Thor Industries THO Form 10-Q filing Q1 FY2025

ITEM 1. FINANCIAL STATEMENTS

THOR INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

See Notes to the Condensed Consolidated Financial Statements.

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See Notes to the Condensed Consolidated Financial Statements.

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See Notes to the Condensed Consolidated Financial Statements.

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See Notes to the Condensed Consolidated Financial Statements.

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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 primarily 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, 2024 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, 2024. Due to seasonality within the recreational vehicle industry, inflation and shifting consumer demand in our industry, among other factors, annualizing the results of operations for the three months ended October 31, 2024 would not necessarily be indicative of the results expected for the full fiscal year.

Recent 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. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this guidance on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which provides updates to qualitative and quantitative disclosure requirements over the disaggregation of relevant expense captions within the income statement to provide more transparency and useful information on expenses within the income statement including tabular presentation of prescribed expense categories such as the purchases of inventory, employee compensation, depreciation, intangible asset amortization, and inclusion of other specific expense, gains and losses required by existing GAAP with reconciliation of disaggregation to the face of the income statement. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The amendment should be applied prospectively; however, retrospective application is also permitted. This ASU will be effective for our fiscal year ending July 31, 2028. We are currently evaluating the impact ASU 2024-03 may have on our consolidated financial statement disclosures.

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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:

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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:

(1) Due to a loss for the three months ended October 31, 2024, zero incremental shares are included because the effect would be antidilutive.

The Company excluded 523,157 and 51,298 unvested restricted stock units and performance stock units that have an antidilutive effect from its calculation of weighted-average common shares outstanding assuming dilution at October 31, 2024 and October 31, 2023, respectively.

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4. Derivatives and Hedging

As of October 31, 2024 and July 31, 2024 there were no derivative instruments designated as hedges, except for the net investment hedge discussed below.

Net Investment Hedge

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. Gains (losses), net of tax, included in the foreign currency translation adjustments were $(1,248) for the three months ended October 31, 2024 and $13,409 for the three months ended October 31, 2023.

There were no amounts reclassified out of AOCI pertaining to the net investment hedge during the three-month periods ended October 31, 2024 or October 31, 2023.

Derivatives Not Designated as Hedging Instruments

The Company has certain other derivative instruments which have not been designated as hedges. These other derivative instruments had a notional amount totaling approximately $37,406 and a fair value liability of $1,084 as of October 31, 2024. These other derivative instruments had a notional amount totaling approximately $22,333 and a fair value liability of $1,137 as of July 31, 2024. For these derivative instruments, changes in fair value are recognized in earnings.

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:

5. Inventories

Major classifications of inventories are as follows:

Of the $1,519,881 and $1,514,748 of inventories at October 31, 2024 and July 31, 2024, $1,115,081 and $1,109,062, respectively, were valued on the first-in, first-out (“FIFO”) basis, and $404,800 and $405,686, respectively, were valued on the last-in, first-out (“LIFO”) basis.

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6. Property, Plant and Equipment

Property, plant and equipment consists of the following:

7. Intangible Assets and Goodwill

The components of Amortizable intangible assets are as follows:

Estimated future amortization expense is as follows:

Changes in the carrying amount of Goodwill by reportable segment for the three months ended October 31, 2024 are summarized as follows:

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Changes in the carrying amount of Goodwill by reportable segment for the three months ended October 31, 2023 are summarized as follows:

8. Equity Investments

As discussed in Note 8 to the Company’s Consolidated Financial Statements included in the Fiscal 2024 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% of the Class A-RP units and Class C-RP units, respectively, issued by TN-RP.

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:

The Company’s share of gains and losses accounted for under the equity method of accounting are included in Other income (expense), net in the Condensed Consolidated Statements of Income and Comprehensive Income. The losses recognized in the three months ended October 31, 2024 were $2,254, and the losses recognized in the three months ended October 31, 2023 were $5,935.

