THOR INDUSTRIES INC - Quarter Report: 2008 January (Form 10-Q)

 

 

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		January 31, 2008		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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company 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 1/31/2008
Common stock, par value $.10 per share		55,497,424 shares

 

 

PART I — Financial Information
Unless otherwise indicated, all amounts presented in thousands of dollars except units, share and per share data.

ITEM 1. Financial Statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

		January 31, 2008				July 31, 2007
ASSETS
Current assets:
Cash and cash equivalents		$	87,935			$	171,889
Investments – short term			146,350				174,575
Accounts receivable:
Trade			177,681				171,596
Other			9,995				5,799
Inventories			200,975				168,980
Prepaid expenses			12,199				6,684
Deferred income taxes			17,966				6,005
Total current assets			653,101				705,528
Property:
Land			20,566				21,795
Buildings and improvements			136,900				134,352
Machinery and equipment			69,283				64,572
Total cost			226,749				220,719
Accumulated depreciation			69,383				63,477
Property, net			157,366				157,242
Investment in Joint ventures			2,912				2,671
Other assets:
Goodwill			165,663				165,663
Non-compete agreements			1,493				1,906
Trademarks			13,900				13,900
Other			12,419				12,387
Total other assets			193,475				193,856
TOTAL ASSETS		$	1,006,854			$	1,059,297
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	138,240			$	123,433
Accrued liabilities:
Taxes			10,878				17,991
Compensation and related items			30,108				39,242
Product warranties			61,690				64,310
Promotions and rebates			12,801				11,697
Product/property liability and related liabilities			11,307				11,691
Other			13,019				8,835
Total current liabilities			278,043				277,199
Long Term Liabilities:
Unrecognized tax benefits			27,134				—
Other			20,573				15,767
Total long term liabilities			47,707				15,767
Contingent liabilities and commitments			—				—
Stockholders’ equity:
Common stock — authorized 250,000,000 shares; issued 57,313,263 shares @ 1/31/08 and 57,222,404 shares @ 7/31/07; par value of $.10 per share			5,731				5,722
Additional paid-in capital			92,737				90,247
Accumulated other comprehensive income			3,766				2,756
Retained earnings			650,798				727,729
Less Treasury shares of 1,815,839 @ 1/31/08 & 1,441,600 @ 7/31/07			(71,928	)			(60,123	)
Total stockholders’ equity			681,104				766,331
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,006,854			$	1,059,297

     See notes to condensed consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED INCOME
FOR THE THREE & SIX MONTHS ENDED JANUARY 31, 2008 AND 2007

		Three Months Ended January 31								Six Months Ended January 31
		2008				2007				2008				2007
Net sales		$	599,170			$	584,049			$	1,362,906			$	1,311,765
Cost of products sold			529,453				522,880				1,191,914				1,161,428
Gross profit			69,717				61,169				170,992				150,337
Selling, general and administrative expenses			39,819				37,424				85,229				80,869
Gain on sale of property			2,308				—				2,308				—
Interest income			3,161				2,346				7,357				5,256
Interest expense			353				164				713				351
Other income			192				315				971				865
Income before income taxes			35,206				26,242				95,686				75,238
Provision for income taxes			13,604				7,990				35,875				26,389
Net income		$	21,602			$	18,252			$	59,811			$	48,849
Average common shares outstanding:
Basic			55,758,534				55,654,744				55,757,936				55,634,023
Diluted			55,910,429				55,927,479				55,937,211				55,909,970
Earnings per common share:
Basic		$	.39			$	.33			$	1.07			$	.88
Diluted		$	.39			$	.33			$	1.07			$	.87
Regular dividends declared per common share:		$	.07			$	.07			$	.14			$	.14
Special dividends declared per common share:		$	—			$	—			$	2.00			$	1.00
Regular dividends paid per common share:		$	.07			$	.07			$	.14			$	.14
Special dividends paid per common share:		$	—			$	—			$	2.00			$	1.00

