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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended October 31, 2020.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____ to ____.
COMMISSION FILE NUMBER 001-09235

tho-20201031_g1.jpg

THOR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware93-0768752
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
601 E. Beardsley Ave., Elkhart, IN
46514-3305
(Address of principal executive offices)(Zip Code)
(574) 970-7460
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act
Name of each exchange
Title of each classTrading Symbol(s)on which registered
Common stock (Par value $.10 Per Share)THONew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes        No    

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes        No    

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

Large accelerated filer                Accelerated filer            
Non-accelerated filer                      Smaller reporting company    
Emerging growth company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes        No    
As of November 30, 2020, 55,366,241 shares of the registrant’s common stock, par value $0.10 per share, were outstanding.




PART I – FINANCIAL INFORMATION (Unless otherwise indicated, amounts in thousands except share and per share data.)
ITEM 1. FINANCIAL STATEMENTS
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

October 31, 2020July 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$337,402 $538,519 
   Restricted cash
2,808 2,844 
Accounts receivable, trade, net653,805 588,069 
Factored accounts receivable111,063 143,278 
Accounts receivable, other, net52,785 82,880 
Inventories, net1,038,250 716,305 
Prepaid income taxes, expenses and other44,203 30,382 
Total current assets2,240,316 2,102,277 
 Property, plant and equipment, net1,091,941 1,107,649 
Other assets:
Goodwill1,481,283 1,476,541 
Amortizable intangible assets, net885,454 914,724 
Deferred income tax assets, net70,496 78,738 
Other91,432 91,531 
Total other assets2,528,665 2,561,534 
TOTAL ASSETS
$5,860,922 $5,771,460 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$753,106 $636,506 
Current portion of long-term debt12,519 13,817 
Short-term financial obligations35,257 35,939 
Accrued liabilities:
Compensation and related items
194,687 160,083 
Product warranties
245,554 252,869 
Income and other taxes
59,934 83,893 
Promotions and rebates
71,344 97,378 
Product, property and related liabilities14,142 15,440 
Dividends payable22,700  
Liabilities related to factored receivables111,063 143,278 
Other
76,384 76,078 
Total current liabilities1,596,690 1,515,281 
Long-term debt1,585,019 1,652,831 
Deferred income tax liabilities, net122,137 123,802 
Unrecognized tax benefits13,441 12,765 
Other liabilities123,114 121,212 
Total long-term liabilities1,843,711 1,910,610 
Contingent liabilities and commitments
  
Stockholders’ equity:
Preferred stock – authorized 1,000,000 shares; none outstanding
  
Common stock – par value of $.10 per share; authorized 250,000,000 shares; issued 65,651,570 and 65,396,531 shares, respectively
6,565 6,540 
Additional paid-in capital442,794 436,828 
Retained earnings2,292,387 2,201,330 
Accumulated other comprehensive income, net of tax11,219 26,993 
Less treasury shares of 10,285,329 and 10,197,775, respectively, at cost
(360,226)(351,909)
Stockholders' equity attributable to THOR Industries, Inc.2,392,739 2,319,782 
Non-controlling interests 27,782 25,787 
Total stockholders’ equity2,420,521 2,345,569 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$5,860,922 $5,771,460 
See Notes to the Condensed Consolidated Financial Statements.


2



THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended October 31,
20202019
Net sales
$2,537,360 $2,158,785 
Cost of products sold2,158,508 1,849,974 
Gross profit378,852 308,811 
Selling, general and administrative expenses181,763 188,464 
Amortization of intangible assets
27,427 24,293 
Interest income318 975 
Interest expense24,276 28,025 
Other income (expense), net615 (370)
Income before income taxes146,319 68,634 
Income tax provision 30,680 16,789 
Net income 115,639 51,845 
Less: Net income attributable to non-controlling interests1,882 780 
Net income attributable to THOR Industries, Inc.$113,757 $51,065 
Weighted-average common shares outstanding:
Basic55,238,164 55,095,074 
Diluted55,554,682 55,224,655 
Earnings per common share:
Basic$2.06 $0.93 
Diluted$2.05 $0.92 
Comprehensive income:
Net income $115,639 $51,845 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment (18,993)993 
Unrealized gain (loss) on derivatives, net of tax3,332 (3,722)
Total other comprehensive loss, net of tax(15,661)(2,729)
Total Comprehensive income 99,978 49,116 
Less: Comprehensive income attributable to non-controlling interests1,995 638 
Comprehensive income attributable to THOR Industries, Inc.$97,983 $48,478 




















