Q4 2019 Earnings Call
Thank you for standing by and welcome to the Q4 2019, L.C.I. Industries earnings Conference call.
At this time, all participants are in listen only mode.
The speakers presentations will be a question and answer session to ask a question during the second only to press star one on your telephone if you require any further assistance. Please press star Zero I would now like to hand your conference over to your Speaker today, Victoria several with Clermont partners. Please go ahead.
Good morning, everyone and welcome to LPI industries fourth quarter and year end 2019 conference call I am joined on the call today by members an LCR his management team, including Jason Lippert, CEO and director and brine home CFO.
Management will be discussing their results in just a moment, but first I would like to inform you that certain statements made in today's conference call regarding L.C. I in the street and its operations maybe considered forward looking statements under the securities laws and involve a number of risks and uncertainties.
As a result, the company cautions you that there are number of factor many of which are beyond the company's control, which would cause actual results and events could differ materially from those described and forward looking statements. These factors are discussed in the Companys earnings release and in its form 10-Q, and other filings with the assay.
The company disclaims any obligation or undertaking to update forward looking statements to reflect circumstances or events that occurred after the date. The forward looking statements are made except as required by law.
With that I would like to turn the call over to Jason Lippert Jason.
Good morning, everyone and welcome to L.C. I spoke earlier in fourth quarter 2019 earnings call and 29, keeping our team made tremendous progress in advancing our diversification strategy. We know a strategic acquisitions two of which were the largest in company history. We further expanded our product portfolio continued to execute on innovation and that's the key to tee up.
Operational initiatives aimed at supporting long term margin expansion.
As a result, we once again outperformed our core RV OEM markets, which experienced increased volatility due to choppy retail demand inventory rebalancing.
We ended 2019 strong as we saw returned to sales growth in the fourth quarter, increasing 5% to 564 million, while the broader industry experienced a decline of 8%.
Turning to the year revenues reached 2.4 billion and 29 team, which given that the industry RV shipments were down 16% of 29 team underscores how critical our strategy has been and supporting the long term success of LCR.
Our ability to increase our operating profit slightly in 2019 over 2018, even with a double digit drop in demand in our core markets again as a great tough went to the strength of our leadership team and effectiveness of our long term strategy.
While our RV OEM revenue declined for the year, we mitigated the impact was substantial growth across our aftermarket adjacent and international segments.
In 2019, North American RV OEM sales represented 58% of our total revenues down almost 6% from the prior year.
We expect further expansion in our aftermarket Jason in international markets in 2020, as we focused on integrating our latest acquisitions into the business on capturing the related synergies as well continuing to identify new organic growth opportunities pro forma net sales for 2019 adjusted to include full year results for businesses acquired reflect North American.
RV OEM that sales will be less than 50% of consolidated net sales.
Our concept for towable RV for the full year increased 5% year over year to 30, $618 well, we saw a slight decline in content for motor home, which decreased 5% year over year to 20 $364 for comparative purposes, excluding ferry on content for towable RV and the full year 2019 was 30 346.
Dollars in content per motor home was 20 $287.
The growth we saw in towable rvs can be attributed to market share gains in innovation. We are also starting to see a reversal of the larger de contenting trend we have witnessed over the last several quarters are focused on creating value added highly engineered products solutions that are as functional as they are innovative has helped us gain market share and drive more content increases over the long term.
Well the inventory issues of 2019, largely behind us and consumer sentiment trending positively we remain optimistic that the RV retail environment, it's better position heading into the first half of 20 Twond.
Early results from recent shows have been better than expected with almost all Oems reporting solid traffic and show sales, we expect wholesale staff to continue to improve over the coming quarter.
Despite 2019 headwinds we remain encouraged by the long term outlook for the RV industry. The RV lifestyle continues to increase in popularity among younger demographics and with higher quality more innovative technologically advanced products introduced to the market. Each year. We believe there are promising growth opportunities for both LCR and the broader RV industry.
We feel very confident we'll reach our goal of reducing RV OEM revenue contribution to 40% of total revenues by 2022.
We've been strategic and her efforts to diversify the business, which has proven essential offsetting volatility and outperforming the broader RV OEM market.
Increasing growth in our adjacent markets remain an essential part of the strategy and in 2019, we delivered solid results increasing our revenue by 7% over the prior year, our growth was driven by LC eyes increasingly broad product portfolio available to the marine Oems cargo trailers and other adjacent markets.
