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WINNEBAGO INDUSTRIES INC - Quarter Report: 2019 November (Form 10-Q)

 
 
 

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

FORM 10-Q
(Mark One)
 
 
 
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
For the quarterly period ended November 30, 2019
 
or
 
 
 
 
 
 
☐
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
 

wgologoa01.jpg
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Iowa
 
 
42-0802678
(State or other jurisdiction of incorporation or organization)
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
P. O. Box 152
Forest City
Iowa
 
 
50436
(Address of principal executive offices)
 
 
(Zip Code)
 
 
 
 
 
 
 
 
 
641
585-3535
 
(Registrant's telephone number, including area code)

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

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

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 ☒ No ☐

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 ☒    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. ☐

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

The number of shares of common stock, par value $0.50 per share, outstanding on December 13, 2019 was 33,680,185.


Winnebago Industries, Inc.
Table of Contents



2

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
(in thousands, except per share data)
November 30,
2019
 
November 24,
2018
Net revenues
$
588,458

 
$
493,648

Cost of goods sold
509,845

 
422,652

Gross profit
78,613

 
70,996

Selling, general, and administrative expenses
51,105

 
35,712

Amortization of intangible assets
3,614

 
2,659

Total operating expenses
54,719

 
38,371

Operating income
23,894

 
32,625

Interest expense
6,049

 
4,501

Non-operating income
(116
)
 
(763
)
Income before income taxes
17,961

 
28,887

Provision for income taxes
3,893

 
6,726

Net income
$
14,068

 
$
22,161

 
 
 
 
Income per common share:
 
 
 
Basic
$
0.44

 
$
0.70

Diluted
$
0.44

 
$
0.70

 
 
 
 
Weighted average common shares outstanding:
 
 
 
Basic
32,067

 
31,567

Diluted
32,267

 
31,814

 
 
 
 
Net income
$
14,068

 
$
22,161

Other comprehensive income (loss):
 
 
 
Amortization of net actuarial loss (net of tax of $3 and $3)
8

 
8

Interest rate swap activity (net of tax of $22 and $7)
(68
)
 
(22
)
Total other comprehensive income (loss)
(60
)
 
(14
)
Comprehensive income
$
14,008

 
$
22,147

See Notes to Condensed Consolidated Financial Statements.

3

Winnebago Industries, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data)
November 30,
2019
 
August 31,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
101,328

 
$
37,431

Receivables, less allowance for doubtful accounts ($260 and $160, respectively)
167,290

 
158,049

Inventories, net
263,333

 
201,126

Prepaid expenses and other assets
13,301

 
14,051

Total current assets
545,252

 
410,657

Property, plant, and equipment, net
163,348

 
127,572

Other assets:
 
 
 
Goodwill
347,840

 
274,931

Other intangible assets, net
423,258

 
256,082

Investment in life insurance
26,958

 
26,846

Operating lease assets
30,720

 
—

Other assets
16,248

 
8,143

Total assets
$
1,553,624

 
$
1,104,231

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
93,120

 
$
81,635

Income taxes payable
—

 
—

Accrued expenses:
 
 
 
Accrued compensation
25,885

 
20,328

Product warranties
61,107

 
44,436

Self-insurance
15,685

 
13,820

Promotional
19,139

 
10,896

Accrued interest
3,034

 
4,059

Other
16,768

 
13,678

Current maturities of long-term debt
12,668

 
8,892

Total current liabilities
247,406

 
197,744

Non-current liabilities:
 
 
 
Long-term debt, less current maturities
450,848

 
245,402

Deferred income taxes
17,210

 
12,032

Unrecognized tax benefits
6,563

 
3,591

Operating lease liabilities
28,066

 
—

Deferred compensation benefits, net of current portion
12,594

 
12,878

Other
5,328

 
372

Total non-current liabilities
520,609

 
274,275

Contingent liabilities and commitments (Note 12)


 


Stockholders' equity:
 
 
 
Preferred stock, par value $0.01: Authorized-10,000 shares; Issued-none
—

 
—

Common stock, par value $0.50: Authorized-60,000 shares; Issued-51,776 shares
25,888

 
25,888

Additional paid-in capital
198,733

 
91,185

Retained earnings
877,469

 
866,886

Accumulated other comprehensive loss
(551
)
 
(491
)
Treasury stock, at cost: 18,177 and 20,262 shares, respectively
(315,930
)
 
(351,256
)
Total stockholders' equity
785,609

 
632,212

Total liabilities and stockholders' equity
$
1,553,624

 
$
1,104,231

See Notes to Condensed Consolidated Financial Statements.

4

Winnebago Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
(in thousands)
November 30,
2019
 
November 24,
2018
Operating activities:
 
 
 
Net income
$
14,068

 
$
22,161

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
3,586

 
3,169

Amortization of intangible assets
3,614

 
2,659

Non-cash interest expense, net
1,023

 
—

Amortization of debt issuance costs
760

 
394

Last-in, first-out expense
332

 
597

Stock-based compensation
1,583

 
2,472

Deferred income taxes
731

 
382

Other, net
65

 
(570
)
Change in assets and liabilities:
 
 
 
Receivables
27,906

 
23,748

Inventories
20,082

 
3,070

Prepaid expenses and other assets
(84
)
 
68

Accounts payable
(4,214
)
 
(799
)
Income taxes and unrecognized tax benefits
3,217

 
(2,443
)
Accrued expenses and other liabilities
6,364

 
(737
)
Net cash provided by operating activities
79,033

 
54,171

Investing activities:
 
 
 
Purchases of property and equipment
(6,624
)
 
(12,771
)
Acquisition of business, net of cash acquired
(264,280
)
 
(702
)
Other, net
243

 
311

Net cash used in investing activities
(270,661
)
 
