UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)

☒			~~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 29, 2020

☐

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~~

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.)

~~Iowa~~

~~42-0802678~~

~~(State or other jurisdiction of incorporation or organization)~~

~~(I.R.S. Employer Identification No.)~~

P. O. Box 152

Forest City ~~Iowa~~

Iowa

50436

(Address of principal executive offices)

(Zip Code)

~~(641) 585-3535~~

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 x ☒No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x ☒No o☐

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



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

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated filer ☐

Smaller Reporting Company ☐ Emerging Growth Company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o ☐No x☒

The number of shares of common stock, par value $0.50 per share, outstanding on ~~June 14, 2019~~March 18, 2020 was ~~31,618,011.~~33,696,855.

Winnebago Industries, Inc.

Table of Contents

PART I. FINANCIAL INFORMATION.

Item 1. Condensed Consolidated Financial Statements.

Winnebago Industries, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
(in thousands, except per share data)	May 25, 2019			May 26, 2018			May 25, 2019			May 26, 2018			(in thousands, except per share data)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Net revenues	$	528,940		$	562,261		$	1,455,278		$	1,480,641		Net revenues	$	626,810	$	432,690	$	1,215,268	$	926,338
Cost of goods sold	442,356			476,747			1,231,269			1,264,635			Cost of goods sold	547,028		366,261		1,056,873		788,913
Gross profit	86,584			85,514			224,009			216,006			Gross profit	79,782		66,429		158,395		137,425
Selling, general, and administrative expenses	35,332			35,304			106,303			95,381			Selling, general, and administrative expenses	42,164		35,259		93,269		70,971
Amortization of intangible assets	2,278			1,933			7,204			5,921			Amortization of intangible assets	7,974		2,267		11,588		4,926
Total operating expenses	37,610			37,237			113,507			101,302			Total operating expenses	50,138		37,526		104,857		75,897
Operating income	48,974			48,277			110,502			114,704			Operating income	29,644		28,903		53,538		61,528
Interest expense	4,446			4,172			13,293			13,871			Interest expense	8,651		4,346		14,700		8,847
Non-operating income	(360		)	(100		)	(1,330		)	(212		)	Non-operating income	(270)		(207)		(386)		(970)
Income before income taxes	44,888			44,205			98,539			101,045			Income before income taxes	21,263		24,764		39,224		53,651
Provision for income taxes	8,717			11,684			18,609			28,478			Provision for income taxes	3,995		3,166		7,888		9,892
Net income	$	36,171		$	32,521		$	79,930		$	72,567		Net income	$	17,268	$	21,598	$	31,336	$	43,759

Income per common share:													Income per common share:
Basic	$	1.15		$	1.03		$	2.53		$	2.30		Basic	$	0.51	$	0.68	$	0.95	$	1.39
Diluted	$	1.14		$	1.02		$	2.52		$	2.28		Diluted	$	0.51	$	0.68	$	0.95	$	1.38

Weighted average common shares outstanding:													Weighted average common shares outstanding:
Basic	31,493			31,582			31,546			31,617			Basic	33,614		31,577		32,840		31,572
Diluted	31,644			31,753			31,722			31,825			Diluted	33,918		31,724		33,143		31,755

Net income	$	36,171		$	32,521		$	79,930		$	72,567		Net income	$	17,268	$	21,598	$	31,336	$	43,759
Other comprehensive income (loss):													Other comprehensive income (loss):
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
Amortization of net actuarial loss (net of tax of $3, $2, $5, and $5)													Amortization of net actuarial loss (net of tax of $3, $2, $5, and $5)	8		8		16		16
Interest rate swap activity (net of tax of $—, $206, $22, and $213)													Interest rate swap activity (net of tax of $—, $206, $22, and $213)	—		(634)		(68)		(656)
Total other comprehensive income (loss)	(354		)	136			(994		)	2,066			Total other comprehensive income (loss)	8		(626)		(52)		(640)
Comprehensive income	$	35,817		$	32,657		$	78,936		$	74,633		Comprehensive income	$	17,276	$	20,972	$	31,284	$	43,119

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except per share data)	May 25, 2019			August 25, 2018			(in thousands, except per share data)	February 29, 2020		August 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	4,176		$	2,342		Cash and cash equivalents	$	122,939	$	37,431
Receivables, less allowance for doubtful accounts ($163 and $197, respectively)	185,546			164,585
Receivables, less allowance for doubtful accounts ($381 and $160, respectively)							Receivables, less allowance for doubtful accounts ($381 and $160, respectively)	182,475		158,049
Inventories, net	190,883			195,128			Inventories, net	237,808		201,126
Prepaid expenses and other assets	10,480			9,883			Prepaid expenses and other assets	20,883		14,051
Total current assets	391,085			371,938			Total current assets	564,105		410,657
Property, plant, and equipment, net	121,977			101,193			Property, plant, and equipment, net	169,840		127,572
Other assets:							Other assets:
Goodwill	275,657			274,370			Goodwill	348,860		274,931
Other intangible assets, net	258,513			265,717			Other intangible assets, net	415,285		256,082
Investment in life insurance	27,111			28,297			Investment in life insurance	27,231		26,846
Operating lease assets							Operating lease assets	30,460		—
Other assets	8,860			10,290			Other assets	16,146		8,143
Total assets	$	1,083,203		$	1,051,805		Total assets	$	1,571,927	$	1,104,231

Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:							Current liabilities:
Accounts payable	$	84,304		$	81,039		Accounts payable	$	99,211	$	81,635
Income taxes payable	—			15,655

Accrued expenses:							Accrued expenses:
Accrued compensation	27,288			29,350			Accrued compensation	28,639		20,328
Product warranties	43,624			40,498			Product warranties	60,211		44,436
Self-insurance	13,316			12,262			Self-insurance	15,639		13,820
Promotional	15,046			11,017			Promotional	13,761		10,896
Accrued interest	3,963			3,095			Accrued interest	747		4,059
Other	10,810			11,269			Other	18,773		13,678
Current maturities of long-term debt	6,500			—			Current maturities of long-term debt	13,668		8,892
Total current liabilities	204,851			204,185			Total current liabilities	250,649		197,744
Non-current liabilities:							Non-current liabilities:
Long-term debt, less current maturities	253,071			291,441			Long-term debt, less current maturities	451,134		245,402
Deferred income taxes	5,255			4,457			Deferred income taxes	17,057		12,032
Unrecognized tax benefits	3,501			1,745			Unrecognized tax benefits	6,253		3,591
Operating lease liabilities							Operating lease liabilities	27,882		—
Deferred compensation benefits, net of current portion	13,161			15,282			Deferred compensation benefits, net of current portion	12,166		12,878
Other	371			250			Other	5,262		372
Total non-current liabilities	275,359			313,175			Total non-current liabilities	519,754		274,275
Contingent liabilities and commitments (Note 11)
Contingent liabilities and commitments (Note 12)							Contingent liabilities and commitments (Note 12)
Stockholders' equity:							Stockholders' equity:
Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-none	—			—
Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-0							Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-0	—		—
Common stock, par value $0.50: Authorized-60,000 shares; Issued-51,776 shares	25,888			25,888			Common stock, par value $0.50: Authorized-60,000 shares; Issued-51,776 shares	25,888		25,888
Additional paid-in capital	89,896			86,223			Additional paid-in capital	200,751		91,185
Retained earnings	838,506			768,816			Retained earnings	890,994		866,886
Accumulated other comprehensive (loss) income	(102		)	892
Treasury stock, at cost: 20,271 and 20,243 shares, respectively	(351,195		)	(347,374		)
Accumulated other comprehensive loss							Accumulated other comprehensive loss	(543)		(491)
Treasury stock, at cost: 18,153 and 20,262 shares, respectively							Treasury stock, at cost: 18,153 and 20,262 shares, respectively	(315,566)		(351,256)
Total stockholders' equity	602,993			534,445			Total stockholders' equity	801,524		632,212
Total liabilities and stockholders' equity	$	1,083,203		$	1,051,805		Total liabilities and stockholders' equity	$	1,571,927	$	1,104,231

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


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

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

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

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

Table of Contents

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


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

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

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

Winnebago Industries, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)


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

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

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

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

Table of Contents

Winnebago Industries, Inc.

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

(Unaudited)

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
Number Amount Number Amount
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


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

See Notes to Condensed Consolidated Financial Statements.

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Winnebago Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1: Basis of Presentation

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

In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.

Interim results are not necessarily indicative of the results to be expected for the full year. The interim Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended August ~~25, 2018.~~31, 2019.

Fiscal Period

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

Subsequent Events

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

~~New~~Dividend

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

Interest Rate Swap

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

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

COVID-19

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

Recently Adopted Accounting Pronouncements

~~In February 2016, the Financial Accounting Standards Board ("FASB") issued~~We adopted 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. This ASU and the related amendments must be adopted on a modified retrospective basis to either each prior reporting period presented or as of ~~the beginning of the period of adoption. Based on the effective dates, we expect to adopt the new guidance in the first quarter of Fiscal 2020~~September 1, 2019, 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 surveying our businesses, assessing our lease population, and compiling information on our active leases.~~ In addition, we ~~are determining needed changes~~elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allowed us to carry forward the historical lease classification, and we elected the hindsight practical expedient. Adoption of the new standard resulted in the recording of net lease assets and lease liabilities of $33.8 million and $33.4 million, respectively, as of September 1, 2019. The standard did not materially impact our ~~policies, business processes, internal controls,~~consolidated net earnings and ~~disclosures. Based~~had no impact on our ~~analysis,~~cash flows.

