Acquisitions

3 Months Ended

Oct. 31, 2021

Airxcel

On September 1, 2021, the Company acquired Wichita, Kansas-based AirX Intermediate, Inc. (“Airxcel”). Airxcel manufactures a comprehensive line of high-quality component products which are sold primarily to original equipment RV manufacturers as well as consumers via aftermarket sales through dealers and retailers. Airxcel provides industry-leading products in recreational vehicle heating, cooling, ventilation, cooking, window coverings, sidewalls and roofing materials, among others. The purchase price of $750,000 in cash is subject to standard post-closing adjustments and was funded through a combination of cash-on-hand and $625,000 of borrowings from the Company’s asset-based credit facility (“ABL”). In conjunction with the Airxcel acquisition, the Company expanded its existing ABL facility from $750,000 to $1,000,000, favorably amended certain terms of the ABL agreement and extended the term of the ABL as discussed in Note 12 to the Condensed Consolidated Financial Statements. The interest rate remains unchanged.

The Company acquired Airxcel as part of its long-term, strategic growth plan and the acquisition is expected to provide numerous benefits, including strengthening the RV supply chain, diversifying its revenue sources and expanding Airxcel's supply chain business in North American and Europe. Airxcel will operate as an independent operation in the same manner as the Company's other subsidiaries.

The results of Airxcel are included in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income since the September 1, 2021 acquisition date. Airxcel recorded net sales of $88,778, net of intercompany sales, and net income before income taxes, net of intercompany profit elimination, was not material for the three months ended October 31, 2021. Net income before income taxes included a charge of $6,791 related to the step-up in assigned value of acquired Airxcel inventory that was included in cost of products sold in the current period, and also includes $2,184 in amortization expense related to the acquired intangible assets.

The following table summarizes the preliminary estimated fair values of the Airxcel net assets acquired on the acquisition date. The Company is in the process of conducting a fair value analysis. While all amounts remain subject to adjustment, the areas subject to the most significant potential adjustment are intangible assets, deferred income tax liabilities and certain accrued expenses. The Company expects to finalize these values as soon as practical and no later than one year from the acquisition date.


Cash	$	23,404
Inventory	71,150
Other assets	61,921
Property, plant and equipment	40,853
Amortizable intangible assets:
Customer relationships	284,000
Trademarks	56,900
Design technology assets	60,600
Backlog	700
Goodwill	368,639
Current liabilities	(109,336)
Deferred income tax liabilities	(79,115)
Other liabilities	(10,494)
Non-controlling interest	(739)
Total fair value of net assets acquired	768,483
Less cash acquired	(23,404)
Total cash consideration for acquisition, less cash acquired	$	745,079

On the acquisition date, amortizable intangible assets had a weighted-average useful life of 18.3 years. The customer relationships were valued based on the Discounted Cash Flow Method and will be amortized on an accelerated basis over 20 years. The trademarks were valued on the Relief from Royalty Method and will be amortized on a straight-line basis over 20 years. The design technology assets were valued on the Relief from Royalty Method and will be amortized on a straight-line basis over 10 years. Backlog was valued based on the Discounted Cash Flow Method and will be amortized on a straight-line basis over 2 months. The vast majority of the goodwill recognized as a result of this transaction is not deductible for tax purposes.

Tiffin Group

On December 18, 2020, the Company acquired all of the issued and outstanding capital stock of luxury motorized recreational vehicle manufacturer Tiffin Motorhomes, Inc., including fifth wheel towable recreational vehicle manufacturer Vanleigh RV, and certain other associated operating and supply companies, which primarily supply component parts and services to Tiffin Motorhomes, Inc. and Vanleigh RV (collectively, the “Tiffin Group”). Tiffin Group, LLC, a wholly-owned subsidiary of the Company, owns the Tiffin Group. Tiffin Motorhomes, Inc. operates out of various locations in Alabama while Vanleigh RV operates out of Mississippi.

The initial cash consideration for the acquisition of the Tiffin Group was approximately $300,000, subject to adjustment, and was funded through existing cash-on-hand as well as $165,000 in borrowings from the Company’s existing asset-based credit facility.

The following table summarizes the final fair values of the Tiffin Group net assets acquired on the acquisition date.


Cash	$	13,074
Inventory	116,441
Other assets	53,860
Property, plant and equipment	48,262
Amortizable intangible assets:
Dealer network	92,200
Trademarks	32,100
Non-compete agreements	1,400
Backlog	4,800
Goodwill	65,064
Current liabilities	(81,423)
Deferred income tax liabilities	(37,263)
Other liabilities	(7,203)
Total fair value of net assets acquired	301,312
Less cash acquired	(13,074)
Total cash consideration for acquisition, less cash acquired	$	288,238

On the acquisition date, amortizable intangible assets had a weighted-average useful life of 18.8 years. The dealer network was valued based on the Discounted Cash Flow Method and is being amortized on an accelerated basis over 18 to 20 years. The trademarks were valued on the Relief from Royalty Method and is being amortized on a straight-line basis over 20 years. Backlogs were valued based on the Discounted Cash Flow Method and were amortized on a straight-line basis over five to seven months. Generally, the goodwill recognized as a result of this transaction is not deductible for tax purposes.

The following unaudited pro forma information represents the Company’s results of operations as if the fiscal 2022 acquisition of Airxcel had occurred at the beginning of fiscal 2021 and the fiscal 2021 acquisition of the Tiffin Group had occurred at the beginning of fiscal 2020. These pro forma results may not be indicative of the actual results that would have occurred under the ownership and management of the Company.


	Three Months Ended		Three Months Ended
	October 31, 2021		October 31, 2020
Net sales	$	4,005,682	$	2,813,236
Net income attributable to THOR Industries, Inc.	$	249,055	$	117,489
Basic earnings per common share	$	4.49	$	2.13
Diluted earnings per common share	$	4.46	$	2.11