THO US Equity☆

ITEM 1A. RISK FACTORS

The following risk factors should be considered carefully in addition to the other information contained in this filing.

The risks and uncertainties described below are not the only ones we face and represent risks that our management believes are material to our Company and our business. Additional risks and uncertainties not presently known to us or that we currently deem not material may also harm our business. If any of the following risks actually occur, our business, financial condition or results of operations could be harmed.

Risks Relating to Our Business

The COVID-19 pandemic had a sudden and material negative impact on our business and results of operations, particularly during the last half of our fiscal year ended July 31, 2020. The continuation of the pandemic and the actions taken to contain the spread of the virus by various governmental entities or other actors in the areas in which we operate and in which we sell our products may have a negative impact on our business, results of operations and financial position in future periods.

The severity, magnitude and duration of the COVID-19 pandemic are hard to predict and are ever-changing. The pandemic has negatively impacted, and may continue to negatively impact, our business in numerous ways, including but not limited to those outlined below:

•During the second half of our fiscal 2020, we experienced delays in obtaining certain raw material components and also experienced an overall reduction in the volume of chassis received compared to our needs, particularly related to our European operations. The operations of our suppliers within Europe, North America and elsewhere may continue to be disrupted, negatively impacting the price we are required to pay to acquire raw material inputs, or limiting our production output due to a lack of key material components in sufficient quantities.

•The geographic centrality of the North American RV industry in northern Indiana, where the majority of our facilities and many of our suppliers are located, could exacerbate supply chain, workforce and other COVID-19 related risks, should northern Indiana or any of the other areas in which we, our suppliers or our customers operate become disproportionately impacted by the pandemic.

•The majority of certain chassis used in our European operations come from a limited number of facilities which, if further impacted by COVID-19, could significantly affect our supply and limit our ability to produce motorized units.

•If the pandemic worsens, or reappears in future periods, our labor force may be negatively impacted which would negatively impact our ability to produce units.

•If governmental mandates or private actor responses imposed to slow the spread of the virus are extended or reinstated in future periods, our business may be negatively impacted. For example, in March, based on employee welfare concerns and in compliance with various governmental actions, including shelter-in-place orders promulgated in Indiana and elsewhere, we temporarily suspended production at all of our North American RV production facilities and temporarily suspended a substantial portion of our European production.

10

•The cancellation of, or our decision to not participate in, certain upcoming retail or wholesale RV shows and general social distancing protocols may negatively impact how dealers and end customers order, view and ultimately purchase our products. Our failure, or the failure of our independent dealer body, to effectively respond to changing conditions with effective alternative sales approaches could negatively impact our sales.

•We may incur larger-than-average repurchase obligations if there is an increase in the number of financing defaults by our independent dealers.

•If the pandemic continues to negatively impact the general economy of the regions in which we operate and in which we sell our products, including an increase in the rate of unemployment and a lack of job security, retail sales of our products may decline.

•During recent periods, retail consumers in many locations were under strict shelter-in-place requirements which limited their ability to buy our products from our dealers. Moreover, the operations of our dealers were disrupted as many of them were required to close their showrooms. A return to widespread restrictions on the movement of consumers or the shutdown of retail facilities or camping or other recreational destinations could decrease the demand for our products or cause retail sales of our products to decline.

•A sustained decline in the sales of our products could cause the fair value of our tangible and intangible assets, including goodwill, to decline below the carrying value on our balance sheet and thereby require an impairment charge. We are required to perform an impairment assessment annually or when events or changes in circumstances indicate that an impairment may have occurred.

•If needed in the future, we may not be able to raise capital efficiently, or at all, due to illiquidity in the global credit markets, perceived higher risk in the consumer discretionary market, perceived reduction in the value of our assets or other factors. We may also incur borrowing costs related to the pandemic that we might not otherwise incur. For example, out of an abundance of caution to maintain maximum flexibility in a period of high uncertainty, we incurred borrowings under our ABL facility in the third quarter of fiscal 2020, which were repaid during the fourth quarter. The Company may, again, undertake additional borrowings should COVID-19 related or other circumstances merit such borrowings in the future.

•Recent increases in demand for our products, driven by the perceived safety of RV travel during the COVID-19 pandemic and a strong desire to socially distance, may dissipate if and when viable vaccines or other treatments are developed and sufficiently distributed.

•Actions we have taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in legal claims or litigation against us, which could have a material, negative impact to our financial results and cash flows. Future actions taken by the Company to respond to the pandemic, directly or indirectly, could also result in increased costs or lower productivity.

The future severity of the pandemic and the extent of the negative impact it may have, directly or indirectly, on the economies that we operate in and sell into cannot be fully foreseen at this time. The longer the pandemic continues, the higher the potential that additional negative impacts on our business could occur, including those which might exacerbate many of the other risks described in this Annual Report on Form 10-K.

The industry in which we operate is highly competitive both in the United States and in Europe.

The industry in which we are engaged is highly competitive. There are approximately 65 RV manufacturers in the U.S. and Canada, according to RVIA and approximately 30 RV manufacturers across Europe according to CIVD. The recreational vehicle industry is generally characterized by relatively low barriers to entry, which results in numerous existing and potential recreational vehicle manufacturing competitors. Recently, a limited number of automotive manufacturers have entered the RV industry, especially in Europe, with the introduction of campervans that directly compete with our products. Also, a number of our operating subsidiaries compete with each other. Competition is based upon price, design, value, quality and service as well as other factors. Competitive pressures have, from time to time, resulted in a reduction of our profit margins and/or a reduction in our market share. Sustained increases in these competitive pressures could have a material adverse effect on our results of operations. If existing or new competitors develop products that are superior to ours or that achieve better consumer acceptance or if existing competitors offer similar products at a lower net price to dealers, our market share, sales volume and profit margins may be adversely affected.

In addition to direct manufacturing competitors, we also compete against consumer demand for used recreational vehicles, particularly during periods of economic downturn. The availability of used recreational vehicles and the pricing differential between used and new recreational vehicles are among the primary factors which impact the competitiveness of used vehicle sales.

11

Finally, we often compete against other consumer leisure, discretionary and vacation spending alternatives, such as cruises, vacation homes, timeshares or other traditional vacations and other recreational products like boats and motorcycles. Changes in actual or perceived value among these alternatives by consumers could impact future sales volume and profitability.

Our U.S.-based operations are primarily centered in northern Indiana.

The majority of our U.S. operations are located in one region. The geographic centrality of the U.S. RV industry in northern Indiana, where the majority of our U.S. facilities are located, creates certain risks, including:

•Competition for workers skilled in the industry, especially during times of low unemployment or periods of high demand for RVs, may increase the cost of our labor or limit the speed at which we can respond to changes in consumer demand;

•Employee retention and recruitment challenges, as employees with industry knowledge and experience may be attracted to the most lucrative positions and their ability to change employers is relatively easy; and

•Potential for greater adverse impact from natural disasters, including a pandemic and government responses thereto, such as mandatory shut downs and shelter-in-place orders.

Our business is both cyclical and seasonal and subject to fluctuations in sales, production and net income.

The RV industry has historically been characterized by cycles of growth and contraction in consumer demand, reflecting prevailing economic and demographic conditions, which affect disposable income for leisure-time activities. Consequently, the results of any prior period may not be indicative of results for any future period.

In addition, we have experienced, and expect to continue to experience, significant variability in quarterly sales, production and net income as a result of annual seasonality in our business. Since recreational vehicles are used primarily by vacationers and campers, historically demand in the recreational vehicle industry generally declines during the fall and winter months, while sales and profits are generally highest during the spring and summer months. The pandemic may disrupt the historical trends in the seasonality of our business in North America and Europe. Independent dealer demand and buying patterns also impact the timing of shipments from one quarter to another. In addition, severe weather conditions in some geographic areas may delay the timing of shipments from one quarter to another. The seasonality of our business may negatively impact quarterly operating results.

Our business is structured to quickly align production and cost structure to meet fast changing market conditions. However, if we are not able to ramp production up or down quickly enough in response to rapid changes in demand, we may not be able to effectively manage our costs, which could negatively impact operating results, and we may lose sales and market share.

Our business may be affected by certain external factors beyond our control.

Companies within the recreational vehicle industry are subject to volatility in operating results due to external factors, such as general economic conditions, credit availability, consumer confidence, employment rates, prevailing interest rates, inflation, other economic conditions affecting consumer attitudes and disposable consumer income, demographic changes and political changes. Specific external factors affecting our business include:

•COVID-19, including the impact of the pandemic on our employees, dealers, retail customers and suppliers and steps taken by governments and other actors to respond to the pandemic;

•Overall consumer confidence and the level of discretionary consumer spending;

•Raw material and commodity price fluctuations;

•Availability of raw materials and components used in production;

•Legislative, regulatory and tax law and/or policy developments including their potential impact on our dealers and their retail customers or on our suppliers;

•Interest rate fluctuations and the availability of credit;

•Success of new and existing products and services;

•Consumer preferences;

•Independent dealer confidence and stocking levels;

12

•RV retail consumer demographics;

•Employment and wage trends;

•Consolidation of independent RV dealerships;

•Consolidation of RV suppliers;

•Global, domestic or regional financial turmoil;

•Natural disasters;

•Relative or perceived safety, cost, availability and comfort of recreational vehicle use versus other modes of travel, such as car, cruise ships, air or rail travel; and

•General economic, market and political conditions, including war, terrorism and military conflict.

The loss of our largest independent dealer could have a significant effect on our business.

Sales to FreedomRoads, LLC accounted for approximately 15.0% of our consolidated net sales for fiscal 2020. During recent years, FreedomRoads, LLC has acquired a number of formerly independent RV dealerships which has impacted our sales to FreedomRoads, LLC. Future consolidation of dealerships by FreedomRoads, LLC could impact our sales, concentration of sales to this key dealer and our exposure under repurchase obligations.

The loss of this dealer could have a significant adverse effect on our business. In addition, deterioration in the liquidity or credit worthiness of FreedomRoads, LLC could negatively impact our sales and accounts receivable and could trigger repurchase obligations under our repurchase agreements.

Fuel shortages, or high prices for fuel, could have a negative effect on sales of our recreational vehicles.

Gasoline or diesel fuel is required for the operation of our vehicles or the vehicles which tow our products. Shortages or rationing of gasoline and diesel fuel, and significant, sudden increases in the price of fuel have had a material adverse effect on the recreational vehicle industry as a whole in the past and could have a material adverse effect on our business in the future.

Business acquisitions pose integration risks.

Our growth has been both internal and by acquisition. Business acquisitions, joint ventures and the merger or combination of subsidiaries within Thor, pose a number of potential integration risks that may result in negative consequences to our business, financial condition or results of operations. The pace and significance of acquisitions; the integration of acquired companies, assets, operations and joint venture arrangements and the merger of subsidiaries within Thor involve a number of related risks, including, but not limited to:

•The diversion of management’s attention from the management of daily operations to various transaction and integration activities;

•The potential for disruption to existing operations and plans;

•The assimilation and retention of employees, including key employees;

•Risks related to transacting business in new geographies, regulatory environments or product categories in which we are unaccustomed, including but not limited to: foreign currency exchange rate changes, expanded macro-economic risks due to operations in and sales to a wide base of countries, political and regulatory exposures to countries in which we formerly did not do business, different employee/employer relationships, including the existence of workers' councils and labor organizations, new product categories and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions;

•The ability of our management teams to manage expanded operations, including international operations, to meet operational and financial expectations;

•The integration of departments and systems, including accounting systems, technologies, books and records, controls and procedures;

•The adverse impact on profitability if expanded or combined operations do not achieve expected financial results or realize the synergies and other benefits expected;

•The potential loss of, or adverse effects on, existing business relationships with suppliers and customers;

13

•The assumption of liabilities of the acquired businesses, which could be greater than anticipated;

•The potential adverse impact on operating results due to the use of estimates, which are subject to significant management judgment, in the accounting for acquisitions, incurrence of non-recurring charges, and write-offs of significant amounts of goodwill and other assets; and

•The potential adverse impact of not achieving the originally intended financial potential from the sharing of best practices, including product development and synergies, among other factors, due to current restrictions on international travel which limits the ability of our North American and European employees and management personnel from having face-to-face meetings and collaborating together.

A significant portion of our revenue is derived from international sources, which creates additional uncertainty.

Combined sales from the United States to foreign countries (predominately Canada) and sales from our foreign subsidiaries to countries other than the U.S. (predominately within the European Union) represent approximately 35.2% of Thor’s consolidated sales for fiscal 2020. These non-U.S. sales create the potential for numerous risks which could impact our financial operating results, including foreign currency effects, tariffs, customs duties, inflation, difficulties in enforcing agreements and collecting receivables through foreign legal systems, compliance with international laws, treaties, and regulations, and unexpected changes in regulatory environments, disruptions in supply or distribution, dependence on foreign personnel and various employee work agreements, as well as economic and social instability. In addition, there may be tax inefficiencies in repatriating cash from non-U.S. subsidiaries, or tax laws that affect this process may change.

The withdrawal of the United Kingdom from the European Union and the perceptions as to the impact of the withdrawal may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere. Negative impacts may include, among others:

•Creating uncertainty regarding any new or modified trade arrangements between the United Kingdom and the European Union and/or other countries;

•The risk that one or more other European Union countries could come under increasing pressure to leave the European Union; or

•The risk that the Euro as the single currency of the Eurozone could cease to exist.