(13,162
)
Financing activities:
 
 
 
Borrowings on credit agreement
603,292

 
133,711

Repayments of credit agreement
(603,292
)
 
(172,229
)
Proceeds from issuance of convertible senior notes
300,000

 
—

Purchase of convertible note hedge
(70,800
)
 
—

Proceeds from issuance of warrants
42,210

 
—

Payments of offering costs
(10,707
)
 
—

Payments of cash dividends
(3,469
)
 
(3,183
)
Other, net
(1,709
)
 
(948
)
Net cash provided by (used in) financing activities
255,525

 
(42,649
)
Net increase (decrease) in cash and cash equivalents
63,897

 
(1,640
)
Cash and cash equivalents at beginning of period
37,431

 
2,342

Cash and cash equivalents at end of period
$
101,328

 
$
702

Supplement cash flow disclosure:
 
 
 
Income taxes paid, net
$
(311
)
 
$
8,778

Interest paid
$
5,193

 
$
3,736

Non-cash transactions:
 
 
 
Issuance of Winnebago common stock for acquisition of business
$
92,572

 
$
—

Capital expenditures in accounts payable
$
2,063

 
$
145

See Notes to Condensed Consolidated Financial Statements.

5

Winnebago Industries, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
 
Three Months Ended November 30, 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 31, 2019
51,776

$
25,888

$
91,185

$
866,886

$
(491
)
(20,262
)
$
(351,256
)
$
632,212

Stock-based compensation, net of forfeitures
—

—

1,574

—

—

—

9

1,583

Issuance of stock, net
—

—

(2,219
)
—

—

128

2,219

—

Issuance of stock for acquisition
—

—

57,811

—

—

2,000

34,761

92,572

Repurchase of common stock
—

—

—

—

—

(43
)
(1,663
)
(1,663
)
Common stock dividends; $0.11 per share
—

—

—

(3,485
)
—

—

—

(3,485
)
Actuarial loss, net of tax
—

—

—

—

8

—

—

8

Interest rate swap activity, net of tax
—

—

—

—

(68
)
—

—

(68
)
Equity component of convertible senior notes and offering costs, net of tax of $20,915
—

—

61,555

—

—

—

—

61,555

Convertible note hedge purchase, net of tax of $17,417
—

—

(53,383
)
—

—

—

—

(53,383
)
Warrant transactions
—

—

42,210

—

—

—

—

42,210

Net income
—

—

—

14,068

—

—

—

14,068

Balances at November 30, 2019
51,776

$
25,888

$
198,733

$
877,469

$
(551
)
(18,177
)
$
(315,930
)
$
785,609

 
 
 
 
 
 
 
 
 
 
Three Months Ended November 24, 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 25, 2018
51,776

$
25,888

$
86,223

$
768,816

$
892

(20,243
)
$
(347,374
)
$
534,445

Stock-based compensation, net of forfeitures
—

—

2,448

—

—

2

41

2,489

Issuance of stock, net
—

—

(383
)
—

—

11

1,911

1,528

Repurchase of common stock
—

—

—

—

—

(48
)
(948
)
(948
)
Common stock dividends; $0.10 per share
—

—

—

(3,183
)
—

—

—

(3,183
)
Actuarial loss, net of tax
—

—

—

—

8

—

—

8

Interest rate swap activity, net of tax
—

—

—

—

(22
)
—

—

(22
)
Net income
—

—

—

22,161

—

—

—

22,161

Balances at November 24, 2018
51,776

$
25,888

$
88,288

$
787,794

$
878

(20,278
)
$
(346,370
)
$
556,478

See Notes to Condensed Consolidated Financial Statements.

6

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," "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 31, 2019.

Fiscal Period

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

Subsequent Events

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

Dividend

On December 18, 2019, our Board of Directors declared a quarterly cash dividend of $0.11 per share payable on January 29, 2020 to common stockholders of record at the close of business on January 15, 2020.

Recently Adopted Accounting Pronouncements

We adopted Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), as of September 1, 2019, using the modified retrospective basis as of the beginning of the period of adoption. In addition, we 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 consolidated net earnings and had no impact on our cash flows.


7

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 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 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, 2019 (our Fiscal 2021), including interim periods within those annual reporting periods. We expect to adopt the new guidance in the first quarter of Fiscal 2021, 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 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.

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 are waiting for additional information necessary to finalize the working capital adjustment as defined in the purchase agreement and the amounts related to income taxes. Thus, the preliminary measurements of fair value reflected are subject to change. We expect

8

to finalize the valuation and 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
72,909

Other intangible assets
172,100

Total assets acquired
408,975

Accounts payable
14,023

Accrued compensation
4,306

Product warranties
15,147

Promotional
2,573

Other
11,637

Deferred tax liabilities
968

Total liabilities assumed
48,654

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 raw materials and supply chain consolidation. Goodwill is expected to be mostly deductible for tax purposes.

The following table summarizes the other intangible assets acquired:
($ in thousands)
November 8, 2019
 
Useful Life-Years
Trade name
$
98,000

 
Indefinite
Dealer network
64,000

 
12.0
Backlog
8,800

 
0.5
Non-compete agreements
1,300

 
5.0


The fair value of the 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 fair value of 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 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.

