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South Dakota RV Dealers Look for Rebound

January 14, 2011 by · 1 Comment 

American families are ready to hitch up their trailers and tow the RV industry out of its worst stretch in nearly two decades.

The industry was driven into the ditch in 2009 by the recession. Sales plunged, plants closed and thousands of jobs were cut as orders for recreational vehicles dropped to their worst level since 1991.

But now, RV makers are starting to turn profits and have begun to hire, the Rapid City (S.D.) Journal reported.

And dealers — including those in the Black Hills — are ordering more RVs for their showrooms. This year, shipments of RVs ranging from entry-level popups to spacious motorhomes are expected to hit their highest level since 2007, when the economic downturn began.

Mid-States Campers, in Summerset at Exit 48, just placed an order for $2 million in inventory, salesman Danny Watt said.

Craig

Craig Wachendorf, manager at Mid-States Campers

“We’re predicting it’ll be a good year,” the dealership’s manager, Craig Wachendorf, said.

He said 2010 sales were back to prerecession levels, and he predicts about 10% growth in 2011 in sales of fifth-wheel and towable campers, with steady sales over 2010 in the more expensive motorhomes.

That’s the trend around the country.

A growing share of RV sales comes from families choosing less expensive towable RVs, including folding camping trailers, or popups. Those towables are smaller and cost a fraction of the price of amenity-filled motorhomes favored by older travelers.

Before the recession hit, towables accounted for eight out of every 10 new RV shipments. Now they make up about nine out of 10 RVs shipped to dealers.

Towables, attached to pickups or hitched to the back of another vehicle, cost between $4,000 and $100,000, according to the Recreation Vehicle Industry Association (RVIA). Stand-alone motorhomes can start at about $41,000 for van-like RVs, according to the industry group, while spacious, bus-like vehicles can run as much as $400,000 for top-of-the-line models.

And that’s before the cost of gas. Big RVs can get as little as 8 miles per gallon.

Bob Olson, CEO of RV manufacturer Winnebago Industries Inc., said a trend of families buying cheaper towables is encouraging.

“They have to start somewhere. And one thing about this lifestyle, you get hooked on it and you want to upgrade,” he said.

The industry is forecasting some recovery across all RV models. It expects shipments from manufacturers to dealers to hit 236,700 in 2010, up 43% from 2009’s nearly 20-year low of 165,700. In 2011, shipments are forecast to reach 246,000.

Higher shipments mean dealers expect retail sales to rise. The two don’t always correlate, but there are signs that sales will, in fact, grow in the mid-single digits in 2011 “with a bias toward cheaper units,” said Bret Jordan, who follows RV companies for Avondale Partners.

“It correlates pretty well with consumer confidence and economic improvement,” he said.

Still, this year’s pace of shipments remains far below the 2006 level of 390,560 — the high-water mark for a quarter century.

And speed bumps remain. Many consumers remain wary of big-ticket purchases and many RV owners have delayed trading in older models for bigger ones. Credit isn’t as nearly free flowing as in prerecessionary times.

Donna Maloney, manager at Dakota RV

Donna Maloney, general manager at Dakota RV

Service departments have seen steady work as RV owners held onto older models. Donna Maloney, general manager at Dakota RV at Interstate 90 and Deadwood Avenue, said, “People were keeping what they had longer.”

Motorhome sales are still sluggish, she said.

“The people that can afford the motorhomes did get hit the hardest,” she said, speaking of older consumers who saw their nest eggs take a hit. “I’m guessing it’s taking them longer to come back.”

But sales of fifth-wheels and trailers have rebounded, she said.

“People that RV, they’re not going to give up their toys and their fun,” Maloney said.

Even today’s small models feel luxurious, with amenities such as king-sized beds, wood cabinets, flat-screen televisions and residential-style lighting fixtures common even in fifth-wheel trailers. Other “toy-hauler” models feature rear garages with covered space to store motorcycles, snowmobiles or four-wheelers, space that converts to a party deck when the vehicles are unloaded, Watt said.

