Annual Statements Open main menu

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

THOR INDUSTRIES, INC. 10-Q
Table of Contents

 
 

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 April 30, 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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     
Class   Outstanding at 4/30/2005
     
     
Common stock, par value
$.10 per share
  56,611,479 shares
 
 

1


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-31.1 302 CEO Certification
EX-31.2 302 CFO Certification
EX-32.1 906 CEO Certification
EX-32.2 906 CFO Certification


Table of Contents

PART I — Financial Information

ITEM 1. Financial Statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                 
    April 30, 2005     July 31, 2004  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 85,687,008     $ 136,120,530  
Investments — short term
    41,840,031       63,045,616  
Accounts receivable:
               
Trade
    183,482,959       132,615,992  
Other
    6,139,174       4,304,573  
Inventories
    182,458,718       147,588,254  
Prepaid expenses
    9,395,732       5,974,938  
Deferred income taxes
    8,316,457       8,316,457  
 
           
Total current assets
    517,320,079       497,966,360  
 
           
Property:
               
Land
    20,780,202       17,263,271  
Buildings and improvements
    105,575,580       74,436,370  
Machinery and equipment
    47,368,299       40,046,081  
 
           
Total cost
    173,724,081       131,745,722  
Accumulated depreciation
    (39,909,854 )     (32,982,694 )
 
           
Property, net
    133,814,227       98,763,028  
 
           
Investments:
               
Joint ventures
    2,481,523       2,514,449  
 
           
Other assets:
               
Goodwill
    161,437,410       140,857,162  
Non-compete agreements
    4,026,874       3,580,962  
Trademarks
    12,961,642       12,269,642  
Other
    6,997,409       6,635,161  
 
           
Total other assets
    185,423,335       163,342,927  
 
           
TOTAL ASSETS
  $ 839,039,164     $ 762,586,764  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 120,728,511     $ 125,574,124  
Accrued liabilities:
               
Taxes
    20,594,954       20,890,901  
Compensation and related items
    26,597,514       25,712,538  
Product warranties
    52,980,773       45,829,471  
Promotions and rebates
    13,553,827       8,915,220  
Product/property liability and related
    7,094,106       11,055,752  
Other
    5,356,985       3,790,324  
 
           
Total current liabilities
    246,906,670       241,768,330  
 
           
Deferred income taxes and other liabilities
    10,960,389       9,214,698  
Stockholders’ equity:
               
Common stock — authorized 250,000,000 shares; issued 56,867,479 shares @ 4/30/05 and 57,146,160 shares @ 7/31/04; par value of $.10 per share
    5,686,748       5,714,616  
Additional paid-in capital
    81,366,816       81,018,989  
Accumulated other comprehensive income
    553,131       63,722  
Retained earnings
    501,468,744       425,933,821  
Restricted stock plan
    (872,320 )     (1,127,412 )
Less Treasury shares of 256,000 @ 4/30/05, at cost
    (7,031,014 )      
 
           
Total stockholders’ equity
    581,172,105       511,603,736  
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 839,039,164     $ 762,586,764  
 
           

See notes to consolidated financial statements

2


Table of Contents

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME

FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2005 AND 2004

                                 
    Three Months Ended April 30     Nine Months Ended April 30  
    2005     2004     2005     2004  
Net sales
  $ 728,692,917     $ 645,690,437     $ 1,898,460,213     $ 1,562,596,996  
Cost of products sold
    634,657,775       555,568,944       1,645,818,652       1,352,932,226  
 
                       
Gross profit
    94,035,142       90,121,493       252,641,561       209,664,770  
Selling, general and administrative expenses
    43,160,296       37,410,857       115,203,051       94,347,836  
Gains (losses) on equity securities
          (12,816 )           1,801,449  
Interest income
    680,113       341,556       2,025,464       1,252,316  
Interest expense
    144,470       20,966       253,814       123,080  
Other income
    743,104       726,409       1,868,062       2,003,710  
 
                       
Income before income taxes
    52,153,593       53,744,819       141,078,222       120,251,329  
Provision for income taxes
    19,203,901       20,961,245       52,417,861       46,244,187  
 
                       
Net income
  $ 32,949,692     $ 32,783,574     $ 88,660,361     $ 74,007,142  
 
                       
 
                               
Average common shares outstanding:
                               
Basic
    56,732,473       57,245,068       56,801,528       57,265,901  
Diluted
    57,129,262       57,587,458       57,195,012       57,641,688  
 
                               
Earnings per common share:
                               
