UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549


FORM 10-K

(Mark one)

☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2018

2021

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                     

Commission file number 001-09235

LOGO

THOR INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

tho-20210731_g1.jpg
THOR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware93-0768752
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
601 EastE. Beardsley Ave., Elkhart, IN46514-3305
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (574) 970-7460

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title

Registrant’s telephone number, including area code: (574) 970-7460
Securities registered pursuant to Section 12(b) of each class:

the Exchange Act:

Name of each exchange
Title of each classTrading Symbol(s)on which registered:

registered

Common Stock (parstock (Par value $.10 per share)

Per Share)

THO

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ☑    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ☐    No  ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to the filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☑    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K.  ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large accelerated filer☑Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-212b-2 of the Exchange Act.)

Yes  ☐    No  ☑

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of January 31, 20182021 was approximately $6.895$5.607 billion based on the closing price of the registrant’s common shares on January 31, 2018,2021, the last business day of the registrant’s most recently completed second fiscal quarter. Solely for the purpose of this calculation and for no other purpose, the non-affiliates of the registrant are assumed to be all shareholders of the registrant other than (i) directors of the registrant (ii) current executive officers of the registrant who are identified as “named executive officers” pursuant to Item 1110 of the registrant’s Form 10-K for the fiscal year ended July 31, 20172020 and (iii) any shareholder that beneficially owns 10% or more of the registrant’s common stock. SuchThe exclusion of such persons is not intended, nor shall it be deemed, to be an admission that such persons are affiliates of the registrant. The number of common shares of the registrant’s common stock outstanding as of August 31, 2018September 15, 2021 was 52,695,365.

55,366,241.

Documents incorporated by reference:

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on December 14, 201817, 2021 are incorporated by reference in Part III of this Annual Report on Form 10-K.

10-K




TABLE OF CONTENTS

Page

PART I

Page

ITEM 1.

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ITEM 1A.

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ITEM 1B.

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ITEM 2.

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ITEM 3.

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ITEM 4.

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ITEM 5.

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ITEM 6.

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ITEM 7.

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ITEM 7A.

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ITEM 8.

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ITEM 9.

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ITEM 9A.

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ITEM 9B.

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ITEM 10.

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ITEM 11.

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ITEM 12.

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ITEM 13.

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ITEM 14.

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PART IV

ITEM 15.

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57

49
59

EX-21.1

EX-23.1

EX-31.1

EX-31.2

EX-32.1

EX-32.2

ii



PART I


Unless otherwise indicated, all dollarDollar and Euro amounts are presented in thousands except per share data.


ITEM 1. BUSINESS

The following discussion of our business solely relates to ongoing operations.


General Development of Business


Our companyCompany was founded in 1980 and through its subsidiaries, primarily manufactures a wide rangehas grown to become the largest manufacturer of recreational vehicles (“RVs”) in the United Statesworld. We are also the largest manufacturer of RVs in North America, and sells those vehicles primarilyone of the largest manufacturers of RVs in Europe. The Company manufactures a wide variety of RVs in the United States and Canada.Europe, and sells those vehicles, as well as related parts and accessories, primarily to independent, non-franchise dealers throughout the United States, Canada and Europe. We are incorporated in Delaware and are the successor to a corporation of the same name which was incorporated in Nevada on July 29, 1980. Our principal executive office is located at 601 East Beardsley Avenue, Elkhart, Indiana 46514 and our telephone number is(574) 970-7460. Our Internet address iswww.thorindustries.com. We maintain copies of our recent filings with the Securities and Exchange Commission (“SEC”), available free of charge, on our web site. Unless the context otherwise requires or indicates, all references to “Thor”“THOR”, the “Company”, “we”, “our” and “us” refer to ThorTHOR Industries, Inc. and its subsidiaries.


Our principal North American recreational vehicle and other operating subsidiaries are Airstream, Inc. (“Airstream”Airstream”), Heartland Recreational Vehicles, LLC (“Heartland”, which includes Cruiser RV, LLC (“CRV”) and DRV, LLC (“DRV”)), Jayco, Inc. (“Jayco”, which includes Jayco, Starcraft, Highland Ridge and Entegra Coach), Keystone RV Company (“Keystone”, which includes CrossRoads and Dutchmen), K.Z., Inc. (“KZ”, which includes Venture RV), Thor Motor Coach, Inc. (“Thor Motor Coach”Coach”) and the Tiffin Group ("Tiffin Group", Keystone RV Company (“Keystone”, which includes CrossRoadsTiffin Motorhomes, Inc. and Dutchmen)Vanleigh RV).

Our European recreational vehicle operations include eight primary RV production locations producing numerous brands within Europe, including Buccaneer, Buerstner, Carado, Compass, CrossCamp, Dethleffs, Elddis, Eriba, Etrusco, Hymer, Laika, LMC, Niesmann+Bischoff, Sunlight and Xplore.

Acquisitions

Fiscal 2021

Tiffin Group

On December 18, 2020, the Company closed on a Stock Purchase Agreement (“Tiffin Group SPA”) for the acquisition of all of the issued and outstanding capital stock of luxury motorized recreational vehicle manufacturer Tiffin Motorhomes, Inc., Heartland Recreational Vehicles,including fifth wheel towable recreational vehicle manufacturer Vanleigh RV, and certain other associated operating and supply companies, which primarily supply component parts and services to Tiffin Motorhomes, Inc. and Vanleigh RV (collectively, the “Tiffin Group”). Tiffin Group, LLC,(“Heartland”, which includes Bison Horse Trailers, LLC dba Bison Coach (“Bison”), Cruiser a wholly-owned subsidiary of the Company, owns the Tiffin Group. Tiffin Motorhomes, Inc. operates out of various locations in Alabama, while Vanleigh RV LLC (“CRV”)operates out of Mississippi.

The initial cash consideration for the acquisition of the Tiffin Group was approximately $300,000, subject to adjustment, and DRV, LLC (“DRV”)), K.Z., Inc. (“KZ”, which includes Venture RV), Postle Operating, LLC (“Postle”) and Jayco, Inc. (“Jayco”, which includes Jayco, StarCraft, Highland Ridge and Entegra Coach).

Acquisitions and Other Significant Events

Fiscal 2018

Share Repurchase Program

On June 19, 2018,was funded through existing cash-on-hand as well as $165,000 in borrowings from the Company’s Board of Directors authorized Company managementexisting asset-based credit facility. The total cash consideration to utilize upbe paid was subject to $250,000 to purchase sharesthe final determination of the Company’s common stock through June 19, 2020.

Under the share repurchase plan, the Company is authorized to repurchase, fromtime-to-time, outstanding shares of its common stockactual acquired net working capital, as defined in the open market orTiffin Group SPA, as of the close of business on December 18, 2020, which determination was finalized in privately negotiated transactions.the fourth quarter of fiscal 2021 and the final adjustment was not material. The timing and amount of share repurchases will be determined byTiffin Group operates as an independent operation in the same manner as the Company’s management team based uponother recreational vehicle subsidiaries. The Tiffin Group's motorized operations are aggregated within the Company’s North American motorized recreational vehicle reportable segment and its evaluation of market conditions and other factors. The share repurchase plan may be suspended, modified or discontinued at any time, andtowable operations are aggregated within the Company has no obligation to repurchase any amount of its common stock under the plan.Company’s North American towable recreational vehicle reportable segment. The Company intendspurchased the Tiffin Group to make all repurchasescomplement its existing motorized and to administer the plan in accordance with applicable lawstowable RV product offerings and regulatory guidelines, including Rule10b-18 of the Securities Exchange Act of 1934, as amended.

Joint Venture

OnNorth American independent dealer base.



1

Fiscal 2020

Togo Group

In February 15, 2018, the Company announced the formation offormed a 50/50 joint venture, originally called TH2connect, LLC, with Tourism Holdings Limited (“("thl”) called TH2connect, LLC (“TH2”"). The Company andthl each have a 50% ownership position in TH2 and equal representation on the board of directors of TH2. The Company contributed cash totaling $46,902 to TH2 in early March 2018 whilethl contributed various assets with the same approximate fair value. The Company’s investment in TH2 was funded entirely from cash on hand. In accordance with the operating agreement, TH2’s future capital needs, which are not expected to be material to the Company, will be funded proportionally bythl and the Company, and an additional $3,500 was contributed to TH2 by both Thor andthl in June 2018. The Company’s investment in TH2 is accounted for under the equity method of accounting, and the results ofJuly 2019, this joint venture are recorded on aone-month lag basis.

TH2was rebranded as "Togo Group." Togo Group was formed to own, improve and sell innovative and comprehensive digital applications through a platform designed for the global RV industry. TH2 will offerSince its formation through March 23, 2020, the Company applied the equity method of accounting to the joint venture.


Effective March 23, 2020 the Company and thl reached an agreement (the “2020 Agreement”) whereby the Company agreed to pay thl $6,000 on August 1, 2020 and, in return, obtained additional ownership interest in Togo Group. In addition, certain assets or rights to assets historically owned by Togo Group were distributed to thl in exchange for a variety of products focused on enhancing the enjoyment, safety, connectivity and convenience of RV ownership and use.

Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanentcorresponding reduction in the federal corporate income tax rate from 35.0% to 21.0%. The rate reduction took effect on January 1, 2018. As the Company’s 2018 fiscal year ended on July 31, 2018, the Company’s federal blended corporate income tax rate for fiscal year 2018 is 26.9%, based on the applicable tax rates before and after the Tax Act and the number of daysthl’s ownership interest in the fiscal year to which the two different rates applied. As a result of other Tax Act changes, the Company’s income tax rate for fiscal year 2019 will be negatively impacted by the repeal of the domestic production activities (“Code Section 199”) deduction and limitations on the deductibility of executive compensation.

Togo Group. As a result of the reduction2020 Agreement, THOR has a 73.5% controlling interest in Togo Group and the power to direct the activities of Togo Group. Since the effective date of the federal corporate income tax rate,2020 Agreement, the operating results, balance sheet accounts and cash flow activity of Togo Group are consolidated within the Company's Consolidated Financial Statements.


The operations of Togo Group are focused on digital solutions primarily for the North American market related to travel and RV use, with expansion into other regions anticipated in future periods. Togo Group is managed as a stand-alone operating entity.

Fiscal 2019

Erwin Hymer Group Acquisition

On February 1, 2019, the Company was requiredacquired Erwin Hymer Group SE (“EHG” or “Erwin Hymer Group”). EHG is headquartered in Bad Waldsee, Germany, and is one of the largest RV manufacturers in Europe. The Company acquired EHG in order to performexpand its operations into the established but growing European market with a revaluation of its net deferred tax assets. Based on currently available information,long-standing European industry leader.

At the closing, the Company has performed an analysis of the impact of the Tax Act and has recorded anon-recurring,non-cash reduction of its net deferred tax assets due to the reduced federal income tax rate, and a corresponding charge to income tax expense, of approximately $34,000 for the year ended July 31, 2018. The Company also recorded a provisional amount of $2,000 of additional income tax expense in the fourth quarter of fiscal 2018 as a result of recent guidance related to limitations on the deductibility of executive compensation as provided under the Tax Act. The Company is still analyzing the impacts of the Tax Act which potentially could affect the measurement of the deferred tax balances.

The reduction in the statutory U.S. federal income tax rate is expected to positively impact the Company’s future U.S.after-tax earnings. For fiscal 2019, after considering the lower federal income tax rate of 21.0%, an estimated blended state income tax rate, the elimination of the Code Section 199 deduction and the limitations on the deductibility of executive compensation, the Company currently estimates an overall effective income tax rate between 23.0% and 25.0%, before consideration of any discrete tax items.

Fiscal 2016

Jayco Acquisition

On June 30, 2016, the Company closed on a Stock Purchase Agreement (“Jayco SPA”) for the acquisition of all the issued and outstanding capital stock of towable and motorized recreational vehicle manufacturer Jayco forpaid cash consideration of $562,690, netapproximately 1.53 billion Euro (approximately $1.76 billion at the exchange rate as of February 1, 2019) and issued 2,256,492 shares of the Company’s common stock to the sellers valued at $144.2 million. The cash acquired. This acquisitionconsideration was funded from the Company’sthrough a combination of available cash on hand of approximately $95 million and $360,000 from an asset-based revolvingdebt financing consisting of two credit facility agreements, a seven-year, $2.1 billion term loan, with an approximate $1.4 billion U.S. dollar-denominated tranche and an approximate 0.6 billion Euro tranche (approximately $0.7 billion at the exchange rate at February 1, 2019), and $100 million utilized at closing from a five-year, $750 million asset-based credit facility (“ABL”), each as more fully described inNotes 2 and Note 12 to the Consolidated Financial Statements. The obligations of the Company purchased Jaycounder each facility are secured by liens on substantially all of the assets of the Company, and both agreements contain certain customary representations, warranties and covenants of the Company.


Certain costs incurred during the fiscal year ended July 31, 2019 related to complement its existing towablethis acquisition, including the foreign currency forward contract loss and motorized RV product offeringscertain bank fees, ticking fees, legal, advisory and dealer base. The fiscal 2016 resultsother costs, as discussed in Note 2 to the Consolidated Financial Statements, are included in Acquisition-related costs in the Consolidated Statements of Income and Comprehensive Income only include one month of Jayco’s operating results.

Discontinued Operations

On July 31, 2013, we entered into a definitive Stock Purchase Agreement and sold our bus business to Allied Specialty Vehicles, Inc. The sale closed on October 20, 2013. Thor’s bus business included Champion Bus, Inc., General Coach America, Inc., Goshen Coach, Inc., El Dorado National (California), Inc., and El Dorado National (Kansas), Inc. As a result of the divestiture of the bus business, the results of operations of the bus business are reported as a loss from discontinued operations, net of income taxes, on the Consolidated Statements of Income and Comprehensive Income for the year ended July 31, 2016.

Income.


North American Recreational Vehicles

Thor,


THOR, through its operating subsidiaries, is currently the largest manufacturer of RVs in North America, by units sold and revenue, based on retail statistics published by Statistical Surveys, Inc. and other reported data. Our North American operating subsidiaries are as follows:


Airstream


Airstream manufactures and sells premium quality travel trailers and motorhomes. Airstream travel trailers are distinguished by their rounded shape and bright aluminum finish and, in our opinion, constitute the most recognized product in the recreational vehicle industry. Airstream manufactures and sells travel trailers under the trade namesAirstream Classic, Airstream Pottery Barn, Globetrotter, International,Tommy Bahama®,Flying Cloud,Sport,Basecamp,Caravel, Bambiand the recently launched Nesttravel trailer.Basecamp. Airstream also sells theInterstate and Atlas series of Class B motorhomes.

Thor Motor Coach

Thor Motor


2

Heartland

Heartland manufactures and sells conventional travel trailers and fifth wheels and includes the operations of Heartland, Cruiser RV and DRV. Heartland, including Cruiser RV and DRV, manufactures and sells conventional travel trailers and fifth wheels under trade names such as Landmark, Bighorn, Elkridge, Trail Runner, North Trail, Cyclone, Torque, Prowler, Milestone, Shadow Cruiser, Lithium, MPG, Hitch, Sundance and Stryker and luxury fifth wheels under the trade name DRVMobile Suites.

Jayco

Jayco manufactures and sells conventional travel trailers, fifth wheels and motorhomes, and includes the operations of Jayco, Starcraft, Highland Ridge and Entegra Coach. Jayco manufactures and sells conventional travel trailers and fifth wheels under trade names such as Jay Flight, Jay Feather, Eagle and Pinnacle, and also manufactures Class A, Class B and Class C motorhomes under trade names such as Alante, Precept, Greyhawk and Redhawk. Starcraft manufactures and sells conventional travel trailers and fifth wheels under trade names such as Autumn Ridge and Telluride. Highland Ridge manufactures and sells conventional travel trailers and fifth wheels under trade names such as Mesa Ridge and Open Range. Entegra Coach manufactures and sells gasoline and diesel Class A and Class C motorhomes. Its products are soldmotorhomes under trade names such asFour WindsInsignia,Freedom Elite, Majestic, HurricaneAspire,ChateauAnthem and Cornerstone and Class A, Class B and Class C motorhomes under trade names such as Odyssey,Windsport,Axis,Vegas, Tuscany,Palazzo, Aria, Quantum, Compass, GeminiEsteem andA.C.E.

Emblem.


Keystone


Keystone manufactures and sells conventional travel trailers and fifth wheels and includes the operations of Keystone, Dutchmen and CrossRoads. Keystone manufactures and sells conventional travel trailers and fifth wheels under trade names such asMontana,Springdale,Hideout,Sprinter,Outback,LaredoArcadia,Bullet,Fuzion,Raptor,Passport andCougar, while the Dutchmen travel trailer and fifth wheel trade names includeColeman,Kodiak,Aspen Trail Aerolite, Astoria andVoltage. CrossRoads manufactures and sells conventional travel trailers and fifth wheels under trade names such asCruiser,Volante,Sunset Trail andZinger and luxury fifth wheels under the trade nameRedwood.

Heartland

Heartland manufactures and sells conventional travel trailers and fifth wheels, as well as equestrian recreational vehicle products with living quarters, and includes the operations of Heartland, Bison, Cruiser RV and DRV. Heartland, including Cruiser RV and DRV, manufactures and sells conventional travel trailers and fifth wheels under trade names such asLandmark,Bighorn,Elkridge,Trail Runner,North Trail, Cyclone,Torque,Prowler,Wilderness,Shadow Cruiser, Fun Finder, MPG, Radiance andStryker and luxury fifth wheels under the trade nameDRV Mobile Suites. Bison manufactures and sells equestrian recreational vehicle products with living quarters under trade names such asPremiere,Silverado,Ranger,Laredo,Trail Boss andTrail HandRedwood.


KZ


KZ manufactures and sells conventional travel trailers and fifth wheels and includes the operations of KZ and Venture RV. KZ manufactures and sells conventional travel trailers and fifth wheels under trade names such asEscape, Sportsmen,Connect, Venom,Gold, Durango, andSportster, while Venture RV manufactures and sells conventional travel trailers under trade names such asStratus, SportTrekandSonic.

Jayco

JaycoSonic.


Thor Motor Coach

Thor Motor Coach manufactures and sells gasoline and diesel Class A, Class B and Class C motorhomes. Its products are sold under trade names such as Ace, Aria, Axis, Challenger, Chateau, Compass, Delano, Echelon, Four Winds, Gemini, Geneva, Hurricane, Magnitude, Miramar, Omni, Outlaw, Palazzo, Quantum, Resonate, Rize, Sanctuary, Scope, Sequence, Synergy, Tellaro, Tuburon, Tranquility, Tuscany, Vegas, Venetian and Windsport.

Tiffin Group (Tiffin)

The Tiffin Group manufactures and sells conventional travel trailers, fifth wheels camping trailers and motorhomes, and includes the operations of Jayco, Starcraft, Highland RidgeVanleigh RV and Entegra Coach. JaycoTiffin Motorhomes, Inc. Vanleigh RV manufactures and sells conventional travel trailers and fifth wheels under trade names such asJay Flight,Jay Feather, Eagle, PinnacleBeacon andTalon, Vilano. Tiffin Motorhomes, Inc. manufactures and also manufacturessells premium diesel and gasoline Class A and Class C motorhomes under trade names such asAlante, Precept,GreyhawkAllegro, Allegro Breeze, Allegro Bus, Allegro Red, Phaeton andRedhawk Zephyr. Starcraft

European Recreational Vehicles

THOR, through its EHG operating subsidiary, is a leading manufacturer of recreational vehicles in Europe, according to statistics published by the Caravaning Industry Association e.V. (“CIVD”) and the European Caravan Foundation (“ECF”).

Erwin Hymer Group (EHG)

EHG manufactures towable and motorized recreational vehicles, including motorcaravans, caravans, campervans and urban vehicles in eight primary RV production locations within Europe. EHG produces and sells conventional travel trailersnumerous brands primarily within Europe, such as Buccaneer, Buerstner, Carado, Compass, CrossCamp, Dethleffs, Elddis, Eriba, Etrusco, Hymer, Laika, LMC, Niesmann+Bischoff, Sunlight and fifth wheels under trade names such asLaunch, Autumn RidgeXplore. In addition, EHG’s operations include other RV-related products and Telluride. Highland Ridge manufactures and sells conventional travel trailers and fifth wheels under trade names such asHighlander, Mesa Ridge andOpen Range. Entegra Coach manufactures and sells luxury Class A motorhomes under trade names such asInsignia, Aspire, Anthem and Cornerstone and Class C and A motorhomes under trade names such asOdyssey,Esteem, andEmblem.

services.

3

Other

Postle


Postle Operating, LLC ("Postle") manufactures and sells aluminum extrusions and specialized component products to RV and other manufacturers.


Togo Group

Togo Group develops and markets innovative digital products and services that empower travelers to more easily own and maintain recreational vehicles, as well as discover, book, and navigate road trips. Togo Group operates digital consumer services under various names at July 31, 2021 including: Overnight RV Parking, Roadpass, Roadtrippers, RVillage, and Togo RV.

Product Line Sales and Segment Information


The Company has twothree reportable segments: (1) towable recreational vehiclesNorth American Towable Recreational Vehicles, (2) North American Motorized Recreational Vehicles and (2) motorized recreational vehicles.(3) European Recreational Vehicles. The towable recreational vehicleNorth American Towable Recreational Vehicle reportable segment consists of the following operating segments that have been aggregated: Airstream (towable), Heartland (including Bison, Cruiser RV and DRV), Jayco (including Jayco towable, Starcraft and Highland Ridge), Keystone (including CrossRoads and Dutchmen) and, KZ (including Venture RV) and Tiffin Group (Vanleigh RV). The motorized recreational vehicleNorth American Motorized Recreational Vehicle reportable segment consists of the following operating segments that have been aggregated: Airstream (motorized), Jayco (including Jayco motorized and Entegra Coach) and, Thor Motor Coach.

Coach and Tiffin Group (Tiffin Motorhomes, Inc). The European Recreational Vehicles reportable segment consists solely of the EHG business. EHG manufactures a full line of towable and motorized recreational vehicles, including motorcaravans, caravans, campervans and urban vehicles in eight RV production facilities within Europe.


The operations of the Company’s Postle subsidiaryand Togo Group subsidiaries are included in Other,“Other,” which is anon-reportable segment. Net sales included in Other mainly relate to the sale of aluminum extrusions and specialized component products. Intercompany eliminations adjust for Postle sales to the Company’s towablesNorth American towable and North American motorized segments, which are consummated at established transfer prices generally consistent with the selling prices of extrusion components to third-party customerscustomers.

Total assets include those assets used in the operation of each reportable and are adjusted as partnon-reportable segment, and the Corporate assets consist primarily of intercompany eliminations.

cash and cash equivalents, deferred income taxes, deferred compensation plan assets and certain Corporate real estate holdings primarily utilized by certain U.S.-based operating subsidiaries.


The table below sets forth the contribution of each of the Company’s reportable segments to net sales in each of the last three fiscal years:

   2018  2017  2016 
         Amount              %              Amount              %              Amount              %       

Recreational vehicles:

       

Towables

  $6,008,700   72.1  $5,127,491   70.8  $3,338,659   72.8 

Motorized

   2,146,315   25.8   1,971,466   27.2   1,094,250   23.9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total recreational vehicles

   8,155,015   97.9   7,098,957   98.0   4,432,909   96.7 

Other

   305,947   3.7   253,557   3.5   218,673   4.8 

Intercompany eliminations

   (132,053)   (1.6)   (105,562)   (1.5)   (69,470)   (1.5) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $8,328,909   100.0  $7,246,952   100.0  $4,582,112   100.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 202120202019
 Amount%Amount%Amount%
Recreational vehicles:
North American Towables (1)
$6,221,928 50.5 $4,140,482 50.7 $4,558,451 58.0 
North American Motorized (1)
2,669,391 21.7 1,390,098 17.0 1,649,329 21.0 
European (2)
3,200,079 26.0 2,485,391 30.4 1,486,978 18.9 
Total recreational vehicles12,091,398 98.2 8,015,971 98.1 7,694,758 97.9 
Other373,174 3.0 234,481 2.9 263,374 3.3 
Intercompany eliminations(147,192)(1.2)(82,519)(1.0)(93,374)(1.2)
Total$12,317,380 100.0 $8,167,933 100.0 $7,864,758 100.0 


(1)The North American Towables and Motorized totals include approximately 7 months of operations in FY 2021 for the Tiffin Group from the December 18, 2020 acquisition date.
(2)The European totals include only 6 months of operations in FY 2019 from the February 1, 2019 acquisition date.

For additional information regarding our segments, seeNote 43 to the Consolidated Financial Statements.



4

Recreational Vehicles


Overview


We manufacture a wide variety of recreational vehicles in the United States and Europe and sell those vehicles, primarily throughout the United States and Canada, as well as related parts and accessories. Recreationalaccessories, primarily to independent, non-franchise dealers throughout the United States, Canada and Europe. North American recreational vehicle classifications are based upon standards established by the RV Industry Association (“RVIA”). The principal types of towable recreational vehicles that we produce in North America include conventional travel trailers and fifth wheels. In addition, we also produce equestrian and other specialty towable recreational vehicles,wheels as well as Class A, Class C and Class B motorhomes.

In Europe, we produce numerous types of towable and motorized recreational vehicles, including caravans, motorcaravans, campervans, urban vehicles and other RV-related products and services.


North American Recreational Vehicles

Travel trailers arenon-motorized vehicles which are designed to be towed by passenger automobiles, pickup trucks, SUVs or vans. Travel trailers provide comfortable, self-contained living facilities for camping, vacationing and vacationingother purposes. WeWithin North America we produce “conventional” and “fifth wheel” travel trailers. Conventional trailers are towed by means of a frame hitch attached to the towing vehicle. Fifth wheel trailers, designed to be towed by pickup trucks, are constructed with a raised forward section that is attached to a receiver in the bed area of the pickup truck.


A motorhome is a self-powered vehicle built on a motor vehicle chassis. Motorhomes are self-contained with their own lighting, heating, cooking, refrigeration, sewage holding and water storage facilities, so that they can be utilized without being attached to utilities.


Within North America, Class A motorhomes, generally constructed on medium-duty truck chassis, are supplied complete with engine and drivetrain components by motor vehicle manufacturers such as Ford, Freightliner and Spartan Motors.The Shyft Group. We design, manufacture and install the living area and driver’s compartment of Class A motorhomes. Class C and Class B motorhomes are generally built on a Ford, General Motors or Mercedes BenzMercedes-Benz small truck or van chassis, which includes an engine, drivetrain components and a finished cab section. We construct a living area which has access to the driver’s compartment and attaches to the cab section. Although they are not designed for permanent or semi-permanent living, motorhomes can provide comfortable living facilities for camping, vacationing and other purposes.

European Recreational Vehicles

In Europe, a caravan is a travel trailer which is a non-motorized vehicle designed to be towed by passenger automobiles, SUVs or vans. Caravans provide comfortable, self-contained living facilities for camping, vacationing and other purposes.

In Europe, the focus is on light and small caravans that can even be towed by small passenger cars.


Motorcaravans are similar to the Class A and Class C motorized products in the North American market. Motorcaravans include various types, such as, integrated, semi-integrated and alcove, and are generally constructed on light duty truck chassis, supplied complete with engine and drivetrain components by chassis manufacturers such as Stellantis, Mercedes-Benz and Iveco. The main difference between European motorcaravans as compared to RVs in the North American market is that the focus in Europe is on lighter and smaller vehicles due to weight restrictions and driving license requirements.

An integrated motorcaravan contains driving and passenger space that is completely integrated into the vehicle, along with the living area, which creates a great feeling of openness. The driver/passenger and living areas are made of one compartment and form a single unit.

A semi-integrated motorcaravan is one whose cab (driver/passenger compartment) belongs to the chassis. This means that the existing driver/passenger area is complemented by an attached living area. As a result, the advantages of the basic vehicle are enhanced by mobile living.

An alcove motorcaravan is one where there is an additional sleeping space located above the driver’s cab. This superstructure is called an “alcove” and it comprises sleeping accommodations for two people. Behind the driver’s cab is an additional bedroom and a living space with basic equipment.

A campervan is comparable to the Class B motorhome in the North American market. They are generally built on a Stellantis or Mercedes-Benz panel van chassis which includes an engine, drivetrain components and a finished cab section. A constructed living area provides access to the driver’s compartment and attaches to the cab section. As they are smaller and more compact than typical motorhomes, a campervan has the advantage of being easier to maneuver and easier to park.
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An urban vehicle is a multi-functional vehicle, similar to a minivan, that is mainly used as a family car but has a small removable kitchen and sitting area that can be converted into a sleeping area. Additionally, these vehicles are equipped with a pop-up roof to provide additional sleeping quarters.

Production


In order to minimize finished inventory, our recreational vehicles in both North America and Europe are generally are produced to dealer order. Our facilities are designed to provide efficient assembly-line manufacturing of products. CapacityIn North America and Europe, capacity increases can generally be achieved relatively quickly and at relatively low cost, largely by acquiring, leasing, or building additional facilities and equipment and increasing the number of production employees. Similarly,In North America, capacity decreases can generally be achieved relatively quickly and at relatively low cost, mainly by decreasing the number of production employees.

In Europe, short-term capacity decreases can generally be achieved by adjusting work schedules and reducing the number of contract and temporary workers.


We purchase many of the components used in the production of our recreational vehicles in finished form. The principal raw materials used in the manufacturing processes for motorhomes, including motorcaravans, campervans and urban vehicles, and travel trailers, including caravans, are chassis, aluminum, lumber, plywood, plastic, fiberglass and steel purchased from numerous suppliers. We believe that, except for chassis and certain key towable RV components sourced from one major supplier, substitute sources for raw materials and components are generally available with no material impact on our operations.


Our relationship with our chassis suppliers is similar to our other RV vendor relationships in that no long-term contractual commitments are entered into by either party. Historically, chassis manufacturers resort to an industry-wide allocation system during periods when chassis supply is restricted. These allocations are generally based on the volume of chassis previously purchased. While we are not dependent on any one supplier, we do depend on a consistent supply of chassis from a limited number of chassis suppliers. Sales of motorhomes rely on these chassis.

Recently, we have been alerted by a number of our North American and European chassis suppliers that supply constraints of key components that they require for the manufacturing of chassis, particularly semiconductor chips, will limit their production of chassis, and hence, our production and sales of motorized RVs will also be impacted. The North American and European recreational vehicle industries have, from time to time in the past and during the fiscal year ended July 31, 2021, experienced shortages of chassis for various other reasons, including component shortages, production delays and work stoppages at the chassis manufacturers. If shortages of chassis were to recur or continue for a prolonged period for any reason, it would have a negative impact on our results of operations.

The North American and European RV industries are affected accordingly,also facing continuing supply shortages or delivery delays of other, non-chassis, raw material components. While our supply chain has been resilient enough to support us during our recent growth in sales and production, these shortages and constraints have negatively impacted our ability to further ramp up production rates and sales during the current fiscal year and has caused an increase in unfinished units as approximately halfof July 31, 2021. We believe these shortages and delays may continue to result in production delays or adjusted production rates, which may limit our ability to ramp up production to meet existing demand and could have a negative impact on our sales and earnings. If shortages of chassis or other component parts were to become more significant or longer term in nature, or if other factors were to impact our suppliers' ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected. Where possible, we continue to work closely with our suppliers on various supply chain strategies to minimize these constraints, and we continue to identify alternative suppliers.

The geographic centrality of the material costNorth American RV industry in northern Indiana, where the majority of our motorhomes relatesfacilities and many of our suppliers are located, could exacerbate supply chain and other COVID-19 related risks, should northern Indiana, or any of the other areas in which we, our suppliers or our customers operate, become disproportionately impacted by the pandemic or other factors.

This situation is fluid, with the items experiencing shortages changing frequently as disruptions caused by COVID-19 and other events are impacting the entire supply chain as well as the transportation of those items. If the supply constraints become more significant, longer term in nature or are not limited in scope; if industry demand continues to chassis.increase faster than the suppliers can respond; or if other factors were to impact the suppliers’ ability to supply our production needs, our business and results of operations could be adversely affected. We have not experienced any recent significant cost increases fromare continuing to take proactive steps to limit the impact of these supply constraints and delays on our chassis suppliers.

production and sales.


Generally, all of our North American and European RV operating subsidiaries introduce new or improved lines or models of recreational vehicles each year. Changes typically include new sizes and floor plans, different decors or design features and engineering and technological improvements.

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Seasonality

Since


Historically, since recreational vehicles arewere used primarily by vacationers and campers, our recreational vehicle sales tendtended to be seasonal and, in most geographical areas, tendtended to be lower during the winter months than in other periods. As a result, our recreational vehicle sales arewere historically lowest during our second fiscal quarter, which ends on January 31 of each year.

However, industry wholesale shipments in calendar 2021 and beyond may not follow typical historical seasonal patterns as dealers adjust their inventory to the current increased demand by consumers.


Marketing and Distribution


We sell our recreational vehicles primarily to independent,non-franchise dealers located primarily throughout the United States, Canada and Canada.Europe. Each of our recreational vehicle operating subsidiaries sell to their own network of independent dealers, with many dealers carrying more than one of our product lines, as well as products from other manufacturers. As of July 31, 2018,2021, there were approximately 2,300 dealerships2,400 independent, non-franchise dealership locations carrying our products in the U.S. and Canada.Canada and approximately 1,100 dealership locations, of which two are Company-owned, carrying our products throughout Europe. We believe that the working relationships between ourthe management and sales personnel of our operating entities and the independent dealers provide us with valuable information on customer preferences and the quality and marketability of our products.

While


Our European brands distribute their vehicles in Europe through dealer networks that offer various EHG brands covering all price segments in each region, avoiding brand overlap even in regions with two or more dealers that offer EHG brands. The European dealer base is comprised primarily of independent dealers, although EHG does operate two Company-owned dealerships. Approximately 40% of the independent European dealers sell EHG brands exclusively.

Each of our recreational vehicle operating subsidiaries has an independent wholesale sales force that works directly with dealers. Typically, there are wholesale shows held during the year in certain locations within the United States and Europe. These shows allow dealers to view new and existing products as well as place orders. Due to ongoing COVID-19 pandemic concerns and efforts to limit its spread, we anticipate certain wholesale shows may be eliminated or scaled back for at least the remainder of calendar 2021. Based on our backlog as of July 31, 2021, we do not believe that the lack of these wholesale shows will have a material, negative impact to our near-term results of operations.

Historically, the most important retail sales events occur at the majorvarious consumer recreational vehicle shows or trade fairs which take place throughout the year at different locations across the country.United States, Canada and Europe. However, due to the COVID-19 pandemic and ongoing efforts to limit its spread, most retail show sponsors and dealers cancelled these shows in calendar 2020 and early calendar 2021, and may continue to do so for at least the near-term future. We do not expect the lack of these shows to have a negative impact on our results of operations in the near-term due to current consumer demand and increased digital marketing activities, by both our operating units and the dealers of our units. We also benefit in the United States from the recreational vehicle awareness advertising and major marketing programs sponsored by the RVIA in national print media and television.


In our selection of individual, independent dealers, we emphasize the dealer’s ability to maintain a sufficient inventory of our products, as well as their financial stability, credit worthiness, reputation, experience and ability to provide service to the end customer. Many dealers, particularly in North America, carry the recreational vehicle lines of one or more of our competitors. Generally, each of our recreational vehicle operating subsidiaries have separate agreements with their dealers.

dealer agreements.


One of our dealers,dealer, FreedomRoads, LLC, accounted for 20%approximately 13.0% of our continuing consolidated net sales in each of fiscal 2018,2021 and for approximately 15.0% and 18.5% in fiscal 20172020 and fiscal 2016.2019, respectively. This dealer also accounted for 26%approximately 15% of the Company’s consolidated trade accounts receivable at July 31, 20182021 and 30%approximately 18% at July 31, 2017.

2020.



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We generally do not finance dealer purchases. Most dealers are financed on a “floor plan” basis by an unrelated bank or financing company, which lends the dealer all or substantially all of the wholesale purchase price and retains a security interest in the vehicles purchased. As is customary in the recreational vehicle industry, we will generally execute a repurchase agreement with a lending institution financing a dealer’s purchase of our products upon the lending institution’s request. Repurchase agreements provide that, typically for a period of up to eighteen18 months after a unit is financed and in the event of default by the dealer and notification from the lending institution of the dealer default, we will repurchase all of the applicable or qualifying dealer units repossessed by the lending institution for the amount then due, which is often less than 100% of the dealer’s cost. The risk of loss under repurchase agreements is spread over numerous dealers and is further reduced by the resale value of the units which we would be required to repurchase. WeBased on current conditions, we believe that any future losses under these agreements would not have a material adverse effect on our Company. The Company’s total commercial commitments under standby repurchase obligations on dealer inventory financing as of July 31, 20182021 and July 31, 20172020 were $2,748,465$1,821,012 and $2,200,544,$1,876,922, respectively. The losses incurred due to repurchase were not material in fiscal 2018, 20172021, 2020 or 2019.

Backlog

The backlogs for our North American towable, North American motorized and 2016.

Backlog

AsEuropean recreational vehicle segments as of July 31, 2018, the backlog for towable2021 and motorized recreational vehicle orders was $766,965 and $634,092, respectively, compared to $1,416,240 and $915,559, respectively, at July 31, 2017, reflecting decreases of 45.8% and 30.7%, respectively. These decreases are mainly2020, respectively, were as follows.

July 31, 2021July 31, 2020Change
Amount		%
Change
Recreational vehicles
North American Towables$9,284,229 $2,763,678 $6,520,551 235.9 
North American Motorized4,014,738 1,451,641 2,563,097 176.6 
Total North America13,298,967 4,215,319 9,083,648 215.5 
European3,559,097 1,525,973 2,033,124 133.2 
Total$16,858,064 $5,741,292 $11,116,772 193.6 

We believe this increase is attributable to our capacity expansions sincea number of causes, including the prior year allowing for increasedperceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance, the reduction in commercial air travel and cruises, an underlying desire by many to get back to nature and relax with family or friends, an increase in various marketing campaigns to promote sales, and to a lesser extent, supply chain issues which delayed certain shipments beyond July 31, 2021 and which prevented us from further increasing production rates, and therefore quicker deliverythe lower levels of units to dealers, elevated existingindependent North American and European RV dealer inventory levels, all of which have led to increased dealer orders and backlog. Tiffin Group's backlog included in certain locationsthe July 31, 2021 totals accounted for $767,036 of the $11,116,772 increase and a more typical seasonal order pattern compared tofor 13.4% of the elevated order levels from the prior year.

193.6% increase.


Backlog represents unfilled dealer orders on a particular day which can and do fluctuate on a seasonal basis. The manufacturing time in the recreational vehicle business is relatively short. TheBarring any significant and longer-term material supply constraints, the existing backlogbacklogs of the North American towable, North American motorized and motorizedEuropean recreational vehicles isvehicle segments are expected to be filled in fiscal 2019.

calendar 2021 and calendar 2022.


Product Warranties

We


In North America, we generally provide retail purchasers of our recreational vehicles with aone-year ortwo-year limited warranty against defects in materials and workmanship with longer warranties on certain structural components. In Europe, we generally offer a two-year limited warranty on certain structural components and up to a 12-year warranty against water leakage. The chassis and engines in all of our motorhomes are generally warranted for various periods in excess of one year by their manufacturers.


Regulation

We


In the countries where we operate and our products are sold, we are subject to various vehicle safety and compliance standards. Within the provisions of the National Traffic and Motor Vehicle Safety Act (“NTMVSA”) and the safety standards for recreational vehicles and recreational vehicle components which have been promulgated thereunder by the U.S. Department of Transportation. Because of our sales in Canada,United States, we are also governed by similar laws and regulations issued by the Canadian government.

We are a member of the RVIA, a voluntary association of recreational vehicle manufacturers which promulgates recreational vehicle safety standards.standards in the United States. We place an RVIA seal on each of our North American recreational vehicles to certify that the RVIA’s standards have been met.

Both federal We also comply with the National Highway Traffic Safety Administration (“NHTSA”) in the U.S. and statewith similar standards within Canada and Europe as it relates to the safety of our products.

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Governmental authorities in the regions in which we operate have various environmental control standards relating to air, water and noise pollution which affect our business and operations. For example, these standards, which are generally applicable to all companies, control our choice of paints, our air compressor discharge, our waste water and the noise emitted by our factories. We rely upon certifications obtained by chassis manufacturers with respect to compliance by our vehicles with all applicable emission control standards.

We


Our plants are also subject to the regulations promulgated by the Occupational Safety and Health Administration (“OSHA”). Our plants are periodically inspected by federalvarious governmental and industry agencies concerned with health and safety in the work place, and by the RVIA,workplace to ensure that our plants and products comply with applicable governmental and industry standards.

We believe that our products and facilities comply in all material respects with applicable vehicle safety (including those promulgated by NHTSA), environmental, RVIAindustry, health, safety and OSHAother required regulations.


We do not believe that ongoing compliance with the existing regulations discussed above will have a material effect in the foreseeable future on our capital expenditures, earnings or competitive position.

However, future developments in regulation and/or policy could impose significant challenges upon our business operations.


Competition


The recreational vehicle industry is generally characterized by low barriers to entry. The recreational vehicle market is intensely competitive, with severalnumerous other manufacturers selling products that compete directly with our products. We also compete against consumer demand for used recreational vehicles, particularly during periods of economic downturn, and against other forms of consumer leisure, outdoor or vacation spending priorities. We also experience a certain level of competition between our own operating subsidiaries. Increased activity in the market for used recreational vehicles may also impactsimpact manufacturers’ sales of new products. Competition in the recreational vehicle industry is based upon price, design, value, quality and service. We believe that the price, design, value and quality of our products and the warranty coverage and service that we provide allow us to compete favorably for retail purchasers of recreational vehicles.vehicles and consumer leisure spending. There are approximately 6070 RV manufacturers in the U.S. and Canada, according to RVIA.

RVIA and approximately 30 RV manufacturers across Europe according to Caravaning Industry Association e.V. (“CIVD”).


Our primary RV competitors within the North American towable and motorized segments are Forest River, Inc. and Winnebago Industries, Inc. We are the largest recreational vehicle manufacturer in North America in terms of both units producedsold and revenue. According to Statistical Surveys, Inc., for the six months ended June 30, 2018, Thor’s2021, THOR’s current combined U.S. and Canadian market share based on unit retail sales was approximately 49.6%41.9% for travel trailers and fifth wheels combined and approximately 40.0%47.5% for motorhomes.


Our primary RV competitors within the European segment are Trigano, Hobby/Fendt, Knaus Tabbert and various vehicle manufacturers. EHG’s current European market share for the six months ended June 30, 2021 based on unit retail sales was approximately 24.5% for motorcaravans and campervans combined and approximately 17.5% for caravans.

Trademarks and Patents

We have registered United States trademarks, Canadian trademarks, German trademarks and certain other international trademarks and licenses carrying the principal trade names and model lines under which our products are marketed. We hold and protect certain patents related to our business. We are not dependent upon any patents or technology licenses of others for the conduct of our business.

Employee Relations


Human Capital Resources

Since our founding in 1980, we have been dedicated to our key principles of operating fairly and ethically, with stewardship and transparency, under our core values of community, compassion, trustworthiness and adventure. We believe in the invigorating power of human connection and commit to our team members by teaching our leaders how to nurture, guide and foster strong relationships with them. We treat others with dignity and respect, practicing thankfulness and gratitude. We strive to operate in a way that our word is trusted, and we are committed to providing a safe work environment for our team members while empowering them to seize opportunities around them and give them avenues to grow and learn.

At July 31, 2018,2021, we employed approximately 17,50031,000 full-time employees worldwide, including approximately 22,000 full-time employees in the United States, of which approximately 1,9502,500 were salaried, and approximately 9,000 full-time employees in Europe, of which approximately 2,300 were salaried. NoneAs of July 31, 2021, none of our North American employees arewere represented by certified labor organizations. Within our European-based operations, we are subject to employee contracts, Works Councils and certain labor organizations. We believe that we maintain a good working relationship with our employees.

Information about Foreign

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Our Company and Domestic Operations and Export Sales

We manufactureoperating subsidiaries share a global commitment to all of our recreational vehiclesstakeholders to foster an inclusive workplace where dignity and respect for team members are encouraged and where each team member is supported to achieve their maximum potential. We believe that the performance of our Company is significantly impacted by our human capital management, and, as a result, we consistently strive to attract, select, engage, develop and retain strong, diverse talent as summarized below.


Competitive Pay and Benefits

THOR is made up of a number of subsidiaries located in various regions within the United States and Europe, each of which operates independently with its own unique culture. As such, compensation and benefits are tailored to meet the specific needs and expectations of the employees at each of our subsidiaries with the goal of attracting and retaining the best talent. At all subsidiaries, we offer competitive pay, health insurance plans, company-paid life insurance and paid-time off. Other benefits offered include a pay-for-performance bonus structure, group and individual life insurance and plans to assist our employees for their retirement.

Team Member Safety and Wellness

THOR is committed to the health and safety of every team member. We maintain a robust safety culture to reduce workplace injuries, supported by effective communication, reporting and external benchmarking. Within each of our manufacturing and distribution facilities, in both North America and Europe, we have site-specific safety and environmental plans designed to reduce risk. All of our sites follow safety laws and regulations, and all accidents, injuries or unsafe equipment, practices, or conditions are required to be reported immediately and are reviewed to determine if additional safety measures are warranted.

The health and wellness of our employees are top priorities for THOR. Our Corporate office and subsidiaries offer standard medical, vision and dental programs as well as various programs to further address the needs of our employees. For example, all THOR North American team members have access to the Employee Assistance Program ("EAP") where they can receive up to five free sessions to assist with counseling needs, personal and/or work related concerns. Our EAP services are designed to help provide support for team members who are navigating life issues.

Our response to the COVID-19 global pandemic further illustrates our commitment to the health, wellness and safety of our team members. To support our employees, communities and other stakeholders, we make employee safety our top priority, following protocols that align with governmental authorities and health organizations, including the Centers for Disease Control and Prevention. Since the onset of the COVID-19 pandemic and throughout fiscal year 2021, THOR has taken numerous, stringent companywide measures to protect our workforce from COVID-19, including the following:
•Implementing robust, consistent cleaning and disinfecting protocols;
•Providing testing locations, free of charge, to team members;
•Requiring team members to stay home, with no actual or implied penalties, if they are feeling ill;
•Restricting onsite visitors and eliminating company tours;
•Restricting or, in many cases, eliminating employee work-related travel;
•Updating our protocols and procedures, as needed, when new information becomes available; and
•Implementing detailed contact tracing procedures for those who may have been exposed.