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
(in thousands)
November 30, 2019
Net revenues
$
35,663

Operating loss
1,283




9

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
(in thousands, except per share data)
November 30, 2019
 
November 24, 2018
Net revenues
$
741,717

 
$
663,786

Net income
17,197

 
10,665

Income per share - basic
$
0.51

 
$
0.32

Income per share - diluted
$
0.50

 
$
0.32



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
(in thousands)
November 30, 2019
 
November 24, 2018
Amortization of intangibles (1 year or less useful life)(1)
$
2,251

 
$
(9,210
)
Increase in amortization of intangibles(2)
(1,057
)
 
(1,398
)
Expenses related to business combination (transaction costs)(3)
9,950

 
(10,606
)
Interest to reflect new debt structure(4)
(3,367
)
 
(4,546
)
Taxes related to the adjustments to the pro forma data and to the income of Newmar(5)
(832
)
 
3,056

(1)
Includes amortization adjustments for our backlog intangible asset and our fair-value inventory adjustment.
(2)
Includes amortization adjustments for our dealer network and non-compete intangible assets.
(3)
Pro forma transaction costs include $0.6 million incurred prior to the acquisition.
(4)
Includes adjustments for cash and non-cash interest expense as well as deferred financing costs. Refer to Note 9, Long-Term Debt, for additional information on 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 three months of Fiscal 2020 and $0.6 million were expensed in the three months ended August 31, 2019. Transaction costs are included in Selling, general, and administrative expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

Note 3: Business Segments

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

Our two reportable segments include: 1) Towable (comprised of products which are not motorized and are generally towed by another vehicle as well as other related manufactured products and services), which is an aggregation of the 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 operating segments as well as expenses related to certain corporate administration expenses for the oversight of the enterprise. These expenses include items such as corporate leadership and administration costs.

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

Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our CODM relies on internal management reporting

10

that analyzes consolidated results to the net earnings level and operating segment's Adjusted EBITDA. Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors the performance of, the consolidated enterprise, the Towable segment, and the 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 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
(in thousands)
November 30,
2019
 
November 24,
2018
Net Revenues
 
 
 
Towable
$
341,250

 
$
292,833

Motorhome
225,891

 
181,328

Corporate / All Other
21,317

 
19,487

Consolidated
$
588,458

 
$
493,648

 
 
 
 
Adjusted EBITDA
 
 
 
Towable
$
35,785

 
$
30,828

Motorhome
9,331

 
11,976

Corporate / All Other
(3,068
)
 
(4,351
)
Consolidated
$
42,048

 
$
38,453

 
 
 
 
Capital Expenditures
 
 
 
Towable
$
4,026

 
$
8,877

Motorhome
2,240

 
3,192

Corporate / All Other
358

 
702

Consolidated
$
6,624

 
$
12,771

 
 
 
 
(in thousands)
November 30,
2019
 
August 31,
2019
Total Assets
 
 
 
Towable
$
673,683

 
$
628,994

Motorhome
674,849

 
332,157

Corporate / All Other
205,092

 
143,080

Consolidated
$
1,553,624

 
$
1,104,231



11

Reconciliation of net income to consolidated Adjusted EBITDA:
 
Three Months Ended
(in thousands)
November 30, 2019
 
November 24, 2018
Net income
$
14,068

 
$
22,161

Interest expense
6,049

 
4,501

Provision for income taxes
3,893

 
6,726

Depreciation
3,586

 
3,169

Amortization of intangible assets
3,614

 
2,659

EBITDA
31,210

 
39,216

Acquisition-related fair-value inventory step-up
1,176

 
—

Acquisition-related costs
9,950

 
—

Restructuring expenses
(172
)
 
—

Non-operating income
(116
)
 
(763
)
Adjusted EBITDA
$
42,048

 
$
38,453



Note 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.

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 November 30, 2019 and August 31, 2019 according to the valuation techniques we used to determine their fair values:
 
Fair Value at
 
Fair Value Hierarchy
(in thousands)
November 30,
2019
 
Level 1
 
Level 2
 
Level 3
Assets that fund deferred compensation:
 
 
 
 
 
 
 
Domestic equity funds
$
444

 
$
345

 
$
99

 
$
—

International equity funds
104

 
37

 
67

 
—

Fixed income funds
163

 
53

 
110

 
—

Total assets at fair value
$
711

 
$
435

 
$
276

 
$
—


12

 
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

 
$
—



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 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 reduced each December during the swap contract. As of August 31, 2019, we had $120.0 million of our Term Loan fixed at an interest rate of 5.32%. In the first quarter of Fiscal 2020, we exited the swap contract prior to its expiration on December 8, 2020.

The fair value of the interest rate swap was classified as Level 2 as it was determined based on observable market data. The asset was included in Other assets on the Condensed Consolidated Balance Sheets. The change in value was recorded to Accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets since the interest rate swap 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. No impairments were recorded for non-financial assets in the first quarter of Fiscal 2020 or the first quarter of Fiscal 2019.

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.


13

Note 5: Inventories

Inventories consist of the following:
(in thousands)
November 30,
2019
 
August 31,
2019
Finished goods
$
77,315

 
$
53,417

Work-in-process
105,779

 
82,926

Raw materials
121,592

 
105,804

Total
304,686

 
242,147

Less last-in, first-out ("LIFO") reserve
41,353

 
41,021

Inventories, net
$
263,333

 
$
201,126



Inventory valuation methods consist of the following:
(in thousands)
November 30,
2019
 
August 31,
2019
LIFO basis
$
164,340

 
$
184,007

First-in, first-out basis
140,346

 
58,140

Total
$
304,686

 
$
242,147



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)
November 30,
2019
 
August 31,
2019
Land
$
10,749

 
$
6,799

Buildings and building improvements
147,770

 
119,638

Machinery and equipment
113,594

 
107,701

Software
29,622

 
29,169

Transportation
4,009

 
3,865

Property, plant, and equipment, gross
305,744

 
267,172

Less accumulated depreciation
142,396

 
139,600

Property, plant, and equipment, net
$
163,348

 
$
127,572



Depreciation expense was $3.6 million and $3.2 million during the first quarter of Fiscal 2020 and 2019, respectively.

