THOR INDUSTRIES INC - Quarter Report: 2009 April (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended April 30, 2009.

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from                      to                      .

THOR INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		93-0768752
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

419 West Pike Street, Jackson Center, OH		45334-0629
(Address of principal executive offices)		(Zip Code)

(937) 596-6849

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at 4/30/2009
Common stock, par value $.10 per share		55,440,924 shares

 

 

PART I — Financial Information

Unless otherwise indicated, all amounts presented in thousands except units, share and per share data.

ITEM 1. Financial Statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

		April 30, 2009				July 31, 2008
ASSETS
Current assets:
Cash and cash equivalents		$	177,878			$	189,620
Accounts receivable:
Trade			116,429				136,866
Other			4,339				9,489
Inventories			131,969				152,582
Prepaid expenses			3,905				5,472
Note receivable			10,000				—
Deferred income taxes			33,891				33,891
Total current assets			478,411				527,920
Property:
Land			20,299				21,090
Buildings and improvements			133,882				135,167
Machinery and equipment			73,951				71,965
Total Cost			228,132				228,222
Accumulated depreciation			82,657				74,992
Property, net			145,475				153,230
Investment in joint ventures			1,920				3,269
Other assets:
Long term investments			119,951				126,403
Goodwill			148,411				158,128
Non-compete agreements			709				1,093
Trademarks			13,336				13,900
Long term note receivable			10,000				—
Other			5,354				12,619
Total other assets			297,761				312,143
TOTAL ASSETS		$	923,567			$	996,562
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	82,081			$	96,158
Accrued liabilities:
Taxes			1,415				26,050
Compensation and related items			23,582				24,845
Product warranties			45,874				61,743
Promotions and rebates			9,260				10,781
Product/property liability and related			16,043				12,560
Other			16,720				16,279
Total current liabilities			194,975				248,416
Long Term Liabilities
Unrecognized tax benefits			32,239				29,332
Other			14,093				19,118
Total long term liabilities			46,332				48,450
Stockholders’ equity:
Common stock — authorized 250,000,000 shares:
issued 57,318,263 shares @ 4/30/09 and 57,317,263 shares @ 7/31/08; par value of $.10 per share			5,732				5,732
Additional paid-in capital			94,159				93,683
Retained earnings			656,647				675,928
Accumulated other comprehensive income			(594	)			(1,963	)
Less Treasury shares of 1,877,339 @ 4/30/09 & 7/31/08			(73,684	)			(73,684	)
Total stockholders’ equity			682,260				699,696
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	923,567			$	996,562

See notes to condensed consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008

		Three Months Ended April 30								Nine Months Ended April 30
		2009				2008				2009				2008
Net Sales		$	415,472			$	707,931			$	1,080,972			$	2,070,837
Cost of products sold			369,025				617,932				986,305				1,809,846
Gross profit			46,447				89,999				94,667				260,991
Selling, general and administrative expenses			33,971				47,903				98,636				133,132
Impairment of goodwill and trademarks			9,717				—				10,281				—
Gain on sale of property			—				—				373				2,308
Interest income			1,169				2,406				4,670				9,763
Interest expense			144				423				386				1,136
Net appreciation (impairment) of auction rate securities			728				—				(1,125	)			—
Other income			60				261				589				1,232
Income (loss) before income taxes			4,572				44,340				(10,129	)			140,026
Provision (benefit) for income taxes			2,470				16,486				(2,491	)			52,361
Net income (loss)		$	2,102			$	27,854			$	(7,638	)		$	87,665
Average common shares outstanding:
Basic			55,436,924				55,447,313				55,426,829				55,655,907
Diluted			55,468,620				55,562,644				55,426,829				55,815,770
Earnings (loss) per common share:
Basic		$	.04			$	.51			$	(.14	)		$	1.58
Diluted		$	.04			$	.50			$	(.14	)		$	1.57
Regular dividends declared and paid per common share:		$	.07			$	.07			$	.21			$	.21
Special dividends declared and paid per common share:		$	—			$	—			$	—			$	2.00

See notes to condensed consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 2009 AND 2008

		2009				2008
Cash flows from operating activities:
Net income (loss)		$	(7,638	)		$	87,665
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			9,885				10,045
Amortization			384				613
Goodwill and Trademark impairment			10,281				—
Deferred income taxes			—				(18,330	)
Gain on disposition of assets			(392	)			(2,343	)
Net impairment on trading investments			1,125				—
Stock based compensation			449				216
Changes in non cash assets and liabilities:
Accounts receivable			25,587				(8,941	)
Note receivable			(10,000	)			—
Inventories			20,613				(30,254	)
Prepaids and other			8,603				(3,069	)
Accounts payable			(13,652	)			(9,308	)
Accrued liabilities			(36,457	)			15,205
Other liabilities			(6,717	)			8,007
Net cash provided by operating activities			2,071				49,506
Cash flows from investing activities:
Purchases of property, plant & equipment			(5,077	)			(12,137	)
Proceeds from disposition of assets			2,785				4,989
Purchase of available for sale investments			—				(66,650	)
Proceeds from disposition of available for sale investments			4,450				105,925
Proceeds from disposition of trading investments			5,550				—
Loan transaction			(10,000	)			—
Proceeds on dissolution of joint venture			1,578				—
Net cash (used in) provided by investing activities			(714	)			32,127
Cash flows from financing activities:
Cash dividends			(11,643	)			(123,397	)
Purchase of common stock held as treasury shares			—				(13,561	)
Proceeds from issuance of common stock			27				2,206
Net cash used in financing activities			(11,616	)			(134,752	)
Effect of exchange rate changes on cash			(1,483	)			910
Net increase (decrease) in cash and equivalents			(11,742	)			(52,209	)
Cash and equivalents, beginning of period			189,620				171,889
Cash and equivalents, end of period		$	177,878			$	119,680
Supplemental cash flow information:
Income taxes paid		$	18,376			$	54,870
Interest paid			386				1,136
Non cash transactions:
Capital expenditures in accounts payable		$	118			$	391

