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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended July 31, 2002, Commission File Number 1-9235
THOR INDUSTRIES, INC.
(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 Number)
419 W. Pike Street, Jackson Center, Ohio 45334-0629
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 596-6849
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock (par value $.10) New York Stock Exchange
- ----------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None
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 the filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting securities of the registrant held by
non-affiliates of the registrant on October 7, 2002 was $511,927,487 based upon
closing price on the New York Stock Exchange for such date. The number of common
shares of registrant's stock outstanding as of October 14, 2002 was 28,486,297.
Documents incorporated by reference:
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held on December 10, 2002 are incorporated by reference in Part III of this
Annual Report on form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Our company was founded in 1980 and produces and sells a wide range of
recreation vehicles and small and mid-size buses in the United States and
Canada. We are incorporated in Delaware and are the successor to a corporation
of the same name which was incorporated in Nevada on July 29, 1980. Our
principal executive office is located at 419 West Pike Street, Jackson Center,
Ohio 45334 and our telephone number is (937)596-6849. Our Internet address is
www.thorindustries.com.
Our principal recreation vehicle operating subsidiaries are Aero Coach, Inc.
(Aero), Airstream, Inc. (Airstream), Dutchmen Manufacturing, Inc. (Dutchmen),
Four Winds International, Inc. (Four Winds), Keystone RV Company (Keystone),
Komfort Corp. (Komfort), Thor America, Inc. (Thor America), Citair, Inc.
(Citair), and Thor California, Inc. (Thor California). Our principal small and
mid-size bus operating subsidiaries are Champion Bus, Inc. (Champion), ElDorado
National California, Inc. (ElDorado California), and ElDorado National Kansas,
Inc. (ElDorado Kansas).
On November 9, 2001, we 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 4,500,000 shares of
Thor common stock valued at $62,280,000, of which 2,744,832 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.
RECREATION VEHICLES
Airstream
Our Airstream subsidiary manufactures and sells premium and medium-high priced
travel trailers and motorhomes under the trade names Airstream Classic, and Land
Yacht. Airstream Classic vehicles are distinguished by their rounded shape and
bright aluminum finish and, in our opinion, constitute the most recognized
product in the recreation vehicle industry. Airstream, responding to the demands
of the market for a lighter, lower-cost product, also manufactures and sells the
Airstream Safari, International and Bambi travel trailers.
Dutchmen
Our Dutchmen subsidiary manufactures and sells conventional travel trailers and
fifth wheels primarily under the trade names Dutchmen and Four Winds. Dutchmen
has become one of the largest-selling brands in the United States due to its
reputation for a quality product sold at a lower price.
Aero
Our Aero subsidiary manufactures and sells laminated, lightweight,
European-styled travel trailers and fifth wheels designed for towing behind
cars, mini vans, sport utility vehicles and trucks.
We manufacture folding camping trailers, which we sell under the Aero, Dutchmen,
and Skamper trade names.
Four Winds
Our Four Winds subsidiary manufactures and sells Class C and Class A motorhomes.
It is the second largest manufacturer of Class C motorhomes with 17% of the
total retail market segment. Its products are sold under trade names such as
Four Winds, Hurricane, Infinity, Windsport, Dutchmen, Chateau and Fun Mover.
Thor America
Our Thor America subsidiary manufactures and sells moderately priced travel
trailers and fifth wheels under the trade names Citation, Chateau, and Corsair.
Citair
Our Citair subsidiary is one of the largest Canadian producers of
moderately-priced travel trailers, fifth wheels, Class C motorhomes and truck
campers. It operates under the name General Coach and sells recreation vehicles
under the trade names Citation and Corsair.
Keystone
Our Keystone subsidiary, acquired on November 9, 2001, manufactures travel
trailers and fifth wheels under trade names such as Montana, Springdale, Hornet,
Sprinter, Outback, Cabana, Laredo, Everest, Mountaineer, Challenger, and Cougar.
Keystone's Montana and Cougar fifth wheels are the number one and number two
brands with an approximate combined 13% share of that retail segment.
Komfort
Our Komfort subsidiary manufactures and sells travel trailers and fifth wheels
under the trade names Komfort and Trailblazer primarily in the western United
States and western Canada.
Thor California
Our Thor California subsidiary manufactures and sells travel trailers and fifth
wheels under the trade names Wanderer, Tahoe, Jazz, and Mirage primarily in the
western United States.
We believe that our recreation vehicle business is the largest unit manufacturer
in North America based on retail statistics published by Statistical Surveys,
Inc.
BUSES
ElDorado National
ElDorado National, comprised of our ElDorado Kansas and ElDorado California
subsidiaries, is a manufacturer of small and mid-size buses for transit, airport
car rental and hotel/motel shuttles, paramedical transit for hospitals and
nursing homes, tour and charter operations and other uses.
ElDorado National builds buses under trade names such as Aerolite, AeroElite,
Aerotech, Escort, MST, Transmark, Axess and EZ Rider. ElDorado National's plants
are located in Salina, Kansas and Chino, California.
Champion Bus
On February 9, 1998 we purchased substantially all of the assets of Champion
Motor Coach, Inc. which is now called Champion Bus, Inc. Champion builds small
and mid-size buses under trade names such as Challenger, CTS, and Crusader.
We believe that our bus division is the largest manufacturer of small and
mid-size commercial buses in North America based on statistics published by the
Mid Size Bus Manufacturers Association.
PRODUCT LINE SALES SEGMENT
The table below sets forth the contribution of each of the Company's product
lines to net sales in each of the last three fiscal years.
2002 2001 2000
---- ---- ----
($000)
Amount % Amount % Amount %
--------------------------------------------------------------
Recreation vehicles $ 973,697 78 $ 529,694 64 $ 672,346 74
Buses 271,603 22 292,034 36 237,733 26
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Total Net Sales $1,245,300 100 $ 821,728 100 $ 910,079 00
--------------------------------------------------------------
Additional information concerning business segments is included in Note N of the
Notes to the Consolidated Financial Statements.
RECREATION VEHICLES
Overview
We manufacture and sell a wide variety of recreation vehicles throughout the
United States and Canada, as well as related parts and accessories. Recreation
vehicle classifications are based upon standards established by the Recreation
Vehicle Industry Association or RVIA. The principal types of recreation vehicles
that we produce include conventional travel trailers, fifth wheels, fold-down
camping trailers, Class A and Class C motorhomes.
Travel trailers are non-motorized vehicles which are designed to be towed by
passenger automobiles, pickup trucks or vans. Travel trailers provide
comfortable, self-contained living facilities for short periods of time. We
produce "conventional," "fold down" and "fifth wheel" travel trailers.
Conventional and fold-down camping trailers are towed by means of a frame hitch
attached to the towing vehicle. Fifth wheel trailers, designed to be towed by
pickup trucks, are constructed with a raised forward section that is attached to
the bed area of the pickup truck.
A motorhome is a self-powered vehicle built on a motor vehicle chassis.
Motorhomes are self-contained with their own lighting, heating, cooking,
refrigeration, sewage holding and water storage facilities, so that they can be
lived in without being attached to utilities.
Class A motorhomes, constructed on medium-duty truck chassis, are supplied
complete with engine and drive train components by motor vehicle manufacturers
such as Workhorse Custom Chassis, Spartan, Ford and Freightliner. We design,
manufacture and install the living area and driver's compartment of Class A
motorhomes. Class C motorhomes are built on a Ford or General Motors small truck
or van chassis which includes an engine, drive train components, and a finished
cab section. We construct a living area which has access to the driver's
compartment and attaches to the cab section. Although they are not designed for
permanent or semi-permanent living, recreation vehicles can provide comfortable
living facilities for short periods of time.
Production
In order to minimize finished inventory, our recreation vehicles generally are
produced to order. Our facilities are designed to provide efficient assembly
line manufacturing of products. We are currently expanding our production
facilities to accommodate increased demand.Capacity increases can be achieved at
relatively low cost, largely by increasing the number of production employees or
by acquiring or leasing additional facilities.
We purchase in finished form many of the components used in the production of
our recreation vehicles. The principal raw materials used in the manufacturing
processes for motorhomes and travel trailers are aluminum, lumber, plywood,
plastic, fiberglass, and steel purchased from numerous suppliers. We believe
that,
except for chassis, substitute sources for raw materials and components are
available with no material impact on our operations. We are able to obtain the
benefit of volume price discounts for many of our purchases of raw materials and
components by centralized purchasing.
Our relationship with our chassis suppliers is similar to all buyer/vendor
relationships and no special contractual commitment is engaged in by either
party. Historically Ford and General Motors resort to an industry-wide
allocation basis during restriction of supply. These allocations would be based
on the volume of chassis previously purchased. Sales of motor homes and small
buses rely on these chassis and are affected accordingly.
Generally, all of our operating subsidiaries introduce new or improved lines or
models of recreation vehicles each year. Changes typically include new sizes and
floorplans, different decors or design features, and engineering improvements.
Seasonality
Since recreation vehicles are used primarily by vacationers and campers, our
recreation vehicle sales are seasonal and, in most geographical areas, tend to
be significantly lower during the winter months than in other periods. As a
result, recreation vehicle sales are historically lowest during the second
fiscal quarter, which ends on January 31 of each year.
Marketing and Distribution
We market our recreation vehicles through independent dealers located throughout
the United States and Canada. Each of our recreation vehicle operating
subsidiaries maintains its own dealer organization, with some dealers carrying
more than one of our product lines. Presently, there are approximately 1,321
dealers carrying our products in the U.S. and Canada. We believe that close
working relationships between our management personnel and the many independent
dealers provide us with valuable information on customer preferences and the
quality and marketability of our products. Additionally, by maintaining
substantially separate dealer networks for each of our subsidiaries, our
products are more likely to be competing against competitor's products in
similar price ranges rather than against our other products.
Each of our recreation vehicle operating subsidiaries has an independent sales
force to call on their dealers. Our most important sales promotions occur at the
major recreation vehicle shows for dealers which take place throughout the year
at different locations across the country. We benefit from the recreation
vehicle awareness advertising and major marketing programs geared towards
first-time buyers sponsored by the RVIA in national print media and television.
We engage in a limited amount of consumer-oriented advertising for our
recreation vehicles, primarily through industry magazines, the distribution of
product brochures, and direct mail advertising campaigns.
In our selection of individual dealers, we emphasize the dealer's financial
strength to maintain a sufficient inventory of our products, as well as their
reputation, experience, and ability to provide service. Many of our dealers
carry the recreation vehicle lines of one or more of our competitors. Each of
our operating subsidiaries has sales agreements with their dealers and these
agreements are subject to annual review. No single recreation vehicle dealer
accounted for more than 5% of our consolidated net sales of recreation vehicles
during fiscal 2002.
