THOR INDUSTRIES INC (THO) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, all Dollar and Euro amounts are presented in thousands except per share data.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto included in Item 8 of this Report.

The discussion below is a comparison of the results of operations and changes in financial condition for the fiscal years ended July 31, 2024 and 2023. The comparison of, and changes between, the fiscal years ended July 31, 2023 and 2022 can be found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023, as filed with the SEC on September 25, 2023.

Executive Summary

We were founded in 1980 and have grown to become the largest manufacturer of recreational vehicles (“RVs”) in the world based on units sold and revenue. We are also the largest manufacturer of RVs in North America, and one of the largest manufacturers of RVs in Europe. In North America, according to Stat Surveys, for the six months ended June 30, 2024, THOR’s current combined U.S. and Canadian market share based on units was approximately 40.2% for travel trailers and fifth wheels combined and approximately 47.2% for motorhomes. In Europe, according to the European Caravan Federation (“ECF”), EHG’s current market share for the six months ended June 30, 2024 based on units was approximately 25.3% for motorcaravans and campervans combined and approximately 18.3% for caravans.

Our business model includes decentralized operating units, and our RV products are primarily sold to independent, non-franchise dealers who, in turn, retail those products. The Company also sells component parts to both RV and other original equipment manufacturers, including aluminum extruded components, and sells aftermarket component parts through dealers and retailers. Our growth has been achieved both organically and through acquisition, and our strategy is designed to increase our profitability by driving innovation, servicing our customers, manufacturing quality products, improving the efficiencies of our facilities and making strategic growth acquisitions.

We generally do not finance dealers directly, but we do provide repurchase agreements to the dealers’ floor plan lenders.

We generally have financed our growth through a combination of internally generated cash flows from operations and, when needed, outside credit facilities. Capital acquisitions of $139,617 in fiscal 2024 were made primarily for purchases of land, production building additions and improvements and replacing machinery and equipment used in the ordinary course of business. See Note 3 to the Consolidated Financial Statements for capital acquisitions by segment. Ongoing supply chain constraints, particularly chassis delivery sequence issues within our European operations, have and could continue to impact our business and our consolidated financial results and financial position. In addition, the impact of recent inflation on consumer confidence, which historically has been highly correlated with RV retail sales, and the impact of inflation on the availability of discretionary funds of our end consumers, combined with significantly higher interest rates compared to recent years impacting both our independent dealers and the end consumer, had a negative impact on demand for our products at both the wholesale and retail levels during fiscal 2024, particularly in North America, and are expected to continue to impact the remainder of calendar year 2024. These risks to our business are more fully described in Part 1, Item 1A “Risk Factors” of this Report.

Significant Fiscal 2024 Events

Refinancing of Credit Agreements

On November 15, 2023, the Company entered into amendments to both its term loan and ABL agreements to extend maturities and lower the applicable margins used to determine the interest rate on the U.S. dollar-denominated loan tranche. The maturity date for the term loan was extended from February 1, 2026 to November 15, 2030. Covenants and other material provisions of the term loan agreement remain materially unchanged. Pursuant to the ABL amendment, the maturity date for loans under the ABL agreement was extended from September 1, 2026 to November 15, 2028. Maximum availability under the ABL remains at $1,000,000 and the applicable margin, covenants and other material provisions of the ABL remain materially unchanged. As a result of these amendments and associated maturity date extensions, the Company recognized total expense of $14,741 in fiscal 2024.

31

Subsequently, on July 1, 2024, the Company entered into an amendment to its term loan to modify the applicable margins used to determine the interest rate on both the U.S. dollar-denominated loans and Euro-denominated loans. The U.S. dollar interest under the amended agreement was reduced by 0.50% so that the applicable margin for Alternate Base Rate (“ABR”)-based loans is now 1.25% and for Secured Overnight Financing Rate (“SOFR”)-based loans is 2.25%. In addition, the applicable margin for the Euro loan interest was reduced by 0.25% so that the applicable margin for the EURIBOR-based loans is 2.75%.

North American RV Industry

The Company monitors industry conditions in the North American RV market using a number of resources including its own performance tracking and modeling. The Company also considers monthly wholesale shipment data as reported by the RVIA, which is typically issued on a one-month lag and represents manufacturers’ North American RV production and delivery to dealers. In addition, we monitor monthly North American retail sales trends as reported by Stat Surveys, whose data is typically issued on a month-and-a-half lag. The Company believes that monthly RV retail sales data is important as consumer purchases impact future dealer orders and ultimately our production and net sales.

North American RV independent dealer inventory of our North American RV products as of July 31, 2024 decreased 14.3% to approximately 75,000 units from approximately 87,500 units as of July 31, 2023. During fiscal 2023, particularly in the second half of fiscal 2023, retail sales began to slow, and carrying costs for dealers increased significantly due to inflationary cost increases and the rapid increase in floor plan interest rates during that period. These factors, among others, combined to cause dealers to reduce the number of units they carried as of July 31, 2024.

As of July 31, 2024, we believe North American dealer inventory levels for most products are generally at, or slightly higher than, the levels that dealers are comfortable stocking given the current retail sales levels and associated carrying costs. We believe dealers will continue to closely evaluate the unit stocking levels that they will elect to carry in future periods, which may be less than historical unit stocking levels, due to a combination of factors such as retail activity, RV wholesale prices as well as interest rates and other carrying costs.

