THOR INDUSTRIES INC - 10-Q Quarterly Report

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, 2005		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 þ		No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


Yes þ		No o

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 1/31/2005
Common stock, par value		56,865,592 shares
$.10 per share

TABLE OF CONTENTS


PART I — Financial Information
	ITEM 1. Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
	ITEM 4. Controls and Procedures
PART II — Other Information
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
	ITEM 6. Exhibits
SIGNATURES
EX-31.1 Certification
EX-31.2 Certification
EX-32.1 Certification
EX-32.2 Certification

PART I - Financial Information

ITEM 1. Financial Statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


	January 31, 2005			July 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	70,122,280		$	136,120,530
Investments – short term		14,174,291			63,045,616
Accounts receivable:
Trade		160,090,817			132,615,992
Other		5,095,815			4,304,573
Inventories		194,224,585			147,588,254
Prepaid expenses		12,295,293			5,974,938
Deferred income taxes		8,316,457			8,316,457

Total current assets		464,319,538			497,966,360

Property:
Land		20,113,119			17,263,271
Buildings and improvements		101,504,542			74,436,370
Machinery and equipment		44,853,731			40,046,081

Total cost		166,471,392			131,745,722
Accumulated depreciation		(37,629,497	)		(32,982,694	)

Property, net		128,841,895			98,763,028

Investments:
Joint ventures		2,341,633			2,514,449

Other assets:
Goodwill		161,388,764			140,857,162
Non-compete agreements		4,285,721			3,580,962
Trademarks		12,961,642			12,269,642
Other		6,830,320			6,635,161

Total other assets		185,466,447			163,342,927


TOTAL ASSETS	$	780,969,513		$	762,586,764

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	109,512,089		$	125,574,124
Accrued liabilities:
Taxes		11,290,291			20,890,901
Compensation and related items		22,979,475			25,712,538
Product warranties		49,151,842			45,829,471
Promotions and rebates		8,637,778			8,915,220
Product/property liability and related		7,043,648			11,055,752
Other		4,800,404			3,790,324

Total current liabilities		213,415,527			241,768,330


Deferred income taxes and other liabilities		10,517,298			9,214,698
Stockholders’ equity:
Common stock - - authorized 250,000,000 shares; issued 56,865,592 shares @ 1/31/05 and 57,146,160 shares @ 7/31/04; par value of $.10 per share		5,686,559			5,714,616
Additional paid-in capital		81,316,225			81,018,989
Accumulated other comprehensive income		790,997			63,722
Retained earnings		470,225,077			425,933,821
Restricted stock plan		(982,170	)		(1,127,412	)

Total stockholders’ equity		557,036,688			511,603,736

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	780,969,513		$	762,586,764

See notes to consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2005 AND 2004


	Three Months Ended January 31				Six Months Ended January 31
	2005		2004		2005		2004
Net sales	$	537,041,204	$	426,479,447	$	1,169,767,296	$	916,906,559

Cost of products sold		469,209,204		373,144,706		1,011,160,877		797,363,282


Gross profit		67,832,000		53,334,741		158,606,419		119,543,277

Selling, general and administrative expenses		35,762,252		28,728,268		72,042,755		56,936,979

Gains on equity securities		—		1,814,265		—		1,814,265

Interest income		541,288		430,510		1,345,351		910,760

Interest expense		66,903		50,509		109,344		102,114

Other income		364,346		625,023		1,124,958		1,277,301


Income before income taxes		32,908,479		27,425,762		88,924,629		66,506,510

Provision for income taxes		12,270,540		9,906,047		33,213,960		25,282,942


Net income	$	20,637,939	$	17,519,715	$	55,710,669	$	41,223,568


Average common shares outstanding:

Basic		56,712,923		57,327,356		56,834,930		57,276,091

Diluted		57,141,714		57,701,234		57,210,661		57,668,857

Earnings per common share:

Basic	$	.36	$	.31	$	.98	$	.72

Diluted	$	.36	$	.30	$	.97	$	.71

Dividends paid per common share:	$	.03	$	.015	$	.06	$	.03

See notes to consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2005 AND 2004


