LCI Industries (LCII) Q1 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Drew Industries Incorporated First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jason Lippert, Chief Executive Officer. Please begin.

Yeah, we got to - sorry, we got to let Renee go first. So go ahead, Renee.

Thank you, Jason. Good morning, everyone and welcome to Drew Industries 2016 first quarter conference call. I'm Renee Ketels with Lambert Edwards, Drew's Investor Relations firm. And I am joined on the call today by members of Drew's management team, including Jason Lippert, CEO and the Director; Scott Mereness, President; and David Smith, CFO. Management will be discussing first quarter results in just a moment, but first, they have asked me to inform you that certain statements made in today's conference call regarding Drew Industries and its operations, may be 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 a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors are discussed in the company's earnings release, in its Annual Report on Form 10-K and in its other filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur 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?

Thank you, Renee, and thank you everyone for joining us on the call today. It's an exciting time in the business and in the industries we serve and we are happy to announce another quarter of solid earnings growth with consolidated net sales in the first quarter of 2016, a $423 million, 17% higher than Q1 of last year. Margin improvement was largely due to increased efficiencies, incremental margin and higher sales, the growth in the aftermarket and our adjacent growth and better margins on our recently acquired businesses. Content was up slightly over Q1 2015 as a result of the continued up-tick of entry level travel trailer demand. While this works against content, volume and sales are still up. We see this trend as a long-term positive for the business as most our peers will ultimately trade out of the entry level unit through more expensive trailers [indiscernible] to motorhomes. This coming May marks the 60th anniversary of LCI, Drew's only operating company. It's a great kind of celebrate as the RV industry continues to gain momentum. The RV industry outperformed expectations with wholesale coming in over 10%, retail was strong, dealer inventories are in line and the OEMs have substantial backlogs and remain bullish as we past prior industry wholesale peaks. So much though that they continue to add new capacity. We credit this continued industry growth to significant new product choices and price points as well as great advertising the lifestyle by the industry. Most notably, a younger demographic seems to favor the RV lifestyle as many companies and studies have recently pointed out. There has been a lot of talk and confirmation that younger buyers, specifically millennials are finding the RV lifestyle to be an attractive choice. We credit our great results for the first quarter of 2016 to many different factors. Our growth has come in the area to the RV industry, aftermarket and adjacent markets, as well as acquisitions in adjacent market. We made several acquisitions over the last couple of years and most of them were in adjacent markets as stronger margins in our historical average. Our non-towable RV OEM sales have now exceeded one-third of our total sales, which is not only helping with margin performance, but also helping diversify the company and the markets outside RV. We've experienced efficiencies to improve consistency in operations, as we haven't had to make significant planned restructures in over a year. We invested heavily in 2014, spending over $42 million for the additional - addition of several new facilities and other growth related CapEx projects. It has taken some time to build this new capacity, but all the restructuring has made us more efficient in manufacturing, creating opportunity for more lean efficient workflows. The most important thing we did during this restructuring was the improvement in the facilities for our employees coupled with our HR and leadership initiatives to create a drastic improvement in attrition. We believe that the significant reduction in attrition and improved morale is the primary reason for our improved efficiencies and margins, as we cut our attrition by over half and are continuing to improve. Lean has also been an important part of our margin improvement story, while we are still in the early stages here, we feel that we're starting to see great results. We started the lean journey in 2012 and it took a couple of years to get a routine down, develop the education classes, train employees, hire lean managers and then take it to multiple facilities. We're still developing better ways to track results, but in 2015, we feel we've paid approximately $3 million in materials and labor through lean activities as well as free up about a 150,000 square feet of capacity. That's the equivalent of freeing up 35,000 square feet - square foot facility every quarter and therefore one of the reasons we haven't had to add facilities over the last couple of years. We feel that we can continue this well into 2017 without