Diversity, Equity and Inclusion ("DE&I")

We strive to have an inclusive culture and diverse workforce, reflective of the communities in which our individual operating companies are located. We believe attracting and retaining talented and diverse employees will enable us to be more innovative and responsive to consumer needs and deliver strong sustained performance and growth. In fiscal year 2021, our Corporate office DE&I Committee focused on three main areas of Recruitment, Culture and Community Partnerships. These initiatives were identified to strengthen our inclusive culture by identifying innovative ways to attract talent, creating an inclusive corporate workplace and focusing on building strong partnerships with organizations in our community who serve diverse populations.

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At THOR, we are committed to:
•Inspiring an inclusive culture which embraces individual differences;
•Treating team members fairly and with respect;
•Establishing a workplace free from discrimination and harassment;
•Training team members to be aware of their rights and responsibilities in regards to fair treatment; and
•Providing equal opportunities based on ability, performance and potential.

Commitment to Ethical Behavior

Each year, THOR conducts training with certain employees, based on their role and level in the United States. Export sales, predominantlyorganization, on its business ethics policy. Providing our team members with resources to Canada, were $788,894, $628,176help make good decisions through an ethics program cultivates strong teamwork and $368,426 in fiscal 2018, 2017productivity. Issues can be communicated anonymously using our multilingual third-party hotline via phone, email or online inquiry systems. Every report is investigated and, 2016, respectively, and accounted for 9.5%, 8.7% and 8.0% of the Company’s consolidated net sales for those respective years.

if warranted, corrective actions are taken or implemented. THOR protects team members, who report issues, from any retaliation.


For more information on THOR’s human capital resources, please visit www.thorindustries.com/sustainability.
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Forward Looking Statements

This Annual Report on Form10-K includes certain statements that are “forward looking”“forward-looking” statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward lookingforward-looking statements are made based on management’s current expectations and beliefs regarding future and anticipated developments and their effects upon Thor,THOR, and inherently involve uncertainties and risks. These forward lookingforward-looking statements are not a guarantee of future performance. We cannot assure you that actual results will not differ materially from our expectations. Factors which could cause materially different results include, among others,others:
•the extent and impact from the continuation of the COVID-19 pandemic, along with the responses to contain the spread of the virus, or its variants, by various governmental entities or other actors, which may have negative effects on retail customer demand, our independent dealers, our supply chain, our labor force, our production or other aspects of our business;
•the ability to ramp production up or down quickly in response to rapid changes in demand while also managing costs and market share;
•the effect of raw material and commodity price fluctuations;fluctuations, and/or raw material, commodity or chassis supply restrictions; constraints;
•the dependence on a small group of suppliers for certain components used in production;
•the level and magnitude of warranty and recall claims incurred;
•the ability of our suppliers to financially support any defects in their products;
•legislative, regulatory and tax law and/or policy developments including their potential impact on our dealers and their retail customers or on our suppliers;
•the costs of compliance with governmental regulation;
•public perception of and the costs related to environmental, social and governance matters;
•legal and compliance issues including those that may arise in conjunction with recentrecently completed transactions;
•lower consumer confidence and the level of discretionary consumer spending; interest rate fluctuations; the potential impact of
•interest rate fluctuations and their potential impact on the general economy and, specifically, on our dealers and consumers;
•the impact of exchange rate fluctuations;
•restrictive lending practices; practices which could negatively impact our independent dealers and/or retail consumers;
•management changes;
•the success of new and existing products and services;
•the ability to maintain strong brands and develop innovative products that meet consumer preferences; demands;
•the ability to efficiently utilize existing production facilities;
•changes in consumer preferences;
•the risks associated with acquisitions, including: the pace of acquisitions and the successful closing of an acquisition, the integration and financial impact thereof;thereof, the level of achievement of anticipated operating synergies from acquisitions, the potential for unknown or understated liabilities related to acquisitions, the potential loss of existing customers of acquisitions;acquisitions and our ability to retain key management personnel of acquired companies;
•a shortage of necessary personnel for production; production and increasing labor costs to attract production personnel in times of high demand;
•the loss or reduction of sales to key dealers;
•disruption of the delivery of units to dealers;
•increasing costs for freight and transportation;
•asset impairment charges; cost structure changes;
•competition;
•the impact of potential losses under repurchase agreements;
•the potential impact of the strength of the U.S. dollar on international demand; demand for products priced in U.S. dollars;
•general economic, market and political conditions;conditions in the various countries in which our products are produced and/or sold;
•the impact of changing emissions and other related climate change regulations in the various jurisdictions in which our products are produced, used and/or sold;
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•changes to our investment and capital allocation strategies or other facets of our strategic plan. Additional risksplan; and uncertainties surrounding the acquisition of Erwin Hymer Group SE (the “Erwin Hymer Group”) include risks regarding the anticipated timing of the closing of the acquisition, the potential benefits of the proposed acquisition
•changes in market liquidity conditions, credit ratings and other factors that may impact our access to future funding and the anticipated operating synergies, the satisfactioncost of the conditions to closing the acquisition (including obtaining necessary regulatory approvals) in the anticipated timeframe or at all, the integration of the business, the impact of exchange rate fluctuations and unknown or understated liabilities related to the acquisition and Erwin Hymer Group’s business. debt.

These and other risks and uncertainties are discussed more fully inITEM 1A. RISK FACTORS Item 1A Risk Factors below.


We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward lookingforward-looking statements contained in this Annual Report on Form10-K or to reflect any change in our expectations after the date of this Annual Report on Form10-K or any change in events, conditions or circumstances on which any statement is based, except as required by law.


Available Information


Our annual reports onForm 10-K, quarterly reports on Form10-Q, current reports on Form8-K and all amendments to those reports and the Proxy Statement for our Annual Meeting of Stockholders are made available, free of charge, on our website,www.thorindustries.com, as soon as reasonably practicable after such reports have been filed with or furnished to the SEC. You may also read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. In addition, the SEC maintains a website that contains reports, proxy and information statements and other information that is filed electronically with the SEC. The website can be accessed atwww.sec.gov.

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ITEM 1A. RISK FACTORS


The following risk factors should be considered carefully in addition to the other information contained in this filing.


The risks and uncertainties described below are not the only ones we face and represent risks that our management believes are material to our Company and our business. Additional risks and uncertainties not presently known to us or that we currently deem not material may also harm our business. If any of the following risks actually occur, our business, financial condition or results of operations could be harmed.

Risks Relating To


RISKS RELATED TO THE COVID-19 PANDEMIC

Our Business

business has been, and may continue to be, affected by the COVID-19 pandemic.


The COVID-19 pandemic had a sudden and material impact on our business and results of operations. In the third quarter of fiscal 2020, the pandemic negatively affected our business, results of operations and financial position as we, our independent dealers and our customers were required to adhere to mandatory shelter-in-place orders, which resulted in six to eight weeks of production shutdowns at most of our facilities. As the shelter-in-place mandates were lifted, we were able to safely restart production beginning in May 2020. Shortly thereafter, we began to see that consumers were eager to travel and saw RV travel as a safe mode of transportation and a safe way to vacation, resulting in a significant increase in demand for our products and a positive impact on our business and financial results.

Localized outbreaks, the emergence of variants, the direct or indirect impact of the pandemic on our supply chain or other continuations of the pandemic, as well as the actions taken to contain the spread of the virus by various governmental entities or other actors in the areas in which we operate and in which we sell our products may have a negative impact on our business, results of operations and financial position in future periods. The future severity of the COVID-19 pandemic is difficult to predict and ever-evolving. The pandemic continues to impact our business in numerous ways, including but not limited to those outlined below:
•Since the start of the pandemic we have experienced delays, and continue to experience delays, in obtaining certain raw material components and chassis. The operations of our suppliers within Europe, North America and elsewhere may continue to be disrupted, negatively impacting the price we are required to pay to acquire raw material inputs, or limiting our production output due to a lack of key material components in sufficient quantities.
•The geographic centrality of the North American RV industry in northern Indiana, where the majority of our facilities and many of our suppliers are located, has, at times, stressed, and could continue to stress, our supply chain and workforce, should northern Indiana or any of the other areas in which we, our suppliers or our customers operate become disproportionately impacted by the pandemic.
•If the pandemic worsens, or reappears in future periods, our labor force may be negatively impacted by COVID-19 infections, which would negatively impact our ability to produce and sell units.
•If governmental mandates or private actor responses imposed to slow the spread of the virus, or its variants, are extended or reinstated in future periods, we may need to temporarily suspend production, like we did in March 2020, and our business may be negatively impacted.
•A return to widespread restrictions on the movement of consumers or the shutdown of retail facilities, camping or other recreational destinations may negatively impact demand for our products.

RISKS RELATED TO OUR OPERATIONS AND THE RV INDUSTRY

The industry in which we operate is highly competitive.

The industrycompetitive both in which we are engaged is highly competitive. the United States and in Europe.


The recreational vehicle industry is generally characterized by relatively low barriers to entry which result in numerous existing and potential recreational vehicle manufacturing competitors. A number of our operating subsidiaries also compete with each other.a highly competitive business environment. Competition within the industry is based upon price, design, value, quality and service as well as other factors. Competitive pressures have, from time to time, resulted in a reduction of our profit margins and/or a reduction in our market share. Sustained increases in these competitive pressures could have a material adverse effect on our results of operations.


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According to RVIA and CIVD, respectively, there are approximately 70 RV manufacturers in the U.S. and Canada and approximately 30 RV manufacturers across Europe. Not only does our Company compete against numerous existing recreational vehicle manufacturers, but a number of our operating subsidiaries compete with each other. Additionally, due to the current robust interest in the RV lifestyle, which is driving strong consumer and dealer demand for products, a number of start-up companies, in North America, and certain automotive manufacturers, in both North America and Europe, have entered the RV industry with the introduction of products that directly compete with our products. If existing or new competitors develop products that are superior to ours, or thatmore innovative, achieve better consumer acceptance or are offered at a lower net price to dealers, our market share, sales volume and profit margins may be adversely affected.


In addition to direct manufacturing competitors,competition from other RV manufacturers, we also compete against consumer demand for used recreational vehicles, particularly during periods of economic downturn. TheIncreased availability of used recreational vehicles and the pricing differentialsignificant price differences between usednew and newused recreational vehicles, areas a result of an economic downturn or otherwise, could have a material adverse effect on demand for our products and our results of operations.

Finally, we also face competition from other consumer leisure, discretionary and vacation spending alternatives, such as cruises, vacation homes, timeshares and other traditional vacations along with other recreational products like boats and motorcycles. Changes in actual or perceived value among the primary factors whichthese alternatives by consumers could impact the competitiveness of used vehicle sales.

The industry in which we operate isour future sales volume and profitability.


Our U.S.-based operations are primarily centered in northern Indiana.


The majority of our U.S. operations are located in one region. The geographic centrality of the U.S. RV industry in northern Indiana, where the majority of our U.S. facilities are located, creates certain risks, including:

●

Competition for workers skilled in the industry, especially during times of increasing RV production, which may increase the cost of our labor or limit the speed at which we can expand production;

●

Employee retention and recruitment challenges, as employees with industry knowledge and experience may be attracted to the most lucrative positions and their ability to change employers is relatively easy;

●

Potential for greater adverse impact from natural disasters; and

●

Competition for desirable production facilities, especially during times of increasing RV production, may increase the cost of acquiring production facilities or limit the availability of such facilities.

•Competition for workers skilled in the industry, especially during times of low unemployment or periods of high demand for RVs, such as we are currently experiencing, has, in the past, and may, in the future, increase the cost of our labor or limit the speed at which we can respond to changes in consumer demand;
•We have, in the past, and could, in the future, experience employee retention and recruitment challenges as employees with industry knowledge and experience have been, and may continue to be, attracted to other positions or opportunities, and their ability to change employers is relatively easy; and
•The potential exists for a greater adverse impact from natural disasters, such as weather-related events and pandemics.

Our business is both cyclical and seasonal and leadssubject to fluctuations in sales, production and net income.

We


The RV industry has historically been characterized by cycles of growth and contraction in consumer demand, reflecting prevailing economic and demographic conditions, which affect disposable income for leisure-time activities. Consequently, the results of any prior period may not be indicative of results for any future period.

In addition, we have experienced in the past, and expect to continue to experience in future periods, significant variability in quarterly sales, production and net income as a result of annual seasonality in our business. Since recreational vehicles are used primarily by vacationers and campers, historically, demand in the recreational vehicle industry generally declines during the fall and winter months, while sales and profits are generally highest during the spring and summer months. DealerRecent factors resulting from the COVID-19 pandemic, such as high consumer demand for RVs, low independent dealer inventory and buying patterns also impactconstraints in the timing of shipments from one quarterlabor pool and supply chain, have been disrupting, and may continue to another. In addition, severe weather conditionsdisrupt, the historical trends in some geographic areas may delay the timing of shipments from one quarter to another. The seasonality of our business in both North America and Europe.

Our business is structured to quickly align production and cost structure to meet fast changing market conditions. However, if we are not able to ramp production up or down quickly enough in response to rapid changes in demand, we may not be able to effectively manage our costs, which could negatively impact quarterly operating results.

results, and we may lose sales and market share.


Our business may be affected by certain external and macroeconomic factors beyond our control.


Companies within the recreational vehicle industry are subject to volatility in operating results due to external factors, such as general economic conditions, credit availability, consumer confidence, employment rates, prevailing interest rates, inflation, other economic conditions affecting consumer attitudes and disposable consumer income, demographic changes, international conflict, and politicalgeopolitical changes. Specific external factors affecting our business include:

●

Overall consumer confidence and the level of discretionary consumer spending;

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Raw material and commodity price fluctuations;

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Availability of raw materials and components used in production;

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Level of warranty claims incurred;

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Legislative, regulatory and tax law and/or policy developments including their potential impact on our dealers and their retail customers or on our suppliers;

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Interest rate fluctuations and the availability of credit;

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Success of new and existing products and services;

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Consumer preferences;

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Dealer confidence and stocking levels;

●

RV retail consumer demographics;

●

Employment and wage trends;

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Consolidation of RV dealerships;

●

Global, domestic or regional financial turmoil;

●

Natural disasters;

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Relative or perceived cost, availability and comfort of recreational vehicle use versus other modes of travel, such as car, air or rail travel; and

●

General economic, market and political conditions, including war, terrorism and military conflict.

•COVID-19, including the impact of the pandemic on our employees, dealers, retail customers and suppliers and steps taken by governments and other actors to respond to the pandemic;

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•Overall consumer confidence and the level of discretionary consumer spending;
•Fuel shortages or high fuel prices;
•Raw material and commodity price fluctuations;
•Availability of raw materials and components used in production;
•Legislative, regulatory and tax law and/or policy developments including their potential impact on our dealers and their retail customers or on our suppliers;
•Interest rate fluctuations and the availability of credit, including the potential impact of these items on our suppliers, dealers and end consumers;
•Success of new and existing products and services, including the success of our competitors with new products or services they may introduce;
•Consumer spending habits and preferences regarding leisure activities;
•Independent dealer confidence and stocking levels;
•RV retail consumer demographics;
•Employment and wage trends;
•Consolidation of independent RV dealerships;
•Consolidation of RV suppliers;
•Global, domestic or regional financial or political turmoil;
•Natural disasters;
•Relative or perceived safety, cost, availability and comfort of recreational vehicle use versus other modes of travel, such as car, cruise ships, air or rail travel; and
•General economic, market and political conditions, including war, terrorism and military conflict.

The loss of our largest independent dealer and the increase in independent dealer consolidations could have a significantmaterial effect on our business.


Sales to FreedomRoads, LLC accounted for 20%approximately 13.0% of our consolidated net sales for fiscal 2018.2021. During recent years, FreedomRoads, LLC has acquired a number of formerly independent RV dealerships which has impacted our salesdealerships. The leverage to negotiate better terms with us arising from FreedomRoads, LLC. Future consolidation of dealerships by FreedomRoads, LLC could impact our sales, concentration of sales to this key dealer and our exposure under repurchase obligations.

TheLLC’s acquisitions or the loss of this dealer could have a significantmaterial adverse effect on our business. In addition, deterioration in the liquidity or credit worthiness of FreedomRoads, LLC could negatively impact our sales and accounts receivable and could trigger repurchase obligations under our repurchase agreements.

Fuel shortages, or high prices for fuel, could have a negative effect on sales of our recreational vehicles.

Gasoline or diesel fuel is required for the operation of our vehicles or the vehicles which tow our products. Shortages or rationing of gasoline and diesel fuel, and significant, sudden increases in the price of fuel have had a material adverse effect on the recreational vehicle industry as a whole in the past and could have a material adverse effect on our business in the future.

Business acquisitions pose integration risks.

Our growth has been both internal and by acquisition. Business acquisitions, joint ventures and the merger of subsidiaries within Thor, pose


Recently, a number of potential integration risks that may resultother U.S.-based independent dealers have acquired, and continue to acquire, formerly independent RV dealerships, resulting in negative consequencesfurther independent dealer concentration. Continued consolidation in the U.S. independent dealer network could negatively impact our sales or gross margins and increase the concentration of our exposure under repurchase obligations related to our business, financial condition or results of operations. The pace and significance of acquisitions; the integration of acquired companies, assets, operations and joint venture arrangements and the merger of subsidiaries within Thor involve a number of related risks, including, but not limited to:

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The diversion of management’s attention from the management of daily operations to various transaction and integration activities;

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The potential for disruption to existing operations and plans;

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The assimilation and retention of employees, including key employees;

independent dealers.

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The ability of our management teams to manage expanded operations to meet operational and financial expectations;

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The integration of departments and systems, including accounting systems, technologies, books and records and procedures;

●

The adverse impact on profitability if expanded or combined operations do not achieve expected financial results;

●

The potential loss of, or adverse effects on, existing business relationships with suppliers and customers;

●

The assumption of liabilities of the acquired businesses, which could be greater than anticipated; and

●

The potential adverse impact on operating results due to the use of estimates, which are subject to significant management judgment, in the accounting for acquisitions, incurrence ofnon-recurring charges, and write-offs of significant amounts of goodwill and other assets.


Our business depends on the performance of independent dealers and transportation carriers.


We distribute all of our North American and the majority of our European products through a system of independent, non-franchise authorized dealers, many of whom sell products from competing manufacturers. As of July 31, 2021, the Company distributed product to approximately 2,400 independent dealerships in the United States and approximately 1,100 dealerships in Europe. The Company depends on the capability of these independent authorized dealers to develop and implement effective retail sales plans to create demand among retail purchasers for the products that the dealers purchase from the Company. If the Company’s independent dealers are not successful in these endeavors, then the Company may be unable to maintain or grow its revenues and meet its financial expectations. The geographic coverage of our independent dealers and their individual business conditions can affect the ability of our authorized dealers to sell our products to consumers. If our independent dealers are unsuccessful, they may exit or be forced to exit the business or, in some cases, the Company may seek to terminate relationships with certain dealerships. As a result, the Company could face additional adverse consequences related to the termination of independent dealer relationships. For example, the unplanned loss of any of the Company’s independent dealers could lead to inadequate market coverage of our products. In addition, recent consolidation of independent dealers, as well as the growth of larger,large, multi-location dealers, may result in increased bargaining power on the part of independent dealers.



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Given the independent nature of dealers, they generally maintain control over which manufacturers, and which brands, they will do business with, often carrying more than one manufacturer’s products. Independent dealers can, and do, change which brands and which manufacturers they sell. If our products are not perceived by the independent dealers as being desirable and profitable for them to carry, the dealers may terminate their relationship with our operating subsidiaries or may drop certain of our brands, which would in turn adversely affect our sales and profit margins if we are unable to replace those dealers.

Our products are generally delivered to our independent dealers via a system of independent transportation contractors. The network of carriers is limited and, in times of high demand and limited availability, can create riskwe have experienced in the past, and could face again, the disruption of our distribution channel.

The network of carriers and their ability to deliver units to certain locations was initially negatively impacted by the COVID-19 pandemic. If the pandemic worsens in the regions in which we operate or sell into, the transportation contractors may have difficulty finding drivers who are willing to deliver in those regions, or governmental agencies or other actors may restrict movement of goods in those regions.


Our repurchase agreements with floor plan lenders could result in increased costs.

In accordance with customary practice in the recreational vehicle industry, upon the request of a lending institution financing an independent dealer’s purchase of our products, we will generally execute a repurchase agreement with the lending institution. Repurchase agreements provide that, typically for a period of up to 18 months after a recreational vehicle is financed and in the event of default by the dealer, we will repurchase the recreational vehicle repossessed by the lending institution for the amount then due, which is usually less than 100% of the dealer’s cost. In addition to the guarantee under these repurchase agreements, we may also be required to repurchase inventory relative to dealer terminations in certain states in accordance with state laws or regulatory requirements.

The difference between the gross repurchase price and the price at which the repurchased product can then be resold, which is typically at a discount to the original sale price, is an expense to us. Thus, if we are obligated to repurchase a substantially greater number of recreational vehicles, or incur substantially greater discounting to resell these units in the future, those circumstances would increase our costs and negatively affect our profit margins and results of operations. In difficult economic times, this amount could increase significantly compared to recent years.

RISKS RELATED TO DEBT, LIQUIDITY AND FOREIGN CURRENCY

The Company’s debt arrangements may make us more sensitive to the effects of economic downturns, and provisions in our debt agreements could constrain the options available to us to react to changes in the economy or our industry.

As of July 31, 2021, total gross outstanding debt was $1,640,693, consisting of $1,540,013 outstanding on our term loan facility, which matures on February 1, 2026, and $100,680 outstanding on other debt facilities which mature at various dates through September 2032. Our level of debt impacts our profit before tax and cash flow because of the interest expense and periodic debt and interest payments. In addition, our debt level could limit our ability to raise additional capital, if necessary, or increase borrowing costs on future debt, and may have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions, requiring us to use a portion of our cash flow to repay indebtedness and placing us at a disadvantage compared to competitors with lower debt obligations.

Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. If we do not generate sufficient cash flow to meet our debt service, capital investment and working capital requirements, we may need to fund those requirements with additional borrowings from the ABL, reduce or cease our payments of dividends, or we may need to seek additional financing or sell assets.

Furthermore, our credit facilities contain certain provisions that may limit our flexibility in planning for, or reacting to, changes in our business and our industry. Our credit facilities contain provisions impacting, among other items, our ability to:
•Declare dividends or repurchase capital stock;
•Incur liens;
•Make loans, guarantees, acquisitions and investments;
•Incur additional indebtedness;
•Amend or otherwise alter debt and other material agreements;
•Engage in mergers, acquisitions or asset sales; and
•Engage in transactions with non-loan party affiliates.


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Changes in market liquidity conditions, credit ratings and other factors may impact our access to future funding and the cost of debt.

Significant changes in market liquidity conditions and changes in the Company's credit ratings could impact our access to future funding, if needed, and funding costs, which could negatively impact the Company's earnings and cash flows. If general economic conditions deteriorate or capital markets become more volatile, including as a result of the COVID-19 pandemic, future funding, if needed, could be unavailable or insufficient. A debt crisis, particularly in the United States or Europe, could negatively impact currencies, global financial markets, social and political stability, funding sources, availability and costs, asset and obligation values, customers, suppliers, demand for our products and our operations and financial results. Financial market conditions could also negatively impact dealer or retail customer access to capital for purchases of the Company's products and customer confidence and purchase decisions.

Our business is affected by the availability and terms of financing to independent dealers and retail purchasers.


Generally, independent recreational vehicle dealers finance their purchases of inventory with financing provided by lending institutions. A decrease in the availability of this type of wholesale financing, more restrictive lending practices or an increase in the cost of such wholesale financing can prevent independent dealers from carrying adequate levels of inventory, which limitsmay limit product offerings and could lead to reduced demand. Threedemand for our products. Two major floor plan financial institutions held approximately 82%59% of our portion of our independent dealers’ total floored dollars outstanding at July 31, 2018.2021. In the event that anyeither of these lending institutions limit or discontinue dealer financing, we could experience a material adverse effect on our results of operations.


Substantial or sudden increases in interest rates and decreases in the general availability of credit have had an adverse impact on our dealers and therefore on our business and results of operations in the past and may do so in the future. Further, a decrease in availability of consumer credit resulting from unfavorable economic conditions, or an increase in the cost of consumer credit, may cause consumers to reduce discretionary spending which could, in turn, reduce demand for our products and negatively affect our sales and profitability.


RISKS RELATED TO OUR PRODUCTS

Changes in consumer preferences for our products, or our failure to gauge those preferences, could lead to reduced sales.

sales or otherwise negatively impact our business.


We cannot be certain that historical consumer preferences for recreational vehicles in general, and our products in particular, will remain unchanged.consistent. Recreational vehicles are generally used for recreational purposes, and demand for our products may be adversely affected by competition from other activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern or taste. Additionally, our products are offered at a variety of price points; however, if our products are determined by dealers or consumers not to be priced competitively, especially compared to our competitors or to other available leisure-time activities, our sales may be adversely impacted. Similarly, an overall decrease in consumer leisure time may reduce consumers’ willingness to purchase our products.


Consumer preferences in vehicles and automotive manufacturers' responses to those preferences and governmental mandates could also result in changes in consumer preferences for recreational vehicles or the types of recreational vehicles preferred. These changes could include shifts to smaller vehicles, electric vehicles, autonomous vehicles or other unanticipated changes.
Our ability to remain competitive depends heavily on our ability to provide a continuing and timely introduction of innovative product offerings. We believe that the introduction of new features, designs and models will be critical to the future success of our recreational vehicle operations. Managing frequent product introductions poses inherent risks. Delays in the introduction or market acceptance of new models, designs or product features could have a material adverse effect on our business. Products may not be accepted for a number of reasons, including changes in consumer preferences or our failure to properly gauge consumer preferences. Further, we cannot be certain that new product introductions will not reduce revenues from existing models and adversely affect our results of operations. In addition, our revenues may be adversely affected if our new models and products are not introduced to the market on time or are not successful when introduced. Finally, our competitors’ new products may obtain better market acceptance or render our products obsolete.

obsolete, and/or new technological advances could disrupt our industry.



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If the frequency and size of product liability and other claims against us increase, our business, results of operations and financial condition may be harmed.


We are subject, in the ordinary course of business, to litigation involving product liability and other claims against us, including, without limitation, wrongful death, personal injury and warranties. WeIn North America, we generally self-insure a portion of our product liability and other claims and also purchase product liability and other insurance in the commercial insurance market. In Europe, we generally fully insure similar risks with insurance offering relatively low deductibles or premiums. We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us. We have a self-insured retention (“SIR”) for products liability and personal injury matters ranging from $500 to $7,500 depending on the product type and when the occurrence took place. Generally, any occurrence (as defined by our insurance policies) after March 31, 2015 is subject to the $500 SIR, while matters occurring after March 31, 2014 and through March 31, 2015 are subject to a $1,000 SIR.

Amounts above the SIR, up to a certain dollar amount, are covered by our excess insurance policy. Currently, we maintain excess liability insurance aggregating $50,000 with outside insurance carriers to minimize our risks related to catastrophic claims in excess of our self-insured positions for products liability and personal injury matters. Any material change in the aforementioned factors could have an adverse impact on our operating results. Any increase in the frequency and size of claims, as compared to our experience in prior years, may cause the premium that we are required to pay for insurance to increase significantly and may negatively impact future SIRself-insured retention levels. It may also increase the amounts we pay in punitive damages, not all of which are covered by our insurance.

An introduction


Our products and services may experience quality problems from time to time, including from vendor-supplied parts, that could result in decreased sales and gross margin and could harm our reputation.

Our products contain thousands of new products into the marketplace or extended warranty coverageparts, many of which are supplied by a network of approved vendors. As with all of our competitors, defects may occur in our products, including those purchased from our vendors. As we continue to ramp up production to meet the current high demand for our product, we cannot be certain that we will detect all such defects prior to distribution of our products. In addition, although we endeavor to compel our suppliers to maintain appropriate levels of insurance coverage, we cannot be certain that, if a defect in a vendor-supplied part were to occur, the vendor would have the ability to financially rectify the defect. Failure to detect defects in our products, including vendor-supplied parts, could result in lost revenue, increased warranty and related costs and harm to our reputation.

Unexpected warranty costs may result in expenses that we did not anticipate, which, in turn, cancould result in reduced earnings.


The introduction of new models, floor plans and features are critical to our future success. We may incur unexpected expenses, however, when we introduce new models, floor plans or features. For example, we may experience unexpectedUnexpected engineering or design flaws that will force a recall of a new product or may causehave resulted in recalls and increased warranty costs.claims in the past and could be incurred in the future. The costs resulting from these types of problems could be substantial and could have a significantmaterial adverse effect on our earnings. Estimated warranty costs are provided at the time of product sale to reflect our best estimate of the amounts necessary to settle future and existing claims on products. An increase in actual warranty claimsclaim costs as compared to our estimates, due to either the introduction of new products or extended warranty coverage, could result in increased warranty reserves and expense which could have an adverse impact on our earnings.


We could lose sales and market share if we do not maintain our strong brands and also develop innovative products that not only meet the needs and desires of consumers but which also align with anticipated changes in future vehicle concepts.

A key driver in our historical performance and growth is our ability to maintain our strong brands and to develop and introduce innovative new and improved products. To successfully execute our long-term strategy, we must continue to develop new products and services. We also recognize that there are numerous changes that may impact our industry in the future, such as lighter-weight vehicles used for towing our products, as well as changes such as electric vehicles that could impact both our motorized and towable units. Our repurchase agreementsinitiatives to invest in the future of the RV industry through product innovation may be costly and may not be successful. The uncertainties associated with floor plan lendersdeveloping and introducing innovative and improved products, such as gauging changing consumer demands and preferences and successfully developing, manufacturing, marketing and selling these products, may impact the success of our product introductions. If the products we introduce do not gain widespread acceptance, or if our competitors improve their products more rapidly or effectively than we do, we could lose market share or be required to reduce our prices, which could adversely impact our results of operations and financial position. In addition, there is no guarantee that our innovation efforts will lead to products that will be introduced to market or that an initial product concept or design will result in increased costs.

In accordancea unit that generates sales in sufficient quantities and at high enough prices to be profitable.


If we do not timely, effectively and accurately predict or identify and respond to changing consumer preferences, including a continued shift in consumer desire for connected vehicles with customary practice ina focus on ease of use and a high-quality customer experience, the recreational vehicle industry, upon the requestdemand for our products could also be reduced and our results of a lending institution financing a dealer’s purchaseoperations and financial position could be adversely affected.
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A material portion of our revenue is derived from sales of our products to international sources, which creates additional uncertainty.

Combined sales from the United States to foreign countries (predominately Canada) and sales from our foreign subsidiaries to countries other than the U.S. (predominately within the European Union) represent approximately 31.3% of THOR’s consolidated sales for fiscal 2021. These non-U.S. sales create the potential for numerous risks which could negatively impact our financial operating results, including foreign currency effects, tariffs, customs duties, inflation, difficulties in enforcing agreements and collecting receivables through foreign legal systems, compliance with international laws, treaties, and regulations, and unexpected changes in regulatory or tax environments, disruptions in supply or distribution, dependence on foreign personnel and various employee work agreements, foreign governmental action, as well as economic and social instability. In addition, there may be tax inefficiencies in repatriating cash from non-U.S. subsidiaries, or unfavorable tax law changes.

Global political uncertainty and shifts pose risks of volatility in global markets, which could negatively affect our operations and financial results. Changes in U.S. policy regarding foreign trade or manufacturing may create negative sentiment about the U.S. among non-U.S. dealers, end customers, employees, or prospective employees, all of which could adversely affect our business, sales, hiring and employee retention. If we willare unable to anticipate and effectively manage these and other risks of operating in and selling into foreign jurisdictions, our international operations and our business as a whole could be materially and adversely affected.

The Company’s U.S.-based subsidiaries have expenses and sales denominated in U.S. dollars. Sales by our U.S.-based subsidiaries into the Canadian market are subject to currency risk as devaluation of the Canadian dollar versus the U.S. dollar may negatively impact U.S.-dollar denominated sales into Canada. With the acquisition of EHG, the Company has Euro-denominated assets which are subject to changes in the Euro and U.S. dollar currency exchange rate. To offset a portion of this currency risk, the acquisition was partially funded through a Euro-denominated Term Loan B, which provides an economic hedge.

Our European segment expenses are predominantly denominated in Euros. European sales are generally execute a repurchase agreementdenominated in Euros, with sales in the United Kingdom market being the primary exception, where sales are denominated in British Pounds Sterling. The Company has used foreign currency forward contracts to help manage (i.e., partially hedge) certain foreign exchange rate exposures related to anticipated sales transactions in British Pounds Sterling with financial instruments whose maturity date, along with the lending institution. Repurchase agreements provide that, typically for a period of up to 18 months after a recreational vehicle is financed and inrealized gain or loss, occurs on or near the event of default by the dealer, we will repurchase the recreational vehicle repossessed by the lending institution for the amount then due, which is usually less than 100%execution of the dealer’s cost.

In addition to the guarantee underanticipated transaction. Despite these repurchase agreements, we may also be required to repurchase inventory relative to dealer terminationsefforts, significant changes in certain states in accordance with state laws or regulatory requirements. The difference between the gross repurchase price and the price at which the repurchased product can then be resold, which is typically atcurrency exchange rates could have a discount to the original sale price, is an expense to us. Thus, if we are obligated to repurchase a substantially greater numbermaterial adverse effect on our results of recreational vehicles, or incur substantially greater discounting to resell these units in the future, those circumstances would increase our costs. In difficult economic times this amount could increase significantly compared to recent years.

operations.


RISKS RELATED TO OUR SUPPLY CHAIN

For some of thecertain components used in production, we depend on a small group of suppliers and the loss of any of these suppliers could affect our ability to obtain components timely or at competitive prices, which, in turn, would decreasenegatively impact our sales and profit margins. Additionally, continued consolidation of our major suppliers further limits alternative supply sources, which could increase costs and decrease our sales and profit margins. Finally, certain raw material components are sourced from foreign sources, and delays in obtaining these components, along with added tariffs, could result in increased costs and decreased sales and profit margins.


We depend on timely and sufficient delivery of components from our suppliers. MostMany components are readily available from a variety of sources. However, a fewcertain key components are currently produced by only a small group of suppliers that have the capacity to supply large quantities, primarily occurring in the case of: 1) motorized chassis, where there are a limited number of chassis suppliers, and 2) windows and doors, towable chassisframes andslide-out mechanisms, axles and upholstered furniture for our recreational vehicles, where LCI Industries is a major supplier for these items within the North American RV industry.


The remaining components are sourced by a number of suppliers, some of which are smaller or medium-sized businesses that may not have the financial reserves or borrowing power to successfully manage through an economic hardship or financially support potential warranty or recall demands. Additionally, some of our smaller suppliers have discontinued, or could in the future discontinue, their business with little to no warning. If our Company is not adequately sourced for certain components, the discontinuation of even some smaller suppliers could have an adverse effect on our business.


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Recently, the recreational vehicle industry, as a whole, has from timeexperienced, and continues to time, experiencedexperience, a shortage of numerous raw materials, including chassis, which has been affected by the ongoing semiconductor shortage that has hampered automobile production around the world. These supply chain constraints have limited our ability to further increase production to meet increased levels of independent dealer demand. We continue to manage production by shifting our production schedules, securing alternative supplies of needed parts and taking other proactive actions. If the shortages become more severe, longer term in nature or are not limited in scope, if industry demand continues to increase faster than the suppliers can respond or if other factors were to impact the suppliers’ ability to supply our production needs, our business and results of motorizedoperations would be adversely impacted. In addition, the recent consolidation of two of our largest European chassis due tosuppliers has increased the supplier concentration in this area. If this supplier increases its prices or allocation of available resources byexperiences operational or integration issues in conjunction with their merger, such as labor shortages or production challenges, our European production, sales and profitability could be additionally adversely impacted.

If key suppliers of these chassis. Historically, inwhich currently serve the event of an industry-wide restriction of supply, suppliers have generally allocated chassis among us and our competitors based on the volume of chassis previously purchased. If certain suppliersRV industry were to discontinue the manufacturing of motorhomeraw materials or chassis suitable for our use for our range of products, or if, as a group, our chassis suppliers significantly reduced the availability of materials or chassis to the industry, our business would be adversely affected. Similarly, shortages at, or production delays or work stoppages by the employees of our raw material and chassis suppliers, have, in the past, and could, in the future, have a material adverse effect on our sales. If the condition of the U.S. auto industry were to significantly deteriorate, that deterioration could also result in supply interruptions and a decrease in

Continued consolidation within our sales and earnings while we obtain replacement chassis from other sources.

LCI Industries is a major supplier of a number of key components of our recreational vehicles such as windows and doors, towable chassis andslide-out mechanisms, axles and upholstered furniture. We have not experienced any significant shortages or delays in delivery related to these items; however, if industry demand were to increase faster than LCI Industries can respond, or other factors impact their ability to continue to supply our needs for these key components, our business could be adversely affected.

Continued consolidation of our major suppliersbase may also inhibit our ability to source from alternative suppliers and could result in increased component costs, which may result in decreased margins or higher wholesale product costs, which could, ultimately, result in decreased sales.

demand for our products and adversely impact our sales and operating results.


In addition, certain RV components are sourced from foreign locations.countries where we do not currently have operations. Changes in U.S. trade policy and resulting tariffs that have or may be imposed, along with port, production or other delays, have, in the past, and could, again in the future, cause increased costs for, or shortages of, certain RV components orsub-components. We may not be able to source alternative supplies as necessary without increased costs or at all. If alternatives are not readily available, that unavailability could lead to potential decreases in our sales and earnings.


Finally, as is standard in the industry, arrangements with chassis and other suppliers are generally terminable at any time by either our Company or the supplier. If we cannot obtain an adequate supply of chassis or other key components, this could result in a decrease in our sales and earnings.

Commodity price fluctuations, including those caused


Our chassis supply, and therefore our production and sales, may be negatively impacted by recent steel and aluminum tariffs, may impact operating results.

Commodity costs, including aluminumongoing compliance requirements with chassis emissions standards, which is utilized extensively by certain of our subsidiaries, are subject to price fluctuations outsidefuture changes by various governmental organizations, in both the U.S. and Europe.


We obtain motorized chassis from a number of our control. The pricedifferent chassis suppliers who are required to comply with strict emission standards. As governmental agencies revise those standards, the chassis manufacturers must comply within the timeframes established. Uncertainties created by continued emission standards compliance requirements or the adoption of aluminum is typically influenced by macroeconomic factors, global supplyrevised emission standards include the ability of the chassis manufacturer to comply with such standards on a timely and demand of aluminum (including expectations for growth and contraction and the level of global inventories); the level of activity by financial investors and, more recently, by tariffs. In addition, the price of aluminum is influenced by the supply of, and demand for, metal in a particular region and associated transportation costs. Similarly, other commodities, suchongoing basis as steel and wood or wood products, are also subject to price fluctuations outside of our control, including fluctuations resulting from the imposition of tariffs or other regulatory actions. Pricing changes for aluminum, steel, wood, and other relevant commodities, and the level of aluminum, steel, wood or other commodity inventory maintained by the Company, may ultimately adversely impact our operating results.

Our products and services may experience quality problems from time to time that can result in decreased sales and gross margin and could harm our reputation.

Our products contain thousands of parts, many of which are supplied by a network of approved vendors. As with all of our competitors, defects may occur in our products, including those purchased from our vendors. We cannot assure you that we will detect all such defects prior to distribution of our products. In addition, although we endeavor to compel our suppliers to maintain appropriate levels of insurance coverage, we cannot assure you that if a defect in a vendor-supplied part were to occur that the vendor would havewell as the ability to financially rectifyproduce sufficient quantities of compliant chassis to meet our demand. In the defect. Failurepast, certain chassis manufacturers have experienced difficulties in meeting one or both of these requirements. In addition, revisions to detect defects inchassis by the suppliers often impact our products, including vendor-supplied parts, couldengineering and production processes and may result in lost revenue, increased warranty and relatedchassis or other costs and could harm our reputation.

to us.


RISKS RELATED TO REGULATIONS

Our business is subject to numerous national, regional, federal, state and local regulations.

Weregulations in the various countries in which we operate and/or sell our products.


Our operations are subject to numerous national, regional, federal, state and local regulations governing the manufacture and sale of our products, including the provisions of NTMVSAvarious vehicle and thecomponent safety standards for vehicles and components which have been promulgated under the NTMVSA by the U.S. Department of Transportation.

The NTMVSA authorizes the National Highway Traffic Safety Administration tocompliance standards. In various jurisdictions, governmental agencies require a manufacturer to recall and repair vehicles which contain certain hazards or defects. Sales into foreign countries may be subject to similar regulations. Any recalls of our vehicles, voluntary or involuntary, could have a material adverse effect on our results of operations and could harm our reputation. Additionally, changes in policy, regulations or the imposition of additional regulations could have a material adverse effect on our Company.

We



21

Our U.S. operations are also subject to federal and numerous state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, includingso-called “lemon laws”. Federal,laws.” U.S. federal and state, and foreignas well as various European laws and regulations, impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions. FederalU.S. federal and state, as well as various European, authorities have various environmental control standards relating to air, water, noise pollution and hazardous waste generation and disposal which affect our business and operations.

Further, certain


Numerous other U.S. and foreignEuropean laws and regulations affect a wide range of the Company’s activities. Areas of our business affected by such laws and regulations include, but are not limited to, labor, advertising, real estate, promotions, quality of services, intellectual property, tax, import and export duties, tariffs, anti-corruption, anti-competition, environmental, health and safety. Compliance with these laws and others may be onerous and costly, at times, and may be inconsistent from jurisdiction to jurisdiction, which further complicates compliance efforts. Violations of these laws and regulations could lead to significant penalties, including restraints on our export or import privileges, monetary fines, criminal or civil proceedings and regulatory or other actions that could materially adversely affect our operating results.

Changes


Climate-related regulations, such as new or more stringent greenhouse gas ("GHG") regulations designed to address climate change, may result in U.S. trade policyadditional compliance costs.

Our operations and the products we sell are currently subject to rules limiting emissions and to other climate related regulations in certain jurisdictions where we operate. Concerns regarding climate change at numerous levels of government in various jurisdictions may lead to additional international, national, regional and local legislative and regulatory responses, and compliance with any new rules could be difficult and costly.

Climate change regulation combined with public sentiment could result in retaliatory trade policiesreduced demand for our products, higher fuel prices or carbon taxes, limitations on where we can operate or sell our units, or other restrictions or costs, all of which could materially adversely affect our business.

Increased public attention to environmental, social and governance matters may expose us to negative public perception, impose additional costs on our business or impact our stock price.

Recently, more attention is being directed towards publicly-traded companies regarding environmental, social and governance (“ESG”) matters. A failure, or perceived failure, to respond to investor or customer expectations related to ESG concerns could cause harm to our business and reputation. For example, our RV products are powered by onegas and diesel engines or more U.S. trading partners.

The U.S. government has indicated its intentare required to adoptbe towed by gas or diesel-powered vehicles. Government, media or activist pressure to limit emissions could negatively impact consumers’ perceptions of our products which could have a new approachmaterial adverse effect on our business, and the actions taken by governments and other actors to trade policyreduce emissions could impose costs that could materially affect our financial condition.


Additionally, while THOR strives to create an inclusive culture and in some casesa diverse workforce where everyone feels valued and respected, a failure, or perceived failure, to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. It has also initiated or is considering the imposition of tariffs on certain foreign goods, including steelproperly address inclusivity and aluminum. Changes in U.S. trade policydiversity matters could result in onereputational harm, reduced sales or an inability to attract and retain a talented workforce.

Organizations that provide information to investors on corporate governance and other matters have developed rating systems for evaluating companies on their approach to ESG. Unfavorable ESG ratings may lead to negative investor sentiment which could have a negative impact on our stock price.

Our operations are subject to numerous labor and employment laws and regulations, and violations of those laws and regulations could have a materially adverse impact on our operating results.

We are subject, in the ordinary course of business, to litigation and claims arising from numerous labor and employment laws and regulations, including potential class action claims arising from alleged violations of such laws and regulations. Any liability arising from such claims would not ordinarily fall within the scope of our insurance coverages. An adverse outcome from such litigation could have a material effect on operating results.


22

Changes in tax rates, tax legislation or exposure to additional tax liabilities or tariffs could have a negative impact on our results of operations, cash flows, financial condition, dividend payments or strategic plan.

The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The Company's domestic and international tax liabilities are dependent upon the location of earnings among, and the applicable tax rates in, these different jurisdictions. Tax rates in various jurisdictions in which we operate or sell into may increase as a means of funding the significant cost of governmental stimulus measures enacted to assist and protect individuals and businesses impacted by the COVID-19 pandemic or to fund other governmental programs. The United States or other governmental authorities may adjust tax rates, impose new income taxes or indirect taxes, or revise interpretations of existing tax rules and regulations. Further, the outcome of future elections and the associated political party with power to enact legislation could make tax increases more U.S. trading partners, including Canadalikely and China, adopting responsive trade policy making it more difficult or costly for us to export our products to those countries. These measuressevere.

Our estimated effective income tax rate could also resultbe affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in statutory rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation. If the Company's effective tax rate were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows and financial condition could be adversely affected, which, in turn, could negatively impact the availability of cash for dividend payments or our strategic plan.

Additionally, new and/or increased tariffs by the United States and/or by other countries could subject the Company to increased costs for RV components that we importare imported into the United States. Increased costs for imported RV components could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, may result in lower marginmargins on products sold.

As a publicly-traded company, we are subject to rules and regulations promulgated by the Securities and Exchange Commission and the New York Stock Exchange.

Failure as a public company to comply with relevant rules and regulations of the Securities and Exchange Commission or the New York Stock Exchange could have an adverse impact on our business. Additionally, amendments to these rules or regulations and the implementation of new rules or regulations could increase the compliance, reporting, or other operating or administrative costs, and therefore could have an adverse impact on our business.

As a public company, we may be required to disclose certain information that may put us at a competitive disadvantage compared to certain of our competitors.


RISKS RELATED TO OUR INFORMATION SYSTEMS

Interruption of information systems service or misappropriation or breach of our information systems could cause disruption to our operations, and the accumulation and reporting of operating results, cause disclosure of confidential or personal information or cause damage to our reputation.


Our business relies on information systems and other technology (“information systems”) to support aspects of our business operations, including but not limited to, procurement, supply chain management, manufacturing, design, distribution, invoicing and collection of payments. We use information systems to accumulate, analyze and report our operational results. In connection with our use of information systems, we obtain, create and maintain confidential and personal information. Additionally, we rely upon information systems in our marketing and communication efforts. Due to our reliance on our information systems, we have established various levels of security, backup and disaster recovery procedures. Our business processes and operations may, however, be negatively impacted in the event of a substantial disruption of service or cyber-attacks.