With modern kitchens including refrigerators, stoves, microwaves and more, even in the smaller models, “They’re not having to rough it,” Maloney said.

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AP: Smaller Trailers Lead Industry Rebound

December 3, 2010 by · Leave a Comment 

American families are ready to hitch up their trailers and tow the RV industry out of its worst stretch in nearly two decades, the Associated Press reported.

The industry was driven into the ditch last year by the recession. Sales plunged, plants closed and thousands of jobs were cut as orders for recreational vehicles dropped to their worse level since 1991.

Now, RV makers such as Winnebago Industries Inc. are starting to turn profits and have begun to hire. And dealers are ordering more RVs for their showrooms.

This year, shipments of RVs ranging from entry-level pop-ups to spacious motorhomes are expected to hit their highest level since 2007, when the economic downturn began.

The upswing is a sign that somewhat looser credit, stable fuel prices and improved consumer confidence are inspiring Americans to buy more RVs.

“Things are starting to look up,” says Tim O’Brien, president of an RV dealership in Lapeer, Mich., where sales are up 55% from a year ago. “People are ready to get out from underneath the frugality of the last couple of years and go out and have some fun and recreation,” he says.

Typical RV buyers are people between 35 and 54 with disposable income. They’re starting to buy again, say industry leaders and dealers who convened at a trade show in Louisville this week. But a growing share of RV sales come from families choosing less expensive towable RVs, including folding camping trailers, or pop-ups. Those towables are smaller and cost a fraction of the price of amenity-filled motor homes favored by older travelers.

Before the recession hit, towables accounted for eight out of every 10 new RV shipments. Now they make up about nine out of 10 RVs shipped to dealers.

Towables, attached to pickups or hitched to the back of another vehicle, cost between $4,000 and $100,000, according to the Recreation Vehicle Industry Association (RVIA). Stand-alone motorhomes can start at about $41,000 for van-like RVs, according to the industry group, while spacious, bus-like vehicles can run as much as $400,000 for top-of-the-line models. And that’s before the cost of gas. Big RVs can get as little as 8 mpg.

Bob Olson, CEO of RV manufacturer Winnebago Industries Inc., says a trend of families buying cheaper towables is encouraging. “They have to start somewhere. And one thing about this lifestyle, you get hooked on it and you want to upgrade.”

Winnebago recently signaled its intention to move back into the towables by signing a letter of intent to buy SunnyBrook RV, which makes those type of RVs. Winnebago last built travel trailers in 1983.

The industry is looking for a recovery across all RV models.

It expects shipments from manufacturers to dealers to hit 236,700 in 2010, up 43% from last year’s nearly 20-year low of 165,700. Through October, shipments have risen nearly 53% from the same period in 2009, according to RVIA. In 2011, shipments are forecast to reach 246,000.

Higher shipments mean dealers expect retail sales to rise. While the two don’t always correlate, there are signs that sales will, in fact, grow in the mid-single digits in 2011 “with a bias toward cheaper units,” says Bret Jordan, who follows RV companies for Avondale Partners.

“It correlates pretty well with consumer confidence and economic improvement,” he says.

Profits are returning to the industry. Winnebago, which closed two plants during the recession, posted net income of $4.9 million in the fourth quarter ending Aug. 28, compared with a loss of $50.2 million a year earlier. That marked its second straight profitable quarter. Revenue more than doubled to $449.5 million for its full fiscal year.

The results follow the company’s biggest loss of $78.8 million in fiscal 2009. Its profit peaked at $70.6 million in fiscal 2004.

Jobs are also starting to come back. Jayco, which makes towables and motor homes, has hired about 500 more workers this year. Dutchmen Manufacturing Inc., a division of Thor Industries Inc. and a maker of towables, has nearly doubled its work force from about 400 during the worst of the recession to about 770 now. Winnebago shed about half its work force, roughly 1,670 workers, but has since added back about 400 employees.

