WINNEBAGO INDUSTRIES INC [WGO] Filings

10-Q 1 wgo-20220528.htm 10-Q wgo-20220528

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

WINNEBAGO INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Minnesota

42-0802678

(State or other jurisdiction of incorporation or organization)

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

13200 Pioneer Trail

Eden Prairie

Minnesota

55347

(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 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 ☒

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


PART I.	FINANCIAL INFORMATION	3
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Income and Comprehensive Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Changes in Shareholders' Equity	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures.	33

PART II.	OTHER INFORMATION	35
Item 1.	Legal Proceedings.	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	35
Item 6.	Exhibits	36

SIGNATURES		37

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Winnebago Industries, Inc.

Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Three Months Ended				Nine 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 sold	1,185,174		791,125		3,059,656		2,130,556
Gross profit	272,964		169,612		718,953		463,198
Selling, general, and administrative expenses	88,231		63,586		234,896		165,001
Amortization	8,016		3,590		24,203		10,771
Total operating expenses	96,247		67,176		259,099		175,772
Operating income	176,717		102,436		459,854		287,426
Interest expense, net	10,511		10,229		31,078		30,222
Non-operating loss (income)	11,658		(93)		24,522		(310)
Income before income taxes	154,548		92,300		404,254		257,514
Provision for income taxes	37,326		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:
Basic	32,389		33,552		32,936		33,565
Diluted	32,855		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.

Table of Contents

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, net	486,100		341,473
Prepaid expenses and other current assets	20,806		29,069
Total current assets	1,118,618		1,058,913
Property, plant, and equipment, net	256,335		191,427
Goodwill	484,176		348,058
Other intangible assets, net	477,603		390,407
Investment in life insurance	29,505		28,821
Operating lease assets	42,327		28,379
Other long-term assets	18,570		16,562
Total assets	$	2,427,134	$	2,062,567

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	229,727	$	180,030
Income taxes payable	10,754		8,043
Accrued expenses:
Accrued compensation	63,966		67,541
Product warranties	127,263		91,222
Self-insurance	20,615		19,296
Promotional	16,191		10,040
Accrued interest and dividends	14,017		10,720
Other current liabilities	53,419		20,384
Total current liabilities	535,952		407,276
Long-term debt, net	541,453		528,559
Deferred income taxes	8,445		13,429
Unrecognized tax benefits	6,346		6,483
Long-term operating lease liabilities	41,195		26,745
Deferred compensation benefits, net of current portion	8,550		9,550
Other long-term liabilities	21,302		13,582
Total liabilities	1,163,243		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 capital	252,257		218,490
Retained earnings	1,463,254		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' equity	1,263,891		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.

Table of Contents

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
Depreciation	17,031		13,476
Amortization	24,203		10,771
Non-cash interest expense, net	11,225		10,372
Amortization of debt issuance costs	1,849		1,852
Last in, first-out expense	5,878		2,321
Stock-based compensation	12,518		11,719
Deferred income taxes	(4,311)		(765)
Contingent consideration fair value adjustment	24,717		—
Other, net	2,261		(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 assets	10,212		1,010
Accounts payable	41,610		40,817
Income taxes and unrecognized tax benefits	4,023		(12,771)
Accrued expenses and other liabilities	32,449		35,560
Net cash provided by operating activities	245,245		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 equipment	113		12,450
Other, net	(60)		(224)
Net cash used in investing activities	(291,334)		(11,370)

Financing activities
Borrowings on long-term debt	3,422,539		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, net	1,894		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 period	434,563		292,575
Cash and cash equivalents at end of period	$	238,073	$	405,841

Table of Contents


Supplemental Disclosures
Income taxes paid, net	$	97,717	$	71,090
Interest paid	14,271		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 liability	13,168		—
Capital expenditures in accounts payable	4,668		121
Dividends declared not yet paid	6,214		4,273
Increase (decrease) in lease assets in exchange for lease liabilities:
Operating leases	17,236		1,633
Finance leases	2,528		(10)

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

Table of Contents

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 Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders' Equity
	Number	Amount								Number	Amount
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 Shares			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders' Equity
	Number	Amount								Number	Amount
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 Shares			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders' Equity
	Number	Amount								Number	Amount
Balances at August 28, 2021	51,776	$	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, 2022	51,776	$	25,888	$	252,257	$	1,463,254	$	(463)	(20,067)	$	(477,045)	$	1,263,891

Table of Contents


	Nine Months Ended May 29, 2021
(in thousands, except per share data)	Common Shares			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Shareholders' Equity
	Number	Amount								Number	Amount
Balances at August 29, 2020	51,776	$	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, 2021	51,776	$	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.

Table of Contents

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.

Table of Contents

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 assets	24,564
Property, plant, and equipment	17,250
Goodwill	136,118
Other intangible assets	111,400
Total assets acquired	301,235
Accounts payable	7,181
Product warranties	4,656
Other current liabilities	3,146
Total liabilities assumed	14,983
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.

Table of Contents

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.

Table of Contents

Financial information by reportable segment is as follows:


	Three Months Ended				Nine 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
Motorhome	516,345		385,257		1,355,389		1,090,221
Marine	126,548		17,170		303,175		43,527
Corporate / All Other	9,678		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
Motorhome	64,388		37,467		160,636		118,779
Marine	19,813		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
Motorhome	570		2,976		16,196		10,247
Marine	6,041		1,061		8,581		1,859
Corporate / All Other	570		—		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
Motorhome	857,636		728,060
Marine	404,137		102,901
Corporate / All Other	251,469		441,349
Consolidated	$	2,427,134	$	2,062,567

Table of Contents

Reconciliation of net income to consolidated Adjusted EBITDA is as follows:


	Three Months Ended				Nine Months Ended
(in thousands)	May 28, 2022		May 29, 2021		May 28, 2022		May 29, 2021
Net income	$	117,222	$	71,295	$	308,027	$	197,786
Interest expense, net	10,511		10,229		31,078		30,222
Provision for income taxes	37,326		21,005		96,227		59,728
Depreciation	6,264		4,917		17,031		13,476
Amortization	8,016		3,590		24,203		10,771
EBITDA	179,339		111,036		476,566		311,983
Acquisition-related costs	724		—		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 adjustment	11,830		—		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 2 — Inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

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

Table of Contents

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 at		Fair Value Hierarchy
(in thousands)	May 28, 2022		Level 1		Level 2		Level 3
Assets that fund deferred compensation
Domestic equity funds	$	1,206	$	1,206	$	—	$	—
International equity funds	61		61		—		—
Fixed income funds	183		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 at		Fair Value Hierarchy
(in thousands)	August 28, 2021		Level 1		Level 2		Level 3
Assets that fund deferred compensation
Domestic equity funds	$	940	$	940	$	—	$	—
International equity funds	41		41		—		—
Fixed income funds	46		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 Ended				Nine 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 adjustments	11,830		—		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.

Table of Contents

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-process	202,733		184,611
Raw materials	309,760		183,583
Total	530,942		380,437
Less: Excess of FIFO over LIFO cost	44,842		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 basis	314,122		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 improvements	169,781		147,629
Machinery and equipment	130,601		121,911
Software	40,747		36,815
Transportation	6,563		5,335
Construction in progress	72,023		31,137
Property, plant, and equipment, gross	430,412		351,938
Less: Accumulated depreciation	174,077		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.

Table of Contents

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)

Towable

Motorhome

Marine

Total

Balances at August 29, 2020 and May 29, 2021(1)

244,684