UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
COMMISSION FILE NUMBER 001-09235
| (Exact name of registrant as specified in its charter) | ||||||||||||||||||||
| (State or other jurisdiction of | (I.R.S. Employer | |||||||||||||||||||
| incorporation or organization) | Identification No.) | |||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
| (Registrant's telephone number, including area code) | ||||||||||||||||||||
| None | ||||||||||||||||||||
| (Former name, former address and former fiscal year, if changed since last report) | ||||||||||||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Name of each exchange | |||||||||||||||||||||||
| Title of each class | Trading Symbol(s) | on which registered | |||||||||||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
As of February 29, 2024, 53,324,545 shares of the registrant’s common stock, par value $0.10 per share, were outstanding.
PART I – FINANCIAL INFORMATION (Unless otherwise indicated, amounts in thousands except share and per share data.)
ITEM 1. FINANCIAL STATEMENTS
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| January 31, 2024 | July 31, 2023 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, trade, net | |||||||||||
| Accounts receivable, other, net | |||||||||||
| Inventories, net | |||||||||||
| Prepaid income taxes, expenses and other | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
Other assets: | |||||||||||
| Goodwill | |||||||||||
| Amortizable intangible assets, net | |||||||||||
| Deferred income tax assets, net | |||||||||||
| Equity investments | |||||||||||
| Other | |||||||||||
| Total other assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Current portion of long-term debt | |||||||||||
| Short-term financial obligations | |||||||||||
| Accrued liabilities: | |||||||||||
Compensation and related items | |||||||||||
Product warranties | |||||||||||
Income and other taxes | |||||||||||
Promotions and rebates | |||||||||||
| Product, property and related liabilities | |||||||||||
Other | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Deferred income tax liabilities, net | |||||||||||
| Unrecognized tax benefits | |||||||||||
| Other liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
Contingent liabilities and commitments | |||||||||||
Stockholders’ equity: | |||||||||||
Preferred stock – authorized | |||||||||||
Common stock – par value of $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss, net of tax | ( | ( | |||||||||
Less: Treasury shares of | ( | ( | |||||||||
| Stockholders’ equity attributable to THOR Industries, Inc. | |||||||||||
| Non-controlling interests | |||||||||||
| Total stockholders’ equity | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | |||||||||
See Notes to the Condensed Consolidated Financial Statements.
2
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of products sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
Amortization of intangible assets | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Less: Net loss attributable to non-controlling interests | ( | ( | ( | ( | |||||||||||||||||||
| Net income attributable to THOR Industries, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ||||||||||||||||||||||
| Unrealized gain (loss) on derivatives, net of tax | ( | ||||||||||||||||||||||
| Other loss, net of tax | ( | ( | ( | ( | |||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Total Comprehensive income | |||||||||||||||||||||||
| Less: Comprehensive loss attributable to non-controlling interests | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income attributable to THOR Industries, Inc. | $ | $ | $ | $ | |||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
3
THOR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Six Months Ended January 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of intangible assets | |||||||||||
| Amortization of debt issuance costs and extinguishment charges | |||||||||||
| Deferred income tax benefit | ( | ( | |||||||||
| Gain on disposition of property, plant and equipment | ( | ( | |||||||||
| Stock-based compensation expense | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories, net | ( | ( | |||||||||
| Prepaid income taxes, expenses and other | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Accrued liabilities | ( | ( | |||||||||
| Long-term liabilities and other | |||||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Proceeds from dispositions of property, plant and equipment | |||||||||||
| Business acquisitions, net of cash acquired | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings on term-loan credit facilities | |||||||||||
| Payments on term-loan credit facilities | ( | ( | |||||||||
| Borrowings on revolving asset-based credit facilities | |||||||||||
| Payments on revolving asset-based credit facilities | ( | ( | |||||||||
| Payments on other debt | ( | ( | |||||||||
| Payments of debt issuance costs | ( | ||||||||||
| Cash dividends paid | ( | ( | |||||||||
| Payments on finance lease obligations | ( | ( | |||||||||
| Purchases of treasury shares | ( | ( | |||||||||
| Payments related to vesting of stock-based awards | ( | ( | |||||||||
| Short-term financial obligations and other, net | |||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Income taxes paid | $ | $ | |||||||||
| Interest paid | $ | $ | |||||||||
| Non-cash investing and financing transactions: | |||||||||||
| Capital expenditures in accounts payable | $ | $ | |||||||||
See Notes to the Condensed Consolidated Financial Statements.
4
| THOR INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2024 AND 2023 (UNAUDITED) | ||||||||||||||||||||||||||||||||
| Three Months Ended January 31, 2024 | ||||||||||||||||||||||||||||||||
| Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Additional | Other | Equity | Non- | Total | ||||||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Treasury Stock | Attributable | controlling | Stockholders’ | |||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income (Loss) | Shares | Amount | to THOR | Interests | Equity | |||||||||||||||||||||||
| Balance at November 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
| Restricted stock unit activity | ( | — | — | ( | ( | — | ( | |||||||||||||||||||||||||
Dividends $ | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
Balance at January 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
Six Months Ended January 31, 2024 | ||||||||||||||||||||||||||||||||
| Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Additional | Other | Equity | Non- | Total | ||||||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Treasury Stock | Attributable | controlling | Stockholders’ | |||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income (Loss) | Shares | Amount | to THOR | Interests | Equity | |||||||||||||||||||||||
| Balance at August 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||
| Restricted stock unit activity | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||
Dividends $ | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||||||||||||
Balance at January 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
5
| THOR INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2024 AND 2023 (UNAUDITED) | ||||||||||||||||||||||||||||||||
| Three Months Ended January 31, 2023 | ||||||||||||||||||||||||||||||||
| Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Additional | Other | Equity | Non- | Total | ||||||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Treasury Stock | Attributable | controlling | Stockholders’ | |||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income (Loss) | Shares | Amount | to THOR | Interests | Equity | |||||||||||||||||||||||
| Balance at November 1, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
| Restricted stock unit activity | — | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||
Dividends $ | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Balance at January 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Six Months Ended January 31, 2023 | ||||||||||||||||||||||||||||||||
| Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Additional | Other | Equity | Non- | Total | ||||||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Treasury Stock | Attributable | controlling | Stockholders’ | |||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Income (Loss) | Shares | Amount | to THOR | Interests | Equity | |||||||||||||||||||||||
| Balance at August 1, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||
| Restricted stock unit activity | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||
Dividends $ | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
Balance at January 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
6
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(All U.S. Dollar and Euro amounts presented in thousands except share and per share data or except as otherwise specified)
1. Nature of Operations and Accounting Policies
Nature of Operations
THOR Industries, Inc. was founded in 1980 and is the sole owner of operating subsidiaries (collectively, the “Company” or “THOR”), that, combined, represent the world's largest manufacturer of recreational vehicles (“RVs”). The Company manufactures a wide variety of RVs in the United States and Europe and sells those vehicles, as well as related parts and accessories, primarily to independent, non-franchise dealers throughout the United States, Canada and Europe. Unless the context requires or indicates otherwise, all references to “THOR,” the “Company,” “we,” “our” and “us” refer to THOR Industries, Inc. and its subsidiaries.
The July 31, 2023 amounts are derived from the annual audited financial statements of THOR. The interim financial statements are unaudited. In the opinion of management, all adjustments (which consist of normal, recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented have been made. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2023. Due to seasonality within the recreational vehicle industry, the impact of supply chain disruptions primarily in Europe, inflation and shifting consumer demand on our industry, among other factors, annualizing the results of operations for the six months ended January 31, 2024 would not necessarily be indicative of the results expected for the full fiscal year.
Recently Issued Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2023-07 (“ASU 2023-07”) “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which requires additional disclosures about significant segment expenses regularly provided to the Chief Operating Decision Maker. ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023, or the annual report for fiscal 2025 for the Company, and interim periods within fiscal years beginning after December 15, 2024, or interim periods starting in fiscal 2026 for the Company. Early adoption is permitted. We are currently evaluating the impact of ASU 2023-07 on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain income tax disclosures. Under this ASU, entities must disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires entities to disclose additional information about income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. ASU 2023-09 is effective for financial statements for annual periods beginning after December 15, 2024. This ASU is effective for the Company in its fiscal year 2026 beginning on August 1, 2025. The Company is currently evaluating the potential impact of adopting this guidance on the consolidated financial statements.
7
2. Business Segments
The Company has three reportable segments, all related to recreational vehicles: (1) North American Towable Recreational Vehicles, (2) North American Motorized Recreational Vehicles and (3) European Recreational Vehicles. The operations of the Company's Airxcel and Postle subsidiaries are included in “Other”. Net sales included in Other relate primarily to the sale of specialized component parts and aluminum extrusions. Intercompany eliminations adjust for Airxcel and Postle sales to the Company’s North American Towable and North American Motorized segments, which are consummated at established transfer prices generally consistent with the selling prices of products to third parties.
The following tables reflect certain financial information by reportable segment:
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| NET SALES: | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||
| North American Towable | $ | $ | $ | $ | |||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||
| Total North America | |||||||||||||||||||||||
| European | |||||||||||||||||||||||
| Total recreational vehicles | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Intercompany eliminations | ( | ( | ( | ( | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES: | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||
| North American Towable | $ | $ | ( | $ | $ | ||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||
| Total North America | |||||||||||||||||||||||
| European | |||||||||||||||||||||||
| Total recreational vehicles | |||||||||||||||||||||||
| Other, net | |||||||||||||||||||||||
| Corporate | ( | ( | ( | ( | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| TOTAL ASSETS: | January 31, 2024 | July 31, 2023 | |||||||||
| Recreational vehicles | |||||||||||
| North American Towable | $ | $ | |||||||||
| North American Motorized | |||||||||||
| Total North America | |||||||||||
| European | |||||||||||
| Total recreational vehicles | |||||||||||
| Other | |||||||||||
| Corporate | |||||||||||
| Total | $ | $ | |||||||||
8
| DEPRECIATION AND INTANGIBLE ASSET AMORTIZATION EXPENSE: | Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||
| North American Towable | $ | $ | $ | $ | |||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||
| Total North America | |||||||||||||||||||||||
| European | |||||||||||||||||||||||
| Total recreational vehicles | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| CAPITAL ACQUISITIONS: | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||
| North American Towable | $ | $ | $ | $ | |||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||
| Total North America | |||||||||||||||||||||||
| European | |||||||||||||||||||||||
| Total recreational vehicles | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
3. Earnings Per Common Share
The following table reflects the weighted-average common shares used to compute basic and diluted earnings per common share as included on the Condensed Consolidated Statements of Income and Comprehensive Income:
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Weighted-average common shares outstanding for basic earnings per share | |||||||||||||||||||||||
| Unvested restricted and performance stock units | |||||||||||||||||||||||
Weighted-average common shares outstanding assuming dilution | |||||||||||||||||||||||
For the three months ended January 31, 2024 and 2023, the Company had 8,078 and 169,350 unvested restricted stock units and performance stock units outstanding, respectively, which were excluded from this calculation as their effect would have been antidilutive. For the six months ended January 31, 2024 and 2023, the Company had 29,688 and 186,895 unvested restricted stock units and performance stock units outstanding, respectively, which were excluded from this calculation as their effect would have been antidilutive.
9
4. Derivatives and Hedging
The total amounts presented in the Condensed Consolidated Statements of Income and Comprehensive Income due to changes in the fair value of the derivative instruments are as follows:
| Three Months Ended January 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Gain (Loss) on Derivatives Designated as Cash Flow Hedges | ||||||||||||||
| Gain (Loss) recognized in Other Comprehensive Income, net of tax | ||||||||||||||
Interest rate swap agreements (1) | $ | $ | ( | |||||||||||
| Total gain (loss) | $ | $ | ( | |||||||||||
(1)Other comprehensive income (loss), net of tax, before reclassification from accumulated other comprehensive income (“AOCI”) was $0 and $(136 ) for the three months ended January 31, 2024 and 2023, respectively.
| Six Months Ended January 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Gain (Loss) on Derivatives Designated as Cash Flow Hedges | ||||||||||||||
| Gain (Loss) recognized in Other Comprehensive Income, net of tax | ||||||||||||||
Interest rate swap agreements (2) | $ | $ | ||||||||||||
| Total gain (loss) | $ | $ | ||||||||||||
(2)Other comprehensive income (loss), net of tax, before reclassification from AOCI was $0 and $718 for the six months ended January 31, 2024 and 2023, respectively.
| Three Months Ended January 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Interest | Interest | |||||||||||||||||||||||||
| Sales | Expense | Sales | Expense | |||||||||||||||||||||||
| Gain (Loss) Reclassified from AOCI, Net of Tax | ||||||||||||||||||||||||||
| Interest rate swap agreements | $ | $ | $ | $ | ||||||||||||||||||||||
| Gain (Loss) on Derivatives Not Designated as Hedging Instruments | ||||||||||||||||||||||||||
| Gain (loss) recognized in income, net of tax | ||||||||||||||||||||||||||
| Foreign currency forward contracts | ( | |||||||||||||||||||||||||
| Commodities swap agreements | ( | |||||||||||||||||||||||||
| Interest rate swap agreements | ( | ( | ||||||||||||||||||||||||
| Total gain (loss) | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
10
| Six Months Ended January 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Interest | Interest | |||||||||||||||||||||||||
| Sales | Expense | Sales | Expense | |||||||||||||||||||||||
| Gain (Loss) Reclassified from AOCI, Net of Tax | ||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Interest rate swap agreements | ||||||||||||||||||||||||||
| Gain (Loss) on Derivatives Not Designated as Hedging Instruments | ||||||||||||||||||||||||||
| Gain (loss) recognized in income, net of tax | ||||||||||||||||||||||||||
| Foreign currency forward contracts | ( | |||||||||||||||||||||||||
| Commodities swap agreements | ( | |||||||||||||||||||||||||
| Interest rate swap agreements | ( | |||||||||||||||||||||||||
| Total gain (loss) | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
As of January 31, 2024 and July 31, 2023 there were no derivative instruments designated as cash flow hedges. The Company has certain other derivative instruments which have not been designated as hedges. These other derivative instruments had a notional amount totaling approximately $78,772 and a fair value liability of $1,509 as of January 31, 2024. These other derivative instruments had a notional amount totaling approximately $25,248 and a fair value liability of $932 as of July 31, 2023. For these derivative instruments, changes in fair value are recognized in earnings.
Net Investment Hedges
The foreign currency transaction gains and losses on the Euro-denominated portion of the term loan, which is designated and effective as a hedge of the Company’s net investment in its Euro-denominated functional currency subsidiaries, are included as a component of the foreign currency translation adjustment. A loss, net of tax, was included in the foreign currency translation adjustment of $6,237 for the three months ended January 31, 2024 and a gain of $7,172 was included for the six months ended January 31, 2024. Losses, net of tax, included in the foreign currency translation adjustments were $30,297 for the three months ended January 31, 2023 and $20,912 for the six months ended January 31, 2023.
