Annual Statements Open main menu

THOR INDUSTRIES INC - Quarter Report: 2007 October (Form 10-Q)

Thor Industries, Inc. 10-Q
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
     
FOR QUARTER ENDED October 31, 2007   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 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 10/31/2007
     
Common stock, par value
$.10 per share
  55,870,663 shares
 
 

 


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
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 1. LEGAL PROCEEDINGS
ITEM 6. Exhibits
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-32.2


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
CONDENSED CONSOLIDATED BALANCE SHEETS
                 
    October 31, 2007     July 31, 2007  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 104,451     $ 171,889  
Investments — short term
    160,550       174,575  
Accounts receivable:
               
Trade
    169,412       171,596  
Other
    9,805       5,799  
Inventories
    187,879       168,980  
Deferred income taxes and other
    31,079       12,689  
 
           
Total current assets
    663,176       705,528  
 
           
Property:
               
Land
    21,816       21,795  
Buildings and improvements
    135,569       134,352  
Machinery and equipment
    66,786       64,572  
 
           
Total cost
    224,171       220,719  
Accumulated depreciation
    67,080       63,477  
 
           
Property, net
    157,091       157,242  
 
           
Investment in Joint ventures
    3,119       2,671  
 
           
Other assets:
               
Goodwill
    165,663       165,663  
Non-compete agreements
    1,693       1,906  
Trademarks
    13,900       13,900  
Other
    13,429       12,387  
 
           
Total other assets
    194,685       193,856  
 
           
TOTAL ASSETS
  $ 1,018,071     $ 1,059,297  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 127,487     $ 123,433  
Accrued liabilities:
               
Taxes
    30,763       17,991  
Compensation and related items
    34,359       39,242  
Product warranties
    66,011       64,310  
Promotions and rebates
    16,020       11,697  
Product/property liability and related
    11,100       11,691  
Other
    9,988       8,835  
 
           
Total current liabilities
    295,728       277,199  
 
           
Long Term Liabilities:
               
Unrecognized tax benefits
    24,673        
Other
    21,547       15,767  
 
           
Total long term liabilities
    46,220       15,767  
Stockholders’ equity:
               
Common stock — authorized 250,000,000 shares; issued 57,312,263 shares @ 10/31/07 and 57,222,404 shares @ 7/31/07; par value of $.10 per share
    5,731       5,722  
Additional paid-in capital
    92,632       90,247  
Retained earnings
    633,108       727,729  
Accumulated other comprehensive income
    4,775       2,756  
Less Treasury shares of 1,441,600 @ 10/31/07 & 7/31/07
    (60,123 )     (60,123 )
 
           
Total stockholders’ equity
    676,123       766,331  
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 1,018,071     $ 1,059,297  
 
           
See notes to condensed consolidated financial statements

1


Table of Contents

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED INCOME

FOR THE THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006
                 
    Three Months Ended October 31  
    2007     2006  
 
Net sales
  $ 763,736     $ 727,716  
 
Cost of products sold
    662,461       638,548  
 
           
 
Gross profit
    101,275       89,168  
 
Selling, general and administrative expenses
    45,410       43,445  
 
Interest income
    4,196       2,910  
 
Interest expense
    360       187  
 
Other income
    779       550  
 
           
 
Income before income taxes
    60,480       48,996  
 
Provision for income taxes
    22,271       18,399  
 
           
 
Net income
  $ 38,209     $ 30,597  
 
           
 
               
Average common shares outstanding:
               
 
Basic
    55,757,338       55,613,302  
 
Diluted
    55,966,614       55,904,797  
 
               
Earnings per common share:
               
 
Basic
  $ .69     $ .55  
Diluted
  $ .68     $ .55  
 
Regular dividends declared per common share:
  $ .07     $ .07  
Special dividends declared per common share:
  $ 2.00     $ 1.00  
 
Regular dividends paid per common share:
  $ .07     $ .07  
Special dividends paid per common share:
  $ 2.00     $ 1.00  
See notes to condensed consolidated financial statements

2


Table of Contents

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

FOR THE THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006
                 
    Three Months Ended October 31  
    2007     2006  
Cash flows from operating activities:
               
Net income
  $ 38,209     $ 30,597  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
               
Depreciation
    3,353       3,226  
Amortization
    213       237  
Deferred income taxes
    (7,026 )     (7,700 )
Loss on disposition of assets
    3       103  
Loss on disposition of trading investments
          104  
Stock based compensation
    84       160  
Changes in non cash assets and liabilities, net of effect from acquisitions:
               
