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THOR INDUSTRIES INC - Quarter Report: 2006 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, 2006
  COMMISSION FILE NUMBER 1-9235
THOR INDUSTRIES, INC.
 
(Exact name of registrant as specified in its charter)
     
Delaware   93-0768752
     
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
         
419 West Pike Street, Jackson Center, OH
       45334-0629
 
       
(Address of principal executive offices)
      (Zip Code)
Registrant’s telephone number, including area code: (937) 596-6849
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
             
    Yes þ   No o    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
         
Large accelerated filer þ
  Accelerated filer o   Non-accelerated filer 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 4/30/2006
Common stock, par value $.10 per share
  56,684,286 shares
 
 

 


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


Table of Contents

PART I — Financial Information
Unless otherwise indicated, all amounts presented in thousands of dollars except unit, share and per share data.
ITEM 1. Financial Statements
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                 
    April 30, 2006     July 31, 2005  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 141,494     $ 163,596  
Investments – short term
    125,013       45,219  
Accounts receivable:
               
Trade
    217,115       140,927  
Other
    6,789       5,409  
Inventories
    200,159       161,770  
Prepaid expenses
    8,388       5,857  
Deferred income taxes
    19,323       1,262  
 
           
Total current assets
    718,281       524,040  
 
           
Property:
               
Land
    23,408       21,339  
Buildings and improvements
    120,750       109,443  
Machinery and equipment
    53,742       49,259  
 
           
Total cost
    197,900       180,041  
Accumulated depreciation
    48,638       40,252  
 
           
Property, net
    149,262       139,789  
 
           
Investment in Joint ventures
    2,664       2,800  
 
           
Other assets:
               
Goodwill
    165,663       165,662  
Non-compete agreements
    3,078       3,790  
Trademarks
    13,900       13,900  
Other
    9,929       7,898  
 
           
Total other assets
    192,570       191,250  
 
           
TOTAL ASSETS
  $ 1,062,777     $ 857,879  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 161,311     $ 118,056  
Accrued liabilities:
               
Taxes
    49,510       8,351  
Compensation and related items
    35,692       28,519  
Product warranties
    56,840       55,118  
Promotions and rebates
    11,687       7,362  
Product/property liability and related
    9,999       7,913  
Dividend payable
          17,000  
Other
    8,115       6,493  
 
           
Total current liabilities
    333,154       248,812  
 
           
Deferred income taxes and other liabilities
    13,778       11,680  
Stockholders’ equity:
               
Common stock — authorized 250,000,000 shares; issued 57,040,286 shares @ 4/30/06 and 56,933,483 shares @ 7/31/05; par value of $.10 per share
    5,704       5,693  
Additional paid-in capital
    85,439       82,652  
Accumulated other comprehensive income
    1,939       943  
Retained earnings
    635,448       515,877  
Restricted stock plan
    (552 )     (747 )
Less Treasury shares of 356,000 @ 4/30/06 & 256,000 @ 7/31/05
    (12,133 )     (7,031 )
 
           
Total stockholders’ equity
    715,845       597,387  
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 1,062,777     $ 857,879  
 
           
See notes to consolidated financial statements

 


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THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME

FOR THE THREE & NINE MONTHS ENDED APRIL 30, 2006 AND 2005
                                 
    Three Months Ended April 30     Nine Months Ended April 30  
    2006     2005     2006     2005  
Net sales
  $ 857,615     $ 728,693     $ 2,260,985     $ 1,898,460  
 
Cost of products sold
    729,604       634,658       1,931,369       1,645,818  
 
Gross profit
    128,011       94,035       329,616       252,642  
 
Selling, general and administrative expenses
    50,317       43,160       135,890       115,203  
 
Interest income
    2,552       680       6,270       2,025  
 
Interest expense
    347       144       917       254  
 
Other income
    243       743       1,169       1,868  
 
 
                       
 
Income before income taxes
    80,142       52,154       200,248       141,078  
 
Provision for income taxes
    29,003       19,204       73,870       52,418  
 
                       
 
Net income
  $ 51,139     $ 32,950     $ 126,378     $ 88,660  
 
                       
 