Basic
  $ .58     $ .57     $ 1.56     $ 1.29  
Diluted
  $ .58     $ .57     $ 1.55     $ 1.28  
 
                               
Dividends paid per common share:
  $ .03     $ .03     $ .09     $ .06  

     See notes to consolidated financial statements

3


Table of Contents

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS

FOR THE NINE MONTHS ENDED APRIL 30, 2005 AND 2004

                 
    2005     2004  
Cash flows from operating activities:
               
Net income
  $ 88,660,361     $ 74,007,142  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    7,131,186       5,727,384  
Amortization
    730,088       597,066  
Loss on disposition of assets
    73,804        
Loss (gains) on sale of trading investments
    1,063,734       (984,756 )
Unrealized (gain) loss on trading investments
    (38,652 )     252,776  
Changes in non cash assets and liabilities, net of effect from acquisitions:
               
Purchases of trading investments
    (103,733,586 )     (63,116,128 )
Proceeds from sales of trading investments
    123,914,089       62,318,396  
Accounts receivable
    (49,438,014 )     (66,791,539 )
Inventories
    (31,450,163 )     (35,935,386 )
Prepaid expense & other
    (3,751,363 )     2,482,705  
Accounts payable
    (9,308,776 )     9,612,941  
Accrued liabilities
    9,834,879       14,632,188  
Other liabilities
    348,010       1,650,388  
 
           
 
               
Net cash provided by operating activities
    34,035,597       4,453,177  
 
           
 
               
Cash flows from investing activities:
               
Purchase of property, plant & equipment
    (38,568,234 )     (19,455,603 )
Proceeds from disposition of assets
    35,466       95,842  
Acquisitions — Net of cash acquired
    (28,021,951 )     (29,618,354 )
 
           
 
               
Net cash used in investing activities
    (66,554,719 )     (48,978,115 )
 
           
 
               
Cash flows from financing activities:
               
Cash dividends
    (5,125,838 )     (3,439,672 )
Purchase of common stock held as treasury shares
    (4,600,519 )      
Purchase of common stock for retirement
    (8,490,265 )     (7,078,339 )
Retirement of acquired debt
    (1,000,851 )     (12,972,498 )
Proceeds from issuance of common stock
    813,664       1,174,545  
 
           
 
               
Net cash used in financing activities
    (18,403,809 )     (22,315,964 )
 
           
 
               
Effect of exchange rate changes on cash
    489,409       257,540  
 
           
 
               
Net decrease in cash and equivalents
    (50,433,522 )     (66,583,362 )
Cash and equivalents, beginning of period
    136,120,530       132,124,452  
 
           
Cash and equivalents, end of period
  $ 85,687,008     $ 65,541,090  
 
           
 
               
Supplemental cash flow information:
               
Income taxes paid
  $ 52,586,368     $ 45,070,716  
Interest paid
    253,814       123,080  
 
               
Non cash transactions:
               
Retirement of treasury shares
  $ 8,490,265     $ 7,078,339  
Purchase of treasury shares
    2,430,495        
Issuance of restricted stock
          309,465  

See notes to consolidated financial statements

4


Table of Contents

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 nine months ended April 30, 2005 are not necessarily indicative of the results for the full year.

2.   Major classifications of inventories are:
                 
    April 30, 2005     July 31, 2004  
Raw materials
  $ 80,910,434     $ 72,323,887  
Chassis
    36,557,650       30,161,715  
Work in process
    52,925,907       41,117,720  
Finished goods
    24,742,613       13,604,925  
 
           
Total
    195,136,604       157,208,247  
Less excess of FIFO costs over LIFO costs
    12,677,886       9,619,993  
 
           
Total inventories
  $ 182,458,718     $ 147,588,254  
 
           

3.   Earnings Per Share
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Weighted average shares outstanding for basic earnings per share
    56,732,473       57,245,068       56,801,528       57,265,901  
Stock options and restricted stock
    396,789       342,390       393,484       375,787  
 
                       
Total — For diluted shares
    57,129,262       57,587,458       57,195,012       57,641,688  
 
                       

4.   Comprehensive Income
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Net income
  $ 32,949,692     $ 32,783,574     $ 88,660,361     $ 74,007,142  
Foreign currency translation adjustment
    (237,866 )     (295,931 )     489,409       257,540  
Unrealized appreciation on investments
                      1,011,865  
Transfer from available-for-sale to trading
                      (1,369,424 )
 
                       
Comprehensive income
  $ 32,711,826     $ 32,487,643     $ 89,149,770     $ 73,907,123  
 
                       

5.   Segment Information

The Company has three reportable segments: Recreation Vehicles — Towable and Motorized, and Buses.

