UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



	FORM 10-Q



(Mark One)

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

For the quarterly period ended May 25, 2019


	~~For the quarterly period ended February 24, 2018~~
	or

o	TRANSITION 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



WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)



Iowa		42-0802678
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

P. O. Box 152, Forest City, Iowa		50436
(Address of principal executive offices)		(Zip Code)

	(641) 585-3535
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



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

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 xNo 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 xNo 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

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 oNo x

The number of shares of common stock, par value $0.50 per share, outstanding ~~March 21, 2018~~on June 14, 2019 was ~~31,659,393.~~

31,618,011.

Winnebago Industries, Inc.

Table of Contents



~~Glossary~~	1

PART II.	FINANCIAL ~~INFORMATION~~INFORMATION.	23
Item 1.	Condensed Consolidated Financial ~~Statements (Unaudited)~~Statements.	3
	Condensed Consolidated Statements of Income and Comprehensive Income	23
	Condensed Consolidated Balance Sheets	34
	Condensed Consolidated Statements of Cash Flows	45
	Condensed Consolidated Statements of Changes in Stockholders' ~~Statement of~~ Equity	56
	Notes to Condensed Consolidated Financial Statements	68
	~~Note 1: Basis of Presentation~~	6
	~~Note 2: Business Combination, Goodwill and Other Intangible Assets~~	7
	~~Note 3: Business Segments~~	10
	~~Note 4: Concentration Risk~~	11
	~~Note 5: Derivatives, Investments and Fair Value Measurements~~	11
	~~Note 6: Inventories~~	12
	~~Note 7: Property, Plant and Equipment~~	13
	~~Note 8: Warranty~~	13
	~~Note 9: Long-Term Debt~~	13
	~~Note 10: Employee and Retiree Benefits~~	14
	~~Note 11: Shareholders' Equity~~	15
	~~Note 12: Contingent Liabilities and Commitments~~	15
	~~Note 13: Income Taxes~~	16
	~~Note 14: Earnings Per Share~~	17
	~~Note 15: Accumulated Other Comprehensive Income (Loss)~~	17
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.	1821
Item 3.	Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.	2831
Item 4.	Controls and ~~Procedures~~Procedures.	2932

PART IIII.	OTHER ~~INFORMATION~~INFORMATION.	33
Item 1.	Legal ~~Proceedings~~Proceedings.	2933
Item 1A1A.	Risk ~~Factors~~Factors.	2933
Item 2.	Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.	2933
Item 6.	~~Exhibits~~	30Exhibits.	34

SIGNATURES		3135

~~Glossary~~

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



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

PART I. FINANCIAL ~~INFORMATION~~INFORMATION.

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

Winnebago Industries, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Three Months Ended					Six Months Ended						Three Months Ended						Nine Months Ended
(In thousands, except per share data)	February 24, 2018		February 25, 2017			February 24, 2018			February 25, 2017
(in thousands, except per share data)												May 25, 2019			May 26, 2018			May 25, 2019			May 26, 2018
Net revenues	$	468,359	$	370,510		$	918,380		$	615,818		$	528,940		$	562,261		$	1,455,278		$	1,480,641
Cost of goods sold	400,698		321,194			787,888			537,627			442,356			476,747			1,231,269			1,264,635
Gross profit	67,661		49,316			130,492			78,191			86,584			85,514			224,009			216,006
SG&A:
Selling	12,209		9,553			24,343			15,423
General and administrative	18,268		12,540			35,684			22,446
Postretirement health care benefit income	—		(11,983		)	—			(24,796		)
Transaction costs	—		463			50			5,925
Selling, general, and administrative expenses												35,332			35,304			106,303			95,381
Amortization of intangible assets	1,933		10,367			3,988			12,418			2,278			1,933			7,204			5,921
Total SG&A	32,410		20,940			64,065			31,416
Total operating expenses												37,610			37,237			113,507			101,302
Operating income	35,251		28,376			66,427			46,775			48,974			48,277			110,502			114,704
Interest expense	4,918		5,178			9,699			6,306			4,446			4,172			13,293			13,871
Non-operating expense (income)	11		4			(112		)	(83		)
Non-operating income												(360		)	(100		)	(1,330		)	(212		)
Income before income taxes	30,322		23,194			56,840			40,552			44,888			44,205			98,539			101,045
Provision for income taxes	8,234		7,916			16,794			13,536			8,717			11,684			18,609			28,478
Net income	$	22,088	$	15,278		$	40,046		$	27,016		$	36,171		$	32,521		$	79,930		$	72,567

Income per common share:
Basic	$	0.70	$	0.48		$	1.27		$	0.91		$	1.15		$	1.03		$	2.53		$	2.30
Diluted	$	0.69	$	0.48		$	1.26		$	0.91		$	1.14		$	1.02		$	2.52		$	2.28

Weighted average common shares outstanding:
Basic	31,654		31,577			31,634			29,707			31,493			31,582			31,546			31,617
Diluted	31,854		31,686			31,852			29,827			31,644			31,753			31,722			31,825

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

Net income	$	22,088	$	15,278		$	40,046		$	27,016		$	36,171		$	32,521		$	79,930		$	72,567
Other comprehensive income (loss):
Amortization of prior service credit (net of tax of $0, $7,495, $0 and $15,409)	—		(12,177		)	—			(25,035		)
Amortization of net actuarial loss (net of tax of $2, $2,932, $6 and $5,968)	7		4,764			13			9,696
Plan amendment (net of tax of $0, $0, $0 and $2,402)	—		—			—			3,903
Change in fair value of interest rate swap (net of tax of $448, $270, $835 and $270)	1,283		(439		)	1,917			(439		)
Amortization of net actuarial loss (net of tax of $3, $3, $8, and $9)												8			7			24			20
Change in fair value of interest rate swap (net of tax of $114, $42, $327, and $877)												(362		)	129			(1,018		)	2,046
Total other comprehensive income (loss)	1,290		(7,852		)	1,930			(11,875		)	(354		)	136			(994		)	2,066
Comprehensive income	$	23,378	$	7,426		$	41,976		$	15,141		$	35,817		$	32,657		$	78,936		$	74,633

See ~~notes~~Notes to ~~condensed consolidated financial statements.~~

Condensed Consolidated Financial Statements.

Winnebago Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands, except per share data)	February 24, 2018			August 26, 2017
(in thousands, except per share data)							May 25, 2019			August 25, 2018
Assets
Current assets:
Cash and cash equivalents	$	27,443		$	35,945		$	4,176		$	2,342
Receivables, less allowance for doubtful accounts ($174 and $183)	157,425			124,539
Inventories	178,046			142,265
Receivables, less allowance for doubtful accounts ($163 and $197, respectively)							185,546			164,585
Inventories, net							190,883			195,128
Prepaid expenses and other assets	9,788			11,388			10,480			9,883
Total current assets	372,702			314,137			391,085			371,938
Property, plant and equipment, net	78,798			71,560
Property, plant, and equipment, net							121,977			101,193
Other assets:
Goodwill	244,684			242,728			275,657			274,370
Other intangible assets, net	224,452			228,440			258,513			265,717
Investment in life insurance	27,921			27,418			27,111			28,297
Deferred income taxes	9,813			12,736
Other assets	6,956			5,493			8,860			10,290
Total assets	$	965,326		$	902,512		$	1,083,203		$	1,051,805

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	99,727		$	79,194		$	84,304		$	81,039
Current maturities of long-term debt	—			2,850
Income taxes payable	2,792			7,450			—			15,655
Accrued expenses:
Accrued compensation	25,407			24,546			27,288			29,350
Product warranties	34,988			30,805			43,624			40,498
Self-insurance	9,124			6,122			13,316			12,262
Promotional	11,136			6,560			15,046			11,017
Accrued interest	2,255			3,128			3,963			3,095
Other	10,161			6,503			10,810			11,269
Current maturities of long-term debt							6,500			—
Total current liabilities	195,590			167,158			204,851			204,185
Non-current liabilities:
Long-term debt, less current maturities	271,102			271,726			253,071			291,441
Deferred income taxes							5,255			4,457
Unrecognized tax benefits	1,668			1,606			3,501			1,745
Deferred compensation benefits, net of current portion	18,907			19,270			13,161			15,282
Other	250			1,078			371			250
Total non-current liabilities	291,927			293,680			275,359			313,175
Contingent liabilities and commitments (Note 11)
Stockholders' equity:
Capital stock common (par value $0.50; authorized 60,000 shares, issued 51,776 shares)	25,888			25,888
Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-none							—			—
Common stock, par value $0.50: Authorized-60,000 shares; Issued-51,776 shares							25,888			25,888
Additional paid-in capital	80,721			80,401			89,896			86,223
Retained earnings	712,809			679,138			838,506			768,816
Accumulated other comprehensive income (loss)	907			(1,023		)
Treasury stock, at cost (20,117 and 20,183 shares)	(342,516		)	(342,730		)
Accumulated other comprehensive (loss) income							(102		)	892
Treasury stock, at cost: 20,271 and 20,243 shares, respectively							(351,195		)	(347,374		)
Total stockholders' equity	477,809			441,674			602,993			534,445
Total liabilities and stockholders' equity	$	965,326		$	902,512		$	1,083,203		$	1,051,805

See Notes to Condensed Consolidated Financial Statements.

Winnebago Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Nine Months Ended
(in thousands)	May 25, 2019			May 26, 2018
Operating activities:
Net income	$	79,930		$	72,567
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	9,788			6,679
Amortization of intangible assets	7,204			5,921
Amortization of debt issuance costs	1,186			1,222
Last in, first-out expense	1,544			1,238
Stock-based compensation	5,735			4,983
Deferred income taxes	362			4,807
Other, net	1,265			194
Change in assets and liabilities:
Receivables	(20,961		)	(24,595		)
Inventories	2,701			(36,351		)
Prepaid expenses and other assets	(653		)	3,320
Accounts payable	3,954			9,617
Income taxes and unrecognized tax benefits	(13,898		)	(1,081		)
Accrued expenses and other liabilities	4,692			12,491
Net cash provided by operating activities	82,849			61,012

Investing activities:
Purchases of property and equipment	(31,681		)	(18,123		)
Acquisition of business, net of cash acquired	(702		)	—
Proceeds from the sale of property	134			316
Other, net	1,752			(83		)
Net cash used in investing activities	(30,497		)	(17,890		)

Financing activities:
Borrowings on credit agreement	342,549			19,700
Repayments of credit agreement	(375,438		)	(43,700		)
Payments of cash dividends	(10,201		)	(9,557		)
Payments for repurchases of common stock	(7,724		)	(6,481		)
Other, net	296			—
Net cash used in financing activities	(50,518		)	(40,038		)

Net increase in cash and cash equivalents	1,834			3,084
Cash and cash equivalents at beginning of period	2,342			35,945
Cash and cash equivalents at end of period	$	4,176		$	39,029

Supplement cash flow disclosure:
Income taxes paid, net	$	33,852		$	24,833
Interest paid	$	10,335		$	11,935
Non-cash transactions:
Capital expenditures in accounts payable	$	9		$	607

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

Winnebago Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)



	Three Months Ended May 25, 2019
(in thousands, except per share data)	Common Shares			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock					Total Stockholders' Equity
	Number	Amount											Number		Amount
Balances at February 23, 2019	51,776	$	25,888	$	89,682		$	805,851		$	252		(20,292	)	$	(351,007	)	$	570,666
Stock-based compensation	—	—		1,118			—			—			1		12			1,130
Issuance of restricted stock	—	—		(904		)	—			—			52		904			—
Repurchase of common stock	—	—		—			—			—			(32	)	(1,104		)	(1,104		)
Common stock dividends; $0.11 per share	—	—		—			(3,516		)	—			—		—			(3,516		)
Actuarial loss, net of tax	—	—		—			—			8			—		—			8
Change in fair value of interest rate swap, net of tax	—	—		—			—			(362		)	—		—			(362		)
Net income	—	—		—			36,171			—			—		—			36,171
Balances at May 25, 2019	51,776	$	25,888	$	89,896		$	838,506		$	(102	)	(20,271	)	$	(351,195	)	$	602,993