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The following table details line items impacted by the adoption of this ASU within the Condensed Consolidated Balance Sheets as of September 1, 2019:


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

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

Also, in the first quarter of Fiscal 2020, we ~~do not expect a material impact to our consolidated financial statements.~~

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

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU ~~2017-12~~2016-13, Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments, and has since issued additional amendments. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The standard is effective for annual reporting periods beginning after December 15, ~~2018~~2019 (our Fiscal ~~2020)~~2021), including interim periods within those annual reporting periods. ~~Early adoption is permitted.~~ We expect to adopt the new guidance in the first quarter of Fiscal ~~2020,~~2021, and we do not expect a material impact to our consolidated financial statements.

~~Recently Adopted~~In December 2019, the Financial Accounting ~~Pronouncements~~

InStandards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740):Simplifying the ~~first quarter~~Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740. The standard is effective for annual reporting periods beginning after December 15, 2020 (our Fiscal ~~2019, we adopted ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~2022), ~~which establishes a comprehensive five-step model for~~including interim periods within those annual reporting periods. We expect to adopt 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. 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. While certain control processes and procedures were updated for this adoption, the changes did not have a material impact on our internal control over financial reporting framework.

~~Also~~new guidance in the first quarter of Fiscal 2022, and we do not expect a material impact to our consolidated financial statements.

Note 2: Business Combinations

Newmar Corporation

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

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


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

The cash portion of the purchase price of the acquisition and certain transaction expenses were funded through the private placement of convertible senior notes (as further described in Note 9, Long-Term Debt) and cash on hand. The stock consideration was discounted by 7.0% due to lack of marketability because of the one year lock-up restrictions.

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The total purchase price was allocated to the net tangible and intangible assets of Newmar acquired, based on their fair values at the date of the acquisition. We believe that the information provides a reasonable basis for estimating the fair values, but we ~~retrospectively adopted ASU 2016-15,~~ ~~Classification~~are waiting for additional information necessary to finalize the working capital adjustment as defined in the purchase agreement and the amounts related to income taxes. Thus, the preliminary measurements of ~~Certain Cash Receipts~~fair value reflected are subject to change. We expect to finalize the valuation and ~~Cash Payments (Topic 230), which provides guidance~~complete the purchase price allocation no later than one year from the acquisition date. The following table summarizes the preliminary fair values assigned to the Newmar net assets acquired and the determination of net assets:


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

The goodwill, recognized in our Motorhome segment, is primarily attributable to the value of the workforce, reputation of founders, customer and dealer growth opportunities, and expected synergies. Key areas of cost synergies include increased purchasing power for ~~eight specific cash flow issues with~~raw materials and supply chain consolidation. Goodwill is expected to be mostly deductible for tax purposes.

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


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

The fair value of ~~reducing~~ the ~~existing diversity in practice.~~trade name and dealer network were estimated using an income approach. Under the income approach, an intangible asset's fair value is equal to the present value of the future economic benefits to be derived from ownership of the asset. The ~~adoption~~fair value of ~~this standard did not materially impact our statements~~the trade name was estimated using an income approach, specifically the relief from royalty method. The relief from royalty method is based on the hypothetical royalty stream that would be received if we were to license the trade name and was based on expected revenues. The fair value of the trade name was estimated using an income approach, specifically the cost to recreate/cost saving method. This method uses the replacement of the asset as an indicator of the fair value of the asset. The useful life of the intangibles was determined considering the expected cash flows ~~and no cash flow reclassifications were required~~used to measure the fair value of the intangible assets adjusted for the entity-specific factors including legal, regulatory, contractual, competitive, economic or other factors that may limit the useful life of intangible assets. On the acquisition date, amortizable intangible assets had a weighted-average useful life of approximately 10.5 years.

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The results of Newmar's operations have been included in our Condensed Consolidated Financial Statements from the close of the acquisition within the Motorhome segment. The following table provides net revenues and operating income from the Newmar operating segment included in our consolidated results following the November 8, 2019 closing date:


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

The following unaudited pro forma information represents our results of operations as if the Fiscal 2020 acquisition of Newmar had occurred at the beginning of Fiscal 2019:


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

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


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

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

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

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

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

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

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

Transaction costs related to the Newmar acquisition were $10.6 million, of which $10.0 million were expensed during the first quarter of Fiscal 2020 and $0.6 million were expensed during the fourth quarter of Fiscal 2019. Transaction costs are included in Selling, general, and administrative expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Note 2:3: Business Segments

~~In the fourth quarter of Fiscal 2018, we revised our segment presentation.~~ We have ~~five~~6 operating segments: 1) ~~Winnebago motorhomes,~~Grand Design towables, 2) Winnebago towables, 3) ~~Grand Design towables,~~Winnebago motorhomes, 4) Newmar motorhomes, 5) Chris-Craft marine, and 6) Winnebago specialty ~~vehicles, and 5) Chris-Craft marine.~~vehicles. We evaluate performance based on each operating segment's Adjusted EBITDA, as defined below, which excludes certain corporate administration expenses and non-operating income and expense.

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

The Corporate / All Other category includes the Chris-Craft marine and Winnebago specialty vehicles ~~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 our Chief Executive Officer. Our CODM relies on internal management reporting that analyzes consolidated results to the net earnings level and operating segment's Adjusted EBITDA. Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors the performance of, the consolidated enterprise, the ~~Motorhome~~Towable segment, and the ~~Towable~~Motorhome segment. The operating segments' management have responsibility for operating decisions, allocating resources, and assessing performance within their respective segments. The accounting policies of both reportable segments are the same and are described 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 ~~25, 2018.~~31, 2019.

We evaluate the performance of our reportable segments based on 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. Examples of items excluded from Adjusted EBITDA include acquisition-related fair-value inventory step-up, acquisition-related costs, restructuring expenses, and non-operating income.

The following table shows information by reportable segment:


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

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

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

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	Three Months Ended						Nine Months Ended
(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	346,811			313,016			890,335			839,039
Corporate / All Other	21,890			4,375			58,714			9,454
Consolidated	$	528,940		$	562,261		$	1,455,278		$	1,480,641

Adjusted EBITDA
Motorhome	$	381		$	11,677		$	16,716		$	22,264
Towable	57,172			45,378			121,638			115,066
Corporate / All Other	(1,679		)	(3,694		)	(9,539		)	(9,176		)
Consolidated	$	55,874		$	53,361		$	128,815		$	128,154

Capital Expenditures
Motorhome	$	2,543		$	2,643		$	7,933		$	7,383
Towable	4,810			3,805			21,335			10,740
Corporate / All Other	962			—			2,413			—
Consolidated	$	8,315		$	6,448		$	31,681		$	18,123

(in thousands)							May 25, 2019			August 25, 2018			(in thousands)	February 29, 2020		August 31, 2019
Total Assets													Total Assets
Towable													Towable	$	687,718	$	628,994
Motorhome							$	336,334		$	322,048		Motorhome	653,014		332,157
Towable							637,371			626,588
Corporate / All Other							109,498			103,169			Corporate / All Other	231,195		143,080
Consolidated							$	1,083,203		$	1,051,805		Consolidated	$	1,571,927	$	1,104,231

Reconciliation of net income to consolidated Adjusted EBITDA:


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

Three Months Ended Nine Months Ended
(in thousands) May 25, 2019 May 26, 2018 May 25, 2019 May 26, 2018
Net income $ 36,171
$ 32,521
$ 79,930
$ 72,567
Interest expense 4,446
4,172
13,293
13,871
Provision for income taxes 8,717
11,684
18,609
28,478
Depreciation 3,520
2,351
9,788
6,679
Amortization of intangible assets 2,278
1,933
7,204
5,921
EBITDA 55,132
52,661
128,824
127,516
Acquisition-related costs —
800
—
850
Restructuring expenses 1,102
—
1,321
—
Non-operating income (360 ) (100 ) (1,330 ) (212 )
Adjusted EBITDA $ 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: 4: Derivatives, Investments, and Fair Value Measurements

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

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

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

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

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

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

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

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

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

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

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The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at ~~May 25, 2019~~February 29, 2020 and August ~~25, 2018~~31, 2019 according to the valuation techniques we used to determine their fair values:


	Fair Value at		Fair Value Hierarchy
(in thousands)	February 29, 2020		Level 1		Level 2		Level 3
Assets that fund deferred compensation:
Domestic equity funds	$	435	$	343	$	92	$	—
International equity funds	100		34		66		—
Fixed income funds	173		52		121		—
Total assets at fair value	$	708	$	429	$	279	$	—

Fair Value at Fair Value Hierarchy
(in thousands) May 25,
2019 Level 1 Level 2 Level 3
Assets that fund deferred compensation:
Domestic equity funds $ 439
$ 357
$ 82
$ —
International equity funds 108
52
56
—
Fixed income funds 155
22
133
—
Interest rate swap contract 614
—
614
—
Total assets at fair value $ 1,316
$ 431
$ 885
$ —


	Fair Value at		Fair Value Hierarchy
(in thousands)	August 31, 2019		Level 1		Level 2		Level 3
Assets that fund deferred compensation:
Domestic equity funds	$	373	$	288	$	85	$	—
International equity funds	101		45		56		—
Fixed income funds	155		54		101		—
Interest rate swap contract	90		—		90		—
Total assets at fair value	$	719	$	387	$	332	$	—

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. 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. Refer to 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~~31, 2019 for additional information regarding these plans.

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

Interest Rate Swap Contract

On January 23, 2017, we entered into an interest rate swap contract, which effectively fixed our interest rate on our $300.0 million term loan agreement ("Term Loan") for a notional amount that ~~reduces~~reduced each December during the swap contract. As of ~~May 25,~~August 31, 2019, we had $120.0 million of our Term Loan fixed at an interest rate of 5.32%. AsIn the first quarter of ~~August 25, 2018,~~Fiscal 2020, we ~~had $170.0 million of our Term Loan fixed at an interest rate of 5.32%. The~~exited the swap contract ~~expires~~prior to its expiration on December 8, 2020.

