10-Q 1 wgo-20220528.htm 10-Q wgo-20220528
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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 May 28, 2022
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
wgo-20220528_g1.jpg
WINNEBAGO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Minnesota42-0802678
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
13200 Pioneer TrailEden PrairieMinnesota55347
(Address of principal executive offices)(Zip Code)
952-829-8600
(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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

As of June 16, 2022, there were 31,753,998 shares of common stock, par value $0.50 per share, outstanding.



Winnebago Industries, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended May 28, 2022

Table of Contents

2

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Winnebago Industries, Inc.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months EndedNine Months Ended
(in thousands, except per share data)May 28,
2022
May 29,
2021
May 28,
2022
May 29,
2021
Net revenues$1,458,138 $960,737 $3,778,609 $2,593,754 
Cost of goods sold1,185,174 791,125 3,059,656 2,130,556 
Gross profit272,964 169,612 718,953 463,198 
Selling, general, and administrative expenses88,231 63,586 234,896 165,001 
Amortization8,016 3,590 24,203 10,771 
Total operating expenses96,247 67,176 259,099 175,772 
Operating income176,717 102,436 459,854 287,426 
Interest expense, net10,511 10,229 31,078 30,222 
Non-operating loss (income)11,658 (93)24,522 (310)
Income before income taxes154,548 92,300 404,254 257,514 
Provision for income taxes37,326 21,005 96,227 59,728 
Net income$117,222 $71,295 $308,027 $197,786 
Earnings per common share:
Basic$3.62 $2.12 $9.35 $5.89 
Diluted$3.57 $2.05 $9.18 $5.83 
Weighted average common shares outstanding:
Basic32,389 33,552 32,936 33,565 
Diluted32,855 34,772 33,559 33,943 
Net income$117,222 $71,295 $308,027 $197,786 
Other comprehensive income:
Amortization of net actuarial loss (net of tax of $3, $3, $9, and $9)
10 9 28 26 
Comprehensive income$117,232 $71,304 $308,055 $197,812 

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
3


Winnebago Industries, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)May 28,
2022
August 28,
2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents$238,073 $434,563 
Receivables, less allowance for doubtful accounts ($370 and $307, respectively)
373,639 253,808 
Inventories, net486,100 341,473 
Prepaid expenses and other current assets20,806 29,069 
Total current assets1,118,618 1,058,913 
Property, plant, and equipment, net256,335 191,427 
Goodwill484,176 348,058 
Other intangible assets, net477,603 390,407 
Investment in life insurance29,505 28,821 
Operating lease assets42,327 28,379 
Other long-term assets18,570 16,562 
Total assets$2,427,134 $2,062,567 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$229,727 $180,030 
Income taxes payable10,754 8,043 
Accrued expenses:
Accrued compensation63,966 67,541 
Product warranties127,263 91,222 
Self-insurance20,615 19,296 
Promotional16,191 10,040 
Accrued interest and dividends14,017 10,720 
Other current liabilities53,419 20,384 
Total current liabilities535,952 407,276 
Long-term debt, net541,453 528,559 
Deferred income taxes8,445 13,429 
Unrecognized tax benefits6,346 6,483 
Long-term operating lease liabilities41,195 26,745 
Deferred compensation benefits, net of current portion8,550 9,550 
Other long-term liabilities21,302 13,582 
Total liabilities1,163,243 1,005,624 
Contingent liabilities and commitments (Note 11)
Shareholders' equity:
Preferred stock, par value $0.01: 10,000 shares authorized; Zero shares issued and outstanding
  
Common stock, par value $0.50: 120,000 shares authorized; 51,776 shares issued and outstanding
25,888 25,888 
Additional paid-in capital252,257 218,490 
Retained earnings1,463,254 1,172,996 
Accumulated other comprehensive loss(463)(491)
Treasury stock, at cost: 20,067 and 18,713 shares, respectively
(477,045)(359,940)
Total shareholders' equity1,263,891 1,056,943 
Total liabilities and shareholders' equity$2,427,134 $2,062,567 
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
4

