THOR INDUSTRIES, INC.
Washington,
2021.
____.
THOR INDUSTRIES, INC.
| THOR INDUSTRIES, INC. | ||||||||||||||||||||
| (Exact name of registrant as specified in its charter) | ||||||||||||||||||||
| Delaware | 93-0768752 | |||||||||||||||||||
| (State or other jurisdiction of | (I.R.S. Employer | |||||||||||||||||||
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| 601 E. Beardsley Ave., Elkhart, IN | 46514-3305 | |||||||||||||||||||
| (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) | ||||||||||||||||||||
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| Common stock (Par value $.10 Per Share) | |||||||||||||||||||||||||||
| THO | |||||||||||
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Current assets: Cash and cash equivalents Accounts receivable, trade, net Accounts receivable, other, net Inventories, net Prepaid expenses and other Total current assets Property, plant and equipment, net Other assets: Goodwill Amortizable intangible assets, net Deferred income taxes, net Other Total other assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Accrued liabilities: Compensation and related items Product warranties Income and other taxes Promotions and rebates Product, property and related liabilities Other Total current liabilities Long-term debt Unrecognized tax benefits Other liabilities Total long-term liabilities Contingent liabilities and commitments Stockholders’ equity: Preferred stock – authorized 1,000,000 shares; none outstanding Common stock – par value of $.10 per share; authorized 250,000,000 shares; issued 62,765,824 and 62,597,110 shares, respectively Additionalpaid-in capital Retained earnings Less treasury shares of 10,070,459 and 10,011,069, respectively, at cost Total stockholders’ equity TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY Net sales Cost of products sold Gross profit Selling, general and administrative expenses Amortization of intangible assets Interest income Interest expense Other income, net Income before income taxes Income taxes Net income and comprehensive income Weighted-average common shares outstanding: Basic Diluted Earnings per common share: Basic Diluted Regular dividends declared and paid per common share Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of intangibles Amortization of debt issuance costs Deferred income tax provision (benefit) Gain on disposition of property, plant and equipment Stock-based compensation expense Changes in assets and liabilities (excluding acquisitions): Accounts receivable Inventories Prepaid income taxes, expenses and other Accounts payable Accrued liabilities Long-term liabilities and other Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Proceeds from dispositions of property, plant and equipment Acquisitions Other Net cash used in investing activities Cash flows from financing activities: Principal payments on revolving credit facility Regular cash dividends paid Principal payments on capital lease obligations Payments related to vesting of stock-based awards Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Supplemental cash flow information: Income taxes paid Interest paid Non-cash transactions: Capital expenditures in accounts payable data or except as otherwise specified) also includes $2,184 in amortization expense related to the acquired intangible assets. Cash Other current assets Property, plant and equipment Dealer network Trademarks Backlog Goodwill Current liabilities Total fair value of net assets acquired Less cash acquired Total cash consideration for acquisition, less cash acquired certain accrued expenses. The Company expects to finalize these values as soon as practical and no later than one year from the acquisition date. (3) European. The operations of the Recreational vehicles Towables Motorized Total recreational vehicles Other Intercompany eliminations Total Recreational vehicles Towables Motorized Total recreational vehicles Other, net Corporate Total Recreational vehicles Towables Motorized Total recreational vehicles Other, net Corporate Total segment: Recreational vehicles Towables Motorized Total recreational vehicles Other Corporate Total Recreational vehicles Towables Motorized Total recreational vehicles Other Corporate Total Weighted-average shares outstanding for basic earnings per share Unvested restricted stock and restricted stock units Weighted-average shares outstanding assuming dilution follows: Cash equivalents Deferred compensation plan assets Finished goods – RV Finished goods – other Work in process Raw materials Chassis Subtotal Excess of FIFO costs over LIFO costs Total inventories, net Land Buildings and improvements Machinery and equipment Total cost Less accumulated depreciation Property, plant and equipment, net Dealer networks/customer relationships Trademarks Design technology and other intangibles Non-compete agreements Total amortizable intangible assets For the fiscal year ending July 31, 2018 For the fiscal year ending July 31, 2019 For the fiscal year ending July 31, 2020 For the fiscal year ending July 31, 2021 For the fiscal year ending July 31, 2022 For the fiscal year ending July 31, 2023 and thereafter applicable observable yield curves. Beginning balance Provision Payments Ending balance 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 2.40% to 3.43%. 820, primarily based on quoted market prices. The fair value of other debt held by the Company approximates fair value. 2021. The overall effective income tax rate for the 31, 2021 were as follows: foreseeable future. 2021. subsidiaries. — North America 2020, with Tiffin Group's backlog included in the October 31, 2021 totals accounting for $781,427, or 9.6%, of the $8,109,294 increase. Dealer inventory levels remain low due to the continuing 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 well as an underlying desire by many to get back to nature and relax with family and friends. Towable Units Motorized Units Total calendar year 2021 wholesale shipments. This calendar year 2022 most likely forecast could range from a lower estimate of approximately 599,600 total units to an upper estimate of approximately 627,600 units. calendar years 2021 and 2022 may not follow typical seasonal patterns as dealers respond to ongoing high consumer demand and then rebuild their inventory to optimal stocking levels. Towable Units Motorized Units Total 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. Towable Units Motorized Units Total Towable Units Motorized Units Total Europe. further ramp up production and sales in the current fiscal year and has caused an increase in our work in process inventory as of October 31, 2021. We output. NET SALES: Recreational vehicles Towables Motorized Total recreational vehicles Other Intercompany eliminations Total # OF UNITS: Recreational vehicles Towables Motorized Total Recreational vehicles Towables Motorized Total recreational vehicles Other, net Total SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Recreational vehicles Towables Motorized Total recreational vehicles Other Corporate Total INCOME (LOSS) BEFORE INCOME TAXES: Recreational vehicles Towables Motorized Total recreational vehicles Other, net Corporate Total Recreational vehicles Towables Motorized Total 2020 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. 113.8%, primarily driven by the increase in net sales and the increase in the consolidated gross profit percentage noted above. prior-year period. period. comparable periods. NET SALES: Towables Travel Trailers and Other Fifth Wheels Total Towables # OF UNITS: Towables Travel Trailers and Other Fifth Wheels Total Towables 2020: According to the most recently published statistics from Stat Surveys, for the three months ended September 30, 2021 and 2020, our North American market share for travel trailers and fifth wheels combined was 42.0% and 42.4%, 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. NET SALES: Motorized Class A Class C Class B Total Motorized # OF UNITS: Motorized Class A Class C Class B Total Motorized 2020: According to the most recently published statistics from Stat Surveys, for the three months ended September 30, 2021 and 2020, our North American market share for motorhomes was 47.7% and 37.9%, respectively, including 5.0% attributable to the Tiffin Group for the three months ended October 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. quarter. NET SALES: Recreational vehicles Towables Motorized Total recreational vehicles Other Intercompany eliminations Total # OF UNITS: Recreational vehicles Towables Motorized Total Recreational vehicles Towables Motorized Total recreational vehicles Other, net Total SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Recreational vehicles Towables Motorized Total recreational vehicles Other Corporate Total INCOME (LOSS) BEFORE INCOME TAXES: Recreational vehicles Towables Motorized Total recreational vehicles Other, net Corporate Total NET SALES: Towables Travel Trailers and Other Fifth Wheels Total Towables # OF UNITS: Towables Travel Trailers and Other Fifth Wheels Total Towables NET SALES: Motorized Class A Class C Class B Total Motorized # OF UNITS: Motorized Class A Class C Class B Total Motorized 2020: 4.3% increase on a constant-currency basis. net sales, in amortization expense. compliance with any then-existing financing facilities. 2020. growth. $43,224. fiscal 2022. 2021. 2021. Senior Vice President and Chief Financial OfficerPART I – FINANCIAL INFORMATION (Unless otherwise indicated, amounts in thousands except share and per share data.)ITEM1. FINANCIAL STATEMENTSITEM 1. FINANCIAL STATEMENTSTHOR INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) January 31, 2018 July 31, 2017 ASSETS $ 109,775 $ 223,258 598,908 453,754 25,177 31,090 590,363 460,488 9,979 11,577 1,334,202 1,180,167 466,215 425,238 377,693 377,693 416,112 443,466 69,657 92,969 45,080 38,398 908,542 952,526 $ 2,708,959 $ 2,557,931 $ 354,499 $ 328,601 105,882 100,114 243,310 216,781 13,818 51,211 51,717 46,459 19,332 16,521 28,559 21,359 817,117 781,046 80,000 145,000 10,507 10,263 53,406 45,082 143,913 200,345 — — 6,277 6,260 245,390 235,525 1,839,990 1,670,826 (343,728 ) (336,071 ) 1,747,929 1,576,540 $ 2,708,959 $ 2,557,931 October 31, 2021 July 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 336,237 $ 445,852 Restricted cash 3,060 2,854 Accounts receivable, trade, net 1,095,970 796,489 Accounts receivable, other, net 70,403 153,443 Inventories, net 1,671,847 1,369,384 Prepaid income taxes, expenses and other 36,194 35,501 Total current assets 3,213,711 2,803,523 Property, plant and equipment, net 1,218,023 1,185,131 Other assets: Goodwill 1,915,388 1,563,255 Amortizable intangible assets, net 1,298,289 937,171 Deferred income tax assets, net 1,288 41,216 Other 122,072 123,792 Total other assets 3,337,037 2,665,434 TOTAL ASSETS $ 7,768,771 $ 6,654,088 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,055,342 $ 915,045 Current portion of long-term debt 12,159 12,411 Short-term financial obligations 19,398 25,720 Accrued liabilities: Compensation and related items 289,127 249,761 Product warranties 290,617 267,620 Income and other taxes 126,320 85,789 Promotions and rebates 105,209 128,869 Product, property and related liabilities 38,692 38,590 Dividends payable 23,917 — Other 75,961 70,980 Total current liabilities 2,036,742 1,794,785 Long-term debt 2,232,266 1,594,821 Deferred income tax liabilities, net 149,811 113,598 Unrecognized tax benefits 19,925 15,844 Other liabilities 197,785 186,934 Total long-term liabilities 2,599,787 1,911,197 Contingent liabilities and commitments 0 0 Stockholders’ equity: Preferred stock – authorized 1,000,000 shares; none outstanding — — Common stock – par value of $.10 per share; authorized 250,000,000 shares; issued 66,058,290 and 65,651,570 shares, respectively 6,606 6,565 Additional paid-in capital 473,775 460,482 Retained earnings 2,988,726 2,770,401 Accumulated other comprehensive income, net of tax 11,969 44,621 Less treasury shares of 10,438,198 and 10,285,329, respectively, at cost (378,237) (360,226) Stockholders’ equity attributable to THOR Industries, Inc. 3,102,839 2,921,843 Non-controlling interests 29,403 26,263 Total stockholders’ equity 3,132,242 2,948,106 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 7,768,771 $ 6,654,088 See Notes to the Condensed Consolidated Financial Statements.2THOR INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2018 AND 2017 (UNAUDITED) Three Months Ended
January 31, Six Months Ended
January 31, 2018 2017 2018 2017 $ 1,971,560 $ 1,588,525 $ 4,203,228 $ 3,297,056 1,701,232 1,376,823 3,599,715 2,848,602 270,328 211,702 603,513 448,454 117,088 96,969 251,351 199,279 13,796 15,279 27,354 33,494 401 177 782 330 1,354 2,486 2,766 5,046 2,574 1,220 5,332 3,200 141,065 98,365 328,156 214,165 61,313 33,583 119,998 70,638 $ 79,752 $ 64,782 $ 208,158 $ 143,527 52,694,680 52,582,134 52,653,303 52,543,050 52,861,140 52,740,959 52,839,752 52,723,450 $ 1.51 $ 1.23 $ 3.95 $ 2.73 $ 1.51 $ 1.23 $ 3.94 $ 2.72 $ 0.37 $ 0.33 $ 0.74 $ 0.66 Three Months Ended October 31, 2021 2020 Net sales $ 3,958,224 $ 2,537,360 Cost of products sold 3,302,800 2,158,508 Gross profit 655,424 378,852 Selling, general and administrative expenses 295,883 181,763 Amortization of intangible assets 33,214 27,427 Interest income 193 318 Interest expense 20,913 24,276 Other income, net 7,235 615 Income before income taxes 312,842 146,319 Income tax provision 68,039 30,680 Net income 244,803 115,639 Less: Net income attributable to non-controlling interests 2,561 1,882 Net income attributable to THOR Industries, Inc. $ 242,242 $ 113,757 Weighted-average common shares outstanding: Basic 55,422,854 55,238,164 Diluted 55,790,712 55,554,682 Earnings per common share: Basic $ 4.37 $ 2.06 Diluted $ 4.34 $ 2.05 Comprehensive income: Net income $ 244,803 $ 115,639 Other comprehensive income (loss), net of tax Foreign currency translation adjustment (35,167) (18,993) Unrealized gain on derivatives, net of tax 2,355 3,332 Total other comprehensive income (loss), net of tax (32,812) (15,661) Total Comprehensive income 211,991 99,978 Less: Comprehensive income attributable to non-controlling interests 2,401 1,995 Comprehensive income attributable to THOR Industries, Inc. $ 209,590 $ 97,983 See Notes to the Condensed Consolidated Financial Statements.3THOR INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JANUARY 31, 2018 AND 2017 (UNAUDITED) Six Months Ended January 31, 2018 2017 $ 208,158 $ 143,527 18,619 16,911 27,354 33,494 785 785 23,312 (4,291) (1,482) (2,262) 8,731 5,892 (138,930) (96,712) (129,875) (73,729) (7,140) (8,455) 27,235 28,591 11,283 6,353 8,795 2,712 56,845 52,816 (63,003) (50,924) 3,552 4,554 — (5,039) 960 (2,213) (58,491) (53,622) (65,000) (35,000) (38,994) (34,704) (186) (165) (7,657) (4,572) (111,837) (74,441) (113,483) (75,247) 223,258 209,902 $ 109,775 $ 134,655 $ 137,169 $ 97,180 $ 2,114 $ 4,466 $ 4,929 $ 2,904 Three Months Ended October 31, 2021 2020 Cash flows from operating activities: Net income $ 244,803 $ 115,639 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 31,739 26,812 Amortization of intangible assets 33,214 27,427 Amortization of debt issuance costs 2,424 2,723 Deferred income tax (benefit) provision (5,253) 4,601 (Gain) loss on disposition of property, plant and equipment 629 (79) Stock-based compensation expense 6,027 5,768 Changes in assets and liabilities: Accounts receivable (167,685) (36,495) Inventories, net (236,915) (322,047) Prepaid income taxes, expenses and other 4,729 (14,857) Accounts payable 71,613 127,585 Accrued liabilities 50,016 (20,601) Long-term liabilities and other 6,451 2,234 Net cash provided by (used in) operating activities 41,792 (81,290) Cash flows from investing activities: Purchases of property, plant and equipment (43,224) (24,708) Proceeds from dispositions of property, plant and equipment 141 975 Business acquisitions, net of cash acquired (747,937) (22,700) Net cash used in investing activities (791,020) (46,433) Cash flows from financing activities: Borrowings on revolving asset-based credit facilities 660,088 ��� Payments on revolving asset-based credit facilities (500,000) — Proceeds from issuance of senior unsecured notes 500,000 — Payments on term-loan credit facilities — (59,700) Payments on other debt (1,959) (3,096) Payments of debt issuance costs (8,445) — Payments on finance lease obligations (262) (119) Short-term financial obligations and other, net (5,825) (5,580) Net cash provided by (used in) financing activities 643,597 (68,495) Effect of exchange rate changes on cash and cash equivalents and restricted cash (3,778) (4,935) Net decrease in cash and cash equivalents and restricted cash (109,409) (201,153) Cash and cash equivalents and restricted cash, beginning of period 448,706 541,363 Cash and cash equivalents and restricted cash, end of period 339,297 340,210 Less: restricted cash 3,060 2,808 Cash and cash equivalents, end of period $ 336,237 $ 337,402 Supplemental cash flow information: Income taxes paid $ 17,956 $ 48,788 Interest paid $ 16,868 $ 18,207 Non-cash investing and financing transactions: Capital expenditures in accounts payable $ 4,320 $ 1,602 Quarterly dividends payable $ 23,917 $ 22,700 See Notes to the Condensed Consolidated Financial Statements.4THOR INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED OCTOBER 31, 2021 AND 2020 (UNAUDITED) Three Months Ended October 31, 2021 Accumulated Stockholders’ Additional Other Equity Non- Total Common Stock Paid-In Retained Comprehensive Treasury Stock Attributable controlling Stockholders’ Shares Amount Capital Earnings Income (Loss) Shares Amount to THOR Interests Equity Balance at August 1, 2021 65,651,570 $ 6,565 $ 460,482 $ 2,770,401 $ 44,621 10,285,329 $ (360,226) $ 2,921,843 $ 26,263 $ 2,948,106 Net income — — — 242,242 — — — 242,242 2,561 244,803 Restricted stock unit activity 406,720 41 7,266 — — 152,869 (18,011) (10,704) — (10,704) Dividends $0.43 per common share — — — (23,917) — — — (23,917) — (23,917) Stock-based compensation expense — — 6,027 — — — — 6,027 — 6,027 Other comprehensive income (loss) — — — — (32,652) — — (32,652) (160) (32,812) Acquisitions — — — — — — — — 739 739 Balance at October 31, 2021 66,058,290 $ 6,606 $ 473,775 $ 2,988,726 $ 11,969 10,438,198 $ (378,237) $ 3,102,839 $ 29,403 $ 3,132,242 Three Months Ended October 31, 2020 Accumulated Stockholders’ Additional Other Equity Non- Total Common Stock Paid-In Retained Comprehensive Treasury Stock Attributable controlling Stockholders’ Shares Amount Capital Earnings Income (Loss) Shares Amount to THOR Interests Equity Balance at August 1, 2020 65,396,531 $ 6,540 $ 436,828 $ 2,201,330 $ 26,993 10,197,775 $ (351,909) $ 2,319,782 $ 25,787 $ 2,345,569 Net income — — — 113,757 — — — 113,757 1,882 115,639 Restricted stock unit activity 255,039 25 198 — — 87,554 (8,317) (8,094) — (8,094) Dividends $0.41 per common share — — — (22,700) — — — (22,700) — (22,700) Stock-based compensation expense — — 5,768 — — — — 5,768 — 5,768 Other comprehensive income (loss) — — — — (15,774) — — (15,774) 113 (15,661) Balance at October 31, 2020 65,651,570 $ 6,565 $ 442,794 $ 2,292,387 $ 11,219 10,285,329 $ (360,226) $ 2,392,739 $ 27,782 $ 2,420,521 See Notes to the Condensed Consolidated Financial Statements.5NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(All dollarU.S. Dollar, Euro and British Pound Sterling amounts presented in thousands except share and per share data)1.Nature of Operations and Accounting Policies1. Nature of OperationsThor and Accounting PoliciesNature of OperationsTHOR Industries, Inc. was founded in 1980 and through itsis the sole owner of operating subsidiaries (collectively, the “Company” or “THOR”), manufactures a wide rangethat, combined, represent the world's largest manufacturer of recreational vehicles (“RVs”) at various manufacturing facilities located. The Company manufactures a wide variety of RVs primarily in Indiana, with additional facilities in Ohio, Oregon, Idahothe United States and Michigan. These products are soldEurope and sells those vehicles, as well as related parts and accessories, primarily to independent,non-franchise dealers primarily throughout the United States, Canada and Canada.Europe. The Company also sells component parts to both RV and original equipment manufacturers, including aluminum extruded components, and sells aftermarket component parts through dealers and retailers. Unless the context requires or indicates otherwise, all references to “Thor”,“THOR,” the “Company”, “we”,“Company,” “we,” “our” and “us” refer to ThorTHOR Industries, Inc. and its subsidiaries.The July 31, 20172021 amounts are derived from the annual audited financial statements.