Substantially all of our sales to dealers are made on terms requiring cash on
delivery or within 10 days thereafter. We generally do not finance dealer
purchases. Most dealers are financed on a "floorplan" basis by a bank or finance
company which lends the dealer all or substantially all of the wholesale
purchase price and retains a security interest in the vehicles purchased. As is
customary in the recreation vehicle industry, we will execute a repurchase
agreement with a lending institution financing a dealer's purchase of our
products upon the lending institution's request and after completion of a credit
investigation of the dealer involved. Repurchase agreements provide that for up
to 12 months after a unit is financed and in the event of default by the dealer
we will repurchase the unit repossessed by the lending institution for the
amount then due, which is usually less than 100% of dealer's cost. The risk of
loss under repurchase agreements is spread over numerous dealers and is further
reduced by the high resale value of the units which we would be required to
repurchase. In our experience, losses under repurchase agreements have not been
significant and we
believe that any future losses under these agreements would not have a material
adverse effect on our company.
During fiscal 2002 the losses incurred due to repurchase were approximately
$730,000 compared to $468,000 during fiscal 2001.
Joint Ventures
In March 1996, our Company and Cruise America, Inc. formed a joint venture, CAT
Joint Venture LLC, to make short-term rentals of motorized recreation vehicles
to the public. We are contingently liable for repurchase obligations of CAT
Joint Venture in the amount of approximately $6.8 million.
Financing
We entered the retail recreation vehicle financing business in March 1994. Thor
Credit Corporation is a captive finance company jointly owned by our company and
Deutsche Financial Services, a major national financial institution engaged in
recreation vehicle financing.
Backlogs
As of July 31, 2002, the backlog for recreation vehicle orders was approximately
$251,354,000 compared to $51,754,000 at July 31, 2001. Included in the backlog
at July 31, 2002 was approximately $160,724,000 for Keystone RV. Backlog
represents unfilled dealer orders on a particular day which can and do fluctuate
widely seasonally. In the recreation vehicle business our manufacturing time is
quite short.
Historically, the amount of our current backlog compared to our backlog in
previous periods reflects general economic and industry conditions and, together
with other relevant factors such as continued acceptance of our products by the
consumer, may be an indicator of our revenues in the near term.
Warranties
We currently provide purchasers of our recreation vehicles with a standard one
or two-year limited warranty against defects in materials and workmanship and a
standard two year limited warranty on certain major components separately
warranted by the suppliers of these components. The chassis and engines of our
motorhomes are warranted for three years or 36,000 miles by their manufacturers.
During 2001, we formed a wholly owned captive insurance company that provides
coverage for product warranties.
SMALL AND MID-SIZE BUSES
Overview
Our line of small and mid-size buses are sold under the names ElDorado National
and Champion Bus. ElDorado National's trade names include Aerolite, AeroElite,
Aerotech, Access, Escort FE, Escort RE, Transmark, MST, EZ Rider and Axess.
Champion Bus' trade names include Challenger, CTS, Crusader, and Defender. Our
line of small and mid-size buses consists of airport shuttle buses, intra-urban
and inter-urban mass transportation buses, and buses for tourist uses.
Production
Our small and mid-size bus production facilities in Salina, Kansas; Chino,
California; and Imlay City, Michigan, are designed to provide efficient assembly
line manufacturing of our small and mid-size buses. The vehicles are produced
according to specific orders which are normally obtained by dealers.
Some of the chassis, all of the engines and auxiliary units, and some of the
seating and other components used in the production of our small and mid-size
buses are purchased in finished form. Our Chino, California, facility assembles
chassis for our rear engine buses from industry standard components and
assembles these buses directly on the chassis.
The principal raw materials used in the manufacturing of our small and mid-size
buses are fiberglass, steel, aluminum, plywood, and plastic. We purchase most of
the raw materials and components from numerous suppliers. We purchase most of
our bus chassis from Ford and General Motors and most of our engines from
Cummins. We believe that, except for chassis, raw materials and components could
be purchased from other sources, if necessary, with no material impact on our
operations.
Marketing and Distribution
We market our small and mid-size buses through a network of 69 independent
dealers in the United States and Canada. We select dealers using criteria
similar to those used in selecting recreation vehicle dealers. During fiscal
2002, one of our dealers, Creative Bus Sales Inc. of Fountain Valley, California
accounted for 25% of the Company's net bus revenue. We also sell our small and
mid-size buses directly to certain national accounts such as major rental car
companies, hotel chains, and transit authorities. Approximately 56% of our bus
sales are derived from contracts with state and local transportation
authorities, in some cases with partial funding from federal agencies.
Terms of sale are typically cash on delivery or through national floorplan
financing institutions. Sales to some state transportation agencies and other
government agencies may be on longer terms. During fiscal 2002 losses due to
repurchase of our small and mid-size buses were not material.
Backlog
As of July 31, 2002 the backlog for bus orders was approximately $99,228,000
compared to $171,319,000 at July 31, 2001. The time for fulfillment of bus
orders is substantially longer than in the recreation vehicle industry because
generally buses are made to customer specification. The existing backlog of bus
orders is expected to be filled in the first six months of fiscal 2003.
Historically, the amount of our current backlog compared to our backlog in
previous periods reflects general economic and industry conditions and, together
with other relevant factors such as continued acceptance of our products by the
consumer, may be an indicator of our revenues in the near term.
Warranties
We currently provide purchasers of our small and mid-size buses with a limited
warranty for one year or 12,000 miles against defects in materials and
workmanship, excluding only certain specified components which are separately
warranted by suppliers. We provide a five-year or 75,000 mile warranty on the
body structure of our "Aerotech" buses that we assemble. The chassis and engines
of our small and mid-size buses are warranted for three years or 36,000 miles by
their manufacturers. During 2001, we founded a wholly owned captive insurance
company that provides coverage for product warranties.
REGULATION
We are subject to the provisions of the National Traffic and Motor Vehicle
Safety Act and the safety standards for recreation vehicles, buses and
recreation vehicle and bus components which have been promulgated thereunder by
the U.S. Department of Transportation. Because of our sales in Canada, we are
also governed by similar laws and regulations issued by the Canadian government.
We are a member of the RVIA, a voluntary association of recreation vehicle
manufacturers which promulgates recreation vehicle safety standards. We place an
RVIA seal on each of our recreation vehicles to certify that the RVIA's
standards have been met.
Both federal and state authorities have various environmental control standards
relating to air, water, and noise pollution which affect our business and
operations. For example, these standards, which are generally applicable to all
companies, control our choice of paints, discharge of air compressor waste water
and noise emitted by factories. We rely upon certifications obtained by chassis
manufacturers with respect to compliance by our vehicles with all applicable
emission control standards.
We are also subject to the regulations promulgated by the Occupational Safety
and Health Administration or OSHA. Our plants are periodically inspected by
federal agencies concerned with health and safety in the
work place, and by the RVIA, to ensure that our products comply with applicable
governmental and industry standards.
We believe that our products and facilities comply in all material respects with
applicable vehicle safety, environmental, RVIA, and OSHA regulations.
We do not believe that compliance with the regulations discussed above will have
any material effect on our capital expenditures, earnings or competitive
position.
COMPETITION
Recreation Vehicles
The recreation vehicle industry is characterized by relative ease of entry,
although the codes, standards, and safety requirements introduced in recent
years are a deterrent to new competitors. The need to develop an effective
dealer network also acts as a barrier to entry. The recreation vehicle market is
intensely competitive with a number of other manufacturers selling products
which compete directly with our products. Competition in the recreation vehicle
industry is based upon price, design, value, quality, and service. We believe
that the quality, design, and price of our products and the warranty coverage
and service that we provide allow us to compete favorably for retail purchasers
of recreation vehicles. We estimate that we are the largest recreation vehicle
manufacturer in terms of units produced.
Small and Mid-Size Buses
We estimate that we have a 38% market share of the U.S. and Canadian small and
mid-size bus market. Our competitors offer lines of buses which compete with all
of our products. Price, quality, and delivery are the primary competitive
factors. As with recreation vehicles, we believe that the quality, design, and
price of small and mid-size buses, the warranty coverage and service that we
provide, and the loyalty of our customers allow us to compete favorably with
similarly priced products of our competitors.
Trade Names and Patents
We have registered United States and Canadian trade names or licenses under the
trade names of others covering the principal trade names and model lines under
which our products are marketed. We are not dependent upon any patents or
technology licenses for the conduct of our business.
EMPLOYEE RELATIONS
At July 31, 2002, we had approximately 5,113 employees in the United States and
271 employees in Canada. Of these 5,384 employees, 460 are salaried. Citair's
and Thor America's approximately 376 hourly employees are currently represented
by certified labor organizations. Citair's and Thor America's current labor
agreements covering their operations expire at various times in September 2003
and October 2003. Employees of our other subsidiaries are not represented by
certified labor organizations. We believe that we maintain a good working
relationship with our employees. An unfair labor practice complaint filed
against Champion in 2001 was dismissed in favor of Champion in 2002.
During 2002, an attempt was made to organize our Airstream facility. On June 27,
2002 the National Labor Relations Board approved the withdrawal of the attempt
with prejudice for 6 months from filing any new petitions.
RESEARCH AND DEVELOPMENT
During the fiscal years 2002, 2001 and 2000, we expensed approximately
$1,405,000, $1,507,000, and $579,000 respectively, on research and development
activities.
We have co-developed a bus using a fuel cell as its power source. Our cumulative
expenditures on the project, which have been expensed, are approximately
$1,100,000. We do not know whether or not it is feasible to produce this product
at a reasonable cost and have no intention to commit material assets to the
project unless its feasibility is established. At the present time the project
is in the testing phase.
INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Sales from our Canadian operations and export sales to Canada from our U.S.
operations amounted to approximately 2.3% and 5.3%, respectively of our total
net sales to unaffiliated customers in fiscal year 2002.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K 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. We
disclaim any obligation or undertaking to disseminate any updates or revisions
to any forward looking statements contained in this Annual Report on Form 10-K
or to reflect any change in our expectations after the date of this Annual
Report on Form 10-K or any change in events, conditions or circumstances on
which any statement is based, except as required by law.
ITEM 2. PROPERTIES
We own or lease approximately 3,311,000 square feet of plant and office space.
We believe that our present facilities, consisting primarily of steel clad,
steel or wood frame, and masonry construction, and the machinery and equipment
contained in these facilities, are well maintained and in good condition. We
believe that these facilities, together with facilities planned for fiscal 2003,
are adequate for our current and foreseeable purposes and that we would be able
to obtain replacement for our leased premises at acceptable costs should our
leases not be renewed.
The following table describes the location, number and size of our facilities as
of July 31, 2002.
