\n Cash and\n Cash Equivalents – Interest-bearing deposits and\n other investments with maturities of three months or less when\n purchased are considered cash equivalents. At July 31, 2016\n and 2015, cash and cash equivalents of $164,696 and $170,231,\n respectively, were held by one financial institution. The remaining\n $45,206 and $13,247 at July 31, 2016 and 2015, respectively,\n were held at various other financial institutions.
\n14. CONTINGENT\n LIABILITIES AND COMMITMENTS
\n\n The Company is\n contingently liable under terms of repurchase agreements with\n financial institutions providing inventory financing for certain\n dealers of certain of its products. These arrangements, which are\n customary in the industry, provide for the repurchase of products\n sold to dealers in the event of default by the dealer on the\n agreement to pay the financial institution. The repurchase price is\n generally determined by the original sales price of the product and\n pre-defined curtailment arrangements. The Company typically resells\n the repurchased product at a discount from its repurchase price.\n The risk of loss from these agreements is spread over numerous\n dealers. In addition to the guarantee under these repurchase\n agreements, the Company may also be required to repurchase\n inventory relative to dealer terminations in certain states in\n accordance with state laws or regulatory requirements. The\n repurchase activity related to dealer terminations in certain\n states has historically been insignificant in relation to our\n repurchase obligation with financial institutions.
\n\n The\n Company’s total commercial commitment under standby\n repurchase obligations on dealer inventory financing as of\n July 31, 2016 and July 31, 2015 were $1,898,307 and\n $1,363,576, respectively, with the increase primarily attributable\n to the Jayco acquisition. The commitment term is generally up to\n eighteen months.
\n\n The Company\n accounts for the guarantee under repurchase agreements of\n dealers’ financing by deferring a portion of the related\n product sale that represents the estimated fair value of the\n guarantee at inception. The estimated fair value takes into account\n an estimate of the losses that may be incurred upon resale of any\n repurchases. This estimate is based on recent historical experience\n supplemented by the Company’s assessment of current economic\n and other conditions affecting its dealers. This deferred amount is\n included in the repurchase and guarantee reserve balances of $6,068\n and $4,163 as of July 31, 2016 and July 31, 2015,\n respectively, which increased primarily due to the acquisition of\n Jayco and are included in Other current liabilities in the\n Consolidated Balance Sheets.
\n\n The following\n table reflects losses incurred related to repurchase agreements\n that were settled in the past three fiscal years. The Company\n believes that any future losses under these agreements will not\n have a significant effect on the Company’s consolidated\n financial position, results of operations or cash flows.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n 2016 \n | \n \n | \n | \n 2015 \n | \n \n | \n | 2014 | \n\n | |||
| \n Cost of units\n repurchased \n | \n \n | $ | \n4,650 | \n\n | \n | $ | \n7,171 | \n\n | \n | $ | \n1,386 | \n\n |
| \n Realization of units\n resold \n | \n \n | \n | 3,832 | \n\n | \n | \n | 5,906 | \n\n | \n | \n | 1,098 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Losses due to\n repurchase \n | \n \n | $ | \n818 | \n\n | \n | $ | \n1,265 | \n\n | \n | $ | \n288 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Legal\n Matters
\n\n The Company is\n involved in certain litigation arising out of its operations in the\n normal course of its business, most of which is based upon state\n “lemon laws”, warranty claims and vehicle accidents\n (for which the Company carries insurance above a specified\n self-insured retention or deductible amount). The outcomes of legal\n proceedings and claims brought against the Company are subject to\n significant uncertainty. There is significant judgment\n required in assessing both the probability of an adverse outcome\n and the determination as to whether an exposure can be reasonably\n estimated. In management’s opinion, the ultimate\n disposition of any current legal proceedings or claims against\n the Company will not have a material effect on the Company’s\n financial condition, operating results or cash flows. Litigation\n is, however, inherently uncertain and an adverse outcome from such\n litigation could have a material effect on the operating results of\n a particular reporting period.
\n3. DISCONTINUED\n OPERATIONS
\n\n On July 31,\n 2013, the Company entered into a Stock Purchase Agreement\n (“ASV SPA”) to sell its bus business to Allied\n Specialty Vehicles, Inc. (“ASV”) for cash of $100,000,\n subject to closing adjustments for changes in the net assets sold\n from April 30, 2013 to the closing date. The Company’s\n bus business, which manufactured and sold transit and shuttle\n buses, included the operations of Champion Bus Inc., General Coach\n America, Inc., Goshen Coach, Inc., ElDorado National (California),\n Inc. and ElDorado National (Kansas), Inc. This divestiture will\n allow the Company to focus on the strategic development and growth\n of its core recreational vehicle business.
\n\n The sale was\n completed as of October 20, 2013 and the Company received\n $100,000 on October 21, 2013, and an additional $5,043 in\n February 2014 representing the increase in bus net assets since\n April 30, 2013. As a result, final cash consideration received\n for the sale of the bus business totaled $105,043.
\n\n The Company\n recorded a pre-tax gain of $7,079 as a result of the sale. The\n results of operations for the bus business, including the gain on\n the sale of the bus business, have been reported as discontinued\n operations in the Consolidated Statements of Income and\n Comprehensive Income for all periods presented.
\nThe following table summarizes\n the results of discontinued operations:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n Net sales \n | \n \n | \n | \n | \n | \n | $ | \n– | \n\n | \n | \n | \n | \n | \n | $ | \n– | \n\n | \n | \n | \n | \n | \n | $ | \n83,903 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Operating income (loss) of\n discontinued operations \n | \n \n | \n | \n | \n | \n | $ | \n(2,417 | \n) | \n\n | \n | \n | \n | \n | $ | \n(4,791 | \n) | \n\n | \n | \n | \n | \n | $ | \n(5,735 | \n) | \n
| \n Pre-tax gain on disposal of\n discontinued business \n | \n \n | \n | \n | \n | \n | \n | – | \n\n | \n | \n | \n | \n | \n | \n | – | \n\n | \n | \n | \n | \n | \n | \n | 7,079 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n Income (loss) before income\n taxes \n | \n \n | \n | \n | \n | \n | \n | (2,417 | \n) | \n\n | \n | \n | \n | \n | \n | (4,791 | \n) | \n\n | \n | \n | \n | \n | \n | 1,344 | \n\n |
| \n Income tax benefit \n | \n \n | \n | \n | \n | \n | \n | 914 | \n\n | \n | \n | \n | \n | \n | \n | 2,167 | \n\n | \n | \n | \n | \n | \n | \n | 2,142 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n Income (loss) from\n discontinued operations, net of income taxes \n | \n \n | \n | \n | \n | \n | $ | \n(1,503 | \n) | \n\n | \n | \n | \n | \n | $ | \n(2,624 | \n) | \n\n | \n | \n | \n | \n | $ | \n3,486 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
\n Operating loss of\n discontinued operations reflects expenses incurred directly related\n to the former bus operations, including ongoing costs related to\n liabilities retained by the Company under the ASV SPA for bus\n product liability and workers’ compensation claims occurring\n prior to the closing date of the sale.
\n\n
\n\n As a result of the\n sale of the bus business, and in accordance with the ASV SPA, the\n Company is no longer the primary obligor to the taxing authorities\n for bus operations in certain states. As a result, the Company\n eliminated the reserves associated with certain uncertain tax\n positions resulting in a net tax benefit of $1,883 which is\n reflected within discontinued operations for fiscal 2014. Under the\n terms of the sale, the Company has agreed to indemnify ASV for any\n claims made by the taxing authorities after the date of sale for\n these uncertain tax positions, but does not expect future losses\n under this guarantee to be material. The effective tax rate of\n discontinued operations for fiscal 2014 was favorably impacted\n primarily by tax return to provision adjustments and the settlement\n of certain uncertain tax benefits.
\n\n Earnings Per\n Share – Basic earnings per common share\n (“EPS”) are computed by dividing net income by the\n weighted-average number of common shares outstanding. Diluted EPS\n is computed by dividing net income by the weighted-average number\n of common shares outstanding assuming dilution. The difference\n between basic EPS and diluted EPS is the result of outstanding\n stock options, unvested restricted stock and restricted stock units\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Weighted-average shares\n outstanding for basic earnings per share \n | \n \n | \n | 52,458,789 | \n\n | \n | \n | 53,166,206 | \n\n | \n | \n | 53,270,076 | \n\n |
| \n Stock options, unvested\n restricted stock and restricted stock units \n | \n \n | \n | 131,727 | \n\n | \n | \n | 109,304 | \n\n | \n | \n | 91,614 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Weighted-average shares\n outstanding assuming dilution \n | \n \n | \n | 52,590,516 | \n\n | \n | \n | 53,275,510 | \n\n | \n | \n | 53,361,690 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company\n excludes stock options, unvested restricted stock and restricted\n stock units that have an antidilutive effect from its calculation\n of weighted-average shares outstanding assuming dilution, but had\n none at July 31, 2016, 2015 and 2014.
\n\n Fair Value\n of Financial Instruments – The carrying amount of\n cash equivalents, investments, accounts receivable, notes\n receivable and accounts payable approximate fair value because of\n the relatively short maturity of these financial instruments. The\n carrying value of the Company’s long-term debt approximates\n fair value as the entire balance is subject to variable market\n interest rates that the Company believes are market rates for a\n similarly situated Company. The fair value of debt is largely\n estimated using level 2 inputs as defined by ASC820.
\n5.\n INVENTORIES
\nMajor classifications of\n inventories are:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Finished products –\n RV \n | \n \n | $ | \n39,943 | \n\n | \n | $ | \n35,693 | \n\n |
| \n Finished products –\n other \n | \n \n | \n | 20,141 | \n\n | \n | \n | 18,045 | \n\n |
| \n Work in process \n | \n \n | \n | 97,872 | \n\n | \n | \n | 51,556 | \n\n |
| \n Raw materials \n | \n \n | \n | 173,362 | \n\n | \n | \n | 133,482 | \n\n |
| \n Chassis \n | \n \n | \n | 102,686 | \n\n | \n | \n | 37,739 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Subtotal \n | \n \n | \n | 434,004 | \n\n | \n | \n | 276,515 | \n\n |
| \n Excess of FIFO costs over LIFO\n costs \n | \n \n | \n | (30,135 | \n) | \n\n | \n | (30,400 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total inventories \n | \n \n | $ | \n403,869 | \n\n | \n | $ | \n246,115 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Of the $434,004\n and $276,515 of inventory at July 31, 2016 and 2015, $219,050\n and $204,017, respectively, was valued on the last-in, first-out\n (LIFO) basis, and $214,954 and $72,498, respectively, was valued on\n the first-in, first-out (FIFO) method. The fiscal 2016 acquisition\n of Jayco accounted for $138,292 of the $142,456 increase in FIFO\n inventory during fiscal 2016.
\n\n The\n Company’s reserves for inventory obsolescence were $4,840 at\n July 31, 2016 and $3,638 at July 31, 2015, with the\n increase primarily due to the fiscal 2016 acquisition of\n Jayco.
\n\n Inventories – Certain inventories are\n stated at the lower of cost or market, determined on the last-in,\n first-out (“LIFO”) basis with the remainder being\n valued on a first-in, first-out (“FIFO”) basis.\n Manufacturing costs include materials, labor, freight-in and\n manufacturing overhead. Unallocated overhead and abnormal costs are\n expensed as incurred.
\nAccounting\n Pronouncements
\n\n In March 2016, the\n FASB issued Accounting Standards Update No. 2016-09\n (“ASU 2016-09”) “Improvements to Employee\n Share-Based Payment Accounting,” which simplifies several\n aspects of the accounting for employee share-based payment\n transactions, including the accounting for the related income\n taxes, forfeitures, statutory tax withholding requirements and\n classification in the statement of cash flows. ASU 2016-09 is\n effective for annual reporting periods beginning after\n December 15, 2016, including interim periods within those\n annual reporting periods. This standard is effective for the\n Company in its fiscal 2018 beginning on August 1, 2017. Early\n adoption is permitted. The Company is currently evaluating the\n impact of this ASU on its consolidated financial\n statements.
\n\n
\n\n In November 2015,\n the FASB issued Accounting Standards Update No. 2015-17\n (“ASU 2015-17”) “Income Taxes (Topic 740):\n Balance Sheet Classification of Deferred Taxes,” to simplify\n the presentation of deferred income taxes. Under the new standard,\n both deferred tax liabilities and assets are required to be\n classified as noncurrent in a classified balance sheet. ASU 2015-17\n is effective for fiscal years, and the interim periods within those\n years, beginning after December 15, 2016 with early adoption\n permitted. This standard is effective for the Company in its fiscal\n year 2018 beginning on August 1, 2017, however, the Company\n elected to early adopt this standard beginning with the year ended\n July 31, 2016 and apply the standard prospectively. As a\n result, $67,344 of net current deferred tax assets and $13,927 of\n net long-term deferred income tax liabilities were netted together\n and reclassified to non-current deferred income taxes on the\n Consolidated Balance Sheet as of July 31, 2016. As\n permitted by the standard, prior periods were not retrospectively\n adjusted.
\n\n In September 2015,\n the FASB issued Accounting Standards Update No. 2015-16\n (“ASU 2015-16”) “Business Combinations (Topic\n 805): Simplifying the Accounting for Measurement Period\n Adjustments,” to simplify the accounting for\n measurement-period adjustments in a business combination. Under the\n new standard, an acquirer must recognize adjustments to provisional\n amounts in a business combination in the reporting period in which\n the adjustment amounts are determined, rather than retrospectively\n adjusting the provisional amounts recognized at the acquisition\n date with a corresponding adjustment to goodwill as under current\n guidance. ASU 2015-16 is effective for fiscal years, and the\n interim periods within those years, beginning after\n December 15, 2015. This standard is effective for the Company\n in its fiscal year 2017 beginning on August 1, 2016. The\n Company will apply this standard prospectively to adjustments to\n provisional amounts that occur after the effective date. The\n Company is currently evaluating the impact of the ASU on its\n consolidated financial statements.
\n\n In July 2015, the\n FASB issued Accounting Standards Update No. 2015-11\n (“ASU 2015-11”) “Inventory (Topic 330):\n Simplifying the Measurement of Inventory.” ASU 2015-11\n requires inventory measured using any method other than last-in,\n first-out (“LIFO”) or the retail inventory method to be\n subsequently measured at the lower of cost or net realizable value,\n rather than at the lower of cost or market. Under this ASU,\n subsequent measurement of inventory using the LIFO and retail\n inventory method is unchanged. ASU 2015-11 is effective\n prospectively for fiscal years, and for interim periods within\n those years, beginning after December 15, 2016. The standard\n is effective for the Company in its fiscal year 2018 beginning on\n August 1, 2017. Early adoption is permitted. The Company is\n currently evaluating the impact of this ASU on its consolidated\n financial statements.
\n\n In May 2014, the\n FASB issued Accounting Standards Update No. 2014-09\n “Revenue from Contracts with Customers (Topic 606),”\n which outlines a single comprehensive model for entities to use in\n accounting for revenue arising from contracts with customers. This\n standard will supersede most current revenue recognition guidance.\n Under the new standard, entities are required to identify the\n contract with a customer, identify the separate performance\n obligations in the contract, determine the transaction price,\n allocate the transaction price to the separate performance\n obligations in the contract and recognize the appropriate amount of\n revenue when (or as) the entity satisfies each performance\n obligation. The standard is effective for fiscal years, and the\n interim periods within those years, beginning after\n December 15, 2017. The standard is effective for the Company\n in its fiscal year 2019 beginning on August 1, 2018. Entities\n have the option of using either retrospective transition or a\n modified approach in applying the new standard. The Company is\n currently evaluating the approach it will use to apply the new\n standard and the impact that the adoption of the new standard will\n have on the Company’s consolidated financial\n statements.