     See notes to condensed consolidated financial statements

THOR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2008 AND 2007

		2008				2007
Cash flows from operating activities:
Net income		$	59,811			$	48,849
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			6,692				6,393
Amortization			413				454
Deferred income taxes			(11,961	)			(7,699	)
(Gain) Loss on disposition of assets			(2,344	)			86
Loss on disposition of trading investments			—				104
Stock based compensation			162				319
Changes in non cash assets and liabilities, net of effect from acquisitions:
Proceeds from disposition of trading investments			—				68,133
Accounts receivable			(10,281	)			7,434
Inventories			(31,995	)			(6,345	)
Prepaids and other			(5,788	)			(13,537	)
Accounts payable			14,843				(22,221	)
Accrued liabilities			(3,906	)			152
Other liabilities			4,754				1,838
Net cash provided by operating activities			20,400				83,960
Cash flows from investing activities:
Purchase of property, plant & equipment			(9,439	)			(7,101	)
Proceeds from disposition of assets			4,983				224
Purchases of available for sale investments			(29,900	)			(202,320	)
Proceeds from sale of available for sale investments			58,125				83,897
Net cash provided by (used in) investing activities			23,769				(125,300	)
Cash flows from financing activities:
Cash dividends			(119,513	)			(63,516	)
Purchase of common stock held as treasury shares			(11,805	)			(1,630	)
Proceeds from issuance of common stock			2,185				2,146
Net cash used in financing activities			(129,133	)			(63,000	)
Effect of exchange rate changes			1,010				(461	)
Net decrease in cash and equivalents			(83,954	)			(104,801	)
Cash and equivalents, beginning of period			171,889				196,136
Cash and equivalents, end of period		$	87,935			$	91,335
Supplemental cash flow information:
Income taxes paid		$	46,145			$	25,846
Interest paid			713				351
Non cash transactions:
Capital expenditures in accounts payable		$	167			$	166

See notes to condensed consolidated financial statements

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 six months ended January 31, 2008 are not necessarily indicative of the results for the full year.

2.

Major classifications of inventories are:

		January 31, 2008				July 31, 2007
Raw materials		$	97,187			$	87,245
Chassis			46,435				42,528
Work in process			57,730				52,102
Finished goods			26,722				12,326
Total			228,074				194,201
Less excess of FIFO costs over LIFO costs			27,099				25,221
Total inventories		$	200,975			$	168,980

3.

Earnings Per Share

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		January 31, 2008				January 31, 2007				January 31, 2008				January 31, 2007
Weighted average shares outstanding for basic earnings per share			55,758,534				55,654,744				55,757,936				55,634,023
Stock options and restricted stock			151,895				272,735				179,275				275,947
Total — For diluted shares			55,910,429				55,927,479				55,937,211				55,909,970

4.

Comprehensive Income

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		January 31, 2008				January 31, 2007				January 31, 2008				January 31, 2007
Net income		$	21,602			$	18,252			$	59,811			$	48,849
Foreign currency translation adjustment			(1,009	)			(562	)			1,010				(461	)
Comprehensive income		$	20,593			$	17,690			$	60,821			$	48,388

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		January 31, 2008				January 31, 2007				January 31, 2008				January 31, 2007
Net Sales:
Recreation vehicles:
Towables		$	394,441			$	373,940			$	918,152			$	873,895
Motorized			110,825				116,694				251,325				252,617
Total recreation vehicles			505,266				490,634				1,169,477				1,126,512
Buses			93,904				93,415				193,429				185,253
Total		$	599,170			$	584,049			$	1,362,906			$	1,311,765

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		January 31, 2008				January 31, 2007				January 31, 2008				January 31, 2007
Income Before Income Taxes:
Recreation vehicles:
Towables		$	30,492			$	21,804			$	81,304			$	62,204
Motorized			3,561				3,468				10,414				9,536
Total recreation vehicles			34,053				25,272				91,718				71,740
Buses			3,556				3,154				7,695				6,174
Corporate			(2,403	)			(2,184	)			(3,727	)			(2,676	)
Total		$	35,206			$	26,242			$	95,686			$	75,238

		January 31, 2008				July 31, 2007
Identifiable Assets:
Recreation vehicles:
Towables		$	479,914			$	449,276
Motorized			156,489				147,598
Total recreation vehicles			636,406				596,874
Buses			99,148				105,864
Corporate			271,300				356,559
Total		$	1,006,854			$	1,059,297