	2005			2004
Cash flows from operating activities:
Net income	$	55,710,669		$	41,223,568
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		4,686,249			3,738,391
Amortization		471,241			395,504
Loss on disposition of assets		74,022			—
Loss (gains) on sale of trading investments		883,890			(552,670	)
Unrealized (gain) loss on trading investments		274,051			(543,428	)
Changes in non cash assets and liabilities, net of effect from acquisitions:
Purchases of trading investments		(54,870,723	)		(47,007,628	)
Proceeds from sales of trading investments		102,584,107			46,950,536
Accounts receivable		(25,002,513	)		(20,040,194	)
Inventories		(43,216,030	)		(32,768,573	)
Prepaid expense & other		(6,343,530	)		(469,385	)
Accounts payable		(27,399,366	)		(19,705,086	)
Accrued liabilities		(3,578,270	)		(8,818,982	)
Other liabilities		224,096			1,165,333


Net cash provided by (used in) operating activities		4,497,893			(36,432,614	)


Cash flows from investing activities:
Purchase of property, plant & equipment		(31,120,524	)		(10,721,628	)
Proceeds from disposition of assets		21,496			39,779
Acquisitions – Net of cash acquired		(27,973,305	)		(29,618,354	)


Net cash used in investing activities		(59,072,333	)		(40,300,203	)


Cash flows from financing activities:
Cash dividends		(3,419,813	)		(1,718,399	)
Purchase of common stock for retirement		(8,490,265	)		—
Retirement of acquired debt		(1,000,851	)		(12,972,498	)
Proceeds from issuance of common stock		759,844			1,083,745


Net cash used in financing activities		(12,151,085	)		(13,607,152	)


Effect of exchange rate changes on cash		727,275			553,471


Net decrease in cash and equivalents		(65,998,250	)		(89,786,498	)
Cash and equivalents, beginning of year		136,120,530			132,124,452

Cash and equivalents, end of period	$	70,122,280		$	42,337,954


Supplemental cash flow information:
Income taxes paid	$	42,115,918		$	32,547,198
Interest paid		109,344			102,114

Non cash transactions:
Retirement of treasury shares	$	8,490,265		$	—
Issuance of restricted stock		—			309,465

See notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The July 31, 2004 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, results of operations and change in cash flow 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, 2004. The results of operations for the six months ended January 31, 2005 are not necessarily indicative of the results for the full year.

2. Major classifications of inventories are:


	January 31, 2005		July 31, 2004
Raw materials	$	83,344,228	$	72,323,887

Chassis		39,826,118		30,161,715

Work in process		46,620,216		41,117,720

Finished goods		36,284,909		13,604,925

Total		206,075,471		157,208,247
Less excess of FIFO costs over LIFO costs		11,850,886		9,619,993

Total inventories	$	194,224,585	$	147,588,254

3. Earnings Per Share


	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
	January 31, 2005		January 31, 2004		January 31, 2005		January 31, 2004
Weighted average shares outstanding for basic earnings per share		56,712,923		57,327,356		56,834,930		57,276,091
Stock options and restricted stock		428,791		373,878		375,731		392,766


Total - For diluted shares		57,141,714		57,701,234		57,210,661		57,668,857

4. Comprehensive Income


	Three Months			Three Months			Six Months		Six Months
	Ended			Ended			Ended		Ended
	January 31, 2005			January 31, 2004			January 31, 2005		January 31, 2004
Net income	$	20,637,939		$	17,519,715		$	55,710,669	$	41,223,568
Foreign currency translation adjustment		(121,734	)		(145,904	)		727,275		553,471
Unrealized appr. on investments		—			—			—		1,011,865
Transfer from available- for-sale to trading		—			(1,369,424	)		—		(1,369,424	)


Comprehensive income	$	20,516,205		$	16,004,387		$	56,437,944	$	41,419,480

5. Segment Information

The Company has three reportable segments: 1.) towable recreation vehicles, 2.) motorized recreation vehicles, and 3.) buses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
	January 31, 2005		January 31, 2004		January 31, 2005		January 31, 2004
Net Sales:
Recreation vehicles:
Towables	$	365,497,384	$	268,010,988	$	805,658,685	$	601,772,615
Motorized		113,529,511		106,211,153		255,664,400		205,420,869
Buses		58,014,309		52,257,306		108,444,211		109,713,075


