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Discontinued Operations
 12 Months Ended
Jul. 31, 2013
Discontinued Operations

3.  DISCONTINUED OPERATIONS

On July 31, 2013, the Company entered into a Stock Purchase Agreement to sell its bus business, which manufactures and sells transit and shuttle buses, to Allied Specialty Vehicles, Inc. (“ASV”) for $100 million in cash, subject to closing adjustments including working capital changes from April 30, 2013 until closing. The Company’s bus business includes the operations of Champion Bus Inc., General Coach America, Inc., Goshen Coach, Inc., ElDorado National Kansas, Inc. and ElDorado National California, Inc. The sale is subject to customary closing conditions and is expected to be completed by November 1, 2013. The Company does not anticipate recording a loss as a result of this sale. The divestiture will allow the Company to focus on the strategic development and growth of its core recreational vehicle business. The results of operations for the bus business, including the results of the divested ambulance product line noted below, have been reported as discontinued operations in the Consolidated Statements of Income and Comprehensive Income for all periods presented. The following table summarizes the results of discontinued operations:

 

           2013                  2012                 2011        

Discontinued Operations:

        

Net sales

    $ 448,385       $ 444,862      $ 415,066   
       

Operating income of discontinued operations

    $ 12,080       $ 15,303      $ 12,303   

Gain on involuntary conversion

      –         –        9,417   

Impairment charges

      11,525         –        1,430   

Income tax benefit (expense)

      631         (4,999 )      (5,664 ) 
  

 

 

     

 

 

    

 

 

  

Income from discontinued operations, net of taxes

    $ 1,186       $ 10,304      $ 14,626   
  

 

 

     

 

 

    

 

 

  

On February 14, 2010, a fire occurred at one of the principal manufacturing plants of the discontinued Champion Bus business. The Company maintains a property and business interruption insurance policy that provided substantial coverage for the losses arising from this incident, which included property, inventory and equipment losses, less the first $5,000 representing the Company’s deductible per the policy. For fiscal 2011, the Company recognized insurance recoveries of $10,437 and clean up and other costs of $1,020 for a net gain on involuntary conversion of $9,417.

In the third quarter of fiscal 2011, the Company’s annual impairment assessment resulted in a non-cash trademark impairment of $1,430 associated with an operating subsidiary in the Company’s bus business. This impairment resulted from lower anticipated future sales than previously expected.

In the third quarter of fiscal 2013, the Company determined that it was more likely than not that certain long-lived assets associated with the Company’s ambulance product line would be sold before the end of their previously estimated useful life. This was determined to be a triggering event and an impairment assessment relative to those assets was performed. Based on the assessment, the Company determined that the carrying amount of the assets would not be recoverable from future cash flows and as a result, a non-cash impairment charge of $4,715 related to certain amortizable intangible assets was recorded.

 

In the third quarter of fiscal 2013, prior to our annual impairment assessment, the Company also performed an interim goodwill impairment assessment relative to the goodwill associated with the reporting unit that included the ambulance product line. Based on the assessment, the Company determined that the fair value of this reporting unit was less than the carrying value and therefore performed the second step of the goodwill impairment assessment, which requires estimating the fair values of the reporting unit’s net identifiable assets and calculating the implied fair value of goodwill. The fair value of this reporting unit was determined by a discounted cash flow model and market approach, consistent with its last annual impairment assessment. The implied fair value of goodwill was determined to be zero and, therefore, recorded goodwill was impaired and a non-cash impairment charge of $6,810 was recognized in the third quarter of fiscal year 2013. The goodwill impairment was primarily a result of lower forecasted margins and increased working capital requirements within this reporting unit. These non-cash impairment charges for amortizable intangible assets and goodwill totaled $11,525.

The asset fair values utilized in the impairment assessments discussed above were determined using Level 3 inputs as defined by ASC 820.

On April 30, 2013, the Company sold the assets held and used in the conduct of its ambulance product line (excluding the plant utilized in ambulance production and certain other excluded assets) for a final price of $12,051. There was no gain or loss recognized on the sale. Discontinued operations include the results of the ambulance product line through the date of its sale on April 30, 2013.

The following is a summary of the assets and liabilities of discontinued operations, excluding cash, which are held for sale as of July 31, 2013:

 

Accounts and other receivable, net

    $ 29,894   

Inventories, net of LIFO reserve of $9,683

      61,800   

Property, plant and equipment, cost

      50,985   

Accumulated depreciation, property, plant and equipment

      (21,422 ) 

Goodwill

      5,559   

Other intangibles, net

      3,743   

Deferred income taxes and other assets

      2,540   

Deferred compensation plan assets

      3,407   
  

 

 

  

Assets of discontinued operations

    $ 136,506   
  

 

 

  

Accounts payable

    $ 23,427   

Accrued compensation and related items

      3,130   

Product warranties

      3,891   

Deferred income taxes and other liabilities

      1,252   

Deferred compensation plan liabilities

      3,407   
  

 

 

  

Liabilities of discontinued operations

    $       35,107   
  

 

 

  

In accordance with the Stock Purchase Agreement with ASV, the Company will retain the costs and liabilities associated with product liability, worker’s compensation and group medical insurance for any occurrence prior to the closing date of the sale. Therefore, these insurance reserves are not included in the liabilities of discontinued operations on the Consolidated Balance Sheet as of July 31, 2013.