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THO Thor Industries

Filed: 8 Jun 21, 6:36am

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended April 30, 2021.
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
tho-20210430_g1.jpg
THOR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware93-0768752
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
601 E. Beardsley Ave., Elkhart, IN46514-3305
(Address of principal executive offices)(Zip Code)
(574) 970-7460
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each classTrading Symbol(s)on which registered
Common stock (Par value $.10 Per Share)THONew York Stock Exchange

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 such 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 such files).
Yes        No    

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” in Rule 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes        No    
As of May 28, 2021, 55,366,241 shares of the registrant’s common stock, par value $0.10 per share, were outstanding.




PART I – FINANCIAL INFORMATION (Unless otherwise indicated, amounts in thousands except share and per share data.)
ITEM 1. FINANCIAL STATEMENTS
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

April 30, 2021July 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$294,562 $538,519 
Restricted cash2,900 2,844 
Accounts receivable, trade, net769,826 588,069 
Factored accounts receivable122,671 143,278 
Accounts receivable, other, net121,651 82,880 
Inventories, net1,484,054 716,305 
Prepaid income taxes, expenses and other50,124 30,382 
Total current assets2,845,788 2,102,277 
 Property, plant and equipment, net1,158,380 1,107,649 
Other assets:
Goodwill1,577,828 1,476,541 
Amortizable intangible assets, net976,261 914,724 
Deferred income tax assets, net49,754 78,738 
Other105,956 91,531 
Total other assets2,709,799 2,561,534 
TOTAL ASSETS$6,713,967 $5,771,460 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,033,026 $636,506 
Current portion of long-term debt12,559 13,817 
Short-term financial obligations34,654 35,939 
Accrued liabilities:
Compensation and related items246,680 160,083 
Product warranties261,965 252,869 
Income and other taxes44,254 83,893 
Promotions and rebates108,893 97,378 
Product, property and related liabilities21,292 15,440 
Liabilities related to factored receivables122,671 143,278 
Other65,927 76,078 
Total current liabilities1,951,921 1,515,281 
Long-term debt1,718,127 1,652,831 
Deferred income tax liabilities, net123,530 123,802 
Unrecognized tax benefits19,864 12,765 
Other liabilities142,603 121,212 
Total long-term liabilities2,004,124 1,910,610 
Contingent liabilities and commitments
Stockholders’ equity:
Preferred stock – authorized 1,000,000 shares; NaN 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 capital454,327 436,828 
Retained earnings2,562,822 2,201,330 
Accumulated other comprehensive income, net of tax69,211 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.2,732,699 2,319,782 
Non-controlling interests25,223 25,787 
Total stockholders’ equity2,757,922 2,345,569 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$6,713,967 $5,771,460 

See Notes to the Condensed Consolidated Financial Statements.



2



THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended April 30,Nine Months Ended April 30,
2021202020212020
Net sales$3,459,264 $1,681,735 $8,724,412 $5,843,653 
Cost of products sold2,953,984 1,476,102 7,425,403 5,072,803 
Gross profit505,280 205,633 1,299,009 770,850 
Selling, general and administrative expenses231,834 128,147 619,786 478,968 
Amortization of intangible assets30,480 24,079 87,110 72,645 
Impairment charges10,057 
Interest income142 847 662 2,796 
Interest expense26,808 26,868 75,248 82,127 
Other income (expense), net16,379 (6,157)25,430 (5,123)
Income before income taxes232,679 21,229 542,957 124,726 
Income tax provision (benefit)49,960 (1,555)113,409 23,071 
Net income182,719 22,784 429,548 101,655 
Less: Net (loss) attributable to non-controlling interests(592)(1,284)(44)(2,151)
Net income attributable to THOR Industries, Inc.$183,311 $24,068 $429,592 $103,806 
Weighted-average common shares outstanding:
Basic55,366,241 55,198,756 55,323,080 55,163,943 
Diluted55,723,378 55,392,982 55,615,107 55,337,665 
Earnings per common share:
Basic$3.31 $0.44 $7.77 $1.88 
Diluted$3.29 $0.43 $7.72 $1.88 
Comprehensive income (loss):
Net income$182,719 $22,784 $429,548 $101,655 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment(7,449)(25,245)33,691 (36,154)
Unrealized gain (loss) on derivatives, net of tax2,929 (7,763)8,612 (11,709)
Total other comprehensive income (loss), net of tax(4,520)(33,008)42,303 (47,863)
Total Comprehensive income (loss)178,199 (10,224)471,851 53,792 
Less: Comprehensive income (loss) attributable to non-controlling interests(647)(1,483)41 (2,794)
Comprehensive income (loss) attributable to THOR Industries, Inc.$178,846 $(8,741)$471,810 $56,586 


















See Notes to the Condensed Consolidated Financial Statements.



3



THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended April 30,
20212020
Cash flows from operating activities:
Net income$429,548 $101,655 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation82,533 71,966 
Amortization of intangible assets87,110 72,645 
Amortization of debt issuance costs12,825 8,050 
Impairment charges10,057 
Deferred income tax (benefit) provision(4,499)19,312 
(Gain) loss on disposition of property, plant and equipment(296)1,524 
Stock-based compensation expense21,424 14,425 
Changes in assets and liabilities:
Accounts receivable(175,635)219,750 
Inventories, net(632,506)(62,475)
Prepaid income taxes, expenses and other(28,280)(8,963)
Accounts payable341,535 (137,668)
Accrued liabilities32,581 (73,621)
Long-term liabilities and other8,733 612 
Net cash provided by operating activities175,073 237,269 
Cash flows from investing activities:
Purchases of property, plant and equipment(81,162)(77,302)
Proceeds from dispositions of property, plant and equipment1,742 26,854 
Business acquisitions, net of cash acquired(310,938)
Other9,330 (5,239)
Net cash used in investing activities(381,028)(55,687)
Cash flows from financing activities:
Borrowings on revolving asset-based credit facilities225,676 379,222 
Payments on revolving asset-based credit facilities(114,836)(74,776)
Payments on term-loan credit facilities(59,700)(199,301)
Payments on other debt(9,711)(10,358)
Regular cash dividends paid(68,100)(66,239)
Payments on finance lease obligations(492)(324)
Payments related to vesting of stock-based awards(8,317)(3,763)
Short-term financial obligations and other, net(7,323)532 
Net cash provided by (used in) financing activities(42,803)24,993 
Effect of exchange rate changes on cash and cash equivalents and restricted cash4,857 (2,872)
Net increase (decrease) in cash and cash equivalents and restricted cash(243,901)203,703 
Cash and cash equivalents and restricted cash, beginning of period541,363 451,262 
Cash and cash equivalents and restricted cash, end of period297,462 654,965 
Less: restricted cash2,900 3,480 
Cash and cash equivalents, end of period$294,562 $651,485 
Supplemental cash flow information:
Income taxes paid$172,397 $51,281 
Interest paid$62,048 $75,709 
Non-cash investing and financing transactions:
Capital expenditures in accounts payable$3,497 $2,057 



See Notes to the Condensed Consolidated Financial Statements.



4




THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended April 30, 2021
AccumulatedStockholders'
AdditionalOtherEquityNon-Total
Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders'
SharesAmountCapitalEarningsIncome (Loss)SharesAmountto THORInterestsEquity
Balance at February 1, 202165,651,570 $6,565 $448,010 $2,402,211 $73,676 10,285,329 $(360,226)$2,570,236 $26,475 $2,596,711 
Net income (loss)— — — 183,311 — — — 183,311 (592)182,719 
Restricted stock unit activity— — (2,049)— — — — (2,049)— (2,049)
Dividends $0.41 per common share— — — (22,700)— — — (22,700)— (22,700)
Stock-based compensation expense— — 8,366 — — — — 8,366 — 8,366 
Other comprehensive income (loss)— — — — (4,465)— — (4,465)(55)(4,520)
Dividend paid to non-controlling interest— — — — — — — — (605)(605)
Balance at April 30, 202165,651,570 $6,565 $454,327 $2,562,822 $69,211 10,285,329 $(360,226)$2,732,699 $25,223 $2,757,922 
Nine Months Ended April 30, 2021
AccumulatedStockholders'
AdditionalOtherEquityNon-Total
Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders'
SharesAmountCapitalEarnings IncomeSharesAmountto THORInterestsEquity
Balance at August 1, 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)— — — 429,592 — — — 429,592 (44)429,548 
Restricted stock unit activity255,039 25 (3,925)— — 87,554 (8,317)(12,217)— (12,217)
Dividends $1.23 per common share— — — (68,100)— — — (68,100)— (68,100)
Stock-based compensation expense— — 21,424 — — — — 21,424 — 21,424 
Other comprehensive income— — — — 42,218 — — 42,218 85 42,303 
Dividend paid to non-controlling interest— — — — — — — — (605)(605)
Balance at April 30, 202165,651,570 $6,565 $454,327 $2,562,822 $69,211 10,285,329 $(360,226)$2,732,699 $25,223 $2,757,922 




See Notes to the Condensed Consolidated Financial Statements.



5



THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended April 30, 2020
AccumulatedStockholders'
AdditionalOtherEquityNon-Total
Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders'
SharesAmountCapitalEarnings(Loss)SharesAmountto THORInterestsEquity
Balance at February 1, 202065,396,531 $6,540 $427,373 $2,102,253 $(71,415)10,197,775 $(351,909)$2,112,842 $9,492 $2,122,334 
Net income (loss)— — — 24,068 — — — 24,068 (1,284)22,784 
Restricted stock unit activity— — 297 — — — — 297 — 297 
Dividends $0.40 per common share— — — (22,080)— — — (22,080)— (22,080)
Stock-based compensation expense— — 4,350 — — — — 4,350 — 4,350 
Other comprehensive loss— — — — (32,809)— — (32,809)(199)(33,008)
Acquisitions— — — — — — — — 16,835 16,835 
Balance at April 30, 202065,396,531 $6,540 $432,020 $2,104,241 $(104,224)10,197,775 $(351,909)$2,086,668 $24,844 $2,111,512 
Nine Months Ended April 30, 2020
AccumulatedStockholders'
AdditionalOtherEquityNon-Total
Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders'
SharesAmountCapitalEarnings(Loss)SharesAmountto THORInterestsEquity
Balance at August 1, 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)— — — 103,806 — — — 103,806 (2,151)101,655 
Restricted stock unit activity206,624 21 1,213 — — 71,341 (3,763)(2,529)— (2,529)
Dividends $1.20 per common share— — — (66,239)— — — (66,239)— (66,239)
Stock-based compensation expense— — 14,425 — — — — 14,425 — 14,425 
Other comprehensive loss— — — — (47,220)— — (47,220)(643)(47,863)
Acquisitions— — — — — — — — 16,835 16,835 
Balance at April 30, 202065,396,531 $6,540 $432,020 $2,104,241 $(104,224)10,197,775 $(351,909)$2,086,668 $24,844 $2,111,512 






See Notes to the Condensed Consolidated Financial Statements.



6



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(All U.S. Dollar, Euro and British Pound Sterling amounts presented in thousands except share and per share data or except as otherwise specified)

1. Nature of Operations and Accounting Policies

Nature of Operations

THOR Industries, Inc. was founded in 1980 and is the sole owner of operating subsidiaries (collectively, the “Company” or "THOR"), that, combined, represent the world's largest manufacturer of recreational vehicles (“RVs”). The Company manufactures a wide variety of RVs in the United States and 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. Unless the context requires or indicates otherwise, all references to “THOR,” the “Company,” “we,” “our” and “us” refer to THOR Industries, Inc. and its subsidiaries.

The July 31, 2020 amounts are derived from the annual audited financial statements of THOR. The interim financial statements are unaudited. In the opinion of management, all adjustments (which consist of normal, recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented have been made. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020. Due to seasonality within the recreational vehicle industry, and the impact of the ongoing COVID-19 pandemic on our industry, among other factors, annualizing the results of operations for the nine months ended April 30, 2021 would not necessarily be indicative of the results expected for the full fiscal year.