In 2020, we expect continued marine growth primarily through the acquisitions on the power on brand of electric remedies as well sure shade high end openings for the larger both categories. The electric Lemony acquisition had a cutting edge technology to our marine product portfolio that already include some of the marine industry's most sophisticated and innovative sunshine.
Great systems, we're striving to be the predominant player in the U.S. in Europe for Marine Shade solutions as we are proven leader and innovator in the space.
While the marine industry experienced some softness in the summer of 2019, it was largely concentrated on the pontoon area since stabilized.
More importantly initial feedback from boat shows in January supports growth for the upcoming retail selling season with our expanded capabilities. We believe there are powerful opportunities to add meaningful content to our marine businesses and strengthen our presence and this attractive leisure market.
Cargo trailer and opened utility components like our axles and suspension systems have also been an area of significant growth in recent quarters.
In addition to marine cargo, we're continuing to work towards expanding our presence in all adjacent markets by adding content in a wide range of industries, including equestrian trailers trains residential buses and other specialty vehicles.
Our aftermarket segment saw significant growth this year, increasing its total sales by 20% compared to the prior year in December we closed our largest acquisition to date, the Curt group, which effectively doubled the size of our 2019 aftermarket revenues.
As a reminder, Kurt as a leader in automotive and trailing aftermarket business with a stable, leading towing and truck accessory brands, including Curt Gary's Luverne retracting GW.
Hertz innovation and R&D capabilities Revolutionary where the company recently launching many new products in 2019, including shock drop racquetball better way, an echo product line better ways. A first of its kind patented technology introduced in 2019 hotels the consumer the weight of the payloads he or she is going behind the vehicle, enabling the consumer to know how much.
He is on the vehicle hitch, how much weight as being told behind the vehicle.
We believe it this product will be revolutionary for towing safety as there isn't a good way for a consumer to know the weight of what they are towing without going to away station.
Another towing industry first is the echo a first ever wireless and Panda brake controller that we believe is transforming the brake controller universal products.
Both products have already demonstrated strong sales momentum and the capability to integrate into L.C.I. strong RV aftermarket networks. The integration of Kurt is progressing as planned and we'll continue to be a big focus over the next few quarters, we've identified more cost synergies than originally estimated which we are eager to take advantage of in 2020.
Yeah.
Further we expect to realize cross selling synergies through new distribution channels expanded dealer and customer networks and our current product offerings.
We've talked for years about adding a cargo management kitchen tolling business and we're excited to have been able to integrate what we believed to be the best brand and leadership team in the industry led by rock Lambert.
We also saw tremendous growth in our international businesses this year.
With sales rising 40% year over year 245 million.
We recently announced the acquisition of Poly plastic group, a leading manufacturer of acrylic window products for the European caravan industry.
Beyond Peter being a minimis team, probably classic is a great supplier and innovator and RV space in Europe, but many new innovations that will allow it to explore other in this industry is as well probably plastic which comes into the fold with our other 2019 European acquisitions of Bloom, our Marine love that Femto and she has a now gives us great Graham.
Leadership and innovation to help us grow in the European Caravan rail and Marine industries.
The combination of these businesses rich innovation histories, and loyal customer basis bring the ability to leverage the solid leadership teams and collaborating on the bigger European picture.
We believe the broader European market continues to display signs of growth and we are focused on integrating these acquisitions into our existing businesses, realizing synergies identifying new efficiencies and broadening our sales impact and reach.
Confident are growing presence in Europe will deliver promising results in the future.
Innovation remains core to everything we do it LCD technology is becoming increasingly important to all our customers and in particular and RV.
We believe that this focus as a key competitive advantage for LCR are one control technology has the capability to provide Oems, but an easy an affordable way to add media technology controls to the RV and has been incredibly well received to date. We now have a run rate of 100000 systems annually with the likelihood of adding to this number in a significant way.
In 2020, given all new functionality, we are bringing to the system.
The RV industry continues also to show signs that is progressively shifting away from the manually driven products like Jackson moving toward electrically driven products like our electric Jackson electric in hydraulic leveling systems. In addition, we've seen great progress in our new Salix depth and believe that we can deliver powerful growth here as well well innovation helps bring us new customers and.
Added market share. It also helps us maintain or customers over the long term, while enhancing the overall consumer experience around the RBC.
As we add additional teams to our organization through acquisition. We are excited to collaborate to bring together best in class R&D expertise to identify new areas of growth and expand the quality and reach of our product portfolio.