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 Form10-K for the fiscal year ended July 31, 2017.2021. Due to seasonality within the recreational vehicle industry, and the impact of the ongoing COVID-19 pandemic and supply constraints on our industry, among other factors, annualizing the results of operations for the sixthree months ended JanuaryOctober 31, 20182021 would not necessarily be indicative of the results expected for athe full fiscal year, and recreational vehicle sales are historically lowest during the second fiscal quarter ending January 31.Accounting PronouncementsIn January 2017, the Financial Accounting Standards Board (“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, with early adoption permitted after Januaryyear.2. AcquisitionsAirxcelOn September 1, 2017. This ASU is effective for2021, the Company in its fiscal year 2021 beginning on August 1, 2020. The Company is currently evaluating the impactacquired Wichita, Kansas-based AirX Intermediate, Inc. (“Airxcel”). Airxcel manufactures a comprehensive line of this ASU on its consolidated financial statements,high-quality component products which will depend on the outcomes of future goodwill impairment tests.In February 2016, the FASB issued ASUNo. 2016-02, “Leases (Topic 842),” which provides guidance on the recognition, measurement, presentation, and disclosure of leases. ASUNo. 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases with terms greater than 12 months. The principal difference from current guidance is that the lease assets and lease liabilities arising from operating leases will be recognized on the Consolidated Balance Sheet. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. This ASU is effective for the Company in its fiscal year 2020 beginning on August 1, 2019. The Company is currently evaluating the impact that implementing this ASU will have on its financial statements.In July 2015, the FASB issued ASUNo. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” ASUNo. 2015-11 requires inventory measured using any method other thanlast-in,first-out (“LIFO”) or the retail inventory methodare sold primarily to be subsequently measured at the lower of cost or net realizable value, rather than at the lower of cost or market. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory method is unchanged. ASUNo. 2015-11 is effective prospectively for fiscal years, and for interim periods within those years, beginning after December 15, 2016. The Company adopted ASUNo. 2015-11 on August 1, 2017 and there was no material impact on the Condensed Consolidated Financial Statements.5In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU will supersede most current revenue recognition guidance. Under this ASU, entities are required to identify the contract with a customer, identify the separate performance obligations in the contract, determine the transaction price, allocate the transaction price to the separate performance obligations in the contract and recognize the appropriate amount of revenue when (or as) the entity satisfies each performance obligation. This ASU will also require additional qualitative and quantitative disclosures about contracts with customers, significant judgments made in applying the revenue guidance, and assets recognized from the costs to obtain or fulfill a contract. ASUNo. 2014-09 is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2017. This ASU is effective for the Company in its fiscal year 2019 beginning on August 1, 2018. In applying this ASU, entities have the option of using either a full retrospective transition or a modified retrospective approach with the cumulative effect recognized as of the date of adoption. The Company plans to use the modified retrospective approach in applying this ASU.The Company is in the process of analyzing and quantifying the adoption impact of this ASUoriginal equipment RV manufacturers as well as evaluating the impact to internal controls, business processesconsumers via aftermarket sales through dealers and financial statement disclosures under this ASU. While the Company is still completing its assessment of all the potential impacts of this ASU, the Company does not anticipate adoption will have a material impact to the consolidated financial statements. The ASU will, however, require more extensive revenue-related disclosures. The Company will continue evaluation of the adoption of this ASU through the date of adoption, including assessing the impact of required financial statement disclosures.2.AcquisitionJayco, Corp.On June 30, 2016, the Company closed on a Stock Purchase Agreement (“Jayco SPA”) for the acquisition of all the issued and outstanding capital stock of towable and motorizedretailers. Airxcel provides industry-leading products in recreational vehicle manufacturer Jayco, Corp. (“Jayco”) for initialheating, cooling, ventilation, cooking, window coverings, sidewalls and roofing materials, among others. The purchase price of $750,000 in cash consideration of $576,060,is subject to adjustment. This acquisitionstandard post-closing adjustments and was funded through a combination of cash-on-hand and $625,000 of borrowings from the Company’s cash on hand and $360,000 from an asset-based revolving credit facility (“ABL”). In conjunction with the Airxcel acquisition, the Company expanded its existing ABL facility from $750,000 to $1,000,000, favorably amended certain terms of the ABL agreement and extended the term of the ABL as more fully describeddiscussed in Note 1112 to the Condensed Consolidated Financial Statements. The final purchase price adjustmentinterest rate remains unchanged.The Company acquired Airxcel as part of $5,039 was based onits long-term, strategic growth plan and the final determination of net assets as ofacquisition is expected to provide numerous benefits, including strengthening the June 30, 2016 closing dateRV supply chain, diversifying its revenue sources and was paid during the first quarter of fiscal 2017. Jayco operatesexpanding Airxcel's supply chain business in North American and Europe. Airxcel will operate as an independent operation in the same manner as the Company’sCompany's other recreational vehicle subsidiaries, and its towables operationssubsidiaries.The results of Airxcel are aggregated withinincluded in the Company’s towable recreational vehicle reportable segmentCondensed Consolidated Statements of Income and its motorized operations are aggregated withinComprehensive Income since the Company’s motorized recreational vehicle reportable segment. The Company purchased JaycoSeptember 1, 2021 acquisition date. Airxcel recorded net sales of $88,778, net of intercompany sales, and net income before income taxes, net of intercompany profit elimination, was not material for the three months ended October 31, 2021. Net income before income taxes included a charge of $6,791 related to complement its existing towablethe step-up in assigned value of acquired Airxcel inventory that was included in cost of products sold in the current period, and motorized RV product offerings and dealer base.6The following table summarizes the finalpreliminary estimated fair values assigned toof the JaycoAirxcel net assets acquired which were based on internalthe acquisition date. The Company is in the process of conducting a fair value analysis. While all amounts remain subject to adjustment, the areas subject to the most significant potential adjustment are intangible assets, deferred income tax liabilities and independent external valuations: $ 18,409 258,158 80,824 261,100 92,800 12,400 74,184 (216,776 ) 581,099 (18,409 ) $ 562,690 Cash $ 23,404 Inventory 71,150 Other assets 61,921 Property, plant and equipment 40,853 Amortizable intangible assets: Customer relationships 284,000 Trademarks 56,900 Design technology assets 60,600 Backlog 700 Goodwill 368,639 Current liabilities (109,336) Deferred income tax liabilities (79,115) Other liabilities (10,494) Non-controlling interest (739) Total fair value of net assets acquired 768,483 Less cash acquired (23,404) Total cash consideration for acquisition, less cash acquired $ 745,079 On the acquisition date, amortizable intangible assets had a weighted-average useful life of 19.318.3 years. The dealer network wascustomer relationships were valued based on the Discounted Cash Flow Method and iswill be amortized on an accelerated basis over 20 years. The trademarks were valued on the Relief from Royalty Method and arewill be amortized on a straight-line basis over 20 years. The design technology assets were valued on the Relief from Royalty Method and will be amortized on a straight-line basis over 10 years. Backlog was valued based on the Discounted Cash Flow Method and waswill be amortized on a straight-line basis over 32 months. GoodwillThe vast majority of the goodwill recognized as a result of this transaction is not deductible for tax purposes.6Tiffin GroupOn December 18, 2020, the Company acquired 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.7The following table summarizes the final fair values of the Tiffin Group net assets acquired on the acquisition date.3.Business SegmentsCash $ 13,074 Inventory 116,441 Other assets 53,860 Property, plant and equipment 48,262 Amortizable intangible assets: Dealer network 92,200 Trademarks 32,100 Non-compete agreements 1,400 Backlog 4,800 Goodwill 65,064 Current liabilities (81,423) Deferred income tax liabilities (37,263) Other liabilities (7,203) Total fair value of net assets acquired 301,312 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 is being amortized on an accelerated basis over 18 to 20 years. The trademarks were valued on the Relief from Royalty Method and is being amortized on a straight-line basis over 20 years. Backlogs were valued based on the Discounted Cash Flow Method and were amortized on a straight-line basis over five to seven months. Generally, the goodwill recognized as a result of this transaction is not deductible for tax purposes.The following unaudited pro forma information represents the Company’s results of operations as if the fiscal 2022 acquisition of Airxcel had occurred at the beginning of fiscal 2021 and the fiscal 2021 acquisition of the Tiffin Group had occurred at the beginning of fiscal 2020. These pro forma results may not be indicative of the actual results that would have occurred under the ownership and management of the Company.Three Months Ended Three Months Ended October 31, 2021 October 31, 2020 Net sales $ 4,005,682 $ 2,813,236 Net income attributable to THOR Industries, Inc. $ 249,055 $ 117,489 Basic earnings per common share $ 4.49 $ 2.13 Diluted earnings per common share $ 4.46 $ 2.11 83. Business SegmentsThe Company has two3 reportable segments, bothall related to recreational vehicles: (1) towablesNorth American Towables, (2) North American Motorized and (2) motorized. The towable recreational vehicle reportable segment consists of the following operating segments that have been aggregated: Airstream (towable), Heartland (including Bison, Cruiser RV and DRV), Jayco (including Jayco towable, Starcraft and Highland Ridge), Keystone (including CrossRoads and Dutchmen) and KZ (including Livin’ Lite). The motorized recreational vehicle reportable segment consists of the following operating segments that have been aggregated: Airstream (motorized), Jayco (including Jayco motorized and Entegra Coach) and Thor Motor Coach.Company’sCompany's Postle, subsidiaryTogo Group (rebranded as Roadpass Digital in November 2021) and recently acquired Airxcel subsidiaries are included in “Other,” which is anon-reportable segment.Other. Net sales included in Other mainly relaterelated primarily to the sale of component parts and aluminum extrusions and specialized component products.extrusions. Intercompany eliminations adjust for Postle and Airxcel sales to the Company’s North American towable and North American motorized segments, which are consummated at establishedarm’s-length transfer prices generally consistent with the selling prices of extrusion componentsproducts to third-party customers.All manufacturing is conducted within the United States. Total assets include those assets used in the operation of eachthird parties.The following tables reflect certain financial information by reportable andnon-reportable segment, and the Corporate assets consist primarily of cash and cash equivalents, deferred net income tax and deferred compensation plan assets and certain Corporate real estate holdings primarily utilized by Thor operating subsidiaries. Three Months Ended
January 31, Six Months Ended
January 31, Net sales: 2018 2017 2018 2017 $ 1,373,118 $ 1,082,249 $ 2,991,619 $ 2,293,122 559,909 474,972 1,126,520 936,426 1,933,027 1,557,221 4,118,139 3,229,548 68,013 53,891 150,932 112,887 (29,480 ) (22,587 ) (65,843 ) (45,379 ) $ 1,971,560 $ 1,588,525 $ 4,203,228 $ 3,297,056 Three Months Ended
January 31, Six Months Ended
January 31, Income (loss) before income taxes: 2018 2017 2018 2017 $ 116,728 $ 78,000 $ 275,579 $ 172,173 37,538 28,488 75,124 57,411 154,266 106,488 350,703 229,584 5,290 5,696 13,773 12,074 (18,491 ) (13,819 ) (36,320 ) (27,493 ) $ 141,065 $ 98,365 $ 328,156 $ 214,165 Total assets: January 31, 2018 July 31, 2017 $ 1,689,874 $ 1,535,029 625,140 500,761 2,315,014 2,035,790 159,630 156,996 234,315 365,145 $ 2,708,959 $ 2,557,931 7Three Months Ended October 31, NET SALES: 2021 2020 Recreational vehicles North American Towables $ 2,240,834 $ 1,392,044 North American Motorized 925,028 493,855 Total North America 3,165,862 1,885,899 European 632,997 602,488 Total recreational vehicles 3,798,859 2,488,387 Other 257,830 80,707 Intercompany eliminations (98,465) (31,734) Total $ 3,958,224 $ 2,537,360 Three Months Ended October 31, INCOME (LOSS) BEFORE INCOME TAXES: 2021 2020 Recreational vehicles North American Towables $ 266,282 $ 141,179 North American Motorized 88,898 41,567 Total North America 355,180 182,746 European (17,976) (5,506) Total recreational vehicles 337,204 177,240 Other, net 23,529 11,490 Corporate (47,891) (42,411) Total $ 312,842 $ 146,319 TOTAL ASSETS: October 31, 2021 July 31, 2021 Recreational vehicles North American Towables $ 2,137,149 $ 1,870,577 North American Motorized 1,244,251 1,073,506 Total North America 3,381,400 2,944,083 European 2,872,828 2,975,821 Total recreational vehicles 6,254,228 5,919,904 Other 1,223,899 272,350 Corporate 290,644 461,834 Total $ 7,768,771 $ 6,654,088 9 Three Months Ended
January 31, Six Months Ended
January 31, Depreciation and intangible amortization expense: 2018 2017 2018 2017 $ 17,223 $ 18,238 $ 34,016 $ 39,164 2,909 2,246 5,637 4,589 20,132 20,484 39,653 43,753 2,748 3,012 5,557 6,016 395 314 763 636 $ 23,275 $ 23,810 $ 45,973 $ 50,405 Three Months Ended
January 31, Six Months Ended
January 31, Capital acquisitions: 2018 2017 2018 2017 $ 18,821 $ 15,453 $ 36,413 $ 36,318 1,754 6,889 14,069 12,045 20,575 22,342 50,482 48,363 1,983 314 2,593 610 7,016 1,141 8,591 1,317 $ 29,574 $ 23,797 $ 61,666 $ 50,290 4.Earnings Per Common ShareDEPRECIATION AND INTANGIBLE AMORTIZATION EXPENSE: Three Months Ended October 31, 2021 2020 Recreational vehicles North American Towables $ 16,302 $ 15,807 North American Motorized 7,022 3,770 Total North America 23,324 19,577 European 34,713 31,323 Total recreational vehicles 58,037 50,900 Other 6,480 2,911 Corporate 436 428 Total $ 64,953 $ 54,239 Three Months Ended October 31, CAPITAL ACQUISITIONS: 2021 2020 Recreational vehicles North American Towables $ 13,134 $ 9,408 North American Motorized 8,629 1,745 Total North America 21,763 11,153 European 14,802 9,894 Total recreational vehicles 36,565 21,047 Other 4,417 1,444 Corporate 34 361 Total $ 41,016 $ 22,852 4. Earnings Per Common ShareThe 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
January 31, Six Months Ended
January 31, 2018 2017 2018 2017 52,694,680 52,582,134 52,653,303 52,543,050 166,460 158,825 186,449 180,400 52,861,140 52,740,959 52,839,752 52,723,450 At January 31, 2018Three Months Ended October 31, 2021 2020 Weighted-average common shares outstanding for basic earnings per share 55,422,854 55,238,164 Unvested restricted stock units and performance stock units 367,858 316,518 Weighted-average common shares outstanding assuming dilution 55,790,712 55,554,682 The Company excluded 30,333 and 2017, the Company had 35,149 and 27,742, respectively, of96,809 unvested restricted stock units and restrictedperformance stock units that have an antidilutive effect from its calculation of weighted average shares outstanding whichassuming dilution at October 31, 2021 and October 31, 2020, respectively.105. Derivatives and HedgingThe fair value of our derivative instruments designated as cash flow hedges and the associated notional amounts, presented on a pre-tax basis, were excluded from this calculation as their effect would be antidilutive.5.Fair Value MeasurementsOctober 31, 2021 July 31, 2021 Fair Value in Fair Value in Other Current Other Current Cash Flow Hedges Notional Liabilities Notional Liabilities Foreign currency forward contracts $ 20,674 $ 282 $ 41,899 $ 88 Interest rate swap agreements 432,250 8,033 482,138 11,420 Total derivative financial instruments $ 452,924 $ 8,315 $ 524,037 $ 11,508 Foreign currency forward contracts outstanding at October 31, 2021 are used to exchange British Pounds Sterling (“GBP”) for Euro. The total notional value of these contracts, including designated hedges and other contracts not designated, at October 31, 2021 is 15,000 GBP ($20,674), and these contracts have various maturity dates through January 31, 2022.The Company assessesentered into interest rate swaps to convert a portion of the inputs usedCompany’s long-term debt from floating rate to measurefixed rate debt. As of October 31, 2021, the outstanding swaps had notional contract values of $432,250, 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 $31,168 at October 31, 2021.Net Investment HedgesThe 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 October 31, 2021, net of tax, were $9,240. Gains for the three months ended October 31, 2020, net of tax, were $5,482.There were no amounts reclassified out of accumulated other comprehensive income (“AOCI”) pertaining to the net investment hedge during the three-month periods ended October 31, 2021 and October 31, 2020, respectively.Derivatives Not Designated as Hedging InstrumentsThe Company has certain other derivative instruments which have not been designated as hedges. These other derivative instruments had a notional amount totaling approximately $31,168 and a fair value of $1,786, which is included in Other current liabilities in the Condensed Consolidated Balance Sheet as of October 31, 2021. These other derivative instruments had a notional amount totaling approximately $32,466 and a fair value of $1,948, as of July 31, 2021. 