Approximate
Building
No. of Area
Location Owned or Leased Buildings Square Feet
- -----------------------------------------------------------------------------------------------------
RV's:
Jackson Center, OH (Airstream)...........................Owned................9...............299,000
Jackson Center, OH (Airstream)(1)........................Leased...............2.................5,000
Middleburg, PA (Thor America)............................Owned................3...............116,000
Hensall, Ontario, Canada (Citair)........................Owned................1................97,000
Oliver, B.C., Canada (Citair)............................Owned................1................55,000
Middlebury, IN (Dutchmen)................................Owned................1................20,000
Goshen, IN (Dutchmen)....................................Owned................6...............261,000
Goshen, IN (Dutchmen)(2).................................Leased...............1................45,000
Syracuse, IN (Fold Down).................................Owned................1................28,000
Syracuse, IN (Aero)......................................Owned................2................86,000
Syracuse, IN (Aero)(3)...................................Leased...............1................49,000
Bristol, IN (Dutchmen)(4)................................Leased...............6...............106,000
Elkhart, IN (Four Winds).................................Owned................6...............363,000
Elkhart, IN (Four Winds)(5)..............................Leased...............1................42,000
Milwaukie, OR (Komfort)(6)...............................Leased...............1................57,000
Clackamas, OR (Komfort)..................................Owned................1...............107,000
Moreno Valley, CA (Thor California)(7)...................Leased...............3...............166,000
Moreno Valley, CA (Thor California)(8)...................Leased...............1................49,000
Goshen, IN (Keystone)(10)................................Leased..............10...............547,000
Elkhart, IN (Keystone)(11)...............................Leased...............1...............132,000
Pendleton, OR (Keystone)(12).............................Leased...............1...............146,000
SMALL AND MID-SIZE BUSES:
Salina, KS (ElDorado Kansas).............................Owned................2...............252,000
Chino, CA (ElDorado California)(9).......................Leased...............3................82,000
Imlay City, Michigan (Champion Bus)......................Owned................5...............201,000
------------------------
TOTAL........................................................................69.............3,311,000
========================
(1) These leased storage facilities are occupied under 1 year lease which
expire July 31, 2003, with four one year options to renew.
(2) This location is occupied under a net lease which expires in 2004 with
an option to extend for five years.
3) This location is occupied under a net lease which expires in 2005 with
an option to extend for three years.
(4) This location is occupied under a net lease which expires in 2005 with
an option to extend for five years.
(5) This location is occupied under a net lease which expires in 2003 with
an option to extend for two years.
(6) This location is occupied under a net lease which expires in 2005 with
an option to extend for five years.
(7) This location is occupied under a net lease which expires in 2008 with
an option to extend for five years.
(8) This location is occupied under a net lease which expires October, 1,
2010.
(9) This location is occupied under a net lease which expires in November
2003 with an option to extend for 1 year.
(10) These locations are occupied under net leases, expiring at various
periods starting in 2003. Leases have extension and or options to
purchase.
(11) This location is occupied under a net lease which expires in July 2003
with an option to extend for two years.
(12) This location is occupied under a net lease which expires in December
2003 with an option to extend for six years.
ITEM 3. LEGAL PROCEEDINGS
We are involved in certain litigation arising out of our operations in the
normal course of our business most of which are based upon state "lemon laws,"
warranty claims and accidents (for which we carry insurance above a specified
deductible amount). In addition to these claims, we are a defendant in a lawsuit
in Ontario, Canada entitled Overland Coach v. General Coach America, et. al.
This suit arises out of an agreement relating to the manufacture of a low floor
bus. The plaintiff claims that we illegally utilized the concept of the low
floor bus for our own profit and that we breached the contract with it in the
manner specified in the complaint. The plaintiff has asked for substantial money
damages including punitive damages. We have counter claimed against the
plaintiff claiming that we overpaid it in excess of $800,000. The case is in the
discovery phase and no trial date has been set. Although there can be no
assurances, we are of the opinion that there will be no material cost to us as a
result of this lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters submitted.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The Company's Common Stock is traded on the New York Stock Exchange. Set forth
below is the range of high and low prices for the common stock for each quarter
during the Company's two most recent fiscal years, as quoted in the New York
Stock Exchange Monthly Market Statistics and Trading Reports. High and low stock
prices were adjusted for the two-for-one stock split in July 2002.
Fiscal 2002 Fiscal 2001
----------- -----------
-------------------------------------------
High Low High Low
First Quarter................... $ 17.86 $ 10.74 $ 12.28 $ 9.78
Second Quarter.................. 24.25 16.62 13.19 9.53
Third Quarter................... 31.00 21.04 13.43 10.08
Fourth Quarter.................. 36.80 24.60 17.79 11.59
(b) HOLDERS
As of October 14, 2002, the number of holders of record of the Company's common
stock was 193.
(c) DIVIDENDS
We paid quarterly dividends of $.01 a share during fiscal 2002 and fiscal 2001.
Any payment of cash dividends in the future will be at the discretion of our
board of directors and will depend upon our financial condition, capital
requirements, earnings and any other factors which the board of directors may
deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
Fiscal years ended July 31,
-----------------------------------------------------
2002 2001 2000 1999 1998
-----------------------------------------------------
($000, except per share amounts)
Income statement data:
Net sales ................... $1,245,300 $821,728 $910,079 $822,072 $731,332
Net income .................. 51,182 26,722 36,119 30,766 19,395
Earnings per common share(1)
Basic .................... 1.88 1.12 1.49 1.27 .80
Diluted .................. 1.87 1.11 1.48 1.26 .79
Dividends per common share(1) .04 .04 .04 .04 .04
Balance sheet data:
Total assets ................ $ 497,503 $309,067 $282,131 $245,912 $213,981
(1) Per share amounts were adjusted for the two-for-one stock split in July
2002.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION RESULTS OF OPERATIONS
Net sales in fiscal 2002 totaled $1,245,299,721 versus $821,728,255 in fiscal
2001. Net income in fiscal 2002 totaled $51,181,673 versus $26,722,273 in 2001.
Basic earnings per share of our common stock in fiscal 2002 were $1.88 compared
to $1.12 in fiscal 2001. Our consolidated statements of income for the years
ended July 31, 2002, 2001 and 2000 shown as a percentage of net sales are:
Fiscal years ended July 31,
----------------------------------
2002 2001 2000
----------------------------------
Net sales ................................... 100.0% 100.0% 100.0%
Cost of products sold ....................... 87.4 89.1 87.6
----------------------------------
Gross profit ................................ 12.6 10.9 12.4
Selling, general and administrative expenses. 6.1 6.2 5.9
Loss on divestment of subsidiaries .......... -- -- (.3)
Loss on impairment of equity security ....... (.2) -- --
Other income (net) .......................... .2 .5 .4
----------------------------------
Income before income taxes .................. 6.6 5.3 6.7
Provision for income taxes .................. 2.5 2.0 2.7
----------------------------------
Net income .................................. 4.1 3.3 4.0
----------------------------------
FISCAL 2002 VS. FISCAL 2001
Net sales in fiscal 2002 were $1,245,299,721, a 51.5% increase from $821,728,255
in fiscal 2001. Income before income taxes in fiscal 2002 was $81,827,235 an
89.0% increase from $43,287,016 in fiscal 2001. The increase in income before
income taxes of $38,540,219 in fiscal 2002 was primarily caused by increased
recreation vehicle revenue of $444,003,459 which resulted in an increase in
income before income taxes of approximately $52,224,000. Included in fiscal 2002
are sales of $391,431,389 and income before income taxes of $44,952,817 for
Keystone RV acquired on November 9, 2001. Bus revenues were $20,431,993 less in
fiscal 2002 than in fiscal 2001. Bus income before income taxes in fiscal 2002
was approximately $5,166,000 less than the same period last year because of
reduced revenues and overall lower margins. This was due to continued
competitive pressure on pricing of buses and decline in airline traffic after
the terrorist attacks of September 11, 2001 which affected the hotel, motel,
rental car and other businesses and delayed purchase of buses. State and
municipal budget constraints have also affected bus sales. Corporate costs were
higher than fiscal 2001 by approximately $8,500,000 due primarily to increased
tax related expenses on research and development tax credits and other tax
planning of $1,052,000, additional funding of group medical reserves of
$1,035,000, increases of approximately $1,390,000 in profit related bonuses, and
an impairment loss of $2,119,000 recorded on an equity investment classified as
available for sale. In addition, interest income was reduced by $2,286,000.
Recreation vehicle revenues increased in fiscal 2002 by 83.8% to $973,697,307
compared to $529,693,848 in fiscal 2001 and accounted for 78.2% of total company
revenues compared to 64.5% in fiscal 2001. Recreation vehicle order backlog of
$251,354,000 (includes $160,724,000 for Keystone RV) at July 31, 2002 was up
385.7% compared to the same period last year. Excluding Keystone RV backlog,
recreation vehicle backlogs were $90,630,000 at July 31, 2002, up 75.1% compared
to the same period last year. This increase is due to the continued
strengthening of the marketplace. Bus revenues in fiscal 2002 decreased by 7.0%
to $271,602,414 compared to $292,034,407 in fiscal 2001 and accounted for 21.8%
of total company revenues compared to 35.5% in fiscal 2001. Bus vehicle order
backlog of $99,228,000 at July 31, 2002 was down 42.1% compared to the same
period last year. This reduction is a reflection of delayed purchases and
funding as a result of September 11, 2001 circumstances and state and municipal
budget constraints.
Gross profit as a percentage of sales in fiscal 2002 increased to 12.6% from
10.9% in fiscal 2001 primarily due to increased recreation vehicle sales.
Recreation vehicle price increases averaged 2% for fiscal 2002. Price increases
for buses were 1% due to soft market conditions and competitive pressures.
Selling, general and administrative expenses and amortization of intangibles was
$75,751,515 compared to $50,813,028 for the same period in fiscal 2001. As a
percentage of sales, selling, general and administrative expenses were 6.1% in
fiscal 2002 compared
to 6.2% in fiscal 2001. Amortization of intangibles decreased in fiscal 2002 to
$570,176 compared to $1,346,080 in fiscal 2001. This $775,904 reduction is
primarily due to expirations of certain non-compete expenses offset by the
Keystone non-compete cost of $433,926 for fiscal 2002, and the reduction in
goodwill and trademark amortization expenses in fiscal 2002 of $688,050
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
substantial 51.5% increase in revenue. Interest income decreased by $2,334,215
due primarily to lower market rates in fiscal 2002 and the use of cash
investments to primarily fund the acquisition of Keystone RV Company on November
9, 2001.
The overall effective income tax rate was 37.5% for fiscal 2002 compared to
38.3% for fiscal 2001 due primarily to research and development tax credits and
lower than expected state tax audit assessments.
FISCAL 2001 VS. FISCAL 2000
Net sales in fiscal 2001 were $821,728,255, a 9.7% decrease from $910,079,280 in
fiscal 2000. Income before income taxes in fiscal 2001 was $43,287,016, a 28.9%
decrease from $60,872,947 in fiscal 2000. The decrease in income before income
taxes of $17,585,931 in fiscal 2001 was primarily caused by reduced recreation
vehicle revenues of $142,652,071. Bus revenues were $54,301,046 greater in
fiscal 2001 than in fiscal 2000, which resulted in an increase in income before
income taxes in fiscal 2001 of approximately $1,300,000. There were no losses in
divestment of operations for the year ended July 31, 2001, which resulted in an
increase in income before income taxes of $2,323,714 compared to the same period
last year.