                               
Average common shares outstanding:
                               
 
Basic
    56,656,684       56,732,473       56,605,615       56,801,528  
 
Diluted
    57,087,096       57,129,262       56,994,628       57,195,012  
 
                               
Earnings per common share:
                               
 
Basic
  $ .90     $ .58     $ 2.23     $ 1.56  
Diluted
  $ .90     $ .58     $ 2.22     $ 1.55  
 
                               
Dividends declared per common share:
  $ .07     $ .03     $ .12     $ .09  
See notes to consolidated financial statements

 


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

FOR THE NINE MONTHS ENDED APRIL 30, 2006 AND 2005
                 
    2006     2005  
Cash flows from operating activities:
               
Net income
  $ 126,378     $ 88,660  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
               
Depreciation
    10,023       7,131  
Amortization
    712       730  
Deferred income taxes
    (18,149 )      
(Gain) loss on disposition of assets
    (11 )     74  
Loss on disposition of trading investments
    403       1,064  
Unrealized (gain) on trading investments
    (461 )     (39 )
Changes in non cash assets and liabilities, net of effect from acquisitions:
               
Purchases of trading investments
    (197,462 )     (103,733 )
Proceeds from disposition of trading investments
    117,726       123,914  
Accounts receivable
    (77,568 )     (49,438 )
Inventories
    (38,389 )     (31,450 )
Prepaids and other
    (4,427 )     (3,751 )
Accounts payable
    36,747       (9,308 )
Accrued liabilities
    58,425       9,835  
Other liabilities
    2,933       348  
 
           
Net cash provided by operating activities
    16,880       34,037  
 
           
 
               
Cash flows from investing activities:
               
Purchase of property, plant & equipment
    (18,263 )     (38,568 )
Proceeds from disposition of assets
    229       35  
Acquisitions – Net of cash acquired
          (28,022 )
 
           
Net cash used in investing activities
    (18,034 )     (66,555 )
 
           
 
               
Cash flows from financing activities:
               
Cash dividends
    (23,807 )     (5,126 )
Purchase of common stock for retirement
          (8,490 )
Purchase of common stock held as treasury shares
          (4,601 )
Proceeds from issuance of common stock
    1,863       814  
Retirement of acquired debt
          (1,001 )
 
           
 
               
Net cash used in financing activities
    (21,944 )     (18,404 )
 
           
 
               
Effect of exchange rate changes on cash
    996       489  
 
           
 
               
Net decrease in cash and equivalents
    (22,102 )     (50,433 )
Cash and equivalents, beginning of period
    163,596       136,120  
 
           
Cash and equivalents, end of period
  $ 141,494     $ 85,687  
 
           
 
               
Supplemental cash flow information:
               
Income taxes paid
  $ 52,057     $ 52,586  
Interest paid
    917       254  
Non cash transactions:
               
Retirement of treasury shares
  $     $ 8,490  
Capital expenditures in accounts payable
    1,406        
Purchase of treasury shares
    5,102       2,430  
Incentive stock option disqualifying disposition
    339        
Cancellation of restricted stock
    42        
     See notes to consolidated financial statements

 


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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 and nine months ended April 30, 2006 are not necessarily indicative of the results for the full year.
 
2.   Major classifications of inventories are:
                 
    April 30, 2006     July 31, 2005  
Raw materials
  $ 101,124     $ 78,493  
Chassis
    45,544       29,506  
Work in process
    45,762       55,413  
Finished goods
    28,553       14,196  
 
           
Total
    220,983       177,608  
Less excess of FIFO costs over LIFO costs
    20,824       15,838  
 
           
Total inventories
  $ 200,159     $ 161,770  
 
           
3.   Earnings Per Share
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2006     April 30, 2005     April 30, 2006     April 30, 2005  
Weighted average shares outstanding for basic earnings per share
    56,656,684       56,732,473       56,605,615       56,801,528  
Stock options and restricted stock
    430,412       396,789       389,013       393,484  
 
                       
 
                               
Total — For diluted shares
    57,087,096       57,129,262       56,994,628       57,195,012  
 
                       
4.   Comprehensive Income
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2006     April 30, 2005     April 30, 2006     April 30, 2005  
Net income
  $ 51,139     $ 32,950     $ 126,378     $ 88,660  
Foreign currency translation adjustment
    156       (238 )     996       490  
 
                       
 
                               
Comprehensive income
  $ 51,295     $ 32,712     $ 127,374     $ 89,150  
 
                       
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. During the quarter ended January 31, 2006, the Company made the decision not to produce a planned motorized product line. The impairment charge associated with the decision was $1,360 and is included in cost of products sold.