There were no
5. Inventories
Major classifications of inventories are as follows:
| January 31, 2024 | July 31, 2023 | ||||||||||
| Finished goods – RV | $ | $ | |||||||||
| Finished goods – other | |||||||||||
| Work in process | |||||||||||
| Raw materials | |||||||||||
| Chassis | |||||||||||
Subtotal | |||||||||||
| Excess of FIFO costs over LIFO costs | ( | ( | |||||||||
| Total inventories, net | $ | $ | |||||||||
Of the $1,935,872 and $1,815,674 of inventories at January 31, 2024 and July 31, 2023, $1,344,893 and $1,224,069 , respectively, were valued on the first-in, first-out (“FIFO”) method, and $590,979 and $591,605 , respectively, were valued on the last-in, first-out (“LIFO”) method.
11
6. Property, Plant and Equipment
Property, plant and equipment consists of the following:
| January 31, 2024 | July 31, 2023 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Machinery and equipment | |||||||||||
| Rental vehicles | |||||||||||
| Lease right-of-use assets – operating | |||||||||||
| Lease right-of-use assets – finance | |||||||||||
| Total cost | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
See Note 15 to the Condensed Consolidated Financial Statements for further information regarding the lease right-of-use assets.
7. Intangible Assets and Goodwill
The components of Amortizable intangible assets, net are as follows:
| January 31, 2024 | July 31, 2023 | ||||||||||||||||||||||
| Accumulated | Accumulated | ||||||||||||||||||||||
| Cost | Amortization | Cost | Amortization | ||||||||||||||||||||
Dealer networks/customer relationships | $ | $ | $ | $ | |||||||||||||||||||
Trademarks | |||||||||||||||||||||||
Design technology and other intangibles | |||||||||||||||||||||||
Non-compete agreements | |||||||||||||||||||||||
Total amortizable intangible assets | $ | $ | $ | $ | |||||||||||||||||||
Estimated future amortization expense is as follows:
| For the remainder of the fiscal year ending July 31, 2024 | $ | ||||
| For the fiscal year ending July 31, 2025 | |||||
| For the fiscal year ending July 31, 2026 | |||||
| For the fiscal year ending July 31, 2027 | |||||
| For the fiscal year ending July 31, 2028 | |||||
| For the fiscal year ending July 31, 2029 and thereafter | |||||
| $ | |||||
12
Changes in the carrying amount of Goodwill by reportable segment for the six months ended January 31, 2024 are summarized as follows:
| North American Towable | North American Motorized | European | Other | Total | |||||||||||||||||||||||||
| Net balance as of August 1, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Fiscal 2024 activity: | |||||||||||||||||||||||||||||
| Goodwill acquired | |||||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||||||||||||||
Net balance as of January 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Changes in the carrying amount of Goodwill by reportable segment for the six months ended January 31, 2023 are summarized as follows:
| North American Towable | North American Motorized | European | Other | Total | |||||||||||||||||||||||||
| Net balance as of August 1, 2022 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Fiscal 2023 activity: | |||||||||||||||||||||||||||||
| Goodwill acquired | |||||||||||||||||||||||||||||
| Measurement period adjustments | |||||||||||||||||||||||||||||
| Foreign currency translation | |||||||||||||||||||||||||||||
| Deconsolidation of Roadpass Digital | ( | ( | |||||||||||||||||||||||||||
Net balance as of January 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
8. Equity Investments
As discussed in Note 8 to the Company’s Consolidated Financial Statements included in the Fiscal 2023 Form 10-K, effective December 30, 2022, the Company formed a joint venture with TechNexus Holdings LLC (“TechNexus”), whereby the Company transferred TH2Connect, LLC d/b/a Roadpass Digital and its associated legal entities to TN-RP Holdings, LLC (“TN-RP”), following which the Company and TechNexus own 100
TN-RP is a variable interest entity (“VIE”), in which both the Company and TechNexus each have a variable interest. The Company’s equity interest, which entitles the Company to a share of future distributions from TN-RP, represents a variable interest. The Company has significant influence due to its Class A-RP unit ownership interest, non-majority seats on the TN-RP advisory board and certain protective rights, and therefore the Company’s investment in TN-RP is accounted for under the equity method of accounting and reported as a component of Equity investments in the Condensed Consolidated Balance Sheets. Similarly, the Company holds an additional investment that is also a VIE over which the Company has significant influence. This is also reported as a component of Equity investments in the Condensed Consolidated Balance Sheets.
The Company had the following aggregate investment and maximum exposure to loss related to these VIEs:
| January 31, 2024 | July 31, 2023 | |||||||||||||
| Carrying amount of investments | $ | $ | ||||||||||||
| Maximum exposure to loss | $ | $ | ||||||||||||
The Company’s share of gains and losses accounted for under the equity method of accounting are included in Other income, net in the Condensed Consolidated Statements of Income and Comprehensive Income. The losses recognized in the three and six months ended January 31, 2024 were $3,502 and $9,437 , respectively, and the amounts recognized in the three and six months ended January 31, 2023 were not
13
9. Concentration of Risk
10. Fair Value Measurements
The financial assets and liabilities that are accounted for at fair value on a recurring basis at January 31, 2024 and July 31, 2023 are as follows:
| Input Level | January 31, 2024 | July 31, 2023 | |||||||||||||||
| Cash equivalents | Level 1 | $ | $ | ||||||||||||||
| Deferred compensation plan mutual fund assets | Level 1 | $ | $ | ||||||||||||||
| Equity investments | Level 1 | $ | $ | ||||||||||||||
| Foreign currency forward contract liability | Level 2 | $ | $ | ||||||||||||||
| Interest rate swap liability | Level 2 | $ | $ | ||||||||||||||
Cash equivalents represent investments in short-term money market instruments that are direct obligations of the U.S. Treasury and/or repurchase agreements backed by U.S. Treasury obligations. These investments are reported as a component of Cash and cash equivalents in the Condensed Consolidated Balance Sheets.
Deferred compensation plan assets accounted for at fair value are investments in securities (primarily mutual funds) traded in an active market held for the benefit of certain employees of the Company as part of a deferred compensation plan, which are reported within Other assets in the Condensed Consolidated Balance Sheets. Additional plan investments in corporate-owned life insurance are recorded at their cash surrender value, not fair value, and therefore are not included above.
Equity investments represent stock investments that are publicly traded in an active market and are reported within Other assets in the Condensed Consolidated Balance Sheets.
The fair value of foreign currency forward contracts is estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates.
The fair value of interest rate swaps is determined by discounting the estimated future cash flows based on the applicable observable yield curves.
11. Product Warranties
The Company generally provides retail customers of its products with a one-year or two-year warranty covering defects in material or workmanship, with longer warranties on certain structural components.
Changes in our product warranty liability during the indicated periods are as follows:
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Provision | |||||||||||||||||||||||
| Payments | ( | ( | ( | ( | |||||||||||||||||||
| Foreign currency translation | ( | ||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
14
12. Long-Term Debt
The components of long-term debt are as follows:
| January 31, 2024 | July 31, 2023 | |||||||||||||
| Term loan | $ | $ | ||||||||||||
| Asset-based credit facility | ||||||||||||||
| Senior unsecured notes | ||||||||||||||
| Unsecured notes | ||||||||||||||
| Other debt | ||||||||||||||
| Total long-term debt | ||||||||||||||
| Debt issuance costs, net of amortization | ( | ( | ||||||||||||
| Total long-term debt, net of debt issuance costs | ||||||||||||||
| Less: Current portion of long-term debt | ( | ( | ||||||||||||
| Total long-term debt, net, less current portion | $ | $ | ||||||||||||
As discussed in Note 13 to the Company’s Consolidated Financial Statements included in the Fiscal 2023 Form 10-K, the Company is a party to a term loan (“term loan”) agreement, which consists of a U.S. dollar-denominated term loan tranche and a Euro-denominated term loan tranche, and a $1,000,000 revolving asset-based credit facility (“ABL”).
On November 15, 2023, the Company entered into amendments to both its term loan and ABL agreements to extend maturities and lower the applicable margins used to determine the interest rate on the U.S. dollar-denominated term loan tranche. Pursuant to the term loan amendments, the applicable margin used to determine the interest rate on U.S. dollar-denominated loans was reduced by 0.25 % so that the applicable margin for Alternate Base Rate ("ABR")-based loans is 1.75 % and 2.75 % for Secured Overnight Financing Rate (“SOFR”)-based loans. The SOFR credit spread adjustment applicable to U.S. dollar-denominated SOFR-based loans was eliminated. The applicable margin for Euro-denominated EURIBOR-based loans was unchanged. The maturity date for the term loan was extended from February 1, 2026 to November 15, 2030. Covenants and other material provisions of the term loan agreement remain materially unchanged. Following the amendments, the principal amounts outstanding under the term loan agreement were $450,000 on the U.S. dollar-denominated term loan tranche and 330,000 Euro on the Euro-denominated term loan tranche. Under the provisions of the amended term loan, both the U.S. and Euro tranches require annual principal payments of 1.0 0.25 1,000,000 and there were no borrowings outstanding as of the November 15, 2023 amendment date. The applicable margin, covenants and other material provisions of the ABL remain materially unchanged.
The November 15, 2023 debt amendments noted above were evaluated on a creditor-by-creditor basis pursuant to the requirements in ASC 470-50 related to syndicated loan arrangements. Extinguishment accounting was applied to the creditors that were deemed to have a substantial difference in terms based on an analysis of the present values of cash flows before and after the amendments. As a result of this analysis, the Company recorded expense of $14,741 in the second quarter of fiscal 2024. $7,566 of this $14,741 expense is classified as interest expense in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income and primarily represents extinguishment charges, while the remaining $7,175 is classified as administrative expense and primarily represents third-party costs attributed to the modified loans. In addition, during the second quarter of fiscal 2024 the Company capitalized qualifying financing-related costs of $10,480 related to these amendments which will be amortized over the remaining term of the amended agreements subject to acceleration for early term loan principal payments.
As of January 31, 2024, the outstanding U.S. term loan tranche balance of $450,000 was subject to a SOFR-based rate totaling 8.083 %. As of July 31, 2023, the outstanding U.S. term loan tranche balance of $271,900 was subject to a SOFR-based rate totaling 8.433 %. The interest rate on the January 31, 2024 outstanding Euro term loan tranche balance of $357,621 was 6.88 %, and the interest rate on the July 31, 2023 outstanding Euro term loan tranche of $486,194 was 6.625 %.
15
As of January 31, 2024, the weighted-average interest rate on the outstanding ABL borrowings of $59,604 was 5.108 %. As of July 31, 2023, there were no outstanding ABL borrowings. The Company may, generally at its option, pay any borrowings under the ABL, in whole or in part, at any time and from time to time, without penalty or premium.
Availability under the ABL agreement is subject to a borrowing base based on a percentage of applicable eligible receivables and eligible inventory. The unused availability under the ABL is generally available to the Company for general operating purposes and, based on January 31, 2024 eligible receivables and inventory balances, net of amounts drawn, totaled approximately $938,000 .
As discussed in Note 13 to the Company’s Consolidated Financial Statements included in the Fiscal 2023 Form 10-K, on October 14, 2021, the Company issued an aggregate principal amount of $500,000 of 4.000 % Senior Unsecured Notes (“Senior Unsecured Notes”) that will mature on October 15, 2029 unless redeemed or repurchased earlier. Interest on the Senior Unsecured Notes is payable in semi-annual installments on April 15 and October 15 of each year.
The unsecured notes of 25,000 Euro ($27,093 ) relate to long-term debt of our European segment. There are two series, 20,000 Euro ($21,674 ) with an interest rate of 1.945 % maturing in March 2025, and 5,000 Euro ($5,419 ) with an interest rate of 2.534 % maturing in March 2028. Other debt relates primarily to real estate loans with varying maturity dates through September 2032 and interest rates ranging from 2.38 % to 2.87 %.
Total contractual gross debt maturities are as follows:
| For the remainder of the fiscal year ending July 31, 2024 | $ | ||||
| For the fiscal year ending July 31, 2025 | |||||
| For the fiscal year ending July 31, 2026 | |||||
| For the fiscal year ending July 31, 2027 | |||||
| For the fiscal year ending July 31, 2028 | |||||
| For the fiscal year ending July 31, 2029 and thereafter | |||||
| $ | |||||
For the three and six months ended January 31, 2024, interest expense on the term loan, ABL, Senior Unsecured Notes and other debt facilities was $30,548 and $53,747 , respectively, which includes amortization of capitalized debt issuance costs and the debt extinguishment charges noted above totaling $8,992 and $11,864 , respectively. For the three and six months ended January 31, 2023, interest expense on the term loan, ABL and other debt facilities was $26,926 and $49,940 , respectively, which includes amortization of debt issuance costs of $2,862 and $5,697 , respectively.
The fair value of the Company’s Senior Unsecured Notes at January 31, 2024 and July 31, 2023 was $444,950 and $430,650 , respectively. The fair value of all other debt held by the Company approximates carrying value. The fair values of the Company’s long-term debt are primarily estimated using Level 2 inputs as defined by ASC 820, based on quoted prices in markets that are not active.
13. Provision for Income Taxes
The overall effective income tax rate for the three months ended January 31, 2024 was 22.7 %, and the effective income tax rate for the six months ended January 31, 2024 was 24.0 %. These rates were both favorably impacted by certain foreign tax rate differences which include certain interest income not subject to corporate income tax.
The overall effective income tax rate for the three months ended January 31, 2023 was 21.1 %, and the effective income tax rate for the six months ended January 31, 2023 was 23.0
Within the next 12 months, the Company does not anticipate any material changes in its unrecognized tax benefits recorded as of January 31, 2024.
16
The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state and foreign jurisdictions. The Company is currently under exam by certain foreign jurisdictions for fiscal years ended 2016 through 2021. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions in its liability for unrecognized tax benefits.
14. Contingent Liabilities, Commitments and Legal Matters
The Company’s total commercial commitments under standby repurchase obligations on global dealer inventory financing were $3,949,915 and $3,893,048 as of January 31, 2024 and July 31, 2023, respectively. The commitment term is generally up to 18 months.
The Company accounts for the guarantee under repurchase agreements of dealers’ financing by deferring a portion of the related product sale that represents the estimated fair value of the guarantee at inception. This deferred amount is included in the repurchase and guarantee reserve balances of $15,621 and $12,114 as of January 31, 2024 and July 31, 2023, respectively, which is included in Other current liabilities in the Condensed Consolidated Balance Sheets.
