10-K 1 l03797ae10vk.txt THOR INDUSTRIES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 --------- FORM 10-K --------- Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended July 31, 2003, Commission File Number 1-9235 THOR INDUSTRIES, INC. --------------------- (Exact name of registrant as specified in its charter) Delaware 93-0768752 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 419 W. Pike Street, Jackson Center, Ohio 45334-0629 ---------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (937) 596-6849 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Stock (par value $.10 per share) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to the filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes X No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the act). Yes X No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of January 31, 2003 was $370,934,493, based on the closing price of the registrant's common shares on January 31, 2003, the last business day of the registrant's most recently completed second fiscal quarter. Solely for the purpose of this calculation and for no other purpose, the non-affiliates of the registrant are assumed to be all shareholders of the registrant other than (i) directors of the registrant (ii) executive officers of the registrant who are identified as "named executive officers" pursuant to Item 11 of the registrants Form 10-K and (iii) any shareholder that beneficially owns 10% or more of the registrant's common shares. Such exclusion is not intended, nor shall it be deemed, to be an admission that such persons are affiliates of the registrant. The number of common shares of registrant's stock outstanding as of October 14, 2003 was 28,621,296. Documents incorporated by reference: Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on December 9, 2003 are incorporated by reference in Part III of this Annual Report on form 10-K. 1 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS Our company was founded in 1980 and produces and sells a wide range of recreation vehicles and small and mid-size buses in the United States and Canada. We are incorporated in Delaware and are the successor to a corporation of the same name which was incorporated in Nevada on July 29, 1980. Our principal executive office is located at 419 West Pike Street, Jackson Center, Ohio 45334 and our telephone number is (937)596-6849. Our Internet address is www.thorindustries.com. Our principal recreation vehicle operating subsidiaries are Airstream, Inc. (Airstream), Dutchmen Manufacturing, Inc. (Dutchmen), Four Winds International, Inc. (Four Winds), Keystone RV Company (Keystone), Komfort Corp. (Komfort), Thor America, Inc. (Thor America), Citair, Inc. (Citair), Thor California, Inc. (Thor California), and Damon Corporation (Damon). Our principal small and mid-size bus operating subsidiaries are Champion Bus, Inc. (Champion), ElDorado National California, Inc. (ElDorado California), and ElDorado National Kansas, Inc. (ElDorado Kansas). On November 9, 2001, we acquired 100% of the common and preferred stock of Keystone RV Company. Keystone is engaged in the business of manufacturing travel trailers and fifth wheel recreation vehicles. The purchase price of $151,104,000 consisted of cash of $88,824,000 and 4,500,000 shares of Thor common stock valued at $62,280,000, of which 2,744,832 shares were restricted. The value of the common stock was based on the average market price of Thor's common shares over the two-day period before and after the terms of the acquisition were agreed to and announced. The value of the restricted shares was based on an independent appraisal. On September 2, 2003 we acquired 100% of the common stock of Damon Corporation, a major manufacturer of Class A motorhomes and the largest builder of park models. Damon has approximately $200 million in sales, approximately 82% of which is Class A motorhomes and the balance in park models. Its acquisition makes Thor the fourth largest class A motorhome builder with 8.5% of the market according to Statistical Surveys, Inc. The purchase price, which is subject to audit and other outstanding conditions was approximately $29,866,000. In addition, immediately after the closing, the Company paid off a $12,972,000 bank debt assumed in connection with the acquisition. RECREATION VEHICLES Airstream Our Airstream subsidiary manufactures and sells premium and medium-high priced travel trailers and motorhomes under the trade names Airstream Classic, and Land Yacht. Airstream Classic vehicles are distinguished by their rounded shape and bright aluminum finish and, in our opinion, constitute the most recognized product in the recreation vehicle industry. Airstream, responding to the demands of the market for a lighter, lower-cost product, also manufactures and sells the Airstream Safari, International and Bambi travel trailers. Dutchmen Our Dutchmen subsidiary manufactures and sells conventional travel trailers and fifth wheels primarily under the trade names Dutchmen, Four Winds, Aero and T@b. Dutchmen has become one of the largest-selling brands in the United States due to its reputation for a quality product sold at a lower price. Four Winds Our Four Winds subsidiary manufactures and sells Class C and Class A motorhomes. It is the second largest manufacturer of Class C motorhomes with 16% of the total retail market segment. Its products are sold under trade names such as Four Winds, Hurricane, Infinity, Windsport, Mandalay, Dutchmen, Chateau and Fun Mover. 2 Thor America Our Thor America subsidiary manufactures and sells moderately priced travel trailers and fifth wheels under the trade names Citation, Chateau, and Corsair. Citair Our Citair subsidiary is one of the largest Canadian producers of moderately-priced travel trailers, fifth wheels, Class C motorhomes and truck campers. It operates under the name General Coach and sells recreation vehicles under the trade names Citation and Corsair. Keystone Our Keystone subsidiary, acquired on November 9, 2001, manufactures travel trailers and fifth wheels under trade names such as Montana, Springdale, Hornet, Sprinter, Outback, Laredo, Everest, Mountaineer, Challenger, and Cougar. Keystone's Montana and Cougar fifth wheels are the number one and number two brands with an approximate combined 13% share of that retail segment. Komfort Our Komfort subsidiary manufactures and sells travel trailers and fifth wheels under the trade names Komfort and Trailblazer primarily in the western United States and western Canada. Thor California Our Thor California subsidiary manufactures and sells travel trailers and fifth wheels under the trade names Wanderer, Tahoe and Jazz primarily in the western United States. Damon Motor Coach Damon Motor Coach (part of newly acquired Damon Corporation) builds gasoline (approximately 80% of sales) and diesel (approximately 20% of sales) Class A motor homes. In the seven months ended July 31, 2003, it achieved 5.1% of the Class A market and was the seventh largest Class A builder, according to Statistical Surveys, Inc. Breckenridge Breckenridge is the park model division of the newly acquired Damon Corporation. Park models are factory built second homes designed for recreational living. They are towed to a destination site such as a lake, woods or park and are considered as a country cottage. Breckenridge is the largest park model builder with a 26% share of this approximately 5,000 annual unit market. We believe that our recreation vehicle business is the largest unit manufacturer in North America based on retail statistics published by Statistical Surveys, Inc. BUSES ElDorado National ElDorado National, comprised of our ElDorado Kansas and ElDorado California subsidiaries, is a manufacturer of small and mid-size buses for transit, airport car rental and hotel/motel shuttles, paramedical transit for hospitals and nursing homes, tour and charter operations and other uses. ElDorado National builds buses under trade names such as Aerolite, AeroElite, Aerotech, Escort, MST, Transmark, Axess and EZ Rider. ElDorado National's plants are located in Salina, Kansas and Chino, California. Champion Bus Champion builds small and mid-size buses under trade names such as Challenger, CTS, and Crusader. We believe that our bus division is the largest unit manufacturer of small and mid-size commercial buses in North America based on statistics published by the Mid-Size Bus Manufacturers Association. 3 PRODUCT LINE SALES SEGMENT The table below sets forth the contribution of each of the Company's product lines to net sales in each of the last three fiscal years.

2003 2002 2001 ---- ---- ---- ($000) Amount % Amount % Amount % ----------------------------------------------------------- Recreation vehicles $1,354,412 86 $ 973,697 78 $529,694 64 Buses 216,992 14 271,603 22 292,034 36 ----------------------------------------------------------- Total Net Sales $1,571,404 100 $1,245,300 100 $821,728 100 -----------------------------------------------------------