 


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2006     April 30, 2005     April 30, 2006     April 30, 2005  
Net Sales:
                               
Recreation vehicles:
                               
Towables
  $ 615,043     $ 497,032     $ 1,606,140     $ 1,302,690  
Motorized
    161,593       165,758       424,528       421,423  
 
                       
Total recreation vehicles
    776,636       662,790       2,030,668       1,724,113  
Buses
    80,979       65,903       230,317       174,347  
 
                       
 
                               
Total
  $ 857,615     $ 728,693     $ 2,260,985     $ 1,898,460  
 
                       
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2006     April 30, 2005     April 30, 2006     April 30, 2005  
Income Before Income Taxes:
                               
Recreation vehicles:
                               
Towables
  $ 71,888     $ 44,119     $ 183,314     $ 121,511  
Motorized
    7,756       7,421       18,293       19,207  
 
                       
Total recreation vehicles
    79,644       51,540       201,607       140,718  
Buses
    2,034       2,641       6,013       5,109  
Corporate
    (1,536 )     (2,027 )     (7,372 )     (4,749 )
 
                       
 
                               
Total
  $ 80,142     $ 52,154     $ 200,248     $ 141,078  
 
                       
                 
    April 30, 2006     July 31, 2005  
Identifiable Assets:
               
Recreation vehicles:
               
Towables
  $ 503,856     $ 384,292  
Motorized
    166,902       126,045  
 
           
Total recreation vehicles
    670,758       510,337  
Buses
    105,886       96,942  
Corporate
    286,133       250,600  
 
           
Total
  $ 1,062,777     $ 857,879  
 
           
6.   Treasury Shares
 
    The Company purchased 100,000 shares of treasury stock in April 2006 at an average cost of $51. The cash outlay occurred in May 2006. The Company purchased 256,000 shares of treasury stock in April 2005 at an average cost of $27. Of these shares 90,000 shares were paid for in May 2005. The Company also 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 – Short Term
 
    Short term investments, which are principally investment grade securities composed of asset-based notes, mortgage-based notes, auction rate securities and corporate bonds, are generally bought and held for sale in the near term, and are classified as trading securities. Trading securities are carried at fair market value. Realized and unrealized gains and losses on trading securities 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

 


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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 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:
                                 
    April 30, 2006   July 31, 2005
            Accumulated           Accumulated
    Cost   Amortization   Cost   Amortization
Amortized Intangible Assets:
                               
Non-compete agreements
  $ 15,889     $ 12,811     $ 15,889     $ 12,099  
                                 
    Three Months   Three Months   Nine Months   Nine Months
    Ended   Ended   Ended   Ended
    April 30, 2006   April 30, 2005   April 30, 2006   April 30, 2005
Non-compete Agreements:
                               
Amortization Expense
  $ 237     $ 259     $ 712     $ 730  
    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 nine month period ended April 30, 2006.
 
