Stock-Based Compensation Plans

On December 11, 2018, our shareholders approved the Winnebago Industries, Inc. 2019 Omnibus Incentive Plan ("2019 Plan") as detailed in our Proxy Statement for the 2018 Annual Meeting of Shareholders. The 2019 Plan allows us to grant or issue non-qualified stock options, incentive stock options, share awards, and other equity compensation to key employees and to non-employee directors. The 2019 Plan replaces our 2014 Omnibus Equity, Performance Award, and Incentive Compensation Plan (as amended, the "2014 Plan"). The number of shares of our Common Stock that may be the subject of awards and issued under the 2019 Plan is 4.1 million, plus the shares subject to any awards outstanding under the 2014 Plan and our predecessor plan, the 2004 Incentive Compensation Plan (the “2004 Plan”), on December 11, 2018 that subsequently expire, are forfeited or canceled, or are settled for cash. Until such time, however, awards under the 2014 Plan and the 2004 Plan, respectively, that are outstanding on December 11, 2018 will continue to be subject to the terms of the 2014 Plan or 2004 Plan, as applicable. Shares remaining available for future awards under the 2014 Plan were not carried over into the 2019 Plan.

Our outstanding options have a 10-year term. Options issued to employees generally vest over a three-year period in equal annual installments on the annual anniversary dates following the grant date. Share awards generally vest based either upon continued employment ("time-based") or upon attainment of specified goals. Outstanding share awards that are not time-based vest at the end of a three-year incentive period based upon the achievement of company performance goals ("performance-based"). Generally, time-based share awards vest over a three-year period in equal annual installments on the annual anniversary dates following the grant date. Time-based share awards to directors vest one year from the grant date.

Beginning with our annual grant of restricted stock units in October 2018, we attach dividend equivalents to our restricted stock units equal to dividends payable on the same number of shares of our common stock during the applicable period. Dividend equivalents, settled in cash, accrue on restricted stock unit awards during the vesting period. No dividend equivalents are paid on any restricted stock units that are forfeited prior to the vesting date.

Our Employee Stock Purchase Plan ("ESPP") permits employees to purchase our common stock at a 15% discount from the market price at the end of semi-annual purchase periods and is compensatory. Employees are required to hold the common stock purchased for one-year. In Fiscal 2019 and 2018, 30,956 shares and 2,760 shares, respectively were purchased through the ESPP. Plan participants had accumulated $0.2 million and $0.1 million as of August 31, 2019 and August 25, 2018, respectively, to purchase our common stock pursuant to this plan.

Compensation expense associated with share-based awards is recognized on a straight-line basis over the required service period and forfeitures are recorded when it occurs. Total stock-based compensation expense for the past three fiscal years consisted of the following components:



(in thousands)	2019		2018		2017
Share awards:
Time-based	$	4,986	$	4,152	$	2,606
Performance-based	716		2,525		69
Stock options	925		502		164
Other⁽¹⁾	431		255		138
Total stock-based compensation expense	$	7,058	$	7,434	$	2,977


(1)	Includes stock-based compensation expense related to Board of Directors stock award expense and ESPP expense. Directors may elect to defer all or part of their annual retainer into a deferred compensation plan. The plan allows them to defer into either money units or stock units and is more fully described in the Proxy Statement.

Share Awards - Time-Based

The fair value of time-based share awards is determined based on the closing market price of our stock on the date of grant. A summary of the status of our nonvested time-based share awards at August 31, 2019, and changes during Fiscal 2019, were as follows:



	Shares		Weighted Average Fair Value
Outstanding at August 25, 2018	285,191		$	34.08
Granted	152,152		$	31.70
Vested	(213,379	)	$	32.88
Forfeited/canceled	(8,458	)	$	38.58
Outstanding at August 31, 2019	215,506		$	33.40

As of August 31, 2019, there was $3.3 million of unrecognized compensation expense related to nonvested time-based share awards that we expect to be recognized over a weighted average period of 0.8 years. The total fair value of awards vested during Fiscal 2019, 2018, and 2017 was $6.6 million, $7.1 million, and $4.9 million, respectively.

On October 9, 2019, the Board of Directors granted 81,872 restricted stock units under the 2019 Plan valued at $3.1 million to our key management group. The value of the restricted stock units, which is based on the closing price of our common stock on the date of grant, was $37.33. Estimated non-cash stock compensation expense based on this grant is expected to be approximately $1.5 million for Fiscal 2020.

Share Awards - Performance-Based

The fair value of performance-based share awards is determined based on the closing market price of our stock on the date of grant. A summary of the status of our nonvested performance-based share awards at August 31, 2019, and changes during Fiscal 2019, were as follows:



	Shares	Weighted Average Fair Value
Outstanding at August 25, 2018	127,226	$	35.08
Granted	80,207	$	31.70
Vested	—	$	—
Forfeited/canceled	—	$	—
Outstanding at August 31, 2019	207,433	$	33.77

As of August 31, 2019, there was $2.5 million of unrecognized compensation expense related to nonvested performance-based share awards that we expect to be recognized over a weighted average period of 1.1 years. No performance-based share awards vested during Fiscal 2019, 2018, or 2017.

Stock Options

A summary of stock option activity for Fiscal 2019 is as follows:



	Stock Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at August 25, 2018	138,510	$	36.68
Granted	114,635	$	31.70
Exercised	—	$	—
Forfeited/canceled	—	$	—
Outstanding at August 31, 2019	253,145	$	34.43	8.3	$	350.4
Vested and expected to vest at August 31, 2019	253,145	$	34.43	8.3	$	350.4
Exercisable at August 31, 2019	71,426	$	33.13	7.4	$	260.3

As of August 31, 2019, there was $1.3 million of unrecognized compensation expense related to option awards that is expected to be recognized over a weighted average period of 0.9 years.

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



Valuation Assumptions⁽¹⁾	2019			2018			2017
Expected dividend yield	1.3		%	0.9		%	1.4		%
Risk-free interest rate⁽²⁾	3.0		%	2.0		%	1.5		%
Expected life of stock options (in years)⁽³⁾	5			5			5
Expected stock price volatility⁽⁴⁾	39.1		%	38.1		%	39.3		%
Weighted average fair value of options granted	$	11.09		$	14.78		$	9.58


(1)	Forfeitures are recorded when they occur.


(2)	Based on U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.


(3)	Estimated based on historical experience.


(4)	Based on historical experience over a term consistent with the expected life of the stock options.