9. Concentration of Risk

One dealer, FreedomRoads, LLC, accounted for approximately 12% of the Company’s consolidated net sales for the three-month period ended October 31, 2024 and approximately 14% of the Company’s consolidated net sales for the three-month period ended October 31, 2023. The majority of the sales to this dealer are reported within the North American Towable and North American Motorized reportable segments. This dealer also accounted for approximately 15% and approximately 10% of the Company’s consolidated trade accounts receivable at October 31, 2024 and July 31, 2024, respectively. The loss of this dealer or a deterioration in the liquidity or creditworthiness of this dealer could have a material effect on the Company’s business.

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10. Fair Value Measurements

The financial assets and liabilities that are accounted for at fair value on a recurring basis at October 31, 2024 and July 31, 2024 are as follows:

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. 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:

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12. Long-Term Debt

The components of long-term debt are as follows:

As discussed in Note 13 to the Company’s Consolidated Financial Statements included in the Fiscal 2024 Form 10-K, the Company is a party to a seven-year term loan (“term loan”) agreement, which consists of both a U.S. dollar-denominated term loan tranche (“USD term loan”) and a Euro-denominated term loan tranche (“Euro term loan”) and a five-year $1,000,000 asset-based credit facility (“ABL”).

As of October 31, 2024, the outstanding USD term loan balance of $205,000 was subject to a Secured Overnight Financing Rate (“SOFR”)-based rate totaling 6.935%. The total interest rate on the October 31, 2024 outstanding Euro term loan tranche balance of $331,003 was 5.896%. The Senior Unsecured Notes were issued on October 14, 2021 in an aggregate principal amount of $500,000 and bear fixed interest at a rate of 4.000%.

As of October 31, 2024 and July 31, 2024, there were no outstanding ABL borrowings. Availability under the ABL agreement is subject to a borrowing base based on a percentage of applicable eligible receivables and eligible inventory, and based on October 31, 2024 eligible receivables and eligible inventory balances and net of amounts drawn, if any, totaled approximately $865,000.

For the three-month periods ended October 31, 2024 and October 31, 2023, interest expense on total long-term debt was $17,585 and $23,199, respectively. These interest expense amounts include the amortization of capitalized debt issuance costs of $2,166 and $2,872, for the three-month periods ended October 31, 2024 and October 31, 2023 respectively.

The fair value of the Company’s term loan debt at October 31, 2024 and July 31, 2024 was $537,028 and $597,334, respectively. The fair value of the Company’s Senior Unsecured Notes at October 31, 2024 and July 31, 2024 was $454,300 and $450,450, 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 October 31, 2024 was 24.5%. This rate was favorably impacted by certain foreign tax rate differences which include certain interest income not subject to corporate income tax. The favorable foreign rate differential was partially offset by additional tax expense related to the jurisdictional mix of earnings between foreign and domestic operations during the three months ended October 31, 2024. The overall effective income tax rate for the three months ended October 31, 2023 was 24.2%, which was favorably impacted by certain foreign tax rate differences, which include certain interest income not subject to corporate income tax. The favorable foreign rate differential was partially offset by tax expense from the vesting of share-based compensation awards during the three months ended October 31, 2023.

Within the next 12 months, the Company does not anticipate any material changes in its unrecognized tax benefits as of October 31, 2024.

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14. Contingent Liabilities, Commitments and Legal Matters

The Company’s total commercial commitments under standby repurchase obligations on dealer inventory financing were $3,422,718 and $3,642,137 as of October 31, 2024 and July 31, 2024, respectively. The commitment term is generally up to eighteen months.

The Company accounts for the guarantee under repurchase agreements of independent dealers’ financing by deferring a portion of the related product sale that represents the estimated fair value of the guarantee at inception. This estimate is based on recent historical experience supplemented by the Company’s assessment of current economic and other conditions affecting its independent dealers. This deferred amount is included in the repurchase and guarantee reserve balances of $12,870 and $14,356 as of October 31, 2024 and July 31, 2024, respectively, which are included in Other current liabilities in the Condensed Consolidated Balance Sheets.