The recovery is becoming evident at Kevin Stone’s RV dealership in Berlin, N.J. Stone had to offer discounts to entice people to his lot in 2008 and 2009. But his dealership just had its best sales year ending in October, he says.

“It’s just pent up demand,” Stone says. Customers don’t feel things are going to get any worse than they’ve been, he says.

Still, this year’s pace of shipments remains far below the 2006 level of 390,560 — the high-water mark for a quarter century.

And speed bumps remain. Many consumers remain wary of big-ticket purchases and many RV owners have delayed trading in older models for bigger ones. Credit isn’t as nearly free flowing as in pre-recessionary times.

Still, a recovery seems to be taking hold.

Winnebago’s Olson, who became CEO just before the RV industry tanked in 2008, says “It’s kind of nice to sit here and see that things are improving.”

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RVs’ Return May Indicate Consumer Recovery

October 4, 2010 by · Leave a Comment 

Sales  for Thor Industries Inc. are on the road to recovery after being slammed by high gas prices, scarce credit and recession-racked consumers, Businessweek reported. U.S. consumers are favoring less expensive and more fuel-efficient models, analysts and industry experts say.

Americans’ willingness to spend, if not splurge, on so-called second homes on wheels could in turn provide a clue to positive trends in the broader economy.

“The RV industry is a great leading indicator for the overall health of the economy,” says Kathryn I. Thompson, founder of Thompson Research Group in Nashville, Tenn. Over the last decade, manufacturers have produced an average of 309,000 RVs a year, according to the Recreation Vehicle Industry Association (RVIA).

On Sept. 28, Thor, the largest U.S. maker of recreational vehicles, reported a 51% jump in last quarter’s sales from a year ago. Profit rose 64%, with net income exceeding by 16% the estimates of analysts surveyed by Bloomberg.

The recession took its toll on the industry. In March 2009, two of the largest RV makers — Monaco Coach and Fleetwood Enterprises — filed for bankruptcy protection.

LOOSER CREDIT, NOT GREATER DEMAND

Mac Bryan

Mac Bryan

On Sept. 24, the RVIA released August data showing that the 177,300 RVs shipped to dealers so far in 2010 had exceeded levels at this point in 2009 by 70%. In 2009, the number of RVs shipped to dealers was 58% below the 390,500 RVs shipped in the peak year of 2006, according to the RVIA.

A key factor in the RV recovery has been credit, says Robert M. “Mac” Bryan, vice president of the RVIA. Because of the credit crisis, neither consumers nor dealers could borrow to buy RVs, which in the case of motorized homes can cost at least $200,000. Much of the improvement in 2010 does not reflect a “change in demand, but an improvement in financing in vehicles,” Bryan says, as the financial crisis has eased and banks have reentered the RV financing market.

So far in 2010, the rebound in actual retail demand has been “fairly modest,” says Bret Jordan, an analyst at Nashville-based investment firm Avondale Partners. “The retail consumer never really came back in a big way,” says Jordan, who is based in the firm’s Boston office.

There are, however, signs that this could be changing. “After a tenuous summer, the season ended well,” Robert W. Baird analyst Craig Kennison wrote on Sept. 29 while unveiling the results of a survey of 104 RV dealers.

Baird’s survey showed that some parts of the RV industry are doing better than others. Sales of motorhomes rose 8% to 10% in the third quarter of 2010. Towable RVs, meanwhile, jumped 16% to 18%.

TRADING DOWN TO TOWABLE RVS

Consumers are deciding on towable RVs partly because of cost, but also because extra features have made them competitive with motorhomes, Jordan says. A “high-end towable vehicle” can cost $60,000 while a high-end motorhome with a diesel engine can be $200,000. Many new towable trailers now feature  “slide-outs” — portions of the trailer that can be expanded when parked to increase living space. “You’re getting comparable living space” to motorhomes, he says, adding: “There is a lot of utility in towables for the cost.”

