THOR INDUSTRIES INC - Quarter Report: 2005 October (Form 10-Q)

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

FOR QUARTER ENDED October 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 incorporation or organization)		(I.R.S. Employer 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 by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                               No þ

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 10/31/2005
Common stock, par value $.10 per share		56,680,817 shares

 

 

PART I — Financial Information

Unless otherwise indicated, all amounts presented in thousands except units, share and per share data.

ITEM 1. Financial Statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS

		October 31, 2005				July 31, 2005
Current assets:
Cash and cash equivalents		$	117,592			$	163,596
Investments — short term			76,029				45,219
Accounts receivable:
Trade			179,715				140,927
Other			5,619				5,409
Inventories			187,048				161,770
Prepaid expenses			14,889				5,857
Deferred income taxes			1,262				1,262
Total current assets			582,154				524,040
Property:
Land			22,436				21,339
Buildings and improvements			113,948				109,443
Machinery and equipment			51,208				49,259
Total cost			187,592				180,041
Accumulated depreciation			42,833				40,252
Property, net			144,759				139,789
Investments:
Joint ventures			3,121				2,800
Other assets:
Goodwill			165,663				165,662
Non-compete agreements			3,553				3,790
Trademarks			13,900				13,900
Other			8,456				7,898
Total other assets			191,572				191,250
TOTAL ASSETS		$	921,606			$	857,879
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	119,274			$	118,056
Accrued liabilities:
Taxes			34,416				8,351
Compensation and related items			31,718				28,519
Product warranties			56,112				55,118
Promotions and rebates			9,337				7,362
Product/property liability and related			8,678				7,913
Dividend Payable			—				17,000
Other			8,449				6,493
Total current liabilities			267,984				248,812
Deferred income taxes and other liabilities			12,157				11,680
Stockholders’ equity:
Common stock — authorized 250,000,000 shares; issued 56,936,817 shares @ 10/31/05 and 56,933,483 shares @ 7/31/05; par value of $.10 per share			5,694				5,693
Additional paid-in capital			82,694				82,652
Accumulated other comprehensive income			1,354				943
Retained earnings			559,242				515,877
Restricted stock plan			(488	)			(747	)
Less Treasury shares of 256,000, at cost			(7,031	)			(7,031	)
Total stockholders’ equity			641,465				597,387
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	921,606			$	857,879

See notes to consolidated financial statements

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

		Three Months Ended October 31
		2005				2004
Net sales		$	761,323			$	632,726
Cost of products sold			649,681				541,952
Gross profit			111,642				90,774
Selling, general and administrative expenses			44,336				36,281
Interest income			1,680				804
Interest expense			347				42
Other income			799				761
Income before income taxes			69,438				56,016
Provision for income taxes			26,073				20,943
Net income		$	43,365			$	35,073
Average common shares outstanding:
Basic			56,568,392				57,096,044
Diluted			56,916,818				57,356,181
Earnings per common share:
Basic		$	.77			$	.61
Diluted		$	.76			$	.61
Dividends paid per common share:		$	.30			$	.03

See notes to consolidated financial statements

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

		2005				2004
Cash flows from operating activities:
Net income		$	43,365			$	35,073
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			2,781				2,277
Amortization			237				201
Loss on disposition of assets			2				8
Loss (gain) on sale of trading investments			100				470
Unrealized (gain) loss on trading investments			116				32
Changes in non cash assets and liabilities, net of effect from acquisitions:
Purchases of trading investments			(64,387	)			(47,414	)
Proceeds from sales of trading investments			33,361				58,847
Accounts receivable			(38,998	)			(23,016	)
Inventories			(25,278	)			(13,684	)
Deferred income taxes and other			(9,911	)			(10,308	)
Accounts payable			442				(20,714	)
Accrued liabilities			35,430				11,312
Other liabilities			241				565
Net cash used in operating activities			(22,499	)			(6,351	)
Cash flows from investing activities:
Purchase of property, plant & equipment			(6,979	)			(18,565	)
Proceeds from disposition of assets			20				20
Net cash used in investing activities			(6,959	)			(18,545	)
Cash flows from financing activities:
Cash dividends			(17,000	)			(1,714	)
Purchase of common stock for retirement			—				(8,490	)
Proceeds from issuance of common stock			43				60
Net cash used in financing activities			(16,957	)			(10,144	)
Effect of exchange rate changes on cash			411				849
Net decrease in cash and equivalents			(46,004	)			(34,191	)
Cash and equivalents, beginning of period			163,596				136,120
Cash and equivalents, end of period		$	117,592			$	101,929
Supplemental cash flow information:
Income taxes paid		$	12			$	5,759
Interest paid			347				42
Non cash transactions:
Retirement of treasury shares			—			$	8,490
Capital expenditures in accounts payable		$	776				—

See notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		The July 31, 2005 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 flows 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, 2005. The results of operations for the three months ended October 31, 2005 are not necessarily indicative of the results for the full year.
2.		Major classifications of inventories are:

		October 31, 2005				July 31, 2005
Raw materials		$	89,287			$	78,493
Chassis			34,414				29,506
Work in process			50,262				55,413
Finished goods			30,289				14,196
Total			204,252				177,608
Less excess of FIFO costs over LIFO costs			17,204				15,838
Total inventories		$	187,048			$	161,770

3.

Earnings Per Share

		Three Months				Three Months
		Ended				Ended
		October 31, 2005				October 31, 2004
Weighted average shares outstanding for basic earnings per share			56,568,392				57,096,044
Stock options and restricted stock			348,426				260,137
Total — For diluted shares			56,916,818				57,356,181

4.

Comprehensive Income

		Three Months				Three Months
		Ended				Ended
		October 31, 2005				October 31, 2004
Net income		$	43,365			$	35,073
Foreign currency translation adjustment			411				849
Comprehensive income		$	43,776			$	35,922

5.		Segment Information
		The Company has three reportable segments: 1.) towable recreation vehicles, 2.) motorized recreation vehicles, and 3.) buses. The towable recreation vehicle segment consists of product lines from the following operating companies that have been aggregated: Airstream, Breckenridge, CrossRoads, Dutchmen, General Coach Hensall and Oliver, Keystone, Komfort, Thor America and Thor California. The motorized recreation vehicle segment consists of product lines from the following operating companies that have been aggregated: Airstream, Damon, Four Winds and Oliver. The bus segment consists of the following operating companies that have been aggregated: Champion Bus, ElDorado California, ElDorado Kansas and Goshen Coach.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Three Months				Three Months
		Ended				Ended
		October 31, 2005				October 31, 2004
Net Sales:
Recreation vehicles:
Towables		$	533,236			$	440,161
Motorized			149,094				142,135
Total recreation vehicles			682,330				582,296
Buses			78,993				50,430
Total		$	761,323			$	632,726

		Three Months				Three Months
		Ended				Ended
		October 31, 2005				October 31, 2004
Income Before Income Taxes:
Recreation vehicles:
Towables		$	61,424			$	47,686
Motorized			8,366				7,908
Total recreation vehicles			69,790				55,594
Buses			1,994				1,126
Corporate			(2,346	)			(704	)
Total		$	69,438			$	56,016

		October 31, 2005				July 31, 2005
Identifiable Assets:
Recreation vehicles:
Towables		$	471,454			$	384,292
Motorized			146,071				126,045
Total recreation vehicles			617,525				510,337
Buses			98,689				96,942
Corporate			205,392				250,600
Total		$	921,606			$	857,879

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 in common stock and $458 in additional paid-in-capital and $8,000 in retained earnings.
7.		Investments
		The Company classifies its debt and equity securities as trading investments classified as short- term. Trading securities are bought and held principally for the purpose of selling them in the near term.
		Trading securities are recorded at fair market value. Realized and unrealized gains and losses on trading investments are included in earnings. Dividend and interest income are recognized when earned.
8.		Acquisitions
		On November 1, 2004, we completed our acquisition of the stock of DS Corp. dba CrossRoads RV, an Indiana corporation (“CrossRoads”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 28, 2004, by and among our company, Thor Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of our company (“Acquisition

