THOR INDUSTRIES INC - Quarter Report: 2010 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, 2010.

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

COMMISSION FILE NUMBER 1-9235

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 o       No þ

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.

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 04/30/2010
Common stock, par value $.10 per share		51,461,510 shares

 

 

PART I — Financial Information			3
ITEM 1. FINANCIAL STATEMENTS			3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)			3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS			4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS			5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)			6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			41
ITEM 4. CONTROLS AND PROCEDURES			41
PART II — Other Information			43
ITEM 1. LEGAL PROCEEDINGS			43
ITEM 1A. RISK FACTORS			44
ITEM 6. EXHIBITS			46
SIGNATURES			47
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Explanatory Note

The Company has completed its evaluation of certain accounting positions previously taken in its audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2009 and the unaudited financial statements included in the Company’s Quarterly Reports on Form 10-Q for the periods ended January 31, 2009, April 30, 2009, October 31, 2009 and January 31, 2010, as previously disclosed in the Company’s Form 12b-25 filed on June 10, 2010. The Company’s auditors have completed their review under SAS100 of the third quarter results included herein. The Company’s evaluation did not result in any changes to previously taken accounting positions.

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

		(UNAUDITED)
		April 30, 2010				July 31, 2009
ASSETS
Current assets:
Cash and cash equivalents		$	80,638			$	221,684
Investments- short term			63,350				107,150
Accounts receivable:
Trade			199,283				111,793
Other			7,985				3,823
Inventories			170,044				105,278
Prepaids and other			3,973				10,949
Note receivable			3,247				10,000
Deferred income taxes			36,591				33,341
Total current assets			565,111				604,018
Property:
Land			20,754				20,310
Buildings and improvements			132,651				134,161
Machinery and equipment			70,135				69,566
Total cost			223,540				224,037
Accumulated depreciation			85,616				81,176
Property, net			137,924				142,861
Investment in joint ventures			2,232				2,257
Other assets:
Long term investments			13,010				13,428
Goodwill			150,576				148,411
Non-compete agreements and other intangible assets			5,917				617
Trademarks			14,936				13,336
Long term notes receivable			29,656				10,000
Other			19,048				16,196
Total other assets			233,143				201,988
TOTAL ASSETS		$	938,410			$	951,124
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	112,357			$	78,120
Accrued liabilities:
Taxes			17,160				5,700
Compensation and related items			32,273				22,548
Product warranties			48,634				41,717
Promotions and rebates			9,949				6,743
Product/property liability and related			14,721				12,990
Other			23,309				16,656
Total current liabilities			258,403				184,474
Long term liabilities:
Unrecognized tax benefits			45,541				46,355
Other			15,346				15,262
Total long term liabilities			60,887				61,617
Stockholders’ equity:
Common stock – authorized 250,000,000 shares:
Issued 57,318,849 shares @ 4/30/10 and 57,318,263 shares @7/31/09; par value of $.10 per share			5,732				5,732
Additional paid-in capital			94,993				94,367
Retained earnings			708,206				677,548
Accumulated other comprehensive income (loss)			(707	)			1,070
Less treasury shares of 5,857,339 and 1,877,339 @ 4/30/10 & 7/31/09			(189,104	)			(73,684	)
Total stockholders’ equity			619,120				705,033
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	938,410			$	951,124

See notes to condensed consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended April 30,								Nine Months Ended April 30,
		2010				2009				2010				2009
Net sales		$	680,192			$	415,472			$	1,612,769			$	1,080,972
Cost of products sold			587,693				369,025				1,400,503				986,305
Gross profit			92,499				46,447				212,266				94,667
Selling, general and administrative expenses			42,824				33,879				108,678				98,252
Amortization of intangibles			152				92				320				384
Impairment of goodwill and trademarks			500				9,717				500				10,281
Gain on sale of property			—				—				—				373
Gain on involuntary conversion			2,283				—				2,283				—
Interest income			1,360				1,169				4,242				4,670
Interest expense			110				144				320				386
Net appreciation (impairment) of auction rate securities			—				728				—				(1,125	)
Other income (expense)			(351	)			60				(262	)			589
Income (loss) before income taxes			52,205				4,572				108,711				(10,129	)
Provision (benefit) for income taxes			18,094				2,470				39,247				(2,491	)
Net income (loss)		$	34,111			$	2,102			$	69,464			$	(7,638	)
Average common shares outstanding:
Basic			51,461,181				55,436,924				53,521,242				55,426,829
Diluted			51,585,450				55,468,620				53,621,584				55,426,829
Earnings (loss) per common share:
Basic		$	.66			$	.04			$	1.30			$	(.14	)
Diluted		$	.66			$	.04			$	1.30			$	(.14	)
Regular dividends declared and paid per common share:		$	.07			$	.07			$	.21			$	.21
Special dividends declared and paid per common share:		$	—			$	—			$	.50			$	—