Additional information concerning business segments is included in Note M of the Notes to the Consolidated Financial Statements. RECREATION VEHICLES Overview We manufacture and sell a wide variety of recreation vehicles throughout the United States and Canada, as well as related parts and accessories. Recreation vehicle classifications are based upon standards established by the Recreation Vehicle Industry Association or RVIA. The principal types of recreation vehicles that we produce include conventional travel trailers, fifth wheels, Class A and Class C motorhomes and park models. Travel trailers are non-motorized vehicles which are designed to be towed by passenger automobiles, pick-up trucks or vans. Travel trailers provide comfortable, self-contained living facilities for short periods of time. We produce "conventional," and "fifth wheel" travel trailers. Conventional trailers are towed by means of a frame hitch attached to the towing vehicle. Fifth wheel trailers, designed to be towed by pickup trucks, are constructed with a raised forward section that is attached to the bed area of the pickup truck. A motorhome is a self-powered vehicle built on a motor vehicle chassis. Motorhomes are self-contained with their own lighting, heating, cooking, refrigeration, sewage holding and water storage facilities, so that they can be lived in without being attached to utilities. Class A motorhomes, constructed on medium-duty truck chassis, are supplied complete with engine and drive train components by motor vehicle manufacturers such as Workhorse Custom Chassis, Spartan, Ford and Freightliner. We design, manufacture and install the living area and driver's compartment of Class A motorhomes. Class C motorhomes are built on a Ford or General Motors small truck or van chassis which includes an engine, drive train components, and a finished cab section. We construct a living area which has access to the driver's compartment and attaches to the cab section. Although they are not designed for permanent or semi-permanent living, recreation vehicles can provide comfortable living facilities for short periods of time. Park models are recreational dwellings towed to a permanent site such as a lake, woods or park. The maximum size of park models is 400 square feet. They provide comfortable self contained living and are second homes for approximately 94% of their owners according to The Recreational Park Trailer Association. Production In order to minimize finished inventory, our recreation vehicles generally are produced to order. Our facilities are designed to provide efficient assembly line manufacturing of products. We are currently expanding our production facilities to accommodate increased demand. Capacity increases can be achieved at relatively low cost, largely by increasing the number of production employees or by acquiring or leasing additional facilities. 4 We purchase in finished form many of the components used in the production of our recreation vehicles. The principal raw materials used in the manufacturing processes for motorhomes and travel trailers are aluminum, lumber, plywood, plastic, fiberglass, and steel purchased from numerous suppliers. We believe that, except for chassis, substitute sources for raw materials and components are available with no material impact on our operations. We are able to obtain the benefit of volume price discounts for many of our purchases of raw materials and components by centralized purchasing. Our relationship with our chassis suppliers is similar to all buyer/vendor relationships and no special contractual commitment is engaged in by either party. Historically, Ford and General Motors resort to an industry-wide allocation basis during restriction of supply. These allocations would be based on the volume of chassis previously purchased. Sales of motor homes and small buses rely on these chassis and are affected accordingly. Generally, all of our operating subsidiaries introduce new or improved lines or models of recreation vehicles each year. Changes typically include new sizes and floorplans, different decors or design features, and engineering improvements. Seasonality Since recreation vehicles are used primarily by vacationers and campers, our recreation vehicle sales are seasonal and, in most geographical areas, tend to be significantly lower during the winter months than in other periods. As a result, recreation vehicle sales are historically lowest during the second fiscal quarter, which ends on January 31 of each year. Marketing and Distribution We market our recreation vehicles through independent dealers located throughout the United States and Canada. Each of our recreation vehicle operating subsidiaries maintains its own dealer organization, with some dealers carrying more than one of our product lines. As of July 31, 2003, there were approximately 1,562 dealers carrying our products in the U.S. and Canada. We believe that close working relationships between our management personnel and the many independent dealers provide us with valuable information on customer preferences and the quality and marketability of our products. Additionally, by maintaining substantially separate dealer networks for each of our subsidiaries, our products are more likely to be competing against competitor's products in similar price ranges rather than against our other products. Park models are typically sold by park model dealers as well as by some travel trailer dealers. Each of our recreation vehicle operating subsidiaries has an independent sales force to call on their dealers. Our most important sales promotions occur at the major recreation vehicle shows for dealers which take place throughout the year at different locations across the country. We benefit from the recreation vehicle awareness advertising and major marketing programs geared towards first-time buyers sponsored by the RVIA in national print media and television. We engage in a limited amount of consumer-oriented advertising for our recreation vehicles, primarily through industry magazines, the distribution of product brochures, and direct mail advertising campaigns. In our selection of individual dealers, we emphasize the dealer's financial strength to maintain a sufficient inventory of our products, as well as their reputation, experience, and ability to provide service. Many of our dealers carry the recreation vehicle lines of one or more of our competitors. Each of our operating subsidiaries has sales agreements with their dealers and these agreements are subject to annual review. No single recreation vehicle dealer accounted for more than 5% of our consolidated net sales of recreation vehicles during fiscal 2003. Substantially all of our sales to dealers are made on terms requiring cash on delivery or within 10 days thereafter. We generally do not finance dealer purchases. Most dealers are financed on a "floorplan" basis by a bank or finance company which lends the dealer all or substantially all of the wholesale purchase price and retains a security interest in the vehicles purchased. As is customary in the recreation vehicle industry, we will execute a repurchase agreement with a lending institution financing a dealer's purchase of our products upon the lending institution's request and after completion of a credit investigation of the dealer involved. Repurchase agreements provide that for up to 12 months after a unit is financed and in the event of default 5 by the dealer we will repurchase the unit repossessed by the lending institution for the amount then due, which is usually less than 100% of dealer's cost. The risk of loss under repurchase agreements is spread over numerous dealers and is further reduced by the high resale value of the units which we would be required to repurchase. In our experience, losses under repurchase agreements have not been significant and we believe that any future losses under these agreements would not have a material adverse effect on our company. During fiscal 2003 the losses incurred due to repurchase were approximately $494,000 compared to $730,000 during fiscal 2002. Joint Ventures In March 1996, our Company and Cruise America, Inc. formed a joint venture, CAT Joint Venture LLC, to make short-term rentals of motorized recreation vehicles to the public. As of July 31, 2003 we were contingently liable for repurchase obligations of CAT Joint Venture inventory in the amount of approximately $6.7 million. Financing Thor Credit Corporation is a captive recreation vehicle finance company jointly owned by our company and ETrade Group, Inc., a major financial institution. Backlogs As of July 31, 2003, the backlog for recreation vehicle orders was approximately $201,112,000 compared to $251,354,000 at July 31, 2002. Backlog represents unfilled dealer orders on a particular day which can and do fluctuate widely seasonally. In the recreation vehicle business our manufacturing time is quite short. Historically, the amount of our current backlog compared to our backlog in previous periods reflects general economic and industry conditions and, together with other relevant factors such as continued acceptance of our products by the consumer, may be an indicator of our revenues in the near term. Warranties We currently provide purchasers of our recreation vehicles with a standard one or two-year limited warranty against defects in materials and workmanship and a standard two year limited warranty on certain major components separately warranted by the suppliers of these components. The chassis and engines of our motorhomes are warranted for three years or 36,000 miles by their manufacturers. During 2001, we formed a wholly owned captive insurance company that provides coverage for product warranties. SMALL AND MID-SIZE BUSES Overview Our line of small and mid-size buses are sold under the names ElDorado National and Champion Bus. ElDorado National's trade names include Aerolite, AeroElite, Aerotech, Access, Escort FE, Escort RE, Transmark, MST, EZ Rider and Axess. Champion Bus'trade names include Challenger, CTS, Crusader, and Defender. Our line of small and mid-size buses consists of airport shuttle buses, intra-urban and inter-urban mass transportation buses, and buses for tourist uses. Production Our small and mid-size bus production facilities in Salina, Kansas; Chino, California; and Imlay City, Michigan, are designed to provide efficient assembly line manufacturing of our small and mid-size buses. The vehicles are produced according to specific orders which are normally obtained by dealers. Some of the chassis, all of the engines and auxiliary units, and some of the seating and other components used in the production of our small and mid-size buses are purchased in finished form. Our Chino, California, facility assembles chassis for our rear engine buses from industry standard components and assembles these buses directly on the chassis. 6 The principal raw materials used in the manufacturing of our small and mid-size buses are fiberglass, steel, aluminum, plywood, and plastic. We purchase most of the raw materials and components from numerous suppliers. We purchase most of our bus chassis from Ford and General Motors and most of our engines from Cummins. We believe that, except for chassis, raw materials and components could be purchased from other sources, if necessary, with no material impact on our operations. Marketing and Distribution We market our small and mid-size buses through a network of 80 independent dealers in the United States and Canada. We select dealers using criteria similar to those used in selecting recreation vehicle dealers. During fiscal 2003, one of our dealers, accounted for 22% of the Company's net bus revenue. We also sell our small and mid-size buses directly to certain national accounts such as major rental car companies, hotel chains, and transit authorities. Approximately 65% of our bus sales are derived from contracts with state and local transportation authorities, in some cases with partial funding from federal agencies. Terms of sale are typically cash on delivery or through national floorplan financing institutions. Sales to some state transportation agencies and other government agencies may be on longer terms. Backlog As of July 31, 2003 the backlog for bus orders was approximately $108,256,000 compared to $99,228,000 at July 31, 2002. The time for fulfillment of bus orders is substantially longer than in the recreation vehicle industry because generally buses are made to customer specification. The existing backlog of bus orders is expected to be filled in the first nine months of fiscal 2004. Historically, the amount of our current backlog compared to our backlog in previous periods reflects general economic and industry conditions and, together with other relevant factors such as continued acceptance of our products by the consumer, may be an indicator of our revenues in the near term. Warranties We currently provide purchasers of our small and mid-size buses with a limited warranty for one year or 12,000 miles against defects in materials and workmanship, excluding only certain specified components which are separately warranted by suppliers. We provide a five-year or 75,000 mile warranty on the body structure of our "Aerotech" buses that we assemble. The chassis and engines of our small and mid-size buses are warranted for three years or 36,000 miles by their manufacturers. During 2001, we founded a wholly owned captive insurance company that provides coverage for product warranties. REGULATION We are subject to the provisions of the National Traffic and Motor Vehicle Safety Act and the safety standards for recreation vehicles, buses and recreation vehicle and bus components which have been promulgated thereunder by the U.S. Department of Transportation. Because of our sales in Canada, we are also governed by similar laws and regulations issued by the Canadian government. We are a member of the RVIA, a voluntary association of recreation vehicle manufacturers which promulgates recreation vehicle safety standards. We place an RVIA seal on each of our recreation vehicles to certify that the RVIA's standards have been met. Both federal and state authorities have various environmental control standards relating to air, water, and noise pollution which affect our business and operations. For example, these standards, which are generally applicable to all companies, control our choice of paints, discharge of air compressor waste water and noise emitted by factories. We rely upon certifications obtained by chassis manufacturers with respect to compliance by our vehicles with all applicable emission control standards. We are also subject to the regulations promulgated by the Occupational Safety and Health Administration or OSHA. Our plants are periodically inspected by federal agencies concerned with health and safety in the work place, and by the RVIA, to ensure that our products comply with applicable governmental and industry standards. 7 We believe that our products and facilities comply in all material respects with applicable vehicle safety, environmental, RVIA, and OSHA regulations. We do not believe that compliance with the regulations discussed above will have any material effect on our capital expenditures, earnings or competitive position. COMPETITION Recreation Vehicles The recreation vehicle industry is characterized by relative ease of entry, although the codes, standards, and safety requirements introduced in recent years are a deterrent to new competitors. The need to develop an effective dealer network also acts as a barrier to entry. The recreation vehicle market is intensely competitive with a number of other manufacturers selling products which compete directly with our products. Competition in the recreation vehicle industry is based upon price, design, value, quality, and service. We believe that the quality, design, and price of our products and the warranty coverage and service that we provide allow us to compete favorably for retail purchasers of recreation vehicles. We estimate that we are the largest recreation vehicle manufacturer in terms of units produced. Small and Mid-Size Buses We estimate that we have a 35% market share of the U.S. and Canadian small and mid-size bus market. Our competitors offer lines of buses which compete with all of our products. Price, quality, and delivery are the primary competitive factors. As with recreation vehicles, we believe that the quality, design, and price of small and mid-size buses, the warranty coverage and service that we provide, and the loyalty of our customers allow us to compete favorably with similarly priced products of our competitors. Trademarks and Patents We have registered United States and Canadian trademarks or licenses covering the principal trade names and model lines under which our products are marketed. We are not dependent upon any patents or technology licenses for the conduct of our business. EMPLOYEE RELATIONS At July 31, 2003, we had approximately 5,485 employees in the United States and 269 employees in Canada. Of these 5,754 employees, 642 are salaried. Citair's and Thor America's approximately 359 hourly employees are currently represented by certified labor organizations. Thor America's new contract was ratified on September 30, 2003 and will be effective October 1, 2003 through October 1, 2006. Our Citair Hensall division contract expired September 30, 2003 and the union employees are continuing to work and negotiate. Citair Oliver's contract expires October 16, 2003. Employees of our other subsidiaries are not represented by certified labor organizations. We believe that we maintain a good working relationship with our employees. An unfair labor practice complaint filed against Champion in 2001 was dismissed in favor of Champion in 2002. During 2002, an attempt was made to organize our Airstream facility. On June 27, 2002 the National Labor Relations Board approved the withdrawal of the attempt with prejudice for 6 months from filing any new petitions. RESEARCH AND DEVELOPMENT During the fiscal years 2003, 2002 and 2001, we expensed approximately $1,067,000, $1,405,000, and $1,507,000 respectively, on research and development activities. We have co-developed a bus using a fuel cell as its power source. Our cumulative expenditures on the project, which have been expensed, are approximately $1,260,000. We do not know whether or not it is feasible to produce this product at a reasonable cost and have no intention to commit material assets to the project unless its feasibility is established. At the present time the project is in the field testing phase. 8 INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Sales from our Canadian operations and export sales to Canada from our U.S. operations amounted to approximately 2.3% and 6.0% in fiscal 2003, 2.3% and 5.3% in fiscal 2002 and 3.4% and 3.4% in fiscal 2001, respectively of our total net sales to unaffiliated customers in fiscal year 2003. FORWARD LOOKING STATEMENTS This Annual Report on Form 10-K includes certain statements that are "forward looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. These forward looking statements involve uncertainties and risks. There can be no assurance that actual results will not differ from the Company's expectations. Factors which could cause materially different results include, among others, the success of new product introductions, the pace of acquisitions and cost structure improvements, competition and general economic conditions. We disclaim any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained in this Annual Report on Form 10-K or to reflect any change in our expectations after the date of this Annual Report on Form 10-K or any change in events, conditions or circumstances on which any statement is based, except as required by law. ITEM 2. PROPERTIES We own or lease approximately 3,722,000 square feet of plant and office space. We believe that our present facilities, consisting primarily of steel clad, steel or wood frame, and masonry construction, and the machinery and equipment contained in these facilities, are well maintained and in good condition. We believe that these facilities, together with facilities planned for fiscal 2004, are adequate for our current and foreseeable purposes and that we would be able to obtain replacement for our leased premises at acceptable costs should our leases not be renewed. The following table describes the location, number and size of our facilities as of July 31, 2003.