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 certainthe following derivative instruments are as follows:Three Months Ended October 31, 2021 2020 Gain (Loss) on Derivatives Designated as Cash Flow Hedges Gain (Loss) recognized in Other Comprehensive Income, net of tax Foreign currency forward contracts $ (141) $ — Interest rate swap agreements (1)2,496 3,332 Total gain (loss) $ 2,355 $ 3,332 (1)Other comprehensive income (loss), net of tax, before reclassification from AOCI was $607 and $558 for the three months ended October 31, 2021 and 2020, respectively.11Three Months Ended October 31, 2021 2020 Interest Interest Sales Expense Sales Expense Gain (Loss) Reclassified from AOCI, Net of Tax Foreign currency forward contracts $ (13) $ — $ — $ — Interest rate swap agreements — (1,889) — (2,774) Gain (Loss) on Derivatives Not Designated as Hedging Instruments Amount of loss recognized in income, net of tax Interest rate swap agreements — 87 — (38) Total gain (loss) $ (13) $ (1,802) $ — $ (2,812) 6. InventoriesMajor classifications of inventories are as follows:October 31, 2021 July 31, 2021 Finished goods – RV $ 124,858 $ 114,843 Finished goods – other 93,452 57,810 Work in process 432,513 376,594 Raw materials 706,689 602,106 Chassis 392,575 292,921 Subtotal 1,750,087 1,444,274 Excess of FIFO costs over LIFO costs (78,240) (74,890) Total inventories, net $ 1,671,847 $ 1,369,384 Of the $1,750,087 and $1,444,274 of inventories at October 31, 2021 and July 31, 2021, $1,086,598 and $946,767, respectively, were valued on the first-in, first-out (“FIFO”) method, and $663,489 and $497,507, respectively, were valued on the last-in, first-out (“LIFO”) method.7. Property, Plant and EquipmentProperty, plant and equipment consists of the following:October 31, 2021 July 31, 2021 Land $ 149,202 $ 142,746 Buildings and improvements 847,315 837,065 Machinery and equipment 568,617 523,714 Rental vehicles 69,748 75,449 Lease right-of-use assets – operating 47,335 42,601 Lease right-of-use assets – finance 6,823 7,010 Total cost 1,689,040 1,628,585 Less accumulated depreciation (471,017) (443,454) Property, plant and equipment, net $ 1,218,023 $ 1,185,131 See Note 15 to the Condensed Consolidated Financial Statements for further information regarding the lease right-of-use assets.128. Intangible Assets and GoodwillThe components of amortizable intangible assets are as follows:October 31, 2021 July 31, 2021 Accumulated Accumulated Cost Amortization Cost Amortization Dealer networks/customer relationships $ 1,139,935 $ 347,875 $ 861,562 $ 327,751 Trademarks 366,152 66,670 311,208 62,675 Design technology and other intangibles 273,370 67,615 215,956 62,237 Non-compete agreements 1,400 408 1,400 292 Total amortizable intangible assets $ 1,780,857 $ 482,568 $ 1,390,126 $ 452,955 Estimated future amortization expense is as follows:For the remainder of the fiscal year ending July 31, 2022 $ 126,544 For the fiscal year ending July 31, 2023 147,390 For the fiscal year ending July 31, 2024 134,611 For the fiscal year ending July 31, 2025 122,120 For the fiscal year ending July 31, 2026 110,251 For the fiscal year ending July 31, 2027 and thereafter 657,373 $ 1,298,289 Changes in the carrying amount of goodwill for the three months ended October 31, 2021 are summarized as follows:North American Towables North American Motorized European Other Total Net balance as of August 1, 2021 $ 344,975 $ 53,875 $ 1,041,697 $ 122,708 $ 1,563,255 Fiscal 2022 activity: Goodwill acquired — — — 373,685 373,685 Foreign currency translation — — (21,552) — (21,552) Net balance as of October 31, 2021 $ 344,975 $ 53,875 $ 1,020,145 $ 496,393 $ 1,915,388 Changes in the carrying amount of goodwill for the three months ended October 31, 2020 are summarized as follows:North American Towables North American Motorized European Other Total Net balance as of August 1, 2020 $ 333,786 $ — $ 1,037,929 $ 104,826 $ 1,476,541 Fiscal 2021 activity: Goodwill acquired — — — 17,882 17,882 Foreign currency translation — — (13,140) — (13,140) Net balance as of October 31, 2020 $ 333,786 $ — $ 1,024,789 $ 122,708 $ 1,481,283 139. Concentration of RiskOne dealer, FreedomRoads, LLC, accounted for 14% of the Company’s consolidated net sales for both the three-month periods ended October 31, 2021 and October 31, 2020. The vast majority of the sales to this dealer are reported within the North American Towables and North American Motorized reportable segments. This dealer also accounted for 16% and 15% of the Company’s consolidated trade accounts receivable at October 31, 2021 and July 31, 2021, respectively. The loss of this dealer could have a material effect on the Company’s business.10. Fair Value MeasurementsThe financial assets and liabilities using a three-level hierarchy as prescribed in ASC 820, “Fair Value Measurements and Disclosures”, and as discussed in Note 9 in the Notes to the Consolidated Financial Statements in our fiscal 2017 Form10-K.The financial assets that wereare accounted for at fair value on a recurring basis at JanuaryOctober 31, 20182021 and July 31, 2017, all using Level 1 inputs,2021 are as follows: January 31, 2018 July 31, 2017 $ 47,258 $ 176,663 $ 36,776 $ 28,095 Input Level October 31, 2021 July 31, 2021 Cash equivalents Level 1 $ 204 $ 204 Deferred compensation plan mutual fund assets Level 1 $ 55,269 $ 51,085 Foreign currency forward contract liability Level 2 $ 282 $ 88 Interest rate swap liabilities Level 2 $ 9,820 $ 13,369 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.8Deferred compensation plan assets representaccounted for at fair value are investments in securities (primarily mutual funds) traded in an active market held for the benefit of certain employees of the Company as part of a deferred compensation plan. Deferred compensationAdditional plan asset balancesinvestments in corporate-owned life insurance are recorded as a component of Other long-term assets in the Condensed Consolidated Balance Sheets. An equalat their cash surrender value, not fair value, and offsetting liability is also recorded in regards to the deferred compensation plan as a component of Other long-term liabilities in the Condensed Consolidated Balance Sheets. Changes in thetherefore are not included above.The fair value of foreign currency forward contracts is estimated by discounting the plan assetsdifference between the contractual forward price and the related liability are reflected in Other income, net and Selling, general and administrative expenses, respectively, incurrent available forward price for the Condensed Consolidated Statements of Income and Comprehensive Income.6.InventoriesMajor classifications of inventories are as follows: January 31, 2018 July 31, 2017 $ 54,722 $ 24,904 34,177 27,862 144,714 117,319 257,765 214,518 135,555 109,555 626,933 494,158 (36,570 ) (33,670 ) $ 590,363 $ 460,488 Of the $626,933 and $494,158 of inventories at January 31, 2018 and July 31, 2017, $351,612 and $284,897, respectively, was valued on thelast-in,first-out (LIFO) basis, and $275,321 and $209,261, respectively, was valued on thefirst-in,first-out (FIFO) method.7.Property, Plant and EquipmentProperty, plant and equipment is stated at cost, net of accumulated depreciation, and consistsresidual maturity of the following: January 31, 2018 July 31, 2017 $ 53,045 $ 48,812 415,794 380,139 180,559 161,724 649,398 590,675 (183,183 ) (165,437 ) $ 466,215 $ 425,238 Property, plant and equipment at both January 31, 2018 and July 31, 2017 includes buildings and improvements under capital leasescontract using observable market rates. The fair value of $6,527 and related amortization included in accumulated depreciation of $1,496 and $1,224 at January 31, 2018 and July 31, 2017, respectively.98.Intangible Assets and GoodwillThe components of amortizable intangible assets are as follows: Weighted-Average Remaining January 31, 2018 July 31, 2017 Life in Years at Cost Accumulated Cost Accumulated January 31, 2018 Amortization Amortization 16 $ 404,960 $ 124,519 $ 404,960 $ 101,795 18 147,617 21,434 147,617 17,570 8 19,300 9,925 19,300 9,203 1 450 337 450 293 $ 572,327 $ 156,215 $ 572,327 $ 128,861 Estimated annual amortization expenseinterest rate swaps is as follows: $ 55,118 50,043 46,194 42,860 37,753 211,498 $ 443,466 Ofdetermined by discounting the recorded goodwill of $377,693 at both January 31, 2018 and July 31, 2017, $334,822 relates to the towable recreational vehicle reportable segment and $42,871 relates to the othernon-reportable segment.9.Concentration of RiskOne dealer, FreedomRoads, LLC, accounted for 22% and 18% of the Company’s consolidated net sales for the six-month periods ended January 31, 2018 and January 31, 2017, respectively. Sales to this dealer are reported within both the towables and motorized segments. This dealer also accounted for 20% of the Company’s consolidated trade accounts receivable at January 31, 2018 and 30% at July 31, 2017. The loss of this dealer could have a significant effectestimated future cash flows based on the Company’s business.10.Product Warranties11. Product WarrantiesThe Company generally provides retail customers of its products with aone-year ortwo-year warranty covering defects in material or workmanship, with longer warranties on certain structural components. The Company records a liability based on its best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors used in estimating the warranty liability include a history of units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditures over the warranty period. Management believes that the recorded warranty liabilities are adequate, however, actual claims incurred could differ from estimates, requiring adjustments to the liabilities. Warranty liabilities are reviewed and adjusted as necessary on at least a quarterly basis.Changes in our product warranty reservesliability during the indicated periods are as follows: Three Months Ended
January 31, Six Months Ended
January 31, 2018 2017 2018 2017 $ 231,999 $ 208,988 $ 216,781 $ 201,840 63,209 44,149 127,042 96,096 (51,898 ) (43,964 ) (100,513 ) (88,763 ) $ 243,310 $ 209,173 $ 243,310 $ 209,173 10Three Months Ended October 31, 2021 2020 Beginning balance $ 267,620 $ 252,869 Provision 84,539 50,872 Payments (70,253) (57,575) Acquisition 9,828 — Foreign currency translation (1,117) (612) Ending balance $ 290,617 $ 245,554 1411.Long-Term Debt12. Long-Term DebtThe components of long-term debt are as follows:October 31, 2021 July 31, 2021 Term loan $ 1,527,639 $ 1,540,013 Asset-based credit facility 159,935 — Senior unsecured notes 500,000 — Unsecured notes 29,113 29,728 Other debt 67,536 70,952 Gross long-term debt 2,284,223 1,640,693 Debt issuance costs, net of amortization (39,798) (33,461) Total long-term debt, net of debt issuance costs 2,244,425 1,607,232 Less: current portion of long-term debt (12,159) (12,411) Total long-term debt, net, less current portion $ 2,232,266 $ 1,594,821 The Company hasis a five-year creditparty to a seven-year term loan (“term loan”) agreement, which was entered into on June 30, 2016originally consisted of both a United States Dollar-denominated term loan tranche 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 June 30, 2021. SeeFebruary 1, 2026 and the ABL originally matured on February 1, 2024. In connection with the Airxcel acquisition discussed in Note 11 in2 to the Notes to theCondensed Consolidated Financial Statements, effective September 1, 2021, the Company expanded its existing ABL facility from $750,000 to $1,000,000, favorably amended certain terms of the ABL agreement and extended the maturity date of the ABL from February 1, 2024 to September 1, 2026, subject to a springing maturity at an earlier date if the maturity date of the Company's term loans have not been extended or refinanced. The ABL interest rate remains unchanged.As of October 31, 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 $432,250 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, 2021, the entire outstanding U.S. term loan tranche balance of $941,900 was subject to a LIBOR-based rate of 3.125%, but the interest rate on $482,138 of that balance was fixed at 5.466% through an interest rate swap, dated March 18, 2019, by swapping the underlying 1-month LIBOR rate for a fixed rate of 2.466%. The total interest rate on the October 31, 2021 outstanding Euro term loan tranche balance of $585,739 was 3.00%, and the total interest rate on the July 31, 2021 outstanding Euro term loan tranche of $598,113 was 3.00%.As of October 31, 2021, the total weighted average interest rate on the outstanding ABL borrowings of $159,935 was 1.314%. The Company may, generally at its option, pay any borrowings under the ABL, in our fiscal 2017 Form10-K for details regardingwhole or in part, at any time and from time to time, without penalty or premium.On October 14, 2021, the credit agreement. BorrowingsCompany issued an aggregate principal amount of $500,000 of 4.000% Senior Unsecured Notes due 2029 (“Senior Unsecured Notes”). The Senior Unsecured Notes will mature on October 15, 2029 unless redeemed or repurchased earlier. Net proceeds from the Senior Unsecured Notes, along with cash-on-hand, were used to repay $500,000 of borrowings outstanding on this facility totaled $80,000 at January 31, 2018the Company’s ABL and $145,000 at July 31, 2017. Asfor certain transaction costs. Interest on the Senior Unsecured Notes is payable in semi-annual installments on April 15 and October 15 of January 31, 2018,each year, beginning with the availablefirst payment on April 15, 2022. The Senior Unsecured Notes will rank equally in right of payment with all of the Company’s existing and unused credit linefuture senior indebtedness and senior to the Company’s future subordinated indebtedness, and effectively junior in right of payment to the Company’s existing and future secured indebtedness to the extent of the assets securing such indebtedness.The Company must make mandatory prepayments of principal under the revolver was $417,675,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 months ended October 31, 2021 or 2020.15Availability 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 0.50%, or LIBOR plus 1.25% to 1.50%, based on adjusted excess availability as defined in the ABL agreement. This agreement also includes a 0.20% unused facility fee.The unused availability under the ABL is generally available to the Company wasfor general operating purposes and, based on October 31, 2021 eligible accounts receivable and inventory balances, net of amounts drawn, totaled approximately $810,000.The unsecured notes of 25,000 Euro ($29,113) relate to long-term debt of our European segment. There are two series, 20,000 Euro ($23,290) with an interest rate of 1.945% maturing in complianceMarch 2025, and 5,000 Euro ($5,823) with the financial covenant in the credit agreement.Total contractual gross debt maturities are as follows: For the remainder of the fiscal year ending July 31, 2022 $ 12,159 For the fiscal year ending July 31, 2023 11,942 For the fiscal year ending July 31, 2024 12,066 For the fiscal year ending July 31, 2025 35,234 For the fiscal year ending July 31, 2026 1,690,691 For the fiscal year ending July 31, 2027 and thereafter 522,131 $ 2,284,223 For the three-month periodsthree months ended JanuaryOctober 31, 2018 and January 31, 2017, the total2021, interest expense on the facilityterm loan, ABL, Senior Unsecured Notes and other debt facilities was $547 and $1,826, respectively, and$17,643. For the weighted-average interest rate on borrowings from the facility was 2.70% and 2.23%, respectively. For thesix-month periodsthree months ended JanuaryOctober 31, 2018 and January 31, 2017, the total2020, interest expense on the facilityterm loan, ABL and other debt facilities was $1,158 and $3,704, respectively, and$20,588.In fiscal 2019, the weighted-average interest rate on borrowings from the facility was 2.63% and 2.19%, respectively. The Company incurred fees to secure the facility of $7,850 in fiscal 2016,term loan and ABL, and those feesamounts are being amortized ratably over the respective seven and five-year terms of those agreements. The Company also incurred and capitalized certain 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, and certain creditor fees of $2,127 related to the September 1, 2021 expansion of the ABL, which are being amortized over the remaining life of the extended ABL. In addition, the Company incurred fees of $8,445 relative to the $500,000 Senior Unsecured Notes issued October 14, 2021 discussed above, and those debt issuance costs are being amortized over the eight-year term of the agreement, or a shorter period if the credit agreement period is shortened for any reason.those notes. The Company recorded total charges related to the amortization of these term loan, ABL and Senior Unsecured Note fees, which are classified as interest expense, of $392$2,424 for both the three-month periodsthree months ended JanuaryOctober 31, 20182021. The Company recorded total charges related to the amortization of these term loan and JanuaryABL fees, which are classified as interest expense, of $2,723 for the three months ended October 31, 2017, and $785 for both thesix-month periods ended January 31, 2018 and January 31, 2017.2020. The unamortized balancesbalance of thesethe ABL facility fees were $5,364was $6,304 at JanuaryOctober 31, 20182021 and $6,149 at$7,005 as of July 31, 2017,2021 and areis included in Other long-term assets in the Condensed Consolidated Balance Sheets.The fair value of the Company’s term loan debt at October 31, 2021 and July 31, 2021 was $1,526,176 and $1,551,141, respectively, and the fair value of the Company’s Senior Unsecured Notes at October 31, 2021 was $496,250. The carrying value of the Company’s long-termterm-loan debt, excluding debt issuance costs, was $1,527,639 and $1,540,013 at JanuaryOctober 31, 2018 approximates fair2021 and July 31, 2021, respectively, and the carrying value asof the entire balance is subject to variable interest rates that the Company believes are market rates for a similarly situated company.Company’s Senior Unsecured Notes was $500,000 at October 31, 2021. The fair valuevalues of debt is largelythe Company’s term loan and Senior Unsecured Notes are primarily estimated using levelLevel 2 inputs as defined by ASC 820.12.Provision for Income Taxes1613. Provision for Income TaxesThe overall effective income tax rate for the three months ended JanuaryOctober 31, 20182021 was 43.5% compared with 34.1% for21.7%. This rate was favorably impacted by certain foreign tax rate differences which include certain interest income not subject to corporate income tax. The Company also recognized a tax benefit from the vesting of share-based compensation awards during the three months ended JanuaryOctober 31, 2017. The primary reason for the increase in the effective income tax rate was the impact of the Tax Cuts and Jobs Act (the “Tax Act”) that was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate has been reduced from 35.0% to 21.0% starting January 1, 2018, which results in the use of an estimated blended federal corporate income tax rate of 26.9% for the Company’s 2018 fiscal year. In addition, the Company was also required to revalue its net deferred tax assets to reflect the impact of the lower tax rates. This revaluation caused anon-recurring,non-cash reduction of the Company’s net deferred tax assets, and a corresponding charge to income tax expense, of approximately $34,000. This charge, with respect to the reduced federal income tax rate and the potential impact of limitations on the deductibility of executive compensation, among other items, represents a provisional amount in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”) based on currently available information and is subject to further refinement during the measurement period as defined by SAB 118. The Company also recorded a tax benefit of $12,535 in the three months ended January 31, 2018 from applying the lower federal income tax rate for fiscal 2018 to the results of operations for the first quarter of fiscal 2018.11sixthree months ended JanuaryOctober 31, 20182020 was 36.6% compared with 33.0% for the six months ended January 31, 2017. Income21.0%. This rate was favorably impacted by certain foreign tax expense for the six months ended January 31, 2018 included approximately $34,000 of additionalrate differences, which include certain interest income tax expense resulting from the revaluation of the Company’s net deferred tax assets in connection with the Tax Act. Income tax expense for thesix-month period ended January 31, 2018 also reflects the use of the estimated blended federalnot subject to corporate income tax rate of 26.9% as a result oftax.Within the Tax Act.Thenext 12 months, the Company anticipates a decrease of approximately $2,730$3,900 in unrecognized tax benefits, and $370$670 in accrued interest related to unrecognized tax benefits recorded as of JanuaryOctober 31, 2018, within the next 12 months2021, from expected settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations. Actual results may differ from these estimates.Generally, fiscal years 2015The Company files income tax returns in the U.S. federal jurisdiction and 2016 remain open forin many U.S. state and foreign jurisdictions. For U.S. federal income tax purposes, and fiscal years 2013, 2014, 2015 and 20162018 through 2020 remain open forand could be subject to examination. In major state and Canadian income tax purposes. The Company and its subsidiaries file a consolidated U.S. federal income tax return and multiple state income tax returns. The Company is currently under examination by certain state authorities for thejurisdictions, fiscal years ended July 31, 20132018 through 2015.2020 generally remain open and could be subject to examination. In major foreign jurisdictions, fiscal years 2015 through 2020 remain open and subject to examination. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions related to its state income tax returns in its liability for unrecognized tax benefits.13.Contingent Liabilities, Commitments and Legal Matters14. Contingent Liabilities, Commitments and Legal MattersThe Company’s total commercial commitments under standby repurchase obligations on global dealer inventory financing as discussed in Note 13 in the Notes to the Consolidated Financial Statements in our fiscal 2017 Form10-K,were $3,076,327$2,322,610 and $2,200,544$1,821,012 as of JanuaryOctober 31, 20182021 and July 31, 2017,2021, respectively. The commitment term is generally up to eighteen18 months.The Company accounts for the guarantee under repurchase agreements of dealers’ financing by deferring a portion of the related product sale that represents the estimated fair value of the guarantee at inception. The estimated fair value takes into account an estimate of the losses that may be incurred upon resale of any repurchases. This estimate is based on recent historical experience supplemented by the Company’s assessment of current economic and other conditions affecting its dealers. This deferred amount is included in the repurchase and guarantee reserve balances of $8,550$6,980 and $6,345$6,023 as of JanuaryOctober 31, 20182021 and July 31, 2017,2021, respectively, which areis included in Other current liabilities in the Condensed Consolidated Balance Sheets.Losses incurred related to repurchase agreements that were settled during the three-month periodsthree months ended JanuaryOctober 31, 20182021 and JanuaryOctober 31, 20172020 were not significant.material. Based on current market conditions, the Company believes that any future losses under these agreements will not have a significantmaterial 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”,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.12The Company issued a product recall in the fourth quarter of fiscal 2021 related to certain purchased parts utilized in certain of our North American towable products. The Company believes that it is legally entitled to full reimbursement of costs related to this recall from the applicable vendor suppliers. However, based on a current assessment, the Company has recorded an additional expense of $22,000 in the first quarter of fiscal 2022 as a component of sales, general and administrative costs due to collection uncertainties.1714.Stockholders’ EquityUnder15. LeasesThe 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 restricted stock unit (“RSU”) program, as discussed in Note 16leases include options to extend or terminate the leases, and these options have been included in the Notesrelevant lease term to the Consolidated Financial Statementsextent that they are reasonably certain to be exercised.The Company does not include significant restrictions or covenants in our fiscal 2017 Form10-K, RSU awards have been approved eachlease agreements, and residual value guarantees are not generally included within our operating leases.The components of lease costs for the three-month periods ended October 31, 2021 and October 31, 2020 were as follows:Three Months Ended October 31, 2021 2020 Operating lease cost $ 6,308 $ 3,877 Finance lease cost: Amortization of right-of-use assets 186 136 Interest on lease liabilities 125 126 Total lease cost $ 6,619 $ 4,139 Other information related to the financial performanceleases was as follows:Three Months Ended October 31, Supplemental Cash Flows Information 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6,309 $ 3,855 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 8,401 $ 2,348 Supplemental Balance Sheet Information October 31, 2021 July 31, 2021 Operating leases: Operating lease right-of-use assets $ 47,335 $ 42,601 Operating lease liabilities: Other current liabilities $ 10,257 $ 8,944 Other long-term liabilities 37,389 33,923 Total operating lease liabilities $ 47,646 $ 42,867 Finance leases: Finance lease right-of-use assets $ 6,823 $ 7,010 Finance lease liabilities Other current liabilities $ 1,106 $ 1,081 Other long-term liabilities 4,407 4,694 Total finance lease liabilities $ 5,513 $ 5,775 18October 31, 2021 July 31, 2021 Weighted-average remaining lease term: Operating leases 10.4 years 11.1 years Finance leases 4.9 years 5.1 years Weighted-average discount rate: Operating leases 3.4 % 3.2 % Finance leases 9.0 % 8.9 % Future minimum rental payments required under operating and finance leases as of the most recently completed fiscal year since October 2012. The awarded employee restricted stock units vest, and shares of common stock are issued, in equal installments on the first, second and third anniversaries of the date of grant. In addition, concurrent with the timing of the employee awards, the Nominating and Governance Committee of the Board of Directors (“Board”) has awarded restricted stock units to Board members that will vest, and shares of common stock will be issued, on the first anniversary of the date of the grant.Operating Leases Finance Leases For the remainder of the fiscal year ending July 31, 2022 $ 12,309 $ 1,169 For the fiscal year ending July 31, 2023 12,524 1,578 For the fiscal year ending July 31, 2024 9,464 1,059 For the fiscal year ending July 31, 2025 6,565 1,083 For the fiscal year ending July 31, 2026 4,693 1,107 For the fiscal year ending July 31, 2027 and thereafter 19,808 954 Total future lease payments 65,363 6,950 Less: amount representing interest (17,717) (1,437) Total reported lease liability $ 47,646 $ 5,513 16. Stockholders’ EquityTotal stock-based compensation expense recognized in the three-month periods ended JanuaryOctober 31, 20182021 and JanuaryOctober 31, 20172020 for these restricted stock unitstock-based awards totaled $6,027 and other stock-based compensation was $4,413$5,768, respectively.1917. Revenue RecognitionThe table below disaggregates revenue to the level that the Company believes best depicts how the nature, amount, timing and $3,154, respectively. Total expense recognized in thesix-month periods ended January 31, 2018 and January 31, 2017 for these restricted stock unit awards and other stock-based compensation was $8,731 and $5,892, respectively.For the restricted stock units that vested during thesix-month periods ended January 31, 2018 and January 31, 2017, portionsuncertainty of the vested shares awarded were withheld as treasury shares to coverCompany’s revenue and cash flows are affected by economic factors. Other RV-related revenues shown below in the recipients’ estimated withholding taxes. Tax payments made by the CompanyEuropean segment include sales related to these stock-based awards for the six months ended January 31, 2018accessories and January 31, 2017 totaled $7,657services, used vehicle sales at owned dealerships and $4,572, respectively.15.Subsequent EventOn February 15, 2018, the Company announced the formationRV rentals. All material revenue streams are considered point-in-time. Other sales relate primarily to component part sales to RV original equipment manufacturers and aftermarket sales through dealers and retailers, as well as aluminum extruded components.Three Months Ended October 31, NET SALES: 2021 2020 Recreational vehicles North American Towables Travel Trailers $ 1,409,624 $ 837,900 Fifth Wheels 831,210 554,144 Total North American Towables 2,240,834 1,392,044 North American Motorized Class A 409,499 158,555 Class C 360,006 275,399 Class B 155,523 59,901 Total North American Motorized 925,028 493,855 Total North America 3,165,862 1,885,899 European Motorcaravan 316,264 318,343 Campervan 177,783 143,400 Caravan 60,680 55,195 Other RV-related 78,270 85,550 Total European 632,997 602,488 Total recreational vehicles 3,798,859 2,488,387 Other 257,830 80,707 Intercompany eliminations (98,465) (31,734) Total $ 3,958,224 $ 2,537,360 2018. Accumulated Other Comprehensive Income (Loss)The components of a joint venture with Tourism Holdings Limitedother comprehensive income (loss) (“thl”OCI”) called TH2. The Company andthl each have a 50% ownership position in TH2 and equal representation on the board of directors of TH2. The Company contributed cash totaling approximately $47,000 to TH2 in early March 2018 whilethl contributed various assets with a fair value of approximately $47,000. The Company’s investment in TH2 was funded entirely from cash on hand. In accordance with the operating agreement, TH2’s future capital needs, which are not expected to be material to the Company, will be funded proportionally bythl and the Company. The Company’s investmentchanges in TH2 will be accountedthe Company's accumulated other comprehensive income (loss) (“AOCI”) by component were as follows:Three Months Ended October 31, 2021 Foreign Currency
Translation
AdjustmentUnrealized
Gain (Loss) on
DerivativesOther AOCI, net of tax, Attributable to THOR Non-controlling Interests Total AOCI Balance at beginning of period, net of tax $ 54,152 $ (8,655) $ (876) $ 44,621 $ (772) $ 43,849 OCI before reclassifications (35,007) 585 — (34,422) (160) (34,582) Income taxes associated with OCI before reclassifications (1)— (132) — (132) — (132) Amounts reclassified from AOCI — 2,528 — 2,528 — 2,528 Income taxes associated with amounts reclassified from AOCI — (626) — (626) — (626) OCI, net of tax for the fiscal year (35,007) 2,355 — (32,652) (160) (32,812) AOCI, net of tax $ 19,145 $ (6,300) $ (876) $ 11,969 $ (932) $ 11,037 Three Months Ended October 31, 2020 Foreign Currency
Translation
AdjustmentUnrealized
Gain (Loss) on
DerivativesOther AOCI, net of tax, Attributable to THOR Non-controlling Interests Total AOCI Balance at beginning of period, net of tax $ 46,512 $ (18,823) $ (696) $ 26,993 $ (855) $ 26,138 OCI before reclassifications (19,106) 732 — (18,374) 113 (18,261) Income taxes associated with OCI before reclassifications (1)— (174) — (174) — (174) Amounts reclassified from AOCI — 3,639 — 3,639 — 3,639 Income taxes associated with amounts reclassified from AOCI — (865) — (865) — (865) OCI, net of tax for the fiscal year (19,106) 3,332 — (15,774) 113 (15,661) AOCI, net of tax $ 27,406 $ (15,491) $ (696) $ 11,219 $ (742) $ 10,477 (1)We do not recognize deferred taxes for undera majority of the equity method of accounting.TH2 was formed to own, improveforeign currency translation gains and sell innovative and comprehensive digital platforms throughoutlosses because we do not anticipate reversal in the world. TH2 will offer a variety of products focused on enhancing the enjoyment, safety, connectivity and convenience of RV ownership and use.1321ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSUnlessotherwise indicated, all dollar amounts are presented in thousands except per share data.Forward LookingUnless otherwise indicated, all U.S. Dollar, Euro and British Pound Sterling amounts are presented in thousands except share and per share data.Forward-Looking StatementsThis report includes certain statements that are “forward looking”“forward-looking” statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward lookingforward-looking statements are made based on management’s current expectations and beliefs regarding future and anticipated developments and their effects upon Thor,THOR, and inherently involve uncertainties and risks. These forward lookingforward-looking statements are not a guarantee of future performance. We cannot assure you that actual results will not differ materially from our expectations. Factors which could cause materially different results include, among others,others:•the extent and impact from the continuation of the COVID-19 pandemic, along with the responses to contain the spread of the virus, or its variants, by various governmental entities or other actors, which may have negative effects on retail customer demand, our independent dealers, our supply chain, our labor force, our production or other aspects of our business;•the ability to ramp production up or down quickly in response to rapid changes in demand while also managing costs and market share;•the effect of raw material and commodity price fluctuations, and/or raw material, commodity or chassis supply restrictions, constraints;•the dependence on a small group of suppliers for certain components used in production;•the level and magnitude of warranty and recall claims incurred, incurred;•the ability of our suppliers to financially support any defects in their products;•legislative, regulatory and tax law and/or policy developments including their potential impact on our dealers and their retail customers or on our suppliers;•the costs of compliance with governmental regulation, regulation;•public perception of and the costs related to environmental, social and governance matters;•legal and compliance issues including those that may arise in conjunction with recent transactions, recently completed transactions;•lower consumer confidence and the level of discretionary consumer spending, spending;•interest rate fluctuations theand their potential impact of interest rate fluctuations on the general economy and, specifically, on our dealers and consumers, consumers;•the impact of exchange rate fluctuations;•restrictive lending practices which could negatively impact our independent dealers and/or retail consumers;•management changes, changes;•the success of new and existing products and services,services;•the ability to maintain strong brands and develop innovative products that meet consumer preferences,demands;•the ability to efficiently utilize existing production facilities;•changes in consumer preferences;•the risks associated with acquisitions, including: the pace of obtaining and producing at new production facilities, the pace of acquisitions and the 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 the integration of new acquisitions,and our ability to retain key management personnel of acquired companies, 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,dealers;•disruption of the availabilitydelivery of delivery personnel, units to dealers;•increasing costs for freight and transportation;22•asset impairment charges, cost structure changes, competition, charges;•competition;•the impact of potential losses under repurchase agreements, 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,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 ITEMItem 1A of our Annual Report on Form10-K for the year ended July 31, 2017.We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward lookingforward-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 OverviewWe were founded in 1980 and have grown to bebecome the largest manufacturer of recreational vehicles (“RVs”) in the world. We are also the largest manufacturer of RVs in North America. AccordingAmerica, and one of the largest manufacturers of RVs in Europe. In North America, according to Statistical Surveys, Inc. (“Stat Surveys”), for the calendar yearnine months ended December 31, 2017, Thor’sSeptember 30, 2021, THOR’s combined U.S. and Canadian market share was approximately 50.4%41.9% for travel trailers and fifth wheels combined and approximately 39.1%47.6% 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 nine months ended September 30, 2021 was approximately 24.9% for motorcaravans and campervans combined and approximately 18.1% 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. The Company also sells component parts to both RV and original equipment manufacturers, including aluminum extruded components, and sells aftermarket component parts through dealers and retailers. Our growth has been achieved both organically and bythrough 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.Recent EventsTaxReformOn December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law. The Tax Act includes numerous changes to tax laws impacting business, the most significant being a permanent reduction in the federal corporate income tax rate from 35.0% to 21.0%. The rate reduction took effectCOVID-19 pandemic, including its wide-reaching impact on January 1, 2018. As the Company’s 2018 fiscal year ends on July 31, 2018, the Company’s estimated federal corporate income tax rate for fiscal year 2018 will be prorated to a blended 26.9% rate, based on the applicable tax rates before and after the Tax Actnearly all facets of our operations and the numberRV industry, as well as related governmental actions and labor shortages throughout the supply chain and within THOR, have impacted and continue to impact our business and our financial results and financial position. In particular, the pandemic has, directly or indirectly, 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 daysoperations, 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, 2021.23Recent EventsOn October 14, 2021, the Company issued an aggregate principal amount of $500,000 of 4.000% Senior Unsecured Notes due 2029 (“Senior Unsecured Notes”). The Senior Unsecured Notes will mature on October 15, 2029 unless redeemed or repurchased earlier. Net proceeds from the Senior Unsecured Notes, along with cash-on-hand, were used to which the two different rates applied. As a resultrepay $500,000 of other Tax Act changes,borrowings outstanding on the Company’s income tax rateABL and for fiscalcertain transaction costs. Interest on the Senior Unsecured Notes is payable in semi-annual installments on October 15 and April 15 of each year, 2019beginning with the first payment on April 15, 2022. The Senior Unsecured Notes will be negatively impacted by the repealrank equally in right of payment with all of the domestic production activities (“Code Section 199”) deductionCompany's existing and limitations onfuture senior indebtedness and senior to the deductibilityCompany’s future subordinated indebtedness, and effectively junior in right of executive compensation.14As a resultpayment to the Company’s existing and future secured indebtedness to the extent of the reductionassets securing such indebtedness.On September 1, 2021, the Company acquired Wichita, Kansas-based AirX Intermediate, Inc. (“Airxcel”). Airxcel manufactures a comprehensive line of high-quality products which they sell primarily to RV original equipment manufacturers as well as consumers via aftermarket sales through dealers and retailers. Airxcel provides industry-leading products in recreational vehicle heating, cooling, ventilation, cooking, window coverings, sidewalls and roofing materials, among others. The purchase price of $750,000 in cash is subject to standard post-closing adjustments, and was funded through a combination of cash-on-hand and $625,000 in borrowings from the Company’s ABL. In conjunction with the Airxcel acquisition, the Company expanded its existing ABL facility from $750,000 to $1,000,000, favorably amended certain terms of the federal corporate income taxABL agreement and extended the term of the ABL as discussed in Note 12 to the Condensed Consolidated Financial Statements. The interest rate theremains unchanged.The Company was required to perform a revaluationacquired Airxcel as part of its net deferred tax assets. Based on currently available information, the Company has performed a preliminary analysis of the impact of the Tax Act as of the enactment date and has recorded anon-recurring,non-cash reduction of its net deferred tax assets due to the reduced federal income tax rate, and a corresponding charge to income tax expense, of approximately $34,000 in the three months ended January 31, 2018. The Company’s revaluation of its net deferred tax assets, with respect to the reduced federal income tax ratelong-term, strategic growth plan and the potential impact of limitations on the deductibility of executive compensation, among other items, are subject to further refinement, review and clarification under the new law as additional information becomes available. In addition to the benefit of a lower income tax rate in the three months ended January 31, 2018, an income tax benefit of $12,535 was also recorded in the three months ended January 31, 2018 to reflect the benefit