Winnebago Industries : Annual Report for Fiscal Year Ending August 30, 2025 (Form 10-K)

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

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 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 is presented in five sections:

•Overview

•Results of Operations

•Analysis of Financial Condition, Liquidity, and Capital Resources

•Critical Accounting Policies and Estimates

•New Accounting Pronouncements

Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8 of Part II in this Annual Report on Form 10-K.

The year-over-year comparisons in this MD&A are as of and for the fiscal years ended August 30, 2025 and August 31, 2024, unless stated otherwise. The discussion of Fiscal 2023 results and related year-over-year comparisons as of and for the fiscal years ended August 31, 2024 and August 26, 2023 are found in Item 7 of Part II of our Form 10-K for the fiscal year ended August 31, 2024.

Overview

Winnebago Industries, Inc. is a leading North American manufacturer of outdoor lifestyle products under the Winnebago, Grand

Design, Chris-Craft, Newmar and Barletta brands, which are used primarily in leisure travel and outdoor recreation 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.

Known Trends and Uncertainties

Our business continues to be challenged by macroeconomic conditions impacting retail consumers and our dealers, such as inflation, elevated interest rates, and lower consumer confidence. 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 Fiscal 2025, these trends resulted in decreased sales due to declines in unit volume. While market pressures have been observed across our portfolio, they have been most acute in our Winnebago motorhome business. As part of our transformation of this business, we have recently taken significant steps to lower field inventory, improve working capital, align our production schedule to market demand, and accelerate stronger product value for our consumers in the future.

We expect that as consumer demand stabilizes, dealers will return to more stable ordering patterns across our portfolio of

businesses. We continue to produce and ship in accordance with dealer demand as evidenced and requested by dealer orders. In

addition, we are closely monitoring the potential impact of new or additional U.S. tariffs and retaliatory measures from other

countries, which may affect material costs or supply.

Despite the current economic uncertainty, we believe in the long-term health of consumer demand for RV and marine products.

Segment Update

In conjunction with the Grand Design RV entrance into the motorized RV category, we established a Grand Design motorhomes operating segment in the first quarter of Fiscal 2025. This newly created operating segment is included in the Motorhome RV reportable segment. Prior period amounts have not been reclassified as the impact was not significant.

Results of Operations - Fiscal 2025 Compared to Fiscal 2024

Consolidated Performance Summary

The following is an analysis of changes in key items included in the statements of operations for the fiscal year ended August 30, 2025 compared to the fiscal year ended August 31, 2024:

(in millions, except per share data)			2025						% of Revenues(1)						2024						% of Revenues(1)						$ Change(1)						% Change(1)
Net revenues			$	2,798.2					100.0		%				$	2,973.5					100.0		%				$	(175.3)					(5.9)		%
Cost of goods sold			2,433.1						87.0		%				2,540.0						85.4		%				(106.8)						(4.2)		%
Gross profit			365.1						13.0		%				433.5						14.6		%				(68.5)						(15.8)		%
Selling, general, and administrative expenses ("SG&A")			285.8						10.2		%				280.0						9.4		%				5.6						2.0		%
Amortization			22.1						0.8		%				23.0						0.8		%				(0.9)						(3.7)		%
Goodwill impairment (Note 7)			-						-		%				30.3						1.0		%				(30.3)						NM
Total operating expenses			307.9						11.0		%				333.3						11.2		%				(25.5)						(7.6)		%
Operating income			57.2						2.0		%				100.2						3.4		%				(43.0)						(42.9)		%
Interest expense, net			25.9						0.9		%				21.1						0.7		%				4.8						22.5		%
Loss on note repurchase (Note 9)			2.0						0.1		%				32.7						1.1		%				(30.8)						(94.0)		%
Non-operating (income) loss			(0.8)						(0.1)		%				8.0						0.3		%				(8.7)						NM
Income before income taxes			30.1						1.1		%				38.4						1.3		%				(8.3)						(21.6)		%
Income tax provision			4.4						0.2		%				25.4						0.9		%				(21.0)						(82.8)		%
Net income			$	25.7					0.9		%				$	13.0					0.4		%				$	12.7					98.1		%
Diluted earnings per share			$	0.91											$	0.44											$	0.47					106.8		%
Diluted weighted average shares outstanding			28.3												29.5												(1.2)						(4.1)		%

(1)Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding.

NM:Not meaningful.

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

Gross profit as a percentage of revenue decreased primarily due to deleverage and slightly higher warranty experience.

Operating expenses decreased primarily due to prior year goodwill impairment and cost reduction initiatives in the current year, partially offset by investments to support the growth of the Grand Design motorhome and Barletta marine businesses.

