate responsibility for enterprise decisions. Our CODM is responsible for allocating resources and assessing performance of the consolidated enterprise, reportable segments into the Towable reportingand between operating segments. Management of each operating segment based uponhas responsibility for operating decisions, allocating resources and assessing performance within their similar products, customers, distribution methods, production processes and economic characteristics.respective operating segment. The accounting policies of bothall reportable segments are the same andas those described in Note 1: Summary1 in the Notes to Consolidated Financial Statements included in Item 8 of Significant Accounting Policies inPart II of our Annual Report on Form 10-K for the fiscal year ended August 26, 2017.27, 2022.


Subsequent to the acquisition
10
Table 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.Contents

We monitor and evaluate theoperating performance of our reportable segments based on Adjusted EBITDA. We believe disclosing Adjusted EBITDA after corporate allocations.is useful to securities analysts, investors and other interested parties when evaluating companies in our industries. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as earningsnet income before interest expense, provision for income taxes, depreciation and amortization expense, and other pretax adjustments made in order to present comparable results from period toover period. Examples of items excluded from Adjusted EBITDA include the postretirement health care benefitacquisition-related costs, litigation reserves, contingent consideration fair value adjustment, and non-operating income resulting from the plan amendments over the past several years and the transaction costs related to our acquisition of Grand Design.or loss.


The following table showsFinancial information by reporting segment:reportable segment is as follows:
Three Months EndedSix Months Ended
(in millions)February 25,
2023		February 26,
2022		February 25,
2023		February 26,
2022
Net Revenues
Towable$342.5 $646.6 $689.8 $1,297.6 
Motorhome403.8 417.6 868.0 839.0 
Marine112.9 97.3 244.3 176.6 
Corporate / All Other7.5 3.2 16.8 7.3 
Consolidated$866.7 $1,164.7 $1,818.9 $2,320.5 
Adjusted EBITDA
Towable$39.3 $100.6 $75.6 $212.7 
Motorhome42.5 46.1 92.8 96.2 
Marine14.4 13.0 32.9 23.5 
Corporate / All Other(7.8)(9.0)(15.9)(14.4)
Consolidated$88.4 $150.7 $185.4 $318.0 
Capital Expenditures
Towable$6.2 $10.2 $20.5 $21.3 
Motorhome9.0 7.9 14.8 15.6 
Marine5.3 1.9 12.6 2.5 
Corporate / All Other1.1 0.2 1.5 4.0 
Consolidated$21.6 $20.2 $49.4 $43.4 

(in millions)February 25,
2023		August 27,
2022
Assets
Towable$871.4 $874.9 
Motorhome856.9 823.4 
Marine443.6 416.1 
Corporate / All Other273.5 302.3 
Consolidated$2,445.4 $2,416.7 


11
  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
Table of Contents


Reconciliation of net income to consolidated Adjusted EBITDA:EBITDA is as follows:
Three Months EndedSix Months Ended
(in millions)February 25, 2023February 26, 2022February 25, 2023February 26, 2022
Net income$52.8 $91.2 $113.0 $190.8 
Interest expense, net5.3 10.3 11.2 20.6 
Provision for income taxes16.9 28.8 36.4 58.9 
Depreciation6.7 5.5 13.3 10.8 
Amortization3.8 8.0 7.6 16.2 
EBITDA85.5 143.8 181.5 297.3 
Acquisition-related costs1.1 0.4 1.7 3.8 
Litigation reserves— — — 4.0 
Contingent consideration fair value adjustment1.6 6.5 2.0 12.9 
Non-operating loss0.2 — 0.2 — 
Adjusted EBITDA$88.4 $150.7 $185.4 $318.0 

  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: Derivatives,4.    Investments and Fair Value Measurements
In determining the fair value of financial assets and liabilities, we utilize market data or other assumptions that we believe market participants would use in pricing the asset or liability in the principal or most advantageous market and adjust for non-performance and/or other risks associated with us as well as counterparties, as appropriate. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

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

Level 2 — Inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

12
Table of Contents
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
We account for fair value measurements in accordance with 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.

The following tables set forth by level within the fair value hierarchy our financialFinancial assets and liabilities that were accounted formeasured at fair value on a recurring basis at February 24, 2018 and August 26, 2017 according to the valuation techniques we used to determine their fair values:
are as follows:
Fair Value atFair 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
Assets that fund deferred compensation:        
(in millions)(in millions)February 25,
2023		Level 1Level 2Level 3
Assets that fund deferred compensationAssets that fund deferred compensation
Domestic equity funds $1,580
 $1,546
 $34
 $—
Domestic equity funds$1.7 $1.7 $— $— 
International equity funds 176
 157
 19
 —
International equity funds0.1 0.1 — — 
Fixed income funds 176
 83
 93
 —
Fixed income funds— — — — 
Interest rate swap contract 1,924
 —
 1,924
 —
Total assets at fair value $3,856
 $1,786
 $2,070
 $—
Total assets at fair value$1.8 $1.8 $— $— 
Contingent considerationContingent consideration
Earnout liability Earnout liability$41.8 $— $— $41.8 
Total liabilities at fair valueTotal liabilities at fair value$41.8 $— $— $41.8 

Fair Value atFair Value Hierarchy
(in millions)August 27,
2022		Level 1Level 2Level 3
Assets that fund deferred compensation
Domestic equity funds$1.2 $1.2 $— $— 
International equity funds0.1 0.1 — — 
Fixed income funds0.1 0.1 — — 
Total assets at fair value$1.4 $1.4 $— $— 
Contingent consideration
   Earnout liability$39.8 $— $— $39.8 
Total liabilities at fair value$39.8 $— $— $39.8 
    
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) $—

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Assets that fund deferred compensationFund Deferred Compensation
Our assets that fund deferred compensation are marketable equity securities measured at fair value using quoted market prices and primarily consist of equity-based mutual funds. The majority ofThese securities, used to fund the Executive Share Option Plan and the Executive Deferred Compensation Plan, are classified as Level 1 as they are traded in an active market for which closing stock prices are readily available. These securities fundRefer to Note 11 in the Executive Share Option Plan andNotes to Consolidated Financial Statements included in Item 8 of Part II of our Annual Report on Form 10-K for the Executive Deferred Compensation Plan (see Note 10). fiscal year ended August 27, 2022 for additional information regarding these plans.

The proportion of the assets that will fund options thatwhich expire within a year are included in prepaid expenses and other current assets inon the accompanying consolidated balance sheets.Consolidated Balance Sheets. The remaining assets are classified as non-current and are included in other assets.assets on the Consolidated Balance Sheets.


Interest Rate Swap ContractContingent Consideration
Under termsContingent consideration represents the earnout liability related to the Barletta acquisition and is valued using a probability-weighted scenario analysis of our Credit Agreement (see Note 9), we were previously required to hedgeprojected gross profit results and discounted at a portionrisk-free rate. The contingent consideration is classified as Level 3. Actual gross profit results may differ significantly from those used in the estimate above, which may affect future payments. Changes in future payments will be reflected in future operating results as they occur.

The following table provides a reconciliation of the floating interest rate exposure. In accordance with that requirement, on January 23, 2017, we entered into an interest swap contract, which effectively fixed our interest rate for our Term Loan for a notional amount that reduces each December duringbeginning and ending balances of the swap contract. Ascontingent consideration:

Three Months EndedSix Months Ended
(in millions)February 25,
2023		February 26,
2022		February 25,
2023		February 26,
2022
Beginning fair value - contingent consideration$40.2 $30.6 $39.8 $— 
Additions— — — 24.2 
Fair value adjustments1.6 6.5 2.0 12.9 
Ending fair value - contingent consideration$41.8 $37.1 $41.8 $37.1 

13
Table of February 24, 2018, we had $170.0 million of our Term Loan fixed at an interest rate of 5.32%. As of August 26, 2017, we had $200.0 million of our Term Loan fixed at an interest rate of 6.32%.Contents

The fair value of the interest rate swap based onearnout liability that will be settled within a Level 2 valuation was an asset of $1.9 million as of February 24, 2018. The fair valueyear is classified as Level 2 as it is corroborated based on observable market data. This amount is classified as non-current and included in other assetscurrent liabilities on the consolidated balance sheets.Consolidated Balance Sheets. The changeremaining earnout liability is included in value in the second quarter was predominately recorded to accumulated other comprehensive incomelong-term liabilities on the consolidated balance sheets since the interest rate swap has been designated for hedge accounting.Consolidated Balance Sheets.


Assets and Liabilities that are measuredMeasured at Fair Value on a Nonrecurring Basis
Our non-financial assets, which include goodwill, intangible assets, and property, plant and equipment,Certain financial instruments are not required to be measured at fair value on a recurringnonrecurring basis. However, ifThese assets primarily include goodwill, intangible assets, property, plant and equipment, and right-of-use lease assets. These assets were originally recognized at amounts equal to the fair value determined at date of acquisition or purchase. If certain triggering events occur, or if an annual impairment test is required, we mustwill evaluate the non-financial asset for impairment. If an impairment did occur,has occurred, the asset is requiredwill be written down to be recorded at theits current estimated fair value. During the first six months of Fiscal 2018, noNo impairments were recorded for non-financial assets.assets in the six months ended February 25, 2023 or February 26, 2022.


Assets and Liabilities Not Measured at Fair Value
Certain financial instruments are not measured at fair value but are recorded at carrying amounts approximating fair value based on their short-term nature. These financial instruments include cash and cash equivalents, receivables, accounts payable, other payables, and long-term debt. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. The carryingfair value of our long-term debt was determined using current quoted prices in active markets for our publicly traded debt obligations, which is classified as of February 24, 2018 approximatesLevel 1 in the fair value as interest is at variable market rates.hierarchy. See Note 9 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for the fair value of our long-term debt.