Recently Adopted Accounting Standards

In January 2017, the FASB issued Accounting Standards Update ("ASU") No. 2017-04, "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. The Company adopted ASU 2017-04, effective August 1, 2020. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

2. Acquisitions

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., 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, 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 the Tiffin Group was approximately $300,000, subject to adjustment, 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 consideration to be paid is subject to the final determination of the actual acquired net working capital, as defined in the Tiffin Group SPA, as of the close of business on December 18, 2020, which determination was finalized in the fourth quarter of fiscal 2021 and the true-up 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 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 the Tiffin Group to complement its existing motorized and towable RV product offerings and North American independent dealer base.


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The results of the Tiffin Group are included in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income since the December 18, 2020 acquisition date. The Tiffin Group recorded net sales of $253,636 and net income before income taxes of $8,847 for the period from the date of acquisition through April 30, 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 $4,248 for the amortization expense related to the acquired backlog and the other acquired amortizable intangible assets.

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 a fair value analysis, but this analysis has not been fully completed. The provisional amounts 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.

Cash$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 
Goodwill62,905 
Current liabilities(81,423)
Deferred income tax liabilities(35,104)
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 

On the acquisition date, amortizable intangible assets had a weighted-average useful life of 18.8 years. The dealer network was valued based on the Discounted Cash Flow Method and will be amortized on an accelerated basis over 18 to 20 years. The trademarks were valued on the Relief from Royalty Method and will be amortized on a straight-line basis over 20 years. Backlog was valued based on the Discounted Cash Flow Method and will be amortized on a straight-line basis over five 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.

Effective March 23, 2020, the Company and thl reached an agreement (the “2020 Agreement”) whereby the Company obtained additional ownership interest in Togo Group. THOR obtained a 73.5% controlling interest in Togo Group and the power to direct the activities of Togo Group. Since the effective date of the 2020 Agreement, the operating results, balance sheet accounts and cash flow activity of Togo Group have been consolidated within the Company's Condensed 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. The 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.





8



The table below summarizes the final estimated fair value of the 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 

Amortizable intangible assets have a weighted-average useful life of approximately eight years and are 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 investment in Togo Group under the equity method of accounting, and the Company's share of the losses of this investment were included in Other income (expense), net in the Condensed Consolidated Statements of Income and Comprehensive Income. The Company's share of the losses from this investment recognized in the three and nine-month periods ended April 30, 2020 were $2,137 and $6,884, respectively.

The following unaudited pro forma information represents the Company’s results of operations as if the fiscal 2021 acquisition of the Tiffin Group had occurred at the beginning of fiscal 2020 and the fiscal 2020 acquisition of the Togo Group had occurred at the beginning of fiscal 2019. These performance results may not be indicative of the actual results that would have occurred under the ownership and management of the Company.

Three Months EndedNine Months Ended
April 30, 2021April 30, 2021
Net sales$3,459,264 $8,988,314 
Net income attributable to THOR Industries, Inc.$183,104 $436,817 
Basic earnings per common share$3.31 $7.90 
Diluted earnings per common share$3.29 $7.85 

Three Months EndedNine Months Ended
April 30, 2020April 30, 2020
Net sales$1,826,765 $6,403,792 
Net income attributable to THOR Industries, Inc.$20,966 $103,623 
Basic earnings per common share$0.38 $1.88 
Diluted earnings per common share$0.38 $1.87 




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3. Business Segments

The Company has 3 reportable segments, all related to recreational vehicles: (1) North American Towables, (2) North American Motorized and (3) European. The operations of the Company's Postle and Togo Group subsidiaries are included in Other, which is a non-reportable segment.

The following tables reflect certain financial information by reportable segment:

Three Months Ended April 30,Nine Months Ended April 30,
NET SALES:2021202020212020
Recreational vehicles
North American Towables$1,726,102$773,391$4,491,327$2,958,186
North American Motorized775,393264,0371,846,2431,023,606
Total North America2,501,4951,037,4286,337,5703,981,792
European894,240615,3432,230,1911,745,465
Total recreational vehicles3,395,7351,652,7718,567,7615,727,257
Other106,96045,632262,381176,943
Intercompany eliminations(43,431)(16,668)(105,730)(60,547)
Total$3,459,264$1,681,735$8,724,412$5,843,653

Three Months Ended April 30,Nine Months Ended April 30,
INCOME (LOSS) BEFORE INCOME TAXES:2021202020212020
Recreational vehicles
North American Towables$167,693$49,261$456,752$207,009
North American Motorized54,78010,915139,76847,606
Total North America222,47360,176596,520254,615
European43,993(242)48,703(18,576)
Total recreational vehicles266,46659,934645,223236,039
Other, net16,6673,99637,80124,356
Corporate(50,454)(42,701)(140,067)(135,669)
Total$232,679$21,229$542,957$124,726

TOTAL ASSETS:April 30, 2021July 31, 2020
Recreational vehicles
North American Towables$1,802,162$1,529,913
North American Motorized1,149,043480,225
Total North America2,951,2052,010,138
European3,206,2213,102,071
Total recreational vehicles6,157,4265,112,209
Other, net258,531212,378
Corporate298,010446,873
Total$6,713,967$5,771,460




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DEPRECIATION AND INTANGIBLE AMORTIZATION EXPENSE:Three Months Ended April 30,Nine Months Ended April 30,
2021202020212020
Recreational vehicles
North American Towables$16,904$16,696$49,029$49,398
North American Motorized7,0083,60016,11210,608
Total North America23,91220,29665,14160,006
European31,25122,04994,18275,552
Total recreational vehicles55,16342,345159,323135,558
Other3,1082,6769,0587,710
Corporate4184381,2621,343
Total$58,689$45,459$169,643$144,611

Three Months Ended April 30,Nine Months Ended April 30,
CAPITAL ACQUISITIONS:2021202020212020
Recreational vehicles
North American Towables$9,750$5,192$26,071$23,888
North American Motorized6,7162,16012,19110,588
Total North America16,4667,35238,26234,476
European14,88915,88038,10538,057
Total recreational vehicles31,35523,23276,36772,533
Other1,4275174,0871,445
Corporate3581217471,049
Total$33,140$23,870$81,201$75,027

4. Earnings Per Common Share

The following table reflects the weighted-average common shares used to compute basic and diluted earnings per common share as included on the Condensed Consolidated Statements of Income and Comprehensive Income:

Three Months Ended April 30,Nine Months Ended April 30,
2021202020212020
Weighted-average common shares outstanding for basic earnings per share55,366,241 55,198,756 55,323,080 55,163,943 
Unvested restricted stock units357,137 194,226 292,027 173,722 
Weighted-average common shares outstanding assuming dilution55,723,378 55,392,982 55,615,107 55,337,665 

For the three months ended April 30, 2021 and 2020, the Company had 86,946 and 140,481 unvested restricted stock units outstanding, respectively, which were excluded from this calculation as their effect would be antidilutive. For the nine months ended April 30, 2021 and 2020, the Company had 81,557 and 189,090 unvested restricted stock units outstanding, respectively, which were excluded from this calculation as their effect would have been antidilutive.




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5. Derivatives and Hedging

The fair value of our derivative instruments and the associated notional amounts, presented on a pre-tax basis, were as follows:
April 30, 2021July 31, 2020
Fair Value inFair Value inFair Value in
Other CurrentOther CurrentOther Current
Cash Flow HedgesNotionalAssetsLiabilitiesNotionalLiabilities
Foreign currency forward contracts$75,110 $494 $$$
Interest rate swap agreements532,025 14,008 673,400 24,840 
Total derivative financial instruments$607,135 $494 $14,008 $673,400 $24,840 
Foreign currency forward contracts accounted for as cash flow hedges and outstanding at April 30, 2021 mature over the next nine months.

Net Investment Hedges

The foreign currency transaction gains and losses on the Euro-denominated portion of the term loan, which is designated and 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 for the three months ended April 30, 2021, net of tax, were $1,984 and losses for the nine months ended April 30, 2021, net of tax, were $8,969. Gains for the three and nine months ended April 30, 2020, net of tax, were $6,293 and $9,136, respectively.

There were 0 amounts reclassified out of accumulated other comprehensive income ("AOCI") pertaining to the net investment hedge during the three and nine-month periods ended April 30, 2021 and April 30, 2020, respectively.

Derivatives Not Designated as Hedging Instruments

The Company has certain other derivative instruments which have not been designated as hedges. These other derivative instruments had a notional amount totaling approximately $33,634 and a fair value of $1,774, which is included in Other current liabilities in the Condensed Consolidated Balance Sheet as of April 30, 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 Condensed Consolidated Statements of Income and Comprehensive Income due to changes in the fair value of the following derivative instruments are as follows:
Three Months Ended April 30,
20212020
Gain (Loss) on Derivatives Designated as Cash Flow Hedges
Gain (Loss) recognized in Other Comprehensive Income, net of tax
Foreign currency forward contracts$422 $856 
Interest rate swap agreements2,507 (8,619)
Total gain (loss)$2,929 $(7,763)

Nine Months Ended April 30,
20212020
Gain (Loss) on Derivatives Designated as Cash Flow Hedges
Gain (Loss) recognized in Other Comprehensive Income, net of tax
Foreign currency forward contracts$356 $(159)
Interest rate swap agreements8,256 (11,550)
Total gain (loss)$8,612 $(11,709)




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Three Months Ended April 30,
20212020
 Interest Interest
SalesExpenseSalesExpense
Gain (Loss) Reclassified from AOCI, Net of Tax
Foreign currency forward contracts$(429)$$(121)$
Interest rate swap agreements(2,353)(1,383)
Gain (Loss) on Derivatives Not Designated as Hedging Instruments
Amount of loss recognized in income, net of tax
Interest rate swap agreements108 (107)
Total gain (loss)$(429)$(2,245)$(121)$(1,490)


Nine Months Ended April 30,
20212020
 Interest Interest
SalesExpenseSalesExpense
Gain (Loss) Reclassified from AOCI, Net of Tax
Foreign currency forward contracts$(422)$$(555)$
Interest rate swap agreements(7,750)(2,897)
Gain (Loss) on Derivatives Not Designated as Hedging Instruments
Amount of loss recognized in income, net of tax
Interest rate swap agreements62 (275)
Total gain (loss)$(422)$(7,688)$(555)$(3,172)

6. Inventories

Major classifications of inventories are as follows:
April 30, 2021July 31, 2020
Finished goods – RV$129,030 $152,297 
Finished goods – other59,369 44,779 
Work in process370,402 128,181 
Raw materials534,965 302,813 
Chassis445,697 135,194 
Subtotal1,539,463 763,264 
Excess of FIFO costs over LIFO costs(55,409)(46,959)
Total inventories, net$1,484,054 $716,305 

Of the $1,539,463 and $763,264 of inventories at April 30, 2021 and July 31, 2020, $527,670 and $251,099, respectively, were valued on the last-in, first-out (LIFO) method, and $1,011,793 and $512,165, respectively, were valued on the first-in, first-out (FIFO) method.




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7. Property, Plant and Equipment

Property, plant and equipment consists of the following:
April 30, 2021July 31, 2020
Land$141,166 $136,200 
Buildings and improvements815,802 760,986 
Machinery and equipment509,924 438,985 
Rental vehicles64,992 83,534 
Lease right-of-use assets – operating38,545 33,609 
Lease right-of-use assets – finance7,196 3,672 
Total cost1,577,625 1,456,986 
Less accumulated depreciation(419,245)(349,337)
Property, plant and equipment, net$1,158,380 $1,107,649 

See Note 15 to the Condensed Consolidated Financial Statements for further information regarding the lease right-of-use assets.