The loss on note repurchase recorded in Fiscal 2024 is related to the refinancing of the 2025 Convertible Notes. The loss on note repurchase recorded in Fiscal 2025 is related to the tender offer of the Senior Secured Notes. Refer to Note 9 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K for further information.

Our effective tax rate decreased primarily due to the prior year's non-deductible debt inducement loss and non-deductible goodwill impairment and, in Fiscal 2025, increased favorable return to provision adjustments and reduced change in the valuation allowance over lower pre-tax income.

Reportable Segment Performance Summary

Towable RV

The following is an analysis of key changes in our Towable RV segment for Fiscal 2025 and 2024:

(in millions, except ASP and units)			2025						% of Revenues(1)						2024						% of Revenues(1)						$ Change(1)						% Change(1)
Net revenues			$	1,220.2											$	1,318.8											$	(98.6)					(7.5)		%
Operating income			72.7						6.0		%				103.1						7.8		%				(30.4)						(29.5)		%
Average Selling Price ("ASP")(2)			38,797												41,004												(2,207)						(5.4)		%
Unit deliveries			2025						Product Mix(3)						2024						Product Mix(3)						Unit Change						% Change
Travel trailer			21,714						69.7		%				21,636						67.5		%				78						0.4		%
Fifth wheel			9,455						30.3		%				10,403						32.5		%				(948)						(9.1)		%
Total Towable RV			31,169						100.0		%				32,039						100.0		%				(870)						(2.7)		%
Dealer Inventory(4)			August 30, 2025												August 31, 2024												Unit Change						% Change
Units			16,200												15,940												260						1.6		%

(1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.

(2) ASP excludes off-invoice dealer incentives.

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

(4)Data is based on the latest information available from our dealer partners and is subject to timing of reporting and other limitations.

Net revenues decreased primarily due to a shift in product mix toward lower price-point models and lower unit volume, partially offset by targeted price increases.

Operating income margin decreased primarily due to deleverage, including that associated with product mix, and higher warranty experience.

Motorhome RV

The following is an analysis of key changes in our Motorhome RV segment for Fiscal 2025 and 2024:

(in millions, except ASP and units)			2025						% of Revenues(1)						2024						% of Revenues(1)						$ Change(1)						% Change(1)
Net revenues			$	1,159.7											$	1,279.8											$	(120.0)					(9.4)		%
Operating (loss) income			(7.3)						(0.6)		%				52.9						4.1		%				(60.2)						NM
ASP(2)			206,441												191,844												14,597						7.6		%
Unit deliveries			2025						Product Mix(3)						2024						Product Mix(3)						Unit Change						% Change
Class A			1,211						21.1		%				1,625						24.0		%				(414)						(25.5)		%
Class B			1,682						29.3		%				2,278						33.7		%				(596)						(26.2)		%
Class C			2,849						49.6		%				2,854						42.2		%				(5)						(0.2)		%
Total Motorhome RV			5,742						100.0		%				6,757						100.0		%				(1,015)						(15.0)		%
Dealer Inventory(4)			August 30, 2025												August 31, 2024												Unit Change						% Change
Units			3,562												3,933												(371)						(9.4)		%

(1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.

(2)ASP excludes off-invoice dealer incentives.

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

(4)Data is based on the latest information available from our dealer partners and is subject to timing of reporting and other limitations.

NM:Not meaningful.

Net revenues decreased primarily due to lower unit volume and higher discounts and allowances related to the Winnebago motorhome business, partially offset by the introduction of the Grand Design motorhome business and product mix.

Operating income margin decreased primarily due to higher discounts and allowances and volume deleverage associated with the Winnebago motorhome business.

Marine

The following is an analysis of key changes in our Marine segment for Fiscal 2025 and 2024:

(in millions, except ASP and units)			2025						% of Revenues(1)						2024						% of Revenues(1)						$ Change(1)						% Change(1)
Net revenues			$	367.8											$	325.5											$	42.3					13.0		%
Operating income (loss)			27.7						7.5		%				(13.5)						(4.2)		%				41.2						NM
ASP(2)			80,888												80,641												247						0.3		%
Unit deliveries			2025												2024												Unit Change						% Change
Boats			4,635												4,149												486						11.7		%
Dealer Inventory(3,4)			August 30, 2025												August 31, 2024												Unit Change						% Change
Units			2,687												2,564												123						4.8		%

(1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.

(2) ASP excludes off-invoice dealer incentives.

(3) Due to the nature of the Marine industry, this amount includes a higher proportion of retail sold units than our other segments.

(4) Data is based on the latest information available from our dealer partners and is subject to timing of reporting and other limitations.

