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 January 31, 2002 COMMISSION FILE NUMBER 1-9235
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THOR INDUSTRIES, INC.
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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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 596-6849
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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 1/31/2002
----- ------------------------
Common stock, par value 14,194,551 shares
$.10 per share
THOR INDUSTRIES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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ASSETS
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JANUARY 31, 2002 JULY 31, 2001
---------------- -------------
Current assets:
Cash and cash equivalents $ 31,091,027 $ 60,058,777
Investments - short term - 47,134,094
Accounts receivable:
Trade 86,800,847 46,174,662
Other 2,297,171 1,341,033
Inventories 88,113,133 80,286,637
Deferred income taxes and other 11,525,190 2,970,082
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Total current assets 219,827,368 237,965,285
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Property:
Land 9,107,948 8,182,431
Buildings and improvements 38,089,448 35,936,200
Machinery and equipment 23,678,795 20,049,176
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Total cost 70,876,191 64,167,807
Accumulated depreciation 19,235,396 17,232,199
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Property, net 51,640,795 46,935,608
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Investments:
Joint ventures 2,201,238 2,192,453
Investments available-for-sale 4,124,264 5,406,286
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Total Investments 6,325,502 7,598,739
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Other assets:
Goodwill 130,539,260 10,378,420
Non-compete agreements 4,811,817 524,584
Trademarks 8,669,642 1,669,642
Other 4,675,597 3,994,601
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Total other assets 148,696,316 16,567,247
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TOTAL ASSETS $ 426,489,981 $ 309,066,879
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 63,683,829 $ 57,290,788
Accrued liabilities:
Taxes 19,231,287 496,333
Compensation and related items 13,198,160 11,630,556
Product warranties 22,239,988 12,541,890
Other 6,040,553 5,308,473
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Total current liabilities 124,393,817 87,268,040
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Deferred income taxes and other liabilities 6,920,348 1,852,432
Stockholders' equity:
Common stock - authorized 40,000,000 shares;
issued 16,102,988 shares @ 1/31/02 and 13,817,847
shares @ 7/31/01; par value of $.10 per share 1,610,299 1,381,785
Additional paid in capital 89,729,981 27,258,323
Accumulated other comprehensive loss (2,737,787) (1,685,309)
Retained earnings 236,791,618 222,942,676
Restricted stock plan (619,629) (352,402)
Cost of treasury shares, 1,908,437 shares @ 1/31/02
and 7/31/01 (29,598,666) (29,598,666)
------------- -------------
Total stockholders' equity 295,175,816 219,946,407
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 426,489,981 $ 309,066,879
============= =============
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JANUARY 31, 2002 AND 2001
-------------------------------------------------------------------
THREE MONTHS ENDED JANUARY 31 SIX MONTHS ENDED JANUARY 31
----------------------------- ---------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net sales $269,215,671 $173,181,163 $479,009,802 $383,002,980
Cost of products sold 238,437,128 155,981,994 424,694,716 339,190,397
------------ ------------ ------------ ------------
Gross profit 30,778,543 17,199,169 54,315,086 43,812,583
Selling, general, and
administrative expenses 18,911,965 12,829,505 33,123,630 27,015,448
Interest income 183,215 645,428 1,116,252 2,065,772
Interest expense 42,897 150,396 194,400 251,525
Other income 57,610 209,085 336,300 650,522
------------ ------------ ------------ ------------
Income before income taxes 12,064,506 5,073,781 22,449,608 19,261,904
Provision for income taxes 4,386,280 1,909,380 8,078,983 7,706,689
------------ ------------ ------------ ------------
Net income $ 7,678,226 $ 3,164,401 $ 14,370,625 $ 11,555,215
============ ============ ============ ============
Average common shares outstanding - Basic 13,968,808 11,887,495 12,942,133 11,936,896
- -----------------------------------------
Average common shares outstanding - Diluted 14,048,290 11,930,800 13,004,774 11,982,122