Winnebago Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
(in thousands)May 28,
2022
May 29,
2021
Operating activities
Net income$308,027 $197,786 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation17,031 13,476 
Amortization24,203 10,771 
Non-cash interest expense, net11,225 10,372 
Amortization of debt issuance costs1,849 1,852 
Last in, first-out expense5,878 2,321 
Stock-based compensation12,518 11,719 
Deferred income taxes(4,311)(765)
Contingent consideration fair value adjustment24,717  
Other, net2,261 (4,412)
Change in operating assets and liabilities, net of assets and liabilities acquired
Receivables, net(117,391)(7,384)
Inventories, net(129,056)(152,398)
Prepaid expenses and other assets10,212 1,010 
Accounts payable41,610 40,817 
Income taxes and unrecognized tax benefits4,023 (12,771)
Accrued expenses and other liabilities32,449 35,560 
Net cash provided by operating activities245,245 147,954 
Investing activities
Purchases of property, plant, and equipment(63,228)(23,596)
Acquisition of business, net of cash acquired(228,159) 
Proceeds from the sale of property, plant, and equipment113 12,450 
Other, net(60)(224)
Net cash used in investing activities(291,334)(11,370)
Financing activities
Borrowings on long-term debt3,422,539 2,629,932 
Repayments on long-term debt(3,422,539)(2,629,932)
Payments of cash dividends(18,052)(12,136)
Payments for repurchases of common stock(134,243)(12,109)
Payments of debt issuance costs (224)
Other, net1,894 1,151 
Net cash used in financing activities(150,401)(23,318)
Net (decrease)/increase in cash and cash equivalents(196,490)113,266 
Cash and cash equivalents at beginning of period434,563 292,575 
Cash and cash equivalents at end of period$238,073 $405,841 
5

Supplemental Disclosures
Income taxes paid, net$97,717 $71,090 
Interest paid14,271 14,618 
Non-cash investing and financing activities
Issuance of common stock for acquisition of business$22,000 $ 
Issuance of common stock for settlement of earnout liability13,168  
Capital expenditures in accounts payable4,668 121 
Dividends declared not yet paid6,214 4,273 
Increase (decrease) in lease assets in exchange for lease liabilities:
Operating leases17,236 1,633 
Finance leases2,528 (10)
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
6


Winnebago Industries, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Three Months Ended May 28, 2022
(in thousands,
except per share data)
Common Shares Additional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury Stock Total Shareholders' Equity
NumberAmountNumberAmount
Balance at February 26, 2022
51,776 $25,888 $238,159 $1,357,812 $(473)(19,045)$(412,399)$1,208,987 
Stock-based compensation— — 5,586 — — 2 41 5,627 
Issuance of stock for settlement of earnout liability— — 7,830 — — 244 5,338 13,168 
Repurchase of common stock— — — — — (1,268)(70,025)(70,025)
Common stock dividends; $0.36 per share
— — — (11,797)— — — (11,797)
Other— — 682 17 — — — 699 
Total comprehensive income— — — — 10 — — 10 
Net income— — — 117,222 — — — 117,222 
Balances at May 28, 2022
51,776 $25,888 $252,257 $1,463,254 $(463)(20,067)$(477,045)$1,263,891 
Three Months Ended May 29, 2021
(in thousands,
except per share data)
Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balance at February 27, 2021
51,776 $25,888 $209,727 $1,032,020 $(509)(18,225)$(324,762)$942,364 
Stock-based compensation— — 4,733 — —  5 4,738 
Common stock dividends; $0.24 per share
— — — (8,148)— — — (8,148)
Total comprehensive income— — — — 9 — — 9 
Net income— — — 71,295 — — — 71,295 
Balances at May 29, 2021
51,776 $25,888 $214,460 $1,095,167 $(500)(18,225)$(324,757)$1,010,258 
Nine Months Ended May 28, 2022
(in thousands,
except per share data)
Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balances at August 28, 202151,776 $25,888 $218,490 $1,172,996 $(491)(18,713)$(359,940)$1,056,943 
Stock-based compensation— — 12,445 — — 3 73 12,518 
Issuance of stock for employee benefit and stock-based awards, net— — (1,899)— — 225 4,436 2,537 
Issuance of stock for acquisition— — 14,709 — — 379 7,291 22,000 
Issuance of stock for settlement of earnout liability— — 7,830 — — 244 5,338 13,168 
Repurchase of common stock— — — — — (2,205)(134,243)(134,243)
Common stock dividends; $0.54 per share
— — — (17,857)— — — (17,857)
Other— — 682 88 — — — 770 
Total comprehensive income— — — — 28 — — 28 
Net income— — — 308,027 — — — 308,027 
Balances at May 28, 202251,776 $25,888 $252,257 $1,463,254 $(463)(20,067)$(477,045)$1,263,891 
7