	Nine Months Ended May 25, 2019
(in thousands, except per share data)	Common Shares			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock					Total Stockholders' Equity
	Number	Amount											Number		Amount
Balances at August 25, 2018	51,776	$	25,888	$	86,223		$	768,816		$	892		(20,243	)	$	(347,374	)	$	534,445
Stock-based compensation	—	—		5,683			—			—			4		69			5,752
Issuance of restricted stock	—	—		(2,056		)	—			—			208		3,584			1,528
Issuance of stock under ESPP	—	—		46			—			—			15		250			296
Repurchase of common stock	—	—		—			—			—			(255	)	(7,724		)	(7,724		)
Common stock dividends; $0.32 per share	—	—		—			(10,240		)	—			—		—			(10,240		)
Actuarial loss, net of tax	—	—		—			—			24			—		—			24
Change in fair value of interest rate swap, net of tax	—	—		—			—			(1,018		)	—		—			(1,018		)
Net income	—	—		—			79,930			—			—		—			79,930
Balances at May 25, 2019	51,776	$	25,888	$	89,896		$	838,506		$	(102	)	(20,271	)	$	(351,195	)	$	602,993

	Three Months Ended May 26, 2018
(in thousands, except per share data)	Common Shares			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock					Total Stockholders' Equity
	Number	Amount											Number		Amount
Balances at February 24, 2018	51,776	$	25,888	$	80,721		$	712,809		$	907		(20,117	)	$	(342,516	)	$	477,809
Stock-based compensation	—	—		3,515			—			—			2		25			3,540
Issuance of restricted stock	—	—		(57		)	—			—			3		57			—
Repurchase of common stock	—	—		—			—			—			(135	)	(5,003		)	(5,003		)
Common stock dividends; $0.10 per share	—	—		—			(3,182		)	—			—		—			(3,182		)
Actuarial loss, net of tax	—	—		—			—			7			—		—			7
Change in fair value of interest rate swap, net of tax	—	—		—			—			129			—		—			129
Net income	—	—		—			32,521			—			—		—			32,521
Balances at May 26, 2018	51,776	$	25,888	$	84,179		$	742,148		$	1,043		(20,247	)	$	(347,437	)	$	505,821

Winnebago Industries, Inc.

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

(Unaudited)

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

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

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

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

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

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

~~See notes to condensed consolidated financial statements.~~

~~Winnebago Industries, Inc.~~

~~Condensed Consolidated Stockholders' Statement of Equity~~

~~(Unaudited)~~

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



	Nine Months Ended May 26, 2018
(in thousands, except per share data)	Common Shares			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock					Total Stockholders' Equity
(in thousands, except per share data)	Number	Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Number		Amount			Total Stockholders' Equity
Balances at August 26, 2017	51,776	$	25,888	$	80,401		$	679,138		$	(1,023	)	(20,183	)	$	(342,730	)	$	441,674
Stock-based compensation	—	—		5,403			—			—			4		62			5,465
Issuance of restricted stock	—	—		(1,625		)	—			—			101		1,712			87
Repurchase of common stock	—	—		—			—			—			(169	)	(6,481		)	(6,481		)
Common stock dividends; $0.30 per share	—	—		—			(9,557		)	—			—		—			(9,557		)
Actuarial loss, net of tax	—	—		—			—			20			—		—			20
Change in fair value of interest rate swap, net of tax	—	—		—			—			2,046			—		—			2,046
Net income	—	—		—			72,567			—			—		—			72,567
Balances at May 26, 2018	51,776	$	25,888	$	84,179		$	742,148		$	1,043		(20,247	)	$	(347,437	)	$	505,821

See ~~notes~~Notes to ~~condensed consolidated financial statements.~~

Condensed Consolidated Financial Statements.

Winnebago Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1: 1: Basis of Presentation

~~The "Company,~~

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

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

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

Interim results ~~of income and comprehensive income, consolidated cash flows and consolidated statement of equity for the first six months of~~ ~~Fiscal 2018~~ ~~and~~ ~~2017. The consolidated statements of income and comprehensive income for the first three months and six months of Fiscal 2018~~ are not necessarily indicative of the results to be expected for the full year. ~~These~~The interim ~~financial statements~~Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited ~~consolidated financial statements and notes thereto appearing~~Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017.~~25, 2018.

Fiscal Period

We follow a 52-/53-week fiscal year, ending the last Saturday in August. ~~Both~~Fiscal 2019 is a 53-week year, while Fiscal 2018 ~~and~~was a 52-week year. The extra (53rd) week in Fiscal ~~2017 are 52-week years.~~2019 will be recognized in our fourth quarter.

~~Recently Adopted Accounting Pronouncements~~Subsequent Events

In ~~March 2016,~~preparing the ~~FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspects~~accompanying unaudited Condensed Consolidated Financial Statements, we evaluated subsequent events for potential recognition and disclosure through the date of the accounting for employee share-based payment transactions, including the accounting for the related income taxes, forfeitures, statutory tax withholding requirements 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 benefits 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.filing. 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.events.

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~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standard Update (“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~~This ASU and the related amendments must be adopted on a modified retrospective basis ~~for fiscal years~~to either each prior reporting period presented or as of the beginning ~~after December 15, 2018 (our~~of the period of adoption. Based on the effective dates, we expect to adopt the new guidance in the first quarter of Fiscal ~~2020),~~2020 using the modified retrospective basis as of the beginning of the period of adoption. We have established an implementation plan and have made progress on this plan including ~~interim periods within those annual reporting periods. Early adoption is permitted. We~~surveying our businesses, assessing our lease population, and compiling information on our active leases. In addition, we are ~~currently evaluating the~~determining needed changes to our policies, business processes, internal controls, and disclosures. Based on our analysis, we do not expect a material impact ~~of adopting this ASU on~~to 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), which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 is effective 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 evaluating~~expect to adopt the new guidance in the first quarter of Fiscal 2020, and we do not expect a material impact ~~of adopting this ASU on~~to our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In ~~February 2018,~~ the ~~FASB issued~~first quarter of Fiscal 2019, we adopted ASU ~~2018-02,~~2014-09, ~~Income Statement—Reporting Comprehensive Income~~Revenue from Contracts with Customers (Topic ~~220)~~606), which ~~allows~~establishes a comprehensive five-step model for ~~a reclassification~~the recognition of ~~stranded tax effects~~revenue from contracts with customers. This model is based on the ~~Tax Cuts and Job Act from accumulated other comprehensive income~~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. We elected the modified retrospective method of adoption, which we applied to contracts not completed as of the initial date of adoption. Application of the transition requirements had no material impact on operations or beginning retained earnings. ~~This ASU is effective~~While certain control processes and procedures were updated for ~~fiscal years beginning after December 15, 2018 (our Fiscal 2020). We are currently evaluating~~this adoption, the ~~impact of adopting this ASU on our consolidated financial statements and do~~changes did not ~~expect adoption to~~ have a material ~~impact.~~impact on our internal control over financial reporting framework.

~~Reporting Segments~~

We have two reporting segments: (1) Motorized products and services and (2) Towable products and services. We aggregate two operating segments into the Towable reporting segment based upon their similar products, customers, distribution methods, production processes and economic characteristics. We adopted a new corporate allocation policyAlso in the first quarter of Fiscal ~~2018 that identifies shared costs~~2019, we retrospectively adopted ASU 2016-15, Classification of Certain Cash Receipts and ~~allocates them to~~Cash Payments (Topic 230), which provides guidance for eight specific cash flow issues with the ~~operating segments.~~objective of reducing the existing diversity in practice. The ~~cost drivers selected as the basis for allocation are the most appropriate drivers~~adoption of this standard did not materially impact our statements of cash flows, and no cash flow reclassifications were required for the type 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 Note 3: Business Segments.

~~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 acquired 100% of the ownership interests of Grand Design on November 8, 2016 in accordance with the Securities Purchase Agreement for an aggregate purchase price of $520.5 million, which was paid in cash and Winnebago shares as follows:

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

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

~~The acquisition has been accounted for in accordance with ASC 805,~~ ~~Business Combinations~~, using the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price was allocated to the tangible and intangible assets of Grand Design acquired, based on their fair values at the date of the acquisition. The purchase price allocation was finalized during the first quarter of Fiscal 2018. The final allocation of the purchase price to assets acquired and liabilities assumed is shown in the following table.

(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.~~period.

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 3:2: Business Segments

In the fourth quarter of Fiscal 2018, we revised our segment presentation. We ~~report segment information~~have five operating segments: 1) Winnebago motorhomes, 2) Winnebago towables, 3) Grand Design towables, 4) Winnebago specialty vehicles, and 5) Chris-Craft marine. We evaluate performance based on ~~the "management" approach~~each operating segment's Adjusted EBITDA, as defined ~~in ASC 280,~~ ~~Segment Reporting. The management approach designates the internal reporting used by management for making decisions~~below, which excludes certain corporate administration expenses and ~~assessing performance as the source of our reportable segments.~~non-operating income and expense.

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

~~We organize our business reporting on a product basis. Each~~The Corporate / All Other category includes the Winnebago specialty vehicles and Chris-Craft marine operating segments as well as expenses related to certain corporate administration expenses for the oversight of the enterprise. These expenses include items such as corporate leadership and administration costs. Previously, these expenses were allocated to each operating segment.

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.

Prior period segment information has been reclassified to conform to the current reportable segment presentation. The reclassifications included removing the corporate administration expenses from both the Motorhome and Towable reportable segments and removing Winnebago specialty vehicles from the Motorhome reportable segment, as we began to dedicate leadership and focus on these operations separately from our Winnebago motorhomes operations.

Our chief operating decision maker ("CODM") is ~~managed separately~~our Chief Executive Officer. Our CODM relies on internal management reporting that analyzes consolidated results to ~~better align to our customers, distribution partners~~the net earnings level and operating segment's Adjusted EBITDA. Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors the performance of, the consolidated enterprise, the Motorhome segment, and the ~~unique market dynamics of the product groups. We aggregate two~~Towable segment. The operating ~~segments into the Towable reporting segment based upon~~segments' management have responsibility for operating decisions, allocating resources, and assessing performance within their ~~similar products, customers, distribution methods, production processes and economic characteristics.~~respective segments. The accounting policies of both reportable segments are the same and are described in Note 1: 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017.~~

Subsequent to the acquisition of Grand Design in Fiscal 2017, management re-evaluated the manner in which corporate expenses were allocated to the reportable segments. A new corporate allocation policy was adopted in the first quarter of Fiscal 2018 that identifies shared costs and allocates them to the operating segments based on a cost driver most appropriate for the type of cost being allocated. For example, certain costs were allocated based on the financial size of the operating segment, while other costs, where appropriate, were allocated based on the headcount in the operating segments since headcount was deemed the appropriate driver for those types of expenses. Prior year segment information has been restated to conform to the current reporting segment presentation. All corporate expenses were allocated to the operating segments. Assets presented by reportable segment exclude certain corporate assets that cannot reasonably be allocated to the reportable segments. These unallocated corporate assets include cash and deferred tax assets.25, 2018.