of applying the lower federal tax rate to the results of operations for the first quarter of fiscal 2018.The reduction in the statutory US federal income tax rateacquisition is expected to positively impactprovide numerous benefits, including strengthening its supply chain, diversifying its revenue sources and expanding Airxcel’s supply chain business in North American and Europe. Airxcel will operate as an independent operation in the same manner as the Company’s fiscal 2018 and future USafter-tax earnings. The Company currently estimates an overall effective income tax rate between 27.0% and 29.0% for the remainder of fiscal year 2018, before consideration of any discrete tax items, as compared to an effective income tax rate of 32.7% for fiscal 2017. For fiscal 2019, after considering the lower federal income tax rate of 21.0%, an estimated blended state income tax rate, the elimination of the Code Section 199 deduction and the limitations on the deductibility of executive compensation, the Company currently estimates an overall effective income tax rate between 23.0% and 25.0%, before consideration of any discrete tax items.While the Tax Act is expected to generate additional cash flow in the future, our main priorities for the use of current and future available cash generated from operations will continue to focus on funding our growth, both organically and through acquisitions, maintaining and growing our regular dividends over time, and reducing indebtedness. Strategic share repurchases or special dividends, as determined by the Company’s Board, will also continue to be considered. As a component of funding our growth, we anticipate making additional investments in our workforce through a variety of initiatives, including enhanced employee training and development programs and other initiatives that will be introduced in fiscal 2018 and fiscal 2019 and targeted to the varying needs of our individual operating entities.Joint VentureOn February 15, 2018, the Company announced the formation of a joint venture with Tourism Holdings Limited (“thl”) called TH2. The Company andthl each have a 50% ownership position in TH2 and equal representation on the board of directors of TH2. The Company contributed cash totaling approximately $47,000 to TH2 in early March 2018 whilethl contributed various assets with a fair value of approximately $47,000. The Company’s investment in TH2 was funded entirely from cash on hand. In accordance with the operating agreement, TH2’s future capital needs, which are not expected to be material to the Company, will be funded proportionally bythl and the Company. The Company’s investment in TH2 will be accounted for under the equity method of accounting.TH2 was formed to own, improve and sell innovative and comprehensive digital platforms throughout the world. TH2 will offer a variety of products focused on enhancing the enjoyment, safety, connectivity and convenience of RV ownership and use.Industry OutlookThe Company monitors industry conditions in the North American RV market through the useusing a number of resources including its own performance tracking and modeling. The Company also considers monthly wholesale shipment data as reported by the Recreation Vehicle Industry Association (“RVIA”), which is typically issued on aone-month lag and represents manufacturers’ North American RV production and delivery to dealers. In addition, we also monitor monthly North American retail sales trends as reported by Stat Surveys, whose data is typically issued on amonth-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.In correlation with current retail demand,production and net sales.North American RV independent dealer inventory of Thorour North American RV products as of JanuaryOctober 31, 20182021 increased 25.5%36.9% to approximately 155,65082,400 units, compared to approximately 124,00060,200 units as of JanuaryOctober 31, 2017. We believe our2020. The acquisition of Tiffin Group since the prior-year period accounted for approximately 550 of the 82,400 units as of October 31, 2021.As of October 31, 2021, North American dealer inventory levels are appropriate for seasonal consumer demand.Thor’scontinue to be well below optimal stocking levels, which has led to ongoing record backlogs. THOR’s North American RV backlog as of JanuaryOctober 31, 20182021 increased $708,013,$8,109,294, or 33.9%122.6%, to $2,798,357$14,722,076 compared to $2,090,344$6,612,782 as of JanuaryOctober 31, 2017.1524North American Industry Wholesale StatisticsKey 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 Year % 2017 2016 Increase Change 441,961 375,950 66,011 17.6 62,638 54,741 7,897 14.4 504,599 430,691 73,908 17.2 U.S. and Canada Wholesale Unit Shipments Nine Months Ended September 30, Increase % 2021 2020 (Decrease) Change North American Towable Units 410,215 271,770 138,445 50.9 North American Motorized Units 42,422 28,330 14,092 49.7 Total 452,637 300,100 152,537 50.8 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 towable 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 calendar 2021 year-to-date period.In December 2021, RVIA releases calendar year unit shipment forecasts periodically throughout the calendar year, updating their prior forecast by factoring actual year-to-date wholesale and retail unit shipments and current economic indicators into their new forecast. We expect the next RVIAissued a revised forecast for calendar year 2018 will be published in March 20182021 wholesale unit shipments. Under a most likely scenario, towable and will take into considerationmotorized unit shipments are projected to increase to approximately 545,400 units and 56,800 units, respectively, for an annual total of approximately 602,200 units, up 39.9% from the current2020 calendar year wholesale shipments. The most likely forecast for calendar year 2021 could range from a lower estimate of approximately 593,600 total units to an upper estimate of approximately 610,800 units.As part of their December 2021 forecast, RVIA also revised their estimates for calendar year 2022 wholesale unit shipments. In the most likely scenario, towable and retail shipment trends, such asmotorized unit shipments are projected to increase to an approximated annual total of 613,700 units, or 1.9% higher than the 8,238 unit or 11.7% increase in retail registrationsmost likely scenario for the three months ended December 31, 2017 vs. the comparable prior-year period as reported by Stat Surveys.North American Industry Retail StatisticsWe believe that retail demand is the key to continued growth in the North American RV industry, and that annual North American RV industry wholesale shipments will generally be in line with annual retail sales going forward.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 Year % 2017 2016 Increase Change 408,309 365,773 42,536 11.6 56,963 50,281 6,682 13.3 465,272 416,054 49,218 11.8 U.S. and Canada Retail Unit Registrations Nine Months Ended September 30, Increase % 2021 2020 (Decrease) Change North American Towable Units 431,754 376,667 55,087 14.6 North American Motorized Units 42,760 41,187 1,573 3.8 Total 474,514 417,854 56,660 13.6 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 continuously updated.25We 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 StatisticsThe Company’sCompany's North American wholesale RV shipments, for the calendar yearsnine-month periods ended December 31, 2017September 30, 2021 and 20162020 to correspond to the North American industry wholesale periods noted above, were as follows (includes Jayco results from the June 30, 2016 date of acquisition forward)(2021 period includes Tiffin Group shipments): U.S. and Canada Wholesale Unit
Shipments Calendar Year % 2017 2016 Increase Change 232,231 164,015 68,216 41.6 26,029 17,827 8,202 46.0 258,260 181,842 76,418 42.0 16U.S. and Canada Wholesale Unit Shipments Nine Months Ended September 30, Increase % 2021 2020 (Decrease) Change North American Towable Units 178,249 116,323 61,926 53.2 North American Motorized Units 21,229 11,426 9,803 85.8 Total 199,478 127,749 71,729 56.1 Company North American Retail StatisticsRetail statistics of the Company’s North American RV products, as reported by Stat Surveys, for the calendar yearsnine-month periods ended December 31, 2017September 30, 2021 and 20162020 to correspond to the North American industry retail periods noted above, (and adjusted to include Jayco’s results from the June 30, 2016 date of acquisition forward) were as follows: U.S. and Canada Retail Unit
Registrations Calendar Year % 2017 2016 Increase Change 200,931 150,566 50,365 33.5 22,283 15,986 6,297 39.4 223,214 166,552 56,662 34.0 Ourfollows (2021 period includes Tiffin Group registrations):U.S. and Canada Retail Unit Registrations Nine Months Ended September 30, Increase % 2021 2020 (Decrease) Change North American Towable Units 176,997 157,867 19,130 12.1 North American Motorized Units 20,349 15,757 4,592 29.1 Total 197,346 173,624 23,722 13.7 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.North American OutlookThe 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 ends. In the near-term, we believe consumers are likely to continue altering their future vacation and travel plans, opting for fewer vacations via air travel, cruise ships and hotels, and preferring vacations that RVs are uniquely positioned to provide, where they can continue practicing social distancing while also allowing them the ability to explore or unwind, often close to home. Minimal-contact vacation options like road trips and camping may prove ideal for people who want to limit pandemic-related risks involved with close personal interactions. We will, however, need to continue to manage through anticipated supply chain issues noted below, which may limit the level to which we can increase output in the near term.26Longer term, a positive outlook for the North American RV segment is supported by surveys conducted by THOR, RVIA and others, which show that Americans love the freedom of the outdoors and the enrichment that comes with living an active lifestyle. RVs allow people to be in control of their travel experiences, going where they want, when they want and with the people they want. The RV units we design, produce and sell allow people to spend time outdoors pursuing their favorite activities, creating cherished moments and deeply connecting with family and friends. Based on the increasing value consumers place on these factors, we expect to see long-term growth in the North American RV industry. Longer term, we also believe retail sales will be dependent upon various economic conditions faced by consumers, such as the rate of unemployment, the level of consumer confidence, the growth in disposable income of consumers, changes in interest rates, credit availability, the health of the housing market, and changes in tax rates and fuel availability and prices. With continued stability or improvement in consumer confidence,In addition, we believe that the availability of camping and RV parking facilities will be an important factor in the future growth of the industry and view both the significant recent investments and the future committed investments by campground owners, states and the federal government in camping facilities and accessibility to state and federal parks and forests to be positive long-term factors.Economic and industry-wide factors that have historically affected, 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 will 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.We continue to be 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. The North American RV industry has, from time to time in the past and continuing into the quarter ended October 31, 2021, experienced shortages of chassis for various other reasons, including component shortages, production delays and intermittent work stoppages at the chassis manufacturers. If these shortages continue for a prolonged period for any reason, it would have a negative impact on our sales and earnings.The North American RV industry is also facing continuing cost increases, supply shortages and 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 work in process inventory as of October 31, 2021. We believe these shortages and delays will continue to result in production delays or adjusted production rates, which will limit our ability to ramp up production to meet existing demand and could have a negative impact on our results of operations. If shortages of chassis or other component parts were to become more significant or longer term in nature, or if other factors were to impact our suppliers’ ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected. Where possible, we continue to work closely with our suppliers on various supply chain strategies to minimize these constraints, and we continue to identify alternative suppliers. The geographic centrality of the North American RV industry in northern Indiana, where the majority of our facilities and many of our suppliers are located, could exacerbate supply chain and other COVID-19 related risks, should northern Indiana, or any of the other areas in which we, our suppliers or our customers operate, become disproportionately impacted by the pandemic or other factors.Industry Outlook — EuropeThe 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 22.0% and 7.8% of the caravan and motorcaravan (including campervans) European market for the nine months ended September 30, 2021, respectively, does not provide OEM-specific information. Industry wholesale credit,shipment data for the European RV market is not available.27Within 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 historic 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 October 31, 2021 increased $1,039,883, or 45.0%, to $3,348,355 compared to $2,308,472 as of October 31, 2020, with the increase attributable to a number of causes, including the perceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance, a reduction in commercial air travel and cruises as compared to historic levels, an increase in various marketing campaigns to promote sales, and the low independent European RV dealer inventory levels noted above.European Industry Retail StatisticsKey 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 Nine Months Ended September 30, % Nine Months Ended September 30, % 2021 2020 Change 2021 2020 Change OEM Reporting Countries (1)136,627 119,220 14.6 50,525 49,956 1.1 Non-OEM Reporting Countries (1)14,904 12,605 18.2 16,481 13,100 25.8 Total 151,531 131,825 14.9 67,006 63,056 6.3 (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)Nine Months Ended September 30, Increase % 2021 2020 (Decrease) Change Motorcaravan and Campervan 33,999 31,295 2,704 8.6 Caravan 9,170 10,307 (1,137) (11.0) Total OEM-Reporting Countries 43,169 41,602 1,567 3.8 (1)Company retail registration statistics have been compiled from individual countries reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.”Note: Data from the ECF is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various countries.28European OutlookOur 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 continue expanding our customer reach, in particular, to new and younger consumer segments.The extent to which the COVID-19 pandemic may impact our business in future periods remains uncertain and unpredictable. Our outlook for future growth in European RV retail sales depends upon various economic conditions in the respective countries in which we sell, and also depends on our ability to manage through supply chain issues that will limit the level to which we can increase output in the near term. 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, the absence of negative economic factors, we would expect to see continuedmost recently, travel safety considerations all influence retail sales. We believe our long-term outlook for future growth in the RV industry.Aretail sales remains positive future outlook for the RV segment is supported by favorable demographics, as more and more people reach the age brackets that historically have accounted for the bulk of retail RV sales. The number of consumers between the ages of 55 and 74 will total 79 million by 2025, 15% higher than in 2015 according to the RVIA. In addition, in recent years the industry has benefited from growing retail sales to younger consumers with new product offerings targeted to younger, more active families, as they place a higher value on family outdoor recreation than any prior generation. Based on a study from the Pew Research Center, the “Millennial” generation, defined as those between the ages of 18 and 34, consisted of more than 75 million people in 2015. In general, these consumers are more technologically savvy, but still value active outdoor experiences shared with family and friends, making them strong potential customers for our industry in the decades to come. Based on the Kampgrounds of America (KOA) 2017 North American Camping Report, their millennial group comprised 31% of the total population in the most recent census, yet accounted for 38% of the total campers in 2016, which increased from 34% of the total campers in 2015. Younger RV consumers are generally attracted to lower and moderately-priced travel trailers, as affordability is a key driver at this stage in their lives.As the first generation of the internet age, Millennials are generally more comfortable gathering information online, and are therefore generally more knowledgeable about products and competitive pricing than any prior generation. This generation is camping more as they view camping as an opportunity to spend time with family and friends as welldiscover RVs as a way to reduce stress,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.Historically, we and our independent European dealers have marketed our European recreational vehicles through numerous RV fairs at the pressures of everyday life, be more activecountry and lead a healthier lifestyle. Inregional 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 younger age demographics, there are opportunitiesbeing able to expand sales topurchase or order an RV. The protection of the health of our employees, customers and dealer-partners is our top priority. As a more ethnically diverse customer base. result, we have cancelled our participation in most European trade fairs and major events through the end of calendar 2021 and currently plan on limited participation in calendar 2022.In our efforts to connect with RV consumersplace of all generations, beginning in the first quarter of fiscal 2017trade fairs, we launched a new consumer-facing website designed to inspire consumers to explore the RV lifestyle. The new website includes videohave and interactive features to help consumers determine the type of RV which may suit their specific camping needs, while providing video footage that can be utilized by dealers to market our products. In the second quarter of fiscal 2018, we launched a targeted campaign towards Millennials, and have begun exploring related marketing opportunities. We will continue to consider additional marketing opportunitiesstrengthen and expand our digital activities in order to youngerreach high potential target groups, generate leads and more diverse consumerssteer customers directly to dealerships. With over the remainder1,000 active dealer-partners in Germany and throughout Europe, we believe our European brands have one of the year. We anticipate our recent formation of the joint venture TH2, as discussedstrongest and most professionally structured dealer and service networks in Note 15 to the Condensed Consolidated Financial Statements, will further enhance the RV value proposition and ownership experience for this younger, more technically savvy customer group.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 raw material or laborthese costs wouldwill impact our profit margins negatively if we wereare unable to raiseoffset 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 continue to be 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 RV chassis. Continuing in the quarter ended October 31, 2021, we have been ableexperienced delays in the receipt of, and a reduction in the volume of, chassis from our European chassis suppliers, limiting our ability to pass alongfurther increase production. We expect these challenges to persist and, in particular, anticipate continued delays in receipt of chassis in Europe as well as a reduction in the number of chassis to be received in fiscal 2022. As a result, limitations in the availability of chassis will limit our ability to consistently maintain our planned production levels and will limit our ability to ramp up production of certain products despite dealer demand for those products.In Europe, we continue to experience cost increases, supply shortages and delivery delays of other, non-chassis, raw material components which negatively impacted our ability to customers.have not experienced any recent unusual cost increases or supply constraints from our chassis suppliers. The recreational vehicle industry has, from timebelieve these shortages and delays will continue to time, experienced shortages of chassis for various reasons, including component shortages,result in production delays or adjusted production rates in the near term, which will limit our ability to ramp up production to meet existing demand and work stoppages at the chassis manufacturers. These shortagescould have had a negative impact on our salesoperating results.Where possible, to minimize the impact of these supply chain constraints, we have identified a second-source supplier base for certain component parts. However, due to engineering requirements, it is generally not possible to quickly change the chassis our various units are built upon.29If 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 supply our needs for key components, our costs of such components and earnings inour production output could be adversely affected. In addition, if the past. We believe thatimpact of COVID-19 on our vendors increases or is prolonged, the current supplylimited availability of key components, including chassis, will have a further negative impact on our production output during fiscal 2022. Uncertainties related to changing emission standards, such as the Euro 6d standard which became effective as of January 2020 for new models and became effective for certain vehicles starting January 2021 and will become effective for other vehicles starting January 2022, may also impact the availability of chassis used in our production of certain European motorized RVRVs and could also impact consumer buying patterns.In addition to material supply constraints, labor shortages may also impact our European operations. Currently, a number of the employees of our production is adequate for currentfacilities in Europe reside in one country while working in another, and therefore travel restrictions imposed by certain countries within Europe may negatively impact the availability of our labor force and therefore our production levels, and that available inventory would compensate for short-term changes in supply schedules if they occur.1730Three Months Ended JanuaryOctober 31, 20182021 Compared to the Three Months Ended JanuaryOctober 31, 2017 Three Months Ended