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Subsidiary”), CrossRoads and the securityholders of CrossRoads. CrossRoads is engaged in the business of manufacturing towable recreation vehicles. Under the terms of the Merger Agreement, Acquisition Subsidiary merged with and into CrossRoads, and CrossRoads continued as the surviving corporation (the “Merger”). In addition, as part of the Merger, certain members of management of CrossRoads entered into non-competition agreements with our company.
		The primary reasons for the acquisition include CrossRoads’ future earnings potential, its fit with our existing operations, its market share, and its cash flow. The results of operations for CrossRoads are included in Thor’s operating results beginning November 1, 2004.
		The purchase price paid by us for the acquisition of the stock of CrossRoads was $28,030, which was payable in cash and was funded from our cash on hand. The fair value of assets acquired and liabilities assumed was $32,958, and $4,928 respectively. The purchase price allocation includes $1,176 of non-compete agreements, which will be amortized over two to seven years, $20,485 of goodwill and $794 for trademarks that are not subject to amortization.
		On May 27, 2005, we completed our acquisition of the Goshen Coach Division of Veritrans Specialty Vehicles Inc. pursuant to an asset purchase agreement dated May 26, 2005 for cash of $10,083.
9.		Goodwill and Other Intangible Assets
		The components of other intangible assets are as follows:

		October 31, 2005								July 31, 2005
						Accumulated								Accumulated
		Cost				Amortization				Cost				Amortization
Amortized Intangible Assets:
Non-compete agreements		$	15,889			$	12,336			$	15,889			$	12,099

		Three Months				Three Months
		Ended				Ended
		October 31, 2005				October 31, 2004
Non-compete Agreements:
Amortization Expense		$	237			$	202

Non-compete agreements are amortized on a straight-line basis.

Estimated Amortization Expense:

For the year ending July 2006		$	949
For the year ending July 2007		$	887
For the year ending July 2008		$	828
For the year ending July 2009		$	492
For the year ending July 2010		$	337

There was no change in the carrying amount of goodwill and trademarks for the three month period ended October 31, 2005.

As of October 31, 2005, Goodwill and Trademarks by segments totaled as follows:

		Goodwill				Trademarks
Recreation Vehicles:
Towables		$	143,795			$	10,237
Motorized			17,252				2,600
Total Recreation Vehicles			161,047				12,837
Bus			4,616				1,063
Total		$	165,663			$	13,900

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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
		Ended				Ended
		October 31, 2005				October 31, 2004
Beginning Balance		$	55,118			$	45,829
Provision			15,967				14,795
Payments			(14,973	)			(12,460	)
Ending Balance		$	56,112			$	48,164

11.		Commercial Commitments
		Our principal commercial commitments at October 31, 2005 are summarized in the following chart:

		Total				Term of
Commitment		Amount Committed				Guarantee
Guarantee on dealer financing		$	2,821			less than 1 year
Standby repurchase obligation on dealer financing		$	705,725			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 $1,486 and $1,368 as of October 31, 2005 and July 31, 2005, respectively.

		Three Months				Three Months
		Ended				Ended
		October 31, 2005				October 31, 2004
Cost of units repurchased		$	1,350			$	1,093
Realization on units resold			1,272				923
Losses due to repurchase		$	78			$	170

12.		Stock-Based Compensation
		Effective August 1, 2005, we adopted Statement of Financial Accounting Standard (“SFAS”) No. 123R, Share Based Payment, using the modified prospective transition method. Under the modified prospective method, awards that are granted, modified or settled after the date of the adoption should be measured and accounted for in accordance with SFAS 123R.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options — The Company’s Board of Directors approved the 1999 Stock Option Plan. 2,000,000 shares were authorized under the Plan. Options expire 10 years from the date of grant and are vested evenly over 3 to 4 years from the date of grant.