- -------------------------------------------
Earnings per common share:
- --------------------------
Basic $ .55 $ .27 $ 1.11 $ .97
============ ============ ============ ============
Diluted $ .55 $ .27 $ 1.10 $ .96
============ ============ ============ ============
Dividends paid per common share $ .02 $ .02 $ .04 $ .04
- ------------------------------- ============ ============ ============ ============
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2002 AND 2001
--------------------------------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,370,625 $ 11,555,215
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 2,171,810 1,689,310
Amortization 64,767 933,723
Purchase of trading securities (3,588,351) (31,866,070)
Proceeds from sale of trading investments 50,027,883 18,903,584
Gain on sale of investments available-for-sale (29,322) --
Gain on sale of trading investments (404,238) --
Deferred income tax 4,670,477 (1,744,165)
Changes in non-cash assets and liabilities, net of assets and liabilities acquired
- ----------------------------------------------------------------------------------
Accounts receivable (16,751,079) (3,200,602)
Inventories 11,109,150 (6,652,081)
Prepaid expenses and other (2,570,433) (3,513,699)
Accounts payable (22,539,090) (7,225,171)
Accrued liabilities 4,598,788 (8,955,548)
Other liabilities 1,565,280 669,725
------------ ------------
Net cash provided by (used in) operating activities 42,696,267 (29,405,779)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (3,282,397) (7,982,956)
Disposals of property, plant & equipment 27,157 513
Purchase of available-for-sale investments -- (619,371)
Proceeds from sale of available-for-sale investments 96,228 --
Acquisition of Keystone (68,604,096) --
------------ ------------
Net cash used in investing activities (71,763,108) (8,601,814)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (521,683) (476,470)
Purchase of treasury stock -- (3,006,036)
Proceeds from issuance of common stock 883,491 193,455
------------ ------------
Net cash provided by (used in) financing activities 361,808 (3,289,051)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (262,717) 97,928
------------ ------------
Net decrease in cash and equivalents (28,967,750) (41,198,716)
Cash and equivalents, beginning of year 60,058,777 59,655,251
------------ ------------
CASH AND EQUIVALENTS, END OF PERIOD $ 31,091,027 $ 18,456,535
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash transactions - Issuance of restricted stock $ 346,199 --
Income taxes paid 176,559 $ 10,164,358
Interest paid 194,400 251,525
Stock issued for Keystone $ 61,470,483 --
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 three months and the six months ended
January 31, 2002, are not necessarily indicative of the results for the
full year.
Certain amounts in the financial statements have been reclassified to
conform with the January 31, 2002 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:
January 31, 2002 July 31, 2001
---------------- -------------
Raw materials $40,370,610 $33,974,281
Chassis 17,503,117 19,021,209
Work in process 21,239,055 23,879,366
Finished goods 14,849,293 8,801,723
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Total 93,962,075 85,676,579
Less excess of FIFO costs over LIFO costs 5,848,942 5,389,942
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Total inventories $88,113,133 $80,286,637
=========== ===========
3. Earnings Per Share:
Three months Three months Six months Six months
ended ended ended ended
January 31, 2002 January 31, 2001 January 31, 2002 January 31, 2001
---------------- ---------------- ---------------- ----------------
Weighted average shares
outstanding for basic
earnings per share 13,968,808 11,887,495 12,942,133 11,936,896
Stock options 52,754 43,305 49,277 45,226
Other issuable shares 26,728 -- 13,364 --
---------- ---------- ---------- ----------
Total - For diluted shares 14,048,290 11,930,800 13,004,774 11,982,122
========== ========== ========== ==========
4. Stockholders' Equity:
Three months Three months Six months Six months
ended ended ended ended
January 31, 2002 January 31, 2001 January 31, 2002 January 31, 2001
---------------- ---------------- ---------------- ----------------
Net Income $7,678,226 $3,164,401 $14,370,625 $11,555,215
Foreign currency
translation adj. (1,881) 219,146 (262,718) 97,928
Unrealized appreciation
(depreciation) on investments (377,005) 1,237,408 (789,760) 1,342,872
---------- ---------- ----------- -----------
Comprehensive Income $7,299,340 $4,620,955 $13,318,147 $12,996,015
