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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED January 31, 2003 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 No.)
419 West Pike Street, Jackson Center, OH 45334-0629
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (937) 596-6849
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------ ------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at 1/31/03
----- ----------------------
Common stock, par value 28,583,645 shares
$.10 per share
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
JANUARY 31, 2003 JULY 31, 2002
---------------- -------------
Current assets:
Cash and cash equivalents $55,351,431 $113,192,639
Investments - short term 20,353,703 4,621,874
Accounts receivable:
Trade 97,016,865 72,816,320
Other 3,518,748 2,445,578
Inventories 113,586,065 94,665,354
Deferred income taxes and other 9,904,215 3,496,589
----------- -----------
Total current assets 299,731,027 291,238,354
----------- -----------
Property:
Land 11,860,206 9,848,968
Buildings and improvements 46,595,210 37,249,824
Machinery and equipment 28,244,911 25,625,071
----------- -----------
Total cost 86,700,327 72,723,863
Accumulated depreciation 23,443,475 20,882,575
----------- -----------
Property, net 63,256,852 51,841,288
----------- -----------
Investments:
Joint venture 2,124,527 2,137,946
Investments available-for-sale 2,652,987 3,920,746
----------- -----------
Total investments 4,777,514 6,058,692
----------- -----------
Other assets:
Goodwill 130,554,872 130,554,872
Non-compete agreements 4,096,999 4,454,408
Trademarks 8,669,642 8,669,642
Other 5,028,299 4,685,877
----------- -----------
Total other assets 148,349,812 148,364,799
----------- -----------
TOTAL ASSETS $516,115,205 $497,503,133
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $72,185,506 $89,397,885
Accrued liabilities:
Taxes 12,990,948 13,793,041
Compensation and related items 14,545,187 20,463,363
Product warranties 29,175,078 25,374,825
Other 9,048,364 7,890,955
----------- -----------
Total current liabilities 137,945,083 156,920,069
----------- -----------
Deferred income taxes and other liabilities 6,234,071 5,964,143
Stockholders' equity:
Common stock - authorized 40,000,000 shares;
issued 28,583,645 shares @ 1/31/03 and 32,299,838
shares @ 7/31/02; par value of $.10 per share 2,858,365 3,229,984
Additional paid-in capital 81,224,493 89,941,287
Accumulated other comprehensive loss (917,461) (1,455,914)
Retained earnings 290,092,289 273,033,292
Restricted stock plan (1,321,635) (531,062)
Cost of treasury shares, -0- shares @ 1/31/03
and 3,816,874 @ 7/31/02 - (29,598,666)
----------- -----------
Total stockholders' equity 371,936,051 334,618,921
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $516,115,205 $497,503,133
============ ============
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2003 AND 2002
------------------------------------------------------------
THREE MONTHS ENDED JANUARY 31 SIX MONTHS ENDED JANUARY 31
----------------------------- -----------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales $329,897,564 $267,905,831 $736,159,878 $476,450,075
Cost of products sold 284,744,953 238,759,192 632,413,410 425,191,000
----------- ----------- ----------- -----------
Gross profit 45,152,611 29,146,639 103,746,468 51,259,075
Selling, general and
administrative expenses 22,132,165 17,283,623 45,435,061 30,074,031
Impairment of equity securities - - 1,580,334 -
Interest income 438,149 183,215 1,033,264 1,116,252
Interest expense 120,825 42,897 236,570 194,400
Other income 395,600 61,172 666,637 342,712
----------- ----------- ----------- -----------
Income before income taxes 23,733,370 12,064,506 58,194,404 22,449,608
Provision for income taxes 8,364,692 4,386,280 21,976,801 8,078,983
----------- ----------- ----------- -----------
Net income $15,368,678 $7,678,226 $36,217,603 $14,370,625
=========== ========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING:
Basic 28,556,802 27,937,616 28,521,394 25,884,266
Diluted 28,820,266 28,113,444 28,798,999 26,048,514
EARNINGS PER COMMON SHARE:
Basic $.54 $.27 $1.27 $.56