The fair value of the interest rate swap iswas classified as Level 2 as it iswas determined based on observable market data. The asset iswas included in Other assets on the Condensed Consolidated Balance Sheets. The change in value iswas recorded to Accumulated other comprehensive ~~(loss) income~~loss on the Condensed Consolidated Balance Sheets since the interest rate swap ~~has been~~was 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 has occurred, the asset is required to be recorded at the estimated fair value. NoNaN impairments were recorded for non-financial assets in the ~~third~~second quarter of Fiscal ~~2019~~2020 or the ~~third~~second quarter of Fiscal ~~2018.~~2019.

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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 long-term debt.

Note 5: Inventories

Inventories consist of the following:


(in thousands)	May 25, 2019		August 25, 2018		(in thousands)	February 29, 2020		August 31, 2019
Finished goods	$	42,876	$	26,513	Finished goods	$	62,569	$	53,417
Work-in-process	93,949		68,339		Work-in-process	110,058		82,926
Raw materials	94,365		139,039		Raw materials	106,865		105,804
Total	231,190		233,891		Total	279,492		242,147
Less last-in, first-out ("LIFO") reserve	40,307		38,763		Less last-in, first-out ("LIFO") reserve	41,684		41,021
Inventories, net	$	190,883	$	195,128	Inventories, net	$	237,808	$	201,126

Inventory valuation methods consist of the following:


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

(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.

Note 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 29, 2020		August 31, 2019
Land	$	10,749	$	6,799
Buildings and building improvements	156,865		119,638
Machinery and equipment	113,957		107,701
Software	29,622		29,169
Transportation	4,212		3,865
Property, plant, and equipment, gross	315,405		267,172
Less accumulated depreciation	145,565		139,600
Property, plant, and equipment, net	$	169,840	$	127,572

(in thousands) May 25,
2019 August 25,
2018
Land $ 8,686
$ 6,747
Buildings and building improvements 112,898
94,622
Machinery and equipment 108,585
105,663
Software 28,152
23,388
Transportation 3,837
8,837
Property, plant, and equipment, gross 262,158
239,257
Less accumulated depreciation 140,181
138,064
Property, plant, and equipment, net $ 121,977
$ 101,193

Depreciation expense was ~~$3.5~~$4.1 million and ~~$2.4~~$3.1 million during the ~~third~~second quarters of Fiscal 2020 and 2019, respectively; and ~~2018, respectively, and $9.8~~$7.7 million and ~~$6.7~~$6.3 million during the first ~~nine~~six months of Fiscal ~~2019~~2020 and ~~2018,~~2019, respectively.

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Note 7: Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows for the first ~~nine~~six months of Fiscal ~~2019~~2020 and ~~2018,~~2019, of which there ~~are~~were no accumulated impairment losses:


(in thousands)	Towable		Motorhome		Corporate / All Other		Total
Balances at August 25, 2018	$	244,684	$	—	$	29,686	$	274,370
Chris-Craft purchase price adjustment⁽¹⁾	—		—		702		702
Balances at February 23, 2019	$	244,684	$	—	$	30,388	$	275,072

Balances at August 31, 2019	$	244,684	$	—	$	30,247	$	274,931
Acquisition of Newmar⁽²⁾	—		73,929		—		73,929
Balances at February 29, 2020	$	244,684	$	73,929	$	30,247	$	348,860

(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.~~

(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 31, 2019 for additional information.

(2) Refer to Note 2, Business Combinations, for additional information.

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


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

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 weighted average remaining amortization period for intangible assets as of ~~May 25, 2019~~February 29, 2020 was approximately 1110 years.

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


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

(in thousands) 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~~Product Warranties

We provide certain service and warranty on our products. From time to time, we also voluntarily incur costs for certain warranty-type expenses occurring after the normal warranty period to help protect the reputation of our products and the goodwill of our customers. 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.

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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
(in thousands)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Balance at beginning of period	$	61,107	$	41,303	$	44,436	$	40,498
Business acquisition⁽¹⁾	—		—		15,147		—
Provision	15,729		9,194		31,047		19,951
Claims paid	(16,625)		(10,192)		(30,419)		(20,144)
Balance at end of period	$	60,211	$	40,305	$	60,211	$	40,305

(1) Refer to Note 2, Business Combinations, for additional information.

Three Months Ended Nine Months Ended
(in thousands) May 25,
2019 May 26,
2018 May 25,
2019 May 26,
2018
Balance at beginning of period $ 40,305
$ 34,988
$ 40,498
$ 30,805
Provision 14,139
11,645
34,090
31,881
Claims paid (10,820 ) (9,189 ) (30,964 ) (25,242 )
Balance at end of period $ 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 29, 2020		August 31, 2019
ABL Credit Facility	$	—	$	—
Term Loan	257,250		260,000
Convertible Notes	300,000		—
Long-term debt, gross	557,250		260,000
Convertible Notes unamortized interest discount	(80,839)		—
Debt issuance costs, net	(11,609)		(5,706)
Long-term debt	464,802		254,294
Less current maturities	13,668		8,892
Long-term debt, less current maturities	$	451,134	$	245,402

Credit Agreements

On November 8, 2016, we entered into a $125.0 million credit facility ("~~ABL"~~ABL Credit Facility") and a $300.0 million loan agreement ("Term ~~Loan~~Loan") with JPMorgan Chase Bank, N.A. ("(the agreements governing the ABL Credit ~~Agreement"). On December 8, 2017, we amended our Credit Agreement, which decreased the interest rate spread on~~Facility and the Term Loan, collectively the "Credit Agreements"). On October 22, 2019, our ABL Credit Facility was amended and restated to, among other things, increase the ~~ABL. As of September 21, 2018, the amount that may be borrowed under the ABL was increased~~commitments thereunder to ~~$165.0~~$192.5 million.

The Credit ~~Agreement contains~~Agreements contain certain financial covenants. As of ~~May 25, 2019,~~February 29, 2020, we are in compliance with all financial covenants of the Credit ~~Agreement.~~Agreements.

Convertible Notes

On November 1, 2019, we issued $300.0 million in aggregate principal amount of 1.5% unsecured convertible senior notes due 2025 (“Convertible Notes”). The net proceeds from the issuance of the Convertible Notes, after deducting the initial purchasers' transaction fees and offering expense payable by us, were approximately $290.4 million. The Convertible Notes bear interest at the annual rate of 1.5%, payable on April 1 and October 1 of each year, beginning on April 1, 2020, and will mature on April 1, 2025, unless earlier converted or repurchased by us.

The Convertible Notes will be convertible into cash, shares of our common stock or a combination thereof, at our election, at an initial conversion rate of 15.6906 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $63.73 per share, as adjusted pursuant to the terms of the indenture governing the Convertible Notes (the "Indenture"). The Convertible Notes may be converted at any time on or after October 1, 2024, until the close of business on the second scheduled trading day immediately preceding the maturity date.

The conversion rate of the Convertible Notes may be adjusted in certain circumstances, including in connection with a conversion of the Convertible Notes made following certain fundamental changes and under other circumstances set forth in the Indenture. It is our current intent to settle all conversions of the Convertible Notes through settlement of cash.

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

(1) during any fiscal quarter commencing after December 31, 2019 if the closing sale price of the common stock is more than 130% of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the 5 consecutive business day period after any 5 consecutive trading day period (the "measurement period") in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the Convertible Notes on each such trading day; or

(3) upon the occurrence of certain specified corporate events set forth in the indenture.

We may not redeem the Convertible Notes at our option prior to the maturity date, and no sinking fund is provided for the Convertible Notes.

On October 29, 2019 and October 30, 2019, in connection with the offering of the Convertible Notes, we entered into privately negotiated convertible note hedge transactions (collectively, the “Hedge Transactions”) that cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlie the Convertible Notes, and are expected generally to reduce the potential dilution and/or offset any cash payments we are required to make in excess of the principal amount due, as the case may be, upon conversion of the Convertible Notes in the event that the market price of our common stock is greater than the strike price of the Hedge Transactions, which was initially $63.73 per share (subject to adjustment under the terms of the Hedge Transactions), corresponding to the initial conversion price of the Convertible Notes.

On October 29, 2019 and October 30, 2019, we also entered into privately negotiated warrant transactions (collectively, the “Warrant Transactions” and, together with the Hedge Transactions, the “Call Spread Transactions”), whereby we sold warrants at a higher strike price relating to the same number of shares of our common stock that initially underlie the Convertible Notes, subject to customary anti-dilution adjustments. The initial strike price of the warrants is $96.20 per share (subject to adjustment under the terms of the Warrant Transactions), which is 100% above the last reported sale price of our common stock on October 29, 2019. The Warrant Transactions could have a dilutive effect to our stockholders to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.

We used $28.6 million of the net proceeds from the issuance of the Convertible Notes to pay the cost of the Call Spread Transactions.

The Hedge Transactions and the Warrant Transactions are separate transactions, in each case, and are not part of the terms of the Convertible Notes and will not affect any holder’s rights under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Call Spread Transactions.

Accounting Treatment of the Convertible Notes and Related Hedge Transactions and Warrant Transactions

The Call Spread Transactions were classified as equity. We bifurcated the proceeds from the offering of the Convertible Notes between liability and equity components. On the date of issuance, the liability and equity components were calculated to be approximately $215.0 million and $85.0 million, respectively. The initial $215.0 million liability component was determined based on the fair value of similar debt instruments excluding the conversion feature assuming a hypothetical interest rate of 8%. The initial $85.0 million ($64.1 million net of tax) equity component represents the difference between the fair value of the initial $215.0 million in debt and the $300.0 million of gross proceeds. The related initial debt discount of $85.0 million is being amortized over the life of the Convertible Notes as non-cash interest expense using the effective interest method.

In connection with the above-noted transactions, we incurred approximately $9.6 million of offering-related costs. These offering fees were allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt and equity issuance costs, respectively. We allocated $7.0 million of debt issuance costs to the liability component, which were capitalized as deferred financing costs within Long-term debt. These costs are being amortized as interest expense over the term of the debt using the effective interest method. The remaining $2.6 million of transaction costs allocated to the equity component were recorded as a reduction of the equity component.