A summary of option activity under the 1999 Stock Option Plan for the three months ended October 31, 2005 is as follows:

						Weighted				Weighted Avg.
						Avg. Exercise				Remaining				Aggregate
		Shares				Price				Contractual Life				Intrinsic Value
Outstanding, August 1, 2005			700,708			$	19.60				—				—
Granted			—				—				—				—
Exercised			3,334				12.86				—				—
Canceled			—				—				—				—
Forfeited			—				—				—				—
Outstanding, October 31, 2005			697,374			$	19.63				7.3			$	9,065
Exercisable, October 31, 2005			424,291			$	14.53				6.7			$	7,681

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Assumptions utilized in the model are evaluated and revised, as necessary, to reflect market conditions and experience. The fair value of the stock options is based upon the market price of the underlying common stock as of the date of the grant, reduced by the present value of estimated future dividends, and risk-free interest rates. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatilities are based on the historical volatility of our stock. The expected term of the options represents the period of time that options are granted are outstanding and is estimated using historical exercise and termination behavior.

The amount expensed in the current period under SFAS No. 123R is consistent with prior proforma disclosures under SFAS 123.

For the three months ended October 31, 2005, the Company recorded expense of $198 for stock incentive awards. At October 31, 2005, there was $1,156 of total unrecognized compensation costs related to stock options that is expected to be recognized over a weighted average period of 1.5 years.

Cash received from stock option exercises for the three months ended October 31, 2005 was $43. The total intrinsic value of stock options exercised was $70.

Exercises of options are satisfied with the issuance of new shares from the authorized share pool.

Stock Awards — The Company has a stock award plan which allows for the granting of up to 600,000 shares of restricted stock to selected executives. Restrictions expire 50% after 5 years following the date of issue and the balance after six years.

A summary of stock award activity under this Plan for the three months ended October 31, 2005 is as follows:

						Weighted
						Average Gross
		Shares				Date Fair Value
Nonvested, August 1, 2005			115,700			$	12.93
Granted			—				—
Vested			8,100				6.50
Forfeited			—				—
Nonvested, October 31, 2005			107,600			$	13.42

For the three months ended October 31, 2005, the Company recorded expense of $62 for restricted stock awards. At October 31, 2005, there was $686 of total unrecognized compensation costs related to restricted stock awards that is expected to be recognized over a weighted average period of 3.1 years.

The total fair value of restricted shares vested during the period is $269.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

We were founded in 1980 and have grown to be the largest manufacturer of Recreation Vehicles (“RV’s”) and small and midsize buses in North America. Our position in the travel trailer and fifth wheel segment of the industry (towables), with the acquisition of CrossRoads RV, gives us an approximate 31% market share. In the motorized segment of the industry we have an approximate 13% market share. Our market share in small and mid-size buses is approximately 44%. We have recently entered the 40-foot bus market with a new facility in Southern California designed for that product as well as our existing 30-foot and 35-foot buses.

Our growth has been internal and by acquisition. Our strategy has been to increase our profitability in North America in the recreation vehicle industry and in the bus business through product innovation, service to our customers, manufacturing quality products, improving our facilities and opportunistic acquisitions. We have not entered unrelated businesses and have no plans to do so in the future.

We rely on internally generated cash flows from operations to finance our growth although we may borrow to make an acquisition if we believe the incremental cash flows will provide for rapid payback. We have invested significant capital to modernize our plant facilities and expended approximately $48,000 for that purpose in fiscal 2005.

Our business model includes decentralized operating units and we compensate operating management primarily with cash based upon profitability of the unit which they manage. Our corporate staff provides financial management, centralized purchasing services, insurance, legal and human resources, risk management, and internal audit functions. Senior corporate management interacts regularly with operating management to assure that corporate objectives are understood clearly and are monitored appropriately.

Our RV products are sold to dealers who, in turn, retail those products. Our buses are sold through dealers to municipalities and private purchasers such as rental car companies and hotels. We do not directly finance dealers but do provide repurchase agreements in order to facilitate the dealers obtaining floor plan financing. We have a joint venture, Thor Credit, operated by GE Consumer Finance, which provides retail credit to ultimate purchasers of any recreation vehicle purchased from a Thor dealer. This retail credit on recreation vehicles is not limited to Thor product only.