\n11. PRODUCT\n WARRANTY
\n\n The Company\n generally provides retail customers of its products with a one-year\n or two-year warranty covering defects in material or workmanship,\n with longer warranties on certain structural components. The\n Company records a liability based on its best estimate of the\n amounts necessary to settle future and existing claims on products\n sold as of the balance sheet date. Factors used in estimating the\n warranty liability include a history of units sold, existing dealer\n inventory, average cost incurred and a profile of the distribution\n of warranty expenditures over the warranty period. Management\n believes that the warranty liabilities are adequate. However,\n actual claims incurred could differ from estimates, requiring\n adjustments to the reserves. Warranty liabilities are reviewed and\n adjusted as necessary on at least a quarterly basis.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n108,206 | \n\n | \n | $ | \n94,938 | \n\n | \n | $ | \n84,250 | \n\n |
| \n Provision \n | \n \n | \n | 114,119 | \n\n | \n | \n | 114,429 | \n\n | \n | \n | 92,809 | \n\n |
| \n Payments \n | \n \n | \n | (110,092) | \n\n | \n | \n | (106,266) | \n\n | \n | \n | (87,402) | \n\n |
| \n Acquisitions \n | \n \n | \n | 89,607 | \n\n | \n | \n | 5,105 | \n\n | \n | \n | 5,281 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n201,840 | \n\n | \n | $ | \n108,206 | \n\n | \n | $ | \n94,938 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The components of the\n provision (benefit) for income taxes from continuing operations are\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||||||
| Income Taxes: | \n\n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Federal \n | \n \n | $ | \n126,846 | \n\n | \n | $ | \n98,504 | \n\n | \n | $ | \n83,374 | \n\n |
| \n State and local \n | \n \n | \n | 12,716 | \n\n | \n | \n | 1,222 | \n\n | \n | \n | (1,383) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total current\n expense \n | \n \n | \n | 139,562 | \n\n | \n | \n | 99,726 | \n\n | \n | \n | 81,991 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Federal \n | \n \n | \n | (13,079) | \n\n | \n | \n | (7,785) | \n\n | \n | \n | (3,805) | \n\n |
| \n State and local \n | \n \n | \n | (1,192) | \n\n | \n | \n | (1,055) | \n\n | \n | \n | (883) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total deferred\n (benefit) \n | \n \n | \n | (14,271) | \n\n | \n | \n | (8,840) | \n\n | \n | \n | (4,688) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Total income tax\n expense \n | \n \n | $ | \n125,291 | \n\n | \n | $ | \n90,886 | \n\n | \n | $ | \n77,303 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n108,206 | \n\n | \n | $ | \n94,938 | \n\n | \n | $ | \n84,250 | \n\n |
| \n Provision \n | \n \n | \n | 114,119 | \n\n | \n | \n | 114,429 | \n\n | \n | \n | 92,809 | \n\n |
| \n Payments \n | \n \n | \n | (110,092) | \n\n | \n | \n | (106,266) | \n\n | \n | \n | (87,402) | \n\n |
| \n Acquisitions \n | \n \n | \n | 89,607 | \n\n | \n | \n | 5,105 | \n\n | \n | \n | 5,281 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n201,840 | \n\n | \n | $ | \n108,206 | \n\n | \n | $ | \n94,938 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
1. SUMMARY OF\n SIGNIFICANT ACCOUNTING POLICIES
\n\n Nature of\n Operations – Thor Industries, Inc. was founded in\n 1980 and, through its subsidiaries, manufactures a wide range of\n recreational vehicles at various manufacturing facilities primarily\n in Indiana and Ohio, with additional facilities in Oregon and\n Idaho. These products are sold to independent dealers primarily\n throughout the United States and Canada. Unless the context\n otherwise requires or indicates, all references to\n “Thor”, the “Company”, “we”,\n “our” and “us” refer to Thor Industries,\n Inc. and its subsidiaries.
\n\n The\n Company’s ongoing business activities are primarily comprised\n of two distinct operations, which include the design, manufacture\n and sale of towable recreational vehicles and motorized\n recreational vehicles. Accordingly, the Company has presented\n segmented financial information for these two segments in Note 4 to\n the Consolidated Financial Statements. See Note 3,\n “Discontinued Operations,” in the Notes to the\n Consolidated Financial Statements for a description of the\n Company’s bus operations which were sold as of\n October 20, 2013. Accordingly, the accompanying financial\n statements (including footnote disclosures unless otherwise\n indicated) reflect these operations as discontinued operations\n apart from the Company’s continuing operations.
\n\n Principles\n of Consolidation – The accompanying Consolidated\n Financial Statements include the accounts of Thor Industries, Inc.\n and its wholly-owned subsidiaries. All intercompany balances and\n transactions are eliminated upon consolidation.
\n\n Estimates – The preparation of financial\n statements in conformity with accounting principles generally\n accepted in the U.S. requires management to make estimates and\n assumptions that affect the reported amounts of assets and\n liabilities at the date of the financial statements and the\n reported amount of revenues and expenses during the reporting\n period. Key estimates include reserves for inventory, incurred but\n not reported medical claims, warranty claims, recalls,\n workers’ compensation claims, vehicle repurchases, uncertain\n tax positions, product and non-product litigation and assumptions\n made in asset impairment assessments. The Company bases its\n estimates on historical experience and on various other assumptions\n believed to be reasonable under the circumstances. The Company\n believes that such estimates are made using consistent and\n appropriate methods. Actual results could differ from these\n estimates.
\n\n Cash and\n Cash Equivalents – Interest-bearing deposits and\n other investments with maturities of three months or less when\n purchased are considered cash equivalents. At July 31, 2016\n and 2015, cash and cash equivalents of $164,696 and $170,231,\n respectively, were held by one financial institution. The remaining\n $45,206 and $13,247 at July 31, 2016 and 2015, respectively,\n were held at various other financial institutions.
\n\n Fair Value\n of Financial Instruments – The carrying amount of\n cash equivalents, investments, accounts receivable, notes\n receivable and accounts payable approximate fair value because of\n the relatively short maturity of these financial instruments. The\n carrying value of the Company’s long-term debt approximates\n fair value as the entire balance is subject to variable market\n interest rates that the Company believes are market rates for a\n similarly situated Company. The fair value of debt is largely\n estimated using level 2 inputs as defined by ASC820.
\n\n Inventories – Certain inventories are\n stated at the lower of cost or market, determined on the last-in,\n first-out (“LIFO”) basis with the remainder being\n valued on a first-in, first-out (“FIFO”) basis.\n Manufacturing costs include materials, labor, freight-in and\n manufacturing overhead. Unallocated overhead and abnormal costs are\n expensed as incurred.
\n\n Depreciation – Property, plant and\n equipment are recorded at cost and depreciated using the\n straight-line method over the estimated useful lives of the assets\n as follows:
\nBuildings and improvements – 10 to 39 years
\nMachinery and equipment – 3 to 10 years
\n\n Depreciation\n expense is recorded in cost of products sold except for $3,812,\n $2,362 and $2,542 in fiscal 2016, 2015 and 2014, respectively,\n which relates primarily to office buildings and office equipment\n and is recorded in selling, general and administrative\n expenses.
\n\n Intangible\n Assets – Intangible assets consist of goodwill,\n trademarks, dealer networks/customer relationships, design\n technology assets and non-compete agreements. Trademarks are being\n amortized on a straight-line basis over 15 to 25 years. Dealer\n networks/customer relationships are amortized on an accelerated\n basis over 12 to 20 years, and design technology assets and\n non-compete agreements are amortized using the straight-line method\n over 2 to 15 years. Backlog is amortized using a straight-line\n basis method over 2 to 3 months. Goodwill is not amortized but is\n tested at least annually for impairment. Goodwill is reviewed for\n impairment by applying a fair-value based test on an annual basis\n at April 30, or more frequently if events or circumstances\n indicate a potential impairment.
\n\n
\n\n Long-lived\n Assets – Property, plant and equipment and\n identifiable intangibles that are amortized are reviewed for\n impairment whenever events or changes in circumstances indicate\n that the carrying amount of an asset may not be recoverable from\n future cash flows. If the carrying value of a long-lived asset is\n impaired, an impairment charge is recorded for the amount by which\n the carrying value of the long-lived asset exceeds its fair\n value.
\n\n Product\n Warranties – Estimated warranty costs are provided at\n the time of sale of the related products. Warranty reserves are\n reviewed and adjusted as necessary on at least a quarterly\n basis.
\n\n Allowance\n for Doubtful Accounts – The allowance for doubtful\n accounts represents management’s estimate of probable credit\n losses in existing accounts receivable, as determined from a review\n of past due balances and other specific account\n information.
\nA summary of allowance for\n doubtful accounts activity is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n1,283 | \n\n | \n | $ | \n348 | \n\n | \n | $ | \n157 | \n\n |
| \n Net recorded expense\n (income) \n | \n \n | \n | (9) | \n\n | \n | \n | 359 | \n\n | \n | \n | 63 | \n\n |
| \n Write-offs, net of\n recoveries/payments \n | \n \n | \n | (679) | \n\n | \n | \n | (67) | \n\n | \n | \n | (72) | \n\n |
| \n Acquisitions \n | \n \n | \n | 30 | \n\n | \n | \n | 643 | \n\n | \n | \n | 200 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n625 | \n\n | \n | $ | \n1,283 | \n\n | \n | $ | \n348 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Insurance\n Reserves – Generally, the Company is self-insured for\n workers’ compensation, products liability and group medical\n insurance. Under these plans, liabilities are recognized for claims\n incurred, including those incurred but not reported. The liability\n for workers’ compensation claims is determined by the Company\n with the assistance of a third party administrator and actuary\n using various state statutes and historical claims experience.\n Group medical reserves are estimated using historical claims\n experience. The Company has a self-insured retention\n (“SIR”) for products liability and personal injury\n matters ranging from $500 to $7,500 per occurrence, depending on\n the product type and when the occurrence took place. Generally, any\n occurrence (as defined by our insurance policies) after\n March 31, 2015 is subject to the $500 SIR, while matters\n occurring after March 31, 2014 and through March 31, 2015\n are subject to a $1,000 SIR. The Company has established a\n liability on our balance sheet for product liability and personal\n injury occurrences based on historical data, known cases and\n actuarial information. Currently, the Company maintains excess\n liability insurance aggregating $50,000 with outside insurance\n carriers to minimize our risks related to catastrophic claims in\n excess of our self-insured positions for products liability and\n personal injury matters.
\n\n Revenue\n Recognition – Revenues from the sale of recreational\n vehicles are recorded primarily when all of the following\n conditions have been met:
\n\n
\n| 1) | \n\n An order for a product has been received from a\n dealer; \n | \n
\n
\n| 2) | \n\n Written or oral approval for payment has been received from the\n dealer’s flooring institution, if applicable; \n | \n
\n
\n| 3) | \n\n A common carrier signs the delivery ticket accepting\n responsibility for the product as agent for the dealer;\n and \n | \n
\n
\n| 4) | \n\n The product is removed from the Company’s property for\n delivery to the dealer who placed the order. \n | \n
\n These conditions\n are generally met when title passes, which is when vehicles are\n shipped to dealers in accordance with shipping terms, which are\n primarily FOB shipping point. Most sales are made to dealers\n financing their purchases under flooring arrangements with banks or\n finance companies. Certain shipments are sold to customers on\n credit or cash on delivery (“COD”) terms. The Company\n recognizes revenue on credit sales upon shipment and COD sales upon\n payment and delivery. Products are not sold on consignment, dealers\n do not have the right to return products and dealers are typically\n responsible for interest costs to floor plan lenders.
\n\n At the time of\n revenue recognition, amounts billed to dealers for delivery of\n product are recognized as revenue and the corresponding delivery\n expense charged to costs of products sold.
\n\n Revenues from the\n sale of extruded aluminum components are recognized when\n title to products and the risk of loss are transferred to the\n customer, which is generally upon shipment.
\n\n Dealer\n Volume Rebates, Sales Incentives and Advertising Costs\n – Estimated costs related to dealer volume rebates and sales\n incentives are accrued as a reduction of revenue at the later of\n the time products are sold or the date the rebate or incentive is\n offered. Advertising costs, which consist primarily of tradeshows,\n are expensed as incurred, and were $14,472, $12,515 and $9,492 in\n fiscal 2016, 2015 and 2014, respectively.
\n\n
\n\n Repurchase\n Agreements – The Company is contingently\n liable under terms of repurchase agreements with financial\n institutions providing inventory financing for certain dealers of\n certain of its products. These arrangements, which are customary in\n the industry, provide for the repurchase of products sold to\n dealers in the event of default by the dealer. The risk of loss\n from these agreements is spread over numerous dealers. In addition\n to the guarantee under these repurchase agreements, we may also be\n required to repurchase inventory relative to dealer terminations in\n certain states in accordance with state laws or regulatory\n requirements. The repurchase price is generally determined by the\n original sales price of the product and pre-defined curtailment\n arrangements and the Company typically resells the repurchased\n product at a discount from its repurchase price. The Company\n accounts for the guarantee under its repurchase agreements with our\n dealers’ financing institutions by estimating and deferring a\n portion of the related product sale that represents the estimated\n fair value of the repurchase obligation. The estimated fair value\n takes into account our estimate of the loss we will incur upon\n resale of any repurchases. This estimate is based on recent\n historical experience supplemented by management’s assessment\n of current economic and other conditions affecting our dealers.\n This deferred amount is included in our repurchase and guarantee\n reserve which is included in other current liabilities on the\n Consolidated Balance Sheets.
\n\n Income\n Taxes – The objectives of accounting for\n income taxes are to recognize the amount of taxes payable or\n refundable for the current year and deferred tax liabilities and\n assets for the future tax consequences of events that have been\n recognized in our financial statements or tax returns. Judgment is\n required in assessing the future tax consequences of events that\n have been recognized in our financial statements or tax returns.\n Fluctuations in the actual outcome of these tax consequences could\n materially impact our financial position or results of\n operations.
\n\n The Company\n recognizes liabilities for uncertain tax positions based on a\n two-step process. The first step is to evaluate the tax position\n for recognition by determining if the weight of available evidence\n indicates that it is more likely than not that the position will be\n sustained on audit, including resolution of related appeals or\n litigation processes, if any. The second step requires the Company\n to estimate and measure the tax benefit as the largest amount that\n is more than 50% likely to be realized upon ultimate settlement. It\n is inherently difficult and subjective to estimate such amounts, as\n the Company has to determine the probability of various possible\n outcomes. The Company reevaluates these uncertain tax positions on\n a quarterly basis. This evaluation is based on factors including,\n but not limited to, changes in facts or circumstances, changes in\n tax law, effectively settled issues under audit, voluntary\n settlements and new audit activity. Such a change in recognition or\n measurement would result in the recognition of a tax benefit or an\n additional charge to the tax provision.
\n\n Significant\n judgment is required in determining the Company’s provision\n for income taxes, the Company’s deferred tax assets and\n liabilities and the valuation allowance recorded against the\n Company’s deferred tax assets, if any. Valuation allowances\n must be considered due to the uncertainty of realizing deferred tax\n assets. Companies must assess whether valuation allowances should\n be established against their deferred tax assets on a tax\n jurisdictional basis based on the consideration of all available\n evidence, using a more likely than not standard. The Company has\n evaluated the realizability of our deferred tax assets on our\n Consolidated Balance Sheets which includes the assessment of the\n cumulative income over recent prior periods.
\n\n See the\n “Accounting Pronouncements” section below regarding the\n Company’s prospective adoption in fiscal 2016 of the new FASB\n standard regarding the balance sheet classification of deferred\n taxes.
\n\n Earnings Per\n Share – Basic earnings per common share\n (“EPS”) are computed by dividing net income by the\n weighted-average number of common shares outstanding. Diluted EPS\n is computed by dividing net income by the weighted-average number\n of common shares outstanding assuming dilution. The difference\n between basic EPS and diluted EPS is the result of outstanding\n stock options, unvested restricted stock and restricted stock units\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Weighted-average shares\n outstanding for basic earnings per share \n | \n \n | \n | 52,458,789 | \n\n | \n | \n | 53,166,206 | \n\n | \n | \n | 53,270,076 | \n\n |
| \n Stock options, unvested\n restricted stock and restricted stock units \n | \n \n | \n | 131,727 | \n\n | \n | \n | 109,304 | \n\n | \n | \n | 91,614 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Weighted-average shares\n outstanding assuming dilution \n | \n \n | \n | 52,590,516 | \n\n | \n | \n | 53,275,510 | \n\n | \n | \n | 53,361,690 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company\n excludes stock options, unvested restricted stock and restricted\n stock units that have an antidilutive effect from its calculation\n of weighted-average shares outstanding assuming dilution, but had\n none at July 31, 2016, 2015 and 2014.
\nAccounting\n Pronouncements
\n\n In March 2016, the\n FASB issued Accounting Standards Update No. 2016-09\n (“ASU 2016-09”) “Improvements to Employee\n Share-Based Payment Accounting,” which simplifies several\n aspects of the accounting for employee share-based payment\n transactions, including the accounting for the related income\n taxes, forfeitures, statutory tax withholding requirements and\n classification in the statement of cash flows. ASU 2016-09 is\n effective for annual reporting periods beginning after\n December 15, 2016, including interim periods within those\n annual reporting periods. This standard is effective for the\n Company in its fiscal 2018 beginning on August 1, 2017. Early\n adoption is permitted. The Company is currently evaluating the\n impact of this ASU on its consolidated financial\n statements.
\n\n
\n\n In November 2015,\n the FASB issued Accounting Standards Update No. 2015-17\n (“ASU 2015-17”) “Income Taxes (Topic 740):\n Balance Sheet Classification of Deferred Taxes,” to simplify\n the presentation of deferred income taxes. Under the new standard,\n both deferred tax liabilities and assets are required to be\n classified as noncurrent in a classified balance sheet. ASU 2015-17\n is effective for fiscal years, and the interim periods within those\n years, beginning after December 15, 2016 with early adoption\n permitted. This standard is effective for the Company in its fiscal\n year 2018 beginning on August 1, 2017, however, the Company\n elected to early adopt this standard beginning with the year ended\n July 31, 2016 and apply the standard prospectively. As a\n result, $67,344 of net current deferred tax assets and $13,927 of\n net long-term deferred income tax liabilities were netted together\n and reclassified to non-current deferred income taxes on the\n Consolidated Balance Sheet as of July 31, 2016. As\n permitted by the standard, prior periods were not retrospectively\n adjusted.
\n\n In September 2015,\n the FASB issued Accounting Standards Update No. 2015-16\n (“ASU 2015-16”) “Business Combinations (Topic\n 805): Simplifying the Accounting for Measurement Period\n Adjustments,” to simplify the accounting for\n measurement-period adjustments in a business combination. Under the\n new standard, an acquirer must recognize adjustments to provisional\n amounts in a business combination in the reporting period in which\n the adjustment amounts are determined, rather than retrospectively\n adjusting the provisional amounts recognized at the acquisition\n date with a corresponding adjustment to goodwill as under current\n guidance. ASU 2015-16 is effective for fiscal years, and the\n interim periods within those years, beginning after\n December 15, 2015. This standard is effective for the Company\n in its fiscal year 2017 beginning on August 1, 2016. The\n Company will apply this standard prospectively to adjustments to\n provisional amounts that occur after the effective date. The\n Company is currently evaluating the impact of the ASU on its\n consolidated financial statements.