Recreation vehicle revenues decreased in fiscal 2001 by 21.2% to $529,693,848
compared to $672,345,919 in fiscal 2000 and accounted for 64.5% of our total
revenues, compared to 73.9% of our total revenues in fiscal 2000. Recreation
vehicle order backlog of $51,754,000 at July 31, 2001 was down 17.2% compared to
the same period in fiscal 2000 and reflected the continuing softness in the
overall recreation vehicle market. Bus revenues in fiscal 2001 increased by
22.8% to $292,034,407 compared to $237,733,361 in fiscal 2000 and accounted for
35.5% of our total revenues in fiscal 2001 compared to 26.1% or our total
revenues in fiscal 2000. Bus order backlog of $171,319,000 at July 31, 2001 was
16.3% lower than the same period in fiscal 2000, reflecting increased
competition from newer entrants in the industry that were able to deliver buses
to customers faster.
Gross profit as a percentage of sales in fiscal 2001 decreased to 10.9% from
12.4% in fiscal 2000 primarily due to the lower volume of recreation vehicle
sales. Due to a soft recreation vehicle market and competitive pressures, there
were no price increases for our products during fiscal 2001. Selling, general
and administration expenses and amortization of intangibles decreased to
$50,813,028 in fiscal 2001 from $53,813,328 in fiscal 2000. However, as a
percentage of net sales, selling, general and administrative expenses were 6.2%
in fiscal 2001 compared to 5.9% in fiscal 2000. The $3,000,300 decrease in
selling, general and administrative expenses is primarily due to a reduction of
approximately $3,700,000 in income-related compensation which resulted from our
reduced profits in fiscal 2001.
Interest income in fiscal 2001 increased by $558,598, primarily due to the
amount of investable cash being higher than fiscal 2000 and offsetting the lower
market rate. Interest expense increased by $573,826 primarily due to interest
paid on increased bus chassis pools.
Our overall effective income tax rate was 38.3% for fiscal 2001 compared to
40.7% for fiscal 2000. The decrease in overall effective income tax rate in
fiscal 2001 is primarily due to a tax benefit of $1,047,000 recorded in fiscal
2001. Based on judicial decisions in late fiscal 2001, we recorded a tax benefit
of $1,047,000 associated with the stock basis of our west coast motorhome
divestiture in fiscal 1998.
FINANCIAL CONDITION AND LIQUIDITY
As of July 31, 2002, we had $117,814,513 in cash, cash equivalents and
short-term investments, compared to $107,192,871 on July 31, 2001. We classify
our debt and equity securities as trading or available-for-sale securities. The
former are carried on our consolidated balance sheets as "Cash and cash
equivalants" 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. (See Footnote A to Consolidated Financial
Statements-"Investments")
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 July 31, 2002 was $134,318,285 compared to $150,697,245 at
July 31, 2001. 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 29, 2002. We expect to renew our credit line. There were
no borrowings on this line of credit at July 31, 2002. The loan agreement
executed in connection with the line of credit contains certain covenants,
including restrictions on additional indebtedness, and required 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 $7,484,000 in fiscal
2002 were primarily for the expansion of our Kansas bus operation, an expansion
at our Four Winds operation to manufacture diesel motorhomes, expansion at our
Keystone RV Company and a roof replacement at our Airstream operation.
The Company anticipates capital expenditures in 2003 of approximately
$31,000,000. The major components of this anticipated capital expenditure
include additional plant expansion at our Keystone facility of $7,000,000,
expansion at our Four Winds facility of $3,000,000, expansion at our Dutchmen
facility of $2,400,000, and expansion at our Thor California facility of
$2,600,000. The Company also plans to spend $9,000,000 on a new facility and
equipment for our Eldorado National California bus operations. The expansion
will allow the Company to increase production efficiencies and techniques 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.
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 4,500,000 shares of
Thor common stock valued at $62,280,000, of which 2,744,832 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.
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
value are reasonable; however, changes in estimates of such cash flows and fair
value 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 $2,500,000 per occurrence with an
annual aggregate of $5,000,000. 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 expenditure 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.
PRINCIPAL CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Our principal contractual obligations and commercial commitments at July 31,
2002 are summarized in the following charts.
PAYMENTS DUE BY PERIOD
CONTRACTUAL ----------------------
OBLIGATIONS TOTAL FISCAL 2003 FISCAL 2004-2005 FISCAL 2006-2007 AFTER 5 YEARS
----------- ----- ----------- ---------------- ---------------- -------------
Long-term debt ....... $ 0 $ -- $ -- $ -- $ --
Capital lease
obligations .......... $ 0 $ -- $ -- $ -- $ --
Operating leases ..... $19,190,968 $ 4,782,163 $ 5,762,593 $ 3,632,263 $ 5,013,949
Unconditional purchase
obligations .......... $ 0 $ -- $ -- $ -- $ --
Other long-term
obligations .......... $ 0 $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------
Total contractual
cash obligations ..... $19,190,968 $ 4,782,163 $ 5,762,593 $ 3,632,263 $ 5,013,949
===============================================================================
OTHER TOTAL AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
COMMERCIAL AMOUNTS LESS THAN 1 ------------------------------------------
COMMITMENTS COMMITTED YEAR 1-3 YEARS 4-5 YEARS OVER 5 YEARS
- ----------- --------- ---- --------- --------- ------------
Lines of credit ......... $ 30,000,000 $ 30,000,000 -- -- --
Guarantees .............. $ 3,262,000 $ 3,262,000 -- -- --
Standby
repurchase
obligations ............. $201,655,000 $201,655,000 -- -- --
Other
commercial
commitments ............. $ 0 -- -- -- --
-------------------------------------------------------------------------
Total commercial
commitments ............. $234,917,000 $234,917,000 $ 0 $ 0 $ 0
=========================================================================
ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs Incurred in a Restructuring)" ("Issue 94-3"). SFAS 146 requires
that a liability be recognized for those costs only when the liability is
incurred. In contrast, under Issue 94-3, a company recognized a liability for an
exit cost when it committed to an exit plan. SFAS 146 also establishes fair
value as the objective for initial measurement of liabilities related to exit or
disposal activities. SFAS 146 is effective for exit or disposal activities that
are initiated after December 31, 2002. The Company does not anticipate any near
term impact on the financial statements as a result of adopting this statement.
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. The Company has adopted SFAS 144 on August 1, 2002 and it did not
have any impact on the Company's financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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 of 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.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA QUARTERLY FINANCIAL DATA
---------------------------------------------------------------
OCTOBER 31 JANUARY 31 APRIL 30 JULY 31
---------------------------------------------------------------
($000, except per share amounts)
2002
Net sales(3) ......................... $ 208,460 $ 267,695 $ 367,735 $ 401,410
Gross Profit(3) ...................... $ 22,203 29,257 47,150 58,794
Net income(1) ........................ 6,693 7,678 16,595 20,216
Earnings per common share(2)
Basic ............................. .29 .29 .59 .71
Diluted ........................... .29 .29 .58 .71
Dividends paid per common share(2) ... .01 .01 .01 .01
MARKET PRICES PER COMMON SHARE(2)
High .............................. $ 17.86 $ 24.25 $ 31.00 $ 36.80
Low ............................... $ 10.74 $ 16.62 $ 21.04 $ 24.60
==============================================================
2001
Net sales(3) ......................... $ 208,299 $ 171,819 $ 219,510 $ 222,100
Gross profit(3) ...................... 25,039 15,786 23,633 25,350
Net income(1) ........................ 8,391 3,164 6,731 8,436
Earnings per common share(2)
Basic ............................. .34 .13 .29 .36
Diluted ........................... .34 .13 .29 .35
Dividends paid per common share(2) ... .01 .01 .01 .01
MARKET PRICES PER COMMON SHARE(2):
High .............................. $ 12.28 $ 13.19 $ 13.43 $ 17.79
Low ............................... $ 9.78 $ 9.53 $ 10.08 $ 11.59
==============================================================
(1) Net income in the fourth quarter was decreased by $1,212,304 in fiscal 2002
for an equity investment impairment charge, net of tax benefit and increased
by $1,047,000 in fiscal 2001 for recording the tax benefit associated with
the stock basis of a 1998 divestiture.
(2) Per share amounts and market prices per common share were adjusted for the
two-for-one stock split in July of 2002.
(3) To comply with EITF 01-09, quarterly amounts for fiscal 2002 and 2001 have
been restated from the amounts previously reported in our Quarterly Report
on Form 10-Q to reflect the reclassification of dealer incentives which were
previously recorded in selling, general and administrative expenses, as a
reduction of net sales.
1st Qtr 2002 2nd Qtr 2002 3rd Qtr 2002
------------ ------------ ------------
Net sales - previously reported $ 209,794 $ 269,216 $ 369,755
Net sales - as reported $ 208,460 $ 267,695 $ 367,735
Gross profit - previously reported $ 23,537 $ 30,779 $ 49,169
Gross profit - as reported $ 22,203 $ 29,257 $ 47,150
1st Qtr 2001 2nd Qtr 2001 3rd Qtr 2001 4th Qtr 2001
------------ ------------ ------------ ------------
Net sales - previously reported $ 209,821 $ 173,181 $ 221,029 $ 222,900
Net sales - as reported $ 208,299 $ 171,819 $ 219,510 $ 222,100
Gross profit - previously reported $ 26,611 $ 17,200 $ 25,202 $ 26,310
Gross profit - as reported $ 25,039 $ 15,786 $ 23,633 $ 25,350
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors and Executive Officers of the Registrant
is included under the captions BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE
OFFICERS and SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, in the
definitive Proxy Statement, dated on or about October 31, 2002, filed with the
Commission pursuant to Regulation 14A, which portion of said Proxy Statement is
hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item is contained under the
captions EXECUTIVE COMPENSATION; DIRECTOR COMPENSATION; RESTRICTED STOCK PLAN;
SELECT EXECUTIVE INCENTIVE PLAN; PERFORMANCE GRAPH; COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION; and COMMITTEE REPORT ON EXECUTIVE
COMPENSATION in the definitive Proxy Statement, dated on or about October 31,
2002, filed with the Commission pursuant to Regulation 14A, which portion of
said Proxy Statement is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this Item is contained under the CAPTION
SECURITY OWNERSHIP OF MANAGEMENT AND OWNERSHIP OF COMMON STOCK FOR PRINCIPAL
SHAREHOLDERS, in the definitive Proxy Statement, dated on or about October 31,
2002, filed with the Commission pursuant to Regulation 14A, which portion of
said Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item is contained under the caption
CERTAIN RELATIONS AND TRANSACTIONS WITH MANAGEMENT in the definitive Proxy
Statement, dated on or about October 31, 2002, filed with the Commission
pursuant to Regulation 14A, which portion of said Proxy Statement is hereby
incorporated by reference.
