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 April 30, 2002 COMMISSION FILE NUMBER 1-9235
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THOR INDUSTRIES, INC.
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Delaware 93-0768752
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(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 4/30/2002
----- ------------------------
Common stock, par value 14,236,489 shares
$.10 per share
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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ASSETS
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APRIL 30, 2002 JULY 31, 2001
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Current assets:
Cash and cash equivalents $ 35,965,517 $ 60,058,777
Investments - short term - 47,134,094
Accounts receivable:
Trade 106,849,472 46,174,662
Other 2,511,937 1,341,033
Inventories 95,344,048 80,286,637
Deferred income taxes and other 8,970,128 2,970,082
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Total current assets 249,641,102 237,965,285
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Property:
Land 9,186,697 8,182,431
Buildings and improvements 34,139,911 35,936,200
Machinery and equipment 29,280,012 20,049,176
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Total cost 72,606,620 64,167,807
Accumulated depreciation 20,488,926 17,232,199
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Property, net 52,117,694 46,935,608
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Investments:
Joint ventures 2,144,653 2,192,453
Investments available-for-sale 5,242,705 5,406,286
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Total Investments 7,387,358 7,598,739
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Other assets:
Goodwill 130,552,823 10,378,420
Non-compete agreements 4,633,112 524,584
Trademarks 8,669,642 1,669,642
Other 4,787,274 3,994,601
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Total other assets 148,642,851 16,567,247
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TOTAL ASSETS $457,789,005 $309,066,879
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 74,408,209 $ 57,290,788
Accrued liabilities:
Taxes 15,757,393 496,333
Compensation and related items 16,885,167 11,630,556
Product warranties 22,509,664 12,541,890
Other 7,402,982 5,308,473
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Total current liabilities 136,963,415 87,268,040
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Deferred income taxes and other liabilities 7,400,588 1,852,432
Stockholders' equity:
Common stock - authorized 40,000,000 shares;
issued 16,144,926 shares @ 4/30/02 and 13,817,847
shares @ 7/31/01; par value of $.10 per share 1,614,493 1,381,785
Additional paid in capital 90,780,762 27,258,323
Accumulated other comprehensive loss (1,896,322) (1,685,309)
Retained earnings 253,102,373 222,942,676
Restricted stock plan (577,638) (352,402)
Cost of treasury shares, 1,908,437 shares @ 4/30/02
and 7/31/01 (29,598,666) (29,598,666)
------------ ------------
Total stockholders' equity 313,425,002 219,946,407
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $457,789,005 $309,066,879
============ ============
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED APRIL 30, 2002 AND 2001
------------------------------------------------------------------
THREE MONTHS ENDED APRIL 30 NINE MONTHS ENDED APRIL 30
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2002 2001 2002 2001
---- ---- ---- ----
Net sales $369,754,869 $221,028,840 $848,764,671 $604,030,823
Cost of products sold 320,585,376 195,826,613 745,280,092 535,017,381
------------ ------------ ------------ ------------
Gross profit 49,169,493 25,202,227 103,484,579 69,013,442
Selling, general, and
administrative expenses 22,925,269 14,388,246 56,048,899 41,402,327
Interest income 162,393 842,946 1,278,645 2,908,718
Interest expense 43,154 191,643 237,554 443,168
Other income 262,726 57,166 599,026 707,688
------------ ------------ ------------ ------------
Income before income taxes 26,626,189 11,522,450 49,075,797 30,784,353
Provision for income taxes 10,030,877 4,791,682 18,109,860 12,498,371
------------ ------------ ------------ ------------
Net income $ 16,595,312 $ 6,730,768 $ 30,965,937 $ 18,285,982
============ ============ ============ ============
Average Common Shares Outstanding - Basic 14,221,263 11,859,729 13,359,139 11,913,085
- -----------------------------------------
