Valuation Project

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Table of Contents

Mission Statement .......................................................... 1

Report to Shareholders ................................................... 2

Motor Home Product Classification ............................... 5

Motor Home Review ...................................................... 6

Management’s Discussion and Analysis of Financial Condition and Results of Operations ......... 9

Consolidated Statements of Income ............................. 17

Consolidated Balance Sheets ........................................ 18

Consolidated Statements of Cash Flows ...................... 20

Consolidated Statements of Changes in Stockholders’ Equity ............................. 21

Notes to Consolidated Financial Statements ................ 22

Management’s Report on Internal Control Over Financial Reporting .............. 35

Reports of Independent Registered Public Accounting Firm ........................................... 36

11-Year Selected Financial Data ................................... 38

Shareholder Information ............................................... 40

Common Stock Data ..................................................... 40

Cash Dividends Paid Per Share .................................... 40

Directors and Officers ..........................Inside Back Cover

Corporate Profile

Winnebago Industries, Inc., (Winnebago Indus- tries® or the Company) headquartered in Forest City, Iowa, is a leading United States (U.S.) manufacturer of motor homes, self-contained recreation vehicles used primarily in leisure travel and outdoor recre- ation activities. The Company builds quality motor homes with state-of-the-art computer-aided design and manufacturing systems on automotive-styled as- sembly lines. The Company’s products are subjected to what the Company believes is the most rigorous testing in the RV industry. These vehicles are sold through independent dealers under the Winnebago® and Itasca® brand names. The Company markets its recreation vehicles on a wholesale basis to a diversi- fied dealer organization located throughout the U.S., and to a limited extent, in Canada. As of August 27, 2005, the motor home dealer organization in the U.S. and Canada included approximately 300 dealer loca- tions. Motor home sales by Winnebago Industries represented at least 92 percent of its revenues in each of the past five fiscal years. Other products manufac- tured by the Company consist principally of a variety of component parts for other manufacturers.

Winnebago Industries was incorporated under the laws of the state of Iowa on February 12, 1958, and adopted its present name on February 28, 1961.

Recent Financial Performance (In thousands, except percent and per share data)

(Adjusted for 2-for-1 stock split on March 5, 2004)

Fiscal 2005 Fiscal 2004 Fiscal 2003 Net Revenues $ 991,975 $1,114,154 $ 845,210 Gross Profit $ 136,978 $ 162,169 $ 113,378 Operating Income $ 98,255 $ 110,798 $ 77,294 Net Income $ 65,073 $ 70,641 $ 49,884 Diluted Income Per Share $ 1.92 $ 2.03 $ 1.33 Diluted Weighted Average Outstanding Shares 33,812 34,789 37,636 Return on Assets 16.1% 18.3% 14.0% Return on Equity 29.7% 34.4% 25.6% Return on Invested Capital 30.7% 35.4% 25.5%

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Winnebago Industries is a leading United States manu- facturer of motor homes and related products and services. Our mission is to continually improve our products and ser- vices to meet or exceed the expectations of our customers. We emphasize employee teamwork and involvement in iden- tifying and implementing programs to save time and lower production costs while maintaining the highest quality of products. These strategies allow us to prosper as a business with a high degree of integrity and to provide a reasonable return for our shareholders, the owners of our business.

Values

How we accomplish our mission is as important as the mission itself. Fundamental to the success of the Company are these basic values we describe as the four Ps:

People Our employees are the source of our strength. They provide our corporate intelligence and determine our reputation and vitality. Involvement and teamwork are our core corporate values.

Products Our products are the end result of our team- work and they should be the best in meeting or exceeding our customers’ expectations. As our products are viewed, so are we viewed.

Plant We believe our facilities to be the most techno- logically advanced in the RV industry. We continue to re- view and make facility improvements that will increase the utilization of our plant capacity and enable us to build the best quality product for the investment.

Profitability Profitability is the ultimate measure of how efficiently we provide our customers with the best prod- ucts for their needs. Profitability is required to survive and grow. As our respect and position within the marketplace grows, so will our profit.

Guiding Principles

Quality comes first To achieve customer satisfaction, the quality of our products and services must be our number one priority.

Customers are central to our existence Our work is done with our customers in mind, providing products and services that meet or exceed the expectations of our custom- ers. We must not only satisfy our customers, we must also delight them.

Continuous improvement is essential to our success We must strive for excellence in everything we do: in our prod- ucts, in their safety and value, as well as in our services, our human relations, our competitiveness and our profitability.

Employee involvement is our way of life We are a team. We must treat each other with trust and respect.

Dealers and suppliers are our partners The Com- pany must maintain mutually beneficial relationships with dealers, suppliers and our other business associates.

Integrity is never compromised The Company must pursue conduct in a manner that is socially responsible and that commands respect for its integrity and for its positive contributions to society.

WINNEBAGO INDUSTRIES, INC. Mission Statement

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Second Best Year in Winnebago Industries’ History Winnebago Industries’ Fiscal �005 results represent the second best year of the Company’s 47-year history. While revenues and earnings for Fiscal �005 were lower than last year, we are still extremely proud of the Company’s perfor- mance in a challenging year. Following the record-breaking year experienced by the recreation vehicle (RV) industry in Calendar Year �004, manufacturers and dealers were extremely optimistic about continued growth and, based on that optimism, manufactur- ers kept factories running at relatively high levels through- out the winter. By the spring of �005, it became evident that there was an industry-wide surplus of inventory in the marketplace, particularly of Class A motor homes, causing most manufacturers to heavily discount these products. We believed in the spring that we would see a return to more normalized inventory levels within the industry by midsum- mer. By midsummer; however, consumer confidence began to dip, primarily due to the increases in fuel prices. Con- sumer confidence has continued to decrease throughout the summer and early fall. According to the New York based research organization, The Conference Board, “Consumer confidence took the biggest tumble in 15 years in September, as Americans came to grips with soaring energy prices after Hurricane Katrina.” Historically, consumer confidence and RV sales trends closely correlate and it has become appar- ent that RV sales followed this trend in �005 as motor home sales slowed at the retail level. In spite of the difficult economic climate, Winnebago Industries had a strong year of product introductions. The Company began production of the new �006 Winnebago View® and Itasca Navion™ Class C diesel motor homes in March. These innovative motor homes have been particular- ly timely with an estimated fuel economy of �7 to �9 miles per gallon. As you’ll read later in this report, 54 percent of Winnebago Industries’ �006 products are new or redesigned, including the new Winnebago Tour™ and Itasca Ellipse™ Class A diesel motor homes. Several of the Company’s new

Winnebago and Itasca products for �006 also feature in- creased headroom which has become a new trend within the industry, creating a more spacious residential feel. This new feature is included on the Company’s high end Class A gas and diesel motor homes, including the Winnebago Adven- turer®, Tour and Vectra®, as well as the Itasca Suncruiser®, Ellipse and Horizon®. Quality and Service In addition to product development, we believe that quality and service are extremely important to Winnebago Industries’ growth. We consider the annual Dealer Satisfac- tion Index (DSI) survey by the Recreation Vehicle Dealers Association (RVDA) a good third-party measurement of our product quality, as well as the quality of our sales, manage- ment, service, warranty and support processes. We use the DSI survey results as an annual benchmark to rate how our dealer partners perceive the Company and our products. Winnebago Industries has received the Quality Circle award from RVDA as a result of our high score on this DSI survey for all nine years of the award’s existence; the only manufac- turer to have achieved this distinction. We believe Winnebago Industries has achieved high scores on the quality of our products and services for several reasons. We have a dedicated work force with long-term experience in the RV industry. We utilize technologically advanced manufacturing systems and continue to implement new technology for improving our operations. We utilize Lean manufacturing techniques, a systematic approach of identifying and eliminating waste (nonvalue added activities) through continuous organization and processes improve- ment. We believe these factors make our manufacturing op- erations more efficient and productive, while increasing the quality of the Company’s products. Winnebago Industries currently has 4� Lean manufac- turing teams and the Company’s employees received ap- proximately 7,000 hours of Lean manufacturing training during Fiscal �005. A good example of the positive results from the imple- mentation of Lean manufacturing techniques is a process change that was made in Fiscal �005 in the way we manu-

To Our Fellow Shareholders:

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facture cabinets in our Charles City Manufacturing Facility. Changes in the production process increased manufacturing capacity by 55 percent while reducing labor content by �0 percent. Winnebago Industries’ Shipout Department ensures that our new motor homes are fully processed and prepared for shipment to Winnebago and Itasca dealers. In July �005, Winnebago Industries began using a new $�.� million Shipout facility in Forest City. This 49,000 square-foot fa- cility features state-of-the-art equipment and enables us to service the new higher-ceiling motor homes that made their debut in the �006 model lineup. The location of the facility within the plant also maximizes workflow efficiency.

Profitability As we have emphasized for the last five years, our pri- mary goal is to be the most profitable public company in the RV industry and we continue to emphasize profitability over market share. For that reason, we chose not to participate in incentives at the same level as our competition. This has resulted in some loss of market share; however, it has allowed us to maintain what we believe is most impor- tant to our shareholders, our profitability. We gauge our performance by five profitability guide- lines: Return on Assets (ROA), Return on Equity (ROE), Return on Invested Capital (ROIC), operating income as a percent of sales and net income as a percent of sales. We use these guidelines to measure our performance against the other five public motor home manufacturers that along with Winnebago Industries account for over 70 percent of all Class A and C motor home sales in the U.S. The graphs below demonstrate that we continue to be a leader in profit- ability within the RV industry.

Return Profits to Shareholders The Company has historically generated substantial cash from operations, which has enabled the Company to meet its working capital needs and make appropriate investments in manufacturing equipment and facilities. Funds that are not needed for these purposes are returned to our sharehold- ers through cash dividends and repurchases of our common stock. The Company’s Board of Directors has authorized ten

stock repurchase programs from December �997 through August �005. During this period, the Company repurchased ��.8 million shares (adjusted for the �-for-� stock split on March 5, �004) of common stock for an aggregate cost of $�78.5 million. During Fiscal �005, Winnebago Industries repurchased approximately 860,000 shares of common stock for an ag- gregate cost of approximately $�7 million. As of August �7, �005, there were approximately ��,989,000 shares out- standing. In addition to the repurchase of the Company’s stock, Winnebago Industries increased cash dividends by 40 per- cent in Fiscal �005 by paying seven cents a share to our shareholders on a quarterly basis, or �8 cents a share for the fiscal year, compared to annual dividends of 20 cents a share for Fiscal �004. The Board of Directors increased the divi- dend for Fiscal �006 by �9 percent, increasing the quarterly dividend to nine cents a share.

Winnebago Industries, Inc. Thor Industries, Inc. Monaco Coach Corporation Coachmen Industries, Inc. Fleetwood Enterprises, Inc. National RV Holding, Inc.

Competitive comparison information obtained from last 12 months public filings.

ROA, ROE and ROIC are based on average assets, average equity and average invested capital.

In commemoration of 35 years of trading on the New York Stock Exchange, Company representatives took part in the Closing Bell ceremony on September 9, 2005.

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Long-Term Growth While we are currently in a difficult motor home market, we continue to believe in the growth fundamentals of our business. Long-term demographic trends continue to favor motor home market growth as the baby-boom generation continues to enter the prime motor home buying age of 50 years old and older. According to the �00� University of Michigan “RV Con- sumer Demographic Profile,” a study of the RV consumer, the age at which the motor home consumer is purchasing motor homes has broadened. For instance, the study showed that motor home buyers have entered the market earlier than in the past, as young as �5 years old, while there has also been growth in the market of people over the age of 75 due to Americans staying active and living longer and healthier lives. RV industry economist, Dr. Richard Curtin, Director of Consumer Surveys at the University of Michigan, indicated in his Fall �005 forecast that he also believes the RV indus-

try will continue to grow. While Dr. Curtin believes there will be a “mild reaction” by consumers to current economic conditions, he believes there will be long-term growth in RV sales due to the positive demographic trends previously mentioned. The theme for Winnebago Industries’ �005 Annual Re- port is travel. Why focus on travel? Because our owners have told us that they intend to continue to travel even in light of the recent increases in fuel prices. Surveys conducted of new owners of Winnebago and Itasca motor homes show that �8 percent intend to travel between �,000 and 5,000 miles per year, an additional 47 percent intend to travel be- tween 5,000 and �0,000 miles per year, while the remaining �5 percent intend to travel over �0,000 miles per year. Research conducted by the Recreation Vehicle Industry Association (RVIA) shows RVers spend more time enjoying the campground experience and their active outdoor lifestyle activities and perhaps less on the road, but it’s important to note that they still intend to travel and have the flexibility to cut costs by staying closer to home or taking fewer trips per year. The RV experience, whether for a weekend or a week or more, continues to be a low-cost way to spend high-qual- ity time with loved ones. Even with today’s higher fuel prices, RV travel is a great value. Fuel price hikes increase the cost of all modes of travel and transportation. RVIA’s Summer �005 vacation cost comparison research shows that RV trips remain the most affordable way for a family to travel because of the significant savings on hotels and restaurant costs. Motor homes are discretionary purchase items and as such, Winnebago Industries is subject to cyclical swings in demand. With an expanded product line and a full comple- ment of new �006 Winnebago and Itasca products, we are ready and able to meet the challenge when the economic cycle again swings toward growth. Long-term, we continue to believe in the growth in our industry and Winnebago In- dustries. We also believe the Company’s long-term growth prospects will provide abundant opportunities for our em- ployees, dealers, suppliers and for you, our shareholders, as we look into the future.

