National R.V. Holdings, Inc.

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National R.V. Holdings, Inc.

3411 North Ferris Boulevard
Ferris, California 92571
U.S.A.
Telephone: (909) 943-6007
Fax: (909) 943-5204
Web site: http://www.nrvh.com

Public Company
Incorporated: 1964 as Dolphin Trailer Company
Employees: 1,903
Sales: $360.3 million (1998)
Stock Exchanges: New York
Ticker Symbol: NVH
NAIC: 336213 Motor Home Manufacturing; 336214 Travel Trailer and Camper Manufacturing

National R.V. Holdings, Inc. is a leading manufacturer of recreational vehicles (RVs). Together with its wholly owned subsidiary Country Coach, National R.V. makes a line of 13 motor homes, travel trailers, and conversion vans under brands such as Dolphin, Sea Breeze, Sea View, Affinity, Allure, and Concept. Named as one of Fortune magazine’s fastest-growing companies in 1999, National R.V. is benefiting from the aging of the massive baby boom generation. As they approach retirement, these consumers enter their prime R.V.-buying years. National R.V. sells its vehicles at 190 dealers in 38 states, Canada, and Europe.

The Roots of the Recreational Vehicle Industry

The American recreational vehicle industry dates back to the early 20th century. Some of the first RV devotees were Henry Ford and Thomas Edison, who teamed up in 1916 with naturalist John Burroughs and tire manufacturer Harvey Firestone to travel and camp across the United States in converted motor cars. These “Four Vagabonds”—as they liked to call themselves—brought some of the comforts of home with them on the road. Like current RVs, these early models provided electric lighting and a cook stove.

RVs did not gain a wide following until after World War II, when mass production of the vehicles began. Like the broader automobile industry, RV production boomed in the postwar era of prosperity and optimism. The construction of an interstate highway system made it feasible for the first time for people to drive easily across the country, and the rise of RVs were another example of Americans taking to roads to see their nation. Moreover, camping became an increasingly popular way to vacation, and RVs enabled families to experience the outdoors without giving up comfortable amenities. As the U.S. rapidly became a “car culture”—with suburbs and shopping malls springing up outside urban areas—RVs became the perfect symbol for the new American way to vacation.

Despite its early momentum, the RV industry remained a small one during the 1960s. As Dave Humphries, president of the Recreational Vehicle Industry Association, explained to the Los Angeles Times on November 7, 1987, “it took us 20 years after the war to get all the elements in place: manufacturers, suppliers, dealers, campgrounds, and so forth.”

Dolphin Trailer Company: 1964–72

Wayne Mertes entered this nascent industry in 1964, when he launched Dolphin Trailer Company with his father. The younger Mertes had moved to California from North Dakota when he was only 15, and had immediately found a job with a mobile home manufacturer. For the next few years, Mertes had worked in every facet of the RV business—from electrical work to plumbing systems to final finishing. Armed with his experience in the field, Mertes ventured out on his own. The father-son pair mortgaged their homes to raise the $6,500 they needed for seed money.

The first eight years of Dolphin Trailer Company’s business coincided with a growth spurt in the overall RV market. However, the young company did not challenge industry leaders such as Fleetwood Enterprises, Inc., which produced Class A motor homes—the largest and most luxurious type of motorized RVs. Instead Dolphin concentrated on the manufacture of camper shells, as well as “Micro-mini motor homes.” These “Micro-mini” RVs consisted of a small motor home shell built on a pickup truck chassis. (Class A motor homes are much larger and utilize a specially designed chassis). In 1970, Mertes rechristened his business National R.V., Inc., although the company continued to focus on its line of Dolphin products.

Like most other firms in the industry, National R.V. was a diminutive company during this period. As Barron’s explained, most RV companies were “tiny operations concentrating on small geographic areas [and] niche products.” In 1972, the RV industry achieved its best year to that date, when a total of 582,900 vehicles were shipped. Although hundreds of small and medium-sized RV manufacturers had sprouted up during the 1960s, record sales supported the entire industry.

Crisis in the Recreational Vehicle Industry: 1973–92

The sector’s good fortunes came to an abrupt halt in 1973 with the onset of the Arab oil embargo. Even “Micro-mini” RVs were gas guzzlers, and concerned Americans worried about future gas prices and eschewed the hulking vehicles in favor of more fuel efficient alternatives. RV sales took another steep drop in 1979 during the next fuel crisis. Gas rationing and long lines at service stations made it not only expensive but also impractical to drive RVs. Informed by the general tenor of the times—that unnecessary consumption of oil resources was frivolous and wasteful—RV purchases declined. With President Jimmy Carter admonishing Americans to “wear a sweater” and lower the temperature of their houses, RVing seemed almost immoral.

RV production fell by about 70 percent in the 1970s, and nearly half of all manufacturers closed, according to the January 9, 1991, Los Angeles Times. In 1980, only 181,400 recreational vehicles were produced, as consumer confidence plummeted and interest rates (which impacted both RV and home sales) rose. But National R.V. weathered this storm, as well as the subsequent recession of the early 1980s.