Note 7: Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows for the first three months of Fiscal 2020 and 2019, of which there 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 November 24, 2018
$
244,684

 
$
—

 
$
30,388

 
$
275,072

 
 
 
 
 
 
 
 
Balances at August 31, 2019
$
244,684

 
$
—

 
$
30,247

 
$
274,931

Acquisition of Newmar(2)
—

 
72,909

 
—

 
72,909

Balances at November 30, 2019
$
244,684

 
$
72,909

 
$
30,247

 
$
347,840

(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.

14

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

Other intangible assets, net of accumulated amortization, consist of the following:
 
 
 
November 30, 2019
 
 
 
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

 
$
22,618

 
12.2
 
95,581

 
$
20,329

Backlog
0.5
 
28,327

 
19,543

 
0.5
 
19,527

 
19,527

Non-compete agreements
4.3
 
6,647

 
4,386

 
4.1
 
5,347

 
3,077

Leasehold interest-favorable
 
 
—

 
—

 
8.1
 
2,000

 
690

Other intangible assets, gross
 
 
469,805

 
46,547

 
 
 
299,705

 
43,623

Less accumulated amortization
 
 
46,547

 
 
 
 
 
43,623

 
 
Other intangible assets, net
 
 
$
423,258

 
 
 
 
 
$
256,082

 
 


The weighted average remaining amortization period for intangible assets as of November 30, 2019 was approximately 11 years.

Remaining estimated aggregate annual amortization expense by fiscal year is as follows:
(in thousands)
Amount
Fiscal 2020
$
18,495

Fiscal 2021
14,361

Fiscal 2022
13,719

Fiscal 2023
13,526

Fiscal 2024
13,424

Thereafter
74,483

Total amortization expense remaining
$
148,008



Note 8: 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.

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
(in thousands)
November 30,
2019
 
November 24,
2018
Balance at beginning of period
$
44,436

 
$
40,498

Business acquisition(1)
15,147

 
—

Provision
15,318

 
10,757

Claims paid
(13,794
)
 
(9,952
)
Balance at end of period
$
61,107

 
$
41,303


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


15

Note 9: Long-Term Debt

The components of long-term debt are as follows:
(in thousands)
November 30,
2019
 
August 31,
2019
ABL Credit Facility
$
—

 
$
—

Term Loan
260,000

 
260,000

Convertible Notes
300,000

 
—

Long-term debt, gross
560,000

 
260,000

Convertible Notes unamortized interest discount
(83,998
)
 
—

Debt issuance costs, net
(12,486
)
 
(5,706
)
Long-term debt
463,516

 
254,294

Less current maturities
12,668

 
8,892

Long-term debt, less current maturities
$
450,848

 
$
245,402



Credit Agreements

On November 8, 2016, we entered into a $125.0 million credit facility ("ABL Credit Facility") and a $300.0 million loan agreement ("Term Loan") with JPMorgan Chase Bank, N.A. (the agreements governing the ABL Credit 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 commitments thereunder to $192.5 million. The Credit Agreements contain certain financial covenants. As of November 30, 2019, we are in compliance with all financial covenants of the Credit 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 $290.2 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.

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

16

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 $9.8 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 $7.2 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.

Fair Value and Future Maturities

As of November 30, 2019, the fair value of long-term debt, gross, was $561.0 million. As of August 31, 2019, the fair value of long-term debt, gross, approximated the carrying value.

Aggregate contractual maturities of debt in future fiscal years are as follows:
(in thousands)
Amount
Fiscal 2020
$
10,250

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
$
560,000



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

17

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
November 30, 2019
Assets
 
 
Operating leases
Operating lease assets
$
30,720

Finance leases
Other assets
4,761

Total lease assets
 
$
35,481

 
 
 
Liabilities
 
 
Current: Operating leases
Accrued expenses: Other
$
2,416

Current: Finance leases
Accrued expenses: Other
516

Non-Current: Operating leases
Operating lease liabilities
28,066

Non-Current: Finance leases
Non-current liabilities: Other
5,275

Total lease liabilities
 
$
36,273



The following table details the operating lease cost incurred:
 
 
Three Months Ended
(in thousands)
Classification
November 30, 2019
Operating lease expense(1)
Costs of goods sold and SG&A
$
1,763

Finance lease cost:
 
 
Depreciation of lease assets
Costs of goods sold and SG&A
43

Interest on lease liabilities
Interest expense
31

Total lease cost
 
$
1,837

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


18

Our future lease commitments for future fiscal years as of November 30, 2019 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
$
2,147

 
$
1,036

 
$
3,183

 
$
642

Fiscal 2021
2,863

 
1,220

 
4,083

 
855

Fiscal 2022
2,863

 
904

 
3,767

 
851

Fiscal 2023
3,463

 
646

 
4,109

 
842

Fiscal 2024
3,763

 
477

 
4,240

 
845

Thereafter
20,073

 
1,371

 
21,444

 
3,443

Total future undiscounted lease payments
35,172

 
5,654

 
40,826

 
7,478

Less: Interest
9,422

 
922

 
10,344

 
1,687

Total reported lease liabilities
$
25,750

 
$
4,732

 
$
30,482

 
$
5,791



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



The following table details additional information related to our leases:
 
Three Months Ended
(in thousands)
November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
554

Operating cash flows from finance leases
31

Financing cash flows from finance leases
46

Leased assets obtained in exchange for lease liabilities:
 
Operating leases
2,317

Finance leases(1)
5,664

 
 
 
November 30, 2019
Weighted average remaining lease term (in years):
 
Operating leases
9.5

Finance leases
8.6

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.