Bruce D. Hertzke Chairman of the Board and Chief Executive Officer

Edwin F. Barker President and Chief Financial Officer November �0, �005

Pictured above are Bruce Hertzke (right) and Ed Barker.

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Ñ View* Ñ Aspect Ñ Outlook Ñ Minnie Winnie Ñ Sightseer Ñ Voyage Ñ Adventurer Ñ Journey* Ñ Tour* Ñ Vectra*

Motor Home Product Classification Class A Motor Homes These are conventional motor homes constructed directly on medium and heavy-duty truck chassis which include the engine and drivetrain components. The living area and the driver’s compartment are designed and produced by the motor home manufacturer. Class A motor homes from Winnebago Indus- tries include: Winnebago Sightseer®, Voyage™, Adventurer, Journey®, Tour and Vectra; and Itasca Sunova®, Sunrise®, Suncruiser, Meridian®, Ellipse and Horizon. The Company manufactures Class A motor homes with gas and die- sel pusher offerings. A diesel pusher is a motor home with a diesel engine in the rear of the unit. Class C Motor Homes These are mini motor homes built on a van-type chassis onto which the mo- tor home manufacturer constructs a living area with access to the driver’s compartment. Class C motor homes from Winnebago Industries include: Winnebago View, Aspect®, Outlook™ and Minnie Winnie®; and Itasca Navi- on, Cambria®, Spirit® and Sundancer®.

Winnebago Industries Motor Home Family Tree

Winnebago Industries manufactures two brands of Class A and Class C motor homes. Listed below are the brand names and model designations of the Company’s �006 product lines.

*Diesel Product

Ñ Navion* Ñ Cambria Ñ Spirit Ñ Sundancer Ñ Sunova Ñ Sunrise Ñ Suncruiser Ñ Meridian* Ñ Ellipse* Ñ Horizon*

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Winnebago Industries is a leading motor home manufac- turer in the United States. In July �005, Winnebago Indus- tries introduced 94 innovative Winnebago and Itasca brand floorplans to its dealers, 54 percent of which are new or re- designed for the new �006 model year.

Class A Diesel In an effort to take advantage of the popularity of diesels within the industry’s Class A market, Winnebago Industries introduced a new line of products, the brand new Winnebago Tour and Itasca Ellipse. Created to fill a price point between the Company’s existing diesel entries, the new Tour and El- lipse feature an impressive ceiling height of 7 feet � inches with 6-foot-�-inch ceilings in the slideouts, as well as luxuri- ous appointments and stunning interior and exterior designs and colors. They are available in four innovative floorplans ranging from �6 to 40 feet in length, three of which are triple slides and one a quad slide. The Tour and Ellipse are built on the Evolution™ Chassis, a Winnebago Industries exclusive developed in conjunction with Freightliner Custom Chassis Corporation. This chassis creates a strong, durable platform with more usable storage than in a conventional raised-rail chassis, as well as excellent driving performance and com- fort. The top-of-the-line Winnebago Vectra and Itasca Horizon were also redesigned with 7-foot-�-inch ceilings. The Vectra and Horizon are offered in three innovative floorplans ranging in length from �6 to 40 feet, including two with quad-slide floorplans, the 40KD and a new 40FD model. The new 40FD

model features two opposing StoreMore® sliderooms that feature a flat-floor design in the front living area, as well as a newly designed front en- tertainment center with op- tional fireplace. The Winnebago Journey and the Itasca Meridian are the Company’s entry-level, diesel-pusher products that are each available in four floorplans for 2006 ranging from 32 to �9 feet in length. The Winnebago Journey was the industry’s top-selling Class A diesel motor home in Calendar �004.

Motor Home Review

2006 Itasca Ellipse

Ellipse 40FD

2006 Winnebago Journey

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Class A Gas The industry leader in retail sales of Class A gas mo- tor homes, Winnebago Industries continued its innovation for �006 with the introduction of the redesigned Winnebago Adventurer and Itasca Suncruiser. Featuring increased ceil- ing heights of 7 feet � inches, the Adventurer and Suncruiser also each offer an exciting new 38T floorplan with an amaz- ing 365 square feet of living space inside. The 38T floorplan has 17-foot, 6-inch slideouts with flat-floor design on each side of the motor home, creating a full �5 feet of slideout area. The Adventurer and Suncruiser each feature seven ex- citing floorplans ranging from 33 to 38 feet in length. The Winnebago Adventurer was the industry’s top-selling Class A gas motor home in Calendar �004. The entry-level Winnebago Sightseer and Itasca Sunova lines each feature two new floorplans for 2006, now offering a total of six floorplans ranging in length from 26 to 35 feet. The new �6P offers a refrigerator/dinette or refrigerator/sofa front slide and a rear bed slide, while the ��T features a front dinette/sofa slideout. The Winnebago Voyage and Itasca Sunrise have six floorplans for 2006, ranging from 31 to 38 feet in length.

Class C Offerings Winnebago Industries continues to lead the industry in retail sales of Class C motor homes, maintaining the number one position that began in �998. The brand new Winnebago View and Itasca Navion join Winnebago Industries’ Class C lineup for �006. This revolutionary new motor home features the Dodge Sprinter

cutaway chassis with a �0,�00-lb. Gross Ve- hicle Weight Rating (GVWR) and a pre- mium 2.7L CDI five- cylinder, turbo-diesel Mercedes-Benz® en- gine. The new View and Navion deliver �54 hp, with excep- tional fuel economy estimated at �7 to �9 miles per gallon.

2006 Itasca Navion

2006 Winnebago Adventurer 38J.

2006 Itasca Navion

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Also joining the lineup for 2006 is the new Winnebago Outlook. The Outlook and the Itasca Spirit are each avail- able in ten ß oorplans ranging from 22 to 32 feet in length and most feature either one or two slideouts. The Outlook and Spirit also feature a new 25-foot ß oorplan for 2006 that features a rear galley and bathroom and a sofa/refrigerator slideout that greatly enhances interior living space opposite the dining table. A new Chevrolet® chassis option is also available for 2006 on all models except the 22-foot lengths and provides a GVWR of 14,050 lbs. The low-proÞ le Winnebago Aspect and Itasca Cambria have been proven performers since their introduction in 2005. They are easy to maneuver with a sleek 95-inch width and make towing a breeze with a 5,000-lb. trailer hitch. The As- pect and Cambria feature an aerodynamic front-end design that compliments the clean lines of the Ford® cab and styl- ized rear cap. Both are offered in three innovative ß oorplans, ranging from 23 to 29 feet, including the new 29-foot model. The microwave/convection oven is now standard in most models for 2006, while a new A&E® metal-wrapped awning option is available as well as an UltraLeather HP� seat up- grade.

Winnebago Industries� top-of-the-line Class C motor homes, the Winnebago Minnie Winnie and Itasca Sundanc- er, each feature two models in 30- and 31-foot lengths. All chassis cabs on the Minnie Winnie and Sundancer have an automotive silver color for 2006 and also feature a new peb- ble interior color.

2006 Itasca Cambria

Outlook 31C

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING INFORMATION

Certain of the matters discussed in this Annual Report are “forward looking statements” within the meaning of Section �7A of the Securities Act of �9��, as amended, and Section ��E of the Securities Exchange Act of �9�4, as amended, which involve risks and uncertainties, including, but not limited to, reactions to actual or threatened terrorist attacks, a further decline in consumer confidence, availability and price of fuel, a significant increase in interest rates, a slow- down in the economy, availability of chassis and other key component parts, sales order cancellations, slower than anticipated sales of new or existing products, new product introductions by competitors, and other factors which may be disclosed throughout this Annual Report. Although man- agement believes that the expectations reflected in the for- ward looking statements are reasonable, the Company can- not guarantee future results, levels of activity, performance or achievements. Undue reliance should not be placed on these forward looking statements, which speak only as of the date of this report. The Company undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or oth- erwise, except as required by law or the rules of the New York Stock Exchange.

OVERVIEW

Motorized products represented 60 percent of the RV indus- try revenues in Calendar �004. For this reason and because we believe there are further growth opportunities in this segment, Winnebago Industries has continued to focus on the motorized segment of the RV industry. Funds for RV purchases, especially the motorized segment, usually come from a buyer’s discretionary income. The RV market, long known as a cyclical market, follows consumer confidence levels; therefore, as confidence levels decline so may the number of units sold. The RV industry as a whole is cur- rently experiencing decreased sales of units in the motorized segment. There are recent indications that industry-wide motor home production has exceeded market demand. The Company remains a market share leader and will monitor its inventories on hand to ensure that production is in line with market demand.

Winnebago Industries manufactures and sells a variety of motor homes throughout the United States and Canada, as well as retail parts and accessories. RV classifications are based upon standards established by the RVIA. The only types of RVs that we produce are Class A and Class C motor homes. Winnebago Industries is a leader in the motorized RV segment of the industry in the combined retail sale of Class A and Class C motor homes with a retail market share of �7.5 percent for calendar year-to-date through August �005.

While market share is important, the Company’s primary goal is to be the most profitable public company in the RV industry. The Company measures profitability by using five guidelines: ROA, ROE, ROIC, operating income as a per- cent of sales and net income as a percent of sales.

CRITICAL ACCOUNTING POLICIES

In preparing the consolidated financial statements, we fol- low accounting principles generally accepted in the Unit- ed States of America, which in many cases require us to make assumptions, estimates and judgments that affect the amounts reported. Actual results could differ from estimates in amounts that may be material to the financial statements. Some of our accounting policies are critical because they are important in determining the financial condition and re- sults of operations. These policies are described below and involve additional management judgment due to the sensi- tivity of the methods, assumptions and estimates necessary in determining the related income statement, asset and/or li- ability amounts.

Revenue. Generally, revenues for motor homes are record- ed when all of the following conditions are met: an order for a product has been received from a dealer; written or verbal approval for payment has been received from the dealer’s floorplan financing institution; and the product is delivered to the dealer who placed the order. Sales are generally made to dealers who finance their purchases under floorplan fi- nancing arrangements with banks or finance companies.

Revenues for the Company’s original equipment manufac- turing (OEM) components and recreation vehicle related parts are recorded as the products are shipped from the Com- pany’s location. The title of ownership transfers on these

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products as they leave the Company’s location due to the freight terms of F.O.B. - Forest City, Iowa.

Postretirement Benefits Obligations and Costs. The Company provides certain health care and other benefits for retired employees, hired before April �, �00�, who have fulfilled eligibility requirements at age 55 with 15 years of continuous service. Postretirement benefit liabilities are de- termined by actuaries using assumptions about the discount rate and health care cost-trend rates. A significant increase or decrease in interest rates could have a significant impact on our operating results. Further discussion of our postretire- ment benefit plan and related assumptions are included in Note 6 to the Company’s �005 Consolidated Financial State- ments.

Warranty. The Company offers with the purchase of any new Winnebago or Itasca motor home, a comprehensive ��-month/�5,000-mile warranty and a �-year/�6,000-mile warranty on sidewalls and floors. Estimated costs related to product warranty are accrued at the time of sale and in- cluded in cost of sales in the Company’s Statements of In- come and as a separate line item, Product Warranties, in the Company’s Balance Sheets. Estimates of future warranty costs are based upon past warranty claims and unit sales his- tory and adjusted as required to reflect actual costs incurred, as information becomes available. A significant increase in dealership labor rates, the cost of parts or the frequency of claims could have a material adverse impact on our operat- ing results for the period or periods in which such claims or additional costs materialize.

In addition to the costs associated with the contractual war- ranty coverage provided on our motor homes, we also incur costs as a result of additional service actions not covered by our warranties, including product recalls and customer sat- isfaction actions. The Company estimates the cost of these service actions using past claim rate experiences and the es- timated cost of the repairs. Estimated costs are accrued at

the time the service action is implemented and included in cost of sales in the Company’s Statements of Income and as other accrued expenses in the Company’s Balance Sheets. See Note 5 to the Company’s �005 Consolidated Financial Statements for further warranty information.

Repurchase Commitments. Generally, companies in the RV industry enter into repurchase agreements with lending institutions which have provided wholesale floorplan fi- nancing to dealers. The Company’s repurchase agreements provide that, in the event of default by the dealer on the agreement to pay the lending institution, the Company will repurchase the financed motor homes. The agreements also provide that the Company’s liability will not exceed �00 per- cent of the dealer invoice and provide for periodic liability reductions based on the time since the date of the original invoice. These repurchase obligations generally expire upon the earlier to occur of (i) the dealer’s sale of the financed unit or (ii) one year from the date of the original invoice. The Company’s obligations under these repurchase agreements are reduced by the proceeds received upon the resale of any repurchased unit. The gross repurchase obligation will vary depending on the season and the level of dealer inventories. Past losses under these agreements have not been significant and lender repurchase obligations have been funded out of working capital. (See Note 7 to the Company’s �005 Con- solidated Financial Statements.) Other. The Company has reserves for other loss exposures, such as litigation, taxes, product liability, worker’s compen- sation, employee medical claims, inventory and accounts re- ceivable. The Company also has loss exposure on loan guar- antees. Establishing loss reserves for these matters requires the use of estimates and judgment in regards to risk exposure and ultimate liability. The Company estimates losses un- der the programs using consistent and appropriate methods; however, changes in assumptions could materially affect the Company’s recorded liabilities for loss.