Any of these or other negative developments, or the perception that negative developments are likely to occur, could affect economic growth or business activity in the United Kingdom or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression and impact the stability of the financial markets, availability of credit, currency exchange rates, interest rates, financial institutions and political, financial and monetary systems. These developments could, in turn, affect our businesses, liquidity, results of operations and financial position.

Global political uncertainty and shifts pose risks of volatility in global markets, which could affect our operations and financial results. Changes in U.S. policy regarding foreign trade or manufacturing may create negative sentiment about the U.S. among non-U.S. dealers, end customers, employees, or prospective employees, all of which could adversely affect our business, sales, hiring, and employee retention. Our success in international markets will depend, in part, on our ability to anticipate and effectively manage these and other risks, which could materially impact our international operations or the business as a whole.

The Company’s debt arrangements may make us more sensitive to the effects of economic downturns, and provisions in our debt agreements could constrain the options available to us to react to changes in the economy or our industry.

We incurred and assumed various debt obligations as a result of the EHG acquisition on February 1, 2019. In conjunction with the acquisition, we entered into a term loan agreement with USD and EUR tranches ($1.4 billion and €618 million, respectively) and a $750 million ABL. We also assumed various existing debt obligations from EHG as of the acquisition date. Our level of debt impacts our profit before tax and cash flow because of the interest expense and periodic payments. In addition, our debt level could impair our ability to raise additional capital, if necessary, or increase borrowing costs on future debt, and may have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions, requiring us to use a substantial portion of our cash flow to repay indebtedness and placing us at a disadvantage compared to competitors with lower debt obligations.

14

Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. If we do not generate sufficient cash flow to meet our debt service, capital investment and working capital requirements, we may need to fund those requirements with borrowings from the ABL, or reduce or cease our payments of dividends, we may be unable to repurchase our shares or we may need to seek additional financing or sell assets.

Furthermore, our credit facilities contain certain provisions that limit our flexibility in planning for, or reacting to, changes in our business and our industry, including limitations on our ability to:

•Declare dividends or repurchase capital stock;

•Prepay or purchase other debt;

•Incur liens;

•Make loans, guarantees, acquisitions and investments;

•Incur additional indebtedness;

•Amend or otherwise alter debt and other material agreements;

•Engage in mergers, acquisitions or asset sales; and

•Engage in transactions with non-loan party affiliates.

Finally, certain of our variable rate debt uses the London Interbank Offer Rate ("LIBOR") as a benchmark for establishing the rate of interest and may be hedged with LIBOR-based interest rate derivatives. LIBOR has been the subject of recent proposals for reform, and it is currently expected that LIBOR will be discontinued after 2021. While all of our material financing arrangements indexed to LIBOR provide procedures for determining an alternative base rate in the event that LIBOR is discontinued, there can be no assurances as to whether such an alternative base rate will be more or less favorable than LIBOR. We intend to monitor developments with respect to LIBOR reform and will work to minimize the impact of any LIBOR transition. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness.

Changes in market liquidity conditions, credit ratings and other factors may impact our access to future funding and the cost of debt.

Significant changes in market liquidity conditions and changes in the Company's credit ratings could impact our access to future funding, if needed, and funding costs, which could negatively impact the Company's earnings and cash flows. If general economic conditions deteriorate or capital markets become more volatile, including as a result of the COVID-19 pandemic, future funding, if needed, could be unavailable or insufficient. A debt crisis, particularly in the United States or Europe, could negatively impact currencies, global financial markets, social and political stability, funding sources, availability and costs, asset and obligation values, customers, suppliers, demand for our products, and our operations and financial results. Financial market conditions could also negatively impact dealer or retail customer access to capital for purchases of the Company's products and customer confidence and purchase decisions.

Our business depends on the performance of independent dealers and transportation carriers.

We distribute all of our North American and the majority of our European products through a system of independent, non-franchise authorized dealers, many of whom sell products from competing manufacturers. The Company depends on the capability of these independent authorized dealers to develop and implement effective retail sales plans to create demand among retail purchasers for the products that the dealers purchase from the Company. If the Company’s independent dealers are not successful in these endeavors, then the Company may be unable to maintain or grow its revenues and meet its financial expectations. The geographic coverage of our independent dealers and their individual business conditions can affect the ability of our authorized dealers to sell our products to consumers. If our independent dealers are unsuccessful, they may exit or be forced to exit the business or, in some cases, the Company may seek to terminate relationships with certain dealerships. As a result, the Company could face additional adverse consequences related to the termination of independent dealer relationships. For example, the unplanned loss of any of the Company’s independent dealers could lead to inadequate market coverage of our products. In addition, recent consolidation of independent dealers, as well as the growth of larger, multi-location dealers, may result in increased bargaining power on the part of independent dealers.

Thor currently owns a majority position in three dealerships within Europe. Beyond the three majority-owned dealerships, all other dealer relationships are with independently owned and managed dealerships. Given the independent nature of these dealers, they maintain control over which manufacturers, and which brands, they will do business with, often carrying more than one manufacturer’s products. Independent dealers can, and do, change which brands and which manufacturers they sell.

15

If our products are not perceived by the independent dealers as being desirable and profitable for them to carry, the dealers may terminate their relationship with our operating subsidiaries or may drop certain of our brands, which would in turn adversely affect our sales and profit margins if we are unable to replace those dealers.

Our products are generally delivered to our independent dealers via a system of independent transportation contractors. The network of carriers is limited and, in times of high demand and limited availability, can create risk in, and disruption of, our distribution channel. The network of carriers may also be negatively impacted by the pandemic. If the pandemic worsens in the regions in which we operate and sell into, the transportation contractors may have difficulty finding drivers who are willing to deliver in those regions, or governmental agencies or other actors may restrict movement of goods in those regions. In March and April, in particular, based on welfare concerns for individuals and in compliance with various governmental actions, including shelter-in-place orders, we experienced disruptions in the transportation of our units from our production facilities to dealer retail facilities in both North America and Europe.

Our business is affected by the availability and terms of financing to independent dealers and retail purchasers.

Generally, independent recreational vehicle dealers finance their purchases of inventory with financing provided by lending institutions. A decrease in the availability of this type of wholesale financing, more restrictive lending practices or an increase in the cost of such wholesale financing can prevent independent dealers from carrying adequate levels of inventory, which limits product offerings and could lead to reduced demand. Two major floor plan financial institutions held approximately 58% of our portion of our independent dealers’ total floored dollars outstanding at July 31, 2020. In the event that either of these lending institutions limit or discontinue dealer financing, we could experience a material adverse effect on our results of operations.

Substantial or sudden increases in interest rates and decreases in the general availability of credit have had an adverse impact on our business and results of operations in the past and may do so in the future. Further, a decrease in availability of consumer credit resulting from unfavorable economic conditions, or an increase in the cost of consumer credit, may cause consumers to reduce discretionary spending which could, in turn, reduce demand for our products and negatively affect our sales and profitability.

Changes in consumer preferences for our products, or our failure to gauge those preferences, could lead to reduced sales or otherwise negatively impact our business.

We cannot be certain that historical consumer preferences for recreational vehicles in general, and our products in particular, will remain consistent. Recreational vehicles are generally used for recreational purposes, and demand for our products may be adversely affected by competition from other activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern or taste. Similarly, an overall decrease in consumer leisure time may reduce consumers’ willingness to purchase our products.

Consumer preferences in vehicles and automotive manufacturers' responses to those preferences and governmental mandates could also result from changes in consumer preferences for recreational vehicles or the types of recreational vehicles preferred. These changes could include shifts to smaller vehicles, electric vehicles, autonomous vehicles or other unanticipated changes.

Our ability to remain competitive depends heavily on our ability to provide a continuing and timely introduction of innovative product offerings. We believe that the introduction of new features, designs and models will be critical to the future success of our recreational vehicle operations. Managing frequent product introductions poses inherent risks. Delays in the introduction or market acceptance of new models, designs or product features could have a material adverse effect on our business. Products may not be accepted for a number of reasons, including changes in consumer preferences or our failure to properly gauge consumer preferences. Further, we cannot be certain that new product introductions will not reduce revenues from existing models and adversely affect our results of operations. In addition, our revenues may be adversely affected if our new models and products are not introduced to the market on time or are not successful when introduced. Finally, our competitors’ new products may obtain better market acceptance or render our products obsolete, and/or new technological advances could disrupt our industry.

16

If the frequency and size of product liability and other claims, including those related to the pandemic, against us increase, our business, results of operations and financial condition may be harmed.

We are subject, in the ordinary course of business, to litigation involving product liability and other claims against us, including, without limitation, wrongful death, personal injury and warranties. In North America, we generally self-insure a portion of our product liability and other claims and also purchase product liability and other insurance in the commercial insurance market. In North America, upon exhaustion of relatively higher deductibles or retentions, we maintain a full line of insurance coverage. In Europe, we generally fully insure similar risks with insurance offering relatively low deductibles or premiums. We cannot be certain that our insurance coverage will be sufficient to cover all future claims against us. Any material change in the aforementioned factors could have an adverse impact on our operating results. Any increase in the frequency and size of claims, as compared to our experience in prior years, may cause the premium that we are required to pay for insurance to increase significantly and may negatively impact future self-insured retention levels. It may also increase the amounts we pay in punitive damages, not all of which are covered by our insurance.

As a result of the pandemic, we may be subject to additional litigation, for which we would generally not have insurance coverage.

An introduction of new products into the marketplace or enhanced standard warranty coverage of our products, may result in expenses that we did not anticipate, which, in turn, could result in reduced earnings.

The introduction of new models, floor plans and features are critical to our future success. We may incur unexpected expenses, however, when we introduce new models, floor plans or features. Unexpected engineering or design flaws have resulted in recalls and increased warranty claims in the past and could be incurred in the future. The costs resulting from these types of problems could be substantial and could have a significant adverse effect on our earnings. Estimated warranty costs are provided at the time of product sale to reflect our best estimate of the amounts necessary to settle future and existing claims on products. An increase in actual warranty claims costs as compared to our estimates, due to either the introduction of new products or extended warranty coverage, could result in increased warranty reserves and expense which could have an adverse impact on our earnings.

Our chassis supply, and therefore sales, may be impacted by ongoing compliance requirements with existing emissions standards by the chassis suppliers, in both the U.S. and Europe. In addition, the implementation of new European emissions standards may result in a negative impact to our chassis supply.

We obtain motorized chassis from a number of different chassis suppliers who are required to comply with strict emission standards. As governmental agencies revise those standards, the chassis manufacturers must comply within the timeframes established. Uncertainties created by continued emission standards compliance requirements or the adoption of revised emission standards include the ability of the chassis manufacturer to comply with such standards on a timely and ongoing basis as well as the ability to produce sufficient quantities of compliant chassis to meet our demand. In the past, certain chassis manufacturers have experienced difficulties in meeting one or both of these requirements. In addition, revisions to chassis by the suppliers often impact our engineering and production processes and may result in increased chassis cost. Currently, certain chassis used in our European production are facing revised emission standards which may negatively impact our ability to produce certain European motorized RVs and could also impact consumer buying patterns if consumers do not embrace the new chassis or if the cost impact is not accepted, all of which could have an adverse impact on our sales and earnings.

Prior to the EHG acquisition, EHG was a privately-held company and its ongoing obligations arising from being a part of a public company may require significant additional resources and management attention.

As a public company, Thor Industries, Inc., is required to comply with U.S. GAAP financial reporting, the Sarbanes-Oxley Act of 2002 ("SOX"), the Dodd-Frank Act and the rules and regulations subsequently implemented by the SEC and the Public Company Accounting Oversight Board. As such, EHG, as a subsidiary of a public company, has established and is required to maintain effective disclosure controls as well as internal controls and procedures for financial reporting under U.S. GAAP. Current and ongoing compliance efforts may be costly and may divert the attention of management. There are a large number of processes, policies, procedures and functions that have been integrated, or enhanced at EHG, particularly those related to the implementation of internal controls for SOX compliance. The maintenance of these plans may lead to additional unanticipated costs and time delays. These incremental costs may exceed the savings we expect to achieve from the realization of efficiencies related to the combination of the businesses, particularly in the near term and in the event there are material unanticipated costs.

17

Our repurchase agreements with floor plan lenders could result in increased costs.

In accordance with customary practice in the recreational vehicle industry, particularly within North America, upon the request of a lending institution financing an independent dealer’s purchase of our products, we will generally execute a repurchase agreement with the lending institution. Repurchase agreements provide that, typically for a period of up to 18 months after a recreational vehicle is financed and in the event of default by the dealer, we will repurchase the recreational vehicle repossessed by the lending institution for the amount then due, which is usually less than 100% of the dealer’s cost.

In addition to the guarantee under these repurchase agreements, we may also be required to repurchase inventory relative to dealer terminations in certain states in accordance with state laws or regulatory requirements. The difference between the gross repurchase price and the price at which the repurchased product can then be resold, which is typically at a discount to the original sale price, is an expense to us. Thus, if we are obligated to repurchase a substantially greater number of recreational vehicles, or incur substantially greater discounting to resell these units in the future, those circumstances would increase our costs. In difficult economic times this amount could increase significantly compared to recent years.

