WINNEBAGO INDUSTRIES INC

Previous wording

Winnebago Industries, Inc. is one of the leading North American manufacturers of recreation vehicles ("RVs") and marine products with a diversified portfolio used primarily in leisure travel and outdoor recreational activities. We also design and manufacture advanced battery solutions that deliver “house power,” supporting internal electrical features and appliances for a variety of outdoor products including RVs, boats, specialty and other low-speed vehicles, as well as other industrial applications. We produce our motorhome RV units in Iowa and Indiana; our towable RV units in Indiana; our marine units in Indiana and Florida; and our battery solutions in Florida. We distribute our RV and marine products primarily through independent dealers across 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. Our battery solutions are primarily sold to customers in the U.S.

Current wording

Winnebago Industries, Inc. is one of the leading North American manufacturers of recreation vehicles ("RVs") and marine products with a diversified portfolio used primarily in leisure travel and outdoor recreational activities. We also design and manufacture advanced battery solutions that deliver “house power,” supporting internal electrical features and appliances for a variety of outdoor products including RVs, boats, specialty and other low-speed vehicles, as well as other industrial applications. Other products manufactured by us consist primarily of original equipment manufacturing parts for other manufacturers and commercial vehicles. We produce our motorhome RV units in Iowa and Indiana; our towable RV units in Indiana; our marine units in Indiana and Florida; and our battery solutions in Florida. We distribute our RV and marine products primarily through independent dealers across 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. Our battery solutions are primarily sold to customers in the U.S.

Previous wording

Our business continues to be challenged by macroeconomic conditions impacting retail consumers and our dealers, such as inflation and elevated interest rates. These factors have contributed to lower consumer spending and reduced short-term demand for large discretionary products such as RVs and marine products. In response, our dealers continue to exercise caution when managing stocking levels. In the first nine months of Fiscal 2024, these trends resulted in decreased sales due to declines in unit volume. We anticipate that as consumer demand stabilizes, dealers will exhibit a willingness to maintain stable inventory levels and ordering patterns. We continue to produce and ship in accordance with dealer demand as evidenced and requested by dealer orders.

Current wording

Our business continues to be challenged by macroeconomic conditions impacting retail consumers and our dealers, such as inflation and elevated interest rates. These factors have contributed to lower consumer spending and reduced short-term demand for large discretionary products such as RVs and marine products. In response, our dealers continue to exercise caution when managing stocking levels. In the first three months of Fiscal 2025, these trends resulted in decreased sales due to declines in unit volume. We expect that as consumer demand stabilizes, which we anticipate will occur as we enter the spring selling season, dealers will return to more stable ordering patterns. We continue to produce and ship in accordance with dealer demand as evidenced and requested by dealer orders.

Previous wording

This MD&A includes financial information prepared in accordance with generally accepted accounting principles ("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 pretax adjustments made in order to present comparable results from period to period.

Current wording

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

Previous wording

Included in "Results of Operations" below for the three and nine months ended May 25, 2024 compared to the comparable prior year period is a reconciliation of EBITDA and Adjusted EBITDA from net income, the most directly comparable GAAP measure. We have included these non-GAAP performance measures as a comparable measure to illustrate the effect of non-recurring transactions that occurred 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 as this measure excludes amounts from net income that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted EBITDA include acquisition-related costs, change in fair value of note receivable, contingent consideration fair value adjustment, loss on note repurchase, and non-operating income or loss.

Current wording

Included in "Results of Operations" below for the three months ended November 30, 2024 compared to the comparable prior year period is a reconciliation of EBITDA and Adjusted EBITDA from net (loss) income, the most directly comparable GAAP measure. We have included these non-GAAP performance measures as a comparable measure to illustrate the effect of non-recurring transactions that occurred 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 as this measure excludes amounts from net (loss) income that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted EBITDA include acquisition-related costs, contingent consideration fair value adjustment, and non-operating income or loss.

Previous wording

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 used by management in their assessment of performance and in forecasting; (d) to evaluate potential acquisitions; and (e) to ensure compliance with covenants and restricted activities under the terms of our ABL Credit Facility and outstanding notes, as further described in Note 9 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q. We believe these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in the industry.

Current wording

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 used by management in its assessments of performance and in forecasting; (d) to evaluate potential acquisitions; and (e) to ensure compliance with covenants and restricted activities under the terms of our ABL Credit Facility and outstanding notes, as further described in Note 8 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q. We believe these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in the industry.

Previous wording

Gross profit as a percentage of revenue decreased primarily due to deleverage, operational efficiency challenges, and higher warranty expense due to a favorable prior year trend, partially offset by cost containment efforts.

Current wording

Gross profit as a percentage of revenue decreased primarily due to deleverage, higher warranty experience compared to the prior year and product mix, partially offset by operational efficiencies.

Previous wording

Operating expenses increased primarily due to strategic investments and increased amortization related to Lithionics intangible assets.

Current wording

Operating expenses increased primarily due to strategic investments, partially offset by cost containment efforts.