THOR’s total North American RV backlog as of July 31, 2024 decreased $669,701, or 33.5%, to $1,329,282 from $1,998,983 as of July 31, 2023. The decrease in backlog is primarily a result of a reduction in recent orders from dealers, mainly for motorized products, which we believe is due to lower retail sales and dealer concerns over current interest costs and other carrying costs compared to the prior-year period.

North American Industry Wholesale Statistics

Key wholesale statistics for the North American RV industry, as reported by RVIA for the periods indicated, are as follows:

In September 2024, RVIA issued a revised forecast for calendar year 2024 North American wholesale unit shipments. Under a most likely scenario, towable and motorized unit shipments are projected to increase to approximately 289,800 and 34,300, respectively, for an annual total of approximately 324,100 units, up 3.5% from the 2023 calendar year wholesale shipments. The RVIA most likely forecast for calendar year 2024 could range from a lower estimate of approximately 311,600 total units to an upper estimate of approximately 336,600 units.

As part of their September 2024 forecast, RVIA also issued a downward revision of their initial June 2024 estimates for calendar year 2025 wholesale unit shipments. In the most likely scenario, towable and motorized unit shipments are projected to increase to an approximated annual total of 346,100 units, or 6.8% higher than the most likely scenario for calendar year 2024 wholesale shipments. This calendar year 2025 most likely forecast could range from a lower estimate of approximately 329,900 total units to an upper estimate of approximately 362,300 units. RVIA stated the primary reason for the downward revision of their calendar year 2025 wholesale unit shipments is the unfavorable impact of persistently elevated interest rates on retail sales causing a delay in the anticipated recovery of wholesale shipments.

32

North American Industry Retail Statistics

We believe that retail demand is the key to growth in the North American RV industry, and that annual North American RV industry wholesale shipments will return to typical seasonal patterns as dealer inventory levels and consumer demand become more balanced.

Key retail statistics for the North American RV industry, as reported by Stat Surveys for the periods indicated, are as follows:

Note: Data reported by Stat Surveys is based on official state and provincial records. This information is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various states or provinces.

While we anticipate that near-term demand will be influenced by many factors, including consumer confidence and the level of consumer spending on discretionary products, we believe future retail demand over the longer term will exceed historical, pre-pandemic levels. We believe interest in the RV lifestyle remains high as consumers continue to value the perceived benefits offered by the RV lifestyle, which provides people with the ability to connect with loved ones and nature as well as the potential to get away for short, frequent breaks or longer adventures.

Company North American Wholesale Statistics

The Company’s wholesale RV shipments, for the six months ended June 30, 2024 and 2023, to correspond with the industry wholesale periods noted above, were as follows:

Company North American Retail Statistics

Retail statistics of the Company’s RV products, as reported by Stat Surveys, for the six months ended June 30, 2024 and 2023, to correspond with the industry retail periods noted above, were as follows:

Note: Data reported by Stat Surveys is based on official state and provincial records. This information is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various states or provinces.

33

North American Outlook

Historically, RV industry sales have been impacted by a number of economic conditions faced by RV dealers, and ultimately retail consumers, such as the rate of unemployment, the rate of inflation, the level of consumer confidence, the disposable income of consumers, interest rates, credit availability, the health of the housing market, tax rates and fuel availability and prices. We believe these factors will continue to affect retail sales in our fiscal 2025. In addition, due to inflationary pressures, higher interest rates and other factors, we believe that RV dealers will be continuously reevaluating their desired stocking levels, which may result in lower than historical dealer inventory stocking levels on a unit basis. It is difficult to predict the extent to which any or all of these factors will impact the RV industry or our business in a particular future period, however, we currently believe the remainder of calendar year 2024 will continue to be negatively impacted by these factors.

Despite the near-term challenges, we remain optimistic about future growth in North American retail sales in the long term, as there are many factors driving product interest. Surveys conducted by THOR, RVIA and others show that Americans of all generations love the freedom of the outdoors and the enrichment that comes with living an active lifestyle. RVs allow people to be in control of their travel experiences, going where they want, when they want and with the people they want. The RV units we design, produce and sell allow people to spend time outdoors pursuing their favorite activities, creating cherished moments and deeply connecting with family and friends. Based on the ongoing value consumers place on these factors, we expect to see long-term growth in the North American RV industry. The growth in industry-wide RV sales during late calendar year 2020 through early calendar year 2023 resulted in exposing a wider range of consumers to the RV lifestyle. As a result, we believe many of those who have been recently exposed to the industry for the first time will become future owners, and that those who became first-time owners since the onset of the pandemic will become long-term RVers, resulting in future repeat and upgrade sales opportunities. We also believe many consumers are likely to continue opting for fewer vacations via air travel, cruise ships and hotels, while preferring vacations that RVs are uniquely positioned to provide, allowing consumers the ability to explore or unwind, often close to home. In addition, we believe that the availability of camping and RV parking facilities will be an important factor in the future growth of the industry and view both the significant recent investments and the future committed investments by campground owners, states and the federal government in camping facilities and accessibility to state and federal parks and forests to be positive long-term factors.