Losses incurred related to repurchase agreements that were settled during the three and six months ended January 31, 2024 totaled $2,892 and $6,060 , respectively, and losses during the three and six months ended January 31, 2023 were not
The Company is also involved in certain litigation arising out of its operations in the normal course of its business, most of which is based upon state “lemon laws,” warranty claims and vehicle accidents (for which the Company carries insurance above a specified self-insured retention or deductible amount). The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. There is significant judgment required in assessing both the probability of an adverse outcome and the determination as to whether an exposure can be reasonably estimated. Based on current conditions, management does not believe the ultimate disposition of any current legal proceedings or claims against the Company will have a material effect on the Company’s financial condition, operating results or cash flows. Litigation is, however, inherently uncertain and an adverse outcome from such litigation could have a material effect on the operating results of a particular reporting period.
A product recall was issued in late fiscal 2021 related to certain purchased parts utilized in certain of our products, and a reserve to cover anticipated costs was established at that time. Starting in fiscal 2022, the reserve has been adjusted quarterly based on developments involving the recall, including our expectations regarding the extent of vendor reimbursements and the estimated total cost of the recall. The Company has been, and will continue to be, reimbursed for a portion of the costs it will incur related to this recall. In addition, the Company accrued expenses during fiscal 2022 based on developments related to an ongoing investigation by certain German-based authorities regarding the adequacy of historical disclosures of vehicle weight in advertisements and other Company-provided literature in Germany. The Company is fully cooperating with the investigation. For the three and six months ended January 31, 2024, the Company recognized income of $4,200 and $14,200 , respectively, as a component of selling, general and administrative expense from adjustments related to these matters. For the three months and six months ended January 31, 2023, the Company’s adjustments related to these two matters were not
17
15. Leases
The Company has operating leases principally for land, buildings and equipment, and has various finance leases for certain land and buildings expiring through 2035.
Certain of the Company’s leases include options to extend or terminate the leases, and these options have been included in the relevant lease term to the extent that they are reasonably certain to be exercised.
The Company does not include significant restrictions or covenants in our lease agreements, and residual value guarantees are not generally included within our operating leases.
The components of lease costs for the three and six-month periods ended January 31, 2024 and January 31, 2023 were as
follows:
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Finance lease cost | |||||||||||||||||||||||
| Amortization of right-of-use assets | |||||||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
Other information related to leases was as follows:
| Six Months Ended January 31, | |||||||||||
| Supplemental Cash Flows Information | 2024 | 2023 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | $ | |||||||||
| Supplemental Balance Sheet Information | January 31, 2024 | July 31, 2023 | |||||||||
| Operating leases: | |||||||||||
| $ | $ | ||||||||||
| Operating lease liabilities: | |||||||||||
| $ | $ | ||||||||||
| Total operating lease liabilities | $ | $ | |||||||||
| Finance leases: | |||||||||||
| $ | $ | ||||||||||
| Finance lease liabilities: | |||||||||||
| $ | $ | ||||||||||
| Total finance lease liabilities | $ | $ | |||||||||
18
| January 31, 2024 | July 31, 2023 | ||||||||||
| Weighted-average remaining lease term: | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted-average discount rate: | |||||||||||
| Operating leases | % | % | |||||||||
| Finance leases | % | % | |||||||||
Future minimum payments required under operating and finance leases as of January 31, 2024 were as follows:
| Operating Leases | Finance Leases | |||||||||||||
| For the remainder of the fiscal year ending July 31, 2024 | $ | $ | ||||||||||||
| For the fiscal year ending July 31, 2025 | ||||||||||||||
| For the fiscal year ending July 31, 2026 | ||||||||||||||
| For the fiscal year ending July 31, 2027 | ||||||||||||||
| For the fiscal year ending July 31, 2028 | ||||||||||||||
| For the fiscal year ending July 31, 2029 and thereafter | ||||||||||||||
| Total future lease payments | ||||||||||||||
| Less: Amount representing interest | ( | ( | ||||||||||||
| Total reported lease liability | $ | $ | ||||||||||||
16. Stockholders’ Equity
Stock-based Compensation
Total stock-based compensation expense recognized in the three-month periods ended January 31, 2024 and January 31, 2023 for stock-based awards totaled $9,246 and $8,543 , respectively. Total stock-based compensation expense recognized in the six-month periods ended January 31, 2024 and January 31, 2023 for stock-based awards totaled $19,698 and $16,935 , respectively.
Share Repurchase Program
As discussed in Note 17 to the Company’s Consolidated Financial Statements included in the Fiscal 2023 Form 10-K, on December 21, 2021, the Company’s Board of Directors authorized Company management to utilize up to $250,000 to purchase shares of the Company’s common stock through December 21, 2024. On June 24, 2022, the Board authorized Company management to utilize up to an additional $448,321 to repurchase shares of the Company’s common stock through July 31, 2025.
During the three months ended January 31, 2024, the Company did not purchase any shares of its common stock. During the six months ended January 31, 2024, the Company purchased 327,876 shares of its common stock, at various times in the open market, at a weighted-average price of $91.61 and held them as treasury shares at an aggregate purchase price of $30,037 , all from the December 21, 2021 authorization. Since the inception of the initial December 21, 2021 authorization, the Company has purchased 2,821,651 shares of its common stock, at various times in the open market, at a weighted-average price of $84.05 and held them as treasury shares at an aggregate purchase price of $237,151 .
As of January 31, 2024, the remaining amount of the Company's common stock that may be repurchased under the December 21, 2021 $250,000 authorization expiring on December 21, 2024 is $12,849 . As of January 31, 2024, the remaining amount of the Company’s common stock that may be repurchased under the June 24, 2022 authorization expiring on July 31, 2025 is $448,321 . As of January 31, 2024, the total remaining amount of the Company’s common stock that may be repurchased under these two authorizations is $461,170 .
19
17. Revenue Recognition
The table below disaggregates revenue to the level that the Company believes best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors. Other RV-related revenues shown below in the European Recreational Vehicle segment include sales related to accessories and services, new and used vehicle sales at owned dealerships and RV rentals. Performance obligations for all material revenue streams are recognized at a point-in-time. Other sales relate primarily to component part sales to RV original equipment manufacturers and aftermarket sales through dealers and retailers, as well as aluminum extruded components.
| Three Months Ended January 31, | Six Months Ended January 31, | ||||||||||||||||||||||
| NET SALES: | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||
| Travel Trailers | $ | $ | $ | $ | |||||||||||||||||||
| Fifth Wheels | |||||||||||||||||||||||
| Total North American Towable | |||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||
| Class A | |||||||||||||||||||||||
| Class C | |||||||||||||||||||||||
| Class B | |||||||||||||||||||||||
| Total North American Motorized | |||||||||||||||||||||||
| Total North America | |||||||||||||||||||||||
| European | |||||||||||||||||||||||
| Motorcaravan | |||||||||||||||||||||||
| Campervan | |||||||||||||||||||||||
| Caravan | |||||||||||||||||||||||
| Other RV-related | |||||||||||||||||||||||
| Total European | |||||||||||||||||||||||
| Total recreational vehicles | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Intercompany eliminations | ( | ( | ( | ( | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
20
18. Accumulated Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) (“OCI”) and the changes in the Company’s accumulated other comprehensive income (loss) (“AOCI”) by component were as follows:
| Three Months Ended January 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivatives | Other | AOCI, net of tax, Attributable to THOR | Non-controlling Interests | Total AOCI | |||||||||||||||||||||||||||||||||
| Balance at beginning of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| OCI before reclassifications | ( | ( | ||||||||||||||||||||||||||||||||||||
Income taxes associated with OCI before reclassifications (1) | ||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ||||||||||||||||||||||||||||||||||||||
| Income taxes associated with amounts reclassified from AOCI | ||||||||||||||||||||||||||||||||||||||
| OCI, net of tax for the fiscal period | ( | ( | ||||||||||||||||||||||||||||||||||||
| Balance at end of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Three Months Ended January 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivatives | Other | AOCI, net of tax, Attributable to THOR | Non-controlling Interests | Total AOCI | |||||||||||||||||||||||||||||||||
| Balance at beginning of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| OCI before reclassifications | ( | ( | ||||||||||||||||||||||||||||||||||||
Income taxes associated with OCI before reclassifications (1) | ||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Income taxes associated with amounts reclassified from AOCI | ||||||||||||||||||||||||||||||||||||||
| OCI, net of tax for the fiscal period | ( | ( | ||||||||||||||||||||||||||||||||||||
| Balance at end of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
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| Six Months Ended January 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivatives | Other | AOCI, net of tax, Attributable to THOR | Non-controlling Interests | Total AOCI | |||||||||||||||||||||||||||||||||
| Balance at beginning of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| OCI before reclassifications | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
Income taxes associated with OCI before reclassifications (1) | ||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ||||||||||||||||||||||||||||||||||||||
| Income taxes associated with amounts reclassified from AOCI | ||||||||||||||||||||||||||||||||||||||
| OCI, net of tax for the fiscal period | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
| Balance at end of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Six Months Ended January 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivatives | Other | AOCI, net of tax, Attributable to THOR | Non-controlling Interests | Total AOCI | |||||||||||||||||||||||||||||||||
| Balance at beginning of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| OCI before reclassifications | ( | ( | ||||||||||||||||||||||||||||||||||||
Income taxes associated with OCI before reclassifications (1) | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Income taxes associated with amounts reclassified from AOCI | ||||||||||||||||||||||||||||||||||||||
| OCI, net of tax for the fiscal period | ( | ( | ||||||||||||||||||||||||||||||||||||
| Balance at end of period, net of tax | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
(1)We do not recognize deferred taxes for a majority of the foreign currency translation gains and losses because we do not anticipate reversal in the foreseeable future.
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, all U.S. Dollar and Euro amounts are presented in thousands except share and per share data.
Forward-Looking Statements
This report includes certain statements that are “forward-looking” statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, 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 are made based on management’s current expectations and beliefs regarding future and anticipated developments and their effects upon THOR, and inherently involve uncertainties and risks. These forward-looking statements are not a guarantee of future performance. We cannot assure you that actual results will not differ materially from our expectations. Factors which could cause materially different results include, among others:
•the impact of inflation on the cost of our products as well as on general consumer demand;
•the effect of raw material and commodity price fluctuations, and/or raw material, commodity or chassis supply constraints;
•the impact of war, military conflict, terrorism and/or cyber-attacks, including state-sponsored or ransom attacks;
•the impact of sudden or significant adverse changes in the cost and/or availability of energy or fuel, including those caused by geopolitical events, on our costs of operation, on raw material prices, on our suppliers, on our independent dealers or on retail customers;
•the dependence on a small group of suppliers for certain components used in production, including chassis;
•interest rates and interest rate fluctuations and their potential impact on the general economy and, specifically, on our profitability and on our independent dealers and consumers;
•the ability to ramp production up or down quickly in response to rapid changes in demand while also managing costs and market share;
•the level and magnitude of warranty and recall claims incurred;
•the ability of our suppliers to financially support any defects in their products;
•legislative, regulatory and tax law (including recent and pending tax-law changes implementing new, widely adopted "Pillar II" tax principles) and/or policy developments including their potential impact on our independent dealers, retail customers or on our suppliers;
•the costs of compliance with governmental regulation;
•the impact of an adverse outcome or conclusion related to current or future litigation or regulatory investigations;
•public perception of and the costs related to environmental, social and governance matters;
•legal and compliance issues including those that may arise in conjunction with recently completed transactions;
•lower consumer confidence and the level of discretionary consumer spending;
•the impact of exchange rate fluctuations;
•restrictive lending practices which could negatively impact our independent dealers and/or retail consumers;
•management changes;
•the success of new and existing products and services;
•the ability to maintain strong brands and develop innovative products that meet consumer demands;
•the ability to efficiently utilize existing production facilities;
•changes in consumer preferences;
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•the risks associated with acquisitions, including: the pace and successful closing of an acquisition, the integration and financial impact thereof, the level of achievement of anticipated operating synergies from acquisitions, the potential for unknown or understated liabilities related to acquisitions, the potential loss of existing customers of acquisitions and our ability to retain key management personnel of acquired companies;
•a shortage of necessary personnel for production and increasing labor costs and related employee benefits to attract and retain production personnel in times of high demand;
•the loss or reduction of sales to key independent dealers, and stocking level decisions of our independent dealers;
•disruption of the delivery of units to independent dealers or the disruption of delivery of raw materials, including chassis, to our facilities;
•increasing costs for freight and transportation;
•the ability to protect our information technology systems from data breaches, cyber-attacks and/or network disruptions;
•asset impairment charges;
•competition;
•the impact of losses under repurchase agreements;
•the impact of the strength of the U.S. dollar on international demand for products priced in U.S. dollars;
•general economic, market, public health and political conditions in the various countries in which our products are produced and/or sold;
•the impact of changing emissions and other related climate change regulations in the various jurisdictions in which our products are produced, used and/or sold;
•changes to our investment and capital allocation strategies or other facets of our strategic plan; and
•changes in market liquidity conditions, credit ratings and other factors that may impact our access to future funding and the cost of debt.
These and other risks and uncertainties are discussed more fully in Item 1A of our Annual Report on Form 10-K for the year ended July 31, 2023.
We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this report or to reflect any change in our expectations after the date hereof or any change in events, conditions or circumstances on which any statement is based, except as required by law.
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Executive Overview
We were founded in 1980 and have grown to become the largest manufacturer of recreational vehicles (“RVs”) in the world based on units sold and revenue. We are also the largest manufacturer of RVs in North America, and one of the largest manufacturers of RVs in Europe. In North America, according to Statistical Surveys, Inc. (“Stat Surveys”), for the calendar year ended December 31, 2023, THOR’s combined U.S. and Canadian market share was approximately 41.8% for travel trailers and fifth wheels combined and approximately 48.7% for motorhomes. In Europe, according to the European Caravan Federation (“ECF”) and based on unit registrations for Europe's original equipment manufacturer (“OEM”) reporting countries, our European market share for the calendar year ended December 31, 2023 was approximately 20.9% for motorcaravans and campervans combined and approximately 18.2% for caravans.
Our business model includes decentralized operating units, and our RV products are primarily sold to independent, non-franchise dealers who, in turn, retail those products. The Company also sells component parts to both RV and other original equipment manufacturers, including aluminum extruded components, and sells aftermarket component parts through dealers and retailers. Our growth has been achieved both organically and through acquisition, and our strategy is designed to increase our profitability by driving innovation, servicing our customers, manufacturing quality products, improving the efficiencies of our facilities and making strategic acquisitions.
We generally do not finance independent dealers directly, but we do provide repurchase agreements to the independent dealers’ floor plan lenders.
