Thor Industries(THO) - 2023 Q4 - Annual Report

PART I Business Overview THOR Industries, Inc. is the world's largest RV manufacturer, holding leading positions in both North American and European markets General Founded in 1980, THOR Industries, Inc. has grown into the world's largest RV manufacturer, holding leading positions in North America and Europe[11] The company produces various RVs in the U.S. and Europe, primarily selling products and related components through an independent dealer network[11] Acquisitions On September 1, 2021, the company acquired Airxcel to strengthen its RV supply chain, diversify revenue, and expand its supply chain operations in North America and Europe[14] On December 18, 2020, the company acquired Tiffin Group, a luxury motorized RV manufacturer, to complement its existing RV product lines and North American independent dealer base[15] North American Recreational Vehicles THOR is the largest North American RV manufacturer, with market shares of approximately 42.7% in travel trailers and fifth-wheel travel trailers, and 49.0% in motorized RVs by volume and revenue as of June 30, 2023[17][74] North American operations include subsidiaries such as Airstream, Heartland, Jayco, Keystone, KZ, Thor Motor Coach, and Tiffin Group, producing various travel trailers, fifth-wheel travel trailers, and Class A, B, and C motorized RVs[12][17][18][19][20][21][22][24] European Recreational Vehicles Through its Erwin Hymer Group (EHG) subsidiary, THOR is a leading European RV manufacturer, with market shares of approximately 20.6% in motorized RVs and campervans, and 18.5% in travel trailers as of June 30, 2023[25][75] EHG produces multiple brands across eight main European production sites, including motorized RVs, travel trailers, campervans, and urban vehicles, also offering other RV-related products and services[13][26] Other Airxcel manufactures high-quality RV-related components, primarily sold to RV original equipment manufacturers and the aftermarket[27] Postle produces and sells aluminum extrusions and specialized components to RV and other manufacturers[28] Product Line Sales and Segment Information The company has three reporting segments: North American Towable RVs, North American Motorized RVs, and European RVs, with Airxcel and Postle businesses included in "Other"[30][31] Net Sales Contribution by Reporting Segment (FY2021-2023) | Segment | FY2023 Amount ($ thousand) | FY2023 Share (%) | FY2022 Amount ($ thousand) | FY2022 Share (%) | FY2021 Amount ($ thousand) | FY2021 Share (%) | | :--------------------- | :------------------ | :---------------- | :------------------ | :---------------- | :------------------ | :---------------- | | North American Towable RVs | 4,202,628 | 37.8 | 8,661,945 | 53.1 | 6,221,928 | 50.5 | | North American Motorized RVs | 3,314,170 | 29.8 | 3,979,647 | 24.4 | 2,669,391 | 21.7 | | European RVs | 3,037,147 | 27.3 | 2,887,453 | 17.7 | 3,200,079 | 26.0 | | Other | 777,639 | 7.0 | 1,225,824 | 7.5 | 373,174 | 3.0 | | Intercompany Eliminations | (209,979) | (1.9) | (442,344) | (2.7) | (147,192) | (1.2) | | Total | 11,121,605 | 100.0 | 16,312,525 | 100.0 | 12,317,380 | 100.0 | Recreational Vehicles North American RV products include towable travel trailers (conventional and fifth wheel) and motorized RVs (Class A, Class C, Class B)[38][39][40] European RV products include towable travel trailers (caravan) and motorized RVs (motorcaravans, campervans, urban vehicles), with a greater emphasis on lightweight and compact designs[41][42][43][44][45][46][47] Production The company typically produces RVs based on dealer orders to minimize finished goods inventory, employing efficient assembly line manufacturing[48] Key raw materials include chassis, aluminum, wood, plywood, plastics, fiberglass, and steel, with chassis supply dependent on a few vendors, and the supply chain still facing labor disputes and shortages not yet recovered to pre-pandemic levels[49][50][51][52] Seasonality RV sales have historically been seasonal, with lower sales during winter months (second fiscal quarter), though high demand in the first half of FY2021 and FY2022 disrupted this pattern, with a return to seasonality expected in FY2023 and full recovery in FY2024[54] Marketing and Distribution The company primarily sells products through a network of independent dealers in the U.S., Canada, and Europe, with approximately 2,400 dealers in North America and 1,100 in Europe as of July 31, 2023[56] FreedomRoads, LLC, the company's largest dealer, accounted for approximately 13.0% of consolidated net sales in fiscal years 2023, 2022, and 2021[61] The company generally does not directly finance dealers but enters into repurchase agreements with lending institutions to repurchase vehicles in case of dealer default, totaling $3,893,048 thousand in repurchase obligations as of July 31, 2023[62] Backlog Backlog Changes (FY2022-2023) | Segment | July 31, 2023 ($ thousand) | July 31, 2022 ($ thousand) | Change