8. Intangible Assets and Goodwill

The components of amortizable intangible assets are as follows:
April 30, 2021July 31, 2020
AccumulatedAccumulated
CostAmortizationCostAmortization
Dealer networks/customer relationships$867,483 $309,523 $766,198 $252,320 
Trademarks313,309 59,037 275,775 47,743 
Design technology and other intangibles219,01257,537213,46840,654
Backlog4,8003,47100
Non-compete agreements1,40017500
Total amortizable intangible assets$1,406,004 $429,743 $1,255,441 $340,717 

Estimated future amortization expense is as follows:
For the remainder of the fiscal year ending July 31, 2021$30,178
For the fiscal year ending July 31, 2022125,339
For the fiscal year ending July 31, 2023106,759
For the fiscal year ending July 31, 202496,863
For the fiscal year ending July 31, 202588,655
For the fiscal year ending July 31, 2026 and thereafter528,467
$976,261

Changes in the carrying amount of goodwill by reportable segment for the nine months ended April 30, 2021 are summarized as follows:
North American TowablesNorth American MotorizedEuropeanOtherTotal
Net balance as of August 1, 2020$333,786 $$1,037,929 $104,826 $1,476,541 
Fiscal 2021 activity:
Goodwill acquired18,845 43,491 17,882 80,218 
Measurement period adjustments(7,656)8,225 569 
Foreign currency translation20,500 20,500 
Net balance as of April 30, 2021$344,975 $51,716 $1,058,429 $122,708 $1,577,828 



14



Changes in the carrying amount of goodwill by reportable segment for the nine months ended April 30, 2020 are summarized as follows:
North American TowablesNorth American MotorizedEuropeanOtherTotal
Net balance as of August 1, 2019$334,822 $$980,339 $42,871 $1,358,032 
Fiscal 2020 activity:
Goodwill acquired— 62,366 62,366 
Measurement period adjustments1,282 1,282 
Foreign currency translation(24,243)(24,243)
Impairment charge(1,036)(1,036)
Net balance as of April 30, 2020$333,786 $$957,378 $105,237 $1,396,401 

During the fiscal quarter ended January 31, 2020, there was an interim impairment assessment performed related to two groups of tangible and intangible assets within the North American Towables reportable segment using Level 3 inputs as defined by ASC 820. The Company recognized an aggregate impairment charge of $10,057 related to these assets during the fiscal year-to-date period ended April 30, 2020, which included a goodwill impairment charge of $1,036.

9. Concentration of Risk

One dealer, FreedomRoads, LLC, accounted for 13% of the Company's consolidated net sales for the three-month period ended April 30, 2021 and 15% of the Company's consolidated net sales for the three-month period ended April 30, 2020, and 13% for the nine-month period ended April 30, 2021 and 15% for the nine-month period ended April 30, 2020, respectively. Sales to this dealer are reported within both the North American Towables and North American Motorized segments. This dealer also accounted for 15% and 18% of the Company’s consolidated trade accounts receivable at April 30, 2021 and July 31, 2020, respectively. The loss of this dealer could have a material effect on the Company’s business.

10. Fair Value Measurements
The financial assets and liabilities that are accounted for at fair value on a recurring basis at April 30, 2021 and July 31, 2020 are as follows:
Input LevelApril 30, 2021July 31, 2020
Cash equivalentsLevel 1$211$227,154
Deferred compensation plan mutual fund assetsLevel 1$46,931$47,327
Deferred compensation plan liabilitiesLevel 1$77,289$61,290
Foreign currency forward contract assetLevel 2$494$0
Interest rate swap liabilitiesLevel 2$15,782$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 Condensed Consolidated Balance Sheets.

Deferred compensation plan assets accounted for at fair value are investments in securities traded in an active market held for the benefit of certain employees of the Company as part of a deferred compensation plan. Additional plan investments in corporate-owned life insurance are recorded at their cash surrender value, not fair value, and therefore are not included above.

Foreign currency forward contracts outstanding at April 30, 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 April 30, 2021 is 54,000 GBP ($75,110), 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 April 30, 2021, the outstanding swaps had notional contract values of $532,025, partially hedging the interest rate risk related to the Company's U.S. dollar term loan tranche that matures in February 2026. The Company's other interest rate swaps not designated as hedging instruments had a notional contract value of $33,634 at April 30, 2021.





15



The fair value of foreign currency forward contracts is estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates. The fair value of interest rate swaps is determined by discounting the estimated future cash flows based on the applicable observable yield curves.

11. Product Warranties

The Company generally provides retail customers of its products with a one-year or two-year warranty covering defects in material or workmanship, with longer warranties on certain structural components.

Changes in our product warranty liability during the indicated periods are as follows:

Three Months Ended April 30,Nine Months Ended April 30,
2021202020212020
Beginning balance$251,009$282,065$252,869$289,679
Provision84,80535,780188,546157,453
Payments(73,767)(59,956)(191,706)(189,254)
Acquisition0011,0320
Foreign currency translation(82)(12)1,224(1)
Ending balance$261,965$257,877$261,965$257,877

12. Long-Term Debt

The components of long-term debt are as follows:
April 30, 2021July 31, 2020
Term loan$1,549,621 $1,597,091 
Asset-based credit facility110,000 
Unsecured notes30,205 29,620 
Other debt76,358 84,500 
Gross long-term debt1,766,184 1,711,211 
Debt issuance costs, net of amortization(35,498)(44,563)
Total long-term debt, net of debt issuance costs1,730,686 1,666,648 
Less: current portion of long-term debt(12,559)(13,817)
Total long-term debt, net, less current portion$1,718,127 $1,652,831 

On February 1, 2019, the Company entered into a seven-year term loan (“term loan”) agreement, which consists of both a United States Dollar-denominated term loan tranche and a Euro-denominated term loan tranche, and a $750,000 revolving asset-based credit facility (“ABL”). Subject to earlier termination, the term loan matures on February 1, 2026 and the ABL matures on February 1, 2024.

As of April 30, 2021, the entire outstanding U.S. term loan tranche balance of $941,900 was subject to a LIBOR-based rate totaling 3.125%. The interest rate on $532,025 of that balance, however, was fixed at 5.466% through an interest rate swap, dated March 18, 2019, by swapping the underlying 1-month LIBOR rate for a 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 of 3.938%, but the interest rate on $673,400 of that balance was fixed at 6.216% through an interest rate swap, dated March 18, 2019, by swapping the underlying 1-month LIBOR rate for a fixed rate of 2.466%. The total interest rate on the April 30, 2021 outstanding Euro term loan tranche balance of $607,721 was 3.00%, and the total interest rate on the July 31, 2020 outstanding Euro term loan tranche of $655,191 was 4.00%.

As of April 30, 2021, the total interest rate on the outstanding ABL borrowings of $110,000 was 1.375%. 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 penalty or premium.



16



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 the three or nine months ended April 30, 2021 or 2020.

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 unused availability under the ABL is generally available to the Company for general operating purposes and, based on April 30, 2021 eligible accounts receivable and inventory balances, net of amounts drawn, totaled approximately $610,000.

The unsecured notes of 25,000 Euro ($30,205) relate to long-term debt of our European segment. There are two series, 20,000 Euro ($24,164) with an interest rate of 1.945% maturing in March 2025, and 5,000 Euro ($6,041) with an interest 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%.

Total contractual gross debt maturities are as follows:

 For the remainder of the fiscal year ending July 31, 2021$4,202
For the fiscal year ending July 31, 202212,264
For the fiscal year ending July 31, 202312,390
For the fiscal year ending July 31, 2024122,519
For the fiscal year ending July 31, 202536,557
For the fiscal year ending July 31, 2026 and thereafter1,578,252
$1,766,184

For the three and nine months ended April 30, 2021, interest expense on the term loan, ABL and other debt facilities was $18,361 and $59,612, respectively. For the three and nine months ended April 30, 2020, interest expense on the term loan, ABL and other debt facilities was $22,825 and $71,037, respectively.

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. This term loan debt repricing was evaluated on a creditor-by-creditor basis to determine whether modification or extinguishment accounting was required under the provisions of ASC 470-50. Extinguishment accounting was applied to a small percentage of the creditors that were deemed to have a substantial difference in terms based on an analysis of the present values of cash flows before and after the repricing. As a result, the Company recorded a debt extinguishment charge of $4,688 in the three months ended April 30, 2021. This charge was recognized through accelerated amortization of unamortized debt issuance costs that is classified as interest expense in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income. For the majority of the creditors, the debt repricing was accounted for as a modification.

In 2019, the Company incurred fees ("2019 fees") to secure the term loan and ABL, and those amounts 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 term loan. The Company recorded total charges related to the amortization of these term loan and ABL fees, which are classified as interest expense, of $7,365 and $12,825 for the three and nine months ended April 30, 2021, respectively, which included $4,688 of accelerated amortization of the 2019 fees recorded in the three months ended April 30, 2021 as a result of the debt repricing. The Company recorded total charges related to the amortization of these term loan and ABL fees, which are classified as interest expense, of $2,679 and $8,050 for the three and nine months ended April 30, 2020, respectively. The unamortized balance of the ABL facility fees was $7,705 at April 30, 2021 and $9,807 as of July 31, 2020 and is included in Other long-term assets in the Condensed Consolidated Balance Sheets.





17



The fair value of the Company’s term-loan debt at April 30, 2021 and July 31, 2020 was $1,551,141 and $1,565,866, respectively. The carrying value of the Company’s term-loan debt, excluding debt issuance costs, was $1,549,621 and $1,597,091 at April 30, 2021 and July 31, 2020, respectively. The fair value of the Company's debt is primarily estimated using Level 2 inputs as defined by ASC 820, primarily based on quoted market prices for the term loan debt. The fair value of other debt held by the Company approximates fair value.
13. Provision for Income Taxes

The overall effective income tax rate for the three months ended April 30, 2021 was 21.5%, and the effective income tax rate for the nine months ended April 30, 2021 was 20.9%. These rates were both favorably impacted by certain foreign tax rate differences which include certain interest income not subject to corporate income tax. The overall effective income tax rate for the three months ended April 30, 2020 was (7.3)%, and the effective income tax rate for the nine months ended April 30, 2020 was 18.5%. These rates were both favorably impacted by certain foreign tax rate differences, the mix of earnings between foreign and domestic operations, which include certain interest income not subject to corporate income tax, and, with respect to the three months ended April 30, 2020, a reduction in forecasted, full-year income before income taxes.

Within the next 12 months, the Company anticipates a decrease of approximately $7,900 in unrecognized tax benefits, and $2,000 in accrued interest related to unrecognized tax benefits recorded as of April 30, 2021, from expected settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations. Actual results may differ from these estimates.

The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state and foreign jurisdictions. For U.S. federal income tax purposes, fiscal years 2017 through 2019 remain open and could be subject to examination. In major state and major foreign jurisdictions, fiscal years 2017 through 2019 generally remain open and could be subject to examination. The Company is currently under exam by certain U.S. state tax authorities for the fiscal years ended July 31, 2015 through 2017. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions in its liability for unrecognized tax benefits.

14. Contingent Liabilities, Commitments and Legal Matters

The Company’s total commercial commitments under standby repurchase obligations on global dealer inventory financing were $2,149,930 and $1,876,922 as of April 30, 2021 and July 31, 2020, respectively. The commitment term is generally up to 18 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. This deferred amount is included in the repurchase and guarantee reserve balances of $7,302 and $7,747 as of April 30, 2021 and July 31, 2020, respectively, which is included in Other current liabilities in the Condensed Consolidated Balance Sheets.

Losses incurred related to repurchase agreements that were settled during the three and nine months ended April 30, 2021 and April 30, 2020 were not material. Based on current market conditions, the Company believes that any future losses under these agreements will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

The Company is also 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,” 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. Based on current conditions, and 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.




18



15. Leases

The Company has operating leases principally for land, buildings and equipment and has various finance leases for certain land and buildings expiring through 2035.

Certain of the Company's leases include options to extend or terminate the leases, and these options have been included in the 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 residual value guarantees are not generally included within our operating leases.