==== ==== ===== ====
Diluted $.53 $.27 $1.26 $.55
==== ==== ===== ====
DIVIDENDS PAID PER COMMON SHARE: $.01 $.01 $.01 $.01
==== ==== ==== ====
See notes to consolidated financial statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2003 AND 2002
--------------------------------------------------
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $36,217,603 $14,370,625
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation 2,672,344 2,171,810
Amortization 357,409 64,767
Deferred Income tax - 497,378
Impairment of equity securities 1,580,334 -
Purchase of trading investments (27,633,253) (3,588,351)
Proceeds from sale of trading investments 11,939,888 50,027,883
(Gain) loss on sale of trading investments 39,254 (404,238)
Unrealized gain on trading investments (77,718) -
Gain on sale of investments available-for-sale - (29,322)
CHANGES IN NON CASH ASSETS AND LIABILITIES:
Accounts receivable (25,273,715) (16,751,079)
Inventories (18,920,711) 11,109,150
Prepaid expenses and other (6,846,861) (2,570,433)
Accounts payable (17,212,379) (16,374,627)
Accrued liabilities (1,477,061) 8,771,887
Other liabilities 388,280 1,590,916
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (44,246,586) 48,886,366
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant & equipment (14,100,549) (3,282,397)
Disposals of property, plant & equipment 13,472 27,157
Proceeds from sale of available-for-sale investments - 96,228
Acquisition of Keystone - (74,794,195)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (14,087,077) (77,953,207)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (570,430) (521,683)
Proceeds from issuance of common stock 727,700 883,491
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 157,270 361,808
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 335,185 (262,717)
----------- -----------
Net decrease in cash and equivalents (57,841,208) (28,967,750)
Cash and equivalents, beginning of year 113,192,639 60,058,777
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $55,351,431 $31,091,027
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $23,307,596 $176,559
Interest paid 236,570 194,400
NON CASH TRANSACTIONS:
Issuance of restricted stock $908,831 $346,199
Stock issued for Keystone - 61,470,483
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. The July 31, 2002 amounts are from the annual audited financial statements.
The interim financial statements are unaudited. In the opinion of
management, all adjustments (which consist of normal recurring adjustments)
necessary to present fairly the financial position and results of
operations for the interim periods presented have been made. These
financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended July 31, 2002. The results of
operations for the three months and six months ended January 31, 2003 are
not necessarily indicative of the results for the full year.
2. Major classifications of inventories are:
January 31, 2003 July 31, 2002
---------------- -------------
Raw materials $52,773,272 $47,286,949
Chassis 21,313,160 21,252,774
Work in process 23,217,201 21,305,448
Finished goods 22,526,657 10,582,408
------------ -----------
Total 119,830,290 100,427,579
Less excess of FIFO costs
over LIFO costs 6,244,225 5,762,225
------------ -----------
Total inventories $113,586,065 $94,665,354
============ ===========
3. Earnings Per Share
Three months Three months Six months Six months
ended ended ended ended
January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Weighted average shares
Outstanding for basic
earnings per share 28,556,802 27,937,616 28,521,394 25,884,266
Stock options 263,464 175,828 277,605 164,248
---------- ---------- ---------- ----------
Total - For diluted shares 28,820,266 28,113,444 28,798,999 26,048,514
---------- ---------- ---------- ----------
4. Comprehensive Income
Three months Three months Six months Six months
ended ended ended ended
January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Net income $15,368,678 $7,678,226 $36,217,603 $14,370,625
Foreign currency
translation adjustment 238,654 (1,881) 335,185 (262,717)
Unrealized appr. (depr.)
