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, 2003 COMMISSION FILE NUMBER 1-9235
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THOR INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 93-0768752
- ------------------------------------------- --------------------------
(State or 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
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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
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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 4/30/03
----- ----------------------
Common stock, par value 28,583,645 shares
$.10 per share
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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ASSETS
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APRIL 30, 2003 JULY 31, 2002
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Current assets:
Cash and cash equivalents $91,370,775 $113,192,639
Investments - short term 29,517,318 4,621,874
Accounts receivable:
Trade 102,431,760 72,816,320
Other 3,340,016 2,445,578
Inventories 102,725,652 94,665,354
Deferred income taxes and other 9,567,841 3,496,589
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Total current assets 338,953,362 291,238,354
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Property:
Land 11,895,856 9,848,968
Buildings and improvements 49,562,884 37,249,824
Machinery and equipment 30,044,333 25,625,071
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Total cost 91,503,073 72,723,863
Accumulated depreciation 25,009,080 20,882,575
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Property, net 66,493,993 51,841,288
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Investments:
Joint venture 2,139,834 2,137,946
Investments available-for-sale 1,598,248 3,920,746
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Total investments 3,738,082 6,058,692
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Other assets:
Goodwill 130,554,872 130,554,872
Non-compete agreements 3,918,294 4,454,408
Trademarks 8,669,642 8,669,642
Other 8,405,977 4,685,877
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Total other assets 151,548,785 148,364,799
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TOTAL ASSETS $560,734,222 $497,503,133
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $84,363,704 $89,397,885
Accrued liabilities:
Taxes 17,488,950 13,793,041
Compensation and related items 20,272,012 20,463,363
Product warranties 31,714,430 25,374,825
Other 8,822,124 7,890,955
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Total current liabilities 162,661,220 156,920,069
------------ ------------
Deferred income taxes and other liabilities 6,431,475 5,964,143
Stockholders' equity:
Common stock - authorized 40,000,000 shares;
issued 28,583,645 shares @ 4/30/03 and 32,299,838
shares @ 7/31/02; par value of $.10 per share 2,858,365 3,229,984
Additional paid-in capital 81,224,493 89,941,287
Accumulated other comprehensive loss (1,156,044) (1,455,914)
Retained earnings 309,960,082 273,033,292
Restricted stock plan (1,245,369) (531,062)
Cost of treasury shares, -0- shares @ 4/30/03
and 3,816,874 @ 7/31/02 - (29,598,666)
------------ ------------
Total stockholders' equity 391,641,527 334,618,921
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $560,734,222 $497,503,133
============ ============
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2003 AND 2002
-----------------------------------------------------------
THREE MONTHS ENDED APRIL 30 NINE MONTHS ENDED APRIL 30
------------------------------- ---------------------------------
2003 2002 2003 2002
------------ ------------ -------------- ------------
Net sales $412,749,534 $367,690,369 $1,148,909,412 $844,140,444
Cost of products sold 355,715,028 320,281,088 988,128,438 745,472,088
------------ ------------ -------------- ------------
Gross profit 57,034,506 47,409,281 160,780,974 98,668,356
Selling, general and
administrative expenses 24,556,771 21,118,392 69,991,832 51,192,423
Impairment of equity securities - - 1,580,334 -
Interest income 397,865 162,393 1,431,129 1,278,645
Interest expense 99,501 43,154 336,071 237,554
Other income 535,684 216,061 1,202,321 558,773
------------ ------------ -------------- ------------
Income before income taxes 33,311,783 26,626,189 91,506,187 49,075,797