Itasca Navion

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Revenues decreased 11.0 percent during the fiscal year ended August 27, 2005, while unit deliveries decreased 15.0 percent. The percentage decrease in net revenues was less than the percentage decrease in unit deliveries due to an increase in the average sales price per unit when comparing the two fiscal years. In Fiscal 2005, the decrease in deliveries, especially in Class A motor homes, which are higher priced, was a result of lower consumer confidence caused primarily by increases in fuel costs. Gross profit as a percentage of net revenue decreased 0.8 percent from Fiscal 2004 to Fiscal 2005. The gross profit percent- age of 13.8 percent for Fiscal 2005 was unfavorably impacted by a decrease in production volume which increased fixed costs per unit of production and resulted in a decline in manufacturing efficiencies. Partially offsetting this decrease was a reduction in net postretirement health care benefit expense of $6.0 million due to a plan amendment made at the beginning of the fiscal year which established maximum employer contributions to be paid in Fiscal 2005 and subsequent years.

Selling expenses decreased 4.0 percent or $8�8,000 from Fiscal �004 to Fiscal �005. The decrease was primarily a result of

RESULTS OF OPERATIONS

Fiscal 2005 Compared to Fiscal 2004

The following is an analysis of changes in key items included in the consolidated statements of income for the year ended August �7, �005 compared to the year ended August �8, �004.

(In thousands, except percent and per share data) August 27, 2005 Year Ended (Adjusted for the 2-for-1 stock split on Compared to August 27, August 28, March 5, 2004) August 28, 2004 2005 2004 Increase % (Decrease) Change % of Net Revenues Net revenues $ (���,�79) (��.0)% �00.0% �00.0 % Cost of goods sold (96,988) (�0.�) 86.� 85.4 Gross profit (25,191) (15.5) 13.8 14.6 Selling (8�8) (4.0) �.0 �.9 General and administrative (��,8�0) (�8.6) �.9 �.7 Operating income (��,54�) (��.�) 9.9 �0.0 Financial income �,�99 8�.5 0.� 0.� Provision for taxes (5,776) (��.9) �.6 �.8 Net income $ (5,568) (7.9)% 6.6 6.� Diluted earnings per share $ (0.��) (5.4)% Fully diluted average shares outstanding (977) (�.8)%

Net revenues for the 5� weeks ended August �7, �005 decreased ��.0 percent to $99�.0 million compared to $�.� billion for the fiscal year ended August 28, 2004.

Unit deliveries consisted of the following:

Year Ended August 27, 2005 August 28, 2004 Decrease % Change Class A motor homes (gas) 4,5�7 5,�77 (750) (�4.�)% Class A motor homes (diesel) �,�47 �,8�� (684) (�4.�)% Class C motor homes �,96� 4,408 (445) (�0.�)% Total deliveries �0,6�7 ��,5�6 (�,879) (�5.0)%

Winnebago View

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a reduction in incentive compensation to the Company’s field sales force and a reduction in net postretirement health care benefit expense.

General and administrative expenses decreased �8.6 percent or $��.8 million from Fiscal �004 to Fiscal �005. The decrease was primarily a result of a $7.� million charge that was recorded in Fiscal �004 in connection with a lawsuit settlement relating to deferred compensation, a reduction of approximately $4.� million in management incentive compensation costs and a reduction in net postretirement health care benefit expense, both in Fiscal 2005.

Financial income increased 8�.5 percent when comparing Fiscal �005 ($�.6 million) to Fiscal �004 ($�.4 million). The increase in financial income when comparing the two periods was due primarily to a higher average rate of return and more cash available for investing during the year ended August �7, �005.

The overall effective income tax rate decreased to �5.5 percent for Fiscal �005 from �7.� percent for Fiscal �004. The decrease was primarily due to the elimination of nondeductible losses in Winnebago Health Care Management Company, a subsidiary of the Company.

Net income and earnings per diluted share decreased by 7.9 percent and 5.4 percent, respectively, when comparing the year ended August �7, �005 to the year ended August �8, �004. The difference in percentages was primarily due to a lower num- ber of outstanding shares of the Company’s common stock during the fiscal year ended August 27, 2005 as a result of the repurchases of approximately 860,000 shares of the Company’s common stock. (See Consolidated Statements of Changes in Stockholder’s Equity in the Company’s �005 Consolidated Financial Statements.)

Itasca Cambria

Fiscal 2004 Compared to Fiscal 2003

The following is an analysis of changes in key items included in the consolidated statements of income for the year ended August �8, �004 compared to the year ended August �0, �00�. (In thousands, except percent and per share data) August 28, 2004 Year Ended (Adjusted for the 2-for-1 stock split on Compared to August 28, August 30, March 5, 2004) August 30, 2003 2004 2003 Increase % (Decrease) Change % of Net Revenues Net revenues $ �68,944 ��.8% �00.0% �00.0% Cost of goods sold ��0,�5� �0.� 85.4 86.6 Gross profit 48,791 43.0 14.6 13.4 Selling �,0�� 5.� �.9 �.4 General and administrative �4,�76 87.4 �.7 �.9 Operating income ��,504 4�.� �0.0 9.� Financial income �7 �.6 0.� 0.� Provision for taxes ��,6�� �8.8 �.8 �.5 Net income before discontinued operations ��,909 45.0 6.� 5.8 Discontinued operations (�,�5�) (�00.0) - - - 0.� Net income $ �0,757 4�.6% 6.� 5.9 Diluted earnings per share $ 0.70 5�.6% Fully diluted average shares outstanding (�,847) (7.6)%

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Net revenues for the year ended August �8, �004 increased ��.8 percent to $�.� billion compared to $845.2 million for the fiscal year ended August 30, 2003. Unit deliveries consisted of the following:

Year Ended August 28, 2004 August 30, 2003 Increase % Change Class A motor homes (gas) 5,�77 5,�5� ��5 �.4% Class A motor homes (diesel) �,8�� �,55� �,�78 8�.�% Class C motor homes 4,408 4,0�� �87 9.6% Total deliveries ��,5�6 �0,7�6 �,790 �6.7%

Revenues increased 31.8 percent during the fiscal year ended August 28, 2004, while unit deliveries increased 16.7 percent. The 8�.� percent increase in diesel deliveries, traditionally a higher priced unit, as well as the overall increase in total motor home volume, were the primary reasons for the differences in the percentage increase in revenues and unit deliveries.

Gross profit as a percentage of net revenues was higher during the year ended August 28, 2004 (14.6 percent) when compared to the comparable period ended August 30, 2003 (13.4 percent). Favorably impacting gross profit in the period ended August 28, 2004 was a 20.4 percent increase in production volume which resulted in improved manufacturing efficiencies and lower fixed costs per unit of production.

Selling expenses increased 5.� percent when comparing Fiscal �004 ($�0.8 million) to Fiscal �00� ($�9.8 million). The in- crease in dollars can be attributed primarily to higher incentive payments to the Company’s field sales force. As a percentage of net revenues, selling expenses decreased to �.9 percent during Fiscal �004 from �.4 percent during Fiscal �00�, caused primarily by decreased advertising costs.

General and administrative expenses increased 87.4 percent during the year ended August �8, �004 to $�0.6 million, or �.7 percent of net revenues, compared to $�6.� million, or �.9 percent of net revenues, for the year ended August �0, �00�. The increases in percentage and dollars in Fiscal �004 were due primarily to a $7.� million lawsuit settlement relating to deferred compensation, an increase of approximately $4.4 million in management incentive programs and an increase of approximately $�.8 million in product liability costs.

The overall effective income tax rate decreased to �7.� percent for Fiscal �004 from �8.� percent for Fiscal �00�. The decrease was primarily due to lower nondeductible losses in Winnebago Health Care Management Company.

Net income and earnings per diluted share increased by 4�.6 percent and 5�.6 percent, respectively, when comparing the year ended August �8, �004 to the year ended August �0, �00�. The difference in percentages was primarily due to a lower number of outstanding shares of the Company’s common stock during the fiscal period ended August 28, 2004 as a result of approxi- mately �.4 million shares of common stock repurchased by the Company.

ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY AND RESOURCES

The Company has historically generated substantial cash from operations, which has enabled it to meet its working capital needs and make appropriate investments in manufacturing equipment and facilities, as well as pay increased cash dividends and repurchase stock. Cash and cash equivalents totaled $�9.5 million and $�4.4 million as of August �7, �005 and August �8, �004, respectively. Short-term investments consisting primarily of highly liquid investments totaled $9�.� million and $5�.� million as of August �7, �005 and August �8, �004, respectively. Working capital at August �7, �005 and August �8, �004 was $�97.5 million and $�64.� million, respectively, an increase of $��.� million. The Company has no long-term debt.

Operating Activities. Cash provided by operating activities was $78.8 million in Fiscal �005, or $��.0 million higher compared with Fiscal �004.

Winnebago Aspect

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The increase in net cash provided by operating activities was primarily attributable to the following items:

Decreases in raw material inventory as the Company continued to adjust its chassis inventory. A decrease in receivables and other assets due to a reduced level of unit deliveries at the end of Fiscal �005 when compared to Fiscal �004.

The increase in net cash provided by operating activities was partially offset by the following:

Decrease in net income. Decreases in accounts payable and accrued expenses due to a reduced production schedule and lower employee incentive compensation accruals. Decreases in the postretirement benefit liability as a result of a plan amendment. Increases in finished goods inventory as a result of more diesel units on hand at year end.

Investing Activities. The primary uses of cash for investing activities were for manufacturing equipment and facilities of $9.7 million for the year ended August �7, �005, compared to $�0.6 million during the year ended August �8, �004. The Company purchased $�55.0 million of short-term investments and received proceeds of $���.0 million from the sale or maturity of short-term investments during the year ended August �7, �005. During the year ended August �8, �004, the Company purchased $�45.4 million of short-term investments and received proceeds of $�84.4 million from the sale or maturity of short-term investments.

Financing Activities. Primary uses of cash in financing activities for the fiscal period ended August 27, 2005 were $26.8 million for the repurchases of the Company’s common stock and payments of $9.4 million in dividends. Primary uses of cash in financing activities for the fiscal period ended August 27, 2004 were $77.7 million for the Company’s common stock repurchases and $6.9 million for the payment of dividends. (See Consolidated Statements of Cash Flows.)

Stock Repurchases. On June �6, �004, the Board of Directors authorized the repurchase of outstanding shares of the Company’s common stock, depending on market conditions, for an aggregate of up to $�0 million. As of August �7, �005, 97�,��� shares had been repurchased for an aggregate consideration of approximately $�0 million which completed that authorization. On June �5, �005, the Board of Directors authorized the repurchase of outstanding shares of the Company’s common stock, depending on market conditions, for an aggregate consideration of up to $�0 million. As of August �7, �005, no stock had been repur- chased under this authorization.

Estimated demands at August �7, �005 on the Company’s liquid assets for Fiscal �006 include $�0.8 million for capital expenditures, primarily for manufacturing equipment and facilities, and $��.9 million for payments of cash dividends. On October ��, �005, the Board of Directors declared a quarterly cash dividend of $0.09 per common share payable January 9, �006 to shareholders of record as of December 9, �005.

Management currently expects its cash on hand and funds from operations to be sufficient to cover both short-term and long-term operation requirements.

• •

• •

• •

Itasca Spirit

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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The Company’s principal contractual obligations and commercial commitments as of August �7, �005 were as follows:

Payments Due By Period (In thousands) Fiscal Fiscal Fiscal More Than Contractual Obligations Total 2006 2007-2008 2009-2010 5 Years Operating leases (�) $ �4� $ �85 $ ��9 $ �� $ 6 Postretirement health care obligations (�) 5�,490 9�6 �,�9� �,709 46,65� Total contractual cash obligations $ 5�,8�� $ �,��� $ �,��� $ �,74� $ 46,659

Amount of Commitment Expiration By Period (In thousands) Fiscal Fiscal Fiscal More Than Commercial Commitments Total 2006 2007-2008 2009-2010 5 Years Guarantees (�) $ 6,�78 $ --- $ 4,054 $ �,��4 $ - - - Repurchase obligations (�) �45,��5 �45,��5 - - - - - - - - - Total commitments $ �5�,�9� $ �45,��5 $ 4,054 $ �,��4 $ - - -

(1) See Note 7 to the Company’s 2005 Consolidated Financial Statements. (2) See Note 6 to the Company’s 2005 Consolidated Financial Statements.

NEW ACCOUNTING PRONOUNCEMENTS. See Note � to the Company’s �005 Consolidated Financial Statements.

IMPACT OF INFLATION

Historically, the impact of inflation on the Company’s operations has not been significantly detrimental, as the Company has usually been able to adjust its prices to reflect the inflationary impact on the cost of manufacturing its product. In recent months, the costs of a number of raw materials and component parts utilized in manufacturing the Company’s motor homes have increased. While the Company has been able to pass on these increases historically, in the event the Company is unable to continue to do so, future increases in manufacturing costs could have a material adverse effect on the Company’s results of operations.

COMPANY OUTLOOK

The RV industry is cyclical and susceptible to slowdowns in the general economy. RV industry sales have been characterized by cycles of growth and contraction in consumer demand, reflecting prevailing economic, demographic and political conditions that affect disposable income for leisure-time activities. Some of the factors that contribute to this cyclicality include fuel avail- ability and costs, interest rate levels, the level of discretionary spending and availability of credit and consumer confidence. The recent decline in consumer confidence and slowing of the overall economy have adversely affected the RV market. An extended continuation of these conditions would materially adversely affect our business, results of operations and financial condition.

Long-term demographics, however, are favorable for the Company as its target market of consumers age 50 and older is ex- pected to increase, due to the aging of the baby boom generation, over the next �0 years. According to a �00� study conducted by the University of Michigan for the RV industry, buyers of RV products include younger buyers, older buyers and a larger percentage of U.S. households than in the past.