NM:Not meaningful.

Net revenues increased primarily due to higher unit volume and targeted price increases, partially offset by product mix.

Operating income margin increased due to prior year goodwill impairment, targeted price increases, and volume leverage.

Analysis of Financial Condition, Liquidity, and Capital Resources

Cash Flows

The following table summarizes our cash flows from total operations for Fiscal 2025 and 2024:

(in millions)			2025						2024
Total cash provided by (used in):
Operating activities			$	128.9					$	143.9
Investing activities			(34.8)						(45.9)
Financing activities			(251.0)						(77.0)
Net (decrease) increase in cash and cash equivalents			$	(156.9)					$	21.0

Operating Activities

During Fiscal 2025, cash provided by operating activities was $128.9 million compared to $143.9 million in Fiscal 2024. The decrease in operating cash flow is primarily driven by lower profitability adjusted for non-cash items, an increase in accounts receivable due to timing of invoicing and collections, unfavorable changes in accounts payable balances and timing of payments, partially offset by improvement in inventory levels and operational efficiency actions.

Investing Activities

Cash used in investing activities decreased primarily due to favorable changes in other investing activities and lower capital expenditures compared to the prior year. Other investing activities include cash proceeds from asset sales and strategic investment activity.

Financing Activities

Cash used in financing activities increased primarily due to partial settlement of high-yield notes and maturity of 2025 Convertible Notes, offset by lower share repurchase activity compared to the prior year.

Debt and Capital

We maintain a $350.0 million asset-based revolving credit facility ("ABL Credit Facility") with a maturity date of July 15, 2027 subject to certain factors which may accelerate the maturity date. As of August 30, 2025, we had no borrowings against the ABL Credit Facility and $174.0 million in cash and cash equivalents. Our cash and cash equivalent balances consist of high quality, short-term money market instruments.

On January 23, 2024, we issued $350.0 million in aggregate principal amount of 3.25% unsecured convertible senior notes due 2030 ("2030 Convertible Notes").

On July 8, 2020, we closed our private offering (the "Senior Secured Notes Offering") of $300.0 million aggregate principal amount of 6.25% Senior Secured Notes due 2028 (the "Senior Secured Notes").

On November 1, 2019, we issued $300.0 million in aggregate principal amount of 1.5% unsecured Convertible Senior Notes due 2025 ("2025 Convertible Notes"). On January 18, 2024, we entered into privately negotiated transactions (the "2025 Convertible Note Repurchases") with certain holders of the 2025 Convertible Notes to repurchase $240.7 million aggregate principal amount of the 2025 Convertible Notes using proceeds received from the 2030 Convertible Notes. On April 1, 2025, the 2025 Convertible Notes matured. We paid $59.3 million in aggregate principal amount and $0.4 million in accrued interest to holders of the notes, fully settling the outstanding balance (the "2025 Convertible Note Maturity Settlement"). The settlement was funded with cash on hand, consistent with our stated intent, with no shares of common stock issued.

As of August 30, 2025, we had no debt maturing in the next twelve months that is classified as current on our Consolidated Balance Sheets.

We evaluate the financial stability of the counterparties for the 2030 Convertible Notes, the Senior Secured Notes, and the ABL Credit Facility, and will continue to monitor counterparty risk on an on-going basis.

Refer to Note 9 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K for additional information.

Working Capital

Working capital as of August 30, 2025 and August 31, 2024 was $465.1 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.

Capital Expenditures

We anticipate capital expenditures in Fiscal 2026 of approximately $35.0 million to $45.0 million. We will continue to support organic growth through facility improvements to benefit a safer operating environment, operational improvements, and investments in software and our digital capabilities. We believe cash on hand, funds generated from operations, and the borrowing capacity available under our ABL Credit Facility and other debt instruments will be sufficient to support our capital expenditures for the foreseeable future.

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 reasonable liquidity, maintain a leverage ratio that reflects a prudent capital structure in light of the cyclical industries we compete in, and then return excess cash over time to shareholders through dividends and share repurchases. Refer to Item 5 of Part II of this Annual Report on Form 10-K for discussion about our share repurchase program and dividend declared on August 14, 2025.

Cash Requirements

Our cash requirements within the next twelve months include accounts payable, current maturities of long-term debt, accrued expenses, purchase commitments and other current liabilities.

Our cash requirements greater than twelve months from various contractual obligations and commitments include:

Debt Obligations and Interest Payments

Refer to Note 9 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K for information regarding our debt and the timing of expected future principal and interest payments. Interest payments are based on fixed interest rates for the 2030 Convertible Notes and the Senior Secured Notes.

