Winnebago Industries, Inc. (NYSE: WGO), a leading outdoor lifestyle product manufacturer, today reported financial results for the Company's Fiscal 2022 third quarter.

Third Quarter Fiscal 2022 ResultsRevenues for the Fiscal 2022 third quarter ended May 28, 2022, were a record $1.5 billion, an increase of 51.8% compared to $960.7 million for the Fiscal 2021 third quarter. Revenues excluding the recently acquired Barletta business were $1.4 billion, representing an organic growth rate of 41.1% over the prior year period, driven by pricing increases and shipments related to the strong dealer order backlog. Gross profit was $273.0 million, an increase of 60.9% compared to $169.6 million for the Fiscal 2021 period. Gross profit margin increased 100 basis points in the quarter to 18.7%, driven primarily by operating leverage, price increases and favorable segment mix, partially offset by higher material and component costs. Operating income, which includes $4.6 million of amortization associated with the acquisition of Barletta, was $176.7 million for the quarter, an increase of 72.5% compared to $102.4 million for the third quarter of last year. Fiscal 2022 third quarter net income, which includes $11.8 million of contingent consideration fair value adjustment related to the Barletta acquisition, was $117.2 million, an increase of 64.4% compared to $71.3 million in the prior year quarter. Reported earnings per diluted share was $3.57, compared to reported earnings per diluted share of $2.05 in the same period last year. Adjusted earnings per diluted share was $4.13, an increase of 84.4% compared to adjusted earnings per diluted share of $2.24 in the same period last year. Consolidated Adjusted EBITDA was $191.7 million for the quarter, compared to $109.8 million last year, an increase of 74.7%.

President and Chief Executive Officer Michael Happe commented, “The trend in recent quarters continued, as Winnebago Industries delivered impressive third quarter results, driven by our team’s focused execution and good progress on reducing our order backlog in the quarter from our expanded portfolio of premier outdoor lifestyle brands. In the third quarter, we capitalized on the prime spring selling season to further gain share and expand our pipeline of lifelong customers, as our golden threads of quality, innovation and customer experience continue to differentiate the Winnebago portfolio and resonate with consumers. The unique strength of our brands positioned Winnebago Industries to not only gain market share but also to successfully take continued pricing actions to offset meaningful component and material cost inflation and enhance margin performance across our segments. We are incredibly proud of our results and the efforts of our talented team across the organization. As we look ahead to our last quarter in the fiscal year, we will maintain our focus on executing our proven strategy and build on our momentum to further grow and solidify our expanding market position, while driving long-term value for end customers, dealers, employees and shareholders. We will also continue to demonstrate appropriate discipline in capacity utilization in accordance with matching our production schedule to dealer demand.”

TowableRevenues for the Towable segment were $805.6 million for the third quarter, up 45.0% over the prior year, primarily driven by pricing increases, in addition to solid unit growth as a result of strong dealer order backlog. Segment Adjusted EBITDA was $117.8 million, up 47.0% over the prior year period. Adjusted EBITDA margin of 14.6% increased 20 basis points over the prior year. Backlog decreased to $1.3 billion, down 13.7% from the prior year and down 29.9% sequentially, as Winnebago Industries successfully replenished dealer inventories in the Towable segment.

MotorhomeRevenues for the Motorhome segment were $516.3 million for the third quarter, up 34.0% from the prior year, driven by pricing increases across the segment and strong unit sales. Segment Adjusted EBITDA was $64.4 million, an increase of 71.9% over the prior year. Adjusted EBITDA margin of 12.5% increased 280 basis points over the prior year driven by price increases and operating leverage, partially offset by increased material and component costs. Backlog increased to $2.3 billion, up 4.8% over the prior year, driven by increased ASP's partially offset by a decrease of 16.3% in units.

MarineRevenues for the Marine segment were $126.5 million for the third quarter. Segment Adjusted EBITDA was $19.8 million, an increase of $18.2 million over the prior year and Adjusted EBITDA margin was 15.7%. Backlog for the Marine segment was $245.4 million and remains at elevated levels as low dealer inventories persist. The Barletta brand continues to outperform pro-forma expectations and deliver margins accretive to the Winnebago Industries portfolio.