on investments 204,644 (377,005) 203,268 (789,761)
----------- ---------- ----------- -----------
Comprehensive income $15,811,976 $7,299,340 $36,756,056 $13,318,147
=========== ========== =========== ===========
5. Segment Information
Three months Three months Six months Six months
ended ended ended ended
Net Sales: January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Recreation vehicles
Towables $233,254,472 $168,517,178 $526,513,517 $252,942,017
Motorized 42,217,176 32,368,761 100,467,200 74,074,377
Other 498,156 542,527 1,166,396 1,287,380
Buses 53,927,760 66,477,365 108,012,765 148,146,301
------------ ------------ ------------ ------------
Total $329,897,564 $267,905,831 $736,159,878 $476,450,075
============ ============ ============ ============
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Three months Three months Six Months Six Months
ended ended ended ended
January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Income Before Income Taxes:
Recreation vehicles $22,370,546 $10,777,185 $56,955,378 $16,266,706
Buses 3,329,258 3,276,381 5,939,116 8,809,804
Corporate (1,966,434) (1,989,060) (4,700,090) (2,626,902)
----------- ----------- ----------- -----------
Total $23,733,370 $12,064,506 $58,194,404 $22,449,608
=========== =========== =========== ===========
January 31, 2003 July 31, 2002
---------------- -------------
Identifiable Assets:
Recreation vehicles $350,097,708 $293,870,571
Buses 65,746,586 64,436,446
Corporate 100,270,911 139,196,116
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Total $516,115,205 $497,503,133
============ ============
6. Accounting Pronouncements
On November 25, 2002, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also requires
the guarantor to recognize, at the inception of the guarantee, a liability
for the fair value of obligation undertaken in issuing the guarantee. The
disclosure requirements are effective for quarters ending after December
15, 2002 and the liability recognition is in effect for guarantees
initiated after December 31, 2002 (See footnote 10 and 11 for disclosure).
7. Investments
The Company classifies its debt and equity securities as trading or
available-for-sale. Trading securities are bought and held principally for
the purpose of selling them in the near term. All securities not included
in trading are classified as available-for-sale.
Trading and available-for-sale investments are recorded at fair market
value. Unrealized holding gains and losses on trading investments are
included in earnings. Unrealized holding gains and losses, net of the
related tax effect, on available-for-sale investments are excluded from
earnings and are reported as a separate component of accumulated other
comprehensive income, net of income taxes until realized. Realized gains
and losses from the sale of available-for-sale investments are determined
on a specific-identification basis. Dividend and interest income are
recognized when earned.
At January 31, 2003, the Company held equity investments with a fair market
value of $2,652,987 and cost basis of $2,340,267 after a recognized
impairment. The Company recorded an impairment charge of $1,580,334 in the
first quarter of fiscal 2003 relating to its investment in an equity
security as it was determined that the decline in market value of the
investment was deemed to be other than temporary. The impairment charge is
included in the statement of consolidated income caption "Impairment of
equity securities". These investments are included in investments
available-for-sale.
The Company has certain corporate debt investments that are classified as
trading investments and reported as Investments - short term.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
8. Business Combination
On November 9, 2001 Thor acquired 100% of the common and preferred stock of
Keystone RV Company ("Keystone"). Keystone is engaged in the business of
manufacturing travel trailers and other recreation vehicles.
Pro forma Information: Pro forma results of operations, as if the
acquisition occurred as of the beginning of the period is presented below.
These pro forma results may not be indicative of the actual results that
would have occurred under the ownership and management of the Company.
Actual Pro Forma
Six Months Six Months
Ended Ended
January 31, 2003 January 31, 2002
---------------- ----------------
Net Sales $ 736,159,878 $ 613,633,714
Net Income $ 36,217,603 $ 24,108,381
Earnings per common share
Basic $1.27 $.85
Diluted $1.26 $.85
9. Treasury Shares
The Company retired 3,816,874 shares from treasury stock in the first
quarter of fiscal 2003. This retirement resulted in a reduction of
$29,598,666 in Treasury Stock, $381,688 in Common Stock, $10,628,802 in
Additional Paid-In Capital and $18,588,176 in Retained Earnings.
10. Warranty
Thor provides customers of our products with a warranty covering defects in
material or workmanship for periods generally ranging from one to two
years, with longer warranties on certain structural components. We record a
liability based on our best estimate of the amounts necessary to settle
future and existing claims on products sold as of the balance sheet date.
Factors we use in estimating the warranty liability include a history of
units sold, existing dealer inventory, average cost incurred and a profile
of the distribution of warranty expenditures over the warranty period. A
significant increase in dealer shop rates, the cost of parts or the
frequency of claims could have a material adverse impact on our operating
results for the period or periods in which such claims or additional costs
materialize. Management believes that the warranty reserve is adequate;
however, actual claims incurred could differ from estimates, requiring
adjustments to the reserves. Warranty reserves are reviewed and adjusted as
necessary on a quarterly basis.