The methods and technologies used to obtain unauthorized access to our information systems are constantly changing and may be difficult to anticipate.anticipate as are laws and regulations concerning data protection and privacy. While we have implemented and periodicallyregularly review robust security measures and processes designed to prevent and detect unauthorized access to our information systems, we may not be able to anticipate and effectively prevent unauthorized access or data loss in the future. The misuse, leakage, unauthorized access or falsification of information could result in a violation of privacy laws, including the European Union’sUnion's General Data Protection Regulation (GDPR),("GDPR") and laws applicable in North America and the United States, and damage to our reputation which could, in turn, have a significant, negative impact on our results of operations.

operations, as a result of fines, remediation costs or other direct or indirect ramifications.


RISKS RELATED TO OUR INTELLECTUAL PROPERTY, GOODWILL AND INTANGIBLE ASSETS

We may not be able to protect our intellectual property and may be subject to infringement claims.


Our intellectual property, including our patents, trademarks, copyrights, trade secrets, and other proprietary rights, constitutes a significant part of our value. Our success depends, in part, on our ability to protect our intellectual property against infringement and misappropriation by defending our intellectual property rights. To protect these rights, we rely on intellectual property laws of the U.S., Germany, Canada, and other countries, as well as contractual and other legal rights. We seek to acquire the rights to intellectual property necessary for our operations. However, our measures may not be successful in any given instance, particularly in countries outside the U.S. We endeavor to protect our rights; however, third parties may infringe upon our intellectual property rights. We may be forced to take steps to protect our rights, including through litigation, which could be expensive and result in a diversion of resources.

23

The inability to protect our intellectual property rights could result in competitors undermining the value of our brands by, among other initiatives,things, manufacturing and marketing similar products, which could adversely affect our market share and results of operations. Moreover, competitors or other third parties may challenge or seek to invalidate or avoid the application of our existing or future intellectual property rights that we develop, purchase, receive or license. The loss of protection for our intellectual property could reduce the market value of our brands and our products and services, lower our profits, and could otherwise have a material adverse effect on our business, financial condition, cash flows or results of operation.


We also face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend, cause us to cease making, licensing, or using products that incorporate the challenged intellectual property, require us to redesign, reengineer, or rebrand our products, if feasible, divert management’s attention and resources, or require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.property or damage our reputation. Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on our business, financial condition, and results of operations.


We could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.


We have a significantmaterial amount of goodwill, intangible assets and other long-lived assets. At least annually, we review goodwill for impairment. Long-lived assets, identifiable intangible assets and goodwill are also reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from future cash flows. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. If the carrying value of a long-lived asset is considered impaired, anon-cash impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value.value at the time of measurement. Our determination of future cash flows, future recoverability and fair value of our long-lived assets includes significant estimates and assumptions. Changes in those estimates or assumptions or lower-than-anticipated future financial performance may result in the identification of an impaired asset and anon-cash impairment charge, which could be material. Any such charge could adversely affect our operating results and financial condition.


RISKS RELATED TO HUMAN RESOURCES

Our ability to meet our manufacturing workforce needs is crucial.


We rely on the existence of an available, qualified workforce to manufacture our products. Competition for qualified employees could require us to pay higher wages to attract and retain a sufficient number of qualified employees. We cannot assure yoube certain that we will be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.

Within our European-based operations, we are subject to employee contracts, Works Councils and certain labor organizations. Any disruption in our relationships with these third-party associations, could adversely affect our ability to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.


We could be impacted by the potential adverse effects of union activities.

While our European-based operations are subject to employee contracts, Works Councils and certain labor organizations, none of our North American employees are currently represented by a labor union. Unionization of any of our North American facilities could result in higher employee costs and increased risk of work stoppages. We are, directly or indirectly, dependent upon companies with unionized work forces, such as parts suppliers, chassis suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition, or operating results. If a work stoppage occurs, it could delay the manufacture and sale of our products and have a material adverse effect on our business, prospects, operating results, or financial condition.

Our operations are dependent upon the services of our executive management and other key individuals, and their loss could materially harm us.



24

We rely upon the knowledge, experience and skills of our executive management and other key employees to compete effectively in our business and manage our operations. Our future success depends on, among other factors, our ability to attract and retain executive management, key employees and other qualified personnel. Upon the departure of such employees, our success may depend upon the existence of adequate succession plans. The loss of our executive management andor other key employees or the failure to attract or retain qualified employees could have a material adverse effect on us in the event that our succession plans prove inadequate.

Production efficiency


Increases in healthcare, workers compensation or other employee benefit costs could negatively impact our results of operations and financial condition.

Within our U.S.-based operations, the Company incurs significant costs with respect to employee healthcare and workers compensation benefits. The Company is self-insured for these employee healthcare and workers compensation benefits up to certain defined retention limits. If costs related to these or other employee benefits increase as a result of increased healthcare costs in the U.S., increased utilization of such benefits as a result of increased claims, new orre-configured facilities may not be realized revised U.S. governmental mandates or may incur unanticipated costs or delays that could adversely affect operating results.

The development and/or expansion of certain products and models may require the construction, improvement,re-configuration, relocation or expansion of production facilities. These development and expansion activities may be delayed, or we may incur unanticipated costs or not achieve the intended efficiencies, which could have a material adverse effect onotherwise, our operating results and financial condition.

condition may suffer. Within our European-based operations, the Company incurs significant costs with respect to employee benefits which are largely governed by country and regional regulations. New or revised governmental mandates may also cause our operating results and financial condition to suffer.


OTHER RISKS RELATING TO OUR COMPANY

Business acquisitions pose integration risks.

Our growth has been achieved by both organic growth and by acquisitions. Business acquisitions, including joint ventures, pose a number of potential integration risks that may result in negative consequences to our business, financial condition or results of operations. The relative strengthpace and significance of acquisitions and the U.S. dollar may impact sales.

We have historically generated considerable salesnature and extent of integration of acquired companies, assets, operations and joint venture arrangements involve a number of related risks including, but not limited to:

•The diversion of management’s attention from the management of existing operations to various transaction and integration activities;
•The potential for disruption to existing operations and plans;
•The assimilation and retention of employees, including key employees;
•Risks related to transacting business in Canadanew geographies, regulatory environments or product categories in which we are less accustomed, including but not limited to: foreign currency exchange rate changes, expanded macro-economic risks due to operations in and sales to Canadian dealers are madea wide base of countries, political and regulatory exposures to a wide array of countries, varying employee/employer relationships, including the existence of workers' councils and labor organizations, new product categories and other challenges caused by distance, language, and cultural differences, making it harder to do business in U.S. dollars. certain jurisdictions;
•The strengthability of our management teams to manage expanded operations, including international operations, to meet operational and financial expectations;
•The integration of departments and systems, including accounting systems, technologies, books and records, controls and procedures;
•The adverse impact on profitability if acquired operations do not achieve expected financial results or realize the synergies and other benefits expected;
•The potential loss of, or adverse effects on, existing business relationships with suppliers and customers;
•The assumption of liabilities of the U.S. dollar relative to the Canadian dollar has,acquired businesses, which could be greater than anticipated; and
•The potential adverse impact on operating results if, in the past,future periods, impairments of significant amounts of goodwill and could in the future, adversely impact sales in Canada. Should the U.S. dollar remain strong or further strengthen relative to the Canadian dollar, our Canadian sales may be negatively impacted.

other assets are required.


Our risk management policies and procedures may not be fully effective in achieving their purposes.


Our policies, procedures, controls and oversight to monitor and manage our enterprise risks may not be fully effective in achieving their purpose and may leave exposure to identified or unidentified risks. Past or future misconduct by our employees or vendors could result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm. The Company monitors its policies, procedures and controls; however, our policies, procedures and controls may not be sufficient to prevent all forms of misconduct. We review our compensation policies and practices as part of our overall enterprise risk management program, but it is possible that our compensation policies could incentivize inappropriate risk taking or misconduct. If such inappropriate risk taking or misconduct occurs, it is possible that it could have a material adverse effect on our results of operations and/or our financial condition.

Increases in healthcare, workers compensation or other employee benefit costs could negatively impact our results of operations and financial condition.

The Company incurs significant costs with respect to employee healthcare and workers compensation benefits. The Company is self-insured for employee healthcare and workers compensation benefits up to certain defined retention limits. If costs related to these or other employee benefits increase as a result of increased healthcare costs, increased utilization of such benefits as a result of increased claims, new or revised governmental mandates or otherwise, our operating results and financial condition may suffer.

Risks Relating To Our Company

25

Provisions in our charter documents and Delaware law may make it difficult for a third party to acquire our Company and could depress the price of our common stock.


Our Restated Certificate of Incorporation contains certain supermajority voting provisions that could delay, defer or prevent a change in control of our Company. These provisions could also make it more difficult for shareholders to elect directors, amend our Restated Certificate of Incorporation or take other corporate actions.


We are also subject to certain provisions of the Delaware General Corporation Law that could delay, deter or prevent us from entering into an acquisition, including provisions which prohibit a Delaware corporation from engaging in a business combination with an interested shareholder unless specific conditions are met. The existence of these provisions could limit the price that investors are willing to pay in the future for shares of our common stock and may deprive investors of an opportunity to sell shares at a premium over prevailing prices.


Our stock price may fluctuate in response to various conditions, many of which are beyond our control.


The stock market, in general, experiences volatility that has often been unrelated to the underlying operating performance of companies. Likewise, our common stock has, at various points in our history, experienced volatility that has not been correlated to our operating results. If this volatility continues,were to occur in the future, the trading price of our common stock could decline significantly, independent of our actual operating performance. The market price of our common stock may also fluctuate significantly in response to numerous factors, many of which are beyond our control, including the following:

●

Development of new products and features by our competitors;

●

Development of new collaborative arrangements by us, our competitors or other parties;

●

Changes in government regulations applicable to our business;

●

Changes in investor perception of our business and/or management;

●

Changes in global economic conditions or general market conditions in our industry;

●

Occurrence of major catastrophic events; and

●

Sales of our common stock held by certain equity investors or members of management.

Price volatility over a given period may cause•Development of new products and features by our competitors;

•Development of new collaborative arrangements by us, our competitors or other parties;
•Changes in government regulations applicable to our business;
•Changes in investor perception of our business and/or management;
•Changes in global economic conditions or general market conditions in our industry;
•COVID-19 developments, including the average price at which the Company repurchases its ownimposition of various governmental mandates in relation to COVID-19 or similar situations;
•Occurrence of major disruptive or catastrophic events; and
•Sales of our common stock to exceed the stock’s price at a given point in time. held by certain equity investors or members of management.

The CompanyCompany's stock price may reflect expectations of future growth and profitability. The Company’s stock priceprofitability and may also reflect expectations that its cash dividend will continue at current levels or grow and that its current share repurchase program will be fully consummated.grow. Future dividends are subject to declaration by the Company’s Board of Directors,Directors. Furthermore, and as is customary under credit facilities generally, certain actions, including our ability to pay dividends and repurchase shares, are subject to the Company’s share repurchase program does not obligate itsatisfaction of certain payment conditions prior to acquire any specific number of shares.payment. If the Company fails to meet expectations related to future growth, profitability, dividends, share repurchases or other market expectations, the Company might miss investor expectations or independent analyst estimates, which might result in analysts or investors changing their opinions and/or recommendations regarding our stock and our stock price may decline, which could have a material adverse impact on investor confidence and employee retention.

Risks Related


Changes to our investment and capital allocation strategies or other facets of our strategic plan may be made.

Our strategic plan guides activities such as our level of debt, pace of debt repayment, timing and extent of new debt, utilization of available cash, prioritization of capital expenditures and acquisition activity. Based on market conditions, opportunities and perceived risks, we could change or alter such activities and priorities. These changes could materially impact our overall business including future operating results, cost structure, debt structure or liquidity.

As a publicly-traded company, our required disclosures may put us at a competitive disadvantage.

As a public company, we may be required to disclose certain information that may put us at a competitive disadvantage compared to certain of our competitors who are either non-public or are not required to disclose specific industry-related information due to the Acquisitionimmateriality of the Erwin Hymer Group

As discussed in Note 18that information to the Consolidated Financial Statements, on September 18, 2018, the Company entered into a definitive agreement to acquire all of the issued and outstanding capital stock of Erwin Hymer Group SE (the “Erwin Hymer Group”). Unanticipated developments, including delays in obtaining various regulatory approvals, could delay or prevent the acquisition. In the event the transaction does not close, significant breakup fees or other monetary damages could be incurred. Additional risks related to the acquisition include:

The Company may fail to realize the anticipated strategic and financial benefits currently anticipated from the acquisition.

The Company may not realize all of the anticipated benefits of the acquisition, we may not further our business strategy as we expect, we may fail to realize the synergies and other benefits we expect from the acquisition or we may otherwise not realize the expected return on our investment, any one of which outcomes could adversely affect our business or operating results and potentially cause impairment to assets that would be recorded as a part of the acquisition, including intangible assets and goodwill.

Our due diligence of the Erwin Hymer Group may not have identified all pertinent risks, which could materially affect our business, financial condition, liquidity and results oftheir parent company’s consolidated operations.

As part of our due diligence, we utilized information provided by the sellers, and, in some cases, our direct access to information was limited due to anti-trust considerations. As is true with any transaction of this nature, there can be no guarantee that we are aware of all liabilities of the acquired company. Potential incremental liabilities and additional risks and uncertainties related to the acquired company not known or fully appreciated by us could negatively impact our future business, financial condition and results of operations.

The acquisition of Erwin Hymer Group poses certain incremental risks to the Company.

The incremental risks posed by the acquisition of the Erwin Hymer Group include, but are not limited to:

●

The diversion of management’s attention from the management of daily operations to various transaction and integration activities;

●

Possible deficiencies in internal control over financial reporting, including but not limited to, deficiencies associated with the IT system of the Erwin Hymer Group;

●

Possible deficiencies in operational processes and procedures;

●

Possible unanticipated, significant expenses related to integration;

●

Increased indebtedness that may negatively affect our capital structure and credit rating;

●

Risks related to transacting business in new geographies and regulatory environments in which we are unaccustomed, including but not limited to: foreign currency exchange rate changes, expanded macro-economic risks due to operations in and sales to a wide base of countries, political and regulatory exposures to countries in which we currently do not do business;

●

Foreign currency exposures;

●

Risks associated with forward currency fluctuations, as we have entered into a forward currency contract to offset the US Dollar cash impact of currency fluctuations related to the cash consideration to be paid in Euros upon closing the transaction. This derivative instrument does not qualify for hedge accounting treatment. Fluctuations in the value of the forward contract will receive mark-to-market accounting treatment which may significantly impact the Company’s earnings.

●

Risks associated with a more capital intense business;

●

Risks associated with carrying a relatively significant level of debt in a cyclical business;

●

The potential for disruption to existing Thor operations and plans;

●

The assimilation and retention of employees, including key employees;

●

The ability of our management team to manage expanded operations to meet operational and financial expectations;

●

The integration of departments and systems, including accounting systems, technologies, books and records and procedures;

●

The potential loss of, or adverse effects on, existing business relationships Erwin Hymer Group has with suppliers and customers.







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ITEM 1B. UNRESOLVED STAFF COMMENTS


None.

ITEM 2. PROPERTIES


As of July 31, 2018,2021, worldwide we owned or leased approximately 14,047,00023,351,000 square feet of total manufacturing plant and office space. We believe that our present facilities, consisting primarily of steel clad, steel or wood frame and masonry construction, and the machinery and equipment contained in these facilities, are generally well maintained and in good condition. As a result of our recent expansion efforts, we added 864,000 square feet in facilities in fiscal 2018 and 882,000 in fiscal 2017. We believe that our facilities are suitable and adequate for their intended purposes and that we would be able to obtain replacements for our leased premises at acceptable costs should our leases not be renewed.


The following table describes the location, number and size of our principal manufacturing plants and other materially important physical properties as of July 31, 2018:

Locations

       Owned or Leased        No. of
      Buildings     		   Approximate
Building Area
     Square Feet     		 

RVs:

      

Jackson Center, OH (Airstream) (A)(B)

   Owned              11    613,000 

Elkhart, IN (Thor Motor Coach) (B)

   Owned              14    826,000 

Bristol, IN (Thor Motor Coach) (B)

   Owned                2    192,000 

Wakarusa, IN (Thor Motor Coach) (B)

   Owned                1    52,000 

Middlebury, IN (Keystone) (A)

   Owned                2    181,000 

Goshen, IN (Keystone) (A)

   Owned              29    2,318,000 

Topeka, IN (Keystone) (A)

   Owned              11    742,000 

Syracuse, IN (Keystone) (A)

   Owned                1    138,000 

Pendleton, OR (Keystone) (A)

   Owned                5    371,000 

Elkhart, IN (Heartland) (A)

   Owned              17    1,171,000 

Elkhart, IN (Heartland) (A)

   Leased                1    53,000 

Middlebury, IN (Heartland) (A)

   Owned                1    143,000 

Nappanee, IN (Heartland) (A)

   Owned                2    111,000 

Howe, IN (Heartland) (A)

   Owned                4    465,000 

LaGrange, IN (Heartland) (A)

   Leased                1    126,000 

Nampa, ID (Heartland) (A)

   Owned                1��   252,000 

Shipshewana, IN (KZ) (A)

   Owned              14    555,000 

Middlebury, IN (Jayco) (A)(B)

   Owned              31    2,419,000 

Topeka, IN (Jayco) (A)

   Owned                7    446,000 

Shipshewana, IN (Jayco) (A)

   Owned                6    289,000 

Twin Falls, ID (Jayco) (A)

   Owned                3           162,000 

RV Subtotal

             164    11,625,000 

Other:

      

Cassopolis, MI (C)

   Owned                1    10,000 

Elkhart, IN (C)

   Owned                1    50,000 

Cassopolis, MI (C)

   Leased                4    270,000 

Elkhart, IN (C)

   Leased                5           464,000 

Other Subtotal

               11    794,000 

Corporate:

      

Elkhart, IN (Corporate)

   Owned                1    21,000 

Milford, IN (utilized by Heartland)

   Owned                7    138,000 

Elkhart, IN (utilized by Thor Motor Coach)

   Owned                3    223,000 

Wakarusa, IN (utilized by Keystone and Thor Motor Coach)

   Owned              18        1,246,000 

Corporate Subtotal

               29        1,628,000 

Total

             204            14,047,000 

(A)    Included in the towable recreational vehicles reportable segment.

(B)    Included in the motorized recreational vehicles reportable segment.

(C)    Included in the othernon-reportable segment.

2021:


Locations – Applicable Segment(s)Owned
or
Leased		No. of
Buildings		Approximate
Building Area Square Feet
United States:
Indiana – North American Towable SegmentOwned89 6,224,000 
Indiana – North American Towable SegmentLeased2 143,000 
Indiana – North American Towable and Motorized SegmentsOwned39 2,782,000 
Indiana – North American Motorized SegmentOwned17 1,200,000 
Indiana – Corporate, North American Towable and Motorized SegmentsOwned24 1,465,000 
Indiana – Other SegmentOwned1 50,000 
Indiana – Other SegmentLeased6 502,000 
Indiana Subtotal178 12,366,000 
Ohio – North American Towable and Motorized SegmentsOwned12 1,324,000 
Michigan – Other SegmentOwned1 10,000 
Michigan – Other SegmentLeased4 270,000 
Idaho – North American Towable SegmentOwned5 661,000 
Oregon – North American Towable SegmentOwned5 371,000 
Alabama – North American Motorized SegmentOwned28 1,137,000 
Alabama – North American Motorized SegmentLeased2 4,000 
Mississippi – North American Towable SegmentOwned13 405,000 
Mississippi – North American Motorized SegmentLeased6 257,000 
Other Subtotal76 4,439,000 
United States Subtotal254 16,805,000 
Europe:
Germany – European SegmentOwned88 4,176,000 
Germany – European SegmentLeased40 967,000 
Italy – European SegmentOwned3 568,000 
Italy – European SegmentLeased5 236,000 
France – European SegmentOwned6 330,000 
United Kingdom – European SegmentOwned1 269,000 
Europe Subtotal143 6,546,000 
Total397 23,351,000 
27

ITEM 3. LEGAL PROCEEDINGS

At July 31, 2018, the


The Company is involved in certain litigation arising out of its operations in the normal course of its business, most of which is based upon state “lemon laws”,laws,” warranty claims and vehicle accidents in North America (for which the Company carries insurance above a specified self-insured retention or deductible amount). The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. There is significant judgment required in assessing both the probability of an adverse outcome and the determination as to whether an exposure can be reasonably estimated. In management’s opinion, the ultimate disposition of any current legal proceedings or claims against the Company will not have a material effect on the Company’s financial condition, operating results or cash flows. Litigation is, however, inherently uncertain and an adverse outcome from such litigation could have a material effect on the operating results of a particular reporting period.


A product recall has been issued recently related to certain purchased parts utilized in certain of our products. The Company expects to be reimbursed for the costs it will incur related to this recall and does not believe there will be a material, adverse impact to our future results of operations and cash flows due to this matter.

ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.

28

PART II


Unless otherwise indicated, all Dollar and Euro amounts are presented in thousands except per share data.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Market Information


The Company’s Common Stock, par value $0.10 per share (the “Common Stock”), is traded on the New York Stock Exchange (“NYSE”). Set forth below is under the range of high and low market prices for the Common Stock for each quarter during the Company’s two most recent fiscal years, as quoted in the NYSE Monthly Market Statistics and Trading Reports:

   Fiscal 2018   Fiscal 2017 
         High               Low               High               Low       

First Quarter

  $136.37   $101.00   $87.08   $74.75 

Second Quarter

   161.48    127.29    108.45    74.00 

Third Quarter

   138.64    98.03    115.74    88.87 

Fourth Quarter

   111.39    87.62    109.91    87.96 

symbol “THO.”


Holders


As of August 31, 2018,September 15, 2021, the number of holders of record of the Common Stock was 105.

136.


Dividends


In fiscal 2018,2021, we paid a $0.37$0.41 per share dividend for each fiscal quarter. In fiscal 2017,2020, we paid a $0.33$0.40 per share dividend for each fiscal quarter.


The Company’s Board currently intends to continue regular quarterly cash dividends for each quarterdividend payments in the foreseeable future. As is customary under asset-based lines of credit facilities generally, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the paymentspayment of dividends under our existing debt facilities include a minimum level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreement.agreements. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors.

factors, in addition to compliance with any then-existing financing facilities.


Issuer Purchases of Equity Securities


There were no purchases of equity securities during the fourth quarter of fiscal 2018.

2021 or at any time during fiscal 2021.


Equity Compensation Plan Information– seeITEM 12

Item 12.

29

ITEM 6. SELECTED FINANCIAL DATA

  Fiscal Years Ended July 31, 
  2018  2017  2016(1)(2)  2015(3)  2014(4) 

Income statement data:

     

Net sales

     $      8,328,909      $      7,246,952      $      4,582,112      $      4,006,819      $      3,525,456 

Net income from continuing operations

  430,151   374,254   258,022   202,009   175,516 

Net income

  430,151   374,254   256,519   199,385   179,002 

Earnings per common share from continuing operations:

     

Basic

     $8.17      $7.12      $4.92      $3.80      $3.29 

Diluted

     $8.14      $7.09      $4.91      $3.79      $3.29 

Earnings per common share:

     

Basic

     $8.17      $7.12      $4.89      $3.75      $3.36 

Diluted

     $8.14      $7.09      $4.88      $3.74      $3.35 

Dividends paid per common share:

     

Regular

     $1.48      $1.32      $1.20      $1.08      $0.92 

Special

     $–      $–      $–      $–      $1.00 

Balance sheet data:

     

Total assets

     $2,778,665      $2,557,931      $2,325,464      $1,503,248      $1,408,718 

Long-term liabilities

  71,594   200,345   408,590   59,726   60,306 

(1)

Includes anon-cash goodwill impairment of $9,113 associated with a subsidiary in our towable segment.

(2)

Includes one month of the operations of Jayco from the date of its acquisition during the fiscal year.

(3)

Includes three and seven months of the operations of Postle and CRV/DRV, respectively, from the dates of their acquisitions during the fiscal year.

(4)

Includes three, nine and eleven months of the operations of KZ, Bison and Livin’ Lite, respectively, from the dates of their acquisitions during the fiscal year.

 Fiscal Years Ended July 31,
 
2021 (1)
2020
2019 (2)
20182017
Income statement data:
Net sales$12,317,380 $8,167,933 $7,864,758 $8,328,909 $7,246,952 
Income before income taxes844,581 272,896 184,666 633,029 556,386 
Acquisition-related costs included in income before income taxes— — 114,866 — — 
Net income660,870 221,384 132,465 430,151 374,254 
Net income attributable to THOR Industries, Inc.659,872 222,974 133,275 430,151 374,254 
Earnings per common share:
Basic$11.94 $4.01 $2.46 $8.17 $7.12 
Diluted$11.87 $4.00 $2.45 $8.14 $7.09 
Earnings per common share attributable to THOR Industries, Inc.:
Basic$11.93 $4.04 $2.47 $8.17 $7.12 
Diluted$11.85 $4.02 $2.47 $8.14 $7.09 
Dividends paid per common share:
Regular$1.64 $1.60 $1.56 $1.48 $1.32 
Balance sheet data:
Total assets$6,654,088 $5,771,460 $5,660,446 $2,778,665 $2,557,931 
Long-term liabilities1,911,197 1,910,610 2,116,893 71,594 200,345 

(1)Includes seven months of the operations of the Tiffin Group from the date of acquisition during the fiscal year.
(2)Includes six months of the operations of the Erwin Hymer Group from the date of acquisition during the fiscal year.
30

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Unless otherwise indicated, all dollarDollar and Euro amounts are presented in thousands except per share data.


Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included inITEM Item 8 of this Report.


The discussion below is a comparison of the results of operations and changes in financial condition for the fiscal years ended July 31, 2021 and 2020. The comparison of, and changes between, the fiscal years ended July 31, 2020 and 2019 can be found within "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2020, as filed with the SEC on September 28, 2020.

Executive Overview


We were founded in 1980 and have grown to bebecome the largest manufacturer of recreational vehicles (“RVs”) in the world based on units sold and revenue. We are also the largest manufacturer of RVs in North America. AccordingAmerica, and one of the largest manufacturers of RVs in Europe. In North America, according to Statistical Surveys, Inc. (“Stat Surveys”), for the six months ended June 30, 2018, Thor’s2021, THOR’s current combined U.S. and Canadian market share based on units was approximately 49.6%41.9% for travel trailers and fifth wheels combined and approximately 40.0%47.5% for motorhomes.

In Europe, according to the European Caravan Federation (“ECF”), EHG’s current market share for the six months ended June 30, 2021 based on units was approximately 24.5% for motorcaravans and campervans combined and approximately 17.5% for caravans.


Our business model includes decentralized operating units, and we compensate operating management primarily with cash, based upon the profitability of the business unit which they manage. Our corporate staff provides financial management, insurance, legal, human resource, risk management, marketing and internal audit functions. Senior corporate management interacts regularly with operating management to assure that corporate objectives are understood and monitored appropriately.

Ourour RV products are primarily sold to independent, non-franchise dealers who, in turn, retail those products. We generally do not finance dealers directly, but do provide repurchase agreements to the dealers’ floor plan lenders.

Our growth has been achieved both internalorganically and by acquisition. Ourthrough acquisition, and our strategy is designed to increase our profitability throughby driving innovation, servicing our customers, manufacturing quality products, improving the efficiencies of our facilities and making strategic growth acquisitions.


We generally rely ondo not finance dealers directly, but we do provide repurchase agreements to the dealers’ floor plan lenders.

We generally have financed our growth through a combination of internally generated cash flows from operations to finance our growth, however, we did obtain aand, when needed, outside credit facility to partially fund the Jayco, Corp. acquisition as more fully described inNotes 2 and12 to the Consolidated Financial Statements.facilities. Capital expendituresacquisitions of $138,197$131,681 in fiscal 20182021 were made primarily for purchases of land, production building additions and improvements and replacing machinery and equipment used in the ordinary course of business.

Significant Events

Recent Events

Subsequent Event

On September 18, 2018, See Note 3 to the CompanyConsolidated Financial Statements for capital acquisitions by segment.


The continuing COVID-19 pandemic, including its wide-reaching impact on nearly all facets of our operations and the shareholders of Erwin Hymer Group SE (“Erwin Hymer Group”) announced that they entered into a definitive agreement forRV industry, as well as related governmental actions and labor shortages throughout the Companysupply chain and within THOR, have impacted and continues to acquire Erwin Hymer Group.impact our business and our financial results and financial position. In accordance withparticular, the agreement, consideration to be paid to the sellers at closing will consist of approximately EUR 1.7 billion cash ($2.0 billion at current exchange rate) and equity consisting of approximately 2.3 million shares of the Company. The Company will also assume responsibility for the debt of the Erwin Hymer Group of approximately EUR 300 million ($350 million at current exchange rate).

The Erwin Hymer Group is headquartered in Bad Waldsee, Germany and is the largest RV manufacturer in Europe, by revenue. The transaction is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close near the end of calendar year 2018.

The Company plans to finance the acquisition primarily through debt financing. In connection with the planned acquisition, the Companypandemic has, obtained financing commitments for a 5 year, $750 million asset-based credit facility and a 7 year, $2.3 billion term loan.

Fiscal 2018

Share Repurchase Program

On June 19, 2018, the Company’s Board of Directors authorized Company management to utilize up to $250,000 to purchase shares of the Company’s common stock through June 19, 2020.

Under the share repurchase plan, the Company is authorized to repurchase, fromtime-to-time, outstanding shares of its common stock in the open marketdirectly or in privately negotiated transactions. The timing and amount of share repurchases will be determined by the Company’s management team based upon its evaluation of market conditions and other factors. The share repurchase plan may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the plan. The Company intends to make all repurchases and to administer the plan in accordance with applicable laws and regulatory guidelines, including Rule10b-18 of the Securities Exchange Act of 1934, as amended.

Joint Venture

On February 15, 2018, the Company announced the formation of a joint venture with Tourism Holdings Limited (“thl”) called TH2connect, LLC (“TH2”). The Company andthl each have a 50% ownership position in TH2 and equal representation on the board of directors of TH2. The Company contributed cash totaling $46,902 to TH2 in early March 2018 whilethl contributed various assets with the same approximate fair value. The Company’s investment in TH2 was funded entirely from cash on hand. In accordance with the operating agreement, TH2’s future capital needs, which are not expected to be material to the Company, will be funded proportionally bythl and the Company, and an additional $3,500 wasindirectly, contributed to TH2 by both Thorchassis andthl certain other supply-side constraints, as described below. Additional impacts could be incurred in June 2018. The Company’s investment in TH2 is accounted for under the equity method of accounting, and thefuture periods, including negative impacts to our results of this joint venture are recorded onoperations, liquidity and financial position, as aone-month lag basis.

TH2 was formed to own, improve and sell innovative and comprehensive digital applications through a platform designed for the global RV industry. TH2 will offer a variety of products focused on enhancing the enjoyment, safety, connectivity and convenience of RV ownership and use.

Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 35.0% to 21.0%. The rate reduction took effect on January 1, 2018. As the Company’s 2018 fiscal year ended on July 31, 2018, the Company’s federal blended corporate income tax rate for fiscal year 2018 is 26.9%, based on the applicable tax rates before and after the Tax Act and the number of days in the fiscal year to which the two different rates applied. As a result of other Tax Act changes, the Company’s income tax rate for fiscal year 2019 will be negatively impacted by the repeal of the domestic production activities (“Code Section 199”) deduction and limitations on the deductibility of executive compensation.

As a direct or indirect result of the reduction ofpandemic. Should the federal corporate income tax rate, the Company was required to perform a revaluation of its net deferred tax assets. Based on currently available information, the Company has performed an analysis of the impact of the Tax Act and has recorded anon-recurring,non-cash reduction of its net deferred tax assets due to the reduced federal income tax rate, and a corresponding charge to income tax expense, of approximately $34,000 for the year ended July 31, 2018. The Company also recorded a provisional amount of $2,000 of additional income tax expense in the fourth quarter of fiscal 2018 as a result of recent guidance related to limitations on the deductibility of executive compensation as provided under the Tax Act. The Company is still analyzing the impacts of the Tax Act which potentially could affect the measurement of the deferred tax balances.

The reduction in the statutory U.S. federal income tax rate is expected to positively impact the Company’s future U.S.after-tax earnings. For fiscal 2019, after considering the lower federal income tax rate of 21.0%, an estimated blended state income tax rate,COVID-19 infections escalate, or the elimination of the Code Section 199 deductionvirus mutate into new, uncontrolled strains, those developments and the limitations on the deductibilityresulting impacts could exacerbate risks to our business, financial results and financial position. These risks to our business are more fully described in Part 1, Item 1A "Risk Factors" of executive compensation, the Company currently estimates an overall effective income tax rate between 23.0% and 25.0%, before consideration of any discrete tax items.

this Report.


Significant Events

Fiscal 2016

Jayco2021


Tiffin Group Acquisition


On June 30, 2016,December 18, 2020, the Company closed on a Stock Purchase Agreement (“JaycoTiffin Group SPA”) for the acquisition of all of the issued and outstanding capital stock of towable andluxury motorized recreational vehicle manufacturer Jayco, Corp. (“Jayco”Tiffin Motorhomes, Inc., including fifth wheel towable recreational vehicle manufacturer Vanleigh RV, and certain other associated operating and supply companies, which primarily supply component parts and services to Tiffin Motorhomes, Inc. and Vanleigh RV, (collectively, the “Tiffin Group”) for. Tiffin Group, LLC, a wholly-owned subsidiary of the Company, owns the Tiffin Group. Tiffin Motorhomes, Inc. operates out of various locations in Alabama, while Vanleigh RV operates out of Mississippi.


31

The initial cash consideration for the acquisition of $562,690, net of cash acquired. This acquisitionthe Tiffin Group was funded from the Company’s cash on handapproximately $300,000, and $360,000 from an asset-based revolving credit facility as more fully described inNotes 2 and12was subject to the Consolidated Financial Statements. Jaycofinal determination of the actual acquired net working capital, as defined in the Tiffin Group SPA, as of the close of business on December 28, 2020, which determination was finalized in the fourth quarter of fiscal 2021. The final adjustment was not material. The Tiffin Group operates as an independent operation in the same manner as the Company’s other recreational vehicle subsidiaries. The Company purchased Jaycothe Tiffin Group to complement its existing towable and motorized RV product offerings and North American independent dealer base.

Discontinued Operations


Fiscal 2019

Erwin Hymer Group Acquisition

On February 1, 2019, the Company acquired Erwin Hymer Group SE. EHG is headquartered in Bad Waldsee, Germany, and is one of the largest RV manufacturers in Europe, by revenue. The Company acquired EHG in order to expand its operations into the growing European market with a long-standing European industry leader.

At the closing, the Company paid cash consideration of approximately 1.53 billion Euro (approximately $1.76 billion at the exchange rate as of February 1, 2019) and issued 2,256,492 shares of the Company’s common stock to the sellers valued at $144.2 million. The cash consideration was funded through a combination of available cash on hand of approximately $95 million and debt financing consisting of two credit facility agreements, a seven-year, $2.1 billion term loan, with an approximate $1.4 billion U.S. dollar-denominated tranche and an approximate 0.6 billion Euro tranche (approximately $0.7 billion at the exchange rate at February 1, 2019), and $100 million utilized at closing from a five-year, $750 million asset-based credit facility ("ABL"), each as more fully described in Note 12 to the Consolidated Financial Statements. The obligations of the Company under each facility are secured by liens on substantially all of the assets of the Company, and both agreements contain certain customary representations, warranties and covenants of the Company.

Certain costs related to this acquisition incurred during the fiscal year ended July 31, 2013,2019, including the Company entered into a definitive Stock Purchase Agreementforeign currency forward contract loss and sold our bus businesscertain bank fees, ticking fees, legal, advisory and other costs, as discussed in Note 2 to Allied Specialty Vehicles, Inc. The sale closed on October 20, 2013. Thor’s bus businessthe Consolidated Financial Statements, are included Champion Bus, Inc., General Coach America, Inc., Goshen Coach, Inc., El Dorado National (California), Inc., and El Dorado National (Kansas), Inc. As a result of the sale, the results of operations of the bus business are reported as loss from discontinued operations, net of income taxes onin Acquisition-related costs in the Consolidated Statements of Income and Comprehensive Income for the fiscal year ended July 31, 2016.

Income.


Industry Outlook

– North America


The Company monitors industry conditions in the North American RV market through the useusing a number of resources including its own performance tracking and modeling. The Company also considers monthly wholesale shipment data as reported by the RVIA,Recreation Vehicle Industry Association (“RVIA”), which is typically issued on aone-month lag and represents the manufacturers’ North American RV production and delivery to dealers. In addition, the Company monitorswe monitor monthly North American retail (end user) sales trends as reported by StatisticalStat Surveys, Inc., whose data is typically issued on amonth-and-a-half lag. We believeThe Company believes that monthly RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production and net sales.

We believe


North American RV independent dealer inventory of Thor products is generally at appropriate levels for seasonal consumer demand, although slightly elevated in certain locations due to several factors. RV dealer inventory of Thorour North American products as of July 31, 2018 increased 26.3%2021 decreased 8.8% to approximately 138,50058,300 units, fromcompared to approximately 109,70063,900 units as of July 31, 2017, and we believe this increase is partially due to2020. The acquisition of Tiffin Group accounted for approximately 500 of the 58,300 units as of July 31, 20172021. North American dealer inventory total being lowlevels at both July 31, 2021 and 2020 were well below recent historical fiscal year end stocking levels, as dealer inventory levels at July 31, 2019 were approximately 103,400 units, which was reflective of more typical stocking levels.

Dealer inventory levels have continued to decrease materially in relation to current sales levels based on strong retail demand at that time. Thor’s totalfor RVs given the perceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance and the reduction in commercial air travel and cruises, as well as an underlying desire by many to get back to nature and relax with family and friends. As of July 31, 2021, North American dealer inventory levels were well below optimal stocking levels, which has led to increased dealer orders and backlog. THOR’s North American RV backlog as of July 31, 2018 decreased $930,7422021 increased $9,083,648, or 39.9%215.5%, to $1,401,057 from $2,331,799$13,298,967 compared to $4,215,319 as of July 31, 2017,2020, with Tiffin Group's backlog included in the decrease mainly attributable to our capacity expansions sinceJuly 31, 2021 totals accounting for $767,036, or 8.4%, of the prior year allowing for increased production and therefore quicker delivery of units to dealers, the increase in existing dealer inventories noted above and a more typical seasonal order pattern compared to the elevated order levels from the prior year.

$9,083,648 increase.



32

Industry Wholesale Statistics – Calendar YTD

North America


Key wholesale statistics for the North American RV industry, as reported by RVIA for the periods indicated, are as follows:

   U.S. and Canada Wholesale Unit Shipments 
   Six Months Ended June 30,         
   2018   2017   Increase   Change 

Towables – Units

   238,502    223,644    14,858    6.6% 

Motorized – Units

   33,086    32,786    300    0.9% 
  

 

 

   

 

 

   

 

 

   

Total

               271,588                256,430                  15,158                    5.9% 
  

 

 

   

 

 

   

 

 

   

According to

 U.S. and Canada Wholesale Unit Shipments
 Six Months Ended June 30,Increase%
 20212020(Decrease)Change
North American Towable Units271,119 159,059 112,060 70.5 
North American Motorized Units29,148 17,008 12,140 71.4 
Total300,267 176,067 124,200 70.5 

The changes in wholesale shipments noted above in the most recent RVIA forecast in August 2018, shipments for towable and motorized units were both impacted by the COVID-19 pandemic. Shipments were significantly limited for both towables and motorized products during the 2018period from March to June 2020, as most RV manufacturers and dealers were shut down for a number of weeks during that time period. Since then, demand for both towable and motorized products has been robust, resulting in strong levels of wholesale shipments in the current year-to-date period.

In September 2021, RVIA issued a revised forecast for calendar year will approximate 444,0002021 wholesale unit shipments. Under a most likely scenario, towable and 61,900motorized unit shipments are projected to increase to approximately 522,400 and 54,800, respectively, for an annual total of approximately 577,200 units, respectively, which are 0.5% higher and 1.2% lower, respectively, thanup 34.1% from the corresponding 20172020 calendar year wholesale shipments. The combinedmost likely forecast for calendar year 2021 could range from a lower estimate of approximately 567,000 total units to an upper estimate of approximately 587,400 units.

As part of their September 2021 forecast, RVIA also released their initial estimates for calendar year 2022 wholesale unit shipments. In the most likely scenario, towable and motorized unit shipments are projected to increase to an approximated annual total of 505,900600,200 units, is 0.3%or 4.0% higher than the total 2017 wholesale shipments of 504,599. Travel trailers and fifth wheels are expected to account for approximately 86% of all RV shipments in calendar year 2018. The outlookmost likely scenario for calendar year 2018 growth in RV sales is based on the expectation of continued gains in jobs and disposable income. It also takes into account the impact of slowly rising interest rates, inflation and geopolitical risks.

RVIA has also forecasted that 20192021 wholesale shipments. This calendar year shipments for towables and motorized2022 most likely forecast could range from a lower estimate of approximately 586,300 total units will ease back to an upper estimate of approximately 442,200 and 54,900 units, respectively, for a total of 497,100 units, a decline of 1.7% from the expected 2018 calendar year shipments. This decline is primarily related to motorized614,100 units. RVIA noted that the enduring preference of consumers for the RV lifestyle has not changed, which will support a long-term upward trend in RV sales.


Industry Retail Statistics – Calendar YTD

North America


We believe that retail demand is the key to continued growth in the North American RV industry. We also believeindustry, and that annual North American RV industry wholesale shipments will generally approximate aone-to-one replenishment ratio with retail sales once dealer inventory levels are adjusted to generally normalized levels, which we expect to happen by the end ofin calendar year 2018.

2021 and calendar 2022 may not follow typical seasonal patterns as dealers respond to ongoing high current consumer demand and then rebuild their inventory to optimal stocking levels.


Key retail statistics for the North American RV industry, as reported by StatisticalStat Surveys Inc. for the periods indicated, are as follows:

   U.S. and Canada Retail Unit Registrations 
   Six Months Ended June 30,         
   2018   2017   Increase   Change 

Towables – Units

   235,059    219,156    15,903    7.3% 

Motorized – Units

   32,093    30,842    1,251    4.1% 
  

 

 

   

 

 

   

 

 

   

Total

               267,152                249,998                  17,154                    6.9% 
  

 

 

   

 

 

   

 

 

   


 U.S. and Canada Retail Unit Registrations
 Six Months Ended June 30,Increase%
 20212020(Decrease)Change
North American Towable Units294,843 211,905 82,938 39.1 
North American Motorized Units29,140 22,910 6,230 27.2 
Total323,983 234,815 89,168 38.0 

Note: Data reported by StatisticalStat Surveys Inc. is based on official state and provincial records. This information is subject to adjustment, is continuously updated and is continuously updated.

often impacted by delays in reporting by various states or provinces. The COVID-19 pandemic has resulted in further delays in the submission of information reported by the various states or provinces beginning with calendar year 2020 results, and may also be impacting the completeness of such information.


We believe that North American retail consumer demand has grown in recent periods due to an increasing interest in the RV lifestyle and the ability to connect with nature and has further accelerated since the onset of the COVID-19 pandemic. Many consumers recognize the perceived benefits offered by the RV lifestyle, which provides people with a personal space to maintain social distance in a safe manner, the ability to connect with loved ones and the potential to get away for short, frequent breaks or longer adventures.


33

Company Wholesale Statistics – Calendar YTD

North America


The Company’s wholesale RV shipments, for thesix-month periods six months ended June 30, 20182021 and 2017,2020 to correspond towith the industry wholesale periods denotednoted above, were as follows:

   U.S. and Canada Wholesale Unit Shipments 
   Six Months Ended June 30,        
   2018   2017   Increase  Change 

Towables – Units

   121,968    116,278    5,690   4.9% 

Motorized – Units

   13,200    13,484    (284)   (2.1)% 
  

 

 

   

 

 

   

 

 

  

Total

               135,168                  129,762                  5,406                   4.2% 
  

 

 

   

 

 

   

 

 

  
follows (2021 period includes Tiffin Group shipments):


 U.S. and Canada Wholesale Unit Shipments
 Six Months Ended June 30,Increase%
 20212020(Decrease)Change
North American Towable Units116,558 66,725 49,833 74.7 
North American Motorized Units14,529 6,513 8,016 123.1 
Total131,087 73,238 57,849 79.0 

Company Retail Statistics – Calendar YTD

North America


Retail shipmentsstatistics of the Company’s RV products, as reported by StatisticalStat Surveys, Inc.,for the six months ended June 30, 2021 and 2020 to correspond with the industry retail periods noted above, were as follows for thesix-month periods ended June 30, 2018 and 2017, to correspond to the industry periods denoted above:

   U.S. and Canada Retail Unit Registrations 
   Six Months Ended June 30,         
   2018   2017   Increase   Change 

Towables – Units

   114,055    108,262    5,793    5.4% 

Motorized – Units

   12,825    12,224    601    4.9% 
  

 

 

   

 

 

   

 

 

   

Total

               126,880                120,486                  6,394                    5.3% 
  

 

 

   

 

 

   

 

 

   

(2021 period includes Tiffin Group registrations):

 U.S. and Canada Retail Unit Registrations
 Six Months Ended June 30,Increase%
 20212020(Decrease)Change
North American Towable Units120,722 89,911 30,811 34.3 
North American Motorized Units13,856 8,839 5,017 56.8 
Total134,578 98,750 35,828 36.3 

Note: Data reported by StatisticalStat Surveys Inc. is based on official state and provincial records. This information is subject to adjustment, is continuously updated, and is continuously updated.

Company Wholesale Statistics – Fiscal Year

Foroften impacted by delays in reporting by various states or provinces. The COVID-19 pandemic has resulted in further delays in the fiscal years ended July 31, 2018submission of information reported by the various states or provinces beginning with calendar year 2020 results, and 2017,may also be impacting the Company’s wholesale RV shipments were as follows:

   U.S. and Canada Wholesale Unit Shipments 
   Fiscal Year Ended July 31,         
   2018   2017   Increase   Change 

Towables – Units

   240,865    213,562    27,303    12.8% 

Motorized – Units

   25,355    24,133    1,222    5.1% 
  

 

 

   

 

 

   

 

 

   

Total

               266,220                237,695                  28,525                    12.0% 
  

 

 

   

 

 

   

 

 

   

Ourcompleteness of such information.


North American Outlook

The extent to which the COVID-19 pandemic may continue to impact our business in future periods remains uncertain and unpredictable. Nonetheless, our outlook for future growth in North American retail sales in both the short term and the long term remains optimistic as there are many factors driving the current demand that we believe will continue even after the pandemic officially ends. In the near-term, we believe consumers are likely to continue altering their future vacation and travel plans, opting for fewer vacations via air travel, cruise ships and hotels, and preferring vacations that RVs are uniquely positioned to provide, where they can continue practicing social distancing while also allowing them the ability to explore or unwind, often close to home. Minimal-contact vacation options like road trips and camping may prove ideal for people who want to limit pandemic-related risks involved with close personal interactions. We will, however, need to continue to manage through anticipated supply chain issues noted below, which may limit the level to which we can increase output in the near term.