Approximate Building No. of Area Location Owned or Leased Buildings Square Feet -------- --------------- --------- ----------- RVs: Jackson Center, OH (Airstream).......... Owned 9 299,000 Jackson Center, OH (Airstream) (1)...... Leased 2 5,000 Middleburg, PA(Thor America)............ Owned 3 116,000 Hensall, Ontario, Canada (Citair)....... Owned 1 97,000 Oliver, B.C., Canada (Citair)........... Owned 1 55,000 Middlebury, IN (Dutchmen)............... Owned 1 20,000 Goshen, IN (Dutchmen)................... Owned 7 359,000 Goshen, IN (Dutchmen) (2)............... Leased 1 45,000 Syracuse, IN (Aero)..................... Owned 3 114,000 Syracuse, IN (Aero) (3)................. Leased 1 49,000 Bristol, IN (Dutchmen) (4).............. Leased 6 106,000 Elkhart, IN (Four Winds)................ Owned 8 473,000 Milwaukie, OR (Komfort) (5)............. Leased 1 57,000 Clackamas, OR (Komfort)................. Owned 1 107,000 Moreno Valley, CA(Thor California) (6).. Leased 3 166,000 Moreno Valley, CA(Thor California) (7).. Leased 1 49,000 Moreno Valley, CA(Thor California)...... Owned 1 63,000 Goshen, IN (Keystone) (9)............... Leased 12 645,000 Goshen, IN (Keystone)................... Owned 3 216,000 Pendleton, OR (Keystone) (10)........... Leased 1 146,000 SMALL AND MID-SIZE BUSES: Salina, KS (ElDorado Kansas)............ Owned 2 252,000 Chino, CA(ElDorado California) (8)...... Leased 3 82,000 Imlay City, Michigan (Champion Bus)..... Owned 5 201,000 --------------------- TOTAL................................... 76 3,722,000 ---------------------

9 (1) These leased storage facilities are occupied under a 1 year lease which expires July 31, 2004, with three one year options to renew. (2) This location is occupied under a net lease which expires in 2004 with an option to extend for five years. (3) This location is occupied under a net lease which expires in 2005 with an option to extend for three years. (4) This location is occupied under a net lease which expires in 2005 with an option to extend for five years. (5) This location is occupied under a net lease which expires in 2005 with an option to extend for five years. (6) This location is occupied under a net lease which expires in 2008 with an option to extend for five years. (7) This location is occupied under a net lease which expires October, 1, 2010. (8) This location is occupied under a net lease which expires in November 2003 with an option to extend for 1 year. (9) These locations are occupied under net leases, expiring at various periods starting in 2003. Leases have extension and or options to purchase. (10) This location is occupied under a net lease which expires in December 2003 with an option to extend for six years. ITEM 3. LEGAL PROCEEDINGS We are involved in certain litigation arising out of our operations in the normal course of our business most of which are based upon state "lemon laws," warranty claims, other claims and accidents (for which we carry insurance above a specified deductible amount). We do not believe that any one of these claims is material. In addition to these claims, we are a defendant in a lawsuit in Ontario, Canada. This suit arises out of an agreement relating to the manufacture of a low floor bus. The plaintiff claims that we illegally utilized the concept of the low floor bus for our own profit and that we breached the contract with it in the manner specified in the complaint. The plaintiff has asked for substantial money damages including punitive damages including puntive damages. We have counter claimed against the plaintiff claiming that we overpaid it in excess of $800,000. The case is in the discovery phase and no trial date has been set. Although there can be no assurances, we are of the opinion that there will be no material cost to us as a result of this lawsuit. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters submitted. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) MARKET INFORMATION The Company's Common Stock is traded on the New York Stock Exchange. Set forth below is the range of high and low prices for the common stock for each quarter during the Company's two most recent fiscal years, as quoted in the New York Stock Exchange Monthly Market Statistics and Trading Reports. High and low stock prices were adjusted for the two-for-one stock split in July 2002.

Fiscal 2003 Fiscal 2002 ----------- ----------- High Low High Low -------------------------------------- First Quarter...... $37.18 $27.45 $17.86 $10.74 Second Quarter..... 42.78 26.30 24.25 16.62 Third Quarter...... 32.29 21.45 31.00 21.04 Fourth Quarter..... 45.85 31.00 36.80 24.60

(b) HOLDERS As of October 14, 2003, the number of holders of record of the Company's common stock was 28,621,296. (c) DIVIDENDS We paid quarterly dividends of $.01 per share in each of the first three quarters of fiscal 2003 and $.02 per share in the fourth quarter of fiscal 2003 and $.01 per share in all four quarters of fiscal 2002. Any payment of cash dividends in the future will be at the discretion of our board of directors and will depend upon our financial condition, capital requirements, earnings and any other factors which the board of directors may deem relevant. 10 (d) EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of July 31, 2003 about the Company's Common Stock that may be issued upon the exercise of options, warrants and rights granted to employees or members of the Board of Directors under all the Company's existing equity compensation plans, including the 1999 Stock Option Plan and the Thor Industries, Inc. Restricted Stock Plan.

Number of securities Number of securities remaining available for to be issued Weighted-average future issuance under upon exercise of exercise price of equity compensation plans outstanding options, outstanding options, (excluding securities Plan category warrants and rights warrants and rights reflected in column (a)) ------------- ------------------- ------------------- ------------------------ (a) (b) (c) Equity compensation plans approved by security holders.................... 329,357 $ 18.51 524,668 Equity compensation plans not approved by security holders................ 0 NA 203,625 ------- -------- ------- Total.............................................. 329,357 $ 18.51 728,293 ------- -------- -------

ITEM 6. SELECTED FINANCIAL DATA

Fiscal years ended July 31, --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 --------------------------------------------------------------------------- Income statement data: ($000, except per share amounts) Net sales (2).................................. $1,571,404 $1,245,300 $ 821,728 $ 910,079 $ 822,072 Net income (2)................................. 78,631 51,182 26,722 36,119 30,766 Earnings per common share (1) (2) Basic........................................ 2.75 1.88 1.12 1.49 1.27 Diluted...................................... 2.74 1.87 1.11 1.48 1.26 Dividends per common share (1) (2)............. .05 .04 .04 .04 .04 Balance sheet data: Total assets (2)............................... $ 608,941 $ 497,503 $ 309,067 $ 282,131 $ 245,912

(1) Per share amounts were adjusted for the two-for-one stock split in July 2002. (2) Selected financial data for 2003 and 2002 include the results of Keystone RV Company, which was acquired on November 9, 2001. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net sales in fiscal 2003 totaled $1,571,404,414 versus $1,245,299,721 in fiscal 2002. Net income in fiscal 2003 totaled $78,630,765 versus $51,181,673 in 2002. Basic earnings per share of our common stock in fiscal 2003 were $2.75 compared to $1.88 in fiscal 2002. Our consolidated statements of income for the years ended July 31, 2003, 2002 and 2001 shown as a percentage of net sales are:

Fiscal years ended July 31, --------------------------- 2003 2002 2001 ---- ---- ---- Net sales .................................................. 100.0% 100.0% 100.0% Cost of products sold ...................................... 85.9 87.4 89.1 ----- ----- ----- Gross profit ............................................... 14.1 12.6 10.9 Selling, general and administrative expenses ............... 6.2 6.1 6.2 Impairment of equity securities ............................ (.1) (.2) -- Other income (net) ......................................... .2 .2 .5 ----- ----- ----- Income before income taxes ................................. 8.0 6.6 5.3 Income taxes ............................................... 3.0 2.5 2.0 ----- ----- ----- Net income ................................................. 5.0% 4.1% 3.3% ----- ----- -----