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Fair Value and Future Maturities

As of February 29, 2020, the fair value of long-term debt, ~~are 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

gross, was $581.3 million. As of ~~May 25,~~August 31, 2019, the fair value of long-term debt, ~~excluding debt issuance costs, was $264.3 million. As of August 25, 2018, the fair value of long-term debt, excluding debt issuance costs,~~gross, approximated the carrying value.

Aggregate contractual maturities of debt in future fiscal years are as follows:


(in thousands)	Amount
Fiscal 2020	$	7,500
Fiscal 2021	15,000
Fiscal 2022	15,000
Fiscal 2023	15,000
Fiscal 2024	204,750
Thereafter	300,000
Total Term Loan and Convertible Notes	$	557,250

Note 10: Leases

Our leases primarily include operating leases for office and manufacturing space and equipment. Our finance leases are primarily for real estate.For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on the Condensed Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components, and we have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over the lease term. When the terms of multiple lease agreements are materially consistent, we have elected the portfolio approach for our asset and liability calculations.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We generally use a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our assumed lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised.

Some of our real estate operating leases require payment of real estate taxes, common area maintenance, and insurance. In addition, certain of our leases are subject to annual changes in the consumer price index. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. Fixed payments may contain predetermined fixed rent escalations. For our operating leases, we recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

The following table details the supplemental balance sheet information related to our leases:


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

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

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(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
The following table details the operating lease cost incurred:


		Three Months Ended		Six Months Ended
(in thousands)	Classification	February 29, 2020		February 29, 2020
Operating lease expense⁽¹⁾	Costs of goods sold and SG&A	$	1,773	$	3,536
Finance lease cost:
Depreciation of lease assets	Costs of goods sold and SG&A	144		187
Interest on lease liabilities	Interest expense	88		119
Total lease cost		$	2,005	$	3,842

(1) Operating lease expense includes short-term leases and variable lease payments, which are immaterial.

Our future lease commitments for future fiscal years as of February 29,2020 included the following related party and non-related party leases:


	Operating Leases								Finance Leases
(in thousands)	Related Party Amount		Non-Related Party Amount		Total		Non-Related Party Amount
Fiscal 2020	$	450	$	1,724	$	2,174	$	426
Fiscal 2021	900		3,299		4,199		855
Fiscal 2022	900		2,983		3,883		851
Fiscal 2023	1,500		2,726		4,226		842
Fiscal 2024	1,800		2,556		4,356		845
Thereafter	9,600		11,893		21,493		3,443
Total future undiscounted lease payments	15,150		25,181		40,331		7,262
Less: Interest	4,210		5,739		9,949		1,599
Total reported lease liabilities	$	10,940	$	19,442	$	30,382	$	5,663

Our future minimum lease payments for future fiscal years as determined prior to the adoption of ASC 842, Leases, and as disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, included the following related party and non-related party leases:


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

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The following table details additional information related to our leases:


	Six Months Ended
(in thousands)	February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,168
Operating cash flows from finance leases	119
Financing cash flows from finance leases	104
Leased assets obtained in exchange for lease liabilities:
Operating leases	1,801
Finance leases⁽¹⁾	5,664

	February 29, 2020
Weighted average remaining lease term (in years):
Operating leases	9.2
Finance leases	8.2
Weighted average discount rate:
Operating leases	6.2		%
Finance leases	6.2		%

(1) Represents the lease liability added. Lease assets are offset by a $1.0 million unfavorable lease liability created by the acquisition of Newmar.

Note ~~10:~~11: Employee and Retiree Benefits

Deferred compensation liabilities are as follows:


(in thousands)	May 25, 2019		August 25, 2018		(in thousands)	February 29, 2020		August 31, 2019
Non-qualified deferred compensation	$	13,459	$	14,831	Non-qualified deferred compensation	$	12,259	$	13,093
Supplemental executive retirement plan	2,056		2,309		Supplemental executive retirement plan	2,098		2,072
Executive share option plan	129		935		Executive share option plan	—		12
Executive deferred compensation plan	590		421		Executive deferred compensation plan	665		621
Officer stock-based compensation	—		1,528
Deferred compensation benefits	16,234		20,024		Deferred compensation benefits	15,022		15,798
Less current portion⁽¹⁾	3,073		4,742		Less current portion⁽¹⁾	2,856		2,920
Deferred compensation benefits, net of current portion	$	13,161	$	15,282	Deferred compensation benefits, net of current portion	$	12,166	$	12,878

(1) Included in Accrued compensation on the Condensed Consolidated Balance Sheets.

Note ~~11:~~12: Contingent Liabilities and Commitments

Repurchase Commitments

Generally, manufacturers in our industries enter into repurchase agreements with lending institutions which have provided wholesale floorplan financing to dealers. Most 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 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 24 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 recreational vehicles or boats to repurchase current inventory if a dealership exits the business. Our total contingent liability on all repurchase agreements was approximately ~~$1.0~~$1.4 billion and ~~$879.0~~$874.9 million at ~~May 25, 2019~~February 29, 2020 and August ~~25, 2018,~~31, 2019, respectively.

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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 these repurchase agreements and our historical loss experience, we establish an associated loss reserve which is included in Accrued expenses: Other on the Condensed Consolidated Balance Sheets. Our accrued losses on repurchases were ~~$0.9~~$1.3 million and $0.9 million at ~~May 25, 2019~~February 29, 2020 and August ~~25, 2018,~~31, 2019, 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 nine~~first six months ended ~~May 25, 2019~~February 29, 2020 and ~~May 26, 2018.~~February 23, 2019.

Litigation

We are involved in various legal proceedings 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 13: Revenue


	Three Months Ended						Six Months Ended
(in thousands)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Net Revenues
Towable:
Fifth Wheel	$	156,748	$	154,783	$	351,937	$	317,532
Travel Trailer	123,894		92,162		264,357		217,788
Other⁽¹⁾	2,821		3,746		8,419		8,204
Total Towable	283,463		250,691		624,713		543,524
Motorhome:
Class A	179,705		55,000		245,349		103,678
Class B	81,893		52,260		167,349		120,980
Class C	55,657		52,243		122,533		108,385
Other⁽¹⁾	8,287		5,159		16,202		12,947
Total Motorhome	325,542		164,662		551,433		345,990
Corporate / All Other:
Other⁽²⁾	17,805		17,337		39,122		36,824
Total Corporate / All Other	17,805		17,337		39,122		36,824
Consolidated	$	626,810	$	432,690	$	1,215,268	$	926,338

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

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

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

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Concentration of Risk

None of our dealer organizations accounted for more than 10% of our net revenue for the second quarter of Fiscal 2020, while one dealer organization accounted for more than 10% of our net revenue for the second quarter of 2019. In addition, none of our dealer organizations accounted for more than 10% of our net revenue for the first six months of Fiscal 2020 or 2019.

Note ~~12:~~14: 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~~$2.0 million and ~~$1.4~~$2.1 million during the ~~third~~second quarters of Fiscal ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$5.7~~$3.6 million and ~~$5.0~~$4.6 million during the first ~~nine~~six months of Fiscal ~~2019~~2020 and ~~2018,~~2019, respectively. Compensation expense is recognized over the requisite service period of the award.

Note ~~13:~~15: Restructuring


	Motorhome
	Three Months Ended						Six Months Ended				Cumulative
(in thousands)	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019		February 29, 2020
Cost of goods sold	$	43	$	—	$	(176)	$	—	$	1,548
Selling, general, and administrative expenses	—		219		47		219		266
Restructuring expense	$	43	$	219	$	(129)	$	219	$	1,814

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~~Expenses 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 andcurrent period mainly include adjustments for facility closure costs. We expect ~~these~~additional net expenses ~~to be partially offset by the corresponding savings generated by the project.~~of approximately $0.3 million in Fiscal 2020.

Note ~~14:~~16: 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~~increased to ~~18.9%~~20.1% for the ~~nine~~first six months ended ~~May 25, 2019~~February 29, 2020 from ~~28.2%~~18.4% for the ~~nine~~first six months ended ~~May 26, 2018~~February 23, 2019 due primarily to the ~~enactment~~favorable impact in the prior year of ~~the 2017 Tax Cuts~~research and ~~Jobs Act ("Tax Act") on December 22, 2017 and net favorable discrete items, primarily attributable to R&D-related~~development tax credits ~~which totaled $3.6 million or 3.7%~~.

~~ASU 2018-05,~~ ~~Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, provided guidance for companies that 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,~~ ~~Income Taxes~~. In accordance with this guidance, a company 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 was incomplete, but it was able to determine a reasonable estimate, the company was required to record a provisional estimate in the financial statements.

In accordance with ASC 740, we recorded non-cash provisional estimates to income tax expense in Fiscal 2018 as a result of revaluing all deferred tax assets and liabilities at the newly enacted Federal corporate income tax rate. 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 of the Tax Act.

We file a U.S. Federal tax return, as well as returns in various international and state jurisdictions. ~~Although certain years~~As of February 29, 2020, our federal returns from Fiscal 2016 to present are ~~no longer~~ subject to ~~examination~~review by the Internal Revenue ~~Service ("IRS") and various~~Service. With limited exception, 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 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~~ state taxing jurisdictions. ~~Several years may lapse before an uncertain~~We are currently under review by certain U.S. state tax ~~position is audited and finally resolved, and it is difficult~~authorities for Fiscal 2015 through 2018. We believe we have adequately reserved for our exposure to ~~predict the outcome of such audits.~~

~~It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. Total reserves~~additional payments for uncertain tax positions ~~were not material.~~in our liability for unrecognized tax benefits.