Proceeds from disposition of trading investments
          68,133  
Accounts receivable
    (1,822 )     34,480  
Inventories
    (18,899 )     (23,999 )
Prepaids and other
    (12,854 )     (11,783 )
Accounts payable
    4,029       (40,752 )
Accrued liabilities
    22,071       20,840  
Other liabilities
    5,677       943  
 
           
Net cash provided by operating activities
    33,038       74,589  
 
           
 
               
Cash flows from investing activities:
               
Purchase of property, plant & equipment
    (3,087 )     (4,076 )
Proceeds from disposition of assets
    10       171  
Purchases of available for sale investments
    (15,300 )     (186,125 )
Proceeds from sale of available for sale investments
    29,325       75,567  
 
           
Net cash provided by (used in) investing activities
    10,948       (114,463 )
 
           
 
               
Cash flows from financing activities:
               
Cash dividends
    (115,601 )     (59,616 )
Purchase of common stock held as treasury shares
          (1,630 )
Proceeds from issuance of common stock
    2,158       845  
 
           
Net cash used in financing activities
    (113,443 )     (60,401 )
 
           
 
               
Effect of exchange rate changes on cash
    2,019       102  
 
           
Net (decrease) in cash and equivalents
    (67,438 )     (100,173 )
Cash and equivalents, beginning of period
    171,889       196,136  
 
           
 
               
Cash and equivalents, end of period
  $ 104,451     $ 95,963  
 
           
Supplemental cash flow information:
               
Income taxes paid
  $ 9,495     $ 106  
Interest paid
  $ 360     $ 187  
Non cash transactions:
               
Capital expenditures in accounts payable
  $ 228     $ 129  
See notes to condensed consolidated financial statements

3


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.   The July 31, 2007 amounts are derived 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, 2007. The results of operations for the three months ended October 31, 2007 are not necessarily indicative of the results for the full year.
 
2.   Major classifications of inventories are:
                 
    October 31, 2007     July 31, 2007  
Raw materials
  $ 96,048     $ 87,245  
Chassis
    40,845       42,528  
Work in process
    53,920       52,102  
Finished goods
    23,226       12,326  
 
           
Total
    214,039       194,201  
Less excess of FIFO costs over LIFO costs
    26,160       25,221  
 
           
Total inventories
  $ 187,879     $ 168,980  
 
           
3.   Earnings Per Share
                 
    Three Months   Three Months
    Ended   Ended
    October 31, 2007   October 31, 2006
Weighted average shares outstanding for basic earnings per share
    55,757,338       55,613,302  
Stock options and restricted stock
    209,276       291,495  
 
               
Total — For diluted shares
    55,966,614       55,904,797  
 
               
4.   Comprehensive Income
                 
    Three Months     Three Months  
    Ended     Ended  
    October 31, 2007     October 31, 2006  
 
               
Net income
  $ 38,209     $ 30,597  
Foreign currency translation adj.
    2,019       102  
 
           
Comprehensive income
  $ 40,228     $ 30,699  
 
           
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 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.

4


Table of Contents

                 
    Three Months     Three Months  
    Ended     Ended  
    October 31, 2007     October 31, 2006  
Net Sales:
               
Recreation vehicles:
               
Towables
  $ 523,711     $ 499,955  
Motorized
    140,500       135,923  
 
           
Total recreation vehicles
    664,211       635,878  
Buses
    99,525       91,838  
 
           
Total
  $ 763,736     $ 727,716  
 
           
                 
    Three Months     Three Months  
    Ended     Ended  
    October 31, 2007     October 31, 2006  
Income Before Income Taxes:
               
Recreation vehicles:
               
Towables
  $ 50,812     $ 40,400  
Motorized
    6,853       6,068  
 
           
Total recreation vehicles
    57,665       46,468  
Buses
    4,139       3,020  
Corporate
    (1,324 )     (492 )
 
           
Total
  $ 60,480     $ 48,996  
 
           
                 
    October 31, 2007     July 31, 2007  
Identifiable Assets:
               
Recreation vehicles:
               
Towables
  $ 479,407     $ 449,276  
Motorized
    145,823       147,598  
 
           
Total recreation vehicles
    625,230       596,874  
Buses
    98,410       105,864  
Corporate
    294,431       356,559  
 
           
Total
  $ 1,018,071     $ 1,059,297  
 
           
6.   Treasury Shares
 
    In the first quarter of fiscal 2007, the Company purchased 40,400 shares and held them as treasury stock at a cost of $1,630, an average cost of $40.33 per share.
 