How much of what I talked about today isn't centered around driving sales growth, we understand doing so profitably as critical to delivering value to all of our stakeholders.
We remain committed to our operational excellence initiatives throughout the organization to drive margin expansion and enable agility of the business to react quickly to varying market conditions.
2018, we moved quickly to adjust our footprint an expedited continuous improvement projects as we saw slower production environment materializing as a result, we captured meaningful savings to support its strong margin improvement over 2019.
Well that expansion moderated in the fourth quarter, we have maintained our teams continuous improvement plans through new automation projects as well as optimizing labor and material costs.
We will continue to challenge our organization to identify and implement cost optimization activities and identify further efficiencies to drive margin improvement in 2020, just as we did in 2019.
As you know, we're aggressive and executing our acquisition strategy in 2019, completing eight acquisitions by the first week of January 2020.
While we continue to integrate these great new companies and the LCR family. We will also be looking for new opportunities, but are doing so diligently to ensure that fit our stringent financial and operational criteria, including strong product lines, great leadership teams innovative products and attractive geographical new market opportunities in the meantime.
We are focused on successfully integrating the acquisitions and capturing synergies for those that we have already announced in conclusion, we made tremendous strides as the business in 2019, the LCR team was able to execute our strategies deliver ongoing product expansion and innovation and enhance our operations. Our management team believes that one of our greatest achievements.
<unk> has been our intentionality around evolving our culture and strengthening it. We believe it has a unique competitive advantage to have team members that are engaged in fired up to come to work every single day.
29 team, we launched the Lippert Academy for leadership and interest has been so strong we have over 20 companies. We are working with now several of which are customers.
Program designed to share our best practices around our learnings and how to create a great culture and leadership development programs at work.
It is unique competitive advantage to be able to engage and add value to our customers in a very nontraditional way.
As a part of our engagement initiatives. Our team members successfully completed more than a 120000 hours of volunteer service in our communities. We have found at one of the byproduct of our strong culture and community service initiatives is that a retention increases today. Our company attrition rate is at an all time low and now significantly below the industry average I want to think.
All of our LCR team members for all their hard work this year and helping to drive a company forward and outperform a tough industry environment in 2019, I'll now turn to Brian Hall, our CFO to discuss more detail our full year fourth quarter financial results.
Thanks, Jason and good morning, everyone.
Our consolidated net sales for the fourth quarter increased 5% to $564 million compared to the prior year. The increase in revenues reflected the impact of recent acquisitions as well as continued organic growth in the company's adjacent OEM aftermarket and international markets, partially offset by a decrease in RV.
Wholesale shipments.
For 2019 sales to RV Oems declined roughly 1% compared to the prior year as dealers completed the final stages of inventory reductions while aftermarket segment sales grew 35% and sales to adjacent industries grew 8%.
Acquired revenues were approximately 35 million dollar for the quarter, primarily impacting adjacent OEM and aftermarket sales.
During the quarter, we expanded operating margins by roughly 120 basis points from the prior year period, driven by many of the continuous improvement initiatives. We've discussed on previous calls in addition to some material cost decreases.
We successfully grew operating margins, despite approximately $2 million or eight cents per diluted share of transaction related costs incurred during the quarter. We'd also like to note that our new beam processing facility is set to begin operations. During the second quarter of 2020, which we are excited about as it's the largest automation project weve under.
Taken today and is expected to significantly improve both product quality and further enable the safety of our team members.
Q4, 2019 diluted earnings per share totaled $1.14 compared to 80 cents per share in Q4 2018. This improvement in profitability was primarily driven by the improvements in operating margin previously mentioned as well as the reduction in the effective tax rate for the quarter due to discrete return to provision adjustments.
And excess tax benefit on equity the impact of these discrete items increased diluted earnings per share by five cents during the quarter.
Moving on to full year 2019 results.
Sales to RV Oems declined, 12% again, driven by lower RV industry production as dealers work to rebalance their inventory throughout the year.
We estimate that over 40000 units were removed from the dealer system. During 2019 as an additional data point. The estimated 450000 units retail during 2019 is approximately 90000 more units back in 2007, while inventories have increased only 20000 units which was.
An indicator the inventories are relatively balanced we're currently assuming retail in 2020 to be flat to down 5% given uncertainty in the back half of the year.
Current RV I forecast is for 387000 units, which would be a 5% decline compared to 2019.