6.		Treasury Shares
		In the second quarter of fiscal year 2008, the Company purchased 374,239 shares and held them as treasury stock at a cost of $11,805, an average cost of $31.54 per share. 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 – Short Term
		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 January 31, 2008, 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		unrealized or realized gains or losses to report. Cost is determined on the specific identification basis. Interest income is accrued as earned.
		At January 31, 2008, we held approximately $146,000 of short term investments, with an auction reset feature (“auction rate securities”) whose underlying assets are generally student loans which are substantially backed by the Federal government. Since February 12, 2008, auctions have failed for some of these securities and there is no assurance that successful auctions on the other auction rate securities in our investment portfolio will succeed and as a result our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be limited or not exist. As of February 29, 2008, we held $135,400 of auction rate securities. An auction failure means that the parties wishing to sell securities could not. All of our auction rate securities, including those subject to the failure, are currently rated AAA, the highest rating, by a rating agency. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may in the future be required to record an impairment charge on these investments. We believe we will be able to liquidate our investment without significant loss within the next year, and we currently believe these securities are not significantly impaired, primarily due to the government guarantee of the underlying securities; however, it could take until the final maturity of the underlying notes (up to 40 years) to realize our investments’ recorded value. Based on our expected operating cash flows, and our other sources of cash, we do not anticipate the potential lack of liquidity on these investments will affect our ability to execute our current business plan.
8.		Goodwill and Other Intangible Assets
		The components of other intangible assets are as follows:

		January 31, 2008								July 31, 2007
						Accumulated								Accumulated
		Cost				Amortization				Cost				Amortization
Amortized Intangible Assets:
Non-compete agreements		$	6,256			$	4,763			$	6,256			$	4,350

Three Months

Three Months

Six Months

Six Months

Ended

Ended

Ended

Ended

January 31, 2008

January 31, 2007

January 31, 2008

January 31, 2007

Non-compete Agreements:

Amortization Expense

$

200

$

217

$

413

$

454

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 six month period ended January 31, 2008.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     As of January 31, 2008, 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.

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		January 31, 2008				January 31, 2007				January 31, 2008				January 31, 2007
Beginning Balance		$	66,011			$	60,923			$	64,310			$	59,795
Provision			13,525				15,243				32,075				33,194
Payments			(17,846	)			(17,105	)			(34,695	)			(33,928	)
Ending Balance		$	61,690			$	59,061			$	61,690			$	59,061

10.		Commercial Commitments
		Our principal commercial commitments at January 31, 2008 are summarized in the following chart:

		Total				Term of
Commitment		Amount Committed				Commitment
Guarantee on dealer financing		$	2,116			less than 1 year
Standby repurchase obligation on dealer financing		$	1,010,074			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 $1,727 and $1,293 as of January 31, 2008 and July 31, 2007, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Three Months				Three Months				Six Months				Six Months
		Ended				Ended				Ended				Ended
		January 31, 2008				January 31, 2007				January 31, 2008				January 31, 2007
Cost of units repurchased		$	1,650			$	6,128			$	2,754			$	8,089
Realization on units resold			1,596				5,474				2,435				7,017
Losses due to repurchase		$	54			$	654			$	319			$	1,072

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.
		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.
		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 $2,100 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 @ 7/31/07		$	727,729
Net income			59,811
Dividends paid			(119,513	)
FIN 48 adjustment			(17,229	)
Balance @ 1/31/08		$	650,798

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.

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% for the twelve months ended December 31, 2007 compared with the same period last year. The motorized segment was down approximately 6%. 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 8% for the twelve months ended December 31, 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.

Three Months Ended January 31, 2008 vs.