Average Common Shares Outstanding - Diluted 14,274,653 11,916,533 13,421,042 11,961,554
- -------------------------------------------
Earnings Per Common Share:
- -------------------------
Basic $1.17 $ .57 $2.32 $1.54
===== ===== ===== =====
Diluted $1.16 $ .57 $2.31 $1.53
===== ===== ===== =====
Dividends Paid Per Common Share $.02 $.02 $.06 $.06
- ------------------------------- ==== ==== ==== ====
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 2002 AND 2001
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $30,965,937 $18,285,982
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 3,453,182 2,573,173
Amortization 391,472 1,138,755
Purchase of trading securities (3,588,350) (40,824,332)
Proceeds from sale of trading investments 50,027,883 21,171,972
Gain on sale of investments available-for-sale (29,322) --
Gain on sale of trading investments (407,012) (1,090,039)
Deferred income tax 4,226,380 --
Changes in non-cash assets and liabilities, net of assets and liabilities acquired
- ----------------------------------------------------------------------------------
Accounts receivable (37,014,469) (14,600,073)
Inventories 3,862,235 (4,970,449)
Prepaid expenses and other 335,734 (1,678,562)
Accounts payable (11,004,535) (3,454,859)
Accrued liabilities 6,444,006 (736,471)
Other liabilities 1,587,553 700,381
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Net cash provided by (used in) operating activities 49,250,694 (23,484,522)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (5,023,521) (14,502,894)
Disposals of property, plant & equipment 27,187 17,421
Purchase of available-for-sale investments -- (642,690)
Proceeds from sale of available-for-sale investments 96,228 --
Acquisition of Keystone - net of cash acquired (68,617,654) --
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Net cash used in investing activities (73,517,760) (15,128,163)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (806,240) (713,742)
Purchase of treasury stock -- (3,006,036)
Proceeds from issuance of common stock 1,128,285 265,105
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Net cash provided by (used in) financing activities 322,045 (3,454,673)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (148,239) (138,024)
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Net decrease in cash and equivalents (24,093,260) (42,205,382)
Cash and equivalents, beginning of year 60,058,777 59,655,251
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CASH AND EQUIVALENTS, END OF PERIOD $35,965,517 $17,449,869
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash transactions - Issuance of restricted stock $ 346,199 $ --
Income taxes paid 8,871,205 11,052,861
Interest paid 237,554 443,168
Stock issued for Keystone 62,280,663 --
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 nine months ended April 30,
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 April 30, 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:
April 30, 2002 July 31, 2001
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Raw materials $ 43,932,246 $33,974,281
Chassis 20,398,613 19,021,209
Work in process 23,120,805 23,879,366
Finished goods 13,968,826 8,801,723
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Total 101,420,490 85,676,579
Less excess of FIFO costs over LIFO costs 6,076,442 5,389,942
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Total inventories $ 95,344,048 $80,286,637
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3. Earnings Per Share:
Three months Three months Nine months Nine months
ended ended ended ended
April 30, 2002 April 30, 2001 April 30, 2002 April 30, 2001
-------------- -------------- -------------- --------------
Weighted average shares
outstanding for basic
earnings per share 14,221,263 11,859,792 13,359,139 11,913,085
Stock options 47,470 56,741 50,966 48,469
Other issuable shares 5,920 -- 10,937 --
---------- ---------- ---------- ----------
Total - For diluted shares 14,274,653 11,916,533 13,421,042 11,961,554
========== ========== ========== ==========
4. Stockholders' Equity:
Three months Three months Nine months Nine months
ended ended ended ended
April 30, 2002 April 30, 2001 April 30, 2002 April 30, 2001
-------------- -------------- -------------- --------------
Net Income $16,595,312 $ 6,730,768 $30,965,937 $18,285,982
Foreign currency
translation adjustment 114,479 (235,952) (148,239) (138,024)