January 31, 2018 Three Months Ended
January 31, 2017 Change
Amount %
Change $ 1,373,118 $ 1,082,249 $ 290,869 26.9 559,909 474,972 84,937 17.9 1,933,027 1,557,221 375,806 24.1 68,013 53,891 14,122 26.2 (29,480 ) (22,587 ) (6,893 ) (30.5 ) $ 1,971,560 $ 1,588,525 $ 383,035 24.1 55,346 45,754 9,592 21.0 6,735 5,831 904 15.5 62,081 51,585 10,496 20.3 GROSS PROFIT: % of
Segment
Net
Sales % of
Segment
Net
Sales Change
Amount %
Change $ 198,305 14.4 $ 151,767 14.0 $ 46,538 30.7 62,961 11.2 50,288 10.6 12,673 25.2 261,266 13.5 202,055 13.0 59,211 29.3 9,062 13.3 9,647 17.9 (585 ) (6.1 ) $ 270,328 13.7 $ 211,702 13.3 $ 58,626 27.7 $ 70,367 5.1 $ 61,155 5.7 $ 9,212 15.1 24,309 4.3 20,868 4.4 3,441 16.5 94,676 4.9 82,023 5.3 12,653 15.4 2,239 3.3 2,272 4.2 (33 ) (1.5 ) 20,173 — 12,674 — 7,499 59.2 $ 117,088 5.9 $ 96,969 6.1 $ 20,119 20.7 $ 116,728 8.5 $ 78,000 7.2 $ 38,728 49.7 37,538 6.7 28,488 6.0 9,050 31.8 154,266 8.0 106,488 6.8 47,778 44.9 5,290 7.8 5,696 10.6 (406 ) (7.1 ) (18,491 ) — (13,819 ) — (4,672 ) (33.8 ) $ 141,065 7.2 $ 98,365 6.2 $ 42,700 43.4 ORDER BACKLOG: As of
January 31, 2018 As of
January 31, 2017 Change
Amount %
Change $ 1,816,520 $ 1,323,451 $ 493,069 37.3 981,837 766,893 214,944 28.0 $ 2,798,357 $ 2,090,344 $ 708,013 33.9 18NET SALES: Three Months Ended
October 31, 2021Three Months Ended
October 31, 2020Change
Amount%
ChangeRecreational vehicles North American Towables $ 2,240,834 $ 1,392,044 $ 848,790 61.0 North American Motorized 925,028 493,855 431,173 87.3 Total North America 3,165,862 1,885,899 1,279,963 67.9 European 632,997 602,488 30,509 5.1 Total recreational vehicles 3,798,859 2,488,387 1,310,472 52.7 Other 257,830 80,707 177,123 219.5 Intercompany eliminations (98,465) (31,734) (66,731) (210.3) Total $ 3,958,224 $ 2,537,360 $ 1,420,864 56.0 # OF UNITS: Recreational vehicles North American Towables 68,437 50,341 18,096 35.9 North American Motorized 7,337 5,167 2,170 42.0 Total North America 75,774 55,508 20,266 36.5 European 12,327 12,226 101 0.8 Total 88,101 67,734 20,367 30.1 GROSS PROFIT: % of
Segment
Net Sales% of
Segment
Net SalesChange
Amount%
ChangeRecreational vehicles North American Towables $ 408,539 18.2 $ 219,848 15.8 $ 188,691 85.8 North American Motorized 139,721 15.1 68,102 13.8 71,619 105.2 Total North America 548,260 17.3 287,950 15.3 260,310 90.4 European 67,444 10.7 72,381 12.0 (4,937) (6.8) Total recreational vehicles 615,704 16.2 360,331 14.5 255,373 70.9 Other, net 39,720 15.4 18,521 22.9 21,199 114.5 Total $ 655,424 16.6 $ 378,852 14.9 $ 276,572 73.0 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Recreational vehicles North American Towables $ 133,812 6.0 $ 70,338 5.1 $ 63,474 90.2 North American Motorized 48,081 5.2 25,152 5.1 22,929 91.2 Total North America 181,893 5.7 95,490 5.1 86,403 90.5 European 67,516 10.7 60,421 10.0 7,095 11.7 Total recreational vehicles 249,409 6.6 155,911 6.3 93,498 60.0 Other 15,127 5.9 5,436 6.7 9,691 178.3 Corporate 31,347 — 20,416 — 10,931 53.5 Total $ 295,883 7.5 $ 181,763 7.2 $ 114,120 62.8 31INCOME (LOSS) BEFORE INCOME TAXES: Three Months Ended
October 31, 2021% of
Segment
Net SalesThree Months Ended
October 31, 2020% of
Segment
Net SalesChange
Amount%
ChangeRecreational vehicles North American Towables $ 266,282 11.9 $ 141,179 10.1 $ 125,103 88.6 North American Motorized 88,898 9.6 41,567 8.4 47,331 113.9 Total North America 355,180 11.2 182,746 9.7 172,434 94.4 European (17,976) (2.8) (5,506) (0.9) (12,470) (226.5) Total recreational vehicles 337,204 8.9 177,240 7.1 159,964 90.3 Other, net 23,529 9.1 11,490 14.2 12,039 104.8 Corporate (47,891) — (42,411) — (5,480) (12.9) Total $ 312,842 7.9 $ 146,319 5.8 $ 166,523 113.8
ORDER BACKLOG:As of
October 31, 2021As of
October 31, 2020Change
Amount%
ChangeRecreational vehicles North American Towables $ 10,444,698 $ 4,397,713 $ 6,046,985 137.5 North American Motorized 4,277,378 2,215,069 2,062,309 93.1 Total North America 14,722,076 6,612,782 8,109,294 122.6 European 3,348,355 2,308,472 1,039,883 45.0 Total $ 18,070,431 $ 8,921,254 $ 9,149,177 102.6 CONSOLIDATEDConsolidated net sales for the three months ended JanuaryOctober 31, 20182021 increased $383,035,$1,420,864, or 24.1%56.0%, compared to the three months ended JanuaryOctober 31, 2017. 2020. The increase in consolidated net sales is primarily due to the continuing increase in consumer demand for RVs and recent acquisitions. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $228,284 of the $1,420,864 increase in net sales, or 9.0% of the 56.0% increase, while the addition of Airxcel, acquired on September 1, 2021, accounted for $88,778 of the $1,420,864 increase, or 3.5% of the 56.0% increase. Approximately 16.0% of the Company’s net sales for the quarter ended October 31, 2021 were transacted in a currency other than the U.S. dollar. The Company’s most material exchange rate exposure is sales in Euros. Regarding the $1,420,864, or 56.0%, increase in consolidated net sales, the impact of the change in currency exchange rates between the two periods was not material. To determine this impact, 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 JanuaryOctober 31, 20182021 increased $58,626,$276,572, or 27.7%73.0%, compared to the three months ended JanuaryOctober 31, 2017.2020. Consolidated gross profit was 13.7%16.6% of consolidated net sales for the three months ended JanuaryOctober 31, 20182021 and 13.3%14.9% for the three months ended JanuaryOctober 31, 2017.Selling, general and administrative expenses for the three months ended JanuaryOctober 31, 20182021 increased $20,119,$114,120, or 20.7%62.8%, compared to the three months ended JanuaryOctober 31, 2017. 2020, primarily due to the 56.0% increase in net sales.Amortization of intangible assets expense for the three months ended JanuaryOctober 31, 2018 decreased $1,483, or 9.7%,2021 increased $5,787 compared to the three months ended JanuaryOctober 31, 2017,2020, primarily due to lower dealer networkadditional amortization of $2,489 and $2,184 from the acquisitions of the Tiffin Group and Airxcel, respectively, as compareddiscussed in Note 2 to the prior-year period. Condensed Consolidated Financial Statements.Income before income taxes for the three months ended JanuaryOctober 31, 20182021 was $141,065,$312,842, as compared to $98,365$146,319 for the three months ended JanuaryOctober 31, 2017,2020, an increase of $42,700,$166,523, or 43.4%.32Additional 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 $7,499$10,931 to $20,173$31,347 for the three months ended JanuaryOctober 31, 20182021 compared to $12,674$20,416 for the three months ended JanuaryOctober 31, 2017. The2020, an increase is due in part toof 53.5%. This increase includes increased compensation costs, including an increase in deferred compensation costs,expense of $2,135, 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 $761 in correlation with$1,556 due to the increase in income before income taxes compared to the prior year,prior-year period, and stock-based and other compensation increased $1,259. The stock-based compensation increase is due to increasing income before income taxes over the past three years, as most stock awards vest ratably over a three-year period. Deferred compensation expense$1,054. Charitable contributions also increased $1,419, which relates to the equal and offsetting increase in other income noted below due to the increase in the related deferred compensation plan assets.$1,319. Legal and professional fees includingalso increased $1,076, primarily due to acquisition-related costs, and costs recorded at Corporate related to sales and marketing initiatives andour standby repurchase obligations increased by $2,000 due to dealer inventory levels increasing in the joint venture discussedcurrent-year period as compared to dealer inventory decreasing in Note 15 to the Condensed Consolidated Financial Statements, increased $2,541.Corporate interest and other income and expense was $1,682 of net income for the three months ended January 31, 2018 compared to $1,145$16,544 of net expense for the three months ended JanuaryOctober 31, 2017.2021 compared to $21,995 of net expense for the three months ended October 31, 2020. This favorable changedecrease in net expense of $2,827 is partially$5,451 was primarily due to a decrease in interest expense and fees of $1,202 incurred in the current-year period related$3,278 on our debt due primarily to reduced interest rates compared to the revolving credit facility, as compared to $2,325 in the prior-year period, aperiod. This decrease of $1,123 primarily as a result of the lower outstanding debt balance. In addition,also 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 $2,460 ofa $2,087 increase in income, net income in the current-year period as compared to net income of $1,041 in the prior-year period, an increase of $1,419.The overall effective income tax rate for the three months ended JanuaryOctober 31, 20182021 was 43.5%21.7% compared with 34.1%21.0% for the three months ended JanuaryOctober 31, 2017.2020. The primary reason for the increase in the effective income tax rate was the impact of the Tax Cuts and Jobs Act (the “Tax Act”) that was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate has been reduced from 35.0% to 21.0% starting January 1, 2018, which results in the use of an estimated blended federal corporate income tax rate of 26.9% for the Company’s 2018 fiscal year. As a result of the Tax Act, the Company was also required to revalue its net deferred tax assets to reflect the impact of the lower tax rates. This revaluation caused anon-recurring,non-cash reduction of the Company’s net deferred tax assets, and a corresponding charge to income tax expense, of approximately $34,000. This charge was partially offset by the benefits of both the lower federal income tax rate for the three months ended January 31, 2018 and a tax benefit of $12,535 recorded in the three months ended January 31, 2018 from applying the lower federal income tax rate for fiscal 2018relates to the resultsjurisdictional mix of operations forpre-tax income between foreign and domestic between the first quarter of fiscal 2018.1933Segment ReportingNORTH AMERICAN TOWABLE RECREATIONAL VEHICLESAnalysis of the change in net sales for the three months ended JanuaryOctober 31, 20182021 compared to the three months ended JanuaryOctober 31, 2017: Three Months
Ended
January 31, 2018 % of
Segment
Net Sales Three Months
Ended
January 31, 2017 % of
Segment
Net Sales Change
Amount %
Change $ 829,318 60.4 $ 653,524 60.4 $ 175,794 26.9 543,800 39.6 428,725 39.6 115,075 26.8 $ 1,373,118 100.0 $ 1,082,249 100.0 $ 290,869 26.9 Three Months
Ended
January 31, 2018 % of
Segment
Shipments Three Months
Ended
January 31, 2017 % of
Segment
Shipments Change
Amount %
Change 42,979 77.7 35,730 78.1 7,249 20.3 12,367 22.3 10,024 21.9 2,343 23.4 55,346 100.0 45,754 100.0 9,592 21.0 Impact of Change in Product Mix and Price on Net Sales:%IncreaseTowablesTravel Trailers and Other6.6Fifth Wheels3.4Total Towables5.9Three Months Ended
October 31, 2021% of
Segment
Net SalesThree Months Ended
October 31, 2020% of
Segment
Net SalesChange Amount %ChangeNET SALES: North American Towables Travel Trailers $ 1,409,624 62.9 $ 837,900 60.2 $ 571,724 68.2 Fifth Wheels 831,210 37.1 554,144 39.8 277,066 50.0 Total North American Towables $ 2,240,834 100.0 $ 1,392,044 100.0 $ 848,790 61.0 Three Months Ended
October 31, 2021% of
Segment
ShipmentsThree Months Ended
October 31, 2020% of
Segment
ShipmentsChange Amount %Change# OF UNITS: North American Towables Travel Trailers 54,899 80.2 39,077 77.6 15,822 40.5 Fifth Wheels 13,538 19.8 11,264 22.4 2,274 20.2 Total North American Towables 68,437 100.0 50,341 100.0 18,096 35.9 IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %ChangeNorth American Towables Travel Trailers 27.7 Fifth Wheels 29.8 Total North American Towables 25.1 The increase in total North American towables net sales of 26.9%61.0% compared to the prior-year quarter resulted from a 21.0%35.9% increase in unit shipments and a 5.9%25.1% 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 the continuing increase in consumer demand. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $27,129 of the $848,790 increase and for 1.9% of the 61.0% increase. According to statistics published by RVIA, for the three months ended JanuaryOctober 31, 2018,2021, combined North American travel trailer and fifth wheel wholesale unit shipments increased 19.1%30.3% compared to the same period last year.The increasesincrease in the overall net price per unit within the travel trailer product line of 27.7% and other product lines of 6.6% andthe overall net price per unit within the fifth wheel product lines of 3.4% were both29.8% was primarily due to changes inthe combination of reduced sales discounts, product mix changes and selective net selling price increases, sinceprimarily to offset known and anticipated material cost increases, compared to the prior-year quarter.Cost34North American towables cost of products sold increased $244,331$660,099 to $1,174,813,$1,832,295, or 85.6%81.8% of North American towables net sales, for the three months ended JanuaryOctober 31, 20182021 compared to $930,482,$1,172,196, or 86.0%84.2% of North American towables net sales, for the three months ended JanuaryOctober 31, 2017.2020. The changes in material, labor,freight-out and warranty costs comprised $232,286$627,913 of the $244,331$660,099 increase in cost of products sold. Material, labor,freight-out and warranty costs as a combined percentage of North American towables net sales increased slightlydecreased to 79.5%76.8% for the three months ended JanuaryOctober 31, 20182021 compared to 79.4%78.4% for the three months ended JanuaryOctober 31, 2017. This increase in percentage was2020, primarily theas a result of an increasea decrease in the labor cost percentage, mainly due to the continued competitive RV labor market,increased volumes combined with a more stable and an increase in the warranty cost percentage, which was partially dueefficient workforce compared to offering extended coverage on certain structural components of certain products since the prior-year period. The freight-out cost percentage also decreased due to a higher percentage of units being picked up by the dealers in the current-year period as opposed to being delivered. These increases in percentagereductions were mostlypartially offset by a decreasean increase in the material cost percentage compared to netthe prior-year period, as the continued benefit from reduced sales due to selective net price increase and operating efficiencies attaineddiscounts since the prior-year period, primarilywhich effectively increases net selling prices and correspondingly decreases the material cost percentage, was more than offset by Jayco.increasing material costs since the prior-year period. Total manufacturing overhead increased $12,045$32,186 with the increase in sales, but decreased as a percentage of North American towables net sales from 6.6%5.8% to 6.1%,5.0% as the significantly increased productionnet sales levels resulted in better absorption of fixedlower overhead costs.Towablescosts per unit sold.North American towables gross profit increased $46,538$188,691 to $198,305,$408,539, or 14.4%18.2% of North American towables net sales, for the three months ended JanuaryOctober 31, 20182021 compared to $151,767,$219,848, or 14.0%15.8% of North American towables net sales, for the three months ended JanuaryOctober 31, 2017.2020. The increase in gross profit is primarily due towas driven by the 21.0% increase in unitnet sales volume noted above, whileand the increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.20Selling,North American towables selling, general and administrative expenses were $70,367,$133,812, or 5.1%6.0% of North American towables net sales, for the three months ended JanuaryOctober 31, 20182021 compared to $61,155,$70,338, or 5.7%5.1% of North American towables net sales, for the three months ended JanuaryOctober 31, 2017. The primary reason for2020. This $63,474 increase is primarily due to the $9,212impact of the increase was increasedin North American towables net sales and towables income before income taxes, which caused related commissions, bonusesincentive and other compensation to increase by $8,864.$36,750. Product-related costs also increased by $22,052, primarily due to collection uncertainty on amounts due from applicable vendor suppliers for costs related to a product recall related to certain purchased parts utilized in certain of our North American towable products, as discussed in Note 14 to the Condensed Consolidated Financial Statements. Sales-related travel, advertising and promotional costs also increased $1,041by $2,184. The increase in correlation with the sales increase. These increases were partially offset by a reduction of $1,562 in legal, professional and related settlement costs primarily due to a reduction in the estimated costs to satisfy certain outstanding legal liability and product recall costs. The overall selling, general and administrative expense as a percentage of towablesNorth American towable net sales decreased by 0.6%is primarily due to the significant increase inincreased product-related costs noted above.North American towables net sales.Towables income before income taxes was $116,728,$266,282, or 8.5%11.9% of North American towables net sales, for the three months ended JanuaryOctober 31, 20182021 compared to $78,000,$141,179 or 7.2%10.1% of North American towables net sales, for the three months ended JanuaryOctober 31, 2017.2020. The primary reasonsreason for the increase in North American towables income before income taxes was the increase in North American towables net sales, and the primary reason for the increase in percentage werewas the decreases in both the cost of products sold andpercentage noted above, partially offset by the increase in the selling, general and administrative expense percentages to salespercentage noted above.35NORTH AMERICAN MOTORIZED RECREATIONAL VEHICLESAnalysis of the change in net sales for the three months ended JanuaryOctober 31, 20182021 compared to the three months ended JanuaryOctober 31, 2017: Three Months