    As of April 30, 2006, 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  
 
           

 


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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     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2006     April 30, 2005     April 30, 2006     April 30, 2005  
Beginning Balance
  $ 53,882     $ 49,152     $ 55,118     $ 45,829  
Provision
    17,428       16,752       45,281       44,133  
Payments
    14,470       12,923       43,559       38,076  
Acquisitions
                      1,095  
 
                       
Ending Balance
  $ 56,840     $ 52,981     $ 56,840     $ 52,981  
 
                       
11.   Commercial Commitments
 
    Our principal commercial commitments at April 30, 2006 are summarized in the following chart:
             
    Total   Term of
Commitment   Amount Committed   Guarantee
Guarantee on dealer financing
  $ 3,440      less than 1 year
Standby repurchase obligation
on dealer financing
  $ 877,967      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 $1,864 and $1,368 as of April 30, 2006 and July 31, 2005, respectively.
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    April 30, 2006     April 30, 2005     April 30, 2006     April 30, 2005  
Cost of units repurchased
  $ 881     $ 2,313     $ 2,984     $ 9,149  
 
Realization on units resold
    749       1,959       2,555       7,433  
 
                       
 
Losses due to repurchase
  $ 132     $ 354     $ 429     $ 1,716  
 
                       
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.

 


Table of Contents

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 nine months ended April 30, 2006 is as follows:
                                 
            Weighted     Weighted Avg.        
            Avg. Exercise     Remaining     Aggregate  
    Shares     Price     Contractual Life     Intrinsic Value  
Outstanding, August 1, 2005
    704,041     $ 19.63              
Granted
                       
Exercised
    111,003       16.78              
Canceled
                       
Forfeited
                       
 
                           
Outstanding, April 30, 2006
    593,038       20.17       6.9     $ 17,976  
 
Exercisable, April 30, 2006
    429,010       17.23       6.5     $ 14,263  
    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 when awards are granted. Forfeiture assumptions are revised as necessary to reflect 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 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 and nine months ended April 30, 2006, the Company recorded expense of $220 and $638 respectively for stock option awards. At April 30, 2006, there was $716 of total unrecognized compensation costs related to stock options that is expected to be recognized over a weighted average period of 1.1 years.
 
    Cash received from stock option exercises for the three and nine months ended April 30, 2006 was $607 and $1,863 respectively. The total intrinsic value of stock options exercised was $3,260 for the nine months ended April 30, 2006.
 
    Exercises of options are satisfied with the issuance of new shares from authorized shares.
 
    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 nine months ended April 30, 2006 is as follows:
                 
            Weighted  
            Average Grant  
    Shares     Date Fair Value  
Nonvested, August 1, 2005
    115,700     $ 12.93  
Granted
           
Vested
    16,800       5.77  
Forfeited
    4,200       9.98  
 
             
Nonvested, April 30, 2006
    94,700     $ 14.33  
 
             

 


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three and nine months ended April 30, 2006, the Company recorded expense of $31 and $153, respectively for restricted stock awards. At April 30, 2006, there was $553 of total unrecognized compensation costs related to restricted stock awards that is expected to be recognized over a weighted average period of 2.6 years.
The total fair value of restricted shares vested during the nine months ended April 30, 2006 is $604.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, all amounts presented in thousands of dollars except unit, share and per share data.
Executive Overview
We were founded in 1980 and have grown to be the largest manufacturer of Recreation Vehicles (“RV’s”) and a major manufacturer of commercial buses in North America. Our position in the travel trailer and fifth wheel segment of the industry (towables), with our 2004 acquisition of CrossRoads RV, gives us an approximate 32% market share. In the motorized segment of the industry we have an approximate 13% market share. Our market share in small and mid-size commercial buses is approximately 38%. We 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 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 and expand 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 program for 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. Recently, the towable segment of the RV industry has been stronger than the motorized segment. For the towable segment, retail sales as reported by Statistical Survey, Inc. were approximately even with last year for the 3-months ended March 31, 2006; however, the motorized segment was down approximately 19%. Higher interest rates and fuel prices appear to have affected the motorized segment more severely.

