THOR INDUSTRIES INC (THO) FY 2021 MD&A

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.

The discussion below is a comparison of the results of operations and changes in financial condition for the fiscal years ended July 31, 2021 and 2020. The comparison of, and changes between, the fiscal years ended July 31, 2020 and 2019 can be found within "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2020, as filed with the SEC on September 28, 2020.

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 sold 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, 2021, THOR’s current combined U.S. and Canadian market share based on units was approximately 41.9% for travel trailers and fifth wheels combined and approximately 47.5% for motorhomes. In Europe, according to the European Caravan Federation (“ECF”), EHG’s current market share for the six months ended June 30, 2021 based on units was approximately 24.5% for motorcaravans and campervans combined and approximately 17.5% 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 we do provide repurchase agreements to the dealers’ floor plan lenders.

We generally have financed our growth through a combination of internally generated cash flows from operations and, when needed, outside credit facilities. Capital acquisitions of $131,681 in fiscal 2021 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 continuing COVID-19 pandemic, including its wide-reaching impact on nearly all facets of our operations and the RV industry, as well as related governmental actions and labor shortages throughout the supply chain and within THOR, have impacted and continues to impact our business and our financial results and financial position. In particular, the pandemic has, directly or indirectly, contributed to chassis and certain other supply-side constraints, as described below. Additional impacts could be incurred in future periods, including negative impacts to our results of operations, liquidity and financial position, as a direct or indirect result of the pandemic. Should the rate of COVID-19 infections escalate, or the virus mutate into new, uncontrolled strains, those developments and the resulting impacts could exacerbate risks to our business, financial results and financial position. These risks to our business are more fully described in Part 1, Item 1A "Risk Factors" of this Report.

Significant Events

Fiscal 2021

Tiffin Group Acquisition

On December 18, 2020, the Company closed on a Stock Purchase Agreement (“Tiffin Group SPA”) for the acquisition of all of the issued and outstanding capital stock of luxury motorized recreational vehicle manufacturer Tiffin Motorhomes, Inc., including fifth wheel towable recreational vehicle manufacturer Vanleigh RV, and certain other associated operating and supply companies, which primarily supply component parts and services to Tiffin Motorhomes, Inc. and Vanleigh RV, (collectively, the “Tiffin Group”). Tiffin Group, LLC, a wholly-owned subsidiary of the Company, owns the Tiffin Group. Tiffin Motorhomes, Inc. operates out of various locations in Alabama, while Vanleigh RV operates out of Mississippi.

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The initial cash consideration for the acquisition of the Tiffin Group was approximately $300,000, and was subject to the final determination of the actual acquired net working capital, as defined in the Tiffin Group SPA, as of the close of business on December 28, 2020, which determination was finalized in the fourth quarter of fiscal 2021. The final adjustment was not material. The Tiffin Group operates as an independent operation in the same manner as the Company’s other recreational vehicle subsidiaries. The Company purchased the Tiffin Group to complement its existing towable and motorized RV product offerings and North American independent dealer base.

Fiscal 2019

Erwin Hymer Group Acquisition

On February 1, 2019, the Company acquired Erwin Hymer Group SE. 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 using a number of resources including its own performance tracking and modeling. The Company also considers monthly wholesale shipment data as reported by the Recreation Vehicle Industry Association (“RVIA”), which is typically issued on a one-month lag and represents manufacturers’ North American RV production and delivery to dealers. In addition, we monitor monthly North American retail sales trends as reported by Stat Surveys, whose data is typically issued on a month-and-a-half lag. The Company believes that monthly RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production and net sales.

North American RV independent dealer inventory of our North American products as of July 31, 2021 decreased 8.8% to approximately 58,300 units, compared to approximately 63,900 units as of July 31, 2020. The acquisition of Tiffin Group accounted for approximately 500 of the 58,300 units as of July 31, 2021. North American dealer inventory levels at both July 31, 2021 and 2020 were well below recent historical fiscal year end stocking levels, as dealer inventory levels at July 31, 2019 were approximately 103,400 units, which was reflective of more typical stocking levels.

Dealer inventory levels have continued to decrease materially in relation to current sales levels based on strong retail demand for RVs given the perceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance and the reduction in commercial air travel and cruises, as well as an underlying desire by many to get back to nature and relax with family and friends. As of July 31, 2021, North American dealer inventory levels were well below optimal stocking levels, which has led to increased dealer orders and backlog. THOR’s North American RV backlog as of July 31, 2021 increased $9,083,648, or 215.5%, to $13,298,967 compared to $4,215,319 as of July 31, 2020, with Tiffin Group's backlog included in the July 31, 2021 totals accounting for $767,036, or 8.4%, of the $9,083,648 increase.

