Contingent Liabilities, Commitments and Legal Matters

9 Months Ended

Apr. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities, Commitments and Legal Matters

13. Contingent Liabilities, Commitments and Legal Matters

The Company’s total commercial commitments under standby repurchase obligations on dealer inventory financing, as discussed in Note 14 in the Notes to the Consolidated Financial Statements in our fiscal 2016 Form 10-K, were $2,443,451 and $1,898,307 as of April 30, 2017 and July 31, 2016, respectively. The commitment term is generally up to eighteen months.

The Company accounts for the guarantee under repurchase agreements of dealers’ financing by deferring a portion of the related product sale that represents the estimated fair value of the guarantee at inception. The estimated fair value takes into account an estimate of the losses that may be incurred upon resale of any repurchases. This estimate is based on recent historical experience supplemented by the Company’s assessment of current economic and other conditions affecting its dealers. This deferred amount is included in the repurchase and guarantee reserve balances of $7,175 and $6,068 as of April 30, 2017 and July 31, 2016, respectively, which are included in Other current liabilities on the Condensed Consolidated Balance Sheets.

The following table reflects losses incurred related to repurchase agreements that were settled in the periods noted. The Company believes that any future losses under these agreements will not have a significant effect on the Company’s consolidated financial position, results of operations or cash flows:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2017		2016		2017		2016
Cost of units repurchased	$	977	$	1,961	$	3,835	$	2,969
Realization of units resold		930		1,524		3,592		2,400
Losses due to repurchase	$	47	$	437	$	243	$	569

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