addition of significant capacity, primarily due to lean and other efficiency related efforts by our management teams and employees. As many of you know, we made the decision to tighten our belt in October of last year and made G&A and indirect labor cuts that resulted in expected annualized savings of around $10 million. These savings started to show on Q1 margins this year and what a great decision that turned out to be as we reduced these costs and got even more efficient at the industries we serve, continue to grow on this time. We are focused on continuing to manage our cost as we get bigger in order to realize better incremental margins. Arguably, one of the biggest competitive advantages we have in our - in the industry is our innovation. Never before we have so much innovative new product, we credit fact to the fact we have continued to build stronger R&D units within each of our core operating division. In addition, we look into customers and develop what they asked for. With the introduction of fifth-wheel leveling and now travel trailer leveling, Sway Command and My RV and countless other innovations, it's not hard to see why innovation is helping to improve sales and margins at Drew. Innovative and unique products [indiscernible] or not tend to offer more opportunity for margin improvement. We are more focused than ever looking for acquisition opportunities that offer an innovation discipline. IDS is an acquisition we made just a couple of years ago, has been a great example here. This group has delivered on My RV, leveling component from sway control and just the last year, which will be significant products with better than average margins for our company. Also in Q1, aftermarket made a significant jump and it's really seeing amazing - and it's really amazing seeing how quickly this has become such an important part of our business. In the past quarter, aftermarket revenues saw improved performance by 41% over Q1 2015 and better than typical OEM margins. Our team is very focused on putting out the best service in parts in front of the aftermarket customers while also trying to define a higher level of service for the industry. In addition, we are all-positioned in the RV aftermarket business because we are putting over $1 billion of components to the new vehicles every year coupled with the fact that dealers and other aftermarket customers are not finding that we are an effective one-stop shop. We realized how important the aftermarket has become to our margin growth and we are committed to providing the highest level of service of the almost $8 billion of component parts we have put into the market. We recently announced that we have completed the acquisition of Project 2000, our supplier to the European caravan market. This manufactures a great company with great people, and with patented and innovative products. We feel the investment in the company, products, and people will give us a great foundation to build the supply network in this new market. We've been making progress in the European caravan market with our own products, but having a real facility and boost underground, with relevant European caravan product knowledge, a better understanding of those products, and customer relationships will help to boost us initiative greatly. Regarding acquisitions in general, the pipeline remains full. Four out of the last five acquisitions we've completed have been outside of our core RV OEM market, and we are continuing to find great supply companies in the bus, marine, heavy truck, cargo trailer, aftermarkets, and international markets. The acquisition opportunities grew significantly in few years ago, as we added adjacent aftermarket and international RV focus to our business. Our disciplines have been getting stronger, and the net we can cast over the target, keeps getting larger as we gain relevance in these newer markets. In the last several months, we have made two great furniture acquisitions in the marine market, and our furniture team is doing a great job of integrating that. Because we have done over 40 acquisitions in the past 16 years, we believe finding the companies that are good fit, and integrating them are real strength of our company, and our management team. All-in-all, we believe our long-term strategy is working. It's simply a matter of having a sharp focus on supplying components for the North American RV market, adjacent markets, aftermarket, international RV markets, and then acquisitions across all of those spaces with the management team as among the best in the business. Recently, we've identified $3.4 billion of revenue opportunity in addressable markets, and we've proven in the past that as long as opportunity is there, we believe we will find a way to get added. We have a great history of performing better than the norm and have a lot of experience and passion around the industries we serve. We never had a call without thinking our customers, management teams, and employees, we could achieve these great results without the great staff and employees we have. And we truly do have the best customer partners and relationships. Now, I will ask Dave Smith, to give comments on the financial results.