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Note ~~15:~~17: 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 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Numerator
Net income	$	17,268	$	21,598	$	31,336	$	43,759

Denominator
Weighted average common shares outstanding	33,614		31,577		32,840		31,572
Dilutive impact of stock compensation awards	304		147		303		183
Weighted average common shares outstanding, assuming dilution	33,918		31,724		33,143		31,755

Anti-dilutive securities excluded from Weighted average common shares outstanding, assuming dilution	45		243		94		212

Basic income per common share	$	0.51	$	0.68	$	0.95	$	1.39
Diluted income per common share	$	0.51	$	0.68	$	0.95	$	1.38

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

Anti-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.

Note ~~16:~~18: Accumulated Other Comprehensive Income (Loss)

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


	Three Months Ended
	February 29, 2020										February 23, 2019
(in thousands)	Defined Benefit Pension Items		Interest Rate Swap		Total		Defined Benefit Pension Items		Interest Rate Swap		Total
Balance at beginning of period	$	(551)	$	—	$	(551)	$	(583)	$	1,461	$	878
Other comprehensive income ("OCI") before reclassifications			—		—		—		(634)		(634)
Amounts reclassified from AOCI	8		—		8		8		—		8
Net current-period OCI	8		—		8		8		(634)		(626)
Balance at end of period	$	(543)	$	—	$	(543)	$	(575)	$	827	$	252

	Six Months Ended
	February 29, 2020										February 23, 2019
(in thousands)	Defined Benefit Pension Items		Interest Rate Swap		Total		Defined Benefit Pension Items		Interest Rate Swap		Total
Balance at beginning of period	$	(559)	$	68	$	(491)	$	(591)	$	1,483	$	892
OCI before reclassifications	—		(68)		(68)		—		(656)		(656)
Amounts reclassified from AOCI	16		—		16		16		—		16
Net current-period OCI	16		(68)		(52)		16		(656)		(640)
Balance at end of period	$	(543)	$	—	$	(543)	$	(575)	$	827	$	252

Three 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 $ (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 —
(1,018 ) (1,018 ) —
2,046
2,046
Amounts reclassified from AOCI 24
—
24
20
—
20
Net current-period OCI 24
(1,018 ) (994 ) 20
2,046
2,066
Balance at end of period $ (567 ) $ 465
$ (102 ) $ (489 ) $ 1,532
$ 1,043

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


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

Three Months Ended 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

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

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 our Annual Report on Form 10-K for the fiscal year ended August ~~25, 2018,~~31, 2019 (including the information presented therein under Risk Factors), as well as our reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited.

Overview

Winnebago Industries, Inc. is one of the leading U.S. manufacturers with a diversified portfolio of recreation vehicles ("RV"s) and marine products used primarily in leisure travel and outdoor recreation activities. We produce our motorhome units in ~~Iowa;~~Iowa and Indiana; our towable units in Indiana; and our marine units in Florida. We distribute our RV and marine products primarily through independent dealers throughout the U.S. and Canada, who then retail the products to the end consumer. We also distribute our marine products internationally through independent dealers, who then retail the products to the end consumer.

Non-GAAP Reconciliation

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

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

Refer to the Results of Operations - ~~Current Quarter Compared to the Comparable Prior Year Quarter and the Results of Operations -~~ First ~~Nine~~Six Months of Fiscal ~~2019~~2020 Compared to the First ~~Nine~~Six Months of Fiscal ~~2018~~2019 for a detailed reconciliation of items that impacted EBITDA and Adjusted EBITDA. We have included ~~this~~these non-GAAP performance ~~measure~~measures as a comparable measure to illustrate the effect of non-recurring transactions occurring during the reported periods and to improve comparability of our results from period to period. We believe Adjusted EBITDA provides meaningful supplemental information about our operating performance because ~~this measure excludes~~these measures exclude amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted EBITDA include acquisition-related fair-value inventory step-up, acquisition-related costs, restructuring expenses, and non-operating income.

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

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Business Combinations

Newmar Corporation

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

Reportable Segments

~~In the fourth quarter of Fiscal 2018, we revised our segment presentation.~~ We have ~~five~~six operating segments: 1) ~~Winnebago motorhomes,~~Grand Design towables, 2) Winnebago towables, 3) ~~Grand Design towables,~~Winnebago motorhomes, 4) Newmar motorhomes, 5) Chris-Craft marine, and 6) Winnebago specialty ~~vehicles, and 5) Chris-Craft marine.~~vehicles. We evaluate performance based on each operating segment's Adjusted EBITDA, as defined ~~above,~~below, which excludes certain corporate administration expenses and non-operating income and expense.

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

The Corporate / All Other category includes the Chris-Craft marine and Winnebago specialty vehicles ~~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 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 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~~January as of ~~2019~~2020 and ~~2018:~~

2019:


														US and Canada Industry
	US and Canada Industry													Wholesale Unit Shipments per RVIA															Retail Unit Registrations per Stat Surveys
	Wholesale Unit Shipments per RVIA						Retail Unit Registrations per Stat Surveys							Rolling 12 Months through January															Rolling 12 Months through January
	Rolling 12 Months through April						Rolling 12 Months through April							2020		2019		Unit Change		% Change			2020		2019		Unit Change		% Change
	2019	2018	Unit Change		% Change		2019	2018	Unit Change		% Change
Towable⁽¹⁾													Towable⁽¹⁾	357,358		399,987		(42,629)		(10.7)	%		391,382		418,956		(27,574)		(6.6)	%
Motorhome⁽¹⁾⁽²⁾	51,309	64,715	(13,406	)	(20.7	)%	54,862	58,454	(3,592	)	(6.1	)%	46,280		55,683		(9,403)		(16.9)	%		51,531		57,635		(6,104)		(10.6)	%
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	)%	Combined	403,638		455,670		(52,032)		(11.4)	%		442,913		476,591		(33,678)		(7.1)	%


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


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

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

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

The rolling twelve months shipments for 2020 and 2019 ~~and 2018 reflects~~reflect a contraction in shipments as dealers ~~rationalize inventory.~~have rationalized inventory during the last twelve months. The rolling twelve months retail information for ~~2019~~2020 and ~~2018~~2019 illustrates that ~~the RV industry is growing~~retail sales remain at ~~a slower rate than previous quarters, however ahead of wholesale shipments.~~healthy levels. We believe retail demand is the key driver to continued growth in the industry.

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The most recent RVIA wholesale shipment forecasts for calendar year ~~2019,~~2020, as noted in the table below, indicate that industry shipments are ~~most likely~~ expected to ~~decline~~remain relatively flat in ~~2019. The~~2020.


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

(1) Prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the Roadsigns RV sales outlook for 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 wages and employment levels.Spring 2020 Industry Forecast Issue.

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)~~	~~Prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the Roadsigns RV Summer 2019 Industry Forecast Issue.~~

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 April				Calendar Year							Rolling 12 Months through January						Calendar Year
US and Canada	2019		2018		2018		2017		2016⁽¹⁾		US and Canada	2020⁽¹⁾		2019		2019		2018		2017
Travel trailer and fifth wheels											Travel trailer and fifth wheels	9.4	%	7.8	%	9.3	%	7.8	%	6.1	%
Motorhome A, B, C	16.0	%	16.1	%	15.6	%	16.2	%	18.0	%	Motorhome A, B, C	16.5	%	15.7	%	15.5	%	15.6	%	16.3	%
Travel trailer and fifth wheels	8.1	%	6.7	%	7.8	%	6.1	%	1.7	%
Total market share	9.0	%	7.9	%	8.7	%	7.4	%	3.7	%	Total market share	10.2	%	8.8	%	10.0	%	8.7	%	7.4	%


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

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

Facility Expansion

Due to the rapid growth in our Towable segment, we have implemented facility expansion projects in our Grand Design towables and Winnebago towables operating segments. The Grand Design towables expansion project consisted of three new production facilities--two were completed in Fiscal 2018 and one was completed during the ~~remaining is expected to be completed mid-Fiscal~~second quarter of Fiscal 2020. The facility expansion in the Winnebago towables division was completed in the third quarter of Fiscal 2019.

Enterprise Resource Planning System

In the second quarter of Fiscal 2015, our Board of Directors approved the strategic initiative of implementing an 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 opportunity to integrate the ERP system with additional manufacturing systems. The project includes software, external implementation assistance, and increased internal staffing directly related to this initiative. We anticipate that approximately 40% of the cost will be expensed in the period incurred and 60% will be capitalized and depreciated over its useful life.

The following table illustrates the cumulative project costs:


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

Nine Months Ended Fiscal Year
(in thousands) May 25,
2019 2018 2017 2016 2015
Cumulative
Investment
Capitalized $ 3,404
$ 5,941
$ 1,881
$ 7,798
$ 3,291
$ 22,315
57.9 %
Expensed 3,072
2,107
2,601
5,930
2,528
16,238
42.1 %
Total $ 6,476
$ 8,048
$ 4,482
$ 13,728
$ 5,819
$ 38,553
100.0 %

~~Restructuring~~

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 chargesTable of $1.1 million for the three months ended May 25, 2019 and $1.3 million for the nine months ended May 25, 2019. These expenses are included in our Motorhome segment and 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.Contents

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.

