Editor’s Note: The following is a blog authored by Robert Hanley of the Motley Fool looking at prospects for the RV industry and some of the major publicly traded companies.
The great American pastime of hitting the open road with family and friends hit a speed bump during the financial crisis, as discretionary incomes fell sharply. The leading manufacturers of RVs, like Winnebago Industries Inc. and Thor Industries Inc., were also hit hard and many of their smaller competitors made the lonely trip to bankruptcy court. Fortunately, the federal government’s stimulus programs have helped the industry prosper again and post a 14% increase in unit sales during 2012, according to the Recreational Vehicle Industry Association (RVIA). So, which players are now worth a look from investors?
The pride of Forest City, Iowa
Founded in 1958, Winnebago sells its iconic recreational vehicles through a network of over 460 dealers throughout the U.S. and Canada. Winnebago controls approximately 20% of the traditional motor coach market and it moved into the towable coach segment with its 2010 purchase of competitor Sunnybrook. The company’s very conservative balance sheet enabled it to survive the industry’s deep recession relatively unscathed, while allowing it to continue investing in new product development.
In its latest fiscal year, Winnebago posted mixed results, with a 17% increase in revenues and a 16% decline in operating income. The company’s sales benefited from a sharp increase in unit volume, as well as improved pricing as its customers opted for more expensive models. However, Winnebago’s razor-thin operating margin, 1.6% in FY2012, was negatively impacted by higher commodity costs and aggressive discounting of its products in the first half of the year.
Looking ahead, Winnebago’s prospects are strong as the industry currently expects an 8% unit sales increase in 2013. In addition, the company has improved its competitive position by expanding into the lower-priced, towable coach market. With a year-over-year doubling in the value of its backlog as of August 2012, Winnebago should be able to earn solid future gains in profitability as it leverages its manufacturing operations.
The pride of Jackson Center, Ohio
Founded in 1980, Thor has become the country’s largest manufacturer of recreational vehicles primarily due to a long string of acquisitions, including purchases of competitors Dutchmen in 1991 and Keystone in 2001. The company has also become the leading manufacturer of small and mid-sized buses for the municipal market, a segment that accounted for roughly 16% of Thor’s total sales in 2012. Similar to Winnebago, Thor maintained a conservative balance sheet through the financial crisis, allowing it to acquire weaker competitors and gain market share.
In FY2013, Thor has reported solid financial results, with increases in revenues and operating income of 27.3% and 31.0%, respectively, compared to the prior-year period. The company’s operating margin gained slightly, as it was able to offset rising commodity costs with operating efficiencies in its manufacturing network. Despite a weak operating margin in its bus segment, due to difficult funding challenges for its municipal customers, Thor sees the segment as a growth market as people continue to gravitate toward public transit.
Looking ahead, Thor should also benefit from the improved industry sales environment in 2013 and beyond. In addition, its shareholder-friendly management team has continued to look for complementary segments to add to Thor’s core recreational vehicle business. With a strong current sales backlog, the company should post solid increases in income this year as it adds acquired brands to its overall manufacturing base.
Investors looking for an investment in the recreational vehicle space might also want to consider leading suppliers to the industry, like Patrick Industries Inc. Founded in 1959 as a distributor of paneling to motor coach manufacturers, Patrick Industries now manufactures a range of products that includes hardwood doors, cabinets, and wall panels through a network of 12 U.S. plants. The company has successfully used the acquisition channel to diversify its product offerings, including purchases of lighting and hardwood door manufacturers in 2012.
In FY2012, Patrick Industries reported strong financial results, with increases in revenues and operating income of 42.1% and 100.7%, respectively, versus the prior year. The company’s sales growth benefited from four acquisitions in 2012, as well as a 20% organic increase in its legacy business. In addition, Patrick Industries’ operating margin increased due to an improved price environment for its product portfolio. Looking ahead, the company should be able to ride the industry’s sales momentum and continue to pick up market share in the fragmented RV supplier industry.
The bottom line
Despite high prices for its products, the RV industry is well positioned for future sales growth with large expected increases in its retirement-age, core customer base. The industry is also trying to reduce its cyclical nature by offering lower-priced products that would appeal to younger seasonal users. While these companies aren’t for the buy-and-hold crowd, the industry’s current upswing could lead to gains for investors willing to take the volatility.