5


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Net Sales:
                               
Recreation vehicles:
                               
Towables
  $ 497,031,861     $ 410,900,766     $ 1,302,690,546     $ 1,012,673,380  
Motorized
    165,758,353       183,256,186       421,422,753       388,677,056  
 
                       
Total recreation vehicles
    662,790,214       594,156,952       1,724,113,299       1,401,350,436  
Buses
    65,902,703       51,533,485       174,346,914       161,246,560  
 
                       
Total
  $ 728,692,917     $ 645,690,437     $ 1,898,460,213     $ 1,562,596,996  
 
                       
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Income Before Income Taxes:
                               
Recreation vehicles:
                               
Towables
  $ 44,118,637     $ 44,492,165     $ 121,511,192     $ 96,096,353  
Motorized
    7,420,800       10,948,492       19,206,817       21,769,760  
 
                       
Total recreation vehicles
    51,539,437       55,440,657       140,718,009       117,866,113  
Buses
    2,641,362       1,388,565       5,109,575       7,539,921  
Corporate
    (2,027,206 )     (3,084,403 )     (4,749,362 )     (5,154,705 )
 
                       
Total
  $ 52,153,593     $ 53,744,819     $ 141,078,222     $ 120,251,329  
 
                       
                 
    April 30, 2005     July 31, 2004  
Identifiable Assets:
               
Recreation vehicles:
               
Towables
  $ 415,971,842     $ 324,041,069  
Motorized
    164,868,359       123,607,436  
 
           
Total recreation vehicles
    580,840,201       447,648,505  
Buses
    86,074,557       65,054,523  
Corporate
    172,124,406       249,883,736  
 
           
Total
  $ 839,039,164     $ 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. In addition, the Company purchased 256,000 shares of Thor common stock in April 2005 at a cost of $7,031,014 to be held as Treasury shares. Of the 256,000 shares, 90,000 shares at a cost of $2,430,495 did not settle until May, and therefore, are recorded in accounts payable. The average cost per share was $27.46.

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.

6


Table of Contents

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 Combinations

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.

7


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 purchase price paid by us for the acquisition of the stock of CrossRoads was $28,021,951, which was payable in cash and was funded from our cash on hand.

9.   Goodwill and Other Intangible Assets

The components of other intangible assets are as follows:

                                 
    April 30, 2005     July 31, 2004  
            Accumulated             Accumulated  
    Cost     Amortization     Cost     Amortization  
Amortized Intangible Assets:
                               
Non-compete agreements
  $ 15,889,367     $ 11,862,493     $ 14,713,367     $ 11,132,405  
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Non-compete Agreement:
                               
Amortization Expense
  $ 258,847     $ 201,562     $ 730,088     $ 597,066  

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

Estimated Amortization Expense:

         
For the year ending July 2005
  $ 967,268  
For the year ending July 2006
  $ 948,719  
For the year ending July 2007
  $ 886,844  
For the year ending July 2008
  $ 827,969  
For the year ending July 2009
  $ 491,733  

The change in the carrying amount of goodwill and trademarks for the period ended April 30, 2005.

                 
    Goodwill     Trademarks  
Balance as of July 31, 2004
  $ 140,857,162     $ 12,269,642  
Arising from acquisition
    20,580,248       692,000  
 
           
Balance as of April 30, 2005
  $ 161,437,410     $ 12,961,642  
 
           

8


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of April 30, 2005, Goodwill and Trademarks by segments totaled as follows:

                 
    Goodwill     Trademarks  
Recreation Vehicles:
               
Towables
  $ 143,889,879     $ 10,133,674  
Motorized
    17,252,031       2,600,000  
 
           
 
               
Total Recreation Vehicles
    161,141,910       12,733,674  
 
           
 
               
Bus
    295,500       227,968  
 
           
Total
  $ 161,437,410     $ 12,961,642  
 
           

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     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Beginning Balance
  $ 49,151,842     $ 41,973,298     $ 45,829,471     $ 35,114,825  
Provision
    16,751,967       11,626,295       44,132,934       38,132,832  
Payments
    12,923,036       10,743,824       38,076,201       34,117,148  
Acquisitions
                1,094,569       3,725,260  
 
                       
Ending Balance
  $ 52,980,773     $ 42,855,769     $ 52,980,773     $ 42,855,769  
 
                       

11.   Stock Split

In the second quarter of 2004, the Company declared a two-for-one common stock split that was distributed to shareholders of record as of January 5, 2004. All share and per share amounts have been retroactively adjusted for the effect of the common stock split.