See notes to condensed consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		2010				2009
Cash flows from operating activities:
Net income		$	69,464			$	(7,638	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			9,452				9,885
Amortization of intangibles			320				384
Impairment of trademarks and goodwill			500				10,281
Deferred income taxes			(4,515	)			—
(Gain)/loss on disposition of assets			225				(392	)
Net impairment of auction rate securities			—				1,125
Gain on involuntary conversion of assets			(1,575	)			—
Stock based compensation			610				449
Loss on divestiture of operating subsidiary			323				—
Changes in non-cash assets and liabilities (excluding acquisition):
Accounts receivable			(91,053	)			25,587
Note receivable			(1,433	)			(10,000	)
Inventories			(57,689	)			20,613
Prepaids and other			3,881				8,603
Accounts payable			29,773				(13,652	)
Accrued liabilities			41,337				(36,457	)
Other liabilities			(806	)			(6,717	)
Net cash provided by (used in) operating activities			(1,186	)			2,071
Cash flows from investing activities:
Purchases of property, plant & equipment			(8,210	)			(5,077	)
Proceeds from disposition of assets			4,958				2,785
Proceeds from disposition of investments			44,200				10,000
Notes receivable			(10,000	)			(10,000	)
Acquisition of operating subsidiary			(19,756	)			—
Insurance proceeds from involuntary conversion of assets			2,908				—
Proceeds on dissolution of joint venture			—				1,578
Net cash provided by (used in) investing activities			14,100				(714	)
Cash flows from financing activities:
Cash dividends			(38,806	)			(11,643	)
Proceeds from issuance of common stock			16				27
Purchase of treasury stock			(115,420	)			—
Net cash used in financing activities			(154,210	)			(11,616	)
Effect of exchange rate changes on cash			250				(1,483	)
Net decrease in cash and equivalents			(141,046	)			(11,742	)
Cash and cash equivalents, beginning of period			221,684				189,620
Cash and cash equivalents, end of period		$	80,638			$	177,878
Supplemental cash flow information:
Income taxes paid		$	32,861			$	18,376
Interest paid		$	320			$	386
Non cash transactions:
Capital expenditures in accounts payable		$	1			$	118

See notes to condensed consolidated financial statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.		The July 31, 2009 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, 2009. The results of operations for the nine months ended April 30, 2010 are not necessarily indicative of the results for the full year.
		On March 1, 2010, the Company acquired 100% of SJC Industries Corp. (“SJC”), a privately held manufacturer of ambulances based in Elkhart, Indiana (see Note 18). The operations of SJC are included in the Company’s operating results from the date of its acquisition.
		Accounting Pronouncements
		In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (SFAS 167). SFAS No. 167 amends Accounting Standards Codification (“ASC”) 810-10 (formerly FASB Interpretation No. 46(R)) by adding previously considered qualifying special purpose entities (the concept of these entities was eliminated by SFAS No. 166). In addition, companies must perform an analysis to determine whether the Company’s variable interest or interests give it a controlling financial interest in a variable interest entity. Companies must also reassess on an ongoing basis whether the Company is the primary beneficiary of a variable interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. The Company is currently evaluating the impact that the adoption of SFAS 167 may have on the Company’s consolidated financial statements.

2.		Inventories
		Major classifications of inventories are:

		April 30, 2010				July 31, 2009
Raw materials		$	79,672			$	55,956
Chassis			46,018				28,613
Work in process			51,171				38,159
Finished goods			18,085				6,682
Total			194,946				129,410
Excess of FIFO costs over LIFO costs			(24,902	)			(24,132	)
Total inventories		$	170,044			$	105,278

3.

Earnings Per Share

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Weighted average shares outstanding for basic earnings per share			51,461,181				55,436,924				53,521,242				55,426,829
Stock options and restricted stock			124,269				31,696				100,342				—
Total — For diluted shares			51,585,450				55,468,620				53,621,584				55,426,829

4.

Comprehensive Income

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Net Income (loss)		$	34,111			$	2,102			$	69,464			$	(7,638	)
Foreign currency translation adjustment, net of tax			(1,803	)			168				(1,762	)			(1,483	)
Change in temporary impairment of investment, net of tax			17				170				(15	)			2,852
Comprehensive income		$	32,325			$	2,440			$	67,687			$	(6,269	)

Comprehensive income activity includes a reclassification adjustment to deduct from accumulated other comprehensive income realized translation gains included within net income as a result of the Citair sale.

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, Goshen Coach, and the newly acquired SJC (see Note 18).

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Net Sales:
Recreation vehicles:
Towables		$	468,002			$	264,317			$	1,090,842			$	664,517
Motorized			91,164				47,724				194,049				112,499
Total recreation vehicles			559,166				312,041				1,284,891				777,016
Buses			121,026				103,431				327,878				303,956
Total		$	680,192			$	415,472			$	1,612,769			$	1,080,972
		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Income (Loss) Before Income Taxes:
Recreation vehicles:
Towables		$	45,114			$	18,374			$	93,397			$	21,197
Motorized			3,640				(11,514	)			5,056				(28,405	)
Total recreation vehicles			48,754				6,860				98,453				(7,208	)
Buses			9,142				1,243				23,755				10,263
Corporate			(5,691	)			(3,531	)			(13,497	)			(13,184	)
Total		$	52,205			$	4,572			$	108,711			$	(10,129	)

		April 30, 2010				July 31, 2009
Identifiable Assets:
Recreation vehicles:
Towables		$	454,455			$	358,562
Motorized			110,831				73,969
Total recreation vehicles			565,286				432,531
Buses			128,240				106,823
Corporate			244,884				411,770
Total		$	938,410			$	951,124

6.		Treasury Stock
		In the second quarter of fiscal year 2010, the Company purchased 3,980,000 shares at $29.00 per share and held them as treasury stock at a total cost of $115,420.
		The common stock shares were repurchased by the Company from the Estate of Wade F. B. Thompson (the “Estate”) in a private transaction. The late Wade F. B. Thompson was Thor’s former Chairman, President and Chief Executive Officer. The repurchase transaction was evaluated and approved by directors of Thor’s Board who are not affiliated with the Estate. At the time of the repurchase, the shares represented 7.2% of Thor’s common stock outstanding. Thor used available cash to purchase the shares.

7.		Investments and Fair Value Measurements
		Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures 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 as the exchange price that would be received for an asset or paid to transfer a liability (i.e., 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 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.