Nine Months Ended May 29, 2021
(in thousands,
except per share data)
Common SharesAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Shareholders' Equity
NumberAmountNumberAmount
Balances at August 29, 202051,776 $25,888 $203,791 $913,610 $(526)(18,133)$(315,297)$827,466 
Stock-based compensation— — 11,701 — — 1 18 11,719 
Issuance of stock for employee benefit and stock-based awards, net— — (1,032)— — 149 2,631 1,599 
Repurchase of common stock— — — — — (242)(12,109)(12,109)
Common stock dividends; $0.48 per share
— — — (16,229)— — — (16,229)
Total comprehensive income— — — — 26 — — 26 
Net income— — — 197,786 — — — 197,786 
Balances at May 29, 202151,776 $25,888 $214,460 $1,095,167 $(500)(18,225)$(324,757)$1,010,258 
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
8

Winnebago Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(All amounts in tables are in thousands, except share and per share data, unless otherwise designated)

Note 1.    Basis of Presentation

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

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

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

The consolidated financial statements included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended August 28, 2021 filed with the SEC. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year ending August 27, 2022.

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

CARES Act
The Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law on March 27, 2020 to help alleviate the impact of the COVID-19 pandemic in the U.S. We took advantage of the employer payroll tax deferral offered by the CARES Act, which allowed us to defer the payment of employer payroll taxes for the period from March 27, 2020 to December 31, 2020. The deferred employer payroll tax liability paid in the first nine months of Fiscal 2022 was $8.0 million and the liability left to pay as of May 28, 2022 was $8.2 million, which will be paid in December 2022. We also took advantage of a tax credit granted to companies under the CARES Act who continued to pay their employees when operations were fully or partially suspended. The refundable tax credit available through the end of the third quarter of Fiscal 2020 reflected in cost of goods sold on the Consolidated Statements of Income and Comprehensive Income was approximately $4.0 million. The entire amount is expected to be received during calendar year 2022. As of May 28, 2022, $0.8 million remains outstanding within other current assets on the Consolidated Balance Sheets.

Recently Adopted Accounting Pronouncements
Accounting Standards Update ("ASU") Topic 740, Income Taxes: Simplifying the Accounting for Income Taxes, was adopted in the first quarter of Fiscal 2022. The new standard eliminates certain exceptions to Topic 740's general principles, improves consistent application and simplifies its application. We adopted the new guidance in the first quarter of Fiscal 2022, and there was not a material impact to our financial condition, results of operations or disclosures.

Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) which reduces the number of models used to account for convertible instruments, amends diluted earnings per share ("EPS") calculations for convertible instruments, and amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity's own shares to be classified in equity. Certain disclosure requirements were also added to increase transparency and decision-usefulness regarding a convertible instrument's terms and features. Additionally, the if-converted method for including convertible instruments must be used in diluted EPS as opposed to the treasury stock method. The new guidance is effective for annual reporting periods beginning after December 15, 2021, which is our Fiscal 2023. We will adopt the new guidance in the first quarter of Fiscal 2023 and expect the new guidance will increase our net long-term debt and decrease our total equity, as well as change our reported diluted EPS.