7.   Investments
 
    Effective August 1, 2006, the Company began classifying all short-term investment purchases as available-for-sale. This change was based on the Company’s decision to change its investment strategy from one of generating profits on short term differences in price to one of preserving capital.
 
    At October 31, 2007 all Investments — short term are comprised of auction rate securities that are classified as available-for-sale and are reported at fair value in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The Company purchases its auction rate securities at par, which either mature or reset at par, and generally there are no unrealized or realized gains or losses to report. Cost is determined on the specific identification basis. Interest income is accrued as earned. All of the available-for-sale securities held at October 31, 2007 mature within one year.

5


Table of Contents

8.   Goodwill and Other Intangible Assets
     The components of other intangible assets are as follows:
                                 
    October 31, 2007   July 31, 2007
            Accumulated           Accumulated
    Cost   Amortization   Cost   Amortization
Amortized Intangible Assets:
                               
Non-compete agreements
  $ 6,256     $ 4,563     $ 6,256     $ 4,350  
                 
    Three Months   Three Months
    Ended   Ended
    October 31, 2007   October 31, 2006
Non-compete Agreements:
               
Amortization Expense
  $ 213     $ 237  
     Non-compete agreements are amortized on a straight-line basis.
         
Estimated Amortization Expense:
       
For the year ending July 2008
  $ 812  
For the year ending July 2009
  $ 476  
For the year ending July 2010
  $ 322  
For the year ending July 2011
  $ 238  
For the year ending July 2012
  $ 58  
There was no change in the carrying amount of goodwill and trademarks for the three month period ended October 31, 2007.
As of October 31, 2007, 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  
 
           
9.   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.

6


Table of Contents

                 
    Three Months     Three Months  
    Ended     Ended  
    October 31, 2007     October 31, 2006  
 
Beginning Balance
  $ 64,310     $ 59,795  
Provision
    18,550       17,951  
Payments
    (16,849 )     (16,823 )
 
           
Ending Balance
  $ 66,011     $ 60,923  
 
           
10.   Commercial Commitments
 
    Our principal commercial commitments at October 31, 2007 are summarized in the following chart:
                 
    Total   Term of
Commitment   Amount Committed   Commitment
Guarantee on dealer financing
  $ 1,956     less than 1 year
 
Standby repurchase obligation on dealer financing
  $ 921,272     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 $1,616 and $1,293 as of October 31, 2007 and July 31, 2007, respectively.
                 
    Three Months     Three Months  
    Ended     Ended  
    October 31, 2007     October 31, 2006  
Cost of units repurchased
  $ 5,187     $ 1,961  
 
               
Realization on units resold
    4,922       1,543  
 
 
           
Losses due to repurchase
  $ 265     $ 418  
 
           
11.   Income Taxes
 
    The Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” on August 1, 2007. FIN 48 clarifies the accounting for uncertainties in income tax law by prescribing a minimum recognition threshold a tax position is required to meet before being recognized for financial accounting purposes. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, and disclosure. The implementation of FIN 48 did not have a significant impact on the Company’s financial position or results of operations.
 
    On August 1, 2007 the Company recognized a cumulative effect adjustment of $17,200 as a reduction to the balance of retained earnings and an increase in tax liabilities of $11,300 and an increase in liability for penalties and interest of $5,900. The amount of unrecognized tax benefits as of August 1, 2007 totaled $25,900, all of which would increase income from continuing operations, and thus impact the Company’s effective tax rate, if ultimately recognized into income. Unrecognized state income tax benefits are reported net of their related deferred federal income tax benefit.
 
    It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. As of August 1, 2007, $6,500 in interest and penalties had been accrued.

7


Table of Contents

    The Company and its corporate subsidiaries file a consolidated U.S. federal income tax return and multiple state income tax returns. The federal returns are subject to examination by taxing authorities for all years after 2005. We are currently under audit by various state Departments of Revenue for 2002 through 2005 tax years. The anticipated effect on unrecognized tax benefits resulting from these audits is not expected to have a material impact on the financial statements.
 
    The Company anticipates a decrease of approximately $2,800 in unrecognized tax benefits within the next 12 months from 1) expected settlements or payments of uncertain tax positions, and 2) lapses of the applicable statutes of limitations. Actual results may differ materially from this estimate.
 