The following table represents the Company’s fair value hierarchy for its financial assets (cash, cash equivalents and investments) measured at fair value on a recurring basis as of April 30, 2010:

		Significant
		Quoted Market
		Prices in Active				Other Observable				Significant
		Markets				Inputs				Unobservable Inputs				Fair Value at
		(Level 1)				(Level 2)				(Level 3)				April 30, 2010
Cash and cash equivalents		$	80,638			$	—			$	—			$	80,638
Auction rate securities (including Put Rights)			—				—				76,360				76,360
Total		$	80,638			$	—			$	76,360			$	156,998

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 $7,550 at April 30, 2010 ($6,016 at July 31, 2009). 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 Condensed Consolidated Balance Sheets.

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 pre-determined “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, 2009		$	120,578
Net change in other comprehensive income			(18	)
Net loss included in earnings			—
Purchases			—
Sales/Maturities			(44,200	)
Balances at April 30, 2010		$	76,360

Auction Rate Securities

At April 30, 2010, we held $14,150 (par value) of long-term investments and $63,350 (par value) of short-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, 2010,

the majority of the ARS we held were AAA rated or equivalent, and none were below B rated or equivalent, with most collateralized by student loans substantially backed by the U.S. federal government.

Since February 12, 2008, most auctions for these securities have failed and there is no assurance that future auctions of 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 ($63,350 of our entire remaining ARS portfolio of $77,500 at par) at any time during a two-year sale period beginning June 30, 2010. We had ARS sales of $44,200 between August 1, 2009 and April 30, 2010, and since April 30, 2010, all of our ARS held by UBS have been sold at par.

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 held by UBS (the “Call Right”). UBS has stated that it will exercise the Call Right only 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 Securities and Exchange Commission (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, 2010, 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 $1,140 ($707 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 $14,150 (par value) that were not part of the UBS settlement as of April 30, 2010. 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 and elected to treat this portion of our ARS portfolio as

trading securities. For the nine months ended April 30, 2010 we recorded a benefit to operations of $4,140 related to an increase in market value of our ARS, offset by a corresponding charge to operations of $4,140 related to the Put Rights on the $63,350 (par value) portion of our ARS portfolio to properly record our investment at par 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, 2010, 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 30 years) to realize our investments’ par value. Based on the terms of the UBS Call Right, which is exercisable at any time after June 30, 2010, effective June 30, 2009, the ARS held by UBS were classified as short-term.

The remaining ARS held by another institution remain classified as long-term at April 30, 2010. 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 all of its ARS until the earlier of when: 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.

8.

Goodwill and Other Intangible Assets

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. One of our subsidiaries included in the towables reportable segment has experienced a decrease in its sales which has caused us to write down the carrying value of its trademarks. Intangible assets are comprised of non-compete agreements and various other intangibles acquired through acquisitions.

The components of non-compete agreements and other intangible assets are as follows:

		April 30, 2010								July 31, 2009
						Accumulated								Accumulated
		Cost				Amortization				Cost				Amortization
Amortized Intangible Assets:		$	8,221			$	2,304			$	2,888			$	2,271
		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Amortization Expense		$	152			$	92			$	320			$	384

Intangible assets are amortized on a straight line basis over the lives of the assets, which range from 2-14 years. The weighted average remaining amortization period at April 30, 2010 is 12.5 years.

Estimated Amortization Expense:

For the year ending July 2010		$	510
For the year ending July 2011		$	689
For the year ending July 2012		$	509
For the year ending July 2013		$	452
For the year ending July 2014 and thereafter		$	4,077

Goodwill and indefinite-lived intangible assets are not subject to amortization.

The change in carrying value in goodwill and trademarks from July 31, 2009 to April 30, 2010 is as follows:

		Goodwill				Trademarks
Balance at July 31, 2009		$	148,411			$	13,336
Impairment of trademark in towable reportable segment			—				(500	)
Amounts resulting from SJC acquisition			2,165				2,100
Balance at April 30, 2010		$	150,576			$	14,936

As of April 30, 2010 and July 31, 2009, Goodwill and Trademarks by segment are as follows:

		April 30, 2010								July 31, 2009
		Goodwill				Trademarks				Goodwill				Trademarks
Recreation Vehicles:
Towables		$	143,795			$	9,737			$	143,795			$	10,237
Motorized			—				2,036				—				2,036
Total Recreation Vehicles			143,795				11,773				143,795				12,273
Bus			6,781				3,163				4,616				1,063
Total		$	150,576			$	14,936			$	148,411			$	13,336

9.

Product Warranties

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 two 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 Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Beginning Balance		$	43,123			$	49,798			$	41,717			$	61,743
Provision			17,602				7,252				42,239				21,283
Payments			(12,091	)			(11,176	)			(35,322	)			(37,152	)
Ending Balance		$	48,634			$	45,874			$	48,634			$	45,874

10.

Contingent Liabilities and Commitments

Our principal commercial commitments at April 30, 2010 are summarized in the following chart:

		Total				Term of
Commitment		Amount Committed				Commitment
Guarantee on dealer financing		$	3,450			Various
Standby repurchase obligation on dealer financing		$	593,579			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 $7,206 and $6,349 as of April 30, 2010 and July 31, 2009, respectively.

		Three Months				Three Months				Nine Months				Nine Months
		Ended				Ended				Ended				Ended
		April 30, 2010				April 30, 2009				April 30, 2010				April 30, 2009
Cost of units repurchased		$	4,832			$	5,852			$	8,052			$	26,559
Realization on units resold			4,357				5,078				7,034				21,644
Losses due to repurchase		$	(475	)		$	(774	)		$	(1,018	)		$	(4,915	)

Losses due to repurchase decreased in the three and nine months ended April 30, 2010 by $299 and $3,897 respectively, due to overall improvements in the RV market.

