SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED October 31, 2001 COMMISSION FILE NUMBER 1-9235
---------------- ------
THOR INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 93-0768752
----------------------------------- ---------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
419 West Pike Street, Jackson Center, OH 45334-0629
---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 596-6849
- --------------------------------------------------- -------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding At 10/31/01
----- -----------------------
Common stock, par value 11,916,460 shares
$.10 per share
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
OCTOBER 31, 2001 JULY 31, 2001
---------------- -------------
Current assets:
Cash and cash equivalents $69,055,731 $60,058,777
Investments - short term 20,275,090 47,134,094
Accounts receivable:
Trade 52,757,134 46,174,662
Other 1,095,561 1,341,033
Inventories 83,601,885 80,286,637
Deferred income taxes and other 1,888,981 2,970,082
----------- -----------
Total current assets 228,674,382 237,965,285
----------- -----------
Property:
Land 8,202,012 8,182,431
Buildings and improvements 36,476,713 35,936,200
Machinery and equipment 21,106,381 20,049,176
---------- ----------
Total cost 65,785,106 64,167,807
Accumulated depreciation 18,129,791 17,232,199
---------- ----------
Property, net 47,655,315 46,935,608
---------- ----------
Investments:
Joint ventures 2,297,287 2,192,453
Investments available-for-sale 3,611,163 5,406,286
---------- ----------
Total Investments 5,908,450 7,598,739
Other assets:
Goodwill 10,378,420 10,378,420
Non-compete agreements 490,521 524,584
Trademarks 1,669,642 1,669,642
Other 4,330,210 3,994,601
---------- ----------
Total other assets 16,868,793 16,567,247
---------- ----------
TOTAL ASSETS $299,106,940 $309,066,879
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $37,997,203 $57,290,788
Accrued liabilities:
Taxes 6,706,577 496,333
Compensation and related items 10,324,153 11,630,556
Product warranties 13,018,583 12,541,890
Other 3,992,488 5,308,473
----------- ----------
Total current liabilities 72,039,004 87,268,040
---------- ----------
Deferred income taxes and other liabilities 2,050,915 1,852,432
Stockholders' equity:
Common stock - authorized 20,000,000 shares;
issued 13,824,897 shares @ 10/31/01 and 13,817,847
shares @ 7/31/01; par value of $.10 per share 1,382,490 1,381,785
Additional paid in capital 27,490,758 27,258,323
Accumulated other comprehensive income (loss) (3,112,911) (1,685,309)
Retained earnings 229,396,746 222,942,676
Restricted stock plan (541,396) (352,402)
Cost of treasury shares, 1,908,437 shares @ 10/31/01
and 7/31/01 (29,598,666) (29,598,666)
------------ ------------
Total stockholders' equity 225,017,021 219,946,407
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $299,106,940 $309,066,879
============ ============
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS ENDED OCTOBER 31, 2001 AND 2000
2001 2000
---- ----
Net sales $209,794,131 $209,821,817
Cost of products sold 186,257,588 183,208,403
----------- -----------
Gross profit 23,536,543 26,613,414
Selling, general, and
administrative expenses 14,211,665 14,185,943
Interest income 933,037 1,420,344
Interest expense 151,503 101,129
Other income 278,690 441,437
------- -------
Income before income taxes 10,385,102 14,188,123
Provision for income taxes 3,692,703 5,797,309
--------- ---------
Net income $6,692,399 $8,390,814
========== ==========
AVERAGE COMMON SHARES OUTSTANDING - BASIC 11,915,458 11,986,297
---------- ----------
AVERAGE COMMON SHARES OUTSTANDING - DILUTED 11,985,616 12,027,565
---------- ----------
EARNINGS PER COMMON SHARE:
Basic $.56 $.70
==== ====
Diluted $.56 $.70
==== ====
DIVIDENDS PAID PER COMMON SHARE $.02 $.02
==== ====
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 2001 AND 2000
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,692,399 $8,390,814
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 966,369 833,965
Amortization 34,063 519,456
Purchase of trading investments (3,588,350) (29,326,442)
Proceeds from sale of trading investments 29,995,799 13,542,607
Gain on sale of trading investments (155,683) --
CHANGES IN NON CASH ASSETS AND LIABILITIES:
Accounts receivable (6,337,000) (6,922,953)
Inventories (3,320,146) (3,332,734)
Prepaid expenses and other 1,268,169 (5,165,757)
Accounts payable (19,293,585) (4,414,072)
Accrued liabilities 4,064,549 (3,783,489)
Other liabilities 842,802 270,205
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 11,169,386 (29,388,400)
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (1,696,558) (3,673,146)
Disposals of property, plant & equipment 16,127 10,421