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Beginning Balance $27,909,411 $13,018,583 $25,374,825 $12,541,890
Provision 11,141,587 5,688,765 21,380,182 9,778,097
Payments (9,875,920) (5,343,211) (17,579,929) (8,955,850)
Acquisitions - 8,875,851 - 8,875,851
----------- ----------- ----------- -----------
Ending Balance $29,175,078 $22,239,988 $29,175,078 $22,239,988
=========== =========== =========== ===========
11. Commercial Commitments
Our principal commercial commitments at January 31, 2003 are summarized in
the following chart:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
Total Term of
Commitment Amount Commitment Guarantee
---------- ----------------- ---------
Guarantee on dealer financing $3,210,000 less than 1 year
Standby repurchase obligation
on dealer financing $220,570,000 less than 1 year
The Company has no reserves for losses that could be incurred on any
guarantee. Based on historical data, the Company has a reserve of $139,000
for potential losses on repurchases under the standby repurchase
obligation.
12. Stock-Based Compensation
In December 2002, The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This Statement
amends the disclosure requirements of Statement 123, "Accounting for
Stock-Based Compensation," to require disclosure in interim financial
statements about the method of accounting for stock-based compensation and
the effect of the method used on reported results. This statement is
effective for interim financial statements beginning after December 15,
2002, with early application encouraged.
As an alternative to accounting for stock-based compensation under APB No.
25, SFAS No. 123, establishes a fair-value method of accounting for
employee stock options. The Company used the Black-Scholes option pricing
model to estimate the grant date fair value of its option grants. The fair
value is recognized over the option vesting period which is three years.
Had compensation cost for these grants been determined in accordance with
SFAS No. 123, the Company's net income and net earnings per common share
would have been:
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
January 31, 2003 January 31, 2002 January 31, 2003 January 31, 2002
---------------- ---------------- ---------------- ----------------
Net Income
As reported $15,368,678 $7,678,226 $36,217,603 $14,370,625
Pro forma $15,210,647 $7,615,483 $35,901,541 $14,245,139
Earnings Per Common Share - Basic
As reported $.54 $.27 $1.27 $.56
Pro forma $.53 $.27 $1.26 $.55
Earnings Per Common Share - Diluted
As reported $.53 $.27 $1.26 $.55
Pro forma $.53 $.27 $1.25 $.55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
Quarter Ended January 31, 2003 vs.
Quarter Ended January 31, 2002
- ------------------------------------
Net sales for the second quarter of fiscal 2003 were $329,897,564 compared to
$267,905,831 for the second quarter of fiscal 2002. Income before income taxes
in fiscal 2003 was $23,733,370, a 96.7% increase from $12,064,506 in fiscal
2002. The increase in income before income taxes of $11,668,864 in fiscal 2003
was primarily caused by increased recreation vehicle revenues of $74,541,338,
which
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
resulted in an increase in income before income taxes of approximately
$11,593,361. Bus revenues were $12,549,605 less in fiscal 2003 than in fiscal
2002. Bus income before income taxes in fiscal 2003 was approximately $52,877
greater than the same period last year due to favorable product mix and reduced
manufacturing costs. These reductions in revenue were due to continued
competitive pressure on pricing of buses, decline in airline traffic after the
terrorist attacks of September 11, 2001 which affected the hotel, motel, rental
car and other bus customers, and delayed purchases of buses affected by state
and municipal budget constraints. Corporate costs, excluding interest and other
income, were higher than fiscal 2002 by approximately $475,000 due primarily to
increased profit related bonuses. Interest income increased by $254,934 due to
increased investable cash and other income increased by $334,428 due primarily
to increased profits of Thor Credit Corporation, our joint venture retail
finance company for recreation vehicles.