Note 6: 5.    Inventories

Inventories consist of the following:
(in millions)February 25,
2023		August 27,
2022
Finished goods$89.8 $59.3 
Work-in-process183.4 198.9 
Raw materials316.3 315.0 
Total589.5 573.2 
Less: Excess of FIFO over LIFO cost49.1 47.4 
Inventories, net$540.4 $525.8 

(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
Inventory valuation methods consist of the following:
(in millions)February 25,
2023		August 27,
2022
LIFO basis$260.4 $212.3 
First-in, first-out basis329.1 360.9 
Total$589.5 $573.2 

The above inventory value, of inventories, before reduction for the LIFO reserve, approximates replacement cost at the respective dates. Of the $214.1 million and $177.7 million inventory at February 24, 2018 and August 26, 2017, respectively, $177.3 million and $149.8


million is valued on a LIFO basis. The remaining inventories of $36.8 million and $27.9 million at February 24, 2018 and August 26, 2017, respectively, are valued on a FIFO basis.
14


Note 7: 6.    Property, Plant, and Equipment
Property, plant, and equipment is stated at cost, net of accumulated depreciation, and consists of the following:
(in millions)February 25,
2023		August 27,
2022
Land$14.6 $14.6 
Buildings and building improvements201.6 171.0 
Machinery and equipment150.8 142.6 
Software44.1 43.8 
Transportation6.7 6.5 
Construction in progress83.9 76.8 
Property, plant, and equipment, gross501.7 455.3 
Less: Accumulated depreciation191.3 179.1 
Property, plant, and equipment, net$310.4 $276.2 

Depreciation expense was $6.7 million and $5.5 million for the three months ended February 25, 2023 and February 26, 2022, respectively; and $13.3 million and $10.8 million for the six months ended February 25, 2023 and February 26, 2022, respectively.

Note 7.    Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by reportable segment, with no accumulated impairment losses, for the six months ended February 25, 2023 and February 26, 2022 are as follows:
(in millions)TowableMotorhomeMarineTotal
Balances at August 28, 2021$244.7 $73.1 $30.3 $348.1 
Acquisition of Barletta(1)
— — 136.1 136.1 
Balances at February 26, 2022$244.7 $73.1 $166.4 $484.2 
Balances at August 27, 2022 and February 25, 2023(2)
$244.7 $73.1 $166.4 $484.2 
(1) The change in marine activity is related to the acquisition of Barletta that occurred on August 31, 2021. See Note 2 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.
(2) There was no activity in the six months ended February 25, 2023.

Other intangible assets, net of accumulated amortization, consist of the following:
February 25, 2023
(in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying Value
Trade names$352.3 $352.3 
Dealer networks180.0 $67.9 112.1 
Backlog42.3 42.3 — 
Non-compete agreements6.6 6.2 0.4 
Other intangible assets$581.2 $116.4 $464.8 
August 27, 2022
(in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying Value
Trade names$352.3 $352.3 
Dealer networks180.0 $60.5 119.5 
Backlog42.3 42.3 — 
Non-compete agreements6.6 6.0 0.6 
Other intangible assets$581.2 $108.8 $472.4 

The weighted average remaining amortization period for intangible assets as of February 25, 2023 was approximately eight years.
15
Table of Contents
(In thousands) February 24,
2018		 August 26,
2017
Land $3,936
 $3,914
Buildings and building improvements 81,367
 73,831
Machinery and equipment 99,577
 99,952
Software 20,601
 17,844
Transportation 8,358
 8,993
Total property, plant and equipment, gross 213,839
 204,534
Less accumulated depreciation (135,041) (132,974)
Total property, plant and equipment, net $78,798
 $71,560


Estimated future amortization expense related to finite-lived intangible assets is as follows:
(in millions)Amortization
Remainder of Fiscal 2023$7.6 
Fiscal 202415.1 
Fiscal 202514.9 
Fiscal 202614.9 
Fiscal 202714.9 
Fiscal 202814.9 
Thereafter30.2 
Total amortization expense remaining$112.5 

Note 8: Warranty8.    Product Warranties


We provide certain service and warranty on our products. From time to time, we also voluntarily incur costs for certain warranty-type expenses occurring after the normal warranty period expires to help protect the reputation of our products and maintain the goodwill of our customers. Warranty expense is affected by dealership labor rates, the cost of parts and the frequency of claims. Estimated costs related to product warranty are accrued at the time of sale and are based upon historical warranty and service claims experience. Adjustments are made to accruals as claim data and cost experience becomes available.


In addition to the costs associated with the contractual warranty coverage provided on products, we also occasionally incur costs as a result of additional service actions not covered by warranties, including product recalls and customer satisfaction actions. Although we estimate and reserve for the cost of these service actions when probable and estimable, there can be no assurance that expense levels will remain at current levels or such reserves will continue to be adequate.

Changes in ourthe product warranty liability are as follows:
Three Months EndedSix Months Ended
(in millions)February 25,
2023		February 26,
2022		February 25,
2023		February 26,
2022
Balance at beginning of period$122.2 $102.4 $127.9 $91.2 
Business acquisition(1)
— — — 4.7 
Provision16.0 31.2 34.1 57.2 
Claims paid(24.5)(19.8)(48.3)(39.3)
Balance at end of period$113.7 $113.8 $113.7 $113.8 
(1)    Relates to the acquisition of Barletta on August 31, 2021. See Note 2 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Note 9.    Long-Term Debt

Long-term debt consists of the following:
(in millions)February 25,
2023		August 27,
2022
ABL Credit Facility$— $— 
Senior Secured Notes300.0 300.0 
Convertible Notes300.0 300.0 
Long-term debt, gross600.0 600.0 
Convertible Notes unamortized interest discount(1)
— (45.3)
Debt issuance costs, net(9.0)(8.8)
Long-term debt, net$591.0 $545.9 
(1)    In connection with the adoption of ASU 2020-06, the unamortized interest discount was derecognized in the first quarter of Fiscal 2023. Refer to Note 1 in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.

16
Table of Contents
  Three Months Ended Six Months Ended
(In thousands) February 24,
2018		 February 25,
2017		 February 24,
2018		 February 25,
2017
Balance at beginning of period $32,500
 $24,551
 $30,805
 $12,412
Provision 10,283
 7,734
 20,236
 11,632
Claims paid (7,795) (7,255) (16,053) (11,918)
Acquisition of Grand Design —
 —
 —
 12,904
Balance at end of period $34,988
 $25,030
 $34,988
 $25,030

Note 9: Long-Term Debt

The components of long-term debt are as follows:
(In thousands) February 24,
2018		 August 26,
2017
ABL $19,700
 $—
Term Loan 260,000
 284,000
Gross long-term debt, excluding issuance costs 279,700
 284,000
Less: debt issuance cost, net (8,598) (9,424)
Long-term debt, net of issuance costs 271,102
 274,576
Less: current maturities —
 (2,850)
Long-term debt, less current maturities $271,102
 $271,726

Credit Agreements
On November 8, 2016, we entered into a $125.0 million ABL and a $300.0 million Term Loan with JPMorgan Chase Bank, N.A. ("Credit Agreement"). On December 8, 2017,July 15, 2022, we amended and restated our existing asset-backed revolving credit agreement ("ABL Credit Agreement,Facility") to, among other things, increase the commitments available from $192.5 million to $350.0 million, and extend the maturity date from October 22, 2024 to July 15, 2027 (subject to certain factors which decreasedmay accelerate the interest rate spread by 1.0% on the Term Loan and 0.25% on the ABL. Prior to this amendment, $19.7maturity date). The $350.0 million was drawn on the ABL and used to make a voluntary prepayment on our Term Loan.
Under the ABL, we have a five year credit facility is on a revolving basis, subject to availability under a borrowing base consisting of eligible accounts receivable and eligible inventory. The ABL Credit Facility is available for issuance of letters of credit to a specified limit of $10.0$35.0 million. We pay a commitment fee in the range of 0.25% - 0.375%based on the average daily amount of the facility available, but unused.unused during the most recent quarter. We can elect to

base the interest rate on various base rates plus specific spreads depending on the amount of borrowings outstanding. We currently pay interest on ABL borrowings at a floating rate based upon LIBOR plus 1.25%.
Under the Term Loan, we can elect to base the interest rate on various base rates plus specific spreads.spreads depending on the borrowing amount outstanding. If drawn, interest on ABL Credit Facility borrowings is at a floating rate based upon our election, either term SOFR or REVSOFR30 (as defined in the ABL Credit Facility agreement), plus, in each case, a credit spread adjustment of 0.10%, as well as an applicable spread between 1.25% and 1.75%, depending on the usage of the facility during the most recent quarter. Based on current usage, we would pay an applicable spread of 1.25%. In connection with the amendment, we capitalized $1.2 million of issuance costs that will be amortized over the five-year term of the ABL Credit Facility.

On July 8, 2020, we closed our private offering (the “Senior Secured Notes Offering”) of $300.0 million aggregate principal amount of 6.25% Senior Secured Notes due 2028 (the “Senior Secured Notes”). The interest rateSenior Secured Notes were issued in accordance with an Indenture dated as of February 24, 2018 was based on LIBOR plus 3.5%July 8, 2020 (the “Indenture”). The Term Loan agreement currently requires quarterlySenior Secured Notes will mature on July 15, 2028 unless earlier redeemed or repurchased. Interest on the Senior Secured Notes accrues starting July 8, 2020 and is payable semi-annually in arrears on January 15 and July 15 of each year, which began on January 15, 2021.

Debt issuance costs incurred and capitalized are amortized on a straight-line basis over the term of the associated debt agreement. If early principal payments are made on the Senior Secured Notes, a proportional amount of the unamortized debt issuance costs is expensed. As part of the Senior Secured Notes Offering, we capitalized $7.5 million in debt issuance costs that will be amortized over the eight-year term of the agreement.

Refer to Note 9 in the Notes to Consolidated Financial Statements included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022 for additional information regarding these credit agreements.

Convertible Notes
On November 1, 2019, we issued $300.0 million in aggregate principal amount of $3.75 million with all amounts then outstanding1.5% unsecured convertible senior notes due 2025 (“Convertible Notes”). The net proceeds from the issuance of the Convertible Notes, after deducting the initial purchasers' transaction fees and offering expense payable by us, were approximately $290.2 million. The Convertible Notes bear interest at the annual rate of 1.5%, payable on November 8, 2023. April 1 and October 1 of each year, beginning on April 1, 2020, and will mature on April 1, 2025, unless earlier converted or repurchased by us.