We generally have financed our growth through a combination of internally generated cash flows from operations and, when needed, outside credit facilities. Ongoing supply chain challenges, particularly chassis issues within our European operations, have and could continue to impact our business and our consolidated financial results and financial position. In addition, the impact of ongoing inflation on consumer confidence, which historically has been highly correlated with RV retail sales, and the impact of inflation on the availability of discretionary funds of our end consumers, combined with significantly higher interest rates compared to recent years impacting both our independent dealers and the end consumer, had a negative impact on demand for our products at both the wholesale and retail levels during the first half of fiscal 2024 and are expected to continue to impact the remainder of our fiscal year. These risks to our business are more fully described in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023.
Recent Events
Refinancing of Credit Agreements
On November 15, 2023, the Company entered into amendments to both its term loan and ABL agreements to extend maturities and lower the applicable margins used to determine the interest rate on the U.S. dollar-denominated loan tranche. The maturity date for the term loan was extended from February 1, 2026 to November 15, 2030. Covenants and other material provisions of the term loan agreement remain materially unchanged. Following the amendments, the principal amounts outstanding under the term loan agreement were $450,000 on the U.S. dollar-denominated term loan tranche and 330,000 Euro on the Euro-denominated term loan tranche. Under the provisions of the amended term loan, both the U.S. and Euro tranches require annual principal payments of 1.0% of the new term loan balance, payable quarterly in 0.25% installments starting on May 1, 2024. Pursuant to the ABL amendment, the maturity date for loans under the ABL agreement was extended from September 1, 2026 to November 15, 2028. Maximum availability under the ABL remains at $1,000,000 and the applicable margin, covenants and other material provisions of the ABL remain materially unchanged. As a result of these amendments and associated maturity date extensions, the Company recognized total expense of $14,741 in the second quarter of fiscal 2024.
Industry Outlook — North America
The Company monitors industry conditions in the North American RV market using a number of resources including its own performance tracking and modeling. The Company also considers monthly wholesale shipment data as reported by the RV Industry Association (“RVIA”), which is typically issued on a one-month lag and represents manufacturers’ North American RV production and delivery to dealers. In addition, we monitor monthly North American retail sales trends as reported by Stat Surveys, whose data is typically issued on a month-and-a-half lag. The Company believes that monthly RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production and net sales.
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North American RV independent dealer inventory of our North American RV products as of January 31, 2024 decreased 27.6% to approximately 87,800 units, compared to approximately 121,300 units as of January 31, 2023. As of January 31, 2024, we believe North American dealer inventory levels for most products are generally at, or slightly higher than, the levels that dealers are comfortable stocking given the current retail sales levels and associated carrying costs. We believe dealers will continue to closely evaluate the unit stocking levels that they will elect to carry in future periods, which may be less than historical unit stocking levels, due to a combination of factors such as retail activity, RV wholesale prices as well as interest rates and other carrying costs.
THOR’s North American RV backlog as of January 31, 2024 decreased $1,092,226, or 36.4%, to $1,908,889 compared to $3,001,115 as of January 31, 2023. The decrease in backlog is primarily a result of a reduction in orders from dealers, which we believe is due to lower retail sales and dealer concerns over current interest costs and other carrying costs compared to the prior-year period.
North American Industry Wholesale Statistics
Key wholesale statistics for the North American RV industry, as reported by RVIA for the periods indicated, are as follows:
| U.S. and Canada Wholesale Unit Shipments | |||||||||||||||||||||||
| Calendar Year | Increase | % | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | Change | ||||||||||||||||||||
| North American Towable units | 267,295 | 434,858 | (167,563) | (38.5) | |||||||||||||||||||
| North American Motorized units | 45,879 | 58,410 | (12,531) | (21.5) | |||||||||||||||||||
| Total | 313,174 | 493,268 | (180,094) | (36.5) | |||||||||||||||||||
In February 2024, RVIA issued a revised forecast for calendar year 2024 wholesale unit shipments. Under the RVIA’s most likely scenario, towable and motorized unit shipments are projected to be approximately 301,800 units and 48,300 units, respectively, for an annual total of approximately 350,100 units, up 11.8% from the 2023 calendar year wholesale shipments. The RVIA’s most likely forecast for calendar year 2024 of 350,100 total units could range from a lower estimate of approximately 334,700 total units to an upper estimate of approximately 365,500 total units.
North American Industry Retail Statistics
Key retail statistics for the North American RV industry, as reported by Stat Surveys for the periods indicated, are as follows:
| U.S. and Canada Retail Unit Registrations | |||||||||||||||||||||||
| Calendar Year | Increase | % | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | Change | ||||||||||||||||||||
| North American Towable units | 334,250 | 399,815 | (65,565) | (16.4) | |||||||||||||||||||
| North American Motorized units | 44,955 | 48,811 | (3,856) | (7.9) | |||||||||||||||||||
| Total | 379,205 | 448,626 | (69,421) | (15.5) | |||||||||||||||||||
Note: Data reported by Stat Surveys is based on official state and provincial records. This information is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various states or provinces.
We believe that North American retail consumer interest remains high due to an ongoing interest in the RV lifestyle. While we anticipate that near-term demand will be influenced by many factors, including consumer confidence and the level of consumer spending on discretionary products, we believe future retail demand over the longer term will exceed historical, pre-pandemic levels as consumers continue to value the perceived benefits offered by the RV lifestyle, which provides people with the ability to connect with loved ones and nature as well as the potential to get away for short, frequent breaks or longer adventures.
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Company North American Wholesale Statistics
The Company’s North American wholesale RV shipments, for the calendar years ended December 31, 2023 and 2022 to correspond to the North American industry wholesale periods noted above, were as follows:
| U.S. and Canada Wholesale Unit Shipments | |||||||||||||||||||||||
| Calendar Year | Increase | % | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | Change | ||||||||||||||||||||
| North American Towable units | 102,141 | 181,645 | (79,504) | (43.8) | |||||||||||||||||||
| North American Motorized units | 21,416 | 29,643 | (8,227) | (27.8) | |||||||||||||||||||
| Total | 123,557 | 211,288 | (87,731) | (41.5) | |||||||||||||||||||
Company North American Retail Statistics
Retail statistics of the Company’s North American RV products, as reported by Stat Surveys, for the calendar years ended December 31, 2023 and 2022 to correspond to the North American industry retail periods noted above, were as follows:
| U.S. and Canada Retail Unit Registrations | |||||||||||||||||||||||
| Calendar Year | Increase | % | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | Change | ||||||||||||||||||||
| North American Towable units | 135,648 | 163,575 | (27,927) | (17.1) | |||||||||||||||||||
| North American Motorized units | 21,906 | 23,633 | (1,727) | (7.3) | |||||||||||||||||||
| Total | 157,554 | 187,208 | (29,654) | (15.8) | |||||||||||||||||||
Note: Data reported by Stat Surveys is based on official state and provincial records. This information is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various states or provinces.
North American Outlook
Historically, RV industry sales have been impacted by a number of economic conditions faced by RV dealers, and ultimately retail consumers, such as the rate of unemployment, the rate of inflation, the level of consumer confidence, the disposable income of consumers, interest rates, credit availability, the health of the housing market, tax rates and fuel availability and prices. We believe these factors will continue to affect retail sales in 2024. In addition, due to inflationary pressures, higher interest rates and other factors, we believe that RV dealers will be continuously reevaluating their desired stocking levels, which may result in lower than historical dealer inventory stocking levels on a unit basis. It is difficult to predict the extent to which any or all of these factors will impact the RV industry or our business in a particular future period, however, we currently believe the remainder of our fiscal 2024 will continue to be negatively impacted by these factors.
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Despite the near-term challenges, we remain optimistic about future growth in North American retail sales in the long term, as there are many factors driving product interest. Surveys conducted by THOR, RVIA and others show that Americans of all generations love the freedom of the outdoors and the enrichment that comes with living an active lifestyle. RVs allow people to be in control of their travel experiences, going where they want, when they want and with the people they want. The RV units we design, produce and sell allow people to spend time outdoors pursuing their favorite activities, creating cherished moments and deeply connecting with family and friends. Based on the on-going value consumers place on these factors, we expect to see long-term growth in the North American RV industry. The growth in industry-wide RV sales during late 2020 through early 2023 has also resulted in exposing a wider range of consumers to the RV lifestyle. We believe many of those who have been recently exposed to the industry for the first time will become future owners, and that those who became first-time owners since the onset of the pandemic will become long-term RVers, resulting in future repeat and upgrade sales opportunities. We also believe many consumers are likely to continue opting for fewer vacations via air travel, cruise ships and hotels, while preferring vacations that RVs are uniquely positioned to provide, allowing consumers the ability to explore or unwind, often close to home. In addition, we believe that the availability of camping and RV parking facilities will be an important factor in the future growth of the industry and view both the significant recent investments and the future committed investments by campground owners, states and the federal government in camping facilities and accessibility to state and federal parks and forests to be positive long-term factors.
Economic and industry-wide factors that have historically affected, and which we believe will continue to affect, our operating results include the costs of commodities, the availability of critical supply components and labor costs incurred in the production of our products. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs will impact our profit margins negatively if we are unable to offset those cost increases through a combination of product recontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts. Historically, we have generally been able to offset net cost increases over time.
It is extremely difficult to predict when or whether future supply chain issues related to chassis or other components used in the production of RVs will arise. Modifying available chassis for certain motorized products to use for other products is not a viable alternative, particularly in the short term, due to engineering requirements. The North American recreational vehicle industry has, from time to time in the past, experienced shortages of chassis for various reasons, including component shortages, production delays or other production issues and work stoppages at the chassis manufacturers.
While the North American RV industry has at times faced supply shortages or delivery delays of other, non-chassis raw material components, the supply chain is currently able to support our demand. If any factors were to impact our suppliers' ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected.
Industry Outlook — Europe
The Company monitors industry conditions in the European RV market using a number of resources including its own performance tracking and modeling. The Company also considers retail trends in the European RV market as reported by the European Caravan Federation (“ECF”) and its members. On a monthly basis, the Company receives original equipment manufacturer ("OEM")-specific reports for most of the individual member countries that make up the ECF through the Caravaning Industrie Verband e.V. (“CIVD”). The timing of these reports may vary, but typically they are issued on a one-to-two-month lag. While most countries provide OEM-specific information, the United Kingdom, which made up 20.7% and 8.3% of the caravan and motorcaravan (including campervans) European market for the calendar year ended December 31, 2023, respectively, does not provide OEM-specific information. Industry wholesale shipment data for the European RV market is not available.
Within Europe, over 90% of our sales are made to dealers within 10 different European countries. The market conditions, as well as the operating status of our independent dealers within each country, vary based on the various local economic and other conditions. It is inherently difficult to generalize about the operating conditions within the entire European region.
Independent dealer inventory of our European RV products as of January 31, 2024 was approximately 24,800 units. Independent RV dealer inventory levels of our European products are generally in line with historic levels in the various countries we serve. Within Germany, which accounts for approximately 60% of our European product sales, independent dealer inventory levels are also generally in line with historical norms. Comparable independent dealer inventory unit information was not available as of January 31, 2023.
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THOR’s European RV backlog as of January 31, 2024 decreased $309,431, or 10.1%, to $2,746,307 compared to $3,055,738 as of January 31, 2023, primarily due to improved chassis supply availability as chassis constraints in the prior year resulted in elevated backlogs.
European Industry Retail Statistics
Key retail statistics for the European RV industry, as reported by the ECF for the periods indicated, are as follows:
| European Unit Registrations | |||||||||||||||||||||||||||||||||||
Motorcaravan and Campervan (2) | Caravan | ||||||||||||||||||||||||||||||||||
| Calendar Year | % | Calendar Year | % | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
OEM Reporting Countries (1) | 129,269 | 130,849 | (1.2) | 47,740 | 54,565 | (12.5) | |||||||||||||||||||||||||||||
Non-OEM Reporting Countries (1) | 17,070 | 16,955 | 0.7 | 16,011 | 16,980 | (5.7) | |||||||||||||||||||||||||||||
| Total | 146,339 | 147,804 | (1.0) | 63,751 | 71,545 | (10.9) | |||||||||||||||||||||||||||||
(1)Industry retail registration statistics have been compiled from individual countries' reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.” The “Non-OEM Reporting Countries” are primarily the United Kingdom and others. Total European unit registrations are reported quarterly by the ECF.
(2)The ECF reports motorcaravans and campervans together.
Note: Data from the ECF is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various countries. (The "Non-OEM Reporting Countries" either do not report OEM-specific data to the ECF or do not have it available for the entire time period covered).
Company European Retail Statistics (1)
European Unit Registrations (1) | |||||||||||||||||||||||
| Calendar Year | Increase | % | |||||||||||||||||||||
| 2023 | 2022 | (Decrease) | Change | ||||||||||||||||||||
| Motorcaravan and Campervan | 27,005 | 27,664 | (659) | (2.4) | |||||||||||||||||||
| Caravan | 8,704 | 10,075 | (1,371) | (13.6) | |||||||||||||||||||
| Total OEM-Reporting Countries | 35,709 | 37,739 | (2,030) | (5.4) | |||||||||||||||||||
(1)Company retail registration statistics have been compiled from individual countries reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.”
Note: Data from the ECF is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various countries.
European Outlook
Our European operations offer a full lineup of leisure vehicles including caravans and motorized products including urban vehicles, campervans and small-to-large motorcaravans. Our product offerings are not limited to vehicles only but also include accessories and services, including vehicle rentals. We address European retail customers through a sophisticated brand management approach based on consumer segmentation according to target group, core values and emotions. With the help of data-based and digital marketing, we intend to continue expanding our retail customer reach to new and younger consumer segments.
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The impact of current macroeconomic factors on our business, including inflation and interest rates, supply chain constraints, environmental and sustainability regulations and geopolitical events, is uncertain. Our outlook for future European RV retail sales depends upon the various economic and regulatory conditions in the respective countries in which we sell our products, and on our ability to manage through supply chain issues that have, and are expected to continue to, impact the efficiency of our production of our motorized products in the near term. End-customer demand for RVs depends strongly on consumer confidence. Factors such as the rate of unemployment, the rate of inflation, private consumption and investments, the level of disposable income of consumers, interest rates, the health of the housing market, tax rates and regulatory restrictions and, since the pandemic, travel safety considerations all influence retail sales. Our long-term outlook for future growth in European RV retail sales remains positive as more people discover RVs as a way to support their lifestyle in search of independence and individuality, as well as using the RV as a multi-purpose vehicle to escape urban life and explore outdoor activities and nature.