For management and reporting purposes, we segment our business into towable recreation vehicles, motorized recreation vehicles and buses.

Trends and Business Outlook

The most important determinant of demand for Recreation Vehicles is demographics. The baby boomer population is now reaching retirement age and retirees are a large market for our products. The baby boomer population in the United States is expected to grow five times as fast as the expected growth in the total United States population. We believe a primary indicator of the strength of the recreation vehicle industry is retail RV sales, which we closely monitor to determine industry trends. Travel trailer sales were up substantially this quarter as a result of the hurricanes and sale of hurricane relief units being used as temporary emergency living quarters.

Government entities are primary users of our buses. Demand in this segment is subject to fluctuations in government spending on transit. In addition, hotel and rental car companies are also major users of our small and mid-size buses and therefore airline travel is an important indicator for this market. The majority of our buses have a 5-year useful life, so many of the buses we sold in 1999 and 2000 will need to be replaced.

Fuel price fluctuations have not historically influenced our sales materially and we do not anticipate that modest increases in interest rates will have a significant negative effect on such sales.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Economic or industry-wide factors affecting our recreation vehicle business include raw material costs of commodities used in the manufacture of our product. Material cost is the primary factor determining our cost of goods sold. Additional increases in raw material costs would impact our profit margins negatively if we were unable to raise prices for our products by corresponding amounts.

Three Months Ended October 31, 2005 vs.
     Three Months Ended October 31, 2004

		Quarter Ended								Quarter Ended								Change
		October 31, 2005								October 31, 2004								Amount				%
NET SALES:
Recreation Vehicles
Towables		$	533,236							$	440,161							$	93,075				21.1
Motorized			149,094								142,135								6,959				4.9
Total Recreation Vehicles			682,330								582,296								100,034				17.2
Buses			78,993								50,430								28,563				56.6
Total		$	761,323							$	632,726							$	128,597				20.3
# OF UNITS:
Recreation Vehicles
Towables			27,518								22,534								4,984				22.1
Motorized			2,019								1,991								28				1.4
Total Recreation Vehicles			29,537								24,525								5,012				20.4
Buses			1,468								901								567				62.9
Total			31,005								25,426								5,579				21.9
						% of								% of
						Segment								Segment
						Net Sales								Net Sales
GROSS PROFIT:
Recreation Vehicles
Towables		$	90,764				17.0			$	71,564				16.3			$	19,200				26.8
Motorized			15,301				10.3				14,435				10.2				866				6.0
Total Recreation Vehicles			106,065				15.5				85,999				14.8				20,066				23.3
Buses			5,577				7.1				4,775				9.5				802				16.8
Total		$	111,642				14.7			$	90,774				14.3			$	20,868				23.0
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreation Vehicles
Towables		$	29,372				5.5			$	23,986				5.4			$	5,386				22.5
Motorized			6,933				4.7				6,530				4.6				403				6.2
Total Recreation Vehicles			36,305				5.3				30,516				5.2				5,789				19.0
Buses			3,463				4.4				3,707				7.4				(244	)			(6.6	)
Corporate			4,568				—				2,058				—				2,510				122.0
Total		$	44,336				5.8			$	36,281				5.7			$	8,055				22.2
INCOME BEFORE INCOME TAXES:
Recreation Vehicles
Towables		$	61,424				11.5			$	47,686				10.8			$	13,738				28.8
Motorized			8,366				5.6				7,908				5.6				458				5.8
Total Recreation Vehicles			69,790				10.2				55,594				9.5				14,196				25.5
Buses			1,994				2.5				1,126				2.2				868				77.1
Corporate			(2,346	)			—				(704	)			—				(1,642	)			(233.2	)
Total		$	69,438				9.1			$	56,016				8.9			$	13,422				24.0

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

CONSOLIDATED

($ in 000)

Net sales and gross profit for the first quarter of fiscal 2006 were up 20.3% and 23.0% respectively compared to the first quarter of fiscal 2005. Income before income taxes for the first quarter of fiscal 2006 was up 24% compared to the first quarter of fiscal 2005. Selling, general and administrative expenses for the first quarter of fiscal 2006 increased 22.2% compared to the first quarter of fiscal 2005. The specifics on changes in net sales, gross profit, general and administrative expense and income before income taxes are addressed in the segment reporting below

Corporate costs in selling, general and administrative were $2,346 for the first quarter of fiscal 2006 compared to $704 in fiscal 2005. This increase of $1,642 is primarily the result of increased insurance costs, legal expenses and cost of compliance with Sarbanes-Oxley.