Balance Sheet and Cash FlowAs of May 28, 2022, the Company had total outstanding debt of $541.5 million ($600.0 million of debt, net of convertible note discount of $49.1 million, and net of debt issuance costs of $9.4 million) and working capital of $582.7 million. Cash flow from operations was $245.2 million in the first nine months of Fiscal 2022, an increase of $97.3 million compared to $148.0 million in the same period last year.

Quarterly Cash Dividend and Share RepurchaseOn May 18, 2022, the Company’s board of directors approved a quarterly cash dividend of $0.18 per share payable on June 29, 2022, to common stockholders of record at the close of business on June 8, 2022. This dividend is in line with the prior quarter dividend of $0.18 per share and represents a 50%, or $0.06 per share, increase from the dividend of $0.12 per share approved in May of 2021. Winnebago Industries executed record share buybacks of $70.0 million during the third quarter. On a fiscal year-to-date basis, share buybacks total $129.6 million and cash returned to shareholders totals $147.7 million.

Mr. Happe continued, “Looking at the broader economic trends, we have been successful in managing supply chain disruptions, improving dealer inventory levels, navigating cost inflation, and driving manufacturing productivity to deliver consistently strong results. We expect supply chain inconsistencies and inflation pressures to continue in the fourth quarter, and into our fiscal 2023, and we are focused on continuing to stay ahead of them by leveraging our resilient operating structure, deep and collaborative relationships with our dealers and suppliers, and highly-differentiated, premium portfolio of brands. We are confident that the continued execution of our strategy, including a focus on innovation and a differentiated product and overall customer experience, and unwavering commitment to our team and communities positions Winnebago Industries for sustained market share gains and strong profitability across our business.”

Conference CallWinnebago Industries, Inc. will discuss Fiscal 2022 third quarter earnings results during a conference call scheduled for 9:00 a.m. Central Time today. Members of the news media, investors and the general public are invited to access a live broadcast of the conference call via the Investor Relations page of the Company's website at http://investor.wgo.net. The event will be archived and available for replay for the next 90 days.

About Winnebago IndustriesWinnebago 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. The Company builds quality motorhomes, travel trailers, fifth-wheel products, pontoons, inboard/outboard and sterndrive powerboats and commercial community outreach vehicles. Winnebago Industries has multiple facilities in Iowa, Indiana, Minnesota and Florida. The Company's common stock is listed on the New York Stock Exchange and traded under the symbol WGO. For access to Winnebago Industries' investor relations material or to add your name to an automatic email list for Company news releases, visit http://investor.wgo.net.

Forward-Looking StatementsThis press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to uncertainty surrounding the COVID-19 pandemic; general economic uncertainty in key markets and a worsening of domestic and global economic conditions or low levels of economic growth; availability of financing for RV and marine dealers; ability to innovate and commercialize new products; ability to manage our inventory to meet demand; competition and new product introductions by competitors; risk related to cyclicality and seasonality of our business; significant increase in repurchase obligations; business or production disruptions; inadequate inventory and distribution channel management; ability to retain relationships with our suppliers; increased material and component costs, including availability and price of fuel and raw materials; ability to integrate mergers and acquisitions; ability to attract and retain qualified personnel and changes in market compensation rates; exposure to warranty claims; ability to protect our information technology systems from data security, cyberattacks, and network disruption risks and the ability to successfully upgrade and evolve our information technology systems; ability to retain brand reputation and related exposure to product liability claims; governmental regulation, including for climate change; impairment of goodwill; and risks related to our Convertible and Senior Secured Notes including our ability to satisfy our obligations under these notes. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company's filings with the Securities and Exchange Commission ("SEC") over the last 12 months, copies of which are available from the SEC or from the Company upon request. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release or to reflect any changes in the Company's expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.