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

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


	Three Months Ended				Six Months Ended				Three Months Ended						Nine 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
(in thousands)									May 25, 2019			May 26, 2018			May 25, 2019			May 26, 2018
Net Revenues
Motorhome									$	160,239		$	244,870		$	506,229		$	632,148
Towable	266,358		171,574		526,023		221,757		346,811			313,016			890,335			839,039
Corporate / All Other									21,890			4,375			58,714			9,454
Consolidated	$	468,359	$	370,510	$	918,380	$	615,818	$	528,940		$	562,261		$	1,455,278		$	1,480,641

Adjusted EBITDA
Motorized	$	4,044	$	10,838	$	7,199	$	21,954
Motorhome									$	381		$	11,677		$	16,716		$	22,264
Towable	35,338		18,233		67,594		21,796		57,172			45,378			121,638			115,066
Corporate / All Other									(1,679		)	(3,694		)	(9,539		)	(9,176		)
Consolidated	$	39,382	$	29,071	$	74,793	$	43,750	$	55,874		$	53,361		$	128,815		$	128,154

Capital expenditures
Motorized	$	1,633	$	1,730	$	4,740	$	4,531
Capital Expenditures
Motorhome									$	2,543		$	2,643		$	7,933		$	7,383
Towable	4,685		1,646		6,935		2,407		4,810			3,805			21,335			10,740
Corporate / All Other									962			—			2,413			—
Consolidated	$	6,318	$	3,376	$	11,675	$	6,938	$	8,315		$	6,448		$	31,681		$	18,123

Total assets
Motorized	$	304,623	$	283,035	$	304,623	$	283,035
(in thousands)															May 25, 2019			August 25, 2018
Total Assets
Motorhome															$	336,334		$	322,048
Towable	618,636		581,863		618,636		581,863								637,371			626,588
Unallocated corporate assets	42,067		29,823		$	42,067	$	29,823
Corporate / All Other															109,498			103,169
Consolidated	$	965,326	$	894,721	$	965,326	$	894,721							$	1,083,203		$	1,051,805

Reconciliation of net income to consolidated Adjusted EBITDA:


	Three Months Ended					Six Months Ended						Three Months Ended						Nine Months Ended
(In thousands)	February 24, 2018		February 25, 2017			February 24, 2018			February 25, 2017
(in thousands)												May 25, 2019			May 26, 2018			May 25, 2019			May 26, 2018
Net income	$	22,088	$	15,278		$	40,046		$	27,016		$	36,171		$	32,521		$	79,930		$	72,567
Interest expense	4,918		5,178			9,699			6,306			4,446			4,172			13,293			13,871
Provision for income taxes	8,234		7,916			16,794			13,536			8,717			11,684			18,609			28,478
Depreciation	2,198		1,848			4,328			3,428			3,520			2,351			9,788			6,679
Amortization of intangible assets	1,933		10,367			3,988			12,418			2,278			1,933			7,204			5,921
EBITDA	39,371		40,587			74,855			62,704			55,132			52,661			128,824			127,516
Postretirement health care benefit income	—		(11,983		)	—			(24,796		)
Transaction costs	—		463			50			5,925
Non-operating expense (income)	11		4			(112		)	(83		)
Acquisition-related costs												—			800			—			850
Restructuring expenses												1,102			—			1,321			—
Non-operating income												(360		)	(100		)	(1,330		)	(212		)
Adjusted EBITDA	$	39,382	$	29,071		$	74,793		$	43,750		$	55,874		$	53,361		$	128,815		$	128,154

Note 3: Revenue

The following table disaggregates revenue by reportable segment and product category:



	Three Months Ended				Nine Months Ended
(in thousands)	May 25, 2019		May 26, 2018		May 25, 2019		May 26, 2018
Net Revenues
Motorhome:
Class A	$	45,138	$	80,093	$	148,816	$	241,680
Class B	41,363		49,715		162,343		112,292
Class C	67,674		109,092		176,059		258,552
Other⁽¹⁾	6,064		5,970		19,011		19,624
Total Motorhome	160,239		244,870		506,229		632,148
Towable:
Fifth Wheel	201,561		179,046		519,093		474,075
Travel Trailer	140,709		130,286		358,497		355,681
Other⁽¹⁾	4,541		3,684		12,745		9,283
Total Towable	346,811		313,016		890,335		839,039
Corporate / All Other:
Other⁽²⁾	21,890		4,375		58,714		9,454
Total Corporate / All Other	21,890		4,375		58,714		9,454
Consolidated	$	528,940	$	562,261	$	1,455,278	$	1,480,641


(1)	Relates to parts, accessories, and services.


(2)	Relates to marine and specialty vehicle units, parts, accessories, and services.

We generate all of our operating revenue from contracts with customers. Our primary source of revenue is generated through the sale of manufactured motorized units, non-motorized towable units, and marine units to our independent dealer network (our customers). We also generate income through the sale of certain parts and services, acting as the principal in these arrangements. We apply the new revenue standard requirements to a portfolio of contracts (or performance obligations) with similar characteristics for transactions where it is expected that the effects on the financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that portfolio. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods or services. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods or services. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. We made an accounting policy election so that our revenue excludes sales and usage-based taxes collected.

Unit revenue

Unit revenue is recognized at a point-in-time when control passes, which generally occurs when the unit is shipped to or picked-up from our manufacturing facilities by the customer, which is consistent with our past practice. Our payment terms are typically before or on delivery, and do not include a significant financing component. The amount of consideration received and recorded to revenue varies with changes in marketing incentives and offers to our customers. These marketing incentives and offers to our customers are considered variable consideration. We adjust the estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed.

Our contracts include some incidental items that are immaterial in the context of the contract. We have made an accounting policy election to not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. We have made an accounting policy to account for any shipping and handling costs that occur after the transfer of control as a fulfillment cost that is accrued when control is transferred. Warranty obligations associated with the sale of a unit are assurance-type warranties that are a guarantee of the unit’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. Contract costs incurred related to the sale of manufactured units are expensed at the point-in-time when the related revenue is recognized.

We do not have material contract assets or liabilities. We establish allowances for uncollectible receivables based on historical collection trends and write-off history.

Concentration of Risk

None of our dealer organizations accounted for more than 10% of our net revenue for the third quarter of Fiscal 2019 or for the third quarter of Fiscal 2018. In addition, none of our dealer organizations accounted for more than 10% of our net revenue for the first nine months of Fiscal 2019 or the first nine months of Fiscal 2018.

~~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 54: Derivatives, Investments, and Fair Value Measurements

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

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

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

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

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

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets in nonactive markets;

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

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

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

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at ~~February 24,~~May 25, 2019 and August 25, 2018 ~~and~~ ~~August 26, 2017~~ according to the valuation techniques we used to determine their fair values:

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:
  Domestic equity funds $ 1,580
$ 1,546
$ 34
$ —
  International equity funds 176
157
19
—
  Fixed income funds 176
83
93
—
Interest rate swap contract 1,924
—
1,924
—
Total assets at fair value $ 3,856
$ 1,786
$ 2,070
$ —


				Fair Value Measurements Using Inputs Considered As							Fair Value at		Fair Value Hierarchy
(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
(in thousands)											May 25, 2019		Level 1		Level 2		Level 3
Assets that fund deferred compensation:
Domestic equity funds	$	1,708		$	1,671	$	37		$	—	$	439	$	357	$	82	$	—
International equity funds	174			157		17			—		108		52		56		—
Fixed income funds	259			170		89			—		155		22		133		—
Interest rate swap contract	(828		)	—		(828		)	—		614		—		614		—
Total assets (liabilities) at fair value	$	1,313		$	1,998	$	(685	)	$	—
Total assets at fair value											$	1,316	$	431	$	885	$	—



	Fair Value at		Fair Value Hierarchy
(in thousands)	August 25, 2018		Level 1		Level 2		Level 3
Assets that fund deferred compensation:
Domestic equity funds	$	1,143	$	1,114	$	29	$	—
International equity funds	139		120		19		—
Fixed income funds	223		132		91		—
Interest rate swap contract	1,959		—		1,959		—
Total assets at fair value	$	3,464	$	1,366	$	2,098	$	—

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Assets that fund 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 of~~These securities are primarily classified as Level 1 as they are traded in an active market for which closing stock prices are readily available. These securities fund the Executive Share Option Plan and the Executive Deferred Compensation ~~Plan (see~~Plan. Refer to Note 10, ~~Note 10~~Employee and Retiree Benefits). , of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August 25, 2018 for additional information regarding these plans.

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

Interest Rate Swap Contract

~~Under terms of our Credit Agreement (see Note 9), we were previously required to hedge a portion of the floating interest rate exposure. In accordance with that requirement, on~~

On January 23, 2017, we entered into an interest rate swap contract, which effectively fixed our interest rate ~~for~~on our $300.0 million term loan agreement ("Term ~~Loan~~Loan") for a notional amount that reduces each December during the swap contract. As of ~~February 24,~~May 25, 2019, we had $120.0 million of our Term Loan fixed at an interest rate of 5.32%. As of August 25, 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%.~~The swap contract expires on December 8, 2020.

The fair value of the interest rate swap ~~based on a Level 2 valuation was an asset of $1.9 million as of February 24, 2018. The fair value~~ is classified as Level 2 as it is ~~corroborated~~determined based on observable market data. ~~This amount~~The asset is ~~classified as non-current and~~ included in ~~other~~Other assets on the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. The change in value ~~in the second quarter was predominately~~is recorded to ~~accumulated~~Accumulated other comprehensive (loss) income on the ~~consolidated balance sheets~~Condensed Consolidated Balance Sheets since the interest rate swap has been designated for hedge accounting.

Assets and Liabilities that are measured at Fair Value on a Nonrecurring Basis

Our non-financial assets, which include goodwill, intangible assets, and property, plant and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required, we must evaluate the non-financial asset for impairment. If an impairment ~~did occur,~~has occurred, the asset is required to be recorded at the estimated fair value. ~~During the first six months of Fiscal 2018, no~~No impairments were recorded for non-financial ~~assets.~~assets in the third quarter of Fiscal 2019 or the third quarter of Fiscal 2018.

Fair Value of Financial Instruments

Our financial instruments, other than those presented in the disclosures above, include cash, receivables, accounts payable, other payables, and long-term debt. The fair values of cash, receivables, accounts payable, and other payables approximated carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. See Note 9, Long-Term Debt, for information about the fair value of our ~~debt as of February 24, 2018 approximates fair value as interest is at variable market rates.~~long-term debt.

Note 6: 5: Inventories

Inventories consist of the following:

~~Inventories~~



(in thousands)	May 25, 2019		August 25, 2018
Finished goods	$	42,876	$	26,513
Work-in-process	93,949		68,339
Raw materials	94,365		139,039
Total	231,190		233,891
Less last-in, first-out ("LIFO") reserve	40,307		38,763
Inventories, net	$	190,883	$	195,128

Inventory valuation methods consist of the following:

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



(in thousands)	May 25, 2019		August 25, 2018
LIFO basis	$	184,516	$	176,215
First-in, first-out basis	46,674		57,676
Total	$	231,190	$	233,891

The above 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.~~

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 thousands)	February 24, 2018			August 26, 2017
(in thousands)							May 25, 2019		August 25, 2018
Land	$	3,936		$	3,914		$	8,686	$	6,747
Buildings and building improvements	81,367			73,831			112,898		94,622
Machinery and equipment	99,577			99,952			108,585		105,663
Software	20,601			17,844			28,152		23,388
Transportation	8,358			8,993			3,837		8,837
Total property, plant and equipment, gross	213,839			204,534
Property, plant, and equipment, gross							262,158		239,257
Less accumulated depreciation	(135,041		)	(132,974		)	140,181		138,064
Total property, plant and equipment, net	$	78,798		$	71,560
Property, plant, and equipment, net							$	121,977	$	101,193

Depreciation expense was $3.5 million and $2.4 million during the third quarters of Fiscal 2019 and 2018, respectively, and $9.8 million and $6.7 million during the first nine months of Fiscal 2019 and 2018, respectively.