See notes to condensed consolidated financial statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.		The July 31, 2008 amounts are derived from the annual audited financial statements. The interim financial statements are unaudited. In the opinion of management, all adjustments (which consist of normal recurring adjustments) necessary to present fairly the financial position, results of operations and change in cash flows for the interim periods presented have been made. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended July 31, 2008. The results of operations for the three and nine months ended April 30, 2009 are not necessarily indicative of the results for the full year.
2.		Major classifications of inventories are:

		April 30, 2009				July 31, 2008
Raw materials		$	66,409			$	79,356
Chassis			36,669				37,562
Work in process			41,344				51,162
Finished goods			15,889				13,584
Total			160,311				181,664
Less excess of FIFO costs over LIFO costs			28,342				29,082
Total inventories		$	131,969			$	152,582

3. Earnings Per Share

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2009				April 30, 2008				April 30, 2009				April 30, 2008
Weighted average shares outstanding for basic earnings per share			55,436,924				55,447,313				55,426,829				55,655,907
Stock options and restricted stock			31,696				115,331				—				159,863
Total — For diluted shares			55,468,620				55,562,644				55,426,829				55,815,770

4.

Comprehensive Income

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2009				April 30, 2008				April 30, 2009				April 30, 2008
Net Income (loss)		$	2,102			$	27,854			$	(7,638	)		$	87,665
Foreign currency translation adjustment			168				(100	)			(1,483	)			910
Change in temporary impairment of investment, net of tax			170				(4,792	)			2,852				(4,792	)
Comprehensive income		$	2,440			$	22,962			$	(6,269	)		$	83,783

As described in Note 6, the Auction Rate Securities (“ARS”) purchased from UBS were previously transferred to trading securities and the related other-than-temporary impairment was recorded against operations. This resulted in a reversal of the charge previously recorded in other comprehensive income in respect of these securities.

5.		Segment Information
		The Company has three reportable segments: (1) towable recreation vehicles, (2) motorized recreation vehicles, and (3) buses. The towable recreation vehicle segment consists of product lines from the following operating companies that have been aggregated: Airstream, Breckenridge, CrossRoads, Dutchmen, General Coach, Keystone and Komfort. The motorized recreation vehicle segment consists of product lines from the following operating companies that have been aggregated: Airstream, Damon and Four Winds. The bus segment consists of the following operating companies that have been aggregated: Champion Bus, ElDorado California, ElDorado Kansas and Goshen Coach.

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2009				April 30, 2008				April 30, 2009				April 30, 2008
Net Sales:
Recreation vehicles:
Towables		$	264,317			$	480,020			$	664,517			$	1,398,172
Motorized			47,724				120,940				112,499				372,265
Total recreation vehicles			312,041				600,960				777,016				1,770,437
Buses			103,431				106,971				303,956				300,400
Total		$	415,472			$	707,931			$	1,080,972			$	2,070,837

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2009				April 30, 2008				April 30, 2009				April 30, 2008
Income (loss) Before Income Taxes:
Recreation vehicles:
Towables		$	18,374			$	42,014			$	21,197			$	123,318
Motorized			(11,514	)			3,390				(28,405	)			13,804
Total recreation vehicles			6,860				45,404				(7,208	)			137,122
Buses			1,243				5,113				10,263				12,808
Corporate			(3,531	)			(6,177	)			(13,184	)			(9,904	)
Total		$	4,572			$	44,340			$	(10,129	)		$	140,026

		April 30, 2009				July 31, 2008
Identifiable Assets:
Recreation vehicles:
Towables		$	372,567			$	409,793
Motorized			93,485				108,740
Total recreation vehicles			466,052				518,533
Buses			97,431				110,647
Corporate			360,084				367,382
Total		$	923,567			$	996,562

6.

Investments and Fair Value Measurements

Effective August 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of

		FASB Statement No. 157”, which provides a one year deferral of the effective date of SFAS 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company has adopted the provisions of SFAS 157 with respect to its financial assets and liabilities only. The adoption of this statement did not have a material impact on the Company’s consolidated results of operations or financial condition. On October 10, 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active, (“FSP 157-3”), that clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP 157-3 is applicable to the valuation of auction rate securities held by the Company for which there was no active market as of April 30, 2009. FSP 157-3 was effective upon issuance, including prior periods for which the financial statements have not been issued. The adoption of FSP 157-3 during the three month period ended October 31, 2008 did not have a material impact on the Company’s consolidated results of operations or financial condition.
		Effective August 1, 2008, the Company adopted SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for specified financial assets and liabilities on a contract-by-contract basis. The Company did not elect to adopt the fair value option under this Statement at the adoption date. On November 14, 2008, the Company adopted the fair value option related to the Put Rights as further discussed in this Note.
		INVESTMENTS AND FAIR VALUE MEASUREMENTS
		SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
		Level 1 — Quoted prices in active markets for identical assets or liabilities.
		Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
		Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
		In accordance with SFAS 157, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of April 30, 2009:

		Significant Quoted				Other				Significant
		Market Prices in				Observable				Unobservable
		Active Markets				Inputs				Inputs				Fair Value at April
		(Level 1)				(Level 2)				(Level 3)				30, 2009
Cash & cash equivalents		$	177,878			$	—			$	—			$	177,878
Auction rate securities (including Put Rights)			—				—				119,951				119,951
Total		$	177,878			$	—			$	119,951			$	297,829

		Our cash equivalents are comprised of money market funds traded in an active market with no restrictions.
		In addition to the above investments, the Company holds non-qualified retirement plan assets of $5,317 at April 30, 2009 ($12,519 at July 31, 2008). These assets, which are held for the benefit of certain employees of the Company, represent Level 1 investments primarily in mutual funds which are valued using observable market prices in active markets. They are included in Other Assets on the Consolidated Balance Sheet.
		Level 3 assets consist of municipal bonds with an auction reset feature (“auction rate securities” or “ARS”) whose underlying assets are primarily student loans which are substantially backed by the federal government. Auction-rate securities are long-term floating rate bonds tied to short-term interest rates. After the initial issuance of the securities, the interest rate on the securities is reset periodically, at intervals established at the time of issuance based on market demand for a reset period. Auction-rate securities are bought and sold in the marketplace through a competitive bidding process often referred to as a “Dutch auction.” If there is insufficient interest in the securities at the time of an auction, the auction may not be completed and the rates may be reset to predetermine “penalty” or “maximum” rates based on mathematical formulas in accordance with each security’s prospectus.
		The following table provides a reconciliation of the beginning and ending balances for the assets measured at fair value using significant unobservable inputs (Level 3 financial assets):