9

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. This guidance is not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The guidance can be applied immediately through December 31, 2022. We will adopt this standard when LIBOR is discontinued and do not expect a material impact to our financial condition, results of operations or disclosures based on the current debt portfolio and capital structure.

Note 2.    Business Combinations

On August 31, 2021, we purchased 100% of the equity interests of Barletta Boat Company, LLC and Three Limes, LLC (collectively, "Barletta"), a manufacturer of high-quality, premium pontoon boats that are sold through a network of independent authorized dealers.

The acquisition of Barletta resulted in a newly created Marine reportable segment that includes the Barletta and Chris-Craft operating segments.

We acquired Barletta for a purchase price of $286.3 million, including cash payments of $240.1 million, $25.0 million in common stock issued to the sellers (subject to a discount noted below), and contingent consideration from earnout provisions. The common stock fair value included in the purchase price reflects a 12% discount, due to the lack of marketability as these are unregistered shares that have a one-year lockup restriction, which reduced the value of the common stock to $22.0 million. The contingent consideration includes both a potential stock payout as well as a potential cash payment based on achievement of certain financial performance metrics over the next few years. The maximum payout under the earnout is $50.0 million in cash and $15.0 million in stock if all metrics are achieved. The fair value of the earnout as of August 31, 2021 was $24.2 million. The fair value of the earnout as of May 28, 2022 was $35.1 million, of which $20.9 million is included in other current liabilities and $14.2 million is included in other long-term liabilities on the Consolidated Balance Sheets. In the third quarter of Fiscal 2022, we issued 0.2 million shares of common stock in connection with the settlement of the 2021 earnout period obligation.

The total purchase price was allocated to the acquired net tangible and intangible assets of Barletta, based on their preliminary fair values at the date of the acquisition. We finalized the allocation of the purchase price in the third quarter of fiscal 2022.

The following table summarizes the fair values assigned to the Barletta net assets acquired as of the date of acquisition:

(in thousands)August 31, 2021
Cash$11,903 
Other current assets24,564 
Property, plant, and equipment17,250 
Goodwill136,118 
Other intangible assets111,400 
Total assets acquired301,235 
Accounts payable7,181 
Product warranties4,656 
Other current liabilities3,146 
Total liabilities assumed14,983 
Total purchase price$286,252 

Goodwill from the Barletta acquisition is recognized in our newly created Marine segment. We expect that the full amount of goodwill will be deductible for tax purposes.

The intangible assets acquired include a trade name, dealer network, and backlog. The trade name has an indefinite life, while the backlog and dealer network will be amortized on a straight line basis over 10 months and 12 years, respectively.

Total transaction costs related to the Barletta acquisition were $3.1 million, of which $2.4 million were expensed during the first quarter of Fiscal 2022 and $0.7 million were expensed during the fourth quarter of Fiscal 2021. Transaction costs are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income.
10


Pro forma results of operations for this acquisition have not been presented as they were immaterial to the reported results.

Note 3.    Business Segments

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

The acquisition of Barletta resulted in a newly created Marine reportable segment effective for the first quarter of Fiscal 2022. The segment consists of Barletta and our existing Chris-Craft operating segment. Prior year amounts for Chris-Craft have been reclassified from Corporate / All Other category to the Marine segment.

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

The Corporate / All Other category includes the Winnebago specialty vehicles operating segment as well as certain corporate administration expenses related to the oversight of the enterprise, such as corporate leadership and administration costs.

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

Our Chief Executive Officer (the Chief Operating Decision Maker ("CODM")) regularly reviews consolidated financial results in their entirety and operating segment financial information through Adjusted EBITDA and has ultimate responsibility for enterprise decisions. Our CODM is responsible for allocating resources and assessing performance of the consolidated enterprise, reportable segments and between operating segments. Management of each operating segment has responsibility for operating decisions, allocating resources and assessing performance within their respective operating segment. The accounting policies of all reportable segments are the same as those described in Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021.