19

Note 11: Employee and Retiree Benefits

Deferred compensation liabilities are as follows:
(in thousands)
November 30,
2019
 
August 31,
2019
Non-qualified deferred compensation
$
12,672

 
$
13,093

Supplemental executive retirement plan
2,085

 
2,072

Executive share option plan
—

 
12

Executive deferred compensation plan
715

 
621

Deferred compensation benefits
15,472

 
15,798

Less current portion(1)
2,878

 
2,920

Deferred compensation benefits, net of current portion
$
12,594

 
$
12,878


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

Note 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 $1,291.6 million and $874.9 million at November 30, 2019 and August 31, 2019, respectively.

Repurchased sales are not recorded as a revenue transaction, but the net difference between the original repurchase price and the resale price are recorded against the loss reserve, which is a deduction from gross revenue. Our loss reserve for repurchase commitments contains uncertainties because the calculation requires management to make assumptions and apply judgment regarding a number of factors. Our risk of loss related to these repurchase commitments is significantly reduced by the potential resale value of any products that are subject to repurchase and is spread over numerous dealers and lenders. The aggregate contingent liability related to our repurchase agreements represents all financed dealer inventory at the period reporting date subject to a repurchase agreement, net of the greater of periodic reductions per the agreement or dealer principal payments. Based on 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 $1.2 million and $0.9 million at November 30, 2019 and August 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 months ended November 30, 2019 and November 24, 2018.

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.  


20

Note 13: Revenue

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). The following table disaggregates revenue by reportable segment and product category:
 
Three Months Ended
(in thousands)
November 30,
2019
 
November 24,
2018
Net Revenues
 
 
 
Towable:
 
 
 
Fifth Wheel
$
195,189

 
$
162,749

Travel Trailer
140,463

 
125,626

Other(1)
5,598

 
4,458

Total Towable
341,250

 
292,833

Motorhome:
 
 
 
Class A
65,644

 
48,678

Class B
85,456

 
68,720

Class C
66,876

 
56,142

Other(1)
7,915

 
7,788

Total Motorhome
225,891

 
181,328

Corporate / All Other:
 
 
 
Other(2)
21,317

 
19,487

Total Corporate / All Other
21,317

 
19,487

Consolidated
$
588,458

 
$
493,648

(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.

Concentration of Risk

None of our dealer organizations accounted for more than 10% of our net revenue for the first quarter of Fiscal 2020 or 2019.

Note 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.

Stock-based compensation expense was $1.6 million and $2.5 million during the first quarter of Fiscal 2020 and 2019, respectively. Compensation expense is recognized over the requisite service period of the award.


21

Note 15: 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. The following table details the restructuring charges incurred:

 
Motorhome
 
Three Months Ended
 
Cumulative
(in thousands)
November 30, 2019
 
November 24, 2018
 
November 30, 2019
Cost of goods sold
$
(219
)
 
$
—

 
$
1,505

Selling, general, and administrative expenses
47

 
—

 
266

Restructuring expense
$
(172
)
 
$
—

 
$
1,771



Expenses in the current period include adjustments to employee-related expenses and facility closure costs. We expect additional expenses of approximately $0.5 million in Fiscal 2020, primarily related to facility closure costs. We expect these expenses to be more than offset by the corresponding savings generated by the project.

Note 16: Income Taxes

Our effective tax rate decreased to 21.7% for the three months ended November 30, 2019 from 23.3% for the three months ended November 24, 2018 primarily due to an increase in estimated research and development tax credits and excess tax benefits related to stock-based compensation in Fiscal 2020.

We file a U.S. Federal tax return, as well as returns in various international and state jurisdictions. As of November 30, 2019, our federal returns from Fiscal 2016 to present are subject to review by the Internal Revenue Service. With limited exception, state returns from Fiscal 2015 to present continue to be subject to review by state taxing jurisdictions. We are currently under review by certain U.S. state tax authorities for Fiscal 2015 through 2018. We believe we have adequately reserved for our exposure to additional payments for uncertain tax positions in our liability for unrecognized tax benefits.

Note 17: Income Per Share
The following table reflects the calculation of basic and diluted income per share:
 
Three Months Ended
(in thousands, except per share data)
November 30,
2019
 
November 24,
2018
Numerator
 
 
 
Net income
$
14,068

 
$
22,161

 
 
 
 
Denominator
 
 
 
Weighted average common shares outstanding
32,067

 
31,567

Dilutive impact of stock compensation awards
200

 
247

Weighted average common shares outstanding, assuming dilution
32,267

 
31,814

 
 
 
 
Anti-dilutive securities excluded from Weighted average common shares outstanding, assuming dilution
73

 
90

 
 
 
 
Basic income per common share
$
0.44

 
$
0.70

Diluted income per common share
$
0.44

 
$
0.70



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.


22

Note 18: Accumulated Other Comprehensive Income (Loss)

Changes in Accumulated Other Comprehensive Income ("AOCI") by component, net of tax, were:
 
Three Months Ended
 
November 30, 2019
 
November 24, 2018
(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
—

 
(80
)
 
(80
)
 
—

 
(22
)
 
(22
)
Amounts reclassified from AOCI
8

 
12

 
20

 
8

 
—

 
8

Net current-period OCI
8

 
(68
)
 
(60
)
 
8

 
(22
)
 
(14
)
Balance at end of period
$
(551
)
 
$
—

 
$
(551
)
 
$
(583
)
 
$
1,461

 
$
878



Reclassifications out of AOCI in net periodic benefit costs, net of tax, were:
 
 
Three Months Ended
(in thousands)
Location on Consolidated Statements
of Income and Comprehensive Income
November 30,
2019
 
November 24,
2018
Amortization of net actuarial loss
SG&A
$
8

 
$
8




23

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

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

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

24

motorized recreation vehicles that are sold through an established network of independent authorized dealers throughout North America.