We and our independent European dealers market our European recreational vehicles through multiple avenues including at numerous RV fairs at the country and regional levels which occur throughout the calendar year. These fairs have historically been well-attended events that allow retail consumers the ability to see the newest products, features and designs and to talk with product experts in addition to being able to purchase or order an RV. The most recent 2023 Caravan Salon show in late August 2023 experienced near-record attendance, demonstrating the high level of interest in the RV lifestyle despite the current macroeconomic uncertainties facing many consumers. In addition to our attendance at various strategic trade fairs, we have and will continue to strengthen and expand our digital activities to reach high potential target groups, generate leads and steer customers directly to dealerships. With approximately 1,100 active independent dealers in Germany and throughout Europe with whom we do business, we believe our European brands have one of the strongest and most professionally structured dealer and service networks in Europe.
Economic or industry-wide factors affecting our European RV operating results include the availability and costs of commodities and component parts and the labor used in the manufacture of our products. Material and labor costs are the primary factors determining our cost of products sold and any future increases in these costs will impact our profit margins negatively if we are unable to offset those cost increases through a combination of product recontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts.
Throughout fiscal 2023, we experienced delays in the receipt of, and significant reductions in the volume of, chassis from our European chassis suppliers, limiting our ability to further increase production of our motorized products. While overall chassis supply has improved, we anticipate disruptions in the sequence of delivery of chassis to continue through the majority of calendar year 2024. The sequence of chassis supply inhibits our ability to efficiently and consistently maintain our planned production levels. Uncertainties related to changing emission standards may also impact the availability of chassis used in our production of certain European motorized RVs and could also impact consumer buying patterns.
In Europe, we also continue to experience cost increases, supply shortages and delivery delays of other, non-chassis raw material components which negatively impacted the efficiency of our production in the current fiscal year, and which resulted in the continuation of an elevated level of work in process inventory on hand compared to historical norms. We believe these shortages and delays will continue to result in production inefficiencies and a continuation of the elevated level of work in process inventory in the near term, which will have a negative impact on our European operating results as well as on our consolidated results due to the negative impact of carrying excess inventory levels and the negative impact of completing units off the production line.
Where possible, to minimize the future impact of supply chain constraints, we have identified a second-source supplier base for certain component parts, however, the engineering requirements required with an alternate component part, particularly the chassis our various units are built upon, limits the impact of these alternative suppliers on reducing any near-term supply constraints.
In addition to potential material supply constraints, labor shortages may also impact our European operations. Currently, we are experiencing a shortage of available skilled workers due to near full employment rates in the European countries where the majority of our manufacturing sites are located.
30
Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023
| NET SALES: | Three Months Ended January 31, 2024 | Three Months Ended January 31, 2023 | Change Amount | % Change | |||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 730,968 | $ | 829,751 | $ | (98,783) | (11.9) | ||||||||||||||||||||||||||||
| North American Motorized | 570,424 | 738,583 | (168,159) | (22.8) | |||||||||||||||||||||||||||||||
| Total North America | 1,301,392 | 1,568,334 | (266,942) | (17.0) | |||||||||||||||||||||||||||||||
| European | 782,294 | 646,938 | 135,356 | 20.9 | |||||||||||||||||||||||||||||||
| Total recreational vehicles | 2,083,686 | 2,215,272 | (131,586) | (5.9) | |||||||||||||||||||||||||||||||
| Other | 166,534 | 164,859 | 1,675 | 1.0 | |||||||||||||||||||||||||||||||
| Intercompany eliminations | (42,851) | (33,496) | (9,355) | (27.9) | |||||||||||||||||||||||||||||||
| Total | $ | 2,207,369 | $ | 2,346,635 | $ | (139,266) | (5.9) | ||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | 21,958 | 19,934 | 2,024 | 10.2 | |||||||||||||||||||||||||||||||
| North American Motorized | 4,438 | 5,438 | (1,000) | (18.4) | |||||||||||||||||||||||||||||||
| Total North America | 26,396 | 25,372 | 1,024 | 4.0 | |||||||||||||||||||||||||||||||
| European | 13,080 | 12,588 | 492 | 3.9 | |||||||||||||||||||||||||||||||
| Total | 39,476 | 37,960 | 1,516 | 4.0 | |||||||||||||||||||||||||||||||
| GROSS PROFIT: | % of Segment Net Sales | % of Segment Net Sales | Change Amount | % Change | |||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 53,897 | 7.4 | $ | 52,863 | 6.4 | $ | 1,034 | 2.0 | ||||||||||||||||||||||||||
| North American Motorized | 60,721 | 10.6 | 107,212 | 14.5 | (46,491) | (43.4) | |||||||||||||||||||||||||||||
| Total North America | 114,618 | 8.8 | 160,075 | 10.2 | (45,457) | (28.4) | |||||||||||||||||||||||||||||
| European | 119,325 | 15.3 | 91,430 | 14.1 | 27,895 | 30.5 | |||||||||||||||||||||||||||||
| Total recreational vehicles | 233,943 | 11.2 | 251,505 | 11.4 | (17,562) | (7.0) | |||||||||||||||||||||||||||||
| Other, net | 36,904 | 22.2 | 31,430 | 19.1 | 5,474 | 17.4 | |||||||||||||||||||||||||||||
| Total | $ | 270,847 | 12.3 | $ | 282,935 | 12.1 | $ | (12,088) | (4.3) | ||||||||||||||||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: | |||||||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 56,006 | 7.7 | $ | 53,955 | 6.5 | $ | 2,051 | 3.8 | ||||||||||||||||||||||||||
| North American Motorized | 30,792 | 5.4 | 42,418 | 5.7 | (11,626) | (27.4) | |||||||||||||||||||||||||||||
| Total North America | 86,798 | 6.7 | 96,373 | 6.1 | (9,575) | (9.9) | |||||||||||||||||||||||||||||
| European | 69,263 | 8.9 | 64,981 | 10.0 | 4,282 | 6.6 | |||||||||||||||||||||||||||||
| Total recreational vehicles | 156,061 | 7.5 | 161,354 | 7.3 | (5,293) | (3.3) | |||||||||||||||||||||||||||||
| Other | 19,049 | 11.4 | 16,293 | 9.9 | 2,756 | 16.9 | |||||||||||||||||||||||||||||
| Corporate | 45,015 | — | 31,096 | — | 13,919 | 44.8 | |||||||||||||||||||||||||||||
| Total | $ | 220,125 | 10.0 | $ | 208,743 | 8.9 | $ | 11,382 | 5.5 | ||||||||||||||||||||||||||
31
| INCOME (LOSS) BEFORE INCOME TAXES: | Three Months Ended January 31, 2024 | % of Segment Net Sales | Three Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | |||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 661 | 0.1 | $ | (7,119) | (0.9) | $ | 7,780 | 109.3 | ||||||||||||||||||||||||||
| North American Motorized | 26,460 | 4.6 | 61,544 | 8.3 | (35,084) | (57.0) | |||||||||||||||||||||||||||||
| Total North America | 27,121 | 2.1 | 54,425 | 3.5 | (27,304) | (50.2) | |||||||||||||||||||||||||||||
| European | 38,057 | 4.9 | 12,015 | 1.9 | 26,042 | 216.7 | |||||||||||||||||||||||||||||
| Total recreational vehicles | 65,178 | 3.1 | 66,440 | 3.0 | (1,262) | (1.9) | |||||||||||||||||||||||||||||
| Other, net | 7,343 | 4.4 | 8,289 | 5.0 | (946) | (11.4) | |||||||||||||||||||||||||||||
| Corporate | (65,627) | — | (42,011) | — | (23,616) | (56.2) | |||||||||||||||||||||||||||||
| Total | $ | 6,894 | 0.3 | $ | 32,718 | 1.4 | $ | (25,824) | (78.9) | ||||||||||||||||||||||||||
ORDER BACKLOG: | As of January 31, 2024 | As of January 31, 2023 | Change Amount | % Change | |||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||
| North American Towable | $ | 836,202 | $ | 1,152,991 | $ | (316,789) | (27.5) | ||||||||||||||||
| North American Motorized | 1,072,687 | 1,848,124 | (775,437) | (42.0) | |||||||||||||||||||
| Total North America | 1,908,889 | 3,001,115 | (1,092,226) | (36.4) | |||||||||||||||||||
| European | 2,746,307 | 3,055,738 | (309,431) | (10.1) | |||||||||||||||||||
| Total | $ | 4,655,196 | $ | 6,056,853 | $ | (1,401,657) | (23.1) | ||||||||||||||||
CONSOLIDATED
Consolidated net sales for the three months ended January 31, 2024 decreased $139,266, or 5.9%, compared to the three months ended January 31, 2023. The decrease in consolidated net sales is primarily due to lower dealer and consumer demand in comparison to the prior-year period, primarily in the North American RV markets. Approximately 35.4% of the Company’s consolidated net sales for the quarter ended January 31, 2024 were transacted in a currency other than the U.S. dollar. The Company’s most material exchange rate exposure is sales in Euros. The decrease in consolidated net sales includes an increase of $26,558 from the change in currency exchange rates between the two periods. To determine this impact, net sales transacted in currencies other than U.S. dollars have been translated to U.S. dollars using the average exchange rates that were in effect during the comparative period.
Consolidated gross profit for the three months ended January 31, 2024 decreased $12,088, or 4.3%, compared to the three months ended January 31, 2023. Consolidated gross profit was 12.3% of consolidated net sales for the three months ended January 31, 2024 and 12.1% for the three months ended January 31, 2023. The decrease in consolidated gross profit was primarily due to the impact of the decrease in consolidated net sales while the slight increase in the consolidated gross profit percentage is due to the favorable impacts of selling price increases, stable material costs and cost-saving initiatives in the current-year quarter compared to the prior-year quarter.
Selling, general and administrative expenses for the three months ended January 31, 2024 increased $11,382, or 5.5%, compared to the three months ended January 31, 2023, primarily due to third-party fees of $7,175 related to the debt refinancing in the second quarter of fiscal 2024 as discussed in Note 12 to the Condensed Consolidated Financial Statements.
The decrease of $25,824, or 78.9%, in income before income taxes for the three months ended January 31, 2024 as compared to the three months ended January 31, 2023 was primarily driven by the decrease in consolidated net sales and the increase in consolidated selling, general and administrative expenses noted above.
The overall effective income tax rate for the three months ended January 31, 2024 was 22.7% compared with 21.1% for the three months ended January 31, 2023. The primary reason for the increase relates to the jurisdictional mix of pre-tax income between foreign and domestic operations between the comparable periods.
32
Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses and income before income taxes are addressed below and in the segment reporting that follows.
Corporate costs included in consolidated selling, general and administrative expenses increased $13,919 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023. This increase includes an increase of $7,990 in legal and professional fees, including the debt financing-related third-party fees of $7,175 discussed above. This increase also includes an increase in deferred compensation expense of $5,231 due to market value fluctuations between the two periods, an increase in innovation-led research and development costs of $2,578 and an increase in stock-based and other compensation of $1,015. These increases were partially offset by $4,200 of income from adjustments made during the quarter related to certain legal and recall matters as discussed in Note 14 to the Condensed Consolidated Financial Statements.
Net expense in Corporate interest and other income and expense increased $9,697 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023. This net expense increase included an increase in net interest expense of $1,336 on our debt, primarily due to extinguishment charges of $7,566 related to the refinancing of our debt facilities as discussed in Note 12 to the Condensed Consolidated Financial Statements more than offsetting increased interest income received from higher average cash balances held and higher interest income rates and lower debt interest expense primarily due to lower average debt balances outstanding. In addition, the current-year period included a non-cash foreign currency loss of $2,627 on certain Euro-denominated loans as compared to a $6,923 gain in the prior-year period. The current-year period also included operating losses of $3,502 related to our Roadpass Digital joint venture as discussed in Note 8 to the Condensed Consolidated Financial Statements. These increases were partially offset by a favorable change of $5,156 in the fair value of the Company's deferred compensation plan assets due to market fluctuations between the two periods.
Segment Reporting
NORTH AMERICAN TOWABLE RECREATIONAL VEHICLES
Analysis of the change in net sales for the three months ended January 31, 2024 compared to the three months ended January 31, 2023:
| Three Months Ended January 31, 2024 | % of Segment Net Sales | Three Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | ||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||||||||||||||
| Travel Trailers | $ | 471,483 | 64.5 | $ | 527,829 | 63.6 | $ | (56,346) | (10.7) | ||||||||||||||||||||||||||
| Fifth Wheels | 259,485 | 35.5 | 301,922 | 36.4 | (42,437) | (14.1) | |||||||||||||||||||||||||||||
| Total North American Towable | $ | 730,968 | 100.0 | $ | 829,751 | 100.0 | $ | (98,783) | (11.9) | ||||||||||||||||||||||||||
| Three Months Ended January 31, 2024 | % of Segment Shipments | Three Months Ended January 31, 2023 | % of Segment Shipments | Change Amount | % Change | ||||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||||||||||||||
| Travel Trailers | 17,652 | 80.4 | 15,494 | 77.7 | 2,158 | 13.9 | |||||||||||||||||||||||||||||
| Fifth Wheels | 4,306 | 19.6 | 4,440 | 22.3 | (134) | (3.0) | |||||||||||||||||||||||||||||
| Total North American Towable | 21,958 | 100.0 | 19,934 | 100.0 | 2,024 | 10.2 | |||||||||||||||||||||||||||||
| IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: | % Change | ||||||||||||||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||||||||||||||
| Travel Trailers | (24.6) | ||||||||||||||||||||||||||||||||||
| Fifth Wheels | (11.1) | ||||||||||||||||||||||||||||||||||
| Total North American Towable | (22.1) | ||||||||||||||||||||||||||||||||||
33
The decrease in total North American Towable net sales of 11.9% compared to the prior-year quarter resulted from a 10.2% increase in unit shipments and a 22.1% decrease in the overall net price per unit due to the combined impact of changes in product mix and price. The increase in unit shipments is primarily due to the heightened demand for the lower cost travel trailers units, which increased 13.9% over the prior-year quarter. According to statistics published by RVIA, for the three months ended January 31, 2024, combined North American travel trailer and fifth wheel wholesale unit shipments increased 12.9% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the three months ended December 31, 2023 and 2022, our North American market share for travel trailers and fifth wheels combined was 39.7% and 41.2%, respectively. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.
The decreases in the overall net price per unit within both the travel trailer product line of 24.6% and the fifth wheel product line of 11.1% were primarily due to the combined impact of sales price reductions due to lower input costs, higher sales discounting levels and product mix changes trending toward more moderately-priced units as compared to the prior-year quarter.
North American Towable cost of products sold decreased $99,817 to $677,071, or 92.6% of North American Towable net sales, for the three months ended January 31, 2024 compared to $776,888, or 93.6% of North American Towable net sales, for the three months ended January 31, 2023. Changes in material, labor, freight-out and warranty costs comprised $91,773 of the $99,817 decrease in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American Towable net sales decreased to 82.2% for the three months ended January 31, 2024 compared to 83.5% for the three months ended January 31, 2023, primarily due to a decrease in the material costs percentage from the combined favorable impacts of cost-saving initiatives and product mix changes. This decrease was partially offset by an increase in the labor percentage primarily due to product mix changes.