		Fair Value Measurements at
		Reporting Date Using
		Significant Unobservable Inputs
		(Level 3)
Balances at August 1, 2008		$	126,403
Net change in other comprehensive income			4,673
Net loss included in earnings			(1,125	)
Purchases			—
Sales/Maturities			(10,000	)
Balances at April 30, 2009		$	119,951

		Auction Rate Securities
		At April 30, 2009, we held $122,550 (par value) of long-term investments comprised of taxable and tax-exempt ARS, which are variable-rate debt securities and have a long-term maturity with the interest being reset through Dutch auctions that are typically held every 7, 28 or 35 days. The securities have historically traded at par and are callable at par at the option of the issuer. Interest is typically paid at the end of each auction period or semi-annually. At April 30, 2009, the majority

		of the ARS we held were AAA rated or equivalent, and none were below A rated or equivalent, with most collateralized by student loans substantially backed by the U.S. Federal government.
		Since February 12, 2008, most auctions have failed for these securities and there is no assurance that future auctions on the ARS in our investment portfolio will succeed and, as a result, our ability to liquidate our investment and fully recover the par value of our investment in the near term may be limited or not exist. An auction failure means that the parties wishing to sell securities could not.
		In November 2008, the Company elected to participate in a rights offering by UBS AG (“UBS”), a Swiss bank which is one of the Company’s investment providers, that provides the Company with the right (the “Put Rights”) to sell to UBS at par value ARS purchased from UBS (approximately $107,400 of our entire ARS portfolio of $122,550) at any time during a two-year sale period beginning June 30, 2010.
		The Put Rights are not transferable or marginable. By electing to participate in the rights offering the Company granted UBS the right, exercisable at any time prior to June 30, 2010 or during the two-year sale period, to purchase or cause the sale of the company’s ARS (the “Call Right”). UBS has stated that it will only exercise the Call Right for the purpose of restructurings, dispositions or other solutions that will provide their clients with par value for their ARS. UBS will pay their clients the par value of their ARS within one day of settlement of any Call Right transaction. Notwithstanding the Call Right, the Company would be permitted to sell ARS to parties other than UBS, in which case the Put Rights attached to the ARS that are sold would be extinguished.
		As consideration for this transaction, Thor has released UBS from all claims relating to the marketing or sale of ARS (except claims for consequential damages) and has agreed not to sue UBS for such claims. During 2008, UBS was sued by the Massachusetts Securities Division and by the New York Attorney General in separate civil lawsuits alleging improper sales practices relating to ARS. The rights offering reflects the terms of a settlement entered into by UBS and various regulators, including the SEC, the New York Attorney General, and the Massachusetts Securities Division, pursuant to which UBS agreed to pay a fine of $150 million. UBS has also been sued by investors in civil lawsuits and arbitrations seeking damages relating to sales of ARS.
		Through its acceptance of the UBS offer, the Company also became eligible to participate in a “no net cost” loan program pursuant to which it may borrow up to the par value of its ARS until June 30, 2010. The Company is still permitted to obtain ARS based financing from lenders other than UBS.
		At April 30, 2009, there was insufficient observable ARS market information available to determine the fair value of our ARS investments, including the Put Rights. Therefore, management, assisted by Houlihan, Smith & Company, Inc., an independent consultant, determined an estimated fair value. In determining the estimate, consideration was given to credit quality, final stated maturities, estimates on the probability of the issue being called prior to final maturity, impact due to extended periods of maximum auction rates and broker quotes. Based on this analysis, we recorded a temporary impairment of $1,474 ($958 net of tax in other comprehensive income which is in the equity section of the balance sheet) related to our long-term ARS investments of $15,150 (par value) that were not part of the UBS settlement as of April 30, 2009. These same assumptions were used to estimate the fair value of our UBS ARS portfolio described above, including the Put Rights.

		The enforceability of the Put Rights results in a put option which has been recognized as a separate freestanding instrument that is accounted for separately from the ARS investment. The Company has elected to account for this put option at fair value under FASB Statement No. 159, “The Fair Value Option for Financial Assets and Liabilities” (SFAS 159) and elected to treat this portion of our ARS portfolio as trading securities. As such, we recorded a benefit to operations of $9,754 related to the Put Rights provided by the settlement and an other-than-temporary impairment charge to operations of $10,879 on the $107,400 (par value) portion of our ARS portfolio for a net loss of $1,125, as we may decide not to hold these ARS until final maturity with the opportunity provided by the Put Rights.
		We have no reason to believe that any of the underlying issuers of our ARS are presently at risk of default. Through April 30, 2009, we have continued to receive interest payments on the ARS in accordance with their terms. We believe we will be able to liquidate our investments without significant loss primarily due to the government guarantee of the underlying securities; however, it could take until the final maturity of the underlying notes (up to 31 years) to realize our investments’ par value. Due to these recent changes and uncertainty in the ARS market, we believe the recovery period for these investments may be longer than twelve months and as a result, we have classified these investments as long-term at April 30, 2009. Although there is uncertainty with regard to the short-term liquidity of these securities, the Company continues to believe that the carrying amount represents the fair value of these marketable securities because of the overall quality of the underlying investments and the anticipated future market for such investments. In addition, the Company has the intent and ability to hold these securities until the earlier of: the market for ARS stabilizes, the issuer refinances the underlying security, a buyer is found outside of the auction process at acceptable terms, the underlying securities have matured or the Company exercises its right to put the securities to UBS, one of the Company’s investment providers.
7.		Goodwill and Other Intangible Assets
		Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” requires goodwill to be tested for impairment at least annually and more frequently if an event occurs which indicates that goodwill may be impaired.
		The components of other intangible assets are as follows:

		April 30, 2009								July 31, 2008
						Accumulated								Accumulated
		Cost				Amortization				Cost				Amortization
Amortized Intangible Assets:
Non-compete agreements		$	2,888			$	2,179			$	5,938			$	4,845

Three Months

Three Months

Nine Months

Nine Months

Ended

Ended

Ended

Ended

April 30, 2009

April 30, 2008

April 30, 2009

April 30, 2008

Non-compete Agreements:

Amortization Expense

$

92

$

200

$

384

$

613

Non-compete agreements are amortized on a straight-line basis.