 


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
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 are being replaced.
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 APRIL 30, 2006 VS. THREE MONTHS ENDED APRIL 30, 2005
                                                 
    Three Months Ended             Three Months Ended             Change        
    April 30, 2006             April 30, 2005             Amount     %  
NET SALES:
                                               
Recreation Vehicles
                                               
Towables
  $ 615,043             $ 497,032             $ 118,011       23.7  
Motorized
    161,593               165,758               (4,165 )     (2.5 )
 
                                         
Total Recreation Vehicles
    776,636               662,790               113,846       17.2  
Buses
    80,979               65,903               15,076       22.9  
 
                                         
Total
  $ 857,615             $ 728,693             $ 128,922       17.7  
 
                                         
 
                                               
# OF UNITS:
                                               
Recreation Vehicles
                                               
Towables
    31,729               25,222               6,507       25.8  
Motorized
    2,190               2,436               (246 )     (10.1 )
 
                                         
Total Recreation Vehicles
    33,919               27,658               6,261       22.6  
Buses
    1,438               1,149               289       25.2  
 
                                         
Total
    35,357               28,807               6,550       22.7  
 
                                         
 
          % of           % of                
 
          Segment           Segment                
 
          Net Sales           Net Sales                
GROSS PROFIT:
                                               
Recreation Vehicles
                                               
Towables
  $ 105,743       17.2     $ 72,670       14.6     $ 33,073       45.5  
Motorized
    15,830       9.8       15,692       9.5       138       0.9  
 
                                         
Total Recreation Vehicles
    121,573       15.7       88,362       13.3       33,211       37.6  
Buses
    6,438       8.0       5,673       8.6       765       13.5  
 
                                         
Total
  $ 128,011       14.9     $ 94,035       12.9     $ 33,976       36.1  
 
                                         
 
                                               
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:                                        
Recreation Vehicles
                                               
Towables
  $ 33,914       5.5     $ 28,607       5.8     $ 5,307       18.6  
Motorized
    8,074       5.0       8,271       5.0       (197 )     (2.4 )
 
                                         
Total Recreation Vehicles
    41,988       5.4       36,878       5.6       5,110       13.9  
Buses
    4,092       5.1       2,937       4.5       1,155       39.3  
Corporate
    4,237       .5       3,345       .5       892       26.7  
 
                                         
Total
  $ 50,317       5.9     $ 43,160       5.9     $ 7,157       16.6  
 
                                         
 
                                               
INCOME BEFORE INCOME TAXES:                                        
Recreation Vehicles
                                               
Towables
  $ 71,888       11.7     $ 44,119       8.9     $ 27,769       62.9  
Motorized
    7,756       4.8       7,421       4.5       335       4.5  
 
                                         
Total Recreation Vehicles
    79,644       10.3       51,540       7.8       28,104       54.5  
Buses
    2,034       2.5       2,641       4.0       (607 )     (23.0 )
Corporate
    (1,536 )     (.2 )     (2,027 )     (.2 )     491       24.2  
 
                                         
Total
  $ 80,142       9.3     $ 52,154       7.2     $ 27,988       53.7  
 
                                         


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 2006 were up 17.7% and 36.1% respectively compared to the third quarter of fiscal 2005. Income before income taxes for the third quarter of fiscal 2006 was up 53.7% compared to the third quarter of fiscal 2005. Selling, general and administrative expenses increased 16.6% compared to the third 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 $4,237 for the third quarter of fiscal 2006 compared to $3,345 for the third quarter of fiscal 2005. This increase of $892 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 third quarter of fiscal 2006 included net sales and income before income taxes of $11,467 and $8 respectively, for Goshen Coach acquired May 27, 2005. The overall effective tax rate for the third quarter of fiscal 2006 was 36.2% compared to 36.8% for the third quarter of fiscal 2005.
Segment Reporting
RECREATION VEHICLES
Analysis of Percentage Change in Net Sales Versus Prior Year
                         
    Impact from Internal Growth    
    Average Price        
    Per Unit   Units   Net Change
Recreation Vehicles
                       