Note 87: Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows for the first nine months of Fiscal 2019 and 2018, of which there are no accumulated impairment losses:



(in thousands)	Towable		Corporate / All Other		Total
Balances at August 26, 2017	$	242,728	$	—	$	242,728
Grand Design purchase price adjustment⁽¹⁾	1,956		—		1,956
Balances at May 26, 2018	$	244,684	$	—	$	244,684

Balances at August 25, 2018	$	244,684	$	29,686	$	274,370
Chris-Craft purchase price adjustment⁽²⁾	—		1,287		1,287
Balances at May 25, 2019	$	244,684	$	30,973	$	275,657


(1)	Refer to Note 2, Business Combinations, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August 25, 2018 for additional information.

(2)

Purchase price adjustments of $0.7 million made for a working capital payment made in the first quarter of Fiscal 2019 and of $0.6 million for an adjustment to taxes recorded in the third quarter of Fiscal 2019. For additional information related to the acquisition of Chris-Craft USA, Inc., refer to Note 2, Business Combinations, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August 25, 2018.

Other intangible assets, net of accumulated amortization, consist of the following:



		May 25, 2019				August 25, 2018
(in thousands)	Weighted Average Life-Years	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Trade names	Indefinite	$	177,250			$	177,250
Dealer networks	12.2	95,581		$	18,216	95,581		$	12,328
Backlog	0.5	19,527		19,527		19,527		19,135
Non-compete agreements	4.1	5,347		2,824		5,347		2,084
Leasehold interest-favorable	8.1	2,000		625		2,000		441
Other intangible assets, gross		299,705		41,192		299,705		33,988
Less accumulated amortization		41,192				33,988
Other intangible assets, net		$	258,513			$	265,717

The weig: hted average remaining amortization period for intangible assets as of May 25, 2019 was approximately 11 years.

Remaining estimated aggregate annual amortization expense by fiscal year is as follows:



(in thousands)	Amount
Fiscal 2019	$	2,283
Fiscal 2020	9,032
Fiscal 2021	9,032
Fiscal 2022	8,405
Fiscal 2023	8,197
Thereafter	44,314
Total amortization expense remaining	$	81,263

Note 8: Warranty

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 to help protect the reputation of our products and 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 our products, we also occasionally incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer satisfaction actions. Although we estimate and reserve for the cost of these service actions, there can be no assurance that expense levels will remain at current levels or such reserves will continue to be adequate.

Changes in our product warranty liability are as follows:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
(In thousands)	February 24, 2018			February 25, 2017			February 24, 2018			February 25, 2017
(in thousands)													May 25, 2019			May 26, 2018			May 25, 2019			May 26, 2018
Balance at beginning of period	$	32,500		$	24,551		$	30,805		$	12,412		$	40,305		$	34,988		$	40,498		$	30,805
Provision	10,283			7,734			20,236			11,632			14,139			11,645			34,090			31,881
Claims paid	(7,795		)	(7,255		)	(16,053		)	(11,918		)	(10,820		)	(9,189		)	(30,964		)	(25,242		)
Acquisition of Grand Design	—			—			—			12,904
Balance at end of period	$	34,988		$	25,030		$	34,988		$	25,030		$	43,624		$	37,444		$	43,624		$	37,444

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

On November 8, 2016, we entered into a $125.0 million ~~ABL~~credit facility ("ABL") and a $300.0 million Term Loan with JPMorgan Chase Bank, N.A. ("Credit Agreement"). On December 8, 2017, we amended our Credit Agreement, which decreased the interest rate spread ~~by 1.0%~~ on the Term Loan and ~~0.25% on~~ the ABL. ~~Prior to this amendment, $19.7 million was drawn on~~As of September 21, 2018, the amount that may be borrowed under the ABL ~~and used~~was increased to ~~make a voluntary prepayment on our Term Loan.~~

Under the ABL, we have a five year credit facility on a revolving basis, subject to availability under a borrowing base consisting of eligible accounts receivable and eligible inventory. The ABL is available for issuance of letters of credit to a specified limit of $10.0$165.0 million. ~~We pay a commitment fee in the range of 0.25% - 0.375% on the amount of facility available, but unused. 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. The interest rate as of February 24, 2018 was based on LIBOR plus 3.5%. The Term Loan agreement currently requires quarterly payments in the amount of $3.75 million with all amounts then outstanding due on November 8, 2023. We have made voluntary prepayments that have extended the opportunity to defer quarterly payments, at our option, until December 31, 2019. There are mandatory prepayments for proceeds of new debt, sale of significant assets or subsidiaries, and excess cash flow as those terms are defined in the Term Loan. Incremental term loans of up to $125.0 million are available if certain financial ratios and other conditions are met.

The Credit Agreement contains certain financial covenants. As of ~~February 24, 2018,~~May 25, 2019, we are in compliance with all financial covenants of the Credit Agreement.

The ~~ABL and Term Loan~~components of long-term debt are guaranteed by Winnebago Industries, Inc. and all material direct and indirect domestic subsidiaries, and are secured by a security interest in substantially all of our assets, except minor excluded assets.as follows:



(in thousands)	May 25, 2019			August 25, 2018
ABL	$	5,643		$	38,532
Term Loan	260,000			260,000
Long-term debt, excluding debt issuance costs	265,643			298,532
Debt issuance cost, net	(6,072		)	(7,091		)
Long-term debt	259,571			291,441
Less current maturities	6,500			—
Long-term debt, less current maturities	$	253,071		$	291,441

As of ~~February 24, 2018, $8.6 million~~May 25, 2019, the fair value of long-term debt, excluding debt issuance costs, ~~net~~was $264.3 million. As of ~~amortization, were recorded as a direct deduction from~~August 25, 2018, the fair value of long-term ~~debt. Unamortized~~debt, excluding debt issuance costs, ~~of $0.6 million related to~~approximated the ~~voluntary prepayment on the Term Loan was expensed in the six months ended February 24, 2018.~~carrying value.

Aggregate contractual maturities of debt in future fiscal years are as ~~follows as of February 24, 2018:~~follows:

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



(in thousands)	Amount
Fiscal 2019	$	—
Fiscal 2020	10,250
Fiscal 2021	15,000
Fiscal 2022	15,000
Fiscal 2023	219,750
Total Term Loan	$	260,000

Note 10: Employee and Retiree Benefits

Deferred compensation liabilities are as follows:

(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



(in thousands)	May 25, 2019		August 25, 2018
Non-qualified deferred compensation	$	13,459	$	14,831
Supplemental executive retirement plan	2,056		2,309
Executive share option plan	129		935
Executive deferred compensation plan	590		421
Officer stock-based compensation	—		1,528
Deferred compensation benefits	16,234		20,024
Less current portion⁽¹⁾	3,073		4,742
Deferred compensation benefits, net of current portion	$	13,161	$	15,282

~~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 equity~~Accrued 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.~~

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.Condensed Consolidated Balance Sheets.

Note 12: 11: Contingent Liabilities and Commitments

Repurchase Commitments

Generally, manufacturers in ~~the RV industry~~our industries enter into repurchase agreements with lending institutions ~~that~~which have provided wholesale floorplan financing to dealers. Most ~~dealers' RVs~~dealers 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 ~~RVs~~units 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 ~~RVs~~recreational vehicles or boats to repurchase current inventory if a dealership exits the business. Our total contingent liability on all repurchase agreements was approximately ~~$923.2 million~~$1.0 billion and ~~$713.1~~$879.0 million at ~~February 24, 2018~~May 25, 2019 and August ~~26, 2017, respectively, with the increase attributed primarily due to growth in the Towable segment.~~25, 2018, respectively.

Repurchased sales are not recorded as a revenue transaction, but the net difference between the original repurchase price and the resale price are recorded against the loss reserve, which is a deduction from gross revenue. Our loss reserve for repurchase commitments contains uncertainties because the calculation requires management to 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 period reporting date subject to a repurchase agreement, net of the greater of periodic reductions per the agreement or dealer principal payments. Based on ~~the~~these repurchase ~~exposure as previously described~~agreements and our historical loss experience, we ~~established~~establish an associated loss ~~reserve.~~reserve which is included in Accrued expenses: Other on the Condensed Consolidated Balance Sheets. Our accrued losses on repurchases were $0.9 million ~~as of February 24,~~and $0.9 million at May 25, 2019 and August 25, 2018, ~~and $0.7 million as of August 26, 2017 and are included in Accrued expenses - Other on the Consolidated Balance Sheets.~~respectively. Repurchase risk is affected by the credit worthiness of our dealer network, and 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.

There was no material activity related to repurchase agreements during the three and ~~six~~nine months ended ~~February 24, 2018~~May 25, 2019 and ~~February 25, 2017.~~May 26, 2018.

Litigation

We are involved in various legal proceedings ~~that~~which are ordinary and routine 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 a 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 change in the future.

Note 12: 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 grant or issue non-qualified stock options, incentive stock options, share awards, and other equity compensation to key employees and to non-employee directors. The 2019 Plan replaces our 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 the subject of awards and issued under the 2019 Plan is 4.1 million, 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, however, awards under the 2014 Plan and the 2004 Plan, respectively, that are 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.

Beginning with our annual grant of restricted stock units in October 2018, we attach dividend equivalents to our restricted stock units equal to dividends payable on the same number of shares of WGO common stock during the applicable period. Dividend equivalents, settled in cash, accrue on restricted stock unit awards during the vesting period. No dividend equivalents are paid on any restricted stock units that are forfeited prior to the vesting date.

Stock-based compensation expense was $1.1 million and $1.4 million during the third quarters of Fiscal 2019 and 2018, respectively, and $5.7 million and $5.0 million during the first nine months of Fiscal 2019 and 2018, respectively. Compensation expense is recognized over the requisite service period of the award.

Note 13: Restructuring



	Motorhome
	Three Months Ended		Nine Months Ended
(in thousands)	May 25, 2019		May 25, 2019
Cost of goods sold	$	1,102	$	1,102
Selling, general, and administrative expenses	—		219
Restructuring expense	$	1,102	$	1,321

These expenses include employee-related costs and accelerated depreciation for assets that will no longer be used. Employee-related costs are expected to be paid in the fourth quarter of Fiscal 2019. We expect additional expenses of approximately $1.0 million in the fourth quarter of Fiscal 2019 and $1.0 million in Fiscal 2020, primarily related to asset-related charges and facility closure costs. We expect these expenses to be partially offset by the corresponding savings generated by the project.

Note 14: Income Taxes

We account for income taxes under ASC 740, Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns.

Our effective tax rate decreased ~~from 33.4%~~to 18.9% for the ~~six~~nine months ended ~~February~~May 25, ~~2017 to 29.5%~~2019 from 28.2% for the ~~six~~nine months ended ~~February 24,~~May 26, 2018 due ~~primarily~~ to the enactment of the 2017 Tax Cuts and Jobs Act ("Tax Act") on December 22, ~~2017. One of the most significant provisions of this legislation was a reduction in the Federal corporate income~~2017 and net favorable discrete items, primarily attributable to R&D-related tax ~~rate from 35% to 21% effective beginning January 1, 2018.~~credits, which totaled $3.6 million or 3.7%.

~~In December 2017, the Securities and Exchange Commission issued~~ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin ~~("SAB")~~No. 118 ~~to provide~~, provided guidance for companies that ~~allows~~allowed 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.~~740, Income Taxes. In accordance with ~~SAB 118,~~this guidance, a company ~~must~~was required to 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 iswas incomplete, but it iswas able to determine a reasonable estimate, the company ~~must~~was required to 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 inIn 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~~we recorded non-cash provisional estimates to income tax expense in Fiscal 2018 as a result 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 revaluedrevaluing all deferred tax assets and liabilities at the newly enacted Federal corporate US income tax rate. ~~This revaluation as~~We have not made any measurement period adjustments related to these items during the first nine months of Fiscal 2019 and are complete in analyzing and recording all aspects of the enactment ~~resulted in a non-cash provisional estimate~~ of ~~$1.4 million to income tax expense and a corresponding reduction in~~ the ~~net deferred tax asset~~.Tax Act.