Results of Operations - Current Quarter Compared to the Comparable Prior Year Quarter

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 ~~May 25, 2019~~February 29, 2020 compared to the three months ended ~~May 26, 2018:~~February 23, 2019:


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

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

Three Months Ended
(in thousands, except percent and per share data) May 25, 2019
% of Revenues⁽¹⁾
May 26, 2018
% of Revenues⁽¹⁾
$ Change % Change
Net revenues $ 528,940
100.0 % $ 562,261
100.0 % $ (33,321 ) (5.9 )%
Cost of goods sold 442,356
83.6 % 476,747
84.8 % (34,391 ) (7.2 )%
Gross profit 86,584
16.4 % 85,514
15.2 % 1,070
1.3 %
Selling, general, and administrative expenses 35,332
6.7 % 35,304
6.3 % 28
0.1 %
Amortization of intangible assets 2,278
0.4 % 1,933
0.3 % 345
17.8 %
Total operating expenses 37,610
7.1 % 37,237
6.6 % 373
1.0 %
Operating income 48,974
9.3 % 48,277
8.6 % 697
1.4 %
Interest expense 4,446
0.8 % 4,172
0.7 % 274
6.6 %
Non-operating income (360 ) (0.1 )% (100 ) — % 260
260.0 %
Income before income taxes 44,888
8.5 % 44,205
7.9 % 683
1.5 %
Provision for income taxes 8,717
1.6 % 11,684
2.1 % (2,967 ) (25.4 )%
Net income $ 36,171
6.8 % $ 32,521
5.8 % $ 3,650
11.2 %

Diluted income per share $ 1.14
$ 1.02
$ 0.12
11.8 %
Diluted average shares outstanding 31,644
31,753
(109 ) (0.3 )%
(1) Percentages may not add due to rounding differences.


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

Net revenues ~~decreased~~increased in the ~~third~~second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 ~~compared to the third quarter of Fiscal 2018~~ primarily due to ~~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.~~Newmar and organic growth.

Gross profit as a percentage of revenue ~~increased~~decreased in the ~~third~~second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 ~~compared~~primarily due to a change in mix as a result of our acquisition of Newmar and the ~~third quarter~~impact 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.~~Newmar inventory step-up.

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

Interest expense increased in the second three months of Fiscal 2020 compared to the ~~third quarter~~second three months of Fiscal ~~2018~~2019 primarily due to ~~Chris-Craft operating expenses, which was acquired~~the additional interest expense related to the Convertible Notes issued in connection with the ~~fourth quarter~~acquisition of ~~Fiscal 2018.~~Newmar.

The effective tax rate ~~decreased~~increased to ~~19.4%~~18.8% for the ~~third~~second quarter of Fiscal 2020 compared to 12.8% for the second quarter of Fiscal 2019 ~~compared to 26.4% for the third quarter of Fiscal 2018~~ due primarily to ~~$1.1 million in net~~the favorable ~~discrete items, primarily attributable to R&D-related tax credits, realized~~impact in the ~~current period~~prior year of research 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%.development credits.

Net income and diluted income per share ~~increased~~decreased in the ~~third~~second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 ~~compared to the third quarter of Fiscal 2018~~ primarily due to ~~a lower statutory tax rate~~incremental non-cash interest expense due to our convertible debt, impact of Newmar inventory step-up and amortization and a favorable ~~R&D-related discrete item.~~credit in the prior year related to research and development credits offset by improved profitability in our organic business.

Table of Contents

Non-GAAP Reconciliation

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the three months ended ~~May 25, 2019~~February 29, 2020 and ~~May 26, 2018:~~February 23, 2019:


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

Three Months Ended
(in thousands) 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~~Towable

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


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

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

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

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

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

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

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

Table of Contents

Motorhome

The following is an analysis of key changes in our Motorhome segment for the three months ended ~~May 25, 2019~~February 29, 2020 compared to the three months ended ~~May 26, 2018:~~February 23, 2019:


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

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

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

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) ASP excludes off-invoice dealer incentives.


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


~~(2)~~	(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.~~rounding differences.

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 in the ~~third~~second quarter of Fiscal 2020 compared to the second quarter of Fiscal 2019 ~~compared to the third quarter of Fiscal 2018~~ due to ~~an increase in the number~~our acquisition of ~~units sold~~Newmar and ~~pricing actions taken~~a favorable mix.

Adjusted EBITDA increased in the second quarter of Fiscal ~~2019.~~

~~Adjusted EBITDA increased in the third quarter of Fiscal 2019~~2020 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 ~~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~~an increase from our acquisition of ~~recent industry trends.~~Newmar and a favorable mix.

Table of Contents

Results of Operations - First ~~Nine~~Six Months of Fiscal ~~2019~~2020 Compared to the First ~~Nine~~Six Months of Fiscal ~~2018~~2019

Consolidated Performance Summary

The following is an analysis of changes in key items included in the consolidated statements of income and comprehensive income for the ~~nine~~six months ended ~~May 25, 2019~~February 29, 2020 compared to the ~~nine~~six months ended ~~May 26, 2018:~~February 23, 2019:


	Nine Months Ended																Six Months Ended
(in thousands, except percent and per share data)	May 25, 2019			% of Revenues⁽¹⁾		May 26, 2018			% of Revenues⁽¹⁾		$ Change			% Change		(in thousands, except percent and per share data)	February 29, 2020		% of Revenues⁽¹⁾		February 23, 2019		% of Revenues⁽¹⁾		$ Change		% Change
Net revenues	$	1,455,278		100.0	%	$	1,480,641		100.0	%	$	(25,363	)	(1.7	)%	Net revenues	$	1,215,268	100.0	%	$	926,338	100.0	%	$	288,930	31.2	%
Cost of goods sold	1,231,269			84.6	%	1,264,635			85.4	%	(33,366		)	(2.6	)%	Cost of goods sold	1,056,873		87.0	%	788,913		85.2	%	267,960		34.0	%
Gross profit	224,009			15.4	%	216,006			14.6	%	8,003			3.7	%	Gross profit	158,395		13.0	%	137,425		14.8	%	20,970		15.3	%
Selling, general, and administrative expenses	106,303			7.3	%	95,381			6.4	%	10,922			11.5	%	Selling, general, and administrative expenses	93,269		7.7	%	70,971		7.7	%	22,298		31.4	%
Amortization of intangible assets	7,204			0.5	%	5,921			0.4	%	1,283			21.7	%	Amortization of intangible assets	11,588		1.0	%	4,926		0.5	%	6,662		135.2	%
Total operating expenses	113,507			7.8	%	101,302			6.8	%	12,205			12.0	%	Total operating expenses	104,857		8.6	%	75,897		8.2	%	28,960		38.2	%
Operating income	110,502			7.6	%	114,704			7.7	%	(4,202		)	(3.7	)%	Operating income	53,538		4.4	%	61,528		6.6	%	(7,990)		(13.0)	%
Interest expense	13,293			0.9	%	13,871			0.9	%	(578		)	(4.2	)%	Interest expense	14,700		1.2	%	8,847		1.0	%	5,853		66.2	%
Non-operating income	(1,330		)	(0.1	)%	(212		)	—	%	1,118			527.4	%	Non-operating income	(386)		—	%	(970)		(0.1)	%	(584)		(60.2)	%
Income before income taxes	98,539			6.8	%	101,045			6.8	%	(2,506		)	(2.5	)%	Income before income taxes	39,224		3.2	%	53,651		5.8	%	(14,427)		(26.9)	%
Provision for income taxes	18,609			1.3	%	28,478			1.9	%	(9,869		)	(34.7	)%	Provision for income taxes	7,888		0.6	%	9,892		1.1	%	(2,004)		(20.3)	%
Net income	$	79,930		5.5	%	$	72,567		4.9	%	$	7,363		10.1	%	Net income	$	31,336	2.6	%	$	43,759	4.7	%	$	(12,423)	(28.4)	%

Diluted income per share	$	2.52				$	2.28				$	0.24		10.5	%	Diluted income per share	$	0.95			$	1.38			$	(0.43)	(31.2)	%
Diluted average shares outstanding	31,722					31,825					(103		)	(0.3	)%	Diluted average shares outstanding	33,143				31,755				1,388		4.4	%


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

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

Net revenues ~~decreased~~increased in the first ~~nine~~six months of Fiscal 2020 compared to the first six 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.~~Newmar and organic growth.

Gross profit as a percentage of revenue ~~increased~~decreased in the first ~~nine~~six months of Fiscal 2020 compared to the first six months of Fiscal 2019 ~~compared~~due primarily to the ~~first nine months~~impact of ~~Fiscal 2018 due to an increase~~Newmar inventory step-up and a change in mix as a result our ~~Towable segment volume and pricing actions taken in the second quarter~~acquisition of ~~Fiscal 2019. This was partially offset by reduced Motorhome sales volume and heightened dealer incentives.~~Newmar.

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

Interest expense increased in the first six months of Fiscal 2020 compared to the first ~~nine~~six months of Fiscal ~~2018~~2019 primarily due to the ~~addition~~additional interest expense related to the Convertible Notes issued in connection with the acquisition of ~~the Chris-Craft business and increased investments in our business.~~Newmar.

~~Interest expense~~Non-operating income decreased in the first ~~nine~~six months of Fiscal 2020 compared to the first six 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 our voluntary prepayment on our Credit Agreement and our Credit Agreement amendment during the second quarter of Fiscal 2018, which resulted in a decrease to the interest rate spread by 1.0% on the Term Loan and 0.25% on the ABL.

~~Non-operating income increased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 due to net proceeds received from~~ company-owned life insurance ~~policies.~~benefits in the prior year.

The effective tax rate ~~decreased~~increased to ~~18.9%~~20.1% for the first ~~nine~~six months of Fiscal 2020 compared to 18.4% for the first six months of Fiscal 2019 ~~compared to 28.2% for the first nine months of Fiscal 2018~~ due primarily to ~~the enactment of the Tax Act on December 22, 2017 and to $3.6 million in net~~a favorable ~~discrete items, primarily attributable to R&D-related tax credits, realized~~credit in the ~~current period. The reduction~~prior year related to ~~the enactment of the Tax Act is primarily attributable to the reduction in the Federal statutory tax rate to 21%.~~research and development credits.

Net income and diluted income per share ~~increased~~decreased in the first ~~nine~~six months of Fiscal 2020 compared to the first six months of Fiscal 2019 ~~compared to the first nine months of Fiscal 2018~~ primarily due to ~~improved profitability in our Towable segment~~the acquisition-related costs for Newmar and the ~~lower effective income tax rate, partially offset by a decrease in~~additional interest expense related to our ~~Motorhome segment profitability.~~Convertible Notes.