Provision for income taxes 13,158,155 10,030,877 35,134,956 18,109,860
------------ ------------ -------------- ------------
Net income $20,153,628 $16,595,312 $56,371,231 $30,965,937
============ ============ ============== ============
Average common shares outstanding:
----------------------------------
Basic 28,583,645 28,442,526 28,541,688 26,718,278
Diluted 28,797,117 28,600,808 28,798,881 26,888,115
Earnings per common share:
--------------------------
Basic $.71 $.58 $1.98 $1.16
Diluted $.70 $.58 $1.96 $1.15
Dividends paid per common share: $.01 $.01 $.03 $.03
--------------------------------
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 2003 AND 2002
-------------------------------------------------
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $56,371,231 $30,965,937
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation 4,148,010 3,453,182
Amortization 536,114 391,472
Deferred Income tax - 4,226,380
Impairment of equity securities 1,580,334 -
Purchase of trading investments (46,514,919) (3,588,350)
Proceeds from sale of trading investments 21,625,573 50,027,883
(Gain) loss on sale of trading investments 175,193 (407,012)
Unrealized gain on trading investments (181,291) -
(Gain) loss on sale of investments available-for-sale 6,205 (29,322)
CHANGES IN NON CASH ASSETS AND LIABILITIES:
Accounts receivable (30,486,191) (37,014,469)
Inventories (8,060,298) 3,862,235
Prepaid expenses and other (9,584,493) 335,734
Accounts payable (5,034,181) (4,840,072)
Accrued liabilities 11,060,878 6,444,006
Other liabilities 661,951 1,599,631
----------- -----------
Net cash provided by (used in) operating activities (3,695,884) 55,427,235
- --------------------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (18,773,639) (5,023,521)
Disposals of property, plant & equipment 13,472 27,187
Proceeds from sale of available-for-sale investments - 96,228
Acquisition of Keystone - (74,794,195)
----------- -----------
Net cash used in investing activities (18,760,167) (79,694,301)
- ------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (856,265) (806,240)
Proceeds from issuance of common stock 727,700 1,128,285
----------- -----------
Net cash provided by (used in) financing activities (128,565) 322,045
- --------------------------------------------------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 762,752 (148,239)
----------- -----------
Net decrease in cash and equivalents (21,821,864) (24,093,260)
Cash and equivalents, beginning of year 113,192,639 60,058,777
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $91,370,775 $35,965,517
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $32,271,406 $8,871,205
Interest paid 336,071 237,554
NON CASH TRANSACTIONS:
Issuance of restricted stock $908,831 $346,199
Stock issued for Keystone - 62,280,663
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. The July 31, 2002 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
for the year ended July 31, 2002. The results of operations for the three
months and nine months ended April 30, 2003 are not necessarily indicative
of the results for the full year.
2. Major classifications of inventories are:
April 30, 2003 July 31, 2002
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Raw materials $51,671,347 $47,286,949
Chassis 21,938,396 21,252,774
Work in process 22,633,575 21,305,448
Finished goods 12,967,559 10,582,408
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Total 109,210,877 100,427,579
Less excess of FIFO costs
over LIFO costs 6,485,225 5,762,225
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Total inventories $102,725,652 $94,665,354
============ ===========
3. Earnings Per Share
Three months Three months Nine months Nine months
ended ended ended ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Weighted average shares 28,583,645 28,442,526 28,541,688 26,718,278
Outstanding for basic
earnings per share
Stock options 213,472 158,282 257,193 169,837
------- ------- ------- -------
Total - For diluted shares 28,797,117 28,600,808 28,798,881 26,888,115
========== ========== ========== ==========
4. Comprehensive Income
Three months Three months Nine months Nine months
ended ended ended ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Net income $20,153,628 $16,595,312 $56,371,231 $30,965,937
Foreign currency
translation adjustment 427,567 114,479 762,752 (148,239)
Unrealized appr. (depr.)