In 1985 Mertes took steps to shield National R.V. from subsequent downturns. After moving the company’s production facilities from Sylmar to Ferris, California, National R.V. entered the Class A motor home segment of the market in 1985 with the introduction of the Sea Breeze model line. By expanding its product lines and boosting sales, National R.V. sought to make its position in the industry more stable. After some successes, the company was acquired by the New York investment firm Siegler, Collery & Co. in 1989, and shortly thereafter was rechristened National R.V. Holdings, Inc. (Gary N. Siegler would serve as the company’s chairman through 1999).

The entire motor home market tightened once again in the early 1990s, though, as the country fell into a recession. On November 11,1992, the Recreational Vehicle Industry Association told the Riverside Press-Enterprise that as a result of this economic downturn, “consumer confidence remain[ed] depressed and RV dealer inventories [were] at near record lows.” Consequently, the RV industry went through another period of mass consolidation. Despite these difficulties, National R.V. survived, although its share of the Class A motor home market remained below one percent and the company was only the 16th largest motor home manufacturer in the country.

Significant Growth in the 1990s

National R.V.’s place in the Class A motor home market changed dramatically in 1992, when the company introduced a bus-style version of its Sea Breeze motor home. Instead of conforming to the typical boxy RV design, National R.V. pioneered the sleeker bus-styling that soon became the industry standard. In addition to giving the huge vehicles a more stylish and contemporary look, the bus-style RVs-with their vertical front windshields—afforded the often inexperienced RV drivers who purchased the new model greater visibility. Moreover, the new design “gave people the feeling they were getting more for their money,” Kenneth Ashley, the company’s chief financial officer, told RV Business on September 1, 1998. Consumers noticed the difference. According to the May 23, 1994, Riverside Press-Enterprise, the new design also “helped National R.V. increase its market share even during the depth of the recession.” Indeed, the company’s share of the Class A market grew from 1.4 percent in 1992 when National R.V. debuted the Sea Breeze to 3.4 percent in 1993. Moreover, the company reported a net income in 1992 after several years of losses, generating about $1 million of profit on sales of over $45 million.

But the company realized that it remained subject to the vicissitudes of the motorized segment of the RV market. Although the success of the new Sea Breeze model was a boon, the overall market for motorized RVs remained weak. Towable RV sales, on the other hand, had proved to be more resilient in the face of recession. While motor home sales increased 4.8 percent from 1992 to 1993, towable RV sales grew 15.8 percent during the same period. The towable segment of the RV industry included inexpensive folding tent trailers, as well as travel trailers (which ranged from 12 to 35 feet long and were intended to be pulled by a car, van, or pickup truck) and fifth-wheel travel trailers (which reached 40 feet in length, could be two stories, and required a special hitch to tow).

With the approximately $2.7 million it raised from an initial public offering of stock in late 1993, National R.V. decided to pursue the towable segment of the RV market as well. “We are totally dependent on the motorized market,” the company’s chief financial officer told Press-Enterprise on August 21, 1993. “We would like to grow the company to a bigger size than it is, and to do that we need to diversify into trailers.”

Company Perspectives:

Over the decades, National R.V. has established a solid reputation in the marketplace for high quality, innovative products that deliver superior value. By building upon and leveraging this strong track record, the company is able to enhance its position among the nation’s leading RV manufacturers. This focused strategy has been responsible for a four-fold increase in the company’s share of the Class A market over the last five years. A parallel development is the aging of the Baby Boomer population into their peak RV buying years. The combination of National R. V. ‘s powerful market position and the positive demographic trends driving the RV industry should provide future growth.

National R.V.’s initial entry in the towable segment was a 30-foot fifth-wheel travel trailer, which was marketed under the company’s Dolphin line. At the close of 1993, National R.V. reported a net income of $3.1 million in total sales of $71.8 million. (The year also marked the end of the company’s production of its original Micro-mini units, a shift triggered by Toyota’s decision to stop making the special chassis that the product required.)

Further expansion was on National R.V.’s horizon. In 1994, the company introduced its first diesel pusher model—a motor home with a diesel engine mounted on the rear of the vehicle—as well as an updated bus-style model of its Dolphin motor home. At the same time, National R.V. extended its sales operations into Canada, a market which was expected to generate an additional $5 million in revenue for the company. At the same time, the company launched its Dolphin Camper Club—an association open to all member of National R.V.’s motor homes—in an effort to foster a sense of community among RV owners.

The company’s efforts to cater to its customers in ways overlooked by its competitors were logical. After weathering several difficult periods in the previous three decades, the RV industry as a whole could look forward to bright prospects—based almost entirely on demographics. The baby boomers (the largest generation in American history) were entering into their prime RV-buying years. As Wayne Mertes explained to Investor’s Business Daily in 1994, “the number one trend is that the baby boomers are maturing into our buyers who are mostly between 50 and 65 years old.” A Wall Street Journal analyst estimated that the population of RV-buying Americans would grow by 14 million people beginning in the mid-1990s. Moreover, baby boomers on the whole were wealthier than previous generations, having reaped the benefits of an unprecedented economic expansion. This development was particularly welcomed by National R.V. as, by 1994, the company’s products ranged in price from $52,000 to over $100,000.