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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:

The changes in wholesale shipments noted above in the towable and motorized units were both impacted by the COVID-19 pandemic. Shipments were significantly limited for both towables and motorized products during the period from March to June 2020, as most RV manufacturers and dealers were shut down for a number of weeks during that time period. Since then, demand for both towable and motorized products has been robust, resulting in strong levels of wholesale shipments in the current year-to-date period.

In September 2021, RVIA issued a revised forecast for calendar year 2021 wholesale unit shipments. Under a most likely scenario, towable and motorized unit shipments are projected to increase to approximately 522,400 and 54,800, respectively, for an annual total of approximately 577,200 units, up 34.1% from the 2020 calendar year wholesale shipments. The most likely forecast for calendar year 2021 could range from a lower estimate of approximately 567,000 total units to an upper estimate of approximately 587,400 units.

As part of their September 2021 forecast, RVIA also released their initial estimates for calendar year 2022 wholesale unit shipments. In the most likely scenario, towable and motorized unit shipments are projected to increase to an approximated annual total of 600,200 units, or 4.0% higher than the most likely scenario for calendar year 2021 wholesale shipments. This calendar year 2022 most likely forecast could range from a lower estimate of approximately 586,300 total units to an upper estimate of approximately 614,100 units.

Industry Retail Statistics – North America

We believe that retail demand is the key to growth in the North American RV industry, and that annual North American RV industry wholesale shipments in calendar year 2021 and calendar 2022 may not follow typical seasonal patterns as dealers respond to ongoing high current consumer demand and then rebuild their inventory to optimal stocking levels.

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

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

We believe that North American retail consumer demand has grown in recent periods due to an increasing interest in the RV lifestyle and the ability to connect with nature and has further accelerated since the onset of the COVID-19 pandemic. Many consumers recognize the perceived benefits offered by the RV lifestyle, which provides people with a personal space to maintain social distance in a safe manner, the ability to connect with loved ones and the potential to get away for short, frequent breaks or longer adventures.

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Company Wholesale Statistics – North America

The Company’s wholesale RV shipments, for the six months ended June 30, 2021 and 2020 to correspond with the industry wholesale periods noted above, were as follows (2021 period includes Tiffin Group shipments):

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, 2021 and 2020 to correspond with the industry retail periods noted above, were as follows (2021 period includes Tiffin Group registrations):

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

North American Outlook

The extent to which the COVID-19 pandemic may continue to impact our business in future periods remains uncertain and unpredictable. Nonetheless, our outlook for future growth in North American retail sales in both the short term and the long term remains optimistic as there are many factors driving the current demand that we believe will continue even after the pandemic officially ends. In the near-term, we believe consumers are likely to continue altering their future vacation and travel plans, opting for fewer vacations via air travel, cruise ships and hotels, and preferring vacations that RVs are uniquely positioned to provide, where they can continue practicing social distancing while also allowing them the ability to explore or unwind, often close to home. Minimal-contact vacation options like road trips and camping may prove ideal for people who want to limit pandemic-related risks involved with close personal interactions. We will, however, need to continue to manage through anticipated supply chain issues noted below, which may limit the level to which we can increase output in the near term.

Longer-term, a positive outlook for the North American RV segment is supported by surveys conducted by THOR, RVIA and others, which show that Americans love the freedom of the outdoors and the enrichment that comes with living an active lifestyle. RVs allow people to be in control of their travel experiences, going where they want, when they want and with the people they want. The RV units we design, produce and sell allow people to spend time outdoors pursuing their favorite activities, creating cherished moments and deeply connecting with family and friends. Based on the increasing value consumers place on these factors, we expect to see long-term growth in the North American RV industry. Longer-term, we also believe retail sales will be dependent upon various economic conditions faced by consumers, such as the rate of unemployment, the level of consumer confidence, the disposable income of consumers, changes in interest rates, credit availability, the health of the housing market, changes in tax rates and fuel availability and prices.

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Economic and industry-wide factors that have historically, and that we believe will continue to affect our RV business, include the costs of commodities, the availability and cost of critical supply components 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 are unable to offset those cost increases through a combination of product decontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts. Historically, we have generally been able to offset net cost increases over time.