on investments (666,150) 726,986 (462,882) (62,774)
----------- ----------- ----------- -----------
Comprehensive income $19,915,045 $17,436,777 $56,671,101 $30,754,924
=========== =========== =========== ===========
5. Segment Information
Three months Three months Nine months Nine months
ended ended ended ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Net Sales:
Recreation vehicles
Towables $297,082,020 $249,533,785 $823,595,537 $502,475,802
Motorized 61,515,814 50,538,207 161,983,014 124,612,584
Other 582,960 636,402 1,749,356 1,923,782
Buses 53,568,740 66,981,975 161,581,505 215,128,276
---------- ---------- ----------- -----------
Total $412,749,534 $367,690,369 $1,148,909,412 $844,140,444
============ ============ ============== ============
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Three months Three months Nine Months Nine Months
ended ended ended ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Income Before Income Taxes:
Recreation vehicles $32,298,946 $26,316,445 $89,235,888 $42,581,970
Buses 2,513,662 2,687,766 8,452,774 11,497,570
Corporate (1,500,825) (2,378,022) (6,182,475) (5,003,743)
----------- ----------- ----------- -----------
Total $33,311,783 $26,626,189 $91,506,187 $49,075,797
=========== =========== =========== ===========
April 30, 2003 July 31, 2002
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Identifiable Assets:
Recreation vehicles $350,362,808 $293,870,571
Buses 63,728,504 64,436,446
Corporate 146,642,910 139,196,116
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Total $560,734,222 $497,503,133
============ ============
6. Accounting Pronouncements
On November 25, 2002, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also requires
the guarantor to recognize, at the inception of the guarantee, a liability
for the fair value of obligation undertaken in issuing the guarantee. The
disclosure requirements are effective for quarters ending after December 15,
2002 and the liability recognition is in effect for guarantees initiated
after December 31, 2002 (See footnote 11 and 12 for disclosure).
7. 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 market
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 April 30, 2003, the Company held equity investments with a fair market
value of $1,598,248 and cost basis of $2,310,375 after a recognized
impairment. The Company recorded animpairment charge of $1,580,334 in the
first quarter of fiscal 2003 relating to its investment in an equity
security as it was determined that the decline in market value of the
investment was deemed to be other than temporary. The impairment charge is
included in the statement of consolidated income caption "Impairment of
equity securities". These investments are included in investments
available-for-sale.
The Company has certain corporate debt investments that are classified as
trading investments and reported as Investments - short term.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Business Combination
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 recreation vehicles.
Pro forma Information: Pro forma results of operations, as if the
acquisition occurred as of the beginning of the period is presented below.
These pro forma results may not be indicative of the actual results that
would have occurred under the ownership and management of the Company.
Actual Pro Forma
Nine Months Nine Months
Ended Ended
April 30, 2003 April 30, 2002
-------------- --------------
Net Sales $1,148,909,412 $978,764,356
Net Income 56,371,231 40,703,693
Earnings per common share
Basic $1.98 $1.39
Diluted $1.96 $1.39
9. Other Intangible Assets
The components of other intangibles are as follows:
April 30, 2003 April 30, 2002
------------------------------- -----------------------------
Accumulated Accumulated
Cost Amortization Cost Amortization
----------- ------------ ----------- ------------
Amortized Intangible Assets:
Non-compete agreements $14,073,367 $10,155,073 $14,073,367 $9,440,255
Three Months Nine Months
Ended Ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Non-compete Agreement
Amortization expense $178,705 $178,705 $536,114 $391,472
Non-compete agreements are amortized on a straight-line basis.
Estimated Amortization Expense:
For the year ending July 2004 $714,818
For the year ending July 2005 $671,485
For the year ending July 2006 $584,818
For the year ending July 2007 $584,818
For the year ending July 2008 $584,818
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Treasury Shares
The Company retired 3,816,874 shares from treasury stock in the first
quarter of fiscal 2003. This retirement resulted in a reduction of
$29,598,666 in Treasury Stock, $381,688 in Common Stock, $10,628,802 in
Additional Paid-In Capital and $18,588,176 in Retained Earnings.
11. Warranty
Thor provides customers of our products with a warranty covering defects in
material or workmanship for periods generally ranging from one to two years,
with longer warranties on certain structural components. We record a
liability based on our best estimate of the amounts necessary to settle
future and existing claims on products sold as of the balance sheet date.