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Non-GAAP Reconciliation

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the ~~first nine~~six months ended ~~May 25, 2019~~February 29, 2020 and ~~May 26, 2018:~~February 23, 2019:


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

Nine Months Ended
(in thousands) May 25,
2019 May 26,
2018
Net income $ 79,930
$ 72,567
Interest expense 13,293
13,871
Provision for income taxes 18,609
28,478
Depreciation 9,788
6,679
Amortization of intangible assets 7,204
5,921
EBITDA 128,824
127,516
Acquisition-related costs —
850
Restructuring expenses 1,321
—
Non-operating income (1,330 ) (212 )
Adjusted EBITDA $ 128,815
$ 128,154

Reportable Segment Performance Summary

Towable

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


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

ASP⁽¹⁾	32,836				32,008				828		2.6	%

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

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

(1) ASP excludes off-invoice dealer incentives.

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

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

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Net revenues increased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 due to an increase in unit deliveries.

Adjusted EBITDA increased in the first six months of Fiscal 2020 compared to the first six months of Fiscal 2019 due to an increase in net revenues offset slightly by higher costs as a result of the start-up of new capacity.

We have seen an increase in the volume and dollar value of backlog as of February 29, 2020 compared to February 23, 2019 due to our strong market share growth and new product introduction.

Motorhome

The following is an analysis of key changes in our Motorhome segment for the ~~first nine~~six months ended ~~May 25, 2019~~February 29, 2020 compared to the ~~first nine~~six months ended ~~May 26, 2018~~February 23, 2019 and as of ~~May 25, 2019~~February 29, 2020 compared to ~~May 26, 2018:~~February 23, 2019:


	Nine Months Ended														Six Months Ended
(in thousands, except ASP)	May 25, 2019		% of Revenues		May 26, 2018		% of Revenues		$ Change			% Change		(in thousands, except ASP)	February 29, 2020		% of Revenues		February 23, 2019		% of Revenues		$ Change		% Change
Net revenues	$	506,229			$	632,148			$	(125,919	)	(19.9	)%	Net revenues	$	551,433			$	345,990			$	205,443	59.4	%
Adjusted EBITDA	16,716		3.3	%	22,264		3.5	%	(5,548		)	(24.9	)%	Adjusted EBITDA	24,277		4.4	%	16,335		4.7	%	7,942		48.6	%

ASP⁽¹⁾	91,091				88,728				2,363			2.7	%	ASP⁽¹⁾	129,344				95,620				33,724		35.3	%

	Nine Months Ended														Six Months Ended
Unit deliveries	May 25, 2019		Product Mix⁽²⁾		May 26, 2018		Product Mix⁽²⁾		Unit Change			% Change		Unit deliveries	February 29, 2020		Product Mix⁽²⁾		February 23, 2019		Product Mix⁽²⁾		Unit Change		% Change
Class A	1,329		23.7	%	2,326		32.8	%	(997		)	(42.9	)%	Class A	1,242		30.1	%	951		26.1	%	291		30.6	%
Class B	1,847		33.0	%	1,387		19.6	%	460			33.2	%	Class B	1,593		38.7	%	1,332		36.6	%	261		19.6	%
Class C	2,430		43.3	%	3,372		47.6	%	(942		)	(27.9	)%	Class C	1,286		31.2	%	1,361		37.3	%	(75)		(5.5)	%
Total motorhomes	5,606		100.0	%	7,085		100.0	%	(1,479		)	(20.9	)%	Total motorhomes	4,121		100.0	%	3,644		100.0	%	477		13.1	%

($ in thousands)	May 25, 2019				May 26, 2018				Change			% Change		($ in thousands)	February 29, 2020				February 23, 2019				Change		% Change
Backlog⁽³⁾														Backlog⁽³⁾
Units	2,074				2,155				(81		)	(3.8	)%	Units	2,856				1,882				974		51.8	%
Dollars	$	182,354			$	193,079			$	(10,725	)	(5.6	)%	Dollars	$	394,570			$	169,581			$	224,989	132.7	%
Dealer Inventory														Dealer Inventory
Units	4,235				4,750				(515		)	(10.8	)%	Units	5,507				4,812				695		14.4	%


~~(1)~~	~~ASP excludes off-invoice dealer incentives.~~


~~(2)~~	(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.

~~Net revenues decreased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018~~ due to ~~a decrease~~rounding differences.

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

~~ASP increased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 due to price increases during the second half of Fiscal 2018.~~

Adjusted EBITDA decreased in the first nine months of 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.

~~Unit deliveries decreased in the first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 driven by decreases~~(3) We include in our ~~Class A~~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, ~~Class C products, partially offset by~~therefore, backlog may not necessarily be an ~~increase in our Class B products.~~accurate measure of future sales.

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 several Class B products due to the temporary disruption in chassis supply.

~~Towable~~

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

Nine Months Ended
(in thousands, except ASP) May 25,
2019 % of Revenues May 26,
2018 % of Revenues $ Change % Change
Net revenues $ 890,335
$ 839,039
$ 51,296
6.1 %
Adjusted EBITDA 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 May 25,
2019
Product Mix⁽²⁾
May 26,
2018
Product Mix⁽²⁾
Unit Change % Change
Travel trailer 16,564
60.5 % 16,495
61.3 % 69
0.4 %
Fifth wheel 10,818
39.5 % 10,428
38.7 % 390
3.7 %
Total towables 27,382
100.0 % 26,923
100.0 % 459
1.7 %

($ in thousands) May 25,
2019 May 26,
2018 Change % Change
Backlog⁽³⁾

Units 7,089
9,968
(2,879 ) (28.9 )%
Dollars $ 237,708
$ 313,513
$ (75,805 ) (24.2 )%
Dealer Inventory
Units 18,984
15,986
2,998
18.8 %


~~(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.

Net revenues increased in the first ~~nine~~six months of Fiscal 2020 compared to the first six months of Fiscal 2019 ~~compared~~due to the ~~first nine months~~acquisition of ~~Fiscal 2018 due to increased volume~~Newmar and ~~a resulting improvement in our market share.~~

~~ASP increased~~an increase in the ~~first nine months of Fiscal 2019 compared to the first nine months of Fiscal 2018 due to price increases during the first half of Fiscal 2019 as well as favorable product mix.~~organic ASP.

Adjusted EBITDA increased in the first ~~nine~~six months of Fiscal 2020 compared to the first six months of Fiscal 2019 ~~compared to the first nine months of Fiscal 2018~~ primarily due to ~~sales growth.~~our Newmar acquisition.

Unit deliveries increased in the 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 6.7% to 8.1% when comparing retail registrations during the twelve-month trailing periods ended April 2018 and April 2019. Shipments grew faster than

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

We have seen ~~a decrease~~an increase in the backlog volumes as of ~~May 25, 2019~~February 29, 2020 compared to ~~May 26, 2018~~February 23, 2019 due to our ~~utilization~~acquisition of ~~additional capacity added during 2018~~Newmar and ~~re-balancing from high backlog levels in the prior year, in addition to a more challenging shipping environment in the current year. We believe dealer inventory increased~~ due to ~~our increased market share in the Towable segment and the strong demand for our Grand Design products.~~new product introductions.

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Analysis of Financial Condition, Liquidity, and Resources

Cash Flows

The following table summarizes our cash flows from operations for the ~~first nine~~six months ended ~~May 25, 2019~~February 29, 2020 and ~~May 26, 2018:~~February 23, 2019:


	Nine Months Ended							Six Months Ended
(in thousands)	May 25, 2019			May 26, 2018			(in thousands)	February 29, 2020		February 23, 2019
Total cash provided by (used in):							Total cash provided by (used in):
Operating activities	$	82,849		$	61,012		Operating activities	$	119,164	$	51,938
Investing activities	(30,497		)	(17,890		)	Investing activities	(283,158)		(23,024)
Financing activities	(50,518		)	(40,038		)	Financing activities	249,502		(28,239)
Net increase in cash and cash equivalents	$	1,834		$	3,084
Net increase (decrease) in cash and cash equivalents							Net increase (decrease) in cash and cash equivalents	$	85,508	$	675

Operating Activities

Cash provided by operating activities increased for the ~~first nine~~six months ended ~~May 25, 2019~~February 29, 2020 compared to the ~~first nine~~six months ended ~~May 26, 2018~~February 23, 2019 primarily due to favorable changes in working capital, ~~year-over-year,~~ partially offset by ~~the timing of estimated tax payments.~~Newmar acquisition-related costs.

Investing Activities

Cash used in investing activities increased for the ~~first nine~~six months ended ~~May 25, 2019~~February 29, 2020 compared to the ~~first nine~~six months ended ~~May 26, 2018~~February 23, 2019 primarily due to ~~increased capital expenditures related to the capacity expansions within~~ our ~~Towable segment.~~acquisition of Newmar.

Financing Activities

Cash ~~used in~~provided by financing activities increased for the ~~first nine~~six months ended ~~May 25, 2019~~February 29, 2020 compared to the ~~first nine~~six months ended ~~May 26, 2018~~February 23, 2019 primarily due to ~~increased net payments on~~the issuance of Convertible Notes issued in the first quarter of Fiscal 2020 to finance our ~~Credit Agreement and increased share repurchases.~~acquisition of Newmar.

Debt and Capital

As of ~~September 21, 2018,~~February 29, 2020, we have a debt agreement that consists of a $300.0 million term loan agreement ("Term Loan") and a ~~$165.0~~$192.5 million asset-based revolving credit facility ("~~ABL"~~ABL Credit Facility") (collectively, the "Credit ~~Agreement"~~Agreements") ~~with JPMorgan Chase Bank, N.A.~~. During the first quarter of Fiscal 2020, we issued the Convertible Notes, which were used to partially fund the Newmar acquisition. Refer to Note 9, Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements included in ~~Item 8,~~ ~~Financial Statements and Supplementary Data, of our Annual~~this Quarterly Report on Form ~~10-K for the fiscal year ended August 25, 2018~~10-Q for additional details. As of ~~May 25, 2019,~~February 29, 2020, we had ~~$5.6 million in~~no borrowings against the ABL.