12.   Retained Earnings
 
    The components of changes in retained earnings are as follows:
         
Balance at 7/31/07
  $ 727,729  
Net income
    38,209  
Dividends paid
    (115,601 )
FIN 48 adjustment
    (17,229 )
 
     
 
       
Balance at 10/31/07
  $ 633,108  
 
     
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 (“RVs”) and a major manufacturer of commercial buses in North America. Our market share in the travel trailer and fifth wheel segment of the industry (towables), is approximately 31%. In the motorized segment of the industry we have a market share of approximately 14%. Our market share in small and mid-size buses is approximately 38%. We also manufacture and sell 40-foot buses at our 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 $13,105 for that purpose in fiscal 2007 and $118,723 over the prior four fiscal years.
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.

8


Table of Contents

Our RV products are sold to dealers who, in turn, retail those products. Our buses are sold through dealers to municipalities and private purchasers such as rental car companies and hotels. We do not directly finance dealers but do provide repurchase agreements in order to facilitate the dealers obtaining floor plan financing. We have a joint venture, Thor Credit, operated by GE Consumer Finance, which provides retail credit to ultimate purchasers of any recreation vehicle purchased from a Thor dealer. This retail credit on recreation vehicles is not limited to Thor products only.
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 retiree population in the United States is expected to grow five times as fast as 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 Surveys, Inc. were up approximately 2.7% for the nine months ended September 30, 2007 compared with the same period last year. The motorized segment was down approximately 5.3%. Higher interest rates and fuel prices appear to affect the motorized segment more severely.
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 and are being continuously replaced by operators. According to Mid Size Bus Manufacturers Association unit sales of small and mid-sized buses are up 17% for the nine months ended September 30, 2007 compared with the same period last year.
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 products 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.

9


Table of Contents

THREE MONTHS ENDED OCTOBER 31, 2007 VS. THREE MONTHS ENDED OCTOBER 31, 2006
                                 
    Three Months Ended     Three Months Ended     Change  
    October 31, 2007     October 31, 2006     Amount     %  
NET SALES:
                               
Recreation Vehicles
                               
Towables
  $ 523,711     $ 499,955     $ 23,756       4.8  
Motorized
    140,500       135,923       4,577       3.4  
 
                         
Total Recreation Vehicles
    664,211       635,878       28,333       4.5  
Buses
    99,525       91,838       7,687       8.3  
 
                         
Total
  $ 763,736     $ 727,716     $ 36,020       4.9  
 
                         
# OF UNITS:
                               
Recreation Vehicles
                               
Towables
    23,815       23,490       325       1.4  
Motorized
    1,771       1,855       (84 )     (4.5 )
 
                         
Total Recreation Vehicles
    25,586       25,345       241       1.0  
Buses
    1,543       1,557       (14 )     (.9 )
 
                         
Total
    27,129       26,902       227       .8  
 
                         
                                                 
            % of             % of        
            Segment             Segment     Change  
            Net Sales             Net Sales     Amount     %  
GROSS PROFIT:
                                               
Recreation Vehicles
                                               
Towables
  $ 79,176       15.1     $ 69,822       14.0     $ 9,354       13.4  
Motorized
    13,818       9.8       12,639       9.3       1,179       9.3  
 
                                         
Total Recreation Vehicles
    92,994       14.0       82,461       13.0       10,533       12.8  
Buses
    8,281       8.3       6,707       7.3       1,574       23.5  
 
                                         
Total
  $ 101,275       13.3     $ 89,168       12.3     $ 12,107       13.6  
 
                                         
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
                                               
Recreation Vehicles
                                               
Towables
  $ 28,519       5.4     $ 29,429       5.9     $ (910 )     (3.1 )
Motorized
    6,962       5.0       6,556       4.8       406       6.2  
 
                                         
Total Recreation Vehicles
  $ 35,481       5.3     $ 35,985       5.7       (504 )     (1.4 )
Buses
    3,796       3.8       3,493       3.8       303       8.7  
Corporate
    6,133             3,967             2,166       54.6  
 
                                         
Total
  $ 45,410       5.9     $ 43,445       6.0     $ 1,965       4.5  
 
                                         
INCOME BEFORE INCOME TAXES:
                                               
Recreation Vehicles
                                               
Towables
  $ 50,812       9.7     $ 40,400       8.1     $ 10,412       25.8  
Motorized
    6,853       4.9       6,068       4.5       785       12.9  
 
