Thor Industries(THO) - 2020 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The financial statements show a slight asset decrease to $5.61 billion and mixed sales results impacted by COVID-19 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 30, 2020 | July 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $2,088,778 | $2,037,357 | | Total Assets | $5,612,290 | $5,660,446 | | Total Current Liabilities | $1,266,270 | $1,448,325 | | Total Long-Term Debt | $1,965,981 | $1,885,253 | | Total Liabilities | $3,500,778 | $3,565,218 | | Total Stockholders' Equity | $2,111,512 | $2,095,228 | Condensed Consolidated Statements of Income Highlights (in thousands, except EPS) | Metric | Three Months Ended April 30, 2020 | Three Months Ended April 30, 2019 | Nine Months Ended April 30, 2020 | Nine Months Ended April 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,681,735 | $2,506,583 | $5,843,653 | $5,553,135 | | Gross Profit | $205,633 | $292,430 | $770,850 | $641,282 | | Net Income | $22,784 | $31,438 | $101,655 | $39,974 | | Diluted EPS | $0.43 | $0.59 | $1.88 | $0.77 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Category | Nine Months Ended April 30, 2020 | Nine Months Ended April 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $237,269 | $175,802 | | Net cash used in investing activities | $(55,687) | $(1,817,072) | | Net cash provided by financing activities | $24,993 | $1,855,544 | | Net increase in cash | $203,703 | $211,664 | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, acquisitions like Togo Group, and segment performance under COVID-19 impacts - On March 23, 2020, the Company acquired a 73.5% controlling interest in Togo Group, a digital application platform for the RV industry, by increasing its stake from a 50/50 joint venture[31][32] - A single dealer, FreedomRoads, LLC, represents a significant concentration of credit risk, accounting for 15% of consolidated net sales for the nine months ended April 30, 2020[57] Revenue by Segment (in thousands) | Segment | Nine Months Ended April 30, 2020 | Nine Months Ended April 30, 2019 | | :--- | :--- | :--- | | North American Towables | $2,958,186 | $3,397,917 | | North American Motorized | $1,023,606 | $1,261,931 | | European | $1,745,465 | $767,509 | Income (Loss) Before Income Taxes by Segment (in thousands) | Segment | Nine Months Ended April 30, 2020 | Nine Months Ended April 30, 2019 | | :--- | :--- | :--- | | North American Towables | $207,009 | $212,325 | | North American Motorized | $47,606 | $64,102 | | European | $(18,576) | $(30,947) | Management's Discussion and Analysis (MD&A) Management discusses COVID-19's impact on operations, a Q3 sales drop, and proactive liquidity measures Impact of COVID-19 The pandemic prompted temporary production suspensions and cost-reduction measures across North American and European facilities - In March 2020, the company temporarily suspended production at all North American RV facilities and a substantial portion of its European RV production facilities due to the COVID-19 pandemic[103] - To mitigate the financial impact of the pandemic, the company furloughed team members, implemented temporary reductions in cash compensation, and significantly reduced discretionary and capital spending[104] Results of Operations Q3 sales fell 32.9% due to shutdowns, but nine-month sales grew 5.2% driven by the EHG acquisition - For the nine months ended April 30, 2020, consolidated net sales increased by 5.2% to $5.84 billion, driven by an incremental $978.0 million in sales from the European segment[168][172] Net Sales Change by Segment (Three Months Ended April 30, 2020 vs 2019) | Segment | Net Sales Change (%) | | :--- | :--- | | North American Towables | -37.5% | | North American Motorized | -42.5% | | European | -19.8% | | Total Consolidated | -32.9% | Income (Loss) Before Income Taxes Change by Segment (Three Months Ended April 30, 2020 vs 2019, in thousands) | Segment | Q3 FY20 | Q3 FY19 | Change | | :--- | :--- | :--- | :--- | | North American Towables | $49,261 | $103,715 | $(54,454) | | North American Motorized | $10,915 | $25,185 | $(14,270) | | European | $(242) | $(30,947) | $30,705 | Financial Condition and Liquidity The company maintained strong liquidity with $651.5 million in cash and proactively borrowed from its ABL facility - Cash and cash equivalents increased to $651.5 million at April 30, 2020, from $425.6 million at July 31, 2019[197] - As a precautionary measure during the COVID-19 uncertainty, the company borrowed $250 million under its ABL Credit Agreement on March 23, 2020[200] - Subsequent to the quarter end, the company made principal payments of $250 million and 30 million Euro to pay off the majority of the ABL facility balance[203] PART II – OTHER INFORMATION Risk Factors The COVID-19 pandemic is identified as a new material risk factor affecting operations, supply chains, and financials - The COVID-19 pandemic and related government mandates are identified as a new material risk, having caused significant negative impacts in Q3 FY2020 through production shutdowns[223][224] - Key ongoing risks from the pandemic include potential supply chain disruptions, labor force impacts, and potential impairment of tangible and intangible assets, including goodwill[225] - The geographic concentration of the North American RV industry and its suppliers in northern Indiana is highlighted as a specific risk that could exacerbate supply chain issues[225] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency exchange rates, primarily the Euro, and interest rates - The company's main currency exposures relate to the Euro and British Pound Sterling, holding $826.6 million of Euro-denominated debt[215][216] - The company is exposed to interest rate risk on its floating-rate debt; a one-percentage-point increase in interest rates would reduce pre-tax net earnings by an estimated $12.7 million over one year[218]