Recently, we have been alerted by a number of our North American chassis suppliers that supply constraints of key components that they require for the manufacturing of chassis, particularly semiconductor chips, will limit their production of chassis, and hence, our production and sales of motorized RVs will also be impacted. The North American recreational vehicle industry has, from time to time in the past and during our current fiscal year, experienced shortages of chassis for various other reasons, including component shortages, production delays and work stoppages at the chassis manufacturers. If shortages of chassis were to recur or continue for a prolonged period for any reason, it would have a negative impact on our sales and earnings.

The North American RV industry is also facing continuing cost increases, supply shortages and delivery delays of other, non-chassis, raw material components, which may be further exacerbated by the recent hurricane in the southern United States. While our supply chain has been resilient enough to support us during our fiscal 2021 growth in sales and production, these shortages and constraints have negatively impacted our ability to further ramp up production rates and sales during the current fiscal year and has caused an increase in unfinished units as of July 31, 2021. We believe these shortages and delays may continue to result in production delays or adjusted production rates, which may limit our ability to ramp up production to meet existing demand and could have a negative impact on our results of operations. If shortages of chassis or other component parts were to become more significant or longer term in nature, or if other factors were to impact our suppliers' ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected. Where possible, we continue to work closely with our suppliers on various supply chain strategies to minimize these constraints, and we continue to identify alternative suppliers. The geographic centrality of the North American RV industry in northern Indiana, where the majority of our facilities and many of our suppliers are located, could exacerbate supply chain and other COVID-19 related risks, should northern Indiana, or any of the other areas in which we, our suppliers or our customers operate, become disproportionately impacted by the pandemic or other factors.

Industry Outlook – 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 OEM-specific reports from most of the individual member countries that make up the ECF. As these reports are coming directly from the ECF member countries, timing and content vary, but typically the reports are issued on a one-to-two-month lag as well. While most countries provide OEM-specific information, the United Kingdom, which made up 20.7% and 7.1% of the caravan and motorcaravan (including campervans) European market for the six months ended June 30, 2021, respectively, does not provide OEM-specific information. Industry wholesale shipment data for the European RV market is not available.

Within Europe, over 90% of our sales are made to dealers within 13 different European countries. The market conditions, as well as the operating status of our independent dealers within each country, vary based on the various local economic conditions, the current impact of COVID-19 and the local responses and restrictions in place to manage the pandemic. It is inherently difficult to generalize about the operating conditions within the entire European region. However, independent RV dealer inventory levels of our European products are generally below prior-year levels in the various countries we serve. Within Germany, which accounts for approximately 60% of our European product sales, independent dealer inventory levels are currently below historical norms, with dealers submitting higher levels of orders than typical due to continued high end-consumer demand, as discussed further below.

THOR’s European RV backlog as of July 31, 2021 increased $2,033,124, or 133.2%, to $3,559,097 compared to $1,525,973 as of July 31, 2020, with the increase attributable to a number of causes, including the perceived safety of RV travel during the COVID-19 pandemic, a strong desire to socially distance, the reduction in commercial air travel and cruises, an increase in various marketing campaigns to promote sales, and the lower levels of independent European RV dealer inventory levels noted above, which has led to increased dealer orders and backlog.

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Industry Retail Statistics – Europe

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

(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 ECF or do not have it available for the entire time period covered).

Company Retail Statistics – Europe

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

Note: Data from the ECF is subject to adjustments, is continuously updated, and is often impacted by delays in reporting by various countries.

European Outlook

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

The extent to which the COVID-19 pandemic may impact our business in future periods remains uncertain and unpredictable. Our outlook for future growth in European RV retail sales depends upon various economic conditions in the respective countries in which we sell, and also depends on our ability to manage through supply chain issues that could limit the level to which we can increase output. 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, environmental surcharges and related regulations, and, most recently, travel safety considerations all influence retail sales. We believe 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.

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Historically, we and our independent European dealers have marketed our European recreational vehicles through numerous RV fairs at the country and regional levels which occur throughout the calendar year. These fairs have historically been well-attended events that allow retail consumers the ability to see the newest products, features and designs and to talk with product experts in addition to being able to purchase or order an RV. The protection of the health of our employees, customers and dealer-partners is our top priority. As a result, we have cancelled our participation in most European trade fairs and major events through calendar 2021.

In place of the trade fairs, we have and will continue to strengthen and expand our digital activities in order to reach high potential target groups, generate leads and steer customers directly to dealerships. With over 1,000 active dealer-partners in Germany and throughout Europe, we believe our European 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 these 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.