Total	$	537,041,204	$	426,479,447	$	1,169,767,296	$	916,906,559


	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	January 31, 2005			January 31, 2004			January 31, 2005			January 31, 2004
Income Before Income Taxes:
Recreation vehicles:
Towables	$	29,706,741		$	19,956,359		$	77,392,555		$	51,503,538
Motorized		3,877,579			4,925,101			11,786,017			10,921,918
Buses		1,342,502			3,418,617			2,468,213			6,151,356
Corporate		(2,018,343	)		(874,315	)		(2,722,156	)		(2,070,302	)


Total	$	32,908,479		$	27,425,762		$	88,924,629		$	66,506,510


	January 31, 2005		July 31, 2004
Identifiable Assets:
Recreation vehicles:
Towables	$	425,607,856	$	324,041,069
Motorized		155,115,447		123,607,436
Buses		77,738,633		65,054,523
Corporate		122,507,577		249,883,736


Total	$	780,969,513	$	762,586,764

6.   Treasury Shares

    The Company purchased and retired 323,200 shares of treasury stock in the first quarter of fiscal 2005 at an average cost of $26.27 per share. This retirement resulted in a reduction of $32,320 in common stock and $458,345 in additional paid-in-capital and $7,999,600 in retained earnings.

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 classified as trading are classified as available-for-sale. During the second quarter of fiscal 2004, the Company decided to begin actively trading its equity securities
previously classified as available-for-sale securities.

    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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    The Company also holds certain corporate investments that are classified as trading investments and reported as Investments – short term.

8.   Business Combination

    On September 2, 2003, we 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 $29,618,354, 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 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		10,302,290
Trademarks and non-compete agreements		4,240,000
Other assets		450,510

Total assets acquired		67,032,041

Current liabilities		24,441,189
Other liabilities		12,972,498


Net assets acquired	$	29,618,354

    The purchase price allocation includes $640,000 of non-compete agreements, which will be amortized over seven to ten years, $10,302,290 of goodwill and $3,600,000 for trademarks that are not subject to amortization. The Company has made an election under Section 338 of the Internal Revenue Code allowing it to deduct non-compete, goodwill and trademarks for tax purposes.

    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.


	Six Months		Six Months
	Ended		Ended
	January 31, 2005		January 31, 2004
	(Actual)		(Pro Forma)
Net Sales	$	1,169,767,296	$	938,907,622
Net Income		55,710,669		41,412,181
Earnings per common share
Basic	$

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1.	The July 31, 2004 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, results of operations and change in cash flow 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, 2004. The results of operations for the six months ended January 31, 2005 are not necessarily indicative of the results for the full year.

2.	Major classifications of inventories are:

5.	Segment Information

	The Company has three reportable segments: 1.) towable recreation vehicles, 2.) motorized recreation vehicles, and 3.) buses.

6.	Treasury Shares

	The Company purchased and retired 323,200 shares of treasury stock in the first quarter of fiscal 2005 at an average cost of $26.27 per share. This retirement resulted in a reduction of $32,320 in common stock and $458,345 in additional paid-in-capital and $7,999,600 in retained earnings.

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 classified as trading are classified as available-for-sale. During the second quarter of fiscal 2004, the Company decided to begin actively trading its equity securities previously classified as available-for-sale securities.

	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.

	The Company also holds certain corporate investments that are classified as trading investments and reported as Investments – short term.

8.	Business Combination

	On September 2, 2003, we 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 $29,618,354, 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 allocation of the fair values of the assets acquired and liabilities assumed at the date of acquisition:

	The purchase price allocation includes $640,000 of non-compete agreements, which will be amortized over seven to ten years, $10,302,290 of goodwill and $3,600,000 for trademarks that are not subject to amortization. The Company has made an election under Section 338 of the Internal Revenue Code allowing it to deduct non-compete, goodwill and trademarks for tax purposes.

	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.