Thank you, Jason and good day to everyone on the call. For the next several minutes, I will discuss our Q1 results, highlight a few things from our recent credit agreement amendment, make a few points about our balance sheet and cash flows and talk some of the quarterly dividend that was paid in April 2015. As Jason mentioned, our revenue in Q1, 2016 was $423 million up more than $60 million over Q1, 2015 representing an increase of 17%. This was due to several key factors including strong wholesale shipments for total RVs and motorhomes and acquisitions. While both completed in 2015 and it was completed during Q1 of 2016. The 2016 acquisitions include our secondary Marine Furniture business completed in January and RV Furniture Business completed in February. Unless contributing to our increase sales also includes sales from the premium electronics distribution agreement in July 2015 and this was the key factors affecting our sales growth is rounded out with a significant growth of aftermarket sale. In percentage terms, the highest year-over-year growth in Q1, 2016 came from RV adjacency, up 55% and the RV aftermarket up 45% over Q1, 2015. The growth in RV adjacencies were strongly impacted by the acquisitions done in 2015 and in early 2016. The growth from the aftermarket is primarily the result of the focus and attention that company has put on serving the customers in this [Technical Difficulty] as millions of dollars and thousands of dollars have been invested to develop this part of our business. Now, let's highlight around sales as underscore two things from the LTM March 31 numbers. First, total net sales for the LTM period ended March 31 is just under $1.5 billion coming in at $1.464 billion. Second, aftermarket sales for RV and MH products in 12 months ended March 31 was just under $112 million, highlighting again of this area of our business continues to develop, and grown significance with each quarter. Operating profit of just under $56 million in Q1 2016 compares favorably to $32 million reported in the Q1 of 2015. This is due to the many of the factors Jason referred to including, an overall increase in sales, sales growth in aftermarket when margins are often higher, sales growth in adjacencies which included several of the businesses acquired in 2015 and 2016, cost efficient fees realized from capacity investments over the last several years, green initiatives, and the indirect labor reductions completed in Q4 of 2015. Cost efficiencies also result from several of the acquisitions completed over the last 12 months, where we're able to use our purchasing power to reduce the cost of material, and the purchase overhead items in those businesses [Technical Difficulty]. We also realized cost efficiencies in the acquired businesses with implying our operational methods, most often makes them operate better. Results for the favorable impacted lower material costs, primarily for steel and aluminum as the prices for these commodities began to trend downward in the second half of [Technical Difficulty] stay below 2015 for that levels in the Q1 2016. Next, I want to briefly discuss the environment extension through our revolver, which we completed at the end of the April, and while this was covered in the separate press release, I think it's worth giving [Technical Difficulty]. The prior example is put in place in 2008, and it was amended twice through 2014. This served amendment has gave us the flexibility of bringing agreement up to a more current standard, and it also built to accommodate international growth in our business. We believe the pricing terms in this amended agreement are slight competitive and give us a good flexibility. Highlights from the agreement are as follows, [indiscernible] who are long time lending partners, JP Morgan, and Wells Fargo, they both increased their commitments in the united facility. We also added of Bank of America Merrill Lynch, and First Source Bank as participants. The maturity was smoothed up by more than two years to April 2021, the committed facility size increased from $100 million to $200 million. There is an accordion of up to $125 million, which is available from lenders who want to participate under the terms of the credit agreement and under certain conditions. $50 million of the $200 million of capacity is available on improved foreign currencies. A signing improved currencies include the Euro, Pound, Sterling, Canadian Dollar and Sterling Dollar. The facility contained provisions for having other currencies approved at our request subject to conditions. With these new examples, they are subject to having up to $200 million of committed dry powder and a potential to have $425 million of available powder and if we were able to draw the potential capacity available under the shelf-loan, and fully exercised accordingly. Finally as the borrowings under the shelf-loan with prudential of [indiscernible] with the revolving credit line and prudential agreement was amended at the same time as a revolver to line covenants and baskets, both no changes to rate term or amount. Jason [indiscernible] the balance sheet. There are a couple of things that I want to point out. First, net debt at March 31, 2016 is $22 million down from nearly $38 million on December 31, 2015 reflecting a strong cash flow to the company during the fourth quarter. The net debt reduction was $16 million incurred during the quarter, where $18 million of cash was used for acquisition. At March 31, 2016 inventory is down by more than $5 million from December 31, 2015 level is slightly due to acquisition in the quarter. These were the results that focus the company to increase churn and utilize more efficiently. Dividends payable $48 million at March 31, 2015, and for special dividend at $2 per share. On March 31, 2016, a dividend of $0.30 per share has been declared and was paid on April 15. Both regular dividends and special dividends are subject to ongoing board review and discussion. During the first quarter of 2016, cash on hand increased by nearly $16 million driven primarily by strong cash flows from operations of $44 million, which was net of $63 million of cash used for the normal seasonal [Technical Difficulty] during the first quarter. $44 million of cash from operations is partially offset by cash usage of $6 million for capital spending, which is in line with the full year 2016 expected spending of $20 million to $26 million, and further cash usage of $18 million due to acquisitions disclosed during the quarter. In summary, the company grew its top-line and bottom-line during the first quarter of 2016, the balance sheet remained strong as the net debt position reduced from December 31, 2015. At March 31, 2016, net debt was less than a quarter turn of LTM EBITDA and the debt-to-equity ratio was 0.1%. We further took actions during the quarter which were completed after the quarter ended to provide added liquidity to the company and return cash to the shareholders. We added liquidity in the form of an increase revolver commitment with foreign currency borrowing capacity and later maturity date with competitive terms in pricing. A dividend was declared during the quarter and paid during April to return just over $7 million to shareholders. We believe our balance sheet and credit line give us the capacity to support additional growth initiatives. Thank you for your time. That is the end of our prepared remarks. Operator, we are ready to take questions.