Similar repurchase obligations also exist for certain accounts receivable from sales to independent dealer customers of our European operations that have been sold to third-party finance companies that provide financing to those dealers. These sold receivables do not meet the definition of a true sale, mainly due to this repurchase obligation, and are therefore recorded as an asset with an offsetting liability balance recorded on the Consolidated Balance Sheets.

For some of the components used in production, we depend on a small group of suppliers and the loss of any of these suppliers, or the disruption of the operations of these suppliers due to COVID-19 or for other reasons, could affect our ability to obtain components timely or at competitive prices, which would decrease our sales and profit margins. Additionally, continued consolidation of our major suppliers further limits alternative supply sources, which could increase costs and decrease our sales and profit margins. Finally, certain raw material components may be sourced from countries where we do not have operations, and delays in obtaining these components, along with added tariffs, could result in increased costs and decreased sales and profit margins.

We depend on timely and sufficient delivery of components from our suppliers. Many components are readily available from a variety of sources. However, certain key components are currently produced by only a small group of suppliers that have the capacity to supply large quantities, primarily occurring in the case of: 1) motorized chassis, where there are a limited number of chassis suppliers, and 2) windows and doors, towable frames and slide-out mechanisms, axles and upholstered furniture for our recreational vehicles, where LCI Industries is a major supplier for these items within the North American RV industry.

The recreational vehicle industry as a whole has, from time to time, experienced shortages of motorized chassis due to the concentration or allocation of available resources by suppliers of these chassis. Historically, in the event of an industry-wide restriction of supply, suppliers have generally allocated chassis among us and our competitors based on the volume of chassis previously purchased. If certain suppliers were to discontinue the manufacturing of chassis suitable for our use for our range of motorhome products, or if, as a group, our chassis suppliers significantly reduced the availability of chassis to the industry, our business would be adversely affected. Similarly, shortages at, or production delays or work stoppages by the employees of chassis suppliers, could have a material adverse effect on our sales. Additionally, the inability of chassis suppliers to comply timely with new or enhanced emission or other compliance requirements could adversely affect supply. If the condition of the auto industry were to significantly deteriorate, that deterioration could also result in supply interruptions and a decrease in our sales and earnings while we obtain replacement chassis from other sources.

Following the COVID-19 related shut-down we experienced in our third fiscal quarter, during our fourth quarter we began to experience certain supply constraints and intermittent, short-term delays related to the delivery of certain component parts, including chassis, that are necessary to the production of our units. Through July 31, 2020 those disruptions were generally short-term in nature and limited in scope. We managed to continue production by shifting our production schedules, securing alternative supplies of the needed parts and taking other proactive actions. Subsequent to July 31, 2020, due to the heightened demand within the RV industry and other related industries that utilize some of the same component parts, we continue to face supply constraints of various component items. This situation is fluid, with the items experiencing shortages changing frequently as disruptions caused by COVID-19 are impacting the entire supply chain as well as the transportation of those items. If the supply constraints become more significant, longer term in nature or are not limited in scope, if industry demand continues to increase faster than the suppliers can respond or if other factors were to impact the suppliers’ ability to supply our production needs, our business and results of operations could be adversely affected.

18

Continued consolidation within our major supplier base may also inhibit our ability to source from alternative suppliers and could result in increased component costs, which may result in decreased margins or higher wholesale product costs, which could result in decreased sales.

In addition, certain RV components are sourced from countries where we do not currently have operations. Changes in trade policy and resulting tariffs that have or may be imposed, along with port, production or other delays, could cause increased costs for, or shortages of, certain RV components or sub-components. We may not be able to source alternative supplies as necessary without increased costs or at all. If alternatives are not readily available, that unavailability could lead to potential decreases in our sales and earnings.

Finally, as is standard in the industry, arrangements with chassis and other suppliers are generally terminable at any time by either our Company or the supplier. If we cannot obtain an adequate supply of chassis or other key components, this could result in a decrease in our sales and earnings.

COVID-19 impacts may serve to exacerbate the above described risks.

Our products and services may experience quality problems from time to time, including from vendor-supplied parts, that could result in decreased sales and gross margin and could harm our reputation.

Our products contain thousands of parts, many of which are supplied by a network of approved vendors. As with all of our competitors, defects may occur in our products, including those purchased from our vendors. We cannot assure you that we will detect all such defects prior to distribution of our products. In addition, although we endeavor to compel our suppliers to maintain appropriate levels of insurance coverage, we cannot assure you that if a defect in a vendor-supplied part were to occur that the vendor would have the ability to financially rectify the defect. Failure to detect defects in our products, including vendor-supplied parts, could result in lost revenue, increased warranty and related costs and could harm our reputation.

Our business is subject to numerous national, regional, federal, state and local regulations in the various countries in which we operate and/or sell our products.

Our operations are subject to numerous national, regional, federal, state and local regulations governing the manufacture and sale of our products, including various vehicle and component safety and compliance standards. In various jurisdictions, governmental agencies require a manufacturer to recall and repair vehicles which contain certain hazards or defects. Any recalls of our vehicles, voluntary or involuntary, could have a material adverse effect on our results of operations and could harm our reputation. Additionally, changes in policy, regulations or the imposition of additional regulations could have a material adverse effect on our Company.

Our U.S. operations are also subject to federal and numerous state consumer protection and unfair trade practice laws and regulations relating to the sale, transportation and marketing of motor vehicles, including so-called “lemon laws.” U.S. federal and state, as well as various European laws and regulations, impose upon vehicle operators various restrictions on the weight, length and width of motor vehicles that may be operated in certain jurisdictions or on certain roadways. Certain jurisdictions also prohibit the sale of vehicles exceeding length restrictions. U.S. federal and state, as well as various European, authorities have environmental control standards relating to air, water, noise pollution and hazardous waste generation and disposal which affect our business and operations.

Further, certain other U.S. and European laws and regulations affect the Company’s activities. Areas of our business affected by such laws and regulations include, but are not limited to, labor, advertising, real estate, promotions, quality of services, intellectual property, tax, import and export duties, tariffs, anti-corruption, anti-competition, environmental, privacy, health and safety. Compliance with these laws and others may be onerous and costly, at times, and may be inconsistent from jurisdiction to jurisdiction, which further complicates compliance efforts. Violations of these laws and regulations could lead to significant penalties, including restraints on our export or import privileges, monetary fines, criminal or civil proceedings and regulatory or other actions that could materially adversely affect our operating results.

Our operations are subject to numerous labor and employment laws and regulations, and violations of those laws and regulations could have a materially adverse impact on our operating results.

We are subject, in the ordinary course of business, to litigation and claims arising from numerous labor and employment laws and regulations, including potential class action claims arising from alleged violations of such laws and regulations. Any liability arising from such claims would not ordinarily fall within the scope of our insurance coverages. An adverse outcome from such litigation could have a material effect on operating results.

19

Changes in U.S. trade policy could result in retaliatory trade policies by one or more U.S. trading partners.

The imposition of tariffs on certain products imported into the United States has introduced greater uncertainty with respect to trade policies and government regulations affecting trade between the United States and other countries. New and/or increased tariffs by the United States and/or by other countries could subject the Company to increased costs for RV components that are imported into the United States. Increased costs for imported RV components could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, may result in lower margins on products sold.

As a publicly-traded company, we are subject to rules and regulations promulgated by the Securities and Exchange Commission and the New York Stock Exchange which entail compliance and disclosure risks as well as the potential for increased costs.

Failure as a public company to comply with relevant rules and regulations of the Securities and Exchange Commission or the New York Stock Exchange could have an adverse impact on our business. Additionally, amendments to these rules or regulations and the implementation of new rules or regulations could increase compliance, reporting, or other operating or administrative costs, and therefore could have an adverse impact on our business.

As a public company, we may be required to disclose certain information that may put us at a competitive disadvantage compared to certain of our competitors.

Interruption of information systems service or misappropriation or breach of our information systems could cause disruption to our operations, disclosure of confidential or personal information or cause damage to our reputation.

Our business relies on information systems and other technology (“information systems”) to support aspects of our business operations, including but not limited to, procurement, supply chain management, manufacturing, design, distribution, invoicing and collection of payments. We use information systems to accumulate, analyze and report our operational results. In connection with our use of information systems, we obtain, create and maintain confidential and personal information. Additionally, we rely upon information systems in our marketing and communication efforts. Due to our reliance on our information systems, especially in the wake of the pandemic and the increase in the number of employees working remotely, we have established various levels of security, backup and disaster recovery procedures. Our business processes and operations may, however, be negatively impacted in the event of a substantial disruption of service or cyber-attacks.

As a result of the COVID-19 pandemic, including related-government guidance or directives, we have, in the past, required or encouraged certain office-based employees to work remotely and may quickly adjust or reinstate such requirements in the future in response to pandemic developments. We may experience reductions in productivity and disruptions to our business routines and heightened cybersecurity risks as a result of remote work policies and rapid changes to such policies.

The methods and technologies used to obtain unauthorized access to our information systems are constantly changing and may be difficult to anticipate. While we have implemented and regularly review security measures and processes designed to prevent unauthorized access to our information systems, we may not be able to anticipate and effectively prevent unauthorized access or data loss in the future. The misuse, leakage, unauthorized access or falsification of information could result in a violation of privacy laws, including the European Union's General Data Protection Regulation ("GDPR") and California’s Consumer Privacy Act (“CCPA”), and damage to our reputation which could, in turn, have a significant, negative impact on our results of operations.

We may not be able to protect our intellectual property and may be subject to infringement claims.

Our intellectual property, including our patents, trademarks, copyrights, trade secrets, and other proprietary rights, constitutes a significant part of our value. Our success depends, in part, on our ability to protect our intellectual property against infringement and misappropriation by defending our intellectual property rights. To protect these rights, we rely on intellectual property laws of the U.S., Germany, Canada, and other countries, as well as contractual and other legal rights. We seek to acquire the rights to intellectual property necessary for our operations. However, our measures may not be successful in any given instance, particularly in countries outside the U.S. We endeavor to protect our rights; however, third parties may infringe upon our intellectual property rights. We may be forced to take steps to protect our rights, including through litigation, which could result in a diversion of resources.

20

The inability to protect our intellectual property rights could result in competitors undermining the value of our brands by, among other initiatives, manufacturing and marketing similar products, which could adversely affect our market share and results of operations. Moreover, competitors or other third parties may challenge or seek to invalidate or avoid the application of our existing or future intellectual property rights that we receive or license. The loss of protection for our intellectual property could reduce the market value of our brands and our products and services, lower our profits, and could otherwise have a material adverse effect on our business, financial condition, cash flows or results of operation.

We also face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend, cause us to cease making, licensing, or using products that incorporate the challenged intellectual property, require us to redesign, reengineer, or rebrand our products, if feasible, divert management’s attention and resources, require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property or damage our reputation. Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on our business, financial condition, and results of operations.

We could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.

We have a material amount of goodwill, intangible assets and other long-lived assets. At least annually, we review goodwill for impairment. Long-lived assets, identifiable intangible assets and goodwill are also reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from future cash flows. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. If the carrying value of a long-lived asset is considered impaired, a non-cash impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Our determination of future cash flows, future recoverability and fair value of our long-lived assets includes significant estimates and assumptions. Changes in those estimates or assumptions or lower-than-anticipated future financial performance may result in the identification of an impaired asset and a non-cash impairment charge, which could be material. Any such charge could adversely affect our operating results and financial condition.

Our ability to meet our manufacturing workforce needs is crucial.

We rely on the existence of an available, qualified workforce to manufacture our products. Competition for qualified employees could require us to pay higher wages to attract and retain a sufficient number of qualified employees. We cannot assure you that we will be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all. Within our European-based operations, we are subject to employee contracts, Works Councils and certain labor organizations. Any disruption in our relationships with these third-party associations, could adversely affect our ability to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.

We could be impacted by the potential adverse effects of union activities.

While our European-based operations are subject to employee contracts, Works Councils and certain labor organizations, none of our North American employees are currently represented by a labor union. Unionization of any of our North American facilities could result in higher employee costs and increased risk of work stoppages. We are, directly or indirectly, dependent upon companies with unionized work forces, such as parts suppliers, chassis suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition, or operating results. If a work stoppage occurs, it could delay the manufacture and sale of our products and have a material adverse effect on our business, prospects, operating results, or financial condition.

Our operations are dependent upon the services of our executive management and other key individuals, and their loss could materially harm us.

We rely upon the knowledge, experience and skills of our executive management and other key employees to compete effectively in our business and manage our operations. Our future success depends on, among other factors, our ability to attract and retain executive management, key employees and other qualified personnel. Upon the departure of such employees, our success may depend upon the existence of adequate succession plans. The loss of our executive management or other key employees or the failure to attract or retain qualified employees could have a material adverse effect on us in the event that our succession plans prove inadequate.

21

Production efficiency related to new facilities may not be realized or we may incur unanticipated costs or delays that could adversely affect operating results.

The development and/or expansion of certain products and models may require the construction, improvement, re-configuration, relocation or expansion of production facilities. These development and expansion activities may be delayed, or we may incur unanticipated costs or not achieve the intended efficiencies, which could have a material adverse effect on our operating results and financial condition.