Previous wording

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA for the three months ended May 25, 2024 and May 27, 2023:

Current wording

The following table reconciles net (loss) income to consolidated EBITDA and Adjusted EBITDA for the three months ended November 30, 2024 and November 25, 2023:

Previous wording

Adjusted EBITDA margin decreased due to deleverage, higher discounts and allowances, higher warranty expense and operational efficiency challenges, partially offset by cost containment efforts.

Current wording

Adjusted EBITDA margin decreased primarily due to volume deleverage, higher discounts and allowances, and higher warranty experience compared to the prior year, partially offset by operational efficiencies.

Previous wording

Net revenues increased primarily due to an increase in unit volume, partially offset by a reduction in average selling price per unit related to product mix.

Current wording

Net revenues increased primarily due to targeted price increases and higher unit volume, partially offset by a reduction in average selling price per unit related to product mix.

Previous wording

Analysis of Financial Condition, Liquidity, and Resources

Current wording

Analysis of Financial Condition, Liquidity, and Capital Resources

Previous wording

During the nine months ended May 25, 2024, net cash provided by operating activities was $103.2 million compared to net cash provided by operating activities of $156.4 million in the same period last year. The decrease in operating cash flow is primarily driven by lower profitability adjusted for non-cash items and an increase in accounts receivable due to timing of invoicing and collections, partially offset by favorable changes in accounts payable due to lower purchasing requirements and timing of payments.

Current wording

During the three months ended November 30, 2024, net cash used in operating activities was $16.7 million compared to net cash used in operating activities of $21.4 million during the same period last year. The change in operating cash flow is primarily driven by favorable changes in inventory levels and a decrease in accounts receivable due to timing of invoicing and collections, partially offset by lower profitability adjusted for non-cash items and a decrease in accounts payable due to lower production levels.

Previous wording

Cash used in financing activities increased primarily due to higher share repurchases compared to prior year, partially offset by $39.1 million of net cash proceeds related to the debt refinancing.

Current wording

Cash used in financing activities decreased primarily due to lower share repurchases compared to the prior year.

Previous wording

As of May 25, 2024, we had $318.1 million in cash and cash equivalents and $350.0 million in unused ABL Credit Facility. Our cash and cash equivalent balances consist of high quality, short-term money market instruments.

Current wording

As of November 30, 2024, we had $262.5 million in cash and cash equivalents and $350.0 million in unused ABL Credit Facility. Our cash and cash equivalent balances consist of high quality, short-term money market instruments.

Previous wording

Working capital at May 25, 2024 and August 26, 2023 was $581.9 million and $600.7 million, respectively. We currently expect cash on hand, funds generated from operations, and the borrowing available under our ABL Credit Facility to be sufficient to cover both short-term and long-term operating requirements.

Current wording

Working capital at November 30, 2024 and August 31, 2024 was $556.1 million and $584.0 million, respectively. We currently expect cash on hand, funds generated from operations, and the borrowing available under our ABL Credit Facility to be sufficient to cover both short-term and long-term operating requirements.

Previous wording

On August 17, 2022, our Board of Directors authorized a new share repurchase program in the amount of $350.0 million with no time restriction on the authorization, which took effect immediately and replaced the prior program. In the nine months ended May 25, 2024, we repurchased approximately 989,000 shares of our own common stock at a cost of $60.0 million under this authorization, and approximately 74,000 shares at a cost of $4.3 million to satisfy tax obligations on employee equity awards vested. We continually evaluate if share repurchases reflect a prudent use of our capital and, subject to compliance with our ABL Credit Facility and Senior Secured Notes, we may purchase shares in the future. As of May 25, 2024, we have $240.0 million remaining on our Board approved repurchase authorization.

Current wording

On August 17, 2022, our Board of Directors authorized a new share repurchase program in the amount of $350.0 million with no time restriction on the authorization, which took effect immediately and replaced the prior program. In the three months ended November 30, 2024, we repurchased approximately 533,000 shares of our own common stock at a cost of $30.0 million under this authorization, and approximately 62,000 shares at a cost of $3.6 million to satisfy tax obligations on employee equity awards vested. We continually evaluate if share repurchases reflect a prudent use of our capital and, subject to compliance with our ABL Credit Facility and Senior Secured Notes, we may purchase shares in the future. As of November 30, 2024, we have $200.0 million remaining on our Board approved repurchase authorization.

Previous wording

On May 15, 2024, our Board of Directors approved a quarterly cash dividend of $0.31 per share payable on June 26, 2024, to common stockholders of record at the close of business on June 12, 2024.

Current wording

On December 18, 2024, our Board of Directors approved a quarterly cash dividend of $0.34 per share payable on January 29, 2025, to common stockholders of record at the close of business on January 15, 2025.

Previous wording

For a summary of recently issued applicable accounting pronouncements, see Note 1 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Current wording

For a summary of new applicable accounting pronouncements, see Note 1 in the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Previous wording

•Availability of financing for RV and marine dealers.

Current wording

•Availability of financing for RV and marine dealers and retail purchasers.

Previous wording

•Exposure to warranty claims.

Current wording

•Exposure to warranty claims and product recalls.