Economic and industry-wide factors that have historically affected, and which we believe will continue to affect, our operating results include the costs of commodities, the availability of critical supply components and labor costs incurred in the production of our products. Material and labor costs are the primary factors determining our cost of products sold, and any future increases in raw material or labor costs will impact our profit margins negatively if we are unable to offset those cost increases through a combination of product recontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts. Historically, we have generally been able to offset net cost increases over time through these measures.

It is extremely difficult to predict when or whether future supply chain issues related to chassis or other components used in the production of RVs will arise. Modifying available chassis for certain motorized products to use for other products is not a viable alternative, particularly in the short term, due to engineering requirements. The North American recreational vehicle industry has, from time to time in the past, experienced shortages of chassis for various reasons, including component shortages, production delays or other production issues and work stoppages at the chassis manufacturers.

While the North American RV industry has at times faced supply shortages or delivery delays of other, non-chassis raw material components, the supply chain is currently able to support our demand. If any of these factors were to impact our suppliers’ ability to fully supply our needs for key components, our costs of such components and our production output could be adversely affected.

European RV Industry

The Company monitors industry conditions in the European RV market using a number of resources including its own performance tracking and modeling. The Company also considers retail trends in the European RV market as reported by the European Caravan Federation (“ECF”) and its members. On a monthly basis, the Company receives OEM-specific reports for most of the individual member countries that make up the ECF through the Caravaning Industrie Verband e.V. (“CIVD”). The timing of these reports may vary, but typically they are issued on a one-to-two-month lag. While most countries provide OEM-specific information, the United Kingdom, which made up 17.4% and 9.3% of the caravan and motorcaravan (including campervans) European market for the six months ended June 30, 2024, respectively, does not provide OEM-specific information. Industry wholesale shipment data for the European RV market is not available.

34

Within Europe, over 90% of our sales are made to dealers within 10 different European countries. The market conditions, as well as the operating status of our independent dealers within each country, vary based on the various local economic and other conditions. It is inherently difficult to generalize about the operating conditions within the entire European region.

Independent dealer inventory of our European RV products as of July 31, 2024 was approximately 26,200 units as compared to approximately 21,200 units as of July 31, 2023. Independent RV dealer inventory levels of our European products are generally in line with historic seasonal levels in the various countries we serve. Within Germany, which accounts for approximately 60% of our European product sales, independent dealer inventory levels are also generally in line with historic norms.

Our European Recreational Vehicle backlog as of July 31, 2024 decreased $1,598,867, or 45.0%, to $1,950,793 compared to $3,549,660 as of July 31, 2023, primarily due to improved chassis supply availability as chassis constraints in the prior year resulted in significantly elevated backlogs as of July 31, 2023.

European Industry Retail Statistics

Key retail statistics for the European RV industry, as reported by the ECF for the periods indicated, are as follows:

(1)Industry retail registration statistics have been compiled from individual countries' reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.” The “Non-OEM Reporting Countries” are primarily the United Kingdom and others. Total European unit registrations are reported quarterly by the ECF.

(2)The ECF reports motorcaravans and campervans together.

Note: Data from the ECF is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various countries. (The "Non-OEM Reporting Countries" either do not report OEM-specific data to the ECF or do not have it available for the entire time period covered).

Company European Retail Statistics

(1)Company retail registration statistics have been compiled from individual countries' reporting of retail sales, and include the following countries: Germany, France, Sweden, Netherlands, Norway, Italy, Spain and others, collectively the “OEM Reporting Countries.”

Note: Data from the ECF is subject to adjustment, is continuously updated and is often impacted by delays in reporting by various countries.

European Outlook

Our European operations offer a full lineup of leisure vehicles including caravans and motorized products including urban vehicles, campervans and small-to-large motorcaravans. Our product offerings are not limited to vehicles only but also include accessories and services, including vehicle rentals. We address European retail customers through a sophisticated brand management approach based on consumer segmentation according to target group, core values and emotions. With the help of data-based and digital marketing, we intend to continue expanding our retail customer reach to new and younger consumer segments.

35

The impact of current macroeconomic factors on our business, including inflation and interest rates, supply chain constraints, environmental and sustainability regulations and geopolitical events, is uncertain. Our outlook for future European RV retail sales depends upon the various economic and regulatory conditions in the respective countries in which we sell our products, and on our ability to manage through supply chain issues that have, and are expected to continue to, impact the efficiency of our production of our motorized products in the near term. End-customer demand for RVs depends strongly on consumer confidence. Factors such as the rate of unemployment, the rate of inflation, private consumption and investments, the level of disposable income of consumers, interest rates, the health of the housing market, tax rates and regulatory restrictions and, since the pandemic, travel safety considerations all influence retail sales. Our long-term outlook for future growth in European RV retail sales remains positive as more people discover RVs as a way to support their lifestyle in search of independence and individuality, as well as using the RV as a multi-purpose vehicle to escape urban life and explore outdoor activities and nature.