Recently, we have been alerted by a number of our European chassis suppliers that supply constraints of key components that they require for the manufacturing of chassis, including, but not limited to, semiconductor chips, will limit their production of chassis. During fiscal 2021, we have experienced delays in the receipt of chassis from our European chassis suppliers, limiting our ability to further increase production. We expect these challenges to persist and, in particular, anticipate continued delays in receipt of chassis in Europe. As a result, limitations in the availability of chassis will limit our ability to consistently maintain our previous production levels and will also limit our ability to ramp up production of certain products despite dealer demand for those products.

In Europe, we continue to experience cost increases, supply shortages and delivery delays of other, non-chassis, raw material components which negatively impacted our ability to further ramp up production and sales in the current fiscal year and has caused an increase in unfinished units as of July 31, 2021. We believe these shortages and delays may continue to result in production delays or adjusted production rates, which may limit our ability to ramp up production to meet existing demand and could have a negative impact on our sales and operating results.

Where possible, to minimize the impact of these supply chain constraints, we have identified a second-source supplier base for most component parts. However, due to engineering requirements, it is generally not possible to quickly change the chassis our various units are built upon.

If shortages of chassis or other component parts were to become more significant or longer term in nature, or if other factors were to impact our suppliers' ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected. In addition, if the impact of COVID-19 on our vendors increases or is prolonged, the availability of key components, including chassis, will have a further negative impact on our production output during fiscal 2022. Uncertainties related to changing emission standards, such as the Euro 6d standard which became effective as of January 2020 for new models and became effective for certain vehicles starting January 2021 and 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.

In addition to material supply constraints, labor shortages may also impact our European operations. Currently, a number of the employees of our production facilities in Europe reside in one country while working in another and therefore travel restrictions imposed by certain countries within Europe may negatively impact the availability of our labor force and therefore our production output.

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FISCAL 2021 VS. FISCAL 2020

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CONSOLIDATED

Consolidated net sales for fiscal 2021 increased $4,149,447, or 50.8%, compared to fiscal 2020. The increase in consolidated net sales is due to both the continuing increase in current consumer demand and the negative impact the start of the COVID-19 pandemic had on net sales during the latter half of the prior fiscal year. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $421,438 of the $4,149,447 increase in net sales, or 5.2% of the 50.8% increase. Approximately 26.0% of the Company's net sales for fiscal 2021 were transacted in a currency other than the U.S. dollar. The Company's most material exchange rate exposure is sales in Euros. Of the $4,149,447, or 50.8% increase in consolidated net sales, $234,968, or 5.7% of the 50.8% increase, reflects the impact of the change in currency exchange rates between the two periods. To determine this information, net sales transacted in currencies other than U.S. dollars have been translated to U.S. dollars using the average exchange rates that were in effect during the comparative period.

Consolidated gross profit for fiscal 2021 increased $776,766, or 69.5%, compared to fiscal 2020. Consolidated gross profit was 15.4% of consolidated net sales for fiscal 2021 and 13.7% for fiscal 2020. The increases in consolidated gross profit and the consolidated gross profit percentage were both primarily due to the impact of the increase in net sales in the current-year period compared to the prior-year period and gross margin percentage improvements noted below.

Selling, general and administrative expenses for fiscal 2021 increased $235,797, or 37.2%, compared to fiscal 2020, primarily due to the 50.8% increase in net sales.

Amortization of intangible assets expense for fiscal 2021 increased $19,949 compared to fiscal 2020, primarily due to higher dealer network amortization in the European segment as compared to the prior-year period and additional amortization of $6,656 due to the acquisition of the Tiffin Group as discussed in Note 2 to the Consolidated Financial Statements.

Corporate costs included in selling, general and administrative expenses increased $46,378 to $117,572 for fiscal 2021 compared to $71,194 for fiscal 2020, an increase of 65.1%. This increase is primarily related to increased compensation costs, including an increase in incentive compensation of $13,262 due to the increase in income before income taxes compared to the prior-year period. Deferred compensation expense also increased $11,829, which was effectively offset by the increase in other income related to the deferred compensation plan assets as noted below, and stock-based compensation also increased $10,625. Costs related to workers' compensation and product liability reserves recorded at Corporate increased by a total of $4,116, primarily due to favorable adjustments in the prior-year period.

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Corporate interest and other income and expense was $73,118 of net expense for fiscal 2021 compared to $101,661 of net expense for fiscal 2020. This decrease in net expense of $28,543 included a decrease in interest expense and fees on the debt facilities of $12,061 due primarily to the reduction in the outstanding debt balances and reduced interest rates compared to the prior-year period. In addition, the change in the fair value of the Company’s deferred compensation plan assets due to market fluctuations and investment income resulted in a net increase in other income of $11,755 compared to the prior-year period. The prior-year total also included losses of $6,884 related to the Company's former equity investment as discussed in Note 2 to the Condensed Consolidated Financial Statements.