In 2006, pricier motorhomes made up 14.3% of all recreational vehicles produced. So far in 2010, that share has fallen to less than 10%.

“You are seeing the trade-down effect,” Thompson says. “People aren’t necessarily giving up the RV lifestyle but they’re choosing less-expensive products.” RVs priced below $150,000 are “doing OK,” she says, while “anything below $100,000 is doing the best.”

According to Thompson, such trends could hurt Winnebago Industries Inc., the motorhome maker headquartered in Forest City, Iowa. They could favor Thor, for which towable RVs made up 70% of sales last quarter, she says. A maker of RVs under the Airstream, Dutchmen, Komfort, CrossRoads, and other brand names based in Jackson Center, Ohio, Thor announced on Sept. 17 the acquisition of Heartland Recreational Vehicles LLC, another specialist in towable RVs, for $100 million in cash and 4.3 million shares of Thor stock — or a total value of $247 million based on the recent share price. On Oct. 1, Thor said it would boost its quarterly dividend, from 7¢ to 10¢ per share.

BIG EXTRA: ADDITIONAL FLAT-SCREEN TV

Winnebago shares are down 14% so far in 2010, while Thor shares are up 9%.

To make cheaper RVs more attractive to consumers, manufacturers have piled on extra “bells and whistles,” Jordan says, like including three flat-screen televisions, instead of just two.

In response to the volatility of gas prices in recent years, RV manufacturers have made their products more fuel-efficient. “We’re seeing a great deal of attention [paid] to the greening of the RV,” Bryan says. RVs are being made of lighter materials and the efficiency of furnaces, air conditioners, water heaters, and other appliances has been improved, he says.

There are further recent indications of returning retail demand. The Pennsylvania RV and Camping Show, an annual event held in Hershey, Pa., bills itself as “America’s largest RV show.” The exhibition, from Sept. 13-19, saw record attendance that was up 9% from last year and the number of RV units on display rose 43%.

Tiffin Motorhomes, a privately held RV company based in Red Bay, Ala., told show organizers that sales were 44% higher than last year.

“People had been holding back on purchases and now they were ready to buy,” says Heather Leach, marketing and education director at the Pennsylvania RV and Camping Association (PRVCA).

RV DEALER: CUSTOMERS REMAIN “LEERY”

Exposure to the U.S. consumer is just one factor that makes the RV industry a good economic barometer, Thompson says. The industry is also affected by important credit trends, including the availability of short-term credit for dealers buying inventory and of long-term credit for customers buying RVs. The industry is also a good window into factors that affect U.S. manufacturing, such as raw material and labor costs.

The economic environment continues to concern the industry. Consumer spending rose 0.4% in August, according to data released Oct. 1 by the U.S. Commerce Dept. According to an unidentified RV dealer quoted in a Sept. 7 survey by Thompson Research Group: “Customers [remain] leery, kind of careful about everything.”

Nonetheless, industry participants say they are confident about the RV’s long-term appeal, especially as Baby Boomers retire and younger Americans seek affordable vacations. “Assuming gas prices remain reasonably affordable, it’s a cheap way to have a vacation,” Jordan says. “It’s cheaper than a second home.”

Park campgrounds are as busy as ever, Bryan says, a fact that underscores the appeal to Americans of the RV lifestyle. According to the National Park Service, the number of RV campers at National Parks rose 6.8% from 2008 to 2009. “Recreational vehicles have a very bright future,” Bryan says.

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Thor Stock Climbs 13th Straight Day on Wall Street

August 6, 2009 by · Leave a Comment 

Makers of recreational vehicles and mobile and manufactured homes fared well on Wall Street on Wednesday (Aug. 5), led by RV maker Thor Industries  Inc. and by Drew Industries Inc., a maker of parts primarily used in travel trailers and fifth-wheel RVs, according to Investor’s Business Daily.

Thor climbed for 13 consecutive sessions through Wednesday, gaining 30% in July and 14% in August.