Unrealized appreciation
(depreciation) on investments 726,986 (1,342,735) (62,774) 137
----------- ------------ ----------- -----------
Comprehensive Income $17,436,777 $ 5,152,081 $30,754,924 $18,148,095
=========== ============ =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
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5. Segment Information:
Three Months Three Months Nine Months Nine Months
ended ended ended ended
April 30, 2002 April 30, 2001 April 30, 2002 April 30, 2001
-------------- -------------- -------------- --------------
Net Sales:
Recreation vehicles
Towables $251,629,480 $ 94,978,054 $507,269,007 $245,730,268
Motorized 50,391,241 51,155,194 124,033,684 140,873,035
Other 758,452 572,486 2,333,704 2,394,850
Buses 66,975,696 74,323,106 215,128,276 215,032,670
------------ ------------ ------------ ------------
Total $369,754,869 $221,028,840 $848,764,671 $604,030,823
============ ============ ============ ============
Income Before Income Taxes:
Recreation vehicles $ 26,316,445 $ 7,307,103 $ 42,583,151 $ 16,990,099
Buses 2,687,766 4,965,483 11,497,570 15,338,677
Corporate (2,378,022) (750,136) (5,004,924) (1,544,423)
------------ ------------ ------------ ------------
Total $ 26,626,189 $ 11,522,450 $ 49,075,797 $ 30,784,353
============ ============ ============ ============
April 30, 2002 July 31, 2001
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Identifiable Assets:
Recreation vehicles $323,263,672 $114,149,684
Buses 84,520,473 82,194,269
Corporate 50,004,860 112,722,926
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Total $457,789,005 $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. In the second quarter of fiscal
year 2002, 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:
April 30, 2002 July 31, 2001
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Accumulated Accumulated
Cost Amortization Cost Amortization
---- ------------ ---- ------------
Amortized Intangible Assets
Non-compete agreements $14,073,367 $9,440,255 $9,573,367 $9,048,783
Aggregate amortization expense for non-compete agreements for the quarters
ended April 30, 2002 and April 30, 2001 was $178,705 and $33,021
respectively. Aggregate amortization expense for the nine months ended
April 30, 2002 and April 30, 2001 was $391,472 and $623,968 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
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The changes in the carrying amount of goodwill and trademarks for the
period ended April 30, 2002 are as follows:
Goodwill Trademarks
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Balance as of July 31, 2001 $ 10,378,420 $1,669,642
Arising from acquisitions 120,174,403 7,000,000
------------ ----------
Balance as of April 30, 2002 $130,552,823 $8,669,642
============ ==========
As of April 30, 2002, goodwill and trademarks for the recreational vehicles
segment totaled $130,257,323 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 Nine Months Nine Months
ended ended ended ended
April 30, 2002 April 30, 2001 April 30, 2002 April 30, 2001
-------------- -------------- -------------- --------------
Net Income $16,595,312 $6,730,768 $30,965,937 $18,285,982
Goodwill Amortization - 128,177 - 383,283
Trademark Amortization - 43,835 - 131,504
----------- ---------- ----------- -----------
Adjusted Net Income $16,595,312 $6,902,780 $30,965,937 $18,800,769
=========== ========== =========== ===========
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
----- ------- ----- ------- ----- ------- ----- -------
Earnings per common share $1.17 $1.16 $ .57 $ .57 $2.32 $2.31 $1.54 $1.53
Effect of accounting change - - .01 .01 - - .04 .04
----- ----- ----- ----- ----- ----- ----- -----
Adjusted Net Income $1.17 $1.16 $ .58 $ .58 $2.32 $2.31 $1.58 $1.57
===== ===== ===== ===== ===== ===== ===== =====
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 or if a decline in the fair market value is
determined to be other than temporary. 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 April 30, 2002, the Company held equity investments with a fair value of
$5,242,705 and cost basis of $6,039,712. The investments are classified as
available-for-sale and included in other investments. Gross unrealized
losses were $797,007.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
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 nine months ended April 30, 2002 are net realized
losses on trading investments of $60,261.