Income before income taxes for fiscal 2021 was $844,581, as compared to $272,896 for fiscal 2020, an increase of $571,685, or 209.5%, primarily driven by the increase in net sales and gross margin and selling, general and administrative expense percentage improvements noted below.

The overall annual effective income tax rate for fiscal 2021 was 21.8% on $844,581 of income before income taxes, compared with 18.9% on $272,896 of income before income taxes for fiscal 2020. The primary reason for the increase relates to the jurisdictional mix of pretax income between foreign and domestic between the comparable periods.

SEGMENT REPORTING

North American Towable Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2021 vs. Fiscal 2020

The increase in total North American towables net sales of 50.3% compared to the prior fiscal year resulted from a 42.9% increase in unit shipments and a 7.4% 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, 2021, combined travel trailer and fifth wheel wholesale unit shipments increased 47.8% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2021 and 2020, our market share for travel trailers and fifth wheels combined was 41.8% and 44.0%, respectively.

The increases in the overall net price per unit within the travel trailer product line of 8.7% and the fifth wheel product line of 11.2% were primarily due to the impacts of both selective net selling price increases, primarily to offset increasing material costs, and product mix changes compared to the prior-year period.

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Cost of products sold increased $1,680,430 to $5,201,020, or 83.6% of North American towables net sales, for fiscal 2021 compared to $3,520,590 or 85.0% of North American towables net sales, for fiscal 2020. The changes in material, labor, freight-out and warranty costs comprised $1,599,973 of the $1,680,430 increase in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American towables net sales decreased to 77.7% for fiscal 2021 compared to 78.1% for fiscal 2020, primarily as a result of improvements in the material and warranty cost percentages, partially offset by an increase in the labor cost percentage. The improvement in the material cost percentage is primarily due to a reduction in sales discounts since the prior-year period, which effectively increases net selling prices and correspondingly decreases the material cost percentage, partially offset by recently increasing material costs. The warranty cost percentage is lower due to favorable experience trends, while the labor cost percentage increase is due to the current competitive RV labor market conditions in northern Indiana compared to the prior-year period. Total manufacturing overhead increased $80,457 with the increase in sales, but decreased as a percentage of North American towables net sales from 6.9% to 5.9%, as the increased sales resulted in lower overhead costs per unit sold.

Variable costs in manufacturing overhead increased $79,171 to $332,049, or 5.3% of North American towables net sales, for fiscal 2021 compared to $252,878, or 6.1% of North American towables net sales, for fiscal 2020 as a result of the increase in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $1,286 to $36,057 in fiscal 2021 from $34,771 in fiscal 2020.

North American towables gross profit increased $401,016 to $1,020,908, or 16.4% of North American towables net sales, for fiscal 2021 compared to $619,892, or 15.0% of North American towables net sales, for fiscal 2020. The increase in the gross profit was driven by the increase in net sales, and 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 $330,138, or 5.3% of North American towables net sales, for fiscal 2021 compared to $238,656, or 5.8% of North American towables net sales, for fiscal 2020. The primary reason for the $91,482 increase was the impact of the increase in North American towables net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $95,734. This increase was partially offset by the decrease in sales-related travel, advertising and promotional costs of $5,374, primarily due to the cancellation of the major North American RV shows, along with travel restrictions, in the current-year period due to the ongoing COVID-19 pandemic. The decrease in the overall selling, general and administrative expense as a percentage of North American towable net sales is primarily due to the reductions in sales-related travel, advertising and promotion costs as a percentage of net sales in tandem with the increase in net sales.

North American towables income before income taxes was $658,964, or 10.6% of North American towables net sales, for fiscal 2021 compared to $336,207, or 8.1% of North American towables net sales, for fiscal 2020. The primary reason for the increase in North American towables income before income taxes was the increase in North American towables net sales, and the primary reasons for the increase in percentage were the decreases in the cost of products sold and selling, general and administrative expense percentages noted above, and a 0.5% increase due to the combination of a lower amortization expense percentage this year and the impairment charges in the prior-year period as discussed in Note 7 to the Condensed Consolidated Financial Statements.

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North American Motorized Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2021 vs. Fiscal 2020

The increase in total motorized net sales of 92.0% compared to the prior fiscal year resulted from a 65.7% increase in unit shipments and a 26.3% increase in the overall net price per unit due to the impact of changes in product mix and price. The addition of the Tiffin Group, acquired on December 18, 2020, accounted for $373,042 of the $1,279,293 increase, or 26.8% of the 92.0% increase. According to statistics published by RVIA, for the twelve months ended July 31, 2021, combined motorhome wholesale unit shipments increased 36.2% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2021 and 2020, our market share for motorhomes was 43.1% and 38.1%, respectively.

