-----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, EvN0zRO7kKJagrEfZia3SoPcEGgt2L2ZOSB/fWZoLkU2zSt0bLv73SPf51eGvZvO jJ1XtwSay9nPQ3CMyqBjiQ== 0000950152-03-010038.txt : 20031202 0000950152-03-010038.hdr.sgml : 20031202 20031202131955 ACCESSION NUMBER: 0000950152-03-010038 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20031202 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: 031032030 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 l04353ae10vq.txt THOR INDUSTRIES 10-Q/QTR END 10-31-03 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 October 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 10/31/03 ----- ----------------------- Common stock, par value 28,621,296 shares $.10 per share
THOR INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ---------------------------
OCTOBER 31, 2003 JULY 31, 2003 ---------------- ------------- ASSETS ------ Current assets: Cash and cash equivalents $ 60,992,976 $ 132,124,452 Investments - short term 52,854,795 40,108,683 Accounts receivable: Trade 120,576,734 94,296,951 Other 4,684,397 3,018,016 Inventories 132,218,044 96,652,532 Deferred income taxes and other 19,302,671 12,431,573 ------------- ------------- Total current assets 390,629,617 378,632,207 ------------- ------------- Property: Land 12,466,290 12,058,354 Buildings and improvements 64,559,181 55,541,971 Machinery and equipment 34,230,355 31,644,155 ------------- ------------- Total cost 111,255,826 99,244,480 Accumulated depreciation (27,722,734) (25,829,440) ------------- ------------- Property, net 83,533,092 73,415,040 ------------- ------------- Investments: Joint ventures 2,485,448 2,219,469 Investments available-for-sale 4,417,182 2,860,466 ------------- ------------- Total investments 6,902,630 5,079,935 ------------- ------------- Other assets: Goodwill 140,565,142 130,554,872 Non-compete agreements 4,185,647 3,739,589 Trademarks 12,269,642 8,669,642 Other 9,474,812 8,850,173 ------------- ------------- Total other assets 166,495,243 151,814,276 ------------- ------------- TOTAL ASSETS $ 647,560,582 $ 608,941,458 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 97,375,225 $ 102,923,191 Accrued liabilities: Taxes 31,170,359 21,431,099 Compensation and related items 19,881,817 19,086,195 Product warranties 42,714,930 35,114,825 Other 9,823,745 9,387,389 ------------- ------------- Total current liabilities 200,966,076 187,942,699 ------------- ------------- Deferred income taxes and other liabilities 6,712,484 6,176,976 Stockholders' equity: Common stock - authorized 40,000,000 shares; issued 28,621,296 shares @ 10/31/03 and 28,597,645 shares @ 7/31/03; par value of $.10 per share 2,862,130 2,859,765 Additional paid-in capital 82,058,459 81,625,236 Accumulated other comprehensive income (loss) 1,569,349 (141,891) Retained earnings 354,493,040 331,647,776 Restricted stock plan (1,100,956) (1,169,103) ------------- ------------- Total stockholders' equity 439,882,022 414,821,783 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 647,560,582 $ 608,941,458 ============= =============
See notes to consolidated financial statements THOR INDUSTRIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME FOR THE THREE MONTHS ENDED OCTOBER 31, 2003 AND 2002 ----------------------------------------------------
2003 2002 ---- ---- Net sales $490,427,112 $406,262,314 Cost of products sold 424,218,576 347,668,457 ------------ ------------ Gross profit 66,208,536 58,593,857 Selling, general and administrative expenses 28,208,711 23,302,896 Impairment of equity securities -- 1,580,334 Interest income 480,250 595,115 Interest expense 51,605 115,745 Other income 652,278 271,037 ------------ ------------ Income before income taxes 39,080,748 34,461,034 Provision for income taxes 15,376,895 13,612,109 ------------ ------------ Net income $ 23,703,853 $ 20,848,925 ============ ============ Average common shares outstanding: - ---------------------------------- Basic 28,612,425 28,485,986 Diluted 28,820,938 28,777,189 Earnings per common share: - -------------------------- Basic $ .83 $ .73 Diluted $ .82 $ .72 Dividends paid per common share: $ .03 $ .01 - --------------------------------
See notes to consolidated financial statements THOR INDUSTRIES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE THREE MONTHS ENDED OCTOBER 31, 2003 AND 2002 ----------------------------------------------------