The Company obtains certain vehicle chassis from automobile manufacturers under converter pool agreements. These agreements generally provide that the manufacturer will supply chassis at the Company’s various production facilities under the terms and conditions set forth in the agreement. The manufacturer does not transfer the certificate of origin to the Company and, accordingly, the Company accounts for the chassis as consigned, unrecorded inventory. Chassis are typically converted and delivered to customers within 90 days of delivery to the Company. If the chassis is not converted within 90 days of delivery to the Company, the Company generally purchases the chassis and records the inventory. At April 30, 2010 and July 31, 2009, chassis on hand accounted for as consigned, unrecorded inventory was approximately $24,132 and $31,201 respectively.

The Company has been named in approximately 565 complaints, some of which were originally styled as putative class actions (with respect to which class certification was ultimately denied) and some of which were filed by individual plaintiffs, filed against manufacturers of travel trailers and manufactured homes supplied to the Federal Emergency Management Agency (“FEMA”) for use as emergency living accommodations in the wake of Hurricanes Katrina and Rita. The complaints have been transferred to the Eastern District of Louisiana by the federal panel on multidistrict litigation for consideration in a matter captioned In re FEMA Trailer Formaldehyde Products Liability Litigation, Case Number MDL 07-1873, United States District Court for the Eastern District of Louisiana. The complaints generally assert claims for

damages (for health related problems, medical expenses, emotional distress and lost earnings) and for medical monitoring costs due to the presence of formaldehyde in the units. Some of the lawsuits also seek punitive and/or exemplary damages. Thus far, however, none of the lawsuits allege a specific amount of damages sought and instead make general allegations about the nature of the plaintiffs’ claims without placing a dollar figure on them. The Company strongly disputes the allegations in these complaints, and intends to vigorously defend itself in all such matters.

In addition, we are involved in certain litigation arising out of our operations in the normal course of our business, most of which are based upon state “lemon laws,” warranty claims, other claims and accidents (for which we carry insurance above a specified deductible amount). In this regard, the Company is a party to two companion lawsuits pending in Jefferson County, Texas which were brought against it and its affiliates, each of which arises from a March 29, 2006 crash of a bus manufactured by a subsidiary of the Company. The cases were filed in the 172nd State District Court on January 30, 2008 and in the 60th State District Court on March 28, 2008. At the time of the crash, the bus was transporting a Beaumont, Texas high school girls’ soccer team to a playoff game. Two girls died in the crash, as many as nine others were seriously injured, and the remainder of the girls, their two coaches, and the bus driver sustained less serious physical injuries. The plaintiffs in these two cases generally allege negligence and product liability claims including that the bus was not crashworthy, that the bus was unreasonably dangerous, and that the design and manufacture of the bus and its component parts were defective. The plaintiffs seek unspecified damages for wrongful death, past and future physical pain and suffering, past and future mental anguish, past and future physical disfigurement, past and future physical impairment, past and future medical and health care expenses, past and future loss of earning capacity, past and future loss of parental companionship and society, as well as exemplary damages, costs of court, and pre-judgment and post-judgment interest. Additionally, the Company has received requests for indemnification and tenders of defense from the bus chassis supplier and the distributor of the bus. Although written discovery has been exchanged in the matter and dozens of depositions have been taken of the plaintiffs, the bus driver, and some of the plaintiffs’ experts, among others, a significant amount of discovery remains. At the mediation of the cases on June 15, 2010, a tentative complete settlement of both cases was reached, subject to the written approval of all the plaintiffs within 30 days. The matter is set for trial October 4, 2010. The Company strongly disputes the allegations in these complaints, and intends to vigorously defend itself in all such matters.

Following our announcement on June 10, 2010 that the filing of our Quarterly Report on Form 10-Q for the period ended April 30, 2010 would be delayed, a lawsuit was filed against us and our officers, Peter B. Orthwein and Christian G. Farman, on June 25, 2010 in the United States District Court for the Southern District of Ohio – Dayton Division. The lawsuit was filed by Teamsters Allied Benefit Funds, individually and purportedly on behalf of a class of all those who purchased or acquired the Company’s common stock between November 30, 2009 and June 10, 2010. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In particular, the lawsuit alleges that the Company made false and misleading statements in its SEC filings and press releases regarding its financial condition, profitability, accounting practices and internal controls. Specifically, plaintiff claims that the Company misled shareholders by making loans to its dealers that masked the profitability of its various divisions and by improperly accounting for repurchase reserves relating to agreements with lenders for its dealers. It further contends that the Company failed to disclose that it lacked proper internal controls to effectively account for such transactions. The plaintiff alleges that on June 10, 2010, the Company revealed the truth by disclosing that the annual and quarterly results for fiscal 2009 and part of fiscal 2010 may need to be restated due to reevaluation of the accounting related to these transactions. The Company’s evaluation of these transactions did not result in any changes to previously taken accounting positions. The Company strongly disputes the allegations in these complaints, and intends to vigorously defend itself in all such matters. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to the litigation arising out of our operations in the normal course of business, including the litigation described above, we believe that while the final resolution of any such litigation may have an impact on our consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have any material adverse effect on our financial position, annual results of operation or liquidity.

11.

Provision for Income Taxes

The Company accounts for income taxes under the provisions of ASC 740, Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact the Company’s financial position or its results of operations.

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. For the nine month period ended April 30, 2010, the Company released approximately $1,800 of uncertain tax benefit reserve and related interest recorded at July 31, 2009 related to the effective settlement of certain uncertain tax benefits and statute of limitation expirations. The Company accrued $400 of uncertain tax benefits related to prior periods and $1,200 in interest and penalties related to the remaining uncertain tax benefits recorded at July 31, 2009. For the three month period ended April 30, 2010, the Company released approximately $1,400 of uncertain tax benefit reserve and related interest recorded at July 31, 2009 related to statute of limitation expirations, accrued $400 of uncertain tax benefits related to prior periods, and accrued $400 in interest and penalties.