We and our independent European dealers market our European recreational vehicles through multiple avenues including at numerous RV fairs at the country and regional levels which occur throughout the calendar year. These fairs have historically been well-attended events that allow retail consumers the ability to see the newest products, features and designs and to talk with product experts in addition to being able to purchase or order an RV. The most recent 2024 Caravan Salon show in late August 2024 experienced near-record attendance, demonstrating the high level of interest in the RV lifestyle despite the current macroeconomic uncertainties facing many consumers. In addition to our attendance at various strategic trade fairs, we have and will continue to strengthen and expand our digital activities to reach high potential target groups, generate leads and steer customers directly to dealerships. With approximately 1,100 active independent dealers in Germany and throughout Europe with whom we do business, we believe our European brands have one of the strongest and most professionally structured dealer and service networks in Europe.

Economic or industry-wide factors affecting our European RV operating results include the availability and costs of commodities and component parts and the labor used in the manufacture of our products. Material and labor costs are the primary factors determining our cost of products sold and any future increases in these costs will impact our profit margins negatively if we are unable to offset those cost increases through a combination of product recontenting, material sourcing strategies, efficiency improvements or raising the selling prices for our products by corresponding amounts.

While overall chassis supply has improved, we anticipate disruptions in the sequence of delivery of chassis to continue through the remainder of calendar year 2024. The sequence of chassis supply inhibits our ability to efficiently and consistently maintain our planned production levels. Uncertainties related to changing emission standards may also impact the availability of chassis used in our production of certain European motorized RVs and could also impact consumer buying patterns.

In Europe, we experienced cost increases, supply shortages and delivery delays of other, non-chassis raw material components which negatively impacted the efficiency of our production in the current fiscal year. We believe these shortages and delays will continue to result in production inefficiencies in the near term, which will have a negative impact on our European operating results as well as on our consolidated results due to the negative impact of completing units off the production line.

Where possible, to minimize the future impact of supply chain constraints, we have identified a second-source supplier base for certain component parts, however, the engineering requirements required with an alternate component part, particularly the chassis our various units are built upon, limits the impact of these alternative suppliers on reducing any near-term supply constraints.

In addition to potential future material supply constraints, labor shortages may also impact our European operations. Currently, we are experiencing a shortage of available skilled workers due to near full employment rates in the European countries where the majority of our manufacturing sites are located.

36

RESULTS OF OPERATIONS

FISCAL 2024 VS. FISCAL 2023

37

CONSOLIDATED

Consolidated net sales for fiscal 2024 decreased $1,078,197, or 9.7%, compared to fiscal 2023. The decrease in consolidated net sales is primarily due to lower current dealer and consumer demand in comparison to fiscal 2023 in the North American Towable and Motorized segments, partially offset by an increase in net sales from our European segment. Approximately 34% of the Company’s net sales for fiscal 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 $1,078,197, or 9.7% decrease in consolidated net sales in fiscal 2024 includes an increase of $66,670 from the change in currency exchange rates between the two periods. To determine this impact, net sales transacted in currencies other than U.S. dollars have been translated to U.S. dollars using the average exchange rates that were in effect during the comparative period.

Consolidated gross profit for fiscal 2024 decreased $144,391, or 9.0%, compared to fiscal 2023. Consolidated gross profit was 14.5% of consolidated net sales for fiscal 2024 and 14.4% for fiscal 2023. The decrease in consolidated gross profit in fiscal 2024 compared to fiscal 2023 was primarily due to the impact of the decrease in consolidated net sales.

Selling, general and administrative expenses for fiscal 2024 increased $25,477, or 2.9%, compared to fiscal 2023, which included increased sales-related travel, advertising and promotional costs, dealer settlement and repurchase costs, research and development costs and professional fees, including third-party fees related to the debt refinancing in the second quarter of fiscal 2024. These cost increases were partially offset by the impact of the 9.7% decrease in consolidated net sales and the decrease in income before income taxes, which resulted in lower sales commissions and other incentive compensation, and there was a combined decrease in net costs related to the investigation of the Company’s advertising practices in Germany and a product recall as discussed in Note 15 to the Consolidated Financial Statements. Selling, general and administrative expenses were 8.9% of consolidated net sales for fiscal 2024 and 7.8% for fiscal 2023, with the increase in percentage due to the combination of the decrease in consolidated net sales in fiscal 2024 compared to fiscal 2023 and the increase in costs.

Amortization of intangible assets expense for fiscal 2024 decreased $8,264, or 5.9%, to $132,544, compared to fiscal 2023 due to a reduction in dealer network amortization, which is amortized on an accelerated basis and therefore decreases over time.

38

The decrease of $150,509, or 30.1%, in income before income taxes for fiscal 2024 compared to fiscal 2023, was primarily driven by the decrease in consolidated net sales and the increase in selling, general and administrative expenses noted above.

The overall annual effective income tax rate for fiscal 2024 was 23.9%, compared with 25.1% for fiscal 2023. The primary reason for the decrease in the overall annual effective income tax rate relates to the favorable impact of the terms of the resolution of certain matters discussed in Note 15 to the Consolidated Financial Statements in fiscal 2024.

Additional information concerning the changes in net sales, gross profit and selling, general and administrative expenses are addressed below in the segment reporting that follows.

