THOR Industries, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and first nine months ended April 30, 2021. Unaudited results; dollar amounts below are in millions except per-share data. THOR manufactures and sells recreational vehicles through North American and European businesses.
Financial performance
| Metric | Three months ended Apr. 30, 2021 | Prior-year quarter | Nine months ended Apr. 30, 2021 | Prior-year period |
|---|---|---|---|---|
| Net sales | $3,459.3 | $1,681.7 | $8,724.4 | $5,843.7 |
| Gross profit / margin | $505.3 / 14.6% | $205.6 / 12.2% | $1,299.0 / 14.9% | $770.9 / 13.2% |
| Income before income taxes | $232.7 | $21.2 | $543.0 | $124.7 |
| Net income attributable to THOR | $183.3 | $24.1 | $429.6 | $103.8 |
| Diluted earnings per share | $3.29 | $0.43 | $7.72 | $1.88 |
Quarterly sales rose 105.7% and nine-month sales rose 49.3%. Strong demand and higher shipments drove growth, while the prior-year comparison was affected by COVID-19-related shutdowns. Tiffin Group, acquired in December 2020, contributed $171.2 of quarterly sales growth and $253.6 of nine-month sales. The filing does not provide a consolidated operating-income figure.
All three RV segments increased sales and pretax income. In the quarter, North American Towables sales increased 123.2%, North American Motorized 193.7%, and European 45.3%. The European segment returned to quarterly pretax profit of $44.0, compared with a small loss a year earlier. Currency gains contributed to European reported sales growth.
- Cash flow: Nine-month operating cash flow was $175.1, down from $237.3. Inventory growth and other working-capital needs used $453.6 of cash; inventory reached $1,484.1 from $716.3 at July 31, 2020. Investing cash outflow was $381.0, including $310.9 for acquisitions and $81.2 of capital expenditures.
- Liquidity: Cash and cash equivalents were $294.6 at April 30, 2021, versus $538.5 at July 31, 2020. Working capital was $893.9. The company reported approximately $610.0 of unused ABL availability, subject to borrowing-base terms.
- Debt: Gross debt was $1,766.2, including $110.0 borrowed under the ABL. Term-loan repricing reduced stated interest-rate spreads; a $4.7 debt-extinguishment charge from accelerated fee amortization was recorded in quarterly interest expense.
- Other: THOR paid $68.1 in regular dividends during the nine-month period and increased its quarterly dividend from $0.40 to $0.41 per share in October 2020.
Material changes and outlook
Order backlog reached $14,324.0, up 548.3% from $2,209.3 a year earlier: North American backlog was $10,980.0 and European backlog $3,344.0. North American dealer inventory was approximately 75,000 units, down 29.2% year over year. Management described dealer inventories as below desired levels and demand as strong, but said constrained component supplies were limiting production and contributing to unfinished units and elevated work-in-process inventory.
Management remained optimistic about longer-term retail demand, while cautioning that COVID-19 effects and industry seasonality make interim results unsuitable for simple annualization. No specific company full-year revenue or earnings guidance is provided in the filing. THOR anticipated approximately $65 million of capital expenditures for the remainder of fiscal 2021.
- Principal operating risks: Semiconductor and other component shortages, chassis delays in North America and Europe, labor availability and costs, rising material and freight costs, and the possibility that production cannot keep pace with backlog. These constraints could limit sales and earnings despite high demand.
- Other exposures: COVID-19 and consumer-demand uncertainty; foreign exchange and interest-rate movements; warranty costs; acquisition integration; and dealer or consumer financing conditions. One dealer, FreedomRoads, represented 13% of quarterly sales and 15% of trade receivables.
- Contingencies: Standby dealer-inventory repurchase obligations totaled $2,149.9; settled losses were not material and management did not expect future losses to materially affect consolidated results. Ordinary-course litigation was not expected by management to have a material overall effect, although adverse outcomes could affect a particular period.
- Unusual items: Quarterly results included a $4.7 debt-repricing extinguishment charge and a favorable European non-income-tax settlement. Other income benefited from changes in deferred-compensation plan asset values; these items may not recur.
Important facts for investors to verify
- Whether component and chassis supply constraints ease, and whether backlog converts to deliveries without materially higher costs or delays.
- Whether strong demand, pricing and gross-margin improvements persist as prior-year COVID-19 comparisons normalize.
- Inventory levels, work-in-process, operating cash conversion and the use of ABL borrowings as production expands.
- Tiffin acquisition integration, final purchase-accounting adjustments and the acquired business’s contribution to segment performance.
- Exposure to FreedomRoads, dealer repurchase commitments, warranty claims, and variable-rate and Euro-denominated debt.