Thor Industries(THO) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements for April 30, 2023, show decreased net sales and net income, with total assets slightly up and liabilities down Condensed Consolidated Balance Sheet Highlights (in millions) | Account | April 30, 2023 | July 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $3,084.8 | $3,062.5 | | Total Assets | $7,554.0 | $7,408.1 | | Total Current Liabilities | $1,720.5 | $1,755.9 | | Total Liabilities | $3,655.7 | $3,807.5 | | Total Stockholders' Equity | $3,898.3 | $3,600.7 | Condensed Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | Nine Months Ended April 30, 2023 | Nine Months Ended April 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,928.8 | $4,657.5 | $8,383.5 | $12,490.8 | | Gross Profit | $432.6 | $807.4 | $1,202.0 | $2,138.1 | | Net Income | $119.7 | $346.0 | $283.0 | $856.5 | | Diluted EPS | $2.24 | $6.32 | $5.27 | $15.44 | Condensed Consolidated Cash Flow Highlights (Nine Months Ended, in millions) | Cash Flow Activity | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $474.1 | $637.5 | | Net cash used in investing activities | ($171.6) | ($971.8) | | Net cash provided by (used in) financing activities | ($266.1) | $250.5 | | Net increase (decrease) in cash | $41.7 | ($116.7) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Declining North American demand due to macroeconomic factors led to reduced financial performance, while the European segment saw sales growth and improved income Executive Overview and Industry Outlook Near-term RV industry slowdown in North America due to inflation and high interest rates contrasts with European backlog growth despite chassis constraints - North American RV backlog as of April 30, 2023, decreased by 81.6% year-over-year to $2.02 billion, primarily due to reduced dealer orders as they manage higher-than-desired inventory levels[102] - European RV backlog as of April 30, 2023, increased by 20.7% year-over-year to $3.47 billion, primarily due to increased selling prices[117] North American Industry Wholesale vs. Retail (Q1 CY2023 vs Q1 CY2022) | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Wholesale Unit Shipments | 78,600 | 171,466 | (54.2)% | | Retail Unit Registrations | 81,881 | 110,304 | (25.8)% | - European operations continue to face significant chassis supply constraints from suppliers due to component shortages (e.g., semiconductor chips), which are expected to negatively impact production through calendar year 2023[126] Results of Operations - Three Months Ended April 30, 2023 vs 2022 Q3 fiscal 2023 saw consolidated net sales drop 37.1% and income before taxes fall 66.4%, primarily due to North American segment declines, offset by European growth Net Sales by Segment (Three Months Ended April 30, in millions) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | North American Towables | $1,124.4 | $2,640.1 | (57.4)% | | North American Motorized | $795.9 | $1,053.0 | (24.4)% | | European | $866.8 | $724.0 | 19.7% | | Total | $2,928.8 | $4,657.5 | (37.1)% | Income Before Income Taxes by Segment (Three Months Ended April 30, in millions) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | North American Towables | $77.6 | $326.7 | (76.3)% | | North American Motorized | $48.2 | $116.3 | (58.6)% | | European | $72.4 | $20.6 | 252.2% | | Total | $155.5 | $462.4 | (66.4)% | Results of Operations - Nine Months Ended April 30, 2023 vs 2022 Nine-month consolidated net sales decreased 32.9% and income before taxes fell 67.2%, driven by North American segment weakness, while European income significantly improved Net Sales by Segment (Nine Months Ended April 30, in millions) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | North American Towables | $3,272.0 | $6,866.1 | (52.3)% | | North American Motorized | $2,658.0 | $2,954.9 | (10.0)% | | European | $2,018.0 | $2,080.7 | (3.0)% | | Total | $8,383.5 | $12,490.8 | (32.9)% | Income Before Income Taxes by Segment (Nine Months Ended April 30, in millions) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | North American Towables | $181.5 | $868.9 | (79.1)% | | North American Motorized | $234.2 | $309.2 | (24.3)% | | European | $77.9 | $12.2 | 536.4% | | Total | $367.4 | $1,121.5 | (67.2)% | Financial Condition and Liquidity The company maintains strong liquidity with $353.2 million cash and $950.0 million credit, prioritizing debt reduction, dividends, and organic growth - Capital allocation priorities remain debt reduction, maintaining and growing dividends, funding organic growth, and opportunistic acquisitions and share repurchases[206] - Subsequent to the quarter end, the company fully paid off the $50.0 million outstanding balance on its asset-based credit facility and paid an additional $85.0 million against its U.S. term loan[207] Cash Flow Summary (Nine Months Ended April 30, in millions) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash from Operations | $474.1 | $637.5 | | Net Cash used in Investing | ($171.6) | ($971.8) | | Net Cash (used in) from Financing | ($266.1) | $250.5 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from Euro exchange rate fluctuations and interest rate changes, impacting debt and net earnings - The company's primary currency exposure relates to the Euro and British Pound Sterling, holding €557.2 million of Euro-denominated debt as of April 30, 2023[221][222] - A hypothetical 1% increase in interest rates would reduce pre-tax net earnings by an estimated $11.0 million over a one-year period[224] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a level of reasonable assurance[225] - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[226] PART II – OTHER INFORMATION Item 1. Legal Proceedings Routine litigation, including warranty claims, is not expected to materially impact the company's financial condition or operating results - The company faces litigation in the normal course of business, primarily related to state "lemon laws," warranty claims, and vehicle accidents[228] - Management does not expect current legal proceedings to have a material impact on the company's financial condition or results of operations[228] Item 1A. Risk Factors No material changes to previously disclosed risk factors, with ongoing concerns including supply chain disruptions and inflation - No material changes have been identified from the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended July 31, 2022[229] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 210,799 shares for $16.6 million in Q3 fiscal 2023, with $491.2 million remaining for future repurchases Share Repurchases (Three Months Ended April 30, 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Feb 2023 | — | $— | | Mar 2023 | 190,233 | $78.83 | | Apr 2023 | 20,566 | $77.99 | | Total | 210,799 | N/A | - As of April 30, 2023, the total remaining value of shares that may be repurchased under existing authorizations is $491.2 million[230][232]