We monitor and evaluate operating performance of our reportable segments based on Adjusted EBITDA. We believe disclosing Adjusted EBITDA is useful to securities analysts, investors and other interested parties when evaluating companies in our industries. EBITDA is defined as net income before interest expense, provision for income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation and amortization expense, and other pretax adjustments made in order to present comparable results period over period. Examples of items excluded from Adjusted EBITDA include acquisition-related costs, litigation reserves, restructuring expenses, gain or loss on sale of property, plant and equipment, contingent consideration fair value adjustment, and non-operating income or loss.

11

Financial information by reportable segment is as follows:
Three Months EndedNine Months Ended
(in thousands)May 28,
2022
May 29,
2021
May 28,
2022
May 29,
2021
Net Revenues
Towable$805,567 $555,749 $2,103,192 $1,449,934 
Motorhome516,345 385,257 1,355,389 1,090,221 
Marine126,548 17,170 303,175 43,527 
Corporate / All Other9,678 2,561 16,853 10,072 
Consolidated$1,458,138 $960,737 $3,778,609 $2,593,754 
Adjusted EBITDA
Towable$117,767 $80,130 $330,417 $205,639 
Motorhome64,388 37,467 160,636 118,779 
Marine19,813 1,624 43,336 3,502 
Corporate / All Other(10,247)(9,447)(24,707)(20,888)
Consolidated$191,721 $109,774 $509,682 $307,032 
Capital Expenditures
Towable$12,621 $4,639 $33,960 $11,490 
Motorhome570 2,976 16,196 10,247 
Marine6,041 1,061 8,581 1,859 
Corporate / All Other570  4,491  
Consolidated$19,802 $8,676 $63,228 $23,596 

(in thousands)May 28,
2022
August 28,
2021
Assets
Towable$913,892 $790,257 
Motorhome857,636 728,060 
Marine404,137 102,901 
Corporate / All Other251,469 441,349 
Consolidated$2,427,134 $2,062,567 


12

Reconciliation of net income to consolidated Adjusted EBITDA is as follows:
Three Months EndedNine Months Ended
(in thousands)May 28, 2022May 29, 2021May 28, 2022May 29, 2021
Net income$117,222 $71,295 $308,027 $197,786 
Interest expense, net10,511 10,229 31,078 30,222 
Provision for income taxes37,326 21,005 96,227 59,728 
Depreciation6,264 4,917 17,031 13,476 
Amortization8,016 3,590 24,203 10,771 
EBITDA179,339 111,036 476,566 311,983 
Acquisition-related costs724  4,594  
Litigation reserves  4,000  
Restructuring expenses 19  112 
Gain on sale of property, plant and equipment (1,188) (4,753)
Contingent consideration fair value adjustment11,830  24,717  
Non-operating income(172)(93)(195)(310)
Adjusted EBITDA$191,721 $109,774 $509,682 $307,032 

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

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

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

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

13

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis are as follows:
Fair Value atFair Value Hierarchy
(in thousands)May 28,
2022
Level 1Level 2Level 3
Assets that fund deferred compensation
Domestic equity funds$1,206 $1,206 $ $ 
International equity funds61 61   
Fixed income funds183 183   
Total assets at fair value$1,450 $1,450 $ $ 
Contingent consideration
   Earnout liability $35,147 $ $ $35,147 
Total liabilities at fair value$35,147 $ $ $35,147 
    
Fair Value atFair Value Hierarchy
(in thousands)August 28,
2021
Level 1Level 2Level 3
Assets that fund deferred compensation
Domestic equity funds$940 $940 $ $ 
International equity funds41 41   
Fixed income funds46 46   
Total assets at fair value$1,027 $1,027 $ $ 

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, used to fund the Executive Share Option Plan and the Executive Deferred Compensation Plan, are classified as Level 1 as they are traded in an active market for which closing stock prices are readily available. Refer to Note 11 of the Notes to the Consolidated Financial Statements included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021 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 on the Consolidated Balance Sheets. The remaining assets are classified as non-current and are included in other assets on the Consolidated Balance Sheets.