Content per towable RV unit in the 12 months ended December 30, Onest 2019 increased $169 to $3618, while content per motorized unit decreased $127 to $2364.
Content per unit growth and Towables have slightly improved due to the reversal of the de contenting trend that Jason mentioned, while motorized content continues to be impacted by the shift in wholesale mix toward smaller class a units.
As a reminder, our distribution agreement with Furion ended on January Onest 2020, given this transition for comparative purposes, excluding theory on content for towable RV for the full year 2019 was $3346 and content per motor home was $2287.
Sales to adjacent industries OEM grew 7% to 660 million in 2019, while international sales increased 40% until 146 million.
And aftermarket sales increased its total sales by 20% to 280 million compared to the prior year.
Acquired revenues were approximately 93 million for the full year 2019.
Noncash depreciation and amortization increased by over 7.8 million for 2019, while noncash stock based compensation expense increased just over $2 million for the full year, we are anticipating depreciation and amortization increased to 105 to 110 million in 2020 primary.
Only due to the increases in acquisition related intangible amortization.
Our effective tax rate for the full year was 23% remaining relatively flat year over year.
Full year 2019 diluted earnings per share increased slightly to $5.84 per share compared to $5. An 83 cents per share in 2018 and included 4.6 million or 19 cents per diluted share of transaction related costs.
During 2019, we generated 270 million of cash from operating activities, while using 448 million for business acquisitions 58 million for capital expenditures and returning 64 million to our shareholders in the form of dividends over the year.
Capital expenditures for 2019 included normal replacement Capex, along with 21 million and automation investments and over 24 million and growth initiatives as part of the operational improvements we have discussed.
We ended the year with a net debt position of 599 million at December 30, Onest 2019, roughly 1.85 times pro forma EBITDA adjusted to include LTM EBITDA acquired businesses.
We remain focused on maintaining a healthy balance sheet and continue to target long term leverage of one to one and half times net debt to EBITDA with this debt pay down to be further supported by strong cash flow generation from our recently completed acquisitions.
We expect capital expenditures between 65, and 75 million in 2020, as we focus further on smaller scale continuous improvement and automation projects that support growth with a quick payback as we continue to integrate our latest acquisitions. We are confident that we are well positioned for strategic growth heading into 2020.
That's the end of our prepared remarks, operator, we're ready to take questions. Thank you.
At this time I'd like to remind everyone in order to ask a question. Please press star and the number one on your telephone keypad. Your first question comes from the line of Kathryn Thompson from Thompson Research. Your line is open.
Hi, Good morning, it's actually Brian virus on for Katherine Thanks.
Thanks for taking my questions I wanted to start with the operating margins for the quarter I think we're up 120 basis points.
Thank you called out efficiencies as well as lower material cost decreases.
Wanted to get break that out between the two.
50, 50 or more efficiencies and material costs.
And how you're thinking about material costs for 2020.
Hey, Brian Brian.
The I'd say materials performed pretty consistent with what we expected going into the quarter. So we had expected about 20 to 40 basis point improvement and materials as we've kind of come to the end of a lot of those savings.
Balanced out by some of the the price reductions that we've given through our indexing program. So.
So the materials portion isn't.
Isn't very significant we do think we have a little bit here in the first couple of quarters.
Maybe something within that similar range, but on the lower side of that so.
We haven't seen a whole lot of movement here as of late.
So then the balance the balance would be a lot of the.
Well the efficiency initiatives throughout the year.
That we were able to capitalize on.
Got it.
And then just a quick follow ups.
You might have touched on earlier I jumped on the call late sorry. This is already discussed but the January 20%.
That's all they got by organic versus the acquired revenue and if there's any kind of differences across your organic segments.
Yeah, I mean, obviously acquisitions are pretty significant I'd say that somewhere.
What 16 $17 million worth of acquired revenues for the balance is all organic.
Certainly Jason alluded to the RV industry is performed pretty well in January.
Expecting that to continue into February as a reminder January was was.
Was significantly down last year due to shut downs, but then some some significant weather so.
So wholesale looks good there, but yeah, our organic the other thing to remember that walk to keep talking about throughout the year is the fury on revenues that we lost.
Starting January one so.
You know that into the year at roughly 100.
37 million I believe of sales are 130, 540 somewhere in that range.
Went away so.
About 10% organic once you would.
Consider the that as well as the acquired revenue.