12.   Commercial Commitments

Our principal commercial commitments at April 30, 2005 are summarized in the following chart:

             
    Total     Term of
Commitment   Amount Committed     Guarantee
Guarantee on dealer financing
  $ 3,419,000     less than 1 year
Standby repurchase obligation on dealer financing
  $ 754,868,000     less than 1 year

9


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company records repurchase and guarantee reserves based on prior experience and known current events. The combined repurchase and recourse reserve balances are approximately $1,204,000 and $546,000 as of April 30, 2005 and July 31, 2004, respectively.

                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
 
                               
Cost of units repurchased
  $ 2,313,000     $ 1,140,000     $ 9,149,000     $ 1,664,000  
 
                               
Realization on units resold
    1,959,000       991,000       7,433,000       1,260,000  
 
                       
 
                               
Losses due to repurchase
  $ 354,000     $ 149,000     $ 1,716,000     $ 404,000  
 
                       

$1,033,000 of the losses due to repurchase for the nine months ended April 30, 2005, was a repurchase from a single dealer. The sales value of units repurchased from that dealer was $5,463,000.

13.   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.

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 earnings per common share would have been:

                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2005     April 30, 2004     April 30, 2005     April 30, 2004  
Net Income:
                               
As reported
  $ 32,949,692     $ 32,783,574     $ 88,660,361     $ 74,007,142  
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects
    (274,511 )     (283,344 )     (878,603 )     (601,096 )
 
                       
 
                               
Pro Forma
  $ 32,675,181     $ 32,500,230     $ 87,781,758     $ 73,406,046  
 
                       
 
                               
Earnings Per Common Share - Basic
                               
As reported
  $ .58     $ .57     $ 1.56     $ 1.29  
Pro forma
  $ .58     $ .57     $ 1.55     $ 1.28  
Earnings Per Common Share - Diluted
                               
As reported
  $ .58     $ .57     $ 1.55     $ 1.28  
Pro forma
  $ .57     $ .56     $ 1.53     $ 1.27  

10


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The assumptions used in determining the fair value of options granted during the nine months of fiscal 2005 are as follows:

         
Expected volatility
    38 %
Expected life of grant
  6 years
Risk free interest rate
    3.90 %
Expected dividend rate
    .30 %

14.   Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), Inventory Costs, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not believe the adoption of SFAS 151 will have a material impact on our financial statements.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment (“SFAS 123R”). SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the consolidated financial statements based on their fair values. This standard is effective for the Company August 1, 2005 and the Company may elect to use either the modified-prospective or modified-retrospective transition method. Under the modified prospective method, awards that are granted, modified, or settled after the date of adoption should be measured and accounted for in accordance with SFAS 123R. Unvested equity-classified awards that were granted prior to the effective date should continue to be accounted for in accordance with SFAS 123 except that amounts must be recognized in the income statement. Under the modified retrospective approach, the previously reported amounts are restated (either to the beginning of the year of adoption or for all periods presented) to reflect the SFAS 123 amounts in the income statement. We are currently evaluating the impact of this standard and its transition alternatives, which may impact the Company’s results of operations in the first quarter of fiscal 2006 and thereafter.

11


Table of Contents

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 11% market share. Our market share in small and mid-size buses is approximately 29%. 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 by improving our facilities, product innovation, opportunistic acquisitions and manufacturing quality products. 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 have expended approximately $54 million for that purpose in the past two fiscal years.

Our business model includes decentralized operating units and we compensate operating management 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 E-Trade, 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 Recreation Vehicles — Towables and Motorized — 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 48% by 2010, or five times as fast as the expected 9% 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.

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 that 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. Retail sales in the recreation vehicle industry have been strong due to low inflation, favorable interest rates, population trends and concerns about the safety of international travel.

12


Table of Contents

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. During fiscal 2005, we increased product prices on our RV segments approximately 1.5% to offset increased raw material costs. Price increases for buses were less than 1% due to continued soft market conditions and competitive pressures. Additional increases in raw material costs would impact our profit margins if we were unable to raise prices for our products by corresponding amounts without negatively affecting sales.