Net sales and income before income taxes for the first quarter of fiscal 2006 included net sales and income before income taxes of $37,636 and $3,990 respectively, for CrossRoads RV acquired November 1, 2004 and net sales and loss before income taxes of $10,674 and $294 respectively, for Goshen Coach acquired May 27, 2005. The overall effective tax rate for the first quarter of fiscal 2006 was 37.5% compared to 37.4% for fiscal 2005.

Segment Reporting

RECREATION VEHICLES

Analysis of Percentage Change in Net Sales Versus Prior Year

						Impact from Internal Growth
		Impact from				Average Price
		Acquisitions				Per Unit				Units				Net Change
Recreation Vehicles
Towables			8.6	%			(.3	)%			12.8	%			21.1	%
Motorized			—				3.5	%			1.4	%			4.9	%

TOWABLE RECREATION VEHICLES

The increase in towables net sales resulted primarily from a combination of an increase in unit shipments and our acquisition of CrossRoads RV. The increase in units sold of approximately 22.1% would have been a 12.8% increase excluding CrossRoads. The overall industry increase in towables for August and September of 2005 was 30.1%. Decreases in the average price per unit resulted from product mix. We estimate that approximately $75,000 of net sales were related to Hurricane relief units which were basic temporary emergency living units sold through our dealer network. We have no industry statistics for the total Hurricane relief units sold.

Towables gross profit percentage increased to 17.0% of net sales for fiscal 2006 from 16.3% of net sales for fiscal 2005. The primary factor for the 26.8% increase in gross profit was the 21.1% increase in net sales. Selling, general and administrative expenses were 5.5% of net sales for fiscal 2006 and 5.4% of net sales for fiscal 2005.

Towables income before income taxes increased to 11.5% of net sales for fiscal 2006 from 10.8% of net sales for fiscal 2005. The primary factor for this increase was our 21.1% revenue increase.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

MOTORIZED RECREATION VEHICLES

The increase in motorized net sales resulted from a combination of an increase in both average price per unit and unit shipments. The increase in units sold of approximately 1.4% outperformed the overall market decrease in motorhomes of 15.0% for the two month period August and September of 2005. Increases in the average price per unit resulted from the combination of price increases and product mix.

Motorized gross profit percentage increased to 10.3% of net sales from 10.2% of net sales for fiscal 2005. The primary factor for the increased gross profit in 2006 was increased unit sales and mix of products. Selling, general and administrative expenses were 4.7% of net sales for fiscal 2006 and 4.6% to net sales for fiscal 2005.

Motorized income before income taxes was 5.6% of net sales for fiscal 2006 and 2005.

BUSES

Analysis of Percentage Change in Net Sales Versus Prior Year

		Impact				Impact from Internal Growth
		from Acquisition				Average Price Per Unit				Units				Net Change
Buses			21.2	%			13.4	%			22.0	%			56.6	%

The increase in buses net sales resulted from a combination of an increase in both average price per unit and unit shipments and our acquisition of Goshen Coach. The increase in units sold of approximately 62.9% would have been 22.0% excluding Goshen Coach. The unit sales increases are indicative of an expected replacement cycle on our buses the majority of which have a 5 year useful life. In addition, replacement of many older buses were delayed due to decline in the travel industry subsequent to the 9/11 terrorist attacks.

Buses gross profit percentage decreased to 7.1% of net sales for fiscal 2006 from 9.5% of net sales for fiscal 2005 due to continuing discounts offered to achieve bus contracts in a very competitive market place. Selling, general and administrative expenses were 4.4% of net sales for fiscal 2006 and 7.4% for fiscal 2005. The reduction in selling, general and administrative expenses as a percentage of net sales is primarily due to a 56.6% increase in bus revenues.

