Stock-Based Compensation Plans

We have a 2014 Omnibus Equity, Performance Award, and Incentive Compensation Plan approved by shareholders (as amended, the "Plan") in place which 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. No more than 3.6 million shares of common stock may be issued under the Plan and no more than 3.6 million of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards that are forfeited or terminated, expire unexercised, are cancelled and settled in cash in lieu of common stock or are exchanged for awards that do no involve common stock, shall be added back to the limits and again immediately become available for awards.

Stock Options and Share Awards

With respect to stock options, the Plan replaced the 2004 Incentive Compensation Plan. Any stock options previously granted under the 2004 Incentive Compensation Plan continue to be exercisable in accordance with their original terms and conditions. The term of any options granted under the Plan may not exceed ten years from the date of the grant. Stock options are granted at the closing market price on the date of grant. Options issued to key employees generally vest over a three-year period in equal annual installments, beginning one year after the date of grant, with immediate vesting upon retirement or upon a change of control (as defined in the Plan), if earlier. Historically, options issued to directors vested six months after grant.

Share awards vest based either upon continued employment, beginning one year after the date of grant, with immediate vesting upon retirement or upon a change of control (collectively, "time-based") or upon attainment of established goals. Share awards that are not time-based typically vest at the end of a one year or three-year incentive period based upon the achievement of company goals ("performance-based"). The value of time-based restricted share awards is based on the number of shares granted and the closing price of our common stock on the date of grant. The value of performance-based restricted share awards is based upon the terms of the plan and an assessment of the probability of reaching the established performance targets. Historically, the terms of these plans linked the incentive payment to a percentage of base salary compensation and if the established goals are met, shares of the appropriate value are then granted.

Annual Incentive Plans

For Fiscal 2012, Fiscal 2013 and Fiscal 2014, the Human Resources Committee of our Board of Directors established annual incentive plans for the officers that were to be paid in 2/3 cash and 1/3 restricted stock (stock must be held for one year from date of grant except for shares we agree to repurchase in lieu of executives' payment of payroll taxes).

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Certain financial performance metrics (pre-tax income and ROIC) were achieved for Fiscal 2012 under the annual incentive plan thus $459,000 of compensation expense was accrued under this plan at the end of Fiscal 2012 of which $120,000 was stock-based. On October 9, 2012, the Human Resources Committee of the Board of Directors approved the award of 9,606 restricted shares to the officers under the annual incentive plan. Of the shares granted, we repurchased 2,408 shares from employees who elected to pay their payroll tax via delivery of common stock as opposed to cash.

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Certain financial performance metrics (net income and ROIC) were achieved for Fiscal 2013 under the annual incentive plan thus $3.0 million of compensation expense was accrued under this plan at the end of Fiscal 2013 of which $1.0 million was stock-based. On October 15, 2013, the Human Resources Committee of the Board of Directors approved the award of 38,139 restricted shares to the officers under the annual incentive plan. Of the shares granted, we repurchased 19,436 shares from employees who elected to pay their payroll tax via delivery of shares of common stock as opposed to cash.

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Certain financial performance metrics (net income and ROIC) were achieved for Fiscal 2014 under the annual incentive plan thus $2.6 million of compensation expense was accrued under this plan at the end of Fiscal 2014 of which $866,000 was stock-based. On October 14, 2014, the Human Resources Committee of the Board of Directors approved the award of 40,495 restricted shares to the officers under the annual incentive plan. Of the shares granted, we repurchased 20,638 shares from employees who elected to pay their payroll tax via delivery of shares of common stock as opposed to cash.

Long-Term Incentive Plans

For Fiscal 2012, Fiscal 2013 and Fiscal 2014, the Human Resources Committee of our Board of Directors established three different three-year incentive compensation plans (Officers Long-Term Incentive Plan Fiscal 2012-2014, 2013-2015 and 2014-2016) to serve as an incentive to our senior management team to achieve certain ROE targets. If the ROE target is met, restricted stock will be awarded subsequent to the end of each three year period with a one-year restriction on sale upon award (except for shares we agree to repurchase in lieu of executives' payment of payroll taxes). In the event that we do not achieve the required ROE targets, no restricted stock will be granted. If it becomes probable that certain of the ROE performance targets will be achieved, the corresponding estimated cost of the grant will be recorded as stock-based compensation expense over the performance period. The probability of reaching the targets is evaluated each reporting period. If it becomes probable that certain of the target performance levels will be achieved, a cumulative adjustment will be recorded and future stock-based-compensation expense will increase based on the then projected performance levels. If we later determine that it is not probable that the minimum ROE performance threshold for the grants will be met, no further stock-based compensation cost will be recognized and any previously recognized stock-based compensation cost related to these plans will be reversed.

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As of the end of Fiscal 2012, $791,000 of stock-based compensation expense was accrued for these plans. Specifically, for the 2010-2012 plan, the ROE target was met, thus subsequent to year end, in October 2012 restricted stock was awarded to the officers in this plan. On October 9, 2012, the Human Resources Committee of the Board of Directors approved the award of 25,532 shares valued at $318,000 to the officers under the 2010-2012 long-term incentive plan. Of the shares granted, we repurchased 7,295 shares valued at $91,000 from employees who elected to pay their payroll tax via delivery of common stock as opposed to cash.