Operating and Finance Leases

Refer to Note 10 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K for information regarding our lease obligations and the timing of expected future payments.

Deferred Compensation Obligations

Refer to Note 11 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K for information regarding our deferred compensation plans. We expect to pay $1.8 million in the next 12 months and $5.1 million beyond 12 months.

Contracted Services

Contracted services include agreements with third-party service providers primarily for software, payroll services, and equipment maintenance services for periods up to Fiscal 2030. We expect to pay approximately $25.2 million in the next 12 months and approximately $20.0 million beyond 12 months.

Contingent Repurchase Obligations

Refer to Note 12 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K for information regarding our contingent repurchase commitment and estimated obligation, most of which we expect to expire within one year.

We expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, and the borrowing capacity available under our ABL Credit Facility and other debt instruments.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors believed to be relevant at the time the consolidated financial statements are prepared. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our critical accounting policies are discussed in Note 1 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K. We believe that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our reported financial results. These estimates require our most difficult, subjective, or complex judgments because they relate to matters that are inherently uncertain. We have reviewed these critical accounting policies and estimates and related disclosures with the Audit Committee of our Board of Directors.

We have not made any material changes during the past three fiscal years, nor do we believe there is a reasonable likelihood of a material future change to the accounting methodologies for the areas described below.

Accounting for Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates, royalty rates and asset lives, among other items.

We used the income approach to value certain intangible assets. Under the income approach, an intangible asset's fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. We used the income approach known as the relief from royalty method to value the fair value of the trade names. 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 dealer network was estimated using an income approach known as the cost to recreate/cost savings method. This method uses the replacement of the asset as an indicator of the fair value of the asset. The determination of the fair value of other assets acquired and liabilities assumed involves assessing factors such as the expected future cash flows associated with individual assets and liabilities and appropriate discount rates at the date of the acquisition.

Goodwill and Indefinite-lived Intangible Assets

We test goodwill and other indefinite-lived intangible assets (trade names in certain instances) for impairment at least annually in the fourth quarter and more frequently if events or circumstances occur that would indicate a reduction in fair value. Our test of impairment begins by either performing a qualitative evaluation or a quantitative test:

•Qualitative evaluation - Performed to determine whether it is more likely than not that the carrying value of goodwill or the indefinite-lived trade name exceeds the fair value of the asset. During our qualitative assessment, we make significant estimates, assumptions, and judgments, including, but not limited to, the macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of the Company and the reporting units, changes in our share price, and relevant company-specific events. If we determine that it is more likely than not that the carrying value of the goodwill or indefinite-lived trade name exceeds the fair value, we perform the quantitative test to determine the amount of the impairment.

•Quantitative test - Used to calculate the fair value of goodwill or the indefinite-lived trade name. If the carrying value of the reporting unit or indefinite-lived trade name exceeds the fair value, the impairment is calculated as the difference between the carrying value and fair value. Our goodwill fair value model uses a blend of the income (discounted future cash flow) and market (guideline public company) approaches, which includes the use of significant unobservable inputs (Level 3 inputs). Our indefinite-lived trade name fair value model uses the income (relief-from-royalty) approach, which includes the use of significant unobservable inputs (Level 3 inputs). During these valuations, we make significant estimates, assumptions, and judgments, including current and projected future levels of income based on management's plans, business trends, market and economic conditions, and market-participant considerations. Actual results may differ from assumed and estimated amounts, which could result in future impairment losses.

During the fourth quarter of Fiscal 2025, we completed our annual assessment of indefinite-lived intangible assets and determined that there was no indication of impairment. Comparatively, during the fourth quarter of Fiscal 2024, we determined that the carrying value of the Chris-Craft reporting unit exceeded its fair value, resulting in a $30.3 million impairment charge, which represents the full goodwill balance attributable to the reporting unit. No impairments were recorded in Fiscal 2023.

For further information regarding goodwill and intangible assets, see Note 7 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K.

Warranty

We provide certain service and warranty on our products. Estimated costs related to product warranty are accrued at the time of sale and are based upon past warranty claims and unit sales history. Estimates are adjusted as needed to reflect actual costs incurred as information 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.

A significant increase in dealership labor rates, the cost of parts, or the frequency of claims could have a material adverse impact on our operating results for the period or periods in which such claims or additional costs materialize. A hypothetical change of a 10% increase or decrease in our warranty liability as of August 30, 2025 would not have a material effect on our net income.

New Accounting Pronouncements

For a summary of new applicable accounting pronouncements, see Note 1 in the Notes to Consolidated Financial Statements, included in Item 8 of Part II in this Annual Report on Form 10-K.