Contacts

Steve Stuber, Investor Relationssrstuber@wgo.net(952) 828-8461

Media: Chad Reece, Corporate Relationscreece@wgo.net(641) 585-6647

Winnebago Industries, Inc.Condensed Consolidated Statements of Income(Unaudited and subject to reclassification)

  Three Months Ended
  May 28, 2022   May 29, 2021
Net revenues $ 1,458,138   100.0 %   $ 960,737     100.0 %
Cost of goods sold   1,185,174   81.3 %     791,125     82.3 %
Gross profit   272,964   18.7 %     169,612     17.7 %
Selling, general, and administrative expenses   88,231   6.1 %     63,586     6.6 %
Amortization   8,016   0.5 %     3,590     0.4 %
Total operating expenses   96,247   6.6 %     67,176     7.0 %
Operating income   176,717   12.1 %     102,436     10.7 %
Interest expense, net   10,511   0.7 %     10,229     1.1 %
Non-operating loss (income)   11,658   0.8 %     (93 )   %
Income before income taxes   154,548   10.6 %     92,300     9.6 %
Provision for income taxes   37,326   2.6 %     21,005     2.2 %
Net income $ 117,222   8.0 %   $ 71,295     7.4 %
               
Earnings per common share:              
Basic $ 3.62       $ 2.12      
Diluted $ 3.57       $ 2.05      
Weighted average common shares outstanding:              
Basic   32,389         33,552      
Diluted   32,855         34,772      
               
  Nine Months Ended
  May 28, 2022   May 29, 2021
Net revenues $ 3,778,609   100.0 %   $ 2,593,754     100.0 %
Cost of goods sold   3,059,656   81.0 %     2,130,556     82.1 %
Gross profit   718,953   19.0 %     463,198     17.9 %
Selling, general, and administrative expenses   234,896   6.2 %     165,001     6.4 %
Amortization   24,203   0.6 %     10,771     0.4 %
Total operating expenses   259,099   6.9 %     175,772     6.8 %
Operating income   459,854   12.2 %     287,426     11.1 %
Interest expense, net   31,078   0.8 %     30,222     1.2 %
Non-operating loss (income)   24,522   0.6 %     (310 )   %
Income before income taxes   404,254   10.7 %     257,514     9.9 %
Provision for income taxes   96,227   2.5 %     59,728     2.3 %
Net income $ 308,027   8.2 %   $ 197,786     7.6 %
Earnings per common share:              
Basic $ 9.35       $ 5.89      
Diluted $ 9.18       $ 5.83      
Weighted average common shares outstanding:              
Basic   32,936         33,565      
Diluted   33,559         33,943      

Percentages may not add due to rounding differences.

Winnebago Industries, Inc. Condensed Consolidated Balance Sheets(Unaudited and subject to reclassification)

  May 28, 2022   August 28, 2021
Assets      
Current assets      
Cash and cash equivalents $ 238,073   $ 434,563
Receivables, net   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 Shareholders' Equity      
Current liabilities      
Accounts payable $ 229,727   $ 180,030
Income taxes payable   10,754     8,043
Accrued expenses   295,471     219,203
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
Shareholders' equity   1,263,891     1,056,943
Total liabilities and shareholders' equity $ 2,427,134   $ 2,062,567

Winnebago Industries, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited and subject to reclassification)

  Nine Months Ended
  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  
       
       
       
       
       
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 )

Winnebago Industries, Inc.Supplemental Information by Reportable Segment - Towable(in thousands, except unit data)(Unaudited and subject to reclassification)

  Three Months Ended
  May 28, 2022   % of Revenues   May 29, 2021   % of Revenues   $ Change   % Change
Net revenues $ 805,567       $ 555,749       $ 249,818     45.0 %
Adjusted EBITDA   117,767   14.6 %     80,130   14.4 %     37,637     47.0 %
                       
  Three Months Ended
Unit deliveries May 28, 2022   Product Mix(1)   May 29, 2021   Product Mix(1)   Unit Change   % Change
Travel trailer   12,031   68.1 %     11,089   66.4 %     942     8.5 %
Fifth wheel   5,644   31.9 %     5,620   33.6 %     24     0.4 %
Total towables   17,675   100.0 %     16,709   100.0 %     966     5.8 %
                       
  Nine Months Ended
  May 28, 2022   % of Revenues   May 29, 2021   % of Revenues   $ Change   % Change
Net revenues $ 2,103,192       $ 1,449,934       $ 653,258     45.1 %
Adjusted EBITDA   330,417   15.7 %     205,639   14.2 %     124,778     60.7 %
                       