The increases in the overall net prices per unit within the Class A of 42.3% and the Class C product line of 17.0% during fiscal 2021 were both impacted by the addition of the higher-priced Tiffin Group product lines and selective net price increases to partially offset increased material costs. The Tiffin Group Class A product lines are primarily higher-priced diesel units as opposed to more moderately-priced gas units. The decrease in the overall net price per unit within the Class B product line of 51.1% is primarily due to product mix changes as a result of a much higher concentration of sales of lower-priced Class B products in the current-year period, including increased sales of previously existing lower-priced models and the introduction of several new lower-priced models, as compared to fiscal 2020.

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Cost of products sold increased $1,083,533 to $2,323,636, or 87.0% of motorized net sales, for fiscal 2021 compared to $1,240,103, or 89.2% of motorized net sales, for fiscal 2020. The changes in material, labor, freight-out and warranty costs comprised $1,021,576 of the $1,083,533 increase due to the increased sales volume. Material, labor, freight-out and warranty costs as a combined percentage of motorized net sales was 81.9% for fiscal 2021 compared to 83.9% for fiscal 2020, with the decrease in percentage primarily due to decreases in both the material and warranty cost percentages, partially offset by an increase in the labor cost percentage. The improvement in the material cost percentage is primarily due to a reduction in sales discounts since the prior-year period, which effectively increases net selling prices and correspondingly decreases the material cost percentage and product mix changes, partially offset by recently increasing material costs. The warranty cost percentage is lower due to favorable experience trends, while the labor cost percentage increase is due to the current competitive RV labor market conditions in northern Indiana compared to the prior-year period. Total manufacturing overhead increased $61,957 due to the net sales increase, but decreased as a percentage of North American motorized net sales from 5.3% to 5.1%, as the increased net sales resulted in lower overhead costs per unit sold.

Variable costs in manufacturing overhead increased $58,514 to $120,442, or 4.5% of North American motorized net sales, for fiscal 2021 compared to $61,928 or 4.5% of North American motorized net sales, for fiscal 2020 as a result of the increase in net sales. Fixed costs in manufacturing overhead, which consist primarily of facility costs, property taxes and depreciation, increased $3,443 to $15,049 in fiscal 2021 from $11,606 in fiscal 2020.

Motorized gross profit increased $195,760 to $345,755, or 13.0% of motorized net sales, for fiscal 2021 compared to $149,995, or 10.8% of motorized net sales, for fiscal 2020. The increase in gross profit was due primarily to the increase in net sales, and the increase in the gross profit percentage was due to the decrease in the cost of products sold percentage noted above.

Selling, general and administrative expenses were $134,315, or 5.0% of motorized net sales, for fiscal 2021 compared to $72,720, or 5.2% of motorized net sales, for fiscal 2020. The $61,595 increase was primarily due to the increase in North American motorized net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $53,061. Legal, professional and related settlement costs also increased by $1,524. The decrease in the overall selling, general and administrative expense as a percentage of North American motorized net sales was due to the increase in net sales.

Motorized income before income taxes was $202,057, or 7.6% of motorized net sales, for fiscal 2021 compared to $71,943, or 5.2% of motorized net sales, for fiscal 2020. The primary reason for the increase in North American motorized income before income taxes was the increase in North American motorized net sales. The primary reasons for the increase in percentage were the decreases in the cost of products sold and selling, general and administrative expense percentages noted above.

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European Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2021 vs. Fiscal 2020

The increase in total European recreational vehicle net sales of 28.8% compared to the prior-year period resulted from an 19.0% increase in unit shipments and a 9.8% increase in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. This increase includes the current heightened European market demand for the campervan product line, and demand for motorcaravan products, as moderated by the impact of current chassis supply constraints on the motorcaravan product line. The sales increase of $714,688 includes an increase of $234,968, or 9.5% of the 28.8% increase, due to the increase in foreign exchange rates since the prior-year period.

The overall net price per unit increase of 9.8% includes the impact of foreign currency exchange rate changes, which accounts for 9.5% of the 9.8% increase on a constant-currency basis.

The decrease in the overall net price per unit due to product mix and price within the motorcaravan product line of 1.0% was primarily due to product mix changes reflecting the trend in the latter half of fiscal 2021 toward the lower-priced models within this product category compared to the prior-year period. The increase in the overall net price per unit due to product mix and price within the campervan product line of 9.7% was primarily due to the net impact of product mix changes, including an increased concentration of units with higher chassis content compared to the prior-year period, in addition to selective net price increases.