Contingent Consideration
Contingent consideration represents the earnout liability related to the Barletta acquisition and is valued using a probability-weighted scenario analysis of projected gross profit results and discounted at a risk-free rate. The contingent consideration is classified as Level 3. Actual gross profit results may differ significantly from those used in the estimate above, which may affect future payments. Changes in future payments will be reflected in future operating results as they occur.

The following table provides a reconciliation of the beginning and ending balances of the contingent consideration:

Three Months EndedNine Months Ended
(in thousands)May 28,
2022
May 29,
2021
May 28,
2022
May 29,
2021
Beginning fair value - contingent consideration$37,077 $ $ $ 
Additions  24,190  
Fair value adjustments11,830  24,717  
Settlements(13,168) (13,168) 
Other$(592)$ $(592)$ 
Ending fair value - contingent consideration$35,147 $ $35,147 $ 

The fair value of the earnout liability that will be settled within a year is included in other current liabilities on the Consolidated Balance Sheets. The remaining earnout liability is included in other long-term liabilities on the Consolidated Balance Sheets.

14

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain financial instruments are measured at fair value on a nonrecurring basis. These assets primarily include goodwill, intangible assets, property, plant and equipment, and right-of-use lease assets. These assets were originally recognized at amounts equal to the fair value determined at date of acquisition or purchase. If certain triggering events occur, or if an annual impairment test is required, we will evaluate the non-financial asset for impairment. If an impairment has occurred, the asset will be written down to its current estimated fair value. No impairments were recorded for non-financial assets in the three or nine months ended May 28, 2022 or May 29, 2021.

Assets and Liabilities Not Measured at Fair Value
Certain financial instruments are not measured at fair value but are recorded at carrying amounts approximating fair value based on their short-term nature. These financial instruments include cash and cash equivalents, receivables, accounts payable, other payables, and long-term debt. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. The fair value of our long-term debt was determined using current quoted prices in active markets for our publicly traded debt obligations, which is classified as Level 1 in the fair value hierarchy. See Note 9 for the fair value of our long-term debt.

Note 5.    Inventories

Inventories consist of the following:
(in thousands)May 28,
2022
August 28,
2021
Finished goods$18,449 $12,243 
Work-in-process202,733 184,611 
Raw materials309,760 183,583 
Total530,942 380,437 
Less: Excess of FIFO over LIFO cost44,842 38,964 
Inventories, net$486,100 $341,473 

Inventory valuation methods consist of the following:
(in thousands)May 28,
2022
August 28,
2021
LIFO basis$216,820 $139,544 
First-in, first-out basis314,122 240,893 
Total$530,942 $380,437 

The above inventory value, 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)May 28,
2022
August 28,
2021
Land$10,697 $9,111 
Buildings and building improvements169,781 147,629 
Machinery and equipment130,601 121,911 
Software40,747 36,815 
Transportation6,563 5,335 
Construction in progress72,023 31,137 
Property, plant, and equipment, gross430,412 351,938 
Less: Accumulated depreciation174,077 160,511 
Property, plant, and equipment, net$256,335 $191,427 

Depreciation expense was $6.3 million and $4.9 million for the three months ended May 28, 2022 and May 29, 2021, respectively; and $17.0 million and $13.5 million for the nine months ended May 28, 2022 and May 29, 2021, respectively.

15

Note 7.    Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by reportable segment, with no accumulated impairment losses, for the nine months ended May 28, 2022 and May 29, 2021 are as follows:
(in thousands)TowableMotorhomeMarineTotal
Balances at August 29, 2020 and May 29, 2021(1)
$244,684