The $25,746 increase in Corporate expenses included in selling, general and administrative expenses for fiscal 2024 compared to fiscal 2023 includes an increase of $9,594 in legal and professional fees, primarily related to third-party fees of $7,175 incurred with the debt refinancing discussed in Note 13 to the Condensed Consolidated Financial Statements. The $25,746 increase also includes an increase in deferred compensation expense of $8,475 due to market value fluctuations between the two periods, an increase in innovation-led research and development costs of $8,463 and an increase in stock-based and other compensation costs of $4,018. Costs related to certain dealer promotional programs also increased $4,500. These expense increases were partially offset by income of $17,012 related to the legal and recall matters discussed in Note 15 to the Condensed Consolidated Financial Statements.

Net expense for Corporate interest and other income and expenses decreased $11,753 in fiscal 2024 compared to fiscal 2023. Net interest expense decreased by $12,157, in spite of the one-time debt refinancing fees of $7,566 incurred in the second quarter of fiscal 2024, due to increased interest income received from higher average cash balances held and higher interest income rates combined with lower debt interest expense, primarily due to lower average debt balances outstanding. In addition, there were favorable changes of $8,038 in the fair value of the Company’s deferred compensation plan assets and $7,958 in the fair value of certain other equity investments, both due to market value fluctuations between the two periods. These net expense decreases were partially offset by a decrease of $7,227 in non-cash foreign currency gains on certain Euro-denominated loans in fiscal 2024 as compared to fiscal 2023, and operating losses related to our equity investments as discussed in Note 8 to the Condensed Consolidated Financial Statements were $2,976 larger in fiscal 2024 as compared to fiscal 2023, primarily due to the current period including a full year of results in fiscal 2024 as compared to seven months in fiscal 2023.

39

SEGMENT REPORTING

North American Towable Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2024 vs. Fiscal 2023

The decrease in total North American Towable net sales of 12.4% compared to the prior fiscal year resulted from a 5.9% increase in unit shipments and a 18.3% 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 recent demand for the lower cost travel trailer units as compared to the prior year. According to statistics published by RVIA, for the twelve months ended July 31, 2024, combined travel trailer and fifth wheel wholesale unit shipments increased 8.0% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2024 and 2023, our retail market share for travel trailers and fifth wheels combined was 40.4% and 42.4%, respectively.

The decreases in the overall net price per unit within the travel trailer product line of 19.9% and the fifth wheel product line of 5.0% during fiscal 2024 were primarily due to product mix changes trending toward more moderately-priced units as compared to fiscal 2023.

North American Towable cost of products sold decreased $446,856 to $3,252,285, or 88.4% of North American Towable net sales, for fiscal 2024 compared to $3,699,141, or 88.0% of North American Towable net sales, for fiscal 2023. Changes in material, labor, freight-out and warranty costs comprised $418,720 of the $446,856 decrease in cost of products. Material, labor, freight-out and warranty costs as a combined percentage of North American Towable net sales were 80.2% for both fiscal 2024 and fiscal 2023, as a decrease in the material cost percentage driven by the combined favorable impacts of selective net selling price increases, stable material costs and cost-saving initiatives was offset by an increase in the labor cost percentage due to product mix changes and a modest increase in the warranty cost percentage.

Total manufacturing overhead decreased $28,136 in correlation with the decrease in sales but increased as a percentage of North American Towable net sales from 7.8% to 8.2%, as the decreased net sales levels resulted in higher overhead costs per unit sold. Variable costs in manufacturing overhead decreased $28,487 in fiscal 2024 compared to fiscal 2023 as a result of the decrease in North American Towable net sales.

40

The decrease of $76,101 in North American Towable gross profit for fiscal 2024 compared to fiscal 2023 was driven by the decrease in net sales, and the decrease in the gross profit percentage is due to the increase in the cost of products sold percentage noted above.

The increase of $2,714 in North American Towable selling, general and administrative expenses for fiscal 2024 compared to fiscal 2023 includes the impact of the decreases in North American Towable net sales and income before income taxes, which caused related commissions, incentive and other compensation to decrease by $6,310. Sales-related travel, advertising and promotional costs also decreased $2,160. These decreases were more than offset by an increase of $15,229 in professional fees and settlement and RV repurchase costs. The increase in the overall selling, general and administrative expense as a percentage of North American Towable net sales was primarily due to the decrease in North American Towable net sales.

The decrease of $67,891 in North American Towable income before income taxes for fiscal 2024 compared to fiscal 2023 was primarily due to the decrease in North American Towable net sales, and the primary reasons for the decrease in the percentage of North American Towable net sales were the increases in the cost of products sold and selling, general and administrative expense percentages noted above.

41

North American Motorized Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2024 vs. Fiscal 2023

The decrease in total North American Motorized net sales of 26.2% compared to the prior fiscal year resulted from a 24.4% decrease in unit shipments and a 1.8% decrease in the overall net price per unit due to the combined impact of changes in product mix and price, which included elevated sales discounts compared to the prior fiscal year. 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 fiscal year, which included independent dealer restocking of certain motorized products. According to statistics published by RVIA, for the twelve months ended July 31, 2024, combined motorhome wholesale unit shipments decreased 24.2% compared to the same period last year. According to statistics published by Stat Surveys, for the twelve-month periods ended June 30, 2024 and 2023, our retail market share for motorhomes was 47.7% and 48.2%, respectively.