The Convertible Notes will be convertible into cash, shares of our common stock or a combination thereof, at our election, at an initial conversion rate of 15.6906 shares of common stock per $1 thousand principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $63.73 per share, as adjusted pursuant to the terms of the indenture governing the Convertible Notes. The Convertible Notes may be converted at any time on or after October 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date.

Prior to the close of business on the business day immediately preceding October 1, 2024, the Convertible Notes will be convertible only under the following circumstances:

1.during any calendar quarter commencing after December 31, 2019 if the closing sale price of the common stock is more than 130% of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
2.during the five consecutive business day period after any five consecutive trading day period (the "measurement period") in which the trading price per $1 thousand principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate for the Convertible Notes on each such trading day; or
3.upon the occurrence of certain specified corporate events set forth in the indenture for the Convertible Notes.

We have made voluntary prepayments that have extendedmay not redeem the opportunity to defer quarterly payments,Convertible Notes at our option until December 31, 2019. There are mandatory prepaymentsprior to the maturity date, and no sinking fund is provided for proceedsthe Convertible Notes.

The conversion rate of new debt, salethe Convertible Notes may be adjusted in certain circumstances, including in connection with a conversion of significant assets or subsidiaries,the Convertible Notes made following certain fundamental changes and excess cash flow as those terms are definedunder other circumstances set forth in the Term Loan. Incremental term loansindenture. It is our current intent to settle all conversions of upthe Convertible Notes in cash. Our ability to $125.0 million are available if certain financial ratioscash settle may be limited depending on the stock price at the time of conversion.
17
Table of Contents

On October 29, 2019 and other conditions are met.October 30, 2019, in connection with the offering of the Convertible Notes, we entered into privately negotiated convertible note hedge transactions (collectively, the “Hedge Transactions”) that cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlie the Convertible Notes.

On October 29, 2019 and October 30, 2019, we also entered into privately negotiated warrant transactions (collectively, the “Warrant Transactions” and, together with the Hedge Transactions, the “Call Spread Transactions”), whereby we sold warrants at a higher strike price relating to the same number of shares of our common stock that initially underlie the Convertible Notes, subject to customary anti-dilution adjustments.
The Credit Agreement contains certain financial covenants. As of February 24, 2018, weHedge Transactions and the Warrant Transactions are separate transactions, in compliance with all financial covenantseach case, and are not part of the Credit Agreement.terms of the Convertible Notes and will not affect any holder’s rights under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Call Spread Transactions.
The ABL and Term Loan are guaranteed by Winnebago Industries, Inc. and all material direct and indirect domestic subsidiaries, and are secured by a security interest
Refer to Note 9 in substantially allthe Notes to Consolidated Financial Statements included in Item 8 of Part II of our assets, except minor excluded assets.Annual Report on Form 10-K for the fiscal year ended August 27, 2022 for additional information regarding the Convertible Notes and the Call Spread Transactions.

Accounting Treatment of the Convertible Notes and Related Hedge Transactions and Warrant Transactions
In the first quarter of Fiscal 2023, we adopted ASU 2020-06 using the modified retrospective approach. The new guidance simplifies the accounting for convertible instruments by removing certain separation models. As a result, more convertible debt instruments will be accounted for as a single liability measured at amortized cost.

Prior to our adoption of February 24, 2018, $8.6ASU 2020-06, we bifurcated the proceeds from the offering of the Convertible Notes between liability and equity components. On the date of issuance, the liability and equity components were calculated to be approximately $215.0 million and $85.0 million, respectively. The initial $215.0 million liability component was determined based on the fair value of similar debt instruments excluding the conversion feature assuming a hypothetical interest rate of 8%. The initial $85.0 million ($64.1 million net of tax) equity component represented the difference between the fair value of the initial $215.0 million in debt and the $300.0 million of gross proceeds. The initial debt issuance costs, netdiscount of amortization, were recorded$85.0 million was being amortized over the life of the Convertible Notes as a direct deduction from long-term debt. Unamortized debt issuancenon-cash interest expense using the effective interest method. We recognized $3.7 million and $7.3 million of non-cash interest expense during the three and six months ended February 26, 2022, respectively. In addition, offering-related costs of $0.6$9.8 million were allocated to the liability and equity components in proportion to the allocation of proceeds.

In connection with our adoption of ASU 2020-06, we derecognized the remaining unamortized interest discount on the Convertible Notes and therefore recorded no non-cash interest expense related to the voluntary prepayment onamortization of the Term Loan was expensed indebt discount during the six months ended February 24, 2018.25, 2023. As a result, the Convertible Notes are now accounted for as a single liability measured at amortized cost. Interest expense, representing the amortization of the debt issuance costs as well as the contractual interest expense is amortized using an effective interest rate of 2.1% over the term of the Convertible Notes. We recorded $1.6 million and $3.1 million of interest expense during the three and six months ended February 25, 2023, respectively.

Refer to Note 15 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for more information related to the earnings per share impact associated with the Convertible Notes and our adoption of ASU-2020-06.

The net cost incurred in connection with the Call Spread Transactions was $11.2 million. These transactions are classified as equity and are not remeasured each reporting period.
18
Table of Contents

Fair Value and Future Maturities
As of February 25, 2023 and August 27, 2022, the fair value of long-term debt, gross, was $636.3 million and $634.2 million, respectively. The fair value of the Convertible Notes was $351.8 million as of February 25, 2023.

Aggregate contractual maturities of debt in future fiscal years are as follows as of February 24, 2018:follows:
(in millions)Amount
Remainder of Fiscal 2023$— 
Fiscal 2024— 
Fiscal 2025300.0 
Fiscal 2026— 
Fiscal 2027— 
Fiscal 2028300.0 
Total Senior Secured Notes and Convertible Notes$600.0 

(In thousands) Amount
2018 $—
2019 —
2020 10,250
2021 15,000
2022 15,000
Thereafter 219,750
Total debt $260,000

Note 10:10.    Employee and Retiree Benefits

Deferred compensation liabilities are as follows:
(in millions)February 25,
2023		August 27,
2022
Non-qualified deferred compensation$7.2 $7.9 
Supplemental executive retirement plan1.4 1.4 
Executive deferred compensation plan1.8 1.4 
Total deferred compensation benefits10.4 10.7 
Less: current portion(1)
2.2 2.6 
Deferred compensation benefits, net of current portion$8.2 $8.1 
(In thousands) February 24,
2018		 August 26,
2017
Non-qualified deferred compensation $15,680
 $16,476
Executive share option plan liability 1,356
 1,498
SERP benefit liability 2,565
 2,534
Executive deferred compensation 451
 447
Officer stock-based compensation 3,292
 1,664
Total deferred compensation 23,344
 22,619
Less current portion (4,437) (3,349)
Long-term deferred compensation $18,907
 $19,270

Postretirement Health Care Benefits
Historically, we provided certain health care and other benefits for retired employees hired before April 1, 2001, who had fulfilled eligibility requirements at age 55 with 15 years of continuous service. During the first quarter of Fiscal 2017, we announced the termination of the remaining postretirement health care benefits to all participants. As of January 1, 2017, postretirement health care benefits were discontinued.


Net periodic postretirement benefit income consisted of the following components:
  Three Months Ended Six Months Ended
(In thousands) February 24,
2018		 February 25,
2017		 February 24,
2018		 February 25,
2017
Interest cost $—
 $—
 $—
 $29
Service cost —
 —
 —
 16
Amortization of prior service benefit —
 (19,672) —
 (40,444)
Amortization of net actuarial loss —
 7,689
 —
 15,648
Net periodic postretirement benefit income $—
 $(11,983) $—
 $(24,751)
         
Payments for postretirement health care $—
 $15
 $—
 $68
Note 11: Shareholders' Equity
Stock-Based Compensation
We have a 2014 Omnibus Equity, Performance Award, and Incentive Compensation Plan (as amended, the "Plan")(1) Included in place as approved by shareholders, which allows us to grant or issue non-qualified stock options, incentive stock options, share awards and other equityaccrued compensation to key employees and to non-employee directors.
On October 18, 2017 and October 11, 2016, the Human Resources Committee of the Board of Directors granted an aggregate of 62,660 and 97,600 shares, respectively, of restricted common stock to our key employees and non-employee directors under the Plan. The value of each restricted stock award is determined using the intrinsic value method, which, in this case, is based on the number of shares granted and the closing price of our common stock on the date of grant.Consolidated Balance Sheets.
Stock-based compensation expense was $2.7 million and $0.7 million during the second quarters of Fiscal 2018 and 2017, respectively. Stock-based compensation expense was $3.6 million and $1.5 million during the first six months of Fiscal 2018 and 2017, respectively. Compensation expense is recognized over the requisite service period of the award.
Dividends
On October 18, 2017, the Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on November 29, 2017 to shareholders of record at the close of business on November 15, 2017.

On December 13, 2017, the Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock, which was paid on January 24, 2018 to shareholders of record at the close of business on January 10, 2018.

On March 14, 2018, the Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock, payable on April 25, 2018 to shareholders of record at the close of business on April 11, 2018.

Share Registration
As a result of the acquisition of Grand Design, we agreed to register the 4,586,555 shares of common stock issued to the Summit Sellers and the RDB Sellers pursuant to the terms of a registration rights agreement. Under the registration rights agreement, we filed a shelf registration statement on January 20, 2017 to register these shares for resale. On April 11, 2017, pursuant to an underwriting agreement dated as of April 5, 2017, by and among the Company, the Summit Sellers and Morgan Stanley & Co., LLC, the Summit Sellers sold 2,293,277 shares of common stock in an underwritten block trade.

Note 12: 11.     Contingent Liabilities and Commitments
Repurchase Commitments
Generally, manufacturers in the RV industrysame industries as us enter into repurchase agreements with lending institutions thatwhich have provided wholesale floorplan financing to dealers. Most dealers' RVsdealers are financed on a "floorplan" basis under which a bank or finance company lends the dealer all, or substantially all, of the purchase price, collateralized by a security interest in the RVsunits purchased.