The Company includes in its backlog all accepted purchase orders from dealers shippable within the next six months. Orders in backlog can be canceled or postponed at the option of the purchaser at any time without penalty and, therefore, backlog may not necessarily be an accurate measure of future sales.

Winnebago Outlook

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Order backlog for the Company’s motor homes was as follows: August 27, 2005 August 28, 2004 Increase (Decrease) %Change Class A motor homes (gas) 6�7 �,�87 (550) (46.�)% Class A motor homes (diesel) ��6 6�4 (�78) (45.�)% Class C motor homes �,086 740 �46 46.8% Total backlog �,059 �,54� (48�) (�9.0)% Total approximate revenue dollars (in thousands) $�70,000 $��0,000 $(50,000) (��.7)%

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of August �7, �005, the Company had $���.6 million of cash and short-term investments consisting of $�9.5 million of cash and cash equivalents and available-for-sale securities of $9�.� million. Taking into account the credit risk criteria of our investments policies, the primary market risk associated with these investments is interest rate risk and a decline in value if market interest rates increase. However, the Company has the ability to hold its fixed income investments until maturity or for the typical Dutch auction period (an average of �6 days) and based upon historical experience does not believe there are significant risks of a failed Dutch auction. Therefore, the Company would not expect to recognize a material adverse impact in income or cash flows in the event of a decline in value due to an increase in market interest.

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Consolidated Statements of Income

Year Ended August 27, August 28, August 30, (In thousands, except per share data) 2005 2004 2003 Net revenues $ 99�,975 $ �,��4,�54 $ 845,��0 Cost of goods sold 854,997 95�,985 7��,8��

Gross profit 136,978 162,169 113,378

Operating expenses: Selling �9,9�6 �0,764 �9,75� General and administrative �8,787 �0,607 �6,���

Total operating expenses �8,7�� 5�,�7� �6,084 Operating income 98,�55 ��0,798 77,�94 Financial income �,6�5 �,4�6 �,�99

Income before income taxes �00,890 ���,��4 78,69� Provision for taxes �5,8�7 4�,59� �9,96�

Income from continuing operations 65,07� 70,64� 48,7�� Income from discontinued operations (net of income taxes of $6�9) - - - - - - �,�5� Net income $ 65,07� $ 70,64� $ 49,884

Basic income per common share: (1) From continuing operations $ �.95 $ �.06 $ �.�� From discontinued operations - - - - - - 0.0�

Basic income per share $ �.95 $ �.06 $ �.�5 Diluted income per common share: (1) From continuing operations $ �.9� $ �.0� $ �.�0 From discontinued operations - - - - - - 0.0� Diluted income per share $ �.9� $ �.0� $ �.��

Weighted average common shares outstanding: (1) Basic ��,�8� �4,��4 �6,974 Diluted ��,8�� �4,789 �7,6�6

See notes to consolidated financial statements.

(1) Income per share calculations and weighted average shares outstanding have been restated to record the effect of the 2-for-1 stock split on March 5, 2004.

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�8

Consolidated Balance Sheets

(In thousands) August 27, 2005 August 28, 2004

Assets

Current assets:

Cash and cash equivalents $ �9,484 $ �4,445 Short-term investments 9�,�00 5�,�00 Receivables, less allowance for doubtful accounts ($�70 and $�6�, respectively) 40,9�0 46,��� Inventories ��0,655 ��0,7�� Prepaid expenses and other assets 4,��� 4,8�4 Deferred income taxes 9,6�0 ��,865 Total current assets �88,09� �70,069 Property and equipment, at cost: Land �,000 �,000 Buildings 60,�8� 57,0�9 Machinery and equipment �00,60� 99,5�� Transportation equipment 9,487 9,�49 Total property and equipment, at cost �7�,�70 �66,889 Less accumulated depreciation �07,5�7 �0�,894 Total property and equipment, net 6�,85� 6�,995 Investment in life insurance ��,066 ��,86� Deferred income taxes �4,997 �5,�66 Other assets ��,95� ��,46� Total assets $ 4��,960 $ �94,556

See notes to consolidated financial statements. Certain prior year information has been reclassified to conform to the current year presentation.

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(In thousands, except per share data) August 27, 2005 August 28, 2004

Liabilities and Stockholders’ Equity Current liabilities: Accounts payable, trade $ �7,��9 $ 46,659 Income taxes payable 4,458 4,��4 Accrued expenses: Accrued compensation �6,�80 ��,��7 Product warranties ��,�8� ��,�56 Self-insurance 6,7�8 6,48� Promotional 5,495 5,885 Other 8,�50 7,960

Total current liabilities 90,6�� �05,894 Postretirement health care and deferred compensation benefits, net of current portion 86,450 86,787 Contingent liabilities and commitments Stockholders’ equity: Capital stock common, par value $0.50; authorized 60,000 shares, issued 5�,776 shares �5,888 �5,888 Additional paid-in capital �6,8�� �4,570 Reinvested earnings 447,5�8 �9�,4�0 490,��7 4��,888 Less treasury stock, at cost (�8,787 and �8,�95 shares) �54,��0 ���,0�� Total stockholders’ equity ��5,887 �0�,875 Total liabilities and stockholders’ equity $ 4��,960 $ �94,556

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Consolidated Statements of Cash Flows

Year Ended August 27, August 28, August 30, (In thousands) 2005 2004 2003 Operating activities: Net income $ 65,07� $ 70,64� $ 49,884 Income from discontinued operations - - - - - - (�,�5�) Income from continuing operations 65,07� 70,64� 48,7�� Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,999 9,6�8 8,786 Tax benefit of stock options 1,177 2,573 1,356 Loss on disposal of property, leases and other assets 9�4 584 ��� Stock compensation �4� 88 6�� Provision for doubtful accounts ��9 7� 54 Change in assets and liabilities: Receivables and other assets 5,5�� (�6,764) (�,8�5) Inventories �0,078 (�6,45�) (6�8) Deferred income taxes �,4�4 (7,6�5) (�,07�) Accounts payable and accrued expenses (�6,7�8) 6,�95 6,407 Income taxes payable ��4 5,759 (4,0�5) Postretirement benefits (1,081) 12,061 4,884 Net cash provided by continuing operations 78,764 66,77� 6�,�94 Net cash provided by discontinued operations - - - - - - ��4 Net cash provided by operating activities 78,764 66,77� 6�,6�8 Investing activities: Purchases of property and equipment (9,65�) (�0,588) (��,487) Purchases of short-term investments (�55,0��) (�45,�8�) (�57,700) Proceeds from the sale or maturity of short-term investments ���,0�� �84,�9� 97,�69 Other (�76) (��8) (�,���) Net cash (used in) provided by continuing operations (5�,9�9) �8,�0� (85,�50) Net cash provided by discontinued operations - - - - - - �9,�88 Net cash (used in) provided by investing activities (5�,9�9) �8,�0� (45,86�) Financing activities: Payments for purchase of common stock (�6,796) (77,668) (�0,���) Payments of cash dividends (9,400) (6,899) (�,70�) Proceeds from issuance of treasury stock 4,400 4,865 �,88� Net cash used in financing activities (31,796) (79,702) (21,041) Net (decrease) increase in cash and cash equivalents (4,96�) �5,�7� (�,�75) Cash and cash equivalents at beginning of year �4,445 9,�7� ��,547 Cash and cash equivalents at end of year $ �9,484 $ �4,445 $ 9,�7�

See notes to consolidated financial statements.

Certain prior year information has been reclassified to conform to the current year presentation.

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Consolidated Statements of Changes in Stockholders’ Equity

Additional Total (In thousands Common Shares Paid-In Reinvested Treasury Stock Stockholders’ except per share data) Number Amount Capital Earnings Number Amount Equity Balance, August 31, 2002 �5,888 $ ��,944 $ �5,740 $ �84,856 7,��0 $ �4�,7�5 $ �79,8�5 Exercise of stock options - - - - - - (�,�96) - - - (��0) (4,�77) �,88� Issuance of stock to officers and directors - - - - - - �69 - - - (�7) (�4�) 6�� Tax benefit of stock options - - - - - - 1,356 - - - - - - - - - 1,356 Payments for purchase of common stock - - - - - - - - - - - - 676 �0,��� (�0,���) Cash dividends on common stock - $0.�0 per share (�) - - - - - - - - - (�,70�) - - - - - - (�,70�) Net income - - - - - - - - - 49,884 - - - - - - 49,884 Balance, August 30, 2003 �5,888 ��,944 �5,969 ���,0�9 7,659 �59,��6 ��0,6�6

Exercise of stock options - - - - - - (�,074) - - - (5�0) (5,9�9) 4,865 Issuance of stock to directors - - - - - - 46 - - - (4) (4�) 88 Tax benefit of stock options - - - - - - 2,573 - - - - - - - - - 2,573 Payments for purchase of common stock - - - - - - - - - - - - �,40� 77,668 (77,668) Cash dividends paid and accrued on common stock - $0.�7 per share (�) - - - - - - - - - (9,�50) - - - - - - (9,�50) Stock Split -�-for-� on March 5, �004 �5,888 ��,944 (��,944) - - - 7,659 - - - - - - Net income - - - - - - - - - 70,64� - - - - - - 70,64� Balance, August 28, 2004 5�,776 �5,888 �4,570 �9�,4�0 �8,�95 ���,0�� �0�,875 Exercise of stock options - - - - - - 99� - - - (�6�) (�,408) 4,400 Issuance of stock to directors - - - - - - 7� - - - (5) (7�) �4� Tax benefit of stock options - - - - - - 1,177 - - - - - - - - - 1,177 Payments for purchase of common stock - - - - - - - - - - - - 860 �6,796 (�6,796) Cash dividends paid and accrued on common stock - $0.�0 per share - - - - - - - - - (9,985) - - - - - - (9,985) Net income - - - - - - - - - 65,07� - - - - - - 65,07� Balance, August 27, 2005 5�,776 $ �5,888 $ �6,8�� $ 447,5�8 �8,787 $ �54,��0 $ ��5,887

See notes to consolidated financial statements.

(1) Adjusted for the 2-for-1 stock split on March 5, 2004.

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Note 1: Nature of Business and Significant Accounting Policies Winnebago Industries, Inc. (the Company) is a leading U.S. manufacturer of motor homes, self-contained RVs used pri- marily in leisure travel and outdoor recreation activities. The RV market is highly competitive, both as to price and quality of the product. The Company believes its principal market- ing advantages are its brand name recognition, the quality of its products, its dealer organization, its warranty and service capability and its marketing techniques. The Company also believes that its prices are competitive with the competition’s units of comparable size and quality.

Principles of Consolidation. The consolidated financial statements include the parent com- pany and subsidiary companies. All material intercompany balances and transactions with subsidiaries have been elimi- nated.

Fiscal Period. The Company follows a 52/53-week fiscal year period. The financial statements presented are all 52-week periods.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and as- sumptions that affect the reported amounts of assets and li- abilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents. Cash and cash equivalents consist primarily of highly liquid investments with an original maturity of three months or less. The carrying amount approximates fair value due to the short maturity of the investments.

Fair Value Disclosures of Financial Instruments. All financial instruments are carried at amounts believed to approximate fair value.

Derivative Instruments and Hedging Activities. All contracts that contain provisions meeting the definition of a derivative also meet the requirements of, and have been des- ignated as, normal purchases or sales. The Company’s policy

is to not enter into contracts with terms that cannot be desig- nated as normal purchases or sales.

Allowance for Doubtful Accounts. The allowance for doubtful accounts is based on previous loss experience. Additional amounts are provided through charges to income as management believes necessary after evaluation of receivables and current economic conditions. Amounts which are considered to be uncollectible are charged off and recoveries of amounts previously charged off are credited to the allowance upon recovery.

Inventories. Inventories are valued at the lower of cost or market, with cost being determined by using the last in, first out (LIFO) method and market defined as net realizable value.

Property and Equipment. Depreciation of property and equipment is computed using the straight line method on the cost of the assets, less allow- ance for salvage value where appropriate, at rates based upon their estimated service lives as follows:

Asset Class Asset Life Buildings �0-�0 yrs. Machinery and equipment �-�0 yrs. Transportation equipment �-6 yrs.

Management periodically reviews the carrying values of long lived assets for impairment. In performing the review for re- coverability, management estimates the nondiscounted future cash flows expected to result from the use of the asset and its eventual disposition.

Income Taxes. The Company accounts for income taxes under Statement of Financial Accounting Standards (SFAS) No. �09, Account- ing for Income Taxes. This Statement requires recognition of deferred assets and liabilities for the expected future tax consequences of events that have been included in the finan- cial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and li- abilities using enacted tax rates in effect for the years in which the differences are expected to reverse.

Legal. The Company’s accounting policy regarding litigation ex-

Notes to Consolidated Financial Statements

Itasca Sunova

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pense is to accrue for the estimated defense costs and for prob- able exposure if the Company is able to estimate the financial impact of an adverse outcome.

Revenue Recognition. Generally, revenues for motor homes are recorded when all of the following conditions are met: an order for a product has been received from a dealer; written or verbal approval for pay- ment has been received from the dealer’s floorplan financing institution; and the product is delivered to the dealer who placed the order. Sales are generally made to dealers who finance their purchases under floorplan financing arrangements with banks or finance companies.

Revenues for the Company’s original equipment manufactur- ing (OEM) components and recreation vehicles related parts are recorded as the products are shipped from the Company’s location. The title of ownership transfers on these products as they leave the Company’s location due to the freight terms of F.O.B. - Forest City, Iowa.