Thank you. [Operator Instructions] Our first question is from Daniel Moore of CJS Securities. Your line is open.

Good morning.

Hey, Dan.

Wanted to focus first on margins, pretty considerable uplift obviously, as you've said before this was your kind of second full quarter of the benefit of the improved operating efficiencies and some lower input costs. In Q4, margins were up 220 bps, this quarter 450 bps, as we look at the Q2, how should we think about the potential margin uplift as it relates to those increases and maybe just talk about the sustainability of higher margins on a go-forward basis?

Well, I think one of the things here as we've been talking for two years about our ability to get back to peak margins and all along of around 11% I think is what we've said in the past with our peak, our prior peak margin. So we've been working toward this with our long-term strategy for the last couple of years and everything starting to pan out and payoff of all the different initiatives we got going. But a lot of it's going to depend on continued improvements in the lean initiative, continued improvements with the businesses that we're buying and the margin profiles that those new businesses have, our continued improvement and market share in the adjacent markets and the varying margin profiles that those businesses have. So I guess just to quantify simply, we've said in the past we can get back - we feel we can get back to our peak margins to sustain and we feel we're there and we just kind of have to take it quarter-by-quarter now.

Okay. That's very helpful. Maybe shift gears, talk a little bit more about Project 2000, how that acquisition came about? And strategically, how you plan to leverage their operations in North America and inversely what it does for you in terms of the platform for growth in Europe?

Sure. Yeah. We'll - we've been - we've had a partnership with this company for a couple of years, they had a product, bed lift product that transitions the U.S. motorhome market and that's how we first came across these guys, partnered up with them. We were their effective distributor for this product in the North American RV market, it's been perceived exceptionally well especially by the motorhomes and we're looking to take that product to towables which is obviously a bigger market. But in the process, we got to know these guys over near Florence and their abilities in terms of innovation and designing new products and all the relationships that they had in Europe and we started crossing over with pumping and trying to get right up going in Europe, we come across them and we just felt that it was a good time to try to put something together and really get us the boots on the ground and the customer relationships and some of the things that they've got 20 years of history and versus us just kind of entering the market as the new player. So, ultimately, there's lot of synergies as more products they develop, they will develop for the European market and the caravan market over there as well as new products that can cross over in North American RV market and so this benefits both ways there. So - and they've been growing as a company for the last several years primarily focused in developing new products for that caravan market.