Recreation vehicle revenues increased in fiscal 2003 by 37% to $275,969,804
compared to $201,428,466 in fiscal 2002, and accounted for 83.7% of total
company revenues compared to 75.2% in fiscal 2002. Recreation vehicle backlogs
were $180,703,000 at January 31, 2003, up 41.3% compared to the same period last
year. This increase is due to the continued strength of the marketplace. Bus
revenues in fiscal 2003 decreased by 18.9% to $53,927,760 compared to
$66,477,365 in fiscal 2002 and accounted for 16.3% of the total company revenues
compared to 24.8% in fiscal 2002. Bus vehicle order backlog of $91,622,000 at
January 31, 2003 was down 21.7% 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 2003 increased to 13.7% from
10.9% in fiscal 2002 primarily due to increased recreation vehicle sales and
lower material cost on recreation vehicles. Price increases during the second
quarter averaged 1% for recreation vehicles. Bus pricing did not increase due to
competitive pressures. Selling, general, and administrative expense and
amortization of intangibles were $22,132,165 compared to $17,283,623 for the
same period in fiscal 2002. As a percentage of sales, selling, general and
administrative expense was 6.7% in fiscal 2003 compared to 6.5% in fiscal 2002.
Amortization of intangibles was $178,000 in fiscal 2003 compared to $179,000 in
fiscal 2002. The additional selling, general and administrative costs are due
primarily to the increased costs associated with the 23.1% increase in revenue.
The overall effective tax rate was 35.2% for fiscal 2003 compared to 36.4% for
fiscal 2002. The lower rate in fiscal 2003 was due primarily to a favorable
state tax ruling of approximately $385,000 received in January 2003.
Six Months Ended January 31, 2003 vs.
Six Months Ended January 31, 2002
- -----------------------------------------
Net sales for the six months of fiscal 2003 were $736,159,878 compared to
$476,450,075 for the same period last year. Income before income taxes in fiscal
2003 was $58,194,404, a 159% increase from $22,449,608 in fiscal 2002. Results
include Keystone RV from date of acquisition on November 9, 2001. The increase
in income before income taxes of $35,744,796 in fiscal 2003 was primarily caused
by increased recreation vehicle revenues of $299,843,339, which resulted in an
increase in income before income taxes of approximately $40,688,672. Bus
revenues were $40,133,536 less in fiscal 2003 than fiscal 2002. Bus income
before income taxes in fiscal 2003 was approximately $2,870,688 less than the
same period last year because of reduced revenues. These reductions in revenue
and profits were due to continued competitive pressure on pricing of buses,
decline in airline traffic after the terrorist attacks of September 11, 2001
which affected the hotel, motel, rental car and other bus customers, and delayed
purchases of buses affected by state and municipal budget constraints. Corporate
costs, excluding interest and other income, are higher than fiscal 2002 by
approximately $2,258,000 due primarily to an impairment loss of $1,580,334
recorded on an equity investment classified as available-for-sale in the first
quarter of fiscal 2003 and approximately $570,000 in increased profit related
bonuses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
In addition, interest income was reduced by $82,988 and interest expense
increased by $42,170. Other income increased $323,925 due primarily to increased
profits of Thor Credit, our joint venture retail finance company for recreation
vehicles.
Recreation vehicle revenues increased in the six months of fiscal 2003 by 91.3%
to $628,147,113, compared to $328,303,774 in fiscal 2002 and accounted for 85.3%
of total company revenues compared to 68.9% in fiscal 2002. Bus revenues in
fiscal 2003 decreased by 27.1% to $108,012,765 compared to $148,146,301 in
fiscal 2002 and accounted for 14.7% of the total company revenues compared 31.1%
in fiscal 2002.
Gross profit as a percentage of sales in fiscal 2003 increased to 14.1% from
10.8% in fiscal 2002 primarily due to increased recreation vehicle sales and
lower material cost on recreation vehicles. Selling, general, and administrative
expenses and amortization of intangibles were $45,435,061 compared to
$30,074,031 for the same period in fiscal 2002. As a percentage of sales,
selling, general and administrative expense was 6.2% in fiscal 2003 compared to
6.3% in fiscal 2002. Amortization of intangibles increased in fiscal 2003 to
$357,409 compared to $212,767 in fiscal 2002. This increase is due to certain
non-compete expenses associated with the Keystone RV acquisition. The additional
selling, general and administrative costs are due primarily to the increased
costs associated with the 54.5% increase in revenue.
The overall effective tax rate was 37.8% for the six months of fiscal 2003
compared to 36.0% for fiscal 2002. The lower rate in fiscal 2002 was due
primarily to higher research and development tax credits recognized by the
Company in fiscal 2002 versus fiscal 2003.