Certain payments to customers for cooperative advertising and certain sales incentive offers are shown as a reduction in net revenues, in accordance with EITF No. 0�-9, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Products.

Shipping Revenues and Expenses. Shipping revenues for products shipped are included within sales, while shipping expenses are included within cost of goods sold, in accordance with Emerging Issues Task Force EITF No. 00-�0, Accounting for Shipping and Handling Fees and Costs.

Research and Development. Research and development expenditures are expensed as in- curred. Development activities generally relate to creating new products and improving or creating variations of exist- ing products to meet new applications. During Fiscal �005, �004 and �00�, the Company spent approximately $�,6�0,000, $�,655,000 and $�,464,000, respectively, on research and de- velopment activities.

Stock Split. The Board of Directors approved a � for � stock split of the Company’s common stock effective on March 5, �004 to share- holders of record on February �0, �004. The stock split was effected in the form of a �00 percent stock dividend. Income per share calculations and weighted average shares outstanding for all the years presented have been restated to record the effect of the stock split.

Income Per Common Share. Basic income per common share is computed by dividing net income by the weighted average common shares outstanding during the period.

Diluted income per common share is computed by dividing net income by the weighted average common shares outstand- ing plus the incremental shares that would have been outstand- ing upon the assumed exercise of dilutive stock options. (See Note ��.)

Reclassifications. Certain reclassifications have been made to the 2004 and 2003 financial statements and footnotes to conform to the presenta- tion used in �005.

In the second quarter of Fiscal �005, the Company began to classify its auction rate securities, municipal auction rate notes, and other investment-grade marketable debt securities as short-term investments-available-for-sale securities. These investments were included in cash and cash equivalents in previous periods ($5�.� million at August �8, �004 and $90.� million at August �0, �00�), and such amounts have been re- classified in the accompanying consolidated financial state- ments to conform to the current period classification. This reclassification had no effect on the amounts of total current assets, total assets, stockholders’ equity or net income. New Accounting Pronouncements. In November �004, the FASB issued Statement of Financial Accounting Standards No. �5�, Inventory Costs (“SFAS �5�”), which amends Accounting Research Bulletin (ARB) No. 4�, Chapter 4. SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) as current period charges regard- less of whether they meet the criteria of “so abnormal.” SFAS 151 also requires the allocation of fixed production overhead to the costs of conversion based on the normal capacity of the production facilities. The Company will adopt SFAS �5� at the beginning of Fiscal �006 and does not anticipate that it will have a material impact on the Company’s consolidated results of operations, financial position, or cash flows.

In December �004, the FASB issued Statement of Financial Accounting Standards No. ���R (revised �004), Share-Based Payment (“SFAS ���R”), which amends FASB Statement Nos. ��� and 95. SFAS ���R requires all companies to mea- sure compensation cost for all share-based payments (includ- ing employee stock options) at fair value and is effective for

Winnebago Sightseer

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all public companies for interim or annual periods beginning after June �5, �005. The Company will adopt this standard at the beginning of Fiscal 2006 and will elect the modified- prospective transition method. Under the modified-prospec- tive method, awards that are granted, modified, repurchased or cancelled after the date of adoption should be measured and accounted for in accordance with SFAS ���R. Awards that are granted prior to the effective date should continue to be accounted for in accordance with SFAS ��� except that stock option expense for unvested options must be recognized in the income statement. Adoption of the standard is currently expected to reduce Fiscal �006 earnings by an amount consis- tent with the reductions shown in recent pro-forma disclosures provided under the provisions of SFAS ��� in the following section titled “Accounting for Stock-Based Compensation.”

In December �004, the FASB issued FASB No. �5�, Ex- change of Nonmonetary Assets (“SFAS �5�”). SFAS �5� addresses the measurement of exchanges of nonmonetary as- sets. It eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges that do not have commercial substance. This Statement specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this Statement shall be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company will adopt SFAS �5� at the beginning of Fiscal �006 and does not anticipate that it will have a material impact on its consoli- dated results of operations, financial position, or cash flows.

In December �004, the FASB staff issued FASB Staff Position FSP FASB �09-� that provides guidance on the application of FASB Statement No. �09, Accounting for Income Taxes, to the provision within the American Jobs Creation Act of �004 that provides a tax deduction on qualified production activi-

ties. This FSP was effective upon issuance. The adoption of this FSP did not have a material impact on our results of op- erations or financial position for Fiscal 2005. The Company expects this FSP to affect its financial position and results of operations by reducing its effective tax rate by approximately one percentage point for Fiscal �006.

In May �005, the FASB issued FASB No. �54, Accounting Changes and Error Corrections (“SFAS �54”). SFAS �54 provides guidance on the accounting for and reporting of ac- counting changes and error corrections. It requires retrospec- tive application to the prior periods’ financial statements of voluntary changes in accounting principle and changes re- quired by an accounting pronouncement in the event the pro- nouncement does not include specific transition provisions. The provision of this Statement shall be effective for account- ing changes made in fiscal years beginning after December �5, �005.

Accounting for Stock-Based Compensation. The Company adopted SFAS No. ���, Accounting for Stock-Based Com- pensation in Fiscal �997. The Company has elected to con- tinue following the accounting guidance of Accounting Prin- ciples Board Opinion No. �5, Accounting for Stock Issued to Employees for measurement and recognition of stock based transactions with employees. No compensation cost has been recognized for options issued under the stock option plans be- cause the exercise price of all options granted was not less than �00 percent of fair market value of the common stock on the date of grant. Had compensation cost for the stock options issued been determined based on the fair value at the grant date, consistent with other provisions of SFAS No. ���, the Company’s �005, �004 and �00� income and income per share would have been changed to the pro forma amounts in- dicated as follows:

Itasca Sunrise

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(In thousands, except per share data) (Adjustments have been recorded to reflect Year Ended the 2-for-1 stock split on March 5, 2004) 2005 2004 2003 Net income As reported $ 65,07� $ 70,64� $ 49,884 Pro forma 6�,0�5 68,�7� 48,��0 Income per share (basic) As reported $ �.95 $ �.06 $ �.�5 Pro forma �.86 �.00 �.�� Income per share (diluted) As reported $ �.9� $ �.0� $ �.�� Pro forma �.84 �.97 �.�9 Weighted average shares outstanding for basic earnings per share ��,�8� �4,��4 �6,974 Weighted average shares outstanding assuming dilution ��,755 �4,66� �7,50�

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

2005 2004 2003 Dividend yield 0.70% 0.7�% 0.78% Risk-free interest rate �.�% �.8�% �.99% Expected life � years 4 years 4 years Expected volatility 46.�5 - 46.56% 48.�9 - 48.54% 49.�5% Estimated per share fair value of options granted $�0.87 $�0.04 $7.��

Note 2: Discontinued Operations On April 24, 2003 the Company sold its dealer financing receivables in Winnebago Acceptance Corporation (WAC) to GE Commercial Distribution Finance Corporation for ap- proximately $�4 million and recorded no gain or loss as the receivables were sold at book value. With the sale of its

WAC receivables, the Company has discontinued its dealer financing operations which are accounted for as discontin- ued operations in the accompanying consolidated financial statements.

(In thousands, except per share data) (Adjustments have been recorded to reflect Year Ended the 2-for-1 stock split on March 5, 2004) August 30, 2003 Winnebago Acceptance Corporation Net revenues $ �,940 Income before income taxes �,77� Net income �,�5� Income per share - basic $ 0.0� Income per share - diluted $ 0.0� Weighted average common shares outstanding: Basic �6,974 Diluted �7,6�6

Winnebago Voyage

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Note 3: Short-Term Investments - Available-for-Sale Securities The Company’s short-term investments consist of auction rate preferred securities, variable rate auction preferred stock and other investment-grade marketable debt securi- ties. These investments, a portion of which have original maturities beyond one year, may be classified as short-term based on their highly liquid nature and because these secu- rities represent the investment of cash that is available for current operations. The Company’s short-term investments are classified as available-for-sale securities due to manage- ment’s intent regarding these securities. The carrying value of these securities approximates fair market value due to their liquidity profile. As of August 27, 2005 and August �8, �004, there were no unrealized gains or losses associated with these investments. The Company had approximately $9�.� million and $5�.� million in short-term investments as of August �7, �005 and August �8, �004, respectively.

Note 4: Inventories Inventories consist of the following:

(In thousands) August 27, 2005 August 28, 2004 Finished goods $ 67,998 $ 58,9�� Work-in-process 45,657 47,��7 Raw materials �8,46� 5�,675 �5�,��6 �57,9�5 LIFO reserve (��,46�) (�7,�9�) $ ��0,655 $ ��0,7��

The above value of inventories, before reduction for the LIFO reserve, approximates replacement cost at the respec- tive dates.

Note 5: Warranty The Company provides its Winnebago and Itasca motor home customers a comprehensive ��-month/�5,000-mile warranty, and a �-year/�6,000-mile warranty on sidewalls and floors. The Company records a liability based on its estimate of the amounts necessary to settle future and ex- isting claims on products sold as of the balance sheet date. Changes in the Company’s product warranty liability during Fiscal �005 and Fiscal �004 are as follows: August 27, August 28, (In thousands) 2005 2004 Balance at beginning of year $ ��,�56 $ 9,755 Provision ��,469 �6,�00 Claims paid (�4,64�) (��,599) Balance at end of year $ ��,�8� $ ��,�56

In addition to the costs associated with the contractual war- ranty coverage provided on our motor homes, the Company also occasionally incurs costs as a result of additional ser- vice actions not covered by our warranties, including prod- uct recalls and customer satisfaction actions. The Company estimates the cost of these service actions using past claim rate experiences and the estimated cost of the repairs. Es- timated costs are accrued at the time the service action is implemented and included in cost of sales in the Company’s Consolidated Statements of Income and as other accrued ex- penses in the Company’s Consolidated Balance Sheets.

Note 6: Employee and Retiree Benefits

Long-term postretirement health care and deferred compensation benefits are as follows:

(In thousands) August 27, 2005 August 28, 2004 Accrued postretirement health care benefit cost(�) $ 5�,554 $ 5�,75� Deferred long-term compensation liability (�) �5,000 �5,70� Executive share option plan liability 9,896 8,��� Total postretirement health care and deferred compensation benefits $ 86,450 $ 86,787

(1) Current portion of accrued postretirement benefit cost of $936,00 and $616,00 as of August 27, 2005 and August 28, 2004, respectively, is included within other accrued expenses. (2) Current portion of deferred compensation liability of $2,007,000 and $1,959,000 as of August 27, 2005 and August 28, 2004, respectively, is included within accrued compensation.

Itasca Suncruiser

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Postretirement Health Care Benefits. The Company provides certain health care and other benefits for retired employees, hired before April �, �00�, who have fulfilled eligibility requirements at age 55 with 15 years of continuous service. Retirees are required to pay a monthly

premium for medical coverage based on years of service at retirement and then current age. The Company’s postretire- ment health care plan currently is not funded. The Company uses a September � measurement date for this plan. The status of the plan is as follows:

(In thousands) August 27, 2005 August 28, 2004 Change in benefit obligation: Accumulated benefit obligation, beginning of year $ 30,494 $ 58,560 Interest cost �,809 �,787 Actuarial loss �,078 6,899 Service cost 9�0 �,5�6 Net benefits paid (619) (874) Plan amendment - - - (40,4�4) Benefit obligation, end of year $ 33,672 $ 30,494 Funded status Accumulated benefit obligation in excess of plan assets $ 33,672 $ 30,494 Unrecognized cost: Net actuarial loss (�4,��5) (�4,5�7) Prior service cost 4�,�4� 47,�9� Accrued postretirement health care benefit cost $ 52,490 $ 53,368

Effective September �004, the Company amended its postre- tirement health care benefit by establishing a maximum em- ployer contribution amount which resulted in a $40,4�4,000 reduction of the accumulated postretirement benefit obliga- tion. This amendment significantly reduced the net postre- tirement health care expense in Fiscal �005.

The discount rate used in determining the accumulated post- retirement benefit obligation was 5.5 percent at August 27, �005 and 6.0 percent at August �8, �004. The average as-

sumed health care cost trend rate used in measuring the ac- cumulated postretirement benefit obligations as of August �7, �005 was 8.5 percent, decreasing each successive year until it reaches 4.5 percent in �0�4 after which it remains constant.

Net periodic postretirement benefit (income) expense for the past three fiscal years consisted of the following com- ponents:

(In thousands) August 27, 2005 August 28, 2004 August 30, 2003 Interest cost $ �,809 $ �,787 $ �,0�7 Service cost 9�0 �,5�6 �,97� Net amortization and deferral (�,978) 7� (�99) Net periodic postretirement benefit (income) expense $ (259) $ 6,394 $ 4,591

Assumed health care cost trend rates have a significant ef- fect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:

One One Percentage Percentage Point Point (In thousands) Increase Decrease Effect on total of service and interest cost components $ �5 $ (�9) Effect on postretirement benefit obligation $ 254 $ (316)

Winnebago Adventurer

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Expected future benefit payments for postretirement health care for the next ten years are as follows:

(In thousands) Year Ended Amount �006 $ 9�6 �007 �,0�� �008 �,�60 �009 �,�85 �0�0 �,4�4 �0�� - �0�5 9,56� $ �5,400 The expected benefits have been estimated based on the same assumptions used to measure the Company’s benefit obliga- tion as of August 27, 2005 and include benefits attached to estimated future employee’s services.