Factors we use in estimating the warranty liability include a history of
units sold, existing dealer inventory, average cost incurred and a profile
of the distribution of warranty expenditures over the warranty period. A
significant increase in dealer shop rates, the cost of parts or the
frequency of claims could have a material adverse impact on our operating
results for the period or periods in which such claims or additional costs
materialize. Management believes that the warranty reserve is adequate;
however, actual claims incurred could differ from estimates, requiring
adjustments to the reserves. Warranty reserves are reviewed and adjusted as
necessary on a quarterly basis.
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Beginning Balance $29,175,078 $22,239,988 $25,374,825 $12,541,890
Provision 11,847,973 7,925,381 33,228,155 17,703,478
Payments 9,308,621 7,655,705 26,888,550 16,611,555
Acquisitions - - - 8,875,851
----------- ------------ ----------- -----------
Ending Balance $31,714,430 $22,509,664 $31,714,430 $22,509,664
=========== =========== =========== ===========
12. Commercial Commitments
Our principal commercial commitments at April 30, 2003 are summarized in the
following chart:
Total Term of
Commitment Amount Commitment Guarantee
---------- ----------------- ---------
Guarantee on dealer financing $2,930,000 less than 1 year
Standby repurchase obligation
on dealer financing $392,321,000 less than 1 year
The Company records repurchase and guarantee reserves based on prior
experience and known current events. The combined repurchase and recourse
reserve balances are approximately $139,000 as of April 30, 2003.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Stock-Based Compensation
In December 2002, The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This Statement amends
the disclosure requirements of Statement 123, "Accounting for Stock-Based
Compensation," to require disclosure in interim financial statements about
the method of accounting for stock-based compensation and the effect of the
method used on reported results. This statement is effective for interim
financial statements beginning after December 15, 2002, with early
application encouraged.
As an alternative to accounting for stock-based compensation under APB No.
25, SFAS No. 123, establishes a fair-value method of accounting for employee
stock options. The Company used the Black-Scholes option pricing model to
estimate the grant date fair value of its option grants. The fair value is
recognized over the option vesting period which is three years. Had
compensation cost for these grants been determined in accordance with SFAS
No. 123, the Company's net income and net earnings per common share would
have been:
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
April 30, 2003 April 30, 2002 April 30, 2003 April 30, 2002
-------------- -------------- -------------- --------------
Net Income
As reported $20,153,628 $16,595,312 $56,371,231 $30,965,937
Pro forma 19,995,597 16,532,569 55,897,138 30,777,708
Earnings Per Common Share - Basic
As reported $.71 $.58 $1.98 $1.16
Pro forma $.70 $.58 $1.96 $1.15
Earnings Per Common Share - Diluted
As reported $.70 $.58 $1.96 $1.15
Pro forma $.69 $.58 $1.94 $1.14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ---------------------------------------------------------------
Quarter Ended April 30, 2003 vs.
Quarter Ended April 30, 2002
- --------------------------------
Net sales for the third quarter of fiscal 2003 were $412,749,534 compared to
$367,690,369 for the third quarter of fiscal 2002. Income before income taxes in
fiscal 2003 was $33,311,783, a 25.1% increase from $26,626,189 in fiscal 2002.
The increase in income before income taxes of $6,685,594 in fiscal 2003 was
primarily caused by increased recreation vehicle revenues of $58,472,400, which
resulted in an increase in income before income taxes of approximately
$5,982,501. Bus revenues were $13,413,235 less in fiscal 2003 than in fiscal
2002. Bus income before income taxes in fiscal 2003 was approximately $174,104
less than the same period last year due primarily to reduced revenues.
Reductions in revenue were due to continued competitive pressure on pricing of
buses, decline in airline traffic, and delayed purchases of buses affected by
state and municipal budget constraints. Corporate costs, excluding interest and
other income, were lower than fiscal 2002 by approximately $486,000 due
primarily to lower medical reserve funding in fiscal 2003 of approximately
$682,000 as a result of reduced medical claims for fiscal 2003. Interest income
increased by $235,472 due to increased investable cash and other income
increased by $319,623 due primarily to increased profits of Thor Credit
Corporation, our joint venture retail finance company for recreation vehicles.