PART IV
ITEM 14. FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS PAGE
Independent Auditors' Report ........................................ 23
Consolidated Balance Sheets, July 31, 2002 and 2001 ................. 24-25
Consolidated Statements of Income for the Years Ended
July 31, 2002, 2001 and 2000 ...................................... 26
Consolidated Statements of Stockholders' Equity for the
Years Ended July 31, 2002, 2001 and 2000 .......................... 27
Consolidated Statements of Cash Flows for the Years Ended
July 31, 2002, 2001 and 2000 ...................................... 28
Notes to Consolidated Financial Statements for the Years Ended
July 31, 2002, 2001 and 2000 ...................................... 29-37
(a)(2) FINANCIAL STATEMENT SCHEDULE AS OF JULY 31, 2002 AND FOR EACH OF THE
THREE YEARS IN THE PERIOD ENDED JULY 31:
Schedule II--Valuation and Qualifying Accounts ...................... 38
All other schedules have been omitted as not required or not applicable
under the instructions.
(a)(3) EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
3(a) Amended and Restated Certificate of Incorporation. (incorporated
by reference to Exhibit 3(a) of the Company's Annual Report on
Form 10-K for the fiscal year ended July 31, 2001)(*)
3(b) Registrant's By-laws. (incorporated by reference to Exhibit 3(b)
of the Company's Registration statement No. 33-13827)(*)
4(a) Form of Common Stock Certificate. (incorporated by reference to
Exhibit 4(a) of the Company's Annual Report on form 10-K for the
fiscal year ended July 31, 1987)(*)
10. MATERIAL CONTRACTS
10(a) Thor Industries, Inc. 1999 Stock Option Plan (incorporated by
reference to Exhibit 4.1 of the Company's Registration Statement
on Form S-8 dated November 5, 1999)(*)
10(b) Thor Industries, Inc. Restricted Stock Plan (incorporated by
reference to Exhibit 4.1 of the Company's Registration Statement
on Form S-8 dated December 3, 1997.)(*)
10(c) Thor Industries, Inc. Select Executive Incentive Plan
(incorporated by reference to Exhibit 10(c) of the company's
Annual Report on form 10-K for the fiscal year ended July 31,
2000)(*)
21 Subsidiaries of the Registrant(**)
(*) Incorporated by reference
(**) Filed herewith
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal year
ended July 31, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Signed)/S/ Wade F.B. Thompson
---------------------------
Wade F. B. Thompson
Chairman, President, and Chief Executive Officer
Date 10 / 24 / 02
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
(Signed)/S/ Peter B. Orthwein (Signed)/S/ Walter L. Bennett
--------------------------- -------------------------------
Peter B. Orthwein Walter L. Bennett
Vice Chairman, Treasurer Chief Financial Officer
(Director) (Principal Financial Officer
& Principal Accounting Officer)
Date 10 / 24 / 02 Date 10 / 24 / 02
--------------------------- ---------------------------------
(Signed)/S/ Wade F.B. Thompson (Signed)/S/ Alan Siegel
--------------------------- -------------------------------
Wade F. B. Thompson Alan Siegel
Chairman, President, and Chief Executive Director
Officer (Principal Executive Officer
and Director)
Date 10 / 24 / 02 Date 10 / 24 / 02
--------------------------- ---------------------------------
(Signed)/S/ William C. Tomson (Signed)/S/ Neil D. Chrisman
--------------------------- -------------------------------
William C. Tomson Neil D. Chrisman
Director Director
Date 10 / 24 / 02 Date 10 / 24 / 02
--------------------------- ---------------------------------
(Signed)/S/ Jan H. Suwinski
-------------------------------
Jan H. Suwinski
Director
Date 10 / 24 / 02
----------------------------------
SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATIONS
I, Wade F. B. Thompson, certify that:
1. I have reviewed this annual report on Form 10-K of Thor Industries, Inc.;
2. Based on my knowledge, this annual 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 annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.
Date: October 24, 2002
/S/ WADE F. B. THOMPSON
-------------------------------------------------
Wade F. B. Thompson
Chairman, President and Chief Executive Officer
I, Walter L. Bennett, certify that:
1. I have reviewed this annual report on Form 10-K of Thor Industries, Inc.;
2. Based on my knowledge, this annual 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 annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.
Date: October 24, 2002
/S/ WALTER L. BENNETT
-------------------------------------------------
Walter L. Bennett
Chief Financial Officer
SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS
In connection with this annual report on Form 10-K of Thor Industries, Inc. for
the period ended July 31, 2002, I, Wade F. B. Thompson, Chairman, President and
Chief Executive Officer of Thor Industries, Inc., hereby certify pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
1. this Form 10-K for the period ended July 31, 2002 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-K for the period ended July 31,
2002 fairly presents, in all material respects, the financial condition and
results of operations of Thor Industries, Inc.
Date: October 24, 2002
/S/ WADE F. B. THOMPSON
-------------------------------------------------
Wade F. B. Thompson
Chairman, President and Chief Executive Officer
(principal executive officer)
In connection with this annual report on Form 10-K of Thor Industries, Inc. for
the period ended July 31, 2002, I, Walter L. Bennett, Chief Financial Officer of
Thor Industries, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. this Form 10-K for the period ended July 31, 2002 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-K for the period ended July 31,
2002 fairly presents, in all material respects, the financial condition and
results of operations of Thor Industries, Inc.
Date: October 24, 2002
/S/ WALTER L. BENNETT
-------------------------------------------------
Walter L. Bennett
Chief Financial Officer
(principal financial and accounting officer)
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF THOR INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheets of Thor Industries,
Inc. and subsidiaries (the "Company") as of July 31, 2002 and 2001, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended July 31, 2002. Our audits also
included the financial statement schedule listed in the index of item 14(a)(2).
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of July 31, 2002 and
2001, and the results of its operations and its cash flows for each of the three
years in the period ended July 31, 2002, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Dayton, Ohio
September 27, 2002
CONSOLIDATED BALANCE SHEETS, JULY 31, 2002 AND 2001
---------------------------------
2002 2001
---------------------------------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 113,192,639 $ 60,058,777
Investments-short term (Note A) ................ 4,621,874 47,134,094
Accounts receivable:
Trade, less allowance for doubtful accounts--
$245,964 in 2002 and $68,210 in 2001 ........ 72,816,320 46,174,662
Other ....................................... 2,445,578 1,341,033
Inventories (Note D) ........................... 94,665,354 80,286,637
Deferred income taxes and other (Note F) ....... 3,496,589 2,970,082
---------------------------------
TOTAL CURRENT ASSETS ........................... 291,238,354 237,965,285
---------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land ........................................... 9,848,968 8,182,431
Buildings and improvements ..................... 37,249,824 35,936,200
Machinery and equipment ........................ 25,625,071 20,049,176
Total cost ..................................... 72,723,863 64,167,807
Less accumulated depreciation .................. (20,882,575) (17,232,199)
---------------------------------
NET PROPERTY, PLANT AND EQUIPMENT .............. 51,841,288 46,935,608
---------------------------------
INVESTMENTS:
Joint ventures (Note L) ........................ 2,137,946 2,192,453
Investments available-for-sale (Note A) ........ 3,920,746 5,406,286
---------------------------------
TOTAL INVESTMENTS .............................. 6,058,692 7,598,739
---------------------------------
OTHER ASSETS:
Goodwill (Note C) .............................. 130,554,872 10,378,420
Noncompete agreements (Note C) ................. 4,454,408 524,584
Trademarks (Note C) ............................ 8,669,642 1,669,642
Other (Note F) ................................. 4,685,877 3,994,601
---------------------------------
TOTAL OTHER ASSETS ............................. 148,364,799 16,567,247
---------------------------------
TOTAL .......................................... $ 497,503,133 $ 309,066,879
=================================
See notes to consolidated financial statements.
--------------------------------
2002 2001
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable .............................................. $ 89,397,885 $ 57,290,788
Accrued liabilities:
Compensation and related items .............................. 20,463,363 11,630,556
Product warranties .......................................... 25,374,825 12,541,890
Taxes ....................................................... 13,793,041 496,333
Other ....................................................... 7,890,955 5,308,473
--------------------------------
TOTAL CURRENT LIABILITIES ...................................... 156,920,069 87,268,040
--------------------------------
Deferred income taxes and other liabilities (Note F) ........... 5,964,143 1,852,432
--------------------------------
Contingent liabilities (Note I) ................................ -- --
STOCKHOLDERS' EQUITY (NOTE J):
Preferred stock--authorized 1,000,000 shares; none outstanding. -- --
Common stock--par value of $.10 a share;
authorized, 40,000,000 shares;
issued 32,299,838 shares in 2002 and 27,635,694 shares in 2001, 3,229,984 2,763,570
Additional paid-in capital ..................................... 89,941,287 25,876,538
Retained earnings .............................................. 273,033,292 222,942,676
Restricted stock plan .......................................... (531,062) (352,402)
Accumulated other comprehensive loss ........................... (1,455,914) (1,685,309)
--------------------------------
Sub total ...................................................... 364,217,587 249,545,073
Less treasury shares of 3,816,874 in 2002 and 2001, at cost .... (29,598,666) (29,598,666)
--------------------------------
TOTAL STOCKHOLDERS' EQUITY ..................................... 334,618,921 219,946,407
--------------------------------
TOTAL .......................................................... $497,503,133 $ 309,066,879
================================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JULY 31, 2002, 2001 AND
- -----------------------------------------------------------------------------
2000
- ----
-----------------------------------------------------------
2002 2001 2000
-----------------------------------------------------------
Net sales ..................................... $ 1,245,299,721 $ 821,728,255 $ 910,079,280
Cost of products sold ......................... 1,087,895,902 731,919,764 796,813,836
Gross profit .................................. 157,403,819 89,808,491 113,265,444
Selling, general and administrative expenses .. 75,181,339 49,466,948 52,025,383
Amortization of intangibles ................... 570,176 1,346,080 1,787,945
Impairment of equity securities (Note A) ...... (2,119,111) -- --
Loss on divestment of subsidiary (Note M) ..... -- -- (2,323,714)
Interest income ............................... 1,541,867 3,876,082 3,317,484
Interest expense .............................. (325,378) (771,122) (197,296)
Other income .................................. 1,077,553 1,186,593 624,357
-----------------------------------------------------------
INCOME BEFORE INCOME TAXES .................... 81,827,235 43,287,016 60,872,947
Income taxes (Note F) ......................... 30,645,562 16,564,743 24,753,539
-----------------------------------------------------------
NET INCOME .................................... $ 51,181,673 $ 26,722,273 $ 36,119,408
===========================================================
EARNINGS PER COMMON SHARE (NOTE A)
Basic ......................................... $ 1.88 $ 1.12 $ 1.49
Diluted ....................................... $ 1.87 $ 1.11 $ 1.48
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JULY 31,
- ----------------------------------------------------------------------------
2002, 2001 AND 2000
- -------------------
TREASURY STOCK COMMON STOCK ADDITIONAL RESTRICTED
--------------------------------------------------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL PLAN
-----------------------------------------------------------------------------------------------
AUGUST 1, 1999 .......... 3,133,274 $ (22,286,749) 27,430,294 $ 2,743,030 $ 24,312,865 $ (216,168)
Net income .............. -- -- -- -- -- --
Shares purchased ........ 384,800 (4,305,881) -- -- -- --
Stock option activity ... -- -- 45,000 4,500 317,925 --
Restricted stock activity -- -- 12,700 1,270 163,830 (165,100)
Cash dividends - $.04
per common share ....... -- -- -- -- -- --
Unrealized depreciation
on investments ......... -- -- -- -- -- --
Foreign currency
translation adjustment . -- -- -- -- -- --
Compensation expense .... -- -- -- -- -- 83,963
-----------------------------------------------------------------------------------------------
JULY 31, 2000 ........... 3,518,074 (26,592,630) 27,487,994 2,748,800 24,794,620 (297,305)
Net income .............. -- -- -- -- --
Shares purchased ........ 298,800 (3,006,036)
Stock option activity ... -- -- 135,000 13,500 953,775 --
Restricted stock activity -- -- 12,700 1,270 128,143 (129,413)
Cash dividends - $.04
per common share ....... -- -- -- -- -- --
Unrealized appreciation
on investments ......... -- -- -- -- -- --
Foreign currency
translation adjustment . -- -- -- -- -- --
Compensation expense .... -- -- -- -- -- 74,316
-----------------------------------------------------------------------------------------------
JULY 31, 2001 ........... 3,816,874 (29,598,666) 27,635,694 2,763,570 25,876,538 (352,402)
Net income .............. -- -- -- -- -- --
Shares purchased ........ -- -- -- -- -- --
Stock option activity ... -- -- 144,644 14,464 1,213,680 --
Restricted stock activity -- -- 19,500 1,950 344,249 (346,199)
Shares issued ........... -- -- 4,500,000 450,000 62,506,820 --
Cash dividends - $.04
per common share ....... -- -- -- -- -- --
Unrealized appreciation
on investments ......... -- -- -- -- -- --
Foreign currency
translation adjustment . -- -- -- -- -- --
Compensation expense .... -- -- -- -- -- 167,539
-----------------------------------------------------------------------------------------------
JULY 31, 2002 ........... 3,816,874 $ (29,598,666) 32,299,838 $ 3,229,984 $ 89,941,287 $ (531,062)
===============================================================================================
ACCUMULATED COMPRE-
OTHER COMPRE- RETAINED HENSIVE
HENSIVE LOSS EARNINGS INCOME
-----------------------------------------------
AUGUST 1, 1999 .......... $ (1,198,511) $ 162,018,698
Net income .............. -- 36,119,408 $ 36,119,408
Shares purchased ........ -- -- --
Stock option activity ... -- -- --
Restricted stock activity -- -- --
Cash dividends - $.04
per common share ....... -- (966,603) --
Unrealized depreciation
on investments ......... (1,504,298) -- (1,504,298)
Foreign currency
translation adjustment . 82,097 -- 82,097
Compensation expense .... -- -- --
-----------------------------------------------
JULY 31, 2000 ........... (2,620,712) 197,171,503 $ 34,697,207
=============
Net income .............. -- 26,722,273 $ 26,722,273
Shares purchased ........