See Notes to the Condensed Consolidated Financial Statements.


3



THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended October 31,
   20202019
Cash flows from operating activities:
Net income$115,639 $51,845 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation26,812 25,914 
Amortization of intangible assets27,427 24,293 
Amortization of debt issuance costs2,723 2,685 
Deferred income tax provision 4,601 2,318 
(Gain) loss on disposition of property, plant and equipment(79)619 
Stock-based compensation expense5,768 5,013 
Changes in assets and liabilities:
Accounts receivable(36,495)(65,307)
Inventories, net(322,047)(82,152)
Prepaid income taxes, expenses and other(14,857)6,649 
Accounts payable127,585 19,639 
Accrued liabilities(20,601)(46,593)
Long-term liabilities and other2,234 3,080 
Net cash used in operating activities(81,290)(51,997)
Cash flows from investing activities:
Purchases of property, plant and equipment (24,708)(31,220)
Proceeds from dispositions of property, plant and equipment 975 18,951 
Business acquisitions, net of cash acquired(22,700) 
Other (1,534)
Net cash used in investing activities(46,433)(13,803)
Cash flows from financing activities:
Borrowings on revolving asset-based credit facilities 41,569 
Payments on term-loan credit facilities(59,700)(140,181)
Payments on revolving asset-based credit facilities (5,577)
Payments on other debt(3,096)(3,001)
Payments on finance lease obligations(119)(107)
        Short-term financial obligations and other, net(5,580)(7,477)
Net cash used in financing activities(68,495)(114,774)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(4,935)(206)
Net decrease in cash and cash equivalents and restricted cash(201,153)(180,780)
Cash and cash equivalents and restricted cash, beginning of period541,363 451,262 
Cash and cash equivalents and restricted cash, end of period340,210 270,482 
Less: restricted cash2,808 38,704 
Cash and cash equivalents, end of period$337,402 $231,778 
Supplemental cash flow information:
Income taxes paid$48,788 $24,512 
Interest paid$18,207 $25,592 
Non-cash investing and financing transactions:
Capital expenditures in accounts payable$1,602 $3,137 
Quarterly dividends payable$22,700 $22,080 





See Notes to the Condensed Consolidated Financial Statements.


4




THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 31, 2020 AND 2019 (UNAUDITED)
Three Months Ended October 31, 2020
AccumulatedStockholders'
AdditionalOtherEquityNon-Total
Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders'
SharesAmountCapitalEarnings Income (Loss)SharesAmountto THORInterestsEquity
Balance at August 1, 202065,396,531 $6,540 $436,828 $2,201,330 $26,993 10,197,775 $(351,909)$2,319,782 $25,787 $2,345,569 
Net income — — — 113,757 — — — 113,757 1,882 115,639 
Restricted stock unit activity255,039 25 198 — — 87,554 (8,317)(8,094)— (8,094)
Dividends $0.41 per common share
— — — (22,700)— — — (22,700)— (22,700)
Stock-based compensation expense— — 5,768 — — — — 5,768 — 5,768 
Other comprehensive income (loss)— — — — (15,774)— — (15,774)113 (15,661)
Balance at October 31, 202065,651,570 $6,565 $442,794 $2,292,387 $11,219 10,285,329 $(360,226)$2,392,739 $27,782 $2,420,521 