in Amount ($ thousand) | Percentage Change (%) | | :--------------------- | :------------------ | :------------------ | :-------------- | :-------------- | | North American Towable | 756,047 | 2,571,009 | (1,814,962) | (70.6) | | North American Motorized | 1,242,936 | 3,436,629 | (2,193,693) | (63.8) | | North American Total | 1,998,983 | 6,007,638 | (4,008,655) | (66.7) | | European | 3,549,660 | 2,753,602 | 796,058 | 28.9 | | Total | 5,548,643 | 8,761,240 | (3,212,597) | (36.7) | North American backlog significantly decreased, primarily due to reduced dealer orders driven by slower retail sales and increased inventory holding costs, while European backlog increased mainly due to higher selling prices[64][65] The existing backlog is expected to be fulfilled during the remainder of calendar year 2023 and throughout calendar year 2024[66] Product Warranties North American RV products typically offer one to two-year limited warranties, with longer terms for certain structural components, while European products generally provide a two-year limited warranty and up to 12 years for water ingress[67] Regulation The company complies with vehicle safety and compliance standards from the U.S. RVIA, NHTSA, as well as Canadian and European authorities, along with environmental pollution control standards[68][69][71] Compliance with existing regulations is not expected to materially impact capital expenditures, earnings, or competitive position, but future regulatory changes could pose challenges and costs[72] Competition The RV industry is highly competitive with low entry barriers, where competition is based on price, design, value, quality, and service, also facing competition from the used RV market and other consumer leisure spending[73] Major North American competitors include Forest River, Inc. and Winnebago Industries, Inc., with THOR holding a leading market share, while key European competitors are Trigano, Hobby/Fendt, and Knaus Tabbert[74][75] Trademarks and Patents The company holds registered trademarks and patents in the U.S., Canada, Germany, and other international markets, and does not rely on third-party patents or technology licenses[76] Human Capital Resources As of July 31, 2023, the company employed approximately 24,900 full-time employees globally, with approximately 15,900 in North America and 9,000 in Europe[78] The company is committed to providing competitive compensation and benefits, ensuring employee safety and health through programs like EAP, and fostering an inclusive work environment to attract, develop, and retain diverse talent[79][80][81][82][83] Annual training on the Code of Business Conduct and Ethics is provided to a portion of employees, along with anonymous reporting channels, to cultivate teamwork and productivity[84] Forward-Looking Statements This report contains forward-looking statements involving expectations and beliefs about future developments and their impact on THOR, which are inherently uncertain and risky[86] Factors that could cause actual results to differ from expectations include inflation, fluctuations in raw material and commodity prices, supply chain constraints, geopolitical events, interest rate volatility, consumer confidence, competition, acquisition risks, and labor costs[86][87][90] Available Information The company's annual reports (10-K), quarterly reports (10-Q), current reports (8-K), their amendments, and proxy statements for shareholder meetings are freely available on the company's website and the SEC website[89] Risk Factors The company faces diverse risks including macroeconomic, operational, legal, regulatory, and financial factors Macroeconomic, Market and Strategic Risks RV industry sales are cyclical and seasonal, influenced by economic conditions, consumer disposable income, and confidence, which can lead to fluctuations in production rates, sales, and net income[93][94] Global operations are adversely affected by macroeconomic and geopolitical developments such as financial crises, recessions, inflation, high unemployment, fuel costs, rising interest rates, geopolitical crises, and public health emergencies[98] The RV market is highly competitive with low barriers to entry, facing threats from existing and new entrants (including automotive manufacturers) and the used RV market, which could impact profit margins and market share[99][100][101][102] The company's long-term success depends on its ability to innovate, including developing new products (e.g., lightweight, electric, autonomous RVs) and adapting to changing consumer preferences, with innovation investments potentially being costly and not always successful[103][104] Operational Risks The company heavily relies on suppliers for timely delivery of raw materials and components, especially chassis, where supply chain disruptions, production issues, or transportation delays could lead to operational interruptions or increased costs[105][106][107][108] Fluctuations in raw material