The decreases in the overall change in product mix and price per unit within the Class A product line of 0.4%, the Class C product line of 1.8% and the Class B product line of 2.1% during fiscal 2024 were all primarily due to both higher discounting levels and consumers trending toward more moderately-priced units compared to the prior fiscal year.

North American Motorized cost of products sold decreased $703,445 to $2,168,010, or 88.6% of North American Motorized net sales, for fiscal 2024 compared to $2,871,455, or 86.6% of North American Motorized net sales, for fiscal 2023. The changes in material, labor, freight-out and warranty costs comprised $665,521 of the $703,445 decrease due to the decreased sales volume. Material, labor, freight-out and warranty costs as a combined percentage of motorized net sales was 82.4% for fiscal 2024 compared to 80.9% for fiscal 2023, with the increase mainly due to an increase in the material cost percentage, primarily due to higher sales discounting, which effectively decreases net selling prices and correspondingly increases the material cost percentage, as well as increased chassis costs. These material cost percentage increases were partially offset by the favorable impact of the North American Motorized LIFO inventory liquidation of approximately $23,900 in fiscal 2024.

42

Total manufacturing overhead decreased $37,924 with the decrease in net sales but increased as a percentage of North American Motorized net sales from 5.7% to 6.2%, as the decrease in net sales levels resulted in slightly higher overhead costs per unit sold. Variable costs in manufacturing overhead decreased $39,251 in fiscal 2024 compared to fiscal 2023 as a result of the decrease in North American Motorized net sales.

The decrease of $164,875 in North American Motorized gross profit for fiscal 2024 compared to fiscal 2023 was driven by the decrease in net sales, while the decrease in the gross profit percentage was due to the increase in the cost of products sold percentage noted above.

The decrease of $39,111 in North American Motorized selling, general and administrative expenses in fiscal 2024 compared to fiscal 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 $40,330. This decrease was partially offset by an increase in professional fees and settlement and RV repurchase costs of $5,690. The increase in the overall selling, general and administrative expense as a percentage of North American Motorized net sales was primarily due to the decrease in North American Motorized net sales.

The decrease of $128,711 in North American Motorized income before income taxes for fiscal 2024 compared to fiscal 2023 was primarily due to the decrease in North American Motorized net sales, and the primary reasons for the decrease in the percentage of North American Motorized net sales were the increases in the cost of products sold and selling, general and administrative expense percentages noted above.

43

European Recreational Vehicles

Analysis of Change in Net Sales for Fiscal 2024 vs. Fiscal 2023

The increase in total European Recreational Vehicle net sales of 10.8% compared to the prior fiscal year resulted from a decrease of 0.7% in unit shipments and an increase of 11.5% in the overall net price per unit due to the total impact of changes in foreign currency, product mix and price. The increase in European Recreational Vehicle net sales of $327,833 includes an increase of $66,670, or 2.2% of the 10.8% increase, due to the increase in foreign exchange rates in fiscal 2024 compared to fiscal 2023. Sales on a constant-currency basis increased by 8.6%.

The overall net price per unit increase of 11.5% includes an increase of 2.2% due to the impact of foreign currency exchange rate changes and a constant-currency increase of 9.3% due to the combined impact of product mix and selling price increases, primarily due to the much higher concentration of the higher-priced Motorcaravan sales in the current fiscal year compared to the prior fiscal year, primarily due to improved supply of chassis and other components compared to the prior fiscal year.

The constant-currency increases in the overall net price per unit within the Motorcaravan product line of 1.6% and the Caravan product line of 0.7% were primarily due to the impact of net selling price increases and product mix changes. The constant-currency decrease in the overall net price per unit within the Campervan product line of 0.9% was primarily due to the impact of product mix changes and increased sales discounting.

44

European Recreational Vehicle cost of products sold increased 251,966 to $2,783,769, or 82.7% of European Recreational Vehicle net sales, for fiscal 2024 compared to 2,531,803, or 83.4% of European Recreational Vehicle net sales, for fiscal 2023. The changes in material, labor, freight-out and warranty costs comprised $210,144 of the $251,966 increase. Material, labor, freight-out and warranty costs as a combined percentage of European Recreational Vehicle net sales decreased to 72.5% for fiscal 2024 compared to 73.4% for fiscal 2023 primarily due to a decrease in the labor cost percentage from product mix changes, mainly the increased concentration of motorcaravans which carry a lower direct labor percentage relative to their sales price. The material cost and warranty cost percentages also improved slightly.

Total manufacturing overhead increased $41,822 with the increase in European Recreational Vehicle net sales and increased as a percentage of European Recreational Vehicle net sales from 10.0% to 10.2% primarily due to small increases in manufacturing overhead wages and benefits and depreciation expense as a percentage of European Recreational Vehicle net sales.

The increase of $75,867 in European Recreational Vehicle gross profit for fiscal 2024 compared to fiscal 2023 was primarily due to the increase in European Recreational Vehicle net sales and the decrease in the cost of products sold percentage noted above.