========== ========== =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
5. Segment Information:
Three Months Three Months Six Months Six Months
ended ended ended ended
January 31, 2002 January 31, 2001 January 31, 2002 January 31, 2001
---------------- ---------------- ---------------- ----------------
Net Sales:
Recreation vehicles
Towables $170,117,283 $ 64,982,994 $255,639,527 $150,729,261
Motorized 31,959,855 37,112,294 73,642,444 89,741,793
Other 657,913 618,118 1,575,251 1,822,364
Buses 66,480,620 70,467,757 148,152,580 140,709,562
------------ ------------ ------------ ------------
Total $269,215,671 $173,181,163 $479,009,802 $383,002,980
============ ============ ============ ============
Income Before Income Taxes:
Recreation vehicles $10,777,185 $1,497,198 $16,266,706 $ 9,682,996
Buses 3,276,381 4,427,062 8,809,804 10,373,192
Corporate (1,989,060) (850,479) (2,626,902) (794,284)
----------- --------- ----------- ---------
Total $12,064,506 $5,073,781 $22,449,608 $19,261,904
=========== ========== =========== ===========
January 31, 2002 July 31, 2001
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Identifiable Assets:
Recreation vehicles $305,592,717 $114,149,684
Buses 78,758,957 82,194,269
Corporate 42,138,307 112,722,926
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Total $426,489,981 $309,066,879
============ ============
6. Goodwill and Other Intangible Assets
On August 1, 2001, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets", which eliminated the amortization of goodwill and
other intangibles with indefinite useful lives. The Company performed an
impairment test of its goodwill and determined that no impairment of the
recorded goodwill existed. In accordance with SFAS No. 142, goodwill will
be tested for impairment at least annually and more frequently if an event
occurs which indicates the goodwill may be impaired. On an annual basis,
we expect to perform our impairment testing during the fourth quarter.
The components of other intangibles are as follows:
January 31, 2002 July 31, 2001
---------------- -------------
Accumulated Accumulated
Cost Amortization Cost Amortization
---- ------------ ---- ------------
Amortized Intangible Assets
Non-compete agreements $14,073,367 $9,261,550 $9,573,367 $9,048,783
Aggregate amortization expense for non-compete agreements for the quarters
ended January 31, 2002 and January 31, 2001 was $178,704 and $242,879
respectively. Aggregate amortization expense for the six months ended
January 31, 2002 and January 31, 2001 was $212,767 and $590,947
respectively. Non-compete agreements are amortized on a straight-line
basis.
Estimated Amortization Expense:
For the year ending July 2002 $570,176
For the year ending July 2003 $714,818
For the year ending July 2004 $714,818
For the year ending July 2005 $671,485
For the year ending July 2006 $584,818
The changes in the carrying amount of goodwill and trademarks for the
period ended January 31, 2002 are as follows:
Goodwill Trademarks
-------- ----------
Balance as of July 31, 2001 $ 10,378,420 $1,669,642
Arising from acquisitions 120,160,840 7,000,000
------------ ----------
Balance as of January 31, 2002 $130,539,260 $8,669,642
============ ==========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
As of January 31, 2002, goodwill and trademarks for the recreational
vehicles segment totaled $130,243,760 and $8,441,674 respectively. The
remainder related to the bus segment.
The table below shows the effect on net income had SFAS No. 142 been
adopted in prior periods:
Three Months Three Months Six Months Six Months
ended ended ended ended
January 31, 2002 January 31, 2001 January 31, 2002 January 31, 2001
---------------- ---------------- ---------------- ----------------
Net Income $7,678,226 $3,164,401 $14,370,625 $11,555,215
Goodwill Amortization - 127,168 - 254,721
Trademark Amortization - 41,236 - 82,474
---------- ---------- ----------- -----------
Adjusted Net Income $7,678,226 $3,332,805 $14,370,625 $11,892,410
========== ========== =========== ===========
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
----- ------- ----- ------- ----- ------- ----- -------
Earnings per common share $.55 $.55 $.27 $.27 $1.11 $1.10 $.97 $.96
Effect of accounting change - - .01 .01 - - .03 .03
----- ----- ----- ----- ----- ----- ----- -----
Adjusted Net Income $.55 $.55 $.28 $.28 $1.11 $1.10 $1.00 $.99
===== ===== ===== ===== ===== ===== ===== =====
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 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 is recognized when earned.