Thank you. One more and I'll jump back in queue, but this is more globally kind of looking forward, I think revenue to RV OEMs was about 73% of overall revenue in 2015, and given the multiple avenues growth that you're pursuing and you described in the prepared remarks, where do you see that number in three years to five years from now?

Well, I think that right now, it's close to that non-RV OEM total businesses, $500 million, and that's been growing, I think three years or four years ago $100 million. A lot of this kind of depend on the acquisition activity we have and we've been making more acquisitions in the adjacent markets than we have in the RV market as a reason and that's going to - that's going to continue to be a trend, because there are just more opportunities there. So, and then from there it depends on how good our ability to gain market share once we gain some traction in those markets as whether it was through introducing new products that we developed or whether it's buying companies in those markets that are on the move and growing their own market share. So, either case we feel that, once we get plan on with a couple of acquisitions or some really good products or combination of the two, we feel our ability to gain bigger market share, very similar, it takes a very similar path of what we've done on the RV side.

But, Dan, I would add that North American RV OEM revenue probably over the next five years would be lower percentage than what it is now.

It is obviously [indiscernible] percentage point.

Right. Right.

Understood. Thank you. I'll jump back in queue. Congrats on a great start to the year.

Hi, Dan.

Thanks.

Thank you. The next question is from Scott Stember of C.L. King. Your line is open.

Good morning.

Hi, Scott.

Hi. Scott.

Could you guys maybe talk about on the raw materials side? You made some commentary about prices input cost having gone up as of late. Just maybe talk about what you're seeing the magnitude of that and just the timing of when that will start to flow through your numbers?

Yeah. So, typically take months to - in our P&L. So what we're seeing is still below 2015 type levels, but it will be towards the back half of the year. We still expect to see Q2 as well as half of Q3 positively benefit us as we compare that back to 2015? But when you look at current raw materials where they are off of the December low, it will be towards the back half of the year early - late 2016, early 2017 that start to impact us.

Got it. And on the pricing side. One of your top publically traded peers, last few quarters has been talking about having to give back on the raw material site to your customer base, where are you guys within that process, if it's happened at all? And maybe just talk about the magnitude of any givebacks to be, assuming that raw material prices don't go sky rocketing again, you know what we're seeing right now.

These are things we typically discuss with our customers, our key customers on a regular basis, because material spend balance suddenly goes up or goes down. And we have discussions both ways. We've just I think Scott discussed on saying that we expect some of that impact or most of that impact to happen in Q2. But it's important to know, and I think we said at previous calls, but some of our customers are tied to indexes, so that's - those increases or decreases in the raw materials are baked into the selling prices as material goes up and down, so that we don't always have to come at the table and negotiate because we've negotiated ahead of time that as materials go - move up or down, selling prices move up or down along with that. So just a little bit easier mechanism to deal with because we don't happen to figure out how much inventory we have and where inventories to have, we just paste it on an index. And allow suppliers in our business to do that, so...

Okay, so did - okay.

Go ahead.

And maybe just talk about on some of the new products like travel trailer leveling and the sway control products, just talk about where those stand and how much traction, I know that on the sway control you had indicated previously that [indiscernible] is putting in a lot of their items, can you maybe talk about just some of the success there?