Estimated Amortization Expense:
For the year ending July 2009		$	476
For the year ending July 2010		$	322
For the year ending July 2011		$	238
For the year ending July 2012		$	57

		In accordance with SFAS 142, goodwill and indefinite-lived intangible assets are not subject to amortization. Goodwill and indefinite-lived intangible assets are reviewed for impairment by applying a fair-value based test on an annual basis, or more frequently if circumstances indicate a potential impairment.
		At April 30, 2009 the Company, with the assistance of an independent valuation firm, completed an annual impairment review which resulted in a non-cash goodwill impairment charge of $9,717 in the third quarter of fiscal 2009 for the goodwill associated with an operating subsidiary in the motorized reportable segment. The Company also completed an impairment review in the second quarter which resulted in a non-cash trademark impairment charge of $564 for the trademark associated with an operating subsidiary in the motorized reportable segment. The impairments result from the difficult market environment and outlook for the motorhome business.
		As of April 30, 2009, Goodwill and Trademarks by segment are as follows:

		Goodwill				Trademarks
Recreation Vehicles:
Towables		$	143,795			$	10,237
Motorized			—				2,036
Total Recreation Vehicles			143,795				12,273
Bus			4,616				1,063
Total		$	148,411			$	13,336

8.		Warranty
		Thor provides customers of our products with a warranty covering defects in material or workmanship for primarily one year with longer warranties of up to five years on certain structural components. We record a liability based on a consistent calculation reflecting our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditures over the warranty period. A significant increase in dealer shop rates, the cost of parts or the frequency of claims could have a material adverse impact on our operating results for the period or periods in which such claims or additional costs materialize. Management believes that the warranty reserve is adequate. However, actual claims incurred could differ from estimates, requiring adjustments to the reserves. Warranty reserves are reviewed and adjusted as necessary on a quarterly basis.

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2009				April 30, 2008				April 30, 2009				April 30, 2008
Beginning Balance		$	49,798			$	61,690			$	61,743			$	64,310
Provision			7,252				17,169				21,283				49,244
Payments			(11,176	)			(16,474	)			(37,152	)			(51,169	)
Ending Balance		$	45,874			$	62,385			$	45,874			$	62,385

The lower provision for the three months and nine months ended April 30, 2009 results primarily from the lower sales activity which the Company is experiencing in the current difficult market environment.

9.		Commercial Commitments

		Our principal commercial commitments at April 30, 2009 are summarized in the following chart:

		Total		Term of
Commitment		Amount Committed		Commitment
Guarantee on dealer financing		$   7,087		various
Standby repurchase obligation on dealer financing		$522,951		up to eighteen months

The Company records repurchase and guarantee reserves based on prior experience and known current events. The combined repurchase and recourse reserve balances are approximately $6,486 and $5,040 as of April 30, 2009 and July 31, 2008, respectively.

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2009				April 30, 2008				April 30, 2009				April 30, 2008
Cost of units repurchased		$	5,852			$	2,239			$	26,559			$	4,993
Realization on units resold			5,078				1,614				21,644				4,049
Losses due to repurchase		$	(774	)		$	(625	)		$	(4,915	)		$	(944	)

		The increase in losses due to repurchase resulted from the more difficult market for the recreation vehicle business. We increased our reserve for repurchases and guarantees at July 31, 2008 and at April 30, 2009.
10.		Provision for Income Taxes
		It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. For the nine months ended April 30, 2009, no material change relative to accrued unrecognized tax benefits was recorded and $1,476 in interest and penalties has been accrued.
		The Company anticipates a decrease of approximately $1,135 in unrecognized tax benefits within the next 12 months from (1) expected settlements or payments of uncertain tax positions, and (2) lapses of the applicable statutes of limitations. Actual results may differ materially from this estimate.

11.		Retained Earnings
		The components of changes in retained earnings are as follows:

Balance as of July 31, 2008		$	675,928
Net Loss			(7,638	)
Dividends Paid			(11,643	)
Balance as of April 30, 2009		$	656,647

12.		Line of Credit
		The Company had a $30,000 unsecured revolving line of credit which bore interest at prime less 2.15% and expired on November 30, 2008. The Company decided not to renew the unsecured revolving line of credit and allowed it to expire on November 30, 2008. The decision not to renew the line of credit was based on our strong cash position combined with our expectation that we will have the ability to borrow at favorable rates against our ARS, if needed. As a result, we did not anticipate utilizing the line of credit and did not want to incur the cost of maintaining it. There was no outstanding balance at July 31, 2008.
13.		Loan Transactions and Related Notes Receivable
		On January 15, 2009, the Company entered into a Credit Agreement (the “First Credit Agreement”) with Stephen Adams, in his individual capacity, and Stephen Adams and his successors, as trustee under the Stephen Adams Living Trust (the “Trust” and together with each of the foregoing persons, the “Borrowers”), pursuant to which the Company loaned $10,000 to the Borrowers (the “First Loan”). The Borrowers own approximately 90% of FreedomRoads Holding Company, LLC (“FreedomRoads”), the parent company of one of the Company’s dealers, and pursuant to the terms of the First Credit Agreement, the Borrowers agreed to use the proceeds of the First Loan solely to make an equity contribution to FreedomRoads to enable FreedomRoads to repay its principal obligations under floorplan financing arrangements with third parties in respect of products of the Company and its subsidiaries.
		The principal amount of the First Loan is payable in full on January 15, 2014 and bears interest at a rate of 12% per annum. Interest is payable in kind for the first year and is payable in cash on a monthly basis thereafter.
		In connection with the First Loan, the Borrowers caused FreedomRoads and its subsidiaries (collectively, the “FR Dealers”), to enter into an agreement pursuant to which the FR Dealers agreed to purchase additional recreation vehicles from the Company and its subsidiaries. The term of this agreement continues until the repayment in full of the First Loan under the First Credit Agreement (including any refinancing or replacement thereof).
		On January 30, 2009, the Company entered into a Second Credit Agreement (the “Second Credit Agreement” and together with the First Credit Agreement, the “Credit Agreements”) with the Borrowers pursuant to which the Company loaned an additional $10,000 to the Borrowers (the “Second Loan” and together with the First Loan, the “Loans”). Pursuant to the terms of the Second Credit Agreement, the Borrowers agreed to use the proceeds of the Second Loan solely to make an equity contribution to FreedomRoads to be used by FreedomRoads to purchase the Company’s products.