and component prices can impact the business, and competitive and market conditions may limit the ability to pass on cost increases to customers[109] Dependence on a few key component suppliers, such as chassis manufacturers and LCI Industries, could lead to increased costs or insufficient supply[110][111][112] Product recalls, customer satisfaction actions, and product liability claims could result in significant costs and reputational damage, despite the company's insurance and reserves[113][114][115][116] Reliance on FreedomRoads, LLC, the largest independent dealer (accounting for 13.0% of consolidated net sales), and dealer consolidation could lead to reduced bargaining power or loss of sales[117][118] International sales, representing 33.1% of consolidated sales, face risks from currency exchange rate fluctuations, tariffs, international legal compliance, supply chain disruptions, and economic and social instability[119][120][121] Business acquisitions involve integration risks, including management distraction, operational disruptions, employee retention, international business challenges, unknown liabilities, and goodwill impairment[122][123][129] Attracting and retaining an experienced workforce, including the management team, is crucial, and labor shortages, rising costs, employee benefits (e.g., healthcare, workers' compensation), and union activities could impact operations[124][125][126][127][128][130] Reliance on independent dealers and independent transportation carriers could lead to sales disruptions, damaged dealer relationships, or distribution channel interruptions[131][132][133] Disruptions to information systems, data breaches, or cyberattacks could lead to operational interruptions, disclosure of confidential information, or reputational damage[135][136] The concentration of U.S. operations in Northern Indiana may exacerbate labor competition, recruitment challenges, and the impact of natural disasters and public health emergencies[137] Legal and Regulatory Risks Climate-related regulations and chassis emission standards could lead to additional disclosure requirements and compliance costs, potentially reducing product demand or limiting product use[138][139][140] Increased focus on environmental, social, and governance (ESG) matters could result in negative public perception, additional costs, or stock price impact[141][142][143] The company's business is subject to numerous national, regional, federal, state, and local regulations, including vehicle safety, consumer protection, environmental standards, and labor laws, with violations potentially leading to significant fines or litigation[144][145][146] Anti-takeover provisions in the company's organizational documents could delay or prevent a change in control, limiting shareholders' ability to receive a premium[147][148] Financial Risks The company has repurchase agreements with financial institutions that provide inventory financing to dealers, and dealer defaults could result in the company incurring repurchase obligations and related losses[149][150] Changes in tax rates, tax laws, or additional tax burdens could negatively impact operating results, cash flow, financial condition, dividend payments, or strategic plans[151][152] Goodwill, intangible assets, or other long-lived assets may be impaired, leading to non-cash impairment charges that affect operating results and financial condition[153] Changes in the availability and terms of financing for dealers and retail purchasers, such as rising interest rates or tighter credit, could reduce product demand, affecting sales and profitability[154][155][156] The company's debt arrangements, totaling $1,327,405 thousand as of July 31, 2023, may make it more sensitive to economic downturns, limit additional financing capacity, and impact cash flow[157][158][159] Market liquidity conditions and changes in credit ratings could affect the availability and cost of future financing[160] The company's risk management policies and procedures may not be fully effective, and misconduct by employees or suppliers could lead to legal violations, regulatory sanctions, or reputational and financial damage[161] Unresolved Staff Comments This report contains no unresolved staff comments - No unresolved staff comments[163] Properties As of July 31, 2023, the company owned or leased approximately 25.8 million square feet of global facilities As of July 31, 2023, the company owned or leased approximately 25,803,000 square feet of manufacturing plants and office space globally[164][165] The company believes its existing facilities are well-maintained and sufficient for their intended purposes, with alternatives for leased premises available at acceptable costs[164] Principal Manufacturing Plants and Physical Properties (as of July 31, 2023) | Geographical Location – Applicable Segment | Ownership Type | Number of Buildings | Approximate Building Area (square feet) | | :------------------------------------------------ | :--------- | :--------- | :----------------------- | | United States Total | | 272 | 18,536,000 | | Europe Total | | 139 | 7,267,000 | | Global Total | | 411 | 25,803,000 | Legal Proceedings Legal proceedings, primarily "lemon law" and warranty claims, are not expected to materially impact financial results The company is involved in legal proceedings in the normal course of business, primarily based on state "lemon laws," warranty claims, and vehicle accidents, for which the company carries insurance[166] Management believes the ultimate outcome of existing legal proceedings will not have a material adverse effect on the company's financial position, results of operations, or cash flows, though litigation inherently involves uncertainty[166] The company has accrued liabilities for a product recall issued at the end of fiscal year 2021 (involving certain purchased components) and an investigation by German authorities regarding vehicle weight disclosures, expecting partial reimbursement from suppliers[167] The company does not believe these matters will have a material adverse effect on future operating results and cash flows[168] Mine Safety Disclosures Not applicable - Not applicable[169] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock trades on NYSE; board plans continued dividends and authorized stock repurchases The company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol "THO"[172] As of September 15, 2023, there were 139 record holders of common stock[172] Dividends Paid Per Share (FY2022-2023) | Fiscal Year | Dividend Per Share ($) | | :----- | :------------ | | 2023 | 0.45 | | 2022 | 0.43 | The company's Board of Directors currently plans to continue paying regular quarterly cash dividends in the future, subject to specific payment conditions in its credit agreements[174] The company has authorized a stock repurchase program, with a remaining repurchase authorization balance of $491,207 thousand as of July 31, 2023[188][491] (Reserved) This item is reserved with no content Management's Discussion and Analysis of Financial Condition and Results of Operations FY2023 consolidated net sales decreased 31.8% due to North American demand, while European sales grew Executive Summary THOR Industries, Inc. is the world's largest RV manufacturer, holding leading positions in North America and Europe, with market shares of 42.7% for North American towables/fifth-wheels and 49.0% for motorized, and 20.6% for European motorized/campervans and 18.5% for travel trailers as of June 30, 2023[179] The company operates with a decentralized model, primarily selling RV products through independent dealers, and achieves profitable growth through innovation, customer service, product quality, efficiency improvements, and strategic acquisitions[180] In fiscal year 2023, inflation, rising interest rates, and supply chain constraints negatively impacted product demand, a trend expected to continue through the remainder of calendar year 2023[182] Significant Events On December 30, 2022, the company transferred Roadpass Digital and its related entities to TN-RP Holdings, LLC, a new entity formed with TechNexus Holdings LLC, resulting in the company no longer having a controlling financial interest in Roadpass Digital[183][428][429][430] The Inflation Reduction Act, enacted in August 2022, imposes a 1% excise tax on stock repurchases, which is not expected to have a material impact on the company's financial statements[184][461] The company's Board of Directors authorized stock repurchase programs in December 2021 and June 2022, with a remaining repurchase authorization balance of $491,207 thousand as of July 31, 2023[185][186][187][188][488][489][490][491] On October 14, 2021, the company issued $500,000 thousand of 4.000% Senior Unsecured Notes, used to repay ABL borrowings[189][450] On September 1, 2021, the company acquired Airxcel for a final cash consideration of $745,279 thousand, and expanded its ABL credit facility to $1,000,000 thousand[190][391] On December 18, 2020, the company acquired Tiffin Group for a cash consideration of $288,238 thousand, financed through existing cash and ABL borrowings[192][193][395][396] North American RV Industry As of July 31, 2023, North American RV independent dealer inventory decreased by 31.1% to approximately 87,500 units, primarily due to slower retail sales and increased dealer holding costs[195][196] The company's North American RV backlog decreased by 66.7% to $1,998,983 thousand as of July 31, 2023, mainly due to reduced dealer orders[197] North American RV Industry Wholesale Unit Shipments (Six Months Ended June 30) | Segment | 2023 Units | 2022 Units | Change in Units | Percentage Change (%) | | :--------------------- | :----- | :----- | :--------- | :------------- | | North American Towable | 139,337 | 293,288 | (153,951) | (52.5) | | North American Motorized | 25,493 | 30,543 | (5,050) | (16.5) | | Total | 164,830 | 323,831 | (159,001) | (49.1) | North American