At January 31, 2002, the Company held equity investments with a fair value
of $4,124,264 and cost basis of $6,039,712. The investments are classified
as available-for-sale and included in other investments. Gross unrealized
losses were $1,915,448.
The Company has certain corporate debt investments that are classified as
trading investments and reported as Investments - short term. Included in
other income for the six months ended January 31, 2002 are net realized
gains on trading investments of $63,035.
9. Acquisition
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 fifth wheel recreation vehicles. The
purchase price of approximately $151,090,000 consisted of
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
cash of $88,810,000 and 2,250,000 shares of Thor common stock valued at
$62,280,000, of which 1,372,433 shares are restricted. The final purchase
price includes $6,244,000 of cash and 29,273 shares of Thor common stock
valued at $810,000 that will be paid and issued subsequent to January 31,
2002, and is included in accounts payable as $7,054,000 at January 31,
2002. The value of the common stock was based on the average 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. The following
table summarizes the fair values of the assets acquired and liabilities
assumed at the date of acquisition:
Current assets $ 63,920,463
Property, plant and equipment 3,607,668
Goodwill 120,012,845
Trademarks and non-compete agreements 11,500,000
Other assets 141,251
-------------
Total assets acquired 199,182,227
Current liabilities 43,918,410
Other liabilities 4,173,099
-------------
Net assets acquired $ 151,090,718
=============
The purchase price allocation includes $4,500,000 of non-compete
agreements, which will be amortized over seven to ten years, $120,012,845
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 primary reasons for the acquisition include Keystone's future earnings
potential, its fit with our existing operations, its market share, and its
cash flow. The results of operations for Keystone are included in Thor's
operating results beginning November 10, 2001. The Keystone goodwill and
its results are included in the recreation vehicle reporting segment.
Pro forma results of operations, as if the acquisition occurred as of the
beginning of the periods presented are as follows:
Three Months Three Months Six Months Six Months
ended ended ended ended
January 31, 2002 January 31, 2001 January 31, 2002 January 31, 2001
---------------- ---------------- ---------------- ----------------
Net Sales $276,643,368 $230,050,576 $613,633,714 $521,681,296
Net Income $ 8,335,692 $ 4,125,090 $ 24,108,381 $ 15,103,653
Earnings per common share
Basic $ .59 $ .29 $ 1.70 $ 1.06
Diluted $ .59 $ .29 $ 1.69 $ 1.06
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- ------------------------------------------------------------------------
OPERATIONS
- ----------
Quarter Ended January 31, 2002 vs. Quarter Ended January 31, 2001
- -----------------------------------------------------------------
Net sales for the second quarter of fiscal 2002 were $269,215,671 compared to
$173,181,163 for the second quarter of fiscal 2001. Income before income taxes
in fiscal 2002 was $12,064,506, a 137.8% increase from $5,073,781 in fiscal
2001. The increase in income before income taxes of $6,990,725 in fiscal 2002
was primarily caused by increased recreation vehicle revenues of $100,021,645
which resulted in an increase in income before income taxes of approximately
$9,280,000. Included in the second quarter of 2002 are sales of $95,447,258 and
income before income taxes of $7,793,594 for Keystone RV acquired on November 9,
2001. Bus revenues were $3,987,137 less in fiscal 2002 than in fiscal 2001. Bus
income before income taxes in fiscal 2002 was approximately $1,151,000 less than
the same period last year because of reduced revenues at our Champion and
ElDorado Kansas operations and overall lower margins. This was due primarily to
declines in airline traffic after the terrorist attacks of
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(CONTINUED)
-----------
September 11, 2001 which affected the hotel, motel, rental car and other
businesses and delayed purchases of buses, as well as to increased competition.