Reportable Segments

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

Our two reportable segments include: 1) Towable (comprised of products which are not motorized and are generally towed by another vehicle as well as other related manufactured products and services), which is an aggregation of the 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 operating segments as well as expenses related to certain corporate administration expenses for the oversight of the enterprise. These expenses include items such as corporate leadership and administration costs.

Industry Trends

Key reported statistics for the North American RV industry are as follows:
•
Wholesale unit shipments: RV product delivered to the dealers, which is reported monthly by 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 October as of 2019 and 2018:
 
US and Canada Industry
 
Wholesale Unit Shipments per RVIA
 
Retail Unit Registrations per Stat Surveys
 
Rolling 12 Months through October
 
Rolling 12 Months through October
 
2019
 
2018
 
Unit Change
 
% Change
 
2019
 
2018
 
Unit Change
 
% Change
Towable(1)
352,496

 
428,708

 
(76,212
)
 
(17.8
)%
 
392,469

 
419,574

 
(27,105
)
 
(6.5
)%
Motorhome(2)
47,726

 
59,947

 
(12,221
)
 
(20.4
)%
 
52,032

 
58,512

 
(6,480
)
 
(11.1
)%
Combined
400,222

 
488,655

 
(88,433
)
 
(18.1
)%
 
444,501

 
478,086

 
(33,585
)
 
(7.0
)%
(1)
Towable: Fifth wheel and travel trailer products.
(2)
Motorhome: Class A, B and C products.

The rolling twelve months shipments for 2019 and 2018 reflect a contraction in shipments as dealers have rationalized inventory during the last twelve months. The rolling twelve months retail information for 2019 and 2018 illustrates that retail sales remain at healthy levels. We believe retail demand is the key driver to continued growth in the industry.

The most recent RVIA wholesale shipment forecasts for calendar year 2020, as noted in the table below, indicate that industry shipments are expected to decline in 2020.
 
Calendar Year
Wholesale Unit Shipment Forecast per RVIA(1)
2020
Forecast
 
2019
Forecast
(Most Likely)
 
Unit Change
 
% Change
Aggressive
404,600

 
402,100

 
2,500

 
0.6
 %
Most likely
386,400

 
402,100

 
(15,700
)
 
(3.9
)%
Conservative
359,600

 
402,100

 
(42,500
)
 
(10.6
)%
(1)
Prepared by Dr. Richard Curtin of the University of Michigan Consumer Survey Research Center for RVIA and reported in the Roadsigns RV Winter 2019 Industry Forecast Issue.


25

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 October
 
Calendar Year
US and Canada
2019
 
2018
 
2018
 
2017
 
2016(1)
Travel trailer and fifth wheels
9.1
%
 
7.7
%
 
7.8
%
 
6.1
%
 
1.7
%
Motorhome A, B, C
15.4
%
 
15.6
%
 
15.6
%
 
16.3
%
 
18.0
%
Total market share
9.8
%
 
8.6
%
 
8.7
%
 
7.4
%
 
3.7
%
(1)
Includes retail unit market share for Grand Design since its acquisition on November 8, 2016.

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 the remaining is expected to be completed mid-Fiscal 2020. The facility expansion in the Winnebago towables division was completed in the third quarter of Fiscal 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:
 
Three Months Ended
 
Fiscal Year
 
Cumulative
Investment
(in thousands)
November 30,
2019
 
2019
 
2018
 
2017
 
2016
 
2015
 
Capitalized
$
430

 
$
3,875

 
$
5,941

 
$
1,881

 
$
7,798

 
$
3,291

 
$
23,216

 
57.5
%
Expensed
305

 
3,709

 
2,107

 
2,601

 
5,930

 
2,528

 
17,180

 
42.5
%
Total
$
735

 
$
7,584

 
$
8,048

 
$
4,482

 
$
13,728

 
$
5,819

 
$
40,396

 
100.0
%


26

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

Consolidated Performance Summary

The following is an analysis of changes in key items included in the consolidated statements of income and comprehensive income for the three months ended November 30, 2019 compared to the three months ended November 24, 2018:
 
Three Months Ended
(in thousands, except percent and per share data)
November 30,
2019
 
% of Revenues(1)
 
November 24,
2018
 
% of Revenues(1)
 
$ Change
 
% Change
Net revenues
$
588,458

 
100.0
 %
 
$
493,648

 
100.0
 %
 
$
94,810

 
19.2
 %
Cost of goods sold
509,845

 
86.6
 %
 
422,652

 
85.6
 %
 
87,193

 
20.6
 %
Gross profit
78,613

 
13.4
 %
 
70,996

 
14.4
 %
 
7,617

 
10.7
 %
Selling, general, and administrative expenses
51,105

 
8.7
 %
 
35,712

 
7.2
 %
 
15,393

 
43.1
 %
Amortization of intangible assets
3,614

 
0.6
 %
 
2,659

 
0.5
 %
 
955

 
35.9
 %
Total operating expenses
54,719

 
9.3
 %
 
38,371

 
7.8
 %
 
16,348

 
42.6
 %
Operating income
23,894

 
4.1
 %
 
32,625

 
6.6
 %
 
(8,731
)
 
(26.8
)%
Interest expense
6,049

 
1.0
 %
 
4,501

 
0.9
 %
 
1,548

 
34.4
 %
Non-operating income
(116
)
 
—
 %
 
(763
)
 
(0.2
)%
 
(647
)
 
(84.8
)%
Income before income taxes
17,961

 
3.1
 %
 
28,887

 
5.9
 %
 
(10,926
)
 
(37.8
)%
Provision for income taxes
3,893

 
0.7
 %
 
6,726

 
1.4
 %
 
(2,833
)
 
(42.1
)%
Net income
$
14,068

 
2.4
 %
 
$
22,161

 
4.5
 %
 
$
(8,093
)
 
(36.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
Diluted income per share
$
0.44

 
 
 
$
0.70

 
 
 
$
(0.26
)
 
(37.1
)%
Diluted average shares outstanding
32,267

 
 
 
31,814

 
 
 
453

 
1.4
 %
(1)
Percentages may not add due to rounding differences.