Purchase of available-for-sale investments -- (215,938)
------------- ---------
NET CASH USED IN INVESTING ACTIVITIES (1,680,431) (3,878,663)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (238,329) (239,729)
Proceeds from issuance of common stock 7,165 21,495
------------ -------------
NET CASH USED IN FINANCING ACTIVITIES (231,164) (218,234)
------------ -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (260,837) (121,218)
------------- -------------
Net increase (decrease) in cash and equivalents 8,996,954 (33,606,515)
Cash and equivalents, beginning of year 60,058,777 59,655,251
---------- ----------
CASH AND EQUIVALENTS, END OF PERIOD $69,055,731 $26,048,736
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $109,409 $3,988,161
Interest paid 151,503 101,129
NON CASH TRANSACTIONS:
Issuance of restricted stock 225,975 --
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The July 31, 2001 amounts are from the annual audited financial statements.
The interim financial statements are unaudited. In the opinion of
management, all adjustments (which consist of normal recurring adjustments)
necessary to present fairly the financial position and results of
operations for the interim periods presented have been made. These
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K/A for the year ended July 31, 2001. The results
of operations for the first quarter ended October 31, 2001, are not
necessarily indicative of the results for the full year.
Certain amounts in the financial statements have been reclassified to
conform with the October 31, 2001 presentation. These changes were made to
conform to Emerging Issues Task Force 00-10, "Accounting for Shipping and
Handling Costs".
2. Major classifications of inventories are:
October 31, 2001 July 31, 2001
---------------- -------------
Raw materials $33,551,197 $33,974,281
Chassis 18,087,321 19,021,209
Work in process 22,186,296 23,879,366
Finished goods 15,396,513 8,801,723
---------- ----------
Total 89,221,327 85,676,579
Less excess of FIFO costs
over LIFO costs 5,619,442 5,389,942
----------- -----------
Total inventories $83,601,885 $80,286,637
=========== ===========
3. Earnings Per Share
Three Months Three Months
ended ended
October 31, 2001 October 31, 2000
---------------- ----------------
Weighted average shares outstanding
for basic earnings per share 11,915,458 11,986,297
Stock options 70,158 41,268
---------- ----------
Total - For diluted shares 11,985,616 12,027,565
========== ==========
4. Stockholders' Equity
Three Months Three Months
ended ended
October 31, 2001 October 31, 2000
---------------- ----------------
Net Income $6,692,399 $8,390,814
Foreign currency translation adjustment (260,837) (121,218)
Unrealized appreciation (depreciation)
on investments (1,166,765) 105,464
---------- ----------
Comprehensive Income $5,264,797 $8,375,060
========== ==========
5. Segment Information Three Months Three Months
ended ended
October 31, 2001 October 31, 2000
---------------- ----------------
Net Sales:
Recreation vehicles
Towables $ 85,522,244 $ 85,746,267
Motorized 41,682,589 52,629,499
Other 917,338 1,204,246
Buses 81,671,960 70,241,805
------------ ------------
Total $209,794,131 $209,821,817
============ ============
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Three Months Three Months
ended ended
October 31, 2001 October 31, 2000
---------------- ----------------
Income Before Income Taxes:
Recreation vehicles $ 5,489,521 $ 8,185,796
Buses 5,533,423 5,946,130
Corporate (637,842) 56,197
----------- -----------
Total $10,385,102 $14,188,123
=========== ===========
October 31, 2001 July 31, 2001
---------------- -------------
Identifiable Assets:
Recreation vehicles $122,258,530 $114,149,684
Buses 87,583,461 82,194,269
Corporate 89,264,949 112,722,926
------------ ------------
Total $299,106,940 $309,066,879
============ ============
6. Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations",
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
requires that all business combinations be accounted for under the purchase
method only and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. SFAS No. 142
requires that ratable amortization of goodwill be replaced with periodic
tests of the goodwill's impairment and that identifiable intangible assets
other than goodwill be amortized over their useful lives. SFAS No. 141 is
effective for all business combinations initiated after June 30, 2001 and
for all business combinations accounted for by the purchase method for
which the date of acquisition is after June 30, 2001. The provisions of
SFAS No. 142 will be effective for fiscal years beginning after December
15, 2001; however, the Company has elected to early adopt the provisions
effective August 1, 2001.