11 FISCAL 2003 VS. FISCAL 2002 Net sales in fiscal 2003 were $1,571,404,414, a 26.2% increase from $1,245,299,721 in fiscal 2002. Income before income taxes in fiscal 2003 was $126,244,258, a 54.3% increase from $81,827,235 in fiscal 2002. This increase in income before income taxes of $44,417,023 was primarily caused by increased recreation vehicle revenue of $380,715,133, which resulted in an increase in income before income taxes of approximately $45,220,000. Bus revenues were $54,610,440 less in fiscal 2003 than in fiscal 2002. Bus income before income taxes in fiscal 2003 was approximately $2,710,000 less than the same period last year due primarily to reduced revenues. Reduction in revenue was due to continued competitive pressure on the pricing of buses, decline in airline traffic, and delayed purchase of buses affected by state and municipal budget constraints. Corporate costs, excluding interest and other income, were lower than fiscal 2002 by approximately $762,000 due primarily to reduced impairment losses of $539,000 recorded on an equity investment classified as available-for-sale for fiscal 2003 compared to 2002. Interest income increased by $543,542 due to increased investable cash and other income increased by $675,372 due primarily to increased profits of Thor Credit, our joint venture retail finance company for recreation vehicles. Interest expense increased in fiscal 2003 by $64,228 due primarily to bus chassis financing. Recreation vehicle revenues increased in fiscal 2003 by 39.1% to $1,354,412,440 compared to $973,697,307 in fiscal 2002 and accounted for 86.2% of total company revenues compared to 78.2% in fiscal 2002. Recreation vehicle order backlog of $201,112,000 at July 31, 2003 was down 20% compared to the same period last year. This decrease compared to July 31, 2002 is due primarily to the expanded new capacity at our Keystone facilities allowing reduced time between vehicle production and shipments. Bus revenues in fiscal 2003 decreased by 20.1% to $216,991,974 compared to $271,602,414 in fiscal 2002 and accounted for 13.8% of the total company revenues compared to 21.8% in fiscal 2002. Bus vehicle order backlog of $108,256,000 at July 31, 2003 was up 9.1% compared to the same period last year. Gross profit as a percentage of sales in fiscal 2003 increased to 14.1% from 12.6% in fiscal 2002 primarily due to increased recreation vehicle sales and lower material cost on recreation vehicles. Recreation vehicle price increases averaged 2% for fiscal 2003. Price increase for buses were less than 1% due to soft market conditions and competitive pressures. Selling, general and administrative expenses and amortization of intangibles was $97,895,716 compared to $75,419,423 for the same period in fiscal 2002. As a percentage of sales, selling, general and administrative expenses were 6.2% in fiscal 2003 compared to 6.1% in fiscal 2002. Amortization of intangibles increased in fiscal 2003 to $714,819 compared to $570,176 in fiscal 2002. This increase is due to certain non-compete expenses associated with the Keystone RV acquisition. The additional selling, general and administrative costs are due primarily to the increased costs associated with the 26.2% increase in revenue. The overall effective tax rate was 37.7% for fiscal 2003 compared to 37.5% for fiscal 2002. The lower rate in fiscal 2002 was due primarily to higher research and development tax credits recognized by the Company in fiscal 2002 versus fiscal 2003. FISCAL 2002 VS. FISCAL 2001 Net sales in fiscal 2002 were $1,245,299,721, a 51.5% increase from $821,728,255 in fiscal 2001. Income before income taxes in fiscal 2002 was $81,827,235 an 89.0% increase from $43,287,016 in fiscal 2001. The increase in income before income taxes of $38,540,219 in fiscal 2002 was primarily caused by increased recreation vehicle revenue of $444,003,459 which resulted in an increase in income before income taxes of approximately $52,224,000. Included in fiscal 2002 are sales of $391,431,389 and income before income taxes of $44,952,817 for Keystone RV acquired on November 9, 2001. Bus revenues were $20,431,993 less in fiscal 2002 than in fiscal 2001. Bus income before income taxes in fiscal 2002 was approximately $5,166,000 less than fiscal 2001 because of reduced revenues and overall lower margins. This was due to continued competitive pressure on pricing of buses and decline in airline traffic after the terrorist attacks of September 11, 2001 which affected the hotel, motel, rental car and other businesses and delayed purchase of buses. State and municipal budget constraints have also affected bus sales. Corporate costs were higher than fiscal 2001 by approximately $8,500,000 due primarily to increased tax related expenses on research and development tax credits and other tax planning of $1,052,000, additional funding of group medical reserves of $1,035,000, increases of approximately $1,390,000 in profit related bonuses, and an impairment loss of $2,119,000 recorded on an equity investment classified as available for sale. In addition, interest income was reduced by $2,286,000. 12 Recreation vehicle revenues increased in fiscal 2002 by 83.8% to $973,697,307 compared to $529,693,848 in fiscal 2001 and accounted for 78.2% of total company revenues compared to 64.5% in fiscal 2001. Recreation vehicle order backlog of $251,354,000 (includes $160,724,000 for Keystone RV) at July 31, 2002 was up 385.7% compared to fiscal 2001. Excluding Keystone RV backlog, recreation vehicle backlogs were $90,630,000 at July 31, 2002, up 75.1% from July 31, 2001. This increase is due to the continued strengthening of the marketplace. Bus revenues in fiscal 2002 decreased by 7.0% to $271,602,414 compared to $292,034,407 in fiscal 2001 and accounted for 21.8% of total company revenues compared to 35.5% in fiscal 2001. Bus vehicle order backlog of $99,228,000 at July 31, 2002 was down 42.1% compared to July 31, 2001. This reduction is a reflection of delayed purchases and funding as a result of September 11, 2001 circumstances and state and municipal budget constraints. Gross profit as a percentage of sales in fiscal 2002 increased to 12.6% from 10.9% in fiscal 2001 primarily due to increased recreation vehicle sales. Recreation vehicle price increases averaged 2% for fiscal 2002. Price increases for buses were 1% due to soft market conditions and competitive pressures. Selling, general and administrative expenses and amortization of intangibles was $75,419,423 compared to $50,813,028 for the same period in fiscal 2001. As a percentage of sales, selling, general and administrative expenses were 6.1% in fiscal 2002 compared to 6.2% in fiscal 2001. Amortization of intangibles decreased in fiscal 2002 to $570,176 compared to $1,346,080 in fiscal 2001. This $775,904 reduction is primarily due to expirations of certain non-compete expenses offset by the Keystone non-compete cost of $433,926 for fiscal 2002, and the reduction in goodwill and trademark amortization expenses in fiscal 2002 of $688,050 resulting from the Company's adoption of Statement of Financial Accounting Standard No. 142 "Goodwill and Other Intangible Assets". The additional selling, general and administrative costs offsetting the reduction of amortization of intangibles is due primarily to the increased costs associated with the substantial 51.5% increase in revenue. Interest income decreased by $2,334,215 due primarily to lower market rates in fiscal 2002 and the use of cash investments to primarily fund the acquisition of Keystone RV Company on November 9, 2001. The overall effective income tax rate was 37.5% for fiscal 2002 compared to 38.3% for fiscal 2001 due primarily to research and development tax credits and lower than expected state tax audit assessments. FINANCIAL CONDITION AND LIQUIDITY As of July 31, 2003 we had $172,233,135 in cash, cash equivalents and short-term investments, compared to $117,814,513 on July 31, 2002. We classify our debt and equity securities as trading or available-for-sale securities. The former are carried on our consolidated balance sheets as "Cash and cash equivalents" or "Investments - short term". The latter are carried on our consolidated balance sheets as "Investments - investments available-for-sale". Trading securities, principally investment grade securities composed of asset-based notes, mortgage-backed notes and corporate bonds, are generally bought and held for sale in the near term. All other securities are classified as available-for-sale. In each case, securities are carried at fair market value. Unrealized gains and losses on trading securities are included in earnings. Unrealized gains and losses on investments classified as available-for-sale, net of related tax effect, are not included in earnings, but appear as a component of "Accumulated other comprehensive loss" on our consolidated balance sheets until the gain or loss is realized upon the disposition of the investment or if a decline in the fair market value is determined to be other than temporary. Due to the relative short-term maturity (average 3 months) of our trading securities, we do not believe that a change in the fair market value of these securities will have a significant impact on our financial position or results of future operations. Working capital at July 31, 2003 was $190,689,508 compared to $134,318,285 on July 31, 2002. We have no long-term debt. We currently have a $30,000,000 revolving line of credit which bears interest at negotiated rates below prime and expires on November 28, 2003. We expect to renew our credit line. There were no borrowings on this line of credit at July 31, 2003. The loan agreement executed in connection with the line of credit contains certain covenants, including restrictions on additional indebtedness, and requires us to maintain certain financial ratios. We believe that internally generated funds and the line of credit will be sufficient to meet our current needs and any additional capital requirements. Capital expenditures of approximately $27,264,000 for fiscal 2003 were primarily for the planned expansions at our Dutchmen, Four Winds, Keystone, Thor California and ElDorado California facilities. The Company anticipates capital expenditures in fiscal 2004 of approximately $13,800,000. The major compo- 13 nents of this capital expenditure include the completion of our ElDorado National California bus company expansion for $4,000,000, expansion at our Dutchmen facility of $1,200,000, and expansion at our Keystone facility of $2,700,000. The ElDorado National California expansion will allow the Company to increase production efficiencies and produce 40 foot buses. The balance of capital expenditures will be for purchase or replacement of machinery and equipment in the ordinary course of business. CRITICAL ACCOUNTING PRINCIPLES The consolidated financial statements of Thor are prepared in conformity with accounting principles generally accepted in the United States. 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 critical accounting policies, the following may involve a higher degree of judgments, estimates, and complexity: Impairment of Long-Lived Assets Thor at least annually reviews the carrying value of its long-lived assets held and used and assets to be disposed of, including goodwill and other intangible assets, or when events and circumstances warrant such a review. This review is performed using estimates of future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Management believes that the estimates of future cash flows and fair value are reasonable; however, changes in estimates of such cash flows and fair value could affect the valuations. Insurance Reserves Generally, we are self-insured for workers' compensation and group medical insurance. Under these plans, liabilities are recognized for claims incurred, including those incurred but not reported, and changes in the reserves. At the time a workers' compensation claim is filed, a liability is estimated to settle the claim. The liability for workers' compensation claims is determined by a third party administrator using various state statutes and reserve requirements. Group medical reserves are funded through a Trust and are estimated using historical claims experience. We have a self-insured retention for product liability and personal injury matters of $5,000,000 per occurrence. We have established a reserve on our balance sheet for such occurrences based on historical data. We maintain excess liability insurance with outside insurance carriers to minimize our risks related to catastrophic claims in excess of all our self-insured positions. Any material change in the aforementioned factors could have an adverse impact on our operating results. Warranty Thor provides customers of our products with a warranty covering defects in material or workmanship for periods generally ranging from one to two years, with longer warranties on certain structural components. We record a liability based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditure over the warranty period. A significant increase in dealer 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 claims or additional costs materialize. Management believes that the warranty reserve is adequate; however, actual claims incurred could differ from estimates, requiring adjustments to the reserves. Warranty reserves are reviewed and adjusted as necessary on a quarterly basis. PRINCIPAL CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS Our principal contractual obligations and commercial commitments at July 31, 2003 are summarized in the following charts. 14

PAYMENTS DUE BY PERIOD CONTRACTUAL ---------------------- OBLIGATIONS TOTAL FISCAL 2004 FISCAL 2005-2006 FISCAL 2007-2008 AFTER 5 YEARS ----------- ----- ----------- ---------------- ---------------- ------------- Long-term debt................ $ -- $ -- $ -- $ -- $ -- Capital lease obligations..... $ -- $ -- $ -- $ -- $ -- Operating leases.............. $19,461,302 $ 4,233,706 $ 6,334,409 $ 4,392,839 $4,500,348 Unconditional purchase obligations................... $ -- $ -- $ -- $ -- $ -- Other long-term obligations................... $ -- $ -- $ -- $ -- $ -- ----------- ----------- ------------- ----------- ---------- Total contractual cash obligations.............. $19,461,302 $ 4,233,706 $ 6,334,409 $ 4,392,839 $4,500,348 =========== =========== ============= =========== ==========

AMOUNT OF COMMITMENT EXPIRATION PER PERIOD OTHER TOTAL ------------------------------------------ COMMERCIAL AMOUNTS LESS THAN 1 COMMITMENTS COMMITTED YEAR 1-3 YEARS 4-5 YEARS OVER 5 YEARS ----------- --------- ---- --------- --------- ------------ Lines of credit................ $ 30,000,000 $ 30,000,000 $ -- $ -- $ -- Guarantees..................... $ 3,598,000 $ 3,598,000 $ -- $ -- $ -- Standby repurchase obligations.................... $ 308,468,000 $ 308,468,000 $ -- $ -- $ -- Other commercial commitments.................... $ -- $ -- $ -- $ -- $ -- ------------- ------------- ----------- --------- ------- Total commercial commitments.................... $ 342,066,000 $ 342,066,000 $ -- $ -- $ -- ============= ============= =========== ========= =======

ACCOUNTING PRONOUNCEMENTS In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46") "Consolidation of Variable Interest Entities," which addresses the reporting and consolidation of variable interest entities as they relate to a business enterprise. This interpretation incorporates and supercedes the guidance set forth in ARB No. 51, "Consolidated Financial Statements." It requires the consolidation of variable interests into the financial statements of a business enterprise if that enterprise holds a controlling interest via other means than the traditional voting majority. The requirements of FIN 46 are effective immediately for variable interest entities created after January 31, 2003 and are effective for the first reporting period after December 15, 2003 for variable interest entities created before February 1, 2003. Management is currently evaluating the impact of this pronouncement on its future consolidated financial statements. On November 1, 2002 we adopted the disclosure provision of FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity's product warranty liabilities. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The adoption of this interpretation did not have a material effect on our financial position or results of operations. Disclosure of our guarantees and warranties is included in Footnote I and N of our financial statements. 15 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK The Company is exposed to market risk from changes in foreign currency related to its operations in Canada. However, because of the size of Canadian operations, a hypothetical 10% change in the Canadian dollar as compared to the U.S. dollar would not have a significant impact of the Company's financial position or results of operations. The Company is also exposed to market risks related to interest rates because of its investments in corporate debt securities. A hypothetical 10% change in interest rates would not have a significant impact on the Company's financial position or results of operations. ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA (UNAUDITED) - SEE ITEM 15 QUARTERLY FINANCIAL DATA

OCTOBER 31 JANUARY 31 APRIL 30 JULY 31 ---------- ---------- -------- ------- ($000, except per share amounts) 2003 Net sales ................................... $ 406,261 $ 329,898 $ 412,750 $ 422,495 Gross profit ................................ 58,593 45,153 57,035 61,486 Net income (1) .............................. 20,848 15,369 20,154 22,260 Earnings per common share Basic ..................................... .73 .54 .70 .78 Diluted ................................... .73 .53 .70 .78 Dividends paid per common share ............. .01 .01 .01 .02 MARKET PRICES PER COMMON SHARE High ...................................... $ 37.18 $ 42.78 $ 32.29 $ 45.85 Low ....................................... $ 27.45 $ 26.30 $ 21.45 $ 31.00 ============ ============ ============ ============ 2002 Net sales ................................... $ 208,460 $ 267,695 $ 367,735 $ 401,410 Gross Profit ................................ 22,112 29,147 47,409 58,399 Net income (1) .............................. 6,693 7,678 16,595 20,216 Earnings per common share (2) Basic ..................................... .29 .29 .59 .71 Diluted ................................... .29 .29 .58 .71 Dividends paid per common share (2) ......... .01 .01 .01 .01 MARKET PRICES PER COMMON SHARE (2) High ...................................... $ 17.86 $ 24.25 $ 31.00 $ 36.80 Low ....................................... $ 10.74 $ 16.62 $ 21.04 $ 24.60 ============ ============ ============ ============