\n\n In July 2015, the\n FASB issued Accounting Standards Update No. 2015-11\n (“ASU 2015-11”) “Inventory (Topic 330):\n Simplifying the Measurement of Inventory.” ASU 2015-11\n requires inventory measured using any method other than last-in,\n first-out (“LIFO”) or the retail inventory method to be\n subsequently measured at the lower of cost or net realizable value,\n rather than at the lower of cost or market. Under this ASU,\n subsequent measurement of inventory using the LIFO and retail\n inventory method is unchanged. ASU 2015-11 is effective\n prospectively for fiscal years, and for interim periods within\n those years, beginning after December 15, 2016. The standard\n is effective for the Company in its fiscal year 2018 beginning on\n August 1, 2017. Early adoption is permitted. The Company is\n currently evaluating the impact of this ASU on its consolidated\n financial statements.
\n\n In May 2014, the\n FASB issued Accounting Standards Update No. 2014-09\n “Revenue from Contracts with Customers (Topic 606),”\n which outlines a single comprehensive model for entities to use in\n accounting for revenue arising from contracts with customers. This\n standard will supersede most current revenue recognition guidance.\n Under the new standard, entities are required to identify the\n contract with a customer, identify the separate performance\n obligations in the contract, determine the transaction price,\n allocate the transaction price to the separate performance\n obligations in the contract and recognize the appropriate amount of\n revenue when (or as) the entity satisfies each performance\n obligation. The standard is effective for fiscal years, and the\n interim periods within those years, beginning after\n December 15, 2017. The standard is effective for the Company\n in its fiscal year 2019 beginning on August 1, 2018. Entities\n have the option of using either retrospective transition or a\n modified approach in applying the new standard. The Company is\n currently evaluating the approach it will use to apply the new\n standard and the impact that the adoption of the new standard will\n have on the Company’s consolidated financial\n statements.
\n16. EMPLOYEE BENEFIT PLANS
\n\n Substantially all\n non-highly compensated employees are eligible to participate in a\n 401(k) plan. The Company may make discretionary contributions to\n the 401(k) plan according to a matching formula determined by each\n operating subsidiary. Total expense for the plan was $917 in fiscal\n 2016, $565 in fiscal 2015 and $387 in fiscal 2014.
\n\n
\n\n The Company has\n established a deferred compensation plan for executives who do not\n participate in a 401(k) plan. This plan allows executives to defer\n a portion of their compensation and to direct the Company to invest\n the funds in mutual fund investments held by the Company.\n Participant benefits are limited to the value of the investments\n held on their behalf. Investments held by the Company are accounted\n for at fair value and reported as other long-term assets, and the\n equal and offsetting obligation to the participants is reported as\n other long-term liabilities in the Consolidated Balance Sheets.\n Changes in the fair value of the plan assets and the related\n deferred liability are both recorded through the Consolidated\n Statements of Income and Comprehensive Income. The Company does not\n make contributions to the plan. The balance of investments held in\n this plan, and the equal and offsetting long-term liability to the\n executives, was $15,529 at July 31, 2016 and $10,803 at\n July 31, 2015.
\n\n Principles\n of Consolidation – The accompanying Consolidated\n Financial Statements include the accounts of Thor Industries, Inc.\n and its wholly-owned subsidiaries. All intercompany balances and\n transactions are eliminated upon consolidation.
\n7. INTANGIBLE\n ASSETS, GOODWILL AND LONG-LIVED ASSETS
\nThe components of amortizable\n intangible assets are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | July 31, 2016 | \n\n | \n | July 31, 2015 | \n\n | |||||||||||
| \n | \n | Weighted-Average \n Years \n Remaining \n Life in Years | \n \n | \n | \n | \n | Cost | \n\n | \n | Accumulated \n Amortization | \n \n | \n | Cost | \n\n | \n | Accumulated \n Amortization | \n \n | |||||
| \n Dealer networks/customer\n relationships \n | \n \n | 16 | \n\n | \n | \n | \n | \n | $ | \n404,960 | \n\n | \n | $ | \n55,191 | \n\n | \n | $ | \n143,860 | \n\n | \n | $ | \n37,194 | \n\n |
| \n Trademarks \n | \n \n | 19 | \n\n | \n | \n | \n | \n | \n | 148,117 | \n\n | \n | \n | 10,539 | \n\n | \n | \n | 55,282 | \n\n | \n | \n | 7,608 | \n\n |
| \n Design technology and other\n intangibles \n | \n \n | 9 | \n\n | \n | \n | \n | \n | \n | 22,400 | \n\n | \n | \n | 10,870 | \n\n | \n | \n | 22,400 | \n\n | \n | \n | 8,168 | \n\n |
| \n Non-compete\n agreements \n | \n \n | 3 | \n\n | \n | \n | \n | \n | \n | 450 | \n\n | \n | \n | 203 | \n\n | \n | \n | 4,710 | \n\n | \n | \n | 4,264 | \n\n |
| \n Backlog \n | \n \n | 0.2 | \n\n | \n | \n | \n | \n | \n | 12,400 | \n\n | \n | \n | 4,133 | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total amortizable intangible\n assets \n | \n \n | \n | \n | \n | \n | \n | \n | $ | \n588,327 | \n\n | \n | $ | \n80,936 | \n\n | \n | $ | \n226,252 | \n\n | \n | $ | \n57,234 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Aggregate\n amortization expense for amortizable intangibles for all operations\n for the fiscal years ended July 31, 2016, 2015 and 2014 was\n $27,962, $16,015 and $12,984, respectively, including $27,962,\n $16,015 and $12,920, respectively, for continuing operations. The\n dealer networks and customer relationships are being amortized on\n an accelerated basis. Trademarks, design technology and other\n intangibles and non-compete agreements are amortized on a\n straight-line basis. The increase in amortizable intangible assets\n in fiscal 2016 is due to the acquisition of Jayco as more fully\n described in Note 2 to the Consolidated Financial\n Statements.
\nEstimated Amortization\n Expense:
\n\n
\n| \n | \n | \n | \n | \n |
| \n For the fiscal year ending\n July 31, 2017 \n | \n \n | $ | \n63,925 | \n\n |
| \n For the fiscal year ending\n July 31, 2018 \n | \n \n | \n | 54,463 | \n\n |
| \n For the fiscal year ending\n July 31, 2019 \n | \n \n | \n | 50,367 | \n\n |
| \n For the fiscal year ending\n July 31, 2020 \n | \n \n | \n | 46,480 | \n\n |
| \n For the fiscal year ending\n July 31, 2021 \n | \n \n | \n | 43,131 | \n\n |
| \n For the fiscal year ending\n July 31, 2022 and thereafter \n | \n \n | \n | 249,025 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n507,391 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n During the second\n quarter of fiscal 2016, the Company determined that sufficient\n evidence existed to warrant an interim goodwill impairment analysis\n for one of its reporting units. As a result of this analysis, the\n Company recorded a pre-tax, non-cash goodwill impairment charge of\n $9,113 in the second quarter of fiscal 2016 related to this\n reporting unit within the towables reportable segment. For the\n purpose of this goodwill test, the fair value of the reporting unit\n was determined by employing a discounted cash flow model, which\n utilized Level 3 inputs as defined by ASC 820. The $9,113 charge\n represents the full impairment of the goodwill related to this\n reporting unit.
\n\n Goodwill is not\n subject to amortization, but instead is reviewed for impairment by\n applying a fair-value based test to the Company’s reporting\n units on an annual basis as of April 30, or more frequently if\n events or circumstances indicate a potential impairment. The\n Company’s reporting units are generally the same as its\n operating segments, which are identified in Note 4 to the Condensed\n Consolidated Financial Statements. Fair values are determined by a\n discounted cash flow model. These estimates are subject to\n significant management judgment, including the determination of\n many factors such as sales growth rates, gross margin patterns,\n cost growth rates, terminal value assumptions and discount rates,\n and therefore largely represent Level 3 inputs as defined by ASC\n 820. Changes in these estimates can have a significant impact on\n the determination of cash flows and fair value and could\n potentially result in future material impairments.
\n\n Management engages\n an independent valuation firm to assist in its impairment\n assessments. The Company completed its annual impairment review as\n of April 30, 2016 and no additional impairment of goodwill was\n identified, other than the second quarter of fiscal 2016 impairment\n described above.
\n\n
\nChanges in the carrying amount\n of goodwill by reportable segment as of July 31, 2016 and 2015\n are summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Towables | \n\n | \n | Motorized | \n\n | \n | Other | \n\n | \n | Total | \n\n | ||||
| \n Net balance as of\n July 31, 2014 \n | \n \n | $ | \n256,579 | \n\n | \n | $ | \n– | \n\n | \n | $ | \n– | \n\n | \n | $ | \n256,579 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n Fiscal year 15\n activity: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Goodwill acquired \n | \n \n | \n | 13,172 | \n\n | \n | \n | – | \n\n | \n | \n | 42,871 | \n\n | \n | \n | 56,043 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net balance as of\n July 31, 2015 \n | \n \n | \n | 269,751 | \n\n | \n | \n | – | \n\n | \n | \n | 42,871 | \n\n | \n | \n | 312,622 | \n\n |
| \n Fiscal year 16\n activity: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Goodwill acquired \n | \n \n | \n | 74,184 | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | 74,184 | \n\n |
| \n Impairment charges \n | \n \n | \n | (9,113 | \n) | \n\n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | (9,113 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net balance as of\n July 31, 2016 \n | \n \n | $ | \n334,822 | \n\n | \n | $ | \n– | \n\n | \n | $ | \n42,871 | \n\n | \n | $ | \n377,693 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | ||||||||||||||||
| \n The components of the net\n balance as of July 31, 2016 are summarized as\n follows: \n\n \n | \n \n \n \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n | \n | Towables | \n\n | \n | Motorized | \n\n | \n | Other | \n\n | \n | Total | \n\n | ||||
| \n Goodwill \n | \n \n | $ | \n343,935 | \n\n | \n | $ | \n17,252 | \n\n | \n | $ | \n42,871 | \n\n | \n | $ | \n404,058 | \n\n |
| \n Accumulated impairment\n charges \n | \n \n | \n | (9,113 | \n) | \n\n | \n | (17,252 | \n) | \n\n | \n | – | \n\n | \n | \n | (26,365 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net balance as of\n July 31, 2016: \n | \n \n | $ | \n334,822 | \n\n | \n | $ | \n– | \n\n | \n | $ | \n42,871 | \n\n | \n | $ | \n377,693 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
13. INCOME\n TAXES
\nThe components of the\n provision (benefit) for income taxes from continuing operations are\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||||||
| Income Taxes: | \n\n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Federal \n | \n \n | $ | \n126,846 | \n\n | \n | $ | \n98,504 | \n\n | \n | $ | \n83,374 | \n\n |
| \n State and local \n | \n \n | \n | 12,716 | \n\n | \n | \n | 1,222 | \n\n | \n | \n | (1,383) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total current\n expense \n | \n \n | \n | 139,562 | \n\n | \n | \n | 99,726 | \n\n | \n | \n | 81,991 | \n\n |
| \n | \n | \n | \n | |||||||||
| \n Federal \n | \n \n | \n | (13,079) | \n\n | \n | \n | (7,785) | \n\n | \n | \n | (3,805) | \n\n |
| \n State and local \n | \n \n | \n | (1,192) | \n\n | \n | \n | (1,055) | \n\n | \n | \n | (883) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total deferred\n (benefit) \n | \n \n | \n | (14,271) | \n\n | \n | \n | (8,840) | \n\n | \n | \n | (4,688) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Total income tax\n expense \n | \n \n | $ | \n125,291 | \n\n | \n | $ | \n90,886 | \n\n | \n | $ | \n77,303 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n \nThe differences between income\n taxes at the federal statutory rate and the actual income taxes are\n as follows: \n\n \n | \n \n \n \n\n \n \n | \n |||||||||||
| \n | \n | July 31, | \n\n | |||||||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Provision at federal statutory\n rate \n | \n \n | $ | \n134,160 | \n\n | \n | $ | \n102,513 | \n\n | \n | $ | \n88,487 | \n\n |
| \n State and local income taxes,\n net of federal benefit \n | \n \n | \n | 6,599 | \n\n | \n | \n | 5,144 | \n\n | \n | \n | 3,748 | \n\n |
| \n Federal income tax credits and\n incentives \n | \n \n | \n | (4,194) | \n\n | \n | \n | (2,207) | \n\n | \n | \n | (772) | \n\n |
| \n Domestic production activities\n deduction \n | \n \n | \n | (12,609) | \n\n | \n | \n | (9,519) | \n\n | \n | \n | (7,947) | \n\n |
| \n Change in uncertain tax\n positions \n | \n \n | \n | 611 | \n\n | \n | \n | (5,650) | \n\n | \n | \n | (6,631) | \n\n |
| \n Change in current tax payable\n and deferred tax liabilities \n | \n \n | \n | 103 | \n\n | \n | \n | 218 | \n\n | \n | \n | 125 | \n\n |
| \n Other permanent\n items \n | \n \n | \n | 621 | \n\n | \n | \n | 387 | \n\n | \n | \n | 293 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total income tax\n expense \n | \n \n | $ | \n125,291 | \n\n | \n | $ | \n90,886 | \n\n | \n | $ | \n77,303 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
A summary of deferred income\n taxes is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Current deferred income tax\n asset (liability): \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n Inventory basis \n | \n \n | $ | \n– | \n\n | \n | $ | \n467 | \n\n |
| \n Employee benefits \n | \n \n | \n | – | \n\n | \n | \n | 3,625 | \n\n |
| \n Self-insurance\n reserves \n | \n \n | \n | – | \n\n | \n | \n | 10,411 | \n\n |
| \n Accrued product\n warranties \n | \n \n | \n | – | \n\n | \n | \n | 39,486 | \n\n |
| \n Accrued incentives \n | \n \n | \n | – | \n\n | \n | \n | 3,959 | \n\n |
| \n Sales returns and\n allowances \n | \n \n | \n | – | \n\n | \n | \n | 1,520 | \n\n |
| \n Accrued expenses \n | \n \n | \n | – | \n\n | \n | \n | 2,067 | \n\n |
| \n Unrecognized tax\n benefits \n | \n \n | \n | – | \n\n | \n | \n | 367 | \n\n |
| \n Other \n | \n \n | \n | – | \n\n | \n | \n | (2,038) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total net current deferred\n income tax asset \n | \n \n | $ | \n– | \n\n | \n | $ | \n59,864 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Long-term deferred income tax\n asset (liability): \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n Inventory basis \n | \n \n | $ | \n1,196 | \n\n | \n | $ | \n– | \n\n |
| \n Employee benefits \n | \n \n | \n | 4,587 | \n\n | \n | \n | – | \n\n |
| \n Self-Insurance\n Reserves \n | \n \n | \n | 10,504 | \n\n | \n | \n | – | \n\n |
| \n Accrued product\n warranties \n | \n \n | \n | 43,388 | \n\n | \n | \n | – | \n\n |
| \n Accrued incentives \n | \n \n | \n | 5,154 | \n\n | \n | \n | – | \n\n |
| \n Sales returns and\n allowances \n | \n \n | \n | 1,642 | \n\n | \n | \n | – | \n\n |
| \n Accrued expenses \n | \n \n | \n | 2,607 | \n\n | \n | \n | – | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | (4,164) | \n\n | \n | \n | (707) | \n\n |
| \n Deferred\n compensation \n | \n \n | \n | 9,145 | \n\n | \n | \n | 6,367 | \n\n |
| \n Tax credit carry\n forward \n | \n \n | \n | 256 | \n\n | \n | \n | 110 | \n\n |
| \n Intangibles \n | \n \n | \n | (22,308) | \n\n | \n | \n | (30,246) | \n\n |
| \n Unrecognized tax\n benefits \n | \n \n | \n | 4,105 | \n\n | \n | \n | 3,913 | \n\n |
| \n Other \n | \n \n | \n | (2,695) | \n\n | \n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total net long-term deferred\n income tax (liability) \n | \n \n | \n | – | \n\n | \n | \n | (20,563) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net deferred tax\n asset \n | \n \n | $ | \n53,417 | \n\n | \n | $ | \n39,301 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n As of\n July 31, 2016, the Company has $2,649 of state tax credit\n carry forwards that expire from fiscal 2022-2026 of which the\n Company expects to realize prior to expiration. In addition, the\n Company has approximately $45,500 of gross state tax Net Operating\n Loss (“NOL”) carry forwards that expire from fiscal\n 2017-2036 that the Company does not expect to realize and therefore\n has been fully reserved. The deferred tax asset of $973 associated\n with the state tax NOL carry forwards and the related equal and\n offsetting valuation allowance are not reflected in the table\n above.
\n\n In November 2015,\n the FASB issued Accounting Standards Update No. 2015-17\n (“ASU 2015-17”) “Income Taxes (Topic 740):\n Balance Sheet Classification of Deferred Taxes,” to simplify\n the presentation of deferred income taxes. Under the new standard,\n both deferred tax liabilities and assets are required to be\n classified as noncurrent in a classified balance sheet. ASU 2015-17\n is effective for fiscal years, and the interim periods within those\n years, beginning after December 15, 2016 with early adoption\n permitted. This standard is effective for the Company in its fiscal\n year 2018 beginning on August 1, 2017, however, the Company\n elected to early adopt this standard beginning with the Annual\n Report on Form 10-K for the year ended July 31, 2016 and apply\n the standard prospectively. As a result, $67,344 of net\n current deferred tax assets and $13,927 of net long-term deferred\n income tax liabilities were netted together and reclassified to\n non-current deferred income taxes on the Consolidated Balance Sheet\n as of July 31, 2016. As permitted by the standard, prior\n periods were not retrospectively adjusted.
