THOR INDUSTRIES, INC. 10-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(Amendment No. 1)
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended July 31, 2006, Commission File Number 1-9235
THOR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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93-0768752 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number) |
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419 W. Pike Street, Jackson Center, Ohio
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45334-0629 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (937) 596-6849
Securities registered pursuant to Section 12(b) of the Exchange Act:
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Title of each class:
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Name of each exchange on which registered: |
Common Stock (par value $.10 per share)
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
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 the filing requirements for the past 90 days. Yes o No þ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes o No þ
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.
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 126-2 of the
Exchange Act.)
Yes o No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the
registrant as of January 31, 2006 was $1,524,716,772, based on the closing price of the
registrants common shares on January 31, 2006, the last business day of the registrants most
recently completed second fiscal quarter. Solely for the purpose of this calculation and for no
other purpose, the non-affiliates of the registrant are assumed to be all shareholders of the
registrant other than (i) directors of the registrant (ii) executive officers of the registrant who
are identified as named executive officers pursuant to Item 11 of the registrants Form 10-K and
(iii) any shareholder that beneficially owns 10% or more of the registrants common stock. Such
exclusion is not intended, nor shall it be deemed, to be an admission that such persons are
affiliates of the registrant. The number of common shares of registrants stock outstanding as of
August 31, 2006 was 55,699,086. Documents incorporated by reference:
Portions of the Proxy Statement for the Annual Meeting of Shareholders held on December 5, 2006 are
incorporated by reference in Part III of this Annual Report on Form 10-K/A.
Explanatory Note
(All amounts presented in thousands)
This amendment on Form 10-K/A amends our Annual Report on Form 10-K for the fiscal year ended July
31, 2006, originally filed with the Securities and Exchange Commission (the SEC) on September 28,
2006. We have restated 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 are filing this amendment to reflect the
restated amounts. We have also restated our unaudited interim consolidated financial statements as
of and for the three months ended October 31, 2006 and will shortly file an amendment to our
Quarterly Report on Form 10-Q/A for such period. The effects of this restatement are reflected in
the comparative amounts included in this Form 10-K/A.
On January 29, 2007, we announced that the Audit Committee of our Board of Directors (the Audit
Committee) initiated an independent investigation regarding certain accounting issues at our
Dutchmen Manufacturing, Inc. operating subsidiary (Dutchmen), primarily involving inventory,
accounts receivable, accounts payable, and cost of products sold. We promptly and voluntarily
informed the SEC of the Audit Committees investigation, and have been responding to SEC staff
requests for additional information in connection with the staffs investigation. The Audit
Committee, assisted by independent outside legal counsel and accounting experts, thoroughly
investigated the accounting issues raised at Dutchmen. The Audit Committee and its advisors also
reviewed the internal controls at Dutchmen and other subsidiaries.
On April 9, 2007, we announced that on April 4, 2007 our Board of Directors, acting upon the
recommendation of the Audit Committee and management, concluded that our previously issued
consolidated financial statements relating to the fiscal years 2004, 2005 and 2006 and the three
months ended October 31, 2006 contained in our filings with the SEC, including related reports of
our independent registered public accounting firm, Deloitte & Touche LLP, and press releases,
should no longer be relied upon.
The consolidated financial statements and related financial information contained in our Annual
Reports on Form 10-K through July 31, 2006 should be read only in conjunction with the information
contained in this Form 10-K/A. See Note A of our consolidated financial statements included in this
Form 10-K/A for further discussion.
The Audit Committees investigation confirmed the Companys determination that income before income
taxes recorded by Dutchmen was overstated in the amount of approximately $26,000 in the aggregate
from fiscal year 2004 to the second quarter of fiscal year 2007, as a result of misconduct by
Dutchmens former Vice President of Finance, the senior financial officer of Dutchmen in which he
intentionally understated the cost of products sold. Dutchmens Vice President of Finance
manipulated accounts reflecting inventory, accounts receivable, accounts payable, and cost of
products sold, by entering and approving his own inaccurate journal entries as well as reconciling
the related accounts, and prepared fraudulent supporting documentation, with the net effect of
overstating Dutchmens income before income taxes by approximately $26,000 during the relevant
period. The Audit Committees investigation found no evidence to conclude that anyone else, at
Dutchmen or elsewhere in the Company, knew of or participated in this misconduct or that there was
theft or misappropriation of company assets. The Audit Committees investigation also identified
issues with respect to internal controls at Dutchmen, certain of the Companys other operating
subsidiaries, and the Companys corporate finance and accounting office. The Companys conclusions
regarding internal controls issues are more fully detailed in Item 9A of this report.
The Companys decision to restate its previously issued financial statements follows the Companys
evaluation, considering the results from the Audit Committees investigation, of accounting
practices employed at Dutchmen during the periods restated. The cumulative effect of the
restatement reported in this Annual Report on Form 10-K/A is a reduction to income before income
taxes of $21,121, or $13,255 in net income, for the fiscal years 2004 through 2006 with the primary
impact occurring in fiscal year 2006. The restated 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, are reported in this Annual Report on
Form 10-K/A.
The effects of these restatements are reflected in the financial statements and other supplemental
data, including the unaudited quarterly data for fiscal years 2004, 2005 and 2006 and selected
financial data, included in this Form 10-K/A. We have not amended and do not intend to amend any
of our previously filed annual reports on Form 10-K for the periods affected by the restatement or
adjustments other than in this Annual Report on Form 10-K/A or any of our previously filed
Quarterly Reports on Form 10-Q other than our Quarterly Report on Form 10-Q/A for the three months
ended October 31, 2006 being filed shortly after this report.
1
We did not timely file our Quarterly Report on Form 10-Q for the quarter ended January 31, 2007 by
the prescribed due date of March 12, 2007. At that time, the Audit Committees investigation was
ongoing. We expect to file our Quarterly Report on Form 10-Q for the quarter ended January 31, 2007
as soon as practicable after the filing of this report.
As a result of our failure to file quarterly reports on a timely basis, we are no longer eligible
to use Form S-3 to register our securities with the SEC until all required reports under the
Securities Exchange Act of 1934 have been timely filed for the 12 months prior to the filing of the
registration statement for those securities.
The restatement, and the reasons for and events leading to the restatement, are described in more
detail in Part II, Item 7 Managements Discussion and Analysis of Financial Condition and
Results of Operations and Note A to our Consolidated Financial Statements Restatement of
Financial Statements. This restatement affects the following areas of the report:
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Part I Item 1
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Business (Forward Looking Statements subsection only); |
Part I Item 1A.
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Risk Factors; |
Part II Item 6.
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Selected Financial Data; |
Part II Item 7.
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Managements Discussion and Analysis of Financial Condition and Results of Operations; |
Part II Item 8.
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Financial Statements and Supplementary Data (Unaudited); |
Part II Item 9A.
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Controls and Procedures; and |
Part IV Item 15.
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Exhibits and Financial Statement Schedules, as described in Note A to our Consolidated Financial Statements
Restatement of Financial Statements. |
Except for the foregoing amended disclosures, the information in this Form 10-K/A generally has not
been updated to reflect events that occurred after September 28, 2006, the original filing date of
our Annual Report on Form 10-K for the fiscal year ended July 31, 2006.
2
PART I
Unless otherwise indicated, all amounts presented in thousands except units, square feet, share and
per share data.
ITEM 1. BUSINESS
General Development of Business
Our company was founded in 1980 and produces and sells a wide range of recreation vehicles and
small and mid-size buses in the United States and Canada. We are incorporated in Delaware and are
the successor to a corporation of the same name which was incorporated in Nevada on July 29, 1980.
Our principal executive office is located at 419 West Pike Street, Jackson Center, Ohio 45334 and
our telephone number is (937)596-6849. Our Internet address is www.thorindustries.com. We maintain
current reports, available free of charge, on our web site.
Our principal recreation vehicle operating subsidiaries are Airstream, Inc. (Airstream), CrossRoads
RV (CrossRoads), Dutchmen Manufacturing, Inc. (Dutchmen), Four Winds International, Inc. (Four
Winds), Keystone RV Company (Keystone), Komfort Corp. (Komfort), Citair, Inc. (Citair), Thor
California, Inc. (Thor California), and Damon Corporation (Damon). Our principal bus operating
subsidiaries are Champion Bus, Inc. (Champion), ElDorado National California, Inc. (ElDorado
California), ElDorado National Kansas, Inc. (ElDorado Kansas) and Goshen Coach, Inc. (Goshen
Coach).
On September 2, 2003, we acquired 100% of the common stock of Damon Corporation, a major
manufacturer of Class A motorhomes and the largest builder of park models. The purchase price was
$29,619. In addition, immediately after the closing, the Company paid off a $12,973 bank debt
assumed in connection with the acquisition.
On November 1, 2004 we completed our acquisition of the stock of DS Corp. dba CrossRoads RV, an
Indiana corporation (CrossRoads), pursuant to an Agreement and Plan of Merger (the Merger
Agreement), dated as of October 28, 2004, by and among our Company, Thor Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of our Company (Acquisition Subsidiary),
CrossRoads and the securityholders of CrossRoads. CrossRoads is engaged in the business of
manufacturing towable recreation vehicles. Under the terms of the Merger Agreement, Acquisition
Subsidiary merged with and into CrossRoads, and CrossRoads continued as the surviving corporation
(the Merger). In addition, as part of the Merger, certain members of management of CrossRoads
entered into non-competition agreements with our Company.
The purchase price paid by us for the acquisition of the stock of CrossRoads was $28,030, 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. The
fair value of assets acquired and liabilities assumed was $10,354 and $271 respectively.
Recreation Vehicles
Airstream
Our Airstream subsidiary manufactures and sells premium and medium-high priced travel trailers and
motorhomes under the trade name Airstream Classic. Airstream Classic vehicles are distinguished by
their rounded shape and bright aluminum finish and, in our opinion, constitute the most recognized
product in the recreation vehicle industry. Airstream, responding to the demands of the market for
a lighter, lower-cost product, also manufactures and sells the Airstream Safari, International,
Bambi and Base Camp travel trailers. Airstream also sells the Interstate and Westfalia Class B
motorhomes.
Dutchmen
Our Dutchmen subsidiary manufactures and sells conventional travel trailers and fifth wheels
primarily under the trade names Dutchmen, Four Winds, Aero, T@b, Grand Junction and Colorado.
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Four Winds
Our Four Winds subsidiary manufactures and sells gasoline and diesel Class C and Class A
motorhomes. Its products are sold under trade names such as Four Winds, Hurricane, Windsport,
Mandalay, Presidio, Dutchmen, Chateau and Fun Mover.
CrossRoads
Our CrossRoads subsidiary manufacturers and sells conventional travel trailers and fifth wheels
under the trade names Paradise Pointe, Cross Terrain, Cruiser, Zinger and Sunset Trail.
Citair
Our Citair subsidiary manufactures moderately-priced travel trailers, fifth wheels, Class C
motorhomes and truck campers. It operates under the name General Coach and sells recreation
vehicles under the trade names Citation and Corsair.
Keystone
Our Keystone subsidiary manufactures and sells travel trailers and fifth wheels under trade names
such as Montana, Springdale, Hornet, Sprinter, Outback, Laredo, Everest, Mountaineer, Challenger,
and Cougar.
Komfort
Our Komfort subsidiary manufactures and sells travel trailers and fifth wheels under the trade
names Komfort and Trailblazer primarily in the western United States and western Canada.
Thor California
Our Thor California subsidiary manufactures and sells travel trailers and fifth wheels under the
trade names Wanderer, Tahoe, Summit, Wave and Jazz primarily in the western United States.
Damon Motor Coach
Damon Motor Coach manufactures and sells gasoline and diesel Class A motor homes under the names
Daybreak, Intruder, Challenger, Astoria, Tuscany and Outlaw.
Breckenridge
Breckenridge is the park model division of Damon Corporation. Park models are factory built second
homes designed for recreational living. They are towed to a destination site such as a lake, woods
or park and are considered a country cottage.
We believe that our recreation vehicle business is the largest unit and revenue manufacturer in
North America based on retail statistics published by Statistical Surveys, Inc. and publicly
reported results.
Buses
ElDorado National
ElDorado National, comprised of our ElDorado Kansas and ElDorado California subsidiaries,
manufactures and sells buses for transit, airport car rental and hotel/motel shuttles, paramedical
transit for hospitals and nursing homes, tour and charter operations and other uses.
ElDorado National manufactures and sells buses under trade names such as Aerolite, AeroElite,
Aerotech, Escort, MST, Transmark, EZ Rider, and Axess, its 40 foot bus. ElDorado Nationals plants
are located in Salina, Kansas and Riverside, California.
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Champion Bus
Champion manufactures and sells small and mid-size buses under trade names such as Challenger,
Defender, and Crusader.
Goshen Coach
Goshen Coach manufactures and sells small and mid-size buses under trade names such as GC II and
Pacer.
We believe that our bus division is the largest unit manufacturer of small and mid-size commercial
buses in North America based on statistics published by the Mid-Size Bus Manufacturers Association.
Product Line Sales and 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 & 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.
The table below sets forth the contribution of each of the Companys product lines to net sales in
each of the last three fiscal years.
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2006 |
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2005 |
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2004 |
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Amount |
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Amount |
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Amount |
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% |
Recreation Vehicles: |
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Towables |
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$ |
2,173,483 |
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71 |
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$ |
1,742,108 |
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68 |
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$ |
1,433,997 |
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65 |
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Motorized |
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577,025 |
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19 |
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566,138 |
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22 |
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539,010 |
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25 |
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Total Recreation Vehicles |
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2,750,508 |
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90 |
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2,308,246 |
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90 |
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1,973,007 |
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90 |
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Buses |
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315,768 |
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10 |
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249,895 |
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10 |
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214,732 |
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10 |
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Total Net Sales |
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3,066,276 |
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100 |
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$ |
2,558,141 |
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100 |
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$ |
2,187,739 |
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100 |
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Additional information concerning business segments is included in Note M of the Notes to the
Companys Consolidated Financial Statements.
Recreation Vehicles
Overview
We manufacture and sell a wide variety of recreation vehicles throughout the United States and
Canada, as well as related parts and accessories. Recreation vehicle classifications are based upon
standards established by the Recreation Vehicle Industry Association (RVIA). The principal types of
recreation vehicles that we produce include conventional travel trailers, fifth wheels, Class A and
Class C motorhomes and park models.
Travel trailers are non-motorized vehicles which are designed to be towed by passenger automobiles,
pickup trucks, SUVs or vans. Travel trailers provide comfortable, self-contained living facilities
for short periods of time. We produce conventional, and fifth wheel travel trailers.
Conventional trailers are towed by means of a frame hitch attached to the towing vehicle. Fifth
wheel trailers, designed to be towed by pickup trucks, are constructed with a raised forward
section that is attached to the bed area of the pickup truck.
Park models are recreational dwellings towed to a permanent site such as a lake, woods or park. The
maximum size of park models is 400 square feet. They provide comfortable self contained living and
are second homes for their owners, according to The Recreational Park Trailer Association.
5
A motorhome is a self-powered vehicle built on a motor vehicle chassis. Motorhomes are
self-contained with their own lighting, heating, cooking, refrigeration, sewage holding and water
storage facilities, so that they can be lived in without being attached to utilities.
Class A motorhomes, constructed on medium-duty truck chassis, are supplied complete with engine and
drive train components by motor vehicle manufacturers such as Workhorse Custom Chassis, Spartan,
Ford and Freightliner. We design, manufacture and install the living area and drivers compartment
of Class A motorhomes. Class C motorhomes are built on a Ford, General Motors or Daimler Chrysler
small truck or van chassis which includes an engine, drive train components, and a finished cab
section. We construct a living area which has access to the drivers compartment and attaches to
the cab section. Although they are not designed for permanent or semi-permanent living, recreation
vehicles can provide comfortable living facilities for short periods of time.
Production
In order to minimize finished inventory, our recreation vehicles generally are produced to order.
Our facilities are designed to provide efficient assembly line manufacturing of products. Capacity
increases can be achieved at relatively low cost, largely by increasing the number of production
employees or by acquiring or leasing additional facilities and equipment.
We purchase in finished form many of the components used in the production of our recreation
vehicles. The principal raw materials used in the manufacturing processes for motorhomes and travel
trailers are aluminum, lumber, plywood, plastic, fiberglass, and steel purchased from numerous
suppliers. We believe that, except for chassis, substitute sources for raw materials and components
are available with no material impact on our operations. We are able to obtain the benefit of
volume price discounts for many of our purchases of raw materials and components by centralized
purchasing.
Our relationship with our chassis suppliers is similar to all buyer/vendor relationships and no
special contractual commitment is engaged in by either party. Historically, Ford and General Motors
resort to an industry-wide allocation basis during restriction of supply. These allocations would
be based on the volume of chassis previously purchased. Sales of motor homes and small buses rely
on these chassis and are affected accordingly.
Generally, all of our operating subsidiaries introduce new or improved lines or models of
recreation vehicles each year. Changes typically include new sizes and floorplans, different decors
or design features, and engineering improvements.
Seasonality
Since recreation vehicles are used primarily by vacationers and campers, our recreation vehicle
sales are seasonal and, in most geographical areas, tend to be significantly lower during the
winter months than in other periods. As a result, recreation vehicle sales are historically lowest
during the second fiscal quarter, which ends on January 31 of each year.
Marketing and Distribution
We market our recreation vehicles through independent dealers located throughout the United States
and Canada. Each of our recreation vehicle operating subsidiaries maintains its own dealer
organization, with some dealers carrying more than one of our product lines. As of July 31, 2006,
there were approximately 1,500 dealers carrying our products in the U.S. and Canada. We believe
that close working relationships between our management and sales personnel and the many
independent dealers provide us with valuable information on customer preferences and the quality
and marketability of our products. Additionally, by maintaining substantially separate dealer
networks for each of our subsidiaries, our products are more likely to be competing against
competitors products in similar price ranges rather than against our other products. Park models
are typically sold by park model dealers as well as by some travel trailer dealers.
Each of our recreation vehicle operating subsidiaries has an independent sales force to call on
their dealers. Our most important sales promotions occur at the major recreation vehicle shows for
dealers which take place throughout the year at different locations across the country. We benefit
from the recreation vehicle awareness advertising and major marketing programs sponsored by the
RVIA in national print media and television. We engage in a limited amount of consumer-oriented
advertising for our recreation vehicles, primarily through industry magazines, the distribution of
product brochures, direct mail advertising campaigns and the internet.
In our selection of individual dealers, we emphasize the dealers financial strength to maintain a
sufficient inventory of our products, as well as their reputation, experience, and ability to
provide service. Many of our dealers carry the recreation vehicle lines of one or
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more of our competitors. Each of our operating subsidiaries has sales agreements with their dealers
and these agreements are subject to annual review. No single recreation vehicle dealer accounted
for more than 8% of our consolidated net sales of recreation vehicles during fiscal 2006.