Jon Tancredi, who served the Recreation Vehicle Industry Association (RVIA) for the past 20 years as a public relations professional with Barton Gilanelli & Associates and more recently as president of Tancredi Public Relations, passed away Tuesday (March 12).
Tancredi, 46, was a member of the Association of Marketing Professionals, Philadelphia Chapter of the Public Relations Society of America (PRSA) , International Association of Business Communicators and adjunct professor, upper level PR courses, Temple University. He served on the boards of various community and youth organizations in Haverford, Pa., including youth football and cheerleading.
“Jon played a crucial role in our industry’s successful public relations effort for two decades,” said RVIA President Richard Coon in a press release. “He was a consummate professional who worked diligently and creatively behind the scenes to engineer high-level media coverage and publicity that transformed the image of RVing. But more than that, he was a great friend who was beloved and respected by our staff, our members, and his many, many friends in the RV industry. We will miss Jon and offer our prayers and condolences to his family and friends.”
“Jon was incredibly dedicated to serving the RV industry, and his tireless effort and professionalism in espousing the virtues of the RV lifestyle earned him the respect of numerous writers and producers across all forms of media,” said James Ashurst, vice president of public relations and advertising, RVIA and Go RVing. ”His passion and spirit extended well beyond our industry, as he was equally dedicated to his family, friends and community. His energy, professionalism and friendship will be truly missed by everyone here, and our deepest sympathies go out to his loved ones.”
BJ Thompson, president of BJ Thompson Associates and chairman of RVIA’s Public Relations Committee, added, “In leading the PR Committee for more than 25 years, I had the pleasure of working with Jon and seeing first-hand the incredible impact he had in moving the RV industry forward. Jon was not only an accomplished media relations expert, but a trusted friend that I and many manufacturers and suppliers had the pleasure of working with over the years. The industry has lost a true champion, and my heartfelt sympathies go out to his family.”
“Over the years, Jon got to know many dealers and worked hard to put the national and local media spotlight on RVs and RV travel,” said Recreation Vehicle Dealers Association (RVDA) President Phil Ingrassia. “We are deeply saddened by his passing. We will miss his enthusiasm and dedication to working on behalf of everyone in the RV business.”
Tancredi is survived by his wife, Katherine B. (nee Beck) Tancredi, son, Jack Owen Tancredi, daughter, Jenna Grace Tancredi and a new baby due April 4.; parents Lou and Maureen Tancredi, Katherine’s parents, Barbara and Jeff Morgan, and John L. Beck and Donald Longhurst; siblings Tony Tancredi of Texas, Louis Tancredi of Florida, Maria (John) Zerr of Texas, Steve Tancredi of Maryland, Anne (Alex) Lenicky of Furlong, Pa., Michael Tancredi of Media, Susan (Dale) Waters of Maryland, Shaun Miller of Westtown, Michael (Carolyn) Miller of East Goshen and many adoring nieces and nephews.
Callings are scheduled at the Carr Funeral Home, 935 S. Providence Rd. (Rt. 320) in Wallingford, Pa., on March 15 from 6-8 p.m. and March 16 at Grace Chapel 1, West Eagle Rd., Havertown, from 9-10 a.m. Service is at 10 a.m. Private contributions to The Tancredi Baby Fund c/o TD Bank 120 W. Eagle Rd. Havertown, PA 19083 would be appreciated.
The name of the game in the world of recreational vehicle sales is consumer confidence.
As reported by the South Bend (Ind.) Tribune, things appear to be heading consistently in the right direction there, based on the latest numbers from the Recreation Vehicle Industry Association (RVIA).
January numbers — 24,379 shipments — are up by 30.5% over January of 2012. And that comes on the heels of a 2012 that saw each and every month beat the corresponding month in 2011 when it comes to shipments.
In fact, 2012 RV shipments were up 13.2% over 2011, totaling 285,749. And 2011 was 4.1% higher than 2010.
Mark Bowersox, the executive director of the Recreation Vehicle Indiana Council (RVIC), was pleased with the January shipment news while also offering a unique perspective on the sequester and how it could affect consumer confidence and spending.
Bowersox thinks the sequester that’s poised to cut $85 billion in federal spending from March through September and with it thousands of government jobs might have very little effect.
“I think on March 2 the sun is still going to rise,” Bowersox said. “The interesting thing to me over the last couple years as the country has grown out of this recession is the fact that the American public seems to be getting more and more comfortable with the idea that they’re not going to be totally comfortable anymore.