     Three Months Ended January 31, 2007

		Three Months Ended								Three Months Ended								Change
		January 31, 2008								January 31, 2007								Amount				%
NET SALES:
Recreation Vehicles
Towables		$	394,441							$	373,940							$	20,501				5.5
Motorized			110,825								116,694								(5,869	)			(5.0	)
Total Recreation Vehicles			505,266								490,634								14,632				3.0
Buses			93,904								93,415								489				.5
Total		$	599,170							$	584,049							$	15,121				2.6
# OF UNITS:
Recreation Vehicles
Towables			17,825								17,436								389				2.2
Motorized			1,340								1,521								(181	)			(11.9	)
Total Recreation Vehicles			19,165								18,957								208				1.1
Buses			1,427								1,531								(104	)			(6.8	)
Total			20,592								20,488								104				.5
						% of								% of
						Segment								Segment				Change
						Net Sales							Net Sales					Amount					%
GROSS PROFIT:
Recreation Vehicles
Towables		$	52,079				13.2			$	44,576				11.9			$	7,503				16.8
Motorized			9,855				8.9				9,854				8.4				1				—
Total Recreation Vehicles			61,934				12.3				54,430				11.1				7,504				13.8
Buses			7,783				8.3				6,739				7.2				1,044				15.5
Total		$	69,717				11.6			$	61,169				10.5			$	8,548				14.0
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreation Vehicles
Towables		$	24,109				6.1			$	22,954				6.1			$	1,155				5.0
Motorized			6,334				5.7				6,388				5.5				(54	)			(.8	)
Total Recreation Vehicles			30,443				6.0				29,342				6.0				1,101				3.8
Buses			3,872				4.1				3,510				3.8				362				10.3
Corporate			5,505				—				4,572				—				933				20.4
Total		$	39,820				6.6			$	37,424				6.4			$	2,396				6.4
INCOME BEFORE INCOME TAXES:
Recreation Vehicles
Towables		$	30,492				7.7			$	21,804				5.8			$	8,688				39.8
Motorized			3,561				3.2				3,468				3.0				93				2.7
Total Recreation Vehicles			34,053				6.7				25,272				5.2				8,781				34.7
Buses			3,556				3.8				3,154				3.4				402				12.7
Corporate			(2,403	)			—				(2,184	)			—				219				(10.0	)
Total		$	35,206				5.9			$	26,242				4.5			$	8,964				34.2

ORDER BACKLOG

		As of				As of				Change
		January 31, 2008				January 31, 2007				Amount				%
Recreation Vehicles
Towables		$	215,479			$	238,658			$	(23,179	)			(9.7	)
Motorized			102,884				99,756				3,128				3.1
Total Recreation Vehicles			318,363				338,414				(20,051	)			(5.9	)
Buses			249,495				206,820				42,675				20.6
Total		$	567,858			$	545,234			$	22,624				4.1

CONSOLIDATED

Net sales and gross profit for the three months ended January 31, 2008 were up 2.6% and 14.0%, respectively, compared to the three months ended January 31, 2007. Selling, general and administrative expenses for the three months ended January 31, 2008 were up 6.4% compared to the three months ended January 31, 2007. Income before income taxes for the three months ended January 31, 2008 increased 34.2% compared to the three months ended January 31, 2007. The specifics on changes in net sales, gross profit, selling, general and administrative expense and income before income taxes are addressed in the segment reporting below.

Corporate costs in selling, general and administrative were $5,505 for the three months ended January 31, 2008 compared to $4,572 for the three months ended January 31, 2007. This $933 increase is primarily the result of increased compensation, and audit related expenses. Corporate interest income and other income was $3,119 for the three months ended January 31, 2008 compared to $2,330 for the three months ended January 31, 2007.

The overall effective tax rate for the three months ended January 31, 2008 was 38.6% compared to 30.4% for the three months ended January 31, 2007.

The primary reason for the lower effective tax rate in 2007 was that the Company recorded $1.9 million of tax benefit in the three months ended January 31, 2007 related to its research and development credits. This tax benefit was recorded because the 2006 Tax Relief and Health Care Act retroactively reinstated the research and development credit to January 1, 2006 and the Company reached an agreement with the Internal Revenue Service regarding the amount of research and development credit for fiscal years 2003 through 2005 which was previously not recognized. The Company is also recording in the current fiscal year additional FIN 48 liability for uncertain tax positions and the benefit from an increased domestic production activities deduction.

SEGMENT REPORTING

Recreation Vehicles

Analysis of Percentage Change in Net Sales Versus Prior Year

		Average Price
		Per Unit				Units				Net Change
Recreation Vehicles
Towables			3.3	%			2.2	%			5.5	%
Motorized			6.9	%			(11.9	)%			(5.0	%)

Towable Recreation Vehicles

The increase in towables net sales of 5.5% resulted from a 2.2% increase in unit shipments and a 3.3% increase in average price per unit and mix of product. The overall industry decrease in unit shipments of

towables for November and December of 2007 was 3.5% according to statistics published by the Recreation Vehicle Industry Association.

Towables gross profit percentage increased to 13.2% of net sales for the three months ended January 31, 2008 from 11.9% of net sales for the three months ended January 31, 2007. The primary factor for the $7,503 increase in gross profit was increased sales volume of $20,501. Selling, general and administrative expenses were 6.1% of net sales for the three months ended January 31, 2008 and the three months ended January 31, 2007.