The components of other intangibles are as follows:
As of October 31, 2001
----------------------------------------
Gross Carrying Accumulated
Amount Amortization
----- ------------
Amortized Intangible Assets
Non-Compete Agreements $9,573,367 $9,082,846
Aggregate amortization expense for the quarter ended October 31, 2001 was
$34,063.
Estimated Amortization Expense:
For the year ending July 2002 $136,250
For the year ending July 2003 $136,250
For the year ending July 2004 $136,250
For the year ending July 2005 $ 92,917
For the year ending July 2006 $ 6,250
All intangibles are amortized on a straight-line basis.
There have been no changes in the carrying amount of goodwill for the
quarter ended October 31, 2001. The Company is required to complete the
initial step of a transitional impairment test within six months of
adoption of SFAS No. 142 and to complete the final step of the
transitional impairment test by the end of the fiscal year.
As of October 31, 2001
-----------------------------------
Accumulated
Cost Amortization
---- ------------
Non-amortized Intangible Assets
Goodwill $15,018,209 $(4,639,790)
Trademarks and Tradenames 4,880,000 (3,210,358)
----------- -----------
$19,898,209 $(7,850,148)
=========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The table below shows the effect on net income had FAS No. 142 been adopted
in prior periods.
Three Months Ended
---------------------------------------------
October 31, 2001 October 31, 2000
---------------- ----------------
Net Income $6,692,399 $8,390,814
Goodwill amortization - 127,553
Trademark amortization - 41,238
---------- ----------
Adjusted net income $6,692,399 $8,559,605
========== ==========
Basic Diluted Basic Diluted
----- ------- ----- -------
Earnings per Common Share $ .56 $ .56 $ .70 $ .70
Effect of accounting change .01 .01
------ ----- ----- -----
Adjusted net income $ .56 $ .56 $ .71 $ .71
===== ===== ===== =====
7. Accounting Pronouncements
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 ("SFAS 144") entitled "Accounting for the Impairment or Disposal of
Long-Lived Assets", which addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. While SFAS 144 supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", it retains many of the fundamental
provisions of that statement. SFAS 144 becomes effective for fiscal years
beginning after December 15, 2001, with early application encouraged. The
Company is reviewing the impact of SFAS 144, and does not believe that its
adoption will have a material affect on the Company's financial statements.
8. Investments - The Company classifies its debt and equity securities as
trading or available-for-sale. Trading securities are bought and held
principally for the purpose of selling them in the near term. All
securities not included in trading are classified as available-for-sale.
Trading and available-for-sale investments are recorded at fair value.
Unrealized holding gains and losses on trading investments are included in
earnings. Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale investments are excluded from earnings and
are reported as a separate component of accumulated other comprehensive
income, net of income taxes until realized. Realized gains and losses from
the sale of available- for-sale investments are determined on a
specific-identification basis. Dividend and interest income are recognized
when earned.
At October 31, 2001, the Company held equity investments with a fair value
of $3,611,163 and cost basis of $6,106,618. The investments are classified
as available-for-sale and included in other investments. Gross unrealized
losses were $2,495,455.
The Company has certain corporate debt investments that are classified as
trading investments and reported as Investments - short term. Included in
other income are net realized gains on trading investments of $155,683.
9. Subsequent Event
On November 9, 2001 Thor acquired 100% of the common and preferred stock of
Keystone RV Company ("Keystone"). Keystone is engaged in the business of
manufacturing travel trailers and other recreational vehicles. The purchase
price of approximately $143,000,000 consisted of cash of $81,000,000 and
2,220,727 shares of Thor common stock valued at $62,000,000, of which
1,354,560 shares are restricted. The value of the common stock was based on
the average
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
market price of Thor's common shares over the two-day period before and
after the terms of the acquisition were agreed to and announced. The value
of the restricted shares was based on an independent appraisal. Preliminary
purchase price allocations include $4,500,000 of non-compete agreements,
which will be amortized over seven to ten years, $117,000,000 of goodwill
and $7,000,000 for trademarks that are not subject to amortization. The
non-compete goodwill and trademarks are not deductible for tax purposes.
