How does your company compare against other trailer manufacturers? With all the uncertainty in the economy over the past few years, understanding your company’s performance against others in the marketplace can provide a competitive advantage. Trailer manufacturers have faced significant fluctuations in revenue, drastic swings in material cost structures, volatility in credit availability at both the manufacturing and retail levels and higher insurance costs. Several manufacturers were able to generate positive returns in 2010. Were you one of them? 

Benchmarking is a critical component of monitoring a company’s attainment of its strategic objectives and provides valuable insight, but benchmarked financial data for mid-sized companies is difficult to find. For the past 19 years, McGladrey and Pullen, LLP has issued financial and operational benchmarks for companies in the trailer industry. The benchmarks compare a company’s performance against others in the industry as well as other assemble-to-order manufacturers. The benchmarks include various financial and operational ratios broken down into the following categories:

• Working capital and asset management
• Productivity and profitability
• Revenue, direction and company value

McGladrey and Pullen, LLP recently completed the 2011 edition of the benchmarks which represent the averages for participating companies for their years ended 2008 to 2010. Highlights from the 2010 benchmark report include:

• After two years of revenue declines, participating companies experienced increases in revenue of approximately 28 percent in 2010.
• Participating companies had an operating cycle of approximately 43 days. Operating cycle ratios measure the number of days it takes a company to convert its cash payments for inventory to cash collections from sales of that inventory. It represents 21 days to pay an inventory related invoice, 53 days to convert the raw materials into a sale and 11 days to collect payment on the related receivable.
• After significantly reducing inventory levels during 2009, participating companies maintained higher levels of inventory in 2010. Average 2010 raw materials and work-in-process/finished goods inventory turns were approximately 10 and 14, respectively.
• As a percentage of revenue, participating companies paid approximately 60 percent for materials, 11 percent for direct labor and 14 percent for overhead related items. These percentages were similar to 2009 performance.
• Participating companies averaged operating income of approximately 3 and 1 percent of revenue during 2010 and 2009 respectively.
• Sales per production employee (based on a quarterly average of employee counts) were approximately $233,000 and $239,000 in 2010 and 2009, respectively.
• On average, participating companies paid approximately $2,500 per employee for group health insurance related costs in 2010.
• In 2010, the average participant paid its production workforce $15.93 per hour. This represents an increase in the average hourly rate of approximately 1 percent or $0.20 per hour.
• On average, participating companies generated approximately $202,000 of revenue per square foot of manufacturing space.
• The average salesperson was responsible for maintaining relationships with 16 dealers.
• Participating companies on average experienced an increase in pretax earnings of approximately 291 percent during 2010.

McGladrey and Pullen, LLP will be at the 2012 NATM annual convention to discuss the benchmarks and obtain feedback on their effectiveness. We look forward to working with trailer companies in the upcoming years to provide valuable industry benchmarks. For more information about benchmarking for the trailer industry or to participate, contact Tim Koch or Sam Reschly at (574) 522-0410.