Ended
January 31, 2018 % of
Segment
Net Sales Three Months
Ended
January 31, 2017 % of
Segment
Net Sales Change
Amount %
Change $ 257,092 45.9 $ 223,818 47.1 $ 33,274 14.9 278,853 49.8 233,197 49.1 45,656 19.6 23,964 4.3 17,957 3.8 6,007 33.5 $ 559,909 100.0 $ 474,972 100.0 $ 84,937 17.9 Three Months
Ended
January 31, 2018 % of
Segment
Shipments Three Months
Ended
January 31, 2017 % of
Segment
Shipments Change
Amount %
Change 2,364 35.1 2,059 35.3 305 14.8 4,191 62.2 3,631 62.3 560 15.4 180 2.7 141 2.4 39 27.7 6,735 100.0 5,831 100.0 904 15.5 Impact of Change in Product Mix and Price on Net Sales:%IncreaseMotorizedClass A0.1Class C4.2Class B5.8Total Motorized2.4Three Months Ended
October 31, 2021% of
Segment
Net SalesThree Months Ended
October 31, 2020% of
Segment
Net SalesChange
Amount%ChangeNET SALES: North American Motorized Class A $ 409,499 44.3 $ 158,555 32.1 $ 250,944 158.3 Class C 360,006 38.9 275,399 55.8 84,607 30.7 Class B 155,523 16.8 59,901 12.1 95,622 159.6 Total North American Motorized $ 925,028 100.0 $ 493,855 100.0 $ 431,173 87.3 Three Months Ended
October 31, 2021% of
Segment
ShipmentsThree Months Ended
October 31, 2020% of
Segment
ShipmentsChange
Amount%Change# OF UNITS: North American Motorized Class A 2,164 29.5 1,168 22.6 996 85.3 Class C 3,645 49.7 3,464 67.0 181 5.2 Class B 1,528 20.8 535 10.4 993 185.6 Total North American Motorized 7,337 100.0 5,167 100.0 2,170 42.0 IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %ChangeNorth American Motorized Class A 73.0 Class C 25.5 Class B (26.0) Total North American Motorized 45.3 The increase in total North American motorized net sales of 17.9%87.3% compared to the prior-year periodquarter resulted from a 15.5%42.0% increase in unit shipments and a 2.4%45.3% 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 consumer demand and the addition of the Tiffin Group, acquired on December 18, 2020, which accounted for $201,154 of the $431,173 increase, or 40.7% of the 87.3% increase. According to statistics published by RVIA, for the three months ended JanuaryOctober 31, 2018,2021, combined North American motorhome wholesale unit shipments increased 15.8%19.6% compared to the same period last year.The increasesincrease in the overall net price per unit within the Class A product line of 0.1%73.0% was predominately due to the impact of the addition of the higher-priced Tiffin Group product lines along with selective net selling price increases since the prior-year period to offset known and anticipated material and other input cost increases. The Tiffin Group Class A product lines are primarily higher-priced diesel units as opposed to the more moderately-priced gas units, which represented the majority of the Class A units sold in the prior-year period. The increase in the overall net price per unit within the Class C product line of 4.2% were25.5% was primarily due to the net impact of product mix changeschange and selective net selling price increases.increases since the prior-year period to offset rising material and other input costs. The increasedecrease in the overall net price per unit within the Class B product line of 5.8%26.0% is primarily due to product mix changes as a result of a 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 aseveral new higher-priced model sincelower-priced models as compared to the prior-year period, and more option content per unit in the current-year period.2136CostNorth American motorized cost of products sold increased $72,264$359,554 to $496,948,$785,307, or 88.8%84.9% of North American motorized net sales, for the three months ended JanuaryOctober 31, 20182021 compared to $424,684,$425,753, or 89.4%86.2% of North American motorized net sales, for the three months ended JanuaryOctober 31, 2017.2020. The changes in material, labor,freight-out and warranty costs comprised $69,738$332,847 of the $72,264$359,554 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 84.6%79.7% for the three months ended JanuaryOctober 31, 20182021 compared to 85.0%81.9% for the three months ended JanuaryOctober 31, 2017. This2020, with the decrease in percentage was primarily the result ofdue to a decrease in the material cost percentage, which was partially due to operating efficiencies attained in the past year, primarily at Jayco, but this decrease was partially offset by an increasemodest increases in the labor costs associated with increasing employment levels and warranty cost percentages. The improvement in the continued competitive RV labor market.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, selective net selling price increases to cover known and anticipated material cost increases, and product mix changes, primarily due to the addition of the Tiffin Group products since the prior-year period. Total manufacturing overhead increased $2,526 with$26,707, primarily due to the volumenet sales increase but decreasedand increased employee benefit and health insurance costs, and increased as a percentage of North American motorized net sales from 4.4%4.3% to 4.2%5.2%, asprimarily due to the increase in production resulted in better absorption of fixed overhead costs.Motorizedincreased employee benefit and health insurance costs percentage.North American motorized gross profit increased $12,673$71,619 to $62,961,$139,721, or 11.2%15.1% of North American motorized net sales, for the three months ended JanuaryOctober 31, 20182021 compared to $50,288,$68,102, or 10.6%13.8% of North American motorized net sales, for the three months ended JanuaryOctober 31, 2017.2020. The $12,673 increase in gross profit was due primarily todriven by the 15.5% increase in unitnet sales, volume noted above, and the increase as a percentage of motorized net sales is due to the decrease in the cost of products sold percentage noted above.Selling, general and administrative expenses were $24,309, or 4.3% of motorized net sales, for the three months ended January 31, 2018 compared to $20,868, or 4.4% of motorized net sales, for the three months ended January 31, 2017. The $3,441 increase was partially due to increased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to increase by $2,509. In addition, legal, professional and related settlement costs increased $462, primarily due to estimated product liability settlement costs. Sales-related travel, advertising and promotional costs also increased $254 in connection with the sales increase.Motorized income before income taxes was $37,538, or 6.7% of motorized net sales, for the three months ended January 31, 2018 compared to $28,488, or 6.0% of motorized net sales, for the three months ended January 31, 2017. The primary reason for this increase in percentage was the impact of the decrease in the cost of products sold percentage as noted above.22Six Months Ended January 31, 2018 Compared to the Six Months Ended January 31, 2017 Six Months Ended
January 31, 2018 Six Months Ended
January 31, 2017 Change
Amount %
Change $ 2,991,619 $ 2,293,122 $ 698,497 30.5 1,126,520 936,426 190,094 20.3 4,118,139 3,229,548 888,591 27.5 150,932 112,887 38,045 33.7 (65,843 ) (45,379 ) (20,464 ) (45.1 ) $ 4,203,228 $ 3,297,056 $ 906,172 27.5 121,441 96,928 24,513 25.3 13,578 11,250 2,328 20.7 135,019 108,178 26,841 24.8 GROSS PROFIT: % of
Segment
Net
Sales % of
Segment
Net
Sales Change
Amount %
Change $ 455,018 15.2 $ 326,745 14.2 $ 128,273 39.3 126,864 11.3 101,725 10.9 25,139 24.7 581,882 14.1 428,470 13.3 153,412 35.8 21,631 14.3 19,984 17.7 1,647 8.2 $ 603,513 14.4 $ 448,454 13.6 $ 155,059 34.6 $ 157,127 5.3 $ 128,743 5.6 $ 28,384 22.0 51,017 4.5 42,182 4.5 8,835 20.9 208,144 5.1 170,925 5.3 37,219 21.8 4,808 3.2 4,592 4.1 216 4.7 38,399 — 23,762 — 14,637 61.6 $ 251,351 6.0 $ 199,279 6.0 $ 52,072 26.1 $ 275,579 9.2 $ 172,173 7.5 $ 103,406 60.1 75,124 6.7 57,411 6.1 17,713 30.9 350,703 8.5 229,584 7.1 121,119 52.8 13,773 9.1 12,074 10.7 1,699 14.1 (36,320 ) — (27,493 ) — (8,827 ) (32.1 ) $ 328,156 7.8 $ 214,165 6.5 $ 113,991 53.2 23CONSOLIDATEDConsolidated net sales for the six months ended January 31, 2018 increased $906,172, or 27.5%, compared to the six months ended January 31, 2017. Consolidated gross profit for the six months ended January 31, 2018 increased $155,059, or 34.6%, compared to the six months ended January 31, 2017. Consolidated gross profit was 14.4% of consolidated net sales for the six months ended January 31, 2018 and 13.6% for the six months ended January 31, 2017.Selling, general and administrative expenses for the six months ended January 31, 2018 increased $52,072, or 26.1%, compared to the six months ended January 31, 2017. Amortization of intangible assets expense for the six months ended January 31, 2018 decreased $6,140, or 18.3%, compared to the six months ended January 31, 2017, primarily due to backlog amortization in the prior-year period related to the Jayco acquisition and lower dealer network amortization as compared to the prior-year period. Income before income taxes for the six months ended January 31, 2018 was $328,156, as compared to $214,165 for the six months ended January 31, 2017, an increase of $113,991, or 53.2%.Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses, amortization of intangible assets expense and income before income taxes are addressed in the segment reporting that follows.Corporate costs included in selling, general and administrative expenses increased $14,637 to $38,399 for the six months ended January 31, 2018 compared to $23,762 for the six months ended January 31, 2017. The increase is due in part to an increase in compensation costs, as incentive compensation increased $2,265 in correlation with the increase in income before income taxes compared to the prior year, and stock-based compensation increased $2,839. The stock-based compensation increase is due to increasing income before income taxes over the past three years, as most stock awards vest ratably over a three-year period. Deferred compensation expense also increased $2,949, which relates to the equal and offsetting increase in other income noted below due to the increase in the related deferred compensation plan assets. Legal and professional fees, including costs related to sales and marketing initiatives and the joint venture discussed in Note 15 to the Condensed Consolidated Financial Statements, increased $3,928.Corporate interest and other income and expense was $2,079 of net income for the six months ended January 31, 2018 compared to $3,731 of net expense for the six months ended January 31, 2017. This favorable change of $5,810 is partially due to interest expense and fees of $2,459 incurred in the current-year period related to the revolving credit facility, as compared to $4,723 in the prior-year period, a decrease of $2,264 primarily as a result of the lower outstanding debt balance. 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 $3,734 of net income in the current-year period as compared to net income of $785 in the prior-year period, an increase of $2,949.The overall effective income tax rate for the six months ended January 31, 2018 was 36.6% compared with 33.0% for the six months ended January 31, 2017. The primary reason for the increase in the effective income tax rate was the impact of the Tax Cuts and Jobs Act (the “Tax Act”) that was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate was reduced from 35.0% to 21.0% starting January 1, 2018, which results in the use of an estimated blended federal corporate income tax rate of 26.9% for the Company’s 2018 fiscal year. In addition, the Company was also required to revalue its net deferred tax assets to reflect the impact of the lower tax rates. This revaluation caused anon-recurring,non-cash reduction of the Company’s net deferred tax assets, and a corresponding charge to income tax expense, of approximately $34,000 in the second quarter of fiscal 2018. This charge was partially offset by the lower tax expense reflected in thesix-month period ended January 31, 2018 due to the decrease in our federal corporate income tax rate to 26.9% for fiscal 2018 as a result of the Tax Act.24Segment ReportingTOWABLE RECREATIONAL VEHICLESAnalysis of the change in net sales for the six months ended January 31, 2018 compared to the six months ended January 31, 2017: Six Months
Ended
January 31, 2018 % of
Segment
Net Sales Six Months
Ended
January 31, 2017 % of
Segment
Net Sales Change
Amount %
Change $ 1,822,922 60.9 $ 1,376,873 60.0 $ 446,049 32.4 1,168,697 39.1 916,249 40.0 252,448 27.6 $ 2,991,619 100.0 $ 2,293,122 100.0 $ 698,497 30.5 Six Months
Ended
January 31, 2018 % of
Segment
Shipments Six Months
Ended
January 31, 2017 % of
Segment
Shipments Change
Amount %
Change 94,647 77.9 75,374 77.8 19,273 25.6 26,794 22.1 21,554 22.2 5,240 24.3 121,441 100.0 96,928 100.0 24,513 25.3 Impact of Change in Product Mix and Price on Net Sales:%IncreaseTowablesTravel Trailers and Other6.8Fifth Wheels3.3Total Towables5.2The increase in total towables net sales of 30.5% compared to the prior-year period resulted from a 25.3% increase in unit shipments and a 5.2% 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 six months ended January 31, 2018, combined travel trailer and fifth wheel wholesale unit shipments increased 24.4% compared to the same period last year.The increases in the overall net price per unit within the travel trailer and other product lines of 6.8% and the fifth wheel product lines of 3.3% were both primarily due to changes in product mix and selective net price increases since the prior-year period.Cost of products sold increased $570,224 to $2,536,601, or 84.8% of towables net sales, for the six months ended January 31, 2018 compared to $1,966,377, or 85.8% of towables net sales, for the six months ended January 31, 2017. The changes in material, labor,freight-out and warranty costs comprised $541,280 of the $570,224 increase in cost of products sold. Material, labor,freight-out and warranty costs as a combined percentage of towables net sales decreased to 79.2% for the six months ended January 31, 2018 compared to 79.7% for the six months ended January 31, 2017. This decrease in percentage was primarily the result of a decrease in the material cost percentage to net sales, due to selective net price increases and operating efficiencies attained since the prior-year period, primarily by Jayco. This decrease was partially offset by an increase in the labor cost percentage due to the continued competitive RV labor market. Total manufacturing overhead increased $28,944 with the increase in sales, but decreased as a percentage of towables net sales from 6.1% to 5.6%, as the increased production resulted in better absorption of fixed overhead costs.Towables gross profit increased $128,273 to $455,018, or 15.2% of towables net sales, for the six months ended January 31, 2018 compared to $326,745, or 14.2% of towables net sales, for the six months ended January 31, 2017. The increase in gross profit is primarily due to the 25.3% increase in unit sales volume noted above, while the increase in gross profit percentage is due to the decrease in the cost of products sold percentage noted above.25Selling,North American motorized selling, general and administrative expenses were $157,127,$48,081, or 5.3%5.2% of towablesNorth American motorized net sales, for the sixthree months ended JanuaryOctober 31, 20182021 compared to $128,743,$25,152, or 5.6%5.1% of towablesNorth American motorized net sales, for the sixthree months ended JanuaryOctober 31, 2017.2020. The primary reason for the $28,384$22,929 increase was increased towablesthe increase in North American motorized net sales and towables income before income taxes, which caused related commissions, bonusesincentive and other compensation to increase by $22,938. Legal, professional and related settlement costs increased $1,989, primarily due to estimated costs related to an industry-wide recall of certain vendor-supplied components and estimated product liability settlement costs. In addition, sales-related$17,753. Sales-related travel, advertising and promotional costs also increased $2,111 in correlation with the sales increase. In spite of these increased amounts, the overall selling, general and administrative expense percentage of towables net sales decreased by 0.3% due to the significant increase in towables net sales.Towables$1,632.North American motorized income before income taxes was $275,579,$88,898, or 9.2%9.6% of towablesNorth American motorized net sales, for the sixthree months ended JanuaryOctober 31, 20182021 compared to $172,173,$41,567, or 7.5%8.4% of towablesmotorized net sales, for the sixthree months ended JanuaryOctober 31, 2017.2020. The primary reasonsreason for the increase in North American motorized income before income taxes was the increase in North American motorized net sales, and the primary reason for the increase in percentage werewas the decreasesdecrease in both the cost of products sold and selling, general and administrative expense percentages to salespercentage noted above. In addition, the towables amortization cost percentage decreased by 0.5%, primarily due tonon-recurring backlog amortization in the prior-year period related to the Jayco acquisition.MOTORIZED37EUROPEAN RECREATIONAL VEHICLESAnalysis of the change in net sales for the sixthree months ended JanuaryOctober 31, 20182021 compared to the sixthree months ended JanuaryOctober 31, 2017: Six Months
Ended
January 31, 2018 % of
Segment
Net Sales Six Months
Ended
January 31, 2017 % of
Segment
Net Sales Change
Amount %
Change $ 509,515 45.2 $ 463,932 49.5 $ 45,583 9.8 565,519 50.2 433,092 46.3 132,427 30.6 51,486 4.6 39,402 4.2 12,084 30.7 $ 1,126,520 100.0 $ 936,426 100.0 $ 190,094 20.3 Six Months
Ended
January 31, 2018 % of
Segment
Shipments Six Months
Ended
January 31, 2017 % of
Segment
Shipments Change
Amount %
Change 4,631 34.1 4,248 37.8 383 9.0 8,555 63.0 6,690 59.5 1,865 27.9 392 2.9 312 2.7 80 25.6 13,578 100.0 11,250 100.0 2,328 20.7 Impact of Change in Product Mix and Price on Net Sales:%Increase(Decrease)MotorizedClass A0.8Class C2.7Class B5.1Total Motorized(0.4) Three Months Ended
October 31, 2021% of
Segment
Net SalesThree Months Ended
October 31, 2020% of
Segment
Net SalesChange
Amount%ChangeNET SALES: European Motorcaravan $ 316,264 50.0 $ 318,343 52.8 $ (2,079) (0.7) Campervan 177,783 28.1 143,400 23.8 34,383 24.0 Caravan 60,680 9.6 55,195 9.2 5,485 9.9 Other 78,270 12.3 85,550 14.2 (7,280) (8.5) Total European $ 632,997 100.0 $ 602,488 100.0 $ 30,509 5.1 Three Months Ended
October 31, 2021% of
Segment
ShipmentsThree Months Ended
October 31, 2020% of
Segment
ShipmentsChange
Amount%Change# OF UNITS: European Motorcaravan 5,080 41.2 5,383 44.0 (303) (5.6) Campervan 4,404 35.7 4,277 35.0 127 3.0 Caravan 2,843 23.1 2,566 21.0 277 10.8 Total European 12,327 100.0 12,226 100.0 101 0.8 IMPACT OF CHANGES IN FOREIGN CURRENCY, PRODUCT MIX AND PRICE ON NET SALES: Foreign Currency % Mix and Price % %