2003 2002 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 23,703,853 $ 20,848,925 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 1,801,969 1,297,302 Amortization 193,942 178,705 Impairment of equity securities -- 1,580,334 Loss on sale of trading investments 192,765 3,951 Unrealized loss (gain) on trading investments 93,659 (45,757) CHANGES IN NON CASH ASSETS AND LIABILITIES, NET OF EFFECT FROM ACQUISITIONS AND DIVESTMENTS: Purchase of trading investments (30,403,377) (18,873,009) Proceeds from sale of trading investments 17,370,841 5,058,879 Accounts receivable (10,447,250) (17,747,272) Inventories (8,575,531) (13,927,530) Prepaid expenses and other (6,449,819) (9,401,032) Accounts payable (19,054,165) (14,194,389) Accrued liabilities 7,636,353 8,251,642 Other liabilities 535,507 269,478 ------------- ------------- Net cash used in operating activities (23,333,106) (36,699,773) - ------------------------------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant & equipment (5,777,532) (6,468,336) Acquisition of Damon (29,326,334) -- ------------- ------------- Net cash used in investing activities (35,103,866) (6,468,336) - ------------------------------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends (858,589) (284,863) Acquisition bank debt paid (12,972,498) -- Proceeds from issuance of common stock 435,588 86,225 ------------- ------------- Net cash used in financing activities (13,395,499) (198,638) - ------------------------------------- ------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 699,375 96,531 ------------- ------------- Net decrease in cash and equivalents (71,131,476) (43,270,216) Cash and equivalents, beginning of year 132,124,452 113,192,639 ------------- ------------- CASH AND EQUIVALENTS, END OF PERIOD $ 60,992,976 $ 69,922,423 ============= ============= SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid $ 6,165,368 $ 5,623,971 Interest paid 51,605 115,745 NON CASH TRANSACTIONS: Issuance of restricted stock $ -- $ 908,831
See notes to consolidated financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. The July 31, 2003 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 and 10-K/A for the year ended July 31, 2003. The results of operations for the three months ended October 31, 2003 are not necessarily indicative of the results for the full year. 2. Major classifications of inventories are:
October 31, 2003 July 31, 2003 ---------------- ------------- Raw materials $ 60,121,090 $ 52,499,474 Chassis 23,201,469 19,108,412 Work in process 35,786,292 25,267,593 Finished goods 19,930,319 6,342,179 ------------ ------------ Total 139,039,170 103,217,658 Less excess of FIFO costs over LIFO costs 6,821,126 6,565,126 ------------ ------------ Total inventories $132,218,044 $ 96,652,532 ============ ============
3. Earnings Per Share
Three months Three months ended ended October 31, 2003 October 31, 2002 ---------------- ---------------- Weighted average shares 28,612,425 28,485,986 Outstanding for basic earnings per share Stock options 208,513 291,203 ---------- ---------- Total - For diluted shares 28,820,938 28,777,189 ========== ==========
4. Comprehensive Income
Three months Three months ended ended October 31, 2003 October 31, 2002 ---------------- ---------------- Net income $ 23,703,853 $ 20,848,925 Foreign currency translation adjustment 699,375 96,531 Unrealized appr. (depr.) on investments 1,011,865 (1,376) ------------ ------------ Comprehensive income $ 25,415,093 $ 20,944,080 ============ ============
5. Segment Information
Three months Three months ended ended October 31, 2003 October 31, 2002 ---------------- ---------------- Net Sales: Recreation vehicles Towables $332,774,607 $293,238,315 Motorized 99,209,713 58,270,754 Other 987,023 668,240 Buses 57,455,769 54,085,005 ------------ ------------ Total $490,427,112 $406,262,314 ============ ============
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Three months Three Months ended ended October 31, 2003 October 31, 2002 ---------------- ---------------- Income Before Income Taxes: Recreation vehicles $ 37,543,996 $ 34,584,832 Buses 2,732,739 2,609,858 Corporate (1,195,987) (2,733,656) ------------- ------------- Total $ 39,080,748 $ 34,461,034 ============= ============= October 31, 2003 July 31, 2003 ---------------- ------------- Identifiable Assets: Recreation vehicles $ 425,006,180 $ 327,614,804 Buses 69,884,134 63,227,069 Corporate 152,670,268 218,099,585 ------------- ------------- Total $ 647,560,582 $ 608,941,458 ============= =============