\nUnrecognized Tax\n Benefits:
\n\n The benefits of\n tax positions reflected on income tax returns but whose outcome\n remains uncertain are only recognized for financial accounting\n purposes if they meet minimum recognition thresholds. The total\n amount of unrecognized tax benefits that, if recognized, would have\n impacted the Company’s effective tax rate were $8,886 for\n 2016, $8,764 for 2015 and $13,679 for 2014.
\n\n Changes in the\n unrecognized tax benefit during fiscal year 2016, 2015 and 2014\n were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n13,156 | \n\n | \n | $ | \n20,813 | \n\n | \n | $ | \n32,733 | \n\n |
| \n Tax positions related to prior\n years: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Additions \n | \n \n | \n | 1,546 | \n\n | \n | \n | 126 | \n\n | \n | \n | 9 | \n\n |
| \n Reductions \n | \n \n | \n | (920) | \n\n | \n | \n | (7,695) | \n\n | \n | \n | (9,281) | \n\n |
| \n Tax positions related to\n current year: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Additions \n | \n \n | \n | 3,123 | \n\n | \n | \n | 2,858 | \n\n | \n | \n | 3,804 | \n\n |
| \n Settlements \n | \n \n | \n | (956) | \n\n | \n | \n | (1,898) | \n\n | \n | \n | (5,002) | \n\n |
| \n Lapses in statute of\n limitations \n | \n \n | \n | (2,680) | \n\n | \n | \n | (1,048) | \n\n | \n | \n | (1,450) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n13,269 | \n\n | \n | $ | \n13,156 | \n\n | \n | $ | \n20,813 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n\n The reductions to\n the tax positions related to prior years of $9,281 in fiscal year\n 2014 includes $1,378 of uncertain tax positions that were\n eliminated as a result of the sale of the bus business. See Note 3\n to the Consolidated Financial Statements for further\n information.
\n\n It is the\n Company’s policy to recognize interest and penalties accrued\n relative to unrecognized tax benefits in income tax expense.\n Interest and penalties related to unrecognized tax benefits are not\n included in the schedule above. The total amount of liabilities\n accrued for interest and penalties related to unrecognized tax\n benefits as of July 31, 2016, 2015 and 2014 were $1,547,\n $1,895 and $5,200, respectively. The total amount of interest and\n penalties expense (benefit) recognized in the Consolidated\n Statements of Income and Comprehensive Income for the fiscal years\n ended July 31, 2016, 2015, and 2014 were $(231), $(2,552) and\n $(3,418), respectively.
\n\n The total\n unrecognized tax benefits above, along with the related accrued\n interest and penalties, are reported within the liability section\n of the Consolidated Balance Sheets. A portion of the unrecognized\n tax benefits is classified as short-term and is included in the\n “Income and other taxes” line of the Consolidated\n Balance Sheets, while the remainder is classified as a long-term\n liability.
\nThe components of total\n unrecognized tax benefits are summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Unrecognized tax\n benefits \n | \n \n | $ | \n13,269 | \n\n | \n | $ | \n13,156 | \n\n | \n | $ | \n20,813 | \n\n |
| \n Reduction to unrecognized tax\n benefits for tax credit carry forward \n | \n \n | \n | (2,255) | \n\n | \n | \n | (2,109) | \n\n | \n | \n | (657) | \n\n |
| \n Accrued interest and\n penalties \n | \n \n | \n | 1,547 | \n\n | \n | \n | 1,895 | \n\n | \n | \n | 5,200 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total unrecognized tax\n benefits \n | \n \n | $ | \n12,561 | \n\n | \n | $ | \n12,942 | \n\n | \n | $ | \n25,356 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Short-term, included in\n “Income and other taxes” \n | \n \n | $ | \n2,586 | \n\n | \n | $ | \n997 | \n\n | \n | $ | \n1,667 | \n\n |
| \n Long-term \n | \n \n | \n | 9,975 | \n\n | \n | \n | 11,945 | \n\n | \n | \n | 23,689 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total unrecognized tax\n benefits \n | \n \n | $ | \n12,561 | \n\n | \n | $ | \n12,942 | \n\n | \n | $ | \n25,356 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company\n anticipates a decrease of approximately $5,193 in unrecognized tax\n benefits and $857 in interest during fiscal 2017 from expected\n settlements or payments of uncertain tax positions and lapses of\n the applicable statutes of limitations. Actual results may differ\n from these estimates.
\n\n Generally, fiscal\n years 2013, 2014 and 2015 remain open for federal income tax\n purposes and fiscal years 2012, 2013, 2014 and 2015 remain open for\n state and Canadian income tax purposes. The Company and its\n subsidiaries file a consolidated U.S. federal income tax return and\n multiple state income tax returns. The Company is currently being\n audited by the IRS for tax year end July 31, 2014 and the\n state of California for tax years ended July 31, 2013 and\n 2014. In addition, the Company is currently disputing the audit\n results by the state of Indiana for tax years ended July 31,\n 2008, 2009 and 2010. The Company believes it has adequately\n reserved for its exposure to additional payments for uncertain tax\n positions related to its Federal, California and Indiana income tax\n returns in its liability for unrecognized tax benefits.
\n15. LEASES
\n\n The Company has\n operating leases principally for land, buildings and equipment and\n also leases certain real estate and transportation equipment under\n various capital leases expiring between 2016 and 2027. Future\n minimum rental payments required under capital and operating leases\n as of July 31, 2016 are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Capital Leases | \n\n | \n | Operating Leases | \n\n | ||
| \n For the fiscal year ending\n July 31, 2017 \n | \n \n | $ | \n943 | \n\n | \n | $ | \n2,517 | \n\n |
| \n For the fiscal year ending\n July 31, 2018 \n | \n \n | \n | 948 | \n\n | \n | \n | 1,864 | \n\n |
| \n For the fiscal year ending\n July 31, 2019 \n | \n \n | \n | 938 | \n\n | \n | \n | 1,437 | \n\n |
| \n For the fiscal year ending\n July 31, 2020 \n | \n \n | \n | 933 | \n\n | \n | \n | 849 | \n\n |
| \n For the fiscal year ending\n July 31, 2021 \n | \n \n | \n | 951 | \n\n | \n | \n | 619 | \n\n |
| \n For the fiscal year ending\n July 31, 2022 and thereafter \n | \n \n | \n | 5,988 | \n\n | \n | \n | 5,628 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total minimum lease\n payments \n | \n \n | \n | 10,701 | \n\n | \n | $ | \n12,914 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n Less amount representing\n interest \n | \n \n | \n | (3,887 | \n) | \n\n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Present value of net minimum\n capital lease payments \n | \n \n | \n | 6,814 | \n\n | \n | \n | \n | \n |
| \n Less current\n portion \n | \n \n | \n | 341 | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Long-term capital lease\n obligations \n | \n \n | $ | \n6,473 | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n The current\n portion of capital lease obligations are included in Other current\n liabilities and the long-term capital lease obligations are\n included in Other long-term liabilities, respectively, in the\n Consolidated Balance Sheets.
\nRent expense for the fiscal\n years ended July 31, 2016, 2015 and 2014 was $3,757, $2,092\n and $1,700, respectively.
\n9. LOAN\n TRANSACTIONS AND RELATED NOTES RECEIVABLE
\n\n In\n January 2009, we entered into two credit agreements, for\n $10,000 each, with Stephen Adams, in his individual capacity, and\n Stephen Adams and his successors, as trustee under the Stephen\n Adams Living Trust (the “Trust” and, together with each\n of the foregoing persons, the “January 2009 Loan\n Borrowers”). The final principal and interest payments on the\n first agreement were received in the second quarter of fiscal 2014\n and the final principal and interest payments on the second\n agreement were received in fiscal 2012.
\n\n Under the terms of\n the second agreement, the January 2009 Loan Borrowers agreed to use\n the loan proceeds to make an equity contribution to FreedomRoads\n Holding to be used to purchase the Company’s products. As a\n result, principal payments received under the second agreement are\n classified as operating activities in the Consolidated Statements\n of Cash Flows.
\n\n In December 2009,\n we entered into a $10,000 credit agreement with Marcus Lemonis,\n Stephen Adams, in his individual capacity, and Stephen Adams and\n his successors, as trustee under the Trust (collectively, the\n “December 2009 Loan Borrowers”), and later modified in\n December 2012. The final principal and interest payments under this\n agreement were received in August 2015.
\n\n The January 2009\n and December 2009 Loan Borrowers own, directly or indirectly, a\n controlling interest in FreedomRoads Holding Company, LLC, the\n parent company of FreedomRoads, LLC, the Company’s largest\n dealer.
\nProperty, plant and equipment\n is stated at cost, net of accumulated depreciation, and consists of\n the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Land \n | \n \n | $ | \n46,422 | \n\n | \n | $ | \n27,447 | \n\n |
| \n Buildings and\n improvements \n | \n \n | \n | 300,902 | \n\n | \n | \n | 214,462 | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 133,112 | \n\n | \n | \n | 106,959 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cost \n | \n \n | \n | 480,436 | \n\n | \n | \n | 348,868 | \n\n |
| \n Less accumulated\n depreciation \n | \n \n | \n | (136,169 | \n) | \n\n | \n | (114,823 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net property, plant and\n equipment \n | \n \n | $ | \n344,267 | \n\n | \n | $ | \n234,045 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Repurchase\n Agreements – The Company is contingently\n liable under terms of repurchase agreements with financial\n institutions providing inventory financing for certain dealers of\n certain of its products. These arrangements, which are customary in\n the industry, provide for the repurchase of products sold to\n dealers in the event of default by the dealer. The risk of loss\n from these agreements is spread over numerous dealers. In addition\n to the guarantee under these repurchase agreements, we may also be\n required to repurchase inventory relative to dealer terminations in\n certain states in accordance with state laws or regulatory\n requirements. The repurchase price is generally determined by the\n original sales price of the product and pre-defined curtailment\n arrangements and the Company typically resells the repurchased\n product at a discount from its repurchase price. The Company\n accounts for the guarantee under its repurchase agreements with our\n dealers’ financing institutions by estimating and deferring a\n portion of the related product sale that represents the estimated\n fair value of the repurchase obligation. The estimated fair value\n takes into account our estimate of the loss we will incur upon\n resale of any repurchases. This estimate is based on recent\n historical experience supplemented by management’s assessment\n of current economic and other conditions affecting our dealers.\n This deferred amount is included in our repurchase and guarantee\n reserve which is included in other current liabilities on the\n Consolidated Balance Sheets.
\n\n Revenue\n Recognition – Revenues from the sale of recreational\n vehicles are recorded primarily when all of the following\n conditions have been met:
\n\n
\n| 1) | \n\n An order for a product has been received from a\n dealer; \n | \n
\n
\n| 2) | \n\n Written or oral approval for payment has been received from the\n dealer’s flooring institution, if applicable; \n | \n
\n
\n| 3) | \n\n A common carrier signs the delivery ticket accepting\n responsibility for the product as agent for the dealer;\n and \n | \n
\n
\n| 4) | \n\n The product is removed from the Company’s property for\n delivery to the dealer who placed the order. \n | \n
\n These conditions\n are generally met when title passes, which is when vehicles are\n shipped to dealers in accordance with shipping terms, which are\n primarily FOB shipping point. Most sales are made to dealers\n financing their purchases under flooring arrangements with banks or\n finance companies. Certain shipments are sold to customers on\n credit or cash on delivery (“COD”) terms. The Company\n recognizes revenue on credit sales upon shipment and COD sales upon\n payment and delivery. Products are not sold on consignment, dealers\n do not have the right to return products and dealers are typically\n responsible for interest costs to floor plan lenders.
\n\n At the time of\n revenue recognition, amounts billed to dealers for delivery of\n product are recognized as revenue and the corresponding delivery\n expense charged to costs of products sold.
\n\n Revenues from the\n sale of extruded aluminum components are recognized when\n title to products and the risk of loss are transferred to the\n customer, which is generally upon shipment.
\nA summary of deferred income\n taxes is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Current deferred income tax\n asset (liability): \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n Inventory basis \n | \n \n | $ | \n– | \n\n | \n | $ | \n467 | \n\n |
| \n Employee benefits \n | \n \n | \n | – | \n\n | \n | \n | 3,625 | \n\n |
| \n Self-insurance\n reserves \n | \n \n | \n | – | \n\n | \n | \n | 10,411 | \n\n |
| \n Accrued product\n warranties \n | \n \n | \n | – | \n\n | \n | \n | 39,486 | \n\n |
| \n Accrued incentives \n | \n \n | \n | – | \n\n | \n | \n | 3,959 | \n\n |
| \n Sales returns and\n allowances \n | \n \n | \n | – | \n\n | \n | \n | 1,520 | \n\n |
| \n Accrued expenses \n | \n \n | \n | – | \n\n | \n | \n | 2,067 | \n\n |
| \n Unrecognized tax\n benefits \n | \n \n | \n | – | \n\n | \n | \n | 367 | \n\n |
| \n Other \n | \n \n | \n | – | \n\n | \n | \n | (2,038) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total net current deferred\n income tax asset \n | \n \n | $ | \n– | \n\n | \n | $ | \n59,864 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Long-term deferred income tax\n asset (liability): \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n Inventory basis \n | \n \n | $ | \n1,196 | \n\n | \n | $ | \n– | \n\n |
| \n Employee benefits \n | \n \n | \n | 4,587 | \n\n | \n | \n | – | \n\n |
| \n Self-Insurance\n Reserves \n | \n \n | \n | 10,504 | \n\n | \n | \n | – | \n\n |
| \n Accrued product\n warranties \n | \n \n | \n | 43,388 | \n\n | \n | \n | – | \n\n |
| \n Accrued incentives \n | \n \n | \n | 5,154 | \n\n | \n | \n | – | \n\n |
| \n Sales returns and\n allowances \n | \n \n | \n | 1,642 | \n\n | \n | \n | – | \n\n |
| \n Accrued expenses \n | \n \n | \n | 2,607 | \n\n | \n | \n | – | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | (4,164) | \n\n | \n | \n | (707) | \n\n |
| \n Deferred\n compensation \n | \n \n | \n | 9,145 | \n\n | \n | \n | 6,367 | \n\n |
| \n Tax credit carry\n forward \n | \n \n | \n | 256 | \n\n | \n | \n | 110 | \n\n |
| \n Intangibles \n | \n \n | \n | (22,308) | \n\n | \n | \n | (30,246) | \n\n |
| \n Unrecognized tax\n benefits \n | \n \n | \n | 4,105 | \n\n | \n | \n | 3,913 | \n\n |
| \n Other \n | \n \n | \n | (2,695) | \n\n | \n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total net long-term deferred\n income tax (liability) \n | \n \n | \n | – | \n\n | \n | \n | (20,563) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net deferred tax\n asset \n | \n \n | $ | \n53,417 | \n\n | \n | $ | \n39,301 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Major classifications of\n inventories are:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Finished products –\n RV \n | \n \n | $ | \n39,943 | \n\n | \n | $ | \n35,693 | \n\n |
| \n Finished products –\n other \n | \n \n | \n | 20,141 | \n\n | \n | \n | 18,045 | \n\n |
| \n Work in process \n | \n \n | \n | 97,872 | \n\n | \n | \n | 51,556 | \n\n |
| \n Raw materials \n | \n \n | \n | 173,362 | \n\n | \n | \n | 133,482 | \n\n |
| \n Chassis \n | \n \n | \n | 102,686 | \n\n | \n | \n | 37,739 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Subtotal \n | \n \n | \n | 434,004 | \n\n | \n | \n | 276,515 | \n\n |
| \n Excess of FIFO costs over LIFO\n costs \n | \n \n | \n | (30,135 | \n) | \n\n | \n | (30,400 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total inventories \n | \n \n | $ | \n403,869 | \n\n | \n | $ | \n246,115 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The aggregate intrinsic value\n of options outstanding and exercisable as of July 31, 2016,\n 2015 and 2014 is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n 2016 \n | \n \n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Aggregate intrinsic value of\n options outstanding and expected to vest \n | \n \n | $ | \n– | \n\n | \n | $ | \n– | \n\n | \n | $ | \n124 | \n\n |
| \n Aggregate intrinsic value of\n options exercisable \n | \n \n | $ | \n– | \n\n | \n | $ | \n– | \n\n | \n | $ | \n124 | \n\n |
\n The difference\n between basic EPS and diluted EPS is the result of outstanding\n stock options, unvested restricted stock and restricted stock units\n as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Weighted-average shares\n outstanding for basic earnings per share \n | \n \n | \n | 52,458,789 | \n\n | \n | \n | 53,166,206 | \n\n | \n | \n | 53,270,076 | \n\n |
| \n Stock options, unvested\n restricted stock and restricted stock units \n | \n \n | \n | 131,727 | \n\n | \n | \n | 109,304 | \n\n | \n | \n | 91,614 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Weighted-average shares\n outstanding assuming dilution \n | \n \n | \n | 52,590,516 | \n\n | \n | \n | 53,275,510 | \n\n | \n | \n | 53,361,690 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
Estimated Amortization\n Expense:
\n\n
\n| \n | \n | \n | \n | \n |
| \n For the fiscal year ending\n July 31, 2017 \n | \n \n | $ | \n63,925 | \n\n |
| \n For the fiscal year ending\n July 31, 2018 \n | \n \n | \n | 54,463 | \n\n |
| \n For the fiscal year ending\n July 31, 2019 \n | \n \n | \n | 50,367 | \n\n |
| \n For the fiscal year ending\n July 31, 2020 \n | \n \n | \n | 46,480 | \n\n |
| \n For the fiscal year ending\n July 31, 2021 \n | \n \n | \n | 43,131 | \n\n |
| \n For the fiscal year ending\n July 31, 2022 and thereafter \n | \n \n | \n | 249,025 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n507,391 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
Changes in the carrying amount\n of goodwill by reportable segment as of July 31, 2016 and 2015\n are summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Towables | \n\n | \n | Motorized | \n\n | \n | Other | \n\n | \n | Total | \n\n | ||||
| \n Net balance as of\n July 31, 2014 \n | \n \n | $ | \n256,579 | \n\n | \n | $ | \n– | \n\n | \n | $ | \n– | \n\n | \n | $ | \n256,579 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| \n Fiscal year 15\n activity: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Goodwill acquired \n | \n \n | \n | 13,172 | \n\n | \n | \n | – | \n\n | \n | \n | 42,871 | \n\n | \n | \n | 56,043 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net balance as of\n July 31, 2015 \n | \n \n | \n | 269,751 | \n\n | \n | \n | – | \n\n | \n | \n | 42,871 | \n\n | \n | \n | 312,622 | \n\n |
| \n Fiscal year 16\n activity: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Goodwill acquired \n | \n \n | \n | 74,184 | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | 74,184 | \n\n |
| \n Impairment charges \n | \n \n | \n | (9,113 | \n) | \n\n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | (9,113 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net balance as of\n July 31, 2016 \n | \n \n | $ | \n334,822 | \n\n | \n | $ | \n– | \n\n | \n | $ | \n42,871 | \n\n | \n | $ | \n377,693 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | ||||||||||||||||
| \n The components of the net\n balance as of July 31, 2016 are summarized as\n follows: \n\n \n | \n \n \n \n \n | \n |||||||||||||||
| \n | \n | \n | \n | \n | ||||||||||||
| \n | \n | Towables | \n\n | \n | Motorized | \n\n | \n | Other | \n\n | \n | Total | \n\n | ||||
| \n Goodwill \n | \n \n | $ | \n343,935 | \n\n | \n | $ | \n17,252 | \n\n | \n | $ | \n42,871 | \n\n | \n | $ | \n404,058 | \n\n |
| \n Accumulated impairment\n charges \n | \n \n | \n | (9,113 | \n) | \n\n | \n | (17,252 | \n) | \n\n | \n | – | \n\n | \n | \n | (26,365 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net balance as of\n July 31, 2016: \n | \n \n | $ | \n334,822 | \n\n | \n | $ | \n– | \n\n | \n | $ | \n42,871 | \n\n | \n | $ | \n377,693 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
2. ACQUISITIONS
\nJayco,\n Inc.