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~~Internal Revenue Service ("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~~,May 25, 2019, our Federal returns from Fiscal 2015 to present continue to be subject to review by the IRS. With limited exception, our state returns from Fiscal 2014 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 to review by the~~ state taxing jurisdictions. Several years may lapse before an uncertain tax position is audited and finally resolved, and it is difficult to predict the outcome of such audits.

~~As of~~ ~~February 24, 2018~~, our 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 asin income tax expense. ~~We do~~Total reserves for uncertain tax positions were not ~~believe that there will be a significant change in the total amount of unrecognized tax benefits within the next twelve months.~~material.

Note 14: ~~Earnings~~15: Income Per Share

The following table reflects the calculation 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



	Three Months Ended				Nine Months Ended
(in thousands, except per share data)	May 25, 2019		May 26, 2018		May 25, 2019		May 26, 2018
Numerator
Net income	$	36,171	$	32,521	$	79,930	$	72,567

Denominator
Weighted average common shares outstanding	31,493		31,582		31,546		31,617
Dilutive impact of stock compensation awards	151		171		176		208
Weighted average common shares outstanding, assuming dilution	31,644		31,753		31,722		31,825

Anti-dilutive securities excluded from Weighted average common shares outstanding, assuming dilution	204		90		183		59

Basic income per common share	$	1.15	$	1.03	$	2.53	$	2.30
Diluted income per common share	$	1.14	$	1.02	$	2.52	$	2.28

The computation of weighted average shares and potential dilutive shares outstanding excludes the effect of options 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 amountsAnti-dilutive securities were not included in the computation of diluted income per common share because they are considered anti-dilutive under the treasury stock ~~method per ASC 260,~~ ~~Earnings Per Share~~.method.

Note ~~15:~~16: Accumulated Other Comprehensive Income (Loss)

Changes in ~~AOCI~~Accumulated Other Comprehensive Income ("AOCI") by component, net of tax, were:

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 )


	Six Months Ended																		Three Months Ended
	February 24, 2018									February 25, 2017									May 25, 2019									May 26, 2018
(In thousands)	Defined Benefit Pension Items			Interest Rate Swap			Total			Defined Benefit Pension Items			Interest Rate Swap			Total
(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		$	(575	)	$	827		$	252		$	(496	)	$	1,403		$	907
Other comprehensive income ("OCI") before reclassifications																			—			(362		)	(362		)	—			129			129
Amounts reclassified from AOCI																			8			—			8			7			—			7
Net current-period OCI																			8			(362		)	(354		)	7			129			136
Balance at end of period																			$	(567	)	$	465		$	(102	)	$	(489	)	$	1,532		$	1,043

																			Nine Months Ended
																			May 25, 2019									May 26, 2018
(in thousands)																			Defined Benefit Pension Items			Interest Rate Swap			Total			Defined Benefit Pension Items			Interest Rate Swap			Total
Balance at beginning of period																			$	(591	)	$	1,483		$	892		$	(509	)	$	(514	)	$	(1,023	)
OCI before reclassifications	—			1,917			1,917			3,903			(439		)	3,464			—			(1,018		)	(1,018		)	—			2,046			2,046
Amounts reclassified from AOCI	13			—			13			(15,339		)	—			(15,339		)	24			—			24			20			—			20
Net current-period OCI	13			1,917			1,930			(11,436		)	(439		)	(11,875		)	24			(1,018		)	(994		)	20			2,046			2,066

Balance at end of period	$	(496	)	$	1,403		$	907		$	(461	)	$	(439	)	$	(900	)	$	(567	)	$	465		$	(102	)	$	(489	)	$	1,532		$	1,043

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

Three Months Ended Six Months Ended
(In thousands)
Location on Consolidated Statements
of Income and Comprehensive Income
February 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 )



		Three Months Ended				Nine Months Ended
(in thousands)	Location on Consolidated Statements of Income and Comprehensive Income	May 25, 2019		May 26, 2018		May 25, 2019		May 26, 2018
Amortization of net actuarial loss	SG&A	$	8	$	7	$	24	$	20

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

~~This section~~

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

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

Our MD&A should be read in conjunction with ~~the unaudited consolidated financial statements contained in this Form 10-Q as well as the Management's Discussion and Analysis and Risk Factors included in~~ our Annual Report on Form ~~10‑K~~10-K for the fiscal year ended August ~~26, 2017~~25, 2018, (including the information presented therein under Risk Factors), as well as our reports on Forms 10-Q and ~~in Part II, Item 1A of this Quarterly Report on Form 10-Q.~~

~~Forward-Looking Information~~

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

Overview

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

~~Significant Transaction~~ We also distribute our marine products internationally through independent dealers, who then retail the products to the end consumer.

~~On November 8, 2016, we acquired all of~~Non-GAAP Reconciliation

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the issued and outstanding capital stock of towable RV manufacturer Grand Design for an aggregate purchase price of $520.5 million. This acquisition was funded from our cash on hand, $353.0 million from asset-based revolving and term loan credit facilities,U.S. ("GAAP"), as well as ~~stock consideration,~~certain adjusted or non-GAAP financial measures such as EBITDA and Adjusted EBITDA. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation and amortization expense, and other adjustments made in order to present comparable results from period to period. These non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, have been provided as information supplemental and in addition to the financial measures presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein. The non-GAAP financial measures presented may differ from similar measures used by other companies.

Refer to the Results of Operations - Current Quarter Compared to the Comparable Prior Year Quarter and the Results of Operations - First Nine Months of Fiscal 2019 Compared to the First Nine Months of Fiscal 2018 for a detailed reconciliation of items that impacted EBITDA and Adjusted EBITDA. We have included this non-GAAP performance measure as a comparable measure to illustrate the effect of non-recurring transactions occurring during the reported periods and improve comparability of our results from period to period. We believe Adjusted EBITDA provides meaningful supplemental information about our operating performance because this 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 acquisition-related costs, restructuring expenses, and non-operating income.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to competitors and peers; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is ~~more fully described~~used by management in ~~Note 2~~its assessments of performance and ~~Note 9~~in forecasting and budgeting for our company; (d) to evaluate potential acquisitions; and (e) to ensure compliance with covenants and restricted activities under the ~~Condensed Consolidated Financial Statements.~~terms of our Credit Agreement. We ~~purchased Grand Design~~believe these non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to ~~significantly expand~~evaluate companies in our ~~existing towable RV product offerings and dealer base and acquire additional talent in the RV~~ industry.

~~With~~Reportable Segments

In the ~~acquisition of Grand Design in the first~~fourth quarter of Fiscal ~~2017,~~2018, we ~~expanded the number~~revised our segment presentation. We have five operating segments: 1) Winnebago motorhomes, 2) Winnebago towables, 3) Grand Design towables, 4) Winnebago specialty vehicles, and 5) Chris-Craft marine. We evaluate performance based on each operating segment's Adjusted EBITDA, as defined above, which excludes certain corporate administration expenses and non-operating income and expense.

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

The Corporate / All Other category includes the Winnebago specialty vehicles and Chris-Craft marine operating segments as well

as expenses related to certain corporate administration expenses for the oversight of the enterprise. These expenses include items such as corporate leadership and administration costs. Previously, these expenses were allocated to each operating segment.

Industry Trends

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

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

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

We track RV ~~industry~~Industry conditions using these key statistics to monitor trends and evaluate and understand our performance relative to the overall industry. The following is an analysis of changes in these key statistics for the rolling 12 months through April as of 2019 and 2018:



	US and Canada Industry
	Wholesale Unit Shipments per RVIA						Retail Unit Registrations per Stat Surveys
	Rolling 12 Months through April						Rolling 12 Months through April
	2019	2018	Unit Change		% Change		2019	2018	Unit Change		% Change
Motorhome⁽¹⁾	51,309	64,715	(13,406	)	(20.7	)%	54,862	58,454	(3,592	)	(6.1	)%
Towable⁽²⁾	377,171	448,693	(71,522	)	(15.9	)%	408,782	407,017	1,765		0.4	%
Combined	428,480	513,408	(84,928	)	(16.5	)%	463,644	465,471	(1,827	)	(0.4	)%


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


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

The rolling twelve months ~~shipment~~shipments for 2019 and 2018 reflects a contraction in shipments as dealers rationalize inventory. The rolling twelve months retail information for ~~2017~~2019 and ~~2016, as noted below,~~2018 illustrates that the RV industry ~~continues to grow~~is growing at ~~the~~a slower rate than previous quarters, however ahead of wholesale ~~and retail level.~~shipments. We believe ~~that~~ retail demand is the key driver to continued growth in the industry.

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


⁽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,~~2019, as noted in the table below, ~~illustrates continued projected growth of the industry.~~indicate that industry shipments are most likely expected to decline in 2019. The RV sales outlook for ~~future~~calendar 2019 considers the continuation of dealer inventory realignment that has been occurring over the last 9-12 months and gradually increasing interest rates, partially offset by anticipated growth in ~~RV sales is based on continued modest gains in job~~wages 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.~~employment levels.

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



	Calendar Year
Wholesale Unit Shipment Forecast per RVIA⁽¹⁾	2019 Forecast	2018 Actual	Unit Change		% Change
Aggressive	430,900	483,700	(52,800	)	(10.9	)%
Most likely	416,300	483,700	(67,400	)	(13.9	)%
Conservative	395,500	483,700	(88,200	)	(18.2	)%


⁽¹⁾	~~Forecast prepared~~Prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the Roadsigns RV ~~Spring 2018~~Summer 2019 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				Rolling 12 Months through April				Calendar Year
	2018	2017	2017	2016	2015
Motorized A, B, C	16.3%	17.8%	16.2%	18.0%	20.5	%
US and Canada							2019		2018		2018		2017		2016⁽¹⁾
Motorhome A, B, C							16.0	%	16.1	%	15.6	%	16.2	%	18.0	%
Travel trailer and fifth wheels	6.2%	1.7%⁽¹⁾	6.1%	1.7%⁽¹⁾	0.9	%	8.1	%	6.7	%	7.8	%	6.1	%	1.7	%
Total market share							9.0	%	7.9	%	8.7	%	7.4	%	3.7	%


⁽¹⁾	Includes retail unit market share for Grand Design since its 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,~~Due to the rapid growth in our ~~Board of Directors approved two large~~Towable segment, we have implemented facility expansion projects in ~~the fast growing Towable segment.~~our Grand Design towables and Winnebago towables operating segments. The Grand Design towables expansion project consisted of ~~two~~three new production ~~facilities. The first was~~facilities--two were completed in ~~January~~Fiscal 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~~remaining is expected to be completed mid-Fiscal 2020. The facility expansion in the Winnebago towables division was completed in the third quarter of Fiscal ~~2018. The facility expansion in the Winnebago-branded Towable division is expected to be completed in early Fiscal~~ 2019.