Yeah, sure. Well, [indiscernible] with sway control, [indiscernible] had an exclusive for several months and they're doing a really great job marketing that product to the dealer body. So the dealers are really trying to understand and learn, that's a part, it's a really unique safety product that gives the drivers with towables a lot of more comfort, and they're not going to have sway incidents when they're pulling the trailers down the road. So on the next, I think we've got another 10 brands lined up for that product. So I think as we move closer to the open house, and then Louisville, we'll see it all over the place, the beauty with the sway control is that we can track the units to OEM level for really tiny amount compared to the total cost of the total product. So that they can prep the vehicle, so if a dealer wants to add, they can buy the aftermarket kit and plug it in there. So the key for us is to just to get the awareness out of the dealers and make sure that they understand that we've got this product, that's a safety product for the consumers that are welcoming lots every day. On the leveling side, we just launched all of our key advertising materials just over the last few weeks. So if you jump on to the RV business website, you'll see a feature there, where our magazines with it now and really the story there for us is pretty simple, we've launched the real leveling about a five years ago, and everybody said, hey, look, nobody is going to put a $1,400 leveling device on a towable. And a five years later, fund some of standard equipment on every single fit we are out there. So that's kind of paved the way for the travel trailer leveling story. All the consumers are very aware of leveling, because the alternative is cranking your jacks up manually, and spend a lot of time doing it. So we think there is not going to be a tough job for the dealers, because dealers have leveling on their lots with towables and making sure that the consumers are aware that now it's available for travel trailers. So the switching gears to My RV product, which is another big product of ours, that's kind of a home automation tablet, that's picking up a lot of steam, we've got a lot of - because of the younger buyers, we just spend some time talking about, they gravitate towards that kind of technology and there is no sense of having a lot of manual switches in the coach and where we can have one control, one type control panel on the coach controlling everything and you can download the app to your phone and move all those controls to your phone just by downloading an app. So that's really picking up steam. We feel that as the RV buyer gets younger and younger, that feature is going to be more and more important. So those three specific innovations we feel are - are going to continue to drive a lot of new product sales in the next few years.

Got it. That's all I have for now. Thank you.

Thanks, guys.

Thank you. The next question is from Tristan Thomas of Sidoti and Company. Your line is open.

Good morning. How is everyone?

Hi, Tristan.

Hi, Tristan.

[Indiscernible] I think you mentioned us that your non-towable RV sales were about a third of your total RV sales. Is that a level you're comfortable with or something you're going to keep looking to expand and then how so?

Yeah. I mean, our goal is to continue to expand that. I mean, we used to be 90% concentrated in the RV OEM and since the good strategy that diversifies sales in the multiple markets and we've got - we had a lot of success moving into these adjacent markets, so whether it's through new product development and market share gains in the adjacent markets, the aftermarket, the international RV markets, those three primary areas of adjacencies or whether it's acquisitions across all those areas including the North American RV market, acquisitions and the market share growth in the adjacent markets are the primary way we're going to get that time. We've had a lot of success growing that. Like I said a few minutes ago, we were $100 million in that - those markets few years ago and now we're over $500 million and it's going to continue to grow.

Part of the $3.4 billion in an addressable market has increased from where it was a few years ago, because of all of our penetration into these new adjacencies. So, that's a much bigger number I think just a few years ago, it was low as $1.6 billion worth of addressable market. So, it definitely has increased quite a bit because we've identified and gotten into the new adjacencies that we're currently fitting in today?

And Scott, really what - what really propelled us over the last several years and you put a team together, that's specifically focused on these areas before we were just kind of taking orders from those markets that they were hearing about us. Today, we're focused on it. We've got teams that are inside those markets every day. And five years later, the customers in those markets know who we are. We're not just a random choice now. I mean, we're one of the premier choices in those markets, which makes the market share come a little bit easier. And hopefully that helps.

Okay. Great. Could you sort of on Furrion for a second, I mean, was the growth we saw on this quarter, was that driven by lots of new products such as new appliances or is that coming later in 2016 those kind of rollouts of the new products?

I'm glad you brought that up, because Furrion is a big part of our R&D store, they're developing a lot of new products and electronics right now. Complementing a lot of the products that we have, they were just here and spent a whole week with us and brainstorming on what the next new products. I mean, these guys are super innovative and they're going to continue to bring very new products. But a lot of other products in improvement and sales that we've seen since we did the deal middle of last year where a lot of the products that they had in their bucket and some of the couple of things that they've added. So you're talking televisions, stereos, the backup cameras, the power cord, some of their staple products and our plan right now is to launch the appliances over the course of the summer. So, we just started prototyping this past month and that's going to be a big area for us. I mean, we started talking ranges [indiscernible] and ultimately some of the other products, it's huge opportunity and our customers are excited about how the products, at least prototype products that we've put them in the market well.