\n\n On June 30,\n 2016, the Company closed on a Stock Purchase Agreement\n (“Jayco SPA”) for the acquisition of all the issued and\n outstanding capital stock of towable and motorized recreational\n vehicle manufacturer Jayco, Corp. (“Jayco”) for initial\n cash consideration of $576,060, subject to adjustment. This\n acquisition was funded from the Company’s cash on hand and\n $360,000 from an asset-based revolving credit facility as more\n fully described in Note 12 to the Consolidated Financial\n Statements. The total cash consideration to be paid is subject to\n the final determination of actual net assets as of the\n June 30, 2016 closing date. A preliminary purchase price\n adjustment of $5,039 is included in accounts payable as of\n July 31, 2016, and the final purchase price adjustment is\n expected to be determined in the first quarter of fiscal 2017.\n Jayco will operate as an independent operation in the same manner\n as the Company’s other recreational vehicle subsidiaries, and\n its towables operations are aggregated within the Company’s\n towable recreational vehicle reportable segment and its motorized\n operations are aggregated within the Company’s motorized\n recreational vehicle reportable segment. The Company purchased\n Jayco to complement its existing towable and motorized RV product\n offerings and dealer base.
\n\n
\n\n The following\n table summarizes the preliminary fair values assigned to the Jayco\n net assets acquired, subject to the finalization of internal and\n independent external valuations and the determination of final net\n assets:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n18,409 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 258,158 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 80,824 | \n\n |
| \n Dealer network \n | \n \n | \n | 261,100 | \n\n |
| \n Trademarks \n | \n \n | \n | 92,800 | \n\n |
| \n Backlog \n | \n \n | \n | 12,400 | \n\n |
| \n Goodwill \n | \n \n | \n | 74,184 | \n\n |
| \n Current liabilities \n | \n \n | \n | (216,776 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 581,099 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (18,409 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n562,690 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n On the acquisition\n date, amortizable intangible assets had a weighted-average useful\n life of 19.3 years. The dealer network was valued based on the\n Discounted Cash Flow Method and is amortized on an accelerated\n basis over 20 years. The trademarks were valued on the Relief from\n Royalty Method and are amortized on a straight-line basis over 20\n years. Backlog was valued based on the Discounted Cash Flow Method\n and is amortized on a straight-line basis over 3 months. Goodwill\n is deductible for tax purposes.
\n\n The following\n unaudited pro forma information represents the Company’s\n results of operations as if the fiscal 2016 acquisition of Jayco\n had occurred at the beginning of fiscal 2015 and the fiscal 2015\n acquisitions of both Postle and CRV/DRV had occurred at the\n beginning of fiscal 2014. These performance results may not be\n indicative of the actual results that would have occurred under the\n ownership and management of the Company.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Fiscal Year Ended \n July 31, | \n \n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Net sales \n | \n \n | $ | \n6,176,686 | \n\n | \n | $ | \n5,517,142 | \n\n |
| \n Net income \n | \n \n | $ | \n284,394 | \n\n | \n | $ | \n202,118 | \n\n |
| \n Basic earnings per common\n share \n | \n \n | $ | \n5.42 | \n\n | \n | $ | \n3.80 | \n\n |
| \n Diluted earnings per common\n share \n | \n \n | $ | \n5.41 | \n\n | \n | $ | \n3.79 | \n\n |
Postle
\n\n On May 1,\n 2015, the Company closed on a Membership Interest Purchase\n Agreement with Postle Aluminum Company, LLC for the acquisition of\n all the outstanding membership units of Postle Operating, LLC\n (“Postle”), a manufacturer of aluminum extrusion and\n specialized component products sold to RV and other manufacturers,\n for total cash consideration to date of $144,048, net of cash\n acquired. The net cash consideration of $144,048 was funded\n entirely from the Company’s cash on hand, based on a final\n determination of the actual net assets as of the May 1, 2015\n closing date and paid during the fourth quarter of fiscal 2015.\n Postle will operate as an independent operation in the same manner\n as the Company’s other subsidiaries. The operations of Postle\n are reported in Other, which is a non-reportable\n segment.
\n\n The following\n table summarizes the fair values assigned to the Postle net assets\n acquired, which are based on internal and independent external\n valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n2,963 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 54,780 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 32,251 | \n\n |
| \n Customer\n relationships \n | \n \n | \n | 38,800 | \n\n |
| \n Trademarks \n | \n \n | \n | 6,000 | \n\n |
| \n Backlog \n | \n \n | \n | 300 | \n\n |
| \n Goodwill \n | \n \n | \n | 42,871 | \n\n |
| \n Current liabilities \n | \n \n | \n | (23,729 | \n) | \n
| \n Capital lease\n obligations \n | \n \n | \n | (7,225 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 147,011 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (2,963 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n144,048 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n
\n\n On the acquisition\n date, amortizable intangible assets had a weighted-average useful\n life of 12.3 years. The customer relationships were valued based on\n the Discounted Cash Flow Method and will be amortized on an\n accelerated basis over 12 years. The trademarks were valued on the\n Relief from Royalty Method and will be amortized on a straight-line\n basis over 15 years. Backlog was valued based on the Discounted\n Cash Flow Method and was amortized on a straight-line basis over 6\n weeks. Goodwill is deductible for tax purposes.
\nCruiser RV, LLC and DRV,\n LLC
\n\n On January 5,\n 2015, the Company closed on a Stock Purchase Agreement\n (“CRV/DRV SPA”) for the acquisition of all the\n outstanding membership units of towable recreational vehicle\n manufacturer Cruiser RV, LLC (“CRV”) and luxury fifth\n wheel towable recreational vehicle manufacturer DRV, LLC\n (“DRV”) through its Heartland Recreational Vehicles,\n LLC subsidiary (“Heartland”). The Heartland operations\n are reported within the towable recreational vehicle reportable\n segment. In accordance with the CRV/DRV SPA, the closing was deemed\n effective as of January 1, 2015. As contemplated in the\n CRV/DRV SPA, the Company also acquired, in a series of integrated\n transactions, certain real estate used in the ongoing operations of\n CRV and DRV. The initial cash paid for this acquisition was\n $47,412, subject to adjustment, and was funded entirely from the\n Company’s cash on hand. Adjustments to increase the net cash\n consideration of $1,173 have been identified as of July 31,\n 2015, based on the determination of the actual net assets as of the\n close of business on December 31, 2014 and the finalization of\n certain tax matters, and paid during the fourth quarter of fiscal\n 2015. The $1,173 included reimbursing the seller for $1,062 of cash\n on hand at the acquisition date, and resulted in total net cash\n consideration of $47,523. The Company purchased CRV and DRV to\n supplement and expand its existing lightweight travel trailer and\n luxury fifth wheel product offerings and dealer base.
\n\n The following\n table summarizes the final fair values assigned to the CRV and DRV\n net assets acquired, which are based on internal and independent\n external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n1,062 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 22,175 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 4,533 | \n\n |
| \n Dealer network \n | \n \n | \n | 14,300 | \n\n |
| \n Trademarks \n | \n \n | \n | 5,400 | \n\n |
| \n Backlog \n | \n \n | \n | 450 | \n\n |
| \n Goodwill \n | \n \n | \n | 13,172 | \n\n |
| \n Current liabilities \n | \n \n | \n | (12,507 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 48,585 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (1,062 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n47,523 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n On the acquisition\n date, amortizable intangible assets had a weighted-average useful\n life of 13.9 years. The dealer network was valued based on the\n Discounted Cash Flow Method and will be amortized on an accelerated\n basis over 12 years. The trademarks were valued on the Relief from\n Royalty Method and will be amortized on a straight-line basis over\n 20 years. Backlog was valued based on the Discounted Cash Flow\n Method and was amortized on a straight-line basis over 6 weeks.\n Goodwill is deductible for tax purposes.
\nK.Z.,\n Inc.
\n\n On May 1,\n 2014, the Company closed on a Stock Purchase Agreement for the\n acquisition of all the outstanding capital stock of towable\n recreational vehicle manufacturer K.Z., Inc. (“KZ”) for\n initial cash consideration of $53,405, subject to adjustment, which\n was funded entirely from the Company’s cash on hand. The\n final purchase price payment of $2,915, included in accounts\n payable as of July 31, 2014, was based on a final\n determination of actual net working capital as of the May 1,\n 2014 closing date and was paid during the first quarter of fiscal\n 2015. The $2,915 included reimbursing the seller for $996 of cash\n on hand at the acquisition date. KZ operates as an independent\n operation in the same manner as the Company’s other primary\n subsidiaries and is aggregated within the Company’s towable\n recreational vehicle reportable segment. The Company purchased KZ\n to supplement its existing towable RV product offerings and dealer\n base.
\n\n
\n\n The following\n table summarizes the final fair values assigned to the KZ net\n assets acquired, which are based on internal and independent\n external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n996 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 34,121 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 15,057 | \n\n |
| \n Dealer network \n | \n \n | \n | 13,160 | \n\n |
| \n Trademarks \n | \n \n | \n | 5,540 | \n\n |
| \n Non-compete\n agreements \n | \n \n | \n | 450 | \n\n |
| \n Backlog \n | \n \n | \n | 420 | \n\n |
| \n Goodwill \n | \n \n | \n | 2,703 | \n\n |
| \n Current liabilities \n | \n \n | \n | (16,127 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 56,320 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (996 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n55,324 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n On the acquisition\n date, amortizable intangible assets had a weighted-average useful\n life of 13.9 years. The dealer network was valued based on the\n Discounted Cash Flow Method and is amortized on an accelerated\n basis over 12 years. The trademarks were valued on the Relief from\n Royalty Method and are amortized on a straight-line basis over 20\n years. The non-compete agreements and backlog were both valued\n based on the Discounted Cash Flow Method, and the non-compete\n agreements are amortized on a straight-line basis over 5 years\n while the backlog was amortized on a straight-line basis over 2\n months. Goodwill is deductible for tax purposes.
\nBison\n Coach
\n\n On\n October 31, 2013, the Company closed on an Asset Purchase\n Agreement with Bison Coach, LLC for the acquisition of its net\n operating assets for initial cash consideration of $16,718, subject\n to adjustment, which was funded entirely from the Company’s\n cash on hand. The purchase price adjustment, which was based on a\n final determination of net assets, was finalized in the third\n quarter of fiscal 2014 and required an additional cash payment of\n $196, resulting in total cash consideration of $16,914. As a result\n of this acquisition, the Company formed a new entity, Bison Coach\n (“Bison”), which is aggregated within the\n Company’s towable recreational vehicle reportable segment.\n The Company purchased the net assets of Bison Coach, LLC to\n supplement its existing product offerings with Bison’s\n equestrian products with living quarters.
\n\n The following\n table summarizes the final fair values assigned to the Bison net\n assets acquired, which are based on internal and independent\n external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Current assets \n | \n \n | $ | \n4,050 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 625 | \n\n |
| \n Dealer network \n | \n \n | \n | 7,400 | \n\n |
| \n Trademarks \n | \n \n | \n | 1,800 | \n\n |
| \n Backlog \n | \n \n | \n | 140 | \n\n |
| \n Goodwill \n | \n \n | \n | 6,660 | \n\n |
| \n Current liabilities \n | \n \n | \n | (3,761 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | $ | \n16,914 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n On the acquisition\n date, amortizable intangible assets had a weighted-average useful\n life of 13.3 years. The dealer network was valued based on the\n Discounted Cash Flow Method and is amortized on an accelerated cash\n flow basis over 12 years. The trademarks were valued on the Relief\n from Royalty Method and are amortized on a straight-line basis over\n 20 years. Backlog was valued based on the Discounted Cash Flow\n Method and was amortized on a straight-line basis over 6 weeks.\n Goodwill is deductible for tax purposes.
\nLivin’ Lite RV,\n Inc.
\n\n On August 30,\n 2013, the Company closed on an Asset Purchase Agreement with\n Livin’ Lite Corp. for the acquisition of its net operating\n assets for aggregate cash consideration of $16,769, net of cash\n acquired, which was funded entirely from the Company’s cash\n on hand. As a result of this acquisition, the Company formed a new\n entity, Livin’ Lite RV, Inc. (“Livin’\n Lite”), which is aggregated within the Company’s\n towable recreational vehicle reportable segment. The Company\n purchased the Livin’ Lite Corp. operating assets to\n complement its existing brands with Livin’ Lite’s\n advanced lightweight product offerings.
\n\n
\n\n The following\n table summarizes the final fair values assigned to the Livin’\n Lite net assets acquired, which are based on internal and\n independent external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n247 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 3,626 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 137 | \n\n |
| \n Dealer network \n | \n \n | \n | 3,200 | \n\n |
| \n Trademarks \n | \n \n | \n | 1,500 | \n\n |
| \n Design technology\n assets \n | \n \n | \n | 1,100 | \n\n |
| \n Non-compete\n agreements \n | \n \n | \n | 130 | \n\n |
| \n Backlog \n | \n \n | \n | 110 | \n\n |
| \n Goodwill \n | \n \n | \n | 9,113 | \n\n |
| \n Current liabilities \n | \n \n | \n | (2,147 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 17,016 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (247 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash paid for\n acquisition, less cash acquired \n | \n \n | $ | \n16,769 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n On the acquisition\n date, amortizable intangible assets had a weighted-average useful\n life of 10.2 years. The dealer network was valued based on the\n Discounted Cash Flow Method and is amortized on an accelerated cash\n flow basis over 8 years. The trademarks were valued on the Relief\n from Royalty Method and are amortized on a straight-line basis over\n 20 years. The design technology assets were valued on the Relief\n from Royalty Method and are amortized on a straight-line basis over\n 5 years. The non-compete agreements and backlog were both valued\n based on the Discounted Cash Flow Method, and the non-compete\n agreements were amortized on a straight-line basis over 2 years\n while the backlog was amortized on a straight-line basis over 6\n weeks. Goodwill is deductible for tax purposes.
\n \n \n6. PROPERTY,\n PLANT AND EQUIPMENT
\nProperty, plant and equipment\n is stated at cost, net of accumulated depreciation, and consists of\n the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Land \n | \n \n | $ | \n46,422 | \n\n | \n | $ | \n27,447 | \n\n |
| \n Buildings and\n improvements \n | \n \n | \n | 300,902 | \n\n | \n | \n | 214,462 | \n\n |
| \n Machinery and\n equipment \n | \n \n | \n | 133,112 | \n\n | \n | \n | 106,959 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cost \n | \n \n | \n | 480,436 | \n\n | \n | \n | 348,868 | \n\n |
| \n Less accumulated\n depreciation \n | \n \n | \n | (136,169 | \n) | \n\n | \n | (114,823 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Net property, plant and\n equipment \n | \n \n | $ | \n344,267 | \n\n | \n | $ | \n234,045 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Property, plant\n and equipment at both July 31, 2016 and July 31, 2015\n includes buildings and improvements acquired under capital leases\n of $6,527, and includes related amortization included in\n accumulated depreciation of $680 and $136, respectively. The fiscal\n 2016 acquisition of Jayco accounted for $84,507 of the $110,222\n increase in fiscal 2016 in net property, plant and\n equipment.