                                                 
Quarter Ended April 30, 2005 vs.                                  
Quarter Ended April 30, 2004                                  
    Quarter Ended             Quarter Ended             Change  
(in 000’s, except units)   April 30, 2005   April 30, 2004   Amount   %  
NET SALES:
                                               
Recreation Vehicles
                                               
Towables
  $ 497,032             $ 410,901             $ 86,131       21.0  
Motorized
    165,758               183,256               (17,498 )     (9.5 )
 
                                         
Total Recreation Vehicles
    662,790               594,157               68,633       11.6  
Buses
    65,903               51,533               14,370       27.9  
 
                                         
Total
  $ 728,693             $ 645,690             $ 83,003       12.9  
 
                                         
                                                 
# OF UNITS:
                                               
Recreation Vehicles
                                               
Towables
    25,222               22,509               2,713       12.1  
Motorized
    2,436               2,954               (518 )     (17.5 )
 
                                         
Total Recreation Vehicles
    27,658               25,463               2,195       8.6  
Buses
    1,149               956               193       20.2  
 
                                         
Total
    28,807               26,419               2,388       9.0  
 
                                         
                                                 
 
          % of           % of                
 
          Segment
Net Sales
          Segment
Net Sales
               
 
                                       
GROSS PROFIT:
                                       
Recreation Vehicles
                                       
Towables
  $ 72,670       14.6     $ 67,115       16.3     $ 5,555       8.3  
Motorized
    15,692       9.5       18,884       10.3       (3,192 )     (16.9 )
 
                                         
Total Recreation Vehicles
    88,362       13.3       85,999       14.5       2,363       2.7  
Buses
    5,673       8.6       4,122       8.0       1,551       37.6  
 
                                         
Total
  $ 94,035       12.9     $ 90,121       14.0     $ 3,914       4.3  
 
                                         
                                                 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
                                               
Recreation Vehicles
                                               
Towables
  $ 28,607       5.8     $ 22,622       5.5     $ 5,985       26.5  
Motorized
    8,271       5.0       7,952       4.3       319       4.0  
 
                                         
Total Recreation Vehicles
    36,878       5.6       30,574       5.1       6,304       20.6  
Buses
    2,937       4.5       2,821       5.5       116       4.1  
Corporate
    3,345       .5       4,016       .6       (671 )     (16.7 )
 
                                         
Total
  $ 43,160       5.9     $ 37,411       5.8     $ 5,749       15.4  
 
                                         
                                                 
INCOME BEFORE INCOME TAXES:
                                               
Recreation Vehicles
                                               
Towables
  $ 44,119       8.9     $ 44,492       10.8     $ (373 )     (.8 )
Motorized
    7,421       4.5       10,948       6.0       (3,527 )     (32.2 )
 
                                         
Total Recreation Vehicles
    51,540       7.8       55,440       9.3       (3,900 )     (7.0 )
Buses
    2,641       4.0       1,389       2.7       1,252       90.1  
Corporate
    (2,027 )     (.2 )     (3,084 )     (.5 )     1,057       34.3  
 
                                         
Total
  $ 52,154       7.2     $ 53,745       8.3     $ (1,591 )     (3.0 )
 
                                         

13


Table of Contents

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

CONSOLIDATED

($ in 000)

Net sales and gross profit for the third quarter of fiscal 2005 were up 12.9% and 4.3% respectively compared to the third quarter of fiscal 2004. Income before income taxes for the third quarter of fiscal 2005 was down 3% compared to the third quarter of fiscal 2004. Selling, general and administrative expenses for the third quarter of fiscal 2005 increased 15.4% compared to the third quarter of fiscal 2004. The specifics on changes in net sales, gross profit, general and administrative expense and income before income taxes will be addressed in the segment reporting.

Corporate costs in selling, general and administrative were $3,345 for the third quarter of fiscal 2005 compared to $4,016 in fiscal 2004. This $671 reduction is primarily the result of lower legal costs and insurance claims in fiscal 2005 of approximately $1,440 offset by increased costs of Sarbanes-Oxley compliance of approximately $462.

Net sales and income before income taxes for the third quarter of fiscal 2005 included net sales and income before income taxes of $29,721 and $2,913 respectively, for CrossRoads RV acquired November 1, 2004. The overall effective tax rate for the third quarter of fiscal 2005 was 36.8% compared to 39.0% for fiscal 2004. The primary reason for the lower effective tax rate in the third quarter of 2005 is lower state tax rates and increased extra-territorial income tax exclusion on related foreign sales increases.

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
    7.2 %     8.6 %     5.2 %     21.0 %
Motorized
          8.0 %     (17.5 )%     (9.5 )%

TOWABLE RECREATION VEHICLES

The increase in towables net sales resulted from a combination of an increase in both average price per unit and unit shipments and our acquisition of CrossRoads RV. The increase in units sold of approximately 12.1% would be a 5.2% increase excluding CrossRoads. The overall industry increase in towables on a comparable basis was 7.6%. Increases in the average price per unit resulted from the combination of price increases and product mix.