Our sales may be impacted by certain currency fluctuations

The Company’s U.S. based subsidiaries have expenses and sales denominated in U.S. dollars. Sales by our U.S. dollar-based subsidiaries into the Canadian market are subject to currency risk as devaluation of the Canadian dollar versus the U.S. dollar may negatively impact U.S. dollar sales into Canada. With the acquisition of EHG, the Company has Euro-denominated assets which are subject to changes in the Euro and U.S. dollar currency rate. To offset a portion of this currency risk, the acquisition was partially funded through a Euro-denominated Term Loan B which provides an economic hedge.

EHG's expenses are predominantly denominated in Euro. EHG’s sales are denominated in Euro, with the exception of sales in the U.K. market, where sales are denominated in Pound Sterling. The Company has used foreign currency forward contracts to help manage (i.e., partially hedge) certain foreign exchange rate exposures related to anticipated sales transactions in Pound Sterling with financial instruments whose maturity date, along with the realized gain or loss, occurs on or near the execution of the anticipated transaction. At July 31, 2020, the Company did not have any foreign currency forward contracts outstanding. Within EHG there are assets held in non-Euro currencies, with most of these assets related to the RV rental business. Where possible, these assets have been funded by debt in the local currency which economically offsets the underlying currency risk.

Our risk management policies and procedures may not be fully effective in achieving their purposes.

Our policies, procedures, controls and oversight to monitor and manage our enterprise risks may not be fully effective in achieving their purpose and may leave exposure to identified or unidentified risks. Past or future misconduct by our employees or vendors could result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm. The Company monitors its policies, procedures and controls; however, our policies, procedures and controls may not be sufficient to prevent all forms of misconduct. We review our compensation policies and practices as part of our overall enterprise risk management program, but it is possible that our compensation policies could incentivize inappropriate risk taking or misconduct. If such inappropriate risk taking or misconduct occurs, it is possible that it could have a material adverse effect on our results of operations and/or our financial condition.

Changes to our investment and capital allocation strategies or other facets of our strategic plan may be made.

Our strategic plan guides activities such as our level of debt, pace of debt repayment, timing and extent of new debt, utilization of available cash, prioritization of capital expenditures and acquisition activity. Based on market conditions, opportunities and perceived risks, we could change or alter such activities and priorities. These changes could materially impact our overall business including future operating results, cost structure or liquidity.

Increases in healthcare, workers compensation or other employee benefit costs could negatively impact our results of operations and financial condition.

Within our U.S. based operations, the Company incurs significant costs with respect to employee healthcare and workers compensation benefits. The Company is self-insured for these employee healthcare and workers compensation benefits up to certain defined retention limits. If costs related to these or other employee benefits increase as a result of increased healthcare costs in the U.S., increased utilization of such benefits as a result of increased claims, new or revised U.S. governmental mandates or otherwise, our operating results and financial condition may suffer. Within our European-based operations, the Company incurs significant costs with respect to employee benefits which are largely governed by country and regional regulations. New or revised governmental mandates may cause our operating results and financial condition to suffer.

22

Changes in tax rates, tax legislation, or exposure to additional tax liabilities could have a negative impact on our results of operations and financial condition.

The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The Company's domestic and international tax liabilities are dependent upon the location of earnings among and the applicable tax rates in these different jurisdictions. Tax rates in various jurisdictions in which we operate or sell into may increase as a means of funding the significant cost of governmental stimulus measures enacted to assist and protect individuals and businesses impacted by the COVID-19 pandemic. The United States or other governmental authorities may impose new income taxes or indirect taxes or revise interpretations of existing tax rules and regulations. Further, the outcome of future elections and the associated political party with power to enact legislation could make tax increases more likely and more severe.

Our estimated effective income tax rate could also be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in statutory rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation. If the Company's effective tax rate was to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows and financial condition could be adversely affected.

Risks Relating to Our Company

Provisions in our charter documents and Delaware law may make it difficult for a third party to acquire our Company and could depress the price of our common stock.

Our Restated Certificate of Incorporation contains certain supermajority voting provisions that could delay, defer or prevent a change in control of our Company. These provisions could also make it more difficult for shareholders to elect directors, amend our Restated Certificate of Incorporation or take other corporate actions.

We are also subject to certain provisions of the Delaware General Corporation Law that could delay, deter or prevent us from entering into an acquisition, including provisions which prohibit a Delaware corporation from engaging in a business combination with an interested shareholder unless specific conditions are met. The existence of these provisions could limit the price that investors are willing to pay in the future for shares of our common stock and may deprive investors of an opportunity to sell shares at a premium over prevailing prices.

Our stock price may fluctuate in response to various conditions, many of which are beyond our control.

The stock market, in general, experiences volatility that has often been unrelated to the underlying operating performance of companies. If this volatility continues, the trading price of our common stock could decline significantly, independent of our actual operating performance. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the following:

•Development of new products and features by our competitors;

•Development of new collaborative arrangements by us, our competitors or other parties;

•Changes in government regulations applicable to our business;

•Changes in investor perception of our business and/or management;

•Changes in global economic conditions or general market conditions in our industry;

•COVID-19 developments, including the imposition of various governmental mandates in relation to COVID-19 or similar situations;

•Occurrence of major disruptive or catastrophic events; and

•Sales of our common stock held by certain equity investors or members of management.

The Company's stock price may reflect expectations of future growth and profitability and may also reflect expectations that its cash dividend will continue at current levels or grow. Future dividends are subject to declaration by the Company’s Board of Directors. Furthermore, and as is customary under credit facilities generally, certain actions, including our ability to pay dividends and repurchase shares, are subject to the satisfaction of certain payment conditions prior to payment. If the Company fails to meet expectations related to future growth, profitability, dividends, share repurchases or other market expectations, the Company might miss investor expectations or independent analyst estimates, which might result in analysts or investors changing their opinions and/or recommendations regarding our stock and our stock price may decline, which could have a material adverse impact on investor confidence and employee retention.

23

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

24

ITEM 2. PROPERTIES

As of July 31, 2020, worldwide we owned or leased approximately 20,611,000 square feet of total manufacturing plant and office space. We believe that our present facilities, consisting primarily of steel clad, steel or wood frame and masonry construction, and the machinery and equipment contained in these facilities, are generally well maintained and in good condition. We believe that our facilities are suitable and adequate for their intended purposes and that we would be able to obtain replacements for our leased premises at acceptable costs should our leases not be renewed.

The following table describes the location, number and size of our principal manufacturing plants and other materially important physical properties as of July 31, 2020:

United States:

Indiana – North American Towable Segment Owned 88 6,117,000

Indiana – North American Towable Segment Leased 1 53,000

Indiana – North American Towable and Motorized Segments Owned 38 2,722,000

Indiana – North American Motorized Segment Owned 17 1,070,000

Indiana – Other Segment Owned 1 50,000

Indiana – Other Segment Leased 6 502,000

Ohio – North American Towable and Motorized Segments Owned 12 1,337,000

Michigan – Other Segment Owned 1 10,000

Michigan – Other Segment Leased 4 270,000

Idaho – North American Towable Segment Owned 5 661,000

Oregon – North American Towable Segment Owned 5 371,000

Europe:

Germany – European Segment Leased 32 590,000

Italy – European Segment Owned 3 568,000

Italy – European Segment Leased 1 22,000

France – European Segment Owned 6 330,000

United Kingdom – European Segment Owned 1 269,000

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in certain litigation arising out of its operations in the normal course of its business, most of which is based upon state “lemon laws,” warranty claims and vehicle accidents in North America (for which the Company carries insurance above a specified self-insured retention or deductible amount). The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. There is significant judgment required in assessing both the probability of an adverse outcome and the determination as to whether an exposure can be reasonably estimated. In management’s opinion, the ultimate disposition of any current legal proceedings or claims against the Company will not have a material effect on the Company’s financial condition, operating results or cash flows. Litigation is, however, inherently uncertain and an adverse outcome from such litigation could have a material effect on the operating results of a particular reporting period.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

25

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s Common Stock, par value $0.10 per share (the “Common Stock”), is traded on the New York Stock Exchange (“NYSE”) under the symbol “THO.”

Holders

As of September 16, 2020, the number of holders of record of the Common Stock was 129.

Dividends

In fiscal 2020, we paid a $0.40 per share dividend for each fiscal quarter. In fiscal 2019, we paid a $0.39 per share dividend for each fiscal quarter.

The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under credit facilities generally, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the payment of dividends under our existing debt facilities include a minimum level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreements. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors, in addition to compliance with any then-existing financing facilities.

Issuer Purchases of Equity Securities

There were no purchases of equity securities during the fourth quarter of fiscal 2020.

Equity Compensation Plan Information – see Item 12.

26

ITEM 6. SELECTED FINANCIAL DATA

Fiscal Years Ended July 31,

Income statement data:

Acquisition-related costs included in income before income taxes — 114,866 — — —

Earnings per common share from continuing operations:

Earnings per common share:

Dividends paid per common share:

Balance sheet data:

(1)Includes non-cash impairment charges totaling $10,057 associated with our towable segment.

(2)Includes six months of the operations of the Erwin Hymer Group from the date of acquisition during the fiscal year.

(3)Includes a non-cash goodwill impairment charge of $9,113 associated with a subsidiary in our towable segment.

(4)Includes one month of the operations of Jayco from the date of its acquisition during the fiscal year.

27

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, all Dollar and Euro amounts are presented in thousands except per share data.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in Item 8 of this Report.

Executive Overview

We were founded in 1980 and have grown to become the largest manufacturer of recreational vehicles (“RVs”) in the world based on units and revenue. We are also the largest manufacturer of RVs in North America, and one of the largest manufacturers of RVs in Europe. In North America, according to Statistical Surveys, Inc. (“Stat Surveys”), for the six months ended June 30, 2020, Thor’s current combined U.S. and Canadian market share based on units was approximately 43.7% for travel trailers and fifth wheels combined and approximately 38.5% for motorhomes. In Europe, according to the European Caravan Federation (“ECF”), EHG’s current market share for the six months ended June 30, 2020 based on units was approximately 26.2% for motorcaravans and campervans combined and approximately 20.6% for caravans.

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

We generally do not finance dealers directly, but do provide repurchase agreements to the dealers’ floor plan lenders.

We generally rely on internally generated cash flows from operations to finance our growth, however, we did obtain and utilize credit facilities to fund the majority of the cash consideration for the EHG acquisition as more fully described in Notes 2 and 12 to the Consolidated Financial Statements. Capital acquisitions of $105,823 in fiscal 2020 were made primarily for purchases of land, production building additions and improvements and replacing machinery and equipment used in the ordinary course of business. See Note 3 to the Consolidated Financial Statements for capital acquisitions by segment.

The COVID-19 coronavirus pandemic had a sudden and material negative impact on our business and results of operations, particularly during the last half of our fiscal year ended July 31, 2020. Additional impacts could be incurred in future periods, including negative impacts to our results of operations, liquidity and financial position as a direct or indirect result of the pandemic. These risks to our business are more fully described in Part I, item 1A “Risk Factors” of this Report.

In March, we temporarily suspended production at all of our North American RV production facilities and temporarily suspended a substantial portion of our European RV production. Throughout late-April and May, Thor's companies in North America and Europe resumed operations, with the exception of our production facility in the UK which resumed operations in mid-June. During the second half of fiscal 2020, we experienced delays in obtaining certain raw material components and also experienced an overall reduction in the volume of chassis received compared to our needs, particularly related to our European operations. The operations of our suppliers within Europe, North America and elsewhere may continue to be disrupted, negatively impacting the price we are required to pay to acquire raw material inputs, or limiting our production output due to a lack of key material components in sufficient quantities.

Beginning in March, and through a portion of the fourth quarter, the Company furloughed or laid off a number of valuable team members, and many employees across the Company, including our executive officers, became subject to a temporary reduction in their cash compensation. During the third and fourth quarter, the Company also significantly reduced its discretionary spend and curtailed spending on most capital expenditure projects. The Company also proactively took steps to maximize its financial position, as more fully described in the "Financial Condition and Liquidity" section of this Report.

28

Significant Events

Fiscal 2019

Erwin Hymer Group Acquisition

On February 1, 2019, the Company and the shareholders of Erwin Hymer Group SE (“EHG” or “Erwin Hymer Group”) closed on a transaction in which the Company acquired EHG. EHG is headquartered in Bad Waldsee, Germany, and is one of the largest RV manufacturers in Europe, by revenue. The Company acquired EHG in order to expand its operations into the growing European market with a long-standing European industry leader.

At the closing, the Company paid cash consideration of approximately 1.53 billion Euro (approximately $1.76 billion at the exchange rate as of February 1, 2019) and issued 2,256,492 shares of the Company’s common stock to the sellers valued at $144.2 million. The cash consideration was funded through a combination of available cash on hand of approximately $95 million and debt financing consisting of two credit facility agreements, a seven-year, $2.1 billion term loan, with an approximate $1.4 billion U.S. dollar-denominated tranche and an approximate 0.6 billion Euro tranche (approximately $0.7 billion at the exchange rate at February 1, 2019), and $100 million utilized at closing from a five-year, $750 million asset-based credit facility (ABL), each as more fully described in Note 12 to the Consolidated Financial Statements. The obligations of the Company under each facility are secured by liens on substantially all of the assets of the Company, and both agreements contain certain customary representations, warranties and covenants of the Company.