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 $151,104,000 consisted of cash of $88,824,000 and
2,250,000 shares of Thor common stock valued at $62,280,000, of which
1,372,433 shares are restricted. 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 120,026,403
Trademarks and non-compete agreements 11,500,000
Other assets 141,251
------------
Total assets acquired 199,195,785
Current liabilities 43,918,410
Other liabilities 4,173,099
------------
Net assets acquired $151,104,276
============
The purchase price allocation includes $4,500,000 of non-compete
agreements, which will be amortized over seven to ten years, $120,026,403
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 Nine Months Nine Months
ended ended ended ended
April 30, 2002 April 30, 2001 April 30, 2002 April 30, 2001
-------------- -------------- -------------- --------------
Net Sales $369,754,869 $322,510,337 $983,388,583 $844,190,636
Net Income $16,595,312 $10,097,539 $40,703,693 $25,201,191
Earnings per common share
Basic $1.15 $ .72 $2.79 $1.78
Diluted $1.15 $ .71 $2.78 $1.77
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- ------------------------------------------------------------------------
OPERATIONS
- ----------
Quarter Ended April 30, 2002 Vs. Quarter Ended April 30, 2001
- -------------------------------------------------------------
Net sales for the third quarter of fiscal 2002 were $369,754,869 compared to
$221,028,840 for the third quarter of fiscal 2001. Income before income taxes in
fiscal 2002 was $26,626,189, a 131.1% increase from $11,522,450 in fiscal 2001.
The increase in income before income taxes of $15,103,739 in fiscal 2002 was
primarily caused by increased recreation vehicle revenues of $156,073,439 which
resulted in an increase in income before income taxes of approximately
$19,000,000. Included in the third quarter of 2002 are sales of $140,300,979 and
income before income taxes of $16,394,617 for Keystone RV acquired on November
9, 2001. Bus revenues were $7,347,410 less in fiscal 2002 than in fiscal 2001.
Bus income before income taxes in fiscal 2002 was approximately $2,300,000 less
than the same period last year because of reduced revenues and overall lower
margins. This was due to continuing competitive pressures on pricing of buses
and the decline in airline traffic after the terrorist attacks of September 11,
2001 which affected the hotel, motel, rental car and other businesses and
delayed purchases of buses.
Recreation vehicle revenues increased in the third quarter of fiscal 2002 by
106.4% to $302,779,173, compared to $146,705,734 in fiscal 2001 and accounted
for 81.9% of total company revenues compared to 66.4% in fiscal 2001. Recreation
vehicle order backlog of $265,220,000 (includes $157,080,000 for Keystone RV) at
April 30, 2002 was up 313.3% compared to the same period last year. Excluding
Keystone RV backlog, recreation vehicle backlogs were $108,140,000 at April 30,
2002, up 68.5% compared to the same period last year. This increase in backlog
is due largely to the recent strengthening in the marketplace. Bus revenues in
fiscal 2002 decreased by 9.9% to $66,975,696 compared to $74,323,106 in fiscal
2001 and accounted for 18.1% of total company revenues compared to 33.6% in
fiscal 2001. Bus vehicle order backlog of $96,327,000 at April 30, 2002 was down
48.8% compared to the same period last year.
Gross profit as a percentage of sales in fiscal 2002 increased to 13.3% from
11.4% in fiscal 2001 primarily due to increased recreation vehicle sales.
Selling, general, and administrative expenses and amortization of intangibles
were $22,925,269 compared to $14,388,246 for the same period in fiscal 2001. As
a percentage of sales, selling, general and administrative expenses were 6.2% in
fiscal 2002 compared to 6.5% in fiscal 2001. Amortization of intangibles
decreased in fiscal 2002 to $178,705 compared to $205,033 in fiscal 2001. This
$26,468 reduction is primarily due to expiration of certain non-compete expenses
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
$172,012 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 $680,553
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 37.7% for the third quarter of fiscal
2002 compared to 41.6% in fiscal 2001 due primarily to lower than expected state
tax audit assessments.