Losses incurred related to repurchase agreements that were settled during the three months ended October 31, 2024 and October 31, 2023 were not material. Based on current market conditions and other conditions affecting its independent dealers, the Company believes that any future losses under these agreements will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

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, and 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.

As discussed in Note 15 to the Company’s Consolidated Financial Statements included in the Fiscal 2024 Form 10-K, the Company is involved in a product recall and was part of an advertising-related investigation by certain German-based authorities that has been fully resolved. There were no significant developments related to these matters during the first quarter of fiscal 2025. There was no impact on the condensed consolidated financial statements for the first quarter of fiscal 2025 related to these matters, and in the first quarter of fiscal 2024, the Company recognized $10,000 of income within selling, general and administrative expenses due to reducing previously recorded reserves related to these matters.

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15. Leases

The components of lease costs for the three-month periods ended October 31, 2024 and October 31, 2023 were as follows:

Other information related to leases was as follows:

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16. Stockholders’ Equity

Total stock-based compensation expense recognized in the three-month periods ended October 31, 2024 and October 31, 2023 for stock-based awards totaled $10,537 and $10,452, respectively.

Share Repurchase Program

As discussed in Note 17 to the Company’s Consolidated Financial Statements included in the Fiscal 2024 Form 10-K, on December 21, 2021, the Company’s Board of Directors authorized Company management to utilize up to $250,000 to repurchase 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-month period ended October 31, 2024, the Company did not purchase any shares of its common stock. During the three-month period ended October 31, 2023, 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 repurchased 3,214,772 shares of its common stock, at various times in the open market, at a weighted-average price of $85.70 and held them as treasury shares at an aggregate purchase price of $275,501.

As of October 31, 2024, there is no remaining amount of the Company's common stock that may be repurchased under the December 21, 2021 $250,000 authorization. As of October 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 $422,820.

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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 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.

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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:

(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.

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19. Weather Damage at Manufacturing Facilities

On March 14, 2024, a weather event that included large damaging hail occurred at and around the Company’s Jackson Center, OH facilities. The hail resulted in significant roof damage to the motorized production facility and significant damage to inventory that was stored outside, primarily motorized chassis, but also some work in process and finished goods inventory.

The Company maintains insurance coverage, subject to a $1,000 self-insured retention, for the repair or replacement of covered assets that suffer loss, as well as coverage for business interruption, including lost profits. Inventory is a covered asset under the insurance policy, as is the production facility itself.

As of October 31, 2024, the Company has a receivable in the amount of $40,270 related to estimated damages incurred for which we deem the recovery of such losses from our insurance carriers to be probable. Total estimated losses are $64,220 and are primarily attributed to the write-off of motorized chassis. The Company has received initial insurance proceeds related to this event totaling $22,950 through the fiscal quarter ended October 31, 2024. This insurance recovery receivable is included in Accounts receivable, other, net on the Condensed Consolidated Balance Sheets, as we believe recovery will be realized within one year of the balance sheet date.

Given the expectation of recovery from insurance, the impact on our consolidated income before income taxes during fiscal 2024 and the first quarter of fiscal 2025 related to the losses incurred on the weather damages noted above was not material. As of the date of this report, the Company is still in the process of fully assessing damages and submitting relevant insurance claim information.

Although our insurance covers business interruption, the Company did not recognize recovery for business interruption during the fiscal quarter ended October 31, 2024 and will do so at the time of final settlement or when nonrefundable cash advances are made in subsequent periods.

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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.