RV Industry Retail Unit Registrations (Six Months Ended June 30) | Segment | 2023 Units | 2022 Units | Change in Units | Percentage Change (%) | | :--------------------- | :----- | :----- | :--------- | :------------- | | North American Towable | 182,418 | 230,228 | (47,810) | (20.8) | | North American Motorized | 25,172 | 27,261 | (2,089) | (7.7) | | Total | 207,590 | 257,489 | (49,899) | (19.4) | RVIA forecasts North American wholesale unit shipments to decrease by 39.8% to approximately 297,100 units in calendar year 2023, but to grow by 24.4% to approximately 369,700 units in calendar year 2024, driven by easing interest rate impacts and resolved inventory imbalances[199][200] The company anticipates continued negative impacts from inflation, high interest rates, and dealer inventory level adjustments in early fiscal year 2024, but sees long-term growth potential for North American RV retail sales[207][208] The North American chassis supply chain has not fully recovered to pre-pandemic levels, with labor disputes and production issues potentially continuing to affect production schedules and cost structures[211] European RV Industry As of July 31, 2023, European RV independent dealer inventory was approximately 21,200 units, having recovered from low levels, with travel trailer and urban vehicle product lines no longer below target inventory, though motorized RVs remain slightly below normal levels[214][215] European RV backlog increased by 28.9% to $3,549,660 thousand as of July 31, 2023, primarily due to higher selling prices[216] European RV Industry Retail Unit Registrations (Six Months Ended June 30) | Product Type | 2023 Units | 2022 Units | Percentage Change (%) | | :--------------------- | :----- | :----- | :------------- | | Motorized RVs and Campervans | 85,869 | 90,419 | (5.0) | | Travel Trailers | 35,328 | 41,598 | (15.1) | European chassis suppliers face issues with critical component shortages, demand exceeding capacity, and personnel shortages, challenges expected to persist through calendar years 2023 and 2024, limiting motorized product output[225] Europe also faces increased costs, supply shortages, and delivery delays for other raw materials and components, leading to production delays and increased work-in-process inventory[226] The company anticipates positive long-term growth prospects for European RV retail sales due to increased consumer interest in the RV lifestyle, but short-term impacts from macroeconomic factors and supply chain constraints[222] Results of Operations Consolidated Consolidated net sales decreased by 31.8% in FY2023, primarily due to lower demand in North America, leading to a 43.1% decline in gross profit Consolidated Results of Operations Overview (FY2023 vs. FY2022) | Metric | FY2023 ($ thousand) | FY2022 ($ thousand) | Change in Amount ($ thousand) | Percentage Change (%) | | :-------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net Sales | 11,121,605 | 16,312,525 | (5,190,920) | (31.8) | | Gross Profit | 1,596,353 | 2,806,030 | (1,209,677) | (43.1) | | Gross Margin | 14.4% | 17.2% | -2.8% | - | | Selling, General and Administrative Expenses | 870,054 | 1,116,462 | (246,408) | (22.1) | | Amortization Expense | 140,808 | 156,946 | (16,138) | (10.3) | | Income Before Income Taxes | 499,353 | 1,459,864 | (960,511) | (65.8) | Consolidated net sales decreased by 31.8%, primarily due to lower dealer and consumer demand in fiscal year 2023 compared to record demand in fiscal year 2022, especially in the North American Towable segment[235] Consolidated gross profit decreased by 43.1%, with gross margin falling from 17.2% to 14.4%, mainly due to reduced absorption of fixed costs resulting from lower net sales[236] Selling, general and administrative expenses decreased by 22.1%, primarily due to lower net sales and a reduction in net costs for certain warranty and settlement expenses[237] Income before income taxes decreased by 65.8%, primarily impacted by the decline in consolidated net sales and consolidated gross margin[238] The effective income tax rate for fiscal year 2023 was 25.1%, higher than 22.0% in fiscal year 2022, mainly due to changes in the jurisdictional mix of income before income taxes between domestic and international operations[239] Segment Reporting North American Towable Recreational Vehicles Net sales decreased by 51.5% due to a 55.4% drop in unit shipments, leading to a significant decline in gross profit and income before income taxes North American Towable Recreational Vehicles Net Sales and Unit Shipments (FY2023 vs. FY2022) | Metric | FY2023 Net Sales ($ thousand) | FY2022 Net Sales ($ thousand) | Net Sales Change (%) | FY2023 Unit Shipments | FY2022 Unit Shipments | Unit Shipments Change (%) | | :--------------------- | :---------------------- | :---------------------- | :--------------- | :------------------- | :------------------- | :--------------------- | | Travel Trailers | 2,587,686 | 5,430,526 | (52.3) | 81,432 | 190,795 | (57.3) | | Fifth-Wheel Travel Trailers | 1,614,942 | 3,231,419 | (50.0) | 25,072 | 47,839 | (47.6) | | Total | 4,202,628 | 8,661,945 | (51.5) | 106,504 | 238,634 | (55.4) | North American Towable net sales decreased by 51.5%, primarily due to a 55.4% decrease in unit shipments and a 3.9% net price increase from product mix and pricing changes[244] Gross profit decreased by $1,008,811 thousand, and gross margin declined, mainly due to lower net sales and an increased percentage of cost of products sold[249] Income before income taxes decreased by $813,413 thousand, primarily due to lower net sales and an increased percentage of cost of products sold[251] North American Motorized Recreational Vehicles Net sales decreased by 16.7% due to a 16.5% drop in unit shipments, resulting in lower gross profit and income before income taxes North American Motorized Recreational Vehicles Net Sales and Unit Shipments (FY2023 vs. FY2022) | Metric | FY2023 Net Sales ($ thousand) | FY2022 Net Sales ($ thousand) | Net Sales Change (%) | FY2023 Unit Shipments | FY2022 Unit Shipments | Unit Shipments Change (%) | | :--------------------- | :---------------------- | :---------------------- | :--------------- | :------------------- | :------------------- | :--------------------- | | Class A | 1,066,617 | 1,779,295 | (40.1) | 5,246 | 9,026 | (41.9) | | Class C | 1,536,398 | 1,408,470 | 9.1 | 13,643 | 13,260 | 2.9 | | Class B | 711,155 | 791,882 | (10.2) | 5,943 | 7,445 | (20.2) | | Total | 3,314,170 | 3,979,647 | (16.7) | 24,832 | 29,731 | (16.5) | North American Motorized net sales decreased by 16.7%, primarily due to a 16.5% decrease in unit shipments and a 0.2% net price decrease from product pricing and mix changes[253] Gross profit decreased by $211,337 thousand, and gross margin declined, mainly due to lower net sales and an increased percentage of cost of products sold, driven by higher chassis costs and increased warranty costs[255][257] Income before income taxes decreased by $181,397 thousand, primarily due to lower net sales and an increased percentage of cost of products sold[259] European Recreational Vehicles Net sales increased by 5.2%, driven by a 12.7% net price increase despite a 7.5% decrease in unit shipments, leading to improved gross profit and income before income taxes European Recreational Vehicles Net Sales and Unit Shipments (FY2023 vs. FY2022) | Product Type | FY2023 Net Sales ($ thousand) | FY2022 Net Sales ($ thousand) | Net Sales Change (%) | FY2023 Unit Shipments | FY2022 Unit Shipments | Unit Shipments Change (%) | | :--------------------- | :---------------------- | :---------------------- | :--------------- | :------------------- | :------------------- | :--------------------- | | Motorized RVs | 1,409,137 | 1,457,226 | (3.3) | 19,391 | 23,688 | (18.1) | | Campervans | 987,623 | 750,310 | 31.6 | 21,087 | 19,369 | 8.9 | | Travel Trailers | 358,415 | 365,902 | (2.0) | 15,201 | 17,135 | (11.3) | | Other | 281,972 | 314,015 | (10.2) | - | - | - | | Total | 3,037,147 | 2,887,453 | 5.2 | 55,679 | 60,192 | (7.5) | European RV net sales increased by 5.2%, primarily due to a 12.7% net price increase from foreign currency, product mix, and pricing changes, despite a 7.5% decrease in unit shipments[262] Gross profit increased by $95,357 thousand, and gross margin improved, mainly due to higher net sales and a decreased percentage of cost of products sold, driven by lower material costs and improved labor costs[265][266] Income before income taxes significantly increased by $92,509 thousand, primarily due to higher net sales and an improved percentage of cost of products sold[268] Liquidity and Capital Resources Cash and cash equivalents increased to $441,232 thousand as of July 31, 2023, driven by strong operating cash flow, while net working capital decreased Cash and Cash Equivalents (FY2022-2023) | Metric | July 31, 2023 ($ thousand) | July 31, 2022 ($ thousand) | | :--------------------- | :------------------ | :------------------ | | Cash and Cash Equivalents | 441,232 | 311,553 | | Of which: Held in U.S. | 338,703 | 256,492 | | Of which: Held in Europe | 102,529 | 55,061 | Net cash provided by operating activities was $981,633 thousand in fiscal year 2023, with $222,483 thousand used in investing activities and $635,685 thousand used in financing activities[269][275][278][279] Net working capital decreased from $1,306,563 thousand as of July 31, 2022, to $1,077,098 thousand as of July 31, 2023, primarily due to reductions in inventory and accounts receivable[270] The company anticipates capital expenditures of $260,000 thousand for fiscal year 2024, primarily for construction projects, automation initiatives, and machinery and equipment upgrades, which will be funded by operating cash flows[273] The company's Board of Directors plans to continue paying regular quarterly cash dividends and may consider strategic stock repurchases and special dividends[274] Principal Contractual Obligations and Commercial Commitments