The components of lease costs for the three and nine-month periods ended April 30, 2021 and April 30, 2020 were as follows:
Three Months Ended April 30,Nine Months Ended April 30,
2021202020212020
Operating lease cost$5,075 $2,920 $12,833 $9,063 
Finance lease cost
Amortization of right-of-use assets164 136 475 408 
Interest on lease liabilities134 131 391 402 
Total lease cost$5,373 $3,187 $13,699 $9,873 

Other information related to leases was as follows:
Nine Months Ended April 30,
Supplemental Cash Flows Information20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$12,767 $8,992 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$9,842 $3,777 
Finance leases$4,000 $

Supplemental Balance Sheet InformationApril 30, 2021July 31, 2020
Operating leases:
Operating lease right-of-use assets$38,545 $33,609 
Operating lease liabilities:
Other current liabilities$7,672 $5,343 
Other long-term liabilities31,126 28,456 
Total operating lease liabilities$38,798 $33,799 
Finance leases:
Finance lease right-of-use assets$7,196 $3,672 
Finance lease liabilities
Other current liabilities$1,014 $505 
Other long-term liabilities5,018 4,743 
Total finance lease liabilities$6,032 $5,248 




19



April 30, 2021July 31, 2020
Weighted-average remaining lease term:
Operating leases11.8 years13.6 years
Finance leases5.3 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 finance leases as of April 30, 2021 were as follows:
Operating LeasesFinancing Leases
 For the remainder of the fiscal year ending July 31, 2021$3,517 $387 
For the fiscal year ending July 31, 202212,025 1,555 
For the fiscal year ending July 31, 20239,187 1,578 
For the fiscal year ending July 31, 20246,449 1,059 
For the fiscal year ending July 31, 2025 4,426 1,083 
For the fiscal year ending July 31, 2026 and thereafter19,616 2,062 
Total future lease payments55,220 7,724 
Less: amount representing interest(16,422)(1,692)
Total reported lease liability$38,798 $6,032 

16. Stockholders’ Equity

Total stock-based compensation expense recognized in the three-month periods ended April 30, 2021 and April 30, 2020 for stock-based awards totaled $8,366 and $4,350, respectively. Total stock-based compensation expense recognized in the nine-month periods ended April 30, 2021 and April 30, 2020 for stock-based awards totaled $21,424 and $14,425, respectively.




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17. Revenue

The table below disaggregates revenue to the level that the Company believes best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors. Other RV-related revenues shown below in the 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.

Three Months Ended April 30,Nine Months Ended April 30,
NET SALES:2021202020212020
Recreational vehicles
North American Towables
Travel Trailers$1,060,058 $455,434 $2,729,317 $1,748,220 
Fifth Wheels666,044 317,957 1,762,010 1,209,966 
Total North American Towables1,726,102 773,391 4,491,327 2,958,186 
North American Motorized
Class A323,547 96,849 704,230 384,055 
Class C342,425 144,826 912,124 561,424 
Class B109,421 22,362 229,889 78,127 
Total North American Motorized775,393 264,037 1,846,243 1,023,606 
Total North America2,501,495 1,037,428 6,337,570 3,981,792 
European
Motorcaravan489,702 380,023 1,227,182 1,044,178 
Campervan236,988 104,486 529,500 280,006 
Caravan84,074 65,790 210,923 196,731 
Other RV-related83,476 65,044 262,586 224,550 
Total European894,240 615,343 2,230,191 1,745,465 
Total recreational vehicles3,395,735 1,652,771 8,567,761 5,727,257 
Other, primarily aluminum extruded components106,960 45,632 262,381 176,943 
Intercompany eliminations(43,431)(16,668)(105,730)(60,547)
Total$3,459,264 $1,681,735 $8,724,412 $5,843,653 




21



18. Accumulated Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) ("OCI") and the changes in the Company's accumulated other comprehensive income (loss) ("AOCI") by component were as follows:
Three Months Ended April 30,
20212020
Foreign CurrencyUnrealizedForeign CurrencyUnrealized
TranslationGain (Loss) onTranslationGain (Loss) on
AdjustmentDerivativeOtherTotalAdjustmentDerivativeOtherTotal
Balance at beginning of period$86,797 $(13,140)$(696)$72,961 $(57,987)$(13,418)$(1,048)$(72,453)
OCI before reclassifications(7,449)193 (7,256)(25,245)(12,059)(37,304)
Income taxes associated with OCI before reclassifications(46)(46)2,792 2,792 
Amounts reclassified from AOCI3,703 3,703 1,979 1,979 
Income taxes associated with amounts reclassified from AOCI(921)(921)(475)(475)
AOCI, net of tax79,348 (10,211)(696)68,441 (83,232)(21,181)(1,048)(105,461)
Less: AOCI attributable to noncontrolling interest(770)(770)(1,237)(1,237)
AOCI, net of tax, attributable to THOR Industries, Inc.$80,118 $(10,211)$(696)$69,211 $(81,995)$(21,181)$(1,048)$(104,224)




22



Nine Months Ended April 30,
20212020
Foreign CurrencyUnrealizedForeign CurrencyUnrealized
TranslationGain (Loss) onTranslationGain (Loss) on
AdjustmentDerivativeOtherTotalAdjustmentDerivativeOtherTotal
Balance at beginning of period$45,657 $(18,823)$(696)$26,138 $(47,078)$(9,472)$(1,048)$(57,598)
OCI before reclassifications33,691 573 34,264 (36,154)(19,885)(56,039)
Income taxes associated with OCI before reclassifications(133)(133)4,724 4,724 
Amounts reclassified from AOCI10,752 10,752 4,561 4,561 
Income taxes associated with amounts reclassified from AOCI(2,580)(2,580)(1,109)(1,109)
AOCI, net of tax79,348 (10,211)(696)68,441 (83,232)(21,181)(1,048)(105,461)
Less: AOCI attributable to noncontrolling interest(770)(770)(1,237)(1,237)
AOCI, net of tax, attributable to THOR Industries, Inc.$80,118 $(10,211)$(696)$69,211 $(81,995)$(21,181)$(1,048)$(104,224)

The Company does not recognize deferred taxes for a majority of the foreign currency translation gains and losses because the Company does not anticipate reversal in the foreseeable future.



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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, all U.S. Dollar, Euro and British Pound Sterling amounts are presented in thousands except share and per share data.

Forward-Looking Statements

This report includes certain statements that are “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-looking statements are made based on management’s current expectations and beliefs regarding future and anticipated developments and their effects upon THOR, and inherently involve uncertainties and risks. These forward-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:

the extent and impact from the continuation of the COVID-19 pandemic, along with the responses to contain the spread of the virus 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 and which may have a negative impact on our consolidated results of operations, financial position, cash flows and liquidity;
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, and/or raw material, commodity or chassis supply constraints;
the impact of tariffs on material or other input costs;
the level and magnitude of warranty claims incurred;
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;
legal and compliance issues including those that may arise in conjunction with recently completed transactions;
lower consumer confidence and the level of discretionary consumer spending;
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 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 efficiently utilize existing production facilities;
changes in consumer preferences;
the risks associated with acquisitions, including: the pace and successful closing of an acquisition, the integration and financial impact 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 and our ability to retain key management personnel of acquired companies;
a shortage of necessary personnel for 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;



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competition;
the impact of potential losses under repurchase or financed receivable agreements;
the potential impact of the strength of the U.S. dollar on international demand for products priced in U.S. dollars;
general economic, market and political 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;
changes to our investment and capital allocation strategies or other facets of our strategic plan; and
changes in market liquidity conditions, credit ratings and other factors that may impact our access to future funding and the cost of debt.

These and other risks and uncertainties are discussed more fully in Item 1A of our Annual Report on Form 10-K for the year ended July 31, 2020.

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

Executive Overview

We were founded in 1980 and have grown to become the largest manufacturer of recreational vehicles ("RVs") in the world. We are also the largest manufacturer of RVs in North America, and one of the largest manufacturers of RVs in Europe. In North America, according to Statistical Surveys, Inc. (“Stat Surveys”), for the three months ended March 31, 2021, THOR’s combined U.S. and Canadian market share was approximately 40.6% for travel trailers and fifth wheels combined and approximately 48.9% for motorhomes. In Europe, according to the European Caravan Federation and based on unit registrations for Europe's original equipment manufacturer ("OEM") reporting countries, our European market share for the three months ended March 31, 2021 was approximately 23.2% for motorcaravans and campervans combined and approximately 16.2% for caravans.

Our business model includes decentralized operating units, and our RV products are primarily sold to independent, non-franchise dealers who, in turn, retail those products. Our growth has been achieved both organically and through acquisition, and our strategy is designed to increase our profitability by driving innovation, servicing our customers, manufacturing quality products, improving the efficiencies of our facilities and making strategic growth acquisitions.

The COVID-19 pandemic, including its wide-reaching impact on nearly all facets of our operations and the RV industry, as well as related governmental actions, has impacted and continues to impact our business and our financial results and financial position. In particular, the pandemic has contributed to chassis and certain other supply-side constraints, as described below. Additional impacts could be incurred in future periods, including negative impacts to our results of operations, liquidity and financial position, as a direct or indirect result of the pandemic. Should the rate of COVID-19 infections escalate, or the virus mutate into new, uncontrolled strains, those developments and the resulting impacts could exacerbate risks to our business, financial results and financial position. Refer also to the COVID-19 related risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2020.

Recent Events

On March 11, 2021, the American Rescue Plan Act was signed into law. The Act includes several changes impacting businesses, including but not limited to insurance premium subsidies effective from April 2021 through September 2021, extension of employee retention tax credits through the end of 2021 and amendments to deductible compensation for tax years beginning in 2027. The Company is evaluating the impacts of the Act, which are currently not expected to be significant.



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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., 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, 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 the Tiffin Group was approximately $300,000, and is subject to the final 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 and the true-up 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 the Tiffin Group to complement its existing towable and motorized RV product offerings and North American independent dealer base.

Industry Outlook — North America

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

North American RV independent dealer inventory of our North American products as of April 30, 2021 decreased 29.2% to approximately 75,000 units, compared to approximately 105,900 units as of April 30, 2020. The acquisition of Tiffin Group accounted for approximately 600 of the 75,000 units as of April 30, 2021.

Dealer inventory levels have decreased materially based on strong retail demand for 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 of April 30, 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 April 30, 2021 increased $9,574,197, or 681.0%, to $10,980,015 compared to $1,405,818 as of April 30, 2020, with Tiffin Group's backlog included in the April 30, 2021 totals accounting for $711,701, or 7.4%, of the $9,574,197 increase.

North American Industry Wholesale Statistics

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
Calendar Quarter Ended March 31,Increase%
20212020(Decrease)Change
North American Towable Units134,199 90,327 43,872 48.6 
North American Motorized Units14,308 10,077 4,231 42.0 
Total148,507 100,404 48,103 47.9 

The changes in wholesale shipments noted above in the towable and motorized units were both impacted by the COVID-19 pandemic. Shipments were significantly limited for both towables and motorized products during the period 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.





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In June 2021, RVIA issued a second revised forecast for calendar year 2021 wholesale unit shipments. In the most-likely scenario, towable and motorized unit shipments are projected to increase to approximately 520,400 and 55,700 units, respectively, for an annual total of 576,100 units, or 33.8% higher than calendar year 2020 shipments. According to RVIA, this calendar year 2021 most-likely forecast could range from a lower estimate of 565,800 total units to an upper estimate of approximately 586,300 units.

North American Industry Retail Statistics

We believe that retail demand is the key to growth in the North American RV industry, and that annual North American RV industry wholesale shipments in calendar year 2021 and early 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 Stat Surveys for the periods indicated, are as follows:

U.S. and Canada Retail Unit Registrations
Calendar Quarter Ended March 31,Increase%
20212020(Decrease)Change
North American Towable Units111,30576,47534,830 45.5 
North American Motorized Units12,46410,1662,298 22.6 
Total123,76986,64137,128 42.9 

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

Company North American Wholesale Statistics

The Company's North American wholesale RV shipments, for the calendar quarters ended March 31, 2021 and 2020 to correspond to the North American industry wholesale periods noted above, were as follows (2021 period includes Tiffin Group shipments):
U.S. and Canada Wholesale Unit Shipments
Calendar Quarter Ended March 31,Increase%
20212020(Decrease)Change
North American Towable Units58,858 38,778 20,080 51.8 
North American Motorized Units6,990 4,058 2,932 72.3 
Total65,84842,83623,01253.7 




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Company North American Retail Statistics

Retail statistics of the Company's North American RV products, as reported by Stat Surveys, for the calendar quarters ended March 31, 2021 and 2020 to correspond to the North American industry retail periods noted above, were as follows (2021 period includes Tiffin Group registrations):

U.S. and Canada Retail Unit Registrations
Calendar Quarter Ended March 31,Increase%
20212020(Decrease)Change
North American Towable Units44,217 31,243 12,974 41.5 
North American Motorized Units6,098 3,881 2,217 57.1 
Total50,315 35,124 15,191 43.2 

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

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 temporary 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 disposable income of consumers, changes in interest rates, credit availability, the health of the housing market, changes in tax rates and fuel availability and prices.