Interest expense increased by $56,347 in fiscal 2003 due primarily to bus
chassis financing.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Recreation vehicle revenues increased in fiscal 2003 by 19.4% to $359,180,794
compared to $300,708,394 in fiscal 2002, and accounted for 87% of total company
revenues compared to 81.8% in fiscal 2002. Recreation vehicle backlogs were
$172,733,000 at April 30, 2003, down 34.9% compared to the same period last
year. This decrease is due to tight economic conditions and the run up to the
Iraq war and the war itself. Bus revenues in fiscal 2003 decreased by 20% to
$53,568,740 compared to $66,981,975 in fiscal 2002 and accounted for 13% of the
total company revenues compared to 18.2% in fiscal 2002. Bus order backlog of
$97,394,000 at April 30, 2003 was up 1.1% compared to the same period last year.
Gross profit as a percentage of sales in fiscal 2003 increased to 13.8% from
12.9% in fiscal 2002 primarily due to increased recreation vehicle sales and
lower material cost on recreation vehicles. Price increases during the third
quarter averaged less than 1% for recreation vehicles. Bus pricing did not
increase due to competitive pressures. Selling, general, and administrative
expense and amortization of intangibles were $24,556,771 compared to $21,118,392
for the same period in fiscal 2002. As a percentage of sales, selling, general
and administrative expense was 5.9% in fiscal 2003 compared to 5.7% in fiscal
2002. Amortization of intangibles was $180,000 in both fiscal 2003 and 2002. The
additional selling, general and administrative costs are due primarily to the
increased costs associated with the 12.3% increase in revenue.
The overall effective tax rate was 39.5% for fiscal 2003 compared to 37.7% for
fiscal 2002. The lower rate in fiscal 2002 was due primarily to recording of a
benefit from lower than expected state tax audit assessments.
Nine Months Ended April 30, 2003 vs.
Nine Months Ended April 30, 2002
- ------------------------------------
Net sales for the nine months of fiscal 2003 were $1,148,909,412 compared to
$844,140,444 for the same period last year. Income before income taxes in fiscal
2003 was $91,506,187, a 86.5% increase from $49,075,797 in fiscal 2002. Results
include Keystone RV from date of acquisition on November 9, 2001. The increase
in income before income taxes of $42,430,390 in fiscal 2003 was primarily caused
by increased recreation vehicle revenues of $358,315,739, which resulted in an
increase in income before income taxes of approximately $46,653,918. Bus
revenues were $53,546,771 less in fiscal 2003 than fiscal 2002. Bus income
before income taxes in fiscal 2003 was approximately $3,044,796 less than the
same period last year because of reduced revenues. These reductions in revenue
and profits were due to continued competitive pressure on pricing of buses,
decline in airline traffic, and delayed purchases of buses affected by state and
municipal budget constraints. Corporate costs, excluding interest and other
income, are higher than fiscal 2002 by approximately $1,772,000 due primarily to
an impairment loss of $1,580,000 recorded on an equity investment classified as
available-for-sale in the first quarter of fiscal 2003.
Interest income increased by $152,484 due to increased investable cash and other
income increased by $643,548 due primarily to increased profits of Thor Credit,
our joint venture retail finance company for recreation vehicles. Interest
expense increased in fiscal 2003 by $98,517 due primarily to bus chassis
financing.
Recreation vehicle revenues increased in the nine months of fiscal 2003 by 57.0%
to $987,327,907 compared to $629,012,168 in fiscal 2002 and accounted for 85.9%
of total company revenues compared to 74.5% in fiscal 2002. Bus revenues in
fiscal 2003 decreased by 24.9% to $161,581,505 compared to $215,128,276 in
fiscal 2002 and accounted for 14.1% of the total company revenues compared to
25.5% in fiscal 2002.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Gross profit as a percentage of sales in fiscal 2003 increased to 14.0% from
11.7% in fiscal 2002 primarily due to increased recreation vehicle sales and
lower material cost on recreation vehicles. Selling, general, and administrative
expenses and amortization of intangibles were $69,991,832 compared to
$51,192,423 for the same period in fiscal 2002. As a percentage of sales,
selling, general and administrative expense was 6.1% in fiscal 2003 and 2002.