  Nine Months Ended
Unit deliveries May 28, 2022   Product Mix(1)   May 29, 2021   Product Mix(1)   Unit Change   % Change
Travel trailer   33,938   68.7 %     29,125   65.6 %     4,813     16.5 %
Fifth wheel   15,462   31.3 %     15,306   34.4 %     156     1.0 %
Total towables   49,400   100.0 %     44,431   100.0 %     4,969     11.2 %
                       
  May 28, 2022       May 29, 2021       Change   % Change
Backlog(2)                      
Units   31,606         46,646         (15,040 )   (32.2 )%
Dollars $ 1,312,878       $ 1,522,069       $ (209,191 )   (13.7 )%
Dealer Inventory                      
Units   25,230         11,647         13,583     116.6 %

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

(2)  Our backlog includes all accepted orders from dealers which generally have been requested to be shipped within the next six months. Orders in backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty; therefore, backlog may not necessarily be an accurate measure of future sales.

Winnebago Industries, Inc.Supplemental Information by Reportable Segment - Motorhome(in thousands, except unit data)(Unaudited and subject to reclassification)

  Three Months Ended
  May 28, 2022   % of Revenues   May 29, 2021   % of Revenues   $ Change   % Change
Net revenues $ 516,345       $ 385,257       $ 131,088     34.0 %
Adjusted EBITDA   64,388   12.5 %     37,467   9.7 %     26,921     71.9 %
                       
  Three Months Ended
Unit deliveries May 28, 2022   Product Mix(1)   May 29, 2021   Product Mix(1)   Unit Change   % Change
Class A   672   21.0 %     745   27.3 %     (73 )   (9.8 )%
Class B   1,801   56.3 %     1,384   50.8 %     417     30.1 %
Class C   728   22.7 %     598   21.9 %     130     21.7 %
Total motorhomes   3,201   100.0 %     2,727   100.0 %     474     17.4 %
                       
  Nine Months Ended
  May 28, 2022   % of Revenues   May 29, 2021   % of Revenues   $ Change   % Change
Net revenues $ 1,355,389       $ 1,090,221       $ 265,168     24.3 %
Adjusted EBITDA   160,636   11.9 %     118,779   10.9 %     41,857     35.2 %
                       
  Nine Months Ended
Unit deliveries May 28, 2022   Product Mix(1)   May 29, 2021   Product Mix(1)   Unit Change   % Change
Class A   2,004   22.9 %     2,047   25.8 %     (43 )   (2.1 )%
Class B   4,889   55.8 %     3,901   49.1 %     988     25.3 %
Class C   1,874   21.4 %     1,994   25.1 %     (120 )   (6.0 )%
Total motorhomes   8,767   100.0 %     7,942   100.0 %     825     10.4 %
                       
  May 28, 2022       May 29, 2021       Change   % Change
Backlog(2)                      
Units   15,180         18,145         (2,965 )   (16.3 )%
Dollars $ 2,285,236       $ 2,180,149       $ 105,087     4.8 %
Dealer Inventory                      
Units   3,008         2,429         579     23.8 %

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

(2)  Our backlog includes all accepted orders from dealers which generally have been requested to be shipped within the next six months. Orders in backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty; therefore, backlog may not necessarily be an accurate measure of future sales.

Winnebago Industries, Inc.Supplemental Information by Reportable Segment - Marine(in thousands, except unit data)(Unaudited and subject to reclassification)

  Three Months Ended
  May 28, 2022   % of Revenues   May 29, 2021   % of Revenues   $ Change   % Change
Net revenues $ 126,548       $ 17,170       $ 109,378   637.0 %
Adjusted EBITDA   19,813   15.7 %     1,624   9.5 %     18,189   1,120.0 %
                       
  Three Months Ended
Unit deliveries May 28, 2022       May 29, 2021       Unit Change   % Change
Boats   1,655         83         1,572   1,894.0 %
                       
  Nine Months Ended
  May 28, 2022   % of Revenues   May 29, 2021   % of Revenues   $ Change   % Change
Net revenues   303,175         43,527       $ 259,648   596.5 %
Adjusted EBITDA   43,336   14.3 %     3,502   8.0 %     39,834   1,137.5 %
                       