Deferred Compensation Benefits. The Company has a nonqualified deferred compensation pro- gram which permitted key employees to annually elect (via individual contracts) to defer a portion of their compensation until their retirement. The plan has been closed to any ad- ditional deferrals since January 2001. The retirement benefit to be provided is based upon the amount of compensation deferred and the age of the individual at the time of the con- tracted deferral. An individual generally vests at the later of age 55 and five years of service since the deferral was made. For deferrals prior to December �99�, vesting occurs at the later of age 55 and five years of service from first defer- ral or �0 years of service. Deferred compensation expense was $�,467,000, $7,669,000 and $�,6�9,000 in Fiscal �005, �004 and �00�, respectively. (See Note 7.) Total deferred compensation liabilities were $�5,000,000 and $�5,70�,000 at August �7, �005 and August �8, �004, respectively.

To assist in funding the deferred compensation liability, the Company has invested in corporate owned life insurance policies. The cash surrender value of these policies (net of borrowings of $�9,40�,000 and $�7,866,000 at August �7, �005 and August �8, �004, respectively) are presented as as- sets of the Company in the accompanying consolidated bal- ance sheets.

In addition, the Company has a nonqualified share option program which permits participants in the Executive Share Option Plan (the “Executive Plan”) to choose to exchange a portion of their salary or other eligible compensation for op- tions on selected mutual funds. Total Executive Plan assets

are presented as other assets and total Executive Plan liabili- ties as postretirement health care and deferred compensation benefits of the Company in the accompanying consolidated balance sheets. Such assets on August �7, �005 and August �8 �004 were $��,6�8,000 and $��,��6,000, respectively, and the liabilities were $9,896,000 and $8,���,000, respec- tively.

Profit Sharing Plan. The Company has a qualified profit sharing and contributory 40�(k) plan for eligible employees. The plan provides for cash contributions by the Company in such amounts as the Board of Directors may determine. Contributions to the plan in cash for Fiscal �005, �004 and �00� were $�,�58,000, $�,�89,000 and $�,809,000, respectively.

Note 7: Contingent Liabilities and Commitments

Repurchase Commitments. Generally, companies in the RV industry enter into repur- chase agreements with lending institutions which have pro- vided wholesale floorplan financing to dealers. Most deal- ers’ motor homes are financed on a “floorplan” basis under which a bank or finance company lends the dealer all, or substantially all, of the purchase price, collateralized by a security interest in the motor homes purchased.

The Company’s repurchase agreements provide that, in the event of default by the dealer on the agreement to pay the lending institution, the Company will repurchase the financed merchandise. The agreements provide that the Company’s liability will not exceed �00 percent of the dealer invoice and provide for periodic liability reductions based on the time since the date of the original invoice. These repurchase obligations expire upon the earlier to occur of (i) the dealer’s sale of the financed unit or (ii) one year from the date of the original invoice. The Company’s contingent obligations under these repurchase agreements are reduced by the pro- ceeds received upon the resale of any repurchased unit. The Company’s contingent liability on these repurchase agree- ments was approximately $�45,��5,000 and $�5�,6�4,000 at August �7, �005 and August �8, �004, respectively. The Company’s losses under repurchase agreements were ap- proximately $��,000, $0 and $��9,000 during Fiscal �005, �004 and �00�, respectively, and charged against the reserve the Company carries on its balance sheet. The reserve for repurchases at August �7, �005 and August �8, �004 was approximately $��5,000 and $�89,000, respectively.

Itasca Meridian

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The Company also entered into a repurchase agreement on February �, �00� with a banking institution which called for a liability reduction of two percent of the original invoice every month for �4 months, at which time the repurchase obligation terminates. The Company’s contingent liability under this agreement was approximately $0 and $�,77�,000 at August �7, �005 and August �8, �004, respectively. The Company did not incur any losses under this repurchase agreement during Fiscal �005, �004, and �00�. The initial agreement covered a two-year period with the option, sub- ject to annual renewal, at the discretion of the parties. The agreement was renewed as of February �, �004. However, during the first quarter of Fiscal 2005, the dealer involved transferred its financing to a different institution, thus elimi- nating the Company’s liability under this agreement.

The Company records an estimated expense and loss reserve in each accounting period based upon its extensive history and experience under repurchase agreements with the lend- ers to the Company’s dealers. As of August �7, �005, his- torical data shows that less than �.0 percent of the outstand- ing repurchase liability is potentially repurchased and the estimated loss reserve of approximately 8.0 percent of such repurchase is established on loss history of the repurchased products. Upon resale of the repurchased units, the Company does not record the transaction as revenue. The difference between the repurchase price and the net proceeds received from reselling the units is charged against the Company’s reserve for losses on repurchases.

Guarantees For Suppliers. During the second quarter of Fiscal �00�, the Company en- tered into a five-year services agreement (the “Agreement”) with an unaffiliated third-party paint Supplier (the “Sup- plier”) and the Forest City Economic Development, Inc., an Iowa nonprofit corporation (the “FCED”), requiring the Sup- plier to provide RV paint services to the Company. Three of the Company’s officers have board seats on the 20-member FCED board. The FCED constructed and debt financed a paint facility on its land adjoining the Company’s Forest City manufacturing plant for the Supplier and the Supplier leases the land and facility from the FCED under a lease that expires in August �0��. In the event of termination of the Agreement by any of the parties involved before September �, �007, the rights and obligations of the Supplier under the lease would be transferred to the Company. As of August �7, �005, the Supplier is current with its lease payment ob- ligations to the FCED with approximately $�,4�4,000 re- maining to be paid through August �0��. Under the terms

of the Agreement in the event of a default by the Supplier, the Company would be obligated to purchase from the Sup- plier approximately $�,���,000 of equipment installed in the paint facility at net book value of $605,000 and is obligated to assume payment obligations for approximately $45,000 in capital equipment leases ($�5,000 remaining to be paid at August �7, �005). In the second quarter of Fiscal �00�, the Company guaranteed $700,000 of the FCED’s $�,�00,000 bank debt for the construction of the paint facility leased by the Supplier. The Company also pledged a $500,000 cer- tificate of deposit to the bank to collateralize a portion of its $700,000 guarantee.

During the first quarter of Fiscal 2004, the debt obliga- tions for the FCED’s paint facility were renegotiated from $�,�00,000 to $�,9�5,000 and as part of this transaction, the Company executed a new guarantee whereby the amount of the guarantee was reduced from $700,000 to $500,000 with the Company continuing to agree to pledge a $500,000 cer- tificate of deposit to the bank. The term of the guarantee coincides with the payment of the first $500,000 of lease obligations of the Supplier scheduled to be paid by Febru- ary of �006. As a result of the new guarantee, the Company recorded a $500,000 liability in the first quarter of Fiscal �004 which will be amortized as the FCED makes its month- ly debt payments funded by monthly lease payments from the Supplier. The balance of the guarantee as of August �7, �005 was approximately $79,000.

During the second quarter of Fiscal �004, the Company en- tered into a five-year limited guarantee agreement (“Guaran- tee Agreement”) with a leasing corporation (“Landlord”) and previously discussed Supplier. The Landlord constructed a paint facility through debt financing on land adjoining the Company’s Charles City manufacturing plant for the Sup- plier. The Landlord and the Supplier have signed a ten-year lease agreement which commenced on August �, �004. The Guarantee Agreement states that the Company will guarantee the first 60 monthly lease payments (totaling approximately $�,559,000 of which $�,�4�,000 was remaining as of August �7, �005). In the event of rental default before August �009 and the Supplier’s failure to correct the default, the Landlord shall give the Company (Guarantor) written notice of its in- tent to terminate said lease. At the time of this notification, the Company will have various options that it must exercise in a timely manner. One is to exercise an option to purchase the real estate with improvements from the Landlord. The price the Company would pay would be the outstanding loan owed by the Landlord to construct the paint facility, which

Winnebago Journey

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was approximately $�,��4,000 as of August �7, �005. As of August �7, �005, the Supplier is current with its lease pay- ment obligations to the Landlord. In August �004, approxi- mately $��5,000 was recorded by the Company as the esti- mated fair value for the guarantee. As of August �7, �005, the balance of the guarantee was approximately $�44,000.

Self-Insured Product Liability. The Company self-insures for a portion of product liabil- ity claims. Self-insurance retention liability varies annu- ally based on market conditions and for the past five fiscal years was at $�,500,000 per occurrence and $6,000,000 in aggregate per policy year. In the event that the annual ag- gregate of the self-insured retention is exhausted by payment of claims and defense expenses, a deductible of $�50,000, excluding defense expenses, is applicable to each and every claim covered under this policy. Included in self-insurance on the Company’s balance sheet along with product liability is workman’s compensation reserves and employee medical claim reserves.

Litigation. The Company is a defendant in a class action lawsuit enti- tled Jody Bartleson, et al vs. Winnebago Industries, Inc., et al which was filed on January 28, 2002. In the complaint, Ms. Bartleson, on her own behalf and as a representative of “others similarly situated,” alleges that such plaintiffs were wrongfully classified by the Company as exempt employees when in fact they were non-exempt employees entitled to re- cover overtime compensation for work performed during the preceding three years. This suit was brought under the Fed- eral Fair Labor Standards Act as an “opt in” class action, �� people have joined the suit to date as plaintiffs. The plaintiffs then amended their Complaint adding a claim under the Iowa Wage Payment Collection Act in order to change the nature of the case from an “opt in” class action where individual plaintiffs must take an affirmative act to join the lawsuit to an “opt out” class action where all persons who had been exempt salaried employees over the three-year period preceding the filing of the lawsuit are included as plaintiffs unless they indi- vidually seek to “opt out” of the lawsuit. In a ruling by Chief Judge Mark W. Bennett, this amendment was disallowed and the lawsuit therefore remained an “opt in” class action with �� participants. The Company believes that it has meritorious defenses to the plaintiffs’ claims. Trial of this case is currently scheduled to commence on March 6, �006. As of August �7, �005 the Company has accrued estimated possible settlement costs and legal fees for the defense of this case.

During Fiscal �004, the Company settled all claims in a law- suit titled Sanft, et al vs. Winnebago Industries, Inc., et al involving �� participants in the Winnebago Industries, Inc. Deferred Compensation Plan and the Winnebago Industries, Inc. Deferred Incentive Formula Bonus Plan (the “Plans”). The Plaintiffs were seeking to negate certain amendments made to the Plans in 1994 which reduced the benefits which some participants would receive under the Plans. The settle- ment resulted in a partial reinstatement of the alleged lost benefits and had a present value cost to the Company of ap- proximately $5,�00,000 accrued in Fiscal �004. Addition- ally, the Company has voluntarily decided to provide the same benefits to an additional 22 nonplaintiff participants in the Plans which resulted in an additional present value cost to the Company of approximately $�,040,000 accrued in Fiscal �004. The total pre-tax charge, which was recorded in the third quarter of Fiscal �004 was $7,�40,000, which on an after tax basis equated to approximately $4,590,000, or �� cents per diluted share. The Company paid out approxi- mately $1,689,000 during the fourth fiscal quarter of 2004 with the balance of the settlement to be paid out in monthly increments over an extended period of time. (See Note 6.)

The Company is also involved in various other legal pro- ceedings which are ordinary routine litigation incident to its business, some of which are covered in whole or in part by insurance. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to this litigation, management is of the opinion that while the final resolution of any such litigation may have an impact on the Company’s consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on the Company’s financial position, results of operations or liquidity. Lease Commitments. The Company leases certain facilities and equipment under operating leases. Lease expense was $57�,000 for �005, $609,000 for �004 and $556,000 for �00�. Minimum future lease commitments under noncancelable lease agreements in excess of one year as of August �7, �005 are as follows (in thousands):

�006 $ �85 �007 9� �008 �6 �009 �6 �0�0 �6 Thereafter 6 Total $ �4�

Itasca Ellipse

2005 Annual Report Body.indd 30 11/4/05 11:31:50 AM

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Note 8: Income Taxes The components of the provision for income taxes are as follows: Year Ended (In thousands) Aug. 27, 2005 Aug. 28, 2004 Aug. 30, 2003 Current Federal $ �0,09� $ 46,688 $ �9,5�6 State �,�00 �,5�� �,5�5 ��,�9� 49,�09 ��,0�� Deferred �,4�5 (7,6�6) (�,070) Total provision $ �5,8�7 $ 4�,59� $ �9,96�

The following is a reconciliation of the U.S. statutory tax rate to the effective income tax rates (benefit) provided: Year Ended August 27, 2005 August 28, 2004 August 30, 2003 U.S. federal statutory rate �5.0% �5.0% �5.0% State taxes, net of federal benefit 1.6 1.8 1.4 Nondeductible losses - - - �.� �.6 Other (0.6) (0.�) 0.� Increase in cash value of life insurance (0.�) (0.5) (0.4) Foreign sales corporation/ extraterritorial income (0.�) (0.�) (0.�) Death benefits - - - - - - (0.4) Total �5.5% �7.�% �8.�%

Significant items comprising the Company’s net deferred tax assets are as follows: August 27, 2005 August 28, 2004 (In thousands) Assets Liabilities Total Total Current Warranty reserves $ 4,�64 $ - - - $ 4,�64 $ 4,675 Carry forward tax credits �,945 - - - �,945 �,�89 Accrued vacation �,859 - - - �,859 �,876 Self-insurance reserve �,70� - - - �,70� �,�69 LIFO variance capitalization - - - (�,549) (�,549) - - - Miscellaneous reserves �,7�4 (�45) �,�89 �,756 Subtotal ��,504 (�,894) 9,6�0 ��,865 Noncurrent Postretirement health care benefits 18,372 - - - 18,372 18,670 Deferred compensation ��,�57 - - - ��,�57 ��,657 Depreciation - - - (6,7��) (6,7��) (7,�6�) Subtotal ��,7�9 (6,7��) �4,997 �5,�66 Total $ 4�,��� $ (8,6�6) $ �4,607 $ �8,0��

Note 9: Financial Income and Expense The following is a reconciliation of financial income (expense): Year Ended (In thousands) August 27, 2005 August 28, 2004 August 30, 2003 Interest income from investments and receivables $ �,54� $ 945 $ 966 Dividend income �,��8 579 50� Loss on foreign currency transactions (�5) (8) (69) Interest expense - - - (80) - - - Total financial income $ 2,635 $ 1,436 $ 1,399

Winnebago Tour

2005 Annual Report Body.indd 31 11/4/05 11:31:58 AM

��

Note 10: Stock Based Compensation Plans The Company’s �99� stock option plan for outside directors provided that each director who was not a current or former full-time employee of the Company received an option to pur- chase �0,000 shares of the Company’s common stock at a price equal to �00 percent of the fair market value, determined by the mean of the high and low prices on the date of grant. The Board of Directors terminated this plan on December �7, �997 as to future grants. There were options for �0,000 shares outstanding at August �7, �005. Future grants of options to outside direc- tors are made under the Company’s �004 incentive compensa- tion plan described below.