(1) Net income in the fourth quarter of fiscal 2002 was decreased by $1,212,304 and net income the first quarter of fiscal 2003 was decreased by $945,830 for an equity investment impairment charge, net of tax benefit. (2) Per share amounts and market prices per common share were adjusted for the two-for-one stock split in July of 2002. PART III ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. ITEM 9A. CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's 16 disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported with the time periods specified by the SEC's rules and forms. The Company's management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that the Company's disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost- effective control system, misstatements due to error or fraud may occur and not be detected. There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls over financial reporting subsequent to the date the Company carried out its evaluation. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors and Executive Officers of the Registrant is included under the captions BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS and SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, in the definitive Proxy Statement, dated on or about October 31, 2003, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by reference. The Company has adopted a written code of ethics, the "Thor Industries, Inc. Business Ethics Policy" which is applicable to all directors, officers and employees of the company, including the Company's principal executive officer, principal financial officer, principal accounting officer or controller and other executive officers identified pursuant to this Item 10 who perform similar functions (collectively, the "Selected Officers"). In accordance with the rules and regulations of the Securities and Exchange Commission a copy of the code has been filed as an exhibit to this Form 10-K, and is posted on the Company's website. The Company intends to disclose any changes in or waivers from its code of ethics applicable to any Selected Officer on its website at http://www.thorindustries.com or by filing a Form 8-K. ITEM 11. EXECUTIVE COMPENSATION The information required in response to this Item is contained under the captions EXECUTIVE COMPENSATION; DIRECTOR COMPENSATION; RESTRICTED STOCK PLAN; SELECT EXECUTIVE INCENTIVE PLAN; PERFORMANCE GRAPH; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; and COMMITTEE REPORT ON EXECUTIVE COMPENSATION in the definitive Proxy Statement, dated on or about October 31, 2003, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this Item is contained under the caption SECURITY OWNERSHIP OF MANAGEMENT AND OWNERSHIP OF COMMON STOCK FOR PRINCIPAL SHAREHOLDERS, in the definitive Proxy Statement, dated on or about October 31, 2003, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by reference. 17 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required in response to this Item is contained under the caption CERTAIN RELATIONS AND TRANSACTIONS WITH MANAGEMENT in the definitive Proxy Statement, dated on or about October 31, 2003, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required in response to this Item is contained under the caption INDEPENDENT AUDITORS FEES in the definitive Proxy Statement, dated on or about October 31, 2003, filed with the Commission pursuant to Regulation 14A, which portion of said Proxy Statement is hereby incorporated by reference. 18 PART IV ITEM 15. FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND REPORTS ON FORM 8-K

PAGE (a) (1) FINANCIAL STATEMENTS Independent Auditors' Report........................................................... 21 Consolidated Balance Sheets, July 31, 2003 and 2002.................................... 22-23 Consolidated Statements of Income for the Years Ended July 31, 2003, 2002 and 2001........................................................ 24 Consolidated Statements of Stockholders' Equity, and Comprehensive Income for the Years Ended July 31, 2003, 2002 and 2001............................................ 25 Consolidated Statements of Cash Flows for the Years Ended July 31, 2003, 2002 and 2001........................................................ 26 Notes to Consolidated Financial Statements for the Years Ended July 31, 2003, 2002 and 2001........................................................ 27-36 (a) (2) FINANCIAL STATEMENT SCHEDULE AS OF JULY 31, 2003 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JULY 31: Schedule II--Valuation and Qualifying Accounts......................................... 36

All other schedules have been omitted as not required or not applicable under the instructions. (a) (3) EXHIBITS

EXHIBIT DESCRIPTION ------- ----------- 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3(a) of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2001)* 3.2 By-laws (incorporated by reference to Exhibit 3(b) of the Registration Statement No. 33-13827)* 4.1 Form of Common Stock Certificate. (incorporated by reference to Exhibit 4(a) of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1987)* 10.1 Thor Industries, Inc. 1999 Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 dated November 5, 1999)* 10.2 Thor Industries, Inc. Restricted Stock Plan (incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-8 dated December 3,1997)* 10.3 Thor Industries, Inc. Select Executive Incentive Plan (incorporated by reference to Exhibit 10(c) of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2000)* 14.1 Thor Industries, Inc. Business Ethics Policy** 21.1 Subsidiaries of the Company** 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

* Incorporated by reference ** Filed herewith (b) REPORTS ON FORM 8-K On May 5, 2003 and June 4, 2003, the Company filed a report on Form 8-K announcing certain financial results for the third quarter and nine months ended April 30, 2003. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THOR INDUSTRIES, INC. (Signed) /s/ Wade F.B. Thompson ------------------------------ Wade F. B. Thompson Chairman, President, and Chief Executive Officer Date October 24, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. (Signed) /s/ Peter B. Orthwein (Signed) /s/ Walter L. Bennett -------------------------- ----------------------------- Peter B. Orthwein Walter L. Bennett Vice Chairman, Treasurer Chief Financial Officer (Director) (Principal Financial Officer & Principal Accounting Officer) Date October 24, 2003 Date October 24, 2003 (Signed) /s/ Wade F.B. Thompson (Signed) /s/ Alan Siegel -------------------------- ------------------------------ Wade F. B. Thompson Alan Siegel Chairman, President, and Chief Executive Director Officer (Principal Executive Officer and Director) Date October 24, 2003 Date October 24, 2003 (Signed) /s/ William C. Tomson (Signed) /s/ Neil D. Chrisman --------------------------- ------------------------------ William C. Tomson Neil D. Chrisman Director Director Date October 24, 2003 Date October 24, 2003 (Signed) /s/ Jan H. Suwinski ------------------------------- Jan H. Suwinski Director Date October 24, 2003 20 INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF THOR INDUSTRIES, INC.: We have audited the accompanying consolidated balance sheets of Thor Industries, Inc. and subsidiaries (the "Company") as of July 31, 2003 and 2002, and the related consolidated statements of income, stockholders'equity and comprehensive income and cash flows for each of the three years in the period ended July 31, 2003. Our audits also included the financial statement schedule listed in the index of item 15(a)(2). These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP Dayton, Ohio October 3, 2003 21 CONSOLIDATED BALANCE SHEETS, JULY 31, 2003 AND 2002

2003 2002 ----------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents ...................... $ 132,124,452 $ 113,192,639 Investments-short term (Note A) ................ 40,108,683 4,621,874 Accounts receivable: Trade, less allowance for doubtful accounts-- $625,214 in 2003 and $245,964 in 2002 ....... 94,296,951 72,816,320 Other ....................................... 3,018,016 2,445,578 Inventories (Note D) ........................... 96,652,532 94,665,354 Deferred income taxes and other (Note F) ....... 12,431,573 3,496,589 ----------------------------- TOTAL CURRENT ASSETS ........................... 378,632,207 291,238,354 ----------------------------- PROPERTY, PLANT AND EQUIPMENT: Land ........................................... 12,058,354 9,848,968 Buildings and improvements ..................... 55,541,971 37,249,824 Machinery and equipment ........................ 31,644,155 25,625,071 ----------------------------- Total cost ..................................... 99,244,480 72,723,863 Less accumulated depreciation .................. (25,829,440) (20,882,575) ----------------------------- NET PROPERTY, PLANT AND EQUIPMENT .............. 73,415,040 51,841,288 ----------------------------- INVESTMENTS: Joint ventures (Note L) ........................ 2,219,469 2,137,946 Investments available-for-sale (Note A) ........ 2,860,466 3,920,746 ----------------------------- TOTAL INVESTMENTS .............................. 5,079,935 6,058,692 ----------------------------- OTHER ASSETS: Goodwill (Note C) .............................. 130,554,872 130,554,872 Noncompete agreements (Note C) ................. 3,739,589 4,454,408 Trademarks (Note C) ............................ 8,669,642 8,669,642 Other .......................................... 8,850,173 4,685,877 ----------------------------- TOTAL OTHER ASSETS ............................. 151,814,276 148,364,799 ----------------------------- TOTAL .......................................... $ 608,941,458 $ 497,503,133 -----------------------------

See notes to consolidated financial statements. 22

2003 2002 ----------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable .............................................. $ 102,923,191 $ 89,397,885 Accrued liabilities: Compensation and related items ........................... 19,086,195 20,463,363 Product warranties ....................................... 35,114,825 25,374,825 Taxes .................................................... 21,431,099 13,793,041 Other .................................................... 9,387,389 7,890,955 ----------------------------- TOTAL CURRENT LIABILITIES ..................................... 187,942,699 156,920,069 ----------------------------- Deferred income taxes and other liabilities (Note F) .......... 6,176,976 5,964,143 ----------------------------- Contingent liabilities and commitments (Note I) STOCKHOLDERS' EQUITY (NOTE J): Preferred stock--authorized 1,000,000 shares; none outstanding -- -- Common stock--par value of $.10 a share; authorized, 40,000,000 shares; issued 28,597,645 shares in 2003 and 32,299,838 shares in 2002,............................................. 2,859,765 3,229,984 Additional paid-in capital .................................... 81,625,236 89,941,287 Retained earnings ............................................. 331,647,776 273,033,292 Restricted stock plan ......................................... (1,169,103) (531,062) Accumulated other comprehensive loss .......................... (141,891) (1,455,914) ----------------------------- Sub total ..................................................... 414,821,783 364,217,587 Less treasury shares of 3,816,874 in 2002, at cost ............ -- (29,598,666) ----------------------------- TOTAL STOCKHOLDERS' EQUITY .................................... 414,821,783 334,618,921 ----------------------------- TOTAL ......................................................... $ 608,941,458 $ 497,503,133 =============================

See notes to consolidated financial statements. 23 CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JULY 31, 2003, 2002 AND 2001

2003 2002 2001 --------------------------------------------------- NET SALES $ 1,571,404,414 $ 1,245,299,721 $ 821,728,255 Cost of products sold 1,349,137,525 1,088,232,685 731,919,764 --------------------------------------------------- GROSS PROFIT 222,266,889 157,067,036 89,808,491 Selling, general and administrative expenses 97,180,897 74,849,247 49,466,948 Amortization of intangibles 714,819 570,176 1,346,080 Impairment of equity securities (Note A) (1,580,334) (2,119,111) -- Interest income 2,085,409 1,541,867 3,876,082 Interest expense (389,606) (325,378) (771,122) Other income 1,757,616 1,082,244 1,186,593 --------------------------------------------------- INCOME BEFORE INCOME TAXES 126,244,258 81,827,235 43,287,016 Income taxes (Note F) 47,613,493 30,645,562 16,564,743 --------------------------------------------------- NET INCOME $ 78,630,765 $ 51,181,673 $ 26,722,273 =================================================== EARNINGS PER COMMON SHARE (NOTE A) Basic $ 2.75 $ 1.88 $ 1.12 Diluted $ 2.74 $ 1.87 $ 1.11

