Contingent Liabilities and Commitments

9 Months Ended

Apr. 30, 2011

Contingent Liabilities and Commitments [Abstract]

11.

Contingent Liabilities and Commitments

The Company is contingently liable under terms of repurchase agreements with certain financial institutions providing inventory financing for certain dealers of certain of its products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to dealers in the event of default by the dealer. The repurchase price is generally determined by the original sales price of the product and pre-defined curtailment arrangements and the Company typically resells the repurchased product at a discount from its repurchase price. The risk of loss from these agreements is spread over numerous dealers. In addition to the guarantee under these repurchase agreements, the Company also provides limited guarantees to certain of its dealers, most of which guarantees are currently in the process of being wound down.

The Company’s principal commercial commitments under repurchase agreements and guarantees at April 30, 2011 are summarized in the following chart:


Commitment	Total Amount Committed		Terms of Commitments
Guarantee on dealer financing	$	2,488	Various
Standby repurchase obligation on dealer financing	$	838,988	Up to eighteen months

The repurchase agreement obligations generally extend up to eighteen months from the date of sale of the related product to the dealer. The repurchase and guarantee reserve balance as of April 30, 2011, which is included in other current liabilities on the Condensed Consolidated Balance Sheets, is $4,138 and includes the deferred estimated fair value of the implied guarantee under outstanding repurchase obligations and the estimated loss upon the eventual resale of expected repurchased product. The table below reflects losses incurred under repurchase agreements in the periods noted. Management believes that any future losses under these agreements will not have a significant effect on the Company’s consolidated financial position or results of operations.


	Three Months Ended						Nine Months Ended
	April 30,						April 30,
	2011			2010			2011			2010
Cost of units repurchased	$	398		$	4,832		$	5,466		$	8,052
Realization of units resold		342			4,357			4,669			7,034

Losses due to repurchase	$	(56	)	$	(475	)	$	(797	)	$	(1,018	)

The Company obtains certain vehicle chassis from automobile manufacturers under converter pool agreements. These agreements generally provide that the manufacturer will supply chassis at the Company’s various production facilities under the terms and conditions set forth in the agreement. The manufacturer does not transfer the certificate of origin to the Company and, accordingly, the Company accounts for the chassis as consigned, unrecorded inventory. Upon being put into production, the Company becomes obligated to pay the manufacturer for the chassis. Chassis are typically converted and delivered to customers within 90 days of delivery. If the chassis is not converted within 90 days of delivery to the Company, the Company generally purchases the chassis and records the inventory. At April 30, 2011, chassis on hand accounted for as consigned, unrecorded inventory was approximately $22,689. In addition to this consigned inventory, at April 30, 2011, an additional $10,978 of chassis provided by customers were located at the Company’s production facilities pending further manufacturing. The Company does not purchase these chassis and does not include their cost in its billings to the customer for the completed unit.

In addition to the matters described below, the Company is 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, other claims and accidents (for which the Company carries insurance above a specified self-insured retention or deductible amount). While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to the litigation arising out of the Company’s operations in the normal course of business, including the pending litigation described below, the Company believes that while the final resolution of any such litigation may have an impact on its consolidated results for a particular reporting period, the ultimate disposition of such litigation will not have a material adverse effect on its financial position, results of operations or liquidity.

SEC Matter

The Company has been subject to an SEC review since 2007 regarding the facts and circumstances giving rise to the restatement of its previously issued financial statements as of July 31, 2006 and 2005, and for each of the years in the three-year period ended July 31, 2006, and the financial results in each of the quarterly periods in 2006 and 2005, and its financial statements as of and for the three months ended October 31, 2006 and related matters. The Company has reached an agreement with the SEC resolving this matter. The settlement was approved by the U.S. District Court for the District of Columbia and a final judgement incorporating its terms was entered on May 23, 2011. The Company cooperated fully with the SEC in the resolution of this matter.

Under the terms of the settlement, the Company has consented, without admitting or denying the allegations in the SEC’s complaint, to the entry of a final judgment of the Court ordering the Company to comply with the Cease and Desist Order issued by the SEC on October 18, 1999, enjoining the Company from violating the books and records and internal control provisions of the federal securities laws and regulations thereunder, imposing a civil cash penalty of $1,000 and requiring the Company to hire an independent consultant not unacceptable to the SEC staff. As of April 30, 2011, the $1,000 civil cash penalty, which was previously provided for, was held in an escrow account and classified as Restricted cash on the Condensed Consolidated Balance Sheets. Subsequent to the entry of a final judgement by the Court approving the settlement on May 23, 2011, the escrow agent released the funds to the SEC. The independent consultant will review and evaluate certain specified aspects of internal accounting controls over financial reporting and record-keeping policies and procedures at each of the Company’s operating subsidiaries and will issue a report with recommendations for necessary improvements or enhancements that the Company should adopt going forward. The Company has retained an independent consultant and it is anticipated that the independent consultant’s report will be completed on or before September 7, 2011.

FEMA Litigation

Beginning in 2006, a number of lawsuits were filed against numerous trailer and manufactured housing manufacturers, including complaints against the Company. The complaints were filed in various state and federal courts throughout Louisiana, Alabama, Texas, and Mississippi on behalf of Gulf Coast residents who lived in travel trailers, park model trailers and manufactured homes provided by the Federal Emergency Management Agency (“FEMA”) following Hurricanes Katrina and Rita in the late summer of 2005. The complaints generally alleged that Gulf Coast residents who occupied FEMA supplied emergency housing units, such as travel trailers, were exposed to formaldehyde emitted from the trailers.

The residents alleged various damages from exposure, including health problems and emotional distress. Most of the initial cases were filed as class action suits. Because of the number of suits, the federal Judicial Panel of Multi-District Litigation (known as the MDL panel) transferred the suits to the United States District Court for the Eastern District of Louisiana (New Orleans). The Court denied class certification in December 2008, and consequently, the cases are now being administered as a mass joinder of claims. There are over 5,000 suits currently pending in the MDL. The number of cases currently pending against the Company is approximately 745. Many of these lawsuits involve multiple plaintiffs, each of whom have brought claims against the Company. Due to the sheer size of the litigation, beginning in September 2009, the Court began hearing both bellwether jury trials and bellwether summary jury trials. The summary jury trial process is an alternative dispute resolution method which is non-binding and confidential. The Company has participated in one confidential summary jury trial. Settlements have been reached with a few of the trailer manufacturers and a group of the manufactured housing defendants. The Company continues to strongly dispute the allegations and continues to vigorously defend the complaints.