Got it appreciate it thank you.
Your next question comes from the line of Daniel Moore from CJS Securities. Your line is open.
Jason Brian Good morning.
I wanted it in.
Wanted to.
Jump over to RV, you touched on the strength, you're seeing in January and February.
If retail doesn't do you'd end up flat to down 5% as you I think I heard alluded to in the in the prepared remarks.
Given where we are in terms of inventories will be your expectation for wholesale for 2020.
At the end as Brian.
I would say.
I mean, obviously, you're dealing with a lot of ranges. So if retail ends up being flat that will be one thing versus down.
5% that'd be it a different story, so I would say to balance it out I would expect wholesale to be somewhere between 400 and 410000.
Yes, thats pretty flat.
Compared to this year, but thats compared to the RV I forecast right now that still at 387000 units. So.
Retail ended up around 450000 units, there's probably some dealers taken a little bit inventory out, but I think for the most part weve. That's much that's behind us and we should start to see them.
Balance out the wholesale versus retail and and Dan I'd say one of the most significant parts of this report here. This morning is that a lot of the.
A lot of the retail and wholesale estimates made where made kind of tail end of last year and things were slowing down pretty good but I think the most significant part of this report like I was going to just say is the the information we're getting back from our OEM customers on the RV scientists as pretty positive right.
Now I mean, obviously, you've heard a little bit over the last 30 days about show report them a lot of the foot traffic's up you know I hear anywhere from 30% to 60% on average a lot of the Oems are reporting retail show sales.
Upwards, a double what they did last year.
And then just talking to some of our OEM partners are our large ones over the last.
Over the last couple of weeks the most part and then color as that their rates or their rates are up and.
Feels like in some cases some of our bigger customers were up double digits in January.
And we look at we look at.
Kind of real time wholesale and the amount of chassis that we sell I mean, we supply.
Large portion of the chassis as to the industry, which is kind of one to one so when we sell a chassis that's pretty much a unit going into wholesale.
So you know it looks it looks like high single digits gone going into February.
From maybe double digits in January so those are obviously positive trends that we hadn't anticipated back when we made reports and and and the Q3 beginning in Q4.
Super helpful and translating that in terms of margins at least in the near term.
Are you comfortable with capacity that you have to be able to address that should we see no kind of a nice normal incremental flow through or are you having to add back any any types of overtime or any offsets.
I'm in the near term to that uptick.
I would tell you that were set sitting pretty good I mean, any time, we come off a year, where there has been.
16% decrease in our core market.
As you know from the path.
When these types of things happened, we react pretty fast we pair the business down and we're set up pretty good going into this year, assuming it was going to be flat to maybe down a little bit and now that it's now that it looks like it's going to be up at least for Q1.
That obviously bodes well for for I mean, our margin situation.
It's a lot easier to hold hold path when youve pared back versus you know you're going to constant growth mode and not knowing how much to add when it's going to stop so I think we're in a really good position right now.
Tsum sale, that's helped but the purchase on the double check that's helpful. I'll sneak one more in sticking with the margin theme finished the year really strong close to 23% on the gross margins.
Basis.
Laundry list of moving parts between input costs as you alluded to Brian tariffs steel price volatility.
Little bit of a mix shift with Kurt just how should we think about directionally at least.
Gross margin picture for 2020, as we sit here today. Thank you.
Okay, Yeah, I think that Theres, a couple of things to look at one would be I think our core business as Jason was talking we're in a pretty good position there to capitalize so we could see some some margin expansion there, but I do think.
Given the acquisitions and integration efforts that we have ongoing that some of that's likely to to offset from a pure margin perspective.
So I think for the full year on the back half is always a little bit more more gray, but for the.
I think that flattish margins for the full year is probably a reasonable expectation at this point given given a lot of those the acquisition integration.
Efforts that we have ongoing here in the first half of the year. The other thing to I think to to note is.
You know things that arent finalized yet like the inventory value for occurred acquisition or they have roughly $70 million worth of inventory.
There will be some step up there.
We'll see flow through our PML is as a negative during Q1, which I think certainly quantify that in call. It out when we.
Report Q1, the other thing is the seasonality of their business their business is seasonal.
Similar to ours, but January February and then November and December or are there slowest month of the year. So is that starts to ramp up during.
The peak during the summer months.
Very good appreciate the color I'll jump back with any follow ups.
Your next question comes from the line of Scott Stember from C.L. King Your line is open.