Longer-term, a positive outlook for the North American RV segment is supported by surveys conducted by THOR, RVIA and others, which show that Americans love the freedom of the outdoors and the enrichment that comes with living an active lifestyle. RVs allow people to be in control of their travel experiences, going where they want, when they want and with the people they want. The RV units we design, produce and sell allow people to spend time outdoors pursuing their favorite activities, creating cherished moments and deeply connecting with family and friends. Based on the increasing value consumers place on these factors, we expect to see long-term growth in the North American RV industry. Longer-term, we also believe retail sales will be dependent upon various economic conditions faced by consumers, such as the rate of unemployment, the level of consumer confidence, the growth in disposable income of consumers, changes in interest rates, credit availability, the health of the housing market, and changes in tax rates and fuel prices. Assuming continued stability or improvement in consumer confidence, availability of retail and wholesale credit, low interest ratesprices.


34

Economic and the absence of negative economic factors, we would expect to see continued growth in the RV industry.

A positive outlook for the RV segment is supported by continued demographic diversification. While consumers between the ages of 55 and 74 still account for the majority of RV retail sales, there is strong interest and growing retail momentum with the younger “generation X” and “millennials” segments. Not surprisingly, behavioral attributes confirm these groups as being more active, tech savvy, well researched, open to new ideas, and very family centric, specifically when it comes to cross generational family activities like RV’ing, camping and time spent outdoors.

Since 2014, Kampgrounds of America (KOA) has measured an increase of 6 million new camper households and in 2018 projects a 45% rise in frequency among all camping families; largely driven by millennials with 6 in 10 having tried a new camping destination in 2017. Younger consumers are also redefining cultural views on “vacation” and opting instead for 50 to 100 mile getaways within driving distance to home or school. Given the importance younger consumers and millennial households place on family, quality experiences, technology and time, we are well-positioned to provide the innovative product offerings which deliver the lifestyle experiences that complement millennial expectations.

In addition to younger age demographics, there are opportunities to expand sales to a more ethnically diverse and global customer base through lifestyle, lifestage and data-driven marketing. We intend to expand upon our recent marketing initiatives that focused on diversity, women, families, millennials and the RV lifestyle across social, digital, web, acquisition, mobile and content marketing. In addition to providingbest-in-class marketing and research assets to our dealers, we intend to provide consumers with technology tools and RV lifestyle resources through our joint venture, TH2.

Economic or industry-wide factors affectingthat have historically, and that we believe will continue to affect our RV business, include the costs of commodities, the availability and thecost of critical supply components and labor usedcosts incurred in the manufactureproduction of our products. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs would impact our profit margins negatively if we wereare unable to offset those cost increases through a combination of product decontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts. Historically, we have generally been able to offset net cost increases over time.

We

Recently, we have not experienced any recent unusual cost increases orbeen alerted by a number of our North American chassis suppliers that supply constraints fromof key components that they require for the manufacturing of chassis, particularly semiconductor chips, will limit their production of chassis, and hence, our chassis suppliers.production and sales of motorized RVs will also be impacted. The North American recreational vehicle industry has, from time to time in the past and during our current fiscal year, experienced shortages of chassis for various other reasons, including component shortages, production delays and work stoppages at the chassis manufacturers. TheseIf shortages of chassis were to recur or continue for a prolonged period for any reason, it would have had a negative impact on our sales and earningsearnings.

The North American RV industry is also facing continuing cost increases, supply shortages and delivery delays of other, non-chassis, raw material components, which may be further exacerbated by the recent hurricane in the past.southern United States. While our supply chain has been resilient enough to support us during our fiscal 2021 growth in sales and production, these shortages and constraints have negatively impacted our ability to further ramp up production rates and sales during the current fiscal year and has caused an increase in unfinished units as of July 31, 2021. We believe these shortages and delays may continue to result in production delays or adjusted production rates, which may limit our ability to ramp up production to meet existing demand and could have a negative impact on our results of operations. If shortages of chassis or other component parts were to become more significant or longer term in nature, or if other factors were to impact our suppliers' ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected. Where possible, we continue to work closely with our suppliers on various supply chain strategies to minimize these constraints, and we continue to identify alternative suppliers. The geographic centrality of the North American RV industry in northern Indiana, where the majority of our facilities and many of our suppliers are located, could exacerbate supply chain and other COVID-19 related risks, should northern Indiana, or any of the other areas in which we, our suppliers or our customers operate, become disproportionately impacted by the pandemic or other factors.

Industry Outlook – Europe

The Company monitors retail trends in the European RV market as reported by the European Caravan Federation (“ECF”), whose industry data is reported to the public quarterly and typically issued on a one-to-two-month lag. Additionally, on a monthly basis the Company receives OEM-specific reports from most of the individual member countries that make up the ECF. As these reports are coming directly from the ECF member countries, timing and content vary, but typically the reports are issued on a one-to-two-month lag as well. While most countries provide OEM-specific information, the United Kingdom, which made up 20.7% and 7.1% of the caravan and motorcaravan (including campervans) European market for the six months ended June 30, 2021, respectively, does not provide OEM-specific information. Industry wholesale shipment data for the European RV market is not available.

Within Europe, over 90% of our sales are made to dealers within 13 different European countries. The market conditions, as well as the operating status of our independent dealers within each country, vary based on the various local economic conditions, the current impact of COVID-19 and the local responses and restrictions in place to manage the pandemic. It is inherently difficult to generalize about the operating conditions within the entire European region. However, independent RV dealer inventory levels of our European products are generally below prior-year levels in the various countries we serve. Within Germany, which accounts for approximately 60% of our European product sales, independent dealer inventory levels are currently below historical norms, with dealers submitting higher levels of orders than typical due to continued high end-consumer demand, as discussed further below.

THOR’s European RV backlog as of July 31, 2021 increased $2,033,124, or 133.2%, to $3,559,097 compared to $1,525,973 as of July 31, 2020, with the increase attributable to a number of causes, including the perceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance, the reduction in commercial air travel and cruises, an increase in various marketing campaigns to promote sales, and the lower levels of independent European RV dealer inventory levels noted above, which has led to increased dealer orders and backlog.

35

Industry Retail Statistics – Europe

Key retail statistics for the European RV industry, as reported by the ECF for the periods indicated, are as follows:
 European Unit Registrations
 
Motorcaravan and Campervan (2)
Caravan
 Six Months Ended June 30,%
Change		Six Months Ended June 30,%
Change
 2021202020212020
OEM Reporting Countries (1)
97,597 73,319 33.1 34,669 31,044 11.7 
Non-OEM Reporting Countries (1)
9,956 5,317 87.2 10,878 6,873 58.3 
Total107,553 78,636 36.8 45,547 37,917 20.1 
(1)Industry retail registration statistics have been compiled from individual countries reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.” The “Non-OEM Reporting Countries” are primarily the United Kingdom and others. Note: the decrease in the "Non-OEM Reporting Countries" is primarily related to the United Kingdom, as a result of both BREXIT and extended shutdowns as a result of the COVID-19 pandemic. Total European unit registrations are reported quarterly by ECF.
(2)The ECF reports motorcaravans and campervans together.
Note: Data from the ECF is subject to adjustment, is continuously updated, and is often impacted by delays in reporting by various countries. (The "Non-OEM Reporting Countries" either do not report OEM-specific data to ECF or do not have it available for the entire time period covered).

Company Retail Statistics – Europe
 
European Unit Registrations (1)
 Six Months Ended June 30,Increase%
 20212020(Decrease)Change
Motorcaravan and Campervan23,866 19,434 4,432 22.8 
Caravan6,055 6,395 (340)(5.3)
Total OEM-Reporting Countries29,921 25,829 4,092 15.8 
(1)Company retail registration statistics have been compiled from individual countries reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.”

Note: Data from the ECF is subject to adjustments, is continuously updated, and is often impacted by delays in reporting by various countries.

European Outlook

Our European operations offer a full lineup of leisure vehicles including caravans, urban campers, campervans and small-to-large motorcaravans. Our product offering is not limited to vehicles only but also includes accessories and services, including vehicle rentals. In addition, we address our European end customers through a sophisticated brand management approach based on consumer segmentation according to target group, core values and emotions. With the help of data-based and digital marketing, we intend to expand our customer reach, in particular, to new and younger consumer segments.

The extent to which the COVID-19 pandemic may impact our business in future periods remains uncertain and unpredictable. Our outlook for future growth in European RV retail sales depends upon various economic conditions in the respective countries in which we sell, and also depends on our ability to manage through supply chain issues that could limit the level to which we can increase output. End-customer demand for RVs depends strongly on consumer confidence. Factors such as the rate of unemployment, private consumption and investments, growth in disposable income of consumers, changes in interest rates, the health of the housing market, changes in tax rates, environmental surcharges and related regulations, and, most recently, travel safety considerations all influence retail sales. We believe our long-term outlook for future growth in retail sales remains positive as more and more people discover RVs as a way to support their lifestyle in search of independence and individuality, as well as using the RV as a multi-purpose vehicle to escape urban life and explore outdoor activities and nature.


36

Historically, we and our independent European dealers have marketed our European recreational vehicles through numerous RV fairs at the country and regional levels which occur throughout the calendar year. These fairs have historically been well-attended events that allow retail consumers the ability to see the newest products, features and designs and to talk with product experts in addition to being able to purchase or order an RV. The protection of the health of our employees, customers and dealer-partners is our top priority. As a result, we have cancelled our participation in most European trade fairs and major events through calendar 2021.

In place of the trade fairs, we have and will continue to strengthen and expand our digital activities in order to reach high potential target groups, generate leads and steer customers directly to dealerships. With over 1,000 active dealer-partners in Germany and throughout Europe, we believe our European brands have one of the strongest and most professionally structured dealer and service networks.

Economic or industry-wide factors affecting our European RV business include the costs of commodities and the labor used in the manufacture of our products. Material and labor costs are the primary factors determining our cost of products sold and any future increases in these costs would impact our profit margins negatively if we were unable to offset those cost increases through a combination of product decontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts.

Recently, we have been alerted by a number of our European chassis suppliers that supply constraints of key components that they require for the manufacturing of chassis, including, but not limited to, semiconductor chips, will limit their production of chassis. During fiscal 2021, we have experienced delays in the receipt of chassis from our European chassis suppliers, limiting our ability to further increase production. We expect these challenges to persist and, in particular, anticipate continued delays in receipt of chassis in Europe. As a result, limitations in the availability of chassis will limit our ability to consistently maintain our previous production levels and will also limit our ability to ramp up production of certain products despite dealer demand for those products.

In Europe, we continue to experience cost increases, supply shortages and delivery delays of other, non-chassis, raw material components which negatively impacted our ability to further ramp up production and sales in the current fiscal year and has caused an increase in unfinished units as of July 31, 2021. We believe these shortages and delays may continue to result in production delays or adjusted production rates, which may limit our ability to ramp up production to meet existing demand and could have a negative impact on our sales and operating results.

Where possible, to minimize the impact of these supply chain constraints, we have identified a second-source supplier base for most component parts. However, due to engineering requirements, it is generally not possible to quickly change the chassis our various units are built upon.

If shortages of chassis or other component parts were to become more significant or longer term in nature, or if other factors were to impact our suppliers' ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected. In addition, if the impact of COVID-19 on our vendors increases or is prolonged, the availability of key components, including chassis, will have a further negative impact on our production output during fiscal 2022. Uncertainties related to changing emission standards, such as the Euro 6d standard which became effective as of January 2020 for new models and became effective for certain vehicles starting January 2021 and other vehicles starting January 2022, may also impact the availability of chassis used in our production of certain European motorized RVRVs and could also impact consumer buying patterns.

In addition to material supply constraints, labor shortages may also impact our European operations. Currently, a number of the employees of our production is generally adequate for currentfacilities in Europe reside in one country while working in another and therefore travel restrictions imposed by certain countries within Europe may negatively impact the availability of our labor force and therefore our production levels, and that available inventory would compensate for short-term changes in supply schedules if they occur.

output.

37

FISCAL 20182021 VS. FISCAL 2017

   

Fiscal 2018

      

Fiscal 2017

      

Change

Amount

  

%

Change

 

NET SALES

         

Recreational vehicles

         

Towables

  $6,008,700    $5,127,491    $881,209   17.2 

Motorized

   2,146,315     1,971,466     174,849   8.9 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   8,155,015     7,098,957     1,056,058   14.9 

Other

   305,947     253,557     52,390   20.7 

Intercompany eliminations

   (132,053)     (105,562)     (26,491)   (25.1) 
  

 

 

    

 

 

    

 

 

  

Total

  $        8,328,909    $        7,246,952    $        1,081,957   14.9 
  

 

 

    

 

 

    

 

 

  

# OF UNITS

         

Recreational vehicles

         

Towables

   240,865     213,562     27,303   12.8 

Motorized

   25,355     24,133     1,222   5.1 
  

 

 

    

 

 

    

 

 

  

Total

   266,220     237,695     28,525   12.0 
  

 

 

    

 

 

    

 

 

  
   

Fiscal 2018

  

% of

Segment

Net Sales

   

Fiscal 2017

  

% of

Segment

Net Sales

   

Change

Amount

  

%

Change

 

GROSS PROFIT

         

Recreational vehicles

         

Towables

  $882,232   14.7   $783,752   15.3   $98,480   12.6 

Motorized

   234,108   10.9    215,324   10.9    18,784   8.7 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   1,116,340   13.7    999,076   14.1    117,264   11.7 

Other

   48,632   15.9    44,702   17.6    3,930   8.8 

Intercompany eliminations

   (306)   –    (195)   –    (111)   – 
  

 

 

    

 

 

    

 

 

  

Total

  $1,164,666   14.0   $1,043,583   14.4   $121,083   11.6 
  

 

 

    

 

 

    

 

 

  

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         

Recreational vehicles

         

Towables

  $304,554   5.1   $273,550   5.3   $31,004   11.3 

Motorized

   96,370   4.5    86,009   4.4    10,361   12.0 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   400,924   4.9    359,559   5.1    41,365   11.5 

Other

   10,047   3.3    8,935   3.5    1,112   12.4 

Corporate

   66,473   –    51,353   –    15,120   29.4 
  

 

 

    

 

 

    

 

 

  

Total

  $477,444   5.7   $419,847   5.8   $57,597   13.7 
  

 

 

    

 

 

    

 

 

  

INCOME (LOSS) BEFORE INCOME TAXES

         

Recreational vehicles

         

Towables

  $532,657   8.9   $458,915   9.0   $73,742   16.1 

Motorized

   134,785   6.3    125,323   6.4    9,462   7.6 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   667,442   8.2    584,238   8.2    83,204   14.2 

Other

   32,973   10.8    28,909   11.4    4,064   14.1 

Intercompany eliminations

   (306)   –    (195)   –    (111)   – 

Corporate

   (67,080)   –    (56,566)   –    (10,514)   (18.6) 
  

 

 

    

 

 

    

 

 

  

Total

  $633,029   7.6   $556,386   7.7   $76,643   13.8 
  

 

 

    

 

 

    

 

 

  
ORDER BACKLOG  

As of

July 31, 2018

      

As of

July 31, 2017

      

Change

Amount

  

%

Change

 

Recreational vehicles

         

Towables

  $766,965    $1,416,240    $(649,275)   (45.8) 

Motorized

   634,092     915,559     (281,467)   (30.7) 
  

 

 

    

 

 

    

 

 

  

Total

  $1,401,057    $2,331,799    $(930,742)   (39.9) 
2020

FISCAL 2021FISCAL 2020Change
Amount		%
Change
NET SALES:
Recreational vehicles
North American Towables$6,221,928 $4,140,482 $2,081,446 50.3 
North American Motorized2,669,391 1,390,098 1,279,293 92.0 
Total North America8,891,319 5,530,580 3,360,739 60.8 
European3,200,079 2,485,391 714,688 28.8 
Total recreational vehicles12,091,398 8,015,971 4,075,427 50.8 
Other373,174 234,481 138,693 59.1 
Intercompany eliminations(147,192)(82,519)(64,673)(78.4)
Total$12,317,380 $8,167,933 $4,149,447 50.8 

# OF UNITS:
Recreational vehicles
North American Towables214,600 150,182 64,418 42.9 
North American Motorized25,008 15,088 9,920 65.7 
Total North America239,608 165,270 74,338 45.0 
European64,875 54,506 10,369 19.0 
Total304,483 219,776 84,707 38.5 
% of
Segment
Net Sales		% of
Segment
Net Sales
GROSS PROFIT:
Recreational vehicles
North American Towables$1,020,908 16.4 $619,892 15.0 $401,016 64.7 
North American Motorized345,755 13.0 149,995 10.8 195,760 130.5 
Total North America1,366,663 15.4 769,887 13.9 596,776 77.5 
European440,855 13.8 304,388 12.2 136,467 44.8 
Total recreational vehicles1,807,518 14.9 1,074,275 13.4 733,243 68.3 
Other, net87,455 23.4 43,932 18.7 43,523 99.1 
Total$1,894,973 15.4 $1,118,207 13.7 $776,766 69.5 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreational vehicles
North American Towables$330,138 5.3 $238,656 5.8 $91,482 38.3 
North American Motorized134,315 5.0 72,720 5.2 61,595 84.7 
Total North America464,453 5.2 311,376 5.6 153,077 49.2 
European261,778 8.2 239,635 9.6 22,143 9.2 
Total recreational vehicles726,231 6.0 551,011 6.9 175,220 31.8 
Other26,113 7.0 11,914 5.1 14,199 119.2 
Corporate117,572 — 71,194 — 46,378 65.1 
Total$869,916 7.1 $634,119 7.8 $235,797 37.2 
38

FISCAL 2021% of
Segment
Net Sales		FISCAL 2020% of
Segment
Net Sales		Change
Amount		%
Change
INCOME (LOSS) BEFORE INCOME TAXES:
Recreational vehicles
North American Towables$658,964 10.6 $336,207 8.1 $322,757 96.0 
North American Motorized202,057 7.6 71,943 5.2 130,114 180.9 
Total North America861,021 9.7 408,150 7.4 452,871 111.0 
European116,576 3.6 9,850 0.4 106,726 1,083.5 
Total recreational vehicles977,597 8.1 418,000 5.2 559,597 133.9 
Other, net57,674 15.5 27,751 11.8 29,923 107.8 
Corporate(190,690)— (172,855)— (17,835)(10.3)
Total$844,581 6.9 $272,896 3.3 $571,685 209.5 
As of
July 31, 2021
As of
July 31, 2020
Change
Amount		%
Change
ORDER BACKLOG:
Recreational vehicles
North American Towables$9,284,229 $2,763,678 $6,520,551 235.9 
North American Motorized4,014,738 1,451,641 2,563,097 176.6 
Total North America13,298,967 4,215,319 9,083,648 215.5 
European3,559,097 1,525,973 2,033,124 133.2 
Total$16,858,064 $5,741,292 $11,116,772 193.6 

CONSOLIDATED


Consolidated net sales for fiscal 20182021 increased $1,081,957,$4,149,447, or 14.9%50.8%, compared to fiscal 2017. 2020. The increase in consolidated net sales is due to both the continuing increase in current consumer demand and the negative impact the start of the COVID-19 pandemic had on net sales during the latter half of the prior fiscal year. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $421,438 of the $4,149,447 increase in net sales, or 5.2% of the 50.8% increase. Approximately 26.0% of the Company's net sales for fiscal 2021 were transacted in a currency other than the U.S. dollar. The Company's most material exchange rate exposure is sales in Euros. Of the $4,149,447, or 50.8% increase in consolidated net sales, $234,968, or 5.7% of the 50.8% increase, reflects the impact of the change in currency exchange rates between the two periods. To determine this information, net sales transacted in currencies other than U.S. dollars have been translated to U.S. dollars using the average exchange rates that were in effect during the comparative period.

Consolidated gross profit for fiscal 20182021 increased $121,083,$776,766, or 11.6%69.5%, compared to fiscal 2017.2020. Consolidated gross profit was 14.0%15.4% of consolidated net sales for fiscal 20182021 and 14.4%13.7% for fiscal 2017.

Consolidated selling,2020. The increases in consolidated gross profit and the consolidated gross profit percentage were both primarily due to the impact of the increase in net sales in the current-year period compared to the prior-year period and gross margin percentage improvements noted below.


Selling, general and administrative expenses for fiscal 20182021 increased $57,597,$235,797, or 13.7%37.2%, compared to fiscal 2017. 2020, primarily due to the 50.8% increase in net sales.

Amortization of intangible assets expense for fiscal 2018 decreased $8,807, or 13.8%,2021 increased $19,949 compared to fiscal 2017,2020, primarily due to lowerhigher dealer network amortization in the European segment as compared to the prior-year period. Consolidated income before income taxes for fiscal 2018 was $633,029, as compared to $556,386 for fiscal 2017, an increase of $76,643, or 13.8%. Consolidated income before income taxes was 7.6% of consolidated net sales for fiscal 2018period and 7.7% for fiscal 2017.

Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses,additional amortization of intangible assets expense and income before income taxes are addressed$6,656 due to the acquisition of the Tiffin Group as discussed in Note 2 to the segment reporting that follows.

Consolidated Financial Statements.


Corporate costs included in selling, general and administrative expenses increased $15,120$46,378 to $66,473$117,572 for fiscal 20182021 compared to $51,353$71,194 for fiscal 2017. The2020, an increase of 65.1%. This increase is due in partprimarily related to increased compensation costs, including an increase in compensation costs, as incentive compensation increased $1,809 in correlation withof $13,262 due to the increase in income before income taxes compared to the prior year, and stock-based compensation increased $4,500. The stock-based compensation increase is due to increasing income before income taxes over the past three years, as most stock awards are based on that metric and vest ratably over a three-yearprior-year period. Deferred compensation expense also increased $928,$11,829, which relates towas effectively offset by the equal and offsetting increase in other income noted below duerelated to the increase in the related deferred compensation plan assets. In addition, legalassets as noted below, and professional fees, including costsstock-based compensation also increased $10,625. Costs related to salesworkers' compensation and marketing initiatives as well asproduct liability reserves recorded at Corporate increased by a total of $4,116, primarily due to favorable adjustments in the joint venture and the strategic growth opportunity as discussed in Notes 8 and 18, respectively, to the Consolidated Financial Statements, increased $5,786.

prior-year period.

39

Corporate interest and other income and expense was $607$73,118 of net expense for fiscal 20182021 compared to $5,213$101,661 of net expense for fiscal 2017.2020. This favorable changedecrease in net expense of $4,606 is primarily due to$28,543 included a decrease in interest expense and fees on the revolving credit facility decreasing $4,512debt facilities of $12,061 due primarily to the reduction in the outstanding debt balances and reduced interest rates compared to the prior-year period as a result of the lower average outstanding debt balance. Interest income also increased $1,264 in fiscal 2018 due primarily to increased rates of return on invested cash balances.period. In addition, the change in the fair value of the Company’s deferred compensation plan assets due to market fluctuations and investment income resulted in ana net increase in other income of $928 in the current-year period as$11,755 compared to the prior-year period. These increases were partially offset byThe prior-year total also included losses of $1,939$6,884 related to the Company’sCompany's former equity investment made in fiscal 2018 as discussed in Note 82 to the Condensed Consolidated Financial Statements.


Income before income taxes for fiscal 2021 was $844,581, as compared to $272,896 for fiscal 2020, an increase of $571,685, or 209.5%, primarily driven by the increase in net sales and gross margin and selling, general and administrative expense percentage improvements noted below.

The overall annual effective income tax rate for fiscal 2018 is 32.0%2021 was 21.8% on $633,029$844,581 of income before income taxes, compared with 32.7%18.9% on $556,386$272,896 of income before income taxes for fiscal 2017.2020. The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate has been reduced from 35.0% to 21.0% starting January 1, 2018, which results in the use of a blended federal corporate income tax rate of 26.9%primary reason for the Company’s 2018 fiscal year. The benefitincrease relates to the jurisdictional mix of pretax income between foreign and domestic between the lower blended tax rate for fiscal 2018 was mostly offset by approximately $34,000 of additional income tax expense in fiscal 2018 resulting from the revaluation of the Company’s net deferred tax assets to reflect the impact of the lower tax rates in connection with the Tax Act.

comparable periods.


SEGMENT REPORTING


North American Towable Recreational Vehicles


Analysis of Change in Net Sales for Fiscal 20182021 vs. Fiscal 2017

      Fiscal 2018      % of
Segment
   Net Sales   		      Fiscal 2017      % of
Segment
  Net Sales   		   Change
  Amount   		   %
   Change 		 

NET SALES:

            

Towables

            

  Travel Trailers and Other

  $3,646,581    60.7   $3,088,561    60.2   $558,020    18.1 

  Fifth Wheels

   2,362,119    39.3    2,038,930    39.8    323,189    15.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Towables

  $6,008,700    100.0   $5,127,491    100.0   $881,209    17.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   Fiscal 2018   % of
Segment
Net Sales		   Fiscal 2017   % of
Segment
Net Sales		   Change
Amount		   %
Change		 

# OF UNITS:

            

Towables

            

  Travel Trailers and Other

   186,710    77.5    166,140    77.8    20,570    12.4 

  Fifth Wheels

   54,155    22.5    47,422    22.2    6,733    14.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Towables

   240,865    100.0    213,562    100.0    27,303    12.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

2020
Fiscal 2021% of
Segment
Net Sales		Fiscal 2020% of
Segment
Net Sales		Change
Amount		%
Change
NET SALES:
North American Towables
Travel Trailers$3,791,235 60.9 $2,449,239 59.2 $1,341,996 54.8 
Fifth Wheels2,430,693 39.1 1,691,243 40.8 739,450 43.7 
Total North American Towables$6,221,928 100.0 $4,140,482 100.0 $2,081,446 50.3 
Fiscal 2021% of
Segment
Shipments		Fiscal 2020% of
Segment
Shipments		Change
Amount		%
Change
# OF UNITS:
North American Towables
Travel Trailers167,309 78.0 114,486 76.2 52,823 46.1 
Fifth Wheels47,291 22.0 35,696 23.8 11,595 32.5 
Total North American Towables214,600 100.0 150,182 100.0 64,418 42.9 
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:%
  Increase  
Change

North American Towables

Travel Trailers and Other

8.7 5.7

Fifth Wheels

11.2 1.7

Total North American Towables

7.4 4.4


The increase in total North American towables net sales of 17.2%50.3% compared to the prior fiscal year resulted from a 12.8%42.9% increase in unit shipments and a 4.4% increase in the overall net price per unit due to the impact of changes in product mix and price. The “Other” units within the “Travel Trailers and Other” category consists primarily of truck and folding campers and other specialty vehicles. According to statistics published by RVIA, for the twelve months ended July 31, 2018, combined travel trailer and fifth wheel wholesale unit shipments for the industry increased 13.8% compared to the same period last year.

The increases in the net price per unit within the travel trailer and other product lines of 5.7% and the fifth wheel product lines of 1.7% were both primarily due to changes in product mix and selective net price increases since the prior fiscal year.

Cost of products sold increased $782,729 to $5,126,468, or 85.3% of towables net sales, for fiscal 2018 compared to $4,343,739, or 84.7% of towables net sales, for fiscal 2017. The changes in material, labor,freight-out and warranty costs comprised $735,323 of the $782,729 increase in cost of products sold. Material, labor,freight-out and warranty costs as a combined percentage of towables net sales increased to 79.6% for fiscal 2018 compared to 78.9% for fiscal 2017. This increase in percentage was primarily the result of increases in the labor cost percentage, due to the continued competitive RV labor market, and the warranty cost percentage, which was partially due to offering extended coverage on certain structural components of certain products since the prior-year period.

Variable costs in manufacturing overhead increased $43,386 to $317,793, or 5.3% of towable net sales, for fiscal 2018 compared to $274,407, or 5.4% of towable net sales, for fiscal 2017 as a result of the increase in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $4,020 to $27,123 in fiscal 2018 from $23,103 in fiscal 2017 primarily due to the increase in manufacturing facilities and production lines.

Towables gross profit increased $98,480 to $882,232, or 14.7% of towables net sales, for fiscal 2018 compared to $783,752, or 15.3% of towables net sales, for fiscal 2017. The increase in gross profit is primarily due to the 12.8% increase in unit sales volume noted above, while the decrease in gross profit percentage is due to the increase in the cost of products sold percentage noted above.

Selling, general and administrative expenses were $304,554, or 5.1% of towables net sales, for fiscal 2018 compared to $273,550, or 5.3% of towables net sales, for fiscal 2017. The primary reason for the $31,004 increase was increased towables net sales and towables income before income taxes, which caused related commissions, bonuses and other compensation to increase by $22,885. Legal, professional and settlement costs increased $2,938, primarily due to product liability and legal settlement costs. In addition, sales-related travel, advertising and promotional costs also increased $3,963 in correlation with the sales increase. The overall selling, general and administrative expense as a percentage of towables net sales decreased by 0.2% due to the significant increase in towables net sales.

Towables income before income taxes was $532,657, or 8.9% of towables net sales, for fiscal 2018 compared to $458,915, or 9.0% of towables net sales, for fiscal 2017. The primary reasons for the slight decrease in percentage was the increase in the cost of products sold percentage noted above, which was partially offset by the decrease in the selling, general and administrative expense percentage to net sales noted above and the towables amortization cost percentage decrease of 0.3%.

Motorized Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2018 vs. Fiscal 2017

       Fiscal 2018       % of
Segment
    Net Sales    		       Fiscal 2017       % of
Segment
    Net Sales    		   Change
    Amount     		   %
    Change    		 

NET SALES:

            

Motorized

            

Class A

  $1,000,881    46.6   $914,681    46.4   $86,200    9.4 

Class C

   1,047,376    48.8    968,899    49.1    78,477    8.1 

Class B

   98,058    4.6    87,886    4.5    10,172    11.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Motorized

  $2,146,315    100.0   $1,971,466    100.0   $174,849    8.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   Fiscal 2018   % of
Segment
Net Sales		   Fiscal 2017   % of
Segment
Net Sales		   Change
Amount		   %
Change		 

# OF UNITS:

            

Motorized

            

Class A

   8,754    34.5    8,264    34.2    490    5.9 

Class C

   15,875    62.6    15,181    62.9    694    4.6 

Class B

   726    2.9    688    2.9    38    5.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Motorized

   25,355    100.0    24,133    100.0    1,222    5.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:%
  Increase  

Motorized

Class A

3.5

Class C

3.5

Class B

6.1

Total Motorized

3.8

The increase in total motorized net sales of 8.9% compared to the prior fiscal year resulted from a 5.1% increase in unit shipments and a 3.8%7.4% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the twelve months ended July 31, 2018,2021, combined motorhometravel trailer and fifth wheel wholesale unit shipments for the industry increased 6.0%47.8% compared to the same period last year.

According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2021 and 2020, our market share for travel trailers and fifth wheels combined was 41.8% and 44.0%, respectively.


The increase in the net price per unit within both the Class A and Class C product lines of 3.5% is primarily due to the net impact of product mix changes and selective net price increases. The increaseincreases in the overall net price per unit within the Class Btravel trailer product line of 6.1% is8.7% and the fifth wheel product line of 11.2% were primarily due to the introductionimpacts of a new, higher-priced model sinceboth selective net selling price increases, primarily to offset increasing material costs, and product mix changes compared to the prior-year period, and more option content per unit in the current fiscal year.

period.

40

Cost of products sold increased $156,065$1,680,430 to $1,912,207,$5,201,020, or 89.1%83.6% of motorizedNorth American towables net sales, for fiscal 20182021 compared to $1,756,142,$3,520,590 or 89.1%85.0% of motorizedNorth American towables net sales, for fiscal 2017.2020. The changes in material, labor,freight-out and warranty costs comprised $150,762$1,599,973 of the $156,065$1,680,430 increase due to increased sales volume.in cost of products sold. Material, labor,freight-out and warranty costs as a combined percentage of motorizedNorth American towables net sales was 84.9%decreased to 77.7% for fiscal 2018 and 84.8%2021 compared to 78.1% for fiscal 2017. The primary reasons for this slight increase2020, primarily as a result of improvements in percentage were increases in labor costs associated with increasing employment levelsthe material and the continued competitive RV labor market andwarranty cost percentages, partially offset by an increase in the warrantylabor cost percentage, but these increases were mostly offset by a reductionpercentage. The improvement in the material cost percentage is primarily due to operating efficiencies attaineda reduction in sales discounts since the past year, primarily at Jayco,prior-year period, which effectively increases net selling prices and selectivecorrespondingly decreases the material cost percentage, partially offset by recently increasing material costs. The warranty cost percentage is lower due to favorable experience trends, while the labor cost percentage increase is due to the current competitive RV labor market conditions in northern Indiana compared to the prior-year period. Total manufacturing overhead increased $80,457 with the increase in sales, but decreased as a percentage of North American towables net price increases.

sales from 6.9% to 5.9%, as the increased sales resulted in lower overhead costs per unit sold.


Variable costs in manufacturing overhead increased $2,644$79,171 to $80,073,$332,049, or 3.7%5.3% of motorizedNorth American towables net sales, for fiscal 20182021 compared to $77,429,$252,878, or 3.9%6.1% of motorizedNorth American towables net sales, for fiscal 20172020 as a result of the increase in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $2,659$1,286 to $9,466$36,057 in fiscal 20182021 from $6,807$34,771 in fiscal 2017 primarily due to the increase in manufacturing facilities and production lines.

Motorized2020.


North American towables gross profit increased $18,784$401,016 to $234,108,$1,020,908, or 10.9%16.4% of motorizedNorth American towables net sales, for fiscal 20182021 compared to $215,324,$619,892, or 10.9%15.0% of motorizedNorth American towables net sales, for fiscal 2017.2020. The increase in the gross profit was primarilydriven by the increase in net sales, and the increase in the gross profit percentage is due to the 5.1% increasedecrease in unit sales volumethe cost of products sold percentage noted above.


Selling, general and administrative expenses were $96,370$330,138, or 4.5%5.3% of motorizedNorth American towables net sales, for fiscal 20182021 compared to $86,009,$238,656, or 4.4%5.8% of motorizedNorth American towables net sales, for fiscal 2017.2020. The $10,361primary reason for the $91,482 increase was partially due to increased motorizedthe impact of the increase in North American towables net sales and motorized income before income taxes, which caused related commissions, bonusesincentive and other compensation to increase by $3,285. In addition, legal, professional and related settlement costs increased $5,393, primarily due to product liability and legal settlement costs. Sales related$95,734. This increase was partially offset by the decrease in sales-related travel, advertising and promotional costs also increased $1,174of $5,374, primarily due to the cancellation of the major North American RV shows, along with travel restrictions, in connectionthe current-year period due to the ongoing COVID-19 pandemic. The decrease in the overall selling, general and administrative expense as a percentage of North American towable net sales is primarily due to the reductions in sales-related travel, advertising and promotion costs as a percentage of net sales in tandem with the sales increase.

Motorizedincrease in net sales.


North American towables income before income taxes was $134,785,$658,964, or 6.3%10.6% of motorizedNorth American towables net sales, for fiscal 20182021 compared to $125,323,$336,207, or 6.4%8.1% of motorizedNorth American towables net sales, for fiscal 2017.2020. The primary reason for this slight decrease in percentage was the impact of the increase in North American towables income before income taxes was the increase in North American towables net sales, and the primary reasons for the increase in percentage were the decreases in the cost of products sold and selling, general and administrative expense percentagepercentages noted above.

FISCAL 2017 VS. FISCAL 2016

   Fiscal 2017      Fiscal 2016      

Change

Amount

  

%

Change

 

NET SALES

         

Recreational vehicles

         

Towables

  $      5,127,491    $      3,338,659    $      1,788,832   53.6 

Motorized

   1,971,466     1,094,250     877,216   80.2 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   7,098,957     4,432,909     2,666,048   60.1 

Other

   253,557     218,673     34,884   16.0 

Intercompany eliminations

   (105,562)     (69,470)     (36,092)   (52.0) 
  

 

 

    

 

 

    

 

 

  

Total

  $7,246,952    $4,582,112    $2,664,840   58.2 
  

 

 

    

 

 

    

 

 

  

# OF UNITS

         

Recreational vehicles

         

Towables

   213,562     128,932     84,630   65.6 

Motorized

   24,133     13,815     10,318   74.7 
  

 

 

    

 

 

    

 

 

  

Total

   237,695     142,747     94,948   66.5 
   Fiscal 2017  

% of

Segment

Net Sales

   Fiscal 2016  

% of

Segment

Net Sales

   

Change

Amount

  

%

Change

 

GROSS PROFIT

         

Recreational vehicles

         

Towables

  $783,752   15.3   $547,460   16.4   $236,292   43.2 

Motorized

   215,324   10.9    144,913   13.2    70,411   48.6 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   999,076   14.1    692,373   15.6    306,703   44.3 

Other

   44,702   17.6    33,975   15.5    10,727   31.6 

Intercompany eliminations

   (195)   –    (23)   –    (172)   – 
  

 

 

    

 

 

    

 

 

  

Total

  $1,043,583   14.4   $726,325   15.9   $317,258   43.7 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         

Recreational vehicles

         

Towables

  $273,550   5.3   $195,983   5.9   $77,567   39.6 

Motorized

   86,009   4.4    56,214   5.1    29,795   53.0 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   359,559   5.1    252,197   5.7    107,362   42.6 

Other

   8,935   3.5    8,162   3.7    773   9.5 

Corporate

   51,353   –    45,910   –    5,443   11.9 
  

 

 

    

 

 

    

 

 

  

Total

  $419,847   5.8   $306,269   6.7   $113,578   37.1 

INCOME (LOSS) BEFORE INCOME TAXES

         

Recreational vehicles

         

Towables

  $458,915   9.0   $321,874   9.6   $137,041   42.6 

Motorized

   125,323   6.4    88,523   8.1    36,800   41.6 
  

 

 

    

 

 

    

 

 

  

Total recreational vehicles

   584,238   8.2    410,397   9.3    173,841   42.4 

Other

   28,909   11.4    18,547   8.5    10,362   55.9 

Intercompany eliminations

   (195)   –    (23)   –    (172)   – 

Corporate

   (56,566)   –    (45,608)   –    (10,958)   (24.0) 
  

 

 

    

 

 

    

 

 

  

Total

  $556,386   7.7   $383,313   8.4   $173,073   45.2 
   

As of

July 31, 2017

      

As of

July 31, 2016

      

Change

Amount

  

%

Change

 

ORDER BACKLOG

         

Recreational vehicles

         

Towables

  $1,416,240    $735,085    $681,155   92.7 

Motorized

   915,559     461,762     453,797   98.3 
  

 

 

    

 

 

    

 

 

  

Total

  $2,331,799    $1,196,847    $1,134,952   94.8 
  

 

 

    

 

 

    

 

 

  

CONSOLIDATED

Consolidated net sales for fiscal 2017 increased $2,664,840, or 58.2%, compared to fiscal 2016. Jayco accounted for $1,814,048 of the $2,664,840above, and a 0.5% increase and 39.6% of the 58.2% increase in consolidated net sales due to the inclusioncombination of twelve months of Jayco’s operationsa lower amortization expense percentage this year and the impairment charges in fiscal 2017the prior-year period as compared to one monthdiscussed in fiscal 2016 from the date of acquisition. Consolidated gross profit for fiscal 2017 increased $317,258, or 43.7%, compared to fiscal 2016, with Jayco accounting for $212,050 of the $317,258 increase and 29.2% of the 43.7% increase. Consolidated gross profit was 14.4% of consolidated net sales for fiscal 2017 and 15.9% for fiscal 2016. The decrease in gross profit percentage is primarily dueNote 7 to the dilutive impact of both Jayco’s gross profit percentage of 11.5% and the overall market-driven changes in product mix toward generally smaller and lower-priced units, which typically have lower gross margins. In addition, there was a higher concentration of motorized net sales to consolidated net sales in fiscal 2017 as compared to fiscal 2016, and motorized products typically carry a lower gross margin as compared to towable products.

Selling, general and administrative expenses for fiscal 2017 increased $113,578 or 37.1% compared to fiscal 2016. Amortization of intangible assets expense for fiscal 2017 increased $35,963 compared to fiscal 2016, primarily due to the increase in Jayco’s total amortization expense of $38,386. Income from continuing operations before income taxes for fiscal 2017 was $556,386, as compared to $383,313 for fiscal 2016, an increase of $173,073 or 45.2%.

Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses and income before income taxes are addressed in the segment reporting that follows.

Corporate costs included in selling, general and administrative expenses increased $5,443 to $51,353 for fiscal 2017 compared to $45,910 for fiscal 2016. The increase is primarily due to an increase in compensation costs, as incentive compensation increased $2,973 in correlation with the increase in income from continuing operations before income taxes compared to the prior year, and stock-based compensation increased $3,113. The stock-based compensation increase is due to increasing income from continuing operations before income taxes over the past three years, as most stock awards vest ratably over a three-year period. Deferred compensation expense also increased $2,432, which relates to the equal and offsetting increase in other income noted below due to the increase in the related deferred compensation plan assets. Costs related to sales and marketing initiatives also increased $1,366. These increases were partially offset by a decrease of $4,882 in legal and professional fees, primarily due tonon-recurring professional fees incurred in fiscal 2016 related to the Jayco acquisition and the development of long-term strategic growth initiatives.

Corporate interest and other income and expense was $5,213 of net expense for fiscal 2017 compared to $302 of net income for fiscal 2016. This increase in net expense of $5,515 is primarily due to an increase in interest expense and fees of $8,172 related to the revolving credit facility, as there were twelve months of these expenses in fiscal 2017 as compared to one month in fiscal 2016 from the date of the establishment of the facility and the related Jayco acquisition. This increase in expense was partially offset by the investment income and market value appreciation on the Company’s deferred compensation plan assets totaling $2,879 in fiscal 2017 as compared to $537 in fiscal 2016, an increase in income of $2,342.

The overall annual effective tax rate for fiscal 2017 remained constant at 32.7% on $556,386 of income before income taxes, compared with 32.7% on $383,313 of income before income taxes for fiscal 2016. The effective income tax rate for fiscal 2017 includes a benefit of $1,898 related to the adoption of ASU2016-09 as discussed inNote 1 to theCondensed Consolidated Financial Statements. The effective income tax rates for the fiscal 2017 and fiscal 2016 periods were both favorably impacted by various uncertain tax benefit settlements and expirations.

SEGMENT REPORTING

Towable


41

North American Motorized Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 20172021 vs. Fiscal 2016

       Fiscal 2017       % of
Segment
    Net Sales    		       Fiscal 2016       % of
Segment
    Net Sales    		   Change
    Amount     		   %
    Change     		 

NET SALES:

            

Towables

            

  Travel Trailers and Other

  $3,088,561    60.2   $1,884,128    56.4   $1,204,433    63.9 

  Fifth Wheels

   2,038,930    39.8    1,454,531    43.6    584,399    40.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Towables

  $5,127,491    100.0   $3,338,659    100.0   $1,788,832    53.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   Fiscal 2017   % of
Segment
Net Sales		   Fiscal 2016   % of
Segment
Net Sales		   Change
Amount		   %
Change		 

# OF UNITS:

            

Towables

            

  Travel Trailers and Other

   166,140    77.8    95,561    74.1    70,579    73.9 

  Fifth Wheels

   47,422    22.2    33,371    25.9    14,051    42.1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Towables

   213,562    100.0    128,932    100.0    84,630    65.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

2020
Fiscal 2021% of
Segment
Net Sales		Fiscal 2020% of
Segment
Net Sales		Change
Amount		%
Change
NET SALES:
North American Motorized
Class A$1,052,982 39.4 $495,520 35.6 $557,462 112.5 
Class C1,266,624 47.4 776,191 55.8 490,433 63.2 
Class B349,785 13.2 118,387 8.6 231,398 195.5 
Total North American Motorized$2,669,391 100.0 $1,390,098 100.0 $1,279,293 92.0 
Fiscal 2021% of
Segment
Shipments		Fiscal 2020% of
Segment
Shipments		Change
Amount		%
Change
# OF UNITS:
North American Motorized
Class A6,717 26.9 3,946 26.2 2,771 70.2 
Class C14,828 59.3 10,143 67.2 4,685 46.2 
Class B3,463 13.8 999 6.6 2,464 246.6 
Total North American Motorized25,008 100.0 15,088 100.0 9,920 65.7 
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:%
 (Decrease) 
Change

Towables

North American Motorized

  Travel Trailers and Other

Class A		42.3 (10.0)

  Fifth Wheels

Class C		17.0 (1.9)

Class B

(51.1)
Total Towables

North American Motorized		26.3 (12.0)


The increase in total towablesmotorized net sales of 53.6%92.0% compared to the prior fiscal year resulted from a 65.6%65.7% increase in unit shipments partially offset byand a 12.0% decrease26.3% increase in the overall net price per unit due to the impact of changes in product mix and price. JaycoThe addition of the Tiffin Group, acquired on December 18, 2020, accounted for 37.7%$373,042 of the 53.6%$1,279,293 increase, in total towable net sales and for $1,257,659or 26.8% of the $1,788,832 increase due92.0% increase. According to the inclusion of twelve months of Jayco’s operations in fiscal 2017 as compared to one month in fiscal 2016 from the date of acquisition. Jayco also accounted for 45.8% of the 65.6% increase in total towable unit shipments and for 59,065 of the 84,630 unit increase. The 12.0% decrease in the overall towables net price per unit is greater than the percentage decreases within the travel trailer and fifth wheel product lines due to a higher concentration of the more moderately priced travel trailers and other units, as compared to fifth wheels, in the current-year period as compared to the prior-year period. The “Other” units within the travel trailer and other category consist primarily of truck and folding campers and other specialty vehicles. The overall industry increase in combined travel trailer and fifth wheel wholesale unit shipmentsstatistics published by RVIA, for the twelve months ended July 31, 2017 was 17.7%2021, combined motorhome wholesale unit shipments increased 36.2% compared to the same period last year accordingyear. According to statistics published by RVIA.

Stat Surveys, for the twelve-month periods ended June 30, 2021 and 2020, our market share for motorhomes was 43.1% and 38.1%, respectively.


The decreasesincreases in the overall net prices per unit within the Class A of 42.3% and the Class C product line of 17.0% during fiscal 2021 were both impacted by the addition of the higher-priced Tiffin Group product lines and selective net price increases to partially offset increased material costs. The Tiffin Group Class A product lines are primarily higher-priced diesel units as opposed to more moderately-priced gas units. The decrease in the overall net price per unit within the travel trailer and otherClass B product linesline of 10.0% and the fifth wheel product lines of 1.9% were both51.1% is primarily due to a change in product mix attributablechanges as a result of a much higher concentration of sales of lower-priced Class B products in the current-year period, including increased sales of previously existing lower-priced models and the introduction of several new lower-priced models, as compared to both the acquisition of Jayco and market-driven changes in product mix toward generally smaller and lower-priced units.

fiscal 2020.