On Tuesday, the Ohio-based company said second-quarter earnings fell 92% to 4 cents, a full 60% below consensus views. Revenue dropped to $415.5 million, 41% below year-ago levels.

Despite the miss, the stock climbed 6% Tuesday and another 6% Wednesday in huge trade.

The trigger appears to have been a rising backlog of undelivered orders.

Thor’s total backlog rose 45% to $588 million by July 31, its highest level in two years.

Thor’s RV segment backlog was $298 million, up from $146 million a year ago.

The increase suggests RV dealers have worked through the bulk of an inventory reduction imposed by their lenders, primarily Bank of America and GE Capital, says analyst Bret Jordan with Avondale Partners.

That could mean increasing orders for manufacturers, Jordan says, but it doesn’t show an increase in consumer demand.

Drew, which reported July 31, saw second-quarter earnings drop 71%. That was 300% above analysts’ consensus views.

But the company says most of the surprise came from low-end, towable products, rather than its higher priced fifth-wheel RV lines.

“The RV category is not dead,” Jordan said, “but the consumer has sort of traded down.”

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CNBC: RV Industry Ready to Signal A Turn

April 9, 2009 by · 1 Comment 

As the recession nears a bottom, many believe RVs may be ready to turn the corner.

“The RV industry serves as a bit of a microcosm of the housing market,” says Craig Kennison, an analyst at Robert W. Baird. “The recession affected the RV industry first, so we’d like to believe that we’ll see it turn before the rest of the economy.”

The $37 billion industry took off in the 1960s, as millions of Americans purchased RVs to realize their American Dream and travel around the nation. The fascination stuck, growing with each passing decade, according to CNBC.

There are now about 8.2 million RV owners across the nation, according to the Recreation Vehicle Industry Association (RVIA). Unlike the stereotype of older couples hitting the road after retirement, the average RV owner is middle-aged and married, traveling a total of 4,500 miles and 26 days annually.

Right now, the biggest roadblock to a recovery has been consumers’ inability to secure credit to buy an RV.

“The single biggest issue for the industry is financing,” said Winnebago  Industries Inc. CEO Bob Olson. “People just can’t get financing from major lending institutions. This is affecting retail and wholesale customers.”

With credit tight, there has been less need for inventory at RV dealerships. At the end of last year, wholesale shipments had fallen by 75%, according to a research note from Baird.

Such drastic cuts have severely impacted many manufacturers. RV makers Fleetwood Enterprises Inc., Country Coach and Monaco Coach Corp. recently sought Chapter 11 bankruptcy protection.

As companies go under, they leave room for larger, more stable companies to take over the industry.

Thor Industries Inc. and Winnebago will be among the survivors. It’s a matter of having a sound balance sheet,” Kennison said. “They will gain a significant amount of market share as other companies exit the market. At the end of this, there will be a considerably significant advantage for Winnebago and Thor.”

This potential is not lost on the RV companies.

“We have a good foundation to weather this storm,” Olson said. “We have no debt and an excellent management team. The economy will turn and we are well poised to take advantage of it.”

Thor did not return phone calls seeking comment.

Investors have taken notice as well, believing that the crunch in the industry will benefit larger companies. They are taking interest in the likely survivors, said Kennison.

However, valuation of the stocks is difficult to discern, since RV companies aren’t making money in the current economic environment. Kennison’s firm has come to terms with this issue by estimating free cash flow for future years and discounting it by the cost of capital. He currently rates both Winnebago and Thor stocks as neutral.

Despite the difficulties facing the industry, things might soon be looking up as a bottom may be forming.

“Sure, sales are down, but we don’t look at it negatively,” said Dena Hurley, president of Crossroads Trailer in Newfield, N.J. “It’s down a little, but not much, people are still buying RVs.” There has been an increase in customers in the last few months, Hurley said, a trend which has been seen nationwide.

In addition, retailers have indicated their intentions to stop decreasing inventories, said Kathryn Thompson, an analyst at Avondale Partners, in a research note.