Buses income before income taxes increased to 2.5% of net sales for fiscal 2006 from 2.2% for fiscal 2005. The primary reason for the increase is increased revenues of 56.6%.

ORDER BACKLOG
$(in 000’s)

		As of				As of				Change
		October 31, 2005				October 31, 2004				Amount				%
Recreation Vehicles
Towables		$	252,301			$	131,801			$	120,500				91.4
Motorized			80,627				77,821				2,806				3.6
Total Recreation Vehicles			332,928				209,622				123,306				58.8
Buses			140,421				134,375				6,046				4.5
Total		$	473,349			$	343,997			$	129,352				37.6

Financial Condition and Liquidity
$ (in 000)

As of October 31, 2005, we had $193,621 in cash, cash equivalents and short-term investments, compared to $208,815 on July 31, 2005. We classify our debt and equity securities as trading securities. The former are carried on our consolidated balance sheets as “Cash and cash equivalents” or “Investments — short term”.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Trading securities, principally investment grade securities composed of asset-based notes, mortgage-backed notes, auction rate securities and corporate bonds, are generally bought and held for sale in the near term. Securities are carried at fair market value. Realized and unrealized gains and losses on trading securities are included in earnings.

Due to the relative short-term maturity (average 3 months) of our trading securities, we do not believe that a change in interest rates will have a significant impact on our financial position or results of future operations.

Working capital at October 31, 2005 was $314,170 compared to $275,228 on July 31, 2005. We have no long-term debt. We currently have a $30,000 revolving line of credit which bears interest at negotiated rates below prime and expires on November 30, 2005. We anticipate renewing the line of credit. There were no borrowings on this line of credit during the period ended October 31, 2005. 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 $7,755 for the three months ended October 31, 2005 were primarily for planned expansions and improvements of $6,790 at our recreation vehicle facilities and $965 for our bus operations, primarily at our new Goshen Coach facility.

The Company anticipates additional capital expenditures in fiscal 2006 of approximately $30,000. These expenditures will be made primarily for planned capacity expansions and for replacement of machinery and equipment to be used in the ordinary course of business and expansions primarily in our recreation vehicle segment.

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 accounting policies, the following may involve a higher degree of judgments, estimates, and complexity:

Impairment of Goodwill, Trademarks and Long-Lived Assets

We at least annually review the carrying value of goodwill and trademarks with indefinite useful lives. Long-lived assets, identifiable intangibles that are amortized, goodwill and trademarks with indefinite useful lives are also reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable from 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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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 and actuarial information. We maintain excess liability insurance aggregating $10,000,000 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

We provide 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, fuel availability, interest rate increases, increased material costs, 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.

ITEM 3. 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.

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as required by Exchange Act Rule 13a-15(f). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended October 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — Other Information

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

(c) Total Number

(d) Maximum Number

of Shares

(or Approximate

(a) Total

(b)

(or Units)

Dollar Value)

Number

Average

Purchased as

of Shares (or Units)

of Shares

Price Paid

Part of Publicly

that May Yet Be

(or Units)

Per Share

Announced Plans

Purchased Under the

Period

Purchased

(or Unit)

or Programs (1)

Plans or Programs

August 2005

—

—

—

1,132,800

September 2005

—

—

—

1,132,800

October 2005

—

—

—

1,132,800

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

ITEM 6. Exhibits

		a.)		Exhibits
				31.1 Chief Executive Officer’s Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
				31.2 Chief Financial Officer’s Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
				32.1 Chief Executive Officer’s Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002.
				32.2 Chief Financial Officer’s Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002.

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: November 28, 2005		/s/		Wade F. B. Thompson
				Wade F. B. Thompson
				Chairman of the Board, President
				and Chief Executive Officer
DATE: November 28, 2005		/s/		Walter L. Bennett
				Walter L. Bennett
				Executive Vice President,
				Secretary and Chief Financial Officer