Towables
    (2.1 )%     25.8 %     23.7 %
Motorized
    7.6 %     (10.1 )%     (2.5 )%
TOWABLE RECREATION VEHICLES
The increase in towables net sales of 23.7% resulted primarily from an increase in unit shipments of 25.8%. The overall industry increase in towables for February and March of 2006 was 19.9% according to statistics published by the Recreation Vehicle Industry Association. Decreases in the average price per unit resulted from product mix. We estimate that approximately $8,581 or 1.4% of towable net sales, were related to Hurricane relief units which were sold through our dealer network. We have no comparable industry statistics for the total Hurricane relief units sold.
Towables gross profit percentage increased to 17.2% of net sales for the third quarter of fiscal 2006 from 14.6% of net sales for the third quarter of fiscal 2005. The primary factor for the 45.5% increase in gross profit was the 23.7% increase in net sales, improved manufacturing cost and reduced warranty as a percentage of sales. Selling, general and administrative expenses were 5.5% of net sales for the third quarter of fiscal 2006 and 5.8% of net sales for the third quarter of fiscal 2005.
Towables income before income taxes increased to 11.7% of net sales for the third quarter of fiscal 2006 from 8.9% of net sales for the third quarter of fiscal 2005. The primary factors for this increase was our 23.7% revenue increase and reduced manufacturing and warranty costs as a percent of sales.

 


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 of 2.5% resulted from a 10.1% decrease in unit sales offset by price increase and product mix. The decrease in units sold of approximately 10.1% outperformed the overall market decrease in motorhomes of 13.3% for the two month period February and March 2006 (according to statistics published by the Recreation Vehicle Industry Association). Increases in the average price per unit resulted from the combination of price increases and product mix.
Motorized gross profit percentage increased to 9.8% of net sales for the third quarter of fiscal 2006 from 9.5% of net sales for the third quarter of fiscal 2005. Selling, general and administrative expenses were 5.0% of net sales for the third quarter of fiscal 2006 and fiscal 2005.
Motorized income before income taxes was 4.8% of net sales for the third quarter of fiscal 2006 and 4.5% of net sales for the third quarter of fiscal 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
    17.4 %     5.7 %     (.2 )%     22.9 %
The increase in buses net sales of 22.9% resulted from a combination of an increase in both average price per unit and our acquisition of Goshen Coach.
Buses gross profit percentage decreased to 8.0% of net sales for the third quarter of fiscal 2006 from 8.6% of net sales for the third quarter of fiscal 2005 due to the low gross profit on bus contracts assumed in the purchase of Goshen Coach. Selling, general and administrative expenses were 5.1% of net sales for fiscal 2006 and 4.5% for the third quarter of fiscal 2005. The increase in selling, general and administrative expenses as a percentage of net sales is primarily due to increased legal and insurance expenses associated with a settled liability claim of $1,000.
Buses income before income taxes decreased to 2.5% of net sales for the third quarter of fiscal 2006 from 4.0% for the third quarter of fiscal 2005. The primary reason for the decrease is the inclusion of Goshen Coach as mentioned above and the settling of a $1,000 liability claim.
ORDER BACKLOG
$(in 000’s)
                                 
    As of     As of     Change  
    April 30, 2006     April 30, 2005     Amount     %  
Recreation Vehicles
                               
Towables
  $ 369     $ 183     $ 186       101.6  
Motorized
    132       132              
 
                         
Total Recreation Vehicles
    501       315       186       59.0  
Buses
    197       140       57       40.7  
 
                         
Total
  $ 698     $ 455     $ 243       53.4  
 
                         

 


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
NINE MONTHS ENDED APRIL 30, 2006 VS. NINE MONTHS ENDED APRIL 30, 2005
                                                 
    Nine Months             Nine Months             Change        
    April 30, 2006             April 30, 2005             Amount     %  
NET SALES:
                                               
Recreation Vehicles
                                             
Towables
  $ 1,606,140             $ 1,302,690             $ 303,450       23.3  
Motorized
    424,528               421,423               3,105       0.7  
 
                                         
Total Recreation Vehicles
    2,030,668               1,724,113               306,555       17.8  
Buses
    230,317               174,347               55,970       32.1  
 
                                         
Total
  $ 2,260,985             $ 1,898,460             $ 362,525       19.1  
 
                                         
# OF UNITS:
                                               
Recreation Vehicles
                                               
Towables
    83,289               66,569               16,720       25.1  
Motorized
    5,695               5,968               (273 )     (4.6 )
 
                                         
Total Recreation Vehicles
    88,984               72,537               16,447       22.7  
Buses
    4,227               3,047               1,180       38.7  
 
                                         
Total
    93,211               75,584               17,627       23.3  
 
                                         
 