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CONSOLIDATED

Consolidated net sales for the three months ended October 31, 2024 decreased $357,975, or 14.3%, compared to the three months ended October 31, 2023. Approximately 28.2% of the Company’s consolidated net sales for the quarter ended October 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 $357,975 decrease in consolidated net sales includes an increase of $17,897 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 three months ended October 31, 2024 decreased $76,490, or 21.4%, compared to the three months ended October 31, 2023. Consolidated gross profit was 13.1% of consolidated net sales for the three months ended October 31, 2024 and 14.3% for the three months ended October 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 quarter compared to the prior-year quarter.

Selling, general and administrative expenses for the three months ended October 31, 2024 increased $22,301, or 10.2%, compared to the three months ended October 31, 2023, primarily due to the increase in certain Corporate selling, general and administrative expenses as discussed below, partially offset by the impact of the 14.3% decrease in consolidated net sales and the decrease in consolidated income before income taxes, which resulted in lower related sales commissions and other incentive compensation.

The increase in income included in Other income (expense), net of $17,562 for the three months ended October 31, 2024 as compared to the three months ended October 31, 2023 is primarily due to the favorable changes in Corporate other income and expenses as discussed below.

The decrease of $73,738, or 101.6%, in income before income taxes to a loss before income taxes for the three months ended October 31, 2024 compared to income before taxes for the three months ended October 31, 2023 was primarily driven by the decrease in consolidated net sales.

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The overall effective income tax rate for the three months ended October 31, 2024 was 24.5% compared with 24.2% for the three months ended October 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.

Corporate costs included in consolidated selling, general and administrative expenses increased $28,179 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023. This increase includes an increase in compensation costs of $13,868, primarily due to employee separation costs related to certain headcount reductions in the current quarter, and an increase in deferred compensation expense of $11,124 due to market value fluctuations between the two periods, which was effectively offset by the increase in other income related to the deferred compensation plan assets noted below. In addition, the prior-year quarter included $10,000 of income from adjustments made related to the matters discussed in Note 14 to the Condensed Consolidated Financial Statements. These cost increases were partially offset by a decrease in certain dealer promotional costs of $3,150, a decrease in incentive compensation of $1,505 due to the decrease in income before income taxes compared to the prior-year quarter, and a decrease of $2,700 in costs related to our standby repurchase obligation reserve due to decreases in both dealer inventory levels and repurchase activity compared to the prior-year quarter.

Net expense from Corporate interest and other income and expenses decreased $17,132 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023. Net interest expense decreased $4,785 primarily due to lower debt interest expense as a result of lower average outstanding debt balances and lower interest rates. This decrease in net expense also included the favorable changes of $11,206 in the fair value of the Company’s deferred compensation plan assets and $2,483 in the fair value of certain other equity investments, both due to market value fluctuations between the two periods, and the recorded operating results of our equity investments as discussed in Note 8 to the Condensed Consolidated Financial Statements improved by $3,681 in the current quarter compared to the prior-year quarter. These favorable changes were partially offset by an unfavorable change of $5,574 in the non-cash foreign currency gains on certain Euro-denominated loans.

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Segment Reporting

NORTH AMERICAN TOWABLE RECREATIONAL VEHICLES

Analysis of the change in net sales for the three months ended October 31, 2024 compared to the three months ended October 31, 2023:

The decrease in total North American Towable net sales of 4.9% compared to the prior-year quarter resulted from a 6.8% increase in unit shipments and an 11.7% 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 higher demand for the lower-cost travel trailers units, which increased 12.5% over the prior-year quarter. According to statistics published by RVIA, for the three months ended October 31, 2024, combined North American travel trailer and fifth wheel wholesale unit shipments increased 9.2% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the three months ended September 30, 2024 and 2023, our North American market share for travel trailers and fifth wheels combined was 38.6% and 41.1%, 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.

The decrease in the overall net price per unit within the travel trailer product line of 15.2% was primarily due to a change in product mix trending toward more moderately-priced units as compared to the prior-year quarter. The increase in overall net price per unit within the fifth wheel product line of 7.5% was primarily due to product mix changes and lower sales discounting as compared to the prior-year quarter.