Economic and industry-wide factors that have historically, and we believe will continue to affect our RV business, include the costs of commodities, the availability of critical supply components, the impact of actual or threatened tariffs on commodity costs and labor costs incurred in the production 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 are 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.

Recently, we have been alerted by a number of our North American 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, particularly in the near term. The North American recreational vehicle industry has, from time to time in the past and during the quarter ended April 30, 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 sales and earnings.





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The North American RV industry is 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 of April 30, 2021. We believe these shortages and delays are temporary, however, in the near term they 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 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 16.9% and 5.1% of the caravan and motorcaravan (including campervans) European market for the three months ended March 31, 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 April 30, 2021 increased $2,540,511, or 316.2%, to $3,344,033 compared to $803,522 as of April 30, 2020. We believe this increase is 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.





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European Industry Retail Statistics

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
Calendar Quarter Ended March 31,%Calendar Quarter Ended March 31,%
 20212020Change20212020Change
OEM Reporting Countries (1)
38,092 27,722 37.4 12,532 12,237 2.4 
Non-OEM Reporting Countries (1)
2,923 3,062 (4.5)3,238 4,400 (26.4)
Total41,015 30,784 33.2 15,770 16,637 (5.2)

(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 extended shutdowns due to the COVID-19 pandemic and BREXIT. 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 the ECF or do not have it available for the entire time period covered.)

Company European Retail Statistics (1)
European Unit Registrations (1)
Calendar Quarter Ended March 31,Increase%
20212020(Decrease)Change
Motorcaravan and Campervan8,827 6,507 2,320 35.7 
Caravan2,026 2,397 (371)(15.5)
Total OEM-Reporting Countries10,853 8,904 1,949 21.9 

(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 adjustment, is continuously updated and is often impacted by delays in reporting by various countries.

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 temporary supply chain issues in the near term 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 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.



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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 the quarter ended April 30, 2021, we also experienced delays in the receipt of chassis from our European chassis suppliers, limiting our ability to further increase production. In the short term, 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 ramp up production of certain products despite dealer demand for those products, and our production and sales of motorized RVs will also be negatively impacted, particularly in the near term.

In Europe, we continue to experience supply shortages or 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 April 30, 2021. We believe these shortages and delays are temporary, however, in the near term they 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.

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 2021. 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 RVs and could also impact consumer buying patterns.

In addition to material supply constraints, labor shortages may also impact our European operations, especially in light of the ongoing COVID-19 pandemic. Currently, a number of the employees of our production facilities 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 output.



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Three Months Ended April 30, 2021 Compared to the Three Months Ended April 30, 2020

NET SALES:Three Months Ended
April 30, 2021
Three Months Ended
April 30, 2020
Change
Amount
%
Change
Recreational vehicles
North American Towables$1,726,102 $773,391 $952,711 123.2
North American Motorized775,393 264,037 511,356 193.7
Total North America2,501,495 1,037,428 1,464,067 141.1
European894,240 615,343 278,897 45.3
Total recreational vehicles3,395,735 1,652,771 1,742,964 105.5
Other106,960 45,632 61,328 134.4
Intercompany eliminations(43,431)(16,668)(26,763)(160.6)
Total$3,459,264 $1,681,735 $1,777,529 105.7

# OF UNITS:
Recreational vehicles
North American Towables60,147 28,233 31,914 113.0
North American Motorized7,162 2,885 4,277 148.2
Total North America67,309 31,118 36,191 116.3
European18,288 13,668 4,620 33.8
Total85,597 44,786 40,811 91.1

GROSS PROFIT:% of
Segment
Net Sales
% of
Segment
Net Sales
Change
Amount
%
Change
Recreational vehicles
North American Towables$264,476 15.3$108,757 14.1$155,719 143.2
North American Motorized96,288 12.426,671 10.169,617 261.0
Total North America360,764 14.4135,428 13.1225,336 166.4
European120,159 13.462,559 10.257,600 92.1
Total recreational vehicles480,923 14.2197,987 12.0282,936 142.9
Other, net24,357 22.87,646 16.816,711 218.6
Total$505,280 14.6$205,633 12.2$299,647 145.7

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreational vehicles
North American Towables$89,015 5.2$49,590 6.4$39,425 79.5
North American Motorized38,391 5.014,437 5.523,954 165.9
Total North America127,406 5.164,027 6.263,379 99.0
European65,943 7.449,597 8.116,346 33.0
Total recreational vehicles193,349 5.7113,624 6.979,725 70.2
Other6,876 6.42,819 6.24,057 143.9
Corporate31,609 11,704 19,905 170.1
Total$231,834 6.7$128,147 7.6$103,687 80.9




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INCOME (LOSS) BEFORE INCOME TAXES:Three Months Ended
April 30, 2021
% of
Segment
Net Sales
Three Months Ended
April 30, 2020
% of
Segment
Net Sales
Change
Amount
%
Change
Recreational vehicles
North American Towables$167,693 9.7$49,261 6.4$118,432 240.4
North American Motorized54,780 7.110,915 4.143,865 401.9
Total North America222,473 8.960,176 5.8162,297 269.7
European43,993 4.9(242)44,235 18,278.9
Total recreational vehicles266,466 7.859,934 3.6206,532 344.6
Other, net16,667 15.63,996 8.812,671 317.1
Corporate(50,454)(42,701)(7,753)(18.2)
Total$232,679 6.7$21,229 1.3$211,450 996.0


ORDER BACKLOG:
As of
April 30, 2021
As of
April 30, 2020
Change
Amount
%
Change
Recreational vehicles
North American Towables$7,429,729 $857,866 $6,571,863 766.1
North American Motorized3,550,286 547,952 3,002,334 547.9
Total North America10,980,015 1,405,818 9,574,197 681.0
European3,344,033 803,522 2,540,511 316.2
Total$14,324,048 $2,209,340 $12,114,708 548.3

CONSOLIDATED

Consolidated net sales for the three months ended April 30, 2021 increased $1,777,529, or 105.7%, compared to the three months ended April 30, 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-year quarter. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $171,203 of the $1,777,529 increase in net sales or 10.2% of the 105.7% increase. Approximately 25.9% of the Company's net sales for the quarter ended April 30, 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 $1,777,529, or 105.7%, increase in consolidated net sales, $76,683, or 4.6% of the 105.7% 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 the three months ended April 30, 2021 increased $299,647, or 145.7%, compared to the three months ended April 30, 2020. Consolidated gross profit was 14.6% of consolidated net sales for the three months ended April 30, 2021 and 12.2% for the three months ended April 30, 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 cost percentage improvements noted below.

Selling, general and administrative expenses for the three months ended April 30, 2021 increased $103,687, or 80.9%, compared to the three months ended April 30, 2020, primarily due to the increase in net sales.

Amortization of intangible assets expense for the three months ended April 30, 2021 increased $6,401 compared to the three months ended April 30, 2020, primarily due to higher dealer network amortization in the European segment as compared to the prior-year period and additional amortization of $2,832 from the acquisition of the Tiffin Group as discussed in Note 2 to the Condensed Consolidated Financial Statements.

Income before income taxes for the three months ended April 30, 2021 was $232,679, as compared to $21,229 for the three months ended April 30, 2020, an increase of $211,450 or 996.0%, primarily driven by the increase in net sales and the increase in the consolidated gross profit percentage noted above.




33



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

Corporate costs included in selling, general and administrative expenses increased $19,905 to $31,609 for the three months ended April 30, 2021 compared to $11,704 for the three months ended April 30, 2020, an increase of 170.1%. This increase is primarily related to increased compensation costs, including an increase in deferred compensation expense of $11,265, which was effectively offset by the increase in other income related to the deferred compensation plan assets as noted below. In addition, incentive compensation increased $4,070 due to the increase in income before income taxes compared to the prior-year period, and stock-based compensation also increased $4,016.

Corporate interest and other income and expense was $18,845 of net expense for the three months ended April 30, 2021 compared to $30,997 of net expense for the three months ended April 30, 2020. This decrease in net expense of $12,152 included the change in the fair value of the Company’s deferred compensation plan assets due to market fluctuations and investment income, which resulted in income, net of $6,016 in the current year period as compared to expense, net of $5,316 in the prior-year period, a total net increase in other income of $11,332 compared to the prior-year period. The prior year total also included losses of $2,137 related to the Company's former equity investment as discussed in Note 2 to the Condensed Consolidated Financial Statements. Interest expense and fees on the debt facilities increased slightly by $121, in spite of the reduction in the outstanding debt balances and reduced interest rates compared to the prior-year period, due to the additional accelerated amortization of debt costs of $4,688 included in interest expense in the current-year period as a result of the Company's term loan debt repricing as discussed in Note 12 to the Condensed Consolidated Financial Statements

The overall effective income tax rate for the three months ended April 30, 2021 was 21.5% compared with (7.3)% for the three months ended April 30, 2020. The primary reason for the increase results from the global spread of the COVID-19 pandemic in the three months ended April 30, 2020 which negatively impacted the Company’s earnings while certain interest income not subject to corporate income tax had a significantly greater impact on the effective tax rate in relation to reduced pre-tax income.





34



Segment Reporting

NORTH AMERICAN TOWABLE RECREATIONAL VEHICLES

Analysis of the change in net sales for the three months ended April 30, 2021 compared to the three months ended April 30, 2020:
Three Months Ended
April 30, 2021
% of
Segment
Net Sales
Three Months Ended
April 30, 2020
% of
Segment
Net Sales
Change Amount
%
Change
NET SALES:
North American Towables
Travel Trailers$1,060,058 61.4 $455,434 58.9 $604,624 132.8
Fifth Wheels666,044 38.6 317,957 41.1 348,087 109.5
Total North American Towables$1,726,102 100.0 $773,391 100.0 $952,711 123.2
Three Months Ended
April 30, 2021
% of
Segment
Shipments
Three Months Ended
April 30, 2020
% of
Segment
Shipments
Change Amount
%
Change
# OF UNITS:
North American Towables
Travel Trailers47,143 78.4 21,518 76.2 25,625 119.1
Fifth Wheels13,004 21.6 6,715 23.8 6,289 93.7
Total North American Towables60,147 100.0 28,233 100.0 31,914 113.0
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:
%
Change
North American Towables
Travel Trailers13.7
Fifth Wheels15.8
Total North American Towables10.2

The increase in total North American towables net sales of 123.2% compared to the prior-year quarter resulted from a 113.0% increase in unit shipments and a 10.2% increase in the overall net price per unit due to the impact of changes in product mix and price. The increase in North American towables 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-year quarter. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $19,548 of the $952,711 increase and for 2.1% of the 123.2% increase. According to statistics published by RVIA, for the three months ended April 30, 2021, combined North American travel trailer and fifth wheel wholesale unit shipments increased 108.5% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the three months ended March 31, 2021 and 2020, our North American market share for travel trailers and fifth wheels combined was 40.6% and 41.8%, respectively. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.

The increase in the overall net price per unit within the travel trailer product line of 13.7% and the overall net price per unit within the fifth wheel product lines of 15.8% was primarily due to the combination of reduced sales discounts, product mix changes and selective net selling price increases compared to the prior-year quarter, with the fifth wheel product line increases also partially attributable to the addition of the Tiffin Group product lines, which generally carry a higher average net selling price.





35



North American towables cost of products sold increased $796,992 to $1,461,626, or 84.7% of North American towables net sales, for the three months ended April 30, 2021 compared to $664,634, or 85.9% of North American towables net sales, for the three months ended April 30, 2020. The changes in material, labor, freight-out and warranty costs comprised $762,820 of the $796,992 increase in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American towables net sales increased to 78.9% for the three months ended April 30, 2021 compared to 77.5% for the three months ended April 30, 2020, primarily as a result of an increase in the labor cost percentage due to the current competitive RV labor market conditions in Northern Indiana compared to the prior-year period. In addition, the material cost percentage increased slightly compared to the prior-year period, as the continued benefits from reduced sales discounts since the prior-year period, which effectively increases net selling prices and correspondingly decreases the material cost percentage, was more than offset by increasing material costs since the prior-year period. Total manufacturing overhead increased $34,172 with the increase in sales, but decreased as a percentage of North American towables net sales from 8.4% to 5.8% as the significantly increased net sales levels resulted in lower overhead costs per unit sold.