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As of the end of Fiscal 2013, $444,000 of stock-based compensation expense has been accrued for these plans. Specifically, for the 2011-2013 plan, the ROE target was met, thus subsequent to year end, in October 2013 restricted stock was awarded to the officers in this plan. On October 15, 2013, the Human Resources Committee of the Board of Directors approved the award of 16,006 shares valued at $443,000 to the officers under the 2011-2013 long-term incentive plan. Of the shares granted, we repurchased 7,875 shares valued at $218,000 from employees who elected to pay their payroll tax via delivery of common stock as opposed to cash.

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As of the end of Fiscal 2014, $540,000 of stock-based compensation expense has been accrued for these plans. Specifically, for the 2012-2014 plan, the ROE target was met, thus subsequent to year end, in October 2014 restricted stock was awarded to the officers in this plan. On October 14, 2014, the Human Resources Committee of the Board of Directors approved the award of 25,529 shares valued at $545,000 to the officers under the 2012-2014 long-term incentive plan. Of the shares granted, we repurchased 13,011 shares valued at $278,000 from employees who elected to pay their payroll tax via delivery of common stock as opposed to cash.

Director's Awards

Non-employee directors may elect to receive all or part of their annual retainer and board fees in the form of Winnebago Industries stock units credited in the form of shares of our common stock instead of cash. The directors are restricted from selling these shares until their retirement. During Fiscal 2014, there were 3,576 stock units awarded to our non-employee directors in lieu of cash compensation. The aggregate intrinsic value of these awards as of August 30, 2014 was $2.6 million with 104,490 stock units outstanding.

Stock-Based Compensation

Total stock-based compensation expense for the past three fiscal years consisted of the following components:



	Year Ended
(In thousands)	August 30, 2014		August 31, 2013		August 25, 2012
Share awards:
Performance-based annual plan employee award expense	$	866	$	1,055	$	120
Performance-based long-term plan employee award expense	540		444		791
Time-based employee award expense	1,472		1,145		685
Time-based directors award expense	410		159		87
Directors stock unit expense	98		206		235
Total stock-based compensation	$	3,386	$	3,009	$	1,918

Stock Options

A summary of stock option activity for Fiscal 2014, 2013 and 2012 is as follows:



	Year Ended
	August 30, 2014					August 31, 2013					August 25, 2012
	Shares		Price per Share	Wtd. Avg. Exercise Price/Share		Shares		Price per Share	Wtd. Avg. Exercise Price/Share		Shares		Price per Share	Wtd. Avg. Exercise Price/Share
Outstanding at beginning of year	664,994		$26 - $36	$	29.83	727,664		$18 - $36	$	29.08	812,983		$18 - $36	$	28.84
Options granted	—		—	—		—		—	—		—		—	—
Options exercised	(77,833	)	$26 - $27	26.72		(4,000	)	$19	18.84		—		—	—
Options canceled	(129,740	)	$26 - $35	29.75		(58,670	)	$18 - $32	21.26		(85,319	)	$19 - $32	26.81
Outstanding at end of year	457,421		$26 - $36	$	30.38	664,994		$26 - $36	$	29.83	727,664		$18 - $36	$	29.08
Exercisable at end of year	457,421		$26 - $36	$	30.38	664,994		$26 - $36	$	29.83	727,664		$18 - $36	$	29.08

The weighted average remaining contractual life for options outstanding and exercisable at August 30, 2014 was 0.5 years. There was no aggregate intrinsic value for the options outstanding and exercisable at August 30, 2014. Other values related to options are as follows:



(In thousands)	Fiscal 2014		Fiscal 2013		Fiscal 2012
Aggregate intrinsic value of options exercised ⁽¹⁾	$	173	$	1	$	—
Net cash proceeds from the exercise of stock options	2,080		75		—
Actual income tax benefit realized from stock option exercises	63		—		—


⁽¹⁾	The amount by which the closing price of our stock on the date of exercise exceeded the exercise price.

Share Awards

A summary of share award activity for Fiscal 2014, 2013 and 2012 is as follows:



	Year Ended
	August 30, 2014				August 31, 2013				August 25, 2012
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Beginning of year	190,962		$	12.46	70,956		$	13.49	148,500		$	13.49
Granted	138,345		27.44		190,738		12.25		50,000		7.96
Vested	(129,817	)	18.82		(70,732	)	12.93		(120,044	)	11.19
Canceled	(967	)	18.44		—		—		(7,500	)	13.49
End of year	198,523		$	18.98	190,962		$	12.46	70,956		$	13.49

The aggregate intrinsic value of awards outstanding at August 30, 2014 was $4.9 million.

As of August 30, 2014, there was $1.5 million of unrecognized compensation expense related to restricted stock awards that is expected to be recognized over a weighted average period of 1.7 years. The total fair value of awards vested during Fiscal 2014, 2013 and 2012 was $3.6 million, $1.1 million and $1.2 million, respectively.

On October 15, 2014 the full Board of Directors approved the award of grants of 78,600 shares of our restricted common stock under the Plan valued at $1.7 million to our key management group (approximately 60 employees). The Board of Directors also granted 21,000 shares of our restricted common stock valued at $461,000 to the non-management members of the Board.

The value of the restricted stock is based on the closing price of our common stock on the date of grant, which was $21.93. The fair value of this award to employees is amortized on a straight-line basis over the requisite service period of three years or to an employee's eligible retirement date, if earlier; thus restricted stock awards are expensed immediately upon grant for retirement-eligible employees. Estimated non-cash stock compensation expense based on this restricted stock grant will be approximately $625,000 for the first quarter of Fiscal 2015 and $1.2 million for Fiscal 2015.