“It used to be any little blip in the stock market, fuel prices or unemployment numbers … or whatever, it would have people stop and tighten the screws a little bit and wait until everything settled down.
“Those kinds of things that would have gotten an emotional reaction are more easily accepted these days.”
To read the entire story click here.
Bill and Jill Phipps shuttle between homes around the country to keep in touch with grandchildren. But, according to a report by USA Today, they got tired of crating up Rockne, their Irish Wolfhound mutt, for seven-hour plane rides.
So, with some trepidation, the Tucson couple recently became first-time RVers.
They took delivery of a new 24-foot motorhome a couple of months ago, contributing to a wave of sales that are lifting an industry rebounding from the depths of recession.
Deliveries of motorhomes from manufacturers to dealers rose 13.6% last year and are expected to climb by almost the same amount this year, the Recreation Vehicle Industry Association (RVIA) reports. Last year marked the third year of increases from a recessionary bottom that that saw sales fall to the lowest levels since at least the 1970s.
With the spring RV-buying season approaching, there’s a growing optimism in the business that affluent families and retirees such as the Phipps are ready to take the plunge. After a round of consolidation, including bankruptcy filings by a couple of the industry’s big names, motorhome makers are starting to hit the road again.
That’s good not only for the RV industry but for the economy in general. Purpose-built motorhomes typically retail for more than $100,000 and because they’re used for vacations, they’re the ultimate discretionary purchase. The pickup in sales is an early indicator that people might be willing to start spending again — and not just on big-ticket items they can’t do without.
But it’s also an American comeback story: Almost all RV rigs are U.S.-made, many in Indiana. Unlike the auto industry, motorhome makers have few foreign competitors, although some are starting to knock at the door.
“People are tired of waiting for things to turn around,” says Sheila Davis, spokeswoman for Winnebago Industries Inc. Some customers “who could have bought a motorhome during the downturn … chose to wait. Now, they are feeling more confident.”
That confidence is bolstered by waves of retiring Baby Boomers, their 401(k)s fattened by the stock market’s recent rally, who always dreamed of roaming the hinterlands. Working against motorhome makers, however, is the painfully slow pace of the recovery and persistently high and unpredictable fuel prices.
To read the entire article in USA Today click here.
While the RV industry is more than just Indiana’s Elkhart County area and Elkhart County is more than just RVs, the two are inextricably intertwined.
“If you mention to anybody throughout the United States or Canada, you mention you’re from Elkhart, the first thing they say is, ‘Oh, that’s the RV capital,’” said Darryl Searer, head of the RV/MH Hall of Fame.
As reported by The Elkhart Truth, while the recession hit this area hard because of the discretionary nature of RVs, even as it shrank the industry shored up its position in Elkhart. Today, 83% of RVs made in North America are made in this area, said Richard Coon, president of the Recreation Vehicle Industry Association (RVIA). “Elkhart’s a very important area, as you know,” Coon said.
The share of production of RVs on the West Coast dropped off significantly in favor of production here, where the industry really grew over the decades.
“I wasn’t around when it started, but from what I understand it’s mainly centered around that area because of the Amish population which brings a strong amount of craftsmanship. It was a good place to be,” Coon said.
Jayco Inc., a home-grown RV success story, started in Middlebury and is still there.
“I can’t think of any other place I’d rather be than right here in Middlebury, Ind., Elkhart County, Ind., for home,” said Derald Bontrager, CEO of the company his father started.
“I think one of the more important things for us and the reason we stay put here is the workforce is second to none, in my mind, anywhere in the country. Just loyal, hardworking, consistent, honest. I could go on and on. They’re just a great work force we’ve been blessed with,” he said.
To read the entire article click here.
There really were plenty of smiles Thursday (Feb. 7) at the Greater Elkhart Chamber of Commerce’s annual meeting in the crowded Crystal Ballroom at the Lerner Theatre.
And keynote speaker David C. Chavern, executive vice president and chief operating officer at the U.S. Chamber of Commerce, agreed those smiles were there for good reason.
The South Bend Tribune reported that Chavern toured two Elkhart companies, RV maker Thor Industries Inc. and CTS Corp., before the luncheon. He cited Elkhart as a positive example of the nation’s slow recovery from the recession.
But he added, as has been seen in recent months with numerous job additions in the recreational vehicle sector, it has an advantage.
“They are ahead of the curve,” he said in an interview prior to his speech. “One of the big advantages Elkhart has is a really strong manufacturing base.