Unit deliveries May 28, 2022       May 29, 2021       Unit Change   % Change
Boats   4,112         213         3,899   1,830.5 %
                       
  May 28, 2022       May 29, 2021       Change   % Change
Backlog(1)                      
Units   2,491         492         1,999   406.3 %
Dollars $ 245,416       $ 110,472       $ 134,944   122.2 %
Dealer Inventory                      
Units   2,454         167         2,287   1,369.5 %

(1)  Our backlog includes all accepted orders from dealers which generally have been requested to be shipped within the next six months. Orders in backlog generally can be cancelled or postponed at the option of the dealer at any time without penalty; therefore, backlog may not necessarily be an accurate measure of future sales.

Winnebago Industries, Inc.Non-GAAP Reconciliation(Unaudited and subject to reclassification)

Non-GAAP financial measures, which are not calculated or presented in accordance with accounting principles generally accepted in the United States (“GAAP”), have been provided as information supplemental and in addition to the financial measures presented in the accompanying news release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the news release. The non-GAAP financial measures presented may differ from similar measures used by other companies.

The following table reconciles diluted earnings per share to Adjusted diluted earnings per share:

  Three Months Ended   Nine Months Ended
  May 28, 2022   May 29, 2021   May 28, 2022   May 29, 2021
Diluted earnings per share $ 3.57     $ 2.05     $ 9.18     $ 5.83  
Acquisition-related costs(1)   0.02             0.14        
Gain on sale of property, plant and equipment(1)         (0.03 )           (0.14 )
Litigation reserves(1)               0.12        
Amortization(1)   0.24       0.10       0.72       0.32  
Non-cash interest expense(1,2)   0.12       0.10       0.33       0.31  
Contingent consideration fair value adjustment(1)   0.36             0.74        
Tax impact of adjustments(3)   (0.18 )     (0.03 )     (0.50 )     (0.10 )
Impact of convertible share dilution(4)         0.05       0.04       0.01  
Adjusted diluted earnings per share(5) $ 4.13     $ 2.24     $ 10.77     $ 6.22  

(1)  Represents a pre-tax adjustment.(2)  Non-cash interest expense associated with the convertible notes issued as part of our acquisition of Newmar.(3)  Income tax charge calculated using the statutory tax rate for the U.S. of 24.2% and 21.0% for Fiscal 2022 and Fiscal 2021, respectively.(4)  Represents the dilution of convertible notes which is economically offset by a call/spread overlay that was put in place upon issuance.(5)  Per share numbers may not foot due to rounding.

The following table reconciles net income to consolidated EBITDA and Adjusted EBITDA.

  Three Months Ended   Nine Months Ended
  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  

Non-GAAP performance measures of Adjusted diluted earnings per share, EBITDA and Adjusted EBITDA have been provided as comparable measures to illustrate the effect of non-recurring transactions occurring during the reported periods and to improve comparability of our results from period to period. Adjusted diluted earnings per share is defined as diluted earnings per share adjusted for after-tax items that impact the comparability of our results from period to period. 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 (benefit) for income taxes, depreciation and amortization expense and other pretax adjustments made in order to present comparable results from period to period. Management believes Adjusted diluted earnings per share and Adjusted EBITDA provide meaningful supplemental information about our operating performance because these measures exclude amounts that we do not consider part of our core operating results when assessing our performance. Examples of items excluded from Adjusted diluted earnings per share include acquisition-related costs, gain on sale of property, plant and equipment, litigation reserves, amortization, non-cash interest expense, contingent consideration fair value adjustment, impact of convertible share dilution and the tax impact of the adjustments. 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.

Management uses these non-GAAP financial measures (a) to evaluate historical and prospective financial performance and trends as well as assess performance relative to competitors and peers; (b) to measure operational profitability on a consistent basis; (c) in presentations to the members of our Board of Directors to enable our Board of Directors to have the same measurement basis of operating performance as is used by management in its assessments of performance and in forecasting and budgeting for the Company; (d) to evaluate potential acquisitions; and (e) to ensure compliance with restricted activities under the terms of our asset-based revolving ("ABL") credit facility and outstanding notes. Management believes these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry.

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