Recreation vehicle revenues increased in the second quarter of fiscal 2002 by
97.4% to $202,735,051, compared to $102,713,406 in fiscal 2001 and accounted for
75.3% of total company revenues compared to 59.3% in fiscal 2001. Recreation
vehicle order backlog of $127,870,000 (includes $62,613,000 for Keystone RV) at
January 31, 2002 was up 117.5% compared to the same period last year. Excluding
Keystone RV backlog, recreation vehicle backlogs were $65,257,000 at January 31,
2002, up 11% compared to the same period last year. This increase in backlog
indicates a recent strengthening in the marketplace. Bus revenues in fiscal 2002
decreased by 5.7% to $66,480,620 compared to $70,467,757 in fiscal 2001 and
accounted for 24.7% of total company revenues compared to 40.7% in fiscal 2001.
Bus vehicle order backlog of $117,081,000 at January 31, 2002 was down 43%
compared to the same period last year.
Gross profit as a percentage of sales in fiscal 2002 increased to 11.4% from
9.9% in fiscal 2001 primarily due to increased recreation vehicle sales.
Selling, general, and administrative expenses and amortization of intangibles
were $18,911,965 compared to $12,829,505 for the same period in fiscal 2001. As
a percentage of sales, selling, general and administrative expenses were 7.0% in
fiscal 2002 compared to 7.4% in fiscal 2001. Amortization of intangibles
decreased in fiscal 2002 to $178,704 compared to $414,266 in fiscal 2001. This
$235,562 reduction is primarily due to expiration of certain non-compete
expenses of approximately $208,817 offset by the Keystone non-compete cost of
$144,642 for fiscal 2002, and the reduction in goodwill and trademark
amortization expense in fiscal 2002 of approximately $171,387 resulting from the
Company's adoption of Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets". The additional selling, general and
administrative costs offsetting the reduction of amortization of intangibles is
due primarily to the increased costs associated with the substantial increase in
revenue. Interest income decreased by $462,213 due primarily to lower market
rates in fiscal 2002 and the use of cash investments to partially fund the
acquisition of Keystone RV Company on November 9, 2001.
The overall effective income tax rate was 36.4% for fiscal 2002 compared to
37.6% in fiscal 2001 due primarily to research and development tax credits
recognized by the Company.
Six Months Ended January 31, 2002 vs. Six Months Ended January 31, 2001
- -----------------------------------------------------------------------
Net sales for the six months of fiscal 2002 were $479,009,802 compared to
$383,002,980 for the same period last year. Income before income taxes in fiscal
2002 was $22,449,608, a 16.5% increase from $19,261,904 in fiscal 2001. The
increase in income before income taxes of $3,187,704 in fiscal 2002 was
primarily caused by increased recreation vehicle revenues of $88,563,804 which
resulted in an increase in income before income taxes of approximately
$6,584,000. Included in the fiscal 2002 results for the six months, are the
sales of $95,447,258 and income before income taxes of $7,793,594 for Keystone
RV Company acquired on November 9, 2001. Bus revenues were $7,443,018 greater in
fiscal 2002 than fiscal 2001. Bus income before income taxes in fiscal 2002 was
approximately $1,563,000 less than the same period last year due primarily to
increased competition.
Recreation vehicle revenues increased in the six months of fiscal 2002 by 36.6%
to $330,857,222, compared to $242,293,418 in fiscal 2001 and accounted for 69.1%
of total company revenues compared to 63.3% in fiscal 2001. Bus revenues in
fiscal 2002 increased by 5.3% to $148,152,580 compared to $140,709,562 in fiscal
2001 and accounted for 30.9% of total company revenues compared to 36.7% in
fiscal 2001.