North American Towable cost of products sold decreased $41,102 to $786,341, or 87.5% of North American Towable net sales, for the three months ended October 31, 2024 compared to $827,443, or 87.5% of North American Towable net sales, for the three months ended October 31, 2023. The changes in material, labor, freight-out and warranty costs comprised $43,990 of the $41,102 decrease in cost of products sold. Material, labor, freight-out and warranty costs as a combined percentage of North American Towable net sales decreased slightly to 79.2% for the three months ended October 31, 2024 compared to 80.0% for the three months ended October 31, 2023, primarily due to a decrease in the material cost percentage from the combined net favorable impacts of lower sales discounting and cost-saving initiatives.

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Total manufacturing overhead increased $2,888, primarily due to higher employee self-insurance costs, and increased as a percentage of North American Towable net sales from 7.5% to 8.3% as the decreased net sales levels resulted in higher overhead costs per unit sold.

The decrease in North American Towable gross profit of $5,574 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 was driven by the decrease in North American Towable net sales while it remained the same as a percentage of North American Towable net sales.

North American Towable selling, general and administrative expenses increased slightly by $487, or 0.8%, for the three months ended October 31, 2024 compared to the three months ended October 31, 2023, and there were no changes of significance within its major cost components. 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 North American Towable net sales increasing the employee compensation and benefits cost percentage and certain other costs percentages that are generally more fixed costs in nature.

The decrease in North American Towable income before income taxes of $2,428 for the three months ended October 31, 2024 as compared to the three months ended October 31, 2023 is primarily due to the decrease in North American Towable net sales, while North American Towable income before income taxes as a percentage of North American Towable net sales was unchanged.

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NORTH AMERICAN MOTORIZED RECREATIONAL VEHICLES

Analysis of the change in net sales for the three months ended October 31, 2024 compared to the three months ended October 31, 2023:

The decrease in total North American Motorized net sales of 29.0% compared to the prior-year quarter resulted from a 33.0% decrease in unit shipments and a 4.0% increase in the overall net price per unit due to the impact of changes in product mix and price. 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. According to statistics published by RVIA, for the three months ended October 31, 2024, combined North American motorhome wholesale unit shipments decreased 27.2% compared to the same period last year. According to the most recently published statistics from Stat Surveys, for the three months ended September 30, 2024 and 2023, our North American market share for motorhomes was 47.9% and 49.0%, 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 increases in the overall net price per unit within the Class A product line of 5.3%, the Class C product line of 3.0% and the Class B product line of 3.0% were all primarily due to favorable product mix changes since the prior-year quarter, with the Class A and Class B product lines benefiting from a higher concentration of sales of the generally higher-priced Tiffin Group product lines in the current-year period, as well as selective net selling price increases.

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North American Motorized cost of products sold decreased $169,286 to $462,481, or 91.5% of North American Motorized net sales, for the three months ended October 31, 2024 compared to $631,767, or 88.8% of North American Motorized net sales, for the three months ended October 31, 2023. The changes in material, labor, freight-out and warranty costs comprised $162,856 of the $169,286 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 84.8% for the three months ended October 31, 2024 compared to 83.2% for the three months ended October 31, 2023, with the increase primarily due to an increase in the material cost percentage primarily as a result of increased sales discounting and increased chassis costs. The material cost percentage increase was partially offset by a decrease in the warranty cost percentage.

Total manufacturing overhead decreased $6,430 in correlation with the net sales decrease, but increased as a percentage of North American Motorized net sales from 5.6% to 6.7% as the decrease in net sales levels resulted in higher overhead costs per unit sold.

The decrease in North American Motorized gross profit of $36,665 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 was driven by the decrease in North American Motorized 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 $8,108 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 was 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 $5,830. Sales-related travel, advertising and promotional costs also decreased $1,398. The increase in the overall selling, general and administrative expense as a percentage of North American Motorized net sales is primarily due to the decrease in North American Motorized net sales.