Towables gross profit percentage decreased to 14.6% of net sales for fiscal 2005 from 16.3% of net sales for fiscal 2004. The primary factors for the 1.7% reduced gross margin in 2005 were a $3.7 million decline in gross margin at our Thor California operation and a $1.4 million recall provision at our Keystone operation. Selling, general and administrative expenses increased to 5.8% of net sales for fiscal 2005 from 5.5% of net sales for fiscal 2004. The primary factor for the increase in fiscal 2005 as a percentage of sales were various sales promotion expenses due to competitive sales pressure.

Towables income before income taxes decreased to 8.9% of net sales for fiscal 2005 from 10.8% of net sales for fiscal 2004. The primary factors for this reduction were 1.7% reduction in gross margin as mentioned earlier and the increase in selling general and administrative expense as noted above.

14


Table of Contents

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

MOTORIZED RECREATION VEHICLES

The decrease in motorized net sales resulted primarily from reduced unit sales. The decrease in units sold of approximately 17.5% is in line with the overall market decrease in motorhomes of 15.1%. Increases in the average price per unit resulted from the combination of price increases and product mix.

Motorized gross profit percentage decreased to 9.5% of net sales from 10.3% of net sales for fiscal 2004. The primary factor for the reduced gross margin in 2005 was lower unit sales.

Motorized income before income taxes decreased to 4.5% of net sales for fiscal 2005 from 6.0% of net sales for fiscal 2004. The reduction was due primarily to reduced unit sales.

BUSES

Analysis of Percentage Change in Net Sales Versus Prior Year

                         
    Average Price Per Unit   Units   Net Change  
Buses
    7.7 %     20.2 %     27.9 %

The increase in buses net sales resulted from a combination of an increase in both average price per unit and unit shipments. 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 increased to 8.6% of net sales for fiscal 2005 from 8.0% of net sales for fiscal 2004 due to leveraging of fixed production costs due to a 27.9% volume increase and lower warranty costs.

Buses income before income taxes increased to 4.0% of net sales for fiscal 2005 from 2.7% for fiscal 2004. The primary reason for the increase is due to increased gross margins as explained above.

Nine Months Ended April 30, 2005 vs.

Nine Months Ended April 30, 2004
                                 
    Nine Months Ended     Nine Months Ended     Change  
(in 000’s, except units)   April 30, 2005   April 30, 2004   Amount   %_  
NET SALES:
                               
Recreation Vehicles
                               
Towables
  $ 1,302,690     $ 1,012,673     $ 290,017       28.6  
Motorized
    421,423       388,677       32,746       8.4  
 
                         
Total Recreation Vehicles
    1,724,113       1,401,350       322,763       23.0  
Buses
    174,347       161,247       13,100       8.1  
 
                         
Total
  $ 1,898,460     $ 1,562,597     $ 335,863       21.5  
 
                         
                                 
# OF UNITS:
                               
Recreation Vehicles
                               
Towables
    66,569       56,468       10,101       17.9  
Motorized
    5,968       6,003       (35 )     (.6 )
 
                         
Total Recreation Vehicles
    72,537       62,471       10,066       16.1  
Buses
    3,047       2,900       147       5.1  
 
                         
Total
    75,584       65,371       10,213       15.6  
 
                         

15


Table of Contents

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

                                                 
            % of             % of                  
            Segment             Segment                  
            Net Sales             Net Sales                  
GROSS PROFIT:
                                               
Recreation Vehicles
                                               
Towables
  $ 196,777       15.1     $ 154,927       15.3     $ 41,850       27.0  
Motorized
    40,972       9.7       39,467       10.2       1,505       3.8  
 
                                         
Total Recreation Vehicles
    237,749       13.8       194,394       13.9       43,355       22.3  
Buses
    14,893       8.5       15,271       9.5       (378 )     (2.5 )
 
                                         
Total
  $ 252,642       13.3     $ 209,665       13.4     $ 42,977       20.5  
 
                                         
                                                 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
                                               
Recreation Vehicles
                                               
Towables
  $ 75,451       5.8     $ 58,893       5.8     $ 16,558       28.1  
Motorized
    21,706       5.2       17,684       4.5       4,022       22.7  
 
                                         
Total Recreation Vehicles
    97,157       5.6       76,577       5.5       20,580       26.9  
Buses
    9,749       5.6       8,238       5.1       1,511       18.3  
Corporate
    8,297       .4       9,533       .6       (1,236 )     13.0  
 
                                         
Total
  $ 115,203       6.0     $ 94,348       6.0     $ 20,855       22.1  
 
                                         
                                                 