42

Cost of products sold increased $1,552,540$1,083,533 to $4,343,739,$2,323,636, or 84.7%87.0% of towablesmotorized net sales, for fiscal 20172021 compared to $2,791,199,$1,240,103, or 83.6%89.2% of towablesmotorized net sales, for fiscal 2016.2020. The changechanges in material, labor,freight-out and warranty costs comprised $1,450,503$1,021,576 of the $1,552,540$1,083,533 increase in cost of products sold.due to the increased sales volume. Material, labor,freight-out and warranty costs as a combined percentage of towablesmotorized net sales increased to 78.9%was 81.9% for fiscal 20172021 compared to 77.7%83.9% for fiscal 2016. This increase2020, with the decrease in percentage was primarily the result of increasesdue to decreases in both the material andfreight-out warranty cost percentages, to salespartially offset by an increase in the labor cost percentage. The improvement in the material cost percentage is primarily due to changesa reduction in sales discounts since the prior-year period, which effectively increases net selling prices and correspondingly decreases the material cost percentage and product mix whichchanges, partially offset by recently increasing material costs. The warranty cost percentage is partially attributable to the acquisition of Jayco. There was also a modest increase in labor costslower due to bothfavorable experience trends, while the labor cost percentage increase is due to the current competitive RV labor market and training an increasing workforce.conditions in northern Indiana compared to the prior-year period. Total manufacturing overhead increased $102,037 with$61,957 due to the net sales increase, in sales, but decreased slightly as a percentage of towablesNorth American motorized net sales from 5.9%5.3% to 5.8%.

5.1%, as the increased net sales resulted in lower overhead costs per unit sold.


Variable costs in manufacturing overhead increased $95,035$58,514 to $274,407,$120,442, or 5.4%4.5% of towableNorth American motorized net sales, for fiscal 20172021 compared to $179,372,$61,928 or 5.4%4.5% of towableNorth American motorized net sales, for fiscal 20162020 as a result of the increase in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $7,002$3,443 to $23,103$15,049 in fiscal 20172021 from $16,101$11,606 in fiscal 2016 primarily due to the increase in manufacturing facilities and production lines.

Towables2020.


Motorized gross profit increased $236,292$195,760 to $783,752,$345,755, or 15.3%13.0% of towablesmotorized net sales, infor fiscal 20172021 compared to $547,460,$149,995, or 16.4%10.8% of towablesmotorized net sales, infor fiscal 2016.2020. The increase in gross profit iswas due primarily due to the 65.6% increase in unitnet sales, volume noted above, whileand the decreaseincrease in the gross profit percentage is primarilywas due to the increasedecrease in the cost of products sold percentage noted above.


Selling, general and administrative expenses were $273,550,$134,315, or 5.3%5.0% of towablesmotorized net sales, for fiscal 20172021 compared to $195,983,$72,720, or 5.9%5.2% of towablesmotorized net sales, for fiscal 2016.2020. The primary reason for the $77,567$61,595 increase was increased towablesprimarily due to the increase in North American motorized net sales and towables income before income taxes, which caused related commissions, bonusesincentive and other compensation to increase by $55,791. These$53,061. Legal, professional and related settlement costs however, decreasedalso increased by $1,524. The decrease in the overall selling, general and administrative expense as a percentage of towablesNorth American motorized net sales by 0.4% comparedwas due to the prior fiscal year. Sales-related travel, advertising and promotional costs also increased $11,296increase in correlation with the sales increase and legal, professional and related settlement cost increased $4,033.

Towablesnet sales.


Motorized income before income taxes was $458,915,$202,057, or 9.0%7.6% of towablesmotorized net sales, for fiscal 20172021 compared to $321,874,$71,943, or 9.6%5.2% of towablesmotorized net sales, for fiscal 2016.2020. The primary reason for the decreaseincrease in North American motorized income before income taxes was the increase in North American motorized net sales. The primary reasons for the increase in percentage waswere the impact of the increasedecreases in the cost of products sold percentage as noted above. In addition, amortization costs as a percentage of towables net sales also increased 0.4% due to the increase of $34,581 in Jayco’s amortization costs. These increases in cost percentages were partially offset by theone-time goodwill impairment charge of $9,113 included in the results for fiscal 2016 as discussed inNote 7 to the Consolidated Financial Statements, and the decrease in the selling, general and administrative expense percentagepercentages noted above.

Motorized



43

European Recreational Vehicles


Analysis of Change in Net Sales for Fiscal 20172021 vs. Fiscal 2016

       Fiscal 2017       % of
Segment
    Net Sales    		       Fiscal 2016       % of
Segment
    Net Sales    		   Change
    Amount     		   %
    Change     		 

NET SALES:

            

Motorized

            

Class A

  $914,681    46.4   $583,252    53.3   $331,429    56.8 

Class C

   968,899    49.1    427,951    39.1    540,948    126.4 

Class B

   87,886    4.5    83,047    7.6    4,839    5.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Motorized

  $1,971,466    100.0   $1,094,250    100.0   $877,216    80.2 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   Fiscal 2017   % of
Segment
Net Sales		   Fiscal 2016   % of
Segment
Net Sales		   Change
Amount		   %
Change		 

# OF UNITS:

            

Motorized

            

Class A

   8,264    34.2    6,114    44.3    2,150    35.2 

Class C

   15,181    62.9    7,023    50.8    8,158    116.2 

Class B

   688    2.9    678    4.9    10    1.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Motorized

   24,133    100.0    13,815    100.0    10,318    74.7 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

IMPACT OF CHANGE IN MIX AND PRICE ON NET SALES:%
 Increase 

Motorized

Class A

21.6

Class C

10.2

Class B

4.3

Total Motorized

5.5
2020

Fiscal 2021% of
Segment
Net Sales		Fiscal 2020% of
Segment
Net Sales		Change
Amount		%
Change
NET SALES:
European
Motorcaravan$1,779,906 55.6 $1,505,353 60.6 $274,553 18.2 
Campervan779,755 24.4 433,398 17.4 346,357 79.9 
Caravan292,708 9.1 273,475 11.0 19,233 7.0 
Other347,710 10.9 273,165 11.0 74,545 27.3 
Total European$3,200,079 100.0 $2,485,391 100.0 $714,688 28.8 

Fiscal 2021% of
Segment
Shipments		Fiscal 2020% of
Segment
Shipments		Change Amount% Change
# OF UNITS:
European
Motorcaravan29,899 46.1 27,244 50.0 2,655 9.7 
Campervan21,371 32.9 13,297 24.4 8,074 60.7 
Caravan13,605 21.0 13,965 25.6 (360)(2.6)
Total European64,875 100.0 54,506 100.0 10,369 19.0 
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:Foreign
Currency %		Mix and
Price %		%
Change
European
Motorcaravan9.5 (1.0)8.5 
Campervan9.5 9.7 19.2 
Caravan9.5 0.1 9.6 
Total European9.5 0.3 9.8 

The increase in total motorizedEuropean recreational vehicle net sales of 80.2%28.8% compared to the prior fiscal yearprior-year period resulted from a 74.7%an 19.0% increase in unit shipments and a 5.5%9.8% increase in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. Jayco accountedThis increase includes the current heightened European market demand for 50.8%the campervan product line, and demand for motorcaravan products, as moderated by the impact of current chassis supply constraints on the motorcaravan product line. The sales increase of $714,688 includes an increase of $234,968, or 9.5% of the 80.2% increase in total motorized net sales and for $556,389 of the $877,21628.8% increase, due to the inclusion of twelve months of Jayco’s operations in fiscal 2017 as compared to one month in fiscal 2016 from the date of acquisition. Jayco accounted for 39.2% of the 74.7% increase in total motorized unit shipments and for 5,411 offoreign exchange rates since the 10,318 unit increase. prior-year period.

The 5.5% increase in the overall motorized net price per unit increase of 9.8% includes the impact of foreign currency exchange rate changes, which accounts for 9.5% of the 9.8% increase on a constant-currency basis.

The decrease in spite of much larger percentage increasesthe overall net price per unit due to product mix and price within the Class A and Class Cmotorcaravan product lines, isline of 1.0% was primarily due to a significantly higher concentration ofproduct mix changes reflecting the more moderately priced Class C units, as compared to Class A units,trend in the current-year period aslatter half of fiscal 2021 toward the lower-priced models within this product category compared to the prior-year period. The overall industry increase in wholesale unit shipments of motorhomes for the twelve months ended July 31, 2017 was 14.2% compared to the same period last year according to statistics published by RVIA.

The increase in the overall net price per unit due to product mix and price within the Class Acampervan product line of 21.6% was primarily due to a higher concentration of sales of the larger and generally more expensive diesel units compared to the more moderately priced gas units in the current-year period compared to the prior-year period. This increase9.7% was primarily due to the change innet impact of product mix attributablechanges, including an increased concentration of units with higher chassis content compared to the acquisition of Jayco’shigh-end Class A diesel products. The increaseprior-year period, in the overalladdition to selective net price per unit within the Class C product line of 10.2% is primarily due to a higher concentration of sales of the generally more expensivehigh-end Class C diesel units in the current period compared to a year ago, also due to the change in product mix attributable to the acquisition of Jayco. The increase in the overall net price per unit within the Class B product line of 4.3% is primarily due to changes in product mix.

Costincreases.



44

European recreational vehicle cost of products sold increased $806,805$578,221 to $1,756,142,$2,759,224, or 89.1%86.2% of motorizedEuropean recreational vehicle net sales, for fiscal 20172021 compared to $949,337,$2,181,003, or 86.8%87.8% of motorizedEuropean recreational vehicle net sales, for fiscal 2016.2020. The changechanges in material, labor,freight-out and warranty costs comprised $770,629$521,250 of the $806,805$578,221 increase primarily due to the increased net sales volume. Material, labor,freight-out and warranty costs as a combined percentage of motorizedEuropean recreational vehicle net sales increaseddecreased to 84.8%77.1% for fiscal 2017 as2021 compared to 82.4%78.3% for fiscal 2016. This increase in percentage was2020, with the decrease primarily due to an increasea decrease in the material cost percentage, to salesprimarily due to changes in product mix, which is primarily attributableselective price increases and better material pricing due to the acquisition of Jayco. The labor cost percentage also increased due to both the current competitive RV labor market and training an increasing workforce. The combination of assimilating and training an increasing workforce while expanding production lines and product offerings also led to ansignificant increase in the warranty cost percentage.volume. Total manufacturing overhead increased $36,176$56,971 with the volume increase but decreased slightly as a percentage of motorized net sales from 4.4%9.5% to 4.3%.

Variable9.1% as the increased net sales levels resulted in lower overhead costs in manufacturing overheadper unit sold.


European recreational vehicle gross profit increased $33,384$136,467 to $77,429,$440,855, or 3.9%13.8% of motorizedEuropean recreational vehicle net sales, for fiscal 20172021 compared to $44,045,$304,388, or 4.0%12.2% of motorizedEuropean recreational vehicle net sales, for fiscal 2016 as a result of the2020. The increase in net sales. This slight decrease as a percentage of motorized net salesgross profit is primarily due to a lower percentage to sales of employee medical benefit costs. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $2,792 to $6,807 in fiscal 2017 from $4,015 in fiscal 2016 primarily due to the increase in manufacturing facilities and production lines.

Motorized gross profit increased $70,411 to $215,324, or 10.9% of motorized net sales, in fiscal 2017 compared to $144,913, or 13.2% of motorized net sales in fiscal 2016. The $70,411 increase in gross profit was due primarily to the impact of the 74.7% increase in unit sales volume noted above, while the decreaseincrease in gross profit as a percentage of motorizedEuropean recreational vehicle net sales wasis due to the increase in the costs of products sold percentage noted above.

Selling, general and administrative expenses were $86,009, or 4.4% of motorized net sales, for fiscal 2017 compared to $56,214, or 5.1% of motorized net sales, for fiscal 2016. The primary reason for the $29,795 increase was increased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to increase by $20,799. These costs, however, decreased as a percentage of motorized net sales by 0.7% compared to the prior fiscal year. Sales related travel, advertising and promotional costs also increased $5,006 in correlation with the sales increase.

Motorized income before income taxes was $125,323, or 6.4% of motorized net sales, for fiscal 2017 compared to $88,523, or 8.1% of motorized net sales, for fiscal 2016. The primary reasons for this decrease in percentage were the impact of the increase in the cost of products sold percentage noted aboveabove.


European recreational vehicle selling, general and anadministrative expenses were $261,778, or 8.2% of European recreational vehicle net sales, for fiscal 2021 compared to $239,635, or 9.6% of European recreational vehicle net sales, for fiscal 2020. The primary reason for the $22,143 increase was the impact of the increase in amortization costs as a percentage of motorizedEuropean recreational vehicle net sales of 0.2%and income before income taxes, which caused commissions, incentive and other compensation and benefits to increase by $25,747. Miscellaneous general and administrative expenses also increased $4,836 primarily due to non-recurring favorable legal and other reserve adjustments in the increase of $3,805 in Jayco’s amortizationprior year. Professional fees and related settlement costs partiallyalso increased $7,230 and depreciation expense increased by $5,386. These increases were mostly offset by the decrease in sales-related travel, advertising and promotional costs of $21,919, primarily due to not participating in European trade shows, along with travel restrictions, in the current year due to the ongoing COVID-19 pandemic. The decrease in the overall selling, general and administrative expense as a percentage of European recreational vehicle net sales is primarily due to the increase in net sales.

European recreational vehicle income before income taxes was $116,576, or 3.6% of European recreational vehicle net sales, for fiscal 2021 compared to $9,850, or 0.4% of European recreational vehicle net sales, for fiscal 2020. The primary reason for the increase in income before income taxes was the increase in European recreational vehicle net sales. The increase in percentage was primarily due to the decreases in the cost of products sold and selling, general and administrative expense percentages noted above.


45

Financial Condition and Liquidity


As of July 31, 2018,2021, we had $445,852 in cash and cash equivalents, of $275,249which $282,220 is held in the United States and the equivalent of $163,632, predominantly in Euros, is held in Europe, compared to $223,258$538,519 on July 31, 2017.2020, of which $276,841 was held in the United States and the equivalent of $261,678, predominantly in Euros, was held in Europe. Cash and cash equivalents held internationally may be subject to foreign withholding taxes if repatriated to the United States. The components of this $51,991 increasethe $92,667 decrease in fiscal 2018cash and cash equivalents are described in more detail below, but the increase isdecrease was primarily dueattributable to the $466,508 of cash provided by operations being mostly offset byof $526,482 less cash usesused in financing activities of $145,000 for principal payments on long-term debt, $138,197 for capital expenditures, $50,402 for an equity investment$188,438 and cash used in a joint venture and $77,989 for cash dividends to our stockholders.

investing activities of $428,493.

Working

Net working capital at July 31, 20182021 was $542,344$1,008,738 compared to $399,121$586,996 at July 31, 20172020, with the increase primarily due to increasedincreases in inventory levels from additional production lines and increased cash.accounts receivable as noted in the Operating Activities section below. Capital expenditures of $138,197$128,835 for the fiscal year ended July 31, 20182021 were made primarily to purchasefor land to expand our RVand production facilitiesbuilding additions and to replaceimprovements, and replacing machinery and equipment used in the ordinary course of business.


We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. We believe ouron-hand cash and cash equivalents and funds generated from operations, along with funds available under the revolving asset-based credit facility, will be sufficient to fund expected operational requirements for the foreseeable future. We have historically relied on internally generated cash flows from operations to finance substantially all our growth, however, we obtained a revolving asset-based credit facility to partially fund the fiscal 2016 acquisition of Jayco as discussed inNotes 2 and12 to the Consolidated Financial Statements.


Our main priorities for the use of current and future available cash generated from operations remain consistent with our history, and include reducing our indebtedness, maintaining and, over time, growing our dividend payments and funding our growth both organically and opportunistically through acquisitions, maintaining and growing our regular dividends over time, reducing indebtedness incurred in connection with the acquisition of the Erwin Hymer Group as discussed in Note 18 to the Consolidated Financial Statements and repurchasing shares under the share repurchase program as discussed in Note 17 to the Consolidated Financial Statements. Strategic share repurchases or special dividends as determined by the Company’s Board will also continue to be considered.

In regard to growing our business, we anticipate capital expenditures in fiscal 2019 of approximately $130,000, primarily for the continued expansion of our facilities, including the previously announced expansions at our Airstream and Jayco subsidiaries, and replacing and upgrading machinery, equipment and other assets to be used in the ordinary course of business.acquisitions. We may also consider additional strategic growthand opportunistic repurchases of shares of THOR stock and special dividends based upon market and business conditions and excess cash availability, subject to potential customary limits and restrictions pursuant to our credit facilities, applicable legal limitations and determination by the Company's Board of Directors ("Board").


During fiscal 2020 and into fiscal 2021, we delayed or paused certain capital expenditures due to the uncertainties related to the COVID-19 pandemic and in an effort to preserve cash. We anticipate that during fiscal 2022 we will incur higher levels of capital spending than the recent fiscal 2019 through fiscal 2021 average as we address capital spending needs of our recent acquisitions that complement or expandand certain delayed projects, focus on automation and other projects directly related to enhancing the quality of our ongoing operations.

products, and implement various capacity enhancement initiatives. Other capital expenditure projects will benefit customer services, technology enhancements, energy efficiency initiatives and general equipment replacements. Included within the capacity enhancement initiatives is a recently announced expansion by our Heartland subsidiary in a new regional complex in southern Michigan of approximately $36,000, the majority of which is expected to be completed in fiscal 2022. These specific facilities will produce various Heartland travel trailer and fifth wheel models. Our current estimate of committed and internally approved capital spend for fiscal 2022 is $275,000, of which we anticipate approximately two-thirds will be in North America and one-third in Europe.


The Company’s Board currently intends to continue regular quarterly cash dividend payments in the foreseeable future. As is customary under asset-based lines of credit facilities, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the paymentspayment of dividends under the existing debt facilities include a minimum level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreement.agreements. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors.

Future purchases of the Company’s common stock or special cash dividends may occur based upon market and business conditions and excess cash availability, subjectfactors, in addition to potential customary limits and restrictions pursuant to the credit facility, applicable legal limitations and determination by the Board.

compliance with any then-existing financing facilities.


Operating Activities


Net cash provided by operating activities for fiscal 20182021 was $466,508$526,482 as compared to net cash provided by operating activities of $419,333$540,941 for fiscal 20172020 and cash provided of $341,209$508,019 for fiscal 2016. 2019.


46

For fiscal 2018,2021, net income adjusted fornon-cash operating items (primarily depreciation, amortization of intangibles, deferred income tax benefit and stock-based compensation) provided $929,482 of operating cash. The change in net working capital resulted in the use of $403,000 of operating cash during fiscal 2021, primarily due to an increase in inventory, as production levels have increased due to the current heightened demand, and there has been an increase in productions lines and capacity. In addition, work-in-process inventory is higher than normal at July 31, 2021 due to elevated material component shortages on otherwise substantially completed units. Accounts receivable also has increased given the increase in sales. These increases were partially offset by an increase in accounts payable primarily related to the inventory growth, and an increase in accrued liabilities, driven primarily by increased accrued compensation and incentive pay resulting from the increased production levels and income before income taxes as compared to the prior year.

For fiscal 2020, net income adjusted for non-cash operating items (primarily depreciation, amortization of intangibles, deferred income tax benefit and stock-based compensation) provided $451,018 of operating cash. The change in net working capital provided $89,923 of operating cash during fiscal 2020, due primarily to a reduction in inventory as well as an increase in accounts payable due to the timing of inventory purchases, partially offset by an increase in accounts receivable due to an increase in July 2020 sales as compared to July 2019 sales.

For fiscal 2019, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles, deferred income tax expense and stock-based compensation) resulted in $555,019provided $368,838 of operating cash. ChangesThe changes in working capital used $88,511$139,181 of operating cash during fiscal 2018,2019, due primarily due to an increasereductions in inventory in correlation with the increases in sales and production capacity and a decrease in accounts payable, primarily resulting from the timing of inventory purchases and the related payments. These cash uses werereceivable, partially offset by an increasepayments made on the guaranteed liabilities related to former EHG subsidiaries, as discussed in accrued liabilities primarily dueNote 2 to the timing of payments.

For fiscal 2017, net income adjusted fornon-cash items (primarily depreciation, amortization of intangibles, deferred income tax benefitConsolidated Financial Statements, and stock-based compensation) resulted in $444,799 of operating cash. Changes in working capital used $25,466 of operating cash during fiscal 2017, primarily due to a larger than usual increasereduction in accounts receivable and inventory in correlation with the increases in sales, backlog and production lines, partially offset by increases in accounts payable and accrued liabilities primarily resulting from the timing of payments.

For fiscal 2016, net income adjusted fornon-cash items (primarily depreciation, amortization of intangibles, impairment charges, deferred income tax benefit and stock-based compensation) resulted in $313,254 of operating cash. Changes in working capital provided $27,955 of operating cash during fiscal 2016, primarily due to an increase in accounts payable and accrued liabilities primarily resulting from the timing of payments.

payable.


Investing Activities


Net cash used in investing activities for fiscal 20182021 was $183,493,$428,493, primarily due to $310,938 used in business acquisitions and capital expenditures of $128,835.

Net cash used in investing activities for fiscal 2020 was $84,249, primarily due to capital expenditures of $138,197 and $50,402 for an equity investment in TH2, our joint venture, partially offset by proceeds from the dispositions of property, plant and equipment of $3,835. The capital expenditures total of $138,197$106,697 which included approximately $97,900$51,100 for land and production building additions and improvements, with the remainder used primarily to replace machinery and equipment used in the ordinary course of business.

These capital expenditures were partially offset by proceeds from the disposition of property, plant and equipment of $27,677.


Net cash used in investing activities for fiscal 20172019 was $116,655,$1,865,503, primarily due to $1,658,577 in cash used to acquire EHG, $70,777 paid for the foreign currency forward contract loss related to this acquisition, and capital expenditures of $115,027 and a final purchase price adjustment payment of $5,039 related to the fiscal 2016 acquisition of Jayco, partially offset by proceeds from the dispositions of property, plant and equipment of $4,682.$130,224. The capital expenditures total of $115,027$130,224 included approximately $85,600$73,200 for land and production building additions and improvements, with the remainder used primarily to replace machinery and equipment used in the ordinary course of business.

Net cash used in investing activities for fiscal 2016 was $601,473, primarily due to $557,651 of net cash consideration paid for the acquisition of Jayco and $51,976 for capital expenditures. The capital expenditures of $51,976 included approximately $39,500 for land and production building additions and improvements, with the remainder primarily to replace machinery and equipment used in the ordinary course of business.


Financing Activities


Net cash used in financing activities of $231,024 for fiscal 20182021 was primarily due to $145,000$188,438, including $59,700 in principal payments onterm loan debt payments. Additionally, the revolving credit facility, as more fully described inNote 12 to the Consolidated Financial Statements in this report, andCompany made regular quarterly cash dividend payments of $77,989, which included a regular quarterly $0.37$0.41 per share dividend for each of the four quartersquarter of fiscal 2018.

2021 totaling $90,801.


Net cash used in financing activities of $289,322 for fiscal 20172020 was $392,916, consisting primarily due to $215,000of $274,963 in principal payments onterm loan debt payments. Additionally, the revolving credit facility, as more fully described inNote 12 to the Consolidated Financial Statements in this report, andCompany made regular quarterly cash dividend payments of $69,409, which included a regular quarterly $0.33$0.40 per share dividend for each of the four quartersquarter of fiscal 2017.

2020 totaling $88,318.


Net cash provided by financing activities of $286,688 for fiscal 20162019 was $1,539,073, consisting primarily from $360,000of $2,195,018 borrowed in borrowings from our asset-based revolving credit facility, as more fully described inNote 12 toconnection with the Consolidated Financial Statements in this report. Those borrowings wereEHG acquisition, partially offset by cash dividend$497,966 in debt payments, of $62,970, which included a regular quarterly $0.30 per share dividend for each of the four quarters of fiscal 2016, and $7,850$70,176 paid for debt issuance costs as more fully described inNote 12related to the Consolidated Financial Statements in this report.

EHG acquisition, and payments for regular quarterly cash dividend payments of $0.39 per share for each quarter of fiscal 2019 totaling $84,139.


The Company increased its previous regular quarterly dividend of $0.30$0.40 per share to $0.33$0.41 per share in October 2016 and then to $0.372020. In October 2019, the Company increased its previous regular quarterly dividend of $0.39 per share in October 2017.

to $0.40 per share.

47

Critical Accounting Policies


The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We believe that of our accounting policies, the following may involve a higher degree of judgment, estimates and complexity:

Impairment


Business Combinations

We account for the acquisition of a business using the acquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to non-controlling interests, are recorded at the acquisition date at their fair values. Assigning fair values requires the Company to make significant estimates and assumptions regarding the fair value of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances, and liabilities, such as uncertain tax positions and contingencies. The Company may refine these estimates if necessary over a period not to exceed one year by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.

Significant estimates and assumptions are used in estimating the value of acquired identifiable intangible assets, including estimating future cash flows based on revenues and margins that the Company expects to generate following the acquisition, selecting an applicable royalty rate where needed, determining an appropriate dealer attrition rate, applying an appropriate discount rate to estimate a present value of those cash flows and determining their useful lives. Subsequent changes to projections driven by actual results following the acquisition date could require the Company to record impairment charges.

Goodwill, Intangible and Long-Lived Assets


Goodwill results from the excess of purchase price over the net assets of an acquired business. The Company's reporting units are generally the same as its operating segments, which are identified in Note 3 to the Consolidated Financial Statements. Goodwill is not amortized but is tested for impairment annually as of May 31 of each fiscal year and whenever events or changes in circumstances indicate that an impairment may have occurred. We utilize atwo-step quantitative assessment to test for impairment. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying valueamount of thea reporting unit exceeds its fair value, an impairment charge equal to that excess is recognized, not to exceed the second stepamount of goodwill allocated to the reporting unit. As part of the process involvesannual impairment testing, the Company may utilize a comparison ofqualitative approach rather than a quantitative approach to determine if an impairment exists, considering various factors including industry changes, actual results as compared to forecasted results, or the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of the goodwilltiming of a reporting unit exceeds the implied fair valuerecent acquisition, if applicable.

The Company’s primary intangible assets are dealer networks, trade names and design technology and other intangible assets acquired in business acquisitions. Dealer networks are valued on a Discounted Cash Flow method and are amortized on an accelerated basis over 12 to 20 years, with amortization beginning after any applicable backlog amortization is completed. Trademarks and technology assets are both valued on a Relief of that goodwill, an impairment loss is recognized in an amount equalRoyalty method and are both amortized on a straight-line basis, using lives of 15 to the excess.

25 years for trademarks and 10 to 15 years for technology assets, respectively.


We review our tangible and intangible long-lived assets (individually or in a related group, as appropriate) for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable from future cash flows attributable to the assets. Additionally, we review our goodwill for impairment at least annually. Accordingly, weWe continually assess whether events or changes in circumstances represent a ‘triggering’ event that would require us to complete an impairment assessment. Factors that we consider in determining whether a triggering event has occurred include, among other things, whether there has been a significant adverse change in legal factors, business climate or competition related to the operation of the asset, whether there has been a significant decrease in actual or expected operating results related to the asset and whether there are current plans to sell or dispose of the asset. The determination of whether a triggering event has occurred is subject to significant management judgment, including at which point or fiscal quarter a triggering event has occurred when the relevant adverse factors persist over extended periods.


Should a triggering event be deemed to occur, and for each of the annual goodwill impairment assessments, management is required to estimate the expected net cash flows to be realized over the life of the asset and/or the asset’s fair value. Fair values are generally determined by a discounted cash flow model. These estimates are also subject to significant management judgment, including the determination of many factors such as sales growth rates, gross margin patterns, cost growth rates, terminal value assumptions and discount rates.rates developed using market observable inputs and consideration of risk regarding future performance. Changes in these estimates can have a significant impact on the determination of cash flows and fair value and could potentially result in future material impairments. Management engaged an independent valuation firm to assist in certain
48

The Company completed its annual goodwill impairment test as of itsMay 31, 2021, and no impairment assessments.

was identified. See Note 7 to the Consolidated Financial Statements for discussionfurther information regarding our goodwill impairment assessments.

Insurance Reserves

Generally, we are self-insured for workers’ compensation, products liability and group medical insurance. Under these plans, liabilities are recognized for claims incurred, including an estimate for those incurred but not reported. The liability for workers’ compensation claims is determined by the Company with the assistance of a third party administrator and actuary using various state statutes and historical claims experience. Group medical reserves are estimated using historical claims experience. We have a self-insured retention (“SIR”) for products liability and personal injury matters ranging from $500 to $7,500 depending on the product type and when the occurrence took place. Generally, any occurrence (as defined by our insurance policies) after March 31, 2015 is subject to the $500 SIR, while matters occurring after March 31, 2014 and through March 31, 2015 are subject to a $1,000 SIR. We have established a liability on our balance sheet for such occurrences based on historical data, known cases and actuarial information. Amounts above the SIR, up to a certain dollar amount, are covered by our excess insurance policy. Currently, we maintain excess liability insurance aggregating $50,000 with outside insurance carriers to minimize our risks related to catastrophic claims in excess of our self-insured positions for products liability and personal injury matters. Any material change in the aforementioned factors could have an adverse impact on our operating results.

intangible assets.


Product Warranty


We generally provide retail customers of our products with either aone-year ortwo-year warranty covering defects in material or workmanship, with longer warranties on certain structural components.components or other items. We record a liability based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditures over the warranty period. A significant increase in dealerservice shop rates, the cost of parts or the frequency of claims could have a material adverse impact on our operating results for the period or periods in which such additional claims or costs materialize. Management believes that the warranty liability is adequate;appropriate; however, actual claims incurred could differ from estimates, requiring adjustments to the reserves. Warranty liabilities are reviewed and adjusted as necessary on at least a quarterly basis.

Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these tax consequences could materially impact our financial position or results of operations.

We recognize liabilities for uncertain tax positions based on atwo-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, voluntary settlements and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and the valuation allowance recorded against our deferred tax assets, if any. Valuation allowances must be considered due to the uncertainty of realizing deferred tax assets. Companies must assess whether valuation allowances should be established against their deferred tax assets on a tax jurisdictional basis based on the consideration of all available evidence, using a more likely than not standard. We have evaluated the realizability of our deferred tax assets on our Consolidated Balance Sheets which includes the assessment of the cumulative income over recent prior periods.

Revenue Recognition

Revenues from the sale of recreational vehicles are recorded primarily when all of the following conditions have been met:

1) An order for a product has been received from a dealer;

2) Written or oral approval for payment has been received from the dealer’s flooring institution, if applicable;

3) A common carrier signs the delivery ticket accepting responsibility for the product as agent for the dealer; and

4) The product is removed from our property for delivery to the dealer who placed the order.

These conditions are generally met when title passes, which is when vehicles are shipped to dealers in accordance with shipping terms, which are primarily FOB shipping point. Most sales are made to dealers financing their purchases under flooring arrangements with banks or finance companies. Certain shipments are sold to customers on credit or cash on delivery (“COD”) terms. We recognize revenue on credit sales upon shipment and COD sales upon payment and delivery.

Products are not sold on consignment, dealers do not have the right to return products and dealers are responsible for interest costs to floor plan lenders.

Revenues from the sale of extruded aluminum components are recognized when title to products and the risk of loss are transferred to the customer. Intercompany sales are eliminated upon consolidation.

Repurchase Commitments

We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for certain dealers of certain of our RV products. These arrangements, which are customary in the RV industry, provide for the repurchase of products sold to dealers in the event of default by the dealer. In addition to the guarantee under these repurchase agreements, we may also be required to repurchase RV inventory relative to dealer terminations in certain states in accordance with state laws or regulatory requirements. The repurchase price is generally determined by the original sales price of the product andpre-defined curtailment arrangements and we typically resell the repurchased product at a discount from its repurchase price. We account for the guarantee under our repurchase agreements with our dealers’ financing institutions by estimating and deferring a portion of the related product sale that represents the estimated fair value of the repurchase obligation. The estimated fair value takes into account our estimate of the loss we will incur upon resale of any repurchases. This estimate is based on recent historical experience supplemented by management’s assessment of current economic and other conditions affecting our dealers. This deferred amount is included in our repurchase and guarantee reserve.

Our risk of loss under these repurchase agreements is reduced because (a) we sell our products to a large number of dealers under these arrangements, (b) the repurchase price we are obligated to pay declines over the period of the agreements (generally up to eighteen months) while the value of the related product may not decline ratably and (c) we have historically been able to readily resell any repurchased product. We believe that any future losses under these agreements will not have a significant effect on our consolidated financial position or results of operations.


Principal Contractual Obligations and Commercial Commitments


Our principal contractual obligations and commercial commitments at July 31, 20182021 are summarized in the following charts. Unrecognized income tax benefits in the amount of $12,446$19,267 have been excluded from the table because we are unable to determine a reasonably reliable estimate of the timing of future payment. We have no other material off balance sheet commitments:

   Payments Due By Period 
Contractual Obligations      Total       Fiscal 2019     Fiscal 2020-2021    Fiscal 2022-2023    After 5 Years   

Capital leases (1)

  $9,094   $977   $1,967   $2,052   $4,098 

Operating leases (1)

   13,884    2,301    2,803    2,057    6,723 

Purchase obligations (2)

   69,566    69,566    –    –    – 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contractual cash obligations

  $  92,544   $72,844   $4,770   $4,109   $10,821 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)

SeeNote 15 to the Consolidated Financial Statements for additional information.

(2)

Represent commitments to purchase specified quantities of raw materials at market prices in our othernon-reportable segment. The dollar values above have been estimated based on July 31, 2018 market prices.

   Total   Amount of Commitment Expiration Per Period 
Other Commercial Commitments  Amounts
Committed		   Less Than
One Year  (1)		   1-3 Years   4-5 Years   Over 5 Years 

Standby repurchase obligations (1)

  $  2,748,465   $    1,571,969   $    1,176,496   $                –   $                – 

(1)

The standby repurchase totals above do not consider any curtailments that lower the eventual repurchase obligation totals, and these obligations generally extend up to eighteen months from the date of sale of the related product to the dealer. In estimating the expiration of the standby repurchase obligations, we used inventory reports as of July 31, 2018 from our dealers’ primary lending institutions and made an assumption for obligations for inventory aged0-12 months that it was financed evenly over the twelve-month period.

commitments.

 Payments Due By Period
Contractual ObligationsTotalFiscal 
2022		Fiscal 
2023-2024 		Fiscal 
2025-2026 		After 5 Years
Debt principal payments (1)
$1,640,693 $12,411 $24,515 $1,579,246 $24,521 
Debt interest payments (2)
234,900 58,500 101,500 72,800 2,100 
Finance leases (3)
7,336 1,555 2,637 2,190 954 
Operating leases (3)
59,247 13,923 18,339 8,718 18,267 
Purchase obligations (4)
185,748 142,026 43,722 — — 
Total contractual cash obligations$2,127,924 $228,415 $190,713 $1,662,954 $45,842 

(1)See Note 12 to the Consolidated Financial Statements for additional information.
(2)Debt interest payment amounts assume the current interest rate environment, current exchange rates and future average outstanding debt balances assuming minimum annual contractual payments.
(3)See Note 15 to the Consolidated Financial Statements for additional information.
(4)Represent commitments to purchase specified quantities of raw materials at market prices in our other non-reportable segment. The dollar values above have been estimated based on July 31, 2021 market prices.

 Total Amounts CommittedAmount of Commitment Expiration Per Period
Other Commercial Commitments
Less Than
One Year (1)
1-3 Years4-5 YearsOver 5 Years
Standby repurchase obligations (1)
$1,821,012 $1,017,500 $803,512 $— $— 
(1)The standby repurchase totals above do not consider any curtailments that lower the eventual repurchase obligation totals, and these obligations generally extend up to eighteen months from the date of sale of the related product to the dealer. In estimating the expiration of the standby repurchase obligations, we used inventory reports as of July 31, 2021 from our dealers’ primary lending institutions and made an assumption for obligations for inventory aged 0-12 months that it was financed evenly over the twelve-month period.

Accounting Pronouncements


Reference is made toNote 1 to the Consolidated Financial Statements in this report for a summary of recently issuedadopted accounting pronouncements, which summary is hereby incorporated by reference.

49

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure


The Company is exposed to market risk from changes in short-termforeign currency exchange rates and interest rates. The Company enters into various hedging transactions to mitigate certain of these risks in accordance with guidelines established by the Company’s management. The Company does not use financial instruments for trading or speculative purposes.

CURRENCY EXCHANGE RISK – The Company’s principal currency exposures mainly relate to the Euro and British Pound Sterling. The Company has used foreign currency forward contracts to manage certain foreign exchange rate exposure related to anticipated sales transactions in Pound Sterling with financial instruments whose maturity date, along with the realized gain or loss, occurs on or near the execution of the anticipated transaction. At July 31, 2021, the Company had foreign currency forward contracts outstanding to exchange Pound Sterling into Euros with a notional value of $41,899 and a fair value of $88. The Company did not have any foreign currency forward contracts outstanding at July 31, 2020.

The Company also holds $698,793 of debt denominated in Euros at July 31, 2021. A hypothetical 10% change in the Euro/U.S. dollar exchange rate would change our July 31, 2021 debt balance by an estimated $69,879.

INTEREST RATE RISK– The Company uses pay-fixed, receive-floating interest rate swaps to convert a portion of the Company’s long-term debt from floating to fixed-rate debt. As of July 31, 2021, the Company has approximately $482,138 as notional amounts hedged in relation to the floating-to-fixed interest rate swap. The notional amounts hedged will decrease on a quarterly basis to zero by August 1, 2023.

Based on our assumption of the Company’s floating-rate debt levels over the next 12 months, and after taking into consideration the impact of our interest rate swaps discussed above, a one-percentage-point increase in interest rates on(approximately 14.7% of our variableweighted-average interest rate debt. Depending upon the borrowing option chosen, the interest charged is based upon either the Base Rate or London Interbank Offered Rate (LIBOR) ofat July 31, 2021) would result in an estimated $8,614 pre-tax reduction in net earnings over a selected time period, plus an applicable margin. If interest rates increased by 0.25%, our results of operations and cash flows for fiscal 2018 would not be materially affected.

one-year period.

50

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — – SEEITEM 15


Quarterly Financial Data (Unaudited)

   Quarter Ended 

Fiscal 2018

  October 31   January 31   April 30   July 31 

Net sales

  $    2,231,668   $    1,971,560   $    2,251,570   $    1,874,111 

Gross profit

   333,185    270,328    316,745    244,408 

Net income

   128,406    79,752    133,788    88,205 

Earnings per common share: (1)

        

Basic

  $2.44   $1.51   $2.54   $1.67 

Diluted

  $2.43   $1.51   $2.53   $1.67 

Dividends paid per common share

  $0.37   $0.37   $0.37   $0.37 

Market prices per common share

        

High

  $136.37   $161.48   $138.64   $111.39 

Low

  $101.00   $127.29   $98.03   $87.62 
   Quarter Ended 

Fiscal 2017

  October 31   January 31   April 30   July 31 

Net sales

  $1,708,531   $1,588,525   $2,015,224   $1,934,672 

Gross profit

   236,752    211,702    293,841    301,288 

Net income

   78,745    64,782    111,263    119,464 

Earnings per common share: (1)

        

Basic

  $1.50   $1.23   $2.12   $2.27 

Diluted

  $1.49   $1.23   $2.11   $2.26 

Dividends paid per common share (2)

  $–   $0.66   $0.33   $0.33 

Market prices per common share

        

High

  $87.08   $108.45   $115.74   $109.91 

Low

  $74.75   $74.00   $88.87   $87.96 

(1)

Earnings per common share are computed independently for each of the quarters presented. The summation of the quarterly amounts will not necessarily equal the total earnings per common share reported for the year due to changes in the weighted-average shares outstanding during the year.

(2)

A regular quarterly dividend of $0.33 per share was declared in the first quarter of fiscal 2017 but not paid until the second quarter of fiscal 2017.

Quarter Ended
Fiscal 2021October 31January 31April 30July 31
Net sales$2,537,360 $2,727,788 $3,459,264 $3,592,968 
Gross profit378,852 414,877 505,280 595,964 
Net income attributable to THOR Industries, Inc.113,757 132,524 183,311 230,280 
Earnings per common share: (1)
Basic$2.06 $2.39 $3.31 $4.16 
Diluted$2.05 $2.38 $3.29 $4.12 
Dividends paid per common share$0.41 $0.41 $0.41 $0.41 
Market prices per common share
High$121.33 $132.12 $152.20 $149.38 
Low$83.05 $78.64 $108.72 $101.79 

Quarter Ended
Fiscal 2020October 31January 31April 30July 31
Net sales$2,158,785 $2,003,133 $1,681,735 $2,324,280 
Gross profit308,811 256,406 205,633 347,357 
Net income attributable to THOR Industries, Inc.51,065 28,673 24,068 119,168 
Earnings per common share: (1)
Basic$0.93 $0.52 $0.44 $2.16 
Diluted$0.92 $0.52 $0.43 $2.14 
Dividends paid per common share$0.40 $0.40 $0.40 $0.40 
Market prices per common share
High$68.78 $83.99 $89.45 $119.77 
Low$42.05 $61.69 $32.30 $59.32 

(1)Earnings per common share are computed independently for each of the quarters presented based on net income attributable to THOR Industries, Inc. The summation of the quarterly amounts will not necessarily equal the total earnings per common share reported for the year due to changes in the weighted-average shares outstanding during the year.
51

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.


ITEM 9A. CONTROLS AND PROCEDURES


Part A – Disclosure Controls and Procedures


The Company maintains “disclosure controls and procedures”, as such term is defined under Securities Exchange Act Rule13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and the Company’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow for timely decisions regarding required disclosure.


Part B – Management’s Annual Report on Internal Control Over Financial Reporting


Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange ActRule 13a-15(f). Internal control over financial reporting refers to a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and members of our Board of Directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections 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.


The Company’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of July 31, 20182021 using the criteria set forth inInternal Control — IntegratedControl-Integrated Framework (2013) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management believes that as of July 31, 2018,2021, the Company’s internal control over financial reporting is effective based on those criteria.

As permitted by SEC guidance, management excluded from its assessment the operations of Tiffin Group, which was acquired on December 18, 2020, and which accounted for approximately 6% of consolidated total assets and approximately 3% of consolidated net sales as of and for the year ended July 31, 2021.


Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on our internal control over financial reporting. The report appears in Part D of thisItem 9A.

9A.


Part C – Changes in Internal Control Over Financial Reporting


During the fourth quarter of fiscal year 2018,2021, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



52

Part D – Attestation Report of Independent Registered Public Accounting Firm


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the stockholders and the Board of Directors of

Thor THOR Industries, Inc.

Elkhart, Indiana


Opinion on Internal Control over Financial Reporting


We have audited the internal control over financial reporting of ThorTHOR Industries, Inc. and subsidiaries (the “Company”) as of July 31, 2018,2021, based on criteria established inInternal Control-IntegratedControl—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2018,2021, based on criteria established inInternal Control-IntegratedControl—Integrated Framework (2013) issued by COSO.


We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended July 31, 2018,2021, of the Company and our report dated September 19, 2018,28, 2021, expressed an unqualified opinion on those financial statements.


As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Tiffin Group, which was acquired on December 18, 2020, and whose financial statements constitute approximately 6% of consolidated total assets and 3% of consolidated net sales as of and for the year ended July 31, 2021. Accordingly, our audit did not include the internal control over financial reporting at Tiffin Group.

Basis for Opinion


The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’s Annual Report on Internal Control over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the PCAOB. 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 understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control over Financial Reporting


A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting 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; (2) 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 (3) 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections 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.


/s/ Deloitte & Touche LLP

Chicago, Illinois

September 20, 2018

28, 2021

53

ITEM 9B. OTHER INFORMATION


None.


54

PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


The Company has adopted a written code of ethics, the “Thor“THOR Industries, Inc. Business Ethics Policy”, which is applicable to all directors, officers and employees of the Company, including the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and other executive officers identified pursuant to this Item 10 who perform similar functions (collectively, the “Selected Officers”). In accordance with the rules and regulations of the SEC, a copy of the code has been posted on the Company’s website and is also available in print to any person, without charge, upon request. The Company intends to disclose any changes in or waivers from its code of ethics applicable to any Selected Officer on its website atwww.thorindustries.com or by filing a Form8-K.


The other information in response to this Item is included under the captions OUR BOARD OF DIRECTORS; EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS; BOARD OF DIRECTORS: STRUCTURE and COMMITTEES AND CORPORATE GOVERNANCE, and SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, in the Company’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A, which portions of said Proxy Statement are hereby incorporated by reference.


ITEM 11. EXECUTIVE COMPENSATION


The information required in response to this Item is contained under the captions EXECUTIVE COMPENSATION, DIRECTOR COMPENSATION and COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION in the Company’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A, which portions of said Proxy Statement are hereby incorporated by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


Equity Compensation Plan Information


The following table provides information as of July 31, 20182021 about the Company’s Common Stock that is authorized for issuance under the Company’s equity compensation plans, including the ThorTHOR Industries, Inc. 2016 Equity and Incentive Plan (the “2016 Plan”).

Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rights
(a)		 Weighted-average exercise price of outstanding options, warrants and rights
(b)		 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)		 
Equity compensation plans approved by security holders716,485 (1)$— (2)652,144 (3)
Equity compensation plans not approved by security holders—  —  —  
Total716,485  $—  652,144  
(1)Represents shares underlying restricted stock units and performance stock units granted pursuant to the Thor Industries, Inc. 2010 Equity Incentive Plan (the “2010 Plan”).

Plan Category  Number of securities to  be
issued upon exercise of
outstanding options,
warrants and rights
(a)		  Weighted-average
exercise price  of
outstanding options,
warrants and  rights
(b)		  Number of securities  remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column  (a))
(c)		 

Equity compensation plans approved by security holders

   328,431 (1)  $– (2)   2,880,837 (3) 

Equity compensation plans not approved by security holders

                               –                               –                                   –  
  

 

 

  

 

 

  

 

 

 

Total

   328,431   $–    2,880,837  
  

 

 

  

 

 

  

 

 

 

(1)

Represents shares underlying restricted stock units granted pursuant to the 2016 Plan and the 2010 Plan.

(2)

The restricted stock units of 328,431 in column (a) do not have an exercise price.

(3)

Represents shares remaining available for future issuance pursuant to the 2016 Plan and the 2010 Plan.

2016 Plan.

(2)The restricted stock units and performance stock units totaling 716,485 in column (a) do not have an exercise price.
(3)Represents shares remaining available for future issuance pursuant to the 2016 Plan.