The decrease in North American Motorized income before income taxes of $27,971 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 was primarily due to the decrease in North American Motorized 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.

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EUROPEAN RECREATIONAL VEHICLES

Analysis of the change in net sales for the three months ended October 31, 2024 compared to the three months ended October 31, 2023:

The decrease in total European Recreational Vehicle net sales of 14.6% compared to the prior-year quarter resulted from a 27.4% decrease in unit shipments and a 12.8% increase in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. The decrease in unit shipments is primarily due to a softening in current dealer and consumer demand compared to the prior-year quarter, which also included independent dealer restocking of their low unit levels while current stocking levels are more in line with historical seasonal levels. The decrease in total European Recreational Vehicle net sales of $103,298 includes an increase of $17,897, or 2.5% netted in the 14.6% decrease, due to the increase in foreign exchange rates compared to the prior-year period.

The overall net price per unit increase of 12.8% includes a 2.5% increase due to the impact of foreign currency exchange rate changes and a 10.3% increase due to the combined impact of product mix and price, primarily due to the higher concentration of Motorcaravan sales in the current-year quarter due to improved chassis supply and fewer other component constraints compared to the prior-year quarter.

The constant-currency decreases in the overall net price per unit within the Motorcaravan product line of 1.5% and the Caravan product line of 2.2% were primarily due to the impact of product mix changes and increased sales discounting. The constant-currency increase in the overall net price per unit within the Campervan product line of 8.7% is primarily due to the current-year quarter included a higher concentration of Campervan units with a purchased chassis that is included in the unit sales price as opposed to units with a customer-supplied chassis that is not included in the unit sales price.

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European Recreational Vehicle cost of products sold decreased $73,118 to $512,255, or 84.7% of European Recreational Vehicle net sales, for the three months ended October 31, 2024 compared to $585,373, or 82.7% of European Recreational Vehicle net sales, for the three months ended October 31, 2023. The changes in material, labor, freight-out and warranty costs comprised $73,937 of the $73,118 decrease primarily due to the decreased net sales volume. Material, labor, freight-out and warranty costs as a combined percentage of European Recreational Vehicle net sales was flat at 71.4% for both the three months ended October 31, 2024 and the three months ended October 31, 2023, as decreases in both the direct labor and warranty cost percentages were offset by an increase in the material cost percentage that was primarily due to increased sales discounting.

Total manufacturing overhead increased slightly by $819, primarily due to increased depreciation expense being mostly offset by lower employee costs, but increased as a percentage of European Recreational Vehicle net sales from 11.3% to 13.3% primarily due to the sales decrease resulting in higher overhead costs per unit sold.

The decrease in European Recreational Vehicle gross profit of $30,180 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 was primarily due to the decrease in European Recreational Vehicle net sales, and the decrease in the gross profit percentage is due to the increase in the cost of products sold percentage noted above.

European Recreational Vehicle selling, general and administrative expenses increased just $38 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 and there were no changes of significance within its major cost components. The increase in the overall selling, general and administrative expense as a percentage of European Recreational Vehicle net sales is due to the decrease in European Recreational Vehicle net sales primarily increasing the employee compensation and benefits and the advertising and promotions cost percentages, which are generally more fixed costs in nature.

The decrease in European Recreational Vehicle income before income taxes of $27,590 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023 was primarily due to the decrease in European Recreational Vehicle net sales, and the primary reasons for the decrease in percentage were the increases in both the cost of products sold and selling, general and administrative expense percentages noted above.

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Liquidity and Capital Resources

As of October 31, 2024, we had $445,222 in cash and cash equivalents, of which $292,653 was held in the U.S. and the equivalent of $152,569, predominantly in Euros, was held in Europe, compared to $501,316 on July 31, 2024, of which $373,031 was held in the U.S. and the equivalent of $128,285, predominantly in Euros, was held in Europe. Cash and cash equivalents held internationally may be subject to foreign withholding taxes if repatriated to the United States. The components of the $56,094 decrease in cash and cash equivalents are described in more detail below, but the decrease was primarily attributable to cash provided by operations of $30,740 less cash used in financing activities of $64,620 and cash used in investing activities of $25,342.