                                         
Total Recreation Vehicles
  $ 57,665       8.7     $ 46,468       7.3       11,197       24.1  
Buses
    4,139       4.2       3,020       3.3       1,119       37.1  
Corporate
    (1,324 )           (492 )           (832 )     (169.1 )
 
                                         
Total
  $ 60,480       7.9     $ 48,996       6.7     $ 11,484       23.4  
 
                                         
ORDER BACKLOG
                                 
    As of     As of     Change  
    October 31, 2007     October 31, 2006     Amount     %  
Recreation Vehicles
                               
Towables
  $ 179,948     $ 120,627     $ 59,321       49.2  
Motorized
    69,774       67,799       1,975       2.9  
 
                         
Total Recreation Vehicles
    249,722       188,426       61,296       32.5  
Buses
    226,342       217,864       8,478       3.9  
 
                         
Total
  $ 476,064     $ 406,290     $ 69,774       17.2  
 
                         

10


Table of Contents

CONSOLIDATED
Net sales and gross profit for the first quarter of fiscal 2008 were up 4.9 % and 13.6% respectively compared to the first quarter of fiscal 2007. Selling, general and administrative expenses for the first quarter of fiscal 2008 were up 4.5% compared to the first quarter of fiscal 2007. Income before income taxes for the first quarter of fiscal 2008 was up 23.4% compared to the first quarter of fiscal 2007. 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 $6,133 for the first quarter of fiscal 2008 compared to $3,967 in the first quarter of fiscal 2007. This $2,166 increase is primarily the result of increased legal and audit fees. Corporate interest income and other income was $4,975 for the first quarter of fiscal 2008 compared to $3,460 for the first quarter of fiscal 2007.
The overall effective tax rate for the first quarter of fiscal 2008 and 2007 was 36.8% and 37.6% respectively.
SEGMENT REPORTING
Recreation Vehicles
Analysis of Percentage Change in Net Sales Versus Prior Year
                         
    Average Price        
    Per Unit   Units   Net Change
     
Recreation Vehicles
                       
Towables
    3.4 %     1.4 %     4.8 %
Motorized
    7.9 %     (4.5 %)     3.4 %
Towable Recreation Vehicles
The increase in towables net sales of 4.8% resulted primarily from increased average price per unit and mix of product. The overall industry decrease in towable units sold for August and September of 2007 compared to the same period last year was 4.7% according to statistics published by the Recreation Vehicle Industry Association.
Towables gross profit percentage increased to 15.1% of net sales for the first quarter of fiscal 2008 from 14.0% of net sales for the first quarter of fiscal 2007. The primary factor for the $9,354 increase in gross profit was increased sales of $23,756. Selling, general and administrative expenses were 5.4% of net sales for the first quarter of fiscal 2008 and 5.9% of net sales for the first quarter of fiscal 2007.
Towables income before income taxes increased to 9.7% of net sales for the first quarter of fiscal 2008 from 8.1% of net sales for the first quarter of fiscal 2007. The primary factor for this was increased sales.
Motorized Recreation Vehicles
The increase in motorized net sales of 3.4% resulted primarily from increased average price and mix of product. The decrease in units sold of approximately 4.5% was slightly higher than the overall market unit decrease in motorhomes of 3.1% for the two month period ended August 2007 compared to the same period last year according to statistics published by the Recreation Vehicle Industry Association.
Motorized gross profit percentage increased to 9.8% of net sales in the first quarter of fiscal 2008 from 9.3% of net sales for the first quarter of fiscal 2007. The primary factor for the increase in gross profit in 2008 was increased sales.

11


Table of Contents

Selling, general and administrative expenses were 5.0% of net sales for the first quarter of fiscal 2008 and 4.8% of net sales for the first quarter of fiscal 2007.
Motorized income before income taxes increased to 4.9% of net sales for the first quarter of fiscal 2008 from 4.5% of net sales for the first quarter of fiscal 2007 due primarily to increased sales.
Buses
Analysis of Percentage Change in Net Sales Versus Prior Year
                         
