THOR Industries, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended July 31, 2021. Unless stated otherwise, financial amounts below are in U.S. dollars; the filing presents most amounts in thousands. FY2021 includes about seven months of Tiffin Group results following its December 2020 acquisition.
Business context and results
THOR manufactures towable and motorized recreational vehicles in North America and Europe and sells mainly through independent dealers. It reports North American Towable, North American Motorized and European RV segments. The company reported strong demand, low dealer inventories and substantial order backlogs, while supply constraints limited production.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $12.317 billion | $8.168 billion |
| Gross profit / margin | $1.895 billion / 15.4% | $1.118 billion / 13.7% |
| Income before taxes / margin | $844.6 million / 6.9% | $272.9 million / 3.3% |
| Net income attributable to THOR | $659.9 million | $223.0 million |
| Diluted EPS attributable to THOR | $11.85 | $4.02 |
| Cash from operating activities | $526.5 million | $540.9 million |
Consolidated sales increased 50.8%; RV unit shipments rose 38.5%. Segment sales were $6.222 billion for North American Towables, $2.669 billion for North American Motorized and $3.200 billion for Europe. Gross-margin improvement reflected higher sales, pricing and mix, lower discounting and improved cost percentages; labor and material inflation remained pressures. Approximately $421.4 million of the sales increase came from Tiffin, and $235.0 million from currency translation.
Fourth-quarter FY2021 sales were $3.593 billion and net income attributable to THOR was $230.3 million; diluted EPS was $4.12. Comparable FY2020 fourth-quarter figures were $2.324 billion, $119.2 million and $2.14, respectively.
Cash, debt and liquidity
- Cash and cash equivalents were $445.9 million at July 31, 2021, down from $538.5 million. Operating cash flow was $526.5 million; investing used $428.5 million and financing used $188.4 million.
- Working capital was $1.009 billion, compared with $587.0 million. Inventory increased to $1.369 billion from $716.3 million, including elevated work in process attributed partly to component shortages.
- Gross debt was $1.641 billion, compared with $1.711 billion. The term loan matures February 2026; $1.543 billion of contractual principal maturities fall in FY2026. The company reported approximately $720 million of unused ABL availability at year-end and no ABL borrowings outstanding then.
- Capital expenditures were $128.8 million. THOR estimated FY2022 committed and internally approved capital spending of $275 million. FY2021 dividends totaled $1.64 per share.
Changes, outlook and risks
- Backlog reached $16.858 billion, up 193.6% from $5.741 billion. North American backlog rose 215.5% and European backlog 133.2%. Management attributed this to high consumer demand, low dealer inventories and, to a lesser extent, supply delays. The filing expected existing backlogs to be filled during calendar 2021 and 2022, subject to material supply constraints.
- Management expressed optimism about long-term RV demand but did not provide company-specific earnings or sales guidance. RVIA’s September 2021 industry forecast projected about 577,200 North American wholesale units in calendar 2021 and 600,200 in 2022.
- Chassis and other component shortages, including semiconductor-related constraints, labor availability and transportation delays constrained production and increased unfinished units. Management warned that prolonged constraints or rising input costs could adversely affect output, sales and earnings.
- COVID-19 remains a source of uncertainty for demand, employees, dealers and suppliers. Other material risks include cyclical consumer demand, interest rates and credit availability, dealer concentration, competition, warranty and recall costs, foreign exchange, and dependence on a limited group of suppliers. FreedomRoads accounted for 13.0% of FY2021 sales and 15.0% of year-end trade receivables.
- Standby dealer-inventory repurchase commitments were $1.821 billion; historical losses were not material and management did not expect future losses to have a significant consolidated effect. A recall involving purchased parts was disclosed; THOR expected reimbursement and did not anticipate a material adverse impact.
- After year-end, THOR completed the $750 million cash acquisition of Airxcel on September 1, 2021, funded partly with $625 million of ABL borrowings. The ABL limit was increased to $1.0 billion and its maturity extended to September 2026. Purchase-price allocation was not yet complete.
- The FY2021 goodwill test found no impairment. The European reporting unit’s goodwill valuation was a critical audit matter because it depended on significant forecast and discount-rate judgments. The financial statement audit opinion was unqualified; management and the auditor assessed internal controls as effective, with Tiffin excluded from management’s assessment and the auditor’s control audit.
Important facts for investors to verify
- Whether component and chassis supply constraints ease, and whether the large backlog converts to shipments and cash without materially higher costs or cancellations.
- How much FY2021 growth and margin improvement reflects durable pricing, mix and operating performance versus pandemic-related demand, low prior-year comparisons, currency and the partial-year Tiffin contribution.
- Post-acquisition leverage, borrowing costs and liquidity following the Airxcel purchase, including the effect of ABL borrowings and planned capital spending.
- Dealer concentration and credit exposure, repurchase commitments, warranty reserves and the expected reimbursement and final cost of the disclosed recall.
- Key assumptions supporting European goodwill valuation and the integration and performance of Tiffin and Airxcel.