The company has significant contractual obligations, including debt principal payments, operating leases, and purchase obligations, totaling $1,549,737 thousand as of July 31, 2023 Contractual Obligations (as of July 31, 2023) | Contractual Obligation | Total ($ thousand) | FY2024 ($ thousand) | FY2025-2026 ($ thousand) | FY2027-2028 ($ thousand) | After 5 Years ($ thousand) | | :--------------- | :---------- | :------------- | :------------------ | :------------------ | :---------- | | Debt Principal Payments | 1,327,405 | 11,368 | 794,382 | 10,979 | 510,676 | | Finance Leases | 4,203 | 1,059 | 2,190 | 954 | — | | Operating Leases | 66,998 | 17,423 | 22,232 | 10,797 | 16,546 | | Purchase Obligations | 151,131 | 151,131 | — | — | — | | Total Contractual Cash Obligations | 1,549,737 | 180,981 | 818,804 | 22,730 | 527,222 | Other Commercial Commitments (as of July 31, 2023) | Other Commercial Commitments | Total Committed Amount ($ thousand) | Within 1 Year ($ thousand) | 1-3 Years ($ thousand) | 4-5 Years ($ thousand) | More than 5 Years ($ thousand) | | :--------------- | :------------ | :---------- | :---------- | :---------- | :---------- | | Standby Repurchase Obligations | 3,893,048 | 2,442,581 | 1,450,467 | — | — | Unrecognized income tax benefits of $15,992 thousand have been excluded from the table as the timing of future payments cannot be reasonably and reliably estimated[283] Application of Critical Accounting Estimates Critical accounting estimates involve valuing acquired assets and liabilities in business combinations, testing goodwill and intangible assets for impairment, and determining product warranty reserves The company makes estimates, judgments, and assumptions when preparing its financial statements, with critical estimates including the valuation of acquired assets and liabilities in business combinations, impairment testing of goodwill and intangible assets, and the determination of product warranty reserves[288][289][290][291][292][293][294][295][298] Goodwill impairment testing involves significant management judgment using discounted cash flow models and market approaches, with assumptions on sales growth rates, profit margins, discount rates, and market multiples[291][292][295] Product warranty liabilities, totaling $345,197 thousand as of July 31, 2023, are based on the best estimates derived from historical retail sales, dealer inventory, average unit costs, and the distribution of expenditures over the warranty period[298] Accounting Pronouncements The company adopted ASU No. 2020-04 "Reference Rate Reform," which did not materially impact consolidated financial statements The company adopted ASU No. 2020-04 "Reference Rate Reform," which adjusted reference rates for U.S. dollar-denominated loans but did not have a material impact on the consolidated financial statements[390] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from foreign currency and interest rate fluctuations through hedging strategies The company faces market risks from foreign currency exchange rates and interest rate changes, utilizing hedging transactions to mitigate these risks, but not for trading or speculative purposes[301] The company is primarily exposed to foreign currency exchange rate risk for the Euro and British Pound; as of July 31, 2023, the company held $555,506 thousand in Euro-denominated debt, where a hypothetical 10% change in the Euro/U.S. dollar exchange rate would result in an estimated $55,551 thousand change in the debt balance[302][303] Based on floating-rate debt levels over the next 12 months, a one percentage point increase in interest rates, representing approximately 13.3% of the weighted-average interest rate as of July 31, 2023, would result in an estimated $7,626 thousand decrease in income before income taxes over one year[304] Financial Statements and Supplementary Data This item includes consolidated financial statements and unaudited quarterly financial data This item refers to the financial statements on pages F-1 through F-33 at the end of the report[306] Quarterly Financial Data (Unaudited) | Fiscal Year | Quarter | Net Sales ($ thousand) | Gross Profit ($ thousand) | Net Income Attributable to THOR Industries, Inc. ($ thousand) | Basic EPS ($) | Diluted EPS ($) | Dividend Per Share ($) | Stock Price High ($) | Stock Price Low ($) | | :----- | :--------- | :-------------- | :------------ | :--------------------------------------- | :--------------- | :--------------- | :----------- | :----------- | :----------- | | 2023 | October 31 | 3,108,084 | 486,476 | 136,185 | 2.54 | 2.53 | 0.45 | 96.11 | 67.09 | | 2023 | January 31 | 2,346,635 | 282,935 | 27,080 | 0.51 | 0.50 | 0.45 | 94.46 | 74.00 | | 2023 | April 30 | 2,928,820 | 432,637 | 120,719 | 2.26 | 2.24 | 0.45 | 105.36 | 74.50 | | 2023 | July 31 | 2,738,066 | 394,305 | 90,287 | 1.69 | 1.68 | 0.45 | 115.52 | 75.93 | | 2022 | October 31 | 3,958,224 | 655,424 | 242,242 | 4.37 | 4.34 | 0.43 | 128.87 | 99.35 | | 2022 | January 