The other information required in response to this Item is contained under the captions OWNERSHIP OF COMMON STOCK and SUMMARY OF EQUITY COMPENSATION PLANS in the Company’s definitive Proxy Statement, to be filed with the SEC pursuant to Regulation 14A, which portions of said Proxy Statement are hereby incorporated by reference.

55

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE


The information required in response to this Item is contained under the captions CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT and BOARD OF DIRECTORS: STRUCTURE, COMMITTEES AND CORPORATE GOVERNANCE in the Company’s definitive Proxy Statement to be filed with the SEC pursuant to Regulation 14A, which portions of said Proxy Statement are hereby incorporated by reference.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES


The information required in response to this Item is contained under the caption INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES in the Company’s definitive Proxy Statement, to be filed with the SEC pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by reference.


56

PART IV


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a)(1) Financial Statements

Page

F-1
F-1

F-2
F-3

F-3
F-4

F-4
F-5

F-5
F-6

F-6
F-7


(a)(2) Financial Statement Schedules


All financial statement schedules have been omitted since the required information is either not applicable, not material or is included in the consolidated financial statements and notes thereto included in this Form10-K.


(b)Exhibits


Exhibit

Description

***
2.1
Sale and Purchase Agreement dated as of September 18, 2018, by and among the Company, Tyr Holdings Gmbh & Co. AG, a wholly-owned subsidiary of the Company and the selling parties identified therein (incorporated by reference to Exhibit 2.1 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2018)
3.12.2

Sale and Purchase Agreement (SPA) Amendment Agreement, dated as of February 1, 2019, by and among the Company, Tyr Holdings LLC and Co. KG, a wholly-owned subsidiary of the Company and the selling parties identified therein (incorporated by reference to Exhibit 2.1 of the Company’s Current report on Form 8-K dated February 1, 2019, as amended April 18, 2019)
2.3
Stock Purchase Agreement, dated as of December 18, 2020, by and among Thor Industries, Inc., the shareholders of Tiffin Motorhomes, Inc., Vanleigh RV, Inc., Water-Way, Inc., Wynne Enterprises, Inc., Tiffin Door Co., Inc., Roma Enterprises, Inc., Drive-A-Way of Red Bay, Inc., and TVL Real Estate, LLC (incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K, filed December 22, 2020)
3.1
Thor Industries, Inc. Amended and Restated Certificate of Incorporation, (incorporated by reference to Exhibit 3(a) of the Company’s Annual Report on Form10-K for the fiscal year ended July 31, 2001)

3.2

Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form10-K for the fiscal year ended July 31, 2004)

3.3

Amended and RestatedBy-Laws of Thor Industries, Inc.as amended (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form8-K dated December 13, 2017)20, 2018)

4.13.2

Thor Industries, Inc. Amended and Restated By-Laws, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K dated December 20, 2018)
4.1Form of Common Stock Certificate (incorporated by reference to Exhibit 4(a) of the Company’s Annual Report onForm 10-K for the fiscal year ended July 31, 1987) (P) Rule 311

10.14.2

Description of Registrant's Securities (incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2020
10.1
Thor Industries, Inc. Amended and Restated Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form8-K dated December 15, 2008), as amended

10.2

Thor Industries, Inc. Form of Indemnification Agreement for executive officers and directors of the Company (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form10-Q for the quarterly period ended January 31, 2011)

10.3

Amended and Restated Dealer Exclusivity Agreement, dated as of January 30, 2009, by and among Thor Industries, Inc., FreedomRoads Holding Company, LLC, and certain subsidiaries of FreedomRoads, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form10-Q for the quarterly period ended April 30, 2011)

10.4

Amendment to Exclusivity Agreement between the Company, FreedomRoads Holding Company, LLC, FreedomRoads, LLC and certain subsidiaries of FreedomRoads, LLC, dated as of December 22, 2009 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form8-K dated December 22, 2009)

10.5

Thor Industries, Inc. 2010 Equity and Incentive Plan (incorporated by reference to Appendix D to the Company’s Proxy Statement on Schedule 14A filed on November 2, 2010)

10.6

Form of Restricted Stock Unit Award Agreement for Grants to Employees of the Company under the Thor Industries, Inc. 2010 Equity and Incentive Plan (incorporated by reference to Exhibit 99.1 of the Company’s Current Report onForm 8-K dated October 12, 2012)

10.7

Form of Restricted Stock Unit Award Agreement for Grants toNon-Employee Directors of the Company under the Thor Industries, Inc. 2010 Equity and Incentive Plan (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form8-K dated October 12, 2012)

10.8

Credit Agreement, dated as of June  30, 2016, among Thor Industries, Inc., each of Thor Industries, Inc.’s subsidiaries from time to time a party thereto as a borrower, each of Thor Industries, Inc.’s subsidiaries from time to time party thereto as a guarantor, each lender from time to time a party thereto, and BMO Harris Bank N.A., as administrative agent (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form8-K dated July 7, 2016)

10.9

Thor Industries, Inc. 2016 Equity and Incentive Plan (incorporated by reference to Appendix A to the Company’s Additional Proxy Soliciting Materials on Schedule 14A filed on November 28, 2016)

10.10

57

10.6
Form of Restricted Stock Unit Award Agreement for Grants to Employees of the Company under the Thor Industries, Inc. 2016 Equity and Incentive Plan (incorporated by reference to Exhibit 99.1 of the Company’s Current Report onForm 8-K dated March 20, 2017)

10.1110.7

Form of Restricted Stock Unit Award Agreement for Grants toNon-Employee Directors of the Company under the Thor Industries, Inc. 2016 Equity and Incentive Plan (incorporated by reference to Exhibit 99.2 of the Company’s Current Report onForm 8-K dated March 20, 2017)

21.110.8

Term Loan Agreement, dated as of February 1, 2019, by and among the Company, as borrower, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company’s Current report on Form 8-K dated February 1, 2019, as amended April 18, 2019)
10.9
ABL Credit Agreement, dated as of February 1, 2019, by and among the Company, certain domestic subsidiaries of the Company, certain subsidiaries of EHG organized under the laws of Germany and a subsidiary of EHG organized under the laws of the United Kingdom, the several lenders from time to time parties thereto and JPMorgan, as administrative agent (incorporated by reference to Exhibit 10.2 of the Company’s Current report on Form 8-K dated February 1, 2019, as amended April 18, 2019)
10.10
Amendment No. 1 to the Term Loan Credit Agreement dated as of March 25, 2021, by and among the Company, certain subsidiaries of the Company and JPMorgan Chase Bank, N.A., as Administrative Agent and Term B-1 Lender (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 2021).
10.11
Form of Employment Agreement between the Company and each of Robert W. Martin, Colleen Zuhl, W. Todd Woelfer and Kenneth D. Julian dated June 18, 2021*
21.1
23.1

31.1

31.2

32.1

32.2

101.INS

Inline XBRL Instance Document*

101.SCH

Inline XBRL Taxonomy Extension Schema Document*

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document*

101.PRE

Inline XBRL Taxonomy Presentation Linkbase Document*

101.LAB

Inline XBRL Taxonomy Label Linkbase Document*

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document*

104.1The cover page from THOR Industries Inc.’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021 formatted in Inline XBRL (included in Exhibit 101).


Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form10-K for the year ended July 31, 20182021 formatted in XBRL (“eXtensibleiXBRL (Inline “eXtensible Business Reporting Language”): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) related notes to these financial statements.

*

*Filed herewith

**

Furnished herewith

***Certain schedules and exhibits referenced in certain agreements filed as exhibits hereto have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request




58

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on September 20, 201828, 2021 on its behalf by the undersigned, thereunto duly authorized.

THOR INDUSTRIES, INC.

(Signed)/s/ Robert W. Martin
Robert W. Martin
Director, President and Chief Executive Officer
(Principal executive officer)

(Signed)

/s/ Robert W. Martin

Robert W. Martin

Director, President and Chief Executive Officer

(Principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on September 20, 201828, 2021 by the following persons on behalf of the Registrant and in the capacities indicated.

(Signed)

/s/ Robert W. Martin

(Signed)

(Signed)

/s/ Colleen Zuhl

Robert W. Martin

Colleen Zuhl

Director, President and Chief Executive Officer

Senior Vice President and Chief Financial Officer

(Principal executive officer)

(Principal financial and accounting officer)

(Signed)

/s/ Andrew E. Graves(Signed)

/s/ Peter B. Orthwein

(Signed)

/s/ James L. Ziemer

Andrew E. Graves

Peter B. Orthwein

James L. Ziemer

Executive Chairman of the Board

Director

 and Chairman Emeritus

(Signed)

/s/ Andrew E. Graves

Christina Hennington(Signed)

(Signed)

/s/ Jan H. Suwinski

Amelia A. Huntington
Christina Hennington

Andrew E. Graves

Jan H. Suwinski

Amelia A. Huntington
Director

Director

Director

(Signed)

/s/ J. Allen Kosowsky

Laurel M. Hurd		(Signed)

(Signed)

/s/ Christopher J. Klein

Wilson R. Jones
Laurel M. Hurd

J. Allen Kosowsky

Christopher J. Klein

Wilson R. Jones
Director

Director

Director

(Signed)/s/ William J. Kelley Jr.(Signed)/s/ Christopher J. Klein

(Signed)

William J. Kelley Jr.

/s/ Wilson R. Jones

Christopher J. Klein
DirectorDirector
(Signed)/s/ J. Allen Kosowsky

Wilson R. Jones

(Signed)/s/ James L. Ziemer
J. Allen Kosowsky

Director

James L. Ziemer
DirectorDirector


59

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the stockholders and the Board of Directors of

Thor THOR Industries, Inc.

Elkhart, Indiana


Opinion on the Financial Statements


We have audited the accompanying consolidated balance sheets of ThorTHOR Industries, Inc. and subsidiaries (the “Company”"Company") as of July 31, 20182021 and 2017,2020, the related consolidated statements of income and comprehensive income, stockholders’stockholders' equity, and cash flows, for each of the three years in the period ended July 31, 2018,2021, and the related notes (collectively referred to as the “financial statements”"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2018,2021, 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) (PCAOB), the Company’sCompany's internal control over financial reporting as of July 31, 2018,2021, based on criteria established inInternal Control-IntegratedControl — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 19, 2018,28, 2021, expressed an unqualified opinion on the Company’sCompany's internal control over financial reporting.


Basis for Opinion


These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of European Reporting Unit Goodwill—See Note 7 to the financial statements

Critical Audit Matter Description

The Company tests goodwill for impairment annually and whenever events or changes in circumstances indicate that an impairment may have occurred. The Company utilized a quantitative assessment to test for impairment, which involved a comparison of the fair value of its reporting units with their carrying values. Fair values were determined by a discounted cash flow model. These estimates are subject to significant management judgment, including the determination of many factors such as, but not limited to, sales growth rates and discount rates developed using market observable inputs and considering risk regarding future performance. Changes in these estimates can have a significant impact on the determination of cash flows and fair value and could potentially result in future material impairments. The goodwill balance was $1,563 million as of July 31, 2021, of which $1,042 million was allocated to the European reporting unit. As a result of the assessment performed by the Company during the year ended July 31, 2021, the Company concluded that the fair value of the European reporting unit exceeded its carrying value and that there was no impairment of European reporting unit goodwill.

F-1

We identified goodwill for the European reporting unit as a critical audit matter because of the significant judgments made by management to estimate the reporting unit fair value and the difference between its fair value and carrying value, which is not significant in part because the acquisition of the European reporting unit occurred on February 1, 2019. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the sales growth rates and discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the sales growth rates and discount rate used by management to estimate the reporting unit fair value included the following, among others:
•We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of reporting unit fair value, such as controls related to management’s selection of the sales growth rates and discount rate.
•We evaluated the reasonableness of management’s forecasted sales growth rates primarily by comparing the forecasts to external data encompassing macroeconomic projections and those of the recreational vehicle industry, including the European sector, as well as information furnished to the public by the Company, its peers, and analysts following the Company and the industry.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:
◦Assessing the appropriateness of the valuation methodology used to determine the discount rate.
◦Testing the source information underlying the determination of the discount rate and mathematical accuracy of the calculations.
◦Developing a range of independent estimates and comparing those to the discount rate selected by management.



/s/ Deloitte & Touche LLP

Chicago, Illinois

September 20, 2018

28, 2021


We have served as the Company’s auditor since 1981.

F-1


F-2

Thor


THOR Industries, Inc. and Subsidiaries

Consolidated Balance Sheets, July 31, 20182021 and 2017

2020

(amounts in thousands, except share and per share data)

       2018          2017     

Assets

   

Current assets:

   

Cash and cash equivalents

  $275,249  $223,258 

Accounts receivable, trade, net

   467,488   453,754 

Accounts receivable, other, net

   19,747   31,090 

Inventories, net

   537,909   460,488 

Prepaid expenses and other

   11,281   11,577 
  

 

 

  

 

 

 

Total current assets

   1,311,674   1,180,167 
  

 

 

  

 

 

 

Property, plant and equipment, net

   522,054   425,238 
  

 

 

  

 

 

 

Other assets:

   

Goodwill

   377,693   377,693 

Amortizable intangible assets, net

   388,348   443,466 

Deferred income taxes, net

   78,444   92,969 

Equity investment in joint venture

   48,463   – 

Other

   51,989   38,398 
  

 

 

  

 

 

 

Total other assets

   944,937   952,526 
  

 

 

  

 

 

 

Total Assets

  $2,778,665  $2,557,931 
  

 

 

  

 

 

 

Liabilities and Stockholders’ Equity

   

Current liabilities:

   

Accounts payable

  $286,974  $328,601 

Accrued liabilities:

   

Compensation and related items

   97,122   100,114 

Product warranties

   264,928   216,781 

Income and other taxes

   19,345   51,211 

Promotions and rebates

   59,133   46,459 

Product, property and related liabilities

   17,815   16,521 

Other

   24,013   21,359 
  

 

 

  

 

 

 

Total current liabilities

   769,330   781,046 
  

 

 

  

 

 

 

Long-term debt

   –   145,000 

Unrecognized tax benefits

   12,446   10,263 

Other liabilities

   59,148   45,082 
  

 

 

  

 

 

 

Total long-term liabilities

   71,594   200,345 
  

 

 

  

 

 

 

Contingent liabilities and commitments

   

Stockholders’ equity:

   

Preferred stock—authorized 1,000,000 shares; none outstanding

   –   – 

Common stock—par value of $.10 a share; authorized, 250,000,000 shares; issued 62,765,824 shares in 2018 and 62,597,110 shares in 2017

   6,277   6,260 

Additionalpaid-in capital

   252,204   235,525 

Retained earnings

   2,022,988   1,670,826 

Less treasury shares of 10,070,459 in 2018 and 10,011,069 in 2017, at cost

   (343,728)   (336,071) 
  

 

 

  

 

 

 

Total stockholders’ equity

   1,937,741   1,576,540 
  

 

 

  

 

 

 

Total Liabilities and Stockholders’ Equity

  $2,778,665  $2,557,931 
  

 

 

  

 

 

 

July 31, 2021July 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$445,852 $538,519 
Restricted cash2,854 2,844 
Accounts receivable, trade, net796,489 588,069 
Accounts receivable, other, net151,087 82,880 
Factored accounts receivable2,356 143,278 
Inventories, net1,369,384 716,305 
Prepaid income taxes, expenses and other35,501 30,382 
Total current assets2,803,523 2,102,277 
Property, plant and equipment, net1,185,131 1,107,649 
Other assets:
Goodwill1,563,255 1,476,541 
Amortizable intangible assets, net937,171 914,724 
Deferred income tax assets, net41,216 78,738 
Other123,792 91,531 
Total other assets2,665,434 2,561,534 
TOTAL ASSETS$6,654,088 $5,771,460 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$915,045 $636,506 
Current portion of long-term debt12,411 13,817 
Short-term financial obligations25,720 35,939 
Accrued liabilities:
Compensation and related items249,761 160,083 
Product warranties267,620 252,869 
Income and other taxes85,789 83,893 
Promotions and rebates128,869 97,378 
Product, property and related liabilities38,590 15,440 
Liabilities related to factored receivables2,356 143,278 
Other68,624 76,078 
Total current liabilities1,794,785 1,515,281 
Long-term debt1,594,821 1,652,831 
Deferred income tax liabilities, net113,598 123,802 
Unrecognized tax benefits15,844 12,765 
Other liabilities186,934 121,212 
Total long-term liabilities1,911,197 1,910,610 
Contingent liabilities and commitments0 0 
Stockholders’ equity:
Preferred stock—authorized 1,000,000 shares; none outstanding— — 
Common stock—par value of $.10 per share; authorized 250,000,000 shares; issued 65,651,570 and 65,396,531 shares, respectively6,565 6,540 
Additional paid-in capital460,482 436,828 
Retained earnings2,770,401 2,201,330 
Accumulated other comprehensive income, net of tax44,621 26,993 
Less treasury shares of 10,285,329 and 10,197,775, respectively, at cost(360,226)(351,909)
Stockholders’ equity attributable to THOR Industries, Inc.2,921,843 2,319,782 
Non-controlling interests26,263 25,787 
Total stockholders’ equity2,948,106 2,345,569 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$6,654,088 $5,771,460 

See Notes to the Consolidated Financial Statements.

F-2

F-3

Thor


THOR Industries, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income for the Years Ended July 31, 2018, 20172021, 2020 and 2016

2019

(amounts in thousands, except share and per share data)

               2018                   2017                   2016     

Net sales

  $8,328,909   $7,246,952   $4,582,112 

Cost of products sold

   7,164,243    6,203,369    3,855,787 
  

 

 

   

 

 

   

 

 

 

Gross profit

   1,164,666    1,043,583    726,325 

Selling, general and administrative expenses

   477,444    419,847    306,269 

Impairment charges

   –    –    9,113 

Amortization of intangible assets

   55,118    63,925    27,962 

Interest income

   2,148    923    743 

Interest expense

   5,187    9,730    1,592 

Other income, net

   3,964    5,382    1,181 
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

   633,029    556,386    383,313 

Income taxes

   202,878    182,132    125,291 
  

 

 

   

 

 

   

 

 

 

Net income from continuing operations

   430,151    374,254    258,022 

Loss from discontinued operations, net of income taxes

   –    –    (1,503) 
  

 

 

   

 

 

   

 

 

 

Net income and comprehensive income

  $430,151   $374,254   $256,519 
  

 

 

   

 

 

   

 

 

 

Earnings per common share from continuing operations:

      

Basic

  $8.17   $7.12   $4.92 

Diluted

  $8.14   $7.09   $4.91 

Loss per common share from discontinued operations:

      

Basic

  $–   $–   $(0.03) 

Diluted

  $–   $–   $(0.03) 

Earnings per common share:

      

Basic

  $8.17   $7.12   $4.89 

Diluted

  $8.14   $7.09   $4.88 

202120202019
Net sales$12,317,380 $8,167,933 $7,864,758 
Cost of products sold10,422,407 7,049,726 6,891,664 
Gross profit1,894,973 1,118,207 973,094 
Selling, general and administrative expenses869,916 634,119 536,044 
Amortization of intangible assets117,183 97,234 75,638 
Impairment charges— 10,057 — 
Acquisition-related costs— — 114,866 
Interest income797 3,116 8,080 
Interest expense94,342 107,322 68,112 
Other income (expense), net30,252 305 (1,848)
Income before income taxes844,581 272,896 184,666 
Income taxes183,711 51,512 52,201 
Net income660,870 221,384 132,465 
Less: net income (loss) attributable to non-controlling interests998 (1,590)(810)
Net income attributable to THOR Industries, Inc.$659,872 $222,974 $133,275 
Weighted-average common shares outstanding:
Basic55,333,959 55,172,694 53,905,667 
Diluted55,687,253 55,397,376 54,026,686 
Earnings per common share:
Basic$11.93 $4.04 $2.47 
Diluted$11.85 $4.02 $2.47 
Comprehensive income:
Net income$660,870 $221,384 $132,465 
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax7,723 92,735 (47,078)
Unrealized gain (loss) on derivatives, net of tax10,168 (9,351)(9,472)
Other income (loss), net of tax(180)352 (1,048)
Total other comprehensive income (loss), net of tax17,711 83,736 (57,598)
Total comprehensive income678,581 305,120 74,867 
Comprehensive income (loss) attributable to non-controlling interest1,081 (1,851)(1,404)
Comprehensive income attributable to THOR Industries, Inc.$677,500 $306,971 $76,271 











See Notes to the Consolidated Financial Statements.

F-3

F-4

Thor


THOR Industries, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity for the Years Ended July 31, 2018, 20172021, 2020 and 2016

2019

(amounts in thousands, except share and per share data)

   Treasury Stock  Common Stock   

Additional

Paid-in

  Retained 
   Shares   Amount  Shares   Amount   Capital  Earnings 

Balance at July 31, 2015

   9,911,474   $(329,015)   62,306,037   $6,231   $215,539  $1,172,432 

Net income

   –    –   –    –    –   256,519 

Restricted stock unit activity

   45,706    (2,484)   133,758    13    (430)   – 

Cash dividends – $1.20 per common share

   –   

 

–

 

  –    –    –   (62,970) 

Stock compensation expense

   –    –   –    –    9,387   – 
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Balance at July 31, 2016

   9,957,180   $(331,499)   62,439,795   $6,244   $224,496  $1,365,981 

Net income

   –    –   –    –    –   374,254 

Restricted stock unit activity

   53,889    (4,572)   157,315    16    (1,471)   – 

Cash dividends – $1.32 per common share

   –    –   –    –    –   (69,409) 

Stock compensation expense

   –    –   –    –    12,500   – 
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Balance at July 31, 2017

   10,011,069   $(336,071)   62,597,110   $6,260   $235,525  $1,670,826 

Net income

   –    –   –    –    –   430,151 

Restricted stock unit activity

   59,390    (7,657)   168,714    17    (321)   – 

Cash dividends – $1.48 per common share

   –    –   –    –    –   (77,989) 

Stock compensation expense

   –    –   –    –    17,000   – 
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Balance at July 31, 2018

   10,070,459   $  (343,728)   62,765,824   $    6,277   $  252,204  $  2,022,988 
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 


AccumulatedStockholders’
AdditionalOtherEquityNon-Total
 Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders’
 SharesAmountCapitalEarningsIncome (Loss), netSharesAmountto THORInterestsEquity
Balance at August 1, 201862,765,824 $6,277 $252,204 $2,022,988 $— 10,070,459 $(343,728)$1,937,741 $— $1,937,741 
Net income (loss)— — — 133,275 — — — 133,275 (810)132,465 
Restricted stock unit activity167,591 16 1,286 — — 55,975 (4,418)(3,116)— (3,116)
Cash dividends $1.56 per common share— — — (84,139)— — — (84,139)— (84,139)
Stock compensation expense— — 18,950 — — — — 18,950 — 18,950 
Other comprehensive income (loss)— — — — (57,004)— — (57,004)(594)(57,598)
Cumulative effect of adoption of ASU no. 2014-09, net of tax— — — (5,450)— — — (5,450)— (5,450)
Acquisitions2,256,492 226 143,942 — — — — 144,168 12,207 156,375 
Balance at July 31, 201965,189,907 $6,519 $416,382 $2,066,674 $(57,004)10,126,434 $(348,146)$2,084,425 $10,803 $2,095,228 
Net income (loss)— — — 222,974 — — — 222,974 (1,590)221,384 
Restricted stock unit activity206,624  21 557 — — 71,341 (3,763)(3,185)— (3,185)
Cash dividends $1.60 per common share— — — (88,318)— — — (88,318)— (88,318)
Stock compensation expense— — 19,889 — — — — 19,889 — 19,889 
Other comprehensive income (loss)— — — — 83,997 — — 83,997 (261)83,736 
Acquisitions—  — — — — — — — 16,835 16,835 
Balance at July 31, 202065,396,531 $6,540 $436,828 $2,201,330 $26,993 10,197,775 $(351,909)$2,319,782 $25,787 $2,345,569 
Net income (loss)— — — 659,872 — — — 659,872 998 660,870 
Restricted stock unit activity255,039 25 (6,860)— — 87,554 (8,317)(15,152)— (15,152)
Cash dividends $1.64 per common share— — — (90,801)— — — (90,801)— (90,801)
Stock compensation expense— — 30,514 — — — — 30,514 — 30,514 
Other comprehensive income (loss)— — — — 17,628 — — 17,628 83 17,711 
Dividend paid to non-controlling interest— — — — — — — — (605)(605)
Balance at July 31, 202165,651,570 $6,565 $460,482 $2,770,401 $44,621 10,285,329 $(360,226)$2,921,843 $26,263 $2,948,106 

See Notes to the Consolidated Financial Statements.

F-4

F-5

Thor


THOR Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows for the Years Ended July 31, 2018, 20172021, 2020 and 2016

2019

(amounts in thousands)

           2018                  2017                  2016         

Cash flows from operating activities:

    

Net income

    $430,151    $374,254    $256,519 

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

   38,105   34,333   24,613 

Amortization of intangibles

   55,118   63,925   27,962 

Amortization of debt issuance costs

   1,570   1,570   131 

Impairment charges

   –   –   9,113 

Deferred income tax provision (benefit)

   14,525   (39,552)   (14,116) 

Gain on disposition of property, plant & equipment

   (1,450)   (2,231)   (35) 

Stock-based compensation

   17,000   12,500   9,387 

Excess tax benefits from stock-based awards

   –   –   (320) 

Changes in assets and liabilities (excluding acquisitions):

    

Accounts receivable

   (2,391)   (92,305)   (15,773) 

Inventories

   (77,421)   (56,619)   (15,582) 

Prepaid expenses and other assets

   (14,197)   (13,888)   719 

Accounts payable

   (40,736)   67,138   28,625 

Accrued liabilities

   29,575   63,075   26,016 

Long-term liabilities and other

   16,659   7,133   3,950 
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   466,508   419,333   341,209 
  

 

 

  

 

 

  

 

 

 

Cash flows from investing activities:

    

Purchases of property, plant & equipment

   (138,197)   (115,027)   (51,976) 

Proceeds from dispositions of property, plant & equipment

   3,835   4,682   347 

Proceeds from notes receivable

   –   –   8,367 

Equity investment in joint venture

   (50,402)   –   – 

Acquisitions, net of cash acquired

   –   (5,039)   (557,651) 

Other

   1,271   (1,271)   (560) 
  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

   (183,493)   (116,655)   (601,473) 
  

 

 

  

 

 

  

 

 

 

Cash flows from financing activities:

    

Borrowings on revolving credit facility

   –   –   360,000 

Principal payments on revolving credit facility

   (145,000)   (215,000)   – 

Payments of debt issuance costs

   –   –   (7,850) 

Cash dividends paid

   (77,989)   (69,409)   (62,970) 

Payments related to vesting of stock-based awards

   (7,657)   (4,572)   (2,484) 

Excess tax benefits from stock-based awards

   –   –   320 

Principal payments on capital lease obligations

   (378)   (341)   (328) 
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) financing activities

   (231,024)   (289,322)   286,688 
  

 

 

  

 

 

  

 

 

 

Net increase in cash and cash equivalents

   51,991   13,356   26,424 

Cash and cash equivalents, beginning of year

   223,258   209,902   183,478 
  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, end of year

    $        275,249    $        223,258    $        209,902 
  

 

 

  

 

 

  

 

 

 

Supplemental cash flow information:

    

Income taxes paid

    $218,841    $198,619    $128,409 

Interest paid

    $3,901    $8,558    $672 

Non-cash transactions:

    

Capital expenditures in accounts payable

    $5,375    $6,266    $3,538 

202120202019
Cash flows from operating activities:
Net income$660,870 $221,384 $132,465 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation113,398 98,933 73,139 
Amortization of intangibles117,183 97,234 75,638 
Amortization of debt issuance costs15,407 10,743 6,189 
Impairment charges— 10,057 — 
Foreign currency forward contract loss— — 70,777 
Deferred income tax benefit(9,026)(11,212)(9,059)
Loss on disposition of property, plant and equipment1,136 3,990 739 
Stock-based compensation expense30,514 19,889 18,950 
Changes in assets and liabilities:
Accounts receivable(234,693)(115,232)136,145 
Inventories(538,756)133,290 283,311 
Prepaid income taxes, expenses and other(32,717)18,427 (13,114)
Accounts payable229,173 60,469 (120,507)
Guarantee liabilities related to former EHG subsidiaries— — (108,843)
Accrued liabilities and other123,078 (14,059)(46,612)
Long-term liabilities and other50,915 7,028 8,801 
Net cash provided by operating activities526,482 540,941 508,019 
Cash flows from investing activities:
Purchases of property, plant and equipment(128,835)(106,697)(130,224)
Proceeds from dispositions of property, plant and equipment1,950 27,677 2,732 
Business acquisitions, net of cash acquired(310,938)— (1,658,577)
Foreign currency forward contract payment related to business acquisition— — (70,777)
Equity investment in joint venture— — (6,500)
Other9,330 (5,229)(2,157)
Net cash used in investing activities(428,493)(84,249)(1,865,503)
Cash flows from financing activities:
Borrowings on term-loan credit facilities— — 2,095,018 
Borrowings on revolving asset-based credit facilities225,676 379,222 100,000 
Payments on term-loan credit facilities(59,700)(274,963)(242,919)
Payments on revolving credit facilities(224,836)(379,986)(100,000)
Payments on unsecured notes— — (84,728)
Payments on other debt(13,950)(14,493)(70,319)
Payments of debt issuance costs— — (70,176)
Cash dividends paid(90,801)(88,318)(84,139)
Payments on finance lease obligations(749)(442)(405)
Payments related to vesting of stock-based awards(8,317)(3,763)(4,418)
Other(15,761)(10,173)1,159 
Net cash provided by (used in) financing activities(188,438)(392,916)1,539,073 
Effect of exchange rate changes on cash and cash equivalents and restricted cash(2,208)26,325 (5,576)
Net increase (decrease) in cash and cash equivalents and restricted cash(92,657)90,101 176,013 
Cash and cash equivalents and restricted cash, beginning of period541,363 451,262 275,249 
Cash and cash equivalents and restricted cash, end of period448,706 541,363 451,262 
Less: restricted cash2,854 2,844 25,647 
Cash and cash equivalents, end of period$445,852 $538,519 $425,615 
Supplemental cash flow information:
Income taxes paid$226,527 $56,803 $87,813 
Interest paid$78,865 $101,784 $57,189 
Non-cash investing and financing transactions:
Capital expenditures in accounts payable$6,304 $3,458 $4,332 
Common stock issued for business acquisition$— $— $144,168 

See Notes to the Consolidated Financial Statements.

F-5

F-6


Notes to the Consolidated Financial Statements as of and for the Years Ended July 31, 2018, 20172021, 2020 and 2016

2019

(All dollarDollar, Euro and GBP amounts are presented in thousands, except share and per share data)

data or as otherwise specified)


1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Nature of Operations – ThorTHOR Industries, Inc. was founded in 1980 and through itsis the sole owner of operating subsidiaries primarily(collectively, the “Company” or “THOR”), that, combined, represent the world’s largest manufacturer of recreational vehicles by units sold and revenue. The Company manufactures a wide rangevariety of recreationalRVs in the United States and Europe and sells those vehicles, at various manufacturing facilitiesas well as related parts and accessories, primarily in Indiana and Ohio, with additional facilities in Oregon and Idaho. These products are sold to independent, non-franchise dealers primarily throughout the United States, Canada and Canada.Europe. Unless the context otherwise requires or indicates otherwise, all references to “Thor”,“THOR,” the “Company”, “we”,“Company,” “we,” “our” and “us” refer to ThorTHOR Industries, Inc. and its subsidiaries.


The Company’s ongoing business activities are primarily comprised of two3 distinct operations, which include the design, manufacture and sale of North American towable recreational vehicles, North American motorized recreational vehicles and European recreational vehicles, with the European vehicles including both towable and motorized recreational vehicles.products as well as other RV-related products and services. Accordingly, the Company has presented segmented financial information for these two3 segments inNote 43 to the Consolidated Financial Statements. SeeNote 3 to the Consolidated Financial Statements for a description of the Company’s former bus operations which were sold as of October 20, 2013. Accordingly, the accompanying financial statements (including footnote disclosures unless otherwise indicated) reflect these operations as discontinued operations apart from the Company’s continuing operations.


Principles of Consolidation – The accompanying Consolidated Financial Statements include the accounts of ThorTHOR Industries, Inc. and its subsidiaries. The Company consolidates all majority-owned subsidiaries, and all intercompany balances and transactions are eliminated upon consolidation.

The results of any companies acquired during a year are included in the consolidated financial statements for the applicable year from the effective date of the acquisition.


Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Key estimates include the valuation of acquired assets and liabilities, reserves for inventory, incurred but not reported medical claims, warranty claims, recalls, workers’ compensation claims, vehicle repurchases, uncertain tax positions, product andnon-product litigation and assumptions made in asset impairment assessments. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. The Company believes that such estimates are made using consistent and appropriate methods. Actual results could differ from these estimates.


Cash and Cash Equivalents – Interest-bearing deposits and other investments with maturities of three months or less when purchased are considered cash equivalents. At July 31, 20182021 and 2017,July 31, 2020, cash and cash equivalents of $254,701$260,101 and $211,408,$260,876, respectively, were held by one U.S. financial institution.

In addition, at July 31, 2021 and July 31, 2020, the equivalent of $111,215 and $174,077, respectively, was held in Euros at one European financial institution and $27,926 and $49,732, respectively, was held in Euros by a different European financial institution.


Derivatives – The Company uses derivative financial instruments to manage its risk related to changes in foreign currency exchange rates and interest rates. The Company does not hold derivative financial instruments of a speculative nature or for trading purposes. The Company records all derivatives on the Consolidated Balance Sheet at fair value using available market information and other observable data. See Note 4 to the Consolidated Financial Statements for further discussion.

Fair Value of Financial Instruments – The carrying amount of cash equivalents, accounts receivable, notes receivable and accounts payable approximate fair value because of the relatively short maturity of these financial instruments. The carrying value of the Company’s long-term debt approximates fair value as the entire balance is subject to variable market interest rates that the Company believes approximate market rates for a similarly situated Company. The fair value of long-term debt is largely estimated using level 2 inputs as defined by ASC 820 and discussed inNote 1012 to the Consolidated Financial Statements.


Inventories – Certain inventoriesInventories are determined on the first-in, first-out (“FIFO”) basis, with the remainder on the last-in, first-out (“LIFO”) basis. Inventories are stated at the lower of cost or net realizable value, except for inventories determined based on thelast-in,first-out (“LIFO”) basis withLIFO, which are stated at the remainder being valued on afirst-in,first-out (“FIFO”) basis.lower of cost or market value. Manufacturing costs included in inventory include materials, labor,freight-in and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred.


Depreciation – Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Buildings and improvements – 10 to 39 years

Machinery and equipment – 3 to 10 years

Rental vehicles – 6 years
F-7

Depreciation expense is recorded in cost of products sold, except for $5,035, $5,710$22,409, $15,060 and $3,812$8,350 in fiscal 2018, 20172021, 2020 and 2016,2019, respectively, which relates primarily to office buildings and office equipment and is recorded in selling, general and administrative expenses.

Intangible Assets


Business Combinations – Intangible assets consistThe Company accounts for the acquisition of goodwill, trademarks, dealer networks/customer relationships, design technology assets andnon-compete agreements. Trademarks are amortized on a straight-line basis over 15 to 25 years. Dealer networks/customer relationships are amortized on an accelerated basis over 12 to 20 years, and design technology assets andnon-compete agreements are amortizedbusiness using the straight-lineacquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, are recorded at the acquisition date at their fair values. Assigning fair values requires the Company to make significant estimates and assumptions regarding the fair value of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances, and liabilities, such as uncertain tax positions and contingencies. The Company may refine these estimates if necessary over 2a period not to 15 years. Backlog is amortized using a straight-line basis methodexceed one year by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.

Goodwill – Goodwill results from the excess of purchase price over periods upthe net assets of an acquired business. The Company's reporting units are generally the same as its operating segments, which are identified in Note 3 to 3 months.the Consolidated Financial Statements. Goodwill is not amortized but is tested at least annually for impairment. Goodwill is reviewed for impairment by applying a fair-value based test on an annual basis, or more frequently ifannually as of May 31 of each fiscal year and whenever events or changes in circumstances indicate that an impairment may have occurred. If the carrying amount of a potential impairment.

F-6
reporting unit exceeds its fair value, an impairment charge equal to that excess is recognized, not to exceed the amount of goodwill allocated to the reporting unit.


Long-lived and Intangible Assets – Property, plant and equipment and identifiable intangibles that are amortized are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from future cash flows. If the carrying value of a long-lived asset is impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value.

Intangible assets consist of trademarks, dealer networks/customer relationships, design technology, backlog and non-compete agreements. Trademarks are amortized on a straight-line basis over 15 to 25 years. Dealer networks/customer relationships are amortized on an accelerated basis over 12 to 20 years, with amortization beginning after backlog amortization is completed, if applicable. Design technology and non-compete agreements are amortized using the straight-line method over 2 to 15 years. Backlog is amortized using a straight-line basis over the associated fulfillment period, typically nine months or less.


Product Warranties – Estimated warranty costs are provided at the time of sale of the related products. Warranty reserves are reviewed and adjusted as necessary on at least a quarterly basis.

AllowanceSee Note 11 to the Consolidated Financial Statements for Doubtfulfurther information.


Factored Accounts Receivable – The allowance for doubtful accounts represents management’s estimate of probable credit losses in existingFactored accounts receivable are receivables from sales to independent dealer customers of our European operations that have been sold to third-party finance companies that provide financing to those dealers. Certain of these sold receivables, which are subject to recourse and in which the Company retains an interest as determined from a reviewsecured obligation, do not meet the definition of past due balancesa true-sale, and other specific account information. The allowance for doubtfulwere therefore recorded as an asset with an offsetting balance recorded as a secured obligation in Liabilities related to factored receivables on the Consolidated Balance Sheets. During the fourth quarter of fiscal year 2021, the Company entered into revised agreements with certain of the third-party financing companies. These revised terms meet the applicable true-sale criteria under ASC 860 and therefore only those arrangements not meeting the applicable true-sale criteria remain as factored accounts activity during fiscal 2018, 2017 and 2016, andreceivable on the balances at July 31, 2018 and July 31, 2017, were not material.

Consolidated Balance Sheet.


Insurance Reserves – Generally, the Company is self-insured for workers’ compensation, products liability and group medical insurance. Upon the exhaustion of the applicable deductibles or retentions, the Company maintains insurance coverage. Under these plans, liabilities are recognized for claims incurred, including those incurred but not reported. The liability for workers’ compensation claims is determined by the Company with the assistance of a third partythird-party administrator and actuary using various state statutes and historical claims experience. Group medical reserves are estimated using historical claims experience. The Company has a self-insured retention (“SIR”) for products liability and personal injury matters ranging from $500 to $7,500 per occurrence, depending on the product type and when the occurrence took place. Generally, any occurrence (as defined by our insurance policies) after March 31, 2015 is subject to the $500 SIR, while matters occurring after March 31, 2014 and through March 31, 2015 are subject to a $1,000 SIR. The Company has established a liability on our balance sheet for product liability and personal injury occurrences based on historical data, known cases and actuarial information. Currently,

Revenue Recognition – Revenue is recognized as performance obligations under the Company maintains excess liability insurance aggregating $50,000terms of contracts with outside insurance carrierscustomers are satisfied. The Company’s recreational vehicle and extruded aluminum contracts have a single performance obligation of providing the promised goods (recreational vehicles and extruded aluminum components), which is satisfied when control of the goods is transferred to minimize our risks related to catastrophic claims in excess of our self-insured positions for products liability and personal injury matters.

the customer. Revenue Recognition– Revenues from the sale of recreational vehicles are recorded primarily when all of the following conditions have been met:

1)

An order for a product has been received from a dealer;

2)

Written or oral approval for payment has been received from the dealer’s flooring institution, if applicable;

3)

A common carrier signs the delivery ticket accepting responsibility for the product as agent for the dealer; and

4)

The product is removed from our property for delivery to the dealer who placed the order.

These conditions are generally met when title passes, which is when vehicles are shipped to dealers in accordance with shipping terms, which are primarily FOB shipping point. Most sales are made to dealers financing their purchases under flooring arrangements with banks or finance companies. Certain shipments are sold to customers on credit or cash on delivery (“COD”) terms. The Company recognizes revenue on credit sales upon shipment and COD sales upon payment and delivery. Products are not sold on consignment, dealers do not have the right to return products and dealers are typically responsible for interest costs to floor plan lenders.

At the time of revenue recognition, amounts billed to dealers for delivery of product are recognized as revenue and the corresponding delivery expense charged to costs of products sold.

Revenues from the sale of extruded aluminum components is generally recognized upon delivery to the customer’s location. The Company’s European recreational vehicle reportable segment includes vehicle sales to third party dealers as well as sales of new and used vehicles to end customers through our owned and operated dealership network of two dealerships.

F-8

For recreational vehicle sales, the Company recognizes revenue when its performance obligation has been satisfied and control of the product is transferred to the dealer, which generally aligns with shipping terms. Shipping terms vary depending on regional contracting practices. U.S. customers primarily contract under FOB shipping point terms. European customers generally contract on ExWorks (“EXW”) incoterms (meaning the seller fulfills its obligation to deliver when it makes goods available at its premises, or another specified location, for the buyer to collect). Under EXW incoterms, the performance obligation is satisfied and control is transferred at the point when the customer is notified that the vehicle is available for pickup. Customers do not have a right of return. All warranties provided are recognizedassurance-type warranties.

In addition to recreational vehicle sales, the Company’s European recreational vehicle reportable segment sells accessory items and provides repair services through our two owned dealerships. Each ordered item represents a distinct performance obligation satisfied when title to products andcontrol of the risk of loss aregood is transferred to the customer.

Dealer Volume Rebates, Sales Incentives Service and Advertising Costs – Estimated costsrepair contracts with customers are short term in nature and are recognized when the service is complete.


Revenue is measured as the amount of consideration to which the Company expects to be entitled in exchange for the Company’s products and services. The amount of revenue recognized includes adjustments for any variable consideration, such as sales discounts, sales allowances, promotions, rebates and other sales incentives which are included in the transaction price and allocated to each performance obligation based on the standalone selling price. The Company estimates variable consideration based on the expected value of total consideration to which customers are likely to be entitled to based primarily on historical experience and current market conditions. Included in the estimate is an assessment as to whether any variable consideration is constrained. Revenue estimates are adjusted at the earlier of a change in the expected value of consideration or when the consideration becomes fixed. During fiscal 2021 and fiscal 2020, adjustments to revenue from performance obligations satisfied in prior periods, which relate primarily to changes in estimated variable consideration, were immaterial.

Amounts billed to customers related to dealer volume rebatesshipping and handling activities are included in net sales. The Company has elected to account for shipping and handling costs as fulfillment activities, and these costs are included in cost of sales. We do not disclose information about the transaction price allocated to the remaining performance obligations at period end because our contracts generally have original expected durations of one year or less. In addition, we expense when incurred contract acquisition costs, primarily sales incentives are accrued as a reduction of revenue atcommissions, because the later ofamortization period, which is aligned with the time products are soldcontract term, is one year or the date the rebate or incentive is offered.less.

Advertising Costs – Advertising costs, which consist primarily of tradeshows,trade shows, are expensed as incurred, and were $26,874, $24,997$44,638, $67,019 and $14,472$38,643 in fiscal 2018, 20172021, 2020 and 2016,2019, respectively.

F-7


Foreign Currency – The financial statements of the Company’s foreign operations with a functional currency other than the U.S. dollar are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, and, for revenues and expenses, the weighted-average exchange rate for each applicable period, and the resulting translation adjustments are recorded in Accumulated Other Comprehensive Income (Loss), net of tax. Transaction gains and losses from foreign currency exchange rate changes are recorded in Other income (expense), net in the Consolidated Statements of Income and Comprehensive Income.

Repurchase Agreements– The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for certain independent domestic and foreign dealers of certain of its RV products. These arrangements, which are customary in the RV industry, provide for the repurchase of products sold to dealers in the event of default by the dealer on their agreement to pay the financial institution. The risk of loss from these agreements is spread over numerous dealers. In additionSee Note 14 to the guarantee under these repurchase agreements, we may also be required to repurchase inventory relative to dealer terminations in certain states in accordance with state laws or regulatory requirements. The repurchase price is generally determined by the original sales price of the product andpre-defined curtailment arrangements and the Company typically resells the repurchased product at a discount from its repurchase price. The Company accountsConsolidated Financial Statements for the guarantee under its repurchase agreements with our dealers’ financing institutions by estimating and deferring a portion of the related product sale that represents the estimated fair value of the repurchase obligation. The estimated fair value takes into account our estimate of the loss we will incur upon resale of any repurchases. This estimate is based on recent historical experience supplemented by management’s assessment of current economic and other conditions affecting our dealers. This deferred amount is included in our repurchase and guarantee reserve which is included in Other current liabilities in the Consolidated Balance Sheets.

further information.


Income Taxes– The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in theThe actual outcome of these future tax consequences could materiallydiffer from our estimates and have a material impact on our financial position or results of operations.


The Company recognizes liabilities for uncertain tax positions based on atwo-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, voluntary settlements and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

F-9

Significant judgment is required in determining the Company’s provision for income taxes, the Company’s deferred tax assets and liabilities and the valuation allowance recorded against the Company’s deferred tax assets, if any.assets. Valuation allowances must be considered due to the uncertainty of realizing deferred tax assets. The Company assesses whether valuation allowances should be established against our deferred tax assets on a tax jurisdictional basis based on the consideration of all available evidence, including cumulative income over recent periods, using a more likely than not standard. The valuation allowance activity during the year was not material.


Research and Development – Research and development costs are expensed when incurred and totaled $26,775, $19,123 and $9,381 in fiscal 2021, 2020 and 2019, respectively.

Stock-Based Compensation – The Company records compensation expense based on the fair value of stock-based awards, primarilyincluding restricted stock and performance stock units, on a straight-line basis over the requisite service period, which is generally three years. Stock-based compensation expense is recorded net of estimated forfeitures, which is based on historical forfeiture rates over the vesting period of employee awards.


Earnings Per Share – Basic earnings per common share (“EPS”) is computed by dividing net income attributable to THOR Industries, Inc. by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income attributable to THOR Industries, Inc. by the weighted-average number of common shares outstanding assuming dilution. The difference between basic EPS and diluted EPS is the result of unvested restricted stock units and unvested restrictedperformance stock units as follows:

   2018   2017   2016 

Weighted-average shares outstanding for basic earnings per share

   52,674,161    52,562,723    52,458,789 

Unvested restricted stock and restricted stock units

   179,199    195,719    131,727 
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding assuming dilution

   52,853,360    52,758,442    52,590,516 
  

 

 

   

 

 

   

 

 

 

202120202019
Weighted-average shares outstanding for basic earnings per share55,333,959 55,172,694 53,905,667 
Unvested restricted stock units and performance stock units353,294 224,682 121,019 
Weighted-average shares outstanding assuming dilution55,687,253 55,397,376 54,026,686 
The Company excludesexcluded 233,395 unvested restricted stock units and unvested restrictedperformance stock units that have an antidilutive effect from its calculation of weighted-average shares outstanding assuming dilution but had none at July 31, 2018, 2017 or 2016.

