Discontinued Operations

3 Months Ended

Oct. 31, 2014

Discontinued Operations

3. Discontinued Operations

On July 31, 2013, the Company entered into a Stock Purchase Agreement (“ASV SPA”) to sell its bus business to Allied Specialty Vehicles, Inc. (“ASV”) for cash of $100,000, subject to closing adjustments for changes in the net assets sold from April 30, 2013 to the closing date. The Company’s bus business manufactured and sold transit and shuttle buses. This divestiture has allowed the Company to focus on the strategic development and growth of its core recreational vehicle business.

The sale was completed as of October 20, 2013 and the Company received $100,000 on October 21, 2013, which, after considering closing date cash on hand at the bus subsidiaries of $2,323, resulted in initial net cash consideration of $97,677. Under the terms of the ASV SPA, the total final cash consideration to be received was subject to adjustment based on changes in the carrying value of the net assets of the bus business between April 30, 2013 and October 20, 2013. As of October 31, 2013, additional cash consideration to be received in connection with this sale was estimated to be $8,329.

During the second quarter of fiscal 2014, the amount of the final net asset adjustment was determined through the completion of a post-close audit, and the remaining cash consideration was received. Based on the final agreed-upon carrying value of the bus business net assets sold as of October 20, 2013, an additional $5,043 was collected from ASV, representing the increase in bus net assets from April 30, 2013 to the October 20, 2013 sale date. In addition, the Company was also reimbursed by ASV for the $2,323 of bus cash on hand at the time of the sale. As a result, final net cash consideration received for the sale of the bus business totaled $105,043.

The Company recorded a preliminary pre-tax gain on the bus business sale of $7,825 in the first quarter of fiscal 2014 and a $746 unfavorable adjustment in the second quarter of fiscal 2014 based on the completion of the post-close audit, resulting in a final pre-tax gain of $7,079. The results of operations for the bus business, including the gain on the sale of the bus business, have been reported as discontinued operations in the Condensed Consolidated Statements of Income and Comprehensive Income for all periods presented.

The following table summarizes the results of discontinued operations:

	Three Months Ended October 31,
Discontinued Operations:	2014		2013
Net sales	$	–	$	83,903
Operating loss of discontinued operations	$	(435)	$	(3,433)
Pre-tax gain on disposal of discontinued business		–		7,825
Income (loss) before income taxes		(435)		4,392
Income tax benefit		(159)		(322)
Income (loss) from discontinued operations, net of taxes	$	(276)	$	4,714

Operating loss of discontinued operations during the three months ended October 31, 2014 reflects expenses incurred directly related to the former bus operations, including ongoing costs related to liabilities retained by the Company under the ASV SPA for bus product liability and worker’s compensation claims occurring prior to the closing date of the sale.

As a result of the sale of the bus business, and in accordance with the ASV SPA, the Company is no longer the primary obligor to the taxing authorities for bus operations in certain states. As a result, the Company eliminated certain reserves associated with uncertain tax positions resulting in a net tax benefit of $1,883, which is included in the discontinued operations income tax benefit of $322 for the three months ended October 31, 2013. Under the terms of the sale, the Company has agreed to indemnify ASV for any claims made by the taxing authorities after the date of sale for these uncertain tax positions, but does not expect future losses under this guarantee to be material.