Our repurchase agreements generally provide that, in the event of default by the dealer on the agreement to pay the lending institution, we will repurchase the financed merchandise. The terms of these agreements, which generally can last up to 1824 months, provide that our liability will be the lesser of remaining principal owed by the dealer to the lending institution, or dealer invoice less periodic reductions based on the time since the date of the original invoice. Our liability cannot exceed 100% of the dealer invoice. In certain instances, we also repurchase inventory from our dealers due to state law or regulatory requirements that govern voluntary or involuntary relationship terminations. Although laws vary from state to state, some states have laws in place that require manufacturers of RVsrecreational vehicles or boats to repurchase current inventory if a dealership exits the business. OurThe total contingent liability on all of our repurchase agreements was approximately $923.2$2,174.3 million and $713.1$1,783.7 million at February 24, 201825, 2023 and August 26, 2017, respectively, with27, 2022, respectively.

Our loss reserve for repurchase commitments contains uncertainties because the increase attributed primarily duecalculation requires management to growth in the Towable segment.

make assumptions and apply judgment regarding a number of factors. Our risk of loss related to these repurchase commitments is significantly reduced by the potential resale value of any products that are subject to repurchase and is spread over numerous dealers and lenders. The aggregate contingent liability related to our repurchase agreements represents all financed dealer inventory at the periodperiod-end reporting date subject to a repurchase agreement, net of the greater of periodic reductions per the agreement or dealer principal payments. Based on thethese repurchase exposure as previously describedagreements and our historical loss experience, we established an associated loss reserve. Our accrued losses on repurchases were $0.9 million as of February 24, 2018 and $0.7 million as of August 26, 2017 and arereserve is established which is included in Accrued expenses - Otherother current liabilities on the Consolidated Balance Sheets. Our repurchase accrual was $1.4 million and $1.4 million at February 25, 2023 and August 27, 2022, respectively. Repurchase risk is affected by the credit worthiness of our dealer network and wenetwork. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to establish the loss reserve for repurchase commitments.

19
Table of Contents
There was no material activity related to repurchase agreements during the three and six months ended February 24, 201825, 2023 and February 25, 2017.26, 2022.


Litigation
We are involved in various legal proceedings thatwhich are considered ordinary and routine litigation incidental to ourthe business, some of which are covered in whole or in part by insurance. While we believe the ultimate disposition of litigation will not have a material adverse effect on our financial position, results of operations or liquidity, there exists the possibility exists 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’sour view of these matters may change in the future. 


Note 13: Income Taxes12. Revenue
We account for income taxes under ASC 740, Income Taxes
All operating revenue is generated from contracts with customers. Our primary revenue source is generated through the sale of manufactured towable units, motorhome units and marine units to our independent dealer network (our customers). The objectivesfollowing table disaggregates revenue by reportable segment and product category:
Three Months EndedSix Months Ended
(in millions)February 25,
2023		February 26,
2022		February 25,
2023		February 26,
2022
Net Revenues
Towable
Fifth Wheel$175.3 $281.1 $363.0 $606.9 
Travel Trailer157.2 356.8 305.5 672.2 
Other(1)
10.0 8.7 21.3 18.5 
Total Towable342.5 646.6 689.8 1,297.6 
Motorhome
Class A183.1 165.0 414.2 360.3 
Class B106.6 167.7 253.5 312.7 
Class C and Other (1)
114.1 84.9 200.3 166.0 
Total Motorhome403.8 417.6 868.0 839.0 
Marine112.9 97.3 244.3 176.6 
Corporate / All Other(2)
7.5 3.2 16.8 7.3 
Consolidated Net Revenues$866.7 $1,164.7 $1,818.9 $2,320.5 
(1)    Relates to parts, accessories, services, and other miscellaneous revenue.
(2)    Relates to specialty vehicle units, parts, accessories, and services.

We do not have material contract assets or liabilities. Allowances for uncollectible receivables are established based on historical collection trends, write-off history, consideration of accountingcurrent conditions and expectations for income taxes are to recognize the amountfuture economic conditions.

Concentration of taxes payable or refundableRisk
No single dealer organization accounted for the current year and deferred tax liabilities and assets for the future tax consequencesmore than 10% of events that have been recognized in our financial statements or tax returns.

Our effective tax rate decreased from 33.4%net revenue for the six months ended February 25, 20172023 or February 26, 2022.

Note 13. Stock-Based Compensation

On December 11, 2018, our shareholders approved the Winnebago Industries, Inc. 2019 Omnibus Incentive Plan ("2019 Plan") as detailed in our Proxy Statement for the 2018 Annual Meeting of Shareholders. The 2019 Plan allows us to 29.5%grant or issue non-qualified stock options, incentive stock options, restricted share units, and other equity compensation to key employees and to non-employee directors. The 2019 Plan replaces the 2014 Omnibus Equity, Performance Award, and Incentive Compensation Plan (as amended, the "2014 Plan"). The number of shares of our common stock that may be awarded and issued under the 2019 Plan is 4.1 million shares, plus the shares subject to any awards outstanding under the 2014 Plan and our predecessor plan, the 2004 Incentive Compensation Plan (the “2004 Plan”), on December 11, 2018 that subsequently expire, are forfeited or canceled, or are settled for cash. Until such time, awards under the 2014 Plan and the 2004 Plan, respectively, that were outstanding on December 11, 2018 will continue to be subject to the terms of the 2014 Plan or 2004 Plan, as applicable. Shares remaining available for future awards under the 2014 Plan were not carried over into the 2019 Plan.

20
Table of Contents
Stock-based compensation expense was $3.5 million and $4.2 million for the three months ended February 25, 2023 and February 26, 2022, respectively; and $6.5 million and $6.9 million for the six months ended February 24, 2018 due primarily to25, 2023 and February 26, 2022, respectively. Compensation expense is recognized over the enactmentrequisite service or performance period of the Tax Act on December 22, 2017. One of the most significant provisions of this legislation was a reduction in the Federal corporate incomeaward, unless accelerated by certain retirement eligibility provisions.

Note 14. Income Taxes

Our effective tax rate from 35% to 21% effective beginning January 1, 2018.

In December 2017, the Securitieswas 24.3% and Exchange Commission issued Staff Accounting Bulletin ("SAB") 118 to provide guidance24.0% for companies that allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts under ASC 740. In accordance with SAB 118, a company must reflect the income tax effect of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, the company must record a provisional estimate in the financial statements.

We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of our deferred tax balances and cause us to revise our estimate in future periods in accordance with SAB 118. These impacts may be material, due to, among other things, further refinement of our calculations, changes in interpretations of the Tax Act, or issuance of additional guidance by the relevant tax authorities.

ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended February 24, 2018, we revalued all deferred25, 2023 and February 26, 2022, respectively, and 24.4% and 23.6% for the six months ended February 25, 2023 and February 26, 2022, respectively. The increase in tax assets and liabilities atrate for the newly enacted Federal corporate US incomethree months ended February 25, 2023 compared to the three months ended February 26, 2022 was driven primarily by the impact of a favorable reserve release in the prior year. The increase in tax rate.  This revaluation asrate for the six months ended February 25, 2023 compared to the six months ended February 26, 2022 was driven primarily by the impact of enactment resulted inboth a non-cash provisional estimate of $1.4 millionnet favorable impact related to income tax expensestock compensation and a corresponding reductionfavorable reserve release in the net deferredprior year.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. Among other provisions, the IRA includes a 15% corporate minimum tax asset.rate applied to certain large corporations and a 1% excise tax on corporate stock repurchases made after December 31, 2022. We do not expect the IRA to have a material impact on our consolidated financial statements.


We file a USU.S. Federal tax return, as well as returns in various international and state jurisdictions. Although certain years are no longer subject to examination by the IRS and various state taxing authorities, net operating loss carryforwards generated in those years may still be adjusted upon examination by the IRS or state taxing authorities. As of February 24, 2018,25, 2023, our Federal returns from Fiscal 20142019 to present are subject to review by the Internal Revenue Service. With limited exceptions, state returns from Fiscal 2018 to present continue to be subject to review by the IRS. With few exceptions, the state returns from Fiscal 2013 to present continue to be subject totaxing jurisdictions. We are currently under review by thecertain U.S. state taxing jurisdictions.

As of February 24, 2018,tax authorities for Fiscal 2019 through Fiscal 2021. We believe we have adequately reserved for our exposure to potential additional payments for uncertain tax positions in our liability for unrecognized tax benefits were $1.7 million including accrued interest and penalties of $0.5 million. If we were to prevail on all unrecognized tax benefits recorded, $1.5 million of the $1.7 million would benefit the overall effective tax rate. It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits as tax expense. We do not believe that there will be a significant change in the total amount of unrecognized tax benefits within the next twelve months.benefits.



Note 14: 15. Earnings Per Share
The following table reflectsIn the calculationfirst quarter of basic and diluted income per share:
  Three Months Ended Six Months Ended
(In thousands, except per share data) February 24,
2018		 February 25,
2017		 February 24,
2018		 February 25,
2017
Income per share - basic        
Net income $22,088
 $15,278
 $40,046
 $27,016
Weighted average shares outstanding 31,654
 31,577
 31,634
 29,707
Net income per share - basic $0.70
 $0.48
 $1.27
 $0.91
         
Income per share - diluted        
Net income $22,088
 $15,278
 $40,046
 $27,016
Weighted average shares outstanding 31,654
 31,577
 31,634
 29,707
Dilutive impact of awards and options outstanding 200
 109
 218
 120
Weighted average shares and potential dilutive shares outstanding 31,854
 31,686
 31,852
 29,827
Net income per share - diluted $0.69
 $0.48
 $1.26
 $0.91

The computation of weighted average shares and potential dilutive shares outstanding excludes the effect of optionsFiscal 2023, we adopted ASU 2020-06. Prior to purchase 72,710 and 61,000 shares of common stock for the three months ended February 24, 2018 and February 25, 2017, respectively, and 72,710 and 61,000 shares of common stock for the six months ended February 24, 2018 and February 25, 2017, respectively. These amounts were not included in the computation of diluted income per share because they are considered anti-dilutive underadoption, we utilized the treasury stock method per ASC 260, Earnings Per Share.