~~ERP~~Enterprise Resource Planning System

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

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

The following table illustrates the cumulative project costs:


	Fiscal 2018				Fiscal		Fiscal		Fiscal		Cumulative				Nine Months Ended		Fiscal Year
(In thousands)	Q2		Q1		2017		2016		2015		Investment
(in thousands)															May 25, 2019		2018		2017		2016		2015		Cumulative Investment
Capitalized	$	1,271	$	1,416	$	1,881	$	7,798	$	3,291	$	15,657	57	%	$	3,404	$	5,941	$	1,881	$	7,798	$	3,291	$	22,315	57.9	%
Expensed	420		387		2,601		5,930		2,528		11,866		43	%	3,072		2,107		2,601		5,930		2,528		16,238		42.1	%
Total	$	1,691	$	1,803	$	4,482	$	13,728	$	5,819	$	27,523	100	%	$	6,476	$	8,048	$	4,482	$	13,728	$	5,819	$	38,553	100.0	%

InRestructuring

On February 4, 2019, we announced our intent to move our diesel production from Junction City, OR to Forest City, IA to enable more effective product development and improve our cost structure. These restructuring activities resulted in pretax charges of $1.1 million for the three months ended May ~~of 2017,~~25, 2019 and $1.3 million for the nine months ended May 25, 2019. These expenses are included in our ~~Board of Directors approved continued investment in the ERP system~~Motorhome segment and ~~a change in implementation partner. The project is proceeding~~include employee-related costs and ~~the benefits are expected to~~accelerated depreciation for assets that will no longer be ~~realized over the next several years. Total project~~used. Employee-related costs are expected to be paid in the fourth quarter of Fiscal 2019. We expect additional expenses of approximately ~~$38.0 million.~~$1.0 million in the fourth quarter of Fiscal 2019 and $1.0 million in Fiscal 2020, primarily related to asset-related charges and facility closure costs. We expect these expenses to be partially offset by the corresponding savings generated by the project.

We currently estimate that upon completion of this restructuring plan in Fiscal 2020, these actions will reduce annual costs by approximately $4.0 million, which is primarily due to lower employee-related costs, lower depreciation expense, and other manufacturing and logistics efficiencies. We expect a portion of these savings will be achieved in Fiscal 2019 and 2020, and the full annual benefit of these actions is expected in Fiscal 2021.

~~Consolidated~~

Results of Operations

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

Consolidated Performance Summary

The following is an analysis of changes in key items included in the consolidated statements of income and comprehensive income for the three months ended ~~February 24, 2018~~May 25, 2019 compared to the three months ended ~~February 25, 2017:~~May 26, 2018:


	Three Months Ended														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
(in thousands, except percent and per share data)															May 25, 2019			% of Revenues⁽¹⁾		May 26, 2018			% of Revenues⁽¹⁾		$ Change			% Change
Net revenues	$	468,359	100.0	%	$	370,510		100.0	%	$	97,849		26.4	%	$	528,940		100.0	%	$	562,261		100.0	%	$	(33,321	)	(5.9	)%
Cost of goods sold	400,698		85.6	%	321,194			86.7	%	79,504			24.8	%	442,356			83.6	%	476,747			84.8	%	(34,391		)	(7.2	)%
Gross profit	67,661		14.4	%	49,316			13.3	%	18,345			37.2	%	86,584			16.4	%	85,514			15.2	%	1,070			1.3	%

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	)%
Selling, general, and administrative expenses															35,332			6.7	%	35,304			6.3	%	28			0.1	%
Amortization of intangible assets	1,933		0.4	%	10,367			2.8	%	(8,434		)	(81.4	)%	2,278			0.4	%	1,933			0.3	%	345			17.8	%
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	%

Total operating expenses															37,610			7.1	%	37,237			6.6	%	373			1.0	%
Operating income	35,251		7.5	%	28,376			7.7	%	6,875			24.2	%	48,974			9.3	%	48,277			8.6	%	697			1.4	%
Interest expense	4,918		1.1	%	5,178			1.4	%	(260		)	(5.0	)%	4,446			0.8	%	4,172			0.7	%	274			6.6	%
Non-operating expense	11		—	%	4			—	%	7			175.0	%
Non-operating income															(360		)	(0.1	)%	(100		)	—	%	260			260.0	%
Income before income taxes	30,322		6.5	%	23,194			6.3	%	7,128			30.7	%	44,888			8.5	%	44,205			7.9	%	683			1.5	%
Provision for income taxes	8,234		1.8	%	7,916			2.1	%	318			4.0	%	8,717			1.6	%	11,684			2.1	%	(2,967		)	(25.4	)%
Net income	$	22,088	4.7	%	$	15,278		4.1	%	$	6,810		44.6	%	$	36,171		6.8	%	$	32,521		5.8	%	$	3,650		11.2	%

Diluted income per share	$	0.69			$	0.48				$	0.21		43.8	%	$	1.14				$	1.02				$	0.12		11.8	%
Diluted average shares outstanding	31,854				31,686					168			0.5	%	31,644					31,753					(109		)	(0.3	)%

⁽¹⁾


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

Net revenues decreased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 primarily due to ~~rounding differences.~~a decline in Motorhome volume, partially offset by an increase in Towable volume and our acquisition of Chris-Craft in the fourth quarter of Fiscal 2018.

Gross profit as a percentage of revenue increased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 driven by an increase in Towable volume and margin expansion driven by pricing and a decline in Motorhome volume providing a favorable mix.

Operating expenses increased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 due to Chris-Craft operating expenses, which was acquired in the fourth quarter of Fiscal 2018.

The effective tax rate decreased to 19.4% for the third quarter of Fiscal 2019 compared to 26.4% for the third quarter of Fiscal 2018 due primarily to $1.1 million in net favorable discrete items, primarily attributable to R&D-related tax credits, realized in the current period and the enactment of the 2017 Tax Cuts and Jobs Act ("Tax Act") on December 22, 2017. The reduction related to the enactment of the Tax Act is primarily attributable to the reduction in the Federal tax rate to 21%.

Net income and diluted income per share increased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 primarily due to a lower statutory tax rate and a favorable R&D-related discrete item.

Non-GAAP Reconciliation

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the three months ended May 25, 2019 and May 26, 2018:



	Three Months Ended
(in thousands)	May 25, 2019			May 26, 2018
Net income	$	36,171		$	32,521
Interest expense	4,446			4,172
Provision for income taxes	8,717			11,684
Depreciation	3,520			2,351
Amortization of intangible assets	2,278			1,933
EBITDA	55,132			52,661
Acquisition-related costs	—			800
Restructuring expenses	1,102			—
Non-operating income	(360		)	(100		)
Adjusted EBITDA	$	55,874		$	53,361

Reportable Segment Performance Summary

Motorhome

~~Consolidated net~~

The following is an analysis of key changes in our Motorhome segment for the three months ended May 25, 2019 compared to the three months ended May 26, 2018:



	Three Months Ended
(in thousands, except ASP)	May 25, 2019		% of Revenues		May 26, 2018		% of Revenues		$ Change			% Change
Net revenues	$	160,239			$	244,870			$	(84,631	)	(34.6	)%
Adjusted EBITDA	381		0.2	%	11,677		4.8	%	(11,296		)	(96.7	)%

Average Selling Price ("ASP")⁽¹⁾	82,679				85,950				(3,271		)	(3.8	)%

	Three Months Ended
Unit deliveries	May 25, 2019		Product Mix⁽²⁾		May 26, 2018		Product Mix⁽²⁾		Unit Change			% Change
Class A	378		19.3	%	722		25.3	%	(344		)	(47.6	)%
Class B	515		26.2	%	606		21.2	%	(91		)	(15.0	)%
Class C	1,069		54.5	%	1,528		53.5	%	(459		)	(30.0	)%
Total motorhomes	1,962		100.0	%	2,856		100.0	%	(894		)	(31.3	)%


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


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

Net revenues decreased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 due to a decrease in the number of units sold as well as an unfavorable product mix.

Adjusted EBITDA decreased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 due to reduced sales volume, unfavorable mix of business, and continued competitive pricing and promotional pressures.

Unit deliveries decreased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 driven primarily by declines in our Class A and Class C products. Class B were also less than the prior year in the third quarter due to a temporary disruption in the supply of chassis used in two of our most popular Class B models.

Towable

The following is an analysis of key changes in our Towable segment for the three months ended May 25, 2019 compared to the three months ended May 26, 2018:



	Three Months Ended
(in thousands, except ASP)	May 25, 2019		% of Revenues		May 26, 2018		% of Revenues		$ Change		% Change
Net revenues	$	346,811			$	313,016			$	33,795	10.8	%
Adjusted EBITDA	57,172		16.5	%	45,378		14.5	%	11,794		26.0	%

ASP⁽¹⁾	33,318				31,826				1,492		4.7	%

	Three Months Ended
Unit deliveries	May 25, 2019		Product Mix⁽²⁾		May 26, 2018		Product Mix⁽²⁾		Unit Change		% Change
Travel trailer	6,185		59.5	%	6,063		62.1	%	122		2.0	%
Fifth wheel	4,216		40.5	%	3,703		37.9	%	513		13.9	%
Total towables	10,401		100.0	%	9,766		100.0	%	635		6.5	%


(1)	ASP excludes off-invoice dealer incentives.


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

Net revenues increased ~~$97.8 million or 26.4%~~in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 due to an increase in the number of units sold and pricing actions taken in the second quarter of Fiscal ~~2018~~2019.

Adjusted EBITDA increased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 due to an increase in sales volume and pricing actions taken during the second quarter of Fiscal ~~2017. This increase was~~2019.

Unit deliveries increased in the third quarter of Fiscal 2019 compared to the third quarter of Fiscal 2018 primarily due to volume growth in excess of recent industry trends.

Results of Operations - First Nine Months of Fiscal 2019 Compared to the First Nine Months of Fiscal 2018

Consolidated Performance Summary

The following is an analysis of changes in key items included in the consolidated statements of income and comprehensive income for the nine months ended May 25, 2019 compared to the nine months ended May 26, 2018:



	Nine Months Ended
(in thousands, except percent and per share data)	May 25, 2019			% of Revenues⁽¹⁾		May 26, 2018			% of Revenues⁽¹⁾		$ Change			% Change
Net revenues	$	1,455,278		100.0	%	$	1,480,641		100.0	%	$	(25,363	)	(1.7	)%
Cost of goods sold	1,231,269			84.6	%	1,264,635			85.4	%	(33,366		)	(2.6	)%
Gross profit	224,009			15.4	%	216,006			14.6	%	8,003			3.7	%
Selling, general, and administrative expenses	106,303			7.3	%	95,381			6.4	%	10,922			11.5	%
Amortization of intangible assets	7,204			0.5	%	5,921			0.4	%	1,283			21.7	%
Total operating expenses	113,507			7.8	%	101,302			6.8	%	12,205			12.0	%
Operating income	110,502			7.6	%	114,704			7.7	%	(4,202		)	(3.7	)%
Interest expense	13,293			0.9	%	13,871			0.9	%	(578		)	(4.2	)%
Non-operating income	(1,330		)	(0.1	)%	(212		)	—	%	1,118			527.4	%
Income before income taxes	98,539			6.8	%	101,045			6.8	%	(2,506		)	(2.5	)%
Provision for income taxes	18,609			1.3	%	28,478			1.9	%	(9,869		)	(34.7	)%
Net income	$	79,930		5.5	%	$	72,567		4.9	%	$	7,363		10.1	%

Diluted income per share	$	2.52				$	2.28				$	0.24		10.5	%
Diluted average shares outstanding	31,722					31,825					(103		)	(0.3	)%


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

Net revenues decreased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 primarily due to a decrease in our Motorhome segment sales which is partially offset by our Towable segment sales and the acquisition of Chris-Craft in the fourth quarter of Fiscal 2018.

Gross profit as a percentage of revenue increased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 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 costs 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~~pricing actions taken in the second quarter of Fiscal ~~2018.~~2019. This ~~decrease is~~was partially offset by reduced Motorhome sales volume and heightened dealer incentives.

Operating expenses increased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 due to the addition of the Chris-Craft business and increased investments in our business.