Financial Condition and Liquidity
- ---------------------------------
As of January 31, 2003, we had $75,705,134 in cash, cash equivalents and
short-term investments, compared to $117,814,513 on July 31, 2002. We classify
our debt and equity securities as trading or available-for-sale securities. The
former are carried on our consolidated balance sheets as "Cash and cash
equivalents" or "Investments - short term". The latter are carried on our
consolidated balance sheet as "Investments - investments available-for-sale".
Trading securities, principally investment grade securities composed of
asset-based notes, mortgage-backed notes and corporate bonds, are generally
bought and held for sale in the near term. All other securities are classified
as available-for-sale. In each case, securities are carried at fair market
value. Unrealized gains and losses on trading securities are included in
earnings. Unrealized gains and losses on investments classified as
available-for-sale, net of related tax effect, are not included in earnings, but
appear as a component of "Accumulated other comprehensive loss" on our
consolidated balance sheets until the gain or loss is realized upon the
disposition of the investment or if a decline in the fair market value is
determined to be other than temporary.
Due to the relative short-term maturity (average 3 months) of our trading
securities, we do not believe that a change in the fair market value of these
securities will have a significant impact on our financial position or results
of future operations.
Working capital at January 31, 2003, was $161,785,944 compared to $134,318,285
on July 31, 2002. We have no long-term debt. We currently have a $30,000,000
revolving line of credit which bears interest at negotiated rates below prime
and expires on November 28, 2003. We expect to renew our credit line. There were
no borrowings on this line of credit at January 31, 2003. The loan agreement
executed in connection with the line of credit contains certain covenants,
including restrictions on additional indebtedness, and requires us to maintain
certain financial ratios. We believe that internally generated funds and the
line of credit will be sufficient to meet our current needs and any additional
capital requirements. Capital expenditures of approximately $14,100,549 for the
six months ended January 31, 2003 were primarily for the planned expansions at
our Dutchmen, Four Winds, Keystone and Thor California facilities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The Company anticipates additional capital expenditures in 2003 of approximately
$21,000,000. The major components of this capital expenditure include completing
the plant expansion at our Dutchmen facility of $3,200,000, our Four Winds
facility of $1,000,000, and our Keystone facility of $3,100,000. 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.
CRITICAL ACCOUNTING PRINCIPLES
- ------------------------------
The consolidated financial statements of Thor are prepared in conformity with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires the use of estimates, judgments, and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. We believe that of our critical
accounting policies, the following may involve a higher degree of judgments,
estimates, and complexity:
Impairment of Long-Lived Assets
Thor at least annually reviews the carrying value of its long-lived assets held
and used and assets to be disposed of, including goodwill and other intangible
assets, or when events and circumstances warrant such a review. This review is
performed using estimates of future cash flows. If the carrying value of a
long-lived asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the long-lived asset exceeds its fair
value. Management believes that the estimates of future cash flows and fair
values are reasonable; however, changes in estimates of such cash flows and fair
values could affect the evaluations.
Insurance Reserves
Generally, we are self-insured for workers' compensation and group medical
insurance. Under these plans, liabilities are recognized for claims incurred,
including those incurred but not reported, and changes in the reserves. At the
time a workers' compensation claim is filed, a liability is estimated to settle
the claim. The liability for workers' compensation claims is determined by a
third party administrator using various state statutes and reserve requirements.
Group medical reserves are funded through a Trust and are estimated using
historical claims' experience. We have a self-insured retention for products
liability and personal injury matters of $5,000,000 per occurrence. We have
established a reserve on our balance sheet for such occurrences based on
historical data. We maintain excess liability insurance with outside insurance
carriers to minimize our risks related to catastrophic claims in excess of all
our self-insured positions. Any material change in the aforementioned factors
could have an adverse impact on our operating results.