F-8
2019. Antidilutive unvested restricted stock units and performance stock units excluded from the July 31, 2021 and July 31, 2020 calculations were not material.


Accounting Pronouncements


Recently Adopted Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. The optional expedients and exceptions are available for all entities as of March 12, 2020, through December 31, 2022. The Company adopted ASU 2020-04, effective March 12, 2020. While there was no impact to the Company’s consolidated financial statements at the time of adoption, the impact of this ASU will ultimately depend on the terms of any future contract modification related to a change in reference rate, including potential future modifications to the Company’s debt facilities and cash flow hedges.

In January 2017, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”)ASU No. 2017-04, “Intangibles-Goodwill "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,”" which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (referred to as Step 2 in the goodwill impairment test). Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment charge equal to that excess shall be recognized, not to exceed the amount of goodwill allocated to the reporting unit. This ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019, with early adoption permitted after January 1, 2017.2019. This ASU isbecame effective for, and was adopted by, the Company in its fiscal year 2021 beginning on August 1, 2020. The Company is currently evaluating the impact of this ASU on itsthe Company's consolidated financial statements which will depend on the outcomes of future goodwill impairment tests.

In February 2016, the FASB issued ASUNo. 2016-02, “Leases (Topic 842),” with further clarifications and improvements included in ASUNo. 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU2018-11, “Leases (Topic 842) Targeted Improvements,” each issued in July 2018, all of which provides guidance on the recognition, measurement, presentation, and disclosure of leases. ASUNo. 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases with terms greater than 12 months. The principal difference from current guidance is that the lease assets and lease liabilities arising from operating leases will be recognized on the Consolidated Balance Sheet. This ASU is effective for fiscal years, and interim periods within those years, beginning after

F-10

2.ACQUISITIONS

Tiffin Group

On December 15, 2018. Early adoption is permitted. This ASU is effective for the Company in its fiscal year18, 2020, beginning on August 1, 2019. The Company is currently evaluating the impact that implementing this ASU will have on its financial statements.

In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU will supersede most current revenue recognition guidance. Under this ASU, entities are required to identify the contract with a customer, identify the separate performance obligations in the contract, determine the transaction price, allocate the transaction price to the separate performance obligations in the contract and recognize the appropriate amount of revenue when (or as) the entity satisfies each performance obligation. This ASU will also require additional qualitative and quantitative disclosures about contracts with customers, significant judgments made in applying the revenue guidance, and assets recognized from the costs to obtain or fulfill a contract. ASUNo. 2014-09 is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2017. This ASU is effective for the Company in its fiscal year 2019 beginning on August 1, 2018. In applying this ASU, entities have the option of using either a full retrospective transition or a modified retrospective approach with the cumulative effect recognized as of the date of adoption. The Company will adopt this ASU on August 1, 2018 using the modified retrospective approach. As a result of the adoption, the Company expects an immaterial net,after-tax cumulative effect adjustment to reduce Retained Earnings as of August 1, 2018. This adjustment is a result of a change in the accounting for certain sales incentives, which are currently recorded as a reduction of revenue at the later of the time products are sold or the date the incentive is offered. Under this ASU, these incentives will need to be estimated and recorded at the time of sale, which is primarily upon shipment to customers. The Company is in the process of evaluating the impact upon adoption of this ASU to internal controls, business processes and financial statement disclosures, none of which are expected to be material.

2.  ACQUISITIONS

Jayco, Inc.

On June 30, 2016, the Company closed on a Stock Purchase Agreement (“JaycoTiffin Group SPA”) for the acquisition of all of the issued and outstanding capital stock of towable andluxury motorized recreational vehicle manufacturer Jayco, Corp. (“Jayco”Tiffin Motorhomes, Inc., including fifth wheel towable recreational vehicle manufacturer Vanleigh RV, and certain other associated operating and supply companies, which primarily supply component parts and services to Tiffin Motorhomes, Inc. and Vanleigh RV (collectively, the “Tiffin Group”) for. Tiffin Group, LLC, a wholly-owned subsidiary of the Company, owns the Tiffin Group. Tiffin Motorhomes, Inc. operates out of various locations in Alabama while Vanleigh RV operates out of Mississippi.


The initial cash consideration for the acquisition of $576,060,the Tiffin Group was approximately $300,000, subject to adjustment. This acquisitionadjustment, and was funded through existing cash-on-hand as well as $165,000 in borrowings from the Company’s existing asset-based credit facility. The total cash on hand and $360,000 from an asset-based revolving credit facility as more fully described inNote 12consideration to the Consolidated Financial Statements. The final purchase price adjustment of $5,039, included in accounts payable as of July 31, 2016, was based onbe paid is subject to the final determination of the actual acquired net assetsworking capital, as defined in the Tiffin Group SPA, as of the June 30, 2016 closing date andclose of business on December 18, 2020, which determination was paid duringfinalized in the firstfourth quarter of fiscal 2017. Jayco2021 and the adjustment was not material. The Tiffin Group operates as an independent operation in the same manner as the Company’s other recreational vehicle subsidiaries, and its towables operations are aggregated within the Company’s towable recreational vehicle reportable segment and its motorized operations are aggregated within the Company’s motorized recreational vehicle reportable segment and its towable operations are aggregated within the Company’s towable recreational vehicle reportable segment. The Company purchased Jaycothe Tiffin Group to complement its existing towablemotorized and motorizedtowable RV product offerings and North American independent dealer base.


The results of the Tiffin Group are included in the Company’s Consolidated Statements of Income and Comprehensive Income since the December 18, 2020 acquisition date. The Tiffin Group recorded net sales of $421,438 and net income before income taxes of $11,648 for the period from the date of acquisition through July 31, 2021. Net income before income taxes included a charge of $4,272 related to the step-up in assigned value of acquired Tiffin Group inventory that was included in cost of products sold in the current period, and also includes a charge of $6,656 for the amortization expense related to the acquired backlog and the other acquired amortizable intangible assets.

During the fiscal quarter end July 31, 2021, the Company made immaterial measurement period adjustments, primarily to deferred income taxes and goodwill, to better reflect the facts and circumstances that existed at the acquisition date. The following table summarizes the estimated fair values of the Tiffin Group net assets acquired on the acquisition date. The Company is in the process of finalizing the fair value analysis, but this analysis has not been fully completed. The provisional amounts included below, related to deferred income tax liabilities and certain accrued expenses, remain subject to potential adjustment. The Company expects to finalize these values as soon as practical and no later than one year from the acquisition date.

CashF-9$13,074 
Inventory116,441 
Other assets53,860 
Property, plant and equipment48,262 
Amortizable intangible assets:
Dealer network92,200 
Trademarks32,100 
Non-compete agreements1,400 
Backlog4,800 
Goodwill65,064 
Current liabilities(81,423)
Deferred income tax liabilities(37,263)
Other liabilities(7,203)
Total fair value of net assets acquired301,312 
Less cash acquired(13,074)
Total cash consideration for acquisition, less cash acquired$288,238 

F-11

The following table summarizes the final fair values assigned to the Jayco net assets acquired, which are based on internal and independent external valuations:

Cash

  $18,409 

Other current assets

   258,158 

Property, plant and equipment

   80,824 

Dealer network

   261,100 

Trademarks

   92,800 

Backlog

   12,400 

Goodwill

   74,184 

Current liabilities

   (216,776) 
  

 

 

 

Total fair value of net assets acquired

   581,099 

Less cash acquired

   (18,409) 
  

 

 

 

Total cash consideration for acquisition, less cash acquired

  $562,690 
  

 

 

 


On the acquisition date, amortizable intangible assets had a weighted-average useful life of 19.318.8 years. The dealer network wasnetworks were valued based on the Discounted Cash Flow Method and iswill be amortized on an accelerated basis over 18 to 20 years. The trademarks were valued on the Relief from Royalty Method and arewill be amortized on a straight-line basis over 20 years. Backlog wasBacklogs were valued based on the Discounted Cash Flow Method and iswere amortized on a straight-line basis over 3five to seven months. Generally, the goodwill recognized as a result of this transaction will be not deductible for tax purposes.

Togo Group

In February 2018, the Company formed a 50/50 joint venture, originally called TH2connect, LLC, with Tourism Holdings Limited ("thl"). In July 2019, this joint venture was rebranded as "Togo Group." Togo Group was formed to own, improve and sell innovative and comprehensive digital applications through a platform designed for the global RV industry. Since its formation through March 23, 2020, the Company applied the equity method of accounting to the joint venture.

Effective March 23, 2020 the Company and thl reached an agreement (the “2020 Agreement”) whereby the Company agreed to pay thl $6,000 on August 1, 2020 and, in return, obtained additional ownership interest in Togo Group. In addition, certain assets or rights to assets historically owned by Togo Group were distributed to thl in exchange for a corresponding reduction in thl’s ownership interest in Togo Group. As a result of the 2020 Agreement, THOR obtained a 73.5% controlling interest in Togo Group and the power to direct the activities of Togo Group. Upon the effective date of the 2020 Agreement, the operating results, balance sheet accounts and cash flow activity of Togo Group were consolidated within the Company's Consolidated Financial Statements.

The operations of Togo Group are focused on digital solutions primarily for the North American market related to travel and RV use, with expansion into other regions anticipated in future periods. Togo Group is managed as a stand-alone operating entity and represents a non-reportable segment and a separate reporting unit for goodwill assessment purposes.

The fair value of the Company’s previously-held equity interest in Togo Group was estimated to be $47,256 immediately prior to the effective date of the 2020 Agreement. The Company recognized an immaterial gain as a result of remeasuring the previously-held equity interest to fair value. The fair value of the Company's previously-held equity interest was determined based on the fair value of Togo Group as of the effective date of the 2020 Agreement, measured using the Discounted Cash Flow method and the Company’s pre-transaction ownership interest percentage.

Following the transaction, the Company holds a 73.5% ownership interest in Togo Group, comprised of Class A common units. In accordance with the 2020 Agreement, the ownership interest held by thl is comprised of Class B preferred units, which entitle thl to a liquidation preference and a 3% annual preferred cash dividend calculated on a stated value of $20,180. The Company has a call option in the amount of $20,180 relative to the Class B preferred units which is exercisable over a four-year period. The fair value of the Class B units, representing a non-controlling interest in Togo Group and shown in the table below, was determined using a Black-Scholes option pricing model and required the Company to make certain assumptions, including, but not limited to, expected volatility and dividend yield. The Company concluded that the non-controlling interest represents equity for accounting purposes based on its evaluation of the terms of the 2020 Agreement and characteristics of the Class B preferred units.

During the fiscal quarter ended July 31, 2020, the Company made immaterial measurement period adjustments primarily to deferred income taxes and goodwill to better reflect the facts and circumstances that existed at the 2020 Agreement effective date. The table below summarizes the final fair value of Togo Group assets acquired and liabilities assumed as of the 2020 Agreement effective date.
Cash$326 
Accounts receivable466 
Other assets749 
Property, plant and equipment362 
Amortizable intangible assets
Trade names and trademarks1,130 
Developed technology5,700 
Other1,350 
Goodwill61,955 
Liabilities(2,595)
Non-controlling interest(16,835)
Total fair value of net assets acquired$52,608 
F-12

As of the 2020 Agreement effective date, amortizable intangible assets had a weighted-average useful life of approximately eight years and will be amortized on a straight-line basis. The developed technology was valued using the Multi-Period Excess Earnings method, which is a form of the income approach. Trade names and trademarks were valued using the Relief from Royalty method. The majority of the goodwill is expected to be deductible for tax purposes.

Prior to the March 23, 2020 effective date of the 2020 Agreement, the Company accounted for the equity method investment in Togo Group on a one-month lag. Beginning in the fiscal quarter ended April 30, 2020, that lag was eliminated. The impact of this change was not material to the Company's Consolidated Financial Statements. The Company's share of the loss from this investment recognized in the Company's 2020 fiscal year through the March 23, 2020 effective date of the 2020 Agreement was $6,884. The Company's share of the losses from this investment for the fiscal year ended July 31, 2019 were $8,798.

Erwin Hymer Group SE

On February 1, 2019, the Company acquired Erwin Hymer Group SE (“EHG”). EHG is headquartered in Bad Waldsee, Germany, and is one of the largest RV manufacturers in Europe. EHG is managed as a stand-alone operating entity that is included in the European recreational vehicle operating segment.

In fiscal 2020, the Company made measurement period adjustments primarily related to the estimated fair value of certain fixed assets, other receivables and deferred income tax assets to better reflect the facts and circumstances that existed at the acquisition date. These adjustments resulted in a decrease in fixed assets, an increase in other receivables, increases in deferred income tax assets, a decrease in deferred income tax liabilities and a net increase of goodwill of $1,282. The impact to our fiscal 2020 Consolidated Statement of Income and Comprehensive Income as a result of these measurement period adjustments was immaterial.

The following table summarizes the final fair values of the EHG assets acquired and liabilities assumed as of the acquisition date.
Cash$97,887 
Inventory593,053 
Other assets435,747 
Property, plant and equipment, rental vehicles80,132 
Property, plant and equipment437,216 
Amortizable intangible assets:
Dealer network355,601 
Trademarks126,181 
Technology assets183,536 
Backlog11,471 
Goodwill1,009,754 
Guarantee liabilities related to former EHG North American subsidiaries(115,668)
Other current liabilities(851,774)
Debt – Unsecured notes(114,710)
Debt – Other(166,196)
Deferred income tax liabilities(152,186)
Other long-term liabilities(17,205)
Non-controlling interests(12,207)
Total fair value of net assets acquired1,900,632 
Less: cash acquired(97,887)
Total fair value of net assets acquired, less cash acquired$1,802,745 

On the acquisition date, amortizable intangible assets had a weighted-average useful life of 17 years. The dealer network was valued based on the Discounted Cash Flow method and is amortized on an accelerated basis over 20 years. The trademarks and technology assets were valued on the Relief of Royalty method and are amortized on a straight-line basis over 20 years and 10 years, respectively. The backlog was valued based on the Discounted Cash Flow method and was amortized on a straight-line basis over a 5 month period. We recognized $1,009,754 of goodwill as a result of this transaction, of which approximately $311,000 is deductible for tax purposes.

F-13

In connection with the closing of the acquisition, THOR and EHG entered into an amendment to exclude EHG’s North American subsidiaries from the business operations acquired by THOR. The acquisition date balance sheet included guarantee liabilities related to the former EHG North American subsidiaries totaling $115,668. Historically, EHG had provided guarantees for certain of its former North American subsidiaries that were assumed by THOR in the acquisition and which related to bank loans, foreign currency derivatives, certain specified supplier contracts and dealer financing arrangements, as well as a specific lease agreement. All of these guarantee liabilities have been settled and there were 0 outstanding liabilities at July 31, 2021 or July 31, 2020.

Net costs incurred during fiscal 2019 related specifically to this acquisition totaled $114,866 and are included in Acquisition-related costs in the Consolidated Statements of Income and Comprehensive Income. These costs include the losses on the foreign currency forward contract of $70,777 discussed in Note 4 to the Consolidated Financial Statements, and $44,089 of other expenses, consisting primarily of bank fees, ticking fees, legal, professional and advisory fees related to financial due diligence and implementation costs, regulatory review costs and the write-off of the remaining unamortized debt fees related to the Company’s previous asset-based facility.

The following unaudited pro forma information represents the Company’s results of operations as if the fiscal 20162021 acquisition of Jaycothe Tiffin Group had occurred at the beginning of fiscal 2015:

   Fiscal Year Ended
July 31,  2016		 

Net sales

  $6,176,686 

Net income

  $284,394 

Basic earnings per common share

  $5.42 

Diluted earnings per common share

  $5.41 

3.  DISCONTINUED OPERATIONS

On2020, the fiscal 2020 acquisition of the Togo Group had occurred at the beginning of fiscal 2019 and the fiscal 2019 acquisition of EHG had occurred at the beginning of fiscal 2018. The disclosure of pro forma net sales and earnings does not purport to indicate the results that would actually have been obtained had the acquisition been completed on the assumed date for the periods presented, or which may be realized in the future. The unaudited pro forma information does not reflect any operating efficiencies or cost savings that may be realized from the integration of the acquisition.

Fiscal 2021Fiscal 2020Fiscal 2019
Net sales$12,581,282 $8,870,746 $9,067,750 
Net income$667,308 $223,861 $136,831 
Basic earnings per common share$12.06 $4.06 $2.54 
Diluted earnings per common share$11.98 $4.04 $2.53 
The pro forma earnings for the fiscal year ended July 31, 2013,2019 were adjusted to exclude $114,866 of acquisition-related costs. Fiscal 2019 also excludes $61,418 of nonrecurring expense related to the Company entered into a Stock Purchase Agreement and sold its bus businessfair value adjustment to Allied Specialty Vehicles, Inc. The sale closed on October 20, 2013. The Company’s bus business, which manufactured and sold transit and shuttle buses,acquisition-date inventory. EHG’s historical net income included the operations of Champion Bus Inc., General Coach America, Inc., Goshen Coach, Inc., ElDorado National (California), Inc. and ElDorado National (Kansas), Inc. This divestiture allowed the Company to focus on the strategic development and growth of its core recreational vehicle business.

The results of operations for the bus business have been reported as loss from discontinued operations, net of income taxes, in the Consolidated Statementstotal above includes nonrecurring charges related to its former North American operations in the amount of Income$52,501 during the fiscal year ended July 31, 2019. These charges primarily consist of EHG’s guarantees to third parties for certain North American subsidiary obligations and Comprehensive Income for fiscal 2016.

4.  the impairment of loan receivables due to EHG from their former North American subsidiaries.


3.BUSINESS SEGMENTS


The Company has two3 reportable segments:segments, all related to recreational vehicles: (1) towable recreational vehiclesNorth American towables, (2) North American motorized and (2) motorized recreational vehicles. (3) European.

The towablesNorth American towable recreational vehicle reportable segment consists of the following operating segments that have been aggregated: Airstream (towable), Heartland (including Bison, CRVCruiser RV and DRV), Jayco (including Jayco towable, Starcraft and Highland Ridge), Keystone (including CrossRoads and Dutchmen), and KZ (including Venture RV) and Tiffin Group (namely, Vanleigh RV). The North American motorized recreational vehicle reportable segment consists of the following operating segments that have been aggregated: Airstream (motorized), Jayco (including Jayco motorized and Entegra Coach) and, Thor Motor Coach.

Coach and Tiffin Group (primarily Tiffin Motorhomes, Inc.). The European recreational vehicles reportable segment consists solely of the EHG business. EHG manufactures a full line of towable and motorized recreational vehicles, including motorcaravans, caravans and campervans in eight primary RV production locations within Europe. EHG produces and sells numerous brands primarily within Europe, including Buccaneer, Buerstner, Carado, Compass, CrossCamp, Dethleffs, Elddis, Eriba, Etrusco, Hymer, Laika, LMC, Niesmann+Bischoff, Sunlight and Xplore. In addition, EHG’s operations include other RV-related products and services.


The operations of the Company’s Postle subsidiaryand Togo Group subsidiaries are included in “Other,” which is anon-reportable segment. Net sales included in Other mainly relate primarily to the sale of aluminum extrusions and specialized component products. Intercompany eliminations adjust for Postle sales to the Company’s towablesNorth American towable and North American motorized segments, which are consummated at established transfer prices generally consistent with the selling prices of extrusion components to third partythird-party customers.

All manufacturing is conducted in the United States.

F-14

Total assets include those assets used in the operation of each reportable andnon-reportable segment, and the Corporate assets consist primarily of cash and cash equivalents, and deferred income tax assets.

F-10
taxes, deferred compensation plan assets and certain Corporate real estate holdings primarily utilized by THOR’s U.S.-based operating subsidiaries.

202120202019
NET SALES:
Recreational vehicles
North American Towables$6,221,928 $4,140,482 $4,558,451 
North American Motorized2,669,391 1,390,098 1,649,329 
Total North America8,891,319 5,530,580 6,207,780 
European3,200,079 2,485,391 1,486,978 
Total recreational vehicles12,091,398 8,015,971 7,694,758 
Other373,174 234,481 263,374 
Intercompany eliminations(147,192)(82,519)(93,374)
Total$12,317,380 $8,167,933 $7,864,758 
INCOME (LOSS) BEFORE INCOME TAXES:
Recreational vehicles
North American Towables$658,964 $336,207 $322,228 
North American Motorized202,057 71,943 80,910 
Total North America861,021 408,150 403,138 
European116,576 9,850 (5,946)
Total recreational vehicles977,597 418,000 397,192 
Other, net57,674 27,751 29,086 
Corporate(190,690)(172,855)(241,612)
Total$844,581 $272,896 $184,666 
20212020
TOTAL ASSETS:
Recreational vehicles
North American Towables$1,870,577 $1,529,913 
North American Motorized1,073,506 480,225 
Total North America2,944,083 2,010,138 
European2,975,821 3,102,071 
Total recreational vehicles5,919,904 5,112,209 
Other, net272,350 212,378 
Corporate461,834 446,873 
Total$6,654,088 $5,771,460 
F-15
           2018                  2017                  2016         

Net sales:

    

Recreational vehicles

    

Towables

   $6,008,700  $5,127,491  $3,338,659 

Motorized

   2,146,315   1,971,466   1,094,250 
  

 

 

  

 

 

  

 

 

 

Total recreational vehicles

   8,155,015   7,098,957   4,432,909 

Other

   305,947   253,557   218,673 

Intercompany eliminations

   (132,053)   (105,562)   (69,470) 
  

 

 

  

 

 

  

 

 

 

Total

   $8,328,909  $7,246,952  $4,582,112 
  

 

 

  

 

 

  

 

 

 

Income (loss) from continuing operations before income taxes:

    

Recreational vehicles

    

Towables

   $532,657  $458,915  $321,874 

Motorized

   134,785   125,323   88,523 
  

 

 

  

 

 

  

 

 

 

Total recreational vehicles

   667,442   584,238   410,397 

Other

   32,973   28,909   18,547 

Intercompany eliminations

   (306)   (195)   (23) 

Corporate

   (67,080)   (56,566)   (45,608) 
  

 

 

  

 

 

  

 

 

 

Total

   $633,029  $556,386  $383,313 
  

 

 

  

 

 

  

 

 

 

Total assets:

    

Recreational vehicles

    

Towables

   $1,654,361  $1,535,029  $1,425,168 

Motorized

   492,830   500,761   476,973 
  

 

 

  

 

 

  

 

 

 

Total recreational vehicles

   2,147,191   2,035,790   1,902,141 

Other, net

   167,965   156,996   156,822 

Corporate

   463,509   365,145   266,501 
  

 

 

  

 

 

  

 

 

 

Total

   $2,778,665  $2,557,931  $2,325,464 
  

 

 

  

 

 

  

 

 

 

Depreciation and amortization expense:

    

Recreational vehicles

    

Towables

   $68,964  $75,568  $36,054 

Motorized

   11,800   9,393   2,994 
  

 

 

  

 

 

  

 

 

 

Total recreational vehicles

   80,764   84,961   39,048 

Other

   10,861   11,967   12,352 

Corporate

   1,598   1,330   1,175 
  

 

 

  

 

 

  

 

 

 

Total

   $93,223  $98,258  $52,575 
  

 

 

  

 

 

  

 

 

 

Capital acquisitions:

    

Recreational vehicles

    

Towables

   $85,304  $72,801  $37,489 

Motorized

   34,660   41,677   11,191 
  

 

 

  

 

 

  

 

 

 

Total recreational vehicles

   119,964   114,478   48,680 

Other

   8,440   1,157   2,799 

Corporate

   8,902   2,120   2,495 
  

 

 

  

 

 

  

 

 

 

Total

   $137,306  $117,755  $53,974 
  

 

 

  

 

 

  

 

 

 

F-11

202120202019
DEPRECIATION AND INTANGIBLE ASSET AMORTIZATION EXPENSE:
Recreational vehicles
North American Towables$66,078 $66,042 $67,751 
North American Motorized23,153 14,202 13,831 
Total North America89,231 80,244 81,582 
European127,432 103,671 54,881 
Total recreational vehicles216,663 183,915 136,463 
Other, net12,220 10,488 10,647 
Corporate1,698 1,764 1,667 
Total$230,581 $196,167 $148,777 
CAPITAL ACQUISITIONS:
Recreational vehicles
North American Towables$35,816 $27,219 $69,321 
North American Motorized22,230 12,603 17,179 
Total North America58,046 39,822 86,500 
European66,930 62,165 35,653 
Total recreational vehicles124,976 101,987 122,153 
Other, net5,620 2,664 3,493 
Corporate1,085 1,172 1,599 
Total$131,681 $105,823 $127,245 
DESTINATION OF NET SALES BY GEOGRAPHIC REGION:
United States$8,462,652 $5,296,482 $5,803,373 
Germany1,977,808 1,494,419 836,151 
Other Europe1,189,747 966,023 636,105 
Canada638,118 377,053 561,172 
Other foreign49,055 33,956 27,957 
Total$12,317,380 $8,167,933 $7,864,758 

20212020
PROPERTY, PLANT AND EQUIPMENT BY GEOGRAPHIC REGION:
United States$626,375��$564,171 
Germany460,446 444,981 
Other Europe95,266 93,220 
Other3,044 5,277 
Total$1,185,131 $1,107,649 
F-16

Export sales, predominantly


4.DERIVATIVES AND HEDGING

The Company uses interest rate swap agreements, foreign currency forward contracts and certain non-derivative financial instruments to Canada, were $788,894, $628,176manage its risks associated with foreign currency exchange rates and $368,426interest rates. The Company does not hold derivative financial instruments of a speculative nature or for trading purposes. The Company records derivatives as assets and liabilities on the balance sheet at fair value. Changes in fiscal 2018, 2017the fair value of derivative instruments are recognized in earnings unless the derivative qualifies and 2016, respectively,is designated as a hedge. Cash flows from derivatives are classified in the Consolidated Statements of Cash Flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. The Company evaluates hedge effectiveness at inception and accounted for 9.5%, 8.7% and 8.0%on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued.

Certain of the Company’s consolidatedderivative transactions are subject to master netting arrangements that allow the Company to net salessettle contracts with the same counter parties. These arrangements generally do not call for those respective years.

collateral and as of the applicable dates presented below, no cash collateral had been received or pledged related to the underlying derivatives.


The fair value of our derivative instruments designated as cash flow hedges and the associated notional amounts, presented on a pre-tax basis, were as follows:
 July 31, 2021July 31, 2020
Cash Flow HedgesNotionalFair Value in
Other Current
Liabilities		NotionalFair Value in
Other Current
Liabilities
Foreign currency forward contracts$41,899 $88 $—  $— 
Interest rate swap agreements482,138 11,420 673,400 24,840 
Total derivative financial instruments$524,037 $11,508 $673,400 $24,840 

Foreign currency forward contracts outstanding at July 31, 2021 are used to exchange British Pounds Sterling ("GBP") for Euro. The total notional value of these contracts, including designated hedges and other contracts not designated, at July 31, 2021 is 30,000 GBP ($41,899), and these contracts have various maturity dates through January 31, 2022.

The Company entered into interest rate swaps to convert a portion of the Company's long-term debt from floating rate to fixed rate debt. As of July 31, 2021, the outstanding swaps had notional contract values of $482,138, partially hedging the interest rate risk related to the Company's U.S. dollar term loan tranche that matures in February 2026.

Cash Flow Hedges

The Company has used foreign currency forward contracts to hedge the effect of certain foreign currency exchange rate fluctuations on forecasted foreign currency transactions, including foreign currency denominated sales. These forward contracts are designated as cash flow hedges. The changes in fair value of these contracts are recorded in accumulated other comprehensive income (“AOCI”) until the hedged items affect earnings, at which time the gain or loss is reclassified into the same line item in the determination of net income as the underlying exposure being hedged. Foreign currency forward contracts accounted for as cash flow hedges and outstanding at July 31, 2021 mature over the next six months.

The Company has entered into interest rate swap agreements to manage certain of its interest rate exposures. During fiscal 2019, the Company entered into pay-fixed, receive-floating interest rate swap agreements, totaling $900,000 in initial value, in order to hedge against interest rate risk relating to the Company’s floating rate debt agreements. The $900,000 in initial value declines quarterly over the initial 4.5 year term of the swaps. The interest rate swaps are designated as cash flow hedges of the expected interest payments related to the Company’s LIBOR-based floating rate debt. Amounts initially recorded in AOCI are reclassified to interest expense over the life of the debt as the forecasted interest transactions occur.

Net Investment Hedges

The Company designates a portion of its outstanding Euro-denominated term loan tranche as a hedge of foreign currency exposures related to investments the Company has in certain Euro-denominated functional currency subsidiaries.


F-17

The foreign currency transaction gains and losses on the Euro-denominated portion of the term loan, which is designated and determined to be effective as a hedge of the Company’s net investment in its Euro-denominated functional currency subsidiaries, are included as a component of the foreign currency translation adjustment. Gains (losses), net of tax, included in the foreign currency translation adjustments were $(1,943), $(25,915) and $7,780 for the fiscal years ended July 31, 2021, July 31, 2020 and July 31, 2019, respectively.

There were no amounts reclassified out of AOCI pertaining to the net investment hedge during the fiscal years ended July 31, 2021, July 31, 2020 and July 31, 2019.

Derivatives Not Designated as Hedging Instruments

As described in more detail in Note 2 to the Consolidated Financial Statements, on September 18, 2018, the Company entered into a definitive agreement to acquire EHG, which closed on February 1, 2019. The cash portion of the purchase price was denominated in Euro, and therefore the Company’s cash flows were exposed to changes in the Euro/USD exchange rate between the September 18, 2018 agreement date and the closing date.
To reduce its exposure, the Company entered into a deal-contingent, foreign currency forward contract on the September 18, 2018 agreement date in the amount of 1.625 billion Euro. Hedge accounting was not applied to this instrument, and therefore all changes in fair value were recorded in earnings.

The contract was settled in connection with the close of the EHG acquisition on February 1, 2019 in the amount of $70,777, resulting in a loss of the same amount which is included in Acquisition-related costs in the Consolidated Statements of Income and Comprehensive Income.

The Company also has certain other derivative instruments which have not been designated as hedges. These other derivative instruments had a notional amount totaling approximately $32,466 and a fair value of $1,948 which is included in Other current liabilities in the Consolidated Balance Sheet as of July 31, 2021. These other derivative instruments had a notional amount totaling approximately $34,862 and a fair value of $1,824 as of July 31, 2020. For these derivative instruments, changes in fair value are recognized in earnings.

The total amounts presented in the Consolidated Statements of Income and Comprehensive Income due to changes in the fair value of the following derivative instruments for the fiscal years ended July 31, 2021, 2020 and 2019 are as follows:
202120202019
Gain (Loss) on Derivatives Designated as Cash Flow Hedges
Gain (loss) recognized in Other comprehensive income (loss), net of tax
Foreign currency forward contracts$(63)$— $129 
Interest rate swap agreements (1)
10,231 (9,351)(9,396)
Total gain (loss)$10,168 $(9,351)$(9,267)

(1)Other comprehensive income (loss), net of tax, before reclassification from AOCI was $340, $(15,265) and $(9,320) for fiscal years 2021, 2020 and 2019, respectively.

2021
SalesInterest
Expense
Gain (Loss) Reclassified from AOCI, Net of Tax
Foreign currency forward contracts$(1,050)$— 
Interest rate swap agreements— (9,891)
Gain (Loss) on Derivatives Not Designated as Hedging Instruments
Amount of gain (loss) recognized in income, net of tax
Interest rate swap agreements— (85)
Total gain (loss)$(1,050)$(9,976)
F-18

2020
SalesInterest
Expense
Gain (Loss) Reclassified from AOCI, Net of Tax
Foreign currency forward contracts$(386)$— 
Interest rate swap agreements— (5,914)
Gain (Loss) on Derivatives Not Designated as Hedging Instruments
Amount of gain (loss) recognized in income, net of tax
Interest rate swap agreements— (376)
Total gain (loss)$(386)$(6,290)

2019
SalesAcquisition-Related CostsInterest
Expense
Gain (Loss) Reclassified from AOCI, Net of Tax
Foreign currency forward contracts$129 $— $— 
Interest rate swap agreements— — 76 
Gain (Loss) on Derivatives Not Designated as Hedging Instruments
Amount of gain (loss) recognized in income, net of tax
Foreign currency forward contracts— (70,777)— 
Interest rate swap agreements— — (438)
Total gain (loss)$129 $(70,777)$(362)

5.INVENTORIES


Major classifications of inventories are:

   July 31, 
   2018  2017 

Finished products – RV

  $44,998  $24,904 

Finished products – Other

   35,320   27,862 

Work in process

   124,703   117,319 

Raw materials

   258,429   214,518 

Chassis

   116,308   109,555 
  

 

 

  

 

 

 

Subtotal

   579,758   494,158 

Excess of FIFO costs over LIFO costs

   (41,849)   (33,670) 
  

 

 

  

 

 

 

Total inventories

  $    537,909  $    460,488 
  

 

 

  

 

 

 

are as follows:

July 31, 2021July 31, 2020
Finished goods—RV$114,843 $152,297 
Finished goods—other57,810 44,779 
Work in process376,594 128,181 
Raw materials602,106 302,813 
Chassis292,921 135,194 
Subtotal1,444,274 763,264 
Excess of FIFO costs over LIFO costs(74,890)(46,959)
Total inventories, net$1,369,384 $716,305 

Of the $579,758$1,444,274 and $494,158$763,264 of inventoryinventories at July 31, 20182021 and 2017, $305,990July 31, 2020, $946,767 and $284,897,$512,165, respectively, was valued on thelast-in, first-in, first-out (LIFO) basis, (“FIFO”) method, and $273,768$497,507 and $209,261,$251,099, respectively, was valued on thefirst-in, last-in, first-out (FIFO) method.

The Company’s reserves for inventory obsolescence were $5,273 at July 31, 2018 and $5,240 at July 31, 2017.

(“LIFO”) basis.


F-19

6.PROPERTY, PLANT AND EQUIPMENT


Property, plant and equipment is stated at cost, net of accumulated depreciation, and consists of the following:

   July 31, 
   2018  2017 

Land

  $57,413  $48,812 

Buildings and improvements

   468,824   380,139 

Machinery and equipment

   197,294   161,724 
  

 

 

  

 

 

 

Total cost

   723,531   590,675 

Less accumulated depreciation

   (201,477)   (165,437) 
  

 

 

  

 

 

 

Net property, plant and equipment

  $    522,054  $    425,238 
  

 

 

  

 

 

 

Property, plant and equipment at both July 31, 2018 and July 31, 2017 includes buildings and improvements acquired under capital leases of $6,527, and includes related amortization included in accumulated depreciation of $1,768 and $1,224, respectively.

F-12

July 31, 2021July 31, 2020
Land$142,746 $136,200 
Buildings and improvements837,065 760,986 
Machinery and equipment523,714 438,985 
Rental vehicles75,449 83,534 
Lease right-of-use assets – operating42,601 33,609 
Lease right-of-use assets – finance7,010 3,672 
Total cost1,628,585 1,456,986 
Less accumulated depreciation(443,454)(349,337)
Property, plant and equipment, net$1,185,131 $1,107,649 


See Note 15 to the Consolidated Financial Statements for further information regarding the lease right-of-use assets.

7.INTANGIBLE ASSETS GOODWILL AND LONG-LIVED ASSETS

GOODWILL


The components of amortizable intangible assets are as follows:

         July 31, 2018   July 31, 2017 
    Weighted-Average  
Remaining
Life in Years
at July 31, 2018		      Cost   Accumulated
Amortization		   Cost   Accumulated
Amortization		 

Dealer networks/customer relationships

 16        $         404,960       $        147,077   $         404,960       $         101,795 

Trademarks

 17     146,117    24,364    147,617    17,570 

Design technology and other intangibles

 7     18,200    9,555    19,300    9,203 

Non-compete agreements

 1     450    383    450    293 
     

 

 

   

 

 

   

 

 

   

 

 

 

Total amortizable intangible assets

         $569,727       $181,379   $572,327       $128,861 
     

 

 

   

 

 

   

 

 

   

 

 

 

The dealer networks and customer relationships are being amortized on an accelerated basis. Trademarks, design technology and other intangibles andnon-compete agreements are amortized on a straight-line basis.

 July 31, 2021July 31, 2020
 CostAccumulated
Amortization		CostAccumulated
Amortization
Dealer networks/customer relationships$861,562 $327,751 $766,198 $252,320 
Trademarks311,208 62,675 275,775 47,743 
Design technology and other intangibles215,956 62,237 213,468 40,654 
Non-compete agreements1,400 292 — — 
Total amortizable intangible assets$1,390,126 $452,955 $1,255,441 $340,717 

Estimated annual amortization expense for future years is as follows:

For the fiscal year ending July 31, 2019

  $50,043 

For the fiscal year ending July 31, 2020

   46,194 

For the fiscal year ending July 31, 2021

   42,860 

For the fiscal year ending July 31, 2022

   37,753 

For the fiscal year ending July 31, 2023

   30,291 

For the fiscal year ending July 31, 2024 and thereafter

   181,207 
  

 

 

 
  $      388,348 
  

 

 

 

During the second quarter of fiscal 2016, the Company determined that sufficient evidence existed to warrant an interim

For the fiscal year ending July 31, 2022$124,151 
For the fiscal year ending July 31, 2023105,779 
For the fiscal year ending July 31, 202495,960 
For the fiscal year ending July 31, 202587,817 
For the fiscal year ending July 31, 202679,049 
For the fiscal year ending July 31, 2027 and thereafter444,415 
$937,171 

For goodwill impairment analysis for one of its reporting units. As a result of this analysis,testing purposes, the Company recorded apre-tax,non-cash goodwill impairment charge of $9,113 in the second quarter of fiscal 2016 related to this reporting unit within the towables reportable segment. For the purpose of this goodwill test, the fair value of the reporting unit was determined by employing a discounted cash flow model, which utilized Level 3 inputs as defined by ASC 820 and discussed inNote 10 to the Consolidated Financial Statements. The $9,113 charge represents the full impairment of the goodwill related to this reporting unit.

The Company’s reporting units are generally the same as its operating segments, which are identified inNote 43 to the Consolidated Financial Statements. Fair values are determined by a discounted cash flow model. These estimates are subjectDuring the fiscal quarter ended January 31, 2020, there was an interim impairment assessment performed related to significant management judgment, includingtwo groups of tangible and intangible assets within the determination of many factors such as sales growth rates, gross margin patterns, cost growth rates, terminal value assumptions and discount rates, and therefore largely representNorth American towables reportable segment, using Level 3 inputs as defined by ASC 820, as it was determined that each group of assets would be sold before the end of their previously estimated useful lives and discussed inNote 10within the next twelve months. The Company recognized an aggregate impairment charge of $10,057 related to these assets during the Consolidated Financial Statements. Changes infiscal quarter ended January 31, 2020, which included a goodwill impairment charge of $1,036. The sales of these estimates can have a significant impact onassets were completed during the determination of cash flows and fair value and could potentially result in future material impairments.

fiscal quarter ended April 30, 2020.


The Company completed its annual goodwill impairment reviewtest for fiscal 2021 as of May 31, 2018,2021, and no impairment was identified.

F-13
There were no impairments of goodwill during fiscal 2020 or 2019 other than the impairment of $1,036 noted above.



F-20


Changes in the carrying amount of goodwill by reportable segment as of July 31, 20182021 and 2017July 31, 2020 are summarized as follows:

   Towables  Motorized  Other   Total 

Net balance as of July 31, 2016

  $        334,822  $        –  $        42,871   $        377,693 

Fiscal year 2017 activity:

      

No activity

   –   –   –    – 

Net balance as of July 31, 2017

  $334,822  $–  $42,871   $377,693 
  

 

 

  

 

 

  

 

 

   

 

 

 

Fiscal year 2018 activity:

      

No activity

   –   –   –    – 
  

 

 

  

 

 

  

 

 

   

 

 

 

Net balance as of July 31, 2018

  $334,822  $–  $42,871   $377,693 
  

 

 

  

 

 

  

 

 

   

 

 

 

The components of the net balance as of July 31, 2018 are summarized as follows:

 

 

   Towables  Motorized  Other   Total 

Goodwill

  $    343,935  $        17,252  $        42,871   $        404,058 

Accumulated impairment charges

   (9,113)   (17,252)   –    (26,365) 
  

 

 

  

 

 

  

 

 

   

 

 

 

Net balance as of July 31, 2018

  $334,822  $–  $42,871   $377,693 
  

 

 

  

 

 

  

 

 

   

 

 

 

8.  EQUITY INVESTMENT

On February 15, 2018, the Company announced the formation of a joint venture with Tourism Holdings Limited (“thl”) called TH2connect, LLC (“TH2”).

North
American
Towables		North 
American
Motorized		EuropeanOtherTotal
Net balance as of July 31, 2019$334,822 $— $980,339 $42,871 $1,358,032 
Fiscal year 2020 activity:
Goodwill acquired— — — 62,366 62,366 
Measurement period adjustment— — 1,282 (411)871 
Foreign currency translation and other— — 56,308 — 56,308 
Impairment charge(1,036)000(1,036)
Net balance as of July 31, 2020$333,786 $— $1,037,929 $104,826 $1,476,541 
Fiscal year 2021 activity:
Goodwill acquired18,845 43,491 — 17,882 80,218 
Measurement period adjustment(7,656)10,384 — — 2,728 
Foreign currency translation and other— — 3,768 — 3,768 
Net balance as of July 31, 2021$344,975 $53,875 $1,041,697 $122,708 $1,563,255 

The Company andthl each have a 50% ownership position in TH2 and equal representation on the board of directors of TH2. The Company contributed cash totaling $46,902 to TH2 in early March 2018 whilethl contributed various assets with the same approximate fair value. The Company’s investment in TH2 was funded entirely from cash on hand. In accordance with the operating agreement, TH2’s future capital needs, which are not expected to be material to the Company, will be funded proportionally bythl and the Company, and an additional $3,500 was contributed to TH2 by both Thor andthl in June 2018.

The Company’s investment in TH2 is accounted for under the equity method of accounting. The Company’s sharecomponents of the lossesgoodwill balances as of this investment, whichJuly 31, 2021 and July 31, 2020 are included in Other income (expense), net in the Consolidated Statements of Income and Comprehensive Income, was $1,939 in fiscal 2018. The results of this joint venture are recorded on aone-month lag basis, and the fiscal 2018 total reflects the results of operations for the four months ended June 30, 2018 since the formation of the joint venture.

TH2 was formed to own, improve and sell innovative and comprehensive digital applications through a platform designed for the global RV industry. TH2 will offer a variety of products focused on enhancing the enjoyment, safety, connectivity and convenience of RV ownership and use.

9.  summarized as follows:

North
American
Towables		North 
American
Motorized		EuropeanOtherTotal
Goodwill$355,124 $71,127 $1,041,697 $122,708 $1,590,656 
Accumulated impairment charges(10,149)(17,252)— — (27,401)
Net balance as of July 31, 2021$344,975 $53,875 $1,041,697 $122,708 $1,563,255 
North
American
Towables		North 
American
Motorized		EuropeanOtherTotal
Goodwill$343,935 $17,252 $1,037,929 $104,826 $1,503,942 
Accumulated impairment charges(10,149)(17,252)— — (27,401)
Net balance as of July 31, 2020$333,786 $— $1,037,929 $104,826 $1,476,541 

8.CONCENTRATION OF RISK


One dealer, FreedomRoads, LLC, accounted for 20%approximately 13.0% of the Company’s consolidated net sales in fiscal 2018,2021 and approximately 15.0% and 18.5% in fiscal 20172020 and fiscal 2016.2019, respectively. Sales to this dealer are reported within both the North American towables and North American motorized segments. This dealer also accounted for 26%approximately 15.0% of the Company’s consolidated trade accounts receivable at July 31, 20182021 and 30%approximately 18.0% at July 31, 2017.2020. The loss of this dealer could have a significantmaterial effect on the Company’s businessbusiness.
F-21

9.EMPLOYEE BENEFIT PLANS

Substantially all non-highly compensated U.S. employees are eligible to participate in a 401(k) plan. The Company may make discretionary contributions to the 401(k) plan according to a matching formula determined by each operating subsidiary. Total expense for the plan was $2,081 in fiscal 2021, $2,987 in fiscal 2020 and $3,197 in fiscal 2019.

The Company has established a deferred compensation plan for highly compensated U.S. employees who are not eligible to participate in a 401(k) plan. This plan allows participants to defer a portion of their compensation and the Company then invests the funds in a combination of corporate-owned life insurance ("COLI") and mutual fund investments held by the Company. The employee deferrals and the results and returns of its operations.

the investments selected by the participants, which totaled $84,588 at July 31, 2021 and $61,290 at July 31, 2020, are recorded as Other long-term liabilities in the Consolidated Balance Sheets. Investments held by the Company are accounted for at cash surrender value for COLI and at fair value for mutual fund investments. Both types of company-owned assets, which in total approximate the same value as the plan liabilities, are reported as Other long-term assets on the Consolidated Balance Sheets. Changes in the value of the plan assets are reflected within Other income (expense), net on the Consolidated Statements of Income and Comprehensive Income. Changes in the value of the liability are reflected within Selling, general and administrative expenses on the Consolidated Statements of Income and Comprehensive Income. The Company does not make contributions to the deferred compensation plan.


The Company also incurred costs related to certain pension obligations from post-employment defined benefit plans to certain current and former employees of the European segment. A significant portion of these plans are not available to new hires. Total expense for these plans in fiscal 2021, fiscal 2020 and fiscal 2019, and the pension plan assets and obligations at July 31, 2021 and July 31, 2020, were immaterial.

10.  INVESTMENTS AND FAIR VALUE MEASUREMENTS


The Company assesses the inputs used to measure the fair value of certain assets and liabilities using a three levelthree-level hierarchy, as prescribed in ASC 820, “Fair Value Measurements and Disclosures.Disclosures,” as defined below:
•Level 1 inputs include quoted prices in active markets for identical assets or liabilities and are the most observable.
•Level 2 inputs include inputs other than Level 1 that are either directly or indirectly observable, such as quoted market prices for similar but not identical assets or liabilities, quoted prices in inactive markets or other inputs that can be corroborated by observable market data.
•Level 3 inputs are not observable, are supported by little or no market activity and include management’s judgments about the assumptions market participants would use in pricing the asset or liability.