Interest expense decreased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 due to the unamortized debt issuance costs expensed in Fiscal 2018 related to ~~the amendment to~~our voluntary prepayment on our Credit Agreement ~~that occurred~~and our Credit Agreement amendment during the second quarter of Fiscal ~~2018. This amendment~~2018, which resulted in a decrease to the interest rate spread by 1.0% on the Term Loan and 0.25% on the ABL. ~~See Analysis~~

Non-operating income increased in the first nine months of ~~Financial Condition, Liquidity, and Resources and Note 9 for further information.~~

~~The overall effective income tax rate for~~Fiscal 2019 compared to the ~~second quarter~~first nine months of Fiscal 2018 ~~was 27.2% compared~~due to ~~the effective tax rate of 34.1% for the same period in Fiscal 2017.~~ net proceeds received from company-owned life insurance policies.

The effective tax rate decreased to 18.9% for the ~~second quarter~~first nine months of Fiscal 2019 compared to 28.2% for the first nine months of Fiscal 2018 ~~was favorably impacted by~~due primarily to the enactment of the Tax ~~Act. This decrease was~~Act on December 22, 2017 and to $3.6 million in net favorable discrete items, primarily ~~due~~attributable to R&D-related tax credits, realized in the current period. The reduction related to the ~~decrease in the Federal rate as a result~~enactment 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 1is primarily attributable to the ~~Condensed Consolidated Financial Statements.~~reduction in the Federal statutory tax rate to 21%.

Net income and diluted income per share ~~were $22.1 million and $0.69 per share, respectively, for~~increased in the ~~second quarter~~first nine months of Fiscal ~~2018. In the~~ ~~second quarter~~ of ~~Fiscal 2017, net income was $15.3 million and diluted income was $0.48 per share. The increase in net income and diluted income per share is due primarily~~2019 compared to the first nine months of Fiscal 2018 primarily due to improved profitability in our Towable segment ~~contribution to net income. In addition, FY2017 results of operations~~and the lower effective income tax rate, partially offset by a decrease in ~~the second quarter was impacted by the increased benefit of $12.0 million due to the termination of the postretirement health care plan.~~our Motorhome segment profitability.

Non-GAAP Reconciliation

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

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the ~~three~~first nine months ended ~~February 24, 2018~~May 25, 2019 and ~~February 25, 2017.~~May 26, 2018:


	Three Months Ended					Nine Months Ended
(In thousands)	February 24, 2018		February 25, 2017
(in thousands)						May 25, 2019			May 26, 2018
Net income	$	22,088	$	15,278		$	79,930		$	72,567
Interest expense	4,918		5,178			13,293			13,871
Provision for income taxes	8,234		7,916			18,609			28,478
Depreciation	2,198		1,848			9,788			6,679
Amortization of intangible assets	1,933		10,367			7,204			5,921
EBITDA	39,371		40,587			128,824			127,516
Postretirement health care benefit income	—		(11,983		)
Transaction costs	—		463
Non-operating expense	11		4
Acquisition-related costs						—			850
Restructuring expenses						1,321			—
Non-operating income						(1,330		)	(212		)
Adjusted EBITDA	$	39,382	$	29,071		$	128,815		$	128,154

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

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

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

~~Segment Results of Operations~~

The following is an analysis of key changes in our ~~Motorized~~Motorhome segment for the ~~three~~first nine months ended ~~February 24, 2018~~May 25, 2019 compared to the ~~three~~first nine months ended ~~February~~May 26, 2018 and as of May 25, ~~2017:~~2019 compared to May 26, 2018:


Motorized
(In thousands, except units)	Three Months Ended
	Feb 24, 2018		% of Revenue		Feb 25, 2017		% of Revenue			Increase (Decrease)			% Change		Nine Months Ended
(in thousands, except ASP)															May 25, 2019		% of Revenues		May 26, 2018		% of Revenues		$ Change			% Change
Net revenues	$	202,001			$	198,936				$	3,065		1.5	%	$	506,229			$	632,148			$	(125,919	)	(19.9	)%
Adjusted EBITDA	4,044		2.0	%	10,838		5.4		%	(6,794		)	(62.7	)%	16,716		3.3	%	22,264		3.5	%	(5,548		)	(24.9	)%

ASP⁽¹⁾															91,091				88,728				2,363			2.7	%

															Nine Months Ended
Unit deliveries	Feb 24, 2018		Product Mix % ⁽¹⁾		Feb 25, 2017		Product Mix % ⁽¹⁾			Increase (Decrease)			% Change		May 25, 2019		Product Mix⁽²⁾		May 26, 2018		Product Mix⁽²⁾		Unit Change			% Change
Class A	881		39.9	%	800		38.0		%	81			10.1	%	1,329		23.7	%	2,326		32.8	%	(997		)	(42.9	)%
Class B	411		18.6	%	376		17.8		%	35			9.3	%	1,847		33.0	%	1,387		19.6	%	460			33.2	%
Class C	918		41.5	%	931		44.2		%	(13		)	(1.4	)%	2,430		43.3	%	3,372		47.6	%	(942		)	(27.9	)%
Total motorhomes	2,210		100.0	%	2,107		100.0		%	103			4.9	%	5,606		100.0	%	7,085		100.0	%	(1,479		)	(20.9	)%

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

					As Of
($ in thousands)															May 25, 2019				May 26, 2018				Change			% Change
Backlog ⁽²⁾⁽³⁾					Feb 24, 2018		Feb 25, 2017			Increase (Decrease)			% Change
Units					3,053		2,143			910			42.5	%	2,074				2,155				(81		)	(3.8	)%
Dollars					$	276,231	$	191,522		$	84,709		44.2	%	$	182,354			$	193,079			$	(10,725	)	(5.6	)%

Dealer Inventory
Units					4,827		5,068			(241		)	(4.8	)%	4,235				4,750				(515		)	(10.8	)%

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

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


(1)	ASP excludes off-invoice dealer incentives.


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


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

~~Motorized net~~Net revenues ~~increased $3.1 million or 1.5%~~decreased in the ~~second quarter~~first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 asdue to a decrease

in the number of units sold, partially offset by increased pricing.

ASP increased in the first nine months of Fiscal 2019 compared to the ~~second quarter~~first nine months of Fiscal ~~2017. This was primarily~~2018 due to ~~an increase~~price increases during the second half of Fiscal 2018.

Adjusted EBITDA decreased in the ~~amount~~first nine months of ~~units sold.~~Fiscal 2019 compared to the first nine months of Fiscal 2018 due to lower volume and higher discounts, partially offset by favorable mix of business.

~~Motorized unit~~Unit deliveries ~~increased by 4.9%~~decreased in the ~~quarter. The unit growth we have generated has been~~first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 driven by decreases in our Class A and Class C products, partially offset by an increase in our Class B ~~and entry-level Class A products, which have a lower ASP. Additionally, we~~products.

We have seen a decrease in the volume and dollar value of backlog as of May 25, 2019 compared to May 26, 2018 due to the continuation of dealers right-sizing inventory levels, partially offset by an increase in ~~the backlog volumes by 42.5% in the second quarter of Fiscal 2018~~several Class B products 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~~temporary disruption in ~~backlog.~~chassis supply.

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

The following is an analysis of key changes in our Towable segment for the ~~three~~first nine months ended ~~February 24, 2018~~May 25, 2019 compared to the ~~three~~first nine months ended ~~February~~May 26, 2018 and as of May 25, ~~2017:~~2019 compared to May 26, 2018:


Towable
(In thousands, except units)	Three Months Ended
	Feb 24, 2018		% of Revenue		Feb 25, 2017		% of Revenue			Increase			% Change		Nine Months Ended
(in thousands, except ASP)															May 25, 2019		% of Revenues		May 26, 2018		% of Revenues		$ Change			% Change
Net revenues	$	266,358			$	171,574				$	94,784		55.2	%	$	890,335			$	839,039			$	51,296		6.1	%
Adjusted EBITDA	35,338		13.3	%	18,233		10.6		%	17,105			93.8	%	121,638		13.7	%	115,066		13.7	%	6,572			5.7	%

ASP⁽¹⁾															32,926				31,361				1,565			5.0	%

															Nine Months Ended
Unit deliveries	Feb 24, 2018		Product Mix % ⁽¹⁾		Feb 25, 2017		Product Mix % ⁽¹⁾			Increase (Decrease)			% Change		May 25, 2019		Product Mix⁽²⁾		May 26, 2018		Product Mix⁽²⁾		Unit Change			% Change
Travel trailer	5,083		59.9	%	3,046		56.3		%	2,037			66.9	%	16,564		60.5	%	16,495		61.3	%	69			0.4	%
Fifth wheel	3,398		40.1	%	2,365		43.7		%	1,033			43.7	%	10,818		39.5	%	10,428		38.7	%	390			3.7	%
Total towables	8,481		100.0	%	5,411		100.0		%	3,070			56.7	%	27,382		100.0	%	26,923		100.0	%	459			1.7	%

Towable ASP	$	31,648			$	32,310				$	(662	)	(2.0	)%

					As Of
($ in thousands)															May 25, 2019				May 26, 2018				Change			% Change
Backlog ⁽²⁾⁽³⁾					Feb 24, 2018		Feb 25, 2017			Increase			% Change
Units					9,342		8,490			852			10.0	%	7,089				9,968				(2,879		)	(28.9	)%
Dollars					$	302,630	$	261,995		$	40,635		15.5	%	$	237,708			$	313,513			$	(75,805	)	(24.2	)%

Dealer Inventory
Units					15,728		9,216			6,512			70.7	%	18,984				15,986				2,998			18.8	%

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


(1)	ASP excludes off-invoice dealer incentives.


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


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

~~Towable net~~Net revenues increased ~~$94.8 million or 55.2%~~ in the ~~second quarter~~first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 asdue to increased volume and a resulting improvement in our market share.

ASP increased in the first nine months of Fiscal 2019 compared to the ~~second quarter~~first nine months of Fiscal ~~2017. This increase was driven by strong organic~~2018 due to price increases during the first half of Fiscal 2019 as well as favorable product mix.

Adjusted EBITDA increased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 primarily due to sales growth.

~~Towable unit~~Unit deliveries ~~grew by 56.7%~~increased in the ~~quarter~~first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 primarily due to volume growth in excess of recent industry trends. Our Towable segment market share increased from ~~1.7%~~6.7% to ~~6.2%~~8.1% when comparing ~~shipments~~retail registrations during the twelve-month trailing periods ended ~~January 2017~~April 2018 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.~~April 2019. Shipments grew faster than

the industry as a result of greater penetration of our new products and further expansion of our ~~distribution base. In~~products on dealer lots.

We have seen a decrease in the backlog volumes as of May 25, 2019 compared to May 26, 2018 due to our utilization of additional capacity added during 2018 and re-balancing from high backlog levels in the prior year, in addition to a more challenging shipping environment in the ~~growth~~current year. We believe dealer inventory increased due to our increased market share in the Towable segment ~~profitability has increased due to~~and the ~~leverage of higher volume on the fixed cost components of~~strong demand for our ~~business as well as effective cost-savings initiatives.~~

~~Consolidated Results of Operations~~

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

~~Non-GAAP Reconciliation~~

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

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

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

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

~~Segment Results of Operations~~

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

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

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

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

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

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

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

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

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

Motorized net revenues decreased $1.7 million or 0.4% in the first six months of Fiscal 2018 as compared to the first six months of Fiscal 2017. This was primarily due to lower ASP on the mix of units sold.

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 related to the ramp up of our West Coast production facility and costs associated with new product start-up.

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

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

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

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

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

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

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

⁽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.