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European recreational vehicle cost of products sold increased $578,221 to $2,759,224, or 86.2% of European recreational vehicle net sales, for fiscal 2021 compared to $2,181,003, or 87.8% of European recreational vehicle net sales, for fiscal 2020. The changes in material, labor, freight-out and warranty costs comprised $521,250 of the $578,221 increase primarily due to the increased net sales volume. Material, labor, freight-out and warranty costs as a combined percentage of European recreational vehicle net sales decreased to 77.1% for fiscal 2021 compared to 78.3% for fiscal 2020, with the decrease primarily due to a decrease in the material cost percentage, primarily due to selective price increases and better material pricing due to the significant increase in volume. Total manufacturing overhead increased $56,971 with the volume increase but decreased as a percentage of motorized net sales from 9.5% to 9.1% as the increased net sales levels resulted in lower overhead costs per unit sold.

European recreational vehicle gross profit increased $136,467 to $440,855, or 13.8% of European recreational vehicle net sales, for fiscal 2021 compared to $304,388, or 12.2% of European recreational vehicle net sales, for fiscal 2020. The increase in gross profit is due to the increase in net sales, while the increase in gross profit as a percentage of European recreational vehicle net sales is due to the decrease in the cost of products sold percentage noted above.

European recreational vehicle selling, general and administrative expenses were $261,778, or 8.2% of European recreational vehicle net sales, for fiscal 2021 compared to $239,635, or 9.6% of European recreational vehicle net sales, for fiscal 2020. The primary reason for the $22,143 increase was the impact of the increase in European recreational vehicle net sales and income before income taxes, which caused commissions, incentive and other compensation and benefits to increase by $25,747. Miscellaneous general and administrative expenses also increased $4,836 primarily due to non-recurring favorable legal and other reserve adjustments in the prior year. Professional fees and related settlement costs also increased $7,230 and depreciation expense increased by $5,386. These increases were mostly offset by the decrease in sales-related travel, advertising and promotional costs of $21,919, primarily due to not participating in European trade shows, along with travel restrictions, in the current year due to the ongoing COVID-19 pandemic. The decrease in the overall selling, general and administrative expense as a percentage of European recreational vehicle net sales is primarily due to the increase in net sales.

European recreational vehicle income before income taxes was $116,576, or 3.6% of European recreational vehicle net sales, for fiscal 2021 compared to $9,850, or 0.4% of European recreational vehicle net sales, for fiscal 2020. The primary reason for the increase in income before income taxes was the increase in European recreational vehicle net sales. The increase in percentage was primarily due to the decreases in the cost of products sold and selling, general and administrative expense percentages noted above.

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Financial Condition and Liquidity

As of July 31, 2021, we had $445,852 in cash and cash equivalents, of which $282,220 is held in the United States and the equivalent of $163,632, predominantly in Euros, is held in Europe, compared to $538,519 on July 31, 2020, of which $276,841 was held in the United States and the equivalent of $261,678, 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 the $92,667 decrease in cash and cash equivalents are described in more detail below, but the decrease was primarily attributable to cash provided by operations of $526,482 less cash used in financing activities of $188,438 and cash used in investing activities of $428,493.

Net working capital at July 31, 2021 was $1,008,738 compared to $586,996 at July 31, 2020, with the increase primarily due to increases in inventory and accounts receivable as noted in the Operating Activities section below. Capital expenditures of $128,835 for fiscal 2021 were made primarily for land and production building additions and improvements, and replacing machinery and equipment used in the ordinary course of business.

We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. We believe 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 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 of THOR stock and special dividends based upon market and business conditions and excess cash availability, subject to potential customary limits and restrictions pursuant to our credit facilities, applicable legal limitations and determination by the Company's Board of Directors ("Board").

During fiscal 2020 and into fiscal 2021, we delayed or paused certain capital expenditures due to the uncertainties related to the COVID-19 pandemic and in an effort to preserve cash. We anticipate that during fiscal 2022 we will incur higher levels of capital spending than the recent fiscal 2019 through fiscal 2021 average as we address capital spending needs of our recent acquisitions and certain delayed projects, focus on automation and other projects directly related to enhancing the quality of our products, and implement various capacity enhancement initiatives. Other capital expenditure projects will benefit customer services, technology enhancements, energy efficiency initiatives and general equipment replacements. Included within the capacity enhancement initiatives is a recently announced expansion by our Heartland subsidiary in a new regional complex in southern Michigan of approximately $36,000, the majority of which is expected to be completed in fiscal 2022. These specific facilities will produce various Heartland travel trailer and fifth wheel models. Our current estimate of committed and internally approved capital spend for fiscal 2022 is $275,000, of which we anticipate approximately two-thirds will be in North America and one-third in Europe.