Total manufacturing overhead decreased $8,044 in correlation with the decrease in sales but increased as a percentage of North American Towable net sales from 10.1% to 10.4% as the decreased net sales levels resulted in higher overhead costs per unit sold.
The increase in North American Towable gross profit of $1,034 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 was due to the decrease in net sales being more than offset by the favorable impact of the decrease in the cost of products sold percentage noted above.
The increase in North American Towable selling, general and administrative expenses of $2,051 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 is primarily due to increases in costs related to our repurchase obligations of $2,085 and legal and professional fees of $1,845, partially offset by the decrease in North American Towable net sales and income before income taxes causing related commissions, incentive and other compensation to decrease by $1,538. The increase in the overall selling, general and administrative expense as a percentage of North American Towable net sales is primarily due to the decrease in net sales.
The increase in North American Towable income before income taxes of $7,780 for the three months ended January 31, 2024 compared to the loss before income taxes for the three months ended January 31, 2023 was primarily attributable to lower amortization costs and larger gains on the sales of fixed assets in the current-year quarter.
34
NORTH AMERICAN MOTORIZED RECREATIONAL VEHICLES
Analysis of the change in net sales for the three months ended January 31, 2024 compared to the three months ended January 31, 2023:
| Three Months Ended January 31, 2024 | % of Segment Net Sales | Three Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | ||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||||||||||||||
| Class A | $ | 178,308 | 31.3 | $ | 244,128 | 33.1 | $ | (65,820) | (27.0) | ||||||||||||||||||||||||||
| Class C | 275,632 | 48.3 | 334,911 | 45.3 | (59,279) | (17.7) | |||||||||||||||||||||||||||||
| Class B | 116,484 | 20.4 | 159,544 | 21.6 | (43,060) | (27.0) | |||||||||||||||||||||||||||||
| Total North American Motorized | $ | 570,424 | 100.0 | $ | 738,583 | 100.0 | $ | (168,159) | (22.8) | ||||||||||||||||||||||||||
| Three Months Ended January 31, 2024 | % of Segment Shipments | Three Months Ended January 31, 2023 | % of Segment Shipments | Change Amount | % Change | ||||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||||||||||||||
| Class A | 875 | 19.7 | 1,194 | 22.0 | (319) | (26.7) | |||||||||||||||||||||||||||||
| Class C | 2,539 | 57.2 | 2,935 | 54.0 | (396) | (13.5) | |||||||||||||||||||||||||||||
| Class B | 1,024 | 23.1 | 1,309 | 24.0 | (285) | (21.8) | |||||||||||||||||||||||||||||
| Total North American Motorized | 4,438 | 100.0 | 5,438 | 100.0 | (1,000) | (18.4) | |||||||||||||||||||||||||||||
| IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: | % Change | ||||||||||||||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||||||||||||||
| Class A | (0.3) | ||||||||||||||||||||||||||||||||||
| Class C | (4.2) | ||||||||||||||||||||||||||||||||||
| Class B | (5.2) | ||||||||||||||||||||||||||||||||||
| Total North American Motorized | (4.4) | ||||||||||||||||||||||||||||||||||
The decrease in total North American Motorized net sales of 22.8% compared to the prior-year quarter resulted from a 18.4% decrease in unit shipments and a 4.4% decrease in the overall net price per unit due to the combined impact of changes in product mix and price, which included elevated sales discounts compared to the prior-year quarter. The decrease in unit shipments is primarily due to a softening in current dealer and consumer demand in comparison with the demand in the prior-year quarter, which included independent dealer restocking of certain motorized products. According to statistics published by RVIA, for the three months ended January 31, 2024, combined North American motorhome wholesale unit shipments decreased 15.8% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the three months ended December 31, 2023 and 2022, our North American market share for motorhomes was 47.3% for both periods. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.
The decreases in the overall net price per unit within the Class A product line of 0.3%, the Class C product line of 4.2% and the Class B product line of 5.2% were all primarily due to higher discounting levels since the prior-year quarter, and consumers trending toward more moderately-priced units compared to the prior-year quarter.
35
North American Motorized cost of products sold decreased $121,668 to $509,703, or 89.4% of North American Motorized net sales, for the three months ended January 31, 2024 compared to $631,371, or 85.5% of North American Motorized net sales, for the three months ended January 31, 2023. The changes in material, labor, freight-out and warranty costs comprised $114,854 of the $121,668 decrease primarily due to the decreased net sales volume. Material, labor, freight-out and warranty costs as a combined percentage of North American Motorized net sales increased to 82.3% for the three months ended January 31, 2024 compared to 79.1% for the three months ended January 31, 2023, with the increase due to an increase in the material cost percentage, primarily due to higher sales discounting, which effectively decreases net selling prices and correspondingly increases the material cost percentage, as well as increased chassis costs.
Total manufacturing overhead decreased $6,814 in correlation with the net sales decrease but increased as a percentage of North American Motorized net sales from 6.4% to 7.1% as the decrease in net sales levels resulted in higher overhead costs per unit sold.
The decrease in North American Motorized gross profit of $46,491 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 was driven by the decrease in net sales, and the decrease in the gross profit percentage is due to the increase in the cost of products sold percentage noted above.
The decrease in North American Motorized selling, general and administrative expenses of $11,626 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 was primarily due to the decrease in North American Motorized net sales and income before income taxes, which caused related commissions, incentive and other compensation to decrease by $10,228. The decrease in commissions, incentive and other compensation also drove the slight decrease in the overall selling, general and administrative expense as a percentage of North American Motorized net sales.
The decrease in North American Motorized income before income taxes of $35,084 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 was primarily due to the decrease in North American Motorized net sales, and the primary reason for the decrease in percentage was the increase in the cost of products sold percentage noted above.
36
EUROPEAN RECREATIONAL VEHICLES
Analysis of the change in net sales for the three months ended January 31, 2024 compared to the three months ended January 31, 2023:
| Three Months Ended January 31, 2024 | % of Segment Net Sales | Three Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | ||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||||||
| European | |||||||||||||||||||||||||||||||||||
| Motorcaravan | $ | 424,813 | 54.3 | $ | 267,782 | 41.4 | $ | 157,031 | 58.6 | ||||||||||||||||||||||||||
| Campervan | 244,724 | 31.3 | 227,136 | 35.1 | 17,588 | 7.7 | |||||||||||||||||||||||||||||
| Caravan | 51,087 | 6.5 | 94,494 | 14.6 | (43,407) | (45.9) | |||||||||||||||||||||||||||||
| Other | 61,670 | 7.9 | 57,526 | 8.9 | 4,144 | 7.2 | |||||||||||||||||||||||||||||
| Total European | $ | 782,294 | 100.0 | $ | 646,938 | 100.0 | $ | 135,356 | 20.9 | ||||||||||||||||||||||||||
| Three Months Ended January 31, 2024 | % of Segment Shipments | Three Months Ended January 31, 2023 | % of Segment Shipments | Change Amount | % Change | ||||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| European | |||||||||||||||||||||||||||||||||||
| Motorcaravan | 5,563 | 42.5 | 3,632 | 28.9 | 1,931 | 53.2 | |||||||||||||||||||||||||||||
| Campervan | 5,382 | 41.1 | 4,826 | 38.3 | 556 | 11.5 | |||||||||||||||||||||||||||||
| Caravan | 2,135 | 16.4 | 4,130 | 32.8 | (1,995) | (48.3) | |||||||||||||||||||||||||||||
| Total European | 13,080 | 100.0 | 12,588 | 100.0 | 492 | 3.9 | |||||||||||||||||||||||||||||
| IMPACT OF CHANGES IN FOREIGN CURRENCY, PRODUCT MIX AND PRICE ON NET SALES: | ||||||||||||||||||||
| Foreign Currency % | Mix and Price % | % Change | ||||||||||||||||||
| European | ||||||||||||||||||||
| Motorcaravan | 4.1 | 1.3 | 5.4 | |||||||||||||||||
| Campervan | 4.1 | (7.9) | (3.8) | |||||||||||||||||
| Caravan | 4.1 | (1.7) | 2.4 | |||||||||||||||||
| Total European | 4.1 | 12.9 | 17.0 | |||||||||||||||||
The increase in total European Recreational Vehicle net sales of 20.9% compared to the prior-year quarter resulted from a 3.9% increase in unit shipments and a 17.0% increase in the overall net price per unit due to the total combined impact of changes in foreign currency, product mix and price. The increase in European Recreational Vehicle net sales of $135,356 includes an increase of $26,558, or 4.1%, due to the increase in foreign exchange rates since the prior-year quarter.
The overall net price per unit increase of 17.0% includes a 4.1% increase due to the impact of foreign currency exchange rate changes and a 12.9% increase due to the combined impact of product mix and selling prices, primarily due to the much higher concentration of Motorcaravan sales in the current-year quarter due to improved chassis supply and fewer other component constraints in the current-year quarter.
The constant-currency increase in the overall net price per unit within the Motorcaravan product line of 1.3% was primarily due to the impact of selling price increases and product mix changes. The constant-currency decreases in the overall net price per unit within the Campervan product line of 7.9% and the Caravan product line of 1.7% are primarily due to product mix changes and increased sales discounting. In addition, the current-year quarter included a higher concentration of Campervan units with a customer-supplied chassis that is not included in the unit sales price as opposed to a purchased chassis that is included in the unit sales price.
37
European Recreational Vehicle cost of products sold increased $107,461 to $662,969, or 84.7% of European Recreational Vehicle net sales, for the three months ended January 31, 2024 compared to $555,508, or 85.9% of European Recreational Vehicle net sales, for the three months ended January 31, 2023. Changes in material, labor, freight-out and warranty costs comprised $92,861 of the $107,461 increase. Material, labor, freight-out and warranty costs as a combined percentage of European Recreational Vehicle net sales decreased to 73.6% for the three months ended January 31, 2024 compared to 74.8% for the three months ended January 31, 2023, with the decrease primarily due to a decrease in the material cost percentage due to net selling price increases and product mix changes. The labor cost percentage also improved. Total manufacturing overhead increased $14,600 with the increase in net sales but remained constant as a percentage of European Recreational Vehicle net sales at 11.1%.
European Recreational Vehicle gross profit increased $27,895 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 primarily due to the increase in European Recreational Vehicle net sales, and the increase in the gross profit percentage is due to the decrease in the cost of products sold percentage noted above.
European Recreational Vehicle selling, general and administrative expenses increased $4,282 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 primarily due to the increase in sales-related travel, advertising and promotional costs of $2,019 in correlation with the increase in European Recreational Vehicle net sales. The decrease in the overall selling, general and administrative expense as a percentage of European Recreational Vehicle net sales is primarily due to the increase in European Recreational Vehicle net sales noted above.
The increase in European Recreational Vehicle income before income taxes of $26,042 for the three months ended January 31, 2024 compared to the three months ended January 31, 2023 was primarily due to the increase in European Recreational Vehicle net sales. The primary reasons for the increase in percentage were the decreases in both the cost of products sold and selling, general and administrative expense percentages noted above. Amortization expense was also 0.4% lower as a percentage of sales primarily due to the increase in European Recreational Vehicle net sales.
38
Six Months Ended January 31, 2024 Compared to the Six Months Ended January 31, 2023
| NET SALES: | Six Months Ended January 31, 2024 | Six Months Ended January 31, 2023 | Change Amount | % Change | |||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 1,676,422 | $ | 2,147,557 | $ | (471,135) | (21.9) | ||||||||||||||||||||||||||||
| North American Motorized | 1,281,583 | 1,862,102 | (580,519) | (31.2) | |||||||||||||||||||||||||||||||
| Total North America | 2,958,005 | 4,009,659 | (1,051,654) | (26.2) | |||||||||||||||||||||||||||||||
| European | 1,490,495 | 1,151,240 | 339,255 | 29.5 | |||||||||||||||||||||||||||||||
| Total recreational vehicles | 4,448,500 | 5,160,899 | (712,399) | (13.8) | |||||||||||||||||||||||||||||||
| Other | 365,455 | 397,507 | (32,052) | (8.1) | |||||||||||||||||||||||||||||||
| Intercompany eliminations | (105,827) | (103,687) | (2,140) | (2.1) | |||||||||||||||||||||||||||||||
| Total | $ | 4,708,128 | $ | 5,454,719 | $ | (746,591) | (13.7) | ||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | 50,065 | 52,225 | (2,160) | (4.1) | |||||||||||||||||||||||||||||||
| North American Motorized | 10,020 | 13,588 | (3,568) | (26.3) | |||||||||||||||||||||||||||||||
| Total North America | 60,085 | 65,813 | (5,728) | (8.7) | |||||||||||||||||||||||||||||||
| European | 24,972 | 22,538 | 2,434 | 10.8 | |||||||||||||||||||||||||||||||
| Total | 85,057 | 88,351 | (3,294) | (3.7) | |||||||||||||||||||||||||||||||
| GROSS PROFIT: | % of Segment Net Sales | % of Segment Net Sales | Change Amount | % Change | |||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 171,908 | 10.3 | $ | 248,729 | 11.6 | $ | (76,821) | (30.9) | ||||||||||||||||||||||||||
| North American Motorized | 140,113 | 10.9 | 292,947 | 15.7 | (152,834) | (52.2) | |||||||||||||||||||||||||||||
| Total North America | 312,021 | 10.5 | 541,676 | 13.5 | (229,655) | (42.4) | |||||||||||||||||||||||||||||
| European | 242,153 | 16.2 | 160,295 | 13.9 | 81,858 | 51.1 | |||||||||||||||||||||||||||||
| Total recreational vehicles | 554,174 | 12.5 | 701,971 | 13.6 | (147,797) | (21.1) | |||||||||||||||||||||||||||||
| Other, net | 74,605 | 20.4 | 67,440 | 17.0 | 7,165 | 10.6 | |||||||||||||||||||||||||||||
| Total | $ | 628,779 | 13.4 | $ | 769,411 | 14.1 | $ | (140,632) | (18.3) | ||||||||||||||||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: | |||||||||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 119,822 | 7.1 | $ | 132,001 | 6.1 | $ | (12,179) | (9.2) | ||||||||||||||||||||||||||
| North American Motorized | 69,267 | 5.4 | 100,595 | 5.4 | (31,328) | (31.1) | |||||||||||||||||||||||||||||
| Total North America | 189,089 | 6.4 | 232,596 | 5.8 | (43,507) | (18.7) | |||||||||||||||||||||||||||||
| European | 148,952 | 10.0 | 127,877 | 11.1 | 21,075 | 16.5 | |||||||||||||||||||||||||||||
| Total recreational vehicles | 338,041 | 7.6 | 360,473 | 7.0 | (22,432) | (6.2) | |||||||||||||||||||||||||||||
| Other | 36,818 | 10.1 | 35,375 | 8.9 | 1,443 | 4.1 | |||||||||||||||||||||||||||||
| Corporate | 63,162 | — | 54,519 | — | 8,643 | 15.9 | |||||||||||||||||||||||||||||
| Total | $ | 438,021 | 9.3 | $ | 450,367 | 8.3 | $ | (12,346) | (2.7) | ||||||||||||||||||||||||||
39
| INCOME (LOSS) BEFORE INCOME TAXES: | Six Months Ended January 31, 2024 | % of Segment Net Sales | Six Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | |||||||||||||||||||||||||||||
| Recreational vehicles | |||||||||||||||||||||||||||||||||||
| North American Towable | $ | 49,910 | 3.0 | $ | 103,888 | 4.8 | $ | (53,978) | (52.0) | ||||||||||||||||||||||||||
| North American Motorized | 63,512 | 5.0 | 185,977 | 10.0 | (122,465) | (65.8) | |||||||||||||||||||||||||||||
| Total North America | 113,422 | 3.8 | 289,865 | 7.2 | (176,443) | (60.9) | |||||||||||||||||||||||||||||
| European | 66,824 | 4.5 | 5,547 | 0.5 | 61,277 | 1,104.7 | |||||||||||||||||||||||||||||
| Total recreational vehicles | 180,246 | 4.1 | 295,412 | 5.7 | (115,166) | (39.0) | |||||||||||||||||||||||||||||
| Other, net | 16,819 | 4.6 | 13,034 | 3.3 | 3,785 | 29.0 | |||||||||||||||||||||||||||||
| Corporate | (117,589) | — | (96,457) | — | (21,132) | (21.9) | |||||||||||||||||||||||||||||
| Total | $ | 79,476 | 1.7 | $ | 211,989 | 3.9 | $ | (132,513) | (62.5) | ||||||||||||||||||||||||||
CONSOLIDATED
Consolidated net sales for the six months ended January 31, 2024 decreased $746,591, or 13.7%, compared to the six months ended January 31, 2023. The decrease in consolidated net sales is primarily due to lower current dealer and consumer demand in comparison to demand in the prior-year period, primarily in the North American Towable and Motorized segments. Approximately 31.7% of the Company’s net sales for the six months ended January 31, 2024 were transacted in a currency other than the U.S. dollar. The Company’s most material exchange rate exposure is sales in Euros. The decrease in consolidated net sales includes an increase of $77,163 from the change in currency exchange rates between the two periods. To determine this impact, net sales transacted in currencies other than U.S. dollars have been translated to U.S. dollars using the average exchange rates that were in effect during the comparative periods.