The Winnebago Industries, Inc. �004 Incentive Compensation Plan (the “Plan”) authorized the Human Resources Committee of the Board of Directors of the Company to grant stock op- tions, stock appreciation rights, stock awards, cash rewards and performance awards to employees. The Plan also allows the Company to provide equity compensation to its nonemployee

directors. The Plan was approved by the Company’s sharehold- ers on January ��, �004. No more than 4,000,000 shares of common stock may be issued under the Plan, and no more than �,000,000 of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards that are forfeited, terminated, expire unexercised, settled in cash, exchanged for other awards, tendered to satisfy the pur- chase price of an award, withheld to satisfy tax obligations or otherwise lapse again become available for awards. The grant price of an option under the Plan may not be less than the fair market value of the common stock subject to such option. The term of any options granted under the Plan may not exceed �0 years from the date of the grant.

The Plan replaced the �997 Stock Option Plan. No new grants will be made from the �997 Stock Option Plan on or after Janu- ary �, �004. Any stock options previously granted under the �997 Stock Option Plan shall continue to vest and/or be exercis- able in accordance with their original terms and conditions.

A summary of stock option activity for Fiscal �005, �004 and �00� is as follows: 2005 2004 2003 Wtd. Wtd. Wtd. (Adjusted for 2-for-1 Price Avg. Price Avg. Price Avg. stock split on per Exercise per Exercise per Exercise March 5, 2004) Shares Share Price/Sh Shares Share Price/Sh Shares Share Price/Sh Outstanding at beginning of year �,��5,040 $� - $�5 $�7.9� �,�96,7�8 $� - $�0 $��.�9 �,�49,008 $� - $�0 $ 7.79 Options granted 40�,500 �� - �6 ��.84 458,000 �6 - �5 �7.�0 �97,600 �8 - �9 �8.�9 Options exercised (�6�,45�) 5 - �7 �6.70 (5�9,698) � - �7 9.�6 (4�0,80�) 4 - �� 6.85 Options canceled - - - - - - - - - - - - - - - - - - (�9,068) 6 - �9 ��.45 Outstanding at end of year �,�74,088 $� - $�6 $��.�4 �,��5,040 $� - $�5 $�7.9� �,�96,7�8 $� - $�0 $��.�9 Exercisable at end of year 696,6�8 $� - $�6 $�7.�� 5��,400 $� - $�5 $��.5� 586,604 $� - $�0 $ 8.4�

The following table summarizes information about stock options outstanding at August �7, �005:

Range of Number Weighted Weighted Number Weighted Exercise Outstanding Remaining Years Average Exercisable at Averages Prices August 27, 2005 of Contractual Life Exercise Price August 27, 2005 Exercise Price $ �.59 - $7.69 �76,940 4 $ 5.7� �76,940 $ 5.7� 9.00 - �0.8� �69,648 5 9.9� �69,648 9.9� �8.�5 - �9.74 ���,000 7 �8.4� ��5,040 �8.58 �6.50 - �5.�5 794,500 8 �9.67 ��5,000 �0.66 �,�74,088 7 $ ��.�4 696,6�8 $ �7.��

Itasca Horizon

2005 Annual Report Body.indd 32 11/4/05 11:32:04 AM

��

Note 11: Supplemental Cash Flow Disclosure Cash paid during the year for: Year Ended (In thousands) August 27, 2005 August 28, 2004 August 30, 2003 Income taxes $ ��,�55 $ 40,575 $ �4,�09 Interest - - - 80 - - -

Note 12: Net Revenues By Major Product Class Fiscal Year Ended (1) (2)

August 27, August 28, August 30, August 31, August 25, (In thousands, except percent data) 2005 2004 2003 2002 2001 Class A & C motor homes $946,�50 $�,070,�64 $80�,0�7 $77�,��5 $6�4,��0 95.4% 96.�% 94.8% 9�.7% 9�.9% Other recreation vehicle revenues (�) �6,40� �5,�99 �7,�85 �0,486 �7,808 �.7% �.�% �.0% �.5% �.7% Other manufactured products revenues (4) �9,��4 �8,69� �6,898 ��,658 �9,768 �.9% �.6% �.�% �.8% 4.4% Total net revenues $99�,975 $�,��4,�54 $845,��0 $8�5,�69 $67�,686 �00.0% �00.0% �00.0% �00.0% �00.0%

(1) Certain prior periods’ information has been reclassified to conform to the current year-end presentation. (2) The fiscal year ended August 31, 2002 contained 53 weeks; all other fiscal years contained 52 weeks. (3) Primarily recreation vehicle related parts and recreation vehicle service revenue. (4) Primarily sales of extruded aluminum and other component products for other manufacturers and commercial vehicles.

Note 13: Income Per Share The following table reflects the calculation of basic and diluted income per share for the past three fiscal years: (In thousands, except per share data) Year Ended (Adjusted for the 2-for-1 stock split on March 5, 2004) August 27, 2005 August 28, 2004 August 30, 2003 Income per share – basic Income from continuing operations $ 65,07� $ 70,64� $ 48,7�� Income from discontinued operations (net of taxes) - - - - - - �,�5� Net income $ 65,07� $ 70,64� $ 49,884 Weighted average shares outstanding ��,�8� �4,��4 �6,974 Net income per share – basic $ �.95 $ �.06 $ �.�5 Income per share – assuming dilution Income from continuing operations $ 65,07� $ 70,64� $ 48,7�� Income from discontinued operations (net of taxes) - - - - - - �,�5� Net income $ 65,07� $ 70,64� $ 49,884 Weighted average shares outstanding ��,�8� �4,��4 �6,974 Dilutive impact of options outstanding 4�0 575 66� Weighted average shares and potential dilutive shares outstanding ��,8�� �4,789 �7,6�6 Net income per share - assuming dilution $ �.9� $ �.0� $ �.��

Note 14: Preferred Stock and Shareholders Rights Plan The Board of Directors may authorize the issuance from time to time of preferred stock in one or more series with

such designations, preferences, qualifications, limitations, restrictions, and optional or other special rights as the Board may fix by resolution. In connection with the Sharehold- ers Rights Plan (Rights Plan) discussed below, the Board

Winnebago Vectra

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�4

Note 15: Interim Financial Information (Unaudited) (In thousands, except per share data) Quarter Ended Fiscal 2005 November 27, 2004 February 26, 2005(1) May 28, 2005 August 27, 2005 Net revenues $ �66,��� $ ��9,�59 $ �55,0�� $ ���,46� Gross profit 40,064 29,261 35,194 32,459 Operating income �9,95� �8,899 �6,�55 ��,048 Net income $ �9,544 $ ��,57� $ �7,580 $ �5,�78 Net income per share (basic) $ 0.58 $ 0.�7 $ 0.5� $ 0.47 Net income per share (diluted) $ 0.57 $ 0.�7 $ 0.5� $ 0.46

(In thousands, except per share data) Quarter Ended Fiscal 2004 November 29, 2003 February 28, 2004 May 29, 2004 August 28, 2004 Net revenues $ �54,9�� $ �66,0�� $ ��0,�86 $ �8�,00� Gross profit 39,465 35,029 46,019 41,656 Operating income �9,�66 �4,5�9 �8,076 �9,0�7 Net income $ �8,067 $ �5,880 $ �7,704 $ �8,990 Net income per share (basic) $ 0.5� $ 0.47 $ 0.5� $ 0.56 Net income per share (diluted) $ 0.50 $ 0.46 $ 0.5� $ 0.55

of Directors has reserved, but not issued, �00,000 shares of preferred stock.

In May �000, the Company adopted a Rights Plan providing for a dividend distribution of one preferred share purchase right for each share of common stock outstanding on and after May �6, �000. The rights can be exercised only if an individual or group acquires or announces a tender offer for �5 percent or more of the Company’s common stock, except as described below. Certain members of the Hanson fam- ily (including trusts and estates established by such Hanson family members and the John K. and Luise V. Hanson Foun- dation) are exempt from the applicability of the Rights Plan as it relates to the acquisition of �5 percent or more of the Company’s outstanding common stock. If the rights first become exercisable as a result of an announced tender of- fer, each right would entitle the holder, (other than the indi- vidual or group acquiring or announcing a tender offer for �5 percent or more of the Company’s common stock) except as described below, to buy �/�00 of a share of a new series of preferred stock at an exercise price of $��.6�5. The pre- ferred shares will be entitled to �00 times the per share divi- dend payable on the Company’s common stock and to �00 votes on all matters submitted to a vote of the shareowners. Once an individual or group acquires �5 percent or more of the Company’s common stock, each right held by such indi- vidual or group becomes void and the remaining rights will then entitle the holder to purchase the number of common shares having a market value of twice the exercise price of the right. In the event the Company is acquired in a merger or 50 percent or more of its consolidated assets or earn- ings power are sold, each right will then entitle the holder

to purchase a number of the acquiring company’s common shares having a market value of twice the exercise price of the right. After an individual or group acquires �5 percent, except as described below, of the Company’s common stock and before they acquire 50 percent, the Company’s Board of Directors may exchange the rights in whole or in part, at an exchange ratio of one share of common stock per right. Be- fore an individual or group acquires �5 percent of the Com- pany’s common stock, the rights are redeemable for $0.0� per right at the option of the Company’s Board of Directors. The Company’s Board of Directors is authorized to reduce the �5 percent threshold to no less than �0 percent. Each right will expire on May �, �0�0, unless earlier redeemed by the Company. An Amendment, dated January ��, �00�, was made to the Rights Plan to permit FMR Corp., its affili- ates and associates (collectively, “FMR”), to be the benefi- cial owner of up to �0 percent of the Company’s outstanding stock provided that FMR, in its filings under the Securities Exchange Act of �9�4, as amended, does not state any pres- ent intention to hold shares of the Company’s common stock with the purpose or effect of changing or influencing control of the Company. An individual or group that becomes the beneficial owner of 15 or 20 percent (in the case of FMR) of the Company’s common stock as a result of an acquisi- tion of the common stock by the Company or the acquisition by such individual or group of new-issued shares directly from the Company, such individual’s or group’s ownership shall not trigger the issuance of rights under the Rights Plan unless such individual or group after such share repurchase or direct issuance by the Company, becomes the beneficial owner of any additional shares of the Company’s common stock.

(1) As restated

2005 Annual Report Body.indd 34 11/4/05 11:32:10 AM

�5

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Winnebago Industries, Inc. and its subsidiaries (the Company) is responsible for establishing and maintain- ing effective internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. The Company’s internal control over financial reporting is a process designed, as defined in Rule 13a- �5(f) under the Securities Exchange Act of �9�4, as amended, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with gener- ally accepted accounting principles.

The Company’s internal control over financial reporting is supported by written policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposi- tions of the Company’s assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and

(�) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

In addition, the Audit Committee of the Board of Directors, consisting solely of independent directors, meets periodically with management, the internal auditors and the independent registered public accounting firm to review internal accounting controls, audit results and accounting principles and practices and annually recommends to the Board of Directors the selec- tion of the independent registered public accounting firm.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Pro- jections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of the Company’s annual consolidated financial statements, management of the Com- pany has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of the Company’s internal control over financial reporting.

Based on this assessment, management has concluded that the Company’s internal control over financial reporting was ef- fective as of August �7, �005.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the Company’s consolidated finan- cial statements included in this Annual Report on Form 10-K, has issued an unqualified attestation report included herein, on management’s assessment of internal control over financial reporting.

Bruce D. Hertzke Edwin F. Barker Chairman of the Board and President and Chief Executive Officer Chief Financial Officer

November �0, �005

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�6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders Winnebago Industries, Inc. Forest City, Iowa

We have audited the accompanying consolidated balance sheets of Winnebago Industries, Inc. and subsidiaries (the “Com- pany”) as of August �7, �005 and August �8, �004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended August 27, 2005. These financial statements are the respon- sibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi- nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 27, 2005 and August 28, 2004, and the results of their operations and their cash flows for each of the three years in the period ended August �7, �005, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of August 27, 2005, based on the criteria established in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Tread- way Commission, and our report dated November 10, 2005, expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effective- ness of the Company’s internal control over financial reporting.