		The principal amount of the Second Loan is payable in full on January 29, 2010 and bears interest at a rate of 12% per annum. Interest is payable in cash and the first interest payment was due and paid in full on April 30, 2009. The remaining interest payment dates are: July 31, 2009, October 30, 2009 and January 29, 2010.
		The Credit Agreements contain customary representations and warranties, affirmative and negative covenants, events of default and acceleration provisions for loans of this type.
		The obligations of the Borrowers under the Credit Agreements are guaranteed by FreedomRoads and are secured by a first priority security interest in all of the direct and indirect legal, equitable and beneficial interests of the Borrowers in FreedomRoads.
		In connection with the Second Loan, the FR Dealers and the Company amended their prior agreement pursuant to which the FR Dealers agreed to purchase additional recreation vehicles from the Company and its subsidiaries to provide that the term of this agreement now continues until the repayment in full of the Loans (including any refinancing or replacement thereof).
14.		Thor CC, Inc.
		In March 1994, the Company and a financial services company formed a joint venture, Thor Credit Corporation, to finance the sale of recreation vehicles to consumer buyers. This joint venture was dissolved in September 2008 after the joint venture partner informed us that it was no longer providing retail financing for recreation vehicles. We recovered our investment of $1,578 upon dissolution.
		In November 2008, the Company announced that it will again be providing retail financing for recreation vehicle customers of Thor dealers through the Company’s wholly owned subsidiary, Thor CC, Inc. (“Thor CC”). The new business, which is led by employees of the former joint venture, will finance new Thor and used recreation vehicle products sold by our dealers.
		The retail financing to be provided by Thor CC will be funded by Thor’s operating cash flow. We anticipate that we will allocate approximately $10,000 which will be used to fund retail loans. The retail loans will then be sold to banks with which Thor CC has established relationships, and the proceeds of such sales will then be available to make new loans. We do not anticipate any significant impact to our liquidity and capital resources beyond the $10,000 that we have allocated to Thor CC. The retail loans will be made to prime and super prime customers with high credit scores. We expect to outsource the servicing of the loans.
		As of June 2, 2009, Thor CC offered retail financing through Thor recreation vehicle dealers in the following states: Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee and Virginia. We expect that Thor CC will expand its lending ability beyond these states in the future.

15.		Liquidation of Insurance Subsidiary
		The Company does not intend to insure any future risks through its insurance subsidiary because of the uncertainty of the timing of the deductibility of the insurance premium. Further, the Company does not believe that the future benefits of the insurance subsidiary, including the risk shifting and risk distribution among the Company’s operating subsidiaries, are in excess of the administrative cost of maintenance. The Company is in the process of liquidating the entity.

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

Unless otherwise indicated, all amounts presented in thousands of dollars except unit, share and per share data.

Executive Overview

We were founded in 1980 and have grown to be the largest manufacturer of Recreation Vehicles (“RVs”) and a major manufacturer of commercial buses in North America. Our market share in the travel trailer and fifth wheel segment of the industry (towables) is approximately 32.6%. In the motorized segment of the industry we have a market share of approximately 16.7%. Our market share in small and mid-size buses is approximately 41%. We also manufacture and sell 30-foot buses, 35-foot buses, and 40-foot buses.

Our growth has been internal and by acquisition. Our strategy has been to increase our profitability in North America in the recreation vehicle industry and in the bus business through product innovation, service to our customers, manufacturing quality products, improving our facilities and acquisitions. We have not entered unrelated businesses and have no plans to do so in the future.

We rely on internally generated cash flows from operations to finance our growth although we may borrow to make an acquisition if we believe the incremental cash flows will provide for rapid payback. We have invested significant capital to modernize, improve and expand our plant facilities and expended $14,815 for that purpose in fiscal year 2008.

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

Our RV products are sold to dealers who, in turn, retail those products. Our buses are sold through dealers to municipalities and private purchasers such as rental car companies and hotels. We generally do not directly finance dealers but do provide repurchase agreements in order to facilitate the dealers obtaining floor plan financing.

In November 2008, the Company announced that it will again be providing retail financing for recreation vehicles of Thor dealers through the Company’s wholly owned subsidiary, Thor CC, Inc. (“Thor CC”). The new business will finance new Thor and used recreation vehicle products sold by our dealers.

The retail financing to be provided by Thor CC will be funded by Thor’s operating cash flow. We anticipate that we will allocate approximately $10,000 which will be used to fund retail loans. The retail loans will then be sold to banks with which Thor CC has established relationships, and the

proceeds of such sales will then be available to make new loans. We do not anticipate any significant impact to our liquidity and capital resources beyond the $10,000 that we have allocated to Thor CC. The retail loans will be made to prime and super prime customers with high credit scores. We expect to outsource the servicing of the loans.

Thor CC currently offers retail financing through Thor recreation vehicle dealers in the following states: Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee and Virginia. We expect that Thor CC will expand its lending ability beyond these states in the future.

One of our recreation vehicle dealers accounted for 14.5% of RV net sales for the three months ended April 30, 2009 and 12.5% for the nine months ended April 30, 2009.

Trends and Business Outlook

Industry conditions in the RV market have been adversely affected by the lack of available wholesale and retail financing and low consumer confidence. As a result, market conditions continue to be soft and we anticipate this weakness to continue for the remainder of 2009.