The Company and its corporate subsidiaries file a consolidated U.S. federal income tax return, multiple U.S. state income tax returns and multiple Canadian income tax returns. The Company has been audited for U.S. federal purposes through fiscal 2007. Periodically, various state and local jurisdictions conduct audits and therefore a variety of other years are subject to state and local review.

The Company anticipates a decrease of approximately $4,600 in unrecognized tax benefits and $2,800 of accrued interest related to these 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.

12.

Retained Earnings

The components of changes in retained earnings are as follows:

Balance as of July 31, 2009		$	677,548
Net Income			69,464
Dividends Paid			(38,806	)
Balance as of April 30, 2010		$	708,206

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, directly or indirectly, a controlling interest in FreedomRoads Holding Company, LLC (“FreedomRoads Holding”), the parent company of the Company’s largest dealer. 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 Holding to enable FreedomRoads Holding or its subsidiaries to repay its principal obligations under floor plan 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, and all interest payments due to date have been paid in full. On January 30, 2009, the Company entered into a Second Credit Agreement (the “Second Credit Agreement”) with the Borrowers pursuant to which the Company loaned an additional $10,000 to the Borrowers (the “Second Loan”). 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 Holding to be used by FreedomRoads Holding or its subsidiaries to purchase the Company’s products.

The maturity date of the Second Loan was originally January 29, 2010 but was extended as discussed below. The principal amount of the Second Loan bears interest at a rate of 12% per annum. Interest is payable in cash and the first six interest payments were due on April 30, 2009, July 31, 2009, October 30, 2009, December 31, 2009, March 31, 2010 and June 30, 2010 and have been paid in full.

The First Credit Agreement and Second Credit Agreement each contain customary representations and warranties, affirmative and negative covenants, events of default and acceleration provisions for loans of this type.

On December 22, 2009, the Company entered into a Credit Agreement (the “Third Credit Agreement”) with Marcus Lemonis, Stephen Adams, in his individual capacity, and Stephen Adams and his successors, as trustee under the Trust (each of the foregoing persons, on a joint and several basis, the “Third Loan Borrowers”), pursuant to which the Company loaned $10,000 to the Third Loan Borrowers (the “Third Loan”). The Third Loan Borrowers own, directly or indirectly, a controlling interest in FreedomRoads Holding, the indirect parent company of FreedomRoads, LLC (“FreedomRoads”). Pursuant to the terms of the Third Credit Agreement, the Third Loan Borrowers agreed to use the proceeds of the Third Loan solely to provide a loan to one of FreedomRoads Holding’s subsidiaries which would ultimately be contributed as equity to FreedomRoads to be used for working capital purposes.

The maturity date of the Third Loan is December 22, 2014 (the “Maturity Date”). The principal amount of the Third Loan bears interest at a rate of 12% per annum. Interest is payable, at the option of the Third Loan Borrowers, either in cash or in kind at each calendar quarter end from March 31, 2010 through September 30, 2011. Interest is payable in cash quarterly in arrears from December 31, 2011 through the Maturity Date. The principal amount of the Third Loan is payable on the following dates in the following amounts: December 31, 2011 — $500; December 31, 2012 — $1,000; December 31, 2013 — $1,100; and December 22, 2014 — $7,400. The Third Credit Agreement also contains customary representations and warranties, affirmative and negative covenants, events of default and acceleration provisions for a loan of this type. The Third Loan Borrowers opted to pay the interest due at March 31, 2010 and June 30, 2010 in kind and it was capitalized as part of the long-term note receivable.

In connection with the Third Loan, the First Credit Agreement was amended to, among other things, provide for a cross default with the Second Credit Agreement and the Third Credit Agreement and to add certain additional events of default (the “Amendment to the First Loan”).

Also in connection with the Third Loan, the Second Credit Agreement was amended to, among other things, extend the maturity date of the Second Loan to June 30, 2012, provide for semi-annual payments of principal in equal principal installments of $1,000 each, commencing on June 30, 2010, with a final payment of $6,000 on June 30, 2012, provide for a cross default with the First Credit Agreement and the Third Credit Agreement and add certain additional events of default (the “Amendment to the Second Loan”). Interest at 12% per annum will continue to be payable in cash on a quarterly basis. The first semi-annual installment of principal was paid in full on June 30, 2010.

Under the original terms of the First Credit Agreement and the Second Credit Agreement, the obligations of the Borrowers had been guaranteed by FreedomRoads Holding and had been secured by a first priority security interest in all of the direct and indirect legal, equitable and beneficial ownership interests of the Borrowers in FreedomRoads Holding and the direct, legal ownership interests of the Borrowers in any

subsidiary of FreedomRoads Holding. In connection with the Amendment to the First Loan and the Amendment to the Second Loan, the guaranty of the initial loans made in connection therewith by FreedomRoads Holding and the pledge by Stephen Adams and the Trust of their respective equity interests of FreedomRoads Holding were each terminated.

In connection with the First Loan, the Borrowers caused FreedomRoads Holding 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, as subsequently amended in connection with the Second Loan, was to continue until the repayment in full of the First Loan and the Second Loan (including any refinancing or replacement thereof). In connection with the Third Loan, the FR Dealers and the Company amended this agreement to provide that the term of this agreement now continues until December 22, 2029 unless earlier terminated in accordance with its terms.

