IPO Report: Truck Hero (TRUK)

Francis Gaskins |

Truck Hero (TRUK) is a fast-growing designer, manufacturer and marketer of branded consumer accessories for pickup trucks. The company is based in Ann Arbor, MI.

Seven other companies are scheduled for the week of Nov 16. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: J.P. Morgan, Baird, BofA Merrill Lynch
Co-managers: KeyBanc Capital Markets, Raymond James, Stifel, SunTrust Robinson Humphrey

End of lockup (180 days): Wednesday, May 18, 2016
End of 25-day quiet period: Tuesday, December 15, 2015

TRUK scheduled a $200 million IPO with a market capitalization of $710 million at a price range midpoint of $18 for Friday, Nov. 20, 2015 on NYSE.

Summary

TRUK is a fast-growing designer, manufacturer and marketer of branded consumer accessories for pickup trucks.

The pickup truck market is large and expanding, driven in part by evolving pickup designs that have increased functionality and versatility, making trucks more suitable as family and lifestyle vehicles.

Valuation

Glossary

Retained earnings (mm)

.

.

$14

     

Per share dilution

.

.

-$28.28

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Truck Hero (TRUK), NYSE

$709

1.4

35.5

2.1

-1.8

28%

annuaizing Sept 9 mos pro forma

       
             

Conclusion

Neutral

A private equity rollup of related companies

$504mm annual run rate

35% gross profit

3.9% net income % of rev

Highly leveraged

.  Per share dlution of -$28.28 vs IPO price of $18

.  Price to tangible ook of -1.8

Price to sales of 1.4

P/E of 35, seems high for a company dependent on acquisitions for growth

Business

TRUK is a fast-growing designer, manufacturer and marketer of branded consumer accessories for pickup trucks.

The pickup truck market is large and expanding, driven in part by evolving pickup designs that have increased functionality and versatility, making trucks more suitable as family and lifestyle vehicles.

Multiple Channels

TRUK’s products include accessories manufactured by it that it sells through multiple channels, primarily truck bed covers, truck caps and bed liners, as well as a broad range of third-party branded vehicle accessories that TRUK sells online, including floor mats, grill guards, steps, tool boxes and towing products.

Primary Products

TRUK’s primary products, truck bed covers and truck caps, enclose the beds of pickup trucks, providing for cargo security and weather protection as well as aesthetic enhancement, while bed liners protect truck beds and cargo from damage.

TRUK’s products enhance the functionality and aesthetics of pickup trucks and enable consumers to customize and personalize their vehicles. TRUK’s portfolio of owned brands, complemented by the online sales of third-party branded products, makes TRUK one of the leaders by sales in the pickup truck accessory market.

A Top Manufacturer

TRUK is the top manufacturer of truck bed covers in North America. TRUK is also one of the top manufacturers of truck caps, including fiberglass and aluminum offerings, and the largest manufacturer in North America of carpeted bed liners, a premium alternative to molded plastic or spray-on liners.

TRUK markets its manufactured accessories under eight primary brands that offer over 85 product styles compatible with over 9,000 unique vehicle configurations.

TRUK has developed products for nearly every make and model of pickup truck that has been manufactured for the North American market in the last 40 years. In addition to products that TRUK manufactures, it also sells third-party branded products directly to consumers online, including over 95,000 SKUs across over 200 brands. TRUK believes its expanded product offering and its innovation are contributing to increasing penetration of its accessories among pickup truck owners.

Market

In 2014, there were approximately 50 million registered pickup trucks in North America, where over 97% of TRUK’s net sales were generated.

TRUK reaches pickup truck owners through a variety of channels including specialty installers, online retailers and pickup truck dealerships.

To support its marketing efforts, TRUK advertises through traditional and online media and maintain a highly-skilled salesforce to promote its brands and products across its distribution channels.

TRUK believes the development of its distribution channels, its expanded product offering and its sales and marketing efforts have contributed to increased penetration of its accessories on pickup trucks.

Sterling Associates Group reported that penetration of truck bed covers on the installed base of existing trucks was approximately 20-25% in 2014. With only 20-25% penetration of the 50 million trucks on the road, TRUK believes there is a significant opportunity for continued growth of the truck bed cover market.

Intellectual Property

TRUK’s intellectual property strategy includes patent, trademark and trade secret protection.

TRUK also uses confidentiality agreements and other contractual provisions to restrict access to and disclosure of its intellectual property.

As of September 30, 2015, TRUK holds more than 60 U.S. patents that cover its technical product designs and innovations and hold more than 50 U.S. trademark registrations to protect its brands. TRUK’s patents and trademarks are filed in the United States and Canada.

TRUK’s issued patents are scheduled to expire beginning in 2016 through 2033. Over 95% of 2014 truck bed cover net sales were derived from products with patented features, including most of TRUK’s newest and best-selling products.

Competition

Within the market for truck bed covers, TRUK’s main competitors include The Truck Accessories Group, LLC (under the brands Leer, Century, Pace Edwards and Raider), Roll-N-Lock Corporation, SnugTop, Agri-Cover, Inc. (under the brand Access), Bridgeway Enterprises, Inc. (under the TonnoPro brand), Lund International, Inc., Bestop, Inc. Truck Covers USA and American Tonneau Company.

Within the market for truck caps, TRUK’s main competitors include The Truck Accessories Group, LLC (under the brands Leer, Century and Raider) and SnugTop.

To its knowledge, TRUK is the only manufacturer of carpeted bed liners in North America.

Within the market for molded plastic or spray-on liners, the main competitors include Sports Resorts International (under the Rugged Liner brand), Rhino Linings Corporation, Advanced Protective Coatings, Inc. (under the Line-X brand), Industrial Polymers Corporation (under the Speedliner brand), DualLiner, LLC, Pendaform Company (under the Pendaliner brand) and Old World Industries, LLC (under the Herculiner brand).

The online retail channel for sales of pickup truck accessories is highly fragmented. TRUK’s RealTruck and Auto Customs subsidiaries compete primarily with a fragmented set of small specialty online truck accessory retailers, generalist auto parts retailers with online offerings including AutoZone, Inc. (through its AutoAnything subsidiary), U.S. Auto Parts Network, Inc., Advance Auto Parts, Inc., The Pep Boys and National Automotive Parts Association (also known as “NAPA”) and large ecommerce retailers such as Amazon.com, Inc. and eBay, Inc.

5% Shareholders Pre-IPO

Entities affiliated with TA Associates      73.1%    

Kinderhook Capital Fund II, L.P.             12.1%  

Jeffrey S. Barber           73.1%    

Michael S. Berk             73.1%  

Dividends

No dividends are planned.

Use of Proceeds

MTCH expects to receive $88 million from its IPO and use it for the following:

$57.0 million of the net proceeds that TRUK receives from this offering to repay all of the indebtedness outstanding under its Second Lien Credit Facility, including accrued interest, applicable prepayment premium payments and related costs and expenses. TRUK intends to use $3.0 million of the net proceeds that its receives from this offering to repay a portion of the indebtedness outstanding under the revolving credit facility under its First Lien Credit Facility.

TRUK intends to use $28 million of net proceeds that its receives from this offering to pay the applicable cash consideration in connection with its acquisition of N-FAB. TRUK currently intends to use any remaining net proceeds that TRUK receives from this offering for working capital and other general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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