ChangeEuropean Motorcaravan (0.8) 5.7 4.9 Campervan (0.8) 21.8 21.0 Caravan (0.8) (0.1) (0.9) Total European (0.8) 5.1 4.3 The increase in total motorizedEuropean recreational vehicle net sales of 20.3%5.1% compared to the prior-year periodquarter resulted from a 20.7%an 0.8% increase in unit shipments and a 0.4% decrease4.3% increase in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. The 0.4%increase in net sales reflects ongoing European market demand for RV products as moderated by the negative impact of current chassis supply constraints. The sales increase of $30,509, or 5.1%, is partially offset by a decrease of $4,688, or (0.8)% of the 5.1% increase, due to the decrease in foreign exchange rates since the prior-year period.The overall motorized net price per unit in spiteincrease of increases within4.3% includes the individual Class A, B and C product lines, is primarily due to a higher concentrationimpact of foreign currency exchange rate changes, which accounts for (0.8)% of the more moderately-priced Class C units, as compared to Class A units, in the current-year period as compared to the prior-year period. According to statistics published by RVIA, for the six months ended January 31, 2018, combined motorhome wholesale unit shipments increased 16.1% compared to the same period last year.26The modest increasesincrease in the overall net price per unit within the Class AMotorcaravan product line of 0.8% and the Class C product line of 2.7% were primarily5.7% was due to the net impact of product mix changes and selective net selling price increases. The increase in the overall net price per unit within the Class BCampervan product line of 5.1% is21.8% was primarily due to the introductionnet impact of a new, higher-priced model sinceproduct mix changes, including more sales of units with higher chassis content compared to the prior-year period, and more option content per unitquarter, in the current-year period.Costaddition to selective net selling price increases.38European recreational vehicle cost of products sold increased $164,955$35,446 to $999,656,$565,553, or 88.7%89.3% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 20182021 compared to $834,701,$530,107, or 89.1%88.0% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 2017.2020. The changes in material, labor,freight-out and warranty costs comprised $158,958$27,412 of the $164,955$35,446 increase primarily due to the increased net sales volume. Material, labor,freight-out and warranty costs as a combined percentage of motorizedEuropean recreational vehicle net sales was 84.7%increased to 78.3% for thesix-month period three months ended JanuaryOctober 31, 2018 and 84.9%2021 compared to 77.8% for thesix-month period three months ended JanuaryOctober 31, 2017. The primary reason for this decrease in percentage was a decrease in2020, with the material cost percentage, which was partiallyincrease primarily due to operating efficiencies attained in the past year, primarily at Jayco, and purchase accounting charges related to Jayco included in the prior-year period. This decrease was partially offset by an increase in the labor costs associated with increasing employment levels and the continued competitive RV labor market.percentage. Total manufacturing overhead increased $5,997$8,034 with the volume increase but decreasedin net sales, and increased as a percentage of motorized net sales from 4.2%10.2% to 4.0%, as the increase in production resulted in better absorption of fixed overhead11.0% primarily due to increased indirect labor and manufacturing employee benefit costs.MotorizedEuropean recreational vehicle gross profit increased $25,139decreased $4,937 to $126,864,$67,444, or 11.3%10.7% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 20182021 compared to $101,725,$72,381, or 10.9%12.0% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 2017.2020. The $25,139 increasedecrease in gross profit was due primarily to the 20.7% increase in unit sales volume noted above, and the increase as adecrease in the gross profit percentage of motorized net sales is due to the decreaseincrease in the cost of products sold percentage noted above.Selling,European recreational vehicle selling, general and administrative expenses were $51,017,$67,516, or 4.5%10.7% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 20182021 compared to $42,182,$60,421, or 4.5%10.0% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 2017.2020. The $8,835$7,095 increase was partially due to increased motorizedincludes the impact of the increase in European recreational vehicle net sales, and motorized income before income taxes, which caused related commissions bonuses and other compensation and benefits to increase by $4,730. In addition, legal, professional and related settlement$1,875. Depreciation expense also increased by $986, while miscellaneous administrative costs increased $2,757,$1,785, primarily due to estimated product liabilitya favorable legal reserve settlement in the prior-year period. The increase in the overall selling, general and administrative expense as a percentage of European recreational vehicle net sales is primarily due to the increased costs and estimated costs related to an industry-wide recall of certain vendor-supplied components. Sales related travel, advertising and promotional costs also increased $804 in connection with the sales increase.Motorized incomenoted above. European recreational vehicle loss before income taxes was $75,124,$17,976, or 6.7%approximately 2.8% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 20182021 compared to $57,411,a net loss of $5,506, or 6.1%0.9% of motorizedEuropean recreational vehicle net sales, for the sixthree months ended JanuaryOctober 31, 2017.2020. The primary reasonreasons for this increasethe increases in the loss before income taxes and the percentage wasloss were the impact of the decreaseincreases in the cost of products sold and selling, general and administrative expense noted above, as well as an increase of $2,162, or 0.2% as a percentage noted above. In addition, the motorized income before income taxes percentage increased due to a gain of $1,506 on the sale of certain motorized buildings and equipment during the six months ended January 31, 2018.Financial Condition and LiquidityAs of JanuaryOctober 31, 2018,2021, we had $109,775$336,237 in cash and cash equivalents, of which $185,563 was held in the U.S. and the equivalent of $150,674, predominantly in Euros, was held in Europe, compared to $223,258$445,852 on July 31, 2017.2021, of which $282,220 was held in the U.S. and the equivalent of $163,632, 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 $113,483$109,615 decrease in cash and cash equivalents are described in more detail below, but the decreasebelow.Net working capital at October 31, 2021 was $1,176,969 compared to $1,008,738 at July 31, 2021. This increase is primarily attributable to capital expendituresthe seasonal increases in inventory and accounts receivable and the impact of $63,003, principal paymentsongoing supply constraints on long-term debt of $65,000 and $38,994 paid for dividends,inventory, partially offset by the decrease in cash provided by operations of $56,845.Working capital at January 31, 2018 was $517,085 compared to $399,121 at July 31, 2017, with theand cash equivalents noted above and an increase primarily attributable to increases in accounts receivable and inventory due to the increases in sales, backlog and production lines.payable. Capital expenditures of $63,003$43,224 for the sixthree months ended JanuaryOctober 31, 20182021 were made primarily for land and production building additions and improvements as well asand replacing machinery and equipment used in the ordinary course of business.We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. We believe ouron-hand cash and cash equivalents and funds generated from continuing operations, along with funds available under the revolving asset-based credit facility, will be sufficient to fund expected future operational requirements for the foreseeable future. We have historically relied on internally generated cash flows from operations to finance substantially all our growth, however, we obtained a revolving asset-based credit facility to partially fund the fiscal 2016 acquisition of Jayco as discussed in Notes 2 and 11 to the Condensed Consolidated Financial Statements.27While the Tax Act enacted in December 2017 is expected to generate additional cash flow in the future, our mainOur priorities for the use of current and future available cash generated from operations will continue to focus onremain 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, maintainingacquisitions. We may also consider strategic and growing our regular dividends over time,opportunistic repurchases of shares of THOR stock and reducing indebtedness. Strategic share repurchases or special dividends as determinedbased upon market and business conditions and excess cash availability, subject to customary limits and restrictions pursuant to our credit facilities, applicable legal limitations and determination by the Company’sour Board will also continue to be considered. As a component of funding our growth, we anticipate making additional investments in our workforce through a variety of initiatives, including enhanced employee training and development programs and other initiatives that will be introduced in fiscal 2018 and fiscal 2019 and targeted to the varying needs of our individual operating entities.In regard to growing our business, weDirectors (“Board”).39We anticipate capital expenditures during the remainder of fiscal 20182022 for the Company of approximately $110,000,$230,000, primarily for the continued expansion of our facilitiescertain building projects and replacing and upgrading machinery, equipment and other assets throughout our facilities to be used in the ordinary course of business.These expenditures are in addition to the approximately $47,000 cash investment in the joint venture as discussed in Note 15 to the Condensed Financial Statements. In regard to reducing indebtedness, absent an alternative to strategically employ funds available under the credit facility, we expect to pay off the current remaining indebtedness of $80,000 in its entirety by the end of fiscal 2018. We may also consider additional strategic growth acquisitions that complement or expand our ongoing operations.The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under asset-based lines of credit facilities, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the paymentspayment of dividends under the existing debt facilities include a minimum level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreement.agreements. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors.Future purchases of the Company’s common stock or special cash dividends may occur based upon market and business conditions and excess cash availability, subjectfactors, in addition to potential customary limits and restrictions pursuant to the credit facility, applicable legal limitations and determination by the Board.Operating ActivitiesNet cash provided by operating activities for the sixthree months ended JanuaryOctober 31, 20182021 was $56,845$41,792 as compared to net cash provided byused in operating activities of $52,816$81,290 for the sixthree months ended JanuaryOctober 31, 2017.For the sixthree months ended JanuaryOctober 31, 2018,2021, net income adjusted fornon-cash items (primarily depreciation, amortization of intangibles deferred income tax provision and stock-based compensation) provided $285,477$313,583 of operating cash. The change in net working capital used $228,632resulted in the use of $271,791 of operating cash during that period, primarily due to an increase in inventory, as production levels have increased due to continued heightened consumer demand, and ongoing supply constraints have caused work in process and other inventory categories to increase. In addition, there was a result of a larger than usual seasonal increase in accounts receivablereceivable. These increases were partially offset by an increase in accounts payable primarily related to the inventory growth, and an increase in accrued liabilities, primarily due to bothtax provisions exceeding tax payments during the timingthree months ended October 31, 2021.For the three months ended October 31, 2020, net income adjusted for non-cash items (primarily depreciation, amortization of shipmentsintangibles, impairment and stock-based compensation) provided $182,891 of operating cash. The change in working capital resulted in the use of $264,181 of operating cash during that period, primarily due to an increase in sales. Inventoryinventory, as production levels increased due to the heightened dealer demand and significantly increased dealer backlog levels, and an increase in production lines. Accounts receivable also increased in conjunction with the increases in backlog and production facilities and lines,reflects a seasonal increase, and required income tax payments during the three months ended October 31, 2020 exceeded the income tax provision duringfor the period as well. These increases were partially offset by increasesan increase in accounts payable and accrued liabilities.Forprimarily related to the six months ended January 31, 2017, net income adjusted fornon-cash items (primarily depreciation, amortization of intangibles, deferred income tax provision and stock-based compensation) provided $194,056 of operating cash. The changes in working capital used $141,240 of operating cash during that period, primarily due to seasonal increases in accounts receivable and inventory in correlation with the increases in sales, backlog and production lines. In addition, required income tax payments exceeded income tax provisions during the period.Investing ActivitiesNet cash used in investing activities for the sixthree months ended JanuaryOctober 31, 20182021 was $58,491,$791,020, primarily due to $747,937 used in business acquisitions, primarily for the Airxcel acquisition discussed in Note 2 to the Condensed Consolidated Financial Statements, and capital expenditures of $63,003, partially offset by proceeds received on the disposition of property, plant and equipment of $3,552.Net cash used in investing activities for the sixthree months ended JanuaryOctober 31, 20172020 was $53,622,$46,433, primarily due to $22,700 used in a business acquisition and capital expenditures of $50,924$24,708.40Financing ActivitiesNet cash provided by financing activities for the three months ended October 31, 2021 was $643,597, consisting primarily of borrowings of $660,088 on the revolving asset-based credit facilities, which included $625,000 borrowed in connection with the acquisition of Airxcel and a final purchase price adjustment$35,088 for temporary working capital needs, in addition to $500,000 in proceeds from the issuance of Senior Unsecured Notes in October 2021, which were then used to make $500,000 in payments on the ABL facility. During the first quarter of fiscal 2022, the Board approved and declared the payment of $5,039 related toa regular quarterly dividend payment of $0.43 per share for the first quarter of fiscal 2016 acquisition2022, but this dividend, totaling $23,917, was not paid until the second quarter of Jayco, partially offset by proceeds received on the dispositions of property, plant and equipment of $4,554.28Financing ActivitiesNet cash used in financing activities for the sixthree months ended JanuaryOctober 31, 20182020 was $111,837,$68,495, consisting primarily for principal payments onof $62,796 in debt payments. During the revolving credit facility totaling $65,000first quarter of fiscal 2021, the Company's Board approved and declared the payment of a regular quarterly cash dividend paymentspayment of $0.37$0.41 per share for each of the first two quartersquarter of fiscal 20182021, but this dividend, totaling $38,994.Net cash used in financing activities for$22,700, was not paid until the six months ended January 31, 2017 was $74,441, primarily for principal payments on the revolving credit facility totaling $35,000 and regular quarterly cash dividend payments of $0.33 per share for each of the first two quarterssecond quarter of fiscal 2017 totaling $34,704.The Company increased its previous regular quarterly dividend of $0.33$0.41 per share to $0.37$0.43 per share in October 2017.2021. In October 2016,2020, the Company increased its previous regular quarterly dividend of $0.30$0.40 per share to $0.33$0.41 per share.Accounting PronouncementsReference is made to Note 1 of our Condensed Consolidated Financial Statements contained in this report for a summary of recently issued accounting pronouncements, which summary is hereby incorporated by reference.None.41ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe have exposureThe Company is exposed to market risk from changes in short-termforeign currency exchange rates and interest rates. The Company enters into various hedging transactions to mitigate certain of these risks in accordance with guidelines established by the Company's management. The Company does not use financial instruments for trading or speculative purposes.CURRENCY EXCHANGE RISK – The Company’s principal currency exposures mainly relate to the Euro and British Pound Sterling. The Company 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 $717,323 of debt denominated in Euros at October 31, 2021. A hypothetical 10% change in the Euro/U.S. Dollar exchange rate would change our October 31, 2021 debt balance by approximately $71,732.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 October 31, 2021, the Company has $432,250 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 October 31, 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 on(approximately 17.7% of our variable-rate debt. Depending upon the borrowing option chosen, the interest charged is based upon either the Base Rate or LIBOR of a selected time period, plus an applicable margin. If interest rates increased by 0.25% (which approximates a 10% increase of the weighted-average interest rate on our borrowings as of Januaryat October 31, 2018), our results of operations and cash flows for the six months ended January 31, 20182021) would not have been materially affected.result in an estimated $10,357 pre-tax reduction in net earnings over a one-year period.ITEM 4. CONTROLS AND PROCEDURESThe Company maintains “disclosure controls and procedures”,procedures,” as such term is defined under Exchange Act Rule13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, 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 necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of 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 JanuaryOctober 31, 2018,2021, there were no changes in our internal controlcontrols over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controlcontrols over financial reporting.42PART II – OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSThe Company is involved in certain litigation arising out of its operations in the normal course of its business, most of which is based upon state “lemon laws”,laws,” warranty claims and vehicle accidents (for which the Company carries insurance above a specified self-insured retention or deductible amount). The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. There is significant judgment required in assessing both the probability of an adverse outcome and the determination as to whether an exposure can be reasonably estimated. In management’s opinion, the ultimate disposition of any current legal proceedings or claims against the Company will not have a material effect on the Company’s financial condition, operating results or cash flows. Litigation is, however, inherently uncertain and an adverse outcome from such litigation could have a material effect on the operating results of a particular reporting period.ITEM 1A. RISK FACTORSThereAlthough 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 Form10-K for the fiscal year ended July 31, 2017.2943ITEM 6. EXHIBITSAttached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly report on Form10-Q for the quarter ended JanuaryOctober 31, 20182021 formatted in XBRL (“eXtensibleiXBRL (Inline “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 (iv)(v) related notes to these financial statements.30*Certain schedules and exhibits referenced in certain agreements filed as exhibits hereto have been omitted in accordance with Item 601 (b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.44SIGNATURESPursuant 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: December 8, 2021 /s/ Robert W. Martin Robert W. Martin President and Chief Executive Officer DATE: December 8, 2021 THOR INDUSTRIES, INC.(Registrant)DATE: March 7, 2018/s/ Robert W. MartinRobert W. MartinPresident and Chief Executive OfficerDATE: March 7, 2018/s/ Colleen ZuhlColleen Zuhl31