6. Accounting Pronouncements In January 2003, FASB issued Interpretation No. 46 "Consolidation of Variable Interest Entities", which addresses the reporting and consolidation of variable interest entities as they relate to a business enterprise. This interpretation incorporates and supercedes the guidance set forth in ARB No. 51, "Consolidated Financial Statements". It requires the consolidation of variable interests into the financial statements of a business enterprise if that enterprise holds a controlling interest via other means than the traditional voting majority. The requirements of FIN 46 are effective immediately for variable interest entities created after January 31, 2003 and are effective for the first reporting period after December 15, 2003 for variable interest entities created before February 1, 2003. Management believes this will not have an effect on the consolidated financial statements. 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 October 31, 2003, the Company held equity investments with a fair market value of $4,417,182 and cost basis of $2,310,375 after recognized impairments in prior periods. The impairment charge of $1,580,334 for the quarter ended October 31, 2002 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 September 2, 2003 Thor acquired 100% of the common stock of Damon Corporation ("Damon"). Damon is engaged in the business of manufacturing Class A motorhomes and park models. The cash price of the acquisition was approximately $29,326,000, which was paid from internal funds. Immediately after the closing, the Company paid off a $12,972,498 bank debt assumed in connection with the acquisition. The following table summarizes the preliminary allocation of the fair values of the assets acquired and liabilities assumed at the date of acquisition: Current assets $45,897,168 Property, plant and equipment 6,142,073 Goodwill 10,010,270 Trademarks and non-compete agreements 4,240,000 Other assets 450,510 ----------- Total assets acquired 66,740,021 Current liabilities 24,441,189 Other liabilities 12,972,498 ----------- Net assets acquired $29,326,334 ===========
The purchase price allocation includes $640,000 of non-compete agreements, which will be amortized over seven to ten years, $10,010,270 of goodwill and $3,600,000 for trademarks that are not subject to amortization. The Company intends to make an election under section 338 of the Internal Revenue Code allowing it to deduct non-compete, goodwill and trademarks. The primary reasons for the acquisition include Damon's future earnings potential, its fit with our existing operations, its market share, and its cash flow. The results of operations for Damon are included in Thor's operating results beginning September 3, 2003. 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.
Three Months Three Months Ended Ended October 31, 2003 October 31, 2002 ---------------- ---------------- Net Sales $512,428,175 $456,253,781 Net Income 23,892,466 22,105,099 Earnings per common share Basic $ .84 $ .78 Diluted $ .83 $ .77
9. Other Intangible Assets The components of other intangibles are as follows:
October 31, 2003 July 31, 2003 ------------------------------------ ---------------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ---- ------------ ---- ------------ Amortized Intangible Assets: Non-compete agreements $14,713,367 $10,527,720 $14,073,367 $10,333,778
Three Months Three Months Ended Ended October 31, 2003 October 31, 2002 ---------------- ---------------- Non-compete Agreement: Amortization Expense $193,942 $178,705
Non-compete agreements are amortized on a straight-line basis. Estimated Amortization Expense: For the year ending July 2004 $798,628 For the year ending July 2005 $762,914 For the year ending July 2006 $676,247 For the year ending July 2007 $676,247 For the year ending July 2008 $676,247
The change in the carrying amount of goodwill and trademarks for the period ended October 31, 2003 are as follows:
Goodwill Trademarks -------- ---------- Balance as of July 31, 2003 $130,554,872 $ 8,669,642 Arising from acquisitions 10,010,270 3,600,000 ------------ ----------- Balance as of October 31, 2003 $140,565,142 $12,269,642 ============ ===========
As of October 31, 2003, goodwill and trademarks for the recreational vehicles segment totaled $140,254,030 and $12,041,674 respectively. The remainder related to the bus segment. 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. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Three Months Three Months Ended Ended October 31, 2003 October 31, 2002 ---------------- ---------------- Beginning Balance $35,114,825 $25,374,825 Provision 15,662,900 10,589,148 Payments 11,788,055 8,054,562 Acquisitions 3,725,260 -- ----------- ----------- Ending Balance $42,714,930 $27,909,411 =========== ===========
11. Commercial Commitments Our principal commercial commitments at October 31, 2003 are summarized in the following chart:
Total Term of Commitment Amount Commitment Guarantee ---------- ----------------- --------- Guarantee on dealer financing $ 3,816,000 less than 1 year Standby repurchase obligation on dealer financing $369,880,000 less than 1 year