Substantially all of our sales to dealers are made on terms requiring cash on delivery or within 10
days thereafter. We generally do not finance dealer purchases. Most dealers are financed on a
floorplan basis by an unrelated bank or financing company which lends the dealer all or
substantially all of the wholesale purchase price and retains a security interest in the vehicles
purchased. As is customary in the recreation vehicle industry, we will execute a repurchase
agreement with a lending institution financing a dealers purchase of our products upon the lending
institutions request and after completion of a credit investigation of the dealer involved.
Repurchase agreements provide that for up to 12 months after a unit is financed and in the event of
default by the dealer we will repurchase the unit repossessed by the lending institution for the
amount then due, which is often less than 100% of the dealers cost. The risk of loss under
repurchase agreements is spread over numerous dealers and is further reduced by the high resale
value of the units which we would be required to repurchase. In our experience, losses under
repurchase agreements have not been significant and we believe that any future losses under these
agreements would not have a material adverse effect on our company.
The losses incurred due to repurchase were approximately $648, $1,865 and $642 in fiscal 2006, 2005
and 2004, respectively.
Joint Ventures
In March 1996, our Company and Cruise America, Inc. formed a 50/50 ownership joint venture, CAT
Joint Venture LLC, to make short-term rentals of motorized recreation vehicles to the public. As of
July 31, 2006 we were contingently liable for repurchase obligations of CAT Joint Venture inventory
in the amount of approximately $9,500.
Thor Credit Corporation, operated by GE Consumer Finance, provides retail credit to ultimate
purchasers of any recreation vehicle purchased from a Thor dealer. This retail credit program is
not limited to Thor products.
Backlogs
As of July 31, 2006, the backlog for towable and motorized recreation vehicle orders was
approximately $229,823 and $103,214, respectively, compared to $202,177 and $133,924 respectively,
at July 31, 2005. Backlog represents unfilled dealer orders on a particular day which can and do
fluctuate on a seasonal basis. In the recreation vehicle business our manufacturing time is quite
short.
Historically, the amount of our current backlog compared to our backlog in previous periods
reflects general economic and industry conditions and, together with other relevant factors such as
continued acceptance of our products by the consumer, may be an indicator of our revenues in the
near term.
Warranties
We currently provide purchasers of our recreation vehicles with a standard one or two-year limited
warranty against defects in materials and workmanship and a standard two year limited warranty on
certain major components separately warranted by the suppliers of these components. The chassis and
engines of our motorhomes are warranted for three years or 36,000 miles by their manufacturers. A
wholly owned captive insurance company provides coverage for product warranties.
Buses
Overview
Our line of buses are sold under the names ElDorado National, Champion Bus and Goshen Coach. Our
line of small and mid-size buses consists of airport shuttle buses, intra-urban and inter-urban
mass transportation buses, and buses for tourist uses. Our Axess 40 foot bus is designed for
transit and airport shuttle uses.
Production
Our bus production facilities in Salina, Kansas; Riverside, California; Imlay City, Michigan; and
Elkhart, Indiana are designed to provide efficient assembly line manufacturing of our buses. The
vehicles are produced according to specific orders which are normally obtained by dealers. In April
2004, we moved out of leased premises in Chino, CA to new owned facilities in Riverside, CA.
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Some of the chassis, all of the engines and auxiliary units, and some of the seating and other
components used in the production of our small and mid-size buses are purchased in finished form.
Our Riverside, California, facility assembles chassis for our rear engine buses from industry
standard components and assembles these buses directly on the chassis.
The principal raw materials used in the manufacturing of our buses are fiberglass, steel, aluminum,
plywood, and plastic. We purchase most of the raw materials and components from numerous suppliers.
We purchase most of our bus chassis from Ford, Freightliner and General Motors and engines from
Cummins, Caterpillar, and John Deere. We believe that, except for chassis, raw materials and
components could be purchased from other sources, if necessary, with no material impact on our
operations.
Marketing and Distribution
We market our small and mid-size buses through a network of 80 independent dealers in the United
States and Canada. We select dealers using criteria similar to those used in selecting recreation
vehicle dealers. During fiscal 2006, one of our dealers accounted for 17% of the Companys bus net
sales and another accounted for 11%. We also sell our small and mid-size buses directly to certain
national accounts such as major rental car companies, hotel chains, and transit authorities. Most
of our bus sales are derived from contracts with state and local transportation authorities, in
some cases with partial funding from federal agencies.
Terms of sale are typically cash on delivery or through national floorplan financing institutions.
Sales to some state transportation agencies and other government agencies may be on longer terms.
Backlog
As of July 31, 2006 the backlog for bus orders was approximately $216,454 compared to $130,566 at
July 31, 2005. The time for fulfillment of bus orders is substantially longer than in the
recreation vehicle industry because generally buses are made to customer specification. The
existing backlog of bus orders is expected to be filled in fiscal 2007.
Historically, the amount of our current backlog compared to our backlog in previous periods
reflects general economic and industry conditions and, together with other relevant factors such as
continued acceptance of our products by the consumer, may be an indicator of our revenues in the
near term.
Warranties
We currently provide purchasers of our buses with a limited warranty for one year or 12,000 miles
against defects in materials and workmanship, excluding only certain specified components which are
separately warranted by suppliers. We provide body structure warranty on buses ranging from 2 years
50,000 miles to 5 years 75,000 miles. The chassis and engines of our small and mid-size buses are
warranted for three years or 36,000 miles by their manufacturers. A wholly owned captive insurance
company provides coverage for product warranties.
Regulation
We are subject to the provisions of the National Traffic and Motor Vehicle Safety Act and the
safety standards for recreation vehicles, buses and recreation vehicle and bus components which
have been promulgated thereunder by the U.S. Department of Transportation. Because of our sales in
Canada, we are also governed by similar laws and regulations issued by the Canadian government.
We are a member of the Recreation Vehicle Industry Association (RVIA), a voluntary association of
recreation vehicle manufacturers which promulgates recreation vehicle safety standards. We place an
RVIA seal on each of our recreation vehicles to certify that the RVIAs standards have been met.
Both federal and state authorities have various environmental control standards relating to air,
water, and noise pollution which affect our business and operations. For example, these standards,
which are generally applicable to all companies, control our choice of paints, discharge of air
compressor waste water and noise emitted by factories. We rely upon certifications obtained by
chassis manufacturers with respect to compliance by our vehicles with all applicable emission
control standards.
8
We are also subject to the regulations promulgated by the Occupational Safety and Health
Administration or OSHA. Our plants are periodically inspected by federal agencies concerned with
health and safety in the work place, and by the RVIA, to ensure that our products comply with
applicable governmental and industry standards.
We believe that our products and facilities comply in all material respects with applicable vehicle
safety, environmental, RVIA, and OSHA regulations.
We do not believe that compliance with the regulations discussed above will have any material
effect on our capital expenditures, earnings or competitive position.
Competition
Recreation Vehicles
The recreation vehicle industry is characterized by relative ease of entry, although the codes,
standards, and safety requirements introduced in recent years are a deterrent to new competitors.
The need to develop an effective dealer network also acts as a barrier to entry. The recreation
vehicle market is intensely competitive with a number of other manufacturers selling products which
compete directly with our products. Competition in the recreation vehicle industry is based upon
price, design, value, quality, and service. We believe that the quality, design, and price of our
products and the warranty coverage and service that we provide allow us to compete favorably for
retail purchasers of recreation vehicles. We estimate that we are the largest recreation vehicle
manufacturer in terms of units produced and revenue. According to Statistical Surveys our market
shares for travel trailers and fifth wheels is 32% and motorhomes are at 15%.
Small and Mid-Size Buses
We estimate that we have a 39% market share of the U.S. and Canadian small and mid-size bus market
after accounting for the acquisition of Goshen Coach on May 27, 2005. Our competitors offer lines
of buses which compete with all of our products. Price, quality, and delivery are the primary
competitive factors. As with recreation vehicles, we believe that the quality, design, and price of
small and mid-size buses, the warranty coverage and service that we provide, and the loyalty of our
customers allow us to compete favorably with similar products of our competitors.
Trademarks and Patents
We have registered United States and Canadian trademarks or licenses covering the principal trade
names and model lines under which our products are marketed. We are not dependent upon any patents
or technology licenses for the conduct of our business.
Employee Relations
At July 31, 2006, we had approximately 9,117 employees in the United States and 246 employees in
Canada. Of these 9,363 employees, 1,112 are salaried. Citairs approximately 210 hourly employees
are currently represented by certified labor organizations. Our Citair Hensall division contract
was ratified on January 13, 2004 and will expire on September 30, 2006. Citair Olivers contract
was ratified on October 17, 2003 and will expire on October 16, 2008. Employees of our other
subsidiaries are not represented by certified labor organizations. We believe that we maintain a
good working relationship with our employees.
Information About Foreign and Domestic Operations and Export Sales
Sales from our Canadian operations and export sales to Canada from our U.S. operations amounted to
approximately 1.3% and 10.0% in fiscal 2006, 1.5% and 9.8% in fiscal 2005, and 1.5% and 7.0% in
fiscal 2004 respectively of our total net sales to unaffiliated customers.
Forward Looking Statements
This Annual Report on Form 10-K/A 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 Companys
expectations. Factors which could cause materially different results include, among others, the
Companys ability to become current in
9
its filings with the SEC, additional issues that may arise in connection with the findings of the
Audit Committees investigation and the SECs requests for
additional information, fuel prices, fuel availability, interest rate increases, increased material costs, the success of
new product introductions, the pace of acquisitions and cost structure improvements, competition
and general economic conditions and other risks and uncertainties discussed more fully in Item 1A.
Risk Factors below. We disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward looking statements contained in this Annual Report on Form 10-K/A or to
reflect any change in our expectations after the date of this Annual Report on Form 10-K/A or any
change in events, conditions or circumstances on which any statement is based, except as required
by law.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
all amendments to those reports and the Proxy Statement for our Annual Meeting of Shareholders are
made available, free of charge, on our web site, http://www.thorindustries.com, as soon as
reasonably practicable after such reports have been filed with or furnished to the SEC.
ITEM 1A. RISK FACTORS
The following risk factors should be considered carefully in addition to the other information
contained in this filing. The risks and uncertainties described below are not the only ones we face
and represent some of the risks that our management believes are material to our company and our
business. If any of the following risks actually occur, our business, financial condition or
results of operations could be harmed.
Risks Relating to Our Investigation
The SEC is reviewing the facts and circumstances giving rise to the restatement of our previously
issued financial statements.
As previously announced, in connection with an internal review of our Dutchmen Manufacturing, Inc.
operating subsidiary, we promptly and voluntarily informed the SEC of the Audit Committees
independent investigation, and have been responding to SEC staff requests for additional
information in connection with the staffs investigation. We continue to be in discussions with
the SEC and 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.
Risks Relating To Our Business
The recreation vehicle and small and mid-size bus industries are highly competitive.
The recreation vehicle and bus industries that we are currently engaged in are highly competitive
and we have numerous competitors and potential competitors. Competition in these industries is
based upon price, design, value, quality and service. Competitive pressures, especially in the
entry-level segment of the recreation vehicle market for travel trailers, have, from time to time,
resulted in a reduction of our profit margins. Sustained increases in these competitive pressures
could have a material adverse effect on our results of operations. There can be no assurance that
existing or new competitors will not develop products that are superior to our recreation vehicles
or small or mid-size buses or that achieve better consumer acceptance, thereby adversely affecting
our market share, sales volume and profit margins.
Our businesses are cyclical and this can lead to fluctuations in our operating results.
The industries in which we operate are cyclical and there can be substantial fluctuations in our
manufacturing, shipments and operating results. Consequently, the results for any prior period may
not be indicative of results for any future period.
External Factors Affecting Any Business.
Companies within the recreation vehicle and bus industries are subject to volatility in operating
results due to external factors such as general economic conditions, including consumer confidence,
employment rates, prevailing interest rates, inflation, and other economic conditions affecting
consumer attitudes and disposable consumer income generally, demographic changes and political
changes. Specific factors affecting the recreation vehicle and bus industries include:
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overall consumer confidence and the level of discretionary consumer spending; |
10
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inventory levels, including the level of retail sales by our dealers; |
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general economic conditions; |
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demographics, such as the retirement of baby boomers; |
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interest rates; |
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employment trends; |
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the amount of backlog, which may be a predictor of near-term future revenues; |
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fuel availability and prices; |
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the adverse impact of terrorism on consumer spending and travel related activities; and |
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adverse impact on our margins of increases in raw material costs which we are unable to
pass on to customers without negatively affecting sales. |
Two dealers accounted for 28% of our bus sales. Loss of either dealer could have a significant effect on our bus business.
A significant portion of our sales of small and mid-size buses are derived from state and local transportation authorities.
Approximately 60% of our bus sales are derived from contracts with state and local transportation
authorities, in most cases with partial funding from federal agencies. There can be no assurance
that these authorities will not reduce their expenditures for our buses in the future as a result
of budgetary constraints or otherwise. A reduction in the purchase of our buses by these
authorities could have an adverse effect on our business and results of operations.
Our recreation vehicle business is seasonal, and this leads to fluctuations in sales, production and net income.
We have experienced, and expect to continue to experience, significant variability in sales,
production and net income as a result of seasonality in our businesses. Demand in the recreation
vehicle industry generally declines during the winter season, while sales and profits are generally
highest during the spring and summer months. In addition, unusually severe weather conditions in
some markets may delay the timing of shipments from one quarter to another.
Our business is affected by the availability and terms of financing to dealers and retail purchasers.
Our business is affected by the availability and terms of financing to dealers and retail
purchasers. Substantial increases in interest rates and decreases in the general availability of
credit have had an adverse impact upon our business and results of operations in the past and may
continue to do so in the future.
Changes in consumer preferences for our products or our failure to gauge those preferences could lead to reduced sales and additional costs.
We cannot be certain that historical consumer preferences for our products in general, and
recreation vehicles in particular, will remain unchanged. We believe that the introduction of new
features, designs and models will be critical to the future success of our recreation vehicle
operations. Delays in the introduction of new models, designs or product features, or a lack of
market acceptance of new models, designs or product features could have a material adverse effect
on our business. For example, we may incur significant additional costs in designing or redesigning
models that are not accepted in the marketplace. Products may not be accepted for a number of
reasons, including changes in consumer preferences or our failure to properly gauge consumer
preferences. Further, we cannot be certain that new product introductions will not reduce revenues
from existing models and adversely affect our results of operations. In addition, there can be no
assurance that any of these new models or products will be introduced to the market on time or that
they will be successful when introduced.
If the frequency and size of product liability and other claims against us rises, our business, results of operations and financial condition may be harmed.
11
We are frequently subject, in the ordinary course of business, to litigation involving product
liability and other claims, including wrongful death, against us related to personal injury and
warranties. We partially self-insure our product liability claims and also purchase product
liability insurance in the commercial insurance market. We cannot be certain that our insurance
coverage will be sufficient to cover all future claims against us. Any increase in the frequency
and size of these claims, as compared to our experience in prior years, may cause the premium that
we are required to pay for insurance to rise significantly. It may also increase the amounts we pay
in punitive damages, not all of which are covered by our insurance.
When we introduce new products into the marketplace we may incur expenses that we did not
anticipate, which, in turn, can result in reduced earnings.
The introduction of new models of recreation vehicles and buses is critical to our future success.
We may incur unexpected expenses, however, when we introduce new models of recreation vehicles and
buses. For example, we may experience unexpected engineering or design flaws that will force a
recall of a new product. The costs resulting from these types of problems could be substantial, and
could have a significant adverse effect on our earnings.
Fuel shortages, or continuing high prices for fuel, could have a negative effect on sales of our
recreation vehicles.
Gasoline or diesel fuel is required for the operation of recreation vehicles. There can be no
assurance that the supply of these petroleum products will continue uninterrupted, that rationing
will not be imposed or that the price of or tax on these petroleum products will not significantly
increase in the future. Shortages of gasoline and substantial increases in the price of gasoline
have had a material adverse effect on the recreation vehicle industry as a whole in the past and
could have a material adverse effect on our business in the future.
Our repurchase agreements with floor plan lenders could result in increased costs.
In accordance with customary practice in the recreation vehicle industry, upon the request of a
lending institution financing a dealers purchase of our products and after completion of a credit
investigation of the dealer involved, we will execute a repurchase agreement with the lending
institution. Repurchase agreements provide that, for up to 12 months after a recreation vehicle is
financed and in the event of default by the dealer, we will repurchase the recreation vehicle
repossessed by the lending institution for the amount then due, which is usually less than 100% of
dealers cost. The difference between the gross repurchase price and the price at which the
repurchased product can then be resold, which is typically at a discount to the original sale
price, is an expense to us. Thus, if we were obligated to repurchase a substantially greater number
of recreation vehicles in the future, this would increase our costs.
For some of our components, we depend on a small group of suppliers, and the loss of any of these
suppliers could affect our ability to obtain components at competitive prices, which would decrease
our margins.
Most recreation vehicle and bus components are readily available from a variety of sources.
However, a few components are produced by only a small group of quality suppliers that have the
capacity to supply large quantities on a national basis. Primarily, this occurs in the case of
chassis for our motor homes and buses, where Ford Motor Company and General Motors are the dominant
suppliers. The recreation vehicle industry as a whole has from time to time experienced shortages
of chassis due to the concentration or allocation of available resources by suppliers of chassis to
the manufacturers of vehicles other than recreation vehicles or for other causes. Historically, in
the event of an industry-wide restriction of supply, Ford Motor Company and General Motors have
allocated chassis among us and our competitors based on the volume of chassis previously purchased.
If Ford Motor Company or General Motors were to discontinue the manufacturing of motor home or bus
chassis, or if as a group all of our chassis suppliers significantly reduced the availability of
chassis to the industry, our business could be adversely effected. Similarly, shortages at, or
production delays or work stoppages by the employees of Ford Motor Company, General Motors or other
chassis suppliers could have a material adverse effect on our sales. Finally, as is standard in the
industry, arrangements with chassis suppliers are terminable at any time by either our company or
the chassis supplier. If we cannot obtain an adequate chassis supply, this could result in a
decrease in our sales and earnings.
12
Our business is subject to numerous federal, state and local regulations.
We are subject to numerous federal, state and local regulations governing the manufacture and sale
of our products, including the provisions of the National Traffic and Motor Vehicle Safety Act, or
NTMVSA, and the safety standards for recreation vehicles and components which have been promulgated
under the NTMVSA by the Department of Transportation. The NTMVSA authorizes the National Highway
Traffic Safety Administration to require a manufacturer to recall and repair vehicles which contain
certain hazards or defects. Any recalls of our vehicles, voluntary or involuntary, could have a
material adverse effect on our company.
We are also subject to federal and numerous state consumer protection and unfair trade practice
laws and regulations relating to the sale, transportation and marketing of motor vehicles,
including so-called Lemon Laws. Federal and state laws and regulations also impose upon vehicle
operators various restrictions on the weight, length and width of motor vehicles, including buses
and motor homes, that may be operated in certain jurisdictions or on certain roadways. Certain
jurisdictions also prohibit the sale of vehicles exceeding length restrictions. Finally, federal
and state authorities also have various environmental control standards relating to air, water,
noise pollution and hazardous waste generation and disposal which affect our business and
operations. Failure to comply with any of the foregoing laws or regulations could have an adverse
impact on our business.
Risks Relating To Our Company.
Provisions in our charter documents and of Delaware law may make it difficult for a third party to
acquire our company and could depress the price of our common stock.
Our Restated Certificate of Incorporation contains certain supermajority voting provisions that
could delay, defer or prevent a change in control of our company. These provisions could also make
it more difficult for you and other stockholders to elect directors, amend our Restated Certificate
of Incorporation and take other corporate actions.
We are also subject to certain provisions of the Delaware General Corporation Law that could delay,
deter or prevent us from entering into an acquisition, including provisions which prohibit a
Delaware corporation from engaging in a business combination with an interested stockholder unless
specific conditions are met. The existence of these provisions could limit the price that investors
are willing to pay in the future for shares of our common stock and may deprive you of an
opportunity to sell your shares at a premium over prevailing prices.
We will continue to be effectively controlled by one of our shareholders.
Wade F. B. Thompson, our President and Chief Executive Officer and Chairman of our board of
directors, owns directly or indirectly voting control over an aggregate of 16,546,470 shares of our
common stock, representing 29.7% of our issued and outstanding voting stock as of August 31, 2006.
As a result, Mr. Thompson will be able to significantly influence most matters requiring approval
by our shareholders, including the election of board members and the approval of mergers or other
business combination transactions.
Our operations may be adversely affected if our Chief Executive Officer is unable to continue in
his present roles.
Wade F. B. Thompson continues as our Chairman, President, and Chief Executive Officer, but has
relinquished most of his day to day operating responsibilities to H. Coleman Davis, III, the Chief
Operating Officer, while Mr. Thompson undergoes medical treatment for cancer. If Mr. Thompson is
unable to continue in these roles, the search for and appointment of a Chief Executive Officer will
result in a transition period for our management team and our Board of Directors, which may
adversely impact the Companys operations. Peter B. Orthwein, a co-founder of our company,
continues in his role as Vice Chairman of our company and has undertaken additional
responsibilities and an enhanced executive role.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We own or lease approximately 6,024,000 square feet of plant and office space. We believe that our
present facilities, consisting primarily of steel clad, steel or wood frame, and masonry
construction, and the machinery and equipment contained in these facilities,
13
are well maintained and in good condition. We believe that these facilities, together with
facilities planned for fiscal 2007, are adequate for our current and foreseeable purposes and that
we would be able to obtain replacement for our leased premises at acceptable costs should our
leases not be renewed.
The following table describes the location, number and size of our facilities as of July 31, 2006.
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Approximate |
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Building |
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No. of |
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Area |
Locations |
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Owned or Leased |
|
Buildings |
|
Square Feet |
RVs: |
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Jackson Center, OH (Airstream) |
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Owned |
|
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9 |
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299,000 |
|
Hensall, Ontario, Canada (Citair) |
|
Owned |
|
|
1 |
|
|
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97,000 |
|
Oliver, B.C., Canada (Citair) |
|
Owned |
|
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1 |
|
|
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55,000 |
|
Middlebury, IN (Dutchmen) |
|
Owned |
|
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2 |
|
|
|
110,000 |
|
Burley, ID (Dutchmen) |
|
Owned |
|
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5 |
|
|
|
162,000 |
|
Goshen, IN (Dutchmen) |
|
Owned |
|
|
12 |
|
|
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513,000 |
|
Bristol, IN (Dutchmen) |
|
Owned |
|
|
1 |
|
|
|
66,000 |
|
Bristol, IN (Aero-Dutchmen) (2) |
|
Leased |
|
|
1 |
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|
|
40,000 |
|
Goshen, IN (Aero-Dutchmen) (2) |
|
Leased |
|
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1 |
|
|
|
23,000 |
|
Syracuse, IN (Aero-Dutchmen) |
|
Owned |
|
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3 |
|
|
|
133,000 |
|
Syracuse, IN (Aero-Dutchmen) (1) |
|
Leased |
|
|
1 |
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|
|
49,000 |
|
Elkhart, IN (Four Winds) |
|
Owned |
|
|
9 |
|
|
|
707,000 |
|
Elkhart, IN (Four Winds) (3) |
|
Leased |
|
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2 |
|
|
|
67,000 |
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Elkhart, IN (Damon) |
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Owned |
|
|
6 |
|
|
|
227,000 |
|
Elkhart, IN (Damon) (4) |
|
Leased |
|
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3 |
|
|
|
41,000 |
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Nappanee, IN (Breckenridge) |
|
Owned |
|
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2 |
|
|
|
144,000 |
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Topeka, IN (CrossRoads) |
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Owned |
|
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4 |
|
|
|
195,000 |
|
Bristol, IN (CrossRoads) (5) |
|
Leased |
|
|
2 |
|
|
|
67,000 |
|
Clackamas, OR (Komfort) |
|
Owned |
|
|
1 |
|
|
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107,000 |
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Moreno Valley, CA (Thor California) (6) |
|
Leased |
|
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3 |
|
|
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166,000 |
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Moreno Valley, CA (Thor California) (7) |
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Leased |
|
|
1 |
|
|
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49,000 |
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Moreno Valley, CA (Thor California) |
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Owned |
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|
1 |
|
|
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63,000 |
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Goshen, IN (Keystone) (8) |
|
Leased |
|
|
9 |
|
|
|
472,000 |
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Goshen, IN (Keystone) |
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Owned |
|
|
13 |
|
|
|
989,000 |
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Howe, IN (Keystone) (10) |
|
Leased |
|
|
1 |
|
|
|
168,000 |
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Pendleton, OR (Keystone) |
|
Owned |
|
|
1 |
|
|
|
146,000 |
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Pendleton, OR (Keystone) (9) |
|
Leased |
|
|
1 |
|
|
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63,000 |
|
Buses: |
|
|
|
|
|
|
|
|
|
|
|
|
Salina, KS (ElDorado Kansas) |
|
Owned |
|
|
2 |
|
|
|
252,000 |
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Riverside, CA (ElDorado California) |
|
Owned |
|
|
1 |
|
|
|
227,000 |
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Imlay City, Michigan (Champion Bus) |
|
Owned |
|
|
5 |
|
|
|
201,000 |
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Elkhart, IN (Goshen Coach) |
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Owned |
|
|
3 |
|
|
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126,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total |
|
|
|
|
|
|
107 |
|
|
|
6,024,000 |
|
|
|
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(1) |
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This location is occupied under a net lease which expires in 2010 with option to purchase. |
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(2) |
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This location is occupied under a net lease which expires in 2008. |
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(3) |
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These locations are occupied under net leases expiring at various times starting in 2007 thru
2008. |
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(4) |
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These locations are occupied under net leases expiring at various times starting in 2006 thru
2013. |
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(5) |
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These locations are occupied under net leases expiring at various times starting in 2006 and
2007. |
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(6) |
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This location is occupied under a net lease which expires in 2008. |
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(7) |
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This location is occupied under a net lease which expires October 2010. |
14
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|
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(8) |
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These locations are occupied under net leases, expiring at various periods starting in 2007
thru 2012. Leases have extensions and or options to purchase. |
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(9) |
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This location is occupied under a net lease expiring in November 2011 with an option to renew
for 7 years. |
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(10) |
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This location is occupied under a net lease expiring in 2010. |
ITEM 3. 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. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters submitted.
PART II
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ITEM 5. |
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MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES. |
(a) Market Information
The Companys Common Stock is traded on the New York Stock Exchange. Set forth below is the range
of high and low prices for the common stock for each quarter during the Companys two most recent
fiscal years, as quoted in the New York Stock Exchange Monthly Market Statistics and Trading
Reports.
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Fiscal 2006 |
|
Fiscal 2005 |
|
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High |
|
Low |
|
High |
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Low |
First Quarter |
|
$ |
36.39 |
|
|
$ |
30.63 |
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|
$ |
31.40 |
|
|
$ |
24.16 |
|
Second Quarter |
|
|
43.46 |
|
|
|
31.66 |
|
|
|
37.99 |
|
|
|
27.55 |
|
Third Quarter |
|
|
56.93 |
|
|
|
41.65 |
|
|
|
36.76 |
|
|
|
26.27 |
|
Fourth Quarter |
|
|
53.28 |
|
|
|
42.00 |
|
|
|
36.52 |
|
|
|
27.00 |
|
(b) Holders
As of August 31, 2006, the number of holders of record of the Companys common stock was 168.
(c) Dividends
We paid a special $.25 per share dividend as well as a $.05 dividend in our first quarter of fiscal
2006. For the second quarter of fiscal 2006 we paid a $.05 per share dividend. In the third and
fourth quarters of fiscal 2006, we paid a $.07 per share dividend in each quarter. In fiscal 2005
we paid quarterly dividends of $.03 per share in each of the four quarters. Any payment of cash
dividends in the future will be at the discretion of the Board of Directors and will depend upon
our financial condition, capital requirements, earnings and any other factors which the Board of
Directors may deem revelant. There are no limitations to the Companys ability to pay dividends
pursuant to any credit facility.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
15
The following table provides information as of July 31, 2006 about the Companys Common Stock that
may be issued upon the exercise of options, warrants and rights granted to employees or members of
the Board of Directors under all the Companys existing equity compensation plans, including the
Thor Industries, Inc. 1999 Stock Option Plan and the Thor Industries, Inc. 1997 Restricted Stock
Plan.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
Number of securities |
|
|
|
|
|
|
remaining available for |
|
|
|
to be issued |
|
|
Weighted-average |
|
|
future issuance under |
|
|
|
upon exercise of |
|
|
exercise price of |
|
|
equity compensation plans |
|
|
|
outstanding options, |
|
|
outstanding options, |
|
|
(excluding securities |
|
|
|
warrants and rights |
|
|
warrants and rights |
|
|
reflected in column (a)) |
|
Plan category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation plans approved by security holders |
|
|
533,038 |
|
|
$ |
21.29 |
|
|
|
666,003 |
|
Equity compensation plans not approved by security holders
(1) |
|
|
|
|
|
NA |
|
|
398,013 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
533,038 |
|
|
$ |
21.29 |
|
|
|
1,064,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Constitutes shares remaining available for issuance under the Thor Industries, Inc.
Restricted Stock Plan (the Stock Plan). The Stock Plan, which was adopted in 1997, is
intended to advance the interests of the Company, its stockholders, its subsidiaries and its
affiliates by encouraging and enabling inside directors, officers and other employees to
acquire and retain a proprietary interest in the Company by ownership of its stock. The
Compensation Committee of the Board of Directors, which administers the Stock Plan, may, at
any time and from time to time, make grants to plan participants in such amounts as it shall
determine. Each grant vests as determined by the Compensation Committee but, in any event,
each grant automatically vests upon the earliest of (x) the termination by the Company of the
recipient other than for cause and (y) the recipients death, disability or retirement. |
(e) Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Total Number of Shares |
|
(d) Maximum Number |
|
|
(a) Total Number |
|
(b) Average |
|
(or Units) Purchased as |
|
of Shares that |
|
|
of Shares (or units) |
|
Price Paid Per |
|
Part of Publicly Announced |
|
May Yet Be Purchased |
Period |
|
Purchased |
|
Share (or Unit) |
|
Plans or Programs (1) |
|
Under the Plans or Programs |
May 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,032,800 |
|
June 2006
|
|
|
728,600 |
|
|
$ |
44.82 |
|
|
|
728,600 |
|
|
|
2,304,200 |
|
July 2006
|
|
|
316,600 |
|
|
$ |
43.29 |
|
|
|
316,600 |
|
|
|
1,987,600 |
|
|
|
|
(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. On June 26, 2006 our Board of
Directors authorized the repurchase of an additional 2,000,000 shares extending over a
24-month period before expiring. At July 31, 2006, 1,987,600 shares of common stock remained
authorized for repurchase under the repurchase program. |
ITEM 6. SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal years ended July 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
|
(restated (4)) |
|
(restated (4)) |
|
(restated (4)) |
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales (2)(3) |
|
$ |
3,066,276 |
|
|
$ |
2,558,141 |
|
|
$ |
2,187,739 |
|
|
$ |
1,571,404 |
|
|
$ |
1,245,300 |
|
Net income (2)(3) |
|
|
163,405 |
|
|
|
119,143 |
|
|
|
104,513 |
|
|
|
78,631 |
|
|
|
51,182 |
|
Earnings per common share (1)(2)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2.89 |
|
|
|
2.10 |
|
|
|
1.83 |
|
|
|
1.38 |
|
|
|
.94 |
|
Diluted |
|
|
2.87 |
|
|
|
2.09 |
|
|
|
1.81 |
|
|
|
1.37 |
|
|
|
.94 |
|
Dividends declared per common share (1) |
|
|
.19 |
|
|
|
.42 |
|
|
|
.09 |
|
|
|
.025 |
|
|
|
.02 |
|
Dividends paid per common share (1) |
|
|
.49 |
|
|
|
.12 |
|
|
|
.09 |
|
|
|
.025 |
|
|
|
.02 |
|
Balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (2)(3) |
|
$ |
1,004,725 |
|
|
$ |
853,893 |
|
|
$ |
762,163 |
|
|
$ |
608,941 |
|
|
$ |
497,503 |
|
|
|
|
(1) |
|
Per share amounts were adjusted for the two-for-one stock split in January 2004 and July
2002. |
16
|
|
|
(2) |
|
Selected financial data for 2006, 2005 and 2004 include the results of Damon Corporation,
which was acquired on September 2, 2003. Selected financial data for 2006, 2005, 2004, 2003
and 2002 include the results of Keystone RV Company, which was acquired on November 9, 2001. |
|
(3) |
|
Selected financial data for 2006 and 2005 includes the results of CrossRoads RV, which was
acquired on November 1, 2004, and Goshen Coach, Inc. which was acquired on May 27, 2005. |
|
(4) |
|
Amounts reflect the restatement discussed in Note A in the Consolidated Financial Statements |
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
We were founded in 1980 and have grown to be the largest manufacturer of Recreation Vehicles
(RVs) 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 the acquisition of CrossRoads RV,
gives us an approximate 32% market share. In the motorized segment of the industry we have an
approximate 15% market share. Our market share in small and mid-size buses is approximately 39%. 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 invested significant capital to modernize and expand our plant facilities and have
expended approximately $31,008 for that purpose in fiscal 2006.
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.
Restatement
On January 29, 2007, we announced that the Audit Committee of our Board of Directors (the Audit
Committee) initiated an independent investigation regarding certain accounting issues at our
Dutchmen Manufacturing, Inc. operating subsidiary (Dutchmen), primarily involving inventory,
accounts receivable, accounts payable, and cost of products sold. We promptly and voluntarily
informed the SEC of the Audit Committees investigation, and have been responding to SEC staff
requests for additional information in connection with the staffs investigation. The Audit
Committee, assisted by independent outside legal counsel and accounting experts, thoroughly
investigated the accounting issues raised at Dutchmen. The Audit Committee and its advisors also
reviewed the internal controls at Dutchmen and other subsidiaries.
On April 9, 2007, we announced that on April 4, 2007 our Board of Directors, acting upon the
recommendation of the Audit Committee and management, concluded that our previously issued
consolidated financial statements relating to the fiscal years 2004, 2005 and 2006 and the three
months ended October 31, 2006 contained in our filings with the SEC, including related reports of
our independent registered public accounting firm, Deloitte & Touche LLP, and press releases,
should no longer be relied upon.
Upon completing their investigation, the Audit Committees independent advisors presented the
findings and recommendations of the investigation to the Companys Board of Directors on April 17,
2007 and April 30, 2007 and to the SEC staff on May 4, 2007. The
17
Audit Committees investigation confirmed the Companys determination that income before income
taxes recorded by Dutchmen was overstated in the amount of approximately $26,000 in the aggregate
from fiscal year 2004 to the second quarter of fiscal year 2007, as a result of misconduct by
Dutchmens former Vice President of Finance, the senior financial officer of Dutchmen in which he
intentionally understated the cost of products sold. Dutchmens Vice President of Finance
manipulated accounts reflecting inventory, accounts receivable, accounts payable, and cost of
products sold, by entering and approving his own inaccurate journal entries as well as reconciling
the related accounts, and prepared fraudulent supporting documentation, with the net effect of
overstating Dutchmens income before income taxes by approximately $26,000 during the relevant
period. The Audit Committees investigation found no evidence to conclude that anyone else, at
Dutchmen or elsewhere in the Company, knew of or participated in this misconduct or that there was
theft or misappropriation of company assets. The Audit Committees investigation also identified
issues with respect to internal controls at Dutchmen, certain of the Companys other operating
subsidiaries, and the Companys corporate finance and accounting office. The Companys conclusions
regarding internal controls issues are more fully detailed in Item 9A of this report.
The Companys decision to restate its 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 the financial statements as of and
for the three months ended October 31, 2006, follows the Companys evaluation, considering the
results from the Audit Committees investigation, of accounting practices employed at Dutchmen
during these periods. As further described in Note A to our Consolidated Financial Statements
Restatement of Financial Statements, the cumulative effect of the restatement reported in this
Annual Report on Form 10-K/A is a reduction to income before income taxes of $21,121, or $13,255 in
net income, for the fiscal years 2004 through 2006 with the primary impact occurring in fiscal year
2006. The restated 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, are reported in this Annual Report on Form 10-K/A The restated
financial statements as of and for the three months ended October 31, 2006 will be reported in our
Quarterly Report on Form 10-Q/A which will be filed shortly after this report. The accompanying
managements discussion and analysis of financial condition and results of operations gives effect
to the restatement described in Note A.
We have incurred material expenses in 2007 as a direct result of the Audit Committees
investigation and the Companys review of the accounting practices at Dutchmen and certain of our
other operating subsidiaries. These costs primarily relate to professional services for legal,
accounting and tax guidance. In addition, we have incurred costs related to the preparation, review
and audit of our restated consolidated financial statements. We expect that we will continue to
incur costs associated with these matters.
Information on our accounting controls and procedures, including our internal controls, is
described in Item 9A Controls and Procedures.
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 approximately even
with last year for the 6 months ended June 30, 2006; however the motorized segment was down
approximately 14%. 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, so many of the
buses are being replaced. According to Mid Size Bus Manufacturers Association unit sales of small
and mid-sized buses are up 11% in the 6 months ended June 30, 2006.
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.
18
FISCAL 2006 VS. FISCAL 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
Fiscal 2006 |
|
|
Fiscal 2005 |
|
|
Amount |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
2,173,483 |
|
|
$ |
1,742,108 |
|
|
$ |
431,375 |
|
|
|
24.8 |
|
Motorized |
|
|
577,025 |
|
|
|
566,138 |
|
|
|
10,887 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
2,750,508 |
|
|
|
2,308,246 |
|
|
|
442,262 |
|
|
|
19.2 |
|
Buses |
|
|
315,768 |
|
|
|
249,895 |
|
|
|
65,873 |
|
|
|
26.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,066,276 |
|
|
$ |
2,558,141 |
|
|
$ |
508,135 |
|
|
|
19.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# OF UNITS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
|
112,103 |
|
|
|
88,471 |
|
|
|
23,632 |
|
|
|
26.7 |
|
Motorized |
|
|
7,860 |
|
|
|
8,158 |
|
|
|
(298 |
) |
|
|
(3.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
119,963 |
|
|
|
96,629 |
|
|
|
23,334 |
|
|
|
24.1 |
|
Buses |
|
|
5,725 |
|
|
|
4,372 |
|
|
|
1,353 |
|
|
|
30.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
125,688 |
|
|
|
101,001 |
|
|
|
24,687 |
|
|
|
24.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
Segment |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
Net Sales |
|
|
Amount |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
350,954 |
|
|
|
16.1 |
|
|
$ |
261,272 |
|
|
|
15.0 |
|
|
$ |
89,682 |
|
|
|
34.3 |
|
Motorized |
|
|
55,622 |
|
|
|
9.6 |
|
|
|
52,993 |
|
|
|
9.4 |
|
|
|
2,629 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
406,576 |
|
|
|
14.8 |
|
|
|
314,265 |
|
|
|
13.6 |
|
|
|
92,311 |
|
|
|
29.4 |
|
Buses |
|
|
24,882 |
|
|
|
7.9 |
|
|
|
21,270 |
|
|
|
8.5 |
|
|
|
3,612 |
|
|
|
17.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
431,458 |
|
|
|
14.1 |
|
|
$ |
335,535 |
|
|
|
13.1 |
|
|
$ |
95,923 |
|
|
|
28.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
121,778 |
|
|
|
5.6 |
|
|
$ |
98,235 |
|
|
|
5.6 |
|
|
$ |
23,543 |
|
|
|
24.0 |
|
Motorized |
|
|
28,147 |
|
|
|
4.9 |
|
|
|
28,314 |
|
|
|
5.0 |
|
|
|
(167 |
) |
|
|
(0.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
149,925 |
|
|
|
5.5 |
|
|
|
126,549 |
|
|
|
5.5 |
|
|
|
23,376 |
|
|
|
18.5 |
|
Buses |
|
|
14,577 |
|
|
|
4.6 |
|
|
|
13,463 |
|
|
|
5.4 |
|
|
|
1,114 |
|
|
|
8.3 |
|
Corporate |
|
|
19,424 |
|
|
|
|
|
|
|
12,487 |
|
|
|
|
|
|
|
6,937 |
|
|
|
55.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
183,926 |
|
|
|
6.0 |
|
|
$ |
152,499 |
|
|
|
6.0 |
|
|
$ |
31,427 |
|
|
|
20.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
228,592 |
|
|
|
10.5 |
|
|
$ |
164,343 |
|
|
|
9.4 |
|
|
$ |
64,249 |
|
|
|
39.1 |
|
Motorized |
|
|
27,404 |
|
|
|
4.7 |
|
|
|
24,607 |
|
|
|
4.3 |
|
|
|
2,797 |
|
|
|
11.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
255,996 |
|
|
|
9.3 |
|
|
|
188,950 |
|
|
|
8.2 |
|
|
|
67,046 |
|
|
|
35.5 |
|
Buses |
|
|
9,356 |
|
|
|
3.0 |
|
|
|
7,492 |
|
|
|
3.0 |
|
|
|
1,864 |
|
|
|
24.9 |
|
Corporate |
|
|
(9,241 |
) |
|
|
|
|
|
|
(7,063 |
) |
|
|
|
|
|
|
(2,178 |
) |
|
|
(30.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
256,111 |
|
|
|
8.4 |
|
|
$ |
189,379 |
|
|
|
7.4 |
|
|
$ |
66,732 |
|
|
|
35.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORDER BACKLOG
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
Change |
|
|
|
|
|
|
July 31, 2006 |
|
|
July 31, 2005 |
|
|
Amount |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
229,823 |
|
|
$ |
202,177 |
|
|
$ |
27,646 |
|
|
|
13.7 |
|
Motorized |
|
|
103,214 |
|
|
|
133,924 |
|
|
|
(30,710 |
) |
|
|
(23.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
333,037 |
|
|
|
336,101 |
|
|
|
(3,064 |
) |
|
|
(.9 |
) |
Buses |
|
|
216,454 |
|
|
|
130,566 |
|
|
|
85,888 |
|
|
|
65.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
549,491 |
|
|
$ |
466,667 |
|
|
$ |
82,824 |
|
|
|
17.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
CONSOLIDATED
Net sales and gross profit for fiscal 2006 were up 19.9% and 28.6% respectively compared to fiscal
2005. Income before income taxes for fiscal 2006 was up 35.2% compared to 2005. Selling, general
and administrative expenses for fiscal 2006 increased 20.6% 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.
Corporate costs in selling, general and administrative were $19,424 for fiscal 2006 compared to
$12,487 in fiscal 2005. This increase of $6,937 is primarily the result of increased insurance
costs, legal expenses, and increased compensation expenses.
Other income for fiscal 2005 included a $2,037 gain from the sale of our Thor America property.
Net sales and income before income taxes for fiscal 2006 included net sales and income (loss)
before income taxes of $41,510 and $(892) respectively, for Goshen Coach acquired May 27, 2005. The
overall effective tax rate for fiscal 2006 was 36.2% compared to 37.1% for fiscal 2005.
Segment Reporting
RECREATION VEHICLES
Analysis of Percentage Change in Net Sales Versus Prior Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact from Internal Growth |
|
|
Impact from |
|
Average Price |
|
|
|
|
|
|
Acquisitions |
|
Per Unit |
|
Units |
|
Net Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
|
2.2 |
% |
|
|
(1.9 |
)% |
|
|
24.5 |
% |
|
|
24.8 |
% |
Motorized |
|
|
|
|
|
|
5.6 |
% |
|
|
(3.7 |
)% |
|
|
1.9 |
% |
TOWABLE RECREATION VEHICLES
The increase in towable net sales of 24.8% resulted primarily from an increase in unit shipments.
The overall industry increase in towables for August 2005 thru July 2006 was 20.4% according to
statistics provided by the Recreation Vehicle Industry Association. Decreases in the average price
per unit resulted from product mix. We estimate that $122,258 or 5.6% 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 16.1% of net sales for fiscal 2006 from 15.0% of net
sales for fiscal 2005. The primary factor for the 34.3% increase in gross profit was the 24.8%
increase in net sales, improved manufacturing cost and reduced warranty cost as a percentage of net
sales. Selling, general and administrative expenses were 5.6% of net sales for fiscal 2006 and
fiscal 2005.
Towables income before income taxes increased to 10.5% of net sales for fiscal 2006 from 9.4% of
net sales for fiscal 2005. The primary factors for this increase was our 24.8% revenue increase and
reduced manufacturing and warranty costs as a percentage of net sales.
MOTORIZED RECREATION VEHICLES
The increase in motorized net sales of 1.9% resulted primarily from an increase in average price
per unit. The decrease in units sold of approximately 3.7% outperformed the overall market decrease
in motorhomes of 13.7% for the period August 2005 through July 2006 according to statistics
published by the Recreation Vehicle Industry Association.
Motorized gross profit percentage was 9.6% of net sales for fiscal 2006 and 9.4% of net sales for
fiscal 2005. Selling, general and administrative expense were 4.9% of net sales for fiscal 2006
compared to 5.0% of net sales for fiscal 2005.
20
Motorized income before income taxes was 4.7% of net sales for fiscal 2006 and 4.3% of net sales
for fiscal 2005. This increase of 11.4% includes an impairment charge of $1,360 reflected in cost
of goods sold in fiscal 2006 due to a decision to not produce a planned motorized product line.
BUSES
Analysis of Percentage Change in Net Sales Versus Prior Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact from Internal Growth |
|
|
|
|
|
|
Impact from Acquisition |
|
Average Price Per Unit |
|
Units |
|
Net Change |
Buses |
|
|
16.6 |
% |
|
|
6.8 |
% |
|
|
3.0 |
% |
|
|
26.4 |
% |
The increase in buses net sales of 26.4% resulted from a combination of an increase in both average
price per unit and unit shipments and our acquisition of Goshen Coach.
Buses gross profit percentage decreased to 7.9% of net sales for fiscal 2006 from 8.5% of net sales
for fiscal 2005 due to low gross profit on bus contracts assumed in the purchase of Goshen Coach
and highly competitive market conditions. Selling, general and administrative expenses were 4.6% of
net sales for fiscal 2006 and 5.4% for fiscal 2005.
Buses income before income taxes was 3.0% of net sales for fiscal 2006 and fiscal 2005.
FISCAL 2005 VS. FISCAL 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
Fiscal 2005 |
|
|
Fiscal 2004 |
|
|
Amount |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
1,742,108 |
|
|
$ |
1,433,997 |
|
|
$ |
308,111 |
|
|
|
21.5 |
|
Motorized |
|
|
566,138 |
|
|
|
539,010 |
|
|
|
27,128 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
2,308,246 |
|
|
|
1,973,007 |
|
|
|
335,239 |
|
|
|
17.0 |
|
Buses |
|
|
249,895 |
|
|
|
214,732 |
|
|
|
35,163 |
|
|
|
16.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,558,141 |
|
|
$ |
2,187,739 |
|
|
$ |
370,402 |
|
|
|
16.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# OF UNITS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
|
88,471 |
|
|
|
78,644 |
|
|
|
9,827 |
|
|
|
12.5 |
|
Motorized |
|
|
8,158 |
|
|
|
8,364 |
|
|
|
(206 |
) |
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
96,629 |
|
|
|
87,008 |
|
|
|
9,621 |
|
|
|
11.1 |
|
Buses |
|
|
4,372 |
|
|
|
3,826 |
|
|
|
546 |
|
|
|
14.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
101,001 |
|
|
|
90,834 |
|
|
|
10,167 |
|
|
|
11.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
261,272 |
|
|
|
15.0 |
|
|
$ |
224,621 |
|
|
|
15.7 |
|
|
$ |
36,651 |
|
|
|
16.3 |
|
Motorized |
|
|
52,993 |
|
|
|
9.4 |
|
|
|
53,190 |
|
|
|
9.9 |
|
|
|
(197 |
) |
|
|
(.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
314,265 |
|
|
|
13.6 |
|
|
|
277,811 |
|
|
|
14.1 |
|
|
|
36,454 |
|
|
|
13.1 |
|
Buses |
|
|
21,270 |
|
|
|
8.5 |
|
|
|
20,148 |
|
|
|
9.4 |
|
|
|
1,122 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
335,535 |
|
|
|
13.1 |
|
|
$ |
297,959 |
|
|
|
13.6 |
|
|
$ |
37,576 |
|
|
|
12.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
98,235 |
|
|
|
5.6 |
|
|
$ |
81,665 |
|
|
|
5.7 |
|
|
$ |
16,570 |
|
|
|
20.3 |
|
Motorized |
|
|
28,314 |
|
|
|
5.0 |
|
|
|
25,065 |
|
|
|
4.7 |
|
|
|
3,249 |
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
126,549 |
|
|
|
5.5 |
|
|
|
106,730 |
|
|
|
5.4 |
|
|
|
19,819 |
|
|
|
18.6 |
|
Buses |
|
|
13,463 |
|
|
|
5.4 |
|
|
|
11,132 |
|
|
|
5.2 |
|
|
|
2,331 |
|
|
|
20.9 |
|
Corporate |
|
|
12,487 |
|
|
|
|
|
|
|
19,799 |
|
|
|
|
|
|
|
(7,312 |
) |
|
|
(36.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
152,499 |
|
|
|
6.0 |
|
|
$ |
137,661 |
|
|
|
6.3 |
|
|
$ |
14,838 |
|
|
|
10.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
164,343 |
|
|
|
9.4 |
|
|
$ |
142,330 |
|
|
|
10.0 |
|
|
$ |
22,013 |
|
|
|
15.5 |
|
Motorized |
|
|
24,607 |
|
|
|
4.3 |
|
|
|
28,064 |
|
|
|
5.2 |
|
|
|
(3,457 |
) |
|
|
(12.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
188,950 |
|
|
|
8.2 |
|
|
|
170,394 |
|
|
|
8.7 |
|
|
|
18,556 |
|
|
|
10.9 |
|
Buses |
|
|
7,492 |
|
|
|
3.0 |
|
|
|
9,577 |
|
|
|
4.5 |
|
|
|
(2,085 |
) |
|
|
(21.8 |
) |
Corporate |
|
|
(7,063 |
) |
|
|
|
|
|
|
(14,329 |
) |
|
|
|
|
|
|
7,266 |
|
|
|
50.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
189,379 |
|
|
|
7.4 |
|
|
$ |
165,642 |
|
|
|
7.6 |
|
|
$ |
23,737 |
|
|
|
14.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORDER BACKLOG
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
Change |
|
|
|
|
|
|
July 31, 2005 |
|
|
July 31, 2004 |
|
|
Amount |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
202,177 |
|
|
$ |
251,573 |
|
|
$ |
(49,396 |
) |
|
|
(19.6 |
) |
Motorized |
|
|
133,924 |
|
|
|
108,991 |
|
|
|
24,933 |
|
|
|
22.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
336,101 |
|
|
|
360,564 |
|
|
|
(24,463 |
) |
|
|
(6.8 |
) |
Buses |
|
|
130,566 |
|
|
|
134,414 |
|
|
|
(3,848 |
) |
|
|
(2.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
466,667 |
|
|
$ |
494,978 |
|
|
$ |
(28,311 |
) |
|
|
(5.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
Net sales and gross profit for fiscal 2005 were up 16.9% and 12.6% respectively compared to fiscal
2004. Income before income taxes for fiscal 2005 was up 14.3% compared to 2004. Selling, general
and administrative expenses for fiscal 2005 increased 10.8% compared to fiscal 2004. 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 $12,487 for fiscal 2005 compared to
$19,799 in fiscal 2004. This $7,312 reduction is primarily the result of lower legal costs and
insurance claims in fiscal 2005 of approximately $9,861 offset by increased costs of Sarbanes-Oxley
compliance of approximately $1,989.
Other income for fiscal 2005 increased due primarily to a $2,037 gain on the sale of our Thor
America property.
Net sales and income before income taxes for fiscal 2005 included net sales and income before
income taxes of $74,165 and $7,526 respectively, for CrossRoads RV acquired November 1, 2004 and
net sales and loss before income taxes of $4,776 and $248 respectively, for Goshen Coach acquired
May 27, 2005. The overall effective tax rate for fiscal 2005 was 37.1% compared to 36.9% for fiscal
2004.
Segment Reporting
RECREATION VEHICLES
Analysis of Percentage Change in Net Sales Versus Prior Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact from Internal Growth |
|
|
|
|
|
|
Impact from |
|
Average Price |
|
|
|
|
|
|
Acquisitions |
|
Per Unit |
|
Units |
|
Net Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
|
5.2 |
% |
|
|
8.8 |
% |
|
|
7.5 |
% |
|
|
21.5 |
% |
Motorized |
|
|
|
|
|
|
7.5 |
% |
|
|
(2.5 |
)% |
|
|
5.0 |
% |
TOWABLE RECREATION VEHICLES
The increase in towables net sales resulted from a combination of an increase in both average price
per unit and unit shipments and our acquisition of CrossRoads RV. The increase in units sold of
approximately 12.5% would be a 7.5% increase excluding CrossRoads. The overall industry increase in
towables on a comparable basis was 7.3%. Increases in the average price per unit resulted from the
combination of price increases and product mix.
22
Towables gross profit percentage decreased to 15.0% of net sales for fiscal 2005 from 15.7% of
net sales for fiscal 2004. The primary factors for the reduced gross margin in 2005 was a $9,300
decline in gross margin at our Thor California operation due to reduced sales volumes of 19%,
higher costs of materials, increased workers compensation claims, and the overall inability to
reduce manufacturing overhead costs in relationship to the sales reductions. Selling, general and
administrative expenses were 5.6% of net sales for fiscal 2005 and 5.7% for fiscal 2004.
Towables income before income taxes decreased to 9.4% of net sales for fiscal 2005 from 10.0% of
net sales for fiscal 2004. The primary factors for this reduction were reductions in gross margin
as mentioned earlier.
MOTORIZED RECREATION VEHICLES
The increase in motorized net sales resulted primarily from an increase in average prices per unit.
The decrease in units sold of approximately 2.5% outperformed the overall market decrease in
motorhomes of 7.2%. Increases in the average price per unit resulted from the combination of price
increases and product mix.
Motorized gross profit percentage decreased to 9.4% of net sales from 9.9% of net sales for fiscal
2004. The primary factor for the reduced gross margin in 2005 was lower unit sales. Selling,
general and administrative expense increased to 5.0% of net sales for fiscal 2005 from 4.7% of net
sales for fiscal 2004.
Motorized income before income taxes decreased to 4.3% of net sales for fiscal 2005 from 5.2% of
net sales for fiscal 2004. The reduction was due primarily to lower gross margins on individual
unit sales and higher selling general and administrative costs.
BUSES
Analysis of Percentage Change in Net Sales Versus Prior Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact from Internal Growth |
|
|
|
|
Impact from Acquisition |
|
Average Price Per Unit |
|
Units |
|
Net Change |
Buses |
|
|
2.2 |
% |
|
|
4.3 |
% |
|
|
9.9 |
% |
|
|
16.4 |
% |
The increase in buses net sales resulted from a combination of an increase in both average price
per unit and unit shipments and our acquisition of Goshen Coach. The increase in units sold of
approximately 14.3% would have been 9.9% excluding Goshen Coach. The unit sales increases are
indicative of an expected replacement cycle on our buses the majority of which have a 5 year useful
life. In addition, replacement of many older buses was delayed due to decline in the travel
industry subsequent to the 9/11 terrorist attacks.
Buses gross profit percentage decreased to 8.5% of net sales for fiscal 2005 from 9.4% of net sales
for fiscal 2004 due to continuing discounts offered to achieve bus contracts in a very competitive
market place. Selling, general and administrative expenses were 5.4% of net sales for fiscal 2005
and 5.2% for fiscal 2004.
Buses income before income taxes decreased to 3.0% of net sales for fiscal 2005 from 4.5% for
fiscal 2004. The primary reason for the decrease is due to reduced gross margins as explained
above.
Financial Condition and Liquidity
As of July 31, 2006, we had $264,373 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 the interest rates will have a significant impact on our financial
position or results of future operations.
Working capital at July 31, 2006 was $360,751 compared to $271,032 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 year ended July 31, 2006. The loan agreement executed in connection with
the
23
line of credit contains certain covenants, including restrictions on additional indebtedness, and
requires us to maintain certain financial ratios. We believe that internally generated funds and
the line of credit will be sufficient to meet our current needs and any additional capital
requirements. Capital expenditures of approximately $31,008 for fiscal year ended July 31, 2006
were primarily for planned expansions and improvements of $26,613 at our recreation vehicle
facilities and $4,395 for our bus operations, primarily at our new Goshen Coach facility. We paid a
special 25¢ dividend in fiscal 2006 totalling $14,166. We also bought back 1,145,200 shares of Thor
common stock in fiscal 2006 at a total cost of $51,462.
The Company anticipates capital expenditures in fiscal 2007 of approximately $20,000. These
expenditures will be made primarily for planned capacity expansions and for replacement of
machinery and equipment to be used in the ordinary course of business and expansions primarily in
our recreation vehicle segment.
Critical Accounting Principles
The consolidated financial statements of Thor are prepared in conformity with accounting principles
generally accepted in the United States. The preparation of these financial statements requires the
use of estimates, judgments, and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. We believe that of our accounting policies, the following
may involve a higher degree of judgments, estimates, and complexity:
Impairment of Goodwill, Trademarks and Long-Lived Assets
We at least annually review the carrying value of goodwill and other intangible assets. 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 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 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 provision of SFAS No. 109 Accounting for Income
Taxes. The objectives of accounting for incomes 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 Companys financial statements or tax
24
returns. Judgement is required in assessing the future tax consequence of events that have been
recognized in the Companys financial statements or tax returns. Fluctuations in the actual outcome
of these future tax consequences could materially impact the Companys 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 dealers flooring institution; |
|
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 Companys 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
floor-plan 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 dealers 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 Companys consolidated financial position or
results of operations. The Company records repurchase and guarantee reserves based on prior
experience and known current events.
Principal Contractual Obligations and Commercial Commitments
Our principal contractual obligations and commercial commitments at July 31, 2006 are summarized in
the following charts. We have no other off balance sheet commitments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual |
|
Payments Due By Period |
|
Obligations |
|
Total |
|
|
Fiscal 2007 |
|
|
Fiscal 2008-2009 |
|
|
Fiscal 2010-2011 |
|
|
After 5 Years |
|
Operating leases |
|
$ |
13,094 |
|
|
$ |
4,021 |
|
|
$ |
5,589 |
|
|
$ |
2,609 |
|
|
$ |
875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
$ |
13,094 |
|
|
$ |
4,021 |
|
|
$ |
5,589 |
|
|
$ |
2,609 |
|
|
$ |
875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
Total |
|
|
Amount of Commitment Expiration Per Period |
|
Commercial |
|
Amounts |
|
|
Less Than 1 |
|
|
|
|
|
|
|
|
|
|
Commitments |
|
Committed |
|
|
Year |
|
|
1-3 Years |
|
|
4-5 Years |
|
|
Over 5 Years |
|
Guarantees |
|
$ |
2,574 |
|
|
$ |
2,574 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Standby repurchase obligations |
|
$ |
813,795 |
|
|
$ |
813,795 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments |
|
$ |
816,369 |
|
|
$ |
816,369 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board issued FIN No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, which clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. The interpretation prescribes
a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 requires
recognition of tax benefits that satisfy a greater than 50% probability threshold. FIN No. 48 also
provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods,
25
disclosure, and transition. FIN No. 48 is effective for us beginning August 1, 2007. We are
assessing the potential impact that the adoption of FIN No. 48 will have on our financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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 Companys
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 Companys financial position or
results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (UNAUDITED) SEE ITEM 15
Quarterly Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported |
|
|
Restated |
|
|
|
October 31 |
|
|
January 31 |
|
|
April 30 |
|
|
July 31 |
|
|
October 31 |
|
|
January 31 |
|
|
April 30 |
|
|
July 31 |
|
Fiscal 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
761,323 |
|
|
$ |
642,047 |
|
|
$ |
857,615 |
|
|
$ |
805,291 |
|
|
$ |
761,323 |
|
|
$ |
642,047 |
|
|
$ |
857,615 |
|
|
$ |
805,291 |
|
Gross profit |
|
|
111,642 |
|
|
|
89,963 |
|
|
|
128,011 |
|
|
|
116,154 |
|
|
|
108,495 |
|
|
|
86,852 |
|
|
|
124,109 |
|
|
|
112,002 |
|
Net income |
|
|
43,365 |
|
|
|
31,874 |
|
|
|
51,139 |
|
|
|
46,086 |
|
|
|
41,373 |
|
|
|
29,905 |
|
|
|
48,669 |
|
|
|
43,458 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
.77 |
|
|
|
.56 |
|
|
|
.90 |
|
|
|
.82 |
|
|
|
.73 |
|
|
|
.53 |
|
|
|
.86 |
|
|
|
.77 |
|
Diluted |
|
|
.76 |
|
|
|
.56 |
|
|
|
.90 |
|
|
|
.81 |
|
|
|
.73 |
|
|
|
.52 |
|
|
|
.85 |
|
|
|
.77 |
|
Dividends declared per common share |
|
|
|
|
|
|
.05 |
|
|
|
.07 |
|
|
|
.07 |
|
|
|
|
|
|
|
.05 |
|
|
|
.07 |
|
|
|
.07 |
|
Dividends paid per common share |
|
|
.30 |
|
|
|
.05 |
|
|
|
.07 |
|
|
|
.07 |
|
|
|
.30 |
|
|
|
.05 |
|
|
|
.07 |
|
|
|
.07 |
|
Market prices per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
36.39 |
|
|
$ |
43.46 |
|
|
$ |
56.93 |
|
|
$ |
53.28 |
|
|
$ |
36.39 |
|
|
$ |
43.46 |
|
|
$ |
56.93 |
|
|
$ |
53.28 |
|
Low |
|
$ |
30.63 |
|
|
$ |
31.66 |
|
|
$ |
41.65 |
|
|
$ |
42.00 |
|
|
$ |
30.63 |
|
|
$ |
31.66 |
|
|
$ |
41.65 |
|
|
$ |
42.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported |
|
|
Restated |
|
|
|
October 31 |
|
|
January 31 |
|
|
April 30 |
|
|
July 31 |
|
|
October 31 |
|
|
January 31 |
|
|
April 30 |
|
|
July 31 |
|
Fiscal 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
632,726 |
|
|
$ |
537,041 |
|
|
$ |
728,693 |
|
|
$ |
659,891 |
|
|
$ |
632,726 |
|
|
$ |
537,041 |
|
|
$ |
728,501 |
|
|
$ |
659,873 |
|
Gross profit |
|
|
90,774 |
|
|
|
67,832 |
|
|
|
94,035 |
|
|
|
87,125 |
|
|
|
89,313 |
|
|
|
66,977 |
|
|
|
93,078 |
|
|
|
86,167 |
|
Net income |
|
|
35,073 |
|
|
|
20,638 |
|
|
|
32,950 |
|
|
|
33,106 |
|
|
|
34,167 |
|
|
|
20,108 |
|
|
|
32,356 |
|
|
|
32,512 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
.61 |
|
|
|
.36 |
|
|
|
.58 |
|
|
|
.59 |
|
|
|
.60 |
|
|
|
.35 |
|
|
|
.57 |
|
|
|
.58 |
|
Diluted |
|
|
.61 |
|
|
|
.36 |
|
|
|
.58 |
|
|
|
.58 |
|
|
|
.60 |
|
|
|
.35 |
|
|
|
.56 |
|
|
|
.58 |
|
Dividends declared per common share |
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.33 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.33 |
|
Dividends paid per common share |
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
|
|
.03 |
|
Market prices per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
31.40 |
|
|
$ |
37.99 |
|
|
$ |
36.76 |
|
|
$ |
36.52 |
|
|
$ |
31.40 |
|
|
$ |
37.99 |
|
|
$ |
36.76 |
|
|
$ |
36.52 |
|
Low |
|
$ |
24.16 |
|
|
$ |
27.55 |
|
|
$ |
26.27 |
|
|
$ |
27.00 |
|
|
$ |
24.16 |
|
|
$ |
27.55 |
|
|
$ |
26.27 |
|
|
$ |
27.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Part A. Restatement of the Consolidated Financial Statements
As discussed in the Explanatory Note, Item 7 Managements Discussion and Analysis of Financial
Condition and Results of Operations and Note A to the financial statements in this Form 10-K/A, the
Company has restated its previously issued financial
26
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.
The Companys decision to restate its financial statements follows the Companys evaluation,
considering the results from the Audit Committees investigation, of accounting practices employed
at Dutchmen during these periods.
Part B. Evaluation of Disclosure Controls and Procedures
In connection with the preparation of the Companys amended Annual Report on Form 10-K/A for the
year ended July 31, 2006, management, with the participation of the Companys Chief Executive
Officer and Chief Financial Officer, re-evaluated its prior conclusion regarding the effectiveness
of the Companys disclosure controls and procedures as of the end of the period covered by the
amended Annual Report. As described below, a material weakness was identified in our internal
control over financial reporting. The Public Company Accounting Oversight Boards Auditing Standard
No. 2 defines a material weakness as a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. Based upon managements
re-evaluation, conducted under Exchange Act Rule 13a-15, management, including the Chief Executive
Officer and Chief Financial Officer, concluded that the Companys disclosure controls and
procedures were not effective as of July 31, 2006 due to the material weakness described in Part C
below.
Part C. Managements Report on Internal Control Over Financial Reporting (as revised)
Management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting
refers to a process designed by, or under the supervision of, our Chief Executive Officer and Chief
Financial Officer and effected by our Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America and includes those policies and procedures that: (i)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and members of
our board of directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of our assets that could have a material
effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives. Internal control over financial
reporting is a process that involves human diligence and compliance and is subject to lapses in
judgment and breakdowns resulting from human failures. Internal control over financial reporting
also can be circumvented by collusion or improper override. Because of such limitations, there is a
risk that material misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. Projections of any evaluation of effectiveness to future periods
are also subject to the risk that controls may become inadequate because of changes in conditions
or that the degree of compliance with established policies or procedures may deteriorate.
In our previously-filed Annual Report on Form 10-K for the year ended July 31, 2006, management
conducted an assessment of the effectiveness of our internal control over financial reporting as of
July 31, 2006, using the criteria set forth in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
As a result of the findings of the independent investigation of the Audit Committee of the Board of
Directors and the restatement of the Companys financial statements, management reassessed our
internal control over financial reporting using the COSO criteria. Management identified the
following material weakness in the Companys internal control over financial reporting as of July
31, 2006:
Lack of Segregation of Duties. In January 2007, management was informed by the President of one of
the Companys operating subsidiaries, Dutchmen Manufacturing, Inc., or Dutchmen, of facts that led
it to discover that there was a lack of segregation of duties at Dutchmen. It is Company policy to
segregate duties among different people to reduce the risk of error or inappropriate action.
Despite certain efforts by the Company to improve internal controls at Dutchmen, Dutchmens Vice
President of Finance was able to perform functions that were or should have been specifically
assigned to other employees of Dutchmen, including Dutchmens controller and internal
auditor/accountant. Specifically, Dutchmens Vice President of Finance, through various means, was
entering, approving and reconciling entries into various accounts, such as inventory, accounts
receivable, accounts payable and cost of products sold, which duties should have been segregated,
and continued to do so after the Company caused additional finance staff to be hired
27
at Dutchmen. Dutchmens Vice President of Finance also entered inaccurate accounting entries and
prepared fraudulent supporting documentation and had excessive access rights to various aspects of
Dutchmens accounting and information systems. Dutchmens internal policies did not sufficiently
segregate duties for making or approving entries in key accounts and account reconciliations, and
the Company lacked sufficient compensating internal controls to prevent or detect the acts
described above. This material weakness caused the financial results reported by Dutchmen to the
Companys corporate finance and accounting group to be materially inaccurate and to be incorporated
into the Companys consolidated financial statements and the Companys required SEC filings. In
addition, certain of the Companys other operating subsidiaries also had functions that should have
been but were not segregated, there were employees who had inappropriate levels of access to
various aspects of the accounting and information systems at certain operating subsidiaries, and
the Companys corporate level monitoring of certain operating subsidiaries reconciliations was
insufficient.
As a result of the aforementioned material weakness, as of July 31, 2006, management has revised
its previously reported assessment of the effectiveness of internal control over financial
reporting and has concluded that, as of July 31, 2006, the Companys internal control over
financial reporting was not effective.
Managements revised assessment of the effectiveness of internal control over financial reporting
as of July 31, 2006 has been audited by Deloitte & Touche LLP, the independent registered public
accounting firm that audited our consolidated financial statements included in this Annual Report
on Form 10-K/A. As stated in their attestation report on managements assessment of the Companys
internal control over financial reporting, Deloitte has expressed an unqualified opinion on
managements assessment and an adverse opinion on the effectiveness of the Companys internal
control over financial reporting as of July 31, 2006.
Part D. Remedial Actions
To remediate the material weakness described above, the Company has taken or intends to take the
following actions:
|
|
|
The Company has terminated the employment of the Dutchmen Vice President of Finance
and has hired a new Vice President of Finance at Dutchmen; |
|
|
|
|
The Company has eliminated the excessive accounting and information system access
rights found to be available to the Dutchmen Vice President of Finance; |
|
|
|
|
Since discovery of the activities of the former Dutchmen Vice President of Finance,
the Company has assigned a member of its internal audit department to Dutchmen to assist
in implementing full segregation of duties in Dutchmens accounting function; |
|
|
|
|
The Company is modifying the duties of accounting personnel to improve segregation of
duties and modifying certain information access rights at certain of its other operating
subsidiaries; |
|
|
|
|
The Company is providing additional training on fraud risk and awareness and
assisting management and other key personnel to understand the lessons learned through
the Dutchmen review; |
|
|
|
|
To improve the Companys oversight of internal controls at its subsidiaries, the
Companys Board of Directors has hired a professional services firm to lead and
coordinate ongoing compliance efforts under Sarbanes-Oxley section 404 and partner with
the internal audit function of the Company; |
|
|
|
|
More frequent and in-depth periodic, unannounced internal audits of controls will be
conducted at the subsidiary level; |
|
|
|
|
The Company has enhanced its corporate level monitoring of the operating
subsidiaries accounts receivable, accounts payable and cash reconciliations, including
verification that financial information submitted by the operating subsidiaries agrees
with the financial information recorded in the operating subsidiaries information
systems; and |
|
|
|
|
The Company has modified its reporting relationships so that heads of subsidiary
accounting departments report directly to the Chief Financial Officer of the Company as
opposed to subsidiary level presidents. |
28
Part E. Changes in Internal Control Over Financial Reporting
Other than the foregoing initiatives, during the fourth quarter of fiscal year 2006 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 F. Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Thor Industries, Inc.:
We have audited managements assessment, included in the accompanying Managements Report on
Internal Controls Over Financial Reporting (as revised), that Thor Industries, Inc. and
subsidiaries (the Company) did not maintain effective internal control over financial reporting
as of July 31, 2006 because of the effect of the material weakness identified in managements
assessment based on the criteria established in Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The Companys management is
responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is
to express an opinion on managements assessment and an opinion on the effectiveness of the
Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions.
A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our report dated September 28, 2006, we expressed an unqualified opinion on managements
assessment that the Company maintained effective internal control over financial reporting and an
unqualified opinion on the effectiveness of internal control over financial reporting as of July
31, 2006. As described in the following paragraph, the Company subsequently identified material
misstatements in its annual financial statements, which caused such annual financial statements to
be restated. Management subsequently revised its assessment due to the identification of a
material weakness, described in the following paragraph, in connection with the financial statement
restatement. Accordingly, our opinion on the effectiveness of the Companys internal control over
financial reporting as of July 31, 2006 expressed herein is different from that expressed in our
previous report.
A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. A material weakness has been identified
and included in managements revised assessment regarding the lack of segregation of duties as the
Company did not design and implement controls necessary to provide reasonable assurance that there
was appropriate segregation of
duties at certain operating subsidiaries. This material weakness resulted in the restatement of
the Companys previously issued
29
financial statements as described in Note A to the consolidated
financial statements. This deficiency was determined to be a material weakness, based upon the
actual misstatements identified, the potential for additional material misstatements to have
occurred as a result of the deficiency and the lack of other mitigating controls. This material
weakness was considered in determining the nature, timing, and extent of audit tests applied in our
audit of the consolidated financial statements as of and for the year ended July 31, 2006 (as
restated), of the Company and this report does not affect our report on such financial statements.
In our opinion, managements revised assessment that the Company did not maintain effective
internal control over financial reporting as of July 31, 2006, is fairly stated, in all material
respects, based on the criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, because of
the effect of the material weakness described above on the achievement of the objectives of the
control criteria, the Company has not maintained effective internal control over financial
reporting as of July 31, 2006, based on the criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements as of and for the year ended July 31,
2006 of the Company and our report dated September 28, 2006
(June 8, 2007 as to the effects of
the restatement discussed in Note A) expressed an unqualified opinion on those financial statements
and includes an explanatory paragraph regarding the restatement of the Companys consolidated
financial statements.
DELOITTE & TOUCHE LLP
Dayton, Ohio
September 28,
2006 (June 8, 2007 as to the effect of the material weakness described in
Managements Report on Internal Controls Over Financial Reporting (as revised)).
ITEM 9B. OTHER INFORMATION
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors and Executive Officers of the Registrant is included under
the captions BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS and SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE, in the definitive Proxy Statement, dated on or about October 30
2006, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement
is hereby incorporated by reference.
The Company has adopted a written code of ethics, the Thor Industries, Inc. Business Ethics
Policy which is applicable to all directors, officers and employees of the Company, including the
Companys principal executive officer, principal financial officer, principal accounting officer or
controller and other executive officers identified pursuant to this Item 10 who perform similar
functions (collectively, the Selected Officers). In accordance with the rules and regulations of
the Securities and Exchange Commission a copy of the code has been posted on the Companys website.
The Company intends to disclose any changes in or waivers from its code of ethics applicable to any
Selected Officer on its website at http://www.thorindustries.com or by filing a Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item is contained under the captions EXECUTIVE
COMPENSATION; DIRECTOR COMPENSATION; 1999 STOCK OPTION PLAN; RESTRICTED STOCK PLAN; SELECT
EXECUTIVE INCENTIVE PLAN; ANNUAL INCENTIVE PLAN; PERFORMANCE GRAPH; COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION; and COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
in the definitive Proxy Statement, dated on or about October 30, 2006, filed with the Commission
pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by
reference.
30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The information required in response to this Item is contained under the caption OWNERSHIP OF
COMMON STOCK in the definitive Proxy Statement, dated on or about October 30, 2006, filed with the
Commission pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item is contained under the caption CERTAIN RELATIONS
AND TRANSACTIONS WITH MANAGEMENT in the definitive Proxy Statement, dated on or about October 30,
2006, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement
is hereby incorporated by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required in response to this Item is contained under the caption Fees Paid to
Independent Registered Public Accounting Firm. in the definitive Proxy Statement, dated on or
about October 30, 2006, filed with the Commission pursuant to Regulation 14A, which portion of said
Proxy Statement is hereby incorporated by reference.
31
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
|
|
|
|
|
Page |
|
|
|
|
|
F-1 |
|
|
|
|
|
F-2 |
|
|
|
|
|
F-4 |
|
|
|
|
|
F-5 |
|
|
|
|
|
F-6 |
|
|
|
|
|
F-7 |
(b) Exhibits
|
|
|
Exhibit |
|
Description |
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3(a) of the Companys Annual Report
on Form 10-K for the fiscal year ended July 31, 2001) |
|
|
|
3.2
|
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 of
the Companys Annual Report on Form 10-K for the fiscal year ended July 31, 2004) |
|
|
|
3.3
|
|
By-laws (incorporated by reference to Exhibit 3(b) of the Companys Registration Statement No. 33-13827) |
|
|
|
4.1
|
|
Form of Common Stock Certificate. (incorporated by reference to Exhibit 4(a) of the Companys Annual Report on Form 10-K
for the fiscal year ended July 31, 1987) |
|
|
|
10.1
|
|
Thor Industries, Inc. 1999 Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Companys Registration
Statement on Form S-8 dated November 5, 1999) |
|
|
|
10.2
|
|
Thor Industries, Inc. Restricted Stock Plan (incorporated by reference to Exhibit 4.1 of the Companys Registration
Statement on Form S-8 dated December 3, 1997) |
|
|
|
10.3
|
|
Thor Industries, Inc. Select Executive Incentive Plan (incorporated by reference to Exhibit 10(c) of the Companys Annual
Report on Form 10-K for the fiscal year ended July 31, 2000) |
|
|
|
14.1
|
|
Thor Industries, Inc. Business Ethics Policy (Incorporated by reference to Exhibit 14.1 of the Companys Annual Report on
Form 10-K/A for the fiscal year ended July 31, 2003) |
|
|
|
21.1
|
|
Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 of the Companys Annual Report on Form 10-K for the
fiscal year ended July 31, 2006, filed with the Commission on September 28, 2006) |
|
|
|
31.1
|
|
Certification of the Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
|
|
|
31.2
|
|
Certification of the Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
|
|
|
32.1
|
|
Certification of the Chief Executive Officer furnished pursuant to Section 906 of the SarbanesOxley Act of 2002** |
|
|
|
32.2
|
|
Certification of the Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes Oxley Act of 2002** |
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. |
|
|
|
|
|
|
|
|
|
|
|
(Signed) |
|
/S/ Wade F.B. Thompson |
|
|
|
|
|
|
|
|
|
|
|
|
|
Wade F. B. Thompson |
|
|
|
|
|
|
Chairman, President, and |
|
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
Date: June 11, 2007 |
|
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
|
|
|
|
(Signed)
|
|
/S/ Peter B. Orthwein
|
|
|
|
(Signed)
|
|
/S/ Walter L. Bennett |
|
|
|
|
|
|
|
|
|
|
|
Peter B. Orthwein
|
|
|
|
|
|
Walter L. Bennett |
|
|
Vice Chairman, Treasurer
|
|
|
|
|
|
Chief Financial Officer |
|
|
(Director)
|
|
|
|
|
|
(Principal Financial Officer
& Principal
Accounting Officer) |
|
|
|
|
|
|
|
|
|
Date: June 11, 2007 |
|
|
|
Date: June 11, 2007 |
|
|
|
|
|
|
|
|
|
(Signed)
|
|
/S/ Wade F.B. Thompson
|
|
|
|
(Signed)
|
|
/S/ Alan Siegel |
|
|
|
|
|
|
|
|
|
|
|
Wade F. B. Thompson
|
|
|
|
|
|
Alan Siegel |
|
|
Chairman, President,
and Chief Executive
Officer (Principal
Executive Officer and
Director)
|
|
|
|
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: June 11, 2007 |
|
|
|
Date: June 11, 2007 |
|
|
|
|
|
|
|
|
|
(Signed)
|
|
/S/ William C. Tomson
|
|
|
|
(Signed)
|
|
/S/ Neil D. Chrisman |
|
|
|
|
|
|
|
|
|
|
|
William C. Tomson
|
|
|
|
|
|
Neil D. Chrisman |
|
|
Director
|
|
|
|
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: June 11, 2007 |
|
|
|
Date: June 11, 2007 |
|
|
|
|
|
|
|
|
|
(Signed)
|
|
/S/ H. Coleman Davis
|
|
|
|
(Signed)
|
|
/S/ Jan H. Suwinski |
|
|
|
|
|
|
|
|
|
|
|
H. Coleman Davis
|
|
|
|
|
|
Jan H. Suwinski |
|
|
Director
|
|
|
|
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: June 11, 2007 |
|
|
|
Date: June 11, 2007 |
|
|
|
|
|
|
|
|
|
(Signed)
|
|
/S/ Geoffrey A. Thompson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey A. Thompson |
|
|
|
|
|
|
|
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: June 11, 2007 |
|
|
|
|
|
|
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Thor Industries, Inc.
We have audited the accompanying consolidated balance sheets of Thor Industries, Inc. and
subsidiaries (the Company) as of July 31, 2006 and 2005, and the related consolidated statements
of income, stockholders equity and comprehensive income, and cash flows for each of the three
years in the period ended July 31, 2006. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of Thor Industries, Inc. and subsidiaries at July 31, 2006 and 2005, and the
results of their operations and their cash flows for each of the three years in the period ended
July 31, 2006, in conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note A, the accompanying 2006, 2005, and 2004 consolidated financial statements
have been restated.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Companys internal control over financial reporting
as of July 31, 2006, based on the criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
September 28, 2006, (June 8, 2007 as to the effects of the material weakness described in
managements Report on Internal Control over Financial Reporting, as revised) expressed an
unqualified opinion on managements assessment of the effectiveness of the Companys internal
control over financial reporting and an adverse opinion on the effectiveness of the Companys
internal control over financial reporting.
DELOITTE & TOUCHE LLP
Dayton, Ohio
September 28,
2006 (June 8, 2007 as to the effects of the restatement discussed in Note A)
F-1
Consolidated Balance Sheets, July 31, 2006 and 2005
(amounts in thousands except share data)
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
(as restated, |
|
|
(as restated, |
|
|
|
see Note A) |
|
|
see Note A) |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
196,136 |
|
|
$ |
163,596 |
|
Investments-short term (Note B) |
|
|
68,237 |
|
|
|
45,219 |
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Trade, less allowance for doubtful accounts $105 in 2006 and $506 in 2005 (Note B) |
|
|
188,104 |
|
|
|
138,226 |
|
Other |
|
|
5,639 |
|
|
|
5,409 |
|
Inventories (Note E) |
|
|
183,169 |
|
|
|
160,485 |
|
Deferred income taxes and other (Note G) |
|
|
11,431 |
|
|
|
7,119 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
652,716 |
|
|
|
520,054 |
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
Land |
|
|
21,323 |
|
|
|
21,339 |
|
Buildings and improvements |
|
|
131,649 |
|
|
|
109,443 |
|
Machinery and equipment |
|
|
55,656 |
|
|
|
49,259 |
|
|
|
|
|
|
|
|
Total cost |
|
|
208,628 |
|
|
|
180,041 |
|
Less accumulated depreciation |
|
|
51,163 |
|
|
|
40,252 |
|
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
157,465 |
|
|
|
139,789 |
|
|
|
|
|
|
|
|
Investments Joint ventures (Note L) |
|
|
2,737 |
|
|
|
2,800 |
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
Goodwill (Note D) |
|
|
165,663 |
|
|
|
165,662 |
|
Noncompete agreements Net (Note D) |
|
|
2,841 |
|
|
|
3,790 |
|
Trademarks (Note D) |
|
|
13,900 |
|
|
|
13,900 |
|
Other |
|
|
9,403 |
|
|
|
7,898 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
191,807 |
|
|
|
191,250 |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,004,725 |
|
|
$ |
853,893 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-2
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
(as restated, |
|
|
(as restated) |
|
|
|
see Note A) |
|
|
see Note A) |
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
145,609 |
|
|
$ |
120,879 |
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
Compensation and related items |
|
|
37,161 |
|
|
|
28,519 |
|
Product warranties (Note N) |
|
|
59,795 |
|
|
|
55,118 |
|
Taxes |
|
|
18,709 |
|
|
|
5,738 |
|
Promotions and rebates |
|
|
12,953 |
|
|
|
7,362 |
|
Product/property liability and related liabilities |
|
|
10,423 |
|
|
|
7,913 |
|
Dividends payable (Note K) |
|
|
|
|
|
|
17,000 |
|
Other |
|
|
7,315 |
|
|
|
6,493 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
291,965 |
|
|
|
249,022 |
|
|
|
|
|
|
|
|
Deferred income taxes and other liabilities (Note G) |
|
|
12,911 |
|
|
|
11,680 |
|
|
|
|
|
|
|
|
Contingent liabilities and commitments (Note J) |
|
|
|
|
|
|
|
|
Stockholders equity (Note K): |
|
|
|
|
|
|
|
|
Preferred stockauthorized 1,000,000 shares; none outstanding |
|
|
|
|
|
|
|
|
Common stockpar value of $.10 a share; authorized, 250,000,000
shares; issued 57,100,286 shares at July 31, 2006 and 56,933,483
shares at July 31, 2005 |
|
|
5,710 |
|
|
|
5,693 |
|
Additional paid-in capital |
|
|
86,538 |
|
|
|
82,652 |
|
Retained earnings |
|
|
664,322 |
|
|
|
511,681 |
|
Less restricted stock plan |
|
|
|
|
|
|
747 |
|
Accumulated other comprehensive income |
|
|
1,772 |
|
|
|
943 |
|
|
|
|
|
|
|
|
Less treasury shares of 1,401,200 in 2006 and 256,000 in 2005, at cost |
|
|
58,493 |
|
|
|
7,031 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
699,849 |
|
|
|
593,191 |
|
|
|
|
|
|
|
|
Total |
|
$ |
1,004,725 |
|
|
$ |
853,893 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-3
Consolidated Statements of Income for the Years Ended July 31, 2006, 2005 and 2004
(amounts in thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
(as restated, |
|
|
(as restated, |
|
|
(as restated, |
|
|
|
see Note A) |
|
|
see Note A) |
|
|
see Note A) |
|
Net sales |
|
$ |
3,066,276 |
|
|
$ |
2,558,141 |
|
|
$ |
2,187,739 |
|
Cost of products sold |
|
|
2,634,818 |
|
|
|
2,222,606 |
|
|
|
1,889,780 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
431,458 |
|
|
|
335,535 |
|
|
|
297,959 |
|
Selling, general and administrative expenses |
|
|
183,926 |
|
|
|
152,499 |
|
|
|
137,661 |
|
Amortization of intangibles |
|
|
949 |
|
|
|
967 |
|
|
|
799 |
|
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
1,802 |
|
Interest income |
|
|
9,020 |
|
|
|
3,155 |
|
|
|
1,789 |
|
Interest expense |
|
|
(1,248 |
) |
|
|
(580 |
) |
|
|
(156 |
) |
Other income |
|
|
1,756 |
|
|
|
4,735 |
|
|
|
2,708 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
256,111 |
|
|
|
189,379 |
|
|
|
165,642 |
|
Income taxes (Note G) |
|
|
92,706 |
|
|
|
70,236 |
|
|
|
61,129 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
163,405 |
|
|
$ |
119,143 |
|
|
$ |
104,513 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (Note B) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.89 |
|
|
$ |
2.10 |
|
|
$ |
1.83 |
|
Diluted |
|
$ |
2.87 |
|
|
$ |
2.09 |
|
|
$ |
1.81 |
|
See notes to consolidated financial statements.
F-4
Consolidated Statements of Stockholders Equity and Comprehensive Income for the Years Ended
July 31, 2006, 2005 and 2004
(amounts in thousands except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Restricted |
|
|
Accumulated Other |
|
|
|
|
|
|
Compre- |
|
|
|
Treasury Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Stock |
|
|
Comprehensive |
|
|
Retained |
|
|
hensive |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Plan |
|
|
Income (Loss) |
|
|
Earnings |
|
|
Income |
|
July 31, 2003 |
|
|
|
|
|
|
|
|
|
|
57,195,290 |
|
|
$ |
5,720 |
|
|
$ |
78,765 |
|
|
$ |
(1,169 |
) |
|
$ |
(141 |
) |
|
$ |
331,648 |
|
|
|
|
|
Net income (as restated, see Note A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,513 |
|
|
$ |
104,513 |
|
Shares purchased |
|
|
288,000 |
|
|
|
(7,078 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares retired |
|
|
(288,000 |
) |
|
|
7,078 |
|
|
|
(288,000 |
) |
|
|
(29 |
) |
|
|
(403 |
) |
|
|
|
|
|
|
|
|
|
|
(6,647 |
) |
|
|
|
|
Stock option activity |
|
|
|
|
|
|
|
|
|
|
227,370 |
|
|
|
23 |
|
|
|
2,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock activity |
|
|
|
|
|
|
|
|
|
|
11,500 |
|
|
|
1 |
|
|
|
309 |
|
|
|
(310 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends $.09 per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,152 |
) |
|
|
|
|
Unrealized appreciation on
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(358 |
) |
|
|
|
|
|
|
(358 |
) |
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
563 |
|
|
|
|
|
|
|
563 |
|
Compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2004 (as restated, see
Note A) |
|
|
|
|
|
|
|
|
|
|
57,146,160 |
|
|
|
5,715 |
|
|
|
81,019 |
|
|
|
(1,128 |
) |
|
|
64 |
|
|
|
424,362 |
|
|
$ |
104,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (as restated, see Note A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,143 |
|
|
$ |
119,143 |
|
Shares purchased |
|
|
579,200 |
|
|
|
(15,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares retired |
|
|
(323,200 |
) |
|
|
8,490 |
|
|
|
(323,200 |
) |
|
|
(32 |
) |
|
|
(458 |
) |
|
|
|
|
|
|
|
|
|
|
(8,000 |
) |
|
|
|
|
Stock option activity |
|
|
|
|
|
|
|
|
|
|
110,636 |
|
|
|
10 |
|
|
|
2,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock activity |
|
|
|
|
|
|
|
|
|
|
(113 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends $.42 per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,824 |
) |
|
|
|
|
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
879 |
|
|
|
|
|
|
|
879 |
|
Compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2005 (as restated, see
Note A) |
|
|
256,000 |
|
|
$ |
(7,031 |
) |
|
|
56,933,483 |
|
|
$ |
5,693 |
|
|
|
82,652 |
|
|
|
(747 |
) |
|
|
943 |
|
|
|
511,681 |
|
|
$ |
120,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (as restated, see Note A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,405 |
|
|
$ |
163,405 |
|
Shares purchased |
|
|
1,145,200 |
|
|
|
(51,462 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option activity |
|
|
|
|
|
|
|
|
|
|
171,003 |
|
|
|
17 |
|
|
|
3,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock activity |
|
|
|
|
|
|
|
|
|
|
(4,200 |
) |
|
|
|
|
|
|
191 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends $.19 per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,764 |
) |
|
|
|
|
Adoption of SFAS123R |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(494 |
) |
|
|
494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
829 |
|
|
|
|
|
|
|
829 |
|
Compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
858 |
|
|
|
211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2006 (as restated, see
Note A) |
|
|
1,401,200 |
|
|
$ |
(58,493 |
) |
|
|
57,100,286 |
|
|
$ |
5,710 |
|
|
$ |
86,538 |
|
|
$ |
|
|
|
$ |
1,772 |
|
|
$ |
664,322 |
|
|
$ |
164,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
Consolidated Statements of Cash Flows for the Years Ended July 31, 2006, 2005 and 2004
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
(as restated, |
|
|
(as restated, |
|
|
(as restated, |
|
|
|
see Note A) |
|
|
see Note A) |
|
|
see Note A) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
163,405 |
|
|
$ |
119,143 |
|
|
$ |
104,513 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
13,097 |
|
|
|
9,808 |
|
|
|
7,656 |
|
Amortization of intangibles |
|
|
949 |
|
|
|
967 |
|
|
|
799 |
|
Deferred income taxes |
|
|
(4,094 |
) |
|
|
6,831 |
|
|
|
101 |
|
(Gain) on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
(1,802 |
) |
(Gain) loss on disposition of property, plant and equipment |
|
|
5 |
|
|
|
(2,164 |
) |
|
|
(200 |
) |
Loss on sale of trading investments |
|
|
439 |
|
|
|
1,369 |
|
|
|
1,298 |
|
Unrealized (gain) loss on trading investments |
|
|
10 |
|
|
|
(233 |
) |
|
|
98 |
|
Stock based compensation |
|
|
1,069 |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities, net of effects from acquisitions and divestments: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of trading investments |
|
|
(255,491 |
) |
|
|
(221,223 |
) |
|
|
(122,909 |
) |
Proceeds from sale of trading investments |
|
|
232,024 |
|
|
|
237,914 |
|
|
|
102,688 |
|
Accounts receivable |
|
|
(50,108 |
) |
|
|
(3,467 |
) |
|
|
(22,090 |
) |
Inventories |
|
|
(22,684 |
) |
|
|
(4,982 |
) |
|
|
(23,538 |
) |
Deferred taxes and other |
|
|
(2,120 |
) |
|
|
(1,145 |
) |
|
|
3,262 |
|
Accounts payable |
|
|
23,888 |
|
|
|
(10,176 |
) |
|
|
10,462 |
|
Accrued liabilities |
|
|
35,212 |
|
|
|
(3,232 |
) |
|
|
19,918 |
|
Other |
|
|
1,658 |
|
|
|
441 |
|
|
|
2,124 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
137,259 |
|
|
|
129,851 |
|
|
|
82,380 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(30,166 |
) |
|
|
(46,178 |
) |
|
|
(26,104 |
) |
Proceeds from disposition of property plant and equipment |
|
|
263 |
|
|
|
3,054 |
|
|
|
292 |
|
Acquisitions net of cash acquired |
|
|
|
|
|
|
(38,113 |
) |
|
|
(29,619 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
(29,903 |
) |
|
|
(81,237 |
) |
|
|
(55,431 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends |
|
|
(27,764 |
) |
|
|
(6,824 |
) |
|
|
(5,152 |
) |
Purchase of common stock held as treasury shares |
|
|
(51,462 |
) |
|
|
(7,031 |
) |
|
|
(7,078 |
) |
Purchase of common stock for retirement |
|
|
|
|
|
|
(8,490 |
) |
|
|
|
|
Retirement of acquired debt |
|
|
|
|
|
|
(1,001 |
) |
|
|
(12,973 |
) |
Proceeds from issuance of common stock |
|
|
3,581 |
|
|
|
1,329 |
|
|
|
1,687 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) financing activities |
|
|
(75,645 |
) |
|
|
(22,017 |
) |
|
|
(23,516 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
829 |
|
|
|
879 |
|
|
|
563 |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
32,540 |
|
|
|
27,476 |
|
|
|
3,996 |
|
Cash and cash equivalents, beginning of year |
|
|
163,596 |
|
|
|
136,120 |
|
|
|
132,124 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
$ |
196,136 |
|
|
$ |
163,596 |
|
|
$ |
136,120 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
82,817 |
|
|
$ |
76,665 |
|
|
$ |
62,431 |
|
Interest paid |
|
$ |
1,248 |
|
|
$ |
580 |
|
|
$ |
156 |
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
310 |
|
Retirement of treasury shares |
|
$ |
|
|
|
$ |
8,490 |
|
|
$ |
7,078 |
|
Dividends payable |
|
$ |
|
|
|
$ |
17,000 |
|
|
$ |
|
|
Deferred taxes |
|
$ |
|
|
|
$ |
775 |
|
|
$ |
|
|
Capital expenditures in accounts payable |
|
$ |
842 |
|
|
$ |
1,492 |
|
|
$ |
836 |
|
Cancellation of restricted stock |
|
$ |
42 |
|
|
$ |
|
|
|
$ |
|
|
See notes to consolidated financial statements.
F-6
Notes to the Consolidated Financial Statements Years Ended July 31, 2006, 2005 and 2004
(All amounts presented in thousands except share and per share data)
A. RESTATEMENT
On January 29, 2007, we announced that the Audit Committee of our Board of Directors (the Audit
Committee) initiated an independent investigation regarding certain accounting issues at our
Dutchmen Manufacturing, Inc. operating subsidiary (Dutchmen). The Vice President of Finance at
Dutchmen was intentionally understating the cost of products sold during the periods restated,
primarily by overstating inventory and accounts receivable and understating accounts payable. We
promptly and voluntarily informed the SEC of the Audit Committees investigation, and have been
responding to SEC staff requests for additional information in connection with the staffs
investigation. The Audit Committee, assisted by independent outside legal counsel and accounting
experts, thoroughly investigated the accounting issues raised at Dutchmen. The Audit Committee and
its advisors also reviewed the internal controls at Dutchmen and other subsidiaries.
The Audit Committees investigation confirmed the Companys determination that the income before
income taxes recorded by Dutchmen were overstated during the periods restated, as a result of
misconduct by Dutchmens former Vice President of Finance, the senior financial officer of
Dutchmen.
The Company has restated its 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. The restatement followed the Companys
evaluation, considering the results from the Audit Committees investigation, of accounting
practices employed at Dutchmen during these periods. The cumulative effect of the restatement is a
reduction to income before income taxes of $21,121, or $13,255 in net income, for the fiscal years
2004 through 2006 with the primary impact occurring in fiscal year 2006.
In addition, the Company determined that certain of its liabilities associated with capital
expenditures were incorrectly reflected as cash inflows from operating activities and cash outflows
from investing activities. The consolidated statements of cash flow for the years ended July 31,
2005 and 2004 have been corrected by reducing net cash from operating activities and net cash used
for investing activities by $1,492 and $836, respectively, and disclosing non-cash investing
activity for the same amounts. In note D, the Company added comparative goodwill and trademarks by
segment for 2005.
The following tables show the previously reported, restatement adjustment and restated amounts for
those accounts in the Consolidated Balance Sheet and the Statements of Consolidated Income and Cash
Flow affected by the restatement.
Year ended July 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
Restatement |
|
|
Account |
|
Reported |
|
Adjustment |
|
Restated |
Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
191,299 |
|
|
$ |
(3,195 |
) |
|
$ |
188,104 |
|
Inventory |
|
|
187,091 |
|
|
|
(3,922 |
) |
|
|
183,169 |
|
Total current assets |
|
|
659,833 |
|
|
|
(7,117 |
) |
|
|
652,716 |
|
Total assets |
|
|
1,011,842 |
|
|
|
(7,117 |
) |
|
|
1,004,725 |
|
Accounts payable |
|
|
131,606 |
|
|
|
14,003 |
|
|
|
145,609 |
|
Taxes |
|
|
26,574 |
|
|
|
(7,865 |
) |
|
|
18,709 |
|
Total current liabilities |
|
|
285,827 |
|
|
|
6,138 |
|
|
|
291,965 |
|
Retained earnings |
|
|
677,577 |
|
|
|
(13,255 |
) |
|
|
664,322 |
|
Total stockholders equity |
|
|
713,104 |
|
|
|
(13,255 |
) |
|
|
699,849 |
|
Total liab. & stockholders equity |
|
|
1,011,842 |
|
|
|
(7,117 |
) |
|
|
1,004,725 |
|
Statement of Consolidated Income |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
$ |
2,620,506 |
|
|
$ |
14,312 |
|
|
$ |
2,634,818 |
|
Gross profit |
|
|
445,770 |
|
|
|
(14,312 |
) |
|
|
431,458 |
|
Income before income taxes |
|
|
270,423 |
|
|
|
(14,312 |
) |
|
|
256,111 |
|
Income taxes |
|
|
97,959 |
|
|
|
(5,253 |
) |
|
|
92,706 |
|
Net income |
|
|
172,464 |
|
|
|
(9,059 |
) |
|
|
163,405 |
|
Consolidated Statement of Cash Flow |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
F-7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
Restatement |
|
|
Account |
|
Reported |
|
Adjustment |
|
Restated |
Net income |
|
$ |
172,464 |
|
|
$ |
(9,059 |
) |
|
$ |
163,405 |
|
Accounts receivable |
|
|
(50,602 |
) |
|
|
494 |
|
|
|
(50,108 |
) |
Inventories |
|
|
(25,321 |
) |
|
|
2,637 |
|
|
|
(22,684 |
) |
Accounts payable |
|
|
12,708 |
|
|
|
11,180 |
|
|
|
23,888 |
|
Accrued liabilities |
|
|
40,464 |
|
|
|
(5,252 |
) |
|
|
35,212 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.05 |
|
|
$ |
(.16 |
) |
|
$ |
2.89 |
|
Diluted |
|
$ |
3.03 |
|
|
$ |
(.16 |
) |
|
$ |
2.87 |
|
Year ended July 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
Restatement |
|
|
Account |
|
Reported |
|
Adjustment |
|
Restated |
Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
140,927 |
|
|
$ |
(2,701 |
) |
|
$ |
138,226 |
|
Inventory |
|
|
161,770 |
|
|
|
(1,285 |
) |
|
|
160,485 |
|
Total current assets |
|
|
524,040 |
|
|
|
(3,986 |
) |
|
|
520,054 |
|
Total assets |
|
|
857,879 |
|
|
|
(3,986 |
) |
|
|
853,893 |
|
Accounts payable |
|
|
118,056 |
|
|
|
2,823 |
|
|
|
120,879 |
|
Taxes |
|
|
8,351 |
|
|
|
(2,613 |
) |
|
|
5,738 |
|
Total current liabilities |
|
|
248,812 |
|
|
|
210 |
|
|
|
249,022 |
|
Retained earnings |
|
|
515,877 |
|
|
|
(4,196 |
) |
|
|
511,681 |
|
Total stockholders equity |
|
|
597,387 |
|
|
|
(4,196 |
) |
|
|
593,191 |
|
Total liab. & stockholders equity |
|
|
857,879 |
|
|
|
(3,986 |
) |
|
|
853,893 |
|
Statement of Consolidated Income |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
2,558,351 |
|
|
$ |
(210 |
) |
|
$ |
2,558,141 |
|
Cost of products sold |
|
|
2,218,585 |
|
|
|
4,021 |
|
|
|
2,222,606 |
|
Gross profit |
|
|
339,766 |
|
|
|
(4,231 |
) |
|
|
335,535 |
|
Income before income taxes |
|
|
193,610 |
|
|
|
(4,231 |
) |
|
|
189,379 |
|
Income taxes |
|
|
71,843 |
|
|
|
(1,607 |
) |
|
|
70,236 |
|
Net income |
|
|
121,767 |
|
|
|
(2,624 |
) |
|
|
119,143 |
|
Consolidated Statement of Cash Flow |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
121,767 |
|
|
$ |
(2,624 |
) |
|
$ |
119,143 |
|
Accounts receivable |
|
|
(6,151 |
) |
|
|
2,684 |
|
|
|
(3,467 |
) |
Inventories |
|
|
(5,860 |
) |
|
|
878 |
|
|
|
(4,982 |
) |
Accounts payable |
|
|
(9,354 |
) |
|
|
(822 |
) |
|
|
(10,176 |
) |
Accrued liabilities |
|
|
(1,624 |
) |
|
|
(1,608 |
) |
|
|
(3,232 |
) |
Net cash provided by operating activities |
|
|
131,343 |
|
|
|
(1,492 |
) |
|
|
129,851 |
|
Net cash (used in) investing activities |
|
|
(82,729 |
) |
|
|
1,492 |
|
|
|
(81,237 |
) |
Non-cash transaction: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures in accounts payable |
|
|
0 |
|
|
|
1,492 |
|
|
|
1,492 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.15 |
|
|
$ |
(.05 |
) |
|
$ |
2.10 |
|
Diluted |
|
$ |
2.13 |
|
|
$ |
(.04 |
) |
|
$ |
2.09 |
|
Year ended July 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
Restatement |
|
|
Account |
|
Reported |
|
Adjustment |
|
Restated |
Statement of Consolidated Income |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
$ |
1,887,202 |
|
|
$ |
2,578 |
|
|
$ |
1,889,780 |
|
Gross profit |
|
|
300,537 |
|
|
|
(2,578 |
) |
|
|
297,959 |
|
Income before income taxes |
|
|
168,220 |
|
|
|
(2,578 |
) |
|
|
165,642 |
|
Income taxes |
|
|
62,135 |
|
|
|
(1,006 |
) |
|
|
61,129 |
|
Net income |
|
|
106,085 |
|
|
|
(1,572 |
) |
|
|
104,513 |
|
F-8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously |
|
Restatement |
|
|
Account |
|
Reported |
|
Adjustment |
|
Restated |
Consolidated Statement of Cash Flow |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
106,085 |
|
|
$ |
(1,572 |
) |
|
$ |
104,513 |
|
Accounts receivable |
|
|
(22,107 |
) |
|
|
17 |
|
|
|
(22,090 |
) |
Inventories |
|
|
(23,946 |
) |
|
|
408 |
|
|
|
(23,538 |
) |
Accounts payable |
|
|
9,145 |
|
|
|
1,317 |
|
|
|
10,462 |
|
Accrued liabilities |
|
|
20,924 |
|
|
|
(1,006 |
) |
|
|
19,918 |
|
Net cash provided by operating activities |
|
|
83,216 |
|
|
|
(836 |
) |
|
|
82,380 |
|
Net cash (used in) investing activities |
|
|
(56,267 |
) |
|
|
836 |
|
|
|
(55,431 |
) |
Non-cash transaction: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures in accounts payable |
|
|
0 |
|
|
|
836 |
|
|
|
836 |
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.85 |
|
|
$ |
(.02 |
) |
|
$ |
1.83 |
|
Diluted |
|
$ |
1.84 |
|
|
$ |
(.03 |
) |
|
$ |
1.81 |
|
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation The accompanying consolidated financial statements include the
accounts of Thor Industries, Inc. and its wholly-owned domestic and foreign subsidiaries
(collectively, the Company). All intercompany balances and transactions are eliminated upon
consolidation.
Cash and Cash Equivalents Interest-bearing deposits and other investments with maturities of
three months or less when purchased are considered cash equivalents. Cash, cash equivalents and
short term investments of $238,097 are held by three financial institutions. The remaining $26,276
is held at various other financial institutions.
Investments 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.
Fair Value of Financial Investments the carrying amount of cash equivalents, investments,
accounts receivable, and accounts payable approximate fair value because of the relatively short
maturity of these financial instruments.
Inventories Inventories are stated at the lower of cost or market, determined principally by the
last-in, first-out (LIFO) basis.
Depreciation Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets as follows:
Buildings and improvements 10 to 39 years
Machinery and equipment 3 to 10 years
Other Assets Other assets consist of goodwill, trademarks, and non-compete agreements.
Non-compete agreements are amortized using the straight-line method over 5 to 10 years. Goodwill
and trademarks are not amortized but are tested at least annually for impairment. Trademarks are
not amortized because they have indefinite useful lives.
Long-lived Assets Long-lived assets and identifiable intangibles that are amortized are reviewed
for impairment annually or whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable from future cash flows. If the carrying value of a
long-lived asset is impaired, an impairment charge is recorded for the amount by which the carrying
value of the long-lived asset exceeds its fair value.
Product Warranties Estimated warranty costs are provided at the time of sale of the warranted
products. Warranty reserves are reviewed and adjusted as necessary on a quarterly basis.
F-9
Allowance for Doubtful Accounts A summary of bad debt activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
July 31, 2006 |
|
|
July 31, 2005 |
|
|
July 31, 2004 |
|
Beginning Balance |
|
$ |
506 |
|
|
$ |
558 |
|
|
$ |
625 |
|
Charged to expense |
|
|
98 |
|
|
|
76 |
|
|
|
(45 |
) |
Write-offs net of recoveries/payments |
|
|
(499 |
) |
|
|
(128 |
) |
|
|
(38 |
) |
Acquisitions |
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
$ |
105 |
|
|
$ |
506 |
|
|
$ |
558 |
|
|
|
|
|
|
|
|
|
|
|
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 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 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.
Revenue Recognition Revenues from the sale of recreation vehicles and buses are recognized when
title passes, which is when shipped to dealers, distributors, or contract buyers in accordance with
shipping terms, which are FOB shipping point.
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 dealers flooring institution; |
|
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 Companys 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.
Dealer Volume Rebates and Sales Incentives Estimated costs related to dealer volume rebates and
sales incentives are accrued as a reduction of revenue at the latter of the time products are sold
or the date the rebate or incentive is offered.
Estimates The preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Foreign Currency Assets and liabilities of the Companys Canadian Operations reported in the
consolidated balance sheets have been translated at current exchange rates. Revenues and expenses
reported in the consolidated statements of income have been translated at the average exchange rate
for the year. Translation adjustments have been included in accumulated other comprehensive income.
Transaction gains and losses are not significant.
Stock Split The Company declared a two-for-one common stock split in the second quarter of 2004
that was distributed to shareholders of record as of January 5, 2004. All share and per share
amounts have been retroactively adjusted for the effect of the common stock splits.
Stock Options 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 settle after the date of the
adoption are measured and accounted for in accordance with SFAS 123R. SFAS 123R establishes a
fair-
F-10
value method of accounting for employee stock options. The Company uses the Black-Scholes
option pricing model to estimate the grant date fair value of its option grants. The fair value,
and related compensation costs are recognized over the option vesting period which is 3 to 4 years.
Earnings Per Share Basic earnings per common share (EPS) is computed by dividing net income by
the weighted average number of common shares outstanding. Diluted EPS is computed by dividing net
income by the weighted average number of common shares outstanding assuming dilution. The
difference between basic EPS and diluted EPS is the result of outstanding stock options and
restricted stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
2004 |
Weighted average shares outstanding for basic earnings per share |
|
|
56,502,865 |
|
|
|
56,726,200 |
|
|
|
57,224,404 |
|
Stock options and restricted stock |
|
|
394,174 |
|
|
|
381,363 |
|
|
|
365,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding assuming dilution |
|
|
56,897,039 |
|
|
|
57,107,563 |
|
|
|
57,590,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table illustrates the pro forma effect on net income and income per share for fiscal
2005 and fiscal 2004 assuming the Company had applied the fair value recognition provisions of
Statement 123R to all previously granted share-based awards. The fair value of each option grant is
estimated at the grant date using the Black-
Scholes option pricing model based on the assumptions listed in Footnote K.
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
Net income as reported |
|
$ |
119,143 |
|
|
$ |
104,513 |
|
Deduct: Total stock-based employee
compensation expense determined under fair
value method for all awards, net of
related tax effects |
|
|
(1,161 |
) |
|
|
(884 |
) |
|
|
|
|
|
|
|
Pro forma |
|
$ |
117,982 |
|
|
$ |
103,629 |
|
|
|
|
|
|
|
|
Earnings per common share basic |
|
|
|
|
|
|
|
|
As reported |
|
$ |
2.10 |
|
|
$ |
1.83 |
|
Pro forma |
|
$ |
2.08 |
|
|
$ |
1.81 |
|
Earnings per common share diluted |
|
|
|
|
|
|
|
|
As reported |
|
$ |
2.09 |
|
|
$ |
1.81 |
|
Pro forma |
|
$ |
2.07 |
|
|
$ |
1.80 |
|
The implementation of Statement 123R did not have any impact on our fiscal 2006 cash flow from
operating and financing activities.
Accounting Pronouncements In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty
in Income Taxes an interpretation of FASB Statement No. 109, which clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with
FASB Statement No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. FIN No. 48 requires recognition of tax
benefits that satisfy a greater than 50% probability threshold. FIN No. 48 also provides guidance
on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN No. 48 is effective for us beginning August 1, 2007. We are
assessing the potential impact that the adoption of FIN No. 48 will have on our financial
statements.
C. ACQUISITIONS
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. The
fair value of assets acquired and liabilities assumed was $10,354 and $271, respectively.
On November 1, 2004, we completed our acquisition of the stock of DS Corp. dba CrossRoads RV, an
Indiana corporation, pursuant to an Agreement and Plan of Merger (the Merger Agreement), dated as
of October 28, 2004, by and among our company, Thor Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of our company (Acquisition Subsidiary), CrossRoads and the security
holders 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.
F-11
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 willl be amortized over two to seven years, $20,485 of
goodwill and $794 for trademarks that are not subject to amortization.
On September 2, 2003, Thor acquired 100% of the common stock of Damon Corporation. Damon is engaged
in the business of manufacturing Class A motorhomes and park models. The cash price of the
acquisition was $29,619 which was paid from internal funds. Immediately after the closing, the
Company paid off a $12,973 bank debt assumed in connection with the acquisition.
D. GOODWILL AND OTHER INTANGIBLE ASSETS
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets,
requires goodwill to be tested for impairment at least annually and more frequently if an event
occurs which indicates the goodwill may be impaired. On an annual basis, we test goodwill for
impairment as of April 30.
The components of other intangibles are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2006 |
|
July 31, 2005 |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
Accumulated |
|
|
Cost |
|
Amortization |
|
Cost |
|
Amortization |
Amortizable Intangible Assets- Non-compete agreements |
|
$ |
15,889 |
|
|
$ |
13,048 |
|
|
$ |
15,889 |
|
|
$ |
12,099 |
|
Aggregate amortization expense for non-compete agreements for the years ended, July 31, 2006, 2005
and 2004 were $949, $967, and $799, respectively. Non-compete agreements are amortized on a
straight-line basis.
The weighted average remaining amortization period at July 31, 2006 is 3.8 years.
Estimated Amortization Expense:
|
|
|
|
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 |
For the year ending July 2011
|
|
$ |
239 |
There was no change in the carrying value of goodwill and trademarks for the year ended July 31,
2006. The change in the carrying value of goodwill and trademarks for the year ended July 31, 2005
was as follows:
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
Trademark |
|
Balance as of July 31, 2004 |
|
$ |
140,857 |
|
|
$ |
12,270 |
|
Acquisitions |
|
|
24,805 |
|
|
|
1,630 |
|
|
|
|
|
|
|
|
Balance as of July 31, 2005 |
|
$ |
165,662 |
|
|
$ |
13,900 |
|
|
|
|
|
|
|
|
Goodwill and trademarks by segment totaled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2006 |
|
|
July 31, 2005 |
|
|
|
Goodwill |
|
|
Trademark |
|
|
Goodwill |
|
|
Trademark |
|
Recreation Vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
143,795 |
|
|
$ |
10,237 |
|
|
$ |
143,795 |
|
|
$ |
10,237 |
|
Motorized |
|
|
17,252 |
|
|
|
2,600 |
|
|
|
17,252 |
|
|
|
2,600 |
|
Buses |
|
|
4,616 |
|
|
|
1,063 |
|
|
|
4,615 |
|
|
|
1,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
165,663 |
|
|
$ |
13,900 |
|
|
$ |
165,662 |
|
|
$ |
13,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
E. INVENTORIES
Major classifications of inventories are:
|
|
|
|
|
|
|
|
|
|
|
As of July 31, |
|
|
|
2006 |
|
|
2005 |
|
Finished products |
|
$ |
13,416 |
|
|
$ |
14,196 |
|
Work in process |
|
|
51,208 |
|
|
|
55,413 |
|
Raw materials |
|
|
99,807 |
|
|
|
77,171 |
|
Chassis |
|
|
39,772 |
|
|
|
29,506 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
204,203 |
|
|
|
176,286 |
|
Less excess of FIFO costs over LIFO costs |
|
|
21,034 |
|
|
|
15,801 |
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
183,169 |
|
|
$ |
160,485 |
|
|
|
|
|
|
|
|
F. LINE OF CREDIT
The Company has a $30,000 unsecured revolving line of credit which bears interest at prime less
2.15% (6.1% at July 31, 2006) and expires on November 30, 2006. There was no outstanding balance at
July 31, 2006 and July 31, 2005. The loan agreement executed in connection with the line of credit
contains certain covenants, including restrictions on additional indebtedness, and requires the
Company to maintain certain financial ratios. The Company intends to renew the unsecured revolving
line of credit prior to expiration.
G. INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended July 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
82,256 |
|
|
$ |
54,963 |
|
|
$ |
49,850 |
|
State and local |
|
|
13,415 |
|
|
|
7,645 |
|
|
|
10,320 |
|
Foreign |
|
|
1,129 |
|
|
|
797 |
|
|
|
858 |
|
|
|
|
|
|
|
|
|
|
|
Total current |
|
|
96,800 |
|
|
|
63,405 |
|
|
|
61,028 |
|
|
|
|
|
|
|
|
|
|
|
Federal deferred |
|
|
(3,863 |
) |
|
|
5,934 |
|
|
|
243 |
|
State and local deferred |
|
|
(231 |
) |
|
|
897 |
|
|
|
(142 |
) |
|
|
|
|
|
|
|
|
|
|
Total deferred |
|
|
(4,094 |
) |
|
|
6,831 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
92,706 |
|
|
$ |
70,236 |
|
|
$ |
61,129 |
|
|
|
|
|
|
|
|
|
|
|
The increase in deferred tax liabilities for the year ended July 31, 2005 was due primarily to
increased funding of self-insurance reserves.
The differences between income taxes at the federal statutory rate and the actual income taxes are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended July 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Provision at statutory rates |
|
$ |
89,639 |
|
|
$ |
66,283 |
|
|
$ |
57,975 |
|
State and local income taxes, net of federal tax benefit |
|
|
8,730 |
|
|
|
5,552 |
|
|
|
6,616 |
|
Extraterritorial income benefit |
|
|
(1,013 |
) |
|
|
(1,221 |
) |
|
|
(867 |
) |
Credits and incentives |
|
|
(233 |
) |
|
|
(490 |
) |
|
|
(1,181 |
) |
Other |
|
|
(4,417 |
) |
|
|
112 |
|
|
|
(1,414 |
) |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
92,706 |
|
|
$ |
70,236 |
|
|
$ |
61,129 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes includes foreign income of $2,962 in fiscal 2006, $2,101 in fiscal 2005,
and $2,192 in fiscal 2004.
|
|
|
|
|
|
|
|
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2006 |
|
|
2005 |
|
A summary of deferred income taxes is: |
|
|
|
|
|
|
|
|
Current deferred tax asset (liability): |
|
|
|
|
|
|
|
|
Inventory basis |
|
$ |
(1,076 |
) |
|
$ |
(931 |
) |
Employee benefits |
|
|
2,110 |
|
|
|
801 |
|
Self-insurance |
|
|
(518 |
) |
|
|
(1,645 |
) |
Product warranties |
|
|
3,377 |
|
|
|
3,059 |
|
Other |
|
|
1,005 |
|
|
|
(22 |
) |
|
|
|
|
|
|
|
F-13
|
|
|
|
|
|
|
|
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2006 |
|
|
2005 |
|
Total current deferred tax asset included in deferred income taxes and other |
|
|
4,898 |
|
|
|
1,262 |
|
|
|
|
|
|
|
|
Long-term deferred tax asset (liability): |
|
|
|
|
|
|
|
|
Property basis |
|
|
(2,211 |
) |
|
|
(2,754 |
) |
Investments |
|
|
162 |
|
|
|
686 |
|
Deferred compensation |
|
|
3,859 |
|
|
|
3,179 |
|
Intangibles |
|
|
(3,547 |
) |
|
|
(3,696 |
) |
Other |
|
|
(1,840 |
) |
|
|
(1,450 |
) |
|
|
|
|
|
|
|
Total net long-term deferred tax liability included in deferred income taxes and other liabilities |
|
|
(3,577 |
) |
|
|
(4,035 |
) |
|
|
|
|
|
|
|
Net deferred tax asset (liability) |
|
$ |
1,321 |
|
|
$ |
(2,773 |
) |
|
|
|
|
|
|
|
H. LEASES
The Company has operating leases principally for land, buildings and equipment. Future minimum
rental payments required under these operating leases are $13,094, which includes the following
amount due in each of the next five fiscal years ending July 31: $4,021 in fiscal 2007; $3,480 in
fiscal 2008; $2,109 in fiscal 2009; $1,742 in fiscal 2010; $867 in fiscal 2011 and $875 thereafter.
Rent expense was $4,956 in fiscal 2006, $4,918 in fiscal 2005 and $6,172 in fiscal 2004.
I. EMPLOYEE BENEFIT PLANS
Substantially all non-highly compensated employees can participate in a 401(k) plan. Company
contributions are at the discretion of the Companys board of directors. Total expense for the plan
was $644 in fiscal 2006, $630 in fiscal 2005, and $645 in fiscal 2004.
The Company has established a deferred compensation plan for executives who do not participate in a
401(k) plan. This plan allows executives to defer a portion of their compensation and to direct the
Company to invest the funds in mutual fund investments held by the Company. Participant benefits
are limited to the value of the investments held on their behalf. Investments held by the Company
are accounted for as trading securities and the obligation to the participants is reported as a
liability. No income or loss is recorded through the Consolidated Statements of Income. The Company
does not make contributions to the plan. The balance of investments held in this plan was $7,542 at
July 31, 2006 and $5,907 at July 31, 2005.
J. CONTINGENT LIABILITIES AND COMMITMENTS
It is customary practice for companies in the recreation 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
dealers default.
Our principal commercial commitments at July 31, 2006 are summarized in the following chart:
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Term of |
Commitment |
|
Amount Commitment |
|
Guarantee |
Guarantee on dealer financing |
|
$ |
2,574 |
|
|
less than 1 year |
Standby repurchase obligation on dealer financing |
|
$ |
813,795 |
|
|
less than 1 year |
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 Companys consolidated financial position or results of operations.
The Company records repurchase and guarantee reserves based on prior experience and known current
events. The combined repurchase and recourse reserve balances are approximately $1,563 as of July
31, 2006 and $1,368 as of July 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 |
|
|
Fiscal 2005 |
|
|
Fiscal 2004 |
|
Cost of units repurchased |
|
$ |
4,878 |
|
|
$ |
11,220 |
|
|
$ |
3,775 |
|
Realization of units resold |
|
|
4,230 |
|
|
|
9,355 |
|
|
|
3,133 |
|
|
|
|
|
|
|
|
|
|
|
Losses due to repurchase |
|
$ |
648 |
|
|
$ |
1,865 |
|
|
$ |
642 |
|
|
|
|
|
|
|
|
|
|
|
The Company obtains certain vehicle chassis from automobile manufacturers under converter pool
agreements. These agreements generally provide that the manufacturer will supply chassis at the
Companys various production facilities under the terms and
F-14
conditions set forth in the agreement. The manufacturer does not transfer the certificate of
origin to the Company and, accordingly, the Company accounts for the chassis as consigned,
unrecorded inventory. Chassis are typically converted and delivered to customers within 90 days of
delivery. If the chassis is not converted within 90 days of delivery to the Company, the Company
purchases the chassis and records the inventory. At July 31, 2006 and July 31, 2005, chassis on
hand accounted for as consigned, unrecorded inventory was approximately $24,970 and and $22,285
respectively.
The Company is involved in various litigation generally incidental to normal operations.
K. STOCKHOLDERS EQUITY
The Company purchased 1,145,200 shares of Thors common stock in fiscal 2006 at an average cost of
$44.94 per share. In fiscal 2005 the Company purchased and retired 323,200 shares of Thors common
stock at an average cost of $26.27 per share. This retirement resulted in a reduction of $8,490 in
Treasury Stock, $32 in Common Stock, $458 in Additional Paid-In Capital and $8,000 in Retained
Earnings in fiscal 2005. In addition, the Company purchased 256,000 shares of Thor Common Stock in
fiscal 2005 at a cost of $7,031 and an average cost of $27.46 per share to be held as Treasury
shares.
In the fourth quarter of fiscal 2005 the Company declared a special 25¢ dividend as well as the
regular dividend which was raised from 3¢ to 5¢ to be paid in the first quarter of fiscal 2006.
These dividends have been accrued for on the Consolidated Balance Sheet in the line item captioned
dividends payable.
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 are
measured and accounted for in accordance with SFAS 123R.
Stock Options The Companys 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 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Shares |
|
|
Exercise Price |
|
|
Shares |
|
|
Exercise Price |
|
Outstanding at beginning of year |
|
|
704,041 |
|
|
$ |
19.63 |
|
|
|
792,344 |
|
|
$ |
18.07 |
|
|
|
658,714 |
|
|
$ |
9.26 |
|
Exercised |
|
|
(171,003 |
) |
|
|
14.47 |
|
|
|
(110,636 |
) |
|
|
11.79 |
|
|
|
(227,370 |
) |
|
|
7.42 |
|
Canceled |
|
|
|
|
|
|
|
|
|
|
(12,667 |
) |
|
|
|
|
|
|
(16,000 |
) |
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
|
30.51 |
|
|
|
377,000 |
|
|
|
27.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
|
533,038 |
|
|
$ |
21.29 |
|
|
|
704,041 |
|
|
$ |
19.63 |
|
|
|
792,344 |
|
|
$ |
18.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at year-end |
|
|
382,843 |
|
|
$ |
18.79 |
|
|
|
426,375 |
|
|
$ |
14.48 |
|
|
|
303,343 |
|
|
$ |
9.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average fair value of options granted was $12.31 and $11.10 in fiscal 2005 and fiscal
2004, respectively as calculated by the Black-Scholes method. The weighted average-remaining
contractual life for options outstanding and exercisable at July 31, 2006, was 6.9 years and 6.6
years respectively. The aggregate intrinsic value of options outstanding and excercisable at July
31, 2006 was $11,486 and $9,209 respectively. There are 666,003 shares available for grant under
the 1999 plan.
The assumptions used in determining the fair value of options granted during fiscal 2005 and 2004
is as follows:
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
Expected volatility |
|
|
38 |
% |
|
|
38 |
% |
Expected life of grant |
|
6 years |
|
6 years |
Risk free interest rate |
|
|
3.90 |
% |
|
|
3.29 |
% |
Expected dividend rate |
|
|
.30 |
% |
|
|
.26 |
% |
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
security rate estimated for the expected life of the options at the date of grant. Expected
F-15
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 fiscal year 2006, the Company recorded expense of $858 for stock option awards. At July 31,
2006, there was $496 of total unrecognized compensation costs related to stock options that is
expected to be recognized over a weighted average period of 1.0 years.
Cash received from stock option exercises for the year ended July 31, 2006 was $2,474. The total
intrinsic value of stock options exercised in 2006, 2005 and 2004 was $5,417, $2,518 and $5,025,
respectively.
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 year ended July 31, 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, July 31, 2006 |
|
|
94,700 |
|
|
$ |
14.33 |
|
|
|
|
|
|
|
|
|
|
For the fiscal year 2006, the Company recorded expense of $211 for restricted stock awards. At July
31, 2006, there was $495 of total unrecognized compensation costs related to restricted stock
awards that is expected to be recognized over a weighted average period of 2.4 years.
The total fair value of restricted shares vested during fiscal year 2006 was $604. 398,013 shares
are available for grant under the restricted stock plan.
L. JOINT VENTURES
In March 1996, the Company and Cruise America, Inc., an unrelated third party, formed a joint
venture, CAT Joint Venture LLC (CAT), to make short-term rentals of motorized recreation vehicles
to the public. As of July 31, 2006 we were contingently liable for repurchase obligations of CAT
inventory in the amount of approximately $9,500. Any losses related to these obligations would be
shared equally by the Company and Cruise America. The Companys total investment is $1,170.
In March 1994, the Company and a financial services company formed a joint venture, Thor Credit
Corporation (TCC), to finance the sales of recreation vehicles to consumer buyers. Historically,
the majority of these financing arrangements were provided to consumers buying recreation vehicles
manufactured by unrelated parties. The Companys total investment is $1,567.
These investments are 50% owned and are accounted for using the equity method. The Companys share
of the combined earnings (loss) for these investments was $(63), $640 and $446, in fiscal 2006,
2005 and 2004 respectively, and is included in the other income caption of the Consolidated
Statements of Income. Additionally, TCC pays the Company a referral fee based upon the amount of
loans generated from Thor dealerships. The Company recognized referral income of $1,564, $1,859 and
$1,921 in fiscal 2006, 2005 and 2004 respectively, which is included in the other income caption of
the Consolidated Statements of Income.
During fiscal 2006, our Four Winds subsidiary had sales to Cruise America of $32,277 and Cruise
America had sales to CAT of $6,657. During fiscal 2005, our Four Winds subsidiary had sales to
Cruise America of $57,979 and Cruise America had sales to CAT of $9,521. During fiscal 2004, our
Four Winds subsidiary had sales to Cruise America of $48,963 and Cruise America had sales to CAT of
$6,299.
F-16
M. BUSINESS SEGMENTS
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 & 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.
Manufacturing and sales are conducted in the United States and, to a much lesser extent, in Canada.
Identifiable assets are those assets used in the operation of each reportable segment. Corporate
assets primarily consist of cash and cash equivalents, deferred income tax assets, the cash value
of Company-owned life insurance and various investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Recreation vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
2,173,483 |
|
|
$ |
1,742,108 |
|
|
$ |
1,433,997 |
|
Motorized |
|
|
577,025 |
|
|
|
566,138 |
|
|
|
539,010 |
|
|
|
|
|
|
|
|
|
|
|
Total Recreation Vehicles |
|
|
2,750,508 |
|
|
|
2,308,246 |
|
|
|
1,973,007 |
|
Buses |
|
|
315,768 |
|
|
|
249,895 |
|
|
|
214,732 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,066,276 |
|
|
$ |
2,558,141 |
|
|
$ |
2,187,739 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Recreation vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
228,592 |
|
|
$ |
164,343 |
|
|
$ |
142,330 |
|
Motorized |
|
|
27,404 |
|
|
|
24,607 |
|
|
|
28,064 |
|
|
|
|
|
|
|
|
|
|
|
Total recreation vehicles |
|
|
255,996 |
|
|
|
188,950 |
|
|
|
170,394 |
|
Buses |
|
|
9,356 |
|
|
|
7,492 |
|
|
|
9,577 |
|
Corporate |
|
|
(9,241 |
) |
|
|
(7,063 |
) |
|
|
(14,329 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
256,111 |
|
|
$ |
189,379 |
|
|
$ |
165,642 |
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Recreation vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
483,324 |
|
|
$ |
380,306 |
|
|
$ |
323,617 |
|
Motorized |
|
|
150,058 |
|
|
|
126,045 |
|
|
|
123,607 |
|
|
|
|
|
|
|
|
|
|
|
Total recreation vehicles |
|
|
633,382 |
|
|
|
506,351 |
|
|
|
447,224 |
|
Buses |
|
|
103,861 |
|
|
|
96,942 |
|
|
|
65,055 |
|
Corporate |
|
|
267,482 |
|
|
|
250,600 |
|
|
|
249,884 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,004,725 |
|
|
$ |
853,893 |
|
|
$ |
762,163 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Recreation vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
8,012 |
|
|
$ |
6,505 |
|
|
$ |
4,976 |
|
Motorized |
|
|
4,365 |
|
|
|
2,672 |
|
|
|
2,203 |
|
|
|
|
|
|
|
|
|
|
|
Total recreation vehicles |
|
|
12,377 |
|
|
|
9,177 |
|
|
|
7,179 |
|
Buses |
|
|
1,629 |
|
|
|
1,556 |
|
|
|
1,238 |
|
Corporate |
|
|
40 |
|
|
|
42 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
14,046 |
|
|
$ |
10,775 |
|
|
$ |
8,455 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
Recreation vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
Towables |
|
$ |
23,575 |
|
|
$ |
32,371 |
|
|
$ |
17,673 |
|
Motorized |
|
|
2,955 |
|
|
|
14,562 |
|
|
|
2,815 |
|
|
|
|
|
|
|
|
|
|
|
Total recreation vehicles |
|
|
26,530 |
|
|
|
46,933 |
|
|
|
20,488 |
|
Buses |
|
|
4,395 |
|
|
|
683 |
|
|
|
6,430 |
|
Corporate |
|
|
83 |
|
|
|
54 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
31,008 |
|
|
$ |
47,670 |
|
|
$ |
26,940 |
|
|
|
|
|
|
|
|
|
|
|
F-17
N. WARRANTY
Thor provides customers of our product with a warranty covering defects in material or workmanship
for periods generally ranging from one to two years, with longer warranties of up to five years 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
reserves are 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
July 31, 2006 |
|
|
July 31, 2005 |
|
|
July 31, 2004 |
|
Beginning Balance |
|
$ |
55,118 |
|
|
$ |
45,829 |
|
|
$ |
35,115 |
|
Provision |
|
|
63,137 |
|
|
|
60,084 |
|
|
|
53,030 |
|
Payments |
|
|
(58,460 |
) |
|
|
(51,940 |
) |
|
|
(46,041 |
) |
Acquisitions |
|
|
|
|
|
|
1,145 |
|
|
|
3,725 |
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
$ |
59,795 |
|
|
$ |
55,118 |
|
|
$ |
45,829 |
|
|
|
|
|
|
|
|
|
|
|
O. SUBSEQUENT EVENT
On September 15, 2006, Thors Board of Directors approved a one time special dividend of $1 per
share. This dividend of approximately $55,700 will be paid on October 10, 2006 to stockholders of
record on September 27, 2006.
F-18