Warranty
Thor provides customers of our products with a warranty covering defects in
material or workmanship for periods generally ranging from one to two years,
with longer warranties on certain structural components. We record a liability
based on our best estimate of the amounts necessary to settle future and
existing claims on products sold as of the balance sheet date. Factors we use in
estimating the warranty liability include a history of units sold, existing
dealer inventory, average cost incurred and a profile of the distribution of
warranty expenditures over the warranty period. A significant increase in dealer
shop rates, the cost of parts or the frequency of claims could have a material
adverse impact on our operating results for the period or periods in which such
claims or additional costs materialize. Management believes that the warranty
reserve is adequate; however, actual claims incurred could differ from
estimates, requiring adjustments to the reserves. Warranty reserves are reviewed
and adjusted as necessary on a quarterly basis.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
FORWARD LOOKING STATEMENTS
- --------------------------
This report includes certain statements that are "forward looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934 as amended. These
forward-looking statements involve uncertainties and risks. There can be no
assurance that actual results will not differ from the Company's expectations.
Factors which could cause materially different results include, among others,
the success of new product introductions, the pace of acquisitions and cost
structure improvements, competition and general economic conditions. The Company
disclaims any obligation or undertaking to disseminate any updates or revisions
to any change in expectation of the Company after the date hereof or any change
in events, conditions or circumstances on which any statement is based except as
required by law.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
The Company is exposed to market risk from changes in foreign currency related
to its operations in Canada. However, because of the size of Canadian
operations, a hypothetical 10% change in the Canadian dollar as compared to the
U.S. dollar would not have a significant impact on the Company's financial
position or results of operations. The Company is also exposed to market risks
related to interest rates because of its investments in corporate debt
securities. A hypothetical 10% change in interest rates would not have a
significant impact on the Company's financial position or results of operations.
CONTROLS AND PROCEDURES
- -----------------------
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), within the 90 days prior to the filing date of this
report, the Company carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Company's Chairman of the Board,
President and Chief Executive Officer along with the Company's Chief Financial
Officer. Based upon that evaluation, the Company's Chairman of the Board,
President and Chief Executive Officer along with the Company's Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective. There have been no significant changes in the Company's internal
controls, or in other factors, which could significantly affect internal
controls subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chairman of
the Board, President and Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
N/A
b.) Reports on Form 8-K
N/A
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOR INDUSTRIES, INC.
(Registrant)
DATE February 27, 2003 /s/ Wade F. B. Thompson
---------------------- ---------------------------------------
Wade F. B. Thompson
Chairman of the Board, President
and Chief Executive Officer
DATE February 27, 2003 /s/ Walter L. Bennett
---------------------- ---------------------------------------
Walter L. Bennett
Senior Vice President
Secretary and Chief Financial Officer
SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATIONS
I, Wade F. B. Thompson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Thor Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 27, 2003 /s/ Wade F. B. Thompson
----------------- ----------------------------------
Wade F. B. Thompson
Chairman of the Board, President and Chief
Executive Officer
SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATIONS
I, Walter L. Bennett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Thor Industries,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 27, 2003 /s/ Walter L. Bennett
----------------- ----------------------------------
Walter L. Bennett
Chief Financial Officer
SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS
In connection with this quarterly report on Form 10-Q of Thor Industries, Inc.
for the period ended January 31, 2003, I, Wade F. B. Thompson, Chairman of the
Board, President and Chief Executive Officer of Thor Industries, Inc., hereby
certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, that:
1. this Form 10-Q for the period ended January 31, 2003 fully complies
with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
2. the information contained in this Form 10-Q for the period ended
January 31, 2003 fairly presents, in all material respects, the
financial condition and results of operations of Thor Industries, Inc.
Date: February 27, 2003 /s/ Wade F. B. Thompson
----------------- ----------------------------------
Wade F. B. Thompson
Chairman, President and Chief Executive
Officer (principal executive officer)
In connection with this quarterly report on Form 10-Q of Thor Industries, Inc.
for the period ended January 31, 2003, I, Walter L. Bennett, Chief Financial
Officer of Thor Industries, Inc., hereby certify pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:
1. this Form 10-Q for the period ended January 31, 2003 fully complies
with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
2. the information contained in this Form 10-Q for the period ended
January 31, 2003 fairly presents, in all material respects, the
financial condition and results of operations of Thor Industries, Inc.
Date: February 27, 2003 /s/ Walter L. Bennett
----------------- ----------------------------------
Walter L. Bennett
Chief Financial Officer
(principal financial and accounting officer)