    Average Price Per Unit   Units   Net Change
     
Buses
    9.2 %     (.9 %)     8.3 %
The increase in buses net sales of 8.3% resulted primarily from increased average price per unit and product mix.
Buses gross profit percentage increased to 8.3% of net sales for the first quarter of fiscal 2008 from 7.3% of net sales for the first quarter of fiscal 2007 due primarily to increased sales. Selling, general and administrative expenses were 3.8% of net sales for the first quarter of fiscal 2008 and the first quarter of fiscal 2007.
Buses income before income taxes increased to 4.2% of net sales for the first quarter of fiscal 2008 from 3.3% for the first quarter of fiscal 2007 due primarily to increased sales.
Financial Condition and Liquidity
As of October 31, 2007, we had $265,001 in cash, cash equivalents and short-term investments, compared to $346,464 on July 31, 2007. The decrease is primarily due to a $2.07 per share dividend payment that totaled $115,601.
Working capital at October 31, 2007 was $367,448 compared to $428,329 on July 31, 2007. 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, 2008. There were no borrowings on this line of credit during the period ended October 31, 2007. 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 $3,112 for the three months ended October 31, 2007 were primarily for planned expansions and improvements.
The Company anticipates additional capital expenditures in fiscal 2008 of approximately $9,888. 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

12


Table of Contents

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. 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. The liability for workers’ compensation claims is determined by the Company with the assistance of a third party administrator using various state statutes and reserve requirements and historical claims’ experience. 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 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 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.
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.
Revenue Recognition
Revenue from the sale of recreation vehicles and buses are recorded when all of the following conditions have been met:
1)   An order for a product has been received from a dealer;
 
2)   Written or oral approval for payment has been received from the dealer’s flooring institution;

13


Table of Contents

3)   A common carrier signs the delivery ticket accepting responsibility for the product as agent for the dealer; and
 
4)   The product is removed from the Company’s property for delivery to the dealer who placed the order.
Certain shipments are sold to customers under cash on delivery (“COD”) terms. The Company recognizes revenue on COD sales upon payment and delivery. Most sales are made by dealers financing their purchases under flooring arrangements with banks or finance companies. Products are not sold on consignment, dealers do not have the right to return products, and dealers are typically responsible for interest costs to floorplan lenders. On average, the Company receives payments from floorplan lenders on products sold to dealers within 15 days of the invoice date.
Repurchase Commitments
It is customary practice for companies in the recreational vehicle industry to enter into repurchase agreements with financing institutions to provide financing to their dealers. Generally, these agreements provide for the repurchase of products from the financing institution in the event of a dealer’s default. The risk of loss under these agreements is spread over numerous dealers and further reduced by the resale value of the units which the Company would be required to repurchase. Losses under these agreements have not been significant in the periods presented in the consolidated financial statements, and management believes that any future losses under these agreements will not have a significant effect on the Company’s consolidated financial position or results of operations. The Company records repurchase and guarantee reserves based on prior experience and known current events.
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, additional issues that may arise in connection with the findings of the completed investigation of the Audit Committee of the Board of Directors and the SEC’s requests for additional information, 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 and the other risks and uncertainties discussed more fully in Item 1A of our Annual Report on Form 10-K for the year ended July 31, 2007. 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
Thor Industries, Inc. (the “Company”) maintains “disclosure controls and procedures”, as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information

14


Table of Contents

required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and the Company’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. 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.
During the first quarter of fiscal 2008 and through the date of this report, there have been no material changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — Other Information
ITEM 1. LEGAL PROCEEDINGS
The SEC is reviewing the facts and circumstances giving rise to the restatement of our previously issued financial statements as of July 31, 2006 and 2005, and for each of the years in the three-year period ended July 31, 2006, and the financial results in each of the quarterly periods in 2006 and 2005, and our financial statements as of and for the three months ended October 31, 2006 and related matters. We intend to cooperate fully with the SEC. The investigation by the SEC staff could result in the SEC seeking various penalties and relief, including, without limitation, civil injunctive relief and/or civil monetary penalties or administrative relief. The nature of the relief or remedies the SEC may seek, if any, cannot be predicted at this time.
In addition, we are involved in certain litigation arising out of our operations in the normal course of our business most of which are based upon state “lemon laws,” warranty claims, other claims and accidents (for which we carry insurance above a specified deductible amount). We do not believe that any one of these claims is material.
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.

15


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: November 26, 2007  /s/ Wade F. B. Thompson    
  Wade F. B. Thompson   
  Chairman of the Board, President
and Chief Executive Officer 
 
 
     
DATE: November 26, 2007  /s/ Walter L. Bennett    
  Walter L. Bennett   
  Executive Vice President,
Secretary and Chief Financial Officer 
 
 

16