~~Towable net 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 2016 and organic volume growth.~~

Towable unit deliveries grew by 131.1% in the first six months of Fiscal 2018 primarily due to the acquisition of Grand Design and also due to Towable growth in excess of recent industry trends. With the addition of Grand Design in Fiscal 2017, our Towable market share increased from 1.7% to 6.2% when comparing shipments during the twelve-month trailing periods ended January 2017 and January 2018.

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

Analysis of Financial Condition, Liquidity, and Resources

Cash ~~and~~Flows

The following table summarizes our cash ~~equivalents decreased $8.5 million~~ ~~during~~flows from operations for the first ~~six~~nine months of ~~Fiscal 2018~~ended May 25, 2019 and ~~totaled~~ ~~$27.4 million~~ ~~as of~~ ~~February 24, 2018. Significant liquidity events that occurred during~~May 26, 2018:



	Nine Months Ended
(in thousands)	May 25, 2019			May 26, 2018
Total cash provided by (used in):
Operating activities	$	82,849		$	61,012
Investing activities	(30,497		)	(17,890		)
Financing activities	(50,518		)	(40,038		)
Net increase in cash and cash equivalents	$	1,834		$	3,084

Operating Activities

Cash provided by operating activities increased for the first ~~six~~nine months of ~~Fiscal~~ended May 25, 2019 compared to the first nine months ended May 26, 2018 ~~were:~~

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

~~Total borrowings at February 24, 2018 were $279.7 million, and we have an additional $105.3 million available~~ primarily due 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)~~

~~Increase~~favorable changes in ~~payables of $32.9 million~~working capital year-over-year, partially offset by ~~increases~~the timing of estimated tax payments.

Investing Activities

Cash used in ~~receivables, prepaid and other assets of $31.1 million~~

investing activities increased for the first nine months ended May 25, 2019 compared to the first nine months ended May 26, 2018 primarily due to increased capital expenditures related to the capacity expansions within our Towable segment.

~~Increase~~Financing Activities

Cash used in ~~inventory of $36.4 million~~

~~As described in Note 9,~~financing activities increased for the first nine months ended May 25, 2019 compared to the first nine months ended May 26, 2018 primarily due to increased net payments on our Credit Agreement ~~at February 24,~~and increased share repurchases.

Debt and Capital

As of September 21, 2018, ~~consisted~~we have a debt agreement that consists of a $300.0 million term loan agreement ("Term ~~Loan~~Loan") and a ~~$125.0~~$165.0 million ~~ABL~~asset-based revolving credit facility ("ABL") (collectively, the "Credit Agreement") with JPMorgan ~~Chase.~~Chase Bank, N.A. Refer to Note 9, Long-Term Debt, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended August 25, 2018 for additional details. As of May 25, 2019, we had $5.6 million in borrowings against the ABL.

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 million of our common stock in one or more offerings pursuant to the registration statement. The registration statement will be available for three years from its effective date. We currently have no plans to offer and sell the common stock registered under the registration statement, however, it does provide another potential source of liquidity to raise capital if we need it, in addition to other alternatives already in place.Other Financial Measures

Working capital at ~~February 24,~~May 25, 2019 and August 25, 2018 was $186.2 million and ~~August 26, 2017~~ ~~was~~ ~~$177.1~~$167.8 million, ~~and~~ ~~$147.0 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 Credit Agreement 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 ~~repurchases~~Repurchases and Dividends

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

On December 19, 2007, our Board of Directors authorized the repurchase of outstanding shares of our common stock, depending on market conditions, for an aggregate consideration of up to $60.0 million. On October 18, 2017, our Board of Directors authorized a share repurchase program in the amount of $70.0 million. There is no time restriction on either authorization. In the first ~~six~~nine months ~~of Fiscal 2018 were to satisfy tax obligations on employee equity awards as they vested.~~ended May 25, 2019, we repurchased 0.2 million shares for $5.7 million under this authorization. We continually

evaluate if share repurchases reflect a prudent use of our capital and, subject to compliance with our Credit Agreement, we may purchase shares in the ~~remainder of Fiscal 2018.~~future. At ~~February 24, 2018,~~May 25, 2019, we have ~~$71.0~~$60.3 million remaining on our board repurchase authorization.

On May 22, 2019, our Board of Directors approved a quarterly cash dividend of $0.11 per share payable on July 3, 2019, to common stockholders of record at the close of business on June 19, 2019.

Contractual Obligations and Commercial Commitments

There has been no material change in our contractual obligations other than in the ordinary course of business since the end of Fiscal 2018. See ~~Part II, Item 2 of this~~our Annual Report on Form ~~10-Q.~~

~~Operating Activities~~

~~Cash provided by operating activities was~~ ~~$15.0 million~~10-K for the ~~six months~~fiscal year ended ~~February 24,~~August 25, 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 growth~~additional information regarding our contractual obligations and ~~an increase in inventory due to planned inventory build.~~

~~Investing Activities~~

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

~~Financing Activities~~

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

Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 1: Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017.~~25, 2018. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended August ~~26, 2017. We refer to these disclosures for a detailed explanation of our significant accounting policies and critical accounting estimates.~~ 25, 2018.

There ~~has~~have been no significant ~~change~~changes in our significant accounting policies or critical accounting estimates since the end of Fiscal ~~2017, except as disclosed in Note 1 to the consolidated financial statements.~~2018.

New Accounting Pronouncements

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act

Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as "anticipate," "assume," "believe," "estimate," "expect," "guidance," "intend," "outlook," "plan," "project," and other words and terms of similar meaning. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment, and other events. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August 25, 2018, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: competition and new product introductions by competitors, our ability to attract and retain qualified personnel, business or production disruptions, sales order cancellations, risk related to compliance with debt covenants and leverage ratios, stock price volatility, availability of labor, a slowdown in the economy, low consumer confidence, the effect of global tensions, increases in interest rates, availability of credit, risk related to cyclicality and seasonality, slower than anticipated sales of new or existing products, integration of operations relating to merger and acquisition activities generally, inadequate liquidity or capital resources, inventory and distribution channel management, our ability to innovate, our reliance on large dealer organizations, significant increase in repurchase obligations, availability and price of fuel, availability of chassis and other key component parts, increased material and component costs, exposure to warranty claims, ability to protect our intellectual property, exposure to product liability claims, dependence on information systems and web applications, any unexpected expenses related to ERP, risk related to data security, governmental regulation, including for climate change, and risk related to anti-takeover provisions applicable to us and other factors. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made, and we assume no obligation to update any forward-looking statement that we may make.

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

~~Interest rate~~There have been no material changes in our primary risk

~~We are exposed to~~ exposures or management of market risks ~~related to fluctuations~~from those previously disclosed in ~~interest rates~~Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on the outstanding variable rate debt. As of February 24, 2018, we had $260.0 million outstanding under our Term Loan, subject to variable interest rates. This risk is partially mitigated through an interest rate swap contract as detailed below.

Under terms of the Credit Agreement, we were previously required to maintain interest rate swaps to manage 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 LIBORForm 10-K 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.~~fiscal year ended August 25, 2018.

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

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

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control Over Financial Reporting

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

There were no changes in our internal control over financial reporting that occurred during the ~~second~~third quarter of Fiscal ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART IIII. OTHER ~~INFORMATION~~INFORMATION.

Item 1. Legal ~~Proceedings~~Proceedings.

~~We are involved in various~~For a description of our legal proceedings, ~~that are ordinary litigation incidental~~see Note 11, Contingent Liabilities and Commitments, of the Notes to ~~our business, some of which are covered~~Condensed Consolidated Financial Statements, included in ~~whole or in part by insurance. While we believe the ultimate disposition of litigation will not have material adverse effect~~this Quarterly Report on our financial position, results of operations or liquidity, there exists the possibility that such litigation may have an impact on our results for a particular reporting period in which litigation effects become probable and reasonably estimable. Though we do not believe there is a reasonable likelihood that there will be a material change related to these matters, litigation is subject to inherent uncertainties and management’s view of these matters may change in the future.Form 10-Q.

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

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form ~~10K~~10-K for the fiscal year ended August ~~26, 2017~~.25, 2018.

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

On December 19, 2007, our Board of Directors authorized the repurchase of outstanding shares of our common stock, depending on market conditions, for an aggregate consideration of up to $60 million. There is no time restriction on this authorization. During the ~~second quarter~~ of ~~Fiscal 2018, 2,117 shares were repurchased under the authorization, at an aggregate cost of approximately $0.1 million. All of these shares 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.~~(c) Stock Repurchases

~~On October 18, 2017, our Board of Directors authorized a share repurchase program in the amount of $70.0 million. There is no time restriction on this 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~~third quarter of Fiscal ~~2018~~2019 were:

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

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

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

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



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs⁽²⁾
02/24/19 - 03/30/19	—	$	—	—	$	60,682,000
03/31/19 - 04/27/19	17,813	$	36.42	—	$	60,682,000
04/28/19 - 05/25/19	13,746	$	33.10	12,729	$	60,262,000
Total	31,559	$	34.97	12,729	$	60,262,000


(1)	Shares not purchased as part of a publicly announced program were repurchased from employees who vested in Company shares and elected to pay their payroll tax via the value of shares delivered as opposed to cash.


(2)	Pursuant to a combined $130.0 million share repurchase program authorized by our Board of Directors. On December 19, 2007, $60.0 million was approved, and on October 18, 2017, $70.0 million was approved. There is no time restriction on either authorization.

Our Credit Agreement, as defined in Note 9, Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements, included in Item 1, Condensed Consolidated Financial Statements, of this Quarterly Report on Form 10-Q, contains restrictions that may limit our ability to make distributions or payments with respect to purchases of our common stock without consent of the lenders, except for limited purchases of our common stock from employees, in the event of a significant reduction in our EBITDA or in the event of a significant borrowing on our ~~ABL.~~asset-based revolving credit agreement.

Item 6. ~~Exhibits~~Exhibits.



3a.		Articles of Incorporation of the Registrant previously filed as Exhibit 3a with the Registrant’s ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~fiscal year ended ~~May 27, 2000~~August 25, 2018 (Commission File Number 001-06403) and incorporated by reference herein.

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

~~10a.~~		Executive Change of Control Agreement between Winnebago Industries, Inc. and Bryan L. Hughes previously filed with the Registrant’s Current Report on Form 8-K dated December 22, 2017 (Commission File Number 001-06403) and incorporated by reference herein.

31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ~~dated March 22, 2018~~
		.
31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002 dated March 22, 2018~~
		2002.
32.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 dated March 22, 2018~~
		2002.
32.2		Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002 dated March 22, 2018~~2002.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*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~~May 25, 2019 formatted in XBRL: (i) the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated ~~Statement~~Statements of Cash Flows, (iv) the Unaudited Condensed Consolidated Statements of Changes in Stockholders' ~~Statement of~~ Equity, and (v) related ~~notes~~Notes to ~~these financial statements. Such exhibits are deemed furnished and not filed pursuant to Rule 406T of Regulation S-T.~~Condensed Consolidated Financial Statements.

SIGNATURES

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



		WINNEBAGO INDUSTRIES, INC.

Date:	~~March 22, 2018~~June 20, 2019	By	/s/ Michael J. Happe
			Michael J. Happe
			Chief Executive Officer, President
			(Principal Executive Officer)

Date:	~~March 22, 2018~~June 20, 2019	By	/s/ Bryan L. Hughes
			Bryan L. Hughes
			Vice President, Chief Financial Officer
			(Principal Financial and Accounting Officer)

3135



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



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



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



			Fair Value Measurements Using Inputs Considered As
(In thousands)	Fair Value at 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:
Domestic equity funds	$	1,580	$	1,546	$	34	$	—
International equity funds	176		157		19		—
Fixed income funds	176		83		93		—
Interest rate swap contract	1,924		—		1,924		—
Total assets at fair value	$	3,856	$	1,786	$	2,070	$	—



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