For fiscal year 2009, FreedomRoads’ 47 dealership locations accounted for 15% of the Company’s consolidated recreation vehicle net sales and 11% of the Company’s consolidated net sales. For the nine months ended April 30, 2010, FreedomRoads accounted for 18% of the Company’s consolidated recreation vehicle net sales and 15% of its consolidated net sales.

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. The Company recovered its investment of $1,578 upon dissolution.
		In November 2008, the Company announced that it would 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 business, which is led by employees of the former joint venture, finances new Thor and used recreation vehicle products sold by our dealers.
		On April 5, 2010 Thor selected GMAC Financial Services “GMAC” as the preferred retail finance provider for its retail customers. Thor CC continued to offer retail financing to Thor dealers until GMAC launched its program in May 2010, but has since ceased new loan activity. GMAC is accepting retail financing applications from Thor dealers for both new and used recreation vehicles, and plans to expand nationwide to all Thor dealers by the end of this calendar year.
		The Company is in the process of closing Thor CC and has recognized $610 of corporate costs in connection therewith as of April 30, 2010.

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. Effective May 31, 2010, the insurance subsidiary was fully liquidated and dissolved and the Company did not incur any losses related to the liquidation.

16.

Concentration of Risk

FreedomRoads, one of our dealers, accounted for 18% of the Company’s recreation vehicle net sales and 15% of its consolidated net sales for the nine months ended April 30, 2010. The loss of this dealer could have a significant effect on the Company’s recreation vehicle business.

17.

Fire at Bus Production Facility

On February 14, 2010, a fire occurred at the northern production facility (the “Facility”) at the Company’s manufacturing site located near Imlay City, Michigan. The Facility is one of the Company’s principal manufacturing locations for its Champion and General Coach America bus lines. The fire resulted in the destruction of a significant portion of the work in process, raw materials and equipment contained in the Facility. There were no reported injuries and the origin of the fire is undetermined. The southern production plant, paint facility and other buildings at the site were not affected by the fire and remain intact. During the third quarter, the Company resumed limited production activities for its Champion and General Coach America buses in the southern manufacturing facility. In addition, the Company has addressed equipment and staffing reallocation. Many employees continue to work out of the southern manufacturing facility and an office building on this site on a temporary basis.

The Company maintains a property and business interruption insurance policy that it believes will provide substantial coverage for the currently foreseeable losses arising from this incident, less up to the first $5,000 representing the Company’s deductible per the policy.

The Company received $9,657 of insurance proceeds as of April 30, 2010. Of these proceeds, $7,340 represents recognized insurance recoveries, net of the deductible, and $2,317 represents advances recorded as deferred revenue in other liabilities. Through April 30, 2010, the cost incurred and insurance recoveries recognized, including $2,824 for business interruption ($708 net of applied deductible), are reflected in our condensed consolidated statements of operations as follows:

Gain on Involuntary Conversion:

Insurance recoveries recognized		$	12,340
Deductible			(5,000	)
WIP and raw material destroyed			(4,092	)
Property and equipment destroyed			(598	)
Clean up and other costs			(367	)
Gain on Involuntary Conversion		$	2,283

The cost incurred to date of reconstructing the Facility and replacing inventory has been accounted for in the normal course of business. The Facility is not expected to be completed and fully operational until September 2010. The Company expects that a.) the replacement cost of the property and equipment will substantially exceed the current carrying costs, and b.) lost profits covered under business interruption and future clean-up and related costs will be reimbursed under the policy, however, an accurate estimate of the remaining potential gain resulting from the involuntary conversion cannot be made at this time.

18.

Acquisition

On March 1, 2010, the Company acquired 100% of SJC Industries Corp. (“SJC”), a privately-held manufacturer of ambulances based in Elkhart, Indiana, for $19,756 in cash. The Company believes that SJC is currently the second largest manufacturer of ambulances in the United States. Its brands include McCoy Miller, Marque and Premiere, each of which is sold through a nationwide network of dealers. The Company believes that the ambulance business is a natural fit with Thor’s bus business and has included the operations of SJC in its Buses reportable segment. Under Thor’s ownership, SJC will continue as an independent operation, in the same manner as Thor’s recreation vehicle and bus companies. The operations of SJC are included in the Company’s operating results from the date of its acquisition. Through April 30, 2010, SJC recorded net sales of $5,984 and acquisition costs were not material.

Based on internal and independent external valuations the Company preliminarily allocated the purchase price to the net identifiable assets of SJC as follows:

Net working capital		$	7,412
Property, plant and equipment			2,459
Dealer Network			5,230
Goodwill			2,165
Trademarks			2,100
Technology			270
Non-compete			120
		$	19,756

Amortized intangible assets have a weighted average useful life of 13.4 years. The dealer network will be amortized on a straight line basis over 14 years, and the technology assets and non-compete agreements, will both be amortized on a straight line basis over 5 years. Goodwill and trademarks are not subject to amortization. The entire goodwill balance is tax deductible.

19. Sale of Business

On April 30, 2010, the Company sold its Citair travel trailer and park model business to a former member of Citair’s management. Citair did business in Canada under the names General Coach, Hensall and General Coach, Oliver. The Company recorded a $323 pre-tax loss on the sale.

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

Unless otherwise indicated, all amounts presented in thousands 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 34%. In the motorized segment of the industry we have a market share of approximately 15%. Our market share in small and mid-size buses is approximately 39%. We also manufacture and sell 30, 35 and 40-foot buses.

On March 1, 2010, we acquired SJC Industries Corp. (“SJC”), a privately held manufacturer of ambulances based in Elkhart, Indiana. We believe that SJC is currently the second largest manufacturer of ambulances in the United States. The operations of SJC are included in the Company’s operating results from the date of its acquisition. We believe the ambulance business is a natural fit with Thor’s bus business and have included the operations of SJC in our buses reportable segment.