Stock option activity ... -- -- --
Restricted stock activity -- -- --
Cash dividends - $.04
per common share ....... -- (951,100) --
Unrealized appreciation
on investments ......... 1,049,017 -- 1,049,017
Foreign currency
translation adjustment . (113,614) -- (113,614)
Compensation expense .... -- -- --
-----------------------------------------------
JULY 31, 2001 ........... (1,685,309) 222,942,676 $ 27,657,676
=============
Net income .............. -- 51,181,673 $ 51,181,673
Shares purchased ........ -- -- --
Stock option activity ... -- -- --
Restricted stock activity -- -- --
Shares issued ........... -- -- --
Cash dividends - $.04
per common share ....... -- (1,091,057) --
Unrealized appreciation
on investments ......... 455,281 -- 455,281
Foreign currency
translation adjustment . (225,886) -- (225,886)
Compensation expense .... -- -- --
-----------------------------------------------
JULY 31, 2002 ........... $ (1,455,914) $ 273,033,292 $ 51,411,068
===============================================
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 2002, 2001
- -----------------------------------------------------------------------------
AND 2000
- --------
-----------------------------------------------
2002 2001 2000
-----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME ......................................... $ 51,181,673 $ 26,722,273 $ 36,119,408
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation ................................... 4,655,184 3,595,547 2,888,601
Amortization of intangibles .................... 570,176 1,346,080 1,787,945
Deferred income taxes .......................... 4,219,343 3,582,045 (318,357)
Impairment of equity securities ................ 2,119,111 -- --
Net loss on divestment of subsidiaries ......... -- -- 2,323,714
Purchase of trading investments ................ (8,273,407) (58,377,034) (29,753,354)
Proceeds from sale of trading investments ...... 50,027,883 30,371,983 11,423,052
Gain on sale of investments available-for-sale . (29,322) (189,255) (621,464)
Gain on sale of trading investments ............ (407,012) (180,000) --
Unrealized (gain) loss on trading investments .. 1,164,756 (640,849) 22,108
CHANGES IN ASSETS AND LIABILITIES,
NET OF EFFECTS FROM ACQUISITIONS AND DIVESTMENTS:
Accounts receivable ................................ (2,914,958) 4,675,817 1,891,573
Inventories ........................................ 4,570,827 9,258,576 (16,694,934)
Deferred taxes and other ........................... (48,238) (1,033,861) 240,226
Accounts payable ................................... 10,149,604 7,466,512 1,534,180
Accrued liabilities ................................ 16,260,239 (6,576,508) 3,490,328
Other .............................................. 626,301 1,002,107 297,363
-----------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... 133,872,160 21,023,433 14,630,389
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ......... (7,483,710) (17,197,774) (13,908,163)
Disposals of property, plant and equipment ......... 1,532,177 46,310 114,343
Purchase of available-for-sale investments ......... -- (642,691) (11,535,508)
Proceeds from sale of available-for-sale investments 96,228 277,723 6,356,517
Acquisition of Keystone - net of cash acquired ..... (74,794,195) -- --
-----------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES .............. (80,649,500) (17,516,432) (18,972,811)
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends ..................................... (1,091,057) (951,100) (966,603)
Purchase of treasury shares ........................ -- (3,006,036) (4,305,881)
Proceeds from issuance of common stock ............. 1,228,145 967,275 322,425
-----------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 137,088 (2,989,861) (4,950,059)
-----------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ............ (225,886) (113,614) 82,097
-----------------------------------------------
Net increase (decrease) in cash and cash equivalents 53,133,862 403,526 (9,210,384)
Cash and cash equivalents, beginning of year ....... 60,058,777 59,655,251 68,865,635
-----------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR ............. $ 113,192,639 $ 60,058,777 $ 59,655,251
===============================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid .................................. $ 17,787,259 $ 17,594,918 $ 20,404,124
Interest paid ...................................... 325,378 771,122 197,296
NON-CASH TRANSACTIONS:
Issuance of restricted stock ....................... $ 346,199 $ 129,413 $ 165,100
See notes to consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 2002, 2001 AND 2000
- --------------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of Thor Industries, Inc. and its wholly-owned domestic and
foreign subsidiaries (collectively, the "Company"). All inter-company balances
and transactions are eliminated in consolidation.
CASH AND CASH EQUIVALENTS - Interest-bearing deposits and other investments with
maturities of three months or less when purchased are considered cash
equivalents. Cash, cash equivalents and short term investments of $72,256,358
are held by a major financial institution. The remaining $45,558,155 is held at
various banks.
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 classified as
trading are classified as available-for-sale.
Trading securities and available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses on trading securities are included in
earnings. Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities 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 securities are determined on a specific-identification basis.
Dividend and interest income are recognized when earned.
At July 31, 2002, the Company held equity securities with a fair value and cost
basis of $3,920,746 after recognized impairment. The Company recorded an
impairment charge of $2,119,111 in the fourth quarter of 2002, with an
associated tax benefit of $906,807 relating to its investment in an equity
investment as it was determined that the decline in market value of the
investment which is classified as a noncurrent investment "available-for-sale"
equity security, was deemed to be other than temporary. For 2002, the impairment
charge is included in the consolidated statement of income caption "Impairment
of Equity Securities". As of September 27, 2002, the market value of the
investment in equity securities has declined approximately $1,349,000 from July
31, 2002. These securities are classified as available-for-sale and are included
in other investments. Available-for-sale securities were sold and a realized
gain of $29,322 in fiscal 2002, $189,255 in fiscal 2001 and $621,464 in fiscal
2000 was recognized in other income.
The Company holds certain corporate debt securities that are classified as
trading securities and reported as Investments - short term. Included in other
income are net realized gains on trading securities of $407,013 in fiscal 2002
and $180,000 in fiscal 2001 and net realized losses on trading securities of
$12,620 in fiscal 2000.
INVENTORIES - Inventories are stated at the lower of cost or market, determined
principally by the last-in, first-out (LIFO) basis.
DEPRECIATION - Property, plant and equipment is recorded at cost and depreciated
using the straight-line method over the estimated useful lives of the assets as
follows:
Buildings and improvements - 10 to 39 years
Machinery and equipment - 3 to 10 years
OTHER ASSETS - Other assets consist of goodwill, trademarks, and non-compete
agreements. Non-compete agreements are amortized using the straight-line
method over 5 to 10 years. Effective August 1, 2001 goodwill and trademarks are
no longer amortized. Trademarks are not amortized because they have indefinite
useful lives.
LONG-LIVED ASSETS - Long-lived assets, identifiable intangibles and goodwill
related to those assets to be held and used are reviewed for impairment annually
or whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable from undiscounted 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.
PRODUCT WARRANTIES - Estimated warranty costs are provided at the time of sale
of the warranted products. During fiscal 2001, the Company formed a wholly owned
captive insurance company that provides coverage for product warranties.
REVENUE RECOGNITION - Revenues from the sale of recreation vehicles and buses
are recognized when title passes, which is when shipped to dealers,
distributors, or contract buyers in accordance with shipping terms, which are
FOB shipping point.
ESTIMATES - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
FOREIGN CURRENCY - Assets and liabilities of the Company's Canadian operations
reported in the consolidated balance sheets have been translated at current
exchange rates. Revenues and expenses reported in the consolidated statements of
income have been translated at the average exchange rate for the year.
Translation adjustments have been included in accumulated other comprehensive
income (loss). Transaction gains and losses are not significant.
STOCK OPTIONS - The Company measures cost for stock options issued to employees
using the method of accounting prescribed by Accounting Principles Board, or
APB, Opinion No. 25, "Accounting for Stock Issued to Employees."
EARNINGS PER SHARE - Basic earnings per common share (EPS) is computed by
dividing net income by the weighted average number of common shares
outstanding. Diluted EPS is computed by dividing net income by the weighted
average number of common shares outstanding assuming dilution. The difference
between basic EPS and diluted EPS is the result of outstanding stock options.