Consolidated gross profit for the six months ended January 31, 2024 decreased $140,632 compared to the six months ended January 31, 2023. Consolidated gross profit was 13.4% of consolidated net sales for the six months ended January 31, 2024 and 14.1% for the six months ended January 31, 2023. The decreases in consolidated gross profit and the consolidated gross profit percentage were both primarily due to the impact of the decrease in consolidated net sales in the current-year period compared to the prior-year period.
Selling, general and administrative expenses for the six months ended January 31, 2024 decreased $12,346, or 2.7%, compared to the six months ended January 31, 2023, primarily due to the 13.7% decrease in consolidated net sales and a decrease in net costs related to the ongoing investigation of the Company’s advertising practices in Germany and a product recall as discussed in Note 14 to the Condensed Consolidated Financial Statements, partially offset by an increase in third-party fees related to the debt refinancing in the second quarter of fiscal 2024.
The decrease of $132,513, or 62.5%, in income before income taxes for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was primarily driven by the decrease in consolidated net sales noted above.
The overall effective income tax rate for the six months ended January 31, 2024 was 24.0% compared with 23.0% for the six months ended January 31, 2023. The primary reason for the increase relates to the jurisdictional mix of pre-tax income between foreign and domestic operations between the comparable periods.
Additional information concerning the changes in net sales, gross profit, selling, general and administrative expenses and income before income taxes are addressed below and in the segment reporting that follows.
The $8,643 increase in Corporate costs included in selling, general and administrative expenses for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 includes an increase of $9,355 in legal and professional fees, primarily related to third-party fees of $7,175 incurred with the debt refinancing discussed in Note 12 to the Condensed Consolidated Financial Statements. The $8,643 increase also includes an increase in deferred compensation expense of $3,684 due to market value fluctuations between the two periods, an increase in innovation-led research and development costs of $4,167 and an increase in stock-based and other compensation of $5,531. These increases were partially offset by income of $14,200 related to the legal and recall matters discussed in Note 14 to the Condensed Consolidated Financial Statements.
40
The $12,489 increase in net expense in Corporate interest and other income and expense for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 includes a decrease of $8,405 in non-cash foreign currency gains on certain Euro-denominated loans in the current-year period as compared to the prior-year period, and the current-year period included operating losses of $9,437 related to our Roadpass Digital joint venture as discussed in Note 8 to the Condensed Consolidated Financial Statements. These increases in net expense were partially offset by the favorable change of $3,226 in the fair value of the Company's deferred compensation plan assets due to market fluctuations between the two periods, and a decrease in net interest expense of $2,496, in spite of the one-time debt refinancing fees incurred in the second quarter of fiscal 2024, primarily due to increased interest income received from higher average cash balances held and higher interest income rates and lower debt interest expense primarily due to lower average debt balances outstanding.
Segment Reporting
NORTH AMERICAN TOWABLE RECREATIONAL VEHICLES
Analysis of the change in net sales for the six months ended January 31, 2024 compared to the six months ended January 31, 2023:
| Six Months Ended January 31, 2024 | % of Segment Net Sales | Six Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | ||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||||||||||||||
| Travel Trailers | $ | 1,091,021 | 65.1 | $ | 1,350,698 | 62.9 | $ | (259,677) | (19.2) | ||||||||||||||||||||||||||
| Fifth Wheels | 585,401 | 34.9 | 796,859 | 37.1 | (211,458) | (26.5) | |||||||||||||||||||||||||||||
| Total North American Towable | $ | 1,676,422 | 100.0 | $ | 2,147,557 | 100.0 | $ | (471,135) | (21.9) | ||||||||||||||||||||||||||
| Six Months Ended January 31, 2024 | % of Segment Shipments | Six Months Ended January 31, 2023 | % of Segment Shipments | Change Amount | % Change | ||||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||||||||||||||
| Travel Trailers | 40,282 | 80.5 | 40,849 | 78.2 | (567) | (1.4) | |||||||||||||||||||||||||||||
| Fifth Wheels | 9,783 | 19.5 | 11,376 | 21.8 | (1,593) | (14.0) | |||||||||||||||||||||||||||||
| Total North American Towable | 50,065 | 100.0 | 52,225 | 100.0 | (2,160) | (4.1) | |||||||||||||||||||||||||||||
| IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: | % Change | ||||||||||||||||||||||||||||||||||
| North American Towable | |||||||||||||||||||||||||||||||||||
| Travel Trailers | (17.8) | ||||||||||||||||||||||||||||||||||
| Fifth Wheels | (12.5) | ||||||||||||||||||||||||||||||||||
| Total North American Towable | (17.8) | ||||||||||||||||||||||||||||||||||
The decrease in total North American Towable net sales of 21.9% compared to the prior-year period resulted from a 4.1% decrease in unit shipments and a 17.8% decrease in the overall net price per unit due to the combined impact of changes in product mix and price. The decrease in unit shipments is primarily due to a softening in dealer and consumer demand in comparison with demand in the prior-year period. According to statistics published by RVIA, for the six months ended January 31, 2024, combined North American travel trailer and fifth wheel wholesale unit shipments decreased 0.3% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the six-month periods ended December 31, 2023 and 2022, our North American market share for travel trailers and fifth wheels combined was 40.6% and 42.1%, respectively. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.
41
The decreases in the overall net price per unit within the travel trailer product line of 17.8% and the fifth wheel product line of 12.5% were primarily due to the combined impact of sales price reductions due to lower input costs, higher sales discounting levels and product mix changes trending toward more moderately-priced units as compared to the prior-year period.
North American Towable cost of products sold decreased $394,314 to $1,504,514, or 89.7% of North American Towable net sales, for the six months ended January 31, 2024 compared to $1,898,828, or 88.4% of North American Towable net sales, for the six months ended January 31, 2023. Changes in material, labor, freight-out and warranty costs comprised $376,989 of the $394,314 decrease in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American Towable net sales increased slightly to 80.9% for the six months ended January 31, 2024 compared to 80.7% for the six months ended January 31, 2023, as modest increases in the labor and warranty percentages were mostly offset by a decrease in the material cost percentage. Total manufacturing overhead decreased $17,325 in correlation with the decrease in sales but increased as a percentage of North American Towable net sales from 7.7% to 8.8%, as the decreased net sales levels resulted in higher overhead costs per unit sold.
The decrease of $76,821 in North American Towable gross profit for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was driven by the decrease in net sales and the decrease in the gross profit percentage is due to the increase in the cost of products sold percentage noted above.
The decrease of $12,179 in North American Towable selling, general and administrative expenses for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 includes the impact of the decrease in North American Towable net sales and income before income taxes, which caused related commissions, incentive and other compensation to decrease by $17,038. These decreases were partially offset by an increase of $8,006 in professional fees and related settlement and RV repurchase costs. The increase in the overall selling, general and administrative expense as a percentage of North American Towable net sales is primarily due to the decrease in net sales.
The decrease of $53,978 in North American Towable income before income taxes for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was primarily due to the decrease in North American Towable net sales, and the primary reasons for the decrease in percentage were the increases in the cost of products sold and selling, general and administrative expense percentages noted above.
42
NORTH AMERICAN MOTORIZED RECREATIONAL VEHICLES
Analysis of the change in net sales for the six months ended January 31, 2024 compared to the six months ended January 31, 2023:
| Six Months Ended January 31, 2024 | % of Segment Net Sales | Six Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | ||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||||||||||||||
| Class A | $ | 386,219 | 30.1 | $ | 648,706 | 34.8 | $ | (262,487) | (40.5) | ||||||||||||||||||||||||||
| Class C | 609,408 | 47.6 | 825,698 | 44.3 | (216,290) | (26.2) | |||||||||||||||||||||||||||||
| Class B | 285,956 | 22.3 | 387,698 | 20.9 | (101,742) | (26.2) | |||||||||||||||||||||||||||||
| Total North American Motorized | $ | 1,281,583 | 100.0 | $ | 1,862,102 | 100.0 | $ | (580,519) | (31.2) | ||||||||||||||||||||||||||
| Six Months Ended January 31, 2024 | % of Segment Shipments | Six Months Ended January 31, 2023 | % of Segment Shipments | Change Amount | % Change | ||||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||||||||||||||
| Class A | 1,955 | 19.5 | 3,120 | 23.0 | (1,165) | (37.3) | |||||||||||||||||||||||||||||
| Class C | 5,584 | 55.7 | 7,281 | 53.6 | (1,697) | (23.3) | |||||||||||||||||||||||||||||
| Class B | 2,481 | 24.8 | 3,187 | 23.4 | (706) | (22.2) | |||||||||||||||||||||||||||||
| Total North American Motorized | 10,020 | 100.0 | 13,588 | 100.0 | (3,568) | (26.3) | |||||||||||||||||||||||||||||
| IMPACT OF CHANGE IN PRODUCT MIX AND PRICE ON NET SALES: | % Change | ||||||||||||||||||||||||||||||||||
| North American Motorized | |||||||||||||||||||||||||||||||||||
| Class A | (3.2) | ||||||||||||||||||||||||||||||||||
| Class C | (2.9) | ||||||||||||||||||||||||||||||||||
| Class B | (4.0) | ||||||||||||||||||||||||||||||||||
| Total North American Motorized | (4.9) | ||||||||||||||||||||||||||||||||||
The decrease in total North American Motorized net sales of 31.2% compared to the prior-year period resulted from a 26.3% decrease in unit shipments and a 4.9% decrease in the overall net price per unit due to the combined impact of changes in product mix and price, which included elevated sales discounts compared to the prior-year period. The decrease in unit shipments is primarily due to a softening in current dealer and consumer demand in comparison with the demand in the prior-year period, which included independent dealer restocking of certain motorized products. According to statistics published by RVIA, for the six months ended January 31, 2024, combined North American motorhome wholesale unit shipments decreased 25.7% compared to the same period last year. According to statistics published by Stat Surveys, for the six-month periods ended December 31, 2023 and 2022, our North American market share for motorhomes was 48.3% and 47.2%, respectively. Comparisons of Company shipments to industry shipments on a quarterly basis would not necessarily be indicative of the results expected for a full fiscal year.
The decreases in the overall net price per unit within the Class A product line of 3.2%, the Class C product line of 2.9% and the Class B product line of 4.0% were all primarily due to higher discounting levels since the prior-year period and consumers trending toward more moderately-priced units compared to the prior-year period.
43
North American Motorized cost of products sold decreased $427,685 to $1,141,470, or 89.1% of North American Motorized net sales, for the six months ended January 31, 2024 compared to $1,569,155, or 84.3% of North American Motorized net sales, for the six months ended January 31, 2023. Changes in material, labor, freight-out and warranty costs comprised $406,092 of the $427,685 decrease. Material, labor, freight-out and warranty costs as a combined percentage of North American Motorized net sales increased to 82.8% for the six months ended January 31, 2024 compared to 78.8% for the six months ended January 31, 2023, with the increase due to an increase in the material cost percentage, primarily due to higher sales discounting, which effectively decreases net selling prices and correspondingly increases the material cost percentage, as well as increased chassis costs. Total manufacturing overhead decreased $21,593 with the decrease in net sales but increased as a percentage of North American Motorized net sales from 5.5% to 6.3% as the decrease in net sales levels resulted in higher overhead costs per unit sold.
The decrease of $152,834 in North American Motorized gross profit for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was driven by the decrease in net sales, while the decrease in the gross profit percentage is due to the increase in the cost of products sold percentage noted above.
The decrease of $31,328 in North American Motorized selling, general and administrative expenses for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 is primarily due to the decreases in North American Motorized net sales and income before income taxes, which caused related commissions, incentive and other compensation to decrease by $30,763.
The decrease of $122,465 in North American Motorized income before income taxes for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was primarily due to the decrease in North American Motorized net sales, and the primary reason for the decrease in percentage was the increase in the cost of products sold percentage noted above.