Note 15: Accumulated Other Comprehensive Income (Loss)

Changesfor calculating the dilutive impact of our Convertible Notes. Upon adoption, we prospectively utilized the if-converted method to calculate the dilutive impact of our Convertible Notes. Under the if-converted method, the Convertible Notes are assumed to be converted into common stock at the beginning of the reporting period, and the resulting shares are included in AOCI by component,the denominator of the calculation. In addition, interest charges, net of any income tax were:effects are added back to the numerator of the calculation.

21
Table of Contents
  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)
Basic and diluted earnings per share are calculated as follows:
Three Months EndedSix Months Ended
(in millions, except per share data)February 25,
2023		February 26,
2022		February 25,
2023		February 26,
2022
Earnings per share - basic
Net income$52.8 $91.2 $113.0 $190.8 
Weighted average common shares outstanding30.5 33.1 30.5 33.2 
Basic earnings per common share(1)
$1.73 $2.75 $3.71 $5.75 
Earnings per share - diluted
Net income$52.8 $91.2 $113.0 $190.8 
Interest expense on convertible notes, net of tax1.2 — 2.4 — 
Diluted net income$54.0 $91.2 $115.4 $190.8 
Weighted average common shares outstanding30.5 33.1 30.5 33.2 
Dilutive impact of stock compensation awards0.3 0.4 0.3 0.5 
Dilutive impact of convertible notes4.7 0.4 4.7 0.5 
Weighted average common shares outstanding, assuming dilution35.5 33.9 35.5 34.2 
Anti-dilutive securities excluded from weighted average common shares outstanding, assuming dilution0.2 — 0.1 0.1 
Diluted earnings per common share(1)
$1.52 $2.69 $3.25 $5.58 
(1)    Earnings per share amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.

For both periods presented, the dilutive effect of stock compensation awards was determined using the treasury stock method. Under the treasury stock method, shares associated with certain anti-dilutive securities have been excluded from the diluted weighted average shares outstanding calculation because the exercise of those options would lead to a net reduction in common shares outstanding or anti-dilution.

22
  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)



Reclassifications outTable of AOCI in net periodic benefit costs, net of tax, were:
Contents
    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)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This section
The terms "Winnebago," "we," "us," and "our," unless the context otherwise requires, refer 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 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 DiscussionConsolidated Financial Statements and Analysis and Risk Factorsrelated Notes included in our Annual Report on Form 10‑K for the fiscal year ended August 26, 2017 and inItem 1 of Part II, Item 1AI of this Quarterly Report on Form 10-Q.

Forward-Looking Information

This Quarterly10-Q and our Annual Report on Form 10-K for the fiscal year ended August 27, 2022 (including the information presented therein under Risk Factors), as well as our reports on Forms 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 mergerpublicly available information. All amounts herein are unaudited. All amounts are in millions, except share 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 which 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.per share data, unless otherwise noted.


Overview
Winnebago Industries, Inc. is aone of the leading US manufacturerNorth American manufacturers of RVsrecreation vehicles ("RV"s) and marine products with a proud history of manufacturing RV products for 60 years.diversified portfolio used primarily in leisure travel and outdoor recreational activities. We currently produce a large majority of our motorhomes in vertically integrated manufacturing facilitiesmotorhome units in Iowa and we produce all ofIndiana; our travel trailertowable units in Indiana; and fifth wheel trailersour marine units in Indiana. We are in the process of expanding some motorhome manufacturing to Junction City, Oregon.Indiana and 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

Macroeconomic Events
On November 8, 2016,In February 2022, the United States announced targeted economic sanctions on Russia in response to the military conflict in Ukraine. As described in Part I, Item 1A — Risk Factors, in the Annual Report on Form 10-K for the fiscal year ended August 27, 2022, our business may be sensitive to economic conditions such as the adverse impact of global tensions, which could impact input costs, consumer spending, and fuel prices. As our operations are primarily in North America, we acquired allhave no direct exposure to Russia and Ukraine. However, we are actively monitoring the broader economic impact of the issuedcrisis, especially the potential impact of rising commodity and outstanding capital stock of towable RV manufacturer Grand Designfuel prices, and the potential decreased demand for an aggregate purchase price of $520.5 million. our products.

Supply chain disruptions continue to impact the global economy, resulting in increased volatility and inflationary cost pressures. For example, our production has experienced certain supply shortages, particularly within our Motorhome and Marine segments. If these disruptions continue, or if there are additional disruptions in our supply chain, it could materially or adversely impact our operating results and financial condition. Despite certain supply shortages and inflationary cost input pressures, we continue to operate and adapt to these temporary supply chain disruptions.

Non-GAAP Financial Measures
This acquisition was funded from our cash on hand, $353.0 million from asset-based revolving and term loan credit facilities,MD&A includes financial information prepared in accordance with generally accepted accounting principles ("GAAP"), as well as stock consideration, as is more fully described in Note 2 and Note 9 to the Condensed Consolidated Financial Statements. We purchased Grand Design to significantly expand our existing towable RV product offerings and dealer base and acquire additional talent in the RV industry.

With the acquisition 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. The Towable segment includes all products that are not motorized and are generally towed by another vehicle.

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


We track RV industry conditions using these key statistics to monitor trends and evaluate and understand our performance relative to the overall industry. The rolling twelve months shipment and retail information for 2017 and 2016, as noted below, illustrates that the RV industry continues to grow at the wholesale and retail level. 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%
Combined500,758
420,033
80,725
19.2% 451,620
402,426
49,194
12.2%
(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, as noted in the table below, illustrates continued projected growth of the industry. The outlook for future growth in 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.
  Calendar Year
Wholesale Unit Shipment Forecast per RVIA(1)
 20182017
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
  20182017 201720162015
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.

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, our Board of Directors approved two large facility expansion projects in the fast growing Towable segment. The Grand Design expansion project consisted of two new production facilities. The first was completed in January 2018 and we have seen an increase in units produced during the second quarter of Fiscal 2018. The second building in the Grand Design expansion project is expected to be 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 System

In the second quarter of Fiscal 2015, our Board of Directors approved the strategic initiative of implementing an 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,certain adjusted or non-GAAP financial measures such as the acquisition of the Junction City, Oregon plantEBITDA 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:
  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 projectAdjusted EBITDA. EBITDA 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 Quarter Last Year
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 compared to the three months ended February 25, 2017:
  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 revenues increased $97.8 million or 26.4% in the second quarter of Fiscal 2018 compared to the second quarter of Fiscal 2017. This increase was primarily due to an increase in volume in our Towable segment.


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 costsdefined as a percent 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 to the amendment to our Credit Agreement that occurred during the second quarter of Fiscal 2018. This amendment resulted in a decrease to the interest rate spread by 1.0% on the Term Loan and 0.25% on the ABL. See Analysis of Financial Condition, Liquidity, and Resources and Note 9 for further information.
The overall effective income tax rate for the second quarter of Fiscal 2018 was 27.2% compared to the effective tax rate of 34.1% for the same period in Fiscal 2017. The effective tax rate for the second quarter 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. 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.
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 millionbefore interest expense, provision for income taxes, and diluted income was $0.48 per share. The increase indepreciation and amortization expense. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation and diluted income per share is due primarilyamortization expense, and other pretax adjustments made in order to the Towable segment contributionpresent comparable results from period to net income. In addition, FY2017 results of operations in the second quarter was impacted by the increased benefit of $12.0 million due to the termination of the postretirement health care plan.period.


Non-GAAP Reconciliation
We have provided the followingThese 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 below may differ from similar measures used by other companies.


The following table reconciles net income to consolidated Adjusted EBITDAIncluded in "Results of Operations" below for the three and six months ended February 24, 2018 and February 25, 2017.
  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

We have provided non-GAAP performance measures2023 compared to the comparable prior year period is a reconciliation of EBITDA and Adjusted EBITDA from net income, the nearest GAAP measure. We have included these non-GAAP performance measures as a comparable measure to illustrate items impacting currentthe effect of non-recurring transactions that occurred during the reported periods and to improve comparability of our results which are not expectedfrom period to impact future performance. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense.period. We believe EBITDA and Adjusted EBITDA provideprovides meaningful supplemental information about our operating performance because eachas this measure excludes amounts from net income 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 benefitacquisition-related costs, litigation reserves, contingent consideration fair value adjustment, and non-operating income from terminating the plan and transaction costs related to our acquisition of Grand Design.or loss.


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;peers; (b) to measure operational profitability on a consistent basis;
23
Table of Contents
(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 assessmentstheir assessment of performance and in forecasting and budgeting for our company; and,forecasting; (d) to evaluate potential acquisitions.acquisitions; and (e) to ensure compliance with covenants and restricted activities under the terms of our ABL Credit Facility and outstanding notes, as further described in Note 9 in the Notes to Consolidated Financial Statements included in Item 1 of Part Iof this Quarterly Report on Form 10-Q. We believe these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in the industry.

Industry Trends and Uncertainties
Although supply chain disruptions are moderating, the RV and marine industries continue to experience intermittent supply shortages and shipping delays. We have continued to operate and adapt to these supply chain disruptions in order to meet existing demand in the current fiscal year.

In the first quarter of Fiscal 2023, Mercedes-Benz AG issued a global recall related to an electronic parking brake defect affecting 2019 through 2022 Sprinter chassis. As a result, all retail sales and wholesale shipments of our industry.products built on this chassis were temporarily suspended until a recall remedy was implemented. During the second quarter of Fiscal 2023, the recall remedy was implemented in cooperation with Mercedes-Benz AG. This recall impacted our Motorhome segment net sales, profitability, and working capital for the six months ended February 25, 2023.


Segment In our Towable and Motorhome segments, we are working closely with dealer partners to align field inventory levels to meet end consumer demand. We believe field inventory for our Marine segment is at an acceptable level, but we remain opportunistic due to market expansion opportunities and new product offerings. We continue to produce and ship in accordance with dealer demand as evidenced and requested by dealer orders.