Amortization of intangibles increased in fiscal 2003 to $536,000 compared to
$391,000 in fiscal 2002. This increase is due to certain non-compete expenses
associated with the Keystone RV acquisition. The additional selling, general and
administrative costs are due primarily to the increased costs associated with
the 36% increase in revenue.
The overall effective tax rate was 38.4% for the nine months of fiscal 2003
compared to 36.9% for fiscal 2002. The lower rate in fiscal 2002 was due
primarily to higher research and development tax credits recognized by the
Company in fiscal 2002 versus fiscal 2003 and recording of a benefit from lower
than expected state tax audit assessments in fiscal 2002.
Financial Condition and Liquidity
- ---------------------------------
As of April 30, 2003, we had $120,888,093 in cash, cash equivalents and
short-term investments, compared to $117,814,513 on July 31, 2002. We classify
our debt and equity securities as trading or available-for-sale securities. The
former are carried on our consolidated balance sheets 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 and losses on trading securities are included in
earnings. Unrealized gains and losses on 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 3 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, 2003, was $176,292,142 compared to $134,318,285 on
July 31, 2002. We have no long-term debt. We currently have a $30,000,000
revolving line of credit which bears interest at negotiated rates below prime
and expires on November 28, 2003. We expect to renew our credit line. There were
no borrowings on this line of credit at April 30, 2003. The loan agreement
executed in connection with the line of credit contains certain covenants,
including restrictions on additional indebtedness, and requires us to maintain
certain financial ratios. We believe that internally generated funds and the
line of credit will be sufficient to meet our current needs and any additional
capital requirements. Capital expenditures of approximately $18,774,000 for the
nine months ended April 30, 2003 were primarily for the planned expansions at
our Dutchmen, Four Winds, Keystone, Thor California and ElDorado California
facilities.
The Company anticipates additional capital expenditures in fiscal 2003 of
approximately $7,800,000. The major components of this capital expenditure
include completing the plant expansion at our Dutchmen facility of $2,400,000,
our Keystone facility of $1,600,000 and $2,300,000 toward a new facility and
equipment for our ElDorado National California bus operations. The ElDorado
National California expansion will allow the Company to increase production
efficiencies and produce 40 foot buses. The balance of capital expenditures will
be for purchase or replacement of machinery and equipment in the ordinary course
of business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CRITICAL ACCOUNTING PRINCIPLES
- ------------------------------
The consolidated financial statements of Thor are prepared in conformity with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires the use of estimates, judgments, and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. We believe that of our critical
accounting policies, the following may involve a higher degree of judgments,
estimates, and complexity:
Impairment of Long-Lived Assets
Thor at least annually reviews the carrying value of its long-lived assets held
and used and assets to be disposed of, including goodwill and other intangible
assets, or when events and circumstances warrant such a review. This review is
performed using estimates of future cash flows. If the carrying value of a
long-lived asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the long-lived asset exceeds its fair
value. Management believes that the estimates of future cash flows and fair
values are reasonable; however, changes in estimates of such cash flows and fair
values could affect the evaluations.
Insurance Reserves
Generally, we are self-insured for workers' compensation and group medical
insurance. Under these plans, liabilities are recognized for claims incurred,
including those incurred but not reported, and changes in the reserves. At the
time a workers' compensation claim is filed, a liability is estimated to settle
the claim. The liability for workers' compensation claims is determined by a
third party administrator using various state statutes and reserve requirements.
Group medical reserves are funded through a Trust and are estimated using
historical claims' experience. We have a self-insured retention for products
liability and personal injury matters of $5,000,000 per occurrence. We have
established a reserve on our balance sheet for such occurrences based on
historical data. We maintain excess liability insurance with outside insurance
carriers to minimize our risks related to catastrophic claims in excess of all
our self-insured positions. Any material change in the aforementioned factors
could have an adverse impact on our operating results.