See notes to consolidated financial statements. 24 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE YEARS ENDED JULY 31, 2003, 2002 AND 2001

TREASURY STOCK COMMON STOCK ADDITIONAL --------------------------------------------------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL -------------------------------------------------------------------------- JULY 31, 2000 3,518,074 $(26,592,630) 27,487,994 $2,748,800 $ 24,794,620 Net income -- -- -- -- Shares purchased 298,800 (3,006,036) -- -- -- Stock option activity -- -- 135,000 13,500 953,775 Restricted stock activity -- -- 12,700 1,270 128,143 Cash dividends - $.04 per common share -- -- -- -- -- Unrealized appreciation on investments -- -- -- -- -- Foreign currency translation adjustment -- -- -- -- -- Compensation expense -- -- -- -- -- -------------------------------------------------------------------------- JULY 31, 2001 3,816,874 (29,598,666) 27,635,694 2,763,570 25,876,538 Net income -- -- -- -- -- Shares purchased -- -- -- -- -- Stock option activity -- -- 144,644 14,464 1,213,680 Restricted stock activity -- -- 19,500 1,950 344,249 Shares issued -- -- 4,500,000 450,000 62,506,820 Cash dividends - $.04 per common share -- -- -- -- -- Unrealized appreciation on investments -- -- -- -- -- Foreign currency translation adjustment -- -- -- -- -- Compensation expense -- -- -- -- -- -------------------------------------------------------------------------- JULY 31, 2002 3,816,874 (29,598,666) 32,299,838 3,229,984 89,941,287 Net income -- -- -- -- -- Shares purchased -- -- -- -- -- Shares retired (3,816,874) 29,598,666 (3,816,874) (381,687) (10,628,801) Stock option activity -- -- 87,331 8,733 1,193,076 Restricted stock activity -- -- 27,350 2,735 1,119,674 Shares issued -- -- -- -- -- Cash dividends - $.05 per common share -- -- -- -- -- Unrealized appreciation on investments -- -- -- -- -- Foreign currency translation adjustment -- -- -- -- -- Compensation expense -- -- -- -- -- -------------------------------------------------------------------------- JULY 31, 2003 -- -- 28,597,645 $2,859,765 $ 81,625,236 ==========================================================================

RESTRICTED ACCUMULATED COMPRE- STOCK OTHER COMPRE- RETAINED HENSIVE PLAN HENSIVE LOSS EARNINGS INCOME ------------------------------------------------------------ JULY 31, 2000 $ (297,305) $(2,620,712) $197,171,503 Net income -- -- 26,722,273 $26,722,273 Shares purchased -- -- -- -- Stock option activity -- -- -- -- Restricted stock activity (129,413) -- -- -- Cash dividends - $.04 per common share -- -- (951,100) -- Unrealized appreciation on investments -- 1,049,017 -- 1,049,017 Foreign currency translation adjustment -- (113,614) -- (113,614) Compensation expense 74,316 -- -- -- ------------------------------------------------------------ JULY 31, 2001 (352,402) (1,685,309) 222,942,676 $27,657,676 =========== Net income -- -- 51,181,673 $51,181,673 Shares purchased -- -- -- -- Stock option activity -- -- -- -- Restricted stock activity (346,199) -- -- -- Shares issued -- -- -- -- Cash dividends - $.04 per common share -- -- (1,091,057) -- Unrealized appreciation on investments -- 455,281 -- 455,281 Foreign currency translation adjustment -- (225,886) -- (225,886) Compensation expense 167,539 -- -- -- ------------------------------------------------------------ JULY 31, 2002 (531,062) (1,455,914) 273,033,292 $51,411,068 =========== Net income -- -- 78,630,765 $78,630,765 Shares purchased -- -- -- -- Shares retired -- -- (18,588,176) -- Stock option activity -- -- -- -- Restricted stock activity (908,830) -- -- -- Shares issued -- -- -- -- Cash dividends - $.05 per common share -- -- (1,428,105) -- Unrealized appreciation on investments -- 357,559 -- 357,559 Foreign currency translation adjustment -- 956,464 -- 956,464 Compensation expense 270,789 -- -- -- ------------------------------------------------------------ JULY 31, 2003 $(1,169,103) $ (141,891) $331,647,776 $79,944,788 ============================================================

See notes to consolidated financial statements. 25 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 2003, 2002 AND 2001

2003 2002 2001 --------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME ................................................... $ 78,630,765 $ 51,181,673 $ 26,722,273 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ............................................. 5,670,597 4,655,184 3,595,547 Amortization of intangibles .............................. 714,819 570,176 1,346,080 Deferred income taxes .................................... (7,130,157) 4,219,343 3,582,045 Impairment of equity securities .......................... 1,580,334 2,119,111 -- (Gain) loss on sale of investments available-for-sale .... 6,255 (29,322) (189,255) (Gain) loss on sale of trading investments ............... 330,233 (407,012) (180,000) Unrealized (gain) loss on trading investments ............ (121,497) 1,164,756 (640,849) CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS FROM ACQUISITIONS AND DIVESTMENTS: Purchase of trading investments .............................. (74,562,479) (8,273,407) (58,377,034) Proceeds from sale of trading investments .................... 38,866,934 50,027,883 30,371,983 Accounts receivable .......................................... (22,053,069) (2,914,958) 4,675,817 Inventories .................................................. (1,987,178) 4,570,827 9,258,576 Deferred taxes and other ..................................... (7,269,186) (48,238) (1,033,861) Accounts payable ............................................. 13,525,306 10,149,604 7,466,512 Accrued liabilities .......................................... 17,964,414 16,260,239 (6,576,508) Other ........................................................ 1,508,063 626,301 1,002,107 -------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES .................... 45,674,154 133,872,160 21,023,433 -------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ................... (27,264,463) (7,483,710) (17,197,774) Disposals of property, plant and equipment ................... 21,777 1,532,177 46,310 Purchase of available-for-sale investments ................... -- -- (642,691) Proceeds from sale of available-for-sale investments ......... 23,687 96,228 277,723 Acquisition of Keystone - net of cash acquired ............... -- (74,794,195) -- -------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES ........................ (27,218,999) (80,649,500) (17,516,432) -------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends ............................................... (1,428,105) (1,091,057) (951,100) Purchase of treasury shares .................................. -- -- (3,006,036) Proceeds from issuance of common stock ....................... 948,299 1,228,145 967,275 -------------------------------------------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES .......... (479,806) 137,088 (2,989,861) -------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH ...................... 956,464 (225,886) (113,614) -------------------------------------------- Net increase in cash and cash equivalents .................... 18,931,813 53,133,862 403,526 Cash and cash equivalents, beginning of year ................. 113,192,639 60,058,777 59,655,251 -------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR ....................... $132,124,452 $ 113,192,639 $ 60,058,777 ============================================ SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid ............................................ $ 48,154,350 $ 17,787,259 $ 17,594,918 Interest paid ................................................ $ 389,606 $ 325,378 $ 771,122 NON-CASH TRANSACTIONS: Issuance of restricted stock ................................. $ 908,830 $ 346,199 $ 129,413 Retirement of treasury shares ................................ $ 29,598,666 $ -- $ --

See notes to consolidated financial statements. 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JULY 31, 2003, 2002 AND 2001 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of Thor Industries, Inc. and its wholly-owned domestic and foreign subsidiaries (collectively, the "Company"). All inter-company balances and transactions are eliminated in consolidation. CASH AND CASH EQUIVALENTS - Interest-bearing deposits and other investments with maturities of three months or less when purchased are considered cash equivalents. Cash, cash equivalents and short term investments of $110,415,024 are held by a major financial institution. The remaining $61,818,111 is held at various banks. INVESTMENTS - The Company classifies its debt and equity securities as trading or available-for-sale. Trading securities are bought and held principally for the purpose of selling them in the near term. All securities not classified as trading are classified as available-for-sale. Trading securities and available-for-sale securities are recorded at fair value. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of accumulated other comprehensive income, net of income taxes until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis. Dividend and interest income are recognized when earned. At July 31, 2003, the Company held equity securities with a fair value of $2,860,466. The Company recorded an impairment charge of $1,580,334 in the first quarter of 2003, with an associated tax benefit of $634,504 and an impairment charge of $2,119,111 in the fourth quarter of fiscal 2002 relating to its investment in an equity investment as it was determined that the decline in market value of the investment which is classified as a noncurrent investment "available-for-sale" equity security, was deemed to be other than temporary. These impairment charges are included in the consolidated statement of income caption "Impairment of Equity Securities". These securities are classified as available-for-sale and are included in other investments. Available-for-sale securities were sold and a realized gain/(loss) of $(6,255) in fiscal 2003, $29,322 in fiscal 2002 and $189,255 in fiscal 2001 was recognized in other income. The Company holds certain corporate debt securities that are classified as trading securities and reported as Investments - short term. Included in other income are net realized losses on trading securities of $330,233 in fiscal 2003 and net realized gains on trading securities of $407,013 in fiscal 2002 and $180,000 in fiscal 2001. FAIR VALUE OF FINANCIAL INVESTMENTS - the carrying amount of cash equivalents, investments, accounts receivable, and accounts payable approximate fair value because of the relatively short maturity of these financial instruments. INVENTORIES - Inventories are stated at the lower of cost or market, determined principally by the last-in, first-out (LIFO) basis. DEPRECIATION - Property, plant and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows: Buildings and improvements - 10 to 39 years Machinery and equipment - 3 to 10 years OTHER ASSETS - Other assets consist of goodwill, trademarks, and non-compete agreements. Non-compete agreements are amortized using the straight-line method over 5 to 10 years. Effective August 1, 2001 goodwill and trademarks are no longer amortized but are tested at least annually for impairment. Trademarks are not amortized because they have indefinite useful lives. LONG-LIVED ASSETS - Long-lived assets and identifiable intangibles are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from undiscounted future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. PRODUCT WARRANTIES - Estimated warranty costs are provided at the time of sale of the warranted products. Warranty reserves are reviewed and adjusted as necessary on a quarterly basis. 27 REVENUE RECOGNITION - Revenues from the sale of recreation vehicles and buses are recognized when title passes, which is when shipped to dealers, distributors, or contract buyers in accordance with shipping terms, which are FOB shipping point. ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. FOREIGN CURRENCY - Assets and liabilities of the Company's Canadian operations reported in the consolidated balance sheets have been translated at current exchange rates. Revenues and expenses reported in the consolidated statements of income have been translated at the average exchange rate for the year. Translation adjustments have been included in accumulated other comprehensive income (loss). Transaction gains and losses are not significant. STOCK OPTIONS - The Company measures cost for stock options issued to employees using the method of accounting prescribed by Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." As an alternative to accounting for stock-based compensation under APB No. 25, SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a fair-value method of accounting for employee stock options. The company uses the Black-Scholes option pricing model to estimate the grant date fair value of its option grants. The fair value is recognized over the option vesting period which is three years. Had compensation cost for these grants been determined using the fair-value method, the Company's net income and net earnings per common share would have been:

2003 2002 2001 ------------------------------------------ Net income As reported........................................................... $78,630,765 $51,181,673 $26,722,273 Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects.... (657,988) (250,969) (250,968) Pro forma............................................................. $77,972,777 $50,930,704 $26,471,305 Earnings per common share -- basic As reported........................................................... $ 2.75 $ 1.88 $ 1.12 Pro forma............................................................. $ 2.73 $ 1.88 $ 1.11 Earnings per common share -- diluted As reported........................................................... $ 2.74 $ 1.87 $ 1.11 Pro forma............................................................. $ 2.71 $ 1.86 $ 1.11

EARNINGS PER SHARE - Basic earnings per common share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding. Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding assuming dilution. The difference between basic EPS and diluted EPS is the result of outstanding stock options.