The $26,975 increase in European Recreational Vehicle selling, general and administrative expenses for fiscal 2024 compared to fiscal 2023 included the impact of the increases in European Recreational Vehicle net sales and income before income taxes, which caused related commissions, incentive and other compensation to increase by $6,732. Sales-related travel and advertising and promotional costs also increased $11,617, primarily due to increased display space at the annual Caravan Salon show and attending more regional shows in comparison to the prior fiscal year, and professional fees also increased $2,699.

The primary reason for the $51,752 increase in European Recreational Vehicle income before income taxes was the increase in European Recreational Vehicle net sales. The primary reasons for the increase in percentage was the decrease in the cost of products sold percentage noted above. Amortization expense was also 0.3% lower as a percentage of sales in fiscal 2024 compared to fiscal 2023.

Liquidity and Capital Resources

As of July 31, 2024, we had $501,316 in cash and cash equivalents, of which $373,031 is held in the United States and the equivalent of $128,285, predominantly in Euros, is held in Europe, compared to $441,232 on July 31, 2023, of which $338,703 was held in the United States and the equivalent of $102,529, predominantly in Euros, was held in Europe. Cash and cash equivalents held internationally may be subject to foreign withholding taxes if repatriated to the United States. The components of the $60,084 increase in cash and cash equivalents are described in more detail below, but the increase was primarily attributable to cash provided by operations of $545,548 less cash used in financing activities of $337,677 and cash used in investing activities of $146,812.

Net working capital at July 31, 2024 was $1,083,005 compared to $1,077,098 at July 31, 2023. Capital expenditures of $139,635 for fiscal 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 $814,000 at July 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 17 to the 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.

45

Our current estimate of committed and internally approved capital spend for fiscal 2025 is $225,000, 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 of our capital spend will be in North America and one-third in Europe, and that these expenditures will be funded by cash provided by our operating activities.

The Company’s Board currently intends to continue regular quarterly cash dividend payments in the future. As is customary under credit facilities, certain actions, including our ability to pay dividends, are subject to the satisfaction of certain payment 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 fiscal 2024 was $545,548 as compared to net cash provided by operating activities of $981,633 for fiscal 2023.

For fiscal 2024, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles, deferred income tax benefit and stock-based compensation) provided $564,153 of operating cash. The change in net working capital used operating cash of $18,605 during fiscal 2024, primarily due to a reduction in inventory levels being more than offset by a decrease in accounts payable associated with the decrease in inventory levels, required income tax payments exceeding the income tax provision for fiscal 2024 and a decrease in certain accrued liabilities as a result of the reduction in sales and production compared to fiscal 2023.

For fiscal 2023, net income adjusted for non-cash items (primarily depreciation, amortization of intangibles, deferred income tax benefit and stock-based compensation) provided $664,339 of operating cash. The change in net working capital provided additional operating cash of $317,294 during fiscal 2023, primarily due to decreases in accounts receivable due to lower sales levels and a reduction in inventory levels.

Investing Activities

Net cash used in investing activities for fiscal 2024 was $146,812, primarily due to capital expenditures of $139,635.

Net cash used in investing activities for fiscal 2023 was $222,483, primarily due to capital expenditures of $208,194.

Financing Activities

Net cash used in financing activities for fiscal 2024 was $337,677, including borrowings of $113,502 on the asset-based credit facility for temporary working capital needs and subsequent payments of $111,555 on the asset-based credit facility. In addition, borrowings of $186,723 were made in connection with the debt refinancing as discussed in Note 13 to the Consolidated Financial Statements, and payments totaling $340,619 were made on the term-loan credit facilities, of which $127,626 was paid in connection with the debt refinancing. Additionally, the Company made regular quarterly cash dividend payments of $0.48 per share for each quarter of fiscal 2024 totaling $102,137, and $68,387 was used for treasury share repurchases.

Net cash used in financing activities for fiscal 2023 was $635,685, including payments of $100,000 on the ABL facility and $402,355 on the term-loan credit facilities. Additionally, the Company made regular quarterly cash dividend payments of $0.45 per share for each quarter of fiscal 2023 totaling $95,969, and $42,007 was used for treasury share repurchases.

The Company increased its previous regular quarterly dividend of $0.45 per share to $0.48 per share in October 2023. The Company increased its previous regular quarterly dividend of $0.43 per share to $0.45 per share in October 2022.

46

Principal Contractual Obligations and Commercial Commitments

Our principal contractual obligations and commercial commitments at July 31, 2024 are summarized in the following charts. Unrecognized income tax benefits in the amount of $12,405 have been excluded from the table because we are unable to determine a reasonably reliable estimate of the timing of future payment. We have no other material off-balance sheet commitments.

(1)See Note 13 to the Consolidated Financial Statements for additional information.

(2)See Note 16 to the Consolidated Financial Statements for additional information.

(3)Represent commitments to purchase specified quantities of raw materials at market prices. The dollar values above have been estimated based on July 31, 2024 market prices.

(1)The standby repurchase totals above do not consider any curtailments that lower the eventual repurchase obligation totals, and these obligations generally extend up to eighteen months from the date of sale of the related product to the dealer. In estimating the expiration of the standby repurchase obligations, we used inventory reports as of July 31, 2024 from our independent dealers’ primary lending institutions and made an assumption for obligations for inventory aged 0-12 months that it was financed evenly over the twelve-month period.