Nine Months Ended April 30, 2002 Vs. Nine Months Ended April 30, 2001
- ---------------------------------------------------------------------
Net sales for the nine months of fiscal 2002 were $848,764,671 compared to
$604,030,823 for the same period last year. Income before income taxes in fiscal
2002 was $49,075,797, a 59.4% increase from $30,784,353 in fiscal 2001. The
increase in income before income taxes of $18,291,444 in fiscal 2002 was
primarily caused by increased recreation vehicle revenues of $244,638,242 which
resulted in an increase in income before income taxes of approximately
$25,600,000. Included in the fiscal 2002 results for the nine months, are the
sales of $235,748,237 and income before income taxes of $24,188,211 for Keystone
RV acquired on November 9, 2001. Bus revenues were $95,606 greater in fiscal
2002 than fiscal 2001. Bus income before income taxes in fiscal 2002 was
approximately $3,900,000 less than the same period last year due primarily to
increased competition and pricing pressures.
Recreation vehicle revenues increased in the nine months of fiscal 2002 by 62.9%
to $633,636,395, compared to $388,998,153 in fiscal 2001 and accounted for 74.7%
of total company revenues compared to 64.4% in fiscal 2001. Bus revenues in
fiscal 2002 increased to $215,128,276 compared to $215,032,670 in fiscal 2001
and accounted for 25.3% of total company revenues compared to 35.6% in fiscal
2001.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- ------------------------------------------------------------------------
OPERATIONS
- ----------
(CONTINUED)
-----------
Gross profit as a percentage of sales in fiscal 2002 increased to 12.2% from
11.4% in fiscal 2001 primarily due to increased recreation vehicle sales.
Selling, general, and administrative expenses and amortization of intangibles
were $56,048,899 compared to $41,402,327 for the same period in fiscal 2001. As
a percentage of sales, selling, general and administrative expenses were 6.6% in
fiscal 2002 compared to 6.9% in fiscal 2001. Amortization of intangibles
decreased in fiscal 2002 to $391,472 compared to $1,138,894 in fiscal 2001. This
$747,422 reduction is primarily due to expiration of certain non-compete
expenses of approximately $521,919 offset by the Keystone non-compete cost of
$289,284 for fiscal 2002, and the reduction in goodwill and trademark
amortization expense in fiscal 2002 of approximately $514,787 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 $1,630,073 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 36.9% for the nine months of fiscal 2002
compared to 40.6% in fiscal 2001 due primarily to research and development tax
credits recognized by the Company and lower than expected state tax audit
assessments.
Financial Condition and Liquidity
- ---------------------------------
As of April 30, 2002, we had $35,965,517 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 primarily 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 April 30, 2002 was $112,677,687 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 April 30, 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 $5,024,000 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 $3,400,000. The major
components of these anticipated capital expenditures include the completion of
our Kansas bus operation 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 fiscal 2003. This expansion at ElDorado California
will allow the Company to increase production efficiencies and techniques and
produce 40 foot and larger buses.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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OPERATIONS
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(CONTINUED)
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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 $151,104,000 consisted of cash of $88,824,000 and 2,250,000 shares of
Thor common stock valued at $62,280,000, of which 1,372,433 shares are
restricted. 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.
Quantitative and Qualitative Disclosures About Market Risk
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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
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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 6. Exhibits and Reports On Form 8-K
--------------------------------
b.) Reports on Form 8-K
On April 11, 2002 a Form 8-K was filed with the Securities and
Exchange Commission pursuant to presentation by the Company's
Chief Executive Officer, Wade F. B. Thompson at the Sidoti &
Company Conference on April 11, 2002.
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 May 29, 2002 (Signed) /s/ Wade F. B. Thompson
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Wade F. B. Thompson, Chairman of the Board,
President and Chief Executive Officer
DATE May 29, 2002 (Signed) /s/ Walter L. Bennett
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Walter L. Bennett, Senior Vice President,
Secretary (Chief Accounting Officer)