The motorized market has been significantly impacted by current market conditions. The volatility of fuel prices and the tightening of the retail credit markets are placing pressure on retail sales and our dealers continue to be cautious in the amount of inventory they are willing to carry. Based on the foregoing, for the nine months ended April 30, 2009 net sales in our motorized segment decreased 69.8% compared to the nine months ended April 30, 2008. Our towable market has also been significantly impacted albeit less than our motorized market as the price of a towable recreation vehicle is generally about one-fourth that of a motorhome and sales of more expensive recreation vehicles have suffered greater in the current economic downturn. Dealers continue to sell older model-year units before replacing them with new products. The decline in wholesale demand has directly impacted our gross margins as we have had to increase our discounts to maintain competitive pricing. For the nine months ended April 30, 2009, net sales in our towables segment decreased 52.5% compared to the nine months ended April 30, 2008. These significant decreases in net sales, offset in part by increases in net sales in our bus segment, were primarily responsible for the loss before income taxes for the nine months ended April 30, 2009 of $10,129 compared to income before income taxes of $140,026 for the nine months ended April 30, 2008. The decrease was also due to a non-cash goodwill impairment charge of $9,717 for the goodwill associated with an operating subsidiary in the motorized reportable segment, trademark impairment of $564 associated with an operating subsidiary in the motorized reportable segment and one-time charges of $4,700 associated with an increase to our insurance reserves of $4,000 and to legal and settlement costs of $700.

The Company has reacted to the difficult business environment by scaling back its activities and reducing its workforce. If the current market environment persists, we may have to take additional cost-cutting measures including idling additional plants, if necessary.

We believe an important determinant of demand for recreation vehicles is demographics. The baby boomer population is now reaching retirement age and retirees are a large market for our products. The baby boomer retiree population in the United States is expected to grow faster than the total

United States population. We believe a primary indicator of the strength of the recreation vehicle industry is retail RV sales, which we closely monitor to determine industry trends. Recently, although the entire RV industry has been weak, the towable segment of the RV industry has been stronger than the motorized segment. For the towable segment, retail unit sales as reported by Statistical Surveys, Inc. were down approximately 42% for the three months ended March 31, 2009 compared with the same period last year. For the motorized segment, retail unit sales were down approximately 53%. A difficult credit environment and declining consumer confidence have slowed retail recreation vehicle sales and appear to affect the motorized segment more severely.

Economic or industry-wide factors affecting our recreation vehicle business include raw material costs of commodities used in the manufacture of our product. Material cost is the primary factor determining our cost of products sold. Material costs have generally been flat in 2009. Future increases in raw material may impact our profit margins negatively if we were unable to raise prices for our products by corresponding amounts.

When consumer confidence improves from its current historic low level and retail and wholesale credit availability improve, we expect to see a rebound in sales and expect to benefit from our ability to rapidly ramp up production in an industry with fewer competitors than before. We have been increasing our market share in the towable and motorized segments and we expect the trend to continue.

Government entities are primary users of our buses. Demand in this segment is subject to fluctuations in government spending on transit. In addition, hotel and rental car companies are also major users of our small and mid-size buses and therefore airline travel is an important indicator for this market. The majority of our buses have a 5-year useful life and are being continuously replaced by operators. Bus sales may benefit from the U.S. government’s emphasis on mass transportation in the American Reinvestment and Recovery Act stimulus package.

We do not expect the current condition of the U.S. auto industry, including the recent bankruptcy filings of General Motors and Chrysler, to have a significant impact on our supply of chassis. In addition to General Motors and Chrysler, the Company purchases chassis from Ford, Navistar, and Daimler Benz. Supply of chassis is adequate for now and we believe that on-hand inventory would compensate for changes in supply schedules if they occur. To date, we have not noticed any unusual cost increases from our chassis suppliers. If the condition of the U.S. auto industry significantly worsens, this could result in supply interruptions and a decrease in our sales and earnings while we obtain replacement chassis from other sources.

Three Months Ended April 30, 2009 vs.

     Three Months Ended April 30, 2008

		Three Months				Three Months
		Ended				Ended				Change
		4/30/2009				4/30/2008				Amount				%
NET SALES:
Recreation Vehicles
Towables		$	264,317			$	480,020			$	(215,703	)			(44.9	)
Motorized			47,724				120,940				(73,216	)			(60.5	)
Total Recreation Vehicles			312,041				600,960				(288,919	)			(48.1	)
Buses			103,431				106,971				(3,540	)			(3.3	)
Total		$	415,472			$	707,931			$	(292,459	)			(41.3	)
# OF UNITS:
Recreation Vehicles
Towables			12,086				21,296				(9,210	)			(43.2	)
Motorized			671				1,570				(899	)			(57.3	)
Total Recreation Vehicles			12,757				22,866				(10,109	)			(44.2	)
Buses			1,551				1,597				(46	)			(2.9	)
Total			14,308				24,463				(10,155	)			(41.5	)

						% of								% of
						Segment								Segment				Change
						Net Sales								Net Sales				Amount				%
GROSS PROFIT:
Recreation Vehicles
Towables		$	34,062				12.9			$	69,731				14.5			$	(35,669	)			(51.2	)
Motorized			1,910				4.0				10,671				8.8				(8,761	)			(82.1	)
Total Recreation Vehicles			35,972				11.5				80,402				13.4				(44,430	)			(55.3	)
Buses			10,475				10.1				9,597				9.0				878				9.1
Total		$	46,447				11.2			$	89,999				12.7			$	(43,552	)			(48.4	)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreation Vehicles
Towables		$	15,809				6.0			$	27,835				5.8			$	(12,026	)			(43.2	)
Motorized			3,729				7.8				7,279				6.0				(3,550	)			(48.8	)
Total Recreation Vehicles			19,538				6.3				35,114				5.8				(15,576	)			(44.4	)
Buses			9,244				8.9				4,293				4.0				4,951				115.3
Corporate			5,189				—				8,496				—				(3,307	)			(38.9	)
Total		$	33,971				8.2			$	47,903				6.8			$	(13,932	)			(29.1	)
INCOME (LOSS) BEFORE INCOME TAXES:
Recreation Vehicles
Towables		$	18,374				7.0			$	42,014				8.8			$	(23,640	)			(56.3	)
Motorized			(11,514	)			(24.1	)			3,390				2.8				(14,904	)			(439.6	)
Total Recreation Vehicles			6,860				2.2				45,404				7.6				(38,544	)			(84.9	)
Buses			1,243				1.2				5,113				4.8				(3,870	)			(75.7	)
Corporate			(3,531	)			—				(6,177	)			—				2,646				42.8
Total		$	4,572				1.1			$	44,340				6.3			$	(39,768	)			(89.7	)