North American towables gross profit increased $155,719 to $264,476, or 15.3% of North American towables net sales, for the three months ended April 30, 2021 compared to $108,757, or 14.1% of North American towables net sales, for the three months ended April 30, 2020. The increase in gross profit was driven by the increase in net sales and the increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.

North American towables selling, general and administrative expenses were $89,015, or 5.2% of North American towables net sales, for the three months ended April 30, 2021 compared to $49,590, or 6.4% of North American towables net sales, for the three months ended April 30, 2020. This $39,425 increase is primarily due to the impact of the increase in North American towables net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $39,554. Sales-related travel, advertising and promotional costs also increased by $1,395, while legal, professional and related settlement costs decreased $2,105. The decrease in the overall selling, general and administrative expense as a percentage of North American towable net sales is primarily due to the increase in net sales.

North American towables income before income taxes was $167,693, or 9.7% of North American towables net sales, for the three months ended April 30, 2021 compared to $49,261 or 6.4% of North American towables net sales, for the three months ended April 30, 2020. The primary reason for 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 percentages noted above.





36



NORTH AMERICAN MOTORIZED RECREATIONAL VEHICLES

Analysis of the change in net sales for the three months ended April 30, 2021 compared to the three months ended April 30, 2020:
Three Months Ended
April 30, 2021
% of
Segment
Net Sales
Three Months Ended
April 30, 2020
% of
Segment
Net Sales
Change
Amount
%
Change
NET SALES:
North American Motorized
Class A$323,547 41.7 $96,849 36.7 $226,698 234.1
Class C342,425 44.2 144,826 54.9 197,599 136.4
Class B109,421 14.1 22,362 8.4 87,059 389.3
Total North American Motorized$775,393 100.0 $264,037 100.0 $511,356 193.7
Three Months Ended
April 30, 2021
% of
Segment
Shipments
Three Months Ended
April 30, 2020
% of
Segment
Shipments
Change
Amount
%
Change
# OF UNITS:
North American Motorized
Class A2,059 28.7 795 27.6 1,264 159.0
Class C3,983 55.6 1,910 66.2 2,073 108.5
Class B1,120 15.7 180 6.2 940 522.2
Total North American Motorized7,162 100.0 2,885 100.0 4,277 148.2
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:
%
Change
North American Motorized
Class A75.1
Class C27.9
Class B(132.9)
Total North American Motorized45.5

The increase in total North American motorized net sales of 193.7% compared to the prior-year quarter resulted from a 148.2% increase in unit shipments and a 45.5% increase in the overall net price per unit due to the impact of changes in product mix and price. The increase in North American motorized 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-year quarter. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $151,655 of the $511,356 increase or 29.7% of the 193.7% increase. According to statistics published by RVIA, for the three months ended April 30, 2021, combined North American motorhome wholesale unit shipments increased 106.0% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the three months ended March 31, 2021 and 2020, our North American market share for motorhomes was 48.9% and 38.2%, respectively, including 6.7% attributable to the Tiffin Group for the three months ended March 31, 2021. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.

The increase in the overall net price per unit within the Class A product line of 75.1% was predominately due to the impact of the addition of the higher-priced Tiffin Group product lines. The Tiffin Group Class A product lines are primarily higher-priced diesel units as opposed to the more moderately-priced gas units. The increase in the overall net price per unit within the Class C product line of 27.9% was primarily due to the impact of the addition of the higher-priced Tiffin Group Class C product lines, product mix changes within previously existing product lines and selective net selling price increases. The decrease in the overall net price per unit within the Class B product line of 132.9% is primarily due to product mix changes as a result of a much higher concentration of sales of lower-priced Class B products in the current-year quarter, including increased sales of previously existing lower-priced models, and the introduction of several new lower-priced models, as compared to the prior-year quarter.




37



North American motorized cost of products sold increased $441,739 to $679,105, or 87.6% of North American motorized net sales, for the three months ended April 30, 2021 compared to $237,366, or 89.9% of North American motorized net sales, for the three months ended April 30, 2020. The changes in material, labor, freight-out and warranty costs comprised $418,588 of the $441,739 increase primarily due to the increased net sales volume. Material, labor, freight-out and warranty costs as a combined percentage of North American motorized net sales decreased to 82.3% for the three months ended April 30, 2021 compared to 83.2% for the three months ended April 30, 2020, with the decrease primarily due to a decrease in the material cost percentage, partially offset by an increase in the labor cost percentage. The improvement in the material cost percentage is primarily due to both a 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 changes, primarily due to the addition of the recently acquired Tiffin Group products. These reductions to the material cost percentage were partially offset by the impact of increased material costs since the prior-year period. The labor cost percentage increase is primarily due to the current competitive RV labor market conditions in northern Indiana compared to the prior-year period. Total manufacturing overhead increased $23,151 due to the net sales increase, but decreased as a percentage of North American motorized net sales from 6.7% to 5.3% as the increased net sales resulted in lower overhead costs per unit sold.

North American motorized gross profit increased $69,617 to $96,288, or 12.4% of North American motorized net sales, for the three months ended April 30, 2021 compared to $26,671, or 10.1% of North American motorized net sales, for the three months ended April 30, 2020. The increase in gross profit was driven by the increase in net sales and the increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.

North American motorized selling, general and administrative expenses were $38,391, or 5.0% of North American motorized net sales, for the three months ended April 30, 2021 compared to $14,437, or 5.5% of North American motorized net sales, for the three months ended April 30, 2020. The primary reason for the $23,954 increase was the increase in North American motorized net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $19,533. Sales-related travel, advertising and promotional costs also increased by $1,266. The decrease in overall selling, general and administrative expense as a percentage of North American motorized net sales was primarily due to the increased net sales volume.

North American motorized income before income taxes was $54,780, or 7.1% of North American motorized net sales, for the three months ended April 30, 2021 compared to $10,915, or 4.1% of motorized net sales, for the three months ended April 30, 2020. The primary reason for the increase in North American motorized income before income taxes was the increase in North American motorized net sales. The primary reason for the increase in percentage were the decreases in the cost of products sold and selling, general and administrative expense percentages noted above.





38



EUROPEAN RECREATIONAL VEHICLES

Analysis of the change in net sales for the three months ended April 30, 2021 compared to the three months ended April 30, 2020:
Three Months Ended
April 30, 2021
% of
Segment
Net Sales
Three Months Ended
April 30, 2020
% of
Segment
Net Sales
Change
Amount
%
Change
NET SALES:
European
Motorcaravan$489,702 54.8 $380,023 61.8 $109,679 28.9
Campervan236,988 26.5 104,486 17.0 132,502 126.8
Caravan84,074 9.4 65,790 10.7 18,284 27.8
Other83,476 9.3 65,044 10.5 18,432 28.3
Total European$894,240 100.0 $615,343 100.0 $278,897 45.3
Three Months Ended
April 30, 2021
% of
Segment
Shipments
Three Months Ended
April 30, 2020
% of
Segment
Shipments
Change
Amount
%
Change
# OF UNITS:
European
Motorcaravan8,177 44.7 6,905 50.5 1,272 18.4
Campervan6,306 34.5 3,320 24.3 2,986 89.9
Caravan3,805 20.8 3,443 25.2 362 10.5
Total European18,288 100.0 13,668 100.0 4,620 33.8

IMPACT OF CHANGES IN FOREIGN CURRENCY, PRODUCT MIX AND PRICE ON NET SALES:
Foreign Currency %Mix and Price %%
Change
European
Motorcaravan12.5(2.0)10.5
Campervan12.524.436.9
Caravan12.54.817.3
Total European12.5(1.0)11.5

The increase in total European recreational vehicle net sales of 45.3% compared to the prior-year quarter resulted from an 33.8% increase in unit shipments and a 11.5% increase in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. The increase in European recreational vehicle 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-year quarter. This increase reflects the current heightened European market demand for the Campervan product line, and demand for the Motorcaravan products, as moderated by the negative impact of current chassis supply constraints on the Motorcaravan product line. The sales increase of $278,897 includes an increase of $76,683, or 12.5% of the 45.3% increase, due to the increase in foreign exchange rates since the prior-year period.

The overall net price per unit increase of 11.5% includes the impact of foreign currency exchange rate changes, which accounts for 12.5% of the 11.5% increase on a constant-currency basis.



39



The decrease in the overall net price per unit due to product mix and price within the Motorcaravan product line of 2.0% was due to the impact of product mix changes reflecting the trend toward the lower-priced models within this product category compared to the prior-year quarter. The increase in the overall net price per unit due to product mix and price within the Campervan product line of 24.4% was primarily due to the net impact of product mix changes, including more sales of units with higher chassis content compared to the prior-year quarter, in addition to selective net selling price increase. The increase in the overall net price per unit due to product mix and price within the Caravan product line of 4.8% was primarily due to product mix changes and selective net selling price increases compared to the prior-year quarter.

European recreational vehicle cost of products sold increased $221,297 to $774,081, or 86.6% of European recreational vehicle net sales, for the three months ended April 30, 2021 compared to $552,784, or 89.8% of European recreational vehicle net sales, for the three months ended April 30, 2020. The changes in material, labor, freight-out and warranty costs comprised $199,798 of the $221,297 increase primarily due to the increased net sales volume. Material, labor, freight-out and warranty costs as a combined percentage of European recreational vehicle net sales decreased to 77.9% for the three months ended April 30, 2021 compared to 80.7% for the three months ended April 30, 2020, with the decrease primarily due to a reduction in the material cost percentage, driven by net selective selling price increases, product mix changes and net material cost reductions due to higher volume levels compared to the prior-year period. This decrease was partially offset by an increase in the labor percentage due to additional costs incurred from increasing employment levels to accommodate current production levels. Total manufacturing overhead increased $21,499 with the increase in net sales, but decreased as a percentage of motorized net sales from 9.1% to 8.7% as the increased net sales levels resulted in lower overhead costs per unit sold.

European recreational vehicle gross profit increased $57,600 to $120,159, or 13.4% of European recreational vehicle net sales, for the three months ended April 30, 2021 compared to $62,559, or 10.2% of European recreational vehicle net sales, for the three months ended April 30, 2020. The increase in gross profit was driven by the increase in net sales and the increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.

European recreational vehicle selling, general and administrative expenses were $65,943, or 7.4% of European recreational vehicle net sales, for the three months ended April 30, 2021 compared to $49,597, or 8.1% of European recreational vehicle net sales, for the three months ended April 30, 2020. The $16,346 increase includes the impact of the increase in European recreational vehicle net sales and income before income taxes, which caused commissions, incentive and other compensation and benefits to increase by $9,695. Depreciation expense also increased by $3,631, while license and tax-related costs decreased $2,926, primarily due to the favorable settlement of a previously accrued non-income German tax structure fee. 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 net income before income taxes was $43,993, or approximately 4.9% of European recreational vehicle net sales, for the three months ended April 30, 2021 compared to $242, or 0.0% of European recreational vehicle net sales, for the three months ended April 30, 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, and an increase of 0.6% in other income as a percentage of European recreational vehicle net sales in the current-year period primarily from a non-recurring favorable settlement.