The Company records repurchase and guarantee reserves based on prior experience and known current events. The combined repurchase and recourse reserve balances are approximately $540,000 and $516,000 as of October 31, 2003 and July 31, 2003, respectively. The Company incurred losses due to repurchases of approximately $130,000 and $115,000 for the three months ended October 31, 2003 and 2002, respectively. 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. 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 Ended Ended October 31, 2003 October 31, 2002 ---------------- ---------------- Net Income: As reported $23,703,853 $20,848,925 Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects (97,704) (158,031) ----------- ----------- Pro forma $23,606,149 $20,690,894 =========== ===========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Earnings Per Common Share - Basic As reported $ .83 $ .73 Pro forma $ .83 $ .73 Earnings Per Common Share - Diluted As reported $ .82 $ .72 Pro forma $ .82 $ .72
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------- Quarter Ended October 31, 2003 vs. Quarter Ended October 31, 2002 - ----------------------------------- Net sales for the first quarter of fiscal 2004 were $490,427,112 compared to $406,262,314 for the first quarter of fiscal 2003. Income before income taxes in fiscal 2004 was $39,080,748, a 13.4% increase from $34,461,034 in fiscal 2003. The increase in income before income taxes of $4,619,714 in fiscal 2004 was primarily caused by increased recreation vehicle revenues of $80,794,034, which resulted in an increase in income before income taxes of approximately $2,959,164. Included in fiscal 2004 are sales of $38,716,075 and income before income taxes of $2,395,692 for Damon Corporation acquired on September 2, 2003. Bus revenues were $3,370,764 greater in fiscal 2004 than in fiscal 2003. Bus income before income taxes in fiscal 2004 was approximately $122,881 greater than the same period last year due primarily to increased revenues. Corporate costs, excluding interest and other income, were lower than fiscal 2003 by approximately $1,537,669 due primarily to reduced impairment losses of $1,580,334 recorded on an equity investment classified as available-for-sale for fiscal 2003 compared to 2004. Interest income decreased by $114,865 due primarily to lower interest rates and a shift to tax exempt investments in 2004 and other income increased by $381,241 due primarily to profits of Thor Credit Corporation, our joint venture retail finance company for recreation vehicles. Interest expense decreased by $64,140 due primarily to reduced bus chassis financing. Recreation vehicle revenues increased in fiscal 2004 by 22.9% to $432,971,343 compared to $352,177,309 in fiscal 2003, and accounted for 88.3% of total company revenues compared to 86.7% in fiscal 2003. Recreation vehicle backlog of $218,720,000 (includes $49,268,000 for Damon Corporation) at October 31, 2003 was up 37.6% compared to the same period last year. Excluding Damon Corporation, recreation vehicle backlogs were $169,452,000 at October 31, 2003, up 6.6% compared to the same period last year. Bus revenues in fiscal 2004 increased by 6.2% to $57,455,769 compared to $54,085,005 in fiscal 2003 and accounted for 11.7% of the total company revenues compared to 13.3% in fiscal 2003. Bus vehicle order backlog of $100,566,000 at October 31, 2003 was up 2.5% compared to the same period last year. Gross profit as a percentage of sales in fiscal 2004 decreased to 13.5% from 14.4% in fiscal 2003 primarily due to increased warranty costs on recreation vehicles, discounts on certain recreation vehicles due to competitive pressures, and costs associated with the change over to laminated products at our Thor California operation. Pricing on recreation vehicles and buses did not increase in the first quarter of 2004 due to competitive pressures. Selling, general, and administrative expense and amortization of intangibles were $28,208,711 compared to $23,302,896 for the same period last year in fiscal 2003. As a percentage of sales, selling, general and administrative expense was 5.8% in fiscal 2004 compared to 5.7% in fiscal 2003. Amortization of intangibles increased in fiscal 2004 to $193,943 compared to $178,705 in fiscal 2003. This increase is due to certain non-compete expenses associated with the Damon Corporation acquisition. The additional selling, general and administrative costs are due primarily to the increased costs associated with the 20.7% increase in revenue. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The overall effective tax rate was 39.3% for fiscal 2004 compared to 39.5% for fiscal 2003. Financial Condition and Liquidity - --------------------------------- As of October 31, 2003, we had $113,847,771 in cash, cash equivalents and short-term investments, compared to $172,233,135 on July 31, 2003. 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 income (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 October 31, 2003, was $189,663,541 compared to $190,689,508 on July 31, 2003. 