Good morning, guys good things for.
Yes.
Hey, Scott.
Okay.
Jason.
Talk I guess on the call when you guys announced Kurt you talked about the abilities to I guess cross pollinate, notably with the or.
The core aftermarket business because of I guess distribution limitations.
We talk of expand on how Curtis.
And is going to help that and whether you've started to do that already.
Yes, so well, it's certainly where we're a month and.
Sitting down having a lot of integration and synergy meetings right now, but I break I break the synergies down into a few buckets and what you know what we plan on doing next quarter is giving you a little bit more color because we'll have.
Now gone through pretty thoroughly to see what's real and what looks like it might be out a little bit farther whats attainable now and what the Danival you know and the next 12 months. So we plan on give any more color next quarter's call because we're just sitting down by the major buckets are purchasing others. There's certainly.
Purchasing synergy when you look at Kurtz core business.
It's welding painting, and and fabricating steel fabricating and obviously thats a huge part of our business. When you look at the chassis infat parts business.
You look at the topline synergies with RV aftermarket as you've heard us say.
RV RV aftermarket as one of the big opportunities.
Playgrounds, Curt isn't really playing and right now and we're going to help them get there.
They've got a really talented team acute product line and a lot of great new innovative products that were in the process of plugging into our dealer and wholesale distributor networks and then just the.
If you look at the fab fab welding and painting businesses, there's some synergies there between how do we run those.
Can some of their leadership handle some of our fab stuff or vice versa.
And what those synergies on materials, there whether synergies on processes.
Raw materials, all that kind of stuff there is opportunity and then finally, the distribution will be the other bucket and.
You know one thing that were we plan on using per for us to utilize or distribution network. So that we can get our aftermarket products to RV a lot quicker than we are today as you know today, we've got one single distribution point in Indiana, and we're serving servicing the RV aftermarket really well from there, but we can you know we can cut a lot.
Of time out to you know Western Canada, the West coast of the U.S. the southeast the south we utilize some of their distribution and we plan on doing that so.
You know distribution might take.
12 months, plus because you know there a capacity and most of their warehouses and we have to look at how are we going to.
Make changes there, but certainly we were going to make some some good progress there on and getting products of the customers quickly.
On of the biggest things we can do in the aftermarket business and they're going to help us get there with the distribution network. So those would be the four buckets if that helps at all and they will give you more color next quarter.
Yes.
I know that and going back this year.
You guys mentioned.
The amount of sales I think you said $135 million to $140 million, which goes away in 2020, and you've talked previously about what's been contribution can you maybe just a little more granularity as we go what our model to talk about what the effect will be from losing those fury on revenues.
Yeah, I mean, we will within our Investor presentation, certainly call out each of the content per unit.
We have been showing that graphically, but I think where we had made a note to add the actual dollar amount. So that you can work that ended you're modeling so.
So that'll be done on on this investor presentation that goes out.
We already spoke to the the.
Content per unit for the full year 2019 from a margin perspective, I think that we've talked about.
That that was a low margin product for us. So you know it will have some positive impact for us and then from a cash perspective, we've talked about that as well that in other $60 million to $70 million worth of inventory that will be.
Paid for here in the in the first couple of quarters as of year.
Got it and then Jason just last question just a follow up you talked about some of your bigger customers sales rates being up high singles heading in January heading up to low doubles in February we are we talking retail or will be talking wholesale.
Talk and wholesale he had that flipped around high.
Low doubles than January.
Adding it looks like high singles on February it's early yet.
But we have we have most of the production schedules out at least at least a month.
[music].
So yes, I think like I said, that's the most positive part of the report I think is that we had it ended the year really wondering maybe how far down we're going to be wholesale.
Compared to last year I don't think anybody is really struggled with the retail numbers being flat because its third best retail year at 450000 units. So.
Everybody would jump up and down if that stayed flat, but I think with wholesale we're seeing we're seeing the numbers jump early in the year, which has been a really good sign and we're we're ramping up to try to meet expectations of the customers right now and it's not just one customer I mean, all of our customers are pretty positive right now.
Got it that's all I have thanks.
Your next question comes from the line of Bret Jordan from Jefferies. Your line is open.
Hi, good morning, guys.
Hey question on the aftermarket I guess, if you took a look at it as an order again as a category rather than including the M&A. What do you think the growth rate is in the aftermarket business and.
When you think about some of your technologies and.