Okay. So that could potentially have a benefit in terms of the appliances by next year?

Yeah, you'll continue to hear us talk more and more about that as our Furrion sale start to really ramp up.

Okay. And then just one final question, I know you mentioned that shifting demographics, are we expecting a new RVIA study, anytime soon, I think this will be about the five year anniversary, the last one...

Yeah.

[Indiscernible] look forward to?

Yeah. I just reached up to those guys last week, and they have, they're nearing completion of the study and they've got to coming up the next couple of month. So I think a big power breakfast for the industries this week, and some of those numbers come out, but one of the numbers they put out was the average age of the RV buyer moved from 48 to 45, so it's - that's again just showing that the RV buyers getting under families and arguably that's why the need for more entry level products are continuing to be the topic of conversation.

That sounds good, great quarter. Thanks.

Thanks, Tristan.

Thank you. The next question is from Chris White of Thompson Research. Your line is open.

Good morning. I wanted to follow-up on raw material cost. I know you had mentioned in your press release and even in your opening statements that commodity prices were trending lower, but I wanted just to confirm what you're seeing in steel pricing. Are you seeing any change in steel given the recently implemented imports, tariffs on imports?

Not directly attributable to some of the legal aspects of what we're seeing as far as imported flat rolled steel, but definitely the water level for steel price is definitely up since December. Keep in mind that December was more than a 10-year low for steel prices. So, it was bound to go up and like we've talked about in many calls, raw materials and commodities are evolved [indiscernible] and we'll continue to monitor that and manage it like we always do. Another key raw material is aluminum. And it's been a little bit more consistent, as of late, although, that could change at any point in time too. So, we've been seeing the same type of cost escalation in the last two months like we did on the steel side.

That's helpful. Thank you. Can you tell me what the percent of cost of goods sold is for steel?

We typically don't - not typically - we don't [indiscernible] information.

Okay. Okay. And then finally, I want to talk about manufacturing housing, which was up 15% year-over-year, which I think we noted was the first double-digit increasing growth since Q2 2012. Do you think this is a kind of a turning point here, do you think that this is showing a real change in demand or do you think maybe this was kind of a one-time anomaly here.

Yeah, so total for the segment was 15.7%, I believe and OEMs was up 19.1%. It's definitely again off of a multiyear low. We've seen several years of rebound and we're poised to make money in that space. We've got a lot of factories that we leverage with some of our other parts of our business, so we got plenty of capacity there and continue to see. Our expectations would be the that that part of our business would continue to improve. Again it's still a relatively low number from what the [indiscernible] have brought to us, but we're excited about the fact that that number continues to be strong and a lot of our customers are talking about growth opportunities in that space, so we're expecting positive trends there.

And I think wholesale for March showed like 24%, so they've got - the industry - their industry is rolling and like Scott said, we're poised to benefit especially considering that we've got plenty of capacity there.

All right. That's helpful. Thanks for taking my question.

Thanks, Chris.

Thank you. [Operator Instructions] The next question is from Scott Stember of C.L. King. Your line is open.

Just had a couple of follow-up questions. The 11% increase that you guys talked about for April, could you talk about how much was organic and just how the - some of this lower content shift that we've been seeing with the lower demographics or the younger demographics, maybe just talk about how that's all playing in?

Yeah. So Scott, the number - the organic number was roughly 5% for April.

Okay.

And again, I think the - and, Jason, you may want to speak more about the younger demographic aspect we're seeing.