          % of           % of                
 
          Segment           Segment                
 
          Net Sales           Net Sales                
 
                                       
GROSS PROFIT:
                                               
Recreation Vehicles
                                               
Towables
  $ 273,265       17.0     $ 196,777       15.1     $ 76,488       38.9  
Motorized
    39,007       9.2       40,972       9.7       (1,965 )     (4.8 )
 
                                         
Total Recreation Vehicles
    312,272       15.4       237,749       13.8       74,523       31.3  
Buses
    17,344       7.5       14,893       8.5       2,451       16.5  
 
                                         
Total
  $ 329,616       14.6     $ 252,642       13.3     $ 76,974       30.5  
 
                                         
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:                                
Recreation Vehicles
                                               
Towables
  $ 90,167       5.6     $ 75,451       5.8     $ 14,716       19.5  
Motorized
    20,711       4.9       21,706       5.2       (995 )     (4.6 )
 
                                         
Total Recreation Vehicles
    110,878       5.5       97,157       5.6       13,721       14.1  
Buses
    10,709       4.6       9,749       5.6       960       9.8  
Corporate
    14,303       0.6       8,297       0.4       6,006       72.4  
 
                                         
Total
  $ 135,890       6.0     $ 115,203       6.1     $ 20,687       18.0  
 
                                         
INCOME BEFORE INCOME TAXES:
                                               
Recreation Vehicles
                                               
Towables
  $ 183,314       11.4     $ 121,511       9.3     $ 61,803       50.9  
Motorized
    18,293       4.3       19,207       4.6       (914 )     (4.8 )
 
                                         
Total Recreation Vehicles
    201,607       9.9       140,718       8.2       60,889       43.3  
Buses
    6,013       2.6       5,109       2.9       904       17.7  
Corporate
    (7,372 )     0.3       (4,749 )     (.3 )     (2,623 )     (55.2 )
 
                                         
Total
  $ 200,248       8.9     $ 141,078       7.4     $ 59,170       41.9  
 
                                         
CONSOLIDATED
($ in 000)
Net sales and gross profit for the nine months of fiscal 2006 were up 19.1% and 30.5% respectively compared to the nine months of fiscal 2005. Income before income taxes for the nine months of fiscal 2006 was up 41.9% compared to the nine months of fiscal 2005. Selling, general and administrative expenses increased 18.0% compared to 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.

 


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Corporate costs in selling, general and administrative were $14,303 for the nine months of fiscal 2006 compared to $8,297 in fiscal 2005. This increase of $6,006 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 nine months of fiscal 2006 included net sales and income before income taxes of $135,287 and $18,848 respectively compared to net sales of $44,156 and income before income taxes of $3,736 for the nine months of 2005 for CrossRoads RV acquired November 1, 2004. Net sales and loss before income taxes for the nine months of fiscal 2006 were $30,854 and $853 respectively, for Goshen Coach acquired May 27, 2005. The overall effective tax rate for the nine months of fiscal 2006 was 36.9% compared to 37.2% for the nine months of fiscal 2005.
Segment Reporting
RECREATION VEHICLES
Analysis of Percentage Change in Net Sales Versus Prior Year
                                 
            Impact from Internal Growth    
    Impact   Average Price        
    from Acquisition   Per Unit   Units   Net Change
Recreation Vehicles
                               