Remote control systems can those be retrofitted and sort of sold into the existing RV base, where you could they be grow that aftermarket business faster.
So I'd tell you that the aftermarket businesses you know encompasses a lot more products and what are what are our standard OEM business doesn't mean, we're working with other companies right now they have no aftermarket presence because we have such a significant one and and bundling some of their products into.
Our packages right now the the aftermarket customers typically already have enough suppliers, where they'd like to pare down and we're a good or good choice for that on the on the one control systems in particular, we're adding.
Optionality to those systems to be able to bolt on some aftermarket products in the aftermarket later this year.
So those are those are getting ready to launch, but as it stands today.
The systems can't be can be upgraded the aftermarket without a whole lot of whole lot of service work. So we are getting ready and then especially considering that we're like I said in my prepared comments 100000, plus units run rate right now.
Those are where a lot of the aftermarket bolt ons will go into now that we've got that math and.
In the on the OEM side of things, whereas two years ago, we might have had 15000 or so units run rate, but the mass today is more meaningful and we can start bolting onto those systems versus.
Trying to figure out how to do it.
With no systems in the market.
Hey, Brett Favre, yet for 2019 organically in aftermarket we grew just a little over 10%.
So that that's been relatively consistent and I would tell you occur which is essentially doubled our aftermarket businesses is pretty close to that expectation as well.
Okay, and then a question on Marine I think you talked about the spread of softness in the pontoon category. When you look at I guess, we have that as much marine showed that our boat show data in yet, but what's your outlook on marine growth for 2020 as an industry.
So industry wise I think that you know, it's looking maybe flattish.
Again, I think we got to wait through the next couple of months to see how the shows go and see what the activity is but from an L.C. I stat side I think what we're most excited about as you know one of our newest products as an electric Germany. So if you look at all the pontoon boats in the market 98% of them are manual Ben.
And so you have to manually take down your youre canopy or your Ben Bimini on the pontoon the technology, we bought last year that were already in full swing production on.
As of December as an electric bimini. It just a push button. So it's like pushing the the car window button on your car versus rolling it up and down.
It's a it's close to 800 do a thousand dollar content piece per boat on 50000 plus both.
And we've had exceptionally.
Exceptional reception to that from the Oems So.
We feel we'll populate that fast where I think last year. We we might have sold the business might have sold 2500 remedies. This year, we're on track to do close to 15000.
So there's significant opportunity for LCR, even if the market stays flat.
Okay, great. Thank you.
Your next question comes from a line of Brandon Rolling from Northcoast Research. Your line is open.
Good morning could you talk about all the aftermarket segment operating profit and kind of the puts and takes their behind the margin contraction.
Hey brand it's Brian.
A lot of it just is coming with the significant growth we've got a lot of changes there we've.
We had pieces that we moved around during the year added new products to the fold.
New leadership brought in Kurt late in the year. So I think really just a lot of changes.
Five in the margin down at the same time mix always comes to comes into play there and certainly every time our mix shifts to the wholesale distributors.
As opposed to going direct to the dealers et cetera.
It can that can certainly have a significant impact on our margins as well. So it's traditionally stayed within.
Relatively tight range, you know north of 10%.
Bounces up a couple of points here and there just depending on those those factors, but I do look at long term, we're making a lot of investments there.
Have great opportunities with occurred to expand our footprint using their distributions.
Footprint like Jason mentioned so.
So lots of opportunities in lots of investments that come with that.
Okay, Great and also a within the RV industry are you seeing broad based strength.
Among multiple categories like book, Towables and motor homes or is it more skewed towards one side.
I think it's more skewed towards Towables mean motor homes, it's a small number motor homes as anyway, but.
Mostly the the.
Excitement around the increase in rates have been around to the total products, which is where most of our volume.
Great. Thank you.
Again, I would like to ask a question. Please press star and the number one on your telephone keypad. Your next question comes from the line of LS White Lin from Baird. Your line is open.
Yes, good morning, gentlemen, just wanted to dig in a little bit more on content per unit you mentioned the reversal of the de contract Decontenting trend.
Maybe between that theory on pricing in a their key factors worth mentioning where do you expect content per unit add to trend this year.
Yes, Brian.
3% to 5% I, certainly think that that's that's reasonable we grew about 5% for the for the year Purion. We continued to grow that that product during the year. So it actually come to contributed to the growth.
Including the back half of the or so.