RV industry retail sales remain soft compared to high prior year levels; however, we still believe in the long-term health of consumer demand for RV and marine products. More people are pursuing outdoor activities, household penetration of RVs is increasing, and campers are more diverse than ever. According to statistics published by Kampgrounds of America, Inc., the number of households in North America that own an RV increased by approximately 4.4 million, or 63%, between 2019 and 2021. Despite these developments, current macroeconomic trends such as inflation, rising interest rates, and global political tensions contribute to reduced short-term consumer demand for large discretionary products such as RVs and Marine products, which could in turn impact our future revenue and profits.

24
Table of Contents
Results of Operations - Three Months Ended February 25, 2023 Compared to the Three Months Ended February 26, 2022

Consolidated Performance Summary
The following is an analysis of key changes in our Motorized segmentkey items included in the Consolidated Statements of Income for the three months ended February 24, 201825, 2023 compared to the three months ended February 25, 2017:26, 2022:
Three Months Ended
($ in millions, except per share data)February 25, 2023
% of Revenues(1)
February 26, 2022
% of Revenues(1)
$ Change(1)
% Change(1)
Net revenues$866.7 100.0 %$1,164.7 100.0 %$(298.0)(25.6)%
Cost of goods sold719.9 83.1 %948.1 81.4 %(228.2)(24.1)%
Gross profit146.8 16.9 %216.6 18.6 %(69.8)(32.2)%
Selling, general, and administrative expenses66.2 7.6 %71.8 6.2 %(5.6)(7.8)%
Amortization3.8 0.4 %8.0 0.7 %(4.2)(52.4)%
Total operating expenses70.0 8.1 %79.8 6.9 %(9.8)(12.3)%
Operating income76.8 8.9 %136.8 11.7 %(60.0)(43.9)%
Interest expense, net5.3 0.6 %10.3 0.9 %(5.0)(48.3)%
Non-operating loss1.8 0.2 %6.5 0.6 %(4.8)(73.7)%
Income before income taxes69.7 8.0 %120.0 10.3 %(50.2)(41.9)%
Provision for income taxes16.9 2.0 %28.8 2.5 %(11.8)(41.1)%
Net income$52.8 6.1 %$91.2 7.8 %$(38.4)(42.1)%
Diluted earnings per share$1.52 $2.69 $(1.17)(43.5)%
Diluted weighted average shares outstanding35.5 33.9 1.6 4.6 %
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)%
(1) Percentages    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding differences.rounding.
(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 netNet revenues increased $3.1 million or 1.5% in the second quarter of Fiscal 2018 as compared to the second quarter of Fiscal 2017. This wasdecreased primarily due to an increaselower unit sales related to retail market conditions, partially offset by carryover price increases in the amountall segments.

Gross profit as a percentage of units sold.revenue decreased primarily from higher material and input costs, deleverage and productivity loss from supply disruption, partially offset by carryover price increases in all segments.


Motorized unit deliveries increasedOperating expenses decreased primarily due to lower incentive-based compensation related to operating performance, and lower amortization related to Barletta intangible assets, partially offset by 4.9% in the quarter. The unit growth we have generated has been in our Class B and entry-level Class A products, which havestrategic investments.

Non-operating loss decreased due to a lower ASP. Additionally, we have seen an increase in the backlog volumes by 42.5% in the second quarter of Fiscal 2018 due largely to the introduction of new products. Dealer inventory declined as a result of the strong demand for our new product introductions as demonstrated by the increase in backlog.

Motorized segment Adjusted EBITDA decreased $6.8 million or 62.7%. This reduction was due to costs associated with ongoing expensescontingent consideration fair value adjustment related to the ramp-upearnout from the acquisition of our West Coast production facilityBarletta.

Our effective tax rate increased primarily from the impact of a favorable reserve release in the prior year.

25
Table of Contents
Non-GAAP Reconciliation
The following table reconciles net income to consolidated EBITDA and costs associated with new product start-up.Adjusted EBITDA for the three months ended February 25, 2023 and February 26, 2022:

Three Months Ended
(in millions)February 25, 2023February 26, 2022
Net income$52.8 $91.2 
Interest expense, net5.3 10.3 
Provision for income taxes16.9 28.8 
Depreciation6.7 5.5 
Amortization3.8 8.0 
EBITDA85.5 143.8 
Acquisition-related costs1.1 0.4 
Contingent consideration fair value adjustment1.6 6.5 
Non-operating loss0.2 — 
Adjusted EBITDA$88.4 $150.7 

Reportable Segment Performance Summary
Towable
The following is an analysis of key changes in our Towable segment for the three months ended February 24, 201825, 2023 compared to the three months ended February 25, 2017:26, 2022:
Three Months Ended
(in millions, except ASP and units)February 25, 2023
% of Revenues(2)
February 26, 2022
% of Revenues(2)
$ Change(2)
% Change(2)
Net revenues$342.5 $646.6 $(304.1)(47.0)%
Adjusted EBITDA39.3 11.5 %100.6 15.6 %(61.3)(60.9)%
Average Selling Price ("ASP")(1)
$46,218 $41,917 $4,301 10.3 %
Three Months Ended
Unit deliveriesFebruary 25, 2023
Product Mix(3)
February 26, 2022
Product Mix(3)
Unit Change% Change
Travel trailer5,023 67.5 %10,764 70.4 %(5,741)(53.3)%
Fifth wheel2,413 32.5 %4,530 29.6 %(2,117)(46.7)%
Total towables7,436 100.0 %15,294 100.0 %(7,858)(51.4)%
Towable         
(In thousands, except units) Three Months Ended
  Feb 24,
2018
% of
Revenue
 Feb 25,
2017
% of
Revenue
 Increase
%
Change
Net revenues $266,358
  $171,574
  $94,784
55.2 %
Adjusted EBITDA 35,338
13.3% 18,233
10.6% 17,105
93.8 %
          
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)%
          
     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)    ASP excludes off-invoice dealer incentives.
(1)(2)    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.
(3)    Percentages may not add due to rounding differences.
(2) We include
Net revenues decreased primarily due to a decline in unit volume associated with retail market conditions.

Adjusted EBITDA decreased primarily due to lower revenues associated with volume declines related to retail market conditions and higher discounts and allowances compared to prior year.

26
Table of Contents

Motorhome
The following is an analysis of key changes in our Motorhome segment for the three months ended February 25, 2023 compared to the three months ended February 26, 2022:
Three Months Ended
(in millions, except ASP and units)February 25, 2023
% of Revenues(2)
February 26, 2022
% of Revenues(2)
$ Change(2)
% Change(2)
Net revenues$403.8 $417.6 $(13.7)(3.3)%
Adjusted EBITDA42.5 10.5 %46.1 11.0 %(3.6)(7.8)%
ASP(1)
$186,896 $146,289 $40,607 27.8 %
Three Months Ended
Unit deliveriesFebruary 25, 2023
Product Mix(3)
February 26, 2022
Product Mix(3)
Unit Change% Change
Class A517 23.9 %588 20.8 %(71)(12.1)%
Class B893 41.2 %1,641 58.0 %(748)(45.6)%
Class C755 34.9 %602 21.3 %153 25.4 %
Total motorhomes2,165 100.0 %2,831 100.0 %(666)(23.5)%
(1)    ASP excludes off-invoice dealer incentives.
(2)    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.
(3)    Percentages may not add due to rounding differences.

Net revenues decreased primarily due to volume decline, partially offset by carryover price increases and favorable product mix.

Adjusted EBITDA decreased primarily due to lower revenues associated with volume declines, higher material and input costs, and productivity and supply chain challenges, partially offset by carryover price increases.

Marine
The following is an analysis of key changes in our Marine segment for the three months ended February 25, 2023 compared to the three months ended February 26, 2022:
Three Months Ended
(in millions, except ASP and units)February 25, 2023
% of Revenues(2)
February 26, 2022
% of Revenues(2)
$ Change(2)
% Change(2)
Net revenues$112.9 $97.3 $15.6 16.1 %
Adjusted EBITDA14.4 12.8 %13.0 13.3 %1.5 11.4 %
ASP(1)
$89,547 $73,492 $16,055 21.8 %
Three Months Ended
Unit deliveriesFebruary 25, 2023February 26, 2022Unit Change% Change
Boats1,266 1,322 (56)(4.2)%
(1)    ASP excludes off-invoice dealer incentives.
(2)    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.

Net revenues increased primarily due to carryover price increases.

Adjusted EBITDA increased primarily due to increased revenue, partially offset by higher material and input costs.


27
Table of Contents
Results of Operations - Six Months Ended February 25, 2023 Compared to the Six Months Ended February 26, 2022

Consolidated Performance Summary
The following is an analysis of changes in key items included in the Consolidated Statements of Income for the six months ended February 25, 2023 compared to the six months ended February 26, 2022:
Six Months Ended
($ in millions, except per share data)February 25, 2023
% of Revenues(1)
February 26, 2022
% of Revenues(1)
$ Change(1)
% Change(1)
Net revenues$1,818.9 100.0 %$2,320.5 100.0 %$(501.5)(21.6)%
Cost of goods sold1,511.7 83.1 %1,874.5 80.8 %(362.7)(19.3)%
Gross profit307.2 16.9 %446.0 19.2 %(138.8)(31.1)%
Selling, general, and administrative expenses136.9 7.5 %146.7 6.3 %(9.8)(6.7)%
Amortization7.6 0.4 %16.2 0.7 %(8.6)(52.9)%
Total operating expenses144.5 7.9 %162.9 7.0 %(18.4)(11.3)%
Operating income162.7 8.9 %283.1 12.2 %(120.5)(42.6)%
Interest expense, net11.2 0.6 %20.6 0.9 %(9.3)(45.5)%
Non-operating loss2.1 0.1 %12.8 0.6 %(10.9)(84.4)%
Income before income taxes149.4 8.2 %249.7 10.8 %(100.3)(40.2)%
Provision for income taxes36.4 2.0 %58.9 2.5 %(22.5)(38.1)%
Net income$113.0 6.2 %$190.8 8.2 %$(77.8)(40.8)%
Diluted earnings per share$3.25 $5.58 $(2.33)(41.8)%
Diluted weighted average shares outstanding35.5 34.2 1.4 4.0 %
(1)    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding.

Net revenues decreased primarily due to lower unit sales related to retail market conditions, partially offset by carryover price increases in all segments.