40



Nine Months Ended April 30, 2021 Compared to the Nine Months Ended April 30, 2020

NET SALES:Nine Months Ended
April 30, 2021
Nine Months Ended
April 30, 2020
Change
Amount
%
Change
Recreational vehicles
North American Towables$4,491,327 $2,958,186 $1,533,141 51.8
North American Motorized1,846,243 1,023,606 822,637 80.4
Total North America6,337,570 3,981,792 2,355,778 59.2
European2,230,191 1,745,465 484,726 27.8
Total recreational vehicles8,567,761 5,727,257 2,840,504 49.6
Other262,381 176,943 85,438 48.3
Intercompany eliminations(105,730)(60,547)(45,183)(74.6)
Total$8,724,412 $5,843,653 $2,880,759 49.3

# OF UNITS:
Recreational vehicles
North American Towables158,891 106,664 52,227 49.0
North American Motorized17,916 11,178 6,738 60.3
Total North America176,807 117,842 58,965 50.0
European45,095 39,251 5,844 14.9
Total221,902 157,093 64,809 41.3

GROSS PROFIT:% of
Segment
Net Sales
% of
Segment
Net Sales
Change
Amount
%
Change
Recreational vehicles
North American Towables$711,980 15.9$423,472 14.3$288,508 68.1
North American Motorized239,508 13.0105,647 10.3133,861 126.7
Total North America951,488 15.0529,119 13.3422,369 79.8
European287,177 12.9206,632 11.880,545 39.0
Total recreational vehicles1,238,665 14.5735,751 12.8502,914 68.4
Other, net60,344 23.035,099 19.825,245 71.9
Total$1,299,009 14.9$770,850 13.2$528,159 68.5

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreational vehicles
North American Towables$232,549 5.2$178,738 6.0$53,811 30.1
North American Motorized93,184 5.054,040 5.339,144 72.4
Total North America325,733 5.1232,778 5.892,955 39.9
European192,673 8.6186,226 10.76,447 3.5
Total recreational vehicles518,406 6.1419,004 7.399,402 23.7
Other18,561 7.17,596 4.310,965 144.4
Corporate82,819 52,368 30,451 58.1
Total$619,786 7.1$478,968 8.2$140,818 29.4




41



INCOME (LOSS) BEFORE INCOME TAXES:Nine Months Ended
April 30, 2021
% of
Segment
Net Sales
Nine Months Ended
April 30, 2020
% of
Segment
Net Sales
Change
Amount
%
Change
Recreational vehicles
North American Towables$456,752 10.2$207,009 7.0$249,743 120.6
North American Motorized139,768 7.647,606 4.792,162 193.6
Total North America596,520 9.4254,615 6.4341,905 134.3
European48,703 2.2(18,576)(1.1)67,279 362.2
Total recreational vehicles645,223 7.5236,039 4.1409,184 173.4
Other, net37,801 14.424,356 13.813,445 55.2
Corporate(140,067)(135,669)(4,398)3.2
Total$542,957 6.2$124,726 2.1$418,231 335.3

CONSOLIDATED

Consolidated net sales for the nine months ended April 30, 2021 increased $2,880,759, or 49.3%, compared to the nine months ended April 30, 2020. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $253,636 of the $2,880,759 increase in net sales or 4.3% of the 49.3% increase. Approximately 25.6% of the Company's net sales for the nine months ended April 30, 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 $2,880,759, or 49.3%, increase in consolidated net sales, $172,569, or 3.0% of the 49.3% 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 the nine months ended April 30, 2021 increased $528,159, or 68.5%, compared to the nine months ended April 30, 2020. Consolidated gross profit was 14.9% of consolidated net sales for the nine months ended April 30, 2021 and 13.2% for the nine months ended April 30, 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.

Selling, general and administrative expenses for the nine months ended April 30, 2021 increased $140,818, or 29.4%, compared to the nine months ended April 30, 2020.

Amortization of intangible assets expense for the nine months ended April 30, 2021 increased $14,465 compared to the nine months ended April 30, 2020, primarily due to higher dealer network amortization in the European segment as compared to the prior-year period and additional amortization of $4,248 due to the acquisition of the Tiffin Group as discussed in Note 2 to the Condensed Consolidated Financial Statements.

The impairment charges for the nine months ended April 30, 2020 of $10,057 related to the North American Towables reportable segment as discussed in Note 8 to the Condensed Consolidated Financial Statements.

Income before income taxes for the nine months ended April 30, 2021 was $542,957, as compared to $124,726 for the nine months ended April 30, 2020, an increase of $418,231, or 335.3%, primarily driven by the increase in net sales.

Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses, impairment charges, acquisition-related costs and income before income taxes are addressed below and in the segment reporting that follows.



42



Corporate costs included in selling, general and administrative expenses increased $30,451 to $82,819 for the nine months ended April 30, 2021 compared to $52,368 for the nine months ended April 30, 2020, an increase of 58.1%. This increase is primarily related to increased compensation costs, including an increase in deferred compensation expense of $14,975, which was effectively offset by the increase in other income related to the deferred compensation plan assets as noted below. Incentive compensation increased $9,013 due to the increase in income before income taxes compared to the prior-year period, and stock-based compensation also increased $6,999. Costs related to workers' compensation and product liability reserves recorded at Corporate increased by a total of $3,806, primarily due to favorable adjustments in the prior-year period. These increases were partially offset by a decrease in donations of $1,890, primarily due to a significant contribution to the National Forest Foundation in the prior-year period, and a decrease in marketing costs of $2,421.

Corporate interest and other income and expense was $57,248 of net expense for the nine months ended April 30, 2021 compared to $83,301 of net expense for the nine months ended April 30, 2020. This decrease in net expense of $26,053 included a decrease in interest expense and fees on the debt facilities of $6,388 due primarily to the reduction in the outstanding debt balances and reduced interest rates compared to the prior-year 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 a net increase in other income of $14,888 compared to the prior-year period. The prior-year total also included losses of $6,884 related to the Company's former equity investment as discussed in Note 2 to the Condensed Consolidated Financial Statements.

The overall effective income tax rate for the nine months ended April 30, 2021 was 20.9% compared with 18.5% for the nine months ended April 30, 2020. The primary reason for the increase relates to the jurisdictional mix of pre-tax income between the comparable periods.

Segment Reporting

NORTH AMERICAN TOWABLE RECREATIONAL VEHICLES

Analysis of the change in net sales for the nine months ended April 30, 2021 compared to the nine months ended April 30, 2020:
Nine Months Ended
April 30, 2021
% of
Segment
Net Sales
Nine Months Ended
April 30, 2020
% of
Segment
Net Sales
Change Amount%
Change
NET SALES:
North American Towables
Travel Trailers$2,729,317 60.8 $1,748,220 59.1 $981,097 56.1
Fifth Wheels1,762,010 39.2 1,209,966 40.9 552,044 45.6
Total North American Towables$4,491,327 100.0 $2,958,186 100.0 $1,533,141 51.8
Nine Months Ended
April 30, 2021
% of
Segment
Shipments
Nine Months Ended
April 30, 2020
% of
Segment
Shipments
Change Amount%
Change
# OF UNITS:
North American Towables
Travel Trailers123,566 77.8 81,164 76.1 42,402 52.2
Fifth Wheels35,325 22.2 25,500 23.9 9,825 38.5
Total North American Towables158,891 100.0 106,664 100.0 52,227 49.0
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:%
Change
North American Towables
Travel Trailers3.9
Fifth Wheels7.1
Total North American Towables2.8




43



The increase in total North American towables net sales of 51.8% compared to the prior-year period resulted from a 49.0% increase in unit shipments and a 2.8% 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 nine months ended April 30, 2021, combined North American travel trailer and fifth wheel wholesale unit shipments increased 55.7% compared to the same period last year. According to statistics published by Stat Surveys, for the nine-month periods ended March 31, 2021 and 2020, our North American market share for travel trailers and fifth wheels combined was 41.4% and 43.7%, respectively. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.

The increase in the overall net price per unit within the travel trailer product line of 3.9% and the increase in the overall net price per unit within the fifth wheel product lines of 7.1% were primarily due to the impacts of selective net price increases and product mix changes compared to the prior-year period.

North American towables cost of products sold increased $1,244,633 to $3,779,347, or 84.1% of North American towables net sales, for the nine months ended April 30, 2021 compared to $2,534,714, or 85.7% of North American towables net sales, for the nine months ended April 30, 2020. The changes in material, labor, freight-out and warranty costs comprised $1,187,719 of the $1,244,633 increase in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American towables net sales decreased to 78.1% for the nine months ended April 30, 2021 compared to 78.5% for the nine months ended April 30, 2020, primarily as a result of improvements in the material and warranty cost percentages, partially offset by an increase in the labor cost percentage. The improvement in the material cost percentage is primarily due to a reduction in sales discounts since the prior-year period, which effectively increases net selling prices and correspondingly 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 $56,914 with the increase in sales, but decreased as a percentage of North American towables net sales from 7.2% to 6.0%, as the increased net sales levels resulted in lower overhead cost per units sold.

North American towables gross profit increased $288,508 to $711,980, or 15.9% of North American towables net sales, for the nine months ended April 30, 2021 compared to $423,472, or 14.3% of North American towables net sales, for the nine months ended April 30, 2020. The increase in the gross profit was driven by the increase in net sales, and the increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.

North American towables selling, general and administrative expenses were $232,549, or 5.2% of North American towables net sales, for the nine months ended April 30, 2021 compared to $178,738, or 6.0% of North American towables net sales, for the nine months ended April 30, 2020. The primary reason for the $53,811 increase was the impact of the increase in North American towables net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $68,817. This increase was partially offset by the decrease in sales-related travel, advertising and promotional costs of $7,915, primarily due to the cancellation of the major North American RV shows, along with travel restrictions, in the current-year period due to the ongoing COVID-19 pandemic. Legal, professional and related settlement costs also decreased $6,560. 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 and legal, professional and related settlement costs in tandem with the increase in net sales.

North American towables income before income taxes was $456,752, or 10.2% of North American towables net sales, for the nine months ended April 30, 2021 compared to $207,009 or 7.0% of North American towables net sales, for the nine months ended April 30, 2020. The primary reason for 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 percentages noted above, and a 0.7% increase due to the combination of a lower amortization expense percentage this year and the impairment charges in the prior-year period as discussed in Note 8 to the Condensed Consolidated Financial Statements.



44



NORTH AMERICAN MOTORIZED RECREATIONAL VEHICLES

Analysis of the change in net sales for the nine months ended April 30, 2021 compared to the nine months ended April 30, 2020:
Nine Months Ended
April 30, 2021
% of
Segment
Net Sales
Nine Months Ended
April 30, 2020
% of
Segment
Net Sales
Change
Amount
%
Change
NET SALES:
North American Motorized
Class A$704,230 38.1 $384,055 37.5 $320,175 83.4
Class C912,124 49.4 561,424 54.8 350,700 62.5
Class B229,889 12.5 78,127 7.7 151,762 194.3
Total North American Motorized$1,846,243 100.0 $1,023,606 100.0 $822,637 80.4
Nine Months Ended
April 30, 2021
% of
Segment
Shipments
Nine Months Ended
April 30, 2020
% of
Segment
Shipments
Change
Amount
%
Change
# OF UNITS:
North American Motorized
Class A4,727 26.4 3,111 27.8 1,616 51.9
Class C10,928 61.0 7,434 66.5 3,494 47.0
Class B2,261 12.6 633 5.7 1,628 257.2
Total North American Motorized17,916 100.0 11,178 100.0 6,738 60.3
IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES:%
Change
North American Motorized
Class A31.5 
Class C15.5 
Class B(62.9)
Total North American Motorized20.1 

The increase in total North American motorized net sales of 80.4% compared to the prior-year period resulted from a 60.3% increase in unit shipments and a 20.1% increase in the overall net price per unit due to the impact of changes in product mix and price. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $226,275 of the $822,637 increase or 27.5% of the 80.4% increase. According to statistics published by RVIA, for the nine months ended April 30, 2021, combined North American motorhome wholesale unit shipments increased 36.0% compared to the same period last year. According to statistics published by Stat Surveys, for the nine-month periods ended March 31, 2021 and 2020, our North American market share for motorhomes was 41.7% and 37.7%, respectively, including 1.9% attributable to the Tiffin Group for the nine-month period ended March 31, 2021. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.

The increase in the overall net price per unit within the Class A product line of 31.5% and the Class C product line of 15.5% were both primarily due to the net impact of the addition of the higher-priced Tiffin Group product lines and selective net price increases. The Tiffin Group Class A product lines are primarily in the higher-priced diesel units as opposed to the more moderately-priced gas units. The decrease in the overall net price per unit within the Class B product line of 62.9% is primarily due to product mix changes 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 the prior-year period.