Certain costs related to this acquisition incurred during the fiscal year ended July 31, 2019, including the foreign currency forward contract loss and certain bank fees, ticking fees, legal, advisory and other costs, as discussed in Note 2 to the Consolidated Financial Statements, are included in Acquisition-related costs in the Consolidated Statements of Income and Comprehensive Income.

Industry Outlook – North America

The Company monitors industry conditions in the North American RV market through numerous sources, including the use of monthly wholesale shipment data as reported by the Recreation Vehicle Industry Association (“RVIA”), which is typically issued on a one-month lag and represents manufacturers’ RV production and delivery to dealers. In addition, we monitor monthly retail sales trends as reported by Stat Surveys, whose data is typically issued on a month-and-a-half lag, but may currently have a longer lag time due to the impact of the COVID-19 pandemic. The Company believes that monthly RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production.

North American independent RV dealer inventory of Thor products as of July 31, 2020 decreased 38.2% to approximately 63,900 units, compared to approximately 103,400 units as of July 31, 2019.

Thor’s North American RV backlog as of July 31, 2020 increased $3,063,316, or 265.9%, to $4,215,319 compared to $1,152,003 as of July 31, 2019. Dealer inventory levels were elevated in certain locations as of July 31, 2019, which depressed dealer orders and backlog as of that time. In recent periods, dealer inventory levels have decreased materially based on recent production interruptions from March through May 2020 due to the COVID-19 pandemic, coupled with strong retail demand for RVs given the perceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance and the reduction in commercial air travel and cruises. As of July 31, 2020, dealer inventory levels were well below optimal stocking levels, which has increased dealer orders and the backlog.

Industry Wholesale Statistics – North America

Key wholesale statistics for the North American RV industry, as reported by RVIA for the periods indicated, are as follows:

U.S. and Canada Wholesale Unit Shipments

Six Months Ended June 30, Increase %

29

The decrease in wholesale shipments noted above in both towable and motorized units is primarily due to the impact of the COVID-19 pandemic on North American shipments during the March to June 2020 timeframe, as most RV manufacturers were shut down for a number of weeks during that time period.

In September 2020, RVIA issued a revised forecast for calendar year 2020 wholesale unit shipments. Under a most likely scenario, towable and motorized unit shipments are projected to increase to approximately 383,900 and 40,500, respectively, for an annual total of approximately 424,400 units, up 4.5% from the 2019 calendar year shipments. The most likely forecast for calendar year 2020 could range from a lower estimate of approximately 414,200 total units to an upper estimate of approximately 434,500 units.

As part of their September 2020 forecast, RVIA also released their initial estimates for calendar year 2021 wholesale unit shipments. In the most likely scenario, towable and motorized unit shipments are projected to increase to approximately 452,500 and 54,700 units, respectively, for an annual total of approximately 507,200 units, or 19.5% higher than the most likely scenario for calendar year 2020 shipments. This calendar year 2021 most likely forecast could range from a lower estimate of approximately 494,400 total units to an upper estimate of approximately 519,900 units.

Industry Retail Statistics – North America

We believe that retail demand is the key to continued growth in the North American RV industry, and that annual North American RV industry wholesale shipments will generally approximate a one-to-one replenishment ratio with retail sales once the currently low dealer inventory levels are replenished to generally normalized levels over the ensuing months.

Key retail statistics for the North American RV industry, as reported by Stat Surveys for the periods indicated, are as follows:

U.S. and Canada Retail Unit Registrations

Six Months Ended June 30, Increase %

Note: Data reported by Stat Surveys is based on official state and provincial records. This information is subject to adjustment and is continuously updated, and is often impacted by delays in reporting by various states or provinces. The COVID-19 pandemic has resulted in further delays in the submission of information reported by the various states or provinces beginning with calendar 2020 results.

Company Wholesale Statistics – North America

The Company’s wholesale RV shipments, for the six months ended June 30, 2020 and 2019 to correspond with the industry wholesale periods noted above, were as follows:

U.S. and Canada Wholesale Unit Shipments

Six Months Ended June 30, Increase %

30

Company Retail Statistics – North America

Retail statistics of the Company’s RV products, as reported by Stat Surveys, for the six months ended June 30, 2020 and 2019 to correspond with the industry retail periods noted above, were as follows:

U.S. and Canada Retail Unit Registrations

Six Months Ended June 30, Increase %

Note: Data reported by Stat Surveys is based on official state and provincial records. This information is subject to adjustment and is continuously updated, and is often impacted by delays in reporting by various states or provinces. The COVID-19 pandemic has resulted in further delays in the submission of information reported by the various states or provinces beginning with calendar 2020 results, and may also be impacting the completeness of such information.

North American Outlook

The extent to which the COVID-19 pandemic may continue to adversely impact our business remains uncertain and unpredictable. Nonetheless, our outlook for future growth in North American retail sales remains optimistic. At least in the near-term, we believe consumers are likely to continue to alter their future vacation and travel plans, opting for fewer vacations via air travel, cruise ships and hotels, and preferring vacations that RVs are uniquely positioned to provide, where they can continue practicing social distancing while also allowing them to explore or unwind, often close to home. Minimal-contact vacation options like road trips and camping may be perceived as great choices for people who want to limit pandemic-related risks involved with close personal interactions. Future retail sales will continue to be dependent upon various economic conditions faced by consumers, especially in the wake of the coronavirus pandemic, such as the rate of unemployment, the level of consumer confidence, the disposable income of consumers, changes in interest rates, credit availability, the health of the housing market and changes in tax rates and fuel availability and prices.

A positive long-term outlook for the North American RV segment is also supported by the exceptional benefits RVs provide. As supported by surveys conducted by Thor, RVIA and others, Americans love the freedom of the outdoors and the enrichment that comes with living an active lifestyle. RVs allow people to be in control of their travel experiences, going where they want, when they want, and with the people they want. The RV units we design, produce and sell allow people to spend time outdoors pursuing their favorite activities, creating cherished moments, and most importantly, deeply connecting with family and friends. Based on the increasing value consumers are placing on these factors, we expect to see long-term growth in the North American RV industry.

As we emerge from this health crisis, economic or industry-wide factors that will continue to affect our RV business include the costs of commodities, the impact of actual or threatened tariffs on commodity costs and labor costs incurred in the production of our products. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs would impact our profit margins negatively if we were unable to offset those cost increases through a combination of product decontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts. Historically, we have generally been able to offset net cost increases over time.

The North American recreational vehicle industry has, from time to time in the past, experienced shortages of chassis for various reasons, including component shortages, production delays and work stoppages at the chassis manufacturers. These shortages have had a negative impact on our sales and earnings in the past.

31

Recently, the North American RV industry has experienced some supply constraints and shortages of various RV component parts from various manufacturers and suppliers as a result of the COVID-19 pandemic. If such shortages were to become more significant or longer term in nature and industry demand were to increase faster than relevant suppliers can respond, or other factors were to impact their ability to continue to supply our needs for key components, our business could be adversely affected. Where possible, to minimize the impact of these supply chain constraints, we continue to identify alternative suppliers. If, however, the impact of the coronavirus on our raw material vendors increases or is prolonged, the availability of key components, including components sourced from one or a small group of suppliers, could be impacted further which could have an adverse impact on the cost of such components or negatively impact our production output. The geographic centrality of the North American RV industry in northern Indiana, where the majority of our facilities and many of our suppliers are located, could exacerbate supply chain and other COVID-19 related risks, should northern Indiana or any of the other areas in which we, our suppliers or our customers operate become disproportionately impacted by the pandemic.

Industry Outlook – Europe

The Company monitors retail trends in the European RV market as reported by the European Caravan Federation (“ECF”), whose industry data is reported to the public quarterly and typically issued on a one-to-two-month lag. Additionally, on a monthly basis the Company receives original equipment manufacturer (“OEM”) specific reports from most of the individual member countries that make up the ECF (“OEM Reporting Countries”). As these reports are coming directly from the ECF member countries, timing and content vary, but typically the reports are issued on a one-to-two-month lag as well. While most countries provide OEM-specific information, the United Kingdom, which makes up 15.4% and 4.7% of the caravan and motorcaravan (including campervans) European market for the six months ended June 30, 2020, respectively, does not provide OEM-specific information. Industry wholesale shipment data for the European RV market is not available.

European independent RV dealer inventory levels of EHG products are generally appropriate for seasonal consumer demand in the majority of European countries. However, in Germany, independent dealer inventory levels are currently below normal due to COVID-19-related higher demand, as described below.

Thor’s European RV backlog as of July 31, 2020 increased $673,298, or 79.0%, to $1,525,973 compared to $852,675 as of July 31, 2019, with the increase attributable to a number of causes, including recent production interruptions due to the COVID-19 pandemic, the perceived safety of RV travel during the COVID-19 pandemic and a strong desire to socially distance, the reduction in commercial air travel and cruises, the temporary reduction in value-added tax ("VAT") in Germany for all goods and services starting July 1, 2020 through the end of the calendar year and an increase in various EHG marketing campaigns to promote sales.

Industry Retail Statistics – Europe

Key retail statistics for the European RV industry, as reported by the ECF for the periods indicated, are as follows:

European Unit Registrations

Motorcaravan and Campervan (2) Caravan

Six Months Ended June 30, %Change Six Months Ended June 30, %Change

(1)Industry retail registration statistics have been compiled from individual countries reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.” The “Non-OEM Reporting Countries” are primarily the United Kingdom and others. Note: the decrease in the "Non-OEM Reporting Countries" is primarily related to the United Kingdom, as a result of both BREXIT and extended shutdowns as a result of the COVID-19 pandemic. Total European unit registrations are reported quarterly by ECF.

(2)The ECF reports motorcaravans and campervans together.

Note: Data from the ECF is subject to adjustment, is continuously updated, and is often impacted by delays in reporting by various countries. (The Non-OEM Reporting Countries either do not report OEM-specific data to EHG or do not have it available for the entire time period covered).

32

Company Retail Statistics – Europe

European Unit Registrations (1)

Six Months Ended June 30, Increase %

(1)Company retail registration statistics have been compiled from individual countries reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.”

Note: For comparison purposes, the totals reflected above include the pre-acquisition results of EHG for January 2019. In addition, data from the ECF is subject to adjustments, is continuously updated, and is often impacted by delays in reporting by various countries.

European Outlook

Our European operations produce various leisure vehicles including caravans, urban campers, campervans and small-to-large motorcaravans. Our product offering is not limited to vehicles only but also includes accessories and services, including vehicle rentals. In addition, EHG addresses its end customers through a sophisticated brand management approach based on consumer segmentation according to target group, core values and emotions. With the help of data-based and digital marketing, EHG intends to expand its customer reach, in particular, to new and younger consumer segments.

The European outlook for future growth in retail sales depends upon various economic conditions in the respective countries in which it sells. End-customer demand for RVs depends strongly on consumer confidence. Factors such as the rate of unemployment, private consumption and investments, growth in disposable income of consumers, changes in interest rates, the health of the housing market, changes in tax rates and, most recently, travel safety considerations, all influence retail sales. Our long-term outlook for future growth in retail sales remains positive as more and more people discover RVs as a way to support their lifestyle in search of independence and individuality, as well as using the RV as a multi-purpose vehicle to escape urban life and explore outdoor activities and nature.

Historically, EHG and their dealers have marketed EHG’s recreational vehicles through numerous RV fairs at the country and regional levels throughout the calendar year. These fairs have historically been well-attended events that allow retail consumers the ability to see the newest products, features and designs and to talk with product experts in addition to being able to purchase or order an RV. Due to the current pandemic and ongoing efforts to limit its spread, EHG has cancelled their participation in all trade fairs and major events planned for the remainder of calendar 2020.

In place of the trade fairs, EHG has strengthened and expanded their digital activities in order to reach high potential target groups, generate leads and steer customers directly to dealerships. With over 1,000 dealer-partners in Germany and throughout Europe, the EHG brands have one of the strongest and most professionally structured dealer and service networks.

Economic or industry-wide factors affecting our European RV business include the costs of commodities and the labor used in the manufacture of our products. Material and labor costs are the primary factors determining our cost of products sold and any future increases in raw material or labor costs would impact our profit margins negatively if we were unable to offset those cost increases through a combination of product decontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts.