Application of Critical Accounting Estimates

See Note 1 to the Consolidated Financial Statements for further information on the Company’s significant accounting policies.

The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We believe that of our accounting estimates, the following may involve a higher degree of judgment and complexity:

Business Combinations

We account for the acquisition of a business using the acquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to non-controlling interests, are recorded at the acquisition date at their fair values. Assigning fair values requires the Company to make significant estimates and assumptions regarding the fair values of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances, and liabilities, such as uncertain tax positions and contingencies. The Company may refine these estimates, if necessary, over a period not to exceed one year by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.

Significant estimates and assumptions are used in estimating the value of acquired identifiable intangible assets, including estimating future cash flows based on revenues and margins that the Company expects to generate following the acquisition, selecting an applicable royalty rate where needed, determining an appropriate dealer attrition rate, applying an appropriate discount rate to estimate a present value of those cash flows and determining their useful lives. Subsequent changes to projections driven by actual results following the acquisition date could require the Company to record impairment charges.

47

Goodwill, Intangible and Long-Lived Assets

Goodwill results from the excess of purchase price over the net assets of an acquired business. The Company’s reporting units are generally the same as its operating segments, which are identified in Note 3 to the Consolidated Financial Statements. Goodwill is not amortized but is tested for impairment annually as of May 31 of each fiscal year and whenever events or changes in circumstances indicate that an impairment may have occurred. The total carrying value of goodwill as of July 31, 2024 is $1,786,973. See Note 7 to the Consolidated Financial Statements for a summary of changes in carrying value by fiscal year and reportable segment. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge equal to that excess is recognized, not to exceed the amount of goodwill allocated to the reporting unit. As part of the annual impairment testing, the Company may utilize a qualitative approach rather than a quantitative approach to determine if an impairment exists, considering various factors including industry changes, actual results as compared to forecasted results, or the timing of a recent acquisition, if applicable.

For the Company’s May 31, 2024 annual impairment test, multiple reporting units showed fair value exceeding carrying value by less than 25%. The aggregate value of goodwill in these reporting units is approximately 85% of the Company’s consolidated goodwill balance. Fair values are determined using discounted cash flow models, and these estimates are subject to significant management judgment, including the determination of many factors and inputs such as, but not limited to, sales growth rates, gross margin patterns, cost growth rates, terminal value assumptions and discount rates developed using market observable inputs and consideration of risk regarding future performance. Market multiples derived from selected guideline public companies are also utilized to evaluate the discounted cash flow models. Changes in any of these estimates can have a significant impact on the determination of fair value. Additionally, market data and factors outside the Company’s control, such as interest rates, dealer and end consumer demand, consumer preferences or unexpected competition could have a significant impact on estimated fair values. Changes in any of these estimates or other factors could potentially result in future material impairments in one or more of the Company’s reporting units.

The Company’s intangible assets are dealer networks, trademarks and design technology and other intangible assets acquired in business acquisitions. Dealer networks are valued on a Discounted Cash Flow method and are amortized on an accelerated basis over 12 to 20 years, with amortization beginning after any applicable backlog amortization is completed. Trademarks and design technology assets are both valued on a Relief of Royalty method and are both amortized on a straight-line basis, using lives of 15 to 25 years for trademarks and 10 to 15 years for design technology assets, respectively. Amortizable intangible assets, net as of July 31, 2024 totaled $861,133. See Note 7 to the Consolidated Financial Statements for a summary of the components of that balance.

We review our tangible and intangible long-lived assets (individually or in a related group, as appropriate) for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable from future cash flows attributable to the assets. We continually assess whether events or changes in circumstances represent a ‘triggering’ event that would require us to complete an impairment assessment. Factors that we consider in determining whether a triggering event has occurred include, among other things, whether there has been a significant adverse change in legal factors, business climate or competition related to the operation of the asset, whether there has been a significant decrease in actual or expected operating results related to the asset and whether there are current plans to sell or dispose of the asset. The determination of whether a triggering event has occurred is subject to significant management judgment, including at which point or fiscal quarter a triggering event has occurred when the relevant adverse factors persist over extended periods.

The Company completed its annual goodwill impairment test as of May 31, 2024, and no impairment was identified. See Note 7 to the Consolidated Financial Statements for further information regarding goodwill and intangible assets.

48

Product Warranty

We generally provide retail customers of our products with either a one-year or two-year warranty covering defects in material or workmanship, with longer warranties on certain structural components or other items. We record a liability, which totaled $311,627 at July 31, 2024, based on our best estimate of the amounts necessary to settle unpaid existing claims and estimated future claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of retail sold units, existing THOR units in dealer inventory, historical average costs per unit incurred and a profile of the distribution of warranty expenditures over the warranty period. A significant increase in service shop rates, the cost of parts or the frequency of claims could have a material adverse impact on our operating results for the period or periods in which such additional claims or costs materialize. Management believes that the warranty liability is appropriate; however, actual claims incurred could differ from estimates, requiring adjustments to the reserves.

Accounting Pronouncements

Reference is made to Note 1 to the Consolidated Financial Statements in this report for a summary of recently adopted accounting pronouncements, which summary is hereby incorporated by reference.

49