44
EUROPEAN RECREATIONAL VEHICLES
Analysis of the change in net sales for the six months ended January 31, 2024 compared to the six months ended January 31, 2023:
| Six Months Ended January 31, 2024 | % of Segment Net Sales | Six Months Ended January 31, 2023 | % of Segment Net Sales | Change Amount | % Change | ||||||||||||||||||||||||||||||
| NET SALES: | |||||||||||||||||||||||||||||||||||
| European | |||||||||||||||||||||||||||||||||||
| Motorcaravan | $ | 771,324 | 51.7 | $ | 507,567 | 44.1 | $ | 263,757 | 52.0 | ||||||||||||||||||||||||||
| Campervan | 466,333 | 31.3 | 366,302 | 31.8 | 100,031 | 27.3 | |||||||||||||||||||||||||||||
| Caravan | 115,714 | 7.8 | 156,109 | 13.6 | (40,395) | (25.9) | |||||||||||||||||||||||||||||
| Other | 137,124 | 9.2 | 121,262 | 10.5 | 15,862 | 13.1 | |||||||||||||||||||||||||||||
| Total European | $ | 1,490,495 | 100.0 | $ | 1,151,240 | 100.0 | $ | 339,255 | 29.5 | ||||||||||||||||||||||||||
| Six Months Ended January 31, 2024 | % of Segment Shipments | Six Months Ended January 31, 2023 | % of Segment Shipments | Change Amount | % Change | ||||||||||||||||||||||||||||||
| # OF UNITS: | |||||||||||||||||||||||||||||||||||
| European | |||||||||||||||||||||||||||||||||||
| Motorcaravan | 10,113 | 40.5 | 7,184 | 31.9 | 2,929 | 40.8 | |||||||||||||||||||||||||||||
| Campervan | 10,122 | 40.5 | 8,159 | 36.2 | 1,963 | 24.1 | |||||||||||||||||||||||||||||
| Caravan | 4,737 | 19.0 | 7,195 | 31.9 | (2,458) | (34.2) | |||||||||||||||||||||||||||||
| Total European | 24,972 | 100.0 | 22,538 | 100.0 | 2,434 | 10.8 | |||||||||||||||||||||||||||||
| IMPACT OF CHANGES IN FOREIGN CURRENCY, PRODUCT MIX AND PRICE ON NET SALES: | ||||||||||||||||||||
| Foreign Currency % | Mix and Price % | % Change | ||||||||||||||||||
| European | ||||||||||||||||||||
| Motorcaravan | 6.7 | 4.5 | 11.2 | |||||||||||||||||
| Campervan | 6.7 | (3.5) | 3.2 | |||||||||||||||||
| Caravan | 6.7 | 1.6 | 8.3 | |||||||||||||||||
| Total European | 6.7 | 12.0 | 18.7 | |||||||||||||||||
The increase in total European Recreational Vehicle net sales of 29.5% compared to the prior-year period resulted from increases of 10.8% in unit shipments and 18.7% in the overall net price per unit due to the total combined impact of changes in foreign currency, product mix and price. The increase in European Recreational Vehicle net sales of $339,255 includes an increase of $77,163, or 6.7% of the 29.5% increase, due to the increase in foreign exchange rates since the prior-year period. Sales on a constant-currency basis increased by 22.8%.
The overall net price per unit increase of 18.7% includes increases of 6.7% due to the impact of foreign currency exchange rate changes and 12.0% due to the combined impact of product mix and selling price increases, primarily due to the much higher concentration of Motorcaravan sales in the current-year period due primarily to improved supply of chassis and other components in the current-year period compared to the prior-year period.
The constant-currency increases in the overall net price per unit within the Motorcaravan product line of 4.5% and the Caravan product line of 1.6% were primarily due to the impact of selling price increases and product mix changes. The constant-currency decrease in the overall net price per unit within the Campervan product line of 3.5% was primarily due to the impact of product mix changes.
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European Recreational Vehicle cost of products sold increased $257,397 to $1,248,342, or 83.8% of European Recreational Vehicle net sales, for the six months ended January 31, 2024 compared to $990,945, or 86.1% of European Recreational Vehicle net sales, for the six months ended January 31, 2023. Changes in material, labor, freight-out and warranty costs comprised $222,851 of the $257,397 increase. Material, labor, freight-out and warranty costs as a combined percentage of European Recreational Vehicle net sales decreased to 72.6% for the six months ended January 31, 2024 compared to 74.6% for the six months ended January 31, 2023, with the decrease primarily due to a decrease in the material cost percentage due to net selling price increases and product mix changes. The labor cost percentage also improved. Total manufacturing overhead increased with the increase in European Recreational Vehicle net sales but decreased as a percentage of European Recreational Vehicle net sales from 11.5% to 11.2% primarily due to the increase in net sales resulting in decreased overhead costs per unit sold.
The increase of $81,858 in European Recreational Vehicle gross profit for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was primarily due to the increase in European Recreational Vehicle net sales and the decrease in the cost of products sold percentage noted above.
The increase of $21,075 in European Recreational Vehicle selling, general and administrative expenses for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was primarily due to the increase in European Recreational Vehicle net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $7,381. Sales-related travel, advertising and promotional costs also increased $8,927, primarily due to increased display space at the annual Dusseldorf show and attending more regional shows in comparison to the prior-year period.
The increase of $61,277 in European Recreational Vehicle income before income taxes for the six months ended January 31, 2024 compared to the six months ended January 31, 2023 was primarily due to the increase in European Recreational Vehicle net sales. The primary reasons for the increase in percentage were the decreases in both the cost of products sold and selling, general and administrative expense percentages noted above. Amortization expense was also 0.6% lower as a percentage of sales in the current year compared to the prior-year period.
Liquidity and Capital Resources
As of January 31, 2024, we had $340,192 in cash and cash equivalents, of which $257,635 was held in the U.S. and the equivalent of $82,557, predominantly in Euros, was held in Europe, compared to $441,232 on July 31, 2023, of which $338,703 was held in the U.S. and the equivalent of $102,529, predominantly in Euros, was held in Europe. Cash and cash equivalents held internationally may be subject to foreign withholding taxes if repatriated to the U.S. The components of the $101,040 decrease in cash and cash equivalents are described in more detail below, but the decrease was primarily attributable to cash used in operations of $44,200 and cash used in investing activities of $80,943, partially offset by cash provided by financing activities of $26,754.
Net working capital at January 31, 2024 was $1,212,801 compared to $1,077,098 at July 31, 2023. Capital expenditures of $78,901 for the six months ended January 31, 2024 were made primarily for production building additions and improvements and replacing machinery and equipment used in the ordinary course of business.
We strive to maintain adequate cash balances to ensure we have sufficient resources to respond to opportunities and changing business conditions. In addition, the unused availability under our revolving asset-based credit facility is generally available to the Company for general operating purposes and approximated $938,000 at January 31, 2024. We believe our on-hand cash and cash equivalents and funds generated from operations, along with funds available under the revolving asset-based credit facility, will be sufficient to fund expected operational requirements for the foreseeable future.
Our priorities for the use of current and future available cash generated from operations remain consistent with our history, and include reducing our indebtedness, maintaining and, over time, growing our dividend payments and funding our growth, both organically and, opportunistically, through acquisitions. We may also consider strategic and opportunistic repurchases of shares of THOR stock under the share repurchase authorizations as discussed in Note 16 to the Condensed Consolidated Financial Statements, and special dividends based upon market and business conditions and excess cash availability, subject to potential customary limits and restrictions pursuant to our credit facilities, applicable legal limitations and determination by the Company's Board of Directors ("Board"). We believe our on-hand cash and cash equivalents and funds generated from operations will be sufficient to fund expected cash dividend payments and share repurchases for the foreseeable future.
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Our current estimate of committed and internally approved capital spend for the remainder of fiscal 2024 is $100,000, primarily for certain building projects and certain automation projects, as well as replacing and upgrading machinery, equipment and other assets throughout our facilities to be used in the ordinary course of business. We anticipate that these expenditures will be funded by cash provided by our operating activities.
The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under credit facilities, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain conditions prior to payment. The conditions for the payment of dividends under the existing debt facilities include a minimum level of adjusted excess cash availability and a fixed charge coverage ratio test, both as defined in the credit agreements. The declaration of future dividends and the establishment of the per share amounts, record dates and payment dates for any such future dividends are subject to the determination of the Board, and will be dependent upon future earnings, cash flows and other factors, in addition to compliance with any then-existing financing facilities.
Operating Activities
Net cash used in operating activities for the six months ended January 31, 2024 was $44,200 as compared to net cash provided by operating activities of $185,321 for the six months ended January 31, 2023.
For the six months ended January 31, 2024, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles and stock-based compensation) provided $207,653 of operating cash. The change in net working capital resulted in a net use of $251,853 of operating cash during that period, primarily due to an increase in chassis inventory as European chassis suppliers continue to get caught up delivering their order backlog, and RV finished goods had a seasonal increase heading into the spring selling season. In addition, required income tax payments during the period exceeded the income tax provision for the period, and certain accrued liabilities decreased with the reduction in sales and production when compared to the prior-year end period.
For the six months ended January 31, 2023, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles and stock-based compensation) provided $314,016 of operating cash. The change in working capital resulted in the use of $128,695 of operating cash during that period, primarily due to an increase in chassis inventory to support the motorized sales and production and as North American chassis suppliers got caught up delivering their order backlog, as the cash impact of the reductions in accounts receivable, accounts payable and accrued liabilities due to the net sales and production decreases mostly offset each other.
Investing Activities
Net cash used in investing activities for the six months ended January 31, 2024 was $80,943, primarily due to capital expenditures of $78,901.
Net cash used in investing activities for the six months ended January 31, 2023 was $113,748, primarily due to capital expenditures of $100,985.
Financing Activities
Net cash provided by financing activities for the six months ended January 31, 2024 was $26,754, which included borrowings of $113,502 on the asset-based credit facility for temporary working capital needs and payments of $51,925 on the asset-based credit facility. In addition, borrowings of $186,723 and payments of $127,626 were made on the term-loan credit facilities in connection with the debt refinancing as discussed in Note 12 to the Condensed Consolidated Financial Statements. Treasury share repurchases of $30,037 were made and regular quarterly dividend payments of $0.48 per share for each of the first two quarters of fiscal 2024 were also made totaling $51,135.
Net cash used in financing activities for the six months ended January 31, 2023 was $101,742, including payments of $15,000 on the asset-based credit facility and $12,355 on the term-loan credit facilities, in addition to treasury share repurchases of $25,407. Regular quarterly dividend payments of $0.45 per share for each of the first two quarters of fiscal 2023 were also made totaling $48,165.
The Company increased its previous regular quarterly dividend of $0.45 per share to $0.48 per share in October 2023. In October 2022, the Company increased its previous regular quarterly dividend of $0.43 per share to $0.45 per share.
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Accounting Standards
See Note 1 in the Notes to the Condensed Consolidated Financial Statements included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 and the notes to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended July 31, 2023. There have been no material changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended July 31, 2023.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates. At times, the Company enters into hedging transactions to mitigate certain of these risks in accordance with guidelines established by the Company’s management. The Company does not use financial instruments for trading or speculative purposes.
CURRENCY EXCHANGE RISK – The Company’s principal currency exposures mainly relate to the Euro and British Pound Sterling. The Company periodically uses foreign currency forward contracts to manage certain foreign exchange rate exposure related to anticipated sales transactions in Pounds Sterling with financial instruments whose maturity date, along with the realized gain or loss, occurs on or near the execution of the anticipated transaction.
The Company also holds $479,786 of debt denominated in Euros at January 31, 2024. A hypothetical 10% change in the Euro/U.S. Dollar exchange rate would change our January 31, 2024 debt balance by approximately $47,978.
INTEREST RATE RISK – Based on our assumption of the Company’s floating-rate debt levels over the next 12 months, a one-percentage-point increase in interest rates (approximately 13.2% of our weighted-average interest rate at January 31, 2024) would result in an estimated $8,776 reduction in income before income taxes over a one-year period.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at attaining the level of reasonable assurance noted above.
During the quarter ended January 31, 2024, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
The Company’s Insider Trading Policy permits its directors and officers to trade Company stock under a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K) that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act, subject to compliance with applicable regulations as well as the Company’s Insider Trading Policy and share ownership requirements. The Insider Trading Policy provides that each officer or director Rule 10b5-1 trading arrangement must be entered into in writing during an open trading window and at a time that the officer or director is not aware of material nonpublic information. The Company generally requires that any Rule 10b5-1 trading arrangement adopted by an officer or director must not expire within one year of implementation and is subject to a mandatory cooling-off period requirement.
On January 16, 2024 , our Chief Financial Officer , Colleen Zuhl , adopted a Rule 10b5-1 trading arrangement (providing for the sale of up to 9,728 shares of Company common stock) that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. Mrs. Zuhl’s Rule 10b5-1 trading arrangement provides for a mandatory cooling-off period as required by Rule 10b5-1 and is scheduled to expire on January 16, 2025 or such earlier date as of which all of the shares covered by the arrangement have been sold. As of January 31, 2024, Mrs. Zuhl held 118,028 shares of Company common stock not subject to trading under her Rule 10b5-1 trading arrangement.
Except as described above, no director or officer of the Company adopted or terminated
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in certain litigation arising out of its operations in the normal course of its business, most of which is based upon state “lemon laws,” warranty claims and vehicle accidents (for which the Company carries insurance above a specified self-insured retention or deductible amount). The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. There is significant judgment required in assessing both the probability of an adverse outcome and the determination as to whether an exposure can be reasonably estimated. In management’s opinion, the ultimate disposition of any current legal proceedings or claims against the Company will not have a material effect on the Company’s financial condition, operating results or cash flows. Litigation is, however, inherently uncertain and an adverse outcome from such litigation could have a material effect on the operating results of a particular reporting period.
ITEM 1A. RISK FACTORS
Although risks specific to the supply chain disruptions are ongoing, and macroeconomic issues like general inflation, as well as certain geopolitical events, including military conflicts, remain, at this point there have been no material changes in those risks or any others from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 31, 2023.
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ITEM 6. EXHIBITS
| Exhibit | Description | ||||
| 3.1 | |||||
| 3.2 | |||||
| 10.1 | |||||
| 10.2 | |||||
| 10.3 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 32.2 | |||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document | ||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | ||||
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | ||||
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101) | ||||
Attached as Exhibits 101 to this report are the following financial statements from the Company's Quarterly report on Form 10-Q for the quarter ended January 31, 2024 formatted in XBRL (“eXtensible Business Reporting Language”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income and Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Changes in Stockholders' Equity and (v) related notes to these financial statements.
| + | Designates management contract or compensatory plan or arrangement | ||||
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SIGNATURES
Pursuant to the requirements 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.
(Registrant)
| DATE: | March 6, 2024 | /s/ Robert W. Martin | ||||||
| Robert W. Martin | ||||||||
| President and Chief Executive Officer | ||||||||
| DATE: | March 6, 2024 | /s/ Colleen Zuhl | ||||||
| Colleen Zuhl | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||