31 | 3,875,018 | 675,274 | 266,568 | 4.80 | 4.79 | 0.43 | 115.47 | 85.13 | | 2022 | April 30 | 4,657,517 | 807,445 | 348,051 | 6.34 | 6.32 | 0.43 | 100.14 | 73.50 | | 2022 | July 31 | 3,821,766 | 667,887 | 280,943 | 5.17 | 5.15 | 0.43 | 89.60 | 66.26 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants are reported - No changes and disagreements[309] Controls and Procedures Management concluded disclosure controls and internal financial reporting controls were effective as of July 31, 2023 As of July 31, 2023, the company's management evaluated and concluded that its disclosure controls and procedures were effective[309] Management believes that the company's internal control over financial reporting was effective as of July 31, 2023, in accordance with the COSO framework criteria[312] Deloitte & Touche LLP, the independent registered public accounting firm, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[313][316] No material changes in internal control over financial reporting occurred during the fourth fiscal quarter of 2023[314] Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated in Q4 FY2023 No adoption or termination of "Rule 10b5-1 trading arrangements" or "non-Rule 10b5-1 trading arrangements" by company directors or officers was reported during the fourth fiscal quarter of 2023[322] PART III Directors, Executive Officers and Corporate Governance The company has a Code of Business Conduct and Ethics, with other governance details referenced from the proxy statement The company has adopted the "THOR Industries, Inc. Code of Business Conduct and Ethics," applicable to all directors, executive officers, and employees, and published on the company's website[326] Other information for this item is provided by reference to the relevant sections of the company's proxy statement concerning the Board of Directors, executive officers, committees, and corporate governance[327] Executive Compensation Executive compensation details are provided by reference to the company's proxy statement The information required for this item is provided by reference to the relevant sections of the company's proxy statement concerning Compensation Discussion and Analysis, Executive Compensation, Director Compensation, and Compensation Committee Interlocks and Insider Participation[328] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This item details common stock authorized under the 2016 Equity and Incentive Plan Equity Compensation Plan Information (as of July 31, 2023) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------- | | Equity compensation plans approved by security holders | 1,175,711 | — | 1,102,045 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 1,175,711 | — | 1,102,045 | The 1,175,711 shares in column (a) represent restricted stock units and performance stock units granted under the 2016 Plan, which do not have an exercise price[330][331] The 1,102,045 shares in column (c) represent the remaining shares available for future issuance under the 2016 Plan[331] Certain Relationships and Related Transactions and Director Independence Information on related transactions and director independence is referenced from the proxy statement The information required for this item is provided by reference to the relevant sections of the company's proxy statement concerning Certain Relationships and Related Transactions of Management and Board Structure, Committees, and Corporate Governance[333] Principal Accounting Fees and Services Details on principal accounting fees and services are referenced from the company's proxy statement The information required for this item is provided by reference to the relevant sections of the company's proxy statement concerning Fees of Independent Registered Public Accounting Firm[334] PART IV Exhibits and Financial Statement Schedules This item lists financial statements, schedules, and various exhibits included in the annual report This item includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Income and Comprehensive Income, Consolidated Statements of Shareholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[336] All financial statement schedules have been omitted because the required information is not applicable, not material, or has been included in the consolidated financial statements and their notes[337] Exhibits include acquisition agreements, articles of incorporation, debt indentures, equity incentive plans, employment agreements, a list of subsidiaries, auditor consent letters, and financial statements in XBRL format[338][339][340] SIGNATURES The report was signed on September 25, 2023, by key executives and board members of THOR Industries, Inc This report was signed on September 25, 2023, by Robert W. Martin, Director, President and Chief Executive Officer of THOR Industries, Inc[342][343] Colleen Zuhl, Senior Vice President and Chief Financial Officer, and other Board members including Andrew E. Graves, Chairman of the Board, also signed[344]