Net revenues increased in the first three months of Fiscal 2020 compared to the first three months of Fiscal 2019 due to organic growth in our Towable and Motorhome segments and our acquisition of Newmar.

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

Operating expenses increased in the first three months of Fiscal 2020 compared to the first three months of Fiscal 2019 due to Newmar acquisition-related costs, 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 three months of Fiscal 2020 compared to the first three months of Fiscal 2019 primarily due to the additional interest expense related to the Convertible Notes issued in connection with the acquisition of Newmar.

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

The effective tax rate decreased to 21.7% for the first three months of Fiscal 2020 compared to 23.3% for the first three months of Fiscal 2019 due primarily to an increase in estimated research and development tax credits and excess tax benefits related to stock-based compensation in Fiscal 2020.

Net income and diluted income per share decreased in the first three months of Fiscal 2020 compared to the first three months of Fiscal 2019 primarily due to the acquisition-related costs for Newmar and the additional interest expense related to our Convertible Notes, partially offset by a favorable effective tax rate.


27

Non-GAAP Reconciliation

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the three months ended November 30, 2019 and November 24, 2018:
 
Three Months Ended
(in thousands)
November 30,
2019
 
November 24,
2018
Net income
$
14,068

 
$
22,161

Interest expense
6,049

 
4,501

Provision for income taxes
3,893

 
6,726

Depreciation
3,586

 
3,169

Amortization of intangible assets
3,614

 
2,659

EBITDA
31,210

 
39,216

Acquisition-related fair-value inventory step-up
1,176

 
—

Acquisition-related costs
9,950

 
—

Restructuring expenses
(172
)
 
—

Non-operating income
(116
)
 
(763
)
Adjusted EBITDA
$
42,048

 
$
38,453


Reportable Segment Performance Summary

Towable

The following is an analysis of key changes in our Towable segment for the three months ended November 30, 2019 compared to the three months ended November 24, 2018 and as of November 30, 2019 compared to November 24, 2018:
 
Three Months Ended
(in thousands, except ASP)
November 30,
2019
 
% of Revenues
 
November 24,
2018
 
% of Revenues
 
$ Change
 
% Change
Net revenues
$
341,250

 
 
 
$
292,833

 
 
 
$
48,417

 
16.5
 %
Adjusted EBITDA
35,785

 
10.5
%
 
30,828

 
10.5
%
 
4,957

 
16.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average Selling Price ("ASP")(1)
32,998

 
 
 
32,117

 
 
 
881

 
2.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Unit deliveries
November 30,
2019
 
Product Mix(2)
 
November 24,
2018
 
Product Mix(2)
 
Unit Change
 
% Change
Travel trailer
6,336

 
59.8
%
 
5,836

 
62.2
%
 
500

 
8.6
 %
Fifth wheel
4,263

 
40.2
%
 
3,549

 
37.8
%
 
714

 
20.1
 %
Total towables
10,599

 
100.0
%
 
9,385

 
100.0
%
 
1,214

 
12.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands)
November 30,
2019
 
 
 
November 24,
2018
 
 
 
Change
 
% Change
Backlog(3)
 
 
 
 
 
 
 
 
 
 
 
Units
7,174

 
 
 
9,199

 
 
 
(2,025
)
 
(22.0
)%
Dollars
$
242,853

 
 
 
$
327,724

 
 
 
$
(84,871
)
 
(25.9
)%
Dealer Inventory
 
 
 
 
 
 
 
 
 
 
 
Units
17,843

 
 
 
16,662

 
 
 
1,181

 
7.1
 %
(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.

Net revenues increased in the first three months of Fiscal 2020 compared to the first three months of Fiscal 2019 due to an

28

increase in unit deliveries and an increase in ASP.

Adjusted EBITDA increased in the first three months of Fiscal 2020 compared to the first three months of Fiscal 2019 due to an increase in net revenues.

We have seen a decrease in the volume and dollar value of backlog as of November 30, 2019 compared to November 24, 2018 due to increased use of our production capacity and reflecting the shift in dealer order patterns to smaller and more frequent orders.

Motorhome

The following is an analysis of key changes in our Motorhome segment for the three months ended November 30, 2019 compared to the three months ended November 24, 2018 and as of November 30, 2019 compared to November 24, 2018:
 
Three Months Ended
(in thousands, except ASP)
November 30,
2019
 
% of Revenues
 
November 24,
2018
 
% of Revenues
 
$ Change
 
% Change
Net revenues
$
225,891

 
 
 
$
181,328

 
 
 
$
44,563

 
24.6
 %
Adjusted EBITDA
9,331

 
4.1
%
 
11,976

 
6.6
%
 
(2,645
)
 
(22.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
ASP(1)
119,749

 
 
 
98,690

 
 
 
21,059

 
21.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Unit deliveries
November 30,
2019
 
Product Mix(2)
 
November 24,
2018
 
Product Mix(2)
 
Unit Change
 
% Change
Class A
399

 
21.2
%
 
422

 
23.2
%
 
(23
)
 
(5.5
)%
Class B
809

 
43.0
%
 
719

 
39.5
%
 
90

 
12.5
 %
Class C
674

 
35.8
%
 
678

 
37.3
%
 
(4
)
 
(0.6
)%
Total motorhomes
1,882

 
100.0
%
 
1,819

 
100.0
%
 
63

 
3.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands)
November 30,
2019
 
 
 
November 24,
2018
 
 
 
Change
 
% Change
Backlog(3)
 
 
 
 
 
 
 
 
 
 
 
Units
2,631

 
 
 
1,961

 
 
 
670

 
34.2
 %
Dollars
$
384,201

 
 
 
$
191,632

 
 
 
$
192,569

 
100.5
 %
Dealer Inventory
 
 
 
 
 
 
 
 
 
 
 
Units
5,169

 
 
 
4,458

 
 
 
711

 
15.9
 %
(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 three months of Fiscal 2020 compared to the first three months of Fiscal 2019 due to the acquisition of Newmar and an increase in the organic ASP.