\n\n The Company sold\n land and buildings and improvements related to a towable RV\n facility located in the western United States in the fourth quarter\n of fiscal 2014. The sale resulted in net cash proceeds of $7,352\n and a gain on the sale of $1,888, which is included in Other\n income, net in the Consolidated Statements of Income and\n Comprehensive Income. RV production from this facility was\n previously consolidated into another Company complex in the same\n region.
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Net sales: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n3,338,659 | \n\n | \n | $ | \n3,096,405 | \n\n | \n | $ | \n2,721,625 | \n\n |
| \n Motorized \n | \n \n | \n | 1,094,250 | \n\n | \n | \n | 870,799 | \n\n | \n | \n | 803,831 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 4,432,909 | \n\n | \n | \n | 3,967,204 | \n\n | \n | \n | 3,525,456 | \n\n |
| \n Other \n | \n \n | \n | 218,673 | \n\n | \n | \n | 56,594 | \n\n | \n | \n | – | \n\n |
| \n Intercompany\n eliminations \n | \n \n | \n | (69,470 | \n) | \n\n | \n | (16,979 | \n) | \n\n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n4,582,112 | \n\n | \n | $ | \n4,006,819 | \n\n | \n | $ | \n3,525,456 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Income (loss) from\n continuing operations before income taxes: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n321,874 | \n\n | \n | $ | \n259,092 | \n\n | \n | $ | \n221,123 | \n\n |
| \n Motorized \n | \n \n | \n | 88,523 | \n\n | \n | \n | 66,746 | \n\n | \n | \n | 57,277 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 410,397 | \n\n | \n | \n | 325,838 | \n\n | \n | \n | 278,400 | \n\n |
| \n Other \n | \n \n | \n | 18,547 | \n\n | \n | \n | 1,424 | \n\n | \n | \n | – | \n\n |
| \n Intercompany\n eliminations \n | \n \n | \n | (23 | \n) | \n\n | \n | (554 | \n) | \n\n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | (45,608 | \n) | \n\n | \n | (33,813 | \n) | \n\n | \n | (25,581 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n383,313 | \n\n | \n | $ | \n292,895 | \n\n | \n | $ | \n252,819 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Total\n assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n1,425,168 | \n\n | \n | $ | \n907,175 | \n\n | \n | $ | \n868,017 | \n\n |
| \n Motorized \n | \n \n | \n | 476,973 | \n\n | \n | \n | 162,940 | \n\n | \n | \n | 170,251 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 1,902,141 | \n\n | \n | \n | 1,070,115 | \n\n | \n | \n | 1,038,268 | \n\n |
| \n Other, net \n | \n \n | \n | 156,822 | \n\n | \n | \n | 161,075 | \n\n | \n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | 266,501 | \n\n | \n | \n | 272,058 | \n\n | \n | \n | 370,450 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n2,325,464 | \n\n | \n | $ | \n1,503,248 | \n\n | \n | $ | \n1,408,718 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Depreciation and\n amortization expense: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n36,054 | \n\n | \n | $ | \n26,296 | \n\n | \n | $ | \n22,192 | \n\n |
| \n Motorized \n | \n \n | \n | 2,994 | \n\n | \n | \n | 2,353 | \n\n | \n | \n | 2,359 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 39,048 | \n\n | \n | \n | 28,649 | \n\n | \n | \n | 24,551 | \n\n |
| \n Other \n | \n \n | \n | 12,352 | \n\n | \n | \n | 1,678 | \n\n | \n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | 1,175 | \n\n | \n | \n | 1,054 | \n\n | \n | \n | 724 | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | 559 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n52,575 | \n\n | \n | $ | \n31,381 | \n\n | \n | $ | \n25,834 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Capital\n acquisitions: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n37,489 | \n\n | \n | $ | \n35,039 | \n\n | \n | $ | \n16,914 | \n\n |
| \n Motorized \n | \n \n | \n | 11,191 | \n\n | \n | \n | 4,309 | \n\n | \n | \n | 5,942 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 48,680 | \n\n | \n | \n | 39,348 | \n\n | \n | \n | 22,856 | \n\n |
| \n Other \n | \n \n | \n | 2,799 | \n\n | \n | \n | 436 | \n\n | \n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | 2,495 | \n\n | \n | \n | 3,271 | \n\n | \n | \n | 7,519 | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | 63 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n53,974 | \n\n | \n | $ | \n43,055 | \n\n | \n | $ | \n30,438 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n A summary of\n option activity under the 1999 Plan, the 2010 Equity and Incentive\n Plan and the 2006 Equity Incentive Plan is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise Price | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise Price | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise Price | \n \n | ||||||
| \n Outstanding at beginning of\n year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n | \n | \n | 106,313 | \n\n | \n | $ | \n31.48 | \n\n |
| \n Exercised \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | (5,000) | \n\n | \n | \n | 28.23 | \n\n | \n | \n | (101,313) | \n\n | \n | \n | 31.64 | \n\n |
| \n Forfeited \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n Expired \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n Granted \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Outstanding at end of\n year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Vested and expected to vest at\n end of year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Exercisable at end of\n year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
17. STOCKHOLDERS’\n EQUITY
\nTreasury\n Stock
\n\n The Company\n entered into a repurchase agreement, dated May 15, 2015 (the\n “May 15, 2015 Repurchase Agreement”), to purchase\n certain shares of its common stock from the Thompson Family\n Foundation (the “Foundation”) in a private transaction.\n Pursuant to the terms of the May 15, 2015 Repurchase\n Agreement, the Company purchased 1,000,000 shares of its common\n stock at a price of $60.00 per share from the Foundation, and held\n them as treasury stock, representing an aggregate purchase price of\n $60,000. The closing price of Thor common stock on May 15,\n 2015 was $61.29. The Foundation holds shares of common stock of the\n Company previously owned by the late Wade F. B. Thompson, the\n Company’s co-founder and former Chief Executive Officer. At\n the time of the repurchase transaction, Alan Siegel, a member of\n the board of directors of the Company (the “Board”),\n served as a director of the Foundation. The repurchase transaction\n was evaluated and approved by members of the Board who are not\n affiliated with the Foundation. The transaction was consummated on\n May 19, 2015, and the Company used available cash to purchase\n the shares. The number of shares repurchased by the Company\n represented 1.9% of the Company’s issued and outstanding\n common stock immediately prior to the repurchase.
\nStock-Based\n Compensation
\n\n The Board approved\n the Thor Industries, Inc. 2010 Equity and Incentive Plan (the\n “2010 Equity and Incentive Plan”) on October 25,\n 2010 and the 2006 Equity Incentive Plan (the “2006 Equity\n Incentive Plan”) on October 16, 2006. These plans were\n subsequently approved by shareholders at the 2010 and 2006 annual\n meetings, respectively. These plans are designed, among other\n things, to replace the Company’s 1999 Stock Option Plan (the\n “1999 Plan”) and the Company’s 1997 Restricted\n Stock Plan (the “1997 Plan”). Upon approval of the 2006\n Equity Incentive Plan, the 1999 Plan and the 1997 Plan were frozen.\n As a result, there will be no further grants pursuant to either the\n 1999 Plan or the 1997 Plan. The maximum number of shares issuable\n under the 2010 Equity and Incentive Plan is 2,000,000 and the\n maximum number of shares issuable under the 2006 Equity Incentive\n Plan is 1,100,000. Remaining shares available to be granted under\n the 2010 Equity and Incentive Plan are 1,211,385 and under the 2006\n Equity Incentive Plan are 30,000 as of July 31, 2016. Awards\n may be in the form of options (incentive stock options and\n non-statutory stock options), restricted stock, restricted stock\n units, performance compensation awards and stock appreciation\n rights. Options typically expire 10 years from the date of grant\n and are vested evenly over 3 to 5 years from the date of\n grant.
\n\n Stock Options\n – A summary of option activity under the 1999 Plan, the 2010\n Equity and Incentive Plan and the 2006 Equity Incentive Plan is as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise Price | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise Price | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise Price | \n \n | ||||||
| \n Outstanding at beginning of\n year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n | \n | \n | 106,313 | \n\n | \n | $ | \n31.48 | \n\n |
| \n Exercised \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | (5,000) | \n\n | \n | \n | 28.23 | \n\n | \n | \n | (101,313) | \n\n | \n | \n | 31.64 | \n\n |
| \n Forfeited \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n Expired \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n Granted \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Outstanding at end of\n year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Vested and expected to vest at\n end of year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Exercisable at end of\n year \n | \n \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | – | \n\n | \n | $ | \n– | \n\n | \n | \n | 5,000 | \n\n | \n | $ | \n28.23 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The aggregate intrinsic value\n of options outstanding and exercisable as of July 31, 2016,\n 2015 and 2014 is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n 2016 \n | \n \n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Aggregate intrinsic value of\n options outstanding and expected to vest \n | \n \n | $ | \n– | \n\n | \n | $ | \n– | \n\n | \n | $ | \n124 | \n\n |
| \n Aggregate intrinsic value of\n options exercisable \n | \n \n | $ | \n– | \n\n | \n | $ | \n– | \n\n | \n | $ | \n124 | \n\n |
There were no option grants\n during fiscal 2016, 2015 or 2014.
\nIn fiscal 2016, 2015 and 2014,\n the Company recorded no expenses for stock option\n awards.
\n\n Cash received from\n stock option exercises for fiscal 2016, 2015 and 2014 was $0, $141\n and $3,206, respectively. The total intrinsic value of stock\n options exercised in fiscal 2016, 2015 and 2014 was $0, $168 and\n $2,597, respectively.
\n\n During fiscal\n 2015, stock options of 5,000 shares were exercised at an aggregate\n exercise price of $141. During fiscal 2014, stock options of\n 101,313 shares were exercised at an aggregate exercise price of\n $3,206. Exercises of options were satisfied with the issuance of\n new shares from authorized shares.
\n\n Restricted Stock\n Awards – A summary of restricted stock award activity under\n the 2010 Equity and Incentive Plan for fiscal 2016, 2015 and 2014\n is as follows:
\n\n
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n | \n | Shares | \n\n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | ||||||
| \n Nonvested, beginning of\n year \n | \n \n | \n | 9,713 | \n\n | \n | $ | \n31.16 | \n\n | \n | \n | 13,620 | \n\n | \n | $ | \n31.08 | \n\n | \n | \n | 17,530 | \n\n | \n | $ | \n31.03 | \n\n |
| \n Granted \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n Vested \n | \n \n | \n | (3,907) | \n\n | \n | \n | 30.87 | \n\n | \n | \n | (3,907) | \n\n | \n | \n | 30.87 | \n\n | \n | \n | (3,910) | \n\n | \n | \n | 30.87 | \n\n |
| \n Forfeited \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Nonvested, end of\n year \n | \n \n | \n | 5,806 | \n\n | \n | $ | \n31.36 | \n\n | \n | \n | 9,713 | \n\n | \n | $ | \n31.16 | \n\n | \n | \n | 13,620 | \n\n | \n | $ | \n31.08 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n In fiscal 2016,\n 2015 and 2014, the Company recorded expense for restricted stock\n awards under this Plan of $115, $115 and $91, respectively. At\n July 31, 2016, there was $101 of total unrecognized\n compensation costs related to restricted stock awards that is\n expected to be recognized over a weighted-average period of 0.98\n years. This restricted stock vests evenly over 5 years from the\n date of grant.
\n\n During fiscal\n 2013, the Compensation and Development Committee of the Board\n (“the Committee”) approved a program to award\n restricted stock units to certain employees at the operating\n subsidiary and corporate levels. The first awards under this\n program were granted in the first quarter of fiscal 2013 related to\n fiscal 2012 performance. Since then, the Committee approved\n additional awards that were granted in fiscal 2014, 2015 and 2016\n related to fiscal year 2013, 2014 and 2015 performance,\n respectively. The employee restricted stock units generally vest,\n and shares of common stock will be issued, in equal installments on\n the first, second and third anniversaries of the date of\n grant. In fiscal 2014, 2015 and 2016, the Nominating and\n Governance Committee of the Board awarded restricted stock units to\n Board members that will vest, and shares of common stock will be\n issued, on the first anniversary of the date of the grant. The fair\n value of the employee and Board member restricted stock units is\n determined using the Company’s stock price on the date of\n grant. Total expense recognized in fiscal 2016, 2015 and 2014 for\n these restricted stock unit awards was $9,272, $6,661 and $5,140\n respectively.
\n\n Restricted Stock\n Units – A summary of restricted stock unit activity during\n fiscal 2016, 2015 and 2014 is included below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n | \n | Restricted Stock \n Units | \n \n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Restricted Stock \n Units | \n \n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Restricted Stock \n Units | \n \n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | ||||||
| \n Nonvested, beginning of\n year \n | \n \n | \n | 280,353 | \n\n | \n | $ | \n50.55 | \n\n | \n | \n | 212,073 | \n\n | \n | $ | \n49.21 | \n\n | \n | \n | 139,275 | \n\n | \n | $ | \n38.06 | \n\n |
| \n Granted \n | \n \n | \n | 181,872 | \n\n | \n | \n | 55.37 | \n\n | \n | \n | 162,967 | \n\n | \n | \n | 50.95 | \n\n | \n | \n | 151,168 | \n\n | \n | \n | 54.26 | \n\n |
| \n Vested \n | \n \n | \n | (133,758) | \n\n | \n | \n | 48.73 | \n\n | \n | \n | (90,608) | \n\n | \n | \n | 48.14 | \n\n | \n | \n | (63,852) | \n\n | \n | \n | 38.68 | \n\n |
| \n Forfeited \n | \n \n | \n | (3,331) | \n\n | \n | \n | 54.18 | \n\n | \n | \n | (4,079) | \n\n | \n | \n | 50.54 | \n\n | \n | \n | (14,518) | \n\n | \n | \n | 47.26 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Nonvested, end of\n year \n | \n \n | \n | 325,136 | \n\n | \n | $ | \n53.95 | \n\n | \n | \n | 280,353 | \n\n | \n | $ | \n50.55 | \n\n | \n | \n | 212,073 | \n\n | \n | $ | \n49.21 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n
\n\n At July 31,\n 2016, there was $11,077 of total unrecognized compensation costs\n related to restricted stock unit awards that is expected to be\n recognized over a weighted-average period of 2.43 years.
\n\n Total non-cash\n compensation expense recognized for stock option awards, restricted\n stock awards and restricted stock unit awards in fiscal 2016, 2015\n and 2014 was $9,387, $6,776 and $5,231, respectively, which\n included $0, $0 and $480, respectively, related to discontinued\n operations.
\n\n The Company\n recognized a tax benefit related to total stock based compensation\n expense of $3,473, $2,507 and $1,925 in fiscal 2016, 2015 and 2014,\n respectively.
\n\n Estimates – The preparation of financial\n statements in conformity with accounting principles generally\n accepted in the U.S. requires management to make estimates and\n assumptions that affect the reported amounts of assets and\n liabilities at the date of the financial statements and the\n reported amount of revenues and expenses during the reporting\n period. Key estimates include reserves for inventory, incurred but\n not reported medical claims, warranty claims, recalls,\n workers’ compensation claims, vehicle repurchases, uncertain\n tax positions, product and non-product litigation and assumptions\n made in asset impairment assessments. The Company bases its\n estimates on historical experience and on various other assumptions\n believed to be reasonable under the circumstances. The Company\n believes that such estimates are made using consistent and\n appropriate methods. Actual results could differ from these\n estimates.
\n\n The following\n unaudited pro forma information represents the Company’s\n results of operations as if the fiscal 2016 acquisition of Jayco\n had occurred at the beginning of fiscal 2015 and the fiscal 2015\n acquisitions of both Postle and CRV/DRV had occurred at the\n beginning of fiscal 2014. These performance results may not be\n indicative of the actual results that would have occurred under the\n ownership and management of the Company.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Fiscal Year Ended \n July 31, | \n \n | |||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n Net sales \n | \n \n | $ | \n6,176,686 | \n\n | \n | $ | \n5,517,142 | \n\n |
| \n Net income \n | \n \n | $ | \n284,394 | \n\n | \n | $ | \n202,118 | \n\n |
| \n Basic earnings per common\n share \n | \n \n | $ | \n5.42 | \n\n | \n | $ | \n3.80 | \n\n |
| \n Diluted earnings per common\n share \n | \n \n | $ | \n5.41 | \n\n | \n | $ | \n3.79 | \n\n |
8. CONCENTRATION\n OF RISK
\n\n One dealer,\n FreedomRoads, LLC, accounted for 20% of the Company’s\n continuing consolidated net sales in fiscal 2016 and 17% in both\n fiscal 2015 and 2014. This dealer also accounted for 18% of the\n Company’s continuing consolidated trade accounts receivable\n at July 31, 2016 and 22% at July 31, 2015. The loss of\n this dealer could have a significant effect on the Company’s\n business.
\n10. INVESTMENTS\n AND FAIR VALUE MEASUREMENTS
\n\n The Company\n assesses the inputs used to measure the fair value of certain\n assets and liabilities using a three level hierarchy as prescribed\n in ASC 820. Level 1 inputs include quoted prices in active markets\n for identical assets or liabilities and are the most observable.\n Level 2 inputs include inputs other than Level 1 that are either\n directly or indirectly observable, such as quoted market prices for\n similar but not identical assets or liabilities, quoted prices in\n inactive markets or other inputs that can be corroborated by\n observable market data. Level 3 inputs are not observable, are\n supported by little or no market activity and include\n management’s judgments about the assumptions market\n participants would use in pricing the asset or\n liability.