2002 2001 2000
Weighted average shares outstanding for
basic earnings per share .................................. 27,162,358 23,807,600 24,212,398
Stock options .............................................. 180,611 117,508 88,026
Weighted average shares outstanding assuming dilution ...... 27,342,969 23,925,108 24,300,424
ACCOUNTING PRONOUNCEMENTS - In June 2002, the FASB issued Statement No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146").
SFAS 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)" ("Issue 94-3").
SFAS 146 requires that a liability be recognized for those costs only when the
liability is incurred. In contrast, under Issue 94-3, a company recognized a
liability for an exit cost when it committed to an exit plan. SFAS 146 also
establishes fair value as the objective for initial measurement of liabilities
related to exit or disposal activities. SFAS 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. The Company does
not anticipate any near term impact on the financial statements as a result of
adopting this statement.
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. The Company has adopted SFAS 144 on August 1, 2002 and it did
not have any impact on the Company's financial statements.
RECLASSIFICATION - Certain reclassifications have been made in fiscal 2001 and
fiscal 2000 consolidated financial statements to conform to the presentation
used in fiscal 2002, including reclassifications to comply with FASB's Emerging
Issues Task Force 01-09 "Accounting for Consideration Given by a Vendor to a
Customer". Dealer incentives which were previously recorded in selling, general
and administrative expenses were reclassified as a reduction of net sales.
B. 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 4,500,000
shares of Thor common stock valued at $62,280,000, of which 2,744,832 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 agreements, 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 Information (unaudited) - Pro Forma results of operations, as
if the acquisition occurred as of the beginning of the periods is
presented below. These proforma results may not be indicative of the
actual results that would have occurred under the ownership and
management of the Company.
YEAR ENDED YEAR ENDED
JULY 31, 2002 JULY 31, 2001
-----------------------------------
Net Sales $1,379,923,633 $1,169,249,025
Net Income $ 60,919,429 $ 38,454,159
Earnings per common share
Basic $ 2.14 $ 1.36
Diluted $ 2.13 $ 1.35
C. 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, our impairment testing will be performed during the fourth
quarter.
The components of other intangibles are as follows:
JULY 31, 2002 JULY 31, 2001
----------------------------------------------------------
ACCUMULATED ACCUMULATED
COST AMORTIZATION COST AMORTIZATION
----------------------------------------------------------
Amortized Intangible Assets:
Non-compete agreements $14,073,367 $9,618,959 $9,573,367 $9,048,783
Aggregate amortization expense for non-compete agreements for the years ended,
July 31, 2002, 2001 and 2000 were $570,176, $658,030, and $ 1,102,395
respectively. Non-compete agreements are amortized on a straight-line basis.
Estimated Amortization Expense:
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
For the year ending July 2007 $584,818
The changes in the carrying amount of goodwill and trademarks for the year ended
July 31, 2002 are as follows:
GOODWILL TRADEMARKS
----------------------------------
Balance as of July 31, 2001 $ 10,378,420 $ 1,669,642
Arising from acquisitions 120,176,452 7,000,000
----------------------------------
Balance as of July 31, 2002 $130,554,872 $ 8,669,642
==================================
As of July 31, 2002 goodwill and trademarks for the recreation vehicles segment
totaled $130,259,372 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 years.
YEAR ENDED YEAR ENDED YEAR ENDED
-------------------------------------------------------------
JULY 31, 2002 JULY 31, 2001 JULY 31, 2000
-------------------------------------------------------------
Net income $51,181,673 $26,722,273 $36,119,408
Goodwill amortization -- 512,711 510,211
Trademark amortization -- 175,339 175,339
-------------------------------------------------------------
Adjusted net income $51,181,673 $27,410,323 $36,804,958
=============================================================
BASIC DILUTED BASIC DILUTED BASIC DILUTED
--------------------------------------------------
Earnings per common share $1.88 $1.87 $1.12 $1.11 $1.49 $1.48
Effect of accounting change - - .03 .03 .03 .03
--------------------------------------------------
Adjusted earnings per common share $1.88 $1.87 $1.15 $1.14 $1.52 $1.51
==================================================
D. INVENTORIES
- --------------------------------------------------------------------------------
Major classifications of inventories are:
AS OF JULY 31,
----------------------------
2002 2001
----------------------------
Finished products ............................ $ 10,582,408 $ 8,801,723
Work in process .............................. 21,305,448 23,879,366
Raw materials ................................ 47,286,949 33,974,281
Chassis ...................................... 21,252,774 19,021,209
----------------------------
Subtotal ..................................... 100,427,579 85,676,579
Less excess of FIFO costs over LIFO costs .... 5,762,225 5,389,942
Total inventories ............................ $ 94,665,354 $ 80,286,637
============================
E. LINE OF CREDIT
- --------------------------------------------------------------------------------
The Company has a $30,000,000 unsecured revolving line of credit which bears
interest below the prime rate (2.6% at July 31, 2002) and expires on November
29, 2002. There was no outstanding balance at July 31, 2002 and July 31, 2001.
The loan agreement executed in connection with the line of credit contains
certain covenants, including restrictions on additional indebtedness, and
requires the Company to maintain certain financial ratios. The Company intends
to renew the unsecured revolving line of credit prior to expiration.
F. INCOME TAXES
- ------------------------------------------------------------------------
YEARS ENDED JULY 31,
------------------------------------------------
2002 2001 2000
------------------------------------------------
INCOME TAXES:
Federal ......... $ 20,996,098 $ 8,838,522 $ 19,160,948
State and local . 5,571,289 3,329,770 4,635,513
Foreign ......... 917,638 814,406 1,275,435
------------------------------------------------
Total current ... 27,485,025 12,982,698 25,071,896
Total deferred .. 3,160,537 3,582,045 (318,357)
------------------------------------------------
Income taxes .... $ 30,645,562 $ 16,564,743 $ 24,753,539
------------------------------------------------
JULY 31, JULY 31,
2002 2001
------------------------------
A SUMMARY OF DEFERRED INCOME TAXES IS:
CURRENT DEFERRED TAX ASSET (LIABILITY):
Inventory basis ......................................... $ (894,707) $ (653,404)
Employee benefits ....................................... 706,308 289,628
Self-insurance .......................................... 1,438,639 571,401
Product warranties ...................................... (558,638) 1,064,312
Divestment of subsidiary ................................ -- 66,500
Other ................................................... 365,439 (773,815)
------------------------------
TOTAL CURRENT DEFERRED TAX ASSET
INCLUDED IN DEFERRED INCOME TAXES AND OTHER ............. 1,057,041 564,622
------------------------------
LONG-TERM DEFERRED TAX ASSET (LIABILITY):
Property basis .......................................... (971,106) (628,947)
Investments ............................................. 906,807 245,152
Deferred compensation ................................... 960,097 528,709
Trademarks and non-compete - Keystone ................... (4,749,559) --
Other ................................................... (174,656) (520,375)
------------------------------
TOTAL LONG-TERM DEFERRED TAX LIABILITY
INCLUDED IN DEFERRED INCOME TAXES AND OTHER LIABILITIES .. (4,028,417) (375,461)
------------------------------
NET DEFERRED TAX ASSET (LIABILITY) ...................... $(2,971,376) $ 189,161
==============================
The differences between income taxes at the federal statutory rate and the
actual income taxes are as follows:
--------------------------------------------------
2002 2001 2000
--------------------------------------------------
Provision at statutory rates .............................. $ 28,639,532 $ 15,150,456 $ 21,305,531
State and local income taxes, net of federal tax benefit .. 3,621,338 2,164,351 3,013,083
Amortization of intangibles ............................... -- 220,966 220,966
Extraterritorial Income/FSC Benefit ....................... (281,750) (245,000) (200,000)
Divestment of subsidiary (Note M) ......................... -- (1,047,000) --
Credits and incentives .................................... (958,839) -- --
Other ..................................................... (374,719) 320,970 413,959
--------------------------------------------------
Income taxes .............................................. $ 30,645,562 $ 16,564,743 $ 24,753,539
==================================================
Income before income taxes includes foreign income of $2,293,791 in fiscal 2002,
$1,986,357 in fiscal 2001 and $3,110,847 in fiscal 2000.
G. LEASES
- --------------------------------------------------------------------------------
The Company has operating leases principally for land, buildings and equipment.
Minimum future rental payments required under these operating leases are
$19,190,968, which includes the following amount due in each of the next five
fiscal years ending July 31: $4,782,163 in fiscal 2003; $3,224,319 in fiscal
2004; $2,538,274 in fiscal 2005; $1,924,102 in fiscal 2006; $1,708,161 in
fiscal 2007 and $5,013,949 thereafter. Rent expense was $4,480,446 in fiscal
2002, $2,338,299 in fiscal 2001, and $2,250,404 in fiscal 2000.
H. EMPLOYER BENEFIT PLANS
- --------------------------------------------------------------------------------
Substantially all non-highly compensated employees can participate in a 401(k)
plan. Company contributions are at the discretion of the Company's board of
directors, except that Company contributions for union employees are based on
hours worked. Total expense for the plans was $556,044 in fiscal 2002, $462,209
in fiscal 2001 and $212,153 in fiscal 2000.
During fiscal 2001, the Company established a deferred compensation plan for
executives who do not participate in a 401(k) plan. This plan allows executives
to defer a portion of their compensation and to direct the Company to invest the
funds in mutual fund investments held by the Company. Participant benefits are
limited to the value of the investments held on their behalf. Investments held
by the Company are accounted for as trading securities and the obligation to the
participants is reported as a liability. The Company does not make contributions
to the plan. The balance of investments held in this plan was $1,307,879 at July
31, 2002 and $856,842 at July 31, 2001.
I. CONTINGENT LIABILITIES AND COMMITMENTS
- --------------------------------------------------------------------------------
It is customary practice for companies in the recreation vehicle industry to
enter into agreements with financing institutions to provide financing to
their dealers. Generally, these repurchase agreements provide for the repurchase
of products from the financing institution in the event of a dealer's default.
Although the total contingent repurchase liability approximated $201,655,000 at
July 31, 2002, the risk of loss under these agreements is spread over numerous
dealers and is further reduced by the resale value of the units which the
Company would be required to repurchase. Losses under these agreements have not
been significant in the periods presented in the accompanying consolidated
financial statements, and management believes that any future losses under these
agreements will not have a significant effect on the Company's consolidated
financial position or results of operations. During fiscal 2002, the Company
incurred losses due to repurchase of approximately $751,000 compared to
$468,000 in fiscal 2001. In addition to the repurchase liability the Company had
additional guarantees of $3,262,000 at July 31, 2002.