Three Months Ended October 31, 2019
AccumulatedStockholders'
AdditionalOtherEquityNon-Total
Common StockPaid-InRetainedComprehensiveTreasury StockAttributablecontrollingStockholders'
SharesAmountCapitalEarnings(Loss)SharesAmountto THORInterestsEquity
Balance at August 1, 201965,189,907 $6,519 $416,382 $2,066,674 $(57,004)10,126,434 $(348,146)$2,084,425 $10,803 $2,095,228 
Net income — — — 51,065 — — — 51,065 780 51,845 
Restricted stock unit activity206,624 21 1,436 — — 71,341 (3,763)(2,306)— (2,306)
Dividends $0.40 per common share
— — — (22,080)— — — (22,080)— (22,080)
Stock-based compensation expense— — 5,013 — — — — 5,013 — 5,013 
Other comprehensive loss— — — — (2,587)— — (2,587)(142)(2,729)
Balance at October 31, 201965,396,531 $6,540 $422,831 $2,095,659 $(59,591)10,197,775 $(351,909)$2,113,530 $11,441 $2,124,971 





See Notes to the Condensed Consolidated Financial Statements.


5



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(All U.S. Dollar, Euro and British Pound Sterling amounts presented in thousands except share and per share data or except as otherwise specified)

1. Nature of Operations and Accounting Policies

Nature of Operations

THOR Industries, Inc. was founded in 1980 and is the sole owner of operating subsidiaries (collectively, the “Company” or "THOR"), that, combined, represent the world's largest manufacturer of recreational vehicles (“RVs”). The Company manufactures a wide variety of RVs in the United States and Europe and sells those vehicles, as well as related parts and accessories, primarily to independent, non-franchise dealers throughout the United States, Canada and Europe. Unless the context requires or indicates otherwise, all references to “THOR,” the “Company,” “we,” “our” and “us” refer to THOR Industries, Inc. and its subsidiaries.

The July 31, 2020 amounts are derived from the annual audited financial statements of THOR. The interim financial statements are unaudited. In the opinion of management, all adjustments (which consist of normal, recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented have been made. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020. Due to seasonality within the recreational vehicle industry, and the current COVID-19 pandemic, among other factors, annualizing the results of operations for the three months ended October 31, 2020 would not necessarily be indicative of the results expected for the full fiscal year.

Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (referred to as Step 2 in the goodwill impairment test). Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment charge equal to that excess shall be recognized, not to exceed the amount of goodwill allocated to the reporting unit. This ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. The Company adopted ASU 2017-04, effective August 1, 2020. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

2. Acquisitions

Togo Group

In February 2018, the Company formed a 50/50 joint venture, originally called TH2connect, LLC, with Tourism Holdings Limited ("thl"). In July 2019, this joint venture was rebranded as "Togo Group." Togo Group was formed to own, improve and sell innovative and comprehensive digital applications through a platform designed for the global RV industry.

Effective March 23, 2020, the Company and thl reached an agreement (the “2020 Agreement”) whereby the Company obtained additional ownership interest in Togo Group. THOR obtained a 73.5% controlling interest in Togo Group and the power to direct the activities of Togo Group. Since the effective date of the 2020 Agreement, the operating results, balance sheet accounts and cash flow activity of Togo Group have been consolidated within the Company's Condensed Consolidated Financial Statements.

The operations of Togo Group are focused on digital solutions primarily for the North American market related to travel and RV use, with expansion into other regions anticipated in future periods. The Togo Group is managed as a stand-alone operating entity and represents a non-reportable segment and a separate reporting unit for goodwill assessment purposes.


6



The table below summarizes the final estimated fair value of the Togo Group assets acquired and liabilities assumed as of the 2020 Agreement effective date.