Gross profit as a percentage of sales in fiscal 2002 decreased to 11.3% from
11.4% in fiscal 2001 primarily due to reduced bus operation margins. Selling,
general, and administrative expenses and amortization of intangibles were
$33,123,630 compared to $27,015,448 for the same period in fiscal 2001. As a
percentage of sales, selling, general and administrative expenses were 6.9% in
fiscal 2002 compared to 7.1% in fiscal 2001. Amortization of intangibles
decreased in fiscal 2002 to $212,767 compared to $933,722 in fiscal 2001. This
$720,955 reduction is primarily due to expiration of certain non-compete
expenses of approximately $522,822 offset by the Keystone non-compete cost of
$144,642 for fiscal 2002, and the reduction in goodwill and trademark
amortization expense in fiscal 2002 of approximately $342,775 resulting from the
Company's adoption of Statement of Financial Accounting Standard No. 142
"Goodwill and Other Intangible Assets". The additional selling, general, and
administrative costs offsetting the reduction of amortization of intangibles is
due primarily to the increased costs associated with the increased revenue in
recreation vehicles. Interest income decreased by
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(CONTINUED)
-----------
$949,520 due primarily to lower market rates in fiscal 2002 and the use of cash
investments to partially fund the acquisition of Keystone RV Company on November
9, 2001.
The overall effective tax rate was 36.0% for the six months of fiscal 2002
compared to 40.0% in fiscal 2001 due primarily to research and development tax
credits recognized by the Company.
Financial Condition and Liquidity
- ---------------------------------
As of January 31, 2002, we had $31,091,027 in cash and cash equivalents compared
to $60,058,777 in cash and cash equivalents and $47,134,094 in short-term
investments on July 31, 2001. The reduction in cash, cash equivalents and
short-term investments was due to cash required for the acquisition of Keystone
RV Company on November 9, 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 January 31, 2002 was $95,433,551 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 January 31, 2002. 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 20, 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 $3,282,000 were primarily for the expansion of our Kansas bus
operation, a roof replacement at our Airstream operation, and expansion at our
Four Winds operation to manufacture diesel motor homes. The Company anticipates
additional capital expenditures in 2002 of approximately $4,600,000. The major
components of these anticipated capital expenditures include the completion of
our Kansas bus operation expense for $400,000; the completion of a roof
replacement at our Airstream operation for $278,000; building expenses at our
Keystone and Four Winds operations for approximately $1,262,000, and computer
systems for our Airstream and Keystone operations for approximately $763,000.
The balance of capital expenditures will be for purchase or replacement of
machinery and equipment in the ordinary course of business. The Company also
plans to spend $9,200,000 on a new building and equipment for our ElDorado
California bus operation which will start in the latter part of fiscal 2002,
with the majority of cost to be incurred in fiscal 2003. This expansion at
ElDorado California will allow the Company to increase production efficiencies
and techniques and produce 40 foot and larger buses.
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 fifth wheel recreation vehicles. The purchase
price of approximately $151,090,000 consisted of cash of $88,810,000 and
2,250,000 shares of Thor common stock valued at $62,280,000, of which 1,372,433
shares are restricted. The final purchase price includes $6,244,000 of cash and
29,273 shares of Thor common stock valued at $810,000 that will be paid and
issued subsequent to January 31, 2002, and is included in accounts payable as
$7,054,000 at January 31, 2002. The value of the common stock was based on the
average 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.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(CONTINUED)
-----------
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 results of operations.
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 assurances
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, competitive 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.
PART II
Item 4. Submission of Matters to a Vote of Security Holders
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Annual Meeting of Shareholders on December 3, 2001
Matters Voted on by Shareholders:
---------------------------------
Proposal #1 Election of Directors: Peter B. Orthwein and
William C. Tomson
Proposal #2 Amendment of Certificate of Incorporation to
increase authorized number of shares from
20,000,000 to 40,000,000.
Results of Voting by Shareholders:
----------------------------------
Proposal #1
For Against Abstain
--- ------- -------
Peter B. Orthwein 10,503,791 -0- 241,059
William C. Tomson 10,715,371 -0- 29,479
Proposal #2
For Against Abstain
--- ------- -------
9,551,440 413,604 779,806
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
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 pro forma financial information required with
respect to the acquisition of Keystone.
SIGNATURES
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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 March 13, 2002 (Signed) /s/ Wade F. B. Thompson
------------------ --------------------------------------------
Wade F. B. Thompson, Chairman of the Board,
President and Chief Executive Officer
DATE March 13, 2002 (Signed) /s/ Walter L. Bennett
------------------ --------------------------------------------
Walter L. Bennett, Senior Vice President,
Secretary (Chief Accounting Officer)