-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CTcy4H+zqZ8tdBS3+D+G/vOO/lW9MH+pUENNlwOnlZpbSWLSJsS6///t6XF6rIeH VLNxMPeilIOog0VIYg2u0w== 0000950152-03-002407.txt : 20030228 0000950152-03-002407.hdr.sgml : 20030228 20030228113638 ACCESSION NUMBER: 0000950152-03-002407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030131 FILED AS OF DATE: 20030228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THOR INDUSTRIES INC CENTRAL INDEX KEY: 0000730263 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR HOMES [3716] IRS NUMBER: 930768752 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09235 FILM NUMBER: 03585165 BUSINESS ADDRESS: STREET 1: 419 W PIKE ST CITY: JACKSON CENTER STATE: OH ZIP: 45334 BUSINESS PHONE: 9375966849 MAIL ADDRESS: STREET 1: 419 W PIKE STREET CITY: JACKSON CENTER STATE: OH ZIP: 45334 10-Q 1 l99113ae10vq.txt THOR INDUSTRIES, INC. 10-Q/QUARTER END 1-31-03 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q --------- QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED 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 ---------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (937) 596-6849 - --------------------------------------------------- ------------- 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 ------------ ------------ 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) -----END PRIVACY-ENHANCED MESSAGE-----