Towables
    3.0 %     (1.9 )%     22.2 %     23.3 %
Motorized
          5.3 %     (4.6 )%     .7 %
TOWABLE RECREATION VEHICLES
The increase in towables net sales of 23.3% resulted primarily from an increase in unit shipments. The overall industry increase in towables for August 2005 through March 2006 was 21.7% according to statistics published by the Recreation Vehicle Industry Association. Decreases in the average price per unit resulted from product mix. We estimate that approximately $122,258 or 7.6% of towable net sales, were related to Hurricane relief units sold through our dealer network. We have no comparable industry statistics for the total Hurricane relief units sold.
Towables gross profit percentage increased to 17.0% of net sales for fiscal 2006 from 15.1% of net sales for fiscal 2005. The primary factor for the 38.9% increase in gross profit was the 23.3% increase in net sales and lower manufacturing and warranty costs. Selling, general and administrative expenses were 5.6% of net sales for fiscal 2006 and 5.8% of net sales for fiscal 2005.
Towables income before income taxes increased to 11.4% of net sales for fiscal 2006 from 9.3% of net sales for fiscal 2005. The primary factors for this increase was our 23.3% revenue increase and reduced manufacturing and warranty costs as a percent of sales.
MOTORIZED RECREATION VEHICLES
The increase in motorized net sales of .7% resulted from an increase in average price per unit. The decrease in units sold of approximately 4.6% outperformed the overall market decrease in motorhomes of 14.5% for August 2005 through March 2006 according to statistics published by the Recreation Vehicle Industry Association. Increases in the average price per unit resulted from the combination of price increases and product mix.
Motorized gross profit percentage decreased to 9.2% of net sales for fiscal 2006 from 9.7% of net sales for fiscal 2005. The primary factor for the decreased gross profit in 2006 was due to the decision to not produce a planned motorized product line. The impairment charge associated with the decision was $1,360 and is included in cost of products sold. The balance of the decrease in gross margin is related to reduced unit sales. Selling, general and administrative expenses were 4.9% of net sales for fiscal 2006 and 5.2% of net sales for fiscal 2005.

 


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Motorized income before income taxes was 4.3% of net sales for fiscal 2006 and 4.6% of net sales for fiscal 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
    17.7 %     8.0 %     6.4 %     32.1 %
The increase in buses net sales of 32.1% 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 38.7% would have been 6.4% 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. However, 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 7.5% of net sales for fiscal 2006 from 8.5% of net sales for fiscal 2005 due to the low gross profit on bus contracts assumed in the purchase of Goshen Coach. Selling, general and administrative expenses were 4.6% of net sales for fiscal 2006 and 5.6% for fiscal 2005. The reduction in selling, general and administrative expenses as a percentage of net sales is primarily due to reduced legal and settlement costs in fiscal 2006.
Buses income before income taxes decreased to 2.6% of net sales for fiscal 2006 from 2.9% for fiscal 2005. The primary reason for the decrease is the loss at Goshen Coach.
Financial Condition and Liquidity
$ (in 000)
As of April 30, 2006, we had $266,507 in cash, cash equivalents and short-term investments, compared to $208,815 on July 31, 2005. Short term investments, which are 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 and are classified as trading securities. Trading securities are carried at fair market value. Realized and unrealized gains and losses on trading securities are included in earnings. Dividend and interest income are recognized when earned.
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 April 30, 2006 was $385,127 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, 2006. There were no borrowings on this line of credit during the nine months ended April 30, 2006. 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 for the foreseeable future. Capital expenditures of approximately $19,669 for the nine months ended April 30, 2006 were primarily for planned expansions and improvements of $18,213 at our recreation vehicle facilities and $1,456 for our bus operations, primarily at our new Goshen Coach facility.

 


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company anticipates additional capital expenditures in fiscal 2006 of approximately $11,000. 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 Policies
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 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 $25,000,000 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.

 


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes.” The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in the company’s financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact the Company’s financial position or its results of operations.
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 prices, fuel availability, interest rate increases, increased material costs, the success of new product introductions, the pace of acquisitions, 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.
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

 


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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 three months ended April 30, 2006 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
(c) 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
February 2006
                      1,132,800  
                                 
March 2006
                      1,132,800  
                                 
April 2006
    100,000     $ 51.01       100,000       1,032,800  
 
(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, 2006, 1,032,800 common stock remained authorized for repurchase under the repurchase program.
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.

 


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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: May 30, 2006
    /s/   Wade F. B. Thompson    
 
     
 
Wade F. B. Thompson
   
 
      Chairman of the Board, President    
 
      and Chief Executive Officer    
 
           
DATE: May 30, 2006
    /s/   Walter L. Bennett    
 
     
 
Walter L. Bennett
   
 
      Executive Vice President,    
 
      Secretary and Chief Financial Officer