Other Financial Measures

Working capital at ~~May 25, 2019~~February 29, 2020 and August ~~25, 2018~~31, 2019 was ~~$186.2~~$313.5 million and ~~$167.8~~$212.9 million, respectively. We currently expect cash on hand, funds generated from operations, and the borrowing available under our ABL Credit ~~Agreement to~~Facility be sufficient to cover both short-term and long-term operating requirements.

Share Repurchases and Dividends

We repurchase our common stock and pay dividends pursuant to programs approved by our Board of 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~~the authorization. In the ~~first nine months ended May 25, 2019,~~second quarter of Fiscal 2020, we ~~repurchased 0.2 million~~did not repurchase any 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,~~Agreements, we may purchase shares in the future. At ~~May 25, 2019,~~February 29, 2020, we have ~~$60.3~~$58.9 million remaining on our board repurchase authorization.

On ~~May 22, 2019,~~March 17, 2020, our Board of Directors approved a quarterly cash dividend of $0.11 per share payable on ~~July 3, 2019,~~April 29, 2020, to common stockholders of record at the close of business on ~~June 19, 2019.~~April 15, 2020.

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Contractual Obligations and Commercial Commitments

There has been no material change in our contractual obligations other than the issuance of the Convertible Notes and in the ordinary course of business since the end of Fiscal ~~2018. See~~2019. Refer to Note 9, Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional details on the Convertible Notes, and see our Annual Report on Form 10-K for the fiscal year ended August ~~25, 2018,~~31, 2019 for additional information regarding our contractual obligations and 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 ~~25, 2018.~~31, 2019. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended August ~~25, 2018.~~

31, 2019. In the first quarter of Fiscal 2020, we adopted new lease accounting guidance, as described in Note 1, Basis of Presentation, and Note 10, Leases, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. There have been no other significant changes in our significant accounting policies or critical accounting estimates since the end of Fiscal ~~2018.~~2019.

New Accounting Pronouncements

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act

Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as "anticipate," "assume," "believe," "estimate," "expect," "guidance," "intend," "outlook," "plan," "project," and other words and terms of similar meaning. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment, and other events. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August ~~25, 2018,~~31, 2019, and Item 1A, Risk Factors, in Part II of this Quarterly Report on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: competition and new product introductions by competitors, our ability to attract and retain qualified personnel, increases in market compensation rates, business or production disruptions, sales order cancellations, risk related to the terms of our credit agreements and compliance with debt covenants and leverage ratios, stock price volatility and share dilution, disruptions or unanticipated costs from facility expansions, availability of labor, a slowdown in the economy, low consumer confidence, the effect of global tensions, increases in interest rates, availability of credit, availability of financing for RV and marine dealers, impairment of goodwill, risk related to cyclicality and seasonality of our business, slower than anticipated sales of new or existing products, integration of operations relating to merger and acquisition activities generally, our acquisition of Newmar, the possibility that the Newmar acquisition may not perform as expected or may not result in earnings growth, difficulties and expenses related to integrating Newmar into our business, possible unknown liabilities of Newmar, significant costs related to the Newmar acquisition, increased focus of management attention and resources on the acquisition of Newmar, risks related to the Convertible Notes, including our ability to satisfy our obligations under the Convertible Notes, risks related to our recent Convertible Note hedge and warrant transactions, inadequate liquidity or capital resources, inventory and distribution channel management, our ability to innovate, our reliance on large dealer organizations, significant increase in repurchase obligations, availability and price of fuel, availability of chassis and other key component parts, increased material and component costs, exposure to warranty claims, ability to protect our intellectual property, exposure to product liability claims, dependence on information systems and web applications, any unexpected expenses related to ~~ERP,~~the implementation of our Enterprise Resource Planning system, impacts of public health crises, such as COVID-19, risk related to data security, governmental regulation, including for climate change, ~~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.

~~There~~The assets we maintain to fund deferred compensation have ~~been no material changes~~market risk, but we maintain a corresponding liability for these assets. The market risk is therefore borne by the participants in ~~our primary~~the deferred compensation program.

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Interest rate risk ~~exposures or management of~~

We are exposed to market risks related to fluctuations in interest rates on the outstanding variable rate debt. As of February 29, 2020, we had $257.3 million outstanding under our Term Loan, subject to variable interest rates. For our Term Loan in the second quarter of Fiscal 2020, a 1.0% increase in interest rates would have increased our interest expense by an estimated $2.6 million, and a 1.0% decrease in interest rates would have decreased our interest expense by an estimated $2.6 million. For additional information, see Note 9, Long-Term Debt. For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant.

While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those ~~previously disclosed~~projected. The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in ~~Part II, Item 7A,~~ ~~Quantitative and Qualitative Disclosures About Market Risk~~,the yield curve. In reality, interest rate changes of ~~our Annual Report on Form 10-K for the fiscal year ended August 25, 2018.~~this magnitude are rarely instantaneous or parallel.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control Over Financial Reporting

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

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

There were no other changes in our internal control over financial reporting that occurred during the ~~third~~second quarter of Fiscal ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

For a description of our legal proceedings, see Note ~~11,~~ 12, Contingent Liabilities and Commitments, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August ~~25, 2018.~~31, 2019, except for the risk factors updated below:

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

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

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

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

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

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

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

In addition, our indebtedness could:

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

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

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

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

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

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

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

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

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

•Diversion of management’s attention;

•Disruption to our existing operations and plans;

•Inability to effectively manage our expanded operations;

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

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

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

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

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

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

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

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

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

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

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

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

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

•failure to retain key customers and suppliers;

•unanticipated changes in applicable laws and regulations;

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

•increased competition within the industries in which Newmar operates;

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

•inherent operating risks in the business;

•unanticipated issues, expenses, and liabilities;

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•additional reporting requirements pursuant to applicable rules and regulations;

•additional requirements relating to internal control over financial reporting;

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

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

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

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

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

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

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

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

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

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

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

Purchases of our common stock during each fiscal month of the ~~third~~second quarter of Fiscal ~~2019~~2020 were:


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

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.

(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 $70.0 million share repurchase program authorized by our Board of Directors on October 18, 2017. There is no time restriction on the authorization.

Our Credit ~~Agreement,~~Agreements, 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 ~~asset-based revolving credit agreement.~~ABL Credit Facility.

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Item 6. Exhibits.



~~3a.~~2.1		Stock Purchase Agreement dated as of September 15, 2019, by and among the Registrant, Octavius Corporation, Newmar Corporation, Dutch Real Estate Corp., New-Way Transport Corp., New-Serv, Inc., the shareholders of Newmar Corporation, Dutch Real Estate Corp., New-Way Transport Corp. and New-Serv, Inc. and Matthew Miller, as Sellers Agent previously filed as Exhibit 2.1 with the Registrant’s Current Report on Form 8-K dated September 15, 2019.
3a.		Articles of Incorporation of the Registrant previously filed as Exhibit 3a ~~with~~to the Registrant’s Annual Report on Form 10-K for the fiscal year ended 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~~to the Registrant's Current Report on Form 8-K dated March 16, 2016 (Commission File Number 001-06403) and incorporated by reference herein.
~~31.1~~4.1		Indenture, dated November 1, 2019, by and between Winnebago Industries, Inc. and U.S. Bank National Association previously filed as Exhibit 4.1 with the Registrant’s Current Report on Form 8-K dated October 29, 2019.
4.2		Form of 1.50% Convertible Senior Note due 2025 (included in Exhibit 4.1).
31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 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.
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.

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

*~~Attached as Exhibit 101~~ Schedules have been omitted pursuant to ~~this report are~~Item 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish copies of any of the ~~following financial statements from our Quarterly Report on Form 10-Q for~~omitted schedules upon request of the ~~quarter ended May 25, 2019 formatted in XBRL: (i) the Unaudited Condensed Consolidated Statements~~U.S. Securities and Exchange Commission.

Table of Income and Comprehensive Income, (ii) the Unaudited Condensed Consolidated Balance Sheets, (iii) the Unaudited Condensed Consolidated Statements of Cash Flows, (iv) the Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity, and (v) related Notes to Condensed Consolidated Financial Statements.Contents

SIGNATURES

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

WINNEBAGO INDUSTRIES, INC.

Date:

March 25, 2020

~~WINNEBAGO INDUSTRIES, INC.~~By

~~Date:~~

~~June 20, 2019~~

/s/ Michael J. Happe

Michael J. Happe

Chief Executive Officer, President

(Principal Executive Officer)

Date:

~~June 20, 2019~~March 25, 2020

/s/ Bryan L. Hughes

Bryan L. Hughes

Vice President, Chief Financial Officer

(Principal Financial and Accounting Officer)



PART I.	FINANCIAL INFORMATION.	3
Item 1.	Condensed Consolidated Financial Statements.	3
	Condensed Consolidated Statements of Income and Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Stockholders' Equity	67
	Notes to Condensed Consolidated Financial Statements	89
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	2127
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3137
Item 4.	Controls and Procedures.	3238

PART II.	OTHER INFORMATION.	3339
Item 1.	Legal Proceedings.	3339
Item 1A.	Risk Factors.	3339
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3341
Item 6.	Exhibits.	3442

SIGNATURES			3543



	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



	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



		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



(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



	Three 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	$	(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	—			(1,018		)	(1,018		)	—			2,046			2,046
Amounts reclassified from AOCI	24			—			24			20			—			20
Net current-period OCI	24			(1,018		)	(994		)	20			2,046			2,066
Balance at end of period	$	(567	)	$	465		$	(102	)	$	(489	)	$	1,532		$	1,043



	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	)%