Gross profit as a percentage of revenue decreased primarily due to higher material and input costs, deleverage and productivity loss from supply disruption, partially offset by carryover price increases in all segments.

Operating expenses decreased primarily due to lower incentive-based compensation related to operating performance, lower amortization related to Barletta intangible assets, and lower legal settlement and transaction costs, partially offset by strategic investments.

Non-operating loss decreased due to a lower contingent consideration fair value adjustment related to the earnout from the acquisition of Barletta.

Our effective tax rate increased primarily from the impact of both a net favorable impact related to stock compensation and a favorable reserve release in the prior year.
28
Table of Contents
Non-GAAP Reconciliation
The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the six months ended February 25, 2023 and February 26, 2022:
Six Months Ended
(in millions)February 25, 2023February 26, 2022
Net income$113.0 $190.8 
Interest expense, net11.2 20.6 
Provision for income taxes36.4 58.9 
Depreciation13.3 10.8 
Amortization7.6 16.2 
EBITDA181.5 297.3 
Acquisition-related costs1.7 3.8 
Litigation reserves— 4.0 
Contingent consideration fair value adjustment2.0 12.9 
Non-operating loss0.2 — 
Adjusted EBITDA$185.4 $318.0 

29
Table of Contents
Reportable Segment Performance Summary
Towable
The following is an analysis of key changes in our Towable segment for the six months ended February 25, 2023 compared to the six months ended February 26, 2022:
Six Months Ended
(in millions, except ASP and units)February 25, 2023
% of Revenues(2)
February 26, 2022
% of Revenues(2)
$ Change(2)
% Change(2)
Net revenues$689.8 $1,297.6 $(607.9)(46.8)%
Adjusted EBITDA75.6 11.0 %212.7 16.4 %(137.1)(64.5)%
ASP(1)
$47,179 $40,529 $6,650 16.4 %
Six Months Ended
Unit deliveriesFebruary 25, 2023
Product Mix(3)
February 26, 2022
Product Mix(3)
Unit Change% Change
Travel trailer9,673 66.1 %21,907 69.1 %(12,234)(55.8)%
Fifth wheel4,954 33.9 %9,818 30.9 %(4,864)(49.5)%
Total towables14,627 100.0 %31,725 100.0 %(17,098)(53.9)%
February 25, 2023February 26, 2022
Change(2)
% Change(2)
Backlog(4)
Units5,841 47,438 (41,597)(87.7)%
Dollars$278.2 $1,873.2 $(1,595.0)(85.1)%
Dealer Inventory
Units22,354 21,738 616 2.8 %
(1)    ASP excludes off-invoice dealer incentives.
(2)    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.
(3)    Percentages may not add due to rounding differences.
(4)    Our backlog includes all accepted orders from dealers which generally have been requested to generally be shipped within the next six months. Orders in backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty and,penalty; therefore, backlog may not necessarily be an accurate measure of future sales.


Towable netNet 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 wasdecreased primarily due to a mix change driven bydecline in unit volume.

Adjusted EBITDA decreased primarily due to lower revenues associated with 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 expensesdeclines 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 wasretail market conditions and higher material and input costs, partially offset in Fiscal 2017by $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.carryover price increases.
Interest expense increased $3.4 million in the first six months of Fiscal 2018
Backlog decreased compared to the first six monthsprior year when dealers were replenishing inventories.
30
Table 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
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 Adjusted EBITDA for the six months ended February 24, 2018 and February 25, 2017.
Contents
  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 OperationsMotorhome
The following is an analysis of key changes in our Motorized segment:Motorhome segment for the six months ended February 25, 2023 compared to the six months ended February 26, 2022:
Six Months Ended
(in millions, except ASP and units)February 25, 2023
% of Revenues(2)
February 26, 2022
% of Revenues(2)
$ Change(2)
% Change(2)
Net revenues$868.0 $839.0 $29.0 3.5 %
Adjusted EBITDA92.8 10.7 %96.2 11.5 %(3.4)(3.6)%
ASP(1)
$184,476 $149,366 $35,110 23.5 %
Six Months Ended
Unit deliveriesFebruary 25, 2023
Product Mix(3)
February 26, 2022
Product Mix(3)
Unit Change% Change
Class A1,210 25.9 %1,332 23.9 %(122)(9.2)%
Class B2,215 47.4 %3,088 55.5 %(873)(28.3)%
Class C1,248 26.7 %1,146 20.6 %102 8.9 %
Total motorhomes4,673 100.0 %5,566 100.0 %(893)(16.0)%
February 25, 2023February 26, 2022
Change(2)
% Change(2)
Backlog(4)
Units5,341 17,255 (11,914)(69.0)%
Dollars$872.7 $2,214.5 $(1,341.8)(60.6)%
Dealer Inventory
Units4,800 3,099 1,701 54.9 %
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)    ASP excludes off-invoice dealer incentives.
(1)(2)    Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.
(3)    Percentages may not add due to rounding differences.
(2) We include in our(4)    Our backlog includes all accepted orders from dealers which generally have been requested to generally be shipped within the next six months. Orders in backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty and,penalty; therefore, backlog may not necessarily be an accurate measure of future sales.


Motorized netNet revenues decreased $1.7 million or 0.4% in the first six months of Fiscal 2018 as compared to the first six months of Fiscal 2017. This wasincreased primarily due to lower ASP on the mix of units sold.carryover price increases, partially offset by unit volume decline.


Motorized unit deliveries grew by 3.0% 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 relatedhigher material and input costs, productivity and supply chain challenges, partially offset by higher revenues.

Backlog decreased due to the ramp upnormalizing levels of our West Coast production facility and costs associated with new product start-up.dealer inventories.

31
Table of Contents

Marine
The following is an analysis of key changes in our Towable segment:Marine segment for the six months ended February 25, 2023 compared to the six months ended February 26, 2022:
Six Months Ended
(in millions, except ASP and units)February 25, 2023
% of Revenues(2)
February 26, 2022
% of Revenues(2)
$ Change(2)
% Change(2)
Net revenues$244.3 $176.6 $67.7 38.3 %
Adjusted EBITDA32.9 13.5 %23.5 13.3 %9.4 39.9 %
ASP(1)
$83,478 $71,849 $11,629 16.2 %
Six Months Ended
Unit deliveriesFebruary 25, 2023February 26, 2022Unit Change% Change
Boats2,966 2,457 509 20.7 %
February 25, 2023February 26, 2022
Change(2)
% Change(2)
Backlog(3)
Units2,511 3,059 (548)(17.9)%
Dollars$238.5 $277.9 $(39.3)(14.1)%
Dealer Inventory
Units4,016 2,062 1,954 94.8 %
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)    ASP excludes off-invoice dealer incentives.
(1) Percentages(2)    Amounts are calculated based on unrounded numbers and therefore may not add due to rounding differences.recalculate using the rounded numbers provided.
(2) We include in our(3)    Our backlog includes all accepted orders from dealers which generally have been requested to generally be shipped within the next six months. Orders in backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty and,penalty; therefore, backlog may not necessarily be an accurate measure of future sales.


Towable netNet revenues increased $304.3 million in the first six monthsof Fiscal 2018 as compared to the first six months of Fiscal 2017. This was primarily due to the fiscal year 2017 acquisition of Grand Design in November 2016unit growth and organic volume growth.carryover price increases.


Towable unit deliveries grew by 131.1% in the first six months of Fiscal 2018Adjusted EBITDA increased primarily due to the acquisition of Grand Designincreased revenue, partially offset by higher material and alsoinput costs.

Backlog decreased due to Towable growth in excesscontinued replenishment 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.dealer inventories.


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 Flows
The following table summarizes our cash flows from operations:
Six Months Ended
(in millions)February 25,
2023		February 26,
2022
Total cash provided by (used in):
Operating activities$16.8 $46.1 
Investing activities(48.6)(271.8)
Financing activities(21.1)(74.1)
Net decrease in cash and cash equivalents$(52.9)$(299.8)
Operating Activities
During the six months ended February 25, 2023, cash provided by operating activities was $16.8 million compared to $46.1 million in the same period last year. The decrease is primarily driven by lower profitability, partially offset by favorable changes in operating assets and liabilities. The favorable impact of operating assets and liabilities is primarily due to changes in accounts receivable due to timing of invoicing/collections and changes in inventory due to elevated purchases in Fiscal 2022 to support customer demand, partially offset by a decrease in accounts payable due to timing of payments and supply chain production slowdowns. Working
32
Table of Contents
capital and cash equivalentsprovided by operating activities were negatively impacted by the Mercedes-Benz AG chassis recall as well as broader supply chain constraints.

Investing Activities
Cash used in investing activities decreased $8.5primarily due to our acquisition of Barletta during the first quarter of Fiscal 2022.

Financing Activities
Cash used in financing activities decreased primarily due to $4.9 million during of stock repurchases in the first six months of Fiscal 2018 and totaled $27.42023 compared to $64.2 million as of February 24, 2018. Significant liquidity events that occurred during in the first six months of Fiscal 2018 were:2022.

Generated net incomeDebt and Capital
We maintain a $350.0 million asset-based revolving credit facility ("ABL Credit Facility") with a maturity date of $40.0July 15, 2027 subject to certain factors which may accelerate the maturity date. As of February 25, 2023, we had no borrowings against the ABL Credit Facility.

As of February 25, 2023, we had $229.3 million
in cash and cash equivalents and $350.0 million in unused ABL Credit Facility. Our cash and cash equivalent balances consist of high quality, short-term money market instruments.
Total borrowings at February 24, 2018 were $279.7 million,
We believe cash flow from operations, existing lines of credit, and access to debt and capital markets will be sufficient to meet our current liquidity needs, and we have an additional $105.3 million available to borrow under the revolving credit agreement, subject to sufficient borrowing base
Net repayment of $4.3 million of debt ($24.0 million repayments less $19.7 million borrowings)
Increasecommitted liquidity and cash reserves in payables of $32.9 million partially offset by increases in receivables, prepaid and other assets of $31.1 million
Increase in inventory of $36.4 million

As described in Note 9, our Credit Agreement at February 24, 2018 consisted of a $300.0 million Term Loan and a $125.0 million ABL with JPMorgan Chase.