I think absent absent Fury on we were roughly 3.6% growth on Towables.
So in that range of three to 3% to 5% and we had a great showing the open house last September.
We've talked a couple of different times about successes with one control and electric leveling and stabilizer system. So those are certainly all things that are contributing to.
What I would say.
US coming back to our normal.
Content per unit growth on the towable side motor homes is a little different story, there's certainly been a more dramatic shift to class season, even smaller class season, I think even.
Of course talked a lot about class B is as well so I.
I think some of those smaller product categories, which just don't have a lot of content opportunities for us.
Certainly impacting that year over year content number, but obviously, it's a small piece of what we do and really Towables is the core focus.
Yes, just to clarify that 3% to 5% is that growing off of a core content for you to number kind of ex furion.
Yes.
Okay.
Great. That's all for me thanks.
Thanks.
Your next question comes from the line of Steve O'hara from Sidoti and co. Your line is open.
Hi, Thanks for taking the questions.
Hey, Steve.
Hi, just quickly on the.
In the quarter and the margins within aftermarket.
Where they are one time did you say with the transaction costs were in the quarter.
You think are one time or.
Or may continue kind of.
You know at a higher rate than maybe a normal amortization into one Q.
And what impact that had on the quarter.
Yeah, I mean, a couple of different things there one transaction related costs, obviously, having an impact on on margins.
I think that that was almost.
I want to say from an EPS when I can't remember Dps perspective, so $2 million to $3 million during the fourth quarter and almost 5 million for the full year.
Some of that falling within.
Operating margins for aftermarket so that's certainly impacting that as well.
And so called the that number out in my speech.
As it relates to amortization, there will be a significant increase in amortization, we guided to.
105 to 110 million of depreciation and amortization for for the year much of that is intangible amortization related to the Curt Kurt transaction.
As well as poly and Lumara mean, all three of those were pretty sizable transactions for us. So.
Thats certainly impacting impacting our numbers.
But I think those are pretty good estimates at this point.
Okay, and then looking at the.
Jamie commentary around January February when you're talking about.
Double digits in single digits, I remember there being some.
Some issues last year in January I think with shipments are you talking about your activity or.
Well just are you are comparing it to.
Our VIP a wholesale.
Deliveries.
We're just comparing it to our activity last year so.
You know there was a little bit of weather last year actually last few years, so and that's one of the things US I think playing into the healthy retail activity we've seen at the shows so.
But there has been pretty decent in the and the Midwest for the most part.
But when you look at our when we say double digits in January and wholesale were strictly looking at our our shipments in our customer shipments compared to what they did last year before RBS a actually report so.
Okay. Okay.
It's a pretty real comparison.
Okay, and then I think for the most part that.
First months comp seems to be a pretty good.
Proxy for the quarter.
It would that not be the case this quarter I mean, I know you talked about February being down.
Or I'm, sorry, not down but.
Less.
So how do you think about the full quarter versus maybe January February well, I mean, you've got to take a month to month. So.
We are up if were up low double digits and and.
In January.
Starting off you know.
High single digits in February.
We don't see that change in my March, but you know if anything's possible I mean, we could we could turn up in the second week of margin orders get cut back or they could you know they could grow so but January isn't the bag in February pretty much in the bag. So you can kind of.
Maker deduction from there.
Okay, and then just one last one I don't think it was asked yet.
But anything from China that could be.
In terms of supply chain or anything with some of the longer shutdowns related to criminal there's things like that.
Yes, I give you a couple a couple of thoughts here first first we haven't we haven't had experienced any disruption so far.
We're fairly well set with supply up through the tens when everybody was supposed to come back to work and we're getting kind of you know.
Bits and pieces of reports on obviously, it's going to be everybody's going be slow coming back to work there and we'll have more color probably.
Next quarter on because everything we've got in the pipeline, we ordered a bunch before Chinese new year.
If there is any disruption, it's likely not going to be till.
A quarter away because we've got inventory today for the next.
Few months so.
Okay. We'll just keep you posted there it's just but if they continue to come back to work and the factories get back to where they were before.
As they've let everybody come back to work.
It'll it'll bode well, where we haven't seen any disruption yet.
Okay. Thank you very much.
Yes.
There are no further questions at this time I'll turn the call over to Jason for closing remarks.
Well, we appreciate everybody for joining us on the call today, we look forward to talking to you next quarter. Thanks, a lot take care.
This concludes today's conference call you May now discuss.