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 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.

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 monitored appropriately.

Our RV segment products are sold to dealers who, in turn, retail those products. Our buses segment products are sold through dealers to municipalities and private purchasers such as rental car companies, hotels and rescue squads. We generally do not directly finance dealers but do provide repurchase agreements to make it easier for our dealers to obtain floor plan financing.

On February 14, 2010, a fire resulted in the total loss of our 92,000 square foot Champion/General Coach of America (GCA) north bus production facility. We reacted immediately and consolidated production into our 92,000 square foot south facility, which was unaffected by the fire, and leased a 59,000 square foot facility on a monthly basis. We resumed production on February 25, 2010 and no significant orders were lost due to the fire. A new Champion/GCA plant is being built and is expected to be completed by September, 2010.

In October 2009, we decided to close our General Coach production facility in Oliver, British Columbia and move all General Coach RV and Park Model production to our other General Coach facility in Hensall, Ontario. As of April 30, 2010, all production ceased at the Oliver facility. Related closure costs of approximately $340 and $3,640 were recorded in the three and nine month periods ended April 30, 2010. On April 30, 2010, we sold our Citair travel trailer and park model business to a former member of Citair’s management. Citair did business in Canada under the names General Coach, Hensall and General Coach, Oliver. We recorded a $323 pre-tax loss on the sale.

On November 13, 2009, we reported that Wade F.B. Thompson, our co-founder and former Chairman, President and Chief Executive Officer, passed away. He was succeeded by Peter B. Orthwein, also a co-founder of the Company, to the offices of Chairman, President and Chief Executive Officer. We proceeded with our business uninterrupted.

In the second quarter of fiscal year 2010, we purchased 3,980,000 shares of our common stock at $29.00 per share and held them as treasury stock at a total cost of $115,420. The shares were repurchased by us from the Estate of Wade F.B. Thompson (the “Estate”) in a private transaction. The repurchase transaction was evaluated and approved by members of our Board of Directors who were not affiliated with the Estate. At the time of the repurchase, the shares represented 7.2% of our common stock outstanding. We used available cash to purchase the shares.

Trends and Business Outlook

Industry conditions in the RV market have been adversely affected over the past two years by low consumer confidence, tighter lending practices and the general economic downturn. As a result, retail sales decreased and dealers significantly reduced their inventory levels. However, during the first nine months of fiscal 2010 we have experienced growth in our backlog, sales and margins. Wholesale and retail credit availability has also improved, resulting in significantly less discounting in fiscal 2010 as compared to fiscal 2009.

If retail and wholesale credit availability continues to improve, we expect to see the rebound in sales from dealers ordering units for stock to continue and expect to benefit from our ability to ramp up production in an industry with fewer manufacturing facilities than before, due to competitor failures or plant consolidations. A short-term positive indicator for us is reflected in our order backlog, which has increased from $441,446 at April 30, 2009 to $666,788 at April 30, 2010, an increase of $225,342 or 51%. A longer-term positive outlook for the recreation vehicle industry is supported by favorable demographics as baby boomers reach the age brackets that historically have accounted for the bulk of retail RV sales, and an increase in interest in the RV lifestyle among both older and younger segments of the population.

Retail demand is the key to a sustained recovery. While the RVIA cites dealers restocking and an improving trend in RV sales to consumers, it also notes that poor employment and income growth as well as continuing credit constraints could slow the pace of the RV recovery. In addition, commercial credit is still a significant restriction for many dealers and there is concern regarding the slowing of RV dealer restocking. For the towable segment, retail sales as reported by Statistical Surveys, Inc. remained the same for the three months ended March 31, 2010 compared with the same period in 2009. The motorized segment was down approximately 6%. Tighter retail credit and lower consumer

confidence appear to affect the motorized segment more severely. The retail 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 recent economic downturn.

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. We are starting to witness increases in the cost of our raw materials. Steel, aluminum, and thermoplastic prices have increased and there continues to be upward price pressure on several of our other raw materials. Future increases in raw material costs would impact our profit margins negatively if we were unable to raise prices for our products by corresponding amounts.

Shipping units to our dealers has become a challenge due to the shortage of RV transporters as a result of the recent increase in industry shipments, and we have recently had to accept freight increases as a result. Transportation delays have also extended the collection cycle in collecting our accounts receivables.

Government entities are the 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 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. According to the Mid Size Bus Manufacturers Association, unit sales of small and mid-sized buses increased 9.1% for the three months ended March 31, 2010 compared with the same period in 2009. Federal stimulus funds have helped the transit industry in the recent economic downturn, however that funding is slowing down and that is expected to have a negative effect on demand for our bus products. Ridership and municipal budgets are reduced and transit agencies’ operating costs are up. This softening has slowed order input at some of our bus operations and we have reduced staff levels in certain locations.

