National RV Holdings Inc., Perris, Calif., announced Friday (July 14) that the use of defective sidewall material on around 70 motorhomes built by subsidiary National RV Inc. (NRV) will impact the company’s second-quarter earnings by over $5 million and yield a net loss for the period.
The firm, also parent to Country Coach Inc., Junction City, Ore., has filed a suit against the sidewall supplier, Channahon, Ill.-based Crane Composites Inc. and its parent Crane Co., to recover all associated damages. The company noted that none of the affected units were manufactured by Country Coach.
In a statement, National RV Holdings also announced that it expects to record a reserve of $1 million to $1.5 million dollars in the second quarter to address a concern it has about tires used on some of its highline coaches built between 1995 and 2000. The company is seeking to recover most of those costs from the tire manufacturer.
National RV Holdings said it repaired and sold most of the fiberglass sidewall material just three months after discovering a serious defect in the units. Costs to complete and ship the remaining units will affect the company’s July and third-quarter results and the impact to cash flows in the short term is believed to exceed $13 million.
“The temporary impact to cash flows of this supplier issue, an issue which we believe has been experienced by other manufacturers of recreational vehicles, has been significant to NRV,” stated CEO Brad Albrechtsen. “However, the extent of the problem has been contained as all but three of the affected units will be repaired and shipped by the end of this month.
“We were successful in catching all but a handful of units before they shipped and have retrieved and repaired the few motorhomes that did leave the factory. We have since changed the supplier of this material.”
National RV Holdings also said that in response to the 18% decline in overall industry Class A shipments, NRV has reduced production from 40-45 units per week down to 35 per week, and has adjusted personnel and other costs accordingly. However, sales of Country Coach highline products remain largely unaffected by the general industry decline and it plans to increase production from approximately 16 units per week to 20 during the third quarter as it rolls out its two new products.
In addition, the company is in the process of exploring financing opportunities to replace a significant portion of the existing working capital line of credit with long-term debt, increasing financial flexibility. National RV Holdings expects to report its results for the second quarter the second week of August.