baird_new_logoEditor’s Note: Robert W. Baird & Co. released this investor note following announcement Thursday that Thor Industries Inc. had purchased approximately 3.98 million shares of Thor stock from the estate of Wade F.B. Thompson.


Raising estimates to reflect share repurchase. Thor purchased 3.98 million shares of common stock at a price of $29 per share from the estate of Wade F.B. Thompson, the founder and former chairman and CEO who passed away in November. We are raising our EPS estimates to reflect the lower share count.


Purchase funded with available cash. Thor purchased 7.2% of outstanding shares from the estate of Wade F.B. Thompson using $115 million from available cash. Thor had no debt and $315 million in cash and short-term investments on the balance sheet on October 31 – and is expected to generate cash in the January quarter.

Raising EPS estimates. We are raising our F2010 EPS estimate to $1.62 from $1.55 to reflect fewer shares outstanding. Likewise, we are raising our F2011 estimate to $1.99 from $1.85.

Estate remains largest shareholder. Following the transaction, the estate still controls approximately 11.5 million shares (22% of shares outstanding) valued at $356 million. It is the largest shareholder.

• Valuation. Our $33 price target is based on 15x our forward estimate one year from now plus consideration for $5/share in cash and investments. This valuation multiple is in line with the five-year historical average as earnings recover into 2010. At the end of FQ1 Thor had approximately $315 million in cash & investments ($6/share). With available cash and operating cash flow we believe Thor is capable of supporting acquisitions, internal growth initiatives, share buybacks and higher dividends.