The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under credit facilities, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment conditions prior to payment. The conditions for the 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.

Operating Activities

Net cash provided by operating activities for fiscal 2021 was $526,482 as compared to net cash provided by operating activities of $540,941 for fiscal 2020 and $508,019 for fiscal 2019.

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For fiscal 2021, net income adjusted for non-cash operating items (primarily depreciation, amortization of intangibles, deferred income tax benefit and stock-based compensation) provided $929,482 of operating cash. The change in net working capital resulted in the use of $403,000 of operating cash during fiscal 2021, primarily due to an increase in inventory, as production levels have increased due to the current heightened demand, and there has been an increase in productions lines and capacity. In addition, work-in-process inventory is higher than normal at July 31, 2021 due to elevated material component shortages on otherwise substantially completed units. Accounts receivable also has increased given the increase in sales. These increases were partially offset by an increase in accounts payable primarily related to the inventory growth, and an increase in accrued liabilities, driven primarily by increased accrued compensation and incentive pay resulting from the increased production levels and income before income taxes as compared to the prior year.

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 payable 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 items (primarily depreciation, amortization of intangibles, deferred income tax expense and stock-based compensation) provided $368,838 of operating cash. The changes in working capital used $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.

Investing Activities

Net cash used in investing activities for fiscal 2021 was $428,493, primarily due to $310,938 used in business acquisitions and capital expenditures of $128,835.

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.

Financing Activities

Net cash used in financing activities for fiscal 2021 was $188,438, including $59,700 in term loan debt payments. Additionally, the Company made regular quarterly cash dividend payments of $0.41 per share for each quarter of fiscal 2021 totaling $90,801.

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.

The Company increased its previous regular quarterly dividend of $0.40 per share to $0.41 per share in October 2020. In October 2019, the Company increased its previous regular quarterly dividend of $0.39 per share to $0.40 per share.

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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, determining an appropriate dealer attrition rate, 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 reporting units are generally the same as its operating segments, which are identified in Note 3 to the Consolidated Financial Statements. 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. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge equal to that excess is recognized, not to exceed the amount of goodwill allocated to the reporting unit. 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 design technology and other intangible 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.

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.

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The Company completed its annual goodwill impairment test as of May 31, 2021, and no impairment was identified. See Note 7 to the Consolidated Financial Statements for further information regarding goodwill and intangible assets.

Product Warranty

We generally provide retail customers of our products with either a one-year or two-year warranty covering defects in material or workmanship, with longer warranties on certain structural components or other items. We record a liability based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditures over the warranty period. A significant increase in service shop rates, the cost of parts or the frequency of claims could have a material adverse impact on our operating results for the period or periods in which such additional claims or costs materialize. Management believes that the warranty liability is appropriate; however, actual claims incurred could differ from estimates, requiring adjustments to the reserves.

Principal Contractual Obligations and Commercial Commitments

Our principal contractual obligations and commercial commitments at July 31, 2021 are summarized in the following charts. Unrecognized income tax benefits in the amount of $19,267 have been excluded from the table because we are unable to determine a reasonably reliable estimate of the timing of future payment. We have no other material off balance sheet commitments.

(1)See Note 12 to the Consolidated Financial Statements for additional information.

(2)Debt interest payment amounts assume the current interest rate environment, current exchange rates and future average outstanding debt balances assuming minimum annual contractual payments.

(3)See Note 15 to the Consolidated Financial Statements for additional information.

(4)Represent commitments to purchase specified quantities of raw materials at market prices in our other non-reportable segment. The dollar values above have been estimated based on July 31, 2021 market prices.

(1)The standby repurchase totals above do not consider any curtailments that lower the eventual repurchase obligation totals, and these obligations generally extend up to eighteen months from the date of sale of the related product to the dealer. In estimating the expiration of the standby repurchase obligations, we used inventory reports as of July 31, 2021 from our dealers’ primary lending institutions and made an assumption for obligations for inventory aged 0-12 months that it was financed evenly over the twelve-month period.

Accounting Pronouncements

Reference is made to Note 1 to the Consolidated Financial Statements in this report for a summary of recently adopted accounting pronouncements, which summary is hereby incorporated by reference.

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