F-14


The financial assets and liabilities that were accounted for at fair value on a recurring basis at July 31, 20182021 and July 31, 2017, all using Level 1 inputs,2020 are as follows:

   July 31, 2018   July 31, 2017 

Cash equivalents

  $        230,319   $        176,663 

Deferred compensation plan assets

  $43,316   $28,095 

Input LevelJuly 31, 2021July 31, 2020
Cash equivalentsLevel 1$204 $227,154 
Deferred compensation plan mutual fund assetsLevel 1$51,085 $47,327 
Deferred compensation plan liabilitiesLevel 1$84,588 $61,290 
Foreign currency forward contract liabilityLevel 2$88 $— 
Interest rate swap liabilitiesLevel 2$13,369 $26,664 

Cash equivalents represent investments in government and other money market funds traded in an active market, and are reported as a component of Cash and cash equivalents in the Consolidated Balance Sheets.


Deferred compensation plan assets representaccounted for at fair value are investments in securities (primarily mutual funds) traded in an active market held for the benefit of certain employees of the Company as part of a deferred compensation plan. Deferred compensationAdditional plan asset balancesinvestments in corporate-owned life insurance are recorded as components of Other long-term assets in the Consolidated Balance Sheets. An equalat their cash surrender value, not fair value, and offsetting liability is also recorded in regards to the deferred compensation plan as a component of Other long-term liabilities in the Consolidated Balance Sheets. Changes in thetherefore are not included above.

The fair value of interest rate swaps is determined by discounting the plan assets andestimated future cash flows based on the related liability are reflected in Other income, net and Selling, general and administrative expenses, respectively, in the Consolidated Statements of Income and Comprehensive Income.

applicable observable yield curves.

F-22

11.PRODUCT WARRANTY


The Company generally provides retail customers of its products with aone-year 1 year ortwo-year 2 year warranty covering defects in material or workmanship, with longer warranties on certain structural components. The Company records a liability based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors used in estimating the warranty liability include a history of retail units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditures over the warranty period. Management believes that the warranty liabilities are appropriate. However, actualActual claims incurred could differ from estimates, requiring adjustments to the liabilities. Warranty liabilities are reviewed and adjusted as necessary on at least a quarterly basis.

Changes in our product warranty liabilities during the indicated periods are as follows:

   2018  2017  2016 

Beginning balance

  $        216,781  $        201,840  $        108,206 

Provision

   259,845   195,799   114,119 

Payments

   (211,698)   (180,858)   (110,092) 

Acquisitions

   –   –   89,607 
  

 

 

  

 

 

  

 

 

 

Ending balance

  $264,928  $216,781  $201,840 
  

 

 

  

 

 

  

 

 

 

202120202019
Beginning balance$252,869 $289,679 $264,928 
Provision261,851 198,873 233,927 
Payments(258,624)(238,590)(251,071)
Acquisition11,032 — 43,329 
Foreign currency translation492 2,907 (1,434)
Ending balance$267,620 $252,869 $289,679 
12.LONG-TERM DEBT


The components of long-term debt are as follows:
July 31, 2021July 31, 2020
Term loan$1,540,013  $1,597,091 
Unsecured notes29,728 29,620 
Other debt70,952 84,500 
Total long-term debt1,640,693 1,711,211 
Debt issuance costs, net of amortization(33,461)(44,563)
Total long-term debt, net of debt issuance costs1,607,232 1,666,648 
Less: current portion of long-term debt(12,411)(13,817)
Total long-term debt, net, less current portion$1,594,821 $1,652,831 

The Company hasis a five-year creditparty to a seven-year term loan (“term loan”) agreement, which was entered into on June 30, 2016originally consisted of both a United States dollar-denominated term loan tranche of $1,386,434 and a Euro-denominated term loan tranche of 617,718 Euro ($708,584 at closing date exchange rate), and a $750,000 asset-based credit facility (“ABL”). Subject to earlier termination, the term loan matures on June 30, 2021. The agreement providesFebruary 1, 2026 and the ABL originally matured on February 1, 2024. Effective September 1, 2021, the ABL facility limit has been increased to $1,000,000, and the maturity date extended to September 1, 2026, as discussed in the Note 19 to the Consolidated Financial Statements.

Under the term loan, both the U.S. and Euro tranches required annual principal payments of 1.00% of the initial term loan balance, payable quarterly in 0.25% installments starting on May 1, 2019. As of July 31, 2021, however, the Company had made sufficient payments on both the U.S. and Euro tranches to fulfill all annual principal payment requirements over the term of the loan.

Borrowings under the U.S. term loan originally bore interest at LIBOR or Alternate Base Rate ("ABR" as defined in the term loan facility agreement) plus an applicable margin of 3.75% for LIBOR-based loans or 2.75% for ABR-based loans. Interest on the Euro portion of the term loan was originally at EURIBOR (subject to a 0.00% floor) plus 4.00%. On March 25, 2021, the Company repriced its term loan debt, which resulted in reductions of the interest rate spread included in the overall interest rates on the Company’s U.S. term loan tranche and the Euro term loan tranche of 0.75% and 1.00%, respectively. Interest is payable quarterly for ABR-based loans and monthly for LIBOR and EURIBOR-based loans.


F-23

As of July 31, 2021, the entire outstanding U.S. term loan tranche balance of $941,900 was subject to a LIBOR-based rate totaling 3.125%, but the interest rate on $482,138 of that balance was fixed at 5.466% through an interest rate swap, dated March 18, 2019, by swapping the underlying 1-month LIBOR rate for a $500,000 asset-based revolving credit facility and a $100,000 expansion option,fixed rate of 2.466%. As of July 31, 2020, the entire outstanding U.S. term loan tranche balance of $941,900 was subject to a LIBOR-based rate totaling 3.938%, but the interest rate on $673,400 of that balance was fixed at 6.216% through the March 18, 2019 interest rate swap noted above. The total interest rate on the July 31, 2021 outstanding Euro term loan tranche balance of $598,113 was 3.00%, and the total interest rate on the July 31, 2020 outstanding Euro term loan tranche balances of $655,191 was 4.00%.

The Company must make mandatory prepayments of principal under the term loan agreement upon the occurrence of certain specified events, including certain asset sales, debt issuances and receipt of annual cash flows in excess of certain amounts. No such specified events occurred during fiscal 2021 or fiscal 2020. The Company may, at its option, prepay any borrowings under the term loan, in whole or in part, at any time without premium or penalty (except in certain circumstances). The Company may add one or more incremental term loan facilities to the term loan, subject to obtaining commitments from any participating lenders and certain other conditions.

Availability under the ABL agreement is subject to a borrowing base based on a percentage of applicable eligible receivables and eligible inventory. The ABL carries interest at an annual base rate plus 0.25% to 0.75%, or LIBOR plus 1.25% to 1.75%, based on adjusted excess availability as defined in the ABL agreement. This agreement also includes a 0.25% unused facility fee. The Company may, generally at its option, pay any borrowings under the ABL, in whole or in part, at any time and from time to time, without premium or penalty. There were no borrowings outstanding on this facilitythe ABL agreement as of July 31, 2021 and July 31, 2020.

The ABL contains a financial covenant which requires the Company to maintain a minimum consolidated fixed-charge coverage ratio of 1.0X, although the covenant is only applicable when adjusted excess availability falls below a threshold of the greater of a) 10% of the lesser of the borrowing base availability or the revolver line total, or b) $60,000. Up to $75,000 of the ABL is available for the issuance of letters of credit, and up to $75,000 is available for swing-line loans. The Company may also increase commitments under the ABL by up to $150,000 by obtaining additional commitments from lenders and adhering to certain other conditions.

The unused availability under the ABL is generally available to the Company for general operating purposes, and based on July 31, 2021 eligible receivable and inventory balances and net of amounts drawn, if any, totaled approximately $720,000.

The unsecured notes of 25,000 Euro ($29,728) at July 31, 2018 and $145,0002021 relate to long-term debt of borrowings outstanding at July 31, 2017. Borrowingsour European segment. There are subject to a variable pricing structure which can result in increases or decreases to the interest rate. Under the terms of the credit agreement, the Company can elect to borrow funds under two different structures. The first option is a variableseries, 20,000 Euro ($23,782) with an interest rate based upon the primeof 1.945% maturing in March 2025, and 5,000 Euro ($5,946) with an interest rate plus a pricing spread (“Base Rate”)of 2.534% maturing March 2028. Other debt relates primarily to real estate loans with varying maturity dates through September 2032 and interest rates ranging from 1.40% to 3.43%. The second option is a variable interest rate based upon the London Interbank Offered Rate plus a pricing spread (“LIBOR Rate”). Depending on the Company’s borrowing availabilityCompany considers cash pledged as a percentage of thecollateral against real estate loans or certain revolving credit commitment, pricing spreads can range from 1.25%debt obligations within its European rental fleet obligations to 1.75% in the case of loans bearing interest at the LIBOR Rate, and from 0.25% to 0.75% for loans bearing interest at the Base Rate.

As of July 31, 2017, all of the $145,000 in outstanding borrowings were loans bearing interest at the LIBOR Rate, and the borrowing spread on those loans was 1.50%, resulting in a total rate of approximately 2.72%. The revolving credit facility, which is secured by substantially all of the Company’s tangible and intangible assets excluding real property, contains customary limits and restrictions concerning investments, sales of assets, liens on assets, stock repurchases and dividend and other payments depending on adjusted excess cash availabilitybe restricted cash.


Total contractual debt maturities are as defined in the agreement and summarized below. The terms of the facility permit prepayment without penalty at any time, subject to customary breakage costs relative to the LIBOR-based loans.

follows:
For the fiscal year ending July 31, 2022$F-1512,411 
For the fiscal year ending July 31, 202312,194 
For the fiscal year ending July 31, 202412,321 
For the fiscal year ending July 31, 202535,979 
For the fiscal year ending July 31, 20261,543,267 
For the fiscal year ending July 31, 2027 and thereafter24,521 
$1,640,693 

Borrowing availabilityThe March 25, 2021 term loan debt repricing noted above was evaluated on a creditor-by-creditor basis to determine whether modification or extinguishment accounting was required under the credit agreement is limitedprovisions of ASC 470-50. Extinguishment accounting was applied to the lessera small percentage of the facility total and the monthly calculated borrowing base, which iscreditors that were deemed to have a substantial difference in terms based on stipulated loan percentages applied to specified assetsan analysis of the Company. The credit agreement has no financial covenant restrictions for borrowings as long aspresent values of cash flows before and after the repricing. As a result, the Company has adjusted excess availability underrecorded a debt extinguishment charge of $4,688 in fiscal 2021. This charge is classified as interest expense in the facility that exceeds 10%Company’s Consolidated Statements of Income and Comprehensive Income. For the majority of the lesser ofcreditors, the line commitment or the borrowing base total, withdebt repricing was accounted for as a floor of $40,000. As of July 31, 2018, the available and unused credit line under the revolver was $495,657, and the Company was in compliance with the financial covenant in the credit agreement.

modification.



F-24

In fiscal 2018, total LIBOR Rate and Base Rate interest expense on2019, the facility was $1,939 and the weighted-average interest rate on borrowings from the facility was 2.82%. In fiscal 2017, total LIBOR Rate and Base Rate interest expense on the facility was $7,002 and the weighted-average interest rate on borrowings from the facility was 2.34%. The Company incurred fees ("2019 fees") totaling $56,166 and $14,010 to secure the facility of $7,850 in fiscal 2016,term loan and ABL, respectively, and those feesamounts are being amortized ratably over the respective seven and five-year terms of those agreements. The Company also incurred and capitalized an insignificant amount of creditor fees related to the March 25, 2021 repricing of its term loan noted above, to be amortized over the remaining life of the agreement, or a shorter period ifterm loan.

For fiscal 2021, interest expense on the credit agreement period is shortened for any reason. Theterm loan, ABL and other debt facilities was $76,072. In addition, the Company recorded total charges related to the amortization of thesethe term loan and ABL fees, which are reflected inclassified as interest expense, of $1,570 in both$15,407 for fiscal 2018 and fiscal 2017 and $131 in fiscal 2016.2021, which included $4,688 of debt extinguishment charge related to the 2019 fees recorded as a result of the debt repricing noted above. The unamortized balancesbalance of thesethe ABL facility fees were $4,579was $7,005 at July 31, 20182021 and $6,149 at July 31, 2017 and areis included in Other long-term assets in the Consolidated Balance Sheets.


For fiscal 2020, interest expense on the term loan, ABL and other debt facilities was $93,475. In addition, the Company recorded total charges related to the amortization of the term loan and ABL fees, which are classified as interest expense, of $10,743 for fiscal 2020. The unamortized balance of the ABL facility fees was $9,807 at July 31, 2020 and is included in Other long-term assets in the Consolidated Balance Sheets.

For fiscal 2019, interest expense on the term loan, ABL and other debt facilities was $56,932. In addition, the Company recorded total charges related to the amortization of the term loan and ABL fees, which are classified as interest expense, of $5,404 for fiscal 2019. Interest expense for fiscal 2019 also included $785 of amortization expense of capitalized debt fees related to the Company’s previous asset-based credit agreement that was terminated on February 1, 2019.

The fair value of the Company's term loan debt at July 31, 2021 and July 31, 2020 was $1,551,141 and $1,565,866, respectively. The carrying value of the Company’s long-termterm loan debt, excluding debt issuance costs, was $1,540,013 and $1,597,091 at July 31, 2017 approximated fair value as the entire balance was subject to variable market interest rates that the Company believed were market rates for a similarly situated Company.2021 and July 31, 2020, respectively. The fair value of the Company’s debt is largelyprimarily estimated using levelLevel 2 inputs as defined by ASC 820820. The fair value of other debt held by the Company approximates carrying value.

13.INCOME TAXES

The sources of earnings before income taxes are as follows:
 For the Fiscal Year Ended July 31,
 202120202019
United States$725,262 $258,483 $200,859 
Foreign119,319 14,413 (16,193)
Total$844,581 $272,896 $184,666 

The components of the provision for income taxes are as follows:
 For the Fiscal Year Ended July 31,
Income Taxes:202120202019
U.S. Federal$148,706 $49,494 $48,757 
U.S. state and local26,344 9,891 5,921 
Foreign17,571 1,842 6,611 
Total current expense192,621 61,227 61,289 
U.S. Federal162 6,472 10,862 
U.S. state and local(365)(197)(36)
Foreign(8,707)(15,990)(19,914)
Total deferred expense (benefit)(8,910)(9,715)(9,088)
Total income tax expense$183,711 $51,512 $52,201 

On March 27, 2020, the Coronavirus Aid, Relief, and discussed inNote 10Economic Security Act ("CARES Act") was signed into law. The CARES Act includes several changes impacting businesses, including, but not limited to, enhanced business interest deductibility, net operating loss ("NOL") carryback provisions, payroll tax deferral provisions and employee retention tax credits. The Company determined that the impacts of the CARES Act are not material to the Consolidated Financial Statements.

13.  INCOME TAXES

The components of



F-25

On March 11, 2021, the provision (benefit) for income taxes from continuing operations are as follows:

   July 31, 
Income Taxes:  2018  2017  2016 

Federal

  $        166,402  $        200,370  $        126,846 

State and local

   21,025   20,941   12,716 
  

 

 

  

 

 

  

 

 

 

Total current expense

   187,427   221,311   139,562 
  

 

 

  

 

 

  

 

 

 

Federal

   17,820   (37,033)   (13,079) 

State and local

   (2,369)   (2,146)   (1,192) 
  

 

 

  

 

 

  

 

 

 

Total deferred expense (benefit)

   15,451   (39,179)   (14,271) 
  

 

 

  

 

 

  

 

 

 

Total income tax expense

  $202,878  $182,132  $125,291 
  

 

 

  

 

 

  

 

 

 

The Tax Cuts and JobsAmerican Rescue Plan Act (the “Tax Act”"Act") was signed into law on December 22, 2017. Under the Taxlaw. The Act the federal corporate incomeincludes several changes impacting business, including, but not limited to, insurance premium subsidies, extension of employee retention tax rate has been reduced from 35.0%credits and amendments to 21.0% starting January 1, 2018, which results in the use of a blended federal corporate income tax rate of 26.9% for the Company’s 2018 fiscal year. Other significant changes to corporate taxation most relevant to the Company include accelerated expensing for certain business assets, the repeal of the domestic production deduction, additional limitations on the deductibility of interest expense and expanded limitations on the deductibility of executivedeductible compensation.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act for which the accounting under ASC 740 is incomplete. The rules allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. Accordingly, as of July 31, 2018 we have not completed our accounting for the tax effects of the Tax Act. For the fiscal year ended July 31, 2018, the Company has recorded a provisional amount of $34,000 of additional deferred income tax expense related to there-measurement of our net deferred tax assets using its best estimates based on reasonable and supportable assumptions and information as of the reporting date. The Company recorded a provisional amount of $2,000 in the fourth quarter of fiscal 2018 of additional income tax expense as a result of recent guidance from the Internal Revenue Service related to limitations on the deductibility of executive compensation as provided under the Tax Act. The Company is still analyzingdetermined that the impacts of the Tax Act which could potentially affectare not material to the measurement of the deferred tax balances.

While the effective date of most of the provisions of the Tax Act do not apply until fiscal 2019, the Company will continue its assessment of the impact of the Tax Act on the business throughout the one year measurement period as provided by SAB 118. The amounts recorded as of July 31, 2018 are subject to adjustment as further guidance becomes available, additional facts become known or estimation approaches are refined.

F-16
Consolidated Financial Statements.


The differences between income taxestax expense at the federal statutory rate and the actual income taxestax expense are as follows:

   July 31, 
   2018   2017   2016 

Provision at federal statutory rate

  $    170,095   $        194,735   $        134,160 

State and local income taxes, net of federal benefit

   14,255    11,021    6,599 

Federal income tax credits and incentives

   (3,518)    (3,228)    (4,194) 

Domestic production activities deduction

   (16,175)    (19,527)    (12,609) 

Change in uncertain tax positions

   396    375    611 

Effect of U.S. federal tax reform

   38,620    –    – 

Other

   (795)    (1,244)    724 
  

 

 

   

 

 

   

 

 

 

Total income tax expense

  $202,878   $182,132   $125,291 
  

 

 

   

 

 

   

 

 

 

Under Internal Revenue Code Section 15(a), companies are required to calculate their federal statutory tax rate by using a blended rate based on the date of enactment of the Tax Act. The federal blended rate for the Company is 26.9% for fiscal 2018.


 For the Fiscal Year Ended July 31,
 202120202019
Provision at federal statutory rate$177,362 $57,308 $38,779 
Differences between U.S. federal statutory and foreign tax rates(16,857)(50,898)1,478 
Foreign currency remeasurement (gains) losses1,595 30,246 (12,942)
U.S. state and local income taxes, net of federal benefit20,407 7,616 4,642 
Nondeductible compensation6,418 2,249 2,401 
Nondeductible acquisition costs— — 3,031 
Nondeductible foreign currency forward contract loss on acquisition— — 14,863 
Federal income tax credits and incentives(3,530)(1,738)(3,373)
Change in uncertain tax positions1,209 1,101 1,279 
Other(2,893)5,628 2,043 
Total income tax expense$183,711 $51,512 $52,201 

A summary of the deferred income taxestax balances is as follows:

   July 31, 
   2018   2017 

Deferred income tax asset (liability):

    

Inventory basis

  $922   $1,460 

Employee benefits

   3,427    6,471 

Self-Insurance Reserves

   6,368    9,940 

Accrued product warranties

   62,332    73,393 

Accrued incentives

   5,235    6,175 

Sales returns and allowances

   1,741    2,340 

Accrued expenses

   1,905    3,399 

Property, plant and equipment

   (9,060)    (8,151) 

Deferred compensation

   12,864    14,556 

Intangibles

   (9,151)    (17,184) 

Unrecognized tax benefits

   2,581    3,925 

Other

   (720)    (3,355) 
  

 

 

   

 

 

 

Deferred income tax asset, net

  $        78,444   $        92,969 
  

 

 

   

 

 

 

 July 31,
 20212020
Deferred income tax asset (liability):
Inventory basis$3,158 $1,000 
Employee benefits10,485 7,353 
Self-insurance reserves6,949 4,923 
Accrued product warranties53,258 53,586 
Accrued incentives4,403 4,316 
Sales returns and allowances934 1,027 
Accrued expenses7,496 6,733 
Property, plant and equipment(36,662)(28,438)
Operating leases10,615 9,110 
Deferred compensation19,260 15,876 
Intangibles(173,360)(147,423)
Net operating loss and other carryforwards38,669 32,877 
Unrealized loss609 4,892 
Unrecognized tax benefits3,946 3,046 
Other(4,949)4,558 
Valuation allowance(17,193)(18,500)
Deferred income tax (liability), net$(72,382)$(45,064)


Deferred tax assets are reduced by a valuation allowance if, based upon available evidence, it is more likely than not that some, or all, of the deferred tax assets will not be realized. The valuation allowances recorded at July 31, 2021 and July 31, 2020 relate to certain foreign net operating loss carry forwards and other assets in foreign jurisdictions.

With the exception of foreign subsidiary investment basis differences not attributable to unrepatriated foreign earnings, we consider all of our undistributed earnings of our foreign subsidiaries, as of July 31, 2021, to not be indefinitely reinvested outside of the United States. As of July 31, 2018,2021, the related income tax cost of the repatriation of foreign earnings is not material.
F-26

As of July 31, 2021, the Company has $996$2,972 of U.S. state tax credit carry forwards that expire from fiscal 2027-2028 of2030-2031 which the Company expects to realize prior to expiration. At July 31, 2021, the Company had $75,407 of gross NOL carry forwards in certain foreign jurisdictions that will expire from fiscal 2023 to indefinite carryforward, of which $70,037 has been reserved with a valuation allowance and the remaining amount the Company expects to realize. In addition, the Company has $9,141$4,961 of gross U.S. state tax Net Operating Loss (“NOL”) carry forwardsNOL carryforwards that expire from fiscal 2019-20382022-2041 that the Company does not expect to realize and therefore has been fully reserved. The deferred tax asset of $525 associatedreserved with the state tax NOL carry forwards and the related equal and offsettinga valuation allowance are not reflected in the table above.

Unrecognized Tax Benefits

allowance.


The benefits of tax positions reflected on income tax returns but whose outcome remains uncertain are only recognized for financial accounting purposes if they meet minimum recognition thresholds. The total amount of unrecognized tax benefits that, if recognized, would have impacted the Company’s effective tax rate were $10,491$13,631 for fiscal 2018, $8,4772021, $11,606 for fiscal 20172020 and $8,886$11,332 for fiscal 2016.

F-17
2019.


Changes in the unrecognized tax benefit during fiscal years 2018, 20172021, 2020 and 20162019 were as follows:

   2018   2017   2016 

Beginning balance

  $12,671   $13,269   $13,156 

Tax positions related to prior years:

      

Additions

   353    75    1,546 

Reductions

   (2,203)    (1,510)    (920) 

Tax positions related to current year:

      

Additions

   3,629    3,853    3,123 

Settlements

   (192)    (1,450)    (956) 

Lapses in statute of limitations

   (1,254)    (1,566)    (2,680) 
  

 

 

   

 

 

   

 

 

 

Ending balance

  $    13,004   $    12,671   $    13,269 
  

 

 

   

 

 

   

 

 

 

202120202019
Beginning balance$14,238 $13,848 $13,004 
Tax positions related to prior years:
Additions72 73 — 
Reductions(277)(129)(263)
Tax positions related to current year:
Additions4,346 1,966 2,062 
Settlements(3,363)— (773)
Lapses in statute of limitations(2,701)(1,520)(918)
Tax positions acquired4,710 — 736 
Ending balance$17,025 $14,238 $13,848 

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. The total amount of liabilities accrued for interest and penalties related to unrecognized tax benefits as of July 31, 20182021 and 2017July 31, 2020 were $1,290$2,967 and $1,209,$2,516, respectively. The total amount of interest and penalties expense (benefit) recognized in the Consolidated Statements of Income and Comprehensive Income for the fiscal years ended July 31, 2018, 20172021, July 31, 2020 and 2016July 31, 2019 were $203, $(218)$238, $544 and $(231),$454, respectively.


The total unrecognized tax benefits above, along with the related accrued interest and penalties, are reported within the liability section of the Consolidated Balance Sheets. A portion of the unrecognized tax benefits is classified as short-term and is included in the “Income and other taxes” line of the Consolidated Balance Sheets, while the remainder is classified as a long-term liability.


The components of total unrecognized tax benefits are summarized as follows:

   July 31, 
   2018   2017 

Unrecognized tax benefits

  $13,004   $12,671 

Reduction to unrecognized tax benefits for tax credit carry forward

   (955)    (1,882) 

Accrued interest and penalties

   1,290    1,209 
  

 

 

   

 

 

 

Total unrecognized tax benefits

  $13,339   $11,998 
  

 

 

   

 

 

 

Short-term, included in “Income and other taxes”

  $893   $1,735 

Long-term

   12,446    10,263 
  

 

 

   

 

 

 

Total unrecognized tax benefits

  $    13,339   $    11,998 
  

 

 

   

 

 

 

 July 31,
 20212020
Unrecognized tax benefits$17,025 $14,238 
Reduction to unrecognized tax benefits which offset tax credit and loss carryforwards(725)(809)
Accrued interest and penalties2,967 2,516 
Total unrecognized tax benefits$19,267 $15,945 
Short-term, included in “Income and other taxes”$3,423 $3,180 
Long-term15,844 12,765 
Total unrecognized tax benefits$19,267 $15,945 

The Company anticipates a decrease of approximately $2,300$4,600 in unrecognized tax benefits and $450$1,600 in interest during fiscal 20192022 from expected settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations. Actual results may differ from these estimates.

Generally, fiscal years 2015-2017 remain open for federal


F-27

The Company files income tax purposesreturns in the U.S. federal jurisdiction and fiscal years 2013-2017 remain open forin many U.S. state and Canadian income tax purposes.foreign jurisdictions. The Company and its subsidiaries file a consolidated U.S. federal income tax return and multiple state income tax returns. The Company recently completed anis currently under exam by thecertain U.S. state of Indianatax authorities for the fiscal years ended July 31, 20132015 through 2015. A formal protest has been submitted in response to the exam.July 31, 2017. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions related to its State of Indiana income tax returns in its liability for unrecognized tax benefits.

The major tax jurisdictions we file in, with the years still subject to income tax examinations, are listed below:
Major Tax JurisdictionF-18Tax Years Subject to Exam
United States – FederalFiscal 2018 – Fiscal 2020
United States – StateFiscal 2018 – Fiscal 2020
GermanyFiscal 2016 – Fiscal 2019
FranceFiscal 2017 – Fiscal 2019
ItalyFiscal 2016 – Fiscal 2020
United KingdomFiscal 2020


14.CONTINGENT LIABILITIES AND COMMITMENTS


The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for certain independent dealers of certain of its RV products. These arrangements, which are customary in the RV industry, provide for the repurchase of products sold to dealers in the event of default by the dealer on their agreement to pay the financial institution. The repurchase price is generally determined by the original sales price of the product andpre-defined predefined curtailment arrangements. The Company typically resells the repurchased product at a discount from its repurchase price. The risk of loss from these agreements is spread over numerous dealers. In addition to the guarantee under these repurchase agreements, the Company may also be required to repurchase inventory relative to dealer terminations in certain states in accordance with state laws or regulatory requirements. The repurchase activity related to dealer terminations in certain states has historically been insignificant in relation to our repurchase obligation with financial institutions.


The Company’s total commercial commitments under standby repurchase obligations on dealer inventory financing as of July 31, 20182021 and July 31, 20172020 were $2,748,465$1,821,012 and $2,200,544,$1,876,922, respectively. The commitment term is generally up to eighteen months.


The Company accounts for the guarantee under repurchase agreements of dealers’ financing by deferring a portion of the related product sale that represents the estimated fair value of the guarantee at inception. The estimated fair value takes into account an estimate of the losses that may be incurred upon resale of any repurchases. This estimate is based on recent historical experience supplemented by the Company’s assessment of current economic and other conditions affecting its dealers. This deferred amount is included in the repurchase and guarantee reserve balances of $7,400$6,023 and $6,345$7,747 as of July 31, 20182021 and July 31, 2017,2020, respectively, which are included in Other current liabilities in the Consolidated Balance Sheets.


Losses incurred related to repurchase agreements that were settled in the past three fiscal years were not material. Based on current market conditions, the Company believes that any future losses under these agreements will not have a significant effect on the Company’s consolidated financial position, results of operations or cash flows.

Legal Matters


The Company is involved in certain litigation arising out of its operations in the normal course of its business, most of which is based upon state “lemon laws”,laws,” warranty claims and vehicle accidents (for which the Company carries insurance above a specified self-insured retention or deductible amount). The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. There is significant judgment required in assessing both the probability of an adverse outcome and the determination as to whether an exposure can be reasonably estimated. In management’s opinion, the ultimate disposition of any current legal proceedings or claims against the Company will not have a material effect on the Company’s financial condition, operating results or cash flows. Litigation is, however, inherently uncertain and an adverse outcome from such litigation could have a material effect on the operating results of a particular reporting period.


A product recall has been issued recently related to certain purchased parts utilized in certain of our products. The Company expects to be reimbursed for the costs it will incur related to this recall and does not believe there will be a material, adverse impact to our results of operations and cash flows due to this matter.
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15.LEASES


The Company has operating leases principallyprimarily for land, buildings and equipment and alsohas various finance leases for certain real estateland and transportation equipment under various capitalbuildings principally expiring through 2035.

Certain of the Company's leases expiring between 2018include options to extend or terminate the leases and 2028. Future minimum rental payments required under capital and operating leases as of July 31, 2018 are as follows:

     Capital Leases      Operating Leases   

For the fiscal year ending July 31, 2019

  $977  $2,301 

For the fiscal year ending July 31, 2020

   974   1,544 

For the fiscal year ending July 31, 2021

   993   1,259 

For the fiscal year ending July 31, 2022

   1,015   1,046 

For the fiscal year ending July 31, 2023

   1,037   1,011 

For the fiscal year ending July 31, 2024 and thereafter

   4,098   6,723 
  

 

 

  

 

 

 

Total minimum lease payments

   9,094  $        13,884 
   

 

 

 

Less amount representing interest

   (2,999)  
  

 

 

  

Present value of net minimum capital lease payments

   6,095  

Less current portion

   (410)  
  

 

 

  

Long-term capital lease obligations

  $        5,685  
  

 

 

  

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The current portion of capital lease obligations arethese options have been included in Other current liabilitiesthe relevant lease term to the extent that they are reasonably certain to be exercised.


The Company does not include significant restrictions or covenants in our lease agreements, and the long-term capitalresidual value guarantees are not generally included within our operating leases.

The components of lease obligations are included in Other long-term liabilities, respectively, in the Consolidated Balance Sheets.

Rent expensecosts for the fiscal years ended July 31, 2018, 20172021 and 2016July 31, 2020 were as follows:

Fiscal Year Ended July 31,
20212020
Operating lease cost$18,140 $12,580 
Finance lease cost
Amortization of right-of-use assets662 544 
Interest on lease liabilities520 531 
Total lease cost$19,322 $13,655 

Other information related to leases was $3,804, $3,560as follows:
Fiscal Year Ended July 31,
Supplemental Cash Flow Information20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$18,054 $12,487 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$16,636 $4,655 
Finance leases$4,000 $— 

July 31,
Supplemental Balance Sheet Information20212020
Operating leases:
Operating lease right-of-use assets$42,601 $33,609 
Operating lease liabilities
Other current liabilities$8,944 $5,343 
Other long-term liabilities33,923 28,456 
Total operating lease liabilities$42,867 $33,799 
Finance leases:
Finance lease right-of-use assets$7,010 $3,672 
Finance lease liabilities
Other current liabilities$1,081 $505 
Other long-term liabilities4,694 4,743 
Total finance lease liabilities$5,775 $5,248 

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July 31,
20212020
Weighted-average remaining lease term
Operating leases11.1 years13.6 years
Finance leases5.1 years6.8 years
Weighted-average discount rate
Operating leases3.2 %3.4 %
Finance leases8.9 %9.7 %

Future minimum rental payments required under operating and $3,757, respectively.

16.  EMPLOYEE BENEFIT PLANS

Substantially allnon-highly compensated employees are eligible to participate in a 401(k) plan. The Company may make discretionary contributions to the 401(k) plan according to a matching formula determined by each operating subsidiary. Totalfinance leases as of July 31, 2021 were as follows:

Operating LeasesFinance Leases
For the fiscal year ending July 31, 2022$13,923 $1,555 
For the fiscal year ending July 31, 202310,576 1,578 
For the fiscal year ending July 31, 20247,763 1,059 
For the fiscal year ending July 31, 20255,188 1,083 
For the fiscal year ending July 31, 20263,530 1,107 
For the fiscal year ending July 31, 2027 and thereafter18,267 954 
Total future lease payments$59,247 $7,336 
Less: amount representing interest(16,380)(1,561)
Total reported lease liability$42,867 $5,775 

Rent expense for the planfiscal year ended July 31, 2019 was $2,689 in fiscal 2018, $1,797 in fiscal 2017 and $917 in fiscal 2016.

$8,825.


16.STOCKHOLDERS’ EQUITY

The Company has established a deferred compensation plan for highly compensated employees who are not eligible to participate in a 401(k) plan. This plan allows participants to defer a portion of their compensation and to direct the Company to invest the funds in mutual fund investments held by the Company. Participant benefits are limited to the value of the investments held on their behalf. Investments held by the Company are accounted for at fair value and reported as Other long-term assets,Board and the equal and offsetting obligation to the participants is reported as Other long-term liabilities in the Consolidated Balance Sheets. Changes in the fair value of the plan assets and the related deferred liability are both recorded through the Consolidated Statements of Income and Comprehensive Income. The Company does not make contributions to the plan. The balance of investments held in this plan, and the equal and offsetting long-term liability to the participants, was $43,316 at July 31, 2018 and $28,095 at July 31, 2017.

17.  STOCKHOLDERS’ EQUITY

Stock-Based Compensation

The Boardshareholders approved the ThorTHOR Industries, Inc. 2016 Equity and Incentive Plan (the “2016 Equity and Incentive Plan”) on October 11, 2016 and the 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”) on October 25, 2010. These plans were subsequently approved by shareholders at the 2016 and 2010 annual meetings, respectively.. The maximum number of shares issuable under each of the 2016 Equity and Incentive Plan and the 2010 Equity and Incentive Plan is 2,000,000. As of July 31, 2018,2021, the remaining shares available to be granted under the 2016 Equity and Incentive Plan are 1,669,452 and under the 2010 Equity Incentive Plan are 1,211,385.is 652,144. Awards may be in the form of options (incentive stock options andnon-statutory stock options), restricted stock, restricted stock units, performance compensation awards and stock appreciation rights.

Restricted Stock Awards – A summary of


Under the Company's program to award restricted stock award activity under the 2010 Equity and Incentive Plan for fiscal 2018, 2017 and 2016 is as follows:

   2018   2017   2016 
   Shares   Weighted-
Average Grant
Date  Fair Value		   Shares   Weighted-
Average Grant
Date  Fair Value		   Shares   Weighted-
Average Grant
Date  Fair Value		 

Nonvested, beginning of year

       1,899   $    32.36        5,806   $    31.36        9,713   $    31.16 

Granted

   –    –    –    –    –    – 

Vested

   (1,899)    32.36    (3,907)    30.87    (3,907)    30.87 

Forfeited

   –    –    –    –    –    – 
  

 

 

     

 

 

     

 

 

   

Nonvested, end of year

   –   $–    1,899   $32.36    5,806   $31.36 
  

 

 

     

 

 

     

 

 

   

In fiscal 2018, 2017 and 2016, the Company recorded expense for restricted stock awards under this Plan of $0, $101 and $115, respectively. At July 31, 2018, there were no unrecognized future compensation costs related to restricted stock. This restricted stock vested evenly over 5 years from the date of grant.

During fiscal 2013,units (the "RSU program"), the Compensation and Development Committee of the Board (the “Committee”) approved a program to award restricted stock units (the “RSU program”) to certain employees at the operating subsidiary and corporate levels. In December 2016, the stockholders of the Company approved a new equity compensation plan that allows the RSU program to continue in subsequent years on similar terms, but now includes a double-trigger change in control provision. The double-trigger provision, which is applicable to awards granted in fiscal 2017 and subsequent years, stipulates that immediate vesting of an outstanding grant would occur only upon the occurrence of both a change in control, as defined by the plan, and a corresponding change in employment status.

F-20

Under the RSU program, since 2012 the Committee has approvedgenerally approves awards each October related to the financial performance of the most recently completed fiscal year. The awarded employee restricted stock units vest, and shares of common stock are issued, in equal installments on the first, second and third anniversaries of the date of grant. In addition, concurrent with the timing of the employee awards, the Nominating and Governance Committee of the Board has awarded restricted stock units to Board members that will vest, and shares of common stock will be issued, on the first anniversary of the date of the grant.


The fair value of the employee and Board member restricted stock units is determined using the Company’s stock price on the date of grant.

In September 2019, the Board approved an equity compensation program for certain members of the Company’s executive management. Under this program, a portion of their equity compensation is determined based on performance related to targets set for both the Company’s return on invested capital and free cash flow during a multi-year measurement period. These performance stock unit (“PSU”) awards are based on a sliding scale of actual performance against relevant goals within a range of fifty percent (50%) to one hundred fifty percent (150%) of the target. Performance below the fifty percent (50%) threshold results in no earned shares, while performance above the one hundred fifty percent (150%) level results in an award of shares equal to two times the amount of target shares. In deriving the number of shares earned, if any, both performance metrics are weighted equally. Following the measurement period, in accordance with actual achievement and certification of performance metrics, fully vested shares of common stock are issued to the award recipients. The fair value of the PSU awards is determined using the Company’s stock price on the grant date. These awards are equity classified and expensed over the applicable measurement period based on the extent to which achievement of the performance metrics is probable.

F-30

Total stock-based expense recognized in fiscal 2018, 20172021, 2020 and 20162019 for these restricted stock unitRSU and PSU awards was $17,000, $12,399totaled $30,514, $19,889 and $9,272$18,950, respectively.

Restricted Stock Units – The fair value of the RSU shares that vested in fiscal 2021, 2020 and 2019 totaled $24,226, $10,906 and $13,227, respectively.


A summary of restricted stock unit and performance stock unit activity during fiscal 2018, 20172021, 2020 and 20162019 is included below:

  2018  2017  2016 
  Restricted Stock
Units		  Weighted-
Average Grant
Date  Fair Value		  Restricted Stock
Units		  Weighted-
Average Grant
Date  Fair Value		  Restricted Stock
Units		  Weighted-
Average Grant
Date  Fair Value		 

Nonvested, beginning of year

  332,576  $69.41   325,136  $53.95   280,353  $50.55 

Granted

  171,340   124.84   166,567   84.85   181,872   55.37 

Vested

  (168,714)   64.01   (157,315)   53.87   (133,758)   48.73 

Forfeited

  (6,771)   93.46   (1,812)   64.03   (3,331)   54.18 
 

 

 

   

 

 

   

 

 

  

Nonvested, end of year

      328,431  $    101.97       332,576  $    69.41       325,136  $    53.95 
 

 

 

   

 

 

   

 

 

  

 202120202019
 
Stock
Units		Weighted-
Average Grant
Date Fair Value		 
Stock
Units		Weighted-
Average Grant
Date Fair Value
Stock
Units		Weighted-
Average Grant
Date Fair Value
Nonvested, beginning of year641,410 $65.28 451,563 $91.08 328,431 $101.97 
Granted338,073 81.41 407,151 50.78 310,924 79.12 
Vested(255,039)76.97 (206,624)92.87 (167,591)90.23 
Forfeited(7,959)67.90 (10,680)69.66 (20,201)91.11 
Nonvested, end of year716,485 $68.70 641,410 $65.28 451,563 $91.08 

At July 31, 20182021 there was $21,993$19,448 of total unrecognized compensation costs related to restricted stock unit and performance stock unit awards that isare expected to be recognized over a weighted-average period of 2.231.81 years.


The Company recognized a tax benefit related to total stock-based compensation expense of $4,930, $4,625$3,532, $4,775 and $3,473$4,550 in fiscal 2018, 20172021, 2020 and 2016,2019, respectively.

Share Repurchase Program

On June 19, 2018,


17.REVENUE RECOGNITION

The table below disaggregates revenue to the Company’s Board of Directors authorizedlevel that the Company management to utilize up to $250,000 to purchase sharesbelieves best depicts how the nature, amount, timing and uncertainty of the Company’s common stock through June 19, 2020.

Underrevenue and cash flows are affected by economic factors. Other RV-related revenues shown below in the share repurchase plan,European segment include sales related to accessories and services, used vehicle sales at owned dealerships and RV rentals. All material revenue streams are considered point in time.

202120202019
NET SALES:
Recreational vehicles
North American Towables
Travel Trailers and Other$3,791,235 $2,449,239 $2,710,308 
Fifth Wheels2,430,693 1,691,243 1,848,143 
Total North American Towables6,221,928 4,140,482 4,558,451 
North American Motorized
Class A1,052,982 495,520 761,176 
Class C1,266,624 776,191 824,449 
Class B349,785 118,387 63,704 
Total North American Motorized2,669,391 1,390,098 1,649,329 
Total North American8,891,319 5,530,580 6,207,780 
European
Motorcaravan1,779,906 1,505,353 960,155 
Campervan779,755 433,398 201,089 
Caravan292,708 273,475 172,144 
Other RV-related347,710 273,165 153,590 
Total European3,200,079 2,485,391 1,486,978 
Total recreational vehicles12,091,398 8,015,971 7,694,758 
Other, primarily aluminum extruded components373,174 234,481 263,374 
Intercompany eliminations(147,192)(82,519)(93,374)
Total$12,317,380 $8,167,933 $7,864,758 
F-31

18.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) (“OCI”) and the changes in the Company’s accumulated OCI (“AOCI”) by component were as follows:
 2021
 Foreign Currency
Translation
Adjustment		Unrealized
Gain (Loss) on
Derivatives		OtherAOCI, net of tax, Attributable to THORNon-controlling InterestsTotal AOCI
Balance at beginning of period, net of tax$46,512 $(18,823)$(696)$26,993 $(855)$26,138 
OCI before reclassifications7,640 (1,100)(180)6,360 83 6,443 
Income taxes associated with OCI before reclassifications (1)
— 327 — 327 — 327 
Amounts reclassified from AOCI— 14,433 — 14,433 — 14,433 
Income taxes associated with amounts reclassified from AOCI— (3,492)— (3,492)— (3,492)
OCI, net of tax for the fiscal year7,640 10,168 (180)17,628 83 17,711 
AOCI, net of tax$54,152 $(8,655)$(876)$44,621 $(772)$43,849 
 2020
 Foreign Currency
Translation
Adjustment		Unrealized
Gain (Loss) on
Derivatives		OtherAOCI, net of tax, Attributable to THORNon-controlling InterestsTotal AOCI
Balance at beginning of period, net of tax$(46,484)$(9,472)$(1,048)$(57,004)$(594)$(57,598)
OCI before reclassifications92,996 (20,557)352 72,791 (261)72,530 
Income taxes associated with OCI before reclassifications (1)
— 4,906 — 4,906 — 4,906 
Amounts reclassified from AOCI— 8,180 — 8,180 — 8,180 
Income taxes associated with amounts reclassified from AOCI— (1,880)— (1,880)— (1,880)
OCI, net of tax for the fiscal year92,996 (9,351)352 83,997 (261)83,736 
AOCI, net of tax$46,512 $(18,823)$(696)$26,993 $(855)$26,138 

 2019
 Foreign Currency
Translation
Adjustment		Unrealized
Gain (Loss) on
Derivatives		OtherAOCI, net of tax, Attributable to THORNon-controlling InterestsTotal AOCI
Balance at beginning of period, net of tax$— $— $— $— $— $— 
OCI before reclassifications(44,090)(12,184)(1,048)(57,322)(594)(57,916)
Income taxes associated with OCI before reclassifications (1)
(2,394)2,917 — 523 — 523 
Amounts reclassified from AOCI— (279)— (279)— (279)
Income taxes associated with amounts reclassified from AOCI— 74 — 74 — 74 
AOCI, net of tax$(46,484)$(9,472)$(1,048)$(57,004)$(594)$(57,598)
(1)We do not recognize deferred taxes for a majority of the foreign currency translation gains and losses because we do not anticipate reversal in the foreseeable future.
F-32

19.SUBSEQUENT EVENTS

On September 1, 2021, the Company is authorizedannounced it completed the acquisition of Wichita, Kansas-based AirX Intermediate, Inc. ("Airxcel"). Airxcel manufactures a comprehensive line of high-quality RV products which they sell to repurchase, fromtime-to-time, outstanding sharesoriginal equipment manufacturers as well as consumers via aftermarket sales through dealers and retailers. Airxcel provides industry-leading products in recreational vehicle heating, cooling, ventilation, cooking, window coverings, sidewalls and roofing materials, among others. The purchase price of its common stock$750,000 in the open market or in privately negotiated transactions. The timing and amount of share repurchases will be determined by the Company’s management team based upon its evaluation of market conditions and other factors. The share repurchase plan may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the plan.

18.  SUBSEQUENT EVENT

On September 18, 2018, the Company and the shareholders of Erwin Hymer Group SE (“Erwin Hymer Group”) announced that they entered into a definitive agreement for the Company to acquire Erwin Hymer Group. In accordance with the agreement, consideration to be paid to the sellers at closing will consist of approximately EUR 1.7 billion cash ($2.0 billion at current exchange rate) and equity consisting of approximately 2.3 million shares of the Company. The Company will also assume responsibility for the debt of the Erwin Hymer Group of approximately EUR 300 million ($350 million at current exchange rate).

The Erwin Hymer Group is headquartered in Bad Waldsee, Germany and is the largest RV manufacturer in Europe, by revenue. The transaction is subject to customary closing conditions, including regulatory approvals.standard post-closing adjustments, and was funded through a combination of cash-on-hand and $625,000 from the Company's ABL. In conjunction with the Airxcel acquisition, the Company expanded its existing ABL facility from $750,000 to $1,000,000, favorably amended certain terms of the agreement and extended the term of the ABL from February 1, 2024 to September 1, 2026. The transactioninterest rate remains unchanged.


The Company acquired Airxcel as part of its long-term, strategic growth plan and the acquisition is expected to provide numerous benefits, including strengthening its supply chain, diversifying its revenue sources and expanding opportunities to enter new product segments. Airxcel will operate as an independent operation in the same manner as the Company's other subsidiaries.

Due to the recent timing of the close nearof the end of calendar year 2018.

The Company plans to finance the acquisition primarily through debt financing. In connection with the planned acquisition, the Company has obtained financing commitments for a 5 year, $750 million asset-based credit facilitynot yet allocated the purchase price to the fair value of the assets acquired and a 7 year, $2.3 billion term loan.

***********

F-21
the liabilities assumed at the acquisition date.

F-33