In Europe, we have experienced some supply constraints from our chassis manufacturers as well as certain component parts from our non-chassis raw material vendors. Where possible, to minimize the impact of these supply chain constraints, we have identified a second-source supplier base for most component parts. If, however, the impact of the coronavirus on our vendors increases or is prolonged, the availability of key components such as chassis could have a negative impact on our production output in fiscal 2021. Uncertainties related to changing emission standards, such as the Euro 6d standard which became effective as of January 2020 for new models and becomes effective for certain vehicles starting January 2021 and other vehicles starting January 2022, may also impact the availability of chassis used in our production of certain European motorized RVs and could also impact consumer buying patterns

33

FISCAL 2020 VS. FISCAL 2019

FISCAL 2020 FISCAL 2019 ChangeAmount %Change

NET SALES:

Recreational vehicles

# OF UNITS:

Recreational vehicles

% of SegmentNet Sales % of SegmentNet Sales

GROSS PROFIT:

Recreational vehicles

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:

Recreational vehicles

34

FISCAL 2020 FISCAL 2019 ChangeAmount %Change

INCOME (LOSS) BEFORE INCOME TAXES:

Recreational vehicles

ORDER BACKLOG:

Recreational vehicles

CONSOLIDATED

Consolidated net sales for fiscal 2020 increased $303,175, or 3.9%, compared to fiscal 2019. This increase is primarily attributable to incremental European net sales of $998,413, as the current fiscal year includes twelve months of European operations as compared to six months in the prior fiscal year from the date of EHG's acquisition. This increase was largely offset by a decrease in North American net sales of $695,238, primarily as a result of the COVID-19 impact on sales between March and May 2020. In March, we temporarily suspended production at all of our North American RV production facilities and temporarily suspended a substantial portion of our European RV production. Throughout late-April and May, our companies in North America and Europe resumed operations, with the exception of our production facility in the UK which resumed operations in mid-June.

Consolidated gross profit for fiscal 2020 increased $145,113, or 14.9%, compared to fiscal 2019. The increase in gross profit is primarily due to incremental European gross profit for fiscal 2020 of $154,349. European gross profit in fiscal 2019 was negatively impacted by $61,418 of purchase accounting adjustments. Consolidated gross profit was 13.7% of consolidated net sales for fiscal 2020 and 12.4% for fiscal 2019, with the increase in percentage primarily impacted by the North American recreational vehicle improvement to 13.9% from 12.6% and the improvement in European gross profit percentage to 12.2% compared with 10.1% last year.

Selling, general and administrative expenses for fiscal 2020 increased $98,075, or 18.3%, compared to fiscal 2019, primarily due to incremental European selling, general and administrative expenses of $105,584 due to a full year of European operations in fiscal 2020 as compared to six months in fiscal 2019.

Amortization of intangible assets expense for fiscal 2020 increased $21,596 compared to fiscal 2019, primarily due to incremental European amortization expense of $25,197 due to a full year of European operations in fiscal 2020 as compared to six months in fiscal 2019, partially offset by lower North American dealer network amortization as compared to the prior year.

The impairment charges for fiscal 2020 of $10,057 relates to the North American Towables reportable segment as discussed in Note 7 to the Consolidated Financial Statements.

35

Corporate costs included in selling, general and administrative expenses increased $10,509 to $71,194 for fiscal 2020 compared to $60,685 for fiscal 2019, an increase of 17.3%. This increase includes an increase in professional fees of $4,595, primarily due to additional fees related to the integration of the EHG operations, and an increase in donations of $2,003, primarily due to a significant contribution to the National Forest Foundation in August 2019. Deferred compensation expense also increased $1,519, which was effectively offset by the increase in other income related to the deferred compensation plan assets as noted below.

Acquisition-related costs were $114,866 for fiscal 2019 and include costs related to the acquisition of EHG as described in Note 2 to the Consolidated Financial Statements. These Corporate costs included a foreign currency forward contract loss of $70,777, with the remaining $44,089 consisting primarily of bank fees, ticking fees, legal, professional and advisory fees related to financial due diligence and implementation costs, regulatory review costs and the write-off of the remaining unamortized debt fees related to the Company’s previous asset-based facility.

Corporate interest and other income and expense was $101,661 of net expense for fiscal 2020 compared to $66,061 of net expense for fiscal 2019. This increase in net expense of $35,600 is primarily due to an increase in interest expense and fees of $37,067 on the debt facilities related to the EHG acquisition, primarily due to fiscal 2020 including twelve months of interest expense as compared to six months in fiscal 2019 from the date of the EHG acquisition. This increase in expense was partially offset by the increase in fair value of the Company's deferred compensation plan assets due to market fluctuations and investment income, which resulted in additional income of $1,572 in fiscal 2020 when compared to the income in fiscal 2019.

Income before income taxes for fiscal 2020 was $272,896, as compared to $184,666 for fiscal 2019, an increase of $88,230, or 47.8%. Fiscal 2019 included acquisition-related costs totaling $114,866.

The overall annual effective income tax rate for fiscal 2020 was 18.9% on $272,896 of income before income taxes, compared with 28.3% on $184,666 of income before income taxes for fiscal 2019. The primary drivers of the change in the overall effective tax rate between comparable periods are certain foreign tax rate differences from the U.S. federal corporate tax rate of 21.0% and the change in the annual mix of earnings between foreign and domestic. The fiscal 2019 effective income tax rate was negatively impacted by an unfavorable, non-deductible forward currency forward contract loss and certain non-deductible transaction costs resulting from the EHG acquisition.

SEGMENT REPORTING

North American Towable Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2020 vs. Fiscal 2019

NET SALES:

North American Towables

# OF UNITS:

North American Towables

36

IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %Change

North American Towables

Travel Trailers and Other 2.1

Fifth Wheels 1.9

Total North American Towables 2.2

The decrease in total North American towables net sales of 9.2% compared to the prior fiscal year resulted from a 11.4% decrease in unit shipments partially offset by a 2.2% increase in the overall net price per unit due to the impact of changes in product mix and price. The fiscal year decreases in towables net sales and unit shipments were both substantially due to lower net sales and unit shipments in the third quarter of fiscal 2020 as compared to the third quarter of fiscal 2019, primarily due to the impact of the COVID-19 pandemic and the resulting production shutdowns for six to eight weeks for most of our North American production facilities. The “Other” units within the “Travel Trailer and Other” category consists primarily of folding campers in fiscal 2019.

According to statistics published by RVIA, for the twelve months ended July 31, 2020, combined travel trailer and fifth wheel wholesale unit shipments decreased 7.8% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2020 and 2019, our market share for travel trailers and fifth wheels combined was 44.3% and 48.6%, respectively.

The increases in the overall net price per unit within the travel trailer and other product lines of 2.1% and the fifth wheel product lines of 1.9% were both primarily due to changes in product mix and selective net price increases since the prior fiscal year.

Cost of products sold decreased $422,893 to $3,520,590, or 85.0% of North American towables net sales, for fiscal 2020 compared to $3,943,483 or 86.5% of North American towables net sales, for fiscal 2019. The changes in material, labor, freight-out and warranty costs comprised $407,132 of the $422,893 decrease in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American towables net sales decreased to 78.1% for fiscal 2020 compared to 79.8% for fiscal 2019, primarily as a result of improvements in the material and warranty cost percentages. The improvement in material cost percentage is primarily due to favorable product mix, selective net price increases, management-led initiatives on improving product procurement and stable material costs since the prior year. The warranty cost percentage is lower primarily due to favorable experience trends and quality improvement initiatives compared to fiscal 2019. Total manufacturing overhead decreased $15,761 with the decrease in sales, but increased as a percentage of North American towables net sales from 6.7% to 6.9%, as the decreased sales resulted in higher overhead costs per unit sold.

Variable costs in manufacturing overhead decreased $19,222 to $252,878, or 6.1% of North American towables net sales, for fiscal 2020 compared to $272,100 or 6.0% of North American towables net sales, for fiscal 2019 as a result of the decrease in net sales and management-led initiatives to control costs, particularly in response to the COVID-19 pandemic. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $3,461 to $34,771 in fiscal 2020 from $31,310 in fiscal 2019.

North American towables gross profit increased $4,924 to $619,892, or 15.0% of North American towables net sales, for fiscal 2020 compared to $614,968, or 13.5% of North American towables net sales, for fiscal 2019. The increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.

Selling, general and administrative expenses were $238,656, or 5.8% of North American towables net sales, for fiscal 2020 compared to $253,092, or 5.6% of North American towables net sales, for fiscal 2019. The primary reason for the $14,436 decrease was a decrease of $7,749 in sales-related travel, advertising and promotion costs, in correlation with the lower sales levels as well as lower travel in the latter part of the year due to the impact of COVID-19 travel restrictions. In addition, decreased North American towables net sales, along with employee cost reduction measures taken in response to the COVID-19 pandemic, caused net compensation costs, including commissions, bonuses and other compensation, to decrease by $3,250. Legal, professional and related settlement costs also decreased by $2,052. The increase in the overall selling, general and administrative expenses as a percentage of net sales was primarily due to the reduction in towables net sales.

37

North American towables income before income taxes was $336,207, or 8.1% of North American towables net sales, for fiscal 2020 compared to $322,228 or 7.1% of North American towables net sales, for fiscal 2019. The primary reason for the increase in towables income before income taxes, in spite of the reduction in towables net sales, was the improvement in the income before income taxes percentage of net sales, primarily due to the decrease in the cost of products sold percentage noted above.

North American Motorized Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2020 vs. Fiscal 2019

NET SALES:

North American Motorized

# OF UNITS:

North American Motorized

IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %Change

North American Motorized

Class A (1.3)

Class C 7.3

Total North American Motorized 0.9

The decrease in total motorized net sales of 15.7% compared to the prior fiscal year resulted from a 16.6% decrease in unit shipments partially offset by a 0.9% increase in the overall net price per unit due to the impact of changes in product mix and price. The fiscal year decreases in motorized net sales and unit shipments were both primarily due to lower net sales and unit shipments in the third quarter of fiscal 2020 as compared to the third quarter of fiscal 2019, primarily due to the impact of the COVID-19 pandemic.

According to statistics published by RVIA, for the twelve months ended July 31, 2020, combined motorhome wholesale unit shipments decreased 21.0% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2020 and 2019, our market share for motorhomes was 38.1% and 37.5%, respectively.

The decrease in the overall net price per unit within the Class A product line was primarily due to a slightly lower concentration of sales of the generally larger and more expensive diesel units in relation to the more modestly-priced gas units in fiscal 2020 compared to fiscal 2019. The increase in the overall net price per unit within the Class C product line of 7.3% was primarily due to the net impact of product mix changes and selective net price increases. The decrease in the overall net price per unit within the Class B product line of 36.7% is primarily due to product mix as a result of the introduction of new, lower-priced models since the prior year.

38

Cost of products sold decreased $244,042 to $1,240,103, or 89.2% of motorized net sales, for fiscal 2020 compared to $1,484,145, or 90.0% of motorized net sales, for fiscal 2019. The changes in material, labor, freight-out and warranty costs comprised $235,505 of the $244,042 decrease due to the decreased sales volume. Material, labor, freight-out and warranty costs as a combined percentage of motorized net sales was 83.9% for fiscal 2020 compared to 85.0% for fiscal 2019, with the decrease in percentage primarily due to improvements in each of the material, labor and warranty cost percentages. Total manufacturing overhead decreased $8,537 with the volume decrease, but increased as a percentage of motorized net sales from 5.0% to 5.3%, as the decrease in sales resulted in higher overhead costs per unit sold.

Variable costs in manufacturing overhead decreased $8,843 to $61,928, or 4.5% of North American motorized net sales, for fiscal 2020 compared to $70,771 or 4.3% of North American motorized net sales, for fiscal 2019 as a result of the decrease in net sales and management-led initiatives to control costs, particularly in response to the COVID-19 pandemic. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $306 to $11,606 in fiscal 2020 from $11,300 in fiscal 2019.

Motorized gross profit decreased $15,189 to $149,995, or 10.8% of motorized net sales, for fiscal 2020 compared to $165,184, or 10.0% of motorized net sales, for fiscal 2019. The decrease in gross profit was due primarily to the 16.6% decrease in unit sales volume noted above, while the increase as a percentage of motorized net sales is due to the decrease in the cost of products sold percentage noted above.

Selling, general and administrative expenses were $72,720, or 5.2% of motorized net sales, for fiscal 2020 compared to $79,202, or 4.8% of motorized net sales, for fiscal 2019. The $6,482 decrease was primarily due to decreased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to decrease by $4,750. Sales-related travel, advertising and promotion costs also decreased $1,180, in correlation with the lower sales levels as well as lower travel in the latter part of the year due to the impact of COVID-19 travel restrictions. The increase in selling, general and administrative expenses as a percentage of sales was primarily due to the reduction in motorized net sales.

Motorized income before income taxes was $71,943, or 5.2% of motorized net sales, for fiscal 2020 compared to $80,910, or 4.9% of motorized net sales, for fiscal 2019. The primary reason for the decrease in motorized income before income taxes is the decrease in motorized net sales. The percentage to net sales increased primarily due to the decrease in the cost of products sold percentage noted above, partially offset by the increase in the selling, general and administrative expense percentage noted above.

European Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2020 vs. Fiscal 2019

NET SALES:

European

39

# OF UNITS:

European

IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %Change

European

Motorcaravan (1.6)

Caravan 1.4

Total European 1.2

The results for fiscal 2020 include twelve months of the operations of EHG while fiscal 2019 includes six months of operations following the date of the EHG acquisition. As a result, year-over-year comparisons of dollar amount changes within given cost categories will not be as relevant as the changes in the percentage of those cost categories to net sales due to the incremental six months of operations included in fiscal 2020. In addition, the six months of operations in fiscal 2019 included the operations for just the second half of the fiscal year, which are typically the strongest six-month sales period of any fiscal year. In fiscal 2020, however, the second half of the fiscal year, primarily the third quarter, was adversely affected by the impact of the COVID-19 pandemic.