		As of				As of				Change
		April 30, 2009				April 30, 2008				Amount				%
ORDER BACKLOG:
Recreation Vehicles
Towables		$	180,075			$	194,938			$	(14,863	)			(7.6	)
Motorized			33,287				81,499				(48,212	)			(59.2	)
Total Recreation Vehicles			213,362				276,437				(63,075	)			(22.8	)
Buses			228,084				249,533				(21,449	)			(8.6	)
Total		$	441,446			$	525,970			$	(84,524	)			(16.1	)

CONSOLIDATED

Net sales and gross profit for the three months ended April 30, 2009 were down 41.3% and 48.4%, respectively, compared to the three months ended April 30, 2008. Selling, general and administrative expenses for the three months ended April 30, 2009 decreased 29.1% compared to the three months ended April 30, 2008. Income before income taxes for the three months ended April 30, 2009 was $4,572 as compared to income before taxes for the three months ended April 30, 2008 of $44,340. The specifics on changes in net sales, gross profit, selling, general and administrative expenses and income before income taxes are addressed in the segment reporting below.

Corporate costs included in selling, general and administrative expenses were $5,189 for the three months ended April 30, 2009 compared to $8,496 for the three months ended April 30, 2008. The decrease of $3,307 is due to a decrease of $2,731 in insurance related expense, $600 in incentive based compensation, and $792 in accounting related fees. These decreases were partially offset by increases in legal costs of $530 and non-incentive compensation cost of $242.

Corporate interest income and other income was $930 for the three months ended April 30, 2009 compared to $2,288 for the three months ended April 30, 2008. The decrease of $1,358 is primarily due to a $1,211 decrease in interest income due to lower interest rates and the contractual terms of our auction rate securities which restrict the maximum yearly interest earned.

The overall effective tax rate for the three months ended April 30, 2009 was tax expense at a 54% rate on $4,572 income before income taxes compared to tax expense at a 37.1% rate on $44,340 income before income taxes for the three months ended April 30, 2008. The primary reasons for the increase are additional tax expense for uncertain tax positions pursuant to FIN48, adjustments to various permanent items affected by the Company’s return to profitability in the third quarter and income tax credits. In the third quarter the Company adjusted its effective tax rate to record the benefit of Qualified Alternative Fuel Motor Vehicle tax credits for buses manufactured to run on alternative fuel. The Company also recorded a tax benefit for additional research and development tax credits. These benefits were offset partially by additional state tax expense recorded as a result of the finalization of California tax audits. Recording these adjustments to the effective tax rate in the third quarter caused a higher than normal tax rate for the three month period ended April 30, 2009, but the company projects the effective tax rate for the fiscal year to be more comparable to the 24.6% rate for the nine months ended April 30, 2009.

Segment Reporting

RECREATION VEHICLES

Analysis of Percentage Change in Net Sales Versus Prior Year

		Average Price
		Per Unit				Units				Net Change
Recreation Vehicles
Towables			(1.7	)%			(43.2	)%			(44.9	)%
Motorized			(3.2	)%			(57.3	)%			(60.5	)%

TOWABLE RECREATION VEHICLES

The decrease in towables net sales of 44.9% resulted from a 43.2% decrease in unit shipments and a 1.7% decrease in average sales price per unit resulting primarily from mix of product.

The overall industry decrease in wholesale unit shipments of towables for February, March and April 2009 compared to the same period last year was 56.8% according to statistics published by the Recreation Vehicle Industry Association.

Towable gross profit decreased $35,669 to $34,062 or 12.9% of towable net sales for the three months ended April 30, 2009 compared to $69,731 or 14.5% of towable net sales for the three months ended April 30, 2008. The decrease was due to a combination of increased discounts from unit list prices, increased wholesale and retail incentives provided to customers and changes in cost of products sold. Additional discounts and incentives were provided as a result of an overall decline in the recreation vehicle industry.

Cost of products sold decreased $180,034 to $230,255 or 87.1% of towable net sales for the three months ended April 30, 2009 compared to $410,289 or 85.5% of towable net sales for the three months ended April 30, 2008. The change in material, labor, freight-out and warranty comprised $169,808 of the $180,034 decrease in cost of products sold due to decreased sales volume. Material, labor, freight-out and warranty as a percentage of net sales was 78.8% for both the three months ended April 30, 2009 and 2008. Manufacturing overhead as a percentage of net sales increased to 8.3% from 6.7% due to a decrease in production resulting in lower absorption of fixed overhead costs. Manufacturing overhead decreased $10,226 due to lower variable overhead costs, resulting from lower production offset by unabsorbed fixed overhead costs.

Selling, general and administrative expenses were $15,809 or 6.0% of towable net sales for the three months ended April 30, 2009 compared to $27,835 or 5.8% of towable net sales for the three months ended April 30, 2008. The primary reason for the $12,026 decrease in selling, general and administrative expenses was decreased net sales which caused commissions, bonuses, and other compensation to decrease by $9,557. In addition, advertising and selling related costs decreased $810 due to decreased sales activity, legal and settlement costs decreased $653 due to the resolution of various legal and product disputes and accounting and other expenses decreased $1,006.

Towables income before income taxes decreased to 7.0% of towable net sales for the three months ended April 30, 2009 from 8.8% of towable net sales for the three months ended April 30, 2008. The primary factor for this decrease was the loss of gross profit on reduced sales volume of $215,703.

MOTORIZED RECREATION VEHICLES

The decrease in motorized net sales of 60.5% resulted from a 57.3% decrease in unit shipments and a 3.2% decrease in average sales price per unit resulting primarily from mix of product. The overall market decrease in unit shipments of motorhomes was 76.9% for the three month period of February, March and April 2009 compared to the same period last year according to statistics published by the Recreation Vehicle Industry Association.

Motorized gross profit decreased $8,761 to $1,910 or 4.0% of motorized net sales for the three months ended April 30, 2009 compared to $10,671 or 8.8% of motorized net sales for the three months ended April 30, 2008. The decrease in margin was due to a combination of increased discounts from unit list prices, increased wholesale and retail incentives provided to customers and changes in cost of products sold. Additional discounts and incentives were provided as a result of an overall decline in the recreation vehicle industry.