In 1995, National R.V. once more made industry history with the introduction of a widebody motor home. While motor homes were typically 96 inches wide, National R.V. was one of the first companies to develop the “slideout” room which increased the width of its motor homes to 102 inches. After the company debuted a widebody Dolphin motor home in 1995, demand quickly outstripped National R.V.’s limited supply, and backlog orders tripled in three months. Not only did the company’s share of the Class A motor home market grow in 1995, but the once-tiny manufacturer had earned the respect of industry analysts. “They’re one of the up-and-comers who are creating excitement in this industry,” one such analyst told the Ontario Business Press in 1996. Fueled by the initial success of the “slideout”-equipped Dolphin, National. R.V. redesigned its Tropi-Cal motor home to incorporate a widebody feature in 1996. By 1997, the company offered 11 different “slide-out” models across its product lines.

Buoyed by its design innovations, National R.V. had a record-breaking year in 1996, attaining a six percent share of the Class A market, and reporting $6.6 million of profit on sales of over $137 million.. The industry as a whole fared well, too, and in 1996 National R.V. teamed up with other RV manufacturers and dealers to help ensure overall future growth. Armed with the knowledge that baby boomers were turning 50—and that the industry could more than double in shipments if it convinced boomers to purchase RVs-the Recreational Vehicle Industry Association launched a $15 million print and television advertising campaign targeting aging baby boomers. Themed “Recreation Vehicles: Wherever You Go, You’re Always At Home,” the campaign relied on nostalgic images of families enjoying the RV lifestyle.

National R.V. concluded 1996 with a bold move. Well established in what the Eugene Register-Guard termed the “moderately-priced motor home” market (its RVs ranging from $50,000 to $110,000), National R.V. sought to expand into new segments of the market. As part of this effort, the company acquired Country Coach Inc.—an Oregon-based manufacturer of luxury motor homes (with RV prices ranging from $170,000 to $700,000) whose 1995 sales topped $70 million. As the Register-Guard explained, the two companies, “which compete [d] in drastically different price brackets,… join[ed] forces in hopes of securing a wider share of the overall RV market.” Although Country Coach became a wholly owned subsidiary of National R.V., the companies’ manufacturing facilities and management remained separate. Soon after announcing its acquisition, National R.V. began a massive expansion of its own manufacturing facilities that would ultimately raise the company’s production capacity by a third.

Financial and industry analysts took note of National R.V.’s successes. Between 1992 and 1996, the company’s share of the Class A market had increased threefold. In 1997, that share grew to 6.6. percent, while its sales reached $286 million. Forbes named National R.V. one of the 200 best small companies in 1997. To ensure its continued vigor, the company continued to introduce new models. Tradewinds—a $140,000 motor home priced to bridge the gap between National R.V.’s own offerings and those of Country Coach—was rolled out in 1997. The following year, the company debuted the Sea View motor home, a mid-range motor home costing about $79,000. The Surf Side, a 31-foot motor home priced at $65,000, was introduced in 1999, and the Islander and Caribbean motor homes were slated to appear for model-year 2000.

Key Dates:

1964:: Wayne Mertes founds Dolphin Trailer Company.
1970:: Company is renamed National R.V., Inc.
1985:: National R.V. introduces its Sea Breeze motor home.
1989:: National R.V. is acquired by Siegler, Collery & Co., and is renamed National R.V. Holdings, Inc.
1993:: National R.V. makes its first public stock offering.
1996:: National R.V. acquires Country Coach.

The roaring economy of the late 1990s fueled growth in the RV industry as a whole, and National R.V.’s sales continued to flourish. In 1998—a year when the motor home market experienced double digit growth and RV sales reached a 20-year high—National R.V.’s sales topped $360 million, while the company became the fifth largest producer of motor homes. Future prospects looked even rosier. Company officials predicted that National R.V.’s target market would grow nearly 40 percent between 1998 and 2008. Moreover, the company’s two primary segments—Class A motor homes and fifth-wheel travel trailers—were two of the fastest-growing sectors of the overall RV market, accounting for nearly two-thirds of the industry’s overall dollar volume. By 1999, National R.V. had become the fourth largest manufacturer of Class A motor homes, and announced further plans to expand its production facilities. Included in both Fortune magazine’s list of “100 Fastest-Growing Companies,” as well as Business Week’s “100 Hot Growth Companies,” National R.V. maintained a strong appeal with investors.

Principal Subsidiaries

Country Coach Inc.

Principal Competitors

Blue Bird Corporation; Coachmen Industries, Inc.; Fleetwood Enterprises, Inc.; KIT Manufacturing Company; Monaco Coach Corporation; Rexhall Industries, Inc.; Skyline Corporation; SMC Corporation; Thor Industries, Inc.; Winnebago Industries, Inc.