Cash$326 
Accounts receivable466 
Other assets749 
Property, plant and equipment362 
Amortizable intangible assets
Trade names and trademarks1,130 
Developed technology5,700 
Other1,350 
Goodwill61,955 
Liabilities(2,595)
Non-controlling interest(16,835)
Total fair value of net assets acquired$52,608 

Amortizable intangible assets have a weighted-average useful life of approximately eight years and are amortized on a straight-line basis. The developed technology was valued using the Multi-Period Excess Earnings method, which is a form of the income approach. Trade names and trademarks were valued using the Relief from Royalty method. The majority of the goodwill is expected to be deductible for tax purposes.

Prior to the March 23, 2020 effective date of the 2020 Agreement, the Company accounted for the investment in Togo Group under the equity method of accounting, and the Company's share of the losses of this investment were included in Other income (expense), net in the Condensed Consolidated Statements of Income and Comprehensive Income. The Company's share of the loss from this investment recognized in the three months ended October 31, 2019 was $2,095.

3. Business Segments

The Company has three reportable segments, all related to recreational vehicles: (1) North American Towables, (2) North American Motorized and (3) European. The operations of the Company's Postle and Togo Group subsidiaries are included in Other, which is a non-reportable segment.

The following tables reflect certain financial information by reportable segment:

   Three Months Ended October 31,
NET SALES:20202019
Recreational vehicles
North American Towables$1,392,044$1,200,888
North American Motorized493,855415,889
Total North America1,885,8991,616,777
European602,488493,007
Total recreational vehicles2,488,3872,109,784
Other80,70773,566
Intercompany eliminations(31,734)(24,565)
Total$2,537,360$2,158,785



7



      Three Months Ended October 31,
INCOME (LOSS) BEFORE INCOME TAXES:20202019
Recreational vehicles
North American Towables$141,179$104,322
North American Motorized41,56721,775
Total North America182,746126,097
European(5,506)(23,024)
Total recreational vehicles177,240103,073
Other, net11,49011,751
Corporate(42,411)(46,190)
Total$146,319$68,634

TOTAL ASSETS:October 31, 2020July 31, 2020
Recreational vehicles
North American Towables$1,698,128$1,529,913
North American Motorized644,142480,225
Total North America2,342,2702,010,138
European2,972,7103,102,071
Total recreational vehicles5,314,9805,112,209
Other, net236,081212,378
Corporate309,861446,873
Total$5,860,922$5,771,460

Three Months Ended October 31,
DEPRECIATION AND INTANGIBLE AMORTIZATION EXPENSE:20202019
Recreational vehicles
North American Towables$15,807$16,271
North American Motorized3,7703,494
Total North America19,57719,765
European31,32327,483
Total recreational vehicles50,90047,248
Other
2,9112,511
Corporate
428448
Total $54,239$50,207

CAPITAL ACQUISITIONS:
Recreational vehicles
North American Towables$9,408$11,275
North American Motorized1,7452,568
Total North America11,15313,843
European9,89415,027
Total recreational vehicles21,04728,870
Other
1,444655
Corporate
361498
Total $22,852$30,023



8



4. Earnings Per Common Share

The following table reflects the weighted-average common shares used to compute basic and diluted earnings per common share as included on the Condensed Consolidated Statements of Income and Comprehensive Income:

Three Months Ended October 31,
20202019
Weighted-average common shares outstanding for basic earnings per share
55,238,164 55,095,074 
Unvested restricted stock units316,518 129,581 
Weighted-average common shares outstanding assuming dilution
55,554,682 55,224,655 

For the three months ended October 31, 2020 and 2019, the Company had 96,809 and 266,699 unvested restricted stock units outstanding, respectively, which were excluded from this calculation as their effect would be antidilutive.

5. Derivatives and Hedging

The fair value of our derivative instruments and the associated notional amounts, presented on a pre-tax basis, were as follows:
October 31, 2020July 31, 2020
Fair Value inFair Value in
Other CurrentOther Current
Cash Flow HedgesNotionalLiabilitiesNotionalLiabilities
Interest rate swap agreements$631,800 $20,469 $673,400 $24,840 
Net Investment Hedges

The foreign currency transaction gains on the Euro-denominated portion of the term loan, which is designated and effective as a hedge of the Company’s net investment in its Euro-denominated functional currency subsidiaries, are included as a component of the foreign currency translation adjustment. Gains for the three months ended October 31, 2020, net of tax, were $5,482, and losses for the three months ended October 31, 2019, net of tax, were $1,254.