We filed a registration statement on Form S-3, which was declared effective by the SEC on April 25, 2016. Subject to market conditions, we have the ability to offer and sell up to $35.0 millionexcess of our common stock in one or more offerings pursuantanticipated funding requirements. We evaluate the financial stability of the counterparties for the Convertible Notes, the Senior Secured Notes, and the ABL Credit Facility, and will continue 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.monitor counterparty risk on an on-going basis.


Other Financial Measures
Working capital at February 24, 201825, 2023 and August 26, 201727, 2022 was $177.1$654.4 million and $147.0$571.7 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 AgreementFacility to 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 repurchasesRepurchases
We repurchase our common stock and pay dividends pursuant to programs approved by our Board of $1.5 millionDirectors. 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 August 17, 2022, our Board of Directors authorized a new share repurchase program in the firstamount of $350.0 million with no time restriction on the authorization, which took effect immediately and replaced the prior program. In the six months ended February 25, 2023, we repurchased 86,727 shares at a cost of Fiscal 2018 were$4.9 million to satisfy tax obligations on employee equity awards as they vested. We continually evaluate if share repurchases reflect a prudent use of our capital and, subject to compliance with our ABL Credit Agreement,Facility and Senior Secured Notes, we may purchase shares in the remainderfuture. As of Fiscal 2018. At February 24, 2018,25, 2023, we have $71.0$350.0 million remaining on our boardBoard approved repurchase authorization. See Part II, Item 2

On March 15, 2023, our Board of this Form 10-Q.Directors approved a quarterly cash dividend of $0.27 per share payable on April 26, 2023, to common stockholders of record at the close of business on April 12, 2023.
Operating Activities
Cash provided by operating activities was $15.0 million for the six months ended February 24, 2018 compared to $5.1 million 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 growthContractual 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 placeThere has been no material change in our Towable segment. Incontractual obligations since the six months ended February 25, 2017, cash used in investing activitiesend 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
We describe our significant accounting policies in Note 1: Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included inFiscal 2022. See our Annual Report on Form 10-K for the fiscal year ended August 26, 2017. 27, 2022 for additional information regarding our contractual obligations and commercial commitments.

Critical Accounting Policies
We discussdescribe our critical accounting estimatespolicies in Note 1 in the Notes to Consolidated Financial Statements included in Item 7, Management's Discussion and Analysis8 of Financial Condition and ResultsPart II of Operations, in our Annual Report on Form 10-K for the fiscal year ended August 26, 2017.27, 2022. We refer to these disclosures for a detailed explanationdiscuss our critical accounting estimates in Item 7 of Part II of our significant accounting policies and critical accounting estimates.Annual Report on Form 10-K for the fiscal year ended August 27, 2022. There hashave been no significant change inmaterial changes to our significantcritical accounting policies or critical accounting estimates since the end of Fiscal 2017, except as disclosed in Note 1 to the2022.

Recently Issued Accounting Pronouncements
There have been no new accounting pronouncements issued but not yet adopted or effective that we believe will have a significant impact on our consolidated financial statements.


33
Table of Contents
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 of Part I of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022, and Item 1A of 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:
•General economic uncertainty in key markets and a worsening of domestic and global economic conditions or low levels of economic growth.
•Uncertainty surrounding the COVID-19 pandemic.
•Availability of financing for RV and marine dealers.
•Ability to innovate and commercialize new products.
•Ability to manage our inventory to meet demand.
•Competition and new product introductions by competitors.
•Risk related to cyclicality and seasonality of our business.
•Risk related to independent dealers.
•Significant increase in repurchase obligations.
•Business or production disruptions.
•Inadequate inventory and distribution channel management.
•Ability to retain relationships with our suppliers and obtain components.
•Increased material and component costs, including availability and price of fuel and other raw materials.
•Ability to integrate mergers and acquisitions.
•Ability to attract and retain qualified personnel and changes in market compensation rates.
•Exposure to warranty claims.
•Ability to protect our information technology systems from data security, cyberattacks, and network disruption risks and the ability to successfully upgrade and evolve our information technology systems.
•Ability to retain brand reputation and related exposure to product liability claims.
•Governmental regulation, including for climate change.
•Impairment of goodwill and trade names.
•Risks related to our Convertible and Senior Secured Notes, including our ability to satisfy our obligations under these notes.
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

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.

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, we had $260.0 million outstanding underThe ABL Credit Facility, which is 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 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 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 point increase in interest rates on the Term Loan would increase 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, a 1.0% decrease could only decrease to the floor for the variable rate, resulting in a decrease in interest expense (after consideration of the interest rate swap) for 2018 of $0.5 million.  As discussed in 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.

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 millionremains undrawn 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.25, 2023.


Item 4. Controls and 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 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(as defined in Rule 13a-15(e) under the Securities Exchange Act Rule 13a-15(b)of 1934, as amended (the "Exchange Act")), 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.


There were no changes in our internal control over financial reporting that occurred during the second quarter of Fiscal 20182023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34
Table of Contents
PART IIII. OTHER INFORMATION


Item 1. Legal Proceedings
We are involved in variousFor a description of our legal proceedings, that are ordinary litigation incidental to our business, some of which are covered in whole or in part by insurance. While we believe the ultimate disposition of litigation will not have material adverse effect 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 changesee Note 11 in the future.Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.


Item 1A. Risk 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 10K10-K for the fiscal year ended August 26, 2017.27, 2022, except for the risk factor updated below:


For some of the components used in production, we depend on a small group of suppliers and the loss of any of these suppliers could affect our ability to obtain components timely or at competitive prices, which would decrease our results of operations, financial condition, and cash flows.

Most of our RV and marine components are readily available from numerous sources. However, a few of our components are produced by a small group of suppliers. In the case of motorhome chassis, Mercedes-Benz (USA and Canada), Stellantis N.V., Freightliner Trucks, Ford Motor Company, and Spartan RV Chassis are our major suppliers. Our relationship with our chassis suppliers is similar to our other supplier relationships in that no specific contractual commitments are engaged in by either party. This means that we do not have minimum purchase requirements, and our chassis suppliers do not have minimum supply requirements. Our chassis suppliers also supply to our competitors. Historically, chassis suppliers resort to an industry-wide allocation system during periods when supply is restricted. These allocations have been based on the volume of chassis previously purchased, which could mean our larger competitors could receive more chassis in a time of scarcity. Sales of motorhomes rely on chassis supply and are affected by shortages or instability from time to time. For example, in the first quarter of Fiscal 2023, the Mercedes-Benz Sprinter chassis became subject to a recall notice, which temporarily suspended all retail sales and wholesale shipments of our products built on this chassis until a recall remedy was implemented. While the remedy was implemented in the second quarter of Fiscal 2023 in cooperation with Mercedes-Benz AG, we believe the recall materially adversely affected our net revenues and earnings for the six months ended February 25, 2023. Furthermore, decisions by our suppliers to decrease production, production delays or work stoppages by the employees of such suppliers, or price increases could have a material adverse effect on our ability to produce motorhomes and ultimately, on our results of operations, financial condition, and cash flows. In Fiscal 2022, one of our suppliers individually accounted for approximately 11% of our consolidated raw material purchases.


Item 2. Unregistered Sales of Equity Securities and Use of 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 considerationduring each fiscal month of up to $60 million. There is no time restriction on this authorization. During the second quarter of Fiscal 2018, 2,1172023 are as follows:
Period
Total Number of Shares Purchased(1,2)
Average Price Paid per Share
Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1,2)
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(3) (in millions)
11/27/22 - 12/31/227,104 $53.11 — $350.0 
1/1/23 - 1/28/23— — — 350.0 
1/29/23 - 2/25/23236 66.70 — 350.0 
Total7,340 $53.55 — $350.0 
(1)    Number of shares were repurchased underin the authorization, at an aggregate costtable are shown in whole numbers.
(2)    Shares not purchased as part of approximately $0.1 million. All of these sharesa 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,(3)    Pursuant to a $350.0 million share repurchase program authorized by our Board of Directors authorized a share repurchase program in the amount of $70.0 million.on August 17, 2022. There is no time restriction on thisthe 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 of the second quarter 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 - 12/30/17926
 $56.65
 926
 $71,051,000
 
12/31/17 - 01/27/181,191
 $52.40
 1,191
 $70,989,000
 
01/28/18 - 02/24/18—
 $—
 —
 $70,989,000
 
Total2,117
 $54.26
 2,117
 $70,989,000
 

Our Credit AgreementSenior Secured Notes, as defined in Note 9 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, contains occurrence based 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.

35
Table of Contents
Item 6.    Exhibits
3a.3.1

3b.
Amended By-Laws of the Registrant previously filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended May 27, 2000 (Commission File Number 001-06403) and incorporated by reference herein.

10a.
Executive Change of Control Agreement between Winnebago Industries, Inc. and Bryan L. Hughes previously filed withfrom Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated December 22, 2017 (Commission File Number 001-06403) and incorporatedJanuary 1, 2022).
3.2

from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K dated January 1, 2022).
4.1
4.2
4.3
4.4
31.1
(filed herewith).
31.2
(filed herewith).
32.1
(furnished herewith).
32.2
101.INS
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (furnished herewith).
101.SCH
101.SCH*Inline XBRL Taxonomy Extension Schema Document (furnished herewith).
101.CALInline XBRL Taxonomy Calculation Linkbase Document (furnished herewith).
101.CAL*101.DEFInline XBRL Taxonomy Extension CalculationDefinition Linkbase Document (furnished herewith).
101.LAB
101.DEF*Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document (furnished herewith).
101.PRE
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith).
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) (furnished herewith).
*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
36
Table 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 pursuant to Rule 406T of Regulation S-T.Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WINNEBAGO INDUSTRIES, INC.
Date:WINNEBAGO INDUSTRIES, INC.
Date:March 22, 20182023ByBy:/s/ Michael J. Happe
Michael J. Happe
Chief Executive Officer, President
(Principal Executive Officer)
Date:March 22, 20182023ByBy:/s/ Bryan L. Hughes
Bryan L. Hughes
Vice President, Chief Financial Officer and Senior Vice President
(Principal Financial and Accounting Officer)



31
37