The Company obtains certain vehicle chassis from automobile manufacturers under
converter pool agreements. These agreements generally provide that the
manufacturer will supply chassis at the Company's various production facilities
under the terms and conditions set forth in the agreement. The manufacturer does
not transfer the certificate of origin to the Company and, accordingly, the
Company accounts for the chassis as consigned, unrecorded inventory. Chassis are
typically converted and delivered to customers within 90 days of delivery. If
the chassis is not converted within 90 days of delivery to the Company, the
Company purchases the chassis and records the inventory. At July 31, 2002,
chassis on hand accounted for as consigned, unrecorded inventory was
approximately $16,786,000. The Company is involved in various litigation
generally incidental to normal operations. In addition to these claims, we are a
defendant in a lawsuit in Ontario, Canada entitled Overland Coach v. General
Coach America, et. al. This suit arises out of an agreement relating to the
manufacture of a low floor bus. The plaintiff claims that we illegally utilized
the concept of the low floor bus for our own profit and that we breached the
contract with it in the manner specified in the complaint. The plaintiff has
asked for substantial money damages including punitive damages. We have counter
claimed against the plaintiff claiming that we overpaid it in excess of
$800,000. The case is in the discovery phase and no trial date has been set. In
management's opinion, the resolution of pending litigation is not expected to
have a material effect on the Company's financial condition, results of
operations or liquidity.
J. STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
In the fourth quarter of 2002, the Company declared a two-for-one common stock
split that was distributed to shareholders of record as of June 19, 2002. All
share and per share amounts have been retroactively adjusted for the effect of
the common stock split.
The Company's officers and key employees have been granted stock options under
the Company's 1988 Incentive Stock Option Plan and all outstanding shares are
fully vested. Additionally, on September 16, 1999 the Company's Board of
Directors approved the 1999 Stock Option Plan. 1,000,000 shares were authorized
under the 1999 Plan. Options expire 10 years from the date of grant and are
vested evenly over 3 years from the date of grant.
A summary of option transactions under the Incentive Stock Option Plans is as
follows:
2002 2001 2000
-------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
-------------------------------------------------------------------------------
Outstanding at beginning of year .. 386,000 $ 9.37 221,000 $ 7.17 266,000 $ 7.17
Exercised ......................... (144,644) 8.49 (135,000) 7.17 (45,000) 7.17
Canceled .......................... (6,000) -- -- -- -- --
Granted ........................... 187,000 25.72 300,000 10.00 -- --
-------------------------------------------------------------------------------
Outstanding at end of year ........ 422,356 $ 16.90 386,000 $ 9.37 221,000 $ 7.17
===============================================================================
Exercisable at year-end ........... 39,346 $ 9.35 86,000 $ 7.17 221,000 $ 7.17
-------------------------------------------------------------------------------
Weighted average fair value of
options granted ................... -- $ 10.20 -- $ 4.19 -- --
-------------------------------------------------------------------------------
The Company applies Accounting Practices Board Opinion No. 25 and related
interpretations in accounting for the 1988 and 1999 Stock Option Plans.
Accordingly, no compensation cost has been recognized for this plan.
The following summarizes information about stock options outstanding at July 31,
2002, under the 1988 and 1999 Incentive Stock Option Plans. No shares are
available for grant under the 1988 Plan. 519,000 shares are available for
grant under the 1999 Plan.
- ----------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
EXERCISE OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE EXERCISE
PRICE AT JULY 31, 2002 CONTRACTUAL LIFE EXERCISE PRICE AT JULY 31, 2002 PRICE
$ 7.17 9,000 5 years $ 7.17 9,000 $ 7.17
$ 10.00 226,356 8 years $ 10.00 30,346 $ 10.00
$ 25.72 187,000 10 years $ 25.72 0 $ 25.72
As an alternative to accounting for stock-based compensation under APB No. 25,
SFAS No. 123, "Accounting for Stock-Based Compensation," 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:
2002 2001 2000
-----------------------------------------------------
Net income
As reported .................................... $ 51,181,673 $ 26,722,273 $ 36,119,408
Pro forma ...................................... $ 50,930,704 $ 26,471,305 $ 36,119,408
Earnings per common share--basic
As reported .................................... $ 1.88 $ 1.12 $ 1.49
Pro forma ...................................... $ 1.88 $ 1.11 $ 1.49
Earnings per common share--diluted
As reported .................................... $ 1.87 $ 1.11 $ 1.48
Pro forma ...................................... $ 1.86 $ 1.11 $ 1.48
The assumptions used in determining the fair value of options granted during
fiscal 2002 and 2001 are as follows:
2002 2001
---- ----
Expected volatility 37% 36%
Expected life of grant 6 years 6 years
Risk free interest rate 3.93% 5.82%
Expected dividend rate .32% .39%
On September 29, 1997, the Company's board of directors approved a stock award
plan which allows for the granting of up to 300,000 shares of restricted stock
to selected executives. Restrictions expire 50% after 5 years following the date
of issue and the balance after six years. As of July 31, 2002, the Company
issued 69,025 shares of restricted stock under this plan and 230,975 shares
remain available for issuance. Compensation costs related to this plan were
$167,539 in fiscal 2002, $74,316 in fiscal 2001, and $83,963 in fiscal 2000 and
are being amortized over the restriction period.
K. RESEARCH AND DEVELOPMENT
- --------------------------------------------------------------------------------
Research and development costs are expensed as incurred and were approximately
$1,405,000 in fiscal 2002, $1,507,000 in fiscal 2001, and $579,000 in fiscal
2000.
L. JOINT VENTURES
- --------------------------------------------------------------------------------
In March 1996, the Company and Cruise America, Inc. formed a joint venture, CAT
Joint Venture LLC ("CAT"), to rent recreation vehicles to the public. The
Company's total investment of $1,001,460 includes a subordinated note
receivable of $810,000.
In March 1994, the Company and a financial services company formed a joint
venture, Thor Credit Corporation, to finance the sales of recreation vehicles to
consumer buyers. The Company's total investment of $1,136,486 includes a
subordinated note receivable of $200,000.
These investments are 50% owned and are accounted for using the equity method.
During fiscal 2002, our Four Winds subsidiary had sales to Cruise America of
$22,188,000 and Cruise America had sales to CAT of $5,988,000.
During fiscal 2001, our Four Winds subsidiary had sales to Cruise America of
$25,622,000 and Cruise America had sales to CAT of $10,020,000.
M. DIVESTMENT OF SUBSIDIARY
- --------------------------------------------------------------------------------
The Company sold its western motorhome operations in December 1998. During
fiscal 2000, the entity that purchased the operation filed for bankruptcy. As
a result, the Company was required to honor its guarantee of $750,000 of the
purchaser's debt as well as assume responsibility for warranties of the western
motorhome products sold prior to December 1998. In addition, the Company
incurred losses in subletting the western motorhome facility and writing off
debt due to the Company from the purchasers. Accordingly, the Company recorded a
loss of $2,323,714 in fiscal 2000. In fiscal 2001, based on judicial decisions,
the Company recorded a tax benefit of $1,047,000 associated with the stock
basis of the divestiture. In addition, the Company guaranteed certain vendor
obligations of the purchaser in the amount of approximately $1,000,000. The
holder of the guarantee has demanded payment of $819,000 plus interest but the
Company believes that it is not obligated to pay because of the holder's failure
to perfect a security interest in the assets purchased by the purchaser which
were the subject of the guarantee.
N. BUSINESS SEGMENTS
- --------------------------------------------------------------------------------
The Company operates in principally two segments - recreation vehicles and small
and mid-size buses. Manufacturing and sales are conducted in the United States
and, to a much lesser extent, in Canada. Identifiable assets are those assets
used in the operation of each industry segment. Corporate assets primarily
consist of cash and cash equivalents, deferred income tax assets, the cash value
of Company-owned life insurance and various investments.
---------------------------------------
2002 2001 2000
---------------------------------------
($000) ($000) ($000)
NET SALES:
- ----------
Recreation vehicles
Towables $ 782,715 $ 337,186 $ 397,959
Motorized 187,665 189,241 268,672
Other 3,317 3,267 5,715
Buses 271,603 292,034 237,733
---------------------------------------
TOTAL $ 1,245,300 $ 821,728 $ 910,079
=======================================
INCOME BEFORE INCOME TAXES:
- ---------------------------
Recreation vehicles $ 77,509 $ 25,285 $ 46,258
Buses 15,016 20,182 18,882
Net loss on divestment of subsidiary (Note M) -- -- (2,324)
Corporate (10,698) (2,180) (1,943)
---------------------------------------
TOTAL $ 81,827 $ 43,287 $ 60,873
=======================================
IDENTIFIABLE ASSETS:
- --------------------
Recreation vehicles $ 293,871 $ 114,150 $ 118,700
Buses 64,436 82,194 66,251
Corporate 139,196 112,723 97,180
---------------------------------------
TOTAL $ 497,503 $ 309,067 $ 282,131
=======================================
DEPRECIATION AND AMORTIZATION EXPENSE:
- --------------------------------------
Recreation vehicles $ 4,160 $ 4,132 $ 3,985
Buses 1,065 810 692
---------------------------------------
TOTAL $ 5,225 $ 4,942 $ 4,677
=======================================
CAPITAL EXPENDITURES:
- ---------------------
Recreation vehicles $ 5,443 $ 6,803 $ 11,207
Buses 2,041 10,395 2,701
---------------------------------------
TOTAL $ 7,484 $ 17,198 $ 13,908
=======================================
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 2002, 2001 AND 2000
Column A Column B Column C Column D Column E
- -------- -------- ------------------------- -------- --------
Balance at Charged to Write-offs Net Balance
Beginning Costs and of Recoveries/ at End of
Description of Period Expenses Acquisitions Payments Period
-----------------------------------------------------------------------------
YEAR ENDED JULY 31, 2002:
Product warranties ............... $ 12,541,890 $ 26,928,523 $ 8,875,851 $(22,971,439) $ 25,374,825
=============================================================================
Allowance for doubtful accounts .. $ 68,210 $ (62,332) $ 274,540 $ (34,454) $ 245,964
=============================================================================
Accumulated amortization of
non-compete agreements ........... $ 9,048,783 $ 570,176 $ -- $ -- $ 9,618,959
=============================================================================
YEAR ENDED JULY 31, 2001:
Product warranties................ $ 11,878,469 $ 12,850,959 $ -- $(12,187,538) $ 12,541,890
=============================================================================
Allowance for doubtful accounts .. $ 43,959 $ 80,890 $ -- $ (56,639) $ 68,210
=============================================================================
Accumulated amortization of
goodwill and other intangibles ... $ 20,188,599 $ 1,346,080 $ -- $ -- $ 21,534,679
=============================================================================
YEAR ENDED JULY 31, 2000:
Product warranties$11,543,598 .... $ 11,543,598 $ 12,481,160 $ -- $(12,146,289) $ 11,878,469
=============================================================================
Allowance for doubtful accounts .. $ 63,485 $ 54,871 $ -- $ (74,397) $ 43,959
=============================================================================
Accumulated amortization of
goodwill and other intangibles ... $ 18,400,654 $ 1,787,945 $ -- $ -- $ 20,188,599
=============================================================================