There were no amounts reclassified out of accumulated other comprehensive income ("AOCI") pertaining to the net investment hedge during the three-month periods ended October 31, 2020 and October 31, 2019, respectively.

Derivatives Not Designated as Hedging Instruments

The Company has certain other derivative instruments which have not been designated as hedges. These other derivative instruments had a notional amount totaling approximately $33,806 and a fair value of $1,854 which is included in Other current liabilities in the Condensed Consolidated Balance Sheet as of October 31, 2020. These other derivative instruments had a notional amount totaling approximately $34,862 and a fair value of $1,824, as of July 31, 2020. For these derivative instruments, changes in fair value are recognized in earnings.

The total amounts presented in the Condensed Consolidated Statements of Income and Comprehensive Income due to changes in the fair value of the following derivative instruments are as follows:
Three Months Ended October 31,
20202019
Gain (Loss) on Derivatives Designated as Cash Flow Hedges
Gain (Loss) recognized in Other Comprehensive Income, net of tax
Foreign currency forward contracts$ $(525)
Interest rate swap agreements3,332 (3,197)
Total gain (loss)$3,332 $(3,722)



9



Three Months Ended October 31,
20202019
 Interest Interest
SalesExpenseSalesExpense
(Loss) Reclassified from AOCI, Net of Tax
Foreign currency forward contracts$ $ $ $ 
Interest rate swap agreements (2,774) (495)
(Loss) on Derivatives Not Designated as Hedging Instruments
Amount of loss recognized in income, net of tax
      Interest rate swap agreements (38) (75)
Total (loss)$ $(2,812)$ $(570)

6. Inventories

Major classifications of inventories are as follows:
   October 31, 2020July 31, 2020
Finished goods – RV$108,327 $152,297 
Finished goods – other46,819 44,779 
Work in process 209,155 128,181 
Raw materials387,516 302,813 
Chassis 334,392 135,194 
Subtotal
1,086,209 763,264 
Excess of FIFO costs over LIFO costs (47,959)(46,959)
Total inventories, net$1,038,250 $716,305 

Of the $1,086,209 and $763,264 of inventories at October 31, 2020 and July 31, 2020, $394,184 and $251,099, respectively, were valued on the last-in, first-out (LIFO) method, and $692,025 and $512,165, respectively, were valued on the first-in, first-out (FIFO) method.

7. Property, Plant and Equipment

Property, plant and equipment consists of the following:
October 31, 2020July 31, 2020
Land$135,604 $136,200 
Buildings and improvements767,246 760,986 
Machinery and equipment448,204 438,985 
Rental vehicles75,546 83,534 
Lease right-of-use assets – operating34,078 33,609 
Lease right-of-use assets – finance3,536 3,672 
Total cost1,464,214 1,456,986 
Less accumulated depreciation(372,273)(349,337)
Property, plant and equipment, net$1,091,941 $1,107,649 

See Note 15 to the Condensed Consolidated Financial Statements for further information regarding the lease right-of-use assets.