The increase in European recreational vehicle net sales of 67.1% compared to the prior fiscal year resulted from a 65.9% increase in unit shipments and a 1.2% increase in the overall net price per unit due to the impact of changes in product mix and price. The increase in net sales and unit sales is due to fiscal 2020 including twelve months of operations as compared to six months in fiscal 2019 as noted above.

The 1.2% increase in the overall net price per unit includes an approximate decrease of 1.5% related to the impact of foreign currency exchange rate changes on a constant-currency basis, which was more than offset by changes in product mix and selective price increases as noted below.

The decrease in the overall net price per unit within the Motorcaravan product line of 1.6% was primarily due to the reduction in foreign exchange rates. The increase in the overall net price per unit within the Campervan product line of 19.7% was primarily due to the net impact of product mix changes, including more sales of units with higher chassis content than the prior year, and selective selling price increases, partially offset by the reduction in exchange rates. The increase in the overall net price per unit within the Caravan product line of 1.4% is primarily due to the impact of product mix changes partially offset by the impact of the reduction in exchange rates.

Cost of products sold increased $844,064 to $2,181,003, or 87.8% of European recreational vehicle net sales, for fiscal 2020 compared to $1,336,939, or 89.9% of European recreational vehicle net sales, for fiscal 2019. The changes in material, labor, freight-out and warranty costs comprised $731,710 of the $844,064 increase primarily due to the increased sales volume. Material, labor, freight-out and warranty costs as a combined percentage of European recreational vehicle net sales decreased to 78.3% for fiscal 2020 compared to 81.7% for fiscal 2019, with the decrease primarily due to a decrease in the material cost percentage. This material cost percentage decrease was mainly attributable to the $61,418 charge included in the prior-year period related to the step-up in value in purchase accounting for acquired inventory that was subsequently sold during the period, partially offset by changes in product mix. Total manufacturing overhead increased $112,354 with the volume increase and increased as a percentage of motorized net sales from 8.2% to 9.5%. The increase in overhead percentage is primarily due to better absorption of fixed overhead costs in fiscal 2019, given that fiscal 2019 sales only included the generally stronger six months of sales of the second half of the fiscal year. The fiscal 2020 overhead percentage was also adversely impacted by COVID-19, which decreased sales for a period of time and resulted in lower overhead absorption during that time.

40

European recreational vehicle gross profit increased $154,349 to $304,388, or 12.2% of European recreational vehicle net sales, for fiscal 2020 compared to $150,039, or 10.1% of European recreational vehicle net sales, for fiscal 2019. The increase in gross profit as a percentage of European recreational vehicle net sales is primarily due to the negative impact of purchase accounting charges of $61,418 on the prior-year period gross profit, partially offset by fiscal 2020 including the generally lower sales from the first six months of the fiscal year, which typically carry a lower gross profit percentage.

Selling, general and administrative expenses were $239,635, or 9.6% of European recreational vehicle net sales, for fiscal 2020 compared to $134,051, or 9.0% of European recreational vehicle net sales for fiscal 2019. The primary reason for the increase in the overall selling, general and administrative expenses as a percentage of sales was a higher percentage of sales promotion costs in fiscal 2020 compared to fiscal 2019, as a much higher concentration of trade show costs occur in the first six months of the fiscal year, so the fiscal 2019 totals do not include such show costs since EHG was acquired on February 1, 2019.

European recreational vehicle net income before income taxes was $9,850, or approximately 0.4% of European recreational vehicle net sales, for fiscal 2020 compared to a net loss of $5,946, or (0.4)% of European recreational vehicle net sales, for fiscal 2019. The primary reason for the increase in income before income taxes was the negative impact of $61,418 in purchase accounting charges included in cost of products sold in the prior-year period. This impact, however, was primarily offset by fiscal 2020 including a net loss before income taxes of $18,334 from the first six months of the fiscal year while fiscal 2019 did not include results prior to the acquisition date of February 1, 2019, and the third quarter of fiscal 2020 was adversely affected by the impact of the COVID-19 pandemic as compared to the third quarter of fiscal 2019.

41

FISCAL 2019 VS. FISCAL 2018

FISCAL 2019 FISCAL 2018 ChangeAmount %Change

NET SALES:

Recreational vehicles

# OF UNITS:

Recreational vehicles

% of SegmentNet Sales % of SegmentNet Sales

GROSS PROFIT:

Recreational vehicles

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:

Recreational vehicles

42

FISCAL 2019 FISCAL 2018 ChangeAmount %Change

INCOME (LOSS) BEFORE INCOME TAXES:

Recreational vehicles

ORDER BACKLOG:

Recreational vehicles

CONSOLIDATED

Consolidated net sales for fiscal 2019 decreased $464,151, or 5.6%, compared to fiscal 2018. Following its February 1, 2019 acquisition date, EHG accounted for net sales of $1,486,978. These additional net sales during the period were offset by a decrease in net sales from North America (including Other and Intercompany eliminations) of $1,951,129, or 23.4%, compared to fiscal 2018. Consolidated gross profit for fiscal 2019 decreased $191,572, or 16.4%, compared to fiscal 2018. EHG’s gross profit for the period of $150,039, which includes the negative impact of $61,418 related to the step-up in purchase accounting for certain acquired inventory that was subsequently sold during the period, was offset by the decrease of $341,611, or 29.3%, in total North American gross profit (including Other, net) compared to the prior-year period. Consolidated gross profit was 12.4% of consolidated net sales for fiscal 2019 and 14.0% for fiscal 2018, with the change partially impacted by the addition of EHG’s gross profit percentage of 10.1%.

Selling, general and administrative expenses for fiscal 2019 increased $58,600, or 12.3%, compared to fiscal 2018, including the addition of EHG’s total of $134,051 for the period. Amortization of intangible assets expense for fiscal 2019 increased $20,520 compared to fiscal 2018, primarily due to EHG’s total amortization expense of $25,594, partially offset by lower North American dealer network amortization as compared to the prior-year period. Acquisition-related costs totaled $114,866 for fiscal 2019. Income before income taxes for fiscal 2019 was $184,666, as compared to $633,029 for fiscal 2018, a decrease of $448,363, or 70.8%. Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses, acquisition-related costs and income before income taxes are addressed below and in the segment reporting that follows.

Corporate costs included in selling, general and administrative expenses decreased $5,788 to $60,685 for fiscal 2019 compared to $66,473 for fiscal 2018, a decrease of 8.7%. This decrease includes a decrease in compensation costs of $2,378, primarily due to a decrease in incentive compensation in correlation with the decrease in income before income taxes compared to the prior year period. Deferred compensation expense also decreased $1,156, which relates to the equal and offsetting decrease in other income related to the deferred compensation plan assets as noted below. Costs related to the actuarially determined workers’ compensation and product liability reserves recorded at Corporate decreased $3,474 as well due to reduced claim activity and improving experience trends. In addition, costs recorded at Corporate related to our standby repurchase obligations on dealer inventory decreased $2,200 due to lower North American dealer inventory levels. These decreases were partially offset by an increase in stock-based compensation of $1,950 due to generally increasing income before income taxes over the past three years, as most stock awards are based on that metric and vest ratably over a three-year period.

43

Acquisition-related costs were $114,866 for fiscal 2019 and include costs related to the acquisition of EHG as described in Note 2 to the Consolidated Financial Statements. These Corporate costs included a foreign currency forward contract loss of $70,777, with the remaining $44,089 consisting primarily of bank fees, ticking fees, legal, professional and advisory fees related to financial due diligence and implementation costs, regulatory review costs and the write-off of the remaining unamortized debt fees related to the Company’s previous asset-based facility.

Corporate interest and other income and expense was $66,061 of net expense for fiscal 2019 compared to $607 of net expense for fiscal 2018. This increase in net expense of $65,454 is primarily due to an increase in interest expense and fees of $59,099 resulting from the new debt facilities incurred related to the EHG acquisition. Fiscal 2019 also includes twelve months of operating losses totaling $8,798 related to the Togo Group joint venture as discussed in Note 2 to the Consolidated Financial Statements as compared to a loss of $1,939 for the four months included in the prior-year period from the inception date, an increase in expense of $6,859. In addition, the income from changes in the fair value of the Company’s deferred compensation plan assets due to market fluctuations and investment income in fiscal 2019 was $1,156 less than the income in fiscal 2018. These increases in net expenses were partially offset by increased interest income of $2,984 primarily due to higher average cash balances as compared to the prior-year period.

The overall effective income tax rate for fiscal 2019 was 28.3% compared with 32.0% for fiscal 2018. The primary drivers of the change in the overall effective tax rate between comparable periods relate to U.S. tax reform and the impact of the EHG acquisition. In fiscal 2018, the enactment of the Tax Cuts and Jobs Act resulted in an unfavorable one-time additional income tax expense as a result of the re-measurement of the Company’s deferred tax assets. Additionally, as a result of being a fiscal year end filer, the Company’s U.S. federal statutory rate was reduced to 21.0% in fiscal 2019 compared to a 26.9% blended rate for fiscal 2018. The resulting benefits of the full U.S. rate reduction and non-taxable foreign currency remeasurement gains resulting from intercompany financing transactions were partially offset by an unfavorable, non-deductible foreign currency forward contract loss resulting from the EHG acquisition.

SEGMENT REPORTING

North American Towable Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2019 vs. Fiscal 2018

NET SALES:

North American Towables

# OF UNITS:

North American Towables

IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %Change

North American Towables

Travel Trailers and Other 4.8

Fifth Wheels 4.7

Total North American Towables 5.5

44

The decrease in total North American towables net sales of 24.1% compared to the prior fiscal year resulted from a 29.6% decrease in unit shipments partially offset by a 5.5% increase in the overall net price per unit due to the impact of changes in product mix and price. The “Other” units within the “Travel Trailer and Other” category consists primarily of folding campers. According to statistics published by RVIA, for the twelve months ended July 31, 2019, combined travel trailer and fifth wheel wholesale unit shipments decreased 19.6% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2019 and 2018, our market share for travel trailers and fifth wheels combined was 48.7% and 49.8%, respectively.

The increases in the overall net price per unit within the travel trailer and other product lines of 4.8% and the fifth wheel product lines of 4.7% were both primarily due to changes in product mix and selective net price increases since the prior fiscal year.

Cost of products sold decreased $1,182,985 to $3,943,483, or 86.5% of North American towables net sales, for fiscal 2019 compared to $5,126,468 or 85.3% of North American towables net sales, for fiscal 2018. The changes in material, labor, freight-out and warranty costs comprised $1,141,479 of the $1,182,985 decrease in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American towables net sales increased slightly to 79.8% for fiscal 2019 compared to 79.6% for fiscal 2018. This increase in percentage was primarily the result of an increase in the material cost percentage to net sales, primarily due to an increase in discounts and sales incentives, which effectively decreased the net sales price per unit and therefore increased the unit material cost percentage. Total manufacturing overhead decreased $41,506 with the decrease in sales, but increased as a percentage of North American towables net sales from 5.7% to 6.7%, as the decreased sales resulted in higher overhead costs per unit sold.

Variable costs in manufacturing overhead decreased $45,693 to $272,100, or 6.0% of North American towables net sales, for fiscal 2019 compared to $317,793 or 5.3% of North American towables net sales, for fiscal 2018 as a result of the decrease in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $4,187 to $31,310 in fiscal 2019 from $27,123 in fiscal 2018.

North American towables gross profit decreased $267,264 to $614,968, or 13.5% of North American towables net sales, for fiscal 2019 compared to $882,232, or 14.7% of North American towables net sales, for fiscal 2018. The decrease in gross profit is primarily due to the 29.6% decrease in unit sales volume noted above, while the decrease in gross profit percentage is due to the increase in the cost of products sold percentage noted above.

Selling, general and administrative expenses were $253,092, or 5.6% of North American towables net sales, for fiscal 2019 compared to $304,554, or 5.1% of North American towables net sales, for fiscal 2018. The primary reason for the $51,462 decrease was decreased North American towables net sales and North American towables income before income taxes, which caused related commissions, bonuses and other compensation to decrease by $52,215. Sales-related travel, advertising and promotion costs also decreased $4,853, while legal, professional and related settlement costs increased $6,533.

North American towables income before income taxes was $322,228, or 7.1% of North American towables net sales, for fiscal 2019 compared to $532,657 or 8.9% of North American towables net sales, for fiscal 2018. The primary reasons for the decrease in percentage were the increases in both the cost of products sold and selling, general and administrative percentages noted above.

45

North American Motorized Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2019 vs. Fiscal 2018

NET SALES:

North American Motorized

# OF UNITS:

North American Motorized

IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: %Change

North American Motorized

Class A 8.2

Class C 5.1

Class B 3.2

Total North American Motorized 5.5

The decrease in total motorized net sales of 23.2% compared to the prior fiscal year resulted from a 28.7% decrease in unit shipments partially offset by a 5.5% increase in the overall net price per unit due to the impact of changes in product mix and price. According to statistics published by RVIA, for the twelve months ended July 31, 2019, combined motorhome wholesale unit shipments decreased 21.3% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2019 and 2018, our market share for motorhomes was 37.5% and 39.3%, respectively.