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 27, 2004. There were no borrowings on this line of credit at October 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 $5,777,000 for the three months ended October 31, 2003 were primarily for the planned expansions at our Keystone, Dutchmen and ElDorado National California facilities. The Company anticipates additional capital expenditures in fiscal 2004 of approximately $16,500,000. The major components of these capital expenditures include the completion of our ElDorado National California bus company expansion for $3,000,000, expansions at our Keystone facilities of $8,700,000, and approximately $1,000,000 of capital expenditures at our recently purchased Damon manufacturing operation. The ElDorado National California expansion will allow the Company to increase production efficiencies and produce 40 foot buses. The balance of capital expenditures will be for purchasing or replacement of machinery and equipment in the ordinary course of business. On September 2, 2003 Thor acquired 100% of the common stock of Damon Corporation ("Damon"). Damon is engaged in the business of manufacturing Class A motorhomes and park models. The cash price of the acquisition was approximately $29,326,000, which was paid from internal funds. 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: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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. 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ---------------------------------------------------------- The Company is exposed to market risk from changes in foreign currency related to its operations in Canada. However, because of the size of Canadian operations, a hypothetical 10% change in the Canadian dollar as compared to the U.S. dollar would not have a significant impact on the Company's financial position or results of operations. The Company is also exposed to market risks related to interest rates because of its investments in corporate debt securities. A hypothetical 10% change in interest rates would not have a significant impact on the Company's financial position or results of operations. CONTROLS AND PROCEDURES - ----------------------- As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's Chairman of the Board, President and Chief Executive Officer along with the Company's Chief Financial Officer. Based upon that evaluation, the Company's Chairman of the Board, President and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls, or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a.) Exhibits N/A b.) Reports on Form 8-K On September 2, 2003, the Company filed a Form 8-K announcing the acquisition of Damon Corporation. On October 2, 2003, the Company filed a Form 8-K announcing the financial results for the fourth quarter and twelve months ended July 31, 2003. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THOR INDUSTRIES, INC. (Registrant) DATE December 2, 2003 /s/ Wade F. B. Thompson --------------------------- -------------------------------------- Wade F. B. Thompson Chairman of the Board, President and Chief Executive Officer DATE December 2, 2003 /s/ Walter L. Bennett --------------------------- -------------------------------------- Walter L. Bennett Senior Vice President Secretary and Chief Financial Officer EX-31.1 3 l04353aexv31w1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: December 2, 2003 /s/ Wade F. B. Thompson ------------------------------------------- Wade F. B. Thompson Chairman of the Board, President and Chief Executive Officer CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: December 2, 2003 /s/ Walter L. Bennett ---------------------------- Walter L. Bennett Chief Financial Officer EX-32.1 4 l04353aexv32w1.txt EXHIBIT 32.1 Exhibit 32.1 SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS In connection with this quarterly report on Form 10-Q of Thor Industries, Inc. for the period ended October 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. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. this Form 10-Q for the period ended October 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 October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of Thor Industries, Inc. Date: December 2, 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 October 31, 2003, I, Walter L. Bennett, Chief Financial Officer of Thor Industries, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. this Form 10-Q for the period ended October 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 October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of Thor Industries, Inc. Date: December 2, 2003 /s/ Walter L. Bennett ---------------- -------------------------------------------- Walter L. Bennett Chief Financial Officer (principal financial and accounting officer) -----END PRIVACY-ENHANCED MESSAGE-----