10



8. Intangible Assets and Goodwill

The components of amortizable intangible assets are as follows:
October 31, 2020July 31, 2020
Accumulated
Accumulated
CostAmortizationCost
Amortization
Dealer networks/customer relationships
$763,378 $270,510 $766,198 $252,320 
Trademarks
276,985 51,066 275,775 47,743 
Design technology and other intangibles
212,21845,551213,46840,654
Total amortizable intangible assets
$1,252,581 $367,127 $1,255,441 $340,717 

Estimated future amortization expense is as follows:
For the remainder of the fiscal year ending July 31, 2021$81,636
For the fiscal year ending July 31, 2022112,771
For the fiscal year ending July 31, 202392,322
For the fiscal year ending July 31, 202483,315
For the fiscal year ending July 31, 202576,397
For the fiscal year ending July 31, 2026 and thereafter439,013
$885,454

Changes in the carrying amount of goodwill by reportable segment for the three months ended October 31, 2020 are summarized as follows:
North American TowablesNorth American MotorizedEuropeanOtherTotal
Net balance as of August 1, 2020$333,786 $ $1,037,929 $104,826 $1,476,541 
Fiscal 2021 activity:
Goodwill acquired   17,882 17,882 
Foreign currency translation   (13,140) (13,140)
Net balance as of October 31, 2020$333,786 $ $1,024,789 $122,708 $1,481,283 

Changes in the carrying amount of goodwill by reportable segment for the three months ended October 31, 2019 are summarized as follows:
North American TowablesNorth American MotorizedEuropeanOtherTotal
Net balance as of August 1, 2019$334,822 $ $980,339 $42,871 $1,358,032 
Fiscal 2020 activity:
Measurement period adjustments  3,054  3,054 
Foreign currency translation  179  179 
Net balance as of October 31, 2019$334,822 $ $983,572 $42,871 $1,361,265 

9. Concentration of Risk

One dealer, FreedomRoads, LLC, accounted for 14% and 15% of the Company's consolidated net sales for the three months ended October 31, 2020 and October 31, 2019, respectively. Sales to this dealer are reported within both the North American towables and North American motorized segments. This dealer also accounted for 16% and 18% of the Company’s consolidated trade accounts receivable at October 31, 2020 and July 31, 2020, respectively. The loss of this dealer could have a material effect on the Company’s business.



11



10. Fair Value Measurements
The financial assets and liabilities that are accounted for at fair value on a recurring basis at October 31, 2020 and July 31, 2020 are as follows:
Input LevelOctober 31, 2020July 31, 2020
Cash equivalentsLevel 1$90,377$227,154
Deferred compensation plan mutual fund assetsLevel 1$48,993$47,327
Deferred compensation plan liabilitiesLevel 1$63,094$61,290
Interest rate swap liabilityLevel 2$22,323$26,664

Cash equivalents represent investments in government and other money market funds traded in an active market and are reported as a component of Cash and cash equivalents in the Condensed Consolidated Balance Sheets.

Deferred compensation plan assets accounted for at fair value are investments in securities (primarily mutual funds) traded in an active market held for the benefit of certain employees of the Company as part of a deferred compensation plan. Additional plan investments in corporate-owned life insurance are recorded at their cash surrender value, not fair value, and therefore are not included above.

The Company entered into interest rate swaps to convert a portion of the Company's long-term debt from floating rate to fixed rate debt. As of October 31, 2020, the outstanding swaps had notional contract values of $631,800, partially hedging the interest rate risk related to the Company's U.S. dollar term loan tranche that matures in February 2026. The Company's other interest rate swaps not designated as hedging instruments had a notional contract value of $33,806 at October 31, 2020.

The fair value of interest rate swaps is determined by discounting the estimated future cash flows based on the applicable observable yield curves.

11. Product Warranties

The Company generally provides retail customers of its products with a one-year or two-year warranty covering defects in material or workmanship, with longer warranties on certain structural components.