Warranty
Thor provides customers of our products with a warranty covering defects in
material or workmanship for periods generally ranging from one to two years,
with longer warranties on certain structural components. We record a liability
based on our best estimate of the amounts necessary to settle future and
existing claims on products sold as of the balance sheet date. Factors we use in
estimating the warranty liability include a history of units sold, existing
dealer inventory, average cost incurred and a profile of the distribution of
warranty expenditures over the warranty period. A significant increase in dealer
shop rates, the cost of parts or the frequency of claims could have a material
adverse impact on our operating results for the period or periods in which such
claims or additional costs materialize. Management believes that the warranty
reserve is adequate; however, actual claims incurred could differ from
estimates, requiring adjustments to the reserves. Warranty reserves are reviewed
and adjusted as necessary on a quarterly basis.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 results of operations.
CONTROLS AND PROCEDURES
- -----------------------
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), within the 90 days prior to the filing date of this
report, the Company carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Company's Chairman of the Board,
President and Chief Executive Officer along with the Company's Chief Financial
Officer. Based upon that evaluation, the Company's Chairman of the Board,
President and Chief Executive Officer along with the Company's Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective. There have been no significant changes in the Company's internal
controls, or in other factors, which could significantly affect internal
controls subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chairman of
the Board, President and Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
N/A
b.) Reports on Form 8-K
On March 3, 2003, the Company filed a Form 8-K announcing
its financial results for the second quarter and six months
ended January 31, 2003.
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 June 4, 2003 /s/ Wade F. B. Thompson
-------------------------- ------------------------------
Wade F. B. Thompson
Chairman of the Board, President
and Chief Executive Officer
DATE June 4, 2003 /s/ Walter L. Bennett
-------------------------- ------------------------------
Walter L. Bennett
Senior Vice President
Secretary and Chief Financial Officer
SARBANES-OXLEY ACT SECTION 302(A) CERTIFICATIONS
I, Wade F. B. Thompson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Thor Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: June 4, 2003 /s/ Wade F. B. Thompson
------------ -----------------------------------------------
Wade F. B. Thompson
Chairman of the Board, President and Chief
Executive Officer
SARBANES-OXLEY ACT SECTION 302(A) CERTIFICATIONS
I, Walter L. Bennett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Thor Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: June 4, 2003 /s/ Walter L. Bennett
------------ --------------------------------------
Walter L. Bennett
Chief Financial Officer
SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS
In connection with this quarterly report on Form 10-Q of Thor Industries, Inc.
for the period ended April 30, 2003, I, Wade F. B. Thompson, Chairman of the
Board, President and Chief Executive Officer of Thor Industries, Inc., hereby
certify pursuant to 18 U.S.C.ss.1350, as adopted pursuant toss.906 of the
Sarbanes-Oxley Act of 2002, that:
1. this Form 10-Q for the period ended April 30, 2003 fully complies with
the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. the information contained in this Form 10-Q for the period ended April
30, 2003 fairly presents, in all material respects, the financial
condition and results of operations of Thor Industries, Inc.
Date: June 4, 2003 /s/ Wade F. B. Thompson
--------------- ---------------------------------------
Wade F. B. Thompson
Chairman, President and Chief Executive
Officer (principal executive officer)
In connection with this quarterly report on Form 10-Q of Thor Industries, Inc.
for the period ended April 30, 2003, I, Walter L. Bennett, Chief Financial
Officer of Thor Industries, Inc., hereby certify pursuant to 18 U.S.C.ss.1350,
as adopted pursuant toss.906 of the Sarbanes-Oxley Act of 2002, that:
1. this Form 10-Q for the period ended April 30, 2003 fully complies with
the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. the information contained in this Form 10-Q for the period ended April
30, 2003 fairly presents, in all material respects, the financial
condition and results of operations of Thor Industries, Inc.
Date: June 4, 2003 /s/ Walter L. Bennett
--------------- --------------------------------------------
Walter L. Bennett
Chief Financial Officer
(principal financial and accounting officer)