\n\n
\n\n The Company carries\n at fair value its investments in securities (primarily in mutual\n funds) held for the benefit of certain employees of the Company as\n part of a deferred compensation plan - measured with Level 1\n inputs. Deferred compensation plan asset balances of $15,529 and\n $10,803 were recorded as of July 31, 2016 and July 31,\n 2015, respectively, as components of other long-term assets in the\n Consolidated Balance Sheets. An equal and offsetting liability was\n also recorded in regards to the deferred compensation plan as a\n component of other long-term liabilities in the Consolidated\n Balance Sheets. Changes in the fair value of the plan assets and\n the related liability are both reflected in the Consolidated\n Statements of Income and Comprehensive Income.
\n\n Intangible\n Assets – Intangible assets consist of goodwill,\n trademarks, dealer networks/customer relationships, design\n technology assets and non-compete agreements. Trademarks are being\n amortized on a straight-line basis over 15 to 25 years. Dealer\n networks/customer relationships are amortized on an accelerated\n basis over 12 to 20 years, and design technology assets and\n non-compete agreements are amortized using the straight-line method\n over 2 to 15 years. Backlog is amortized using a straight-line\n basis method over 2 to 3 months. Goodwill is not amortized but is\n tested at least annually for impairment. Goodwill is reviewed for\n impairment by applying a fair-value based test on an annual basis\n at April 30, or more frequently if events or circumstances\n indicate a potential impairment.
\n\n Long-lived\n Assets – Property, plant and equipment and\n identifiable intangibles that are amortized are reviewed for\n impairment whenever events or changes in circumstances indicate\n that the carrying amount of an asset may not be recoverable from\n future cash flows. If the carrying value of a long-lived asset is\n impaired, an impairment charge is recorded for the amount by which\n the carrying value of the long-lived asset exceeds its fair\n value.
\n\n Income\n Taxes – The objectives of accounting for\n income taxes are to recognize the amount of taxes payable or\n refundable for the current year and deferred tax liabilities and\n assets for the future tax consequences of events that have been\n recognized in our financial statements or tax returns. Judgment is\n required in assessing the future tax consequences of events that\n have been recognized in our financial statements or tax returns.\n Fluctuations in the actual outcome of these tax consequences could\n materially impact our financial position or results of\n operations.
\n\n The Company\n recognizes liabilities for uncertain tax positions based on a\n two-step process. The first step is to evaluate the tax position\n for recognition by determining if the weight of available evidence\n indicates that it is more likely than not that the position will be\n sustained on audit, including resolution of related appeals or\n litigation processes, if any. The second step requires the Company\n to estimate and measure the tax benefit as the largest amount that\n is more than 50% likely to be realized upon ultimate settlement. It\n is inherently difficult and subjective to estimate such amounts, as\n the Company has to determine the probability of various possible\n outcomes. The Company reevaluates these uncertain tax positions on\n a quarterly basis. This evaluation is based on factors including,\n but not limited to, changes in facts or circumstances, changes in\n tax law, effectively settled issues under audit, voluntary\n settlements and new audit activity. Such a change in recognition or\n measurement would result in the recognition of a tax benefit or an\n additional charge to the tax provision.
\n\n Significant\n judgment is required in determining the Company’s provision\n for income taxes, the Company’s deferred tax assets and\n liabilities and the valuation allowance recorded against the\n Company’s deferred tax assets, if any. Valuation allowances\n must be considered due to the uncertainty of realizing deferred tax\n assets. Companies must assess whether valuation allowances should\n be established against their deferred tax assets on a tax\n jurisdictional basis based on the consideration of all available\n evidence, using a more likely than not standard. The Company has\n evaluated the realizability of our deferred tax assets on our\n Consolidated Balance Sheets which includes the assessment of the\n cumulative income over recent prior periods.
\n\n See the\n “Accounting Pronouncements” section below regarding the\n Company’s prospective adoption in fiscal 2016 of the new FASB\n standard regarding the balance sheet classification of deferred\n taxes.
\n12. LONG-TERM\n DEBT
\n\n The Company has a\n five-year credit agreement, which was entered into on June 30,\n 2016 and matures on June 30, 2021. The agreement provides for\n a $500,000 asset-based revolving credit facility and a $100,000\n expansion option, subject to certain conditions. Borrowings\n outstanding on this facility totaled $360,000 at July 31,\n 2016, and are subject to a variable pricing structure which can\n result in increases or decreases to the borrowing spread. Depending\n on the Company’s borrowing availability as a percentage of\n the revolving credit commitment, pricing spreads can range from\n 1.25% to 1.75% in the case of loans bearing interest at LIBOR, and\n from 0.25% to 0.75% for loans bearing interest at the base rate. As\n of July 31, 2016, the borrowing spread on the LIBOR-based\n borrowings of $320,000 was 1.50%, resulting in a total rate of\n approximately 1.97%, and the spread on the base loans of $40,000\n was 0.5%, resulting in a total rate of 4.00%. In addition, a 0.25%\n annual fee is payable quarterly on the unused portion of the credit\n line under the revolver. The revolving credit facility, which is\n secured by substantially all of the Company’s tangible and\n intangible assets excluding real property, contains customary\n limits and restrictions concerning investments, sales of assets,\n liens on assets, stock repurchases and dividend and other payments\n depending on adjusted excess cash availability as defined in the\n agreement and summarized below. The terms of the facility permit\n prepayment without penalty at any time, subject to customary\n breakage costs relative to the LIBOR-based loans.
\n\n Borrowing\n availability under the credit agreement is limited to the lesser of\n the facility total and the monthly calculated borrowing base, which\n is based on stipulated loan percentages applied to the\n Company’s eligible trade accounts receivable and eligible\n inventories plus a defined amount related to certain machinery and\n equipment. The credit agreement has no financial covenant\n restrictions for borrowings as long as the Company has adjusted\n excess availability under the facility that exceeds 10% of the\n lesser of the line commitment or the borrowing base total, with a\n floor of $40,000. Adjusted excess availability consists of the\n calculated borrowing base availability plus eligible cash on\n deposit as specified in the facility agreement. If the adjusted\n excess availability is less than the stipulated amount, then the\n Company must comply with one financial covenant, a trailing\n twelve-month minimum fixed charge coverage ratio of 1:1. The\n Company was in compliance with its financial covenant at\n July 31, 2016. Based on the July 2016 borrowing base\n calculation, the Company had borrowing availability in excess of\n the outstanding loan balances of approximately $114,000, and\n adjusted excess availability for covenant purposes of approximately\n $276,000 as of July 31, 2016.
\n\n In fiscal 2016,\n total interest expense on the facility was $789 and the\n weighted-average interest rate on borrowings from the facility was\n 2.55%. The Company incurred fees to secure the facility of $7,850\n in fiscal 2016, and those fees will be amortized ratably over the\n five-year term of the agreement, or a shorter period if the credit\n agreement period is shortened for any reason. The Company recorded\n charges related to the amortization of these fees, which are\n recorded in interest expense, of $131 in fiscal 2016, and the\n unamortized balance of these facility fees was $7,719 at\n July 31, 2016 and is included in Other long-term assets in the\n Consolidated Balance Sheet.
\n\n Depreciation – Property, plant and\n equipment are recorded at cost and depreciated using the\n straight-line method over the estimated useful lives of the assets\n as follows:
\nBuildings and improvements – 10 to 39 years
\nMachinery and equipment – 3 to 10 years
\n\n Depreciation\n expense is recorded in cost of products sold except for $3,812,\n $2,362 and $2,542 in fiscal 2016, 2015 and 2014, respectively,\n which relates primarily to office buildings and office equipment\n and is recorded in selling, general and administrative\n expenses.
\n\n Allowance\n for Doubtful Accounts – The allowance for doubtful\n accounts represents management’s estimate of probable credit\n losses in existing accounts receivable, as determined from a review\n of past due balances and other specific account\n information.
\nA summary of allowance for\n doubtful accounts activity is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n1,283 | \n\n | \n | $ | \n348 | \n\n | \n | $ | \n157 | \n\n |
| \n Net recorded expense\n (income) \n | \n \n | \n | (9) | \n\n | \n | \n | 359 | \n\n | \n | \n | 63 | \n\n |
| \n Write-offs, net of\n recoveries/payments \n | \n \n | \n | (679) | \n\n | \n | \n | (67) | \n\n | \n | \n | (72) | \n\n |
| \n Acquisitions \n | \n \n | \n | 30 | \n\n | \n | \n | 643 | \n\n | \n | \n | 200 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n625 | \n\n | \n | $ | \n1,283 | \n\n | \n | $ | \n348 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
The components of amortizable\n intangible assets are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n | \n | \n | \n | \n | July 31, 2016 | \n\n | \n | July 31, 2015 | \n\n | |||||||||||
| \n | \n | Weighted-Average \n Years \n Remaining \n Life in Years | \n \n | \n | \n | \n | Cost | \n\n | \n | Accumulated \n Amortization | \n \n | \n | Cost | \n\n | \n | Accumulated \n Amortization | \n \n | |||||
| \n Dealer networks/customer\n relationships \n | \n \n | 16 | \n\n | \n | \n | \n | \n | $ | \n404,960 | \n\n | \n | $ | \n55,191 | \n\n | \n | $ | \n143,860 | \n\n | \n | $ | \n37,194 | \n\n |
| \n Trademarks \n | \n \n | 19 | \n\n | \n | \n | \n | \n | \n | 148,117 | \n\n | \n | \n | 10,539 | \n\n | \n | \n | 55,282 | \n\n | \n | \n | 7,608 | \n\n |
| \n Design technology and other\n intangibles \n | \n \n | 9 | \n\n | \n | \n | \n | \n | \n | 22,400 | \n\n | \n | \n | 10,870 | \n\n | \n | \n | 22,400 | \n\n | \n | \n | 8,168 | \n\n |
| \n Non-compete\n agreements \n | \n \n | 3 | \n\n | \n | \n | \n | \n | \n | 450 | \n\n | \n | \n | 203 | \n\n | \n | \n | 4,710 | \n\n | \n | \n | 4,264 | \n\n |
| \n Backlog \n | \n \n | 0.2 | \n\n | \n | \n | \n | \n | \n | 12,400 | \n\n | \n | \n | 4,133 | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total amortizable intangible\n assets \n | \n \n | \n | \n | \n | \n | \n | \n | $ | \n588,327 | \n\n | \n | $ | \n80,936 | \n\n | \n | $ | \n226,252 | \n\n | \n | $ | \n57,234 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Changes in the\n unrecognized tax benefit during fiscal year 2016, 2015 and 2014\n were as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n13,156 | \n\n | \n | $ | \n20,813 | \n\n | \n | $ | \n32,733 | \n\n |
| \n Tax positions related to prior\n years: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Additions \n | \n \n | \n | 1,546 | \n\n | \n | \n | 126 | \n\n | \n | \n | 9 | \n\n |
| \n Reductions \n | \n \n | \n | (920) | \n\n | \n | \n | (7,695) | \n\n | \n | \n | (9,281) | \n\n |
| \n Tax positions related to\n current year: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Additions \n | \n \n | \n | 3,123 | \n\n | \n | \n | 2,858 | \n\n | \n | \n | 3,804 | \n\n |
| \n Settlements \n | \n \n | \n | (956) | \n\n | \n | \n | (1,898) | \n\n | \n | \n | (5,002) | \n\n |
| \n Lapses in statute of\n limitations \n | \n \n | \n | (2,680) | \n\n | \n | \n | (1,048) | \n\n | \n | \n | (1,450) | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n13,269 | \n\n | \n | $ | \n13,156 | \n\n | \n | $ | \n20,813 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n
4. BUSINESS\n SEGMENTS
\n\n The Company has\n two reportable segments: (1) towable recreational vehicles and\n (2) motorized recreational vehicles. The towables recreational\n vehicle reportable segment consists of the following operating\n segments that have been aggregated: Airstream (towable), Heartland\n (including Bison, CRV and DRV), Jayco (including Jayco towable,\n Starcraft and Highland Ridge), Keystone (including CrossRoads and\n Dutchmen), and KZ (including Livin’ Lite). The motorized\n recreational vehicle reportable segment consists of the following\n operating segments that have been aggregated: Airstream\n (motorized), Jayco (including Jayco motorized and Entegra Coach)\n and Thor Motor Coach.
\n\n The operations of\n the Company’s Postle subsidiary, which was acquired\n May 1, 2015, are included in Other, which is a non-reportable\n segment. Net sales included in Other mainly relate to the sale of\n aluminum extrusions and specialized component products.\n Intercompany eliminations adjust for Postle sales to the\n Company’s towables and motorized segments, which are\n consummated at established arm’s length transfer prices\n consistent with the selling prices of extrusion components to third\n party customers.
\n\n All manufacturing\n is conducted in the United States. Total assets include those\n assets used in the operation of each reportable and non-reportable\n segment, and the Corporate assets consist primarily of cash and\n cash equivalents and deferred income tax assets.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Net sales: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n3,338,659 | \n\n | \n | $ | \n3,096,405 | \n\n | \n | $ | \n2,721,625 | \n\n |
| \n Motorized \n | \n \n | \n | 1,094,250 | \n\n | \n | \n | 870,799 | \n\n | \n | \n | 803,831 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 4,432,909 | \n\n | \n | \n | 3,967,204 | \n\n | \n | \n | 3,525,456 | \n\n |
| \n Other \n | \n \n | \n | 218,673 | \n\n | \n | \n | 56,594 | \n\n | \n | \n | – | \n\n |
| \n Intercompany\n eliminations \n | \n \n | \n | (69,470 | \n) | \n\n | \n | (16,979 | \n) | \n\n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n4,582,112 | \n\n | \n | $ | \n4,006,819 | \n\n | \n | $ | \n3,525,456 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Income (loss) from\n continuing operations before income taxes: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n321,874 | \n\n | \n | $ | \n259,092 | \n\n | \n | $ | \n221,123 | \n\n |
| \n Motorized \n | \n \n | \n | 88,523 | \n\n | \n | \n | 66,746 | \n\n | \n | \n | 57,277 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 410,397 | \n\n | \n | \n | 325,838 | \n\n | \n | \n | 278,400 | \n\n |
| \n Other \n | \n \n | \n | 18,547 | \n\n | \n | \n | 1,424 | \n\n | \n | \n | – | \n\n |
| \n Intercompany\n eliminations \n | \n \n | \n | (23 | \n) | \n\n | \n | (554 | \n) | \n\n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | (45,608 | \n) | \n\n | \n | (33,813 | \n) | \n\n | \n | (25,581 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n383,313 | \n\n | \n | $ | \n292,895 | \n\n | \n | $ | \n252,819 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Total\n assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n1,425,168 | \n\n | \n | $ | \n907,175 | \n\n | \n | $ | \n868,017 | \n\n |
| \n Motorized \n | \n \n | \n | 476,973 | \n\n | \n | \n | 162,940 | \n\n | \n | \n | 170,251 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 1,902,141 | \n\n | \n | \n | 1,070,115 | \n\n | \n | \n | 1,038,268 | \n\n |
| \n Other, net \n | \n \n | \n | 156,822 | \n\n | \n | \n | 161,075 | \n\n | \n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | 266,501 | \n\n | \n | \n | 272,058 | \n\n | \n | \n | 370,450 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n2,325,464 | \n\n | \n | $ | \n1,503,248 | \n\n | \n | $ | \n1,408,718 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Depreciation and\n amortization expense: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n36,054 | \n\n | \n | $ | \n26,296 | \n\n | \n | $ | \n22,192 | \n\n |
| \n Motorized \n | \n \n | \n | 2,994 | \n\n | \n | \n | 2,353 | \n\n | \n | \n | 2,359 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 39,048 | \n\n | \n | \n | 28,649 | \n\n | \n | \n | 24,551 | \n\n |
| \n Other \n | \n \n | \n | 12,352 | \n\n | \n | \n | 1,678 | \n\n | \n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | 1,175 | \n\n | \n | \n | 1,054 | \n\n | \n | \n | 724 | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | 559 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n52,575 | \n\n | \n | $ | \n31,381 | \n\n | \n | $ | \n25,834 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Capital\n acquisitions: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Recreational\n vehicles \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n Towables \n | \n \n | $ | \n37,489 | \n\n | \n | $ | \n35,039 | \n\n | \n | $ | \n16,914 | \n\n |
| \n Motorized \n | \n \n | \n | 11,191 | \n\n | \n | \n | 4,309 | \n\n | \n | \n | 5,942 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total recreational\n vehicles \n | \n \n | \n | 48,680 | \n\n | \n | \n | 39,348 | \n\n | \n | \n | 22,856 | \n\n |
| \n Other \n | \n \n | \n | 2,799 | \n\n | \n | \n | 436 | \n\n | \n | \n | – | \n\n |
| \n Corporate \n | \n \n | \n | 2,495 | \n\n | \n | \n | 3,271 | \n\n | \n | \n | 7,519 | \n\n |
| \n Discontinued\n operations \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | 63 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total \n | \n \n | $ | \n53,974 | \n\n | \n | $ | \n43,055 | \n\n | \n | $ | \n30,438 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Export sales from\n the Company’s continuing operations, predominantly to Canada,\n were $368,426, $465,642 and $521,818 in fiscal 2016, 2015 and 2014,\n respectively, with the fiscal 2016 and 2015 totals being adversely\n impacted by the strength of the U.S. dollar during those\n periods.
\n\n Product\n Warranties – Estimated warranty costs are provided at\n the time of sale of the related products. Warranty reserves are\n reviewed and adjusted as necessary on at least a quarterly\n basis.