INCOME BEFORE INCOME TAXES:
                                               
Recreation Vehicles
                                               
Towables
  $ 121,511       9.3     $ 96,096       9.5     $ 25,415       26.4  
Motorized
    19,207       4.6       21,770       5.6       (2,563 )     (11.8 )
 
                                         
Total Recreation Vehicles
    140,718       8.2       117,866       8.4       22,852       19.4  
Buses
    5,109       2.9       7,540       4.7       (2,431 )     (32.2 )
Corporate
    (4,749 )     (.3 )     (5,155 )     (.3 )     406       7.9  
 
                                         
Total
  $ 141,078       7.4     $ 120,251       7.7     $ 20,827       17.3  
 
                                         

CONSOLIDATED

($ in 000)

Net sales, gross profit and income before income taxes for the nine months of fiscal 2005 were up 21.5%, 20.5% and 17.3% respectively compared to the nine months of fiscal 2004. Selling, general and administrative expenses for the nine months of fiscal 2005 increased 22.1% compared to the nine months of fiscal 2004. The specifics on changes in net sales, gross profit, selling, general and administrative expense and income before income taxes will be addressed in the segment reporting.

Corporate costs in selling, general and administrative were $8,297 for the nine months of fiscal 2005 compared to $9,533 fiscal 2004. This $1,236 reduction is primarily the result of lower legal costs and insurance claims in fiscal 2005 of $3,182 offset by increased costs of Sarbanes-Oxley compliance of approximately $1,277.

Other income for the nine months of fiscal 2005, compared to fiscal 2004, was lower due to a gain on sale of equity securities of $1,801 recorded in the second quarter of fiscal 2004.

Net sales and income before income taxes for the nine months of fiscal 2005 included net sales and income before income taxes of $44,156 and $3,736 respectively, for CrossRoads RV acquired November 1, 2004. The overall effective tax rate for the nine months of fiscal 2005 was 37.2% compared to 38.5% for fiscal 2004. The primary reason for the lower effective tax rate for fiscal 2005 is lower state tax rates and increased extra-territorial income tax exclusion on related foreign sales increases.

16


Table of Contents

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

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
    4.4 %     10.4 %     13.8 %     28.6 %
Motorized
          9.0 %     (.6 )%     8.4 %

TOWABLE RECREATION VEHICLES

The increase in towables net sales resulted from a combination of an increase in both average price per unit and unit shipments and our acquisition of CrossRoads RV. The increase in units sold of approximately 17.9% would be 13.8% excluding CrossRoads. The overall industry increase in towables on a comparable basis was 12.2%. Increases in the average price per unit resulted from the combination of price increases and product mix.

Towables gross profit percentage decreased to 15.1% of net sales for fiscal 2005 from 15.3% of net sales for fiscal 2004. The primary factors for the .2% reduced gross margin in 2005 were a $3.3 million decline in gross margins at our Thor California operations and a $1.4 million recall provision at our Keystone operation.

Towables income before income taxes decreased to 9.3% of net sales for fiscal 2005 from 9.5% for fiscal 2004. The primary factors for the reductions were reductions in gross margins as noted above.

MOTORIZED RECREATION VEHICLES

The increase in motorized net sales resulted from an increase in the average price per unit. Increases in the average price per unit resulted from the combination of price increases and product mix.

The decrease in units sold of approximately .6% is significantly better than the overall industry decrease on a comparable basis of 5.5%.

Motorized gross profit percentage decreased to 9.7% of net sales from 10.2% of net sales for fiscal 2004. The primary factor for the reduced gross margin in 2005 was lower unit sales. Selling, general and administrative expenses increased to 5.2% of net sales for fiscal 2005 from 4.5% of net sales for fiscal 2004. The primary factors for the increases in fiscal 2005 as a percentage of sales were repurchase costs of $1,716,000.

Motorized income before income taxes decreased to 4.6% of net sales for fiscal 2005 compared to 5.6% of net sales for fiscal 2004. This reduction was due primarily to lower gross margins as noted above on individual unit sales and higher selling, general and administrative costs due primarily to a large repurchase in 2005.

BUSES

Analysis of Percentage Change in Net Sales Versus Prior Year

                         
    Average Price Per Unit   Units   Net Change  
Buses
    3.0 %     5.1 %     8.1 %

The increase in buses net sales resulted from a combination of an increase in both average price per unit and unit shipments. 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.

17


Table of Contents

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

Buses gross profit percentage decreased to 8.5% for fiscal 2005 from 9.5% for fiscal 2004 due to continuing discounts offered to achieve bus contracts in a very competitive market place, primarily in the first six months of fiscal 2005.