Cost of products sold decreased $64,455 to $45,814 or 96.0% of motorized net sales for the three months ended April 30, 2009 compared to $110,269 or 91.2% of motorized net sales for the three months ended April 30, 2008. The change in material, labor, freight-out and warranty comprised $61,650 of the $64,455 decrease in cost of products sold due to decreased sales volume. Material, labor, freight-out and warranty as a percentage of net sales increased to 84.6% from 84.4%. Manufacturing overhead as a percentage of motorized net sales increased to 11.4% from 6.8% due to a decrease in production resulting in lower absorption of fixed overhead costs. Manufacturing overhead decreased $2,805 due to lower variable overhead costs resulting from lower production offset by unabsorbed fixed overhead costs.

Selling, general and administrative expenses were $3,729 or 7.8% of motorized net sales for the three months ended April 30, 2009 compared to $7,279 or 6.0% of motorized net sales for the three months ended April 30, 2008. The primary reason for the $3,550 decrease was decreased net sales which caused commissions, bonuses, and other compensation to decrease by $2,075. In addition, legal and settlement costs decreased $911 due to the resolution of various legal and product disputes and advertising and selling related costs decreased $386.

Motorized income before income taxes was a negative 24.1% of motorized net sales for the three months ended April 30, 2009 and 2.8% of motorized net sales for the three months ended April 30, 2008. The primary factor for this decrease was the loss of gross profit on reduced sales volume of $73,216 and the $9,717 write-off of goodwill.

BUSES

Analysis of Percentage Change in Net Sales Versus Prior Year

		Average Price Per Unit				Units				Net Change
Buses			(0.4	)%			(2.9	)%			(3.3	)%

The decrease in buses net sales of 3.3% resulted from a 2.9% decrease in unit shipments and a 0.4% decrease in average price per unit resulting primarily from mix of product.

Buses gross profit increased $878 to $10,475 or 10.1% of buses net sales for the three months ended April 30, 2009 compared to $9,597 or 9.0% of buses net sales for the three months ended April 30, 2008. The increase was due to the additional margin we realized on additional features with higher margins included in our buses.

Cost of products sold decreased $4,418 to $92,956 or 89.9% of buses net sales for the three months ended April 30, 2009 compared to $97,374 or 91.0% of buses net sales for the three months ended April 30, 2008. The decrease in material, labor, freight-out and warranty represents $3,987 of the $4,418 decrease in cost of products sold. Material, labor, freight-out and warranty as a percentage of buses net sales decreased to 82.9% from 83.9%. This decrease in percentage of cost of products sold was due to better procurement. Manufacturing overhead decreased $431 which caused manufacturing overhead to decrease to 7.0% from 7.2% as a percentage of buses net sales.

Selling, general and administrative expenses were $9,244 or 8.9% of buses net sales for the three months ended April 30, 2009 compared to $4,293 or 4.0% of buses net sales for the three months ended April 30, 2008. The primary reason for the $4,951 increase in selling, general and administrative expenses was due to a $4,000 increase in self insurance reserves and a $902 increase in legal and settlement costs.

Buses income before income taxes was 1.2% of buses net sales for the three months ended April 30, 2009 compared to 4.8% for the three months ended April 30, 2008. This decrease is primarily due to the increases in selling, general and administrative expenses noted above.

Nine Months Ended April 30, 2009 vs.

     Nine Months Ended April 30, 2008

		Nine
		Months				Nine Months
		Ended				Ended				Change
		4/30/2009				4/30/2008				Amount				%
NET SALES:
Recreation Vehicles
Towables		$	664,517			$	1,398,172			$	(733,655	)			(52.5	)
Motorized			112,499				372,265				(259,766	)			(69.8	)
Total Recreation Vehicles			777,016				1,770,437				(993,421	)			(56.1	)
Buses			303,956				300,400				3,556				1.2
Total		$	1,080,972			$	2,070,837			$	(989,865	)			(47.8	)
# OF UNITS:
Recreation Vehicles
Towables			29,732				62,936				(33,204	)			(52.8	)
Motorized			1,419				4,681				(3,262	)			(69.7	)
Total Recreation Vehicles			31,151				67,617				(36,466	)			(53.9	)
Buses			4,648				4,567				81				1.8
Total			35,799				72,184				(36,385	)			(50.4	)

						% of								% of
						Segment								Segment				Change
						Net Sales								Net Sales				Amount				%
GROSS PROFIT:
Recreation Vehicles
Towables		$	68,799				10.4			$	200,986				14.4			$	(132,187	)			(65.8	)
Motorized			(2,501	)			(2.2	)			34,344				9.2				(36,845	)			(107.3	)
Total Recreation Vehicles			66,298				8.5				235,330				13.3				(169,032	)			(71.8	)
Buses			28,369				9.3				25,661				8.5				2,708				10.6
Total		$	94,667				8.8			$	260,991				12.6			$	(166,324	)			(63.7	)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreation Vehicles
Towables		$	48,223				7.3			$	80,462				5.8			$	(32,239	)			(40.1	)
Motorized			15,641				13.9				20,575				5.5				(4,934	)			(24.0	)
Total Recreation Vehicles			63,864				8.2				101,037				5.7				(37,173	)			(36.8	)
Buses			17,909				5.9				11,961				4.0				5,948				49.7
Corporate			16,863				—				20,134				—				(3,271	)			(16.2	)
Total		$	98,636				9.1			$	133,132				6.4			$	(34,496	)			(25.9	)
INCOME (LOSS) BEFORE INCOME TAXES:
Recreation Vehicles
Towables		$	21,197				3.2			$	123,318				8.8			$	(102,121	)			(82.8	)
Motorized			(28,405	)			(25.2	)			13,804				3.7				(42,209	)			(305.8	)
Total Recreation Vehicles			(7,208	)			(0.9	)			137,122				7.7				(144,330	)			(105.3	)
Buses			10,263				3.4				12,808				4.3				(2,545	)			(19.9	)
Corporate			(13,184	)			—				(9,904	)			—				(3,280	)			(33.1	)
Total		$	(10,129	)			(0.9	)		$	140,026				6.8			$	(150,155	)			(107.2	)