Contingent Liabilities, Commitments and Legal Matters

9 Months Ended

Apr. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities, Commitments and Legal Matters

Contingent Liabilities, Commitments and Legal Matters

The Company’s total commercial commitments under standby repurchase obligations on global dealer inventory financing were $4,215,062 and $1,821,012 as of April 30, 2022 and July 31, 2021, respectively. The commitment term is generally up to 18 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. This deferred amount is included in the repurchase and guarantee reserve balances of $11,317 and $6,023 as of April 30, 2022 and July 31, 2021, respectively, which is included in Other current liabilities in the Condensed Consolidated Balance Sheets.

Losses incurred related to repurchase agreements that were settled during the three and nine months ended April 30, 2022 and April 30, 2021 were not material. Based on current market conditions, the Company believes that any future losses under these agreements will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

The Company issued a product recall in the fourth quarter of fiscal 2021 related to certain purchased parts utilized in certain of our North American towable products. Based on developments during the second and third quarters of fiscal 2022, including our expectations regarding the extent of vendor reimbursement, we have revised our estimate of the cost of the recall, which resulted in favorable adjustments during the three months ended January 31, 2022 and April 30, 2022 to the amounts previously accrued. In addition, we accrued expenses during the second quarter of fiscal 2022 based on developments related to an ongoing investigation by certain German-based authorities regarding the adequacy of historical disclosures of vehicle weight in advertisements and other Company-provided literature in Germany. The Company is fully cooperating with the investigation. For the nine months ended April 30, 2022, the Company has recognized $32,125 of net expense as a component of selling, general and administrative costs related to these two matters, and the amounts recognized in the three months ended April 30, 2022 were not material.

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. Based on current conditions, and 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 consolidated 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.