Adjusted EBITDA decreased in the first three months of Fiscal 2020 compared to the first three months of Fiscal 2019 primarily due to an unfavorable mix and higher SG&A expense, partially offset by the Newmar acquisition and pricing in excess of inflation.

We have seen an increase in the backlog volumes as of November 30, 2019 compared to November 24, 2018 due to our acquisition of Newmar and due to new product introductions.


29

Analysis of Financial Condition, Liquidity, and Resources
Cash Flows
The following table summarizes our cash flows from operations for the three months ended November 30, 2019 and November 24, 2018:
 
Three Months Ended
(in thousands)
November 30,
2019
 
November 24,
2018
Total cash provided by (used in):
 
 
 
Operating activities
$
79,033

 
$
54,171

Investing activities
(270,661
)
 
(13,162
)
Financing activities
255,525

 
(42,649
)
Net increase (decrease) in cash and cash equivalents
$
63,897

 
$
(1,640
)
Operating Activities
Cash provided by operating activities increased for the three months ended November 30, 2019 compared to the three months ended November 24, 2018 primarily due to favorable changes in working capital, partially offset by Newmar acquisition-related costs.
Investing Activities
Cash used in investing activities increased for the three months ended November 30, 2019 compared to the three months ended November 24, 2018 primarily due to our acquisition of Newmar.
Financing Activities
Cash provided by financing activities increased for the three months ended November 30, 2019 compared to the three months ended November 24, 2018 primarily due to our Convertible Notes issued to finance our acquisition of Newmar.

Debt and Capital

As of November 30, 2019, we have a debt agreement that consists of a $300.0 million term loan agreement ("Term Loan") and a $192.5 million asset-based revolving credit facility ("ABL Credit Facility") (collectively, the "Credit Agreements"). During the first quarter of Fiscal 2020, we issued the Convertible Notes, which were used to partially fund the Newmar acquisition. Refer to Note 9, Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional details. As of November 30, 2019, we had no borrowings against the ABL.

Other Financial Measures

Working capital at November 30, 2019 and August 31, 2019 was $297.8 million and $212.9 million, respectively. We currently expect cash on hand, funds generated from operations, and the borrowing available under our ABL Credit 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 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 the authorization. In the first quarter of Fiscal 2020, we did not repurchase any shares under this authorization. We continually evaluate if share repurchases reflect a prudent use of our capital and, subject to compliance with our Credit Agreements, we may purchase shares in the future. At November 30, 2019, we have $58.9 million remaining on our board repurchase authorization.

On December 18, 2019, our Board of Directors approved a quarterly cash dividend of $0.11 per share payable on January 29, 2020, to common stockholders of record at the close of business on January 15, 2020.


30

Contractual Obligations and Commercial Commitments

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

New Accounting Pronouncements

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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


31

Interest rate risk

We are exposed to market risks related to fluctuations in interest rates on the outstanding variable rate debt. As of November 30, 2019, we had $260.0 million outstanding under our Term Loan, subject to variable interest rates. For our Term Loan in the first three months 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 projected. The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve. In reality, interest rate changes of this magnitude are rarely instantaneous or parallel.

Item 4. Controls and Procedures.

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 first quarter of Fiscal 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


32

PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.
For a description of our legal proceedings, see Note 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 31, 2019, except for the risk factors updated below:

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 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

33

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;
•
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.

34


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.
(c) Stock Repurchases
Purchases of our common stock during each fiscal month of the first quarter of Fiscal 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)
09/01/19 - 10/05/19
511

 
$
36.38

 
—

 
$
58,870,000

10/06/19 - 11/02/19
42,112

 
$
38.68

 
—

 
$
58,870,000

11/03/19 - 11/30/19
313

 
$
48.78

 
—

 
$
58,870,000

Total
42,936

 
$
38.73

 
—

 
$
58,870,000

(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 $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 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 ABL Credit Facility.

35

Item 6. Exhibits.

36

 
 
101
The following financial statements from our Quarterly Report on Form 10-Q for the first quarter of Fiscal 2020 in Inline Extensible Business Reporting Language ("iXBRL"): (i) the Condensed Consolidated Balance Sheets at November 30, 2019, and August 31, 2019, (ii) the Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended November 30, 2019, and November 24, 2018, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2019, and November 24, 2018, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended November 30, 2019, and November 24, 2018, and (v) the Notes to the Condensed Consolidated Financial Statements.
104
The cover page from our Quarterly Report on Form 10-Q for the first quarter of Fiscal 2020 formatted in iXBRL (included as Exhibit 101).
*
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish copies of any of the omitted schedules upon request of the U.S. Securities and Exchange Commission.

37

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:
December 20, 2019
By
/s/ Michael J. Happe
 
 
 
 
Michael J. Happe
 
 
 
 
Chief Executive Officer, President
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
Date:
December 20, 2019
By
/s/ Bryan L. Hughes
 
 
 
 
Bryan L. Hughes
 
 
 
 
Vice President, Chief Financial Officer
 
 
 
 
(Principal Financial and Accounting Officer)
 


38