Towables income before income taxes increased to 7.7% of net sales for the three months ended January 31, 2008 from 5.8% of net sales for the three months ended January 31, 2008. The primary factors for this increase of $8,688 was the profits on increased sales volume of $20,501 and a gain on the sale of property of $2,308.

Motorized Recreation Vehicles

The decrease in motorized net sales of 5.0% resulted from a 11.9% decrease in unit shipments offset by a 6.9% increase in average price per unit and product mix. The overall market decrease in unit shipments of motorhomes was 8.6% for the two month period November and December 2007 according to statistics published by the Recreation Vehicle Industry Association.

Motorized gross profit percentage increased to 8.9% of net sales for the three months ended January 31, 2008 from 8.4% of net sales for the three months ended January 31, 2007. Selling, general and administrative expenses were 5.7% of net sales for the three months ended January 31, 2008 and 5.5% of net sales for the three months ended January 31, 2007.

Motorized income before income taxes was 3.2% of net sales for the three months ended January 31, 2008 and 3.0% of net sales for the three months ended January 31, 2007.

Buses

Analysis of Percentage Change in Net Sales Versus Prior Year

		Average Price Per Unit				Units				Net Change
Buses			7.3	%			(6.8	%)			.5	%

The increase in buses net sales of .5% resulted from a 6.8% decrease on unit shipments offset by a 7.3% increase in average price and product mix. The increase in the average price per unit resulted primarily from the product mix.

Buses gross profit percentage increased to 8.3% of net sales for the three months ended January 31, 2008 from 7.2% of net sales for the three months ended January 31, 2007. The primary reason for the increase in gross profit percentage was due principally to reduced material cost as a percent of sales due to increased average price per unit and mix of units. Selling, general and administrative expenses were 4.1% of net sales for the three months ended January 31, 2008 and 3.8% for the three months ended January 31, 2007.

Buses income before income taxes increased to 3.8% of net sales for the three months ended January 31, 2008 from 3.4% for the three months ended January 31, 2007.

Six Months Ended January 31, 2008 vs.

     Six Months Ended January 31, 2007

		Six Months Ended								Six Months Ended								Change
		January 31, 2008								January 31, 2007								Amount				%
NET SALES:
Recreation Vehicles
Towables		$	918,152							$	873,895							$	44,257				5.1
Motorized			251,325								252,617								(1,292	)			(.5	)
Total Recreation Vehicles			1,169,477								1,126,512								42,965				3.8
Buses			193,429								185,253								8,176				4.4
Total		$	1,362,906							$	1,311,765							$	51,141				3.9
# OF UNITS:
Recreation Vehicles
Towables			41,640								40,926								714				1.8
Motorized			3,111								3,376								(265	)			(7.8	)
Total Recreation Vehicles			44,751								44,302								449				1.0
Buses			2,970								3,088								(118	)			(3.8	)
Total			47,721								47,390								331				.7
						% of								% of
						Segment								Segment				Change
						Net Sales								Net Sales				Amount					%
GROSS PROFIT:
Recreation Vehicles
Towables		$	131,255				14.3			$	114,398				13.1			$	16,857				14.7
Motorized			23,673				9.4				22,493				8.9				1,180				5.2
Total Recreation Vehicles			154,928				13.2				136,891				12.2				18,037				13.2
Buses			16,064				8.3				13,446				7.3				2,618				19.5
Total		$	170,992				12.5			$	150,337				11.5			$	20,655				13.7
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Recreation Vehicles
Towables		$	52,628				5.7			$	52,383				6.0			$	245				.5
Motorized			13,296				5.3				12,944				5.1				352				2.7
Total Recreation Vehicles			65,924				5.6				65,327				6.0				597				.9
Buses			7,668				4.0				7,003				3.8				665				9.5
Corporate			11,638				—				8,539				—				3,099				36.3
Total		$	85,230				6.3			$	80,869				6.2			$	4,361				5.4
INCOME BEFORE INCOME TAXES:
Recreation Vehicles
Towables		$	81,304				8.9			$	62,204				7.1			$	19,100				30.7
Motorized			10,414				4.1				9,536				3.8				878				9.2
Total Recreation Vehicles			91,718				7.8				71,740				6.4				19,978				27.8
Buses			7,695				4.0				6,174				3.3				1,521				24.6
Corporate			(3,727	)			—				(2,676	)			—				(1,051	)			(39.3	)
Total		$	95,686				7.0			$	75,238				5.7			$	20,448				27.2