Thor’s purchase of Jayco is big merger in recreational vehicle sector during summer camping season

By Steve Brachmann
July 16, 2016

Jayco_Expanda_interior_1

“Jayco Expanda Interior” by Damien Cook. Licensed under CC BY-SA 2.0.

The luxury of bringing all the amenities of home onto a camping trip with a recreational vehicle (RV) is a concept almost as traditionally American as the mass-produced automobile. From small campers to large motorhomes, RVs have taken on many incarnations since the earlier parts of the 20th century when modern RVs began to take shape in North America. The industry itself is a large boon to the American economy, supporting nearly 300,000 full-time jobs and adding $49.7 billion to the U.S. economy.

The market for recreational vehicles in America has been doing pretty well in recent years. A 2011 study sponsored by the Recreational Vehicle Industry Association (RVIA) pegs the number of households which own an RV at 8.9 million, a new high figure for RV ownership which is a full one million more households than was found in a 2005 study. The average age of ownership dropped by a year to 48 years with owners having a median income of $62,000. The strongest ownership growth was seen in the age range of 35 years to 54 years. RVIA shipping statistics for the first four months of 2015 show that RV shipments during the first quarter of that year reached more than 135,000 units among travel trailers, campers, motorhomes and towable RVs.

The North American RV market appears set for future growth according to market research analysts. An RV market forecast out from research firm Technavio predicts that this sector will increase by a compound annual growth rate (CAGR) of 8.35 percent in the five years between 2014 and 2019. 2014 was already a banner year for the RV industry as analysts expected shipments to exceed 300,000 total units for the first time since the global economic recession.

In this atmosphere of growing prosperity in the RV sector, a sizable acquisition has just taken place. On July 1st of this year, Elkhart, IN-based Thor Industries (NYSE:THO) has agreed to buy private RV developer Jayco, Inc. of Middlebury, IN. The cash deal is worth a reported $576 million and will allow Jayco to operate as an independent subsidiary while bringing products like the Jay Flight, which Thor called the top selling travel trailer over the past 11 years, into the Thor lineup.

The move has already had a positive effect on Thor’s fortunes on Wall Street. Shares of Thor rose almost seven percent in the days following the acquisition announcement. Although the Jayco purchase wasn’t cited as a reason, fund management firm Gabelli increased its earnings per share (EPS) estimates for Thor from $5.40 per share to $5.90 per share on the year. The company has seen revenues increase from less than $2 billion in 2009 up to about $4 billion in 2015, setting the stage for continued growth after the Jayco merger.

Thor’s earnings report for the quarter ending April 30th of this year shows strong year-over-year growth in profit. The three month period ending April 30th, 2016, saw gross profits of nearly $202 million while the trailing nine months saw Thor earn nearly $503 million in gross profits; those figures for the three-month and nine-month periods ending April 30th, 2015 were $166.6 million and $386.3 million, respectively.

The earnings report also reflect a few other strategic acquisitions made by Thor during recent quarters. Last May, Thor announced an acquisition of Postle Aluminum, also of Elkhart, IN, in a cash deal valued at about $144 million. Postle, which manufacturers extruded aluminum and specialty parts for RV manufacturers, will also operate as a separate subsidy. Thor’s press release on the acquisition noted the $220 million in sales generated by Postle during the 2014 calendar year. Last January, Thor added to both its towable RV and its luxury fifth-wheel RV portfolios with the respective acquisitions of Cruiser RV of Howe, IN, and DRV, also of Howe. That acquisition was another cash deal worth a reported $47.4 million.

Thor patent clusterThor’s corporate portfolio also includes intellectual property assets of 18 active U.S. patents. A quick scan of the text cluster provided by the portfolio analysis tools of Innography shows that travel trailers and trailer bodies and receive the greatest research and development focus from this company. The biocidal results come mainly from Thor GmbH, an unrelated chemical manufacturer headquartered in Speyer, Germany.

improved turningOne of the travel trailer innovations in Thor’s patent portfolio comes to it from its subsidiary Heartland Vehicles. U.S. Patent No. 8851521, entitled Travel Trailer Having Improved Turning Radius, was issued in October 2014. It protects a travel trailer having a forward end cap with a forward face and two inwardly recessed corner edges which are received into cavities found in two arcuate braces located on the travel trailer’s chassis. The use of the recessed corner edges is intended to improve the turning radius of a towable trailer. It’s designed to solve an issue arising from the growing popularity of extended-cab pickup trucks which reduce the space between a cab and the forward end of the trailer’s fifth wheel, impairing the turning radius.

travel trailerAn improved arrangement for tanks storing liquid propane on recreational vehicles is seen in U.S. Patent No. 8360506, which is titled Travel Trailer. It discloses a travel trailer having a recess cover pivotally secured to a front cap, the cover being movable to provide access to a covered liquid propane tank. The cap and recess cover allow for the installation of liquid propane tanks used to power RV appliances in front of the RV cabin, where such tanks are typically installed, without exposing the unsightly appearance of the tank to full view.

trailer patioRecreational vehicles providing the easy ability to add more recreational space to the area surrounding the vehicle are discussed in Thor’s U.S. Patent No. 6971707, entitled Extendable Trailer Patio Room. It discloses an exterior room for a recreational vehicle trailer, the room having a floor extensible between a stowed and an open position and supported above ground level by a rail disposed underneath a trailer. The room also has a roof, a flexible wall and an exit making the room accessible from the trailer’s interior. The innovation adds recreational patio space to an RV without requiring the installation of a platform or deck, even semi-permanent ones.

Jayco’s recent performance and milestones hit underscore the value the brand can have as part of the Thor portfolio. This May, it was announced that Jayco had manufactured its one-millionth RV since the company was founded in 1968. This occurred only 14 years after Jayco manufactured its 500,000th RV in 2002. In March, news reports indicated that Jayco’s RV sales were outpacing the rest of the industry with a sales increase of greater than 32 percent in its towables division, where it gained 4 percent of the market share. A 40 percent sales increase in Jayco’s motorized division also helped it increase its market share in that sector by 22 percent.

The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

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