We do not expect the current condition of the U.S. auto industry, including the bankruptcy reorganizations of General Motors and Chrysler, to have a significant impact on our supply of chassis. Supply of chassis is adequate for now and we believe that available 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, 2010 vs. Three Months Ended April 30, 2009

		Three Months								Three Months
		Ended								Ended								Change				%
		April 30, 2010								April 30, 2009								Amount				Change
NET SALES:
Recreation Vehicles
Towables		$	468,002							$	264,317							$	203,685				77.1
Motorized			91,164								47,724								43,440				91.0
Total Recreation Vehicles			559,166								312,041								247,125				79.2
Buses			121,026								103,431								17,595				17.0
Total		$	680,192							$	415,472							$	264,720				63.7
# OF UNITS:
Recreation Vehicles
Towables			20,978								12,086								8,892				73.6
Motorized			1,278								671								607				90.5
Total Recreation Vehicles			22,256								12,757								9,499				74.5
Buses			1,596								1,551								45				2.9
Total			23,852								14,308								9,544				66.7
			% of Segment										% of Segment
						Net Sales								Net Sales
GROSS PROFIT:
Recreation Vehicles
Towables		$	71,443				15.3			$	34,062				12.9			$	37,381				109.7
Motorized			8,133				8.9				1,910				4.0				6,223				325.8
Total Recreation Vehicles			79,576				14.2				35,972				11.5				43,604				121.2
Buses			12,923				10.7				10,475				10.1				2,448				23.4
Total		$	92,499				13.6			$	46,447				11.2			$	46,052				99.1
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreation Vehicles
Towables		$	25,524				5.5			$	15,729				6.0			$	9,795				62.3
Motorized			4,476				4.9				3,717				7.8				759				20.4
Total Recreation Vehicles			30,000				5.4				19,446				6.2				10,554				54.3
Buses			5,954				4.9				9,244				8.9				(3,290	)			(35.6	)
Corporate			6,870				—				5,189				—				1,681				32.4
Total		$	42,824				6.3			$	33,879				8.2			$	8,945				26.4
INCOME (LOSS) BEFORE INCOME TAXES:
Recreation Vehicles
Towables		$	45,114				9.6			$	18,374				7.0			$	26,740				145.5
Motorized			3,640				4.0				(11,514	)			(24.1	)			15,154				131.6
Total Recreation Vehicles			48,754				8.7				6,860				2.2				41,894				610.7
Buses			9,142				7.6				1,243				1.2				7,899				635.5
Corporate			(5,691	)			—				(3,531	)			—				(2,160	)			(61.2	)
Total		$	52,205				7.7			$	4,572				1.1			$	47,633				1,041.8

		As of				As of				Change
		April 30, 2010				April 30, 2009				Amount				%
ORDER BACKLOG:
Recreation Vehicles
Towables		$	370,779			$	180,075			$	190,704				105.9
Motorized			76,692				33,287				43,405				130.4
Total Recreation Vehicles			447,471				213,362				234,109				109.7
Buses			219,317				228,084				(8,767	)			(3.8	)
Total		$	666,788			$	441,446			$	225,342				51.0

CONSOLIDATED

Net sales and gross profit for the three months ended April 30, 2010 increased 63.7% and 99.1%, respectively, compared to the three months ended April 30, 2009. Selling, general and administrative expenses for the three months ended April 30, 2010 increased 26.4% compared to the three months ended April 30, 2009. Income before income taxes for the three months ended April 30, 2010 was $52,205 as compared to income before income taxes for three months ended April 30, 2009 of $4,572. Income before income taxes for the three months ended April 30, 2010 included $2,283 of net gain on involuntary conversion related to the fire at our Champion bus facility and $500 of trademark impairment in our towable reportable segment. Income before income taxes for the three months ended April 30, 2009 included an impairment of goodwill of $9,717 in the motorized reportable segment. 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 increased $1,681 to $6,870 for the three months ended April 30, 2010 compared to $5,189 for the three months ended April 30, 2009. Of the increase of $1,681, $610 was related to costs incurred in conjunction with the closure of Thor CC, $386 was related to costs associated with the SJC acquisition, and the remaining increase was primarily due to increased salaries and bonuses based on profitability.

Corporate interest income and other income was $1,179 for the three months ended April 30, 2010 compared to $930 for the three months ended April 30, 2009. The increase of $249 is primarily due to increased interest income on our notes receivable, partially offset by a decrease in interest income due to lower investment balances, lower interest rates and the contractual terms of our auction rate securities which restrict the maximum yearly interest earned. The Corporate loss before income taxes of $3,531 for the three months ended April 30, 2009 also includes the net appreciation of auction rate securities of $728.

The overall effective income tax rate for the three months ended April 30, 2010 was 34.7% compared with 54.0% for the three months ended April 30, 2009. The primary reason for the difference in the overall effective income tax rate is the relationship between the lower pre-tax income relative to certain permanent financial accounting to taxable income adjustments, the settlement of a state tax audit, and adjustments to uncertain tax positions for the three months ended April 30, 2009 as compared to the three months ended April 30, 2010. This impact was partially offset by the expiration of the federal research and experimentation credit as of December 31, 2009. The overall effective

income tax rate for the three months ended April 30, 2010 reflects less income tax benefit from this credit as compared to the three months ended April 30, 2009.

Segment Reporting

TOWABLE RECREATION VEHICLES

Analysis of change in net sales for the three months ended April 30, 2010 vs. the three months ended April 30, 2009:

		Three Months				% of				Three Months				% of
		Ended				Segment				Ended				Segment				Change				%
		April 30, 2010				Net Sales				April 30, 2009				Net Sales				Amount				Change
NET SALES:
Towables
Travel Trailers		$	244,359				52.2			$	132,610				50.2			$	111,749				84.3
Fifth Wheels			212,301				45.4				120,958				45.8				91,343				75.5
Other			11,342				2.4				10,749				4.0				593				5.5
Total Towables		$	468,002				100.0			$	264,317				100.0			$	203,685				77.1

		Three Months				% of				Three Months				% of
		Ended				Segment				Ended				Segment				Change				%
		April 30, 2010				Shipments				April 30, 2009				Shipments				Amount				Change
# OF UNITS:
Towables
Travel Trailers			13,810				65.8				7,771				64.3				6,039				77.7
Fifth Wheels			6,805				32.5				3,955				32.7				2,850				72.1
Other			363				1.7				360				3.0				3				.8
Total Towables			20,978				100.0				12,086				100.0				8,892				73.6