Deloitte & Touche LLP Minneapolis, Minnesota

November �0, �005

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�7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders Winnebago Industries, Inc. Forest City, Iowa

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Winnebago Industries, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of August 27, 2005, based on criteria established in Internal Control—Integrated Framework is- sued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO framework). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the ef- fectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assess- ment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an under- standing of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted account- ing principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (�) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (�) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or im- proper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of August �7, �005, is fairly stated, in all material respects, based on the criteria established in the COSO framework. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August �7, �005, based on the criteria established in the COSO framework.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended August 27, 2005, of the Company and our report dated November 10, 2005, expressed an unqualified opinion on those financial statements.

Deloitte & Touche LLP Minneapolis, Minnesota

November �0, �005

2005 Annual Report Body.indd 37 11/4/05 11:32:18 AM

11-Year Selected Financial Data(1) (In thousands, except percent and per share data) (Adjusted for the 2-for-1 stock split on Aug. 27, Aug. 28, Aug. 30, Aug. 31, March 5, 2004) 2005 2004 2003 2002(2)

For the Year Net revenues $ 991,975 $ 1,114,154 $ 845,210 $ 825,269 Income before taxes 100,890 112,234 78,693 81,324 Pretax proÞ t % of revenue 10.2% 10.1% 9.3% 9.9% Provision for income taxes (credits) 35,817 41,593 29,961 28,431 Income tax rate 35.5% 37.1% 38.1% 35.0% Income from continuing operations 65,073 70,641 48,732 52,893 Gain on sale of Cycle-Sat subsidiary - - - - - - - - - - - - Income (loss) from discontinued operations (4) - - - - - - 1,152 1,778 Cum. effect of change in accounting principle - - - - - - - - - - - - Net income $ 65,073 $ 70,641 $ 49,884 $ 54,671 Income per share Continuing operations Basic $ 1.95 $ 2.06 $ 1.32 $ 1.33 Diluted 1.92 2.03 1.30 1.30 Discontinued operations Basic - - - - - - 0.03 0.04 Diluted - - - - - - 0.03 0.04 Cum. effect of change in accounting principle Basic - - - - - - - - - - - - Diluted - - - - - - - - - - - - Net income per share Basic $ 1.95 $ 2.06 $ 1.35 $ 1.37 Diluted 1.92 2.03 1.33 1.34 Weighted average common shares outstanding (in thousands) Basic 33,382 34,214 36,974 39,898 Diluted 33,812 34,789 37,636 40,768 Cash dividends paid per share $ 0.28 $ 0.20 $ 0.10 $ 0.10 Book value per share 7.15 6.01 5.78 4.81 Return on assets (ROA) (5) 16.1% 18.3% 14.0% 15.9% Return on equity (ROE) (6) 29.7% 34.4% 25.6% 28.2% Return on invested capital (ROIC) (7) 30.7% 35.4% 25.5% 29.1% Unit Sales Class A 6,674 8,108 6,705 6,725 Class C 3,963 4,408 4,021 4,329 Total Class A & C Motor Homes 10,637 12,516 10,726 11,054 Class B Conversions (EuroVan Campers) - - - - - - 308 763 At Year End Total assets $ 412,960 $ 394,556 $ 377,462 $ 337,077 Stockholders� equity 235,887 201,875 210,626 179,815 Market capitalization 1,073,152 1,071,571 898,010 713,500 Working capital 197,469 164,175 164,017 144,303 Long-term debt - - - - - - - - - - - - Current ratio 3.2 to 1 2.6 to 1 2.8 to 1 2.6 to 1 Number of employees 3,610 4,220 3,750 3,685

(1) Certain prior periods� information has been reclassiÞ ed to conform to the current year-end presentation. (2) The Þ scal years ended August 31, 2002 and August 31, 1996 contained 53 weeks; all other Þ scal years contained 52 weeks. (3) Includes a noncash after-tax cumulative effect of change in accounting principle of $1.1 million expense or $0.05 per share due to the adoption of SAB No. 101, Revenue Recognition in Financial Statements.

38

�9

Aug. 25, Aug. 26, Aug. 28, Aug. 29, Aug. 30, Aug. 31, Aug. 26, 2001(3) 2000 1999 1998 1997 1996(2) 1995

$ 67�,686 $ 74�,7�9 $ 668,658 $ 5�7,�87 $ 4�6,54� $ 486,��9 $ 46�,540 55,754 70,58� 6�,848 ��,765 5,704 �9,0�5 �7,9�0 8.�% 9.5% 9.4% 6.4% �.�% �.9% �.9% �4,�58 �4,400 ��,0�� �0,786 (�5) 5,9�� (8,64�) �5.6% �4.6% ��.5% ��.0% (0.6)% ��.�% (48.�)% 4�,496 46,�8� 4�,8�5 ��,979 5,7�9 ��,09� �6,56� --- --- - - - - - - �6,47� - - - - - - �,�58 �,��6 �,445 �,405 8�7 (708) �,�94 (�,050) --- --- --- --- --- --- $ 4�,704 $ 48,�99 $ 44,�60 $ �4,�84 $ ��,048 $ ��,�85 $ �7,756 $ �.00 $ �.07 $ 0.94 $ 0.48 $ 0.�� $ 0.�6 $ 0.5� 0.99 �.05 0.9� 0.47 0.�� 0.�6 0.5� 0.05 0.05 0.06 0.0� 0.�4 (0.0�) 0.0� 0.05 0.05 0.05 0.0� 0.�4 (0.0�) 0.0� (0.0�) --- --- --- --- --- --- (0.0�) --- --- --- --- --- --- $ �.0� $ �.�� $ �.00 $ 0.5� $ 0.45 $ 0.�4 $ 0.55 �.0� �.�0 0.98 0.50 0.45 0.�4 0.55 4�,470 4�,�60 44,4�8 48,��� 50,870 50,698 50,57� 4�,080 44,0�� 45,074 48,6�8 5�,�00 5�,048 50,9�4 $ 0.�0 $ 0.�0 $ 0.�0 $ 0.�0 $ 0.�0 $ 0.�5 $ 0.�5 5.00 4.�� �.�5 �.55 �.4� �.08 �.98 ��.9% �6.�% �7.�% ��.0% �0.6% 5.7% �4.�% ��.�% �9.8% ��.�% �0.�% �0.�% ��.0% �0.8% �4.�% �8.�% ��.7% �9.�% �5.7% 8.�% �0.�% 5,666 6,8�9 6,054 5,�8� 4,8�4 5,89� 5,99� �,4�0 �,697 4,��� �,�90 �,7�4 �,857 �,85� 9,076 �0,5�6 �0,�76 8,77� 7,558 8,750 8,846 70� 854 600 978 �,�05 857 �,0�4 $ �5�,9�� $ �08,686 $ �85,889 $ ��0,6�� $ ���,475 $ ��0,596 $ ���,6�0 �07,464 �74,909 �49,�84 ��6,5�� ���,88� �05,��� �00,448 58�,779 �7�,7�� 5�8,��� �54,��7 ���,47� �06,�7� ���,�58 �7�,677 �4�,687 ���,�45 9�,�56 99,6�8 6�,907 69,�9� --- --- --- --- --- �,69� �,8�0 �.� to � �.0 to � �.5 to � �.5 to � �.4 to � �.0 to � �.4 to � �,��5 �,�00 �,400 �,0�0 �,8�0 �,�50 �,0�0

(4) Includes discontinued operations of Winnebago Acceptance Corporation for all years presented and discontinued operations of Cycle-Sat, Inc. for fiscal years ended August 26, 1995 and August 31, 1996. (5) ROA - Current period net income divided by average total asset balance using current ending period and previous ending period. (6) ROE - Current period net income divided by average equity balance using current ending period and previous ending period. (7) ROIC - Current period net income divided by average invested capital using current ending period - total assets minus cash and noninterest liabilities and previous ending period - total assets minus cash and noninterest liabilities.

2005 Annual Report Body.indd 39 11/4/05 11:32:19 AM

40

Publications A notice of Annual Meeting of Shareholders and Proxy State- ment is furnished to shareholders in advance of the annual meeting.

Copies of the Company’s quarterly financial earnings releases, the annual report on Form �0-K (without exhibits), the quar- terly reports on Form �0-Q (without exhibits) and current re- ports on Form 8-K (without exhibits) as filed by the Company with the Securities and Exchange Commission, may be ob- tained without charge from the corporate offices as follows:

Sheila Davis, PR/IR Manager Winnebago Industries, Inc. 605 W. Crystal Lake Road P.O. Box �5� Forest City, Iowa 504�6-0�5� Telephone: (64�) 585-�5�5 Fax: (64�) 585-6966 E-Mail: [email protected]

All news releases issued by the Company, reports filed by the Company with the Securities and Exchange Commission (in- cluding exhibits) and information on the Company’s Corpo- rate Governance Policies and Procedures may also be viewed at the Winnebago Industries’ website: http://winnebagoind.com/html/company/investorRelations.html. Information contained on Winnebago Industries’ website is not incorporated into this Annual Report or other securities filings.

Annual Meeting The Annual Meeting of Shareholders is scheduled to be held on Tuesday, January �0, �006, at 7:�0 p.m. (CST) in Friend- ship Hall, Highway 69 South, Forest City, Iowa.

Shareholder Account Assistance Transfer Agent to contact for address changes, account certifi- cates and stock holdings:

Wells Fargo Bank N.A. P.O. Box 64854 St. Paul, Minnesota 55�64-0854 or �6� North Concord Exchange South St. Paul, Minnesota 55075-���9 Telephone: (800) 468-97�6 or (65�) 450-4064 Inquirees: www.wellsfargo.com/shareownerservices

Auditor Deloitte & Touche LLP 400 One Financial Plaza ��0 South Sixth Street Minneapolis, Minnesota 5540�-�844

Purchase of Common Stock Winnebago Industries stock may be purchased from Share- Builder Corporation through the Company’s website at http://winnebagoind.com/html/company/investorRelations.html. Winnebago Industries is not affiliated with ShareBuilder and has no involvement in the relationship between ShareBuilder and any of its customers.

NYSE Annual CEO Certification and Sarbanes-Oxley Section 302 Certifications. We submitted the annual Chief Executive Officer Certification to the New York Stock Ex- change (NYSE) as required under the Corporate Governance Rules of the NYSE. We also filed as exhibits to our 2005 Annual Report on Form 10-K the Chief Executive Officer and Chief Financial Officer Certifications required under Section �0� of the Sarbanes-Oxley Act of �00�.

Shareholder Information

Common Stock Data (Adjusted for 2-for-1 Stock Split on March 5, 2004) The Company’s common stock is listed on the New York, Chicago and Pacific Stock Exchanges. Ticker symbol: WGO Shareholders of record as of November �, �005: 4,05� Below are the New York Stock Exchange high, low and closing prices of Winnebago Industries, Inc. stock for each quarter of Fiscal �005 and Fiscal �004. Fiscal 2005 High Low Close Fiscal 2004 High Low Close First Quarter $�9.�5 $�9.74 $�8.�5 First Quarter $�9.6� $��.08 $�7.64 Second Quarter 40.64 ��.64 �4.90 Second Quarter �7.88 �7.64 ��.40 Third Quarter �7.�4 �8.�� ��.88 Third Quarter �4.95 �5.�0 �8.40 Fourth Quarter �9.7� ��.0� ��.5� Fourth Quarter �8.�7 �8.09 ��.9�

Cash Dividends Paid Per Share Fiscal 2005 Fiscal 2004 Amount Date Paid Amount Date Paid $0.07 October 4, �004 $0.05 October 6, �00� 0.07 January 5, �005 0.05 January 5, �004 0.07 April 4, �005 0.05 April �5, �004 0.07 July 6, �005 0.05 July 6, �004 $0.�8 Total $0.�0 Total

2005 Annual Report Body.indd 40 11/4/05 11:32:20 AM

Directors and Officers Directors

Bruce D. Hertzke (54) Chairman of the Board and Chief Executive Officer Winnebago Industries, Inc.

Irvin E. Aal (66) 1, 2, 5* Former General Manager Case Tyler Business Unit of CNH Global

Jerry N. Currie (60) 1, 2, 3* President and Chief Executive Officer CURRIES Company and GRAHAM Manufacturing

Joseph W. England (65) 1*, 3, 4 Former Senior Vice President Deere and Company

Lawrence A. Erickson (56) 4, 5 Former Senior Vice President & Chief Financial Officer Rockwell Collins, Inc.

John V. Hanson (63) 4* Former Deputy Chairman of the Board Winnebago Industries, Inc. John E. Herlitz (62) 4, 5 Former Senior Vice President DaimlerChrysler AG

Gerald C. Kitch (67) **, 2*, 3, 5 Former Executive Vice President Pentair, Inc.

Board Committee/Members 1) Audit 2) Human Resources 3) Nominating and Governance 4) Product Development 5) Sales and Marketing * Committee Chairman ** Lead Independent Board Member

Officers

Bruce D. Hertzke (54) Chairman of the Board and

Chief Executive Officer

William J. O’Leary (56) Vice President, Product Development

Robert L. Gossett (54) Vice President, Administration

Raymond M. Beebe (63) Vice President, General Counsel

and Secretary

Joseph L. Soczek, Jr. (62) Treasurer

Roger W. Martin (45) Vice President, Sales and Marketing

Edwin F. Barker (58) President and Chief Financial Officer

Robert J. Olson (54) Vice President, Manufacturing

Brian J. Hrubes (54) Controller

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