“And you are seeing a resurgence in manufacturing in the U.S., and I think Elkhart is benefiting from it.”
To view the entire article click here.
The final numbers are in. And officially, as expected, it was a good year in the RV business in 2012.
The South Bend (Ind.) Tribune reported that a strong December fortified earlier monthly totals, all of which were higher than the corresponding month in 2011.
Shipments for December were up 11.6% over December of 2011. But more importantly, the strong finish resulted in the year’s total reaching 285,749, a 13.2% increase over 2011.
It is the third straight year annual numbers have been up over the previous year.
The strong showing is an indication that the American economy is stabilizing, said Mark Bowersox, executive director of the Recreation Vehicle Indiana Council (RVIC).
“That’s a positive sign. The RV business is by and large a consumer confidence business,” Bowersox said. “When you see continual stabilization and even slight growth in the market, that’s a real good thing for our business.
“The other piece of it, is the continued stabilization is bringing back that pent-up demand.”
Bowersox believes the drastic drop in RV demand from 2006 to 2009 had nothing to do with whether people wanted RVs or not.
“It was because they were uncomfortable with their personal economic situation,” he said.
To read the entire article click here.
Total RV shipments to retailers for all of 2012 increased to 285,749 units, a gain of 13.2% over the 2011 total. Towable RV shipments alone rose to 257,551 units in 2012, a 13.2% increase over the 2011 total and more than all RV shipments last year. Motorhome totals in 2012 climbed to 28,198 units, a gain of 13.6% over the prior year and their best year since 2008.
Monthly RV shipments to retailers were reported at 18,960 units in the December 2012 survey of manufacturers, an increase of 11.6% over this same month one year ago. Shipments of both towable and motorhome categories were greater in December with towables ahead by the largest unit increases while motorhomes were ahead by the largest percentage gains. On a seasonally adjusted basis, December shipments were at an annualized rate of over 307,000 units, less than the November rate but the best December pace since 2007.
Through the winter months, the Recreation Vehicle Industry Association’s (RVIA) work with reporters and producers has produced a steady stream of positive media coverage. According to a press release, coverage included stories about the industry’s continuing recovery from the economic downturn, positives about the RV lifestyle, and cable TV specials about what’s new in RVs.
A few of the highlights:
• A Nov. 27 Associated Press story from the Louisville show reported on the industry’s accelerating recovery from the recession. This story appeared in media markets nationwide, including Boston, Seattle, San Francisco, Washington, DC, Columbus, San Diego, Chicago, St. Louis, and New York. The story also was published on major online outlets, including Yahoo! Finance and Bloomberg BusinessWeek.
• On Nov.30, BudgetTravel.com published a story offering tips for renting and traveling by RV. The story mentioned rising RV shipments, and presented RVs as an accessible and fun way to travel.
• A Dec. 10 story in The Wall Street Journal reported that RV sales are expected to rise in 2013. Growth was predicted to be strongest in lower-cost models, with travel trailers and fifth wheels expected to be in highest demand.
• On Dec. 20, Winnebago CEO Randy Potts appeared on FOX Business where he talked about the positive outlook for the RV industry. The segment also featured a Winnebago Tour outside FOX’s New York studio.
• On Dec. 21, AnimalFair.com suggested that readers should consider an RV for traveling with pets. The tip pointed out that no boarding, no cargo holds and built-in pet stations could make traveling with pets more convenient and more fun. More than half of RVers travel with pets, according to RVIA research.
• On Jan. 1, HGTV broadcasted RV2013, this year’s version of the annual RV special. The show featured three families touring the RV show in Hershey and presented the latest trends and newest models. RVIA works with producers throughout the production, and the show continues to be HGTV’s highest-rated special.
Indiana saw a record-breaking 27,600 new jobs announced over the last year, according to the Indiana Economic Development Corp., and Elkhart County was a big beneficiary with 2,700 of those jobs.
As reported by The Elkhart Truth, some of those jobs are already here and some will be phased in this year and next. A total of $120 million will be invested in real estate and equipment as part of those jobs announcements, said Dorinda Heiden-Guss, president of the Economic Development Corp. of Elkhart County.
The average wage in Elkhart County – home to the RV industry’s manufacturing hub – is about $18.01 an hour, and the local economic development corporation worked on projects paying from $12 an hour to $40 an hour in 2012, Heiden-Guss said. The average on the new jobs is about $20.41, she said.
To view the entire article click here.