Buses income before income taxes decreased to 2.9% of net sales for fiscal 2005 from 4.7% for fiscal 2004. The primary reason for the decrease is due to reduced gross margins as noted above.

ORDER BACKLOG

                                 
    As of     As of     Change  
$(in 000’s)   April 30, 2005   April 30, 2004   Amount   %  
Recreation Vehicles
                               
Towables
  $ 182,646     $ 334,680     $ (152,034 )     (45.4 )
Motorized
    131,887       144,272       (12,385 )     (8.6 )
 
                         
Total Recreation Vehicles
    314,533       478,952       (164,419 )     (34.3 )
Buses
    140,429       121,038       19,391       16.0  
 
                         
Total
  $ 454,962     $ 599,990     $ (145,028 )     (24.2 )
 
                         

Overall backlog is down 24.2% as of April 30, 2005 compared to April 30, 2004. Towable backlog is down 45.4%. The decline in the towable recreation vehicle backlog is due to increased production capacity built in the last approximately 12 months which resulted in enabling us to ship more products in the first 6 months of this fiscal year. Motorized backlog is down 8.6%, primarily due to softening in the overall motorized market. Bus backlog increased 16.0% from prior year due to large orders received at our Champion Bus operation of approximately $18.9 million.

Financial Condition and Liquidity

$ (in 000)

As of April 30, 2005, we had $127,527 in cash, cash equivalents and short-term investments, compared to $199,166 on July 31, 2004. The decrease in cash equivalents is related to $38,568 in capital expenditures, the $28,022 acquisition of CrossRoads, seasonal increases in inventory and receivables, and the purchase of 489,200 shares of the Company’s stock for $13,091. 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”.

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” 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 interest rates will have a significant impact on our financial position or results of future operations.

Working capital at April 30, 2005 was $270,413 compared to $256,198 on July 31, 2004. 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. There were no borrowings on this line of credit at April 30, 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 $38,568 for the nine months ended April 30, 2005 were primarily for planned purchases of leased buildings of approximately $10,500 and planned capacity expansions of approximately $28,068 in our RV companies.

18


Table of Contents

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

The Company anticipates additional capital expenditures in fiscal 2005 of approximately $11,997. These expenditures will be made primarily to expand our RV companies and for replacement of machinery and equipment to be used in the ordinary course of business.

Critical Accounting Principles

The consolidated financial statements of Thor are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We believe that of our 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 undiscounted future cash flows. 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 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.

19


Table of Contents

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

Forward Looking Statements

This report includes certain statements that are “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve uncertainties and risks. There can be no assurance that actual results will not differ from the Company’s expectations. Factors which could cause materially different results include, among others, 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 procedure, as required by Exchange Act Rule 13a-15. 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.

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 April 30, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

20


Table of Contents

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

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 2004
                288,000       1,712,000  
 
                               
September 2004
                288,000       1,712,000  
 
                               
October 2004
    323,200     $ 26.27       611,200       1,388,800  
 
                               
November 2004
                611,200       1,388,800  
 
                               
December 2004
                611,200       1,388,800  
 
                               
January 2005
                611,200       1,388,800  
 
                               
February 2005
                611,200       1,388,800  
 
                               
March 2005
                611,200       1,388,800  
 
                               
April 2005
    256,000     $ 27.46       887,200       1,132,800  
 
                           
 
                               
Total
    579,200     $ 26.80                  
 
                           


(1)   On March 11, 2003, we announced that our Board of Directors had approved a share repurchase program, pursuant to which up to 1,000,000 shares of our common stock may be repurchased. In the second quarter of fiscal 2004, we affected a two-for-one stock split, resulting in 2,000,000 shares authorized for repurchase under the program. At April 30, 2005, 1,132,800 shares of common stock remained authorized for repurchase under the repurchase program.

ITEM 6.Exhibits

      a.) Exhibits

  31.1   Chief Executive Officer’s Certification, pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
 
  31.2   Chief Financial Officer’s Certification, pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
 
  32.1   Chief Executive Officer’s Certification, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.
 
  32.2   Chief Financial Officer’s Certification, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.

21


Table of Contents

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: June 2, 2005  /s/   Wade F. B. Thompson   
    Wade F. B. Thompson   
    Chairman of the Board, President and Chief Executive Officer   
   
           
       
DATE: June 2, 2005  /s/   Walter L. Bennett    
    Walter L. Bennett   
    Executive Vice President, Secretary and Chief Financial Officer   

22