45



North American motorized cost of products sold increased $688,776 to $1,606,735, or 87.0% of motorized net sales, for the nine months ended April 30, 2021 compared to $917,959, or 89.7% of motorized net sales, for the nine months ended April 30, 2020. The changes in material, labor, freight-out and warranty costs comprised $652,417 of the $688,776 increase due to the increased sales volume. Material, labor, freight-out and warranty costs as a combined percentage of motorized net sales decreased to 82.0% for the nine months ended April 30, 2021 compared to 84.2% for the nine months ended April 30, 2020, with the decrease in percentage primarily due to decreases in both the material and warranty cost percentages, partially offset by an increase in the labor cost percentage. The improvement in the material cost percentage is primarily due to a 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 changes, 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 $36,359 due to the net sales increase, but decreased as a percentage of North American motorized net sales from 5.5% to 5.0%, as the increased net sales resulted in lower overhead costs per unit sold.

North American motorized gross profit increased $133,861 to $239,508, or 13.0% of motorized net sales, for the nine months ended April 30, 2021 compared to $105,647, or 10.3% of motorized net sales, for the nine months ended April 30, 2020. The increase in gross profit was due primarily to the increase in net sales, and the increase in the gross profit percentage was due to the decrease in the cost of products sold percentage noted above.

North American motorized selling, general and administrative expenses were $93,184, or 5.0% of motorized net sales, for the nine months ended April 30, 2021 compared to $54,040, or 5.3% of motorized net sales, for the nine months ended April 30, 2020. The primary reason for the $39,144 increase was the increase in North American motorized net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $35,264. The decrease in the overall selling, general and administrative expense as a percentage of North American motorized net sales was primarily due to the increased net sales volumes.

North American motorized income before income taxes was $139,768, or 7.6% of motorized net sales, for the nine months ended April 30, 2021 compared to $47,606, or 4.7% of motorized net sales, for the nine months ended April 30, 2020. The primary reason for the increase in North American motorized income before income taxes was the increase in North American motorized net sales. The primary reason for the increase in percentage was the decrease in the cost of products sold and selling, general and administrative expense percentages noted above.





46



EUROPEAN RECREATIONAL VEHICLES

Analysis of the change in net sales for the nine months ended April 30, 2021 compared to the nine months ended April 30, 2020:
Nine Months Ended
April 30, 2021
% of
Segment
Net Sales
Nine Months Ended
April 30, 2020
% of
Segment
Net Sales
Change Amount%
Change
NET SALES:
European
Motorcaravan$1,227,182 55.0 $1,044,178 59.8 $183,004 17.5
Campervan529,500 23.7 280,006 16.0 249,494 89.1
Caravan210,923 9.5 196,731 11.3 14,192 7.2
Other262,586 11.8 224,550 12.9 38,036 16.9
Total European$2,230,191 100.0 $1,745,465 100.0 $484,726 27.8
Nine Months Ended
April 30, 2021
% of
Segment
Shipments
Nine Months Ended
April 30, 2020
% of
Segment
Shipments
Change Amount%
Change
# OF UNITS: 
European
Motorcaravan20,586 45.7 19,787 50.4 799 4.0
Campervan14,704 32.6 9,255 23.6 5,449 58.9
Caravan9,805 21.7 10,209 26.0 (404)(4.0)
Total European45,095 100.0 39,251 100.0 5,844 14.9

IMPACT OF CHANGES IN FOREIGN CURRENCY, PRODUCT MIX AND PRICE ON NET SALES:
Foreign Currency %Mix and Price %%
Change
European
Motorcaravan9.93.613.5
Campervan9.920.330.2
Caravan9.91.311.2
Total European9.93.012.9

The increase in total European recreational vehicle net sales of 27.8% compared to the prior-year period resulted from an 14.9% increase in unit shipments and a 12.9% increase in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. This increase includes the current heightened European market demand for 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 $484,726 includes an increase of $172,569, or 9.9% of the 27.8% increase, due to the increase in foreign exchange rates since the prior-year period.

The overall net price per unit increase of 12.9% includes the impact of foreign currency exchange rate changes, which accounts for 9.9% of the 12.9% increase on a constant-currency basis.

The increase in the overall net price per unit due to product mix and price within the Motorcaravan product line of 3.6% was primarily due to product mix changes and selective net selling price increases since the prior-year period. The increase in the overall net price per unit due to product mix and price within the Campervan product line of 20.3% was primarily due to the net impact of product mix changes, including more sales of units with higher chassis content compared to the prior-year period. The increase in the overall net price per unit due to product mix and price within the Caravan product line of 1.3% was primarily due to the impact of product mix changes.





47



European recreational vehicle cost of products sold increased $404,181 to $1,943,014, or 87.1% of European recreational vehicle net sales, for the nine months ended April 30, 2021 compared to $1,538,833, or 88.2% of European recreational vehicle net sales, for the nine months ended April 30, 2020. The changes in material, labor, freight-out and warranty costs comprised $368,394 of the $404,181 increase primarily due to the increased net sales volume. Material, labor, freight-out and warranty costs as a combined percentage of European recreational vehicle net sales decreased to 77.8% for the nine months ended April 30, 2021 compared to 78.3% for the nine months ended April 30, 2020, with the decrease primarily due to a decrease in the material cost percentage due primarily to better material pricing due to the significant increase in volume. Total manufacturing overhead increased $35,787 with the volume increase but decreased as a percentage of motorized net sales from 9.9% to 9.3% as the increased net sales levels resulted in lower overhead costs per unit sold.

European recreational vehicle gross profit increased $80,545 to $287,177, or 12.9% of European recreational vehicle net sales, for the nine months ended April 30, 2021 compared to $206,632, or 11.8% of European recreational vehicle net sales, for the nine months ended April 30, 2020. The increase in gross profit is due to the increase in net sales, while the increase in gross profit as a percentage of European recreational vehicle net sales is due to the decrease in the cost of products sold percentage noted above.

European recreational vehicle selling, general and administrative expenses were $192,673, or 8.6% of European recreational vehicle net sales, for the nine months ended April 30, 2021 compared to $186,226, or 10.7% of European recreational vehicle net sales, for the nine months ended April 30, 2020. The primary reason for the $6,447 increase was the impact of the increase in European recreational vehicle net sales and income before income taxes, which caused commissions, incentive and other compensation and benefits to increase by $16,542. Professional fees also increased $7,375 and depreciation expense increased by $5,683. These increases were mostly offset by the decrease in sales-related travel, advertising and promotional costs of $21,551, primarily due to not participating in European trade shows, along with travel restrictions, in the current-year period 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 net income before income taxes was $48,703, or 2.2% of European recreational vehicle net sales, for the nine months ended April 30, 2021 compared to a net loss of $18,576, or 1.1% of European recreational vehicle net sales, for the nine months ended April 30, 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.

Financial Condition and Liquidity

As of April 30, 2021, we had $294,562 in cash and cash equivalents, of which $135,507 was held in the U.S. and the equivalent of $159,055, predominantly in Euros, was held in Europe, compared to $538,519 on July 31, 2020, of which $276,841 was held in the U.S. 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 U.S. The components of this $243,957 decrease in cash and cash equivalents are described in more detail below.

Net working capital at April 30, 2021 was $893,867 compared to $586,996 at July 31, 2020. This increase is primarily attributable to the increases in inventory and accounts receivable, partially offset by the decrease in cash and cash equivalents noted above and an increase in accounts payable. Capital expenditures of $81,162 for the nine months ended April 30, 2021 were made primarily for production building additions and improvements 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 our on-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.

Our 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. We may also consider strategic and opportunistic repurchases of shares 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").



48



We anticipate capital expenditures during the remainder of fiscal 2021 for the Company of approximately $65,000, primarily for certain building projects and replacing and upgrading machinery, equipment and other assets throughout our facilities to be used in the ordinary course of business.

The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under 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 payment 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 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, in addition to compliance with any then-existing financing facilities.

Operating Activities

Net cash provided by operating activities for the nine months ended April 30, 2021 was $175,073 as compared to net cash provided by operating activities of $237,269 for the nine months ended April 30, 2020.

For the nine months ended April 30, 2021, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles and stock-based compensation) provided $628,645 of operating cash. The change in net working capital resulted in the use of $453,572 of operating cash during that period, 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 production lines and capacity. In addition, work in process inventory is higher than normal at April 30, 2021 due to elevated material component shortages on otherwise substantially completed units. Accounts receivable also reflects a seasonal increase, and required income tax payments during the nine months ended April 30, 2021 exceeded the income tax provision for the period as well. These increases were partially offset by an increase in accounts payable primarily related to the inventory growth.

For the nine months ended April 30, 2020, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles, impairment and stock-based compensation) provided $299,634 of operating cash. The change in working capital resulted in the use of $62,365 of operating cash during that period, primarily due to a reduction in accounts payable and accrued liabilities, partially offset by a reduction in accounts receivable as shipments in April 2020 were significantly reduced due to the impact of the COVID-19 pandemic.

Investing Activities

Net cash used in investing activities for the nine months ended April 30, 2021 was $381,028, primarily due to $310,938 used in business acquisitions and capital expenditures of $81,162.

Net cash used in investing activities for the nine months ended April 30, 2020 was $55,687, primarily due to capital expenditures of $77,302, partially offset by proceeds from the dispositions of property, plant and equipment of $26,854.





49



Financing Activities

Net cash used in financing activities for the nine months ended April 30, 2021 was $42,803, consisting primarily of borrowings of $225,676 on the revolving asset-based credit facilities, which included $165,000 borrowed in connection with the acquisition of Tiffin Group and $60,676 for temporary working capital needs, partially offset by $184,247 in debt payments and regular quarterly dividend payments of $0.41 per share for each of the first three quarters of fiscal 2021 totaling $68,100.

Net cash provided by financing activities for the nine months ended April 30, 2020 was $24,993, consisting primarily of $379,222 in borrowings on the revolving asset-based credit facilities, which included $250,000 of precautionary borrowings taken during the onset of the COVID-19 pandemic, mostly offset by $284,435 in debt payments. Additionally, the Company made regular quarterly dividend payments of $0.40 per share for each of the first three quarters of fiscal 2020 totaling $66,239.

The Company increased its previous regular quarterly dividend of $0.40 per share to $0.41 per share in October 2020. In October 2019, the Company increased its previous regular quarterly dividend of $0.39 per share to $0.40 per share.

Accounting Standards

Reference is made to Note 1 of our Condensed Consolidated Financial Statements contained in this report for a summary of recently issued accounting standards applicable to the Company.



50



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in foreign 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 periodically uses foreign currency forward contracts to manage certain foreign exchange rate exposure related to anticipated sales transactions in Pounds Sterling with financial instruments whose maturity date, along with the realized gain or loss, occurs on or near the execution of the anticipated transaction.

The Company also holds $714,284 of debt denominated in Euros at April 30, 2021. A hypothetical 10% change in the Euro/U.S. Dollar exchange rate would change our April 30, 2021 debt balance by approximately $71,428.

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 April 30, 2021, the Company has $532,025 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 interest rate exposure at April 30, 2021, assumed floating-rate debt levels throughout the next 12 months and the effects of our existing derivative instruments, a one-percentage-point increase in interest rates (approximately 15.0% of our weighted-average interest rate at April 30, 2021) would result in an estimated $9,250 pre-tax reduction in net earnings over a one-year period.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-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, our 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 our management 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 our management, including our 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 our disclosure controls and procedures were effective at attaining the level of reasonable assurance noted above.

During the quarter ended April 30, 2021, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.




51



PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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”, 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.

ITEM 1A. RISK FACTORS

Although risks specific to the COVID-19 pandemic are ongoing, including supply chain disruptions, there have been no material changes in those risks or any others from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2020.

ITEM 6. EXHIBITS
ExhibitDescription
10.1
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Calculation Linkbase Document
101.PREInline XBRL Taxonomy Presentation Linkbase Document
101.LABInline XBRL Taxonomy Label Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101)

Attached as Exhibits 101 to this report are the following financial statements from the Company's Quarterly report on Form 10-Q for the quarter ended April 30, 2021 formatted in XBRL ("eXtensible Business Reporting Language"): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income and Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Changes in Stockholders' Equity and (v) related notes to these financial statements.



52



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


THOR INDUSTRIES, INC.
(Registrant)



DATE:June 8, 2021/s/ Robert W. Martin
Robert W. Martin
President and Chief Executive Officer
DATE:June 8, 2021/s/ Colleen Zuhl
Colleen Zuhl
Senior Vice President and Chief Financial Officer