\nThe following table summarizes\n the results of discontinued operations:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n Net sales \n | \n \n | \n | \n | \n | \n | $ | \n– | \n\n | \n | \n | \n | \n | \n | $ | \n– | \n\n | \n | \n | \n | \n | \n | $ | \n83,903 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | \n | \n | \n | ||||||||||||||||||
| \n Operating income (loss) of\n discontinued operations \n | \n \n | \n | \n | \n | \n | $ | \n(2,417 | \n) | \n\n | \n | \n | \n | \n | $ | \n(4,791 | \n) | \n\n | \n | \n | \n | \n | $ | \n(5,735 | \n) | \n
| \n Pre-tax gain on disposal of\n discontinued business \n | \n \n | \n | \n | \n | \n | \n | – | \n\n | \n | \n | \n | \n | \n | \n | – | \n\n | \n | \n | \n | \n | \n | \n | 7,079 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n Income (loss) before income\n taxes \n | \n \n | \n | \n | \n | \n | \n | (2,417 | \n) | \n\n | \n | \n | \n | \n | \n | (4,791 | \n) | \n\n | \n | \n | \n | \n | \n | 1,344 | \n\n |
| \n Income tax benefit \n | \n \n | \n | \n | \n | \n | \n | 914 | \n\n | \n | \n | \n | \n | \n | \n | 2,167 | \n\n | \n | \n | \n | \n | \n | \n | 2,142 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n Income (loss) from\n discontinued operations, net of income taxes \n | \n \n | \n | \n | \n | \n | $ | \n(1,503 | \n) | \n\n | \n | \n | \n | \n | $ | \n(2,624 | \n) | \n\n | \n | \n | \n | \n | $ | \n3,486 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
\n Nature of\n Operations – Thor Industries, Inc. was founded in\n 1980 and, through its subsidiaries, manufactures a wide range of\n recreational vehicles at various manufacturing facilities primarily\n in Indiana and Ohio, with additional facilities in Oregon and\n Idaho. These products are sold to independent dealers primarily\n throughout the United States and Canada. Unless the context\n otherwise requires or indicates, all references to\n “Thor”, the “Company”, “we”,\n “our” and “us” refer to Thor Industries,\n Inc. and its subsidiaries.
\n\n The\n Company’s ongoing business activities are primarily comprised\n of two distinct operations, which include the design, manufacture\n and sale of towable recreational vehicles and motorized\n recreational vehicles. Accordingly, the Company has presented\n segmented financial information for these two segments in Note 4 to\n the Consolidated Financial Statements. See Note 3,\n “Discontinued Operations,” in the Notes to the\n Consolidated Financial Statements for a description of the\n Company’s bus operations which were sold as of\n October 20, 2013. Accordingly, the accompanying financial\n statements (including footnote disclosures unless otherwise\n indicated) reflect these operations as discontinued operations\n apart from the Company’s continuing operations.
\n\n Dealer\n Volume Rebates, Sales Incentives and Advertising Costs\n – Estimated costs related to dealer volume rebates and sales\n incentives are accrued as a reduction of revenue at the later of\n the time products are sold or the date the rebate or incentive is\n offered. Advertising costs, which consist primarily of tradeshows,\n are expensed as incurred, and were $14,472, $12,515 and $9,492 in\n fiscal 2016, 2015 and 2014, respectively.
\n\n Insurance\n Reserves – Generally, the Company is self-insured for\n workers’ compensation, products liability and group medical\n insurance. Under these plans, liabilities are recognized for claims\n incurred, including those incurred but not reported. The liability\n for workers’ compensation claims is determined by the Company\n with the assistance of a third party administrator and actuary\n using various state statutes and historical claims experience.\n Group medical reserves are estimated using historical claims\n experience. The Company has a self-insured retention\n (“SIR”) for products liability and personal injury\n matters ranging from $500 to $7,500 per occurrence, depending on\n the product type and when the occurrence took place. Generally, any\n occurrence (as defined by our insurance policies) after\n March 31, 2015 is subject to the $500 SIR, while matters\n occurring after March 31, 2014 and through March 31, 2015\n are subject to a $1,000 SIR. The Company has established a\n liability on our balance sheet for product liability and personal\n injury occurrences based on historical data, known cases and\n actuarial information. Currently, the Company maintains excess\n liability insurance aggregating $50,000 with outside insurance\n carriers to minimize our risks related to catastrophic claims in\n excess of our self-insured positions for products liability and\n personal injury matters.
\n\n Future minimum\n rental payments required under capital and operating leases as of\n July 31, 2016 are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Capital Leases | \n\n | \n | Operating Leases | \n\n | ||
| \n For the fiscal year ending\n July 31, 2017 \n | \n \n | $ | \n943 | \n\n | \n | $ | \n2,517 | \n\n |
| \n For the fiscal year ending\n July 31, 2018 \n | \n \n | \n | 948 | \n\n | \n | \n | 1,864 | \n\n |
| \n For the fiscal year ending\n July 31, 2019 \n | \n \n | \n | 938 | \n\n | \n | \n | 1,437 | \n\n |
| \n For the fiscal year ending\n July 31, 2020 \n | \n \n | \n | 933 | \n\n | \n | \n | 849 | \n\n |
| \n For the fiscal year ending\n July 31, 2021 \n | \n \n | \n | 951 | \n\n | \n | \n | 619 | \n\n |
| \n For the fiscal year ending\n July 31, 2022 and thereafter \n | \n \n | \n | 5,988 | \n\n | \n | \n | 5,628 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total minimum lease\n payments \n | \n \n | \n | 10,701 | \n\n | \n | $ | \n12,914 | \n\n |
| \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n |
| \n Less amount representing\n interest \n | \n \n | \n | (3,887 | \n) | \n\n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Present value of net minimum\n capital lease payments \n | \n \n | \n | 6,814 | \n\n | \n | \n | \n | \n |
| \n Less current\n portion \n | \n \n | \n | 341 | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Long-term capital lease\n obligations \n | \n \n | $ | \n6,473 | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
The components of total\n unrecognized tax benefits are summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | July 31, | \n\n | |||||||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Unrecognized tax\n benefits \n | \n \n | $ | \n13,269 | \n\n | \n | $ | \n13,156 | \n\n | \n | $ | \n20,813 | \n\n |
| \n Reduction to unrecognized tax\n benefits for tax credit carry forward \n | \n \n | \n | (2,255) | \n\n | \n | \n | (2,109) | \n\n | \n | \n | (657) | \n\n |
| \n Accrued interest and\n penalties \n | \n \n | \n | 1,547 | \n\n | \n | \n | 1,895 | \n\n | \n | \n | 5,200 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total unrecognized tax\n benefits \n | \n \n | $ | \n12,561 | \n\n | \n | $ | \n12,942 | \n\n | \n | $ | \n25,356 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | \n | |||||||||
| \n Short-term, included in\n “Income and other taxes” \n | \n \n | $ | \n2,586 | \n\n | \n | $ | \n997 | \n\n | \n | $ | \n1,667 | \n\n |
| \n Long-term \n | \n \n | \n | 9,975 | \n\n | \n | \n | 11,945 | \n\n | \n | \n | 23,689 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total unrecognized tax\n benefits \n | \n \n | $ | \n12,561 | \n\n | \n | $ | \n12,942 | \n\n | \n | $ | \n25,356 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n The differences between income\n taxes at the federal statutory rate and the actual income taxes are\n as follows: \n\n \n | \n \n \n \n\n \n \n | \n |||||||||||
| \n | \n | July 31, | \n\n | |||||||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Provision at federal statutory\n rate \n | \n \n | $ | \n134,160 | \n\n | \n | $ | \n102,513 | \n\n | \n | $ | \n88,487 | \n\n |
| \n State and local income taxes,\n net of federal benefit \n | \n \n | \n | 6,599 | \n\n | \n | \n | 5,144 | \n\n | \n | \n | 3,748 | \n\n |
| \n Federal income tax credits and\n incentives \n | \n \n | \n | (4,194) | \n\n | \n | \n | (2,207) | \n\n | \n | \n | (772) | \n\n |
| \n Domestic production activities\n deduction \n | \n \n | \n | (12,609) | \n\n | \n | \n | (9,519) | \n\n | \n | \n | (7,947) | \n\n |
| \n Change in uncertain tax\n positions \n | \n \n | \n | 611 | \n\n | \n | \n | (5,650) | \n\n | \n | \n | (6,631) | \n\n |
| \n Change in current tax payable\n and deferred tax liabilities \n | \n \n | \n | 103 | \n\n | \n | \n | 218 | \n\n | \n | \n | 125 | \n\n |
| \n Other permanent\n items \n | \n \n | \n | 621 | \n\n | \n | \n | 387 | \n\n | \n | \n | 293 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Total income tax\n expense \n | \n \n | $ | \n125,291 | \n\n | \n | $ | \n90,886 | \n\n | \n | $ | \n77,303 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n
A summary of allowance for\n doubtful accounts activity is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n Beginning balance \n | \n \n | $ | \n1,283 | \n\n | \n | $ | \n348 | \n\n | \n | $ | \n157 | \n\n |
| \n Net recorded expense\n (income) \n | \n \n | \n | (9) | \n\n | \n | \n | 359 | \n\n | \n | \n | 63 | \n\n |
| \n Write-offs, net of\n recoveries/payments \n | \n \n | \n | (679) | \n\n | \n | \n | (67) | \n\n | \n | \n | (72) | \n\n |
| \n Acquisitions \n | \n \n | \n | 30 | \n\n | \n | \n | 643 | \n\n | \n | \n | 200 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Ending balance \n | \n \n | $ | \n625 | \n\n | \n | $ | \n1,283 | \n\n | \n | $ | \n348 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The following\n table reflects losses incurred related to repurchase agreements\n that were settled in the past three fiscal years. The Company\n believes that any future losses under these agreements will not\n have a significant effect on the Company’s consolidated\n financial position, results of operations or cash flows.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n 2016 \n | \n \n | \n | \n 2015 \n | \n \n | \n | 2014 | \n\n | |||
| \n Cost of units\n repurchased \n | \n \n | $ | \n4,650 | \n\n | \n | $ | \n7,171 | \n\n | \n | $ | \n1,386 | \n\n |
| \n Realization of units\n resold \n | \n \n | \n | 3,832 | \n\n | \n | \n | 5,906 | \n\n | \n | \n | 1,098 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n Losses due to\n repurchase \n | \n \n | $ | \n818 | \n\n | \n | $ | \n1,265 | \n\n | \n | $ | \n288 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n A summary of\n restricted stock unit activity during fiscal 2016, 2015 and 2014 is\n included below:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n | \n | Restricted Stock \n Units | \n \n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Restricted Stock \n Units | \n \n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Restricted Stock \n Units | \n \n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | ||||||
| \n Nonvested, beginning of\n year \n | \n \n | \n | 280,353 | \n\n | \n | $ | \n50.55 | \n\n | \n | \n | 212,073 | \n\n | \n | $ | \n49.21 | \n\n | \n | \n | 139,275 | \n\n | \n | $ | \n38.06 | \n\n |
| \n Granted \n | \n \n | \n | 181,872 | \n\n | \n | \n | 55.37 | \n\n | \n | \n | 162,967 | \n\n | \n | \n | 50.95 | \n\n | \n | \n | 151,168 | \n\n | \n | \n | 54.26 | \n\n |
| \n Vested \n | \n \n | \n | (133,758) | \n\n | \n | \n | 48.73 | \n\n | \n | \n | (90,608) | \n\n | \n | \n | 48.14 | \n\n | \n | \n | (63,852) | \n\n | \n | \n | 38.68 | \n\n |
| \n Forfeited \n | \n \n | \n | (3,331) | \n\n | \n | \n | 54.18 | \n\n | \n | \n | (4,079) | \n\n | \n | \n | 50.54 | \n\n | \n | \n | (14,518) | \n\n | \n | \n | 47.26 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Nonvested, end of\n year \n | \n \n | \n | 325,136 | \n\n | \n | $ | \n53.95 | \n\n | \n | \n | 280,353 | \n\n | \n | $ | \n50.55 | \n\n | \n | \n | 212,073 | \n\n | \n | $ | \n49.21 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n A summary of\n restricted stock award activity under the 2010 Equity and Incentive\n Plan for fiscal 2016, 2015 and 2014 is as follows:
\n\n
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||||||||||||||
| \n | \n | Shares | \n\n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | \n | Shares | \n\n | \n | Weighted- \n Average Grant \n Date Fair Value | \n \n | ||||||
| \n Nonvested, beginning of\n year \n | \n \n | \n | 9,713 | \n\n | \n | $ | \n31.16 | \n\n | \n | \n | 13,620 | \n\n | \n | $ | \n31.08 | \n\n | \n | \n | 17,530 | \n\n | \n | $ | \n31.03 | \n\n |
| \n Granted \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n Vested \n | \n \n | \n | (3,907) | \n\n | \n | \n | 30.87 | \n\n | \n | \n | (3,907) | \n\n | \n | \n | 30.87 | \n\n | \n | \n | (3,910) | \n\n | \n | \n | 30.87 | \n\n |
| \n Forfeited \n | \n \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n | \n | \n | – | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n Nonvested, end of\n year \n | \n \n | \n | 5,806 | \n\n | \n | $ | \n31.36 | \n\n | \n | \n | 9,713 | \n\n | \n | $ | \n31.16 | \n\n | \n | \n | 13,620 | \n\n | \n | $ | \n31.08 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n The following\n table summarizes the fair values assigned to the Postle net assets\n acquired, which are based on internal and independent external\n valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n2,963 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 54,780 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 32,251 | \n\n |
| \n Customer\n relationships \n | \n \n | \n | 38,800 | \n\n |
| \n Trademarks \n | \n \n | \n | 6,000 | \n\n |
| \n Backlog \n | \n \n | \n | 300 | \n\n |
| \n Goodwill \n | \n \n | \n | 42,871 | \n\n |
| \n Current liabilities \n | \n \n | \n | (23,729 | \n) | \n
| \n Capital lease\n obligations \n | \n \n | \n | (7,225 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 147,011 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (2,963 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n144,048 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n The following\n table summarizes the final fair values assigned to the Livin’\n Lite net assets acquired, which are based on internal and\n independent external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n247 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 3,626 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 137 | \n\n |
| \n Dealer network \n | \n \n | \n | 3,200 | \n\n |
| \n Trademarks \n | \n \n | \n | 1,500 | \n\n |
| \n Design technology\n assets \n | \n \n | \n | 1,100 | \n\n |
| \n Non-compete\n agreements \n | \n \n | \n | 130 | \n\n |
| \n Backlog \n | \n \n | \n | 110 | \n\n |
| \n Goodwill \n | \n \n | \n | 9,113 | \n\n |
| \n Current liabilities \n | \n \n | \n | (2,147 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 17,016 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (247 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash paid for\n acquisition, less cash acquired \n | \n \n | $ | \n16,769 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n The following\n table summarizes the final fair values assigned to the KZ net\n assets acquired, which are based on internal and independent\n external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n996 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 34,121 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 15,057 | \n\n |
| \n Dealer network \n | \n \n | \n | 13,160 | \n\n |
| \n Trademarks \n | \n \n | \n | 5,540 | \n\n |
| \n Non-compete\n agreements \n | \n \n | \n | 450 | \n\n |
| \n Backlog \n | \n \n | \n | 420 | \n\n |
| \n Goodwill \n | \n \n | \n | 2,703 | \n\n |
| \n Current liabilities \n | \n \n | \n | (16,127 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 56,320 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (996 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n55,324 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n The following\n table summarizes the final fair values assigned to the CRV and DRV\n net assets acquired, which are based on internal and independent\n external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n1,062 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 22,175 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 4,533 | \n\n |
| \n Dealer network \n | \n \n | \n | 14,300 | \n\n |
| \n Trademarks \n | \n \n | \n | 5,400 | \n\n |
| \n Backlog \n | \n \n | \n | 450 | \n\n |
| \n Goodwill \n | \n \n | \n | 13,172 | \n\n |
| \n Current liabilities \n | \n \n | \n | (12,507 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 48,585 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (1,062 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n47,523 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n The following\n table summarizes the final fair values assigned to the Bison net\n assets acquired, which are based on internal and independent\n external valuations:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Current assets \n | \n \n | $ | \n4,050 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 625 | \n\n |
| \n Dealer network \n | \n \n | \n | 7,400 | \n\n |
| \n Trademarks \n | \n \n | \n | 1,800 | \n\n |
| \n Backlog \n | \n \n | \n | 140 | \n\n |
| \n Goodwill \n | \n \n | \n | 6,660 | \n\n |
| \n Current liabilities \n | \n \n | \n | (3,761 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | $ | \n16,914 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n The following\n table summarizes the preliminary fair values assigned to the Jayco\n net assets acquired, subject to the finalization of internal and\n independent external valuations and the determination of final net\n assets:
\n\n
\n| \n | \n | \n | \n | \n |
| \n Cash \n | \n \n | $ | \n18,409 | \n\n |
| \n Other current\n assets \n | \n \n | \n | 258,158 | \n\n |
| \n Property, plant and\n equipment \n | \n \n | \n | 80,824 | \n\n |
| \n Dealer network \n | \n \n | \n | 261,100 | \n\n |
| \n Trademarks \n | \n \n | \n | 92,800 | \n\n |
| \n Backlog \n | \n \n | \n | 12,400 | \n\n |
| \n Goodwill \n | \n \n | \n | 74,184 | \n\n |
| \n Current liabilities \n | \n \n | \n | (216,776 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total fair value of net assets\n acquired \n | \n \n | \n | 581,099 | \n\n |
| \n Less cash acquired \n | \n \n | \n | (18,409 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n Total cash consideration for\n acquisition, less cash acquired \n | \n \n | $ | \n562,690 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |