THOR Industries, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended July 31, 2013. The filing also reports the fiscal fourth quarter ended July 31, 2013. Dollar figures below are in millions unless noted. FY2013 continuing operations principally comprise towable and motorized recreational vehicles; the bus business is presented as discontinued operations.
Business context and reporting period
Thor manufactures recreational vehicles in North America and sells through independent dealers. Towables accounted for 82% of FY2013 continuing net sales and motorized RVs 18%. The company reported U.S. market shares of approximately 37% in travel trailers and fifth wheels and 25% in motorhomes for the period through June 30, 2013.
Financial performance and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| Continuing net sales | $3,241.8 | $2,639.8 |
| Gross profit | $424.5; 13.1% margin | $319.5; 12.1% margin |
| Income before tax | $222.0 | $165.4 |
| Net income from continuing operations | $151.7 | $111.4 |
| Net income, including discontinued operations | $152.9 | $121.7 |
| Diluted EPS from continuing operations | $2.86 | $2.07 |
| Operating cash flow | $145.1 | $118.8 |
| Cash and cash equivalents at year-end | $236.6 | $218.6 |
| Working capital at year-end | $469.0 | $373.8 |
FY2013 sales increased 22.8%, pretax income 34.2%, and continuing net income 36.1% year over year. Cash from operations rose $26.2 million. Capital expenditures were $24.3 million; cash dividends totaled $117.7 million, including a $79.5 million special dividend. No borrowing balance is identified in the balance sheet presented; reported interest expense was $6,000.
Fourth-quarter net sales were $914.0 million versus $769.9 million in FY2012 Q4. Gross profit was $140.2 million versus $102.3 million, and continuing net income was $55.2 million versus $40.9 million. Fourth-quarter net income, including discontinued operations, was $58.2 million versus $44.4 million.
Material changes versus the prior comparable period
- Towable sales increased 15.9% to $2,650.3 million, reflecting 12.9% more units and a 3.0% increase from price and mix. Towable gross margin rose to 13.3% from 12.4%.
- Motorized sales rose 67.1% to $591.5 million, with unit shipments up 57.2% and price/mix up 9.9%. Motorized gross margin improved to 12.4% from 10.3%.
- Total RV order backlog increased 31.7% to $441.5 million at year-end. Motorized backlog rose 92.4% to $213.1 million; towable backlog rose 1.7% to $228.4 million.
- SG&A increased 31.3% to $194.7 million, including higher compensation, insurance and corporate costs. The effective tax rate declined to 31.7% from 32.6%.
Outlook, management commentary, risks and unusual items
- Management said dealer inventory was appropriate for seasonal demand and expected available cash, operating cash flows and the planned bus-sale proceeds to fund anticipated requirements. FY2014 capital expenditures were expected to be approximately $24 million.
- The RVIA forecast calendar-2014 industry wholesale shipments of 334,300 units, up 4.7% from its expected 2013 level. This is an industry forecast, not company revenue or earnings guidance.
- Management cited chassis availability constraints that had limited motorized production and were expected to continue through early calendar 2014. Other key risks include cyclicality and seasonality, discretionary consumer spending and credit availability, raw-material costs, competition, and reliance on suppliers and dealers.
- FreedomRoads, the largest dealer, represented 17% of continuing sales and 24% of continuing trade receivables. Thor also had $1,027.6 million of standby repurchase commitments; this is contingent exposure, not recorded debt. FY2013 losses from repurchases were $0.9 million.
- The bus business was classified as discontinued operations following a July 31, 2013 agreement to sell it to Allied Specialty Vehicles for $100 million cash, subject to adjustments and closing conditions. The sale was expected by November 1, 2013; the filing says the company did not anticipate a loss. FY2013 discontinued operations included $11.5 million of non-cash impairment charges and $1.2 million of net income.
- After year-end, Thor acquired Livin’ Lite assets for approximately $18 million, subject to working-capital adjustments. It also purchased a Wakarusa production campus in June 2013 for $5.8 million for planned capacity and production integration.
- The FEMA trailer litigation settlement was funded and approved, with no company plaintiffs opting out. Management stated ordinary-course legal matters were not expected to materially affect consolidated results, while noting that a significant adverse case could affect an individual period.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting; management reported effective disclosure controls and internal controls.
Most important facts for investors to verify
- Completion terms and final proceeds from the planned $100 million bus divestiture, including working-capital adjustments and retained pre-closing liabilities.
- Whether motorhome chassis supply improved after the stated early-2014 constraint period, and how that affected production and backlog conversion.
- Retail demand and dealer inventory trends relative to shipments, particularly given FreedomRoads’ sales and receivables concentration.
- Actual cash generation and margins against the strong FY2013 growth, while monitoring warranty costs, raw-material prices and repurchase losses.
- Livin’ Lite integration and Wakarusa facility utilization, including any related spending, delays or impairment indicators.