Net working capital at October 31, 2024 was $1,051,459 compared to $1,083,005 at July 31, 2024. Capital expenditures of $25,273 for the three months ended October 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 $865,000 at October 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.

Our current estimate of committed and internally approved capital spend for the remainder of fiscal 2025 is approximately $200,000, 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 approximately two-thirds will be in North America and one-third in Europe, and that these expenditures will be funded by cash provided by our operating activities.

Our 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 provided by operating activities for the three months ended October 31, 2024 was $30,740 as compared to net cash provided by operating activities of $59,668 for the three months ended October 31, 2023.

For the three months ended October 31, 2024, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles and stock-based compensation) provided $76,854 of operating cash. The change in net working capital resulted in the use of $46,114 of operating cash during that period, primarily due to the decreases in certain accrued liabilities as the impacts of the changes in accounts receivable and accounts payable mostly offset each other.

For the three months ended October 31, 2023, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles and stock-based compensation) provided $138,101 of operating cash. The change in net working capital resulted in the use of $78,433 of operating cash during that period, primarily due to an increase in RV finished goods inventory.

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Investing Activities

Net cash used in investing activities for the three months ended October 31, 2024 was $25,342, primarily due to capital expenditures of $25,273.

Net cash used in investing activities for the three months ended October 31, 2023 was $51,062, primarily due to capital expenditures of $38,211.

Financing Activities

Net cash used in financing activities for the three months ended October 31, 2024 was $64,620, primarily for payments on the term-loan credit facilities of $60,000. During the first quarter of fiscal 2025, the Board approved and declared the payment of a regular quarterly dividend of $0.50 per share for the first quarter of fiscal 2025, but this dividend, totaling $26,551, was not paid until the second quarter of fiscal 2025.

Net cash used in financing activities for the three months ended October 31, 2023 was $19,153, which included borrowings of $53,449 on the asset-based credit facility and payments of $51,925 on the asset-based credit facility, in addition to treasury share purchases of $30,037. During the first quarter of fiscal 2024, the Board approved and declared the payment of a regular quarterly dividend of $0.48 per share for the first quarter of fiscal 2024, but this dividend, totaling $25,539, was not paid until the second quarter of fiscal 2024.

The Company increased its previous regular quarterly dividend of $0.48 per share to $0.50 per share in October 2024. In October 2023, the Company increased its previous regular quarterly dividend of $0.45 per share to $0.48 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, 2024. 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, 2024.

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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 $386,397 of debt denominated in Euros at October 31, 2024. A hypothetical 10% change in the Euro/U.S. dollar exchange rate would change our October 31, 2024 debt balance by approximately $38,640.

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 15.4% of our weighted-average interest rate at October 31, 2024) would result in an estimated $5,434 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 October 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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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

Before deciding to invest in our Company, in addition to the other information contained in our Annual Report on Form 10-K and other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended July 31, 2024, which could materially and adversely affect our business, financial condition, prospects, results of operations and cash flows. In such case, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks described in our most recent Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially affect our business, financial condition, results of operations and prospects.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

No director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or “non-Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K) during the three months ended October 31, 2024.

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ITEM 6. EXHIBITS

Exhibit Description

3.1 Thor Industries, Inc. Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated December 20, 2018) 3.2 Thor Industries, Inc. Amended and Restated By-Laws, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K dated December 20, 2018) 31.1 Chief Executive Officer’s Rule 13a-14(a) Certification 31.2 Chief Financial Officer’s Rule 13a-14(a) Certification 32.1 Chief Executive Officer’s Section 1350 Certification 32.2 Chief Financial Officer’s Section 1350 Certification 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 October 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.

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