Yeah. I think year-to-date, we've seen trailers are up - here we can keeps talking about the mix thing every quarter and trailers are up over 6,000 units at least from what we can see up to April and fifth-wheels are actually down close to 1,500 units. So, we talked about our content and trailers for fifth-wheels and Thor guys and everybody else had the same types of comments. So, when trailers are up like that, it does impact the mix in the sales numbers, but, again, like I said in our opening comments, this is a little bit of a short-term negative, but it's a long-term positive from the standpoint that we're bringing, we're definitely bringing more people into the lifestyle and it will pay-off down the road. But when you look at the something like travel trailer leveling and that changes again for content and trailers when we start talking about adding $1,000 components to a trailer then it makes a big difference in our content. And I'd also add that within the fifth-wheel and trailer spaces, we've seen a little bit of gravitation towards the lower end of both of those spectrums too, just to keep adding on to that mix. So, yeah, we expect that top change up and down and this was the time of the year, when fifth-wheel around us strong anyway. So, but the industry is good, the Thor and Jayco and Forest River, the top 3 guys players in the RV business, they are all reporting very bullish backlog especially on trailers. And this time is typically a time for the year, when there is a few more question marks than not and nobody seems to have any question marks about, especially trailer production right now, some of the high-end motorhomes and some of the high-end fifth-wheels are a little soft from what we hear, but again the retail is strong, our customers are having record quarters and record halves. So, there is no real signs to see that the volumes going to back off and we'll probably continue to make up more on what we view from the content.

And there's [indiscernible] make for every fifth-wheel, so there's still a lot of opportunity in that products and that's for the volume.

Got you. And just last question, just back to the gross margin. I mean, you guys had a phenomenal story there in the first quarter. And with some of the things that we talked about with how many give some back to your customers and potential for a little bit of a normalization on that front and make sure that we don't get too far of our skis going forward. Can you just - just high level talk about the sustainability again of this 25.6% number that you had in the first quarter? And maybe just frame it up for a little bit, so we don't get - so we can have expectations that are realistic - and I guess.

Scott, I think that the answer to that question was a lot simpler when we were just one dimensional and part of the OEM, but we got so many moving parts to our business now, that it's a little bit harder to look out and quantify. But what I can tell you is that we're very sound on the manufacturing side now, we've seen significant improvements in our efficiencies, our lean initiatives. I talked last call about the momentum that we have with the company. I've got 22 years and all the people are on me have - we get more and more experience and that momentum creates a lot of that efficiency, the retention efforts and reducing the attrition by over half over the last few years is huge. We're not retraining thousands of employees every year now. So there's so many moving parts. It's really hard to quantify. Of course we got a - we want to give back when the materials comes down and we - try to get something after materials stabilize at higher levels over time. So, those kind of watch each other out over time and we're focused on the improvements in the business right now and focused on our long-term strategy in these adjacent markets, where margins are better. The acquisitions for those markets, where the margins are better, the focus on innovation and R&D where the margins are better, that's where our focus is [indiscernible] right now.

Great that's all I have, and congratulations on a great quarter.

Thank you, Scott.

Thank you. Our next question is from Daniel Moore of CJS Securities. Your line is open.

Thank you again. Just wondering what was the organic growth in content for [indiscernible] in the quarter?

Q1?

Yeah.

I think that is the organic growth.

Okay, what you gave is organic?

Right.

Got it. And then one other, just picked up on something you said in the prepared remarks, as with related to the dividend, you've always looked at specials, now obviously initiated a one more regular ongoing dividend. Will you continue to consider special dividends, as we go forward? More likely increase the regular? What's the top brass set there?

It's the same, same as we've done in the past. I mean it's a quarterly discussion with the board and we look at everything and we look at use of the cash, and [indiscernible] when we're looking at in terms of acquisition and the other things, but we can look at those every quarter with our Board of Directors and usually come up with the right combination of solutions in those used for the cash areas.

Great. Thank you, again.

Okay.

Thank you. [Operator Instructions]

Okay. Well, if there's no - go ahead.

There are no further questions in queue at this time. I'll turn the call back over to Jason Lippert for closing remarks.

Well, again, everybody, we appreciate you for taking the time to sit with us on the call today and feel free to call us, if you got more questions offline, and we'll see you or talk to you next quarter - for next quarter. See you.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.