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Business Combination, Goodwill and Other Intangible Assets | 3 Months Ended
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Nov. 25, 2017
Business Combinations [Abstract] |
Business Combination, Goodwill and Other Intangible Assets | Business Combination, Goodwill and Other Intangible Assets We acquired 100% of the ownership interests of Grand Design on November 8, 2016 in accordance with the Securities Purchase Agreement for an aggregate purchase price of $520.5 million, which was paid in cash and Winnebago shares as follows:
(In thousands, except shares) |  | November 8, 2016
Cash |  | $ | 396,442 |
Winnebago shares: 4,586,555 at $27.05 per share |  | 124,066 |
Total |  | $ | 520,508 |
The cash portion was funded from cash on hand and borrowings under our ABL and Term Loan agreements. The stock was valued using our share price on the date of closing. The acquisition has been accounted for in accordance with ASC 805, Business Combinations, using the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets of Grand Design acquired, based on their fair values at the date of the acquisition. The purchase price allocation was finalized during the first quarter of Fiscal 2018. The allocation of the purchase price to assets acquired and liabilities assumed is as follows:
(In thousands) |  | November 8, 2016
Cash |  | $ | 1,748 |
Accounts receivable |  | 32,834 |
Inventories |  | 15,300 |
Prepaid expenses and other assets |  | 3,037 |
Property, plant and equipment |  | 8,998 |
Goodwill |  | 243,456 |
Other intangible assets |  | 253,100 |
Total assets acquired |  | 558,473 |
Accounts payable |  | 11,163 |
Accrued compensation |  | 3,615 |
Product warranties |  | 12,904 |
Promotional |  | 3,976 |
Other |  | 1,496 |
Deferred tax liabilities |  | 4,811 |
Total liabilities assumed |  | 37,965 |
Total purchase price |  | $ | 520,508 |
The acquisition of 100% of the ownership interests of Grand Design occurred in two steps: (1) direct purchase of 89.34% of Grand Design member interests and (2) simultaneous acquisition of the remaining 10.66% of Grand Design member interests via the purchase of 100% of the shares of Blocker Corporation which held the remaining 10.66% of the Grand Design member interests. We agreed to acquire Blocker Corporation as part of the Securities Purchase Agreement and we did not receive a step-up in basis for 10.66% of the Grand Design assets. As a result, we established certain deferred tax liabilities on the opening balance sheet that relate to Blocker Corporation. The goodwill recognized is primarily attributable to the value of the workforce, reputation of founders, customer and dealer growth opportunities and expected synergies. Key areas of cost synergies include increased purchasing power for raw materials and supply chain consolidation. Goodwill is expected to be mostly deductible for tax purposes. The goodwill resulting from the acquisition of Grand Design is included in total goodwill of $244.7 million within the Towable segment as of November 25, 2017. Goodwill was $242.7 million as of August 26, 2017. Changes made to the carrying amount of goodwill for the three months ended November 25, 2017 included adjustments to tax liabilities assumed as part of the Grand Design acquisition. The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of intangible assets with fair value on the closing date of November 8, 2016 and amortization accumulated from the closing date through November 25, 2017 as follows:
(In thousands) |  | Weighted Average Life- Years |  | Fair Value Amount |  | Accumulated Amortization
Trade name |  | Indefinite |  | $ | 148,000 |  |  | $ | — |
Dealer network |  | 12.0 |  | 80,500 |  |  | 7,021 |
Backlog |  | 0.5 |  | 18,000 |  |  | 18,000 |
Non-compete agreements |  | 4.0 |  | 4,600 |  |  | 1,437 |
Leasehold interest-favorable |  | 8.1 |  | 2,000 |  |  | 257 |
Total |  |  |  | 253,100 |  |  | $ | 26,715 |
Accumulated amortization |  |  |  | (26,715 | ) |  |
Net book value of intangible assets |  |  |  | $ | 226,385 |  |  |
We used the income approach to value certain intangible assets. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. We used the income approach known as the relief from royalty method to value the trade name. The relief from royalty method is based on the hypothetical royalty stream that would be received if we were to license the trade name and is based on expected revenues from such license. The fair value of the dealer network was estimated using an income approach known as the cost to recreate/cost savings method. This method uses the replacement of the asset as an indicator of the fair value of the asset. The useful life of the intangible assets was determined considering the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic or other factors that may limit the useful life of the intangible assets. For the three months ended November 25, 2017 and November 26, 2016, amortization of intangible assets charged to operations was $2.1 million and $2.1 million respectively. The weig hted average remaining amortization period for intangible assets as of November 25, 2017 was approximatel y 10.8 years. Remaining estimated aggregate annual amortization expense by fiscal year is as follows:
(In thousands) |  | Amount
Remainder of 2018 |  | 5,799 |
2019 |  | 7,733 |
2020 |  | 7,733 |
2021 |  | 7,733 |
2022 |  | 7,106 |
Thereafter |  | 42,281 |
Within the Towable segment, the results of Grand Design's operations have been included in our consolidated financial statements from the close of the acquisition. The following table provides net revenues and operating income (which includes amortization expense) from the Grand Design business included in our consolidated results during the three months ended November 25, 2017 and November 26, 2016 following the November 8, 2016 closing date:
|  | Three Months Ended
(In thousands) |  | November 25, 2017 |  | November 26, 2016
Net revenues |  | $ | 221,229 |  |  | $ | 25,836 |
Operating income |  | 26,507 |  |  | 760 |
Unaudited pro forma information has been prepared as if the acquisition had taken place on August 30, 2015. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transaction actually taken place on August 30, 2015, and the unaudited pro forma information does not purport to be indicative of future financial operating results. The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition. Unaudited pro forma information is as follows:
|  | Three Months Ended
(In thousands, except per share data) |  | November 25, 2017 |  | November 26, 2016(1)
Net revenues |  | $ | 450,021 |  |  | $ | 340,975 |
Net income |  | 18,066 |  |  | 20,269 |
Income per share - basic |  | 0.57 |  |  | 0.64 |
Income per share - diluted |  | 0.57 |  |  | 0.64 |
(1) Net income and income per share include the increased benefit of $8.4 million, net of tax, associated with the termination of the postretirement health care plan in the first quarter of Fiscal 2017. The unaudited pro forma data above includes the following significant non-recurring adjustments made to account for certain costs which would have changed if the acquisition of Grand Design had been completed on August 30, 2015:
|  | Three Months Ended
(In thousands) |  | November 25, 2017 |  | November 26, 2016
Amortization of intangibles (1 year or less useful life) |  | $ | (122 | ) |  | $ | (1,941 | )
Increase in amortization of intangibles |  | — |  |  | 1,551 |
Expenses related to business combination (transaction costs) (1) |  | (50 | ) |  | (5,519 | )
Interest to reflect new debt structure |  | — |  |  | 3,672 |
Taxes related to the adjustments to the pro forma data and to the income of Grand Design |  | 64 |  |  | 5,011 |
(1) Pro forma transaction costs include $0.1 million incurred by Grand Design prior to acquisition. We incurred approximately $6.9 million of acquisition-related costs to date, of which $0.1 million and $5.5 million were expensed during the three months ended November 25, 2017 and November 26, 2016, respectively.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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- References No definition available. + Details
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