The final purchase price is subject to post closing adjustments.
The primary reasons for the acquisition include Keystone's future earnings
potential, its fit with our existing operations, its market share in its
business, and its cash flow. The results of operations for Keystone will be
included in Thor's operating results beginning November 10, 2001. The
Keystone goodwill and its results will be included in the recreation
vehicle reporting segment.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
QUARTER ENDED OCTOBER 31, 2001 VS.
QUARTER ENDED OCTOBER 31, 2000
Net sales for the first quarter of fiscal 2002 were $209,794,131 compared to
$209,821,817 for the first quarter of fiscal 2001. Income before income taxes in
fiscal 2002 was $10,385,102, a 26.8% decrease from $14,188,123 in fiscal 2001.
The decrease in income before income taxes of $3,803,021 in fiscal 2002 was
primarily caused by reduced recreation vehicle revenues of $11,457,842 for the
period, which resulted in a reduction in income before income taxes of
approximately $2,696,000. Bus revenues were $11,430,155 greater in fiscal 2002
than in fiscal 2001. Bus income before income taxes in fiscal 2002 was
approximately $413,000 less than the same period last year due primarily to
reduced margins at our California bus operation.
Recreation vehicle revenues decreased in fiscal 2002 by 8.2% to $128,122,171
compared to $139,580,012 in fiscal 2001, and accounted for 61.1% of total
company revenues compared to 66.5% in fiscal 2001. Recreation vehicle order
backlog of $35,036,000 at October 31, 2001 was down 18.2% compared to the same
period last year and reflects the continuing softness in the overall recreation
vehicle market. Bus revenues in fiscal 2002 increased by 16.3% to $81,671,960
compared to $70,241,805 in fiscal year 2001 and accounted for 38.9% of the total
company revenues compared to 33.5% in fiscal 2001. Bus vehicle order backlog of
$137,716,000 at October 31, 2001 was down 29.1% compared to the same period last
year, reflecting increased competition from newer entrants in the industry that
were able to deliver buses to customers faster.
Gross profit as a percentage of sales in fiscal 2002 decreased to 11.2% from
12.7% in fiscal 2001 primarily due to lower recreation vehicle sales. Due to a
soft recreation vehicle market and competitive pressures, there were no price
increases for our products during fiscal 2002. Selling, general, and
administrative expense and amortization of intangibles was $14,211,665 compared
to $14,185,943 for the same period in fiscal 2001. As a percentage of sales,
selling, general and administrative expenses were 6.8% in fiscal 2002 compared
to 6.8% in fiscal 2001. Amortization of intangibles decreased in fiscal 2002 to
$34,063 compared to $519,455 in fiscal 2001. This $485,392 reduction is
primarily due to expiration of certain non-compete expenses of approximately
$314,000 for fiscal 2002 and a reduction in goodwill and trademark amortization
expense in fiscal 2002 of approximately $171,000 resulting from the Company's
adoption of Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets". Offsetting the reduction in intangible expenses was a
$511,000 increase in selling, general and administrative costs for fiscal 2002.
These increases were primarily due to increased selling, general and
administrative expense associated with increased bus revenues and fees
associated with research and development tax credits resulting in reduced income
taxes for fiscal 2002. Interest income decreased by $487,307 due primarily to
lower market rates in fiscal 2002 and the shifting of cash investments to a
shorter term and more liquid position to fund the acquisition of Keystone RV
Company on November 9, 2001.
The overall effective income tax rate was 35.6% for fiscal 2002 compared to
40.9% in fiscal 2001 due primarily to research and development tax credits
recognized by the Company.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(CONTINUED)
FINANCIAL CONDITION AND LIQUIDITY
As of October 31, 2001, we had $89,330,821 in cash, cash equivalents and short
term investments, compared to $107,192,871 on July 31, 2001. We classify our
debt and equity securities as trading or available-for-sale securities. The
former are carried on our consolidated balance sheet as "Cash and cash
equivalents" or "Investments - short term". The latter are carried on our
consolidated balance sheet as "Investments - investments available-for-sale".