The increase in the overall net price per unit within the Class A product line of 8.2% was primarily due to a higher concentration of sales of the generally larger and more expensive diesel units in relation to the more modestly priced gas units in fiscal 2019 compared to fiscal 2018. The increase in the overall net price per unit within the Class C product line of 5.1% was primarily due to the net impact of product mix changes and selective net price increases. The increase in the overall net price per unit within the Class B product line of 3.2% is primarily due to the introduction of a new, higher-priced model and more option content per unit in the current-year period.

Cost of products sold decreased $428,062 to $1,484,145, or 90.0% of motorized net sales, for fiscal 2019 compared to $1,912,207, or 89.1% of motorized net sales, for fiscal 2018. The changes in material, labor, freight-out and warranty costs comprised $420,594 of the $428,062 decrease due to the decreased sales volume. Material, labor, freight-out and warranty costs as a combined percentage of motorized net sales was 85.0% for fiscal 2019 compared to 84.9% for fiscal 2018. Total manufacturing overhead decreased $7,468 with the volume decrease, but increased as a percentage of motorized net sales from 4.2% to 5.0%, as the decrease in sales resulted in higher overhead costs per unit sold.

46

Variable costs in manufacturing overhead decreased $9,302 to $70,771, or 4.3% of North American motorized net sales, for fiscal 2019 compared to $80,073, or 3.7% of North American motorized net sales, for fiscal 2018 as a result of the decrease in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $1,834 to $11,300 in fiscal 2019 from $9,466 in fiscal 2018.

Motorized gross profit decreased $68,924 to $165,184, or 10.0% of motorized net sales, for fiscal 2019 compared to $234,108, or 10.9% of motorized net sales, for fiscal 2018. The decrease in gross profit was due primarily to the 28.7% decrease in unit sales volume noted above, and the decrease as a percentage of motorized net sales is due to the increase in the cost of products sold percentage noted above.

Selling, general and administrative expenses were $79,202, or 4.8% of motorized net sales, for fiscal 2019 compared to $96,370, or 4.5% of motorized net sales, for fiscal 2018. The $17,168 decrease was primarily due to decreased motorized net sales and motorized income before income taxes, which caused related commissions, bonuses and other compensation to decrease by $15,825. Sales-related travel, advertising and promotion costs also decreased $1,745.

Motorized income before income taxes was $80,910, or 4.9% of motorized net sales, for fiscal 2019 compared to $134,785, or 6.3% of motorized net sales, for fiscal 2018. The primary reasons for this decrease in percentage were the increases in both the cost of products sold and selling, general and administrative expense percentages noted above.

European Recreational Vehicles

The net sales included in fiscal 2019 from the EHG acquisition date of February 1, 2019 are as follows:

Fiscal 2019 % ofSegmentNet Sales

NET SALES:

European

Fiscal 2019 % ofSegmentShipments

# OF UNITS:

European

The European reportable segment for fiscal 2019 includes the results of operations of EHG for the six months of operations since the February 1, 2019 acquisition date, as more fully described in Note 2 to the Consolidated Financial Statements.

During fiscal 2019, EHG recorded net sales of $1,486,978, gross profit of $150,039 and a loss before income taxes of $5,946. Gross profit and loss before income taxes include the negative impact of $61,418 related to the fair value step-up in purchase accounting of acquired inventory that was sold during the first three months subsequent to the acquisition, and the loss before income taxes also includes $11,239 for the complete amortization expense of backlog and the continuing amortization expense of the other acquired amortizable intangibles of $14,355.

47

Financial Condition and Liquidity

As of July 31, 2020, we had $538,519 in cash and cash equivalents, of which $276,841 is held in the United States and the equivalent of $261,678, predominantly in Euros, is held in Europe, compared to $425,615 on July 31, 2019, of which $223,394 was held in the United States and the equivalent of $202,221, predominantly in Euros, was held in Europe. Cash and cash equivalents held internationally may be subject to foreign withholding taxes if repatriated to the United States. The components of this $112,904 increase in cash and cash equivalents are described in more detail below, but the increase was primarily attributable to cash provided by operations of $540,941 less cash used in financing activities of $392,916 and cash used in investing activities of $84,249.

Net working capital at July 31, 2020 was $586,996 compared to $589,032 at July 31, 2019. Capital expenditures of $106,697 for fiscal 2020 were made primarily for land and production building additions and improvements, and replacing machinery and equipment used in the ordinary course of business.

As a result of the COVID-19 pandemic, there has been significant uncertainty surrounding the impact and duration of that impact on the Company's results of operations, cash flows and financial position. The Company proactively took numerous steps in the third quarter of fiscal 2020 to maximize its financial position including, but not limited to, temporary reductions in compensation costs and discretionary operating expenses, limiting capital expenditures and drawing funds available under the Company's asset-based credit agreement.

On March 23, 2020, the Company borrowed $250 million under the ABL Credit Agreement as a precautionary measure to secure its liquidity position and provide financial flexibility given the uncertain market conditions as a result of COVID-19. This amount was repaid in the fourth quarter of fiscal 2020.

We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. We believe our on-hand cash and cash equivalents, and funds generated from operations, along with funds available under the revolving asset-based credit facility will be sufficient to fund expected future operational requirements for the foreseeable future.

Our priorities for the use of current and future available cash generated from operations remain consistent with our history, and include reducing our indebtedness, maintaining and over time growing our dividend payments, and funding our growth both organically and opportunistically through acquisitions. We may also consider strategic and opportunistic repurchases of shares and special dividends as determined by the Company's Board of Directors and subject to potential customary limits and restrictions pursuant to our credit facilities and applicable legal limitations.

In regard to reducing indebtedness, on August 31, 2020, we made an additional principal payment of 50,000 Euro ($59,700 using the applicable exchange rate from that day) on the Euro term loan. The Euro term loan is discussed in more detail in Note 12 to the Consolidated Financial Statements.

In regard to growing our business, we anticipate capital expenditures during fiscal 2021 for the Company of approximately $135,000. Approximately half of those expenditures will be in North America and half in Europe, primarily for the replacing and upgrading machinery, equipment and other assets throughout our facilities to be used in the ordinary course of business.

The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under credit facilities generally, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the payment of dividends under the existing debt facilities include a minimum level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreements. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors, in addition to compliance with any then-existing financing facilities.

48

Operating Activities

Net cash provided by operating activities for fiscal 2020 was $540,941 as compared to net cash provided by operating activities of $508,019 for fiscal 2019 and $466,508 for fiscal 2018.

For fiscal 2020, net income adjusted for non-cash operating items (primarily depreciation, amortization of intangibles, deferred income tax benefit and stock-based compensation) provided $451,018 of operating cash. The change in net working capital provided $89,923 of operating cash during fiscal 2020, due primarily to a reduction in inventory as well as an increase in accounts payables due to the timing of inventory purchases, partially offset by an increase in accounts receivable due to an increase in July 2020 sales as compared to July 2019 sales.

For fiscal 2019, net income adjusted for non-cash operating items (primarily depreciation, amortization of intangibles, foreign currency forward contract loss, deferred income tax benefit and stock-based compensation) provided $368,838 of operating cash. The change in net working capital provided $139,181 of operating cash during fiscal 2019, due primarily to reductions in inventory and accounts receivable, partially offset by payments made on the guaranteed liabilities related to former EHG subsidiaries, as discussed in Note 2 to the Consolidated Financial Statements, and a reduction in accounts payable.

For fiscal 2018, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles, deferred income tax expense and stock-based compensation) provided $555,019 of operating cash. The changes in working capital used $88,511 of operating cash during fiscal 2018, primarily due to an increase in inventory in correlation with the increases in sales and production capacity and a decrease in accounts payable, primarily resulting from the timing of inventory purchases and the related payments. These cash uses were partially offset by an increase in accrued liabilities primarily due to the timing of payments.

Investing Activities

Net cash used in investing activities for fiscal 2020 was $84,249, primarily due to capital expenditures of $106,697 which included approximately $51,100 for land and production building additions and improvements, with the remainder used primarily to replace machinery and equipment used in the ordinary course of business. These capital expenditures were partially offset by proceeds from the disposition of property, plant and equipment of $27,677.

Net cash used in investing activities for fiscal 2019 was $1,865,503, primarily due to $1,658,577 in cash used to acquire EHG, $70,777 paid for the foreign currency forward contract loss related to this acquisition, and capital expenditures of $130,224. The capital expenditures total of $130,224 included approximately $73,200 for land and production building additions and improvements, with the remainder used primarily to replace machinery and equipment used in the ordinary course of business.

Net cash used in investing activities for fiscal 2018 was $183,493, primarily due to capital expenditures of $138,197 and $50,402 paid for the equity investment in TH2, our joint venture. The capital expenditures total of $138,197 included approximately $97,900 for land and production building additions and improvements, with the remainder primarily to replace machinery and equipment used in the ordinary course of business.

Financing Activities

Net cash used in financing activities for fiscal 2020 was $392,916, consisting primarily of $274,963 in term loan debt payments. Additionally, the Company made regular quarterly cash dividend payments of $0.40 per share for each quarter of fiscal 2020 totaling $88,318.

Net cash provided by financing activities for fiscal 2019 was $1,539,073, consisting primarily of $2,195,018 borrowed in connection with the EHG acquisition, partially offset by $497,966 in debt payments, $70,176 paid for debt issuance costs related to the EHG acquisition, and payments for regular quarterly cash dividend payments of $0.39 per share for each quarter of fiscal 2019 totaling $84,139.

Net cash used in financing activities for fiscal 2018 was $231,024, primarily for principal payments on the previous revolving credit facility totaling $145,000 and regular quarterly cash dividend payments of $0.37 per share for each quarter of fiscal 2018 totaling $77,989.

The Company increased its previous regular quarterly dividend of $0.39 per share to $0.40 per share in October 2019. In October 2018, the Company increased its previous regular quarterly dividend of $0.37 per share to $0.39 per share.

49

Critical Accounting Policies

The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We believe that of our accounting policies, the following may involve a higher degree of judgment, estimates and complexity:

Business Combinations

We account for the acquisition of a business using the acquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to non-controlling interests, are recorded at the acquisition date at their fair values. Assigning fair values requires the Company to make significant estimates and assumptions regarding the fair value of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances, and liabilities, such as uncertain tax positions and contingencies. The Company may refine these estimates if necessary over a period not to exceed one year by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.

Significant estimates and assumptions are used in estimating the value of acquired identifiable intangible assets, including estimating future cash flows based on revenues and margins that the Company expects to generate following the acquisition, selecting an applicable royalty rate where needed, applying an appropriate discount rate to estimate a present value of those cash flows and determining their useful lives. Subsequent changes to projections driven by actual results following the acquisition date could require the Company to record impairment charges.

Goodwill, Intangible and Long-Lived Assets

Goodwill results from the excess of purchase price over the net assets of an acquired business. The Company’s North American towables and European reportable segments, as well as its non-reportable operating segments, have a goodwill balance. Goodwill is not amortized but is tested for impairment annually as of May 31 of each fiscal year and whenever events or changes in circumstances indicate that an impairment may have occurred. We generally utilize a two-step quantitative assessment to test for impairment. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying value of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. As part of the annual impairment testing, the Company may utilize a qualitative approach rather than a quantitative approach to determine if an impairment exists, considering various factors including industry changes, actual results as compared to forecasted results, or the timing of a recent acquisition, if applicable.

The Company’s primary intangible assets are dealer networks, trade names and technology assets acquired in business acquisitions. Dealer networks are valued on a Discounted Cash Flow method and are amortized on an accelerated basis over 12 to 20 years, with amortization beginning after any applicable backlog amortization is completed. Trademarks and technology assets are both valued on a Relief of Royalty method and are both amortized on a straight-line basis, using lives of 15 to 25 years for trademarks and 10 to 15 years for technology assets, respectively.

We review our tangible and intangible long-lived assets (individually or in a related group, as appropriate) for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable from future cash flows attributable to the assets. We continually assess whether events or changes in circumstances represent a ‘triggering’ event that would require us to complete an impairment assessment. Factors that we consider in determining whether a triggering event has occurred include, among other things, whether there has been a significant adverse change in legal factors, business climate or competition related to the operation of the asset, whether there has been a significant decrease in actual or expected operating results related to the asset and whether there are current plans to sell or dispose of the asset. The determination of whether a triggering event has occurred is subject to significant management judgment, including at which point or fiscal quarter a triggering event has occurred when the relevant adverse factors persist over extended periods.

50

Should a triggering event be deemed to occur, and for each of the annual goodwill impairment assessments, management is required to estimate fair value. Fair values are generally determined by a discounted cash flow model. These estimates are also subject to significant management judgment, including the determination of many factors such as sales growth rates, gross margin patterns, cost growth rates, terminal value assumptions and discount rates developed using market observable inputs and consideration of risk regarding future performance. Changes in these estimates can have a significant impact on the determination of cash flows and fair value and could potentially result in future material impairments. Management engaged an independent valuation firm to assist in certain of its impairment assessments.

The Company completed its annual goodwill impairment test as of May 31, 2020, and no impairment was identified. See Note 7 to the Consolidated Financial Statements for further discussion of the interim impairment assessments performed in fiscal 2020, including one related to the European reporting unit, and the results of those assessments. There was no material impairment of goodwill during fiscal 2020, 2019 or 2018.

Product Warranty