If the RV industry is bottoming, it may be indicative of the beginning of a new trade cycle. Motorhome sales follow an average four- to six-year trade cycle, with the last one peaking in 2004. After five years, industry watchers are expecting an upswing within the next two years.

Many also believe there to be pent up demand in the public, signaling an increase in sales as the market begins to prosper and consumer confidence returns. The numbers from the Florida RV Super Show in Tampa in January reveal an interest in the purchase of RVs within the general public. The show drew record numbers, with over 10,000 guests during the exhibit’s first two days.

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Monaco/Navistar Talks to Continue Into April

March 27, 2009 by · Leave a Comment 

Monaco logo  Negotiations between Monaco Coach Corp. and Navistar International Corp – the company seeking to buy    Monaco’s RV-related assets – will continue into early April, when the two companies hope to sign a final    agreement. 

 The sale could be completed by late June, according to documents Monaco filed with the U.S. Bankruptcy Court. 

Bankrupt Coburg, Ore.-based Monaco announced Thursday (March 26) that it has found a possible buyer in Navistar, a massive Illinois- based corporation that makes everything from school buses to military vehicles, according to The Register-Guard, Eugene, Ore. 

Navistar issued a nonbinding letter of intent to buy some elements and liabilities associated with Monaco’s recreational vehicle manufacturing, Monaco spokesman Craig Wanichek said. 

Navistar — which has 17,000 employees worldwide and is the leading producer of long-haul trucks in the United States — is looking to buy Monaco’s core RV assets for up to $50 million, Wanichek said. 

Navistar declined to say what it plans for the Coburg headquarters and idled Coburg factory, but Wanicheck indicated that the new owner would restart the plant. 

“They wouldn’t have put out a letter of intent that included those assets if they didn’t see the value of what we did here,” he said. “Our plan is to get as many people back to work as soon as we can.” 

Should the deal go through as planned, Navistar would own all of Monaco’s RV brand names, its closed factories in Coburg and Indiana, plus equipment and intellectual property, Wanichek said. 

Navistar also would assume some of Monaco’s liabilities, but Wanichek declined to discuss more details of which debts would be covered. 

“It’s very good news,” the Monaco spokesman said. “This is an extremely important step to keep the process moving forward.” 

Earlier this month, Monaco laid off 2,000 employees in Oregon and filed to reorganize under Chapter 11 of the federal bankruptcy code. 

A spokesman for Navistar on Thursday said he could not say much about a deal that’s still in the works. 

“We do think Monaco is a quality company, and we think there’s potential there, or we wouldn’t have entered into negotiations,” said the spokesman, Roy Wiley. 

The company put most of its workers on unpaid leave late last year, then terminated 2,000 of its 2,145 employees on March 2. Three days later, the company filed for bankruptcy. 

News of a potential buyer surfaced Wednesday, when Monaco listed an unnamed potential buyer in parts of a 60-page financial plan it filed in U.S. Bankruptcy Court. 

The proposed sale would enable Monaco’s secured lenders — Bank of America and Ableco — to be repaid, Wanichek said. Secured lenders have a legal hold on company’s physical property, such as real estate and equipment. 

Still up for sale through Nashville, Tenn., investment bank Avondale Partners are Monaco’s luxury motorhome resorts in California, Las Vegas and Florida. 

Wanichek said the company is working with potential buyers for those properties as well. 

Monaco owes Ableco $37.4 million, and Bank of America and other lenders $36.3 million. In its bankruptcy filing, Monaco estimated that it has 25,000 to 50,000 additional creditors. 

Should all of Monaco’s assets be sold, the company may be able to pay some of its un secured creditors as well, Wanichek said. Unsecured creditors — those who have no legal hold on a company’s physical assets — typically are paid only after secured creditors have been satisfied. 

Navistar is based in Warrenville, Ill., a suburb of Chicago. The 175-year-old company focuses on large truck production, military vehicles and diesel engines and has $15 billion a year in sales.

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