Trading securities, principally investment grade securities composed of
asset-based notes, mortgage-backed notes and corporate bonds, are generally
bought and held for sale in the near term. All other securities are classified
as available-for-sale. In each case, securities are carried at fair market
value. Unrealized gains or losses on trading securities are included in
earnings. Unrealized gains and losses in investments classified as
available-for-sale, net of related tax effect, are not included in earnings, but
appear as a component of "Accumulated other comprehensive loss" on our
consolidated balance sheets until the gain or loss is realized upon the
disposition of the investment or if a decline in the fair market value is
determined to be other than temporary.
Due to the relative short-term maturity (average 6 months) of our trading
securities, we do not believe that a change in the fair market value of these
securities will have a significant impact on our financial position or results
of future operations.
Working capital at October 31, 2001, was $156,635,378 compared to $150,697,245
on July 31, 2001. The Company had no long term debt. The Company currently has a
$30,000,000 revolving line of credit. There were no borrowings on the line of
credit at October 31, 2001. The loan agreement contains certain covenants
including restrictions on additional indebtedness, and the Company must maintain
certain financial ratios. The line of credit bears interest at negotiated rates
below prime and expires on November 29, 2002. The Company believes that
internally generated funds and the revolving line of credit agreement will be
sufficient to meet current needs and additional capital requirements. Capital
expenditures of $1,696,558 in the quarter were primarily for the expansion of
our Kansas bus operation. The Company anticipates additional capital
expenditures in 2002 of approximately $3,000,000 primarily for purchase and
replacement of machinery and equipment in the ordinary course of business.
On November 9, 2001 Thor acquired 100% of the common and preferred stock of
Keystone RV Company ("Keystone"). Keystone is engaged in the business of
manufacturing travel trailers and other recreational vehicles. The purchase
price of approximately $143,000,000 consisted of cash of $81,000,000 and
2,220,727 shares of Thor common stock valued at $62,000,000, of which 1,354,560
shares are restricted. The results of operations for Keystone will be included
in Thor's operating results beginning November 10, 2001.
FORWARD LOOKING STATEMENTS
This report includes certain statements that are "forward looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934 as amended. These
forward-looking statements involve uncertainties and risks. There can be no
assurance that actual results will not differ from the Company's expectations.
Factors which could cause materially different results include, among others,
the success of new product introductions, the pace of acquisitions and cost
structure improvements, competition and general economic conditions. The Company
disclaims any obligation or undertaking to disseminate any updates or revisions
to any change in expectation of the Company after the date hereof or any change
in events, conditions or circumstances on which any statement is based except as
required by law.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency related
to its operations in Canada. However, because of the size of Canadian
operations, a hypothetical 10% change in the Canadian dollar as compared to the
U.S. dollar would not have a significant impact on the Company's financial
position or results of operations. The Company is also exposed to market risks
related to interest rates because of its investments in corporate debt
securities. A hypothetical 10% change in interest rates would not have a
significant impact on the Company's financial position or result's of
operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
N/A
b.) Reports on Form 8-K
On October 31, 2001 a Form 8-K was filed with the Securities and
Exchange Commission pursuant to a press release regarding the
Company's intent to purchase Keystone RV Company.
On November 13, 2001 a Form 8-K was filed with the Securities and
Exchange Commission pursuant to the acquisition of Keystone RV
Company.
On December 3, 2001 a Form 8-K/A was filed which amended the Form
8-K filed on November 13, 2001, and includes the historical
financial information with respect to Keystone RV Company and the
proforma financial information required with respect to the
acquisition of Keystone.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOR INDUSTRIES, INC.
(Registrant)
DATE 12/11/01 /s/ Wade F. B. Thompson
------------- ---------------------------------------
Wade F. B. Thompson
Chairman of the Board, President
and Chief Executive Officer
DATE 12/11/01 /s/ Walter L. Bennett
-------------- --------------------------------------
Walter L. Bennett
Senior Vice President
Secretary (Chief Financial Officer)