2003 2002 2001 ------------------------------------ Weighted average shares outstanding for basic earnings per share............................................ 28,553,792 27,162,358 23,807,600 Stock options......................................................... 171,136 180,611 117,508 ------------------------------------ Weighted average shares outstanding assuming dilution................. 28,724,928 27,342,969 23,925,108 ====================================

ACCOUNTING PRONOUNCEMENTS - In January 2003, FASB Interpretation No. 46 "Consolidation of Variable Interest Entities," which addresses the reporting and consolidation of variable interest entities as they relate to a business enterprise. This interpretation incorporates and supercedes the guidance set forth in ARB No. 51, "Consolidated Financial Statements." It requires the consolidation of variable interests into the financial statements of a business enterprise if that enterprise holds a controlling interest via other means than the traditional voting majority. The requirements of FIN 46 are effective immediately for variable interest entities created after January 31, 2003 and are effective for the first reporting period after December 15, 2003 for variable interest entities created before February 1, 2003. Management is currently evaluating the impact of this pronouncement on its future consolidated financial statements. 28 On November 1, 2002 we adopted the disclosure provision of FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity's product warranty liabilities. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The adoption of this interpretation did not have a material effect on our financial position or results of operations. Disclosure of our guarantees and warranties is included in Footnote I and N of our financial statements. RECLASSIFICATION - Certain reclassifications have been made in fiscal 2002 and fiscal 2001 consolidated financial statements to conform to the presentation used in fiscal 2003. B. ACQUISITIONS On September 2, 2003, Thor acquired 100% of the common stock of Damon Corporation ("Damon"). Damon is engaged in the business of manufacturing Class A motorhomes and park models. The purchase price, which is subject to audit, was approximately $29,866,000 in cash. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

(UNAUDITED) Current assets $ 50,311,000 Property, plant and equipment 5,787,000 Goodwill 10,360,000 Trademarks 3,600,000 Non-compete 640,000 Other assets 451,000 ------------- Total assets acquired 71,149,000 Current liabilities 41,283,000 ------------- Net assets acquired $ 29,866,000 =============

Immediately after the closing, the Company paid off a $12,972,000 bank debt assumed in connection with the acquisition. The primary reasons for the acquisition include Damon's future earnings potential, its fit with our existing operations, its market share, and its cash flows. On November 9, 2001, Thor acquired 100% of the common and preferred stock of Keystone RV Company ("Keystone"). Keystone is engaged in the business of manufacturing travel trailers and fifth wheel recreation vehicles. The purchase price of $151,104,000 consisted of cash of $88,824,000 and 4,500,000 shares of Thor common stock valued at $62,280,000, of which 2,744,832 shares are restricted. The value of the common stock was based on the average market price of Thor's common shares over the two-day period before and after the terms of the acquisition were agreed to and announced. The value of the restricted shares was based on an independent appraisal. The purchase price allocation includes $4,500,000 of non-compete agreements, which will be amortized over seven to ten years, $120,026,403 of goodwill and $7,000,000 for trademarks that are not subject to amortization. The non-compete agreements, goodwill and trademarks are not deductible for tax purposes. The primary reasons for the acquisition include Keystone's future earnings potential, its fit with our existing operations, its market share, and its cash flows. The results of operations for Keystone are included in Thor's operating results beginning November 10, 2001. The Keystone goodwill and its results are included in the recreation vehicle reporting segment. Pro Forma Information (unaudited) - Pro Forma results of operations, as if the Keystone acquisition occurred as of the beginning of the period is presented below. These proforma results may not be indicative of the actual results that would have occurred under the ownership and management of the Company. 29

YEAR ENDED JULY 31, 2002 ------------- Net Sales $1,379,923,633 Net Income $ 60,919,429 Earnings per common share Basic $ 2.14 Diluted $ 2.13

C. GOODWILL AND OTHER INTANGIBLE ASSETS On August 1, 2001, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets", which eliminated the amortization of goodwill and other intangibles with indefinite useful lives. In accordance with SFAS No. 142, goodwill will be tested for impairment at least annually and more frequently if an event occurs which indicates the goodwill may be impaired. On an annual basis, we test goodwill for impairment during the fourth quarter. The components of other intangibles are as follows:

JULY 31, 2003 JULY 31, 2002 ------------------------------------------------------- ACCUMULATED ACCUMULATED COST AMORTIZATION COST AMORTIZATION ------------------------------------------------------- Amortized Intangible Assets: Non-compete agreements $14,073,367 $10,333,778 $14,073,367 $9,618,959

Aggregate amortization expense for non-compete agreements for the years ended, July 31, 2003, 2002 and 2001 were $714,818, $570,176, and $658,030 respectively. Non-compete agreements are amortized on a straight-line basis. Estimated Amortization Expense: For the year ending July 2004 $714,819 For the year ending July 2005 $671,485 For the year ending July 2006 $584,818 For the year ending July 2007 $584,818 For the year ending July 2008 $584,818 As of July 31, 2003 goodwill and trademarks for the recreation vehicles segment totaled $130,259,372 and $8,441,674, respectively. The remainder related to the bus segment. The table below shows the effect on net income had SFAS No. 142 been adopted in prior years.

YEAR ENDED YEAR ENDED YEAR ENDED ------------------------------------------------- July 31, 2003 July 31, 2002 July 31, 2001 ------------------------------------------------- Net income $78,630,765 $51,181,673 $26,722,273 Goodwill amortization, net of tax benefits -- -- 512,711 Trademark amortization, net of tax benefits -- -- 175,339 ------------------------------------------------- Adjusted net income $78,630,765 $51,181,673 $27,410,323 ==================================================

BASIC DILUTED BASIC DILUTED BASIC DILUTED ------------------------------------------------- Earnings per common share $2.75 $2.74 $1.88 $1.87 $1.12 $1.11 Effect of accounting change -- -- -- -- .03 .03 ------------------------------------------------ Adjusted earnings per common share $2.75 $2.74 $1.88 $1.87 $1.15 $1.14 ================================================

30 D. INVENTORIES Major classifications of inventories are:

AS OF JULY 31, --------------------------- 2003 2002 --------------------------- Finished products............................... $ 6,342,179 $ 8,044,174 Work in process................................. 25,267,593 23,843,682 Raw materials................................... 52,499,474 47,286,949 Chassis......................................... 19,108,412 21,252,774 --------------------------- Subtotal........................................ 103,217,658 100,427,579 Less excess of FIFO costs over LIFO costs....... 6,565,126 5,762,225 --------------------------- Total inventories............................... $ 96,652,532 $ 94,665,354 ===========================

E. LINE OF CREDIT The Company has a $30,000,000 unsecured revolving line of credit which bears interest below the prime rate (2.0% at July 31, 2003) and expires on November 28, 2003. There was no outstanding balance at July 31, 2003 and July 31, 2002. The loan agreement executed in connection with the line of credit contains certain covenants, including restrictions on additional indebtedness, and requires the Company to maintain certain financial ratios. The Company intends to renew the unsecured revolving line of credit prior to expiration. F. INCOME TAXES

YEARS ENDED JULY 31, -------------------------------------------- 2003 2002 2001 -------------------------------------------- INCOME TAXES: Federal.................................................. $ 43,300,270 $ 20,996,098 $ 8,838,522 State and local.......................................... 9,890,039 5,571,289 3,329,770 Foreign.................................................. 1,553,341 917,638 814,406 -------------------------------------------- Total current............................................ 54,743,650 27,485,025 12,982,698 Total deferred........................................... (7,130,157) 3,160,537 3,582,045 -------------------------------------------- Income taxes............................................. $ 47,613,493 $ 30,645,562 $ 16,564,743 ============================================

The differences between income taxes at the federal statutory rate and the actual income taxes are as follows:

2003 2002 2001 -------------------------------------------- Provision at statutory rates................................ $ 44,185,490 $ 28,639,532 $ 15,150,456 State and local income taxes, net of federal tax benefit.... 5,446,387 3,621,338 2,164,351 Amortization of intangibles................................. -- -- 220,966 Extraterritorial income/FSC benefit......................... (402,500) (281,750) (245,000) Divestment of subsidiary.................................... -- -- (1,047,000) Credits and incentives...................................... (1,118,863) (958,839) -- Other....................................................... (497,021) (374,719) 320,970 -------------------------------------------- Income taxes................................................ $ 47,613,493 $ 30,645,562 $ 16,564,743 ============================================

In fiscal 2001, based on judicial decisions, the Company recorded a tax benefit of $1,047,000 associated with the stock basis of a divestiture. Income before income taxes includes foreign income of $3,586,649 in fiscal 2003, $2,293,791 in fiscal 2002 and $1,986,357 in fiscal 2001. 31

JULY 31, JULY 31, 2003 2002 --------------------------- A SUMMARY OF DEFERRED INCOME TAXES IS: CURRENT DEFERRED TAX ASSET (LIABILITY): Inventory basis............................................. $(1,135,821) $ (894,707) Employee benefits........................................... 359,121 706,308 Self-insurance.............................................. 4,835,447 1,438,639 Product warranties.......................................... 2,460,359 (558,638) Other....................................................... 451,215 365,439 -------------------------- TOTAL CURRENT DEFERRED TAX ASSET INCLUDED IN DEFERRED INCOME TAXES AND OTHER................. 6,970,321 1,057,041 -------------------------- LONG-TERM DEFERRED TAX ASSET (LIABILITY): Property basis.............................................. (1,505,401) (971,106) Investments................................................. 1,395,321 906,807 Deferred compensation....................................... 1,454,440 960,097 Trademarks and non-compete - Keystone....................... (4,493,512) (4,749,559) Other....................................................... 145,129 (174,656) -------------------------- TOTAL LONG-TERM DEFERRED TAX LIABILITY INCLUDED IN DEFERRED INCOME TAXES AND OTHER LIABILITIES..... (3,004,023) (4,028,417) -------------------------- NET DEFERRED TAX ASSET (LIABILITY).......................... $ 3,966,298 $(2,971,376) ==========================

G. LEASES The Company has operating leases principally for land, buildings and equipment. Minimum future rental payments required under these operating leases are $19,461,302, which includes the following amount due in each of the next five fiscal years ending July 31: $4,233,706 in fiscal 2004; $3,503,727 in fiscal 2005; $2,830,682 in fiscal 2006; $2,289,553 in fiscal 2007; $2,103,286 in fiscal 2008 and $4,500,348 thereafter. Rent expense was $5,636,059 in fiscal 2003, $4,480,446 in fiscal 2002, and $2,338,299 in fiscal 2001. H. EMPLOYEE BENEFIT PLANS Substantially all non-highly compensated employees can participate in a 401 (k) plan. Company contributions are at the discretion of the Company's board of directors, except that Company contributions for union employees are based on hours worked. Total expense for the plans was $484,499 in fiscal 2003, $556,044 in fiscal 2002 and $462,209 in fiscal 2001. During fiscal 2001, the Company established a deferred compensation plan for executives who do not participate in a 401 (k) plan. This plan allows executives to defer a portion of their compensation and to direct the Company to invest the funds in mutual fund investments held by the Company. Participant benefits are limited to the value of the investments held on their behalf. Investments held by the Company are accounted for as trading securities and the obligation to the participants is reported as a liability. No income or loss is recorded through the Consolidated Statements of Income. The Company does not make contributions to the plan. The balance of investments held in this plan was $2,318,496 at July 31, 2003 and $1,307,879 at July 31, 2002. I. CONTINGENT LIABILITIES AND COMMITMENTS It is customary practice for companies in the recreation vehicle industry to enter into repurchase agreements with financing institutions to provide financing to their dealers. Generally, these agreements provide for the repurchase of products from the financing institution in the event of a dealer's default. Our principal commercial commitments at July 31, 2003 are summarized in the following chart:

Total Term of Commitment Amount Commitment Guarantee ---------- ----------------- --------- Guarantee on dealer financing $ 3,598,000 less than 1 year Standby repurchase obligation on dealer financing $ 308,468,000 less than 1 year

32 The risk of loss under these agreements is spread over numerous dealers and further reduced by the resale value of the units which the company would be required to repurchase. Losses under these agreements have not been significant in the periods presented in the consolidated financial statements, and management believes that any future losses under these agreements will not have a significant effect on the Company's consolidated financial position or results of operations. The Company records repurchase and guarantee reserves based on prior experience and known current events. The combined repurchase and recourse reserve balances are approximately $516,113 as of July 31, 2003 and $139,000 as of July 31, 2002. The Company incurred losses due to repurchases of approximately $494,000, $751,000 and $468,000 in fiscal 2003, 2002 and 2001, respectively. The Company obtains certain vehicle chassis from automobile manufacturers under converter pool agreements. These agreements generally provide that the manufacturer will supply chassis at the Company's various production facilities under the terms and conditions set forth in the agreement. The manufacturer does not transfer the certificate of origin to the Company and, accordingly, the Company accounts for the chassis as consigned, unrecorded inventory. Chassis are typically converted and delivered to customers within 90 days of delivery. If the chassis is not converted within 90 days of delivery to the Company, the Company purchases the chassis and records the inventory. At July 31, 2003, chassis on hand accounted for as consigned, unrecorded inventory was approximately $16,521,878. The Company is involved in various litigation generally incidental to normal operations. In addition to these claims, we are a defendant in a lawsuit in Ontario, Canada. This suit arises out of an agreement relating to the manufacture of a low floor bus. The plaintiff claims that we illegally utilized the concept of the low floor bus for our own profit and that we breached the contract with it in the manner specified in the complaint. The plaintiff has asked for substantial money damages including punitive damages. We have counter claimed against the plaintiff claiming that we overpaid it in excess of $800,000. The case is in the discovery phase and no trial date has been set. In management's opinion, the resolution of pending litigation is not expected to have a material effect on the Company's financial condition, results of operations or liquidity. J. STOCKHOLDERS' EQUITY The Company retired 3,816,814 shares from treasury stock in fiscal 2003. This retirement resulted in a reduction of $29,598,666 in Treasury Stock, $381,687 in Common Stock, $10,628,802 in Additional Paid-in Capital and $18,588,176 in Retained Earnings. In the fourth quarter of 2002, the Company declared a two-for-one common stock split that was distributed to shareholders of record as of June 19, 2002. All share and per share amounts have been retroactively adjusted for the effect of the common stock split. The Company's officers and key employees have been granted stock options under the Company's 1988 Incentive Stock Option Plan and all options have been exercised. Additionally, on September 16, 1999 the Company's Board of Directors approved the 1999 Stock Option Plan. 1,000,000 shares were authorized under the 1999 Plan. Options expire 10 years from the date of grant and are vested evenly over 3 years from the date of grant. A summary of option transactions under the Incentive Stock Option Plans is as follows:

2003 2002 2001 ---------------------------------------------------------------------------------- Weighted- Weighted- Weighted- Average Average Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ---------------------------------------------------------------------------------- Outstanding at beginning of year 422,356 $ 16.90 386,000 $ 9.37 221,000 $ 7.17 Exercised (87,331) 10.73 (144,644) 8.49 (135,000) 7.17 Canceled (5,668) -- (6,000) -- -- -- Granted -- -- 187,000 25.72 300,000 10.00 ------------------------------------------------------------------------------- Outstanding at end of year 329,357 $ 18.51 422,356 $ 16.90 386,000 $ 9.37 =============================================================================== Exercisable at year-end 109,580 $ 17.99 39,356 $ 9.35 86,000 $ 7.17 ------------------------------------------------------------------------------- Weighted average fair value of options granted during the year -- $ -- -- $ 10.20 -- $ 4.19 -------------------------------------------------------------------------------

33 The Company applies Accounting Practices Board Opinion No. 25 and related interpretations in accounting for the 1988 and 1999 Stock Option Plans. Accordingly, no compensation cost has been recognized for this plan. The following summarizes information about stock options outstanding at July 31, 2003, under the 1999 Incentive Stock Option Plans. 524,668 shares are available for grant under the 1999 Plan.

OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------------------------------------------------------------------------- NUMBER WEIGHTED-AVERAGE NUMBER EXERCISE OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE EXERCISE PRICE AT JULY 31, 2003 CONTRACTUAL LIFE EXERCISE PRICE AT JULY 31, 2003 PRICE ----------------------------------------------------------------------------------------------------- $ 10.00 151,024 7 years $ 10.00 53,914 $10.00 $ 25.72 178,333 9 years $ 25.72 55,666 $25.72

The assumptions used in determining the fair value of options granted during fiscal 2002 and 2001 are as follows:

2002 2001 ------- ------- Expected volatility 37% 36% Expected life of grant 6 years 6 years Risk free interest rate 3.93% 5.82% Expected dividend rate .32% .39%

On September 29, 1997, the Company's board of directors approved a stock award plan which allows for the granting of up to 300,000 shares of restricted stock to selected executives. Restrictions expire 50% after 5 years following the date of issue and the balance after six years. As of July 31, 2003, the Company issued 96,375 shares of restricted stock under this plan and 203,625 shares remain available for issuance. Compensation costs related to this plan were $270,789 in fiscal 2003, $167,539 in fiscal 2002, and $74,316 in fiscal 2001 and are being amortized over the restriction period. K. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred and were approximately $1,067,265 in fiscal 2003, $1,404,477 in fiscal 2002, and $1,506,814 in fiscal 2001. L. JOINT VENTURES In March 1996, the Company and Cruise America, Inc., an unrelated third party, formed a joint venture, CAT Joint Venture LLC ("CAT"), to rent recreation vehicles to the public. The Company's total investment of $1,066,530 includes a subordinated note receivable of $710,000. In March 1994, the Company and a financial services company formed a joint venture, Thor Credit Corporation, to finance the sales of recreation vehicles to consumer buyers. The Company's total investment of $1,152,939 includes a subordinated note receivable of $150,000. These investments are 50% owned and are accounted for using the equity method. During fiscal 2003, our Four Winds subsidiary had sales to Cruise America of $26,486,000 and Cruise America had sales to CAT of $7,049,000. During fiscal 2002, our Four Winds subsidiary had sales to Cruise America of $22,188,000 and Cruise America had sales to CAT of $5,988,000. 34 M. BUSINESS SEGMENTS The Company operates in principally two segments - recreation vehicles and small and mid-size buses. Manufacturing and sales are conducted in the United States and, to a much lesser extent, in Canada. Identifiable assets are those assets used in the operation of each industry segment. Corporate assets primarily consist of cash and cash equivalents, deferred income tax assets, the cash value of Company-owned life insurance and various investments.

2003 2002 2001 ------------------------------------------ ($000) ($000) ($000) NET SALES: Recreation vehicles Towables $ 1,124,207 $ 782,715 $ 337,186 Motorized 227,651 187,665 189,241 Other 2,554 3,317 3,267 Buses 216,992 271,603 292,034 ------------------------------------------ TOTAL $ 1,571,404 $ 1,245,300 $ 821,728 ========================================== INCOME BEFORE INCOME TAXES: Recreation vehicles $ 122,729 $ 77,509 $ 25,285 Buses 12,306 15,016 20,182 Corporate (8,791) (10,698) (2,180) ------------------------------------------ TOTAL $ 126,244 $ 81,827 $ 43,287 ========================================== IDENTIFIABLE ASSETS: Recreation vehicles $ 327,615 $ 293,871 $ 114,150 Buses 63,227 64,436 82,194 Corporate 218,099 139,196 112,723 ------------------------------------------ TOTAL $ 608,941 $ 497,503 $ 309,067 ========================================== DEPRECIATION AND AMORTIZATION EXPENSE: Recreation vehicles $ 5,232 $ 4,160 $ 4,132 Buses 1,153 1,065 810 ------------------------------------------ TOTAL $ 6,385 $ 5,225 $ 4,942 ========================================== CAPITAL EXPENDITURES: Recreation vehicles $ 23,082 $ 5,443 $ 6,803 Buses 3,962 2,041 10,395 Corporate 220 -- -- ------------------------------------------ TOTAL $ 27,264 $ 7,484 $ 17,198 ==========================================

35 N. WARRANTY Thor provides customers of our product with a warranty covering defects in material or workmanship for periods generally ranging from one to two years, with longer warranties of up to five years on certain structural components. We record a liability based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors we use in estimating the warranty liability include a history of units sold, existing dealer inventory, average cost incurred and a profile of the distribution of warranty expenditures over the warranty period. A significant increase in dealer 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 claims or additional costs materialize. Management believes that the warranty reserves are adequate. However, actual claims incurred could differ from estimates, requiring adjustments to the reserves. Warranty reserves are reviewed and adjusted as necessary on a quarterly basis.

YEAR ENDED YEAR ENDED YEAR ENDED JULY 31, 2003 JULY 31, 2002 JULY 31, 2001 ---------------------------------------------- Beginning Balance $ 25,374,825 $ 12,541,890 $ 11,878,469 Provision 44,787,237 26,928,523 12,850,959 Payments 35,047,237 22,971,439 12,187,538 Acquisitions -- 8,875,851 -- --------------------------------------------- ENDING BALANCE $ 35,114,825 $ 25,374,825 $ 12,541,890 =============================================

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JULY 31, 2003, 2002 AND 2001

Column A Column B Column C Column D Column E -------- ---------- -------------------------- -------------- --------- Balance at Charged to Write-offs Net Balance Beginning Costs and of Recoveries/ at End of of Period Expenses Acquisitions Payments Period ------------------------------------------------------------------------ Description YEAR ENDED JULY 31, 2003: Allowance for doubtful accounts $ 245,964 $ 431,030 $ -- $ (51,780) $ 625,214 ======================================================================== Accumulated amortization of non-compete agreements ........ $ 9,618,959 $ 714,819 $ -- $ -- $10,333,778 ======================================================================== YEAR ENDED JULY 31, 2002: Allowance for doubtful accounts $ 68,210 $ (62,332) $ 274,540 $ (34,454) $ 245,964 ======================================================================== Accumulated amortization of non-compete agreements ........ $ 9,048,783 $ 570,176 $ -- $ -- $ 9,618,959 ======================================================================== YEAR ENDED JULY 31, 2001: Allowance for doubtful accounts $ 43,959 $ 80,890 $ -- $ (56,639) $ 68,210 ======================================================================== Accumulated amortization of goodwill and other intangibles $20,188,599 $ 1,346,080 $ -- $ -- $21,534,679 ========================================================================

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