Changes in our product warranty liability during the indicated periods are as follows:
Three Months Ended October 31,
20202019
Beginning balance$252,869$289,679
Provision50,87260,209
Payments(57,575)(64,593)
Foreign currency translation(612)305
Ending balance$245,554$285,600



12



12. Long-Term Debt

The components of long-term debt are as follows:
October 31, 2020July 31, 2020
Term loan$1,530,305 $1,597,091 
Unsecured notes 29,245 29,620 
Other debt80,361 84,500 
Gross long-term debt1,639,911 1,711,211 
Debt issuance costs, net of amortization(42,373)(44,563)
Total long-term debt, net of debt issuance costs1,597,538 1,666,648 
Less: current portion of long-term debt(12,519)(13,817)
Total long-term debt, net, less current portion$1,585,019 $1,652,831 

On February 1, 2019, the Company entered into a seven-year term loan (“term loan”) agreement, which consists of both a United States Dollar-denominated term loan tranche and a Euro-denominated term loan tranche, and a $750,000 revolving asset-based credit facility (“ABL”). Subject to earlier termination, the term loan matures on February 1, 2026 and the ABL matures on February 1, 2024.

As of October 31, 2020, the entire outstanding U.S. term loan tranche balance of $941,900 was subject to a LIBOR-based rate totaling 3.938%, but the interest rate on $631,800 of that balance was fixed at 6.216% through an interest rate swap, dated March 18, 2019, by swapping the underlying 1-month LIBOR rate for a fixed rate of 2.466%. As of July 31, 2020, the entire outstanding U.S. term loan tranche balance of $941,900 was subject to a LIBOR-base rate of 3.938%, but the interest rate on $673,400 of that balance was fixed at 6.216% through an interest rate swap, dated March 18, 2019, by swapping the underlying 1-month LIBOR rate for a fixed rate of 2.466%. The total interest rate on both the October 31, 2020 and July 31, 2020 outstanding Euro term loan tranche balance of $588,405 and $655,191, respectively, was 4.00%.

The Company must make mandatory prepayments of principal under the term loan agreement upon the occurrence of certain specified events, including certain asset sales, debt issuances and receipt of annual cash flows in excess of certain amounts. No such specified events occurred during the three months ended October 31, 2020 or 2019.

Availability under the ABL agreement is subject to a borrowing base based on a percentage of applicable eligible receivables and eligible inventory. The ABL carries interest at an annual base rate plus 0.25% to 0.75%, or LIBOR plus 1.25% to 1.75%, based on adjusted excess availability as defined in the ABL agreement. This agreement also includes a 0.25% unused facility fee. The Company may, generally at its option, pay any borrowings under the ABL, in whole or in part, at any time and from time to time, without premium or penalty. There were no borrowings outstanding on the ABL agreement as of October 31, 2020 or July 31, 2020.

The unused availability under the ABL is generally available to the Company for general operating purposes and, based on October 31, 2020 eligible accounts receivable and inventory balances, net of amounts drawn, totaled approximately $720,000.

The unsecured notes of 25,000 Euro ($29,245) relate to long-term debt of our European segment. There are two series, 20,000 Euro ($23,396) with an interest rate of 1.945% maturing in March 2025, and 5,000 Euro ($5,849) with an interest rate of 2.534% maturing February 2028. Other debt relates primarily to real estate loans with varying maturity dates through September 2032 and interest rates ranging from 1.40% to 3.43%.




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Total contractual gross debt maturities are as follows:
 For the remainder of the fiscal year ending July 31, 2021$10,266
For the fiscal year ending July 31, 202211,875
For the fiscal year ending July 31, 202311,996
For the fiscal year ending July 31, 202412,121
For the fiscal year ending July 31, 202535,395
For the fiscal year ending July 31, 2026 and thereafter1,558,258
$1,639,911

For the three months ended October 31, 2020 and October 31, 2019, interest expense on the term loan, ABL and other debt facilities was $20,588 and $24,349, respectively. The Company incurred fees to secure the term loan and ABL, and those amounts are being amortized ratably over the respective seven and five-year terms of those agreements. The Company recorded total charges related to the amortization of these term loan and ABL fees, which are included in interest expense, of $2,723 and $2,685 for the three months ended October 31, 2020 and October 31, 2019, respectively. The unamortized balance of the ABL facility fees was $9,106 at October 31, 2020 and $9,807 as of July 31, 2020 and is included in Other long-term assets in the Condensed Consolidated Balance Sheets.