Drew Industries Reports 2015 Third Quarter Results

03 Nov, 2015, 07:30 ET from Drew Industries Incorporated

ELKHART, Ind., Nov. 3, 2015 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $17.3 million, or $0.70 per diluted share, for the third quarter ended September 30, 2015, compared to net income of $15.5 million, or $0.64 per diluted share, for the third quarter ended September 30, 2014.

Consolidated net sales in the third quarter of 2015 increased to $345 million, 17 percent higher than the 2014 third quarter. This growth in consolidated net sales resulted primarily from a 19 percent increase in net sales of Drew's RV Segment for the 2015 third quarter compared to the 2014 third quarter. The acquisitions completed by the Company over the twelve months ended September 30, 2015, as well as the distribution and supply agreement with Furrion Limited entered into in July 2015, added $23 million in net sales in the third quarter of 2015. The five percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew's primary RV market, as well as increased content per unit through market share gains positively impacted the net sales growth in the 2015 third quarter. Further, the Company organically increased sales to adjacent industries and the aftermarket.

The Company's content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2015, increased $148, or 5.3 percent, to $2,952, compared to content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2014 of $2,804.  The Company's content per motorhome RV for the twelve months ended September 30, 2015, increased by $307, or 20.5 percent, to $1,807, compared to content per motorhome RV for the twelve months ended September 30, 2014, of $1,500.

"Our net sales in the 2015 third quarter increased at double digit year-over-year rates, despite a modest increase in industry-wide wholesale shipments of RVs during the quarter," said Jason Lippert, Drew's Chief Executive Officer. "Strong organic growth from new products, product innovation and market share gains, coupled with recent acquisitions, allowed us to significantly exceed the industry-wide increase in wholesale shipments of RVs. Our focus on enhancing the RV user's experience and our extensive product offerings together contributed to our organic sales growth. In particular, our net sales attributable to adjacent industries and the aftermarket increased organically during the 2015 third quarter by a combined $12 million, or 22 percent. These markets will continue to be areas of focus for our teams as key drivers of future growth."

Over the past twelve months, the RV industry has produced units earlier in its annual cycle than in prior years, with a 14 percent increase in wholesale shipments of travel trailer and fifth-wheel RVs between October 2014 and March 2015, followed by a four percent increase in wholesale shipments of travel trailer and fifth-wheel RVs between April 2015 and September 2015. Over that same twelve month period, retail sales of travel trailer and fifth-wheel RVs increased an estimated 12 percent. Based on the strength of retail sales to date and projected economic conditions, most industry analysts continue to report that RV dealer inventory is in line with anticipated retail demand.

"The 2015 RV OEM Open House in Elkhart, Indiana in September was well attended by RV dealers and our RV OEM customers reported taking significant orders during this event. The majority of those orders will be filled over the next two quarters, and we are seeing strong demand in our factories as a result of another strong Open House," said Jason Lippert. "Over the past several months, the industry-wide wholesale production growth rate of towable RVs slowed to mid-single digit rates. This primarily affected larger units containing more of our content, which we believe is due to the pull forward of production in late 2014 and early 2015.  Customers have reported that orders received after the RV OEM Open House indicate a more normalized travel trailer and fifth-wheel RV wholesale shipment level in the fourth quarter of 2015."

In October 2015, Drew's consolidated net sales reached approximately $129 million, 11 percent higher than October 2014. Excluding the impact of acquisitions, the Company's consolidated net sales for October 2015 were up 5 percent.

"Our operating profit margin in the third quarter of 2015 was 7.9 percent, compared to 7.8 percent in the third quarter of 2014," said Scott Mereness, Drew's President. "In 2014 and early 2015 in response to the strong growth in the RV industry and our market share gains, we made significant investments in manufacturing capacity, both facilities and personnel. As RV industry growth has slowed from its multi-year double digit growth pace, these higher fixed costs negatively impacted our operating margins in the 2015 third quarter. In response, we evaluated our labor requirements and initiated a focused program to reduce indirect labor costs by approximately $12 to $14 million annually. During October 2015, we took actions that will realize approximately 70 percent of our target."

In August 2015, Drew acquired the business and certain assets of Roehm Marine, LLC, also known as Signature Seating ("Signature"), a manufacturer of furniture solutions for fresh water boat manufacturers, primarily pontoon boats. Signature's net sales for the twelve months ended June 2015 were approximately $16 million. The purchase price was $16.0 million paid at closing, plus contingent consideration based on future sales of this operation.

Conference Call & Webcast

Drew will provide an online, real-time webcast of its third quarter 2015 earnings conference call on the Company's website, www.drewindustries.com. on Tuesday, November 3, 2015, at 11:00 a.m. Eastern time.

Institutional investors can access the call via the password-protected site, StreetEvents (www.streetevents.com). A replay of the call will be available by dialing (888) 286-8010 and referencing access code 64342523. A replay of the webcast will also be available on Drew's website.

About Drew Industries

From 42 manufacturing facilities located throughout the United States and Canada, Drew Industries, through its wholly-owned subsidiary, Lippert Components®, supplies a broad array of components for the leading manufacturers of recreational vehicles and manufactured homes, and to a lesser extent supplies components for adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; pontoon boats; modular housing; and factory-built mobile office units. Drew's products include steel chassis; axles and suspension solutions; slide-out mechanisms and solutions; thermoformed bath, kitchen and other products; windows; manual, electric and hydraulic stabilizer and leveling systems; chassis components; furniture and mattresses; entry, luggage, patio and ramp doors; electric and manual entry steps; awnings and slide toppers; LED televisions and sound systems; navigation systems; wireless backup cameras; other accessories; and electronic components. Additional information about Drew and its products can be found at www.drewindustries.com.

Forward-Looking Statements

This press release contains certain "forward-looking statements" with respect to our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management and other matters. Statements in this press release that are not historical facts are "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.

Forward-looking statements, including, without limitation, those relating to our future business prospects, net sales, expenses and income (loss), cash flow, and financial condition, whenever they occur in this press release are necessarily estimates reflecting the best judgment of the Company's senior management at the time such statements were made. 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 include, in addition to other matters described in this press release, pricing pressures due to domestic and foreign competition, costs and availability of raw materials (particularly steel, steel based components and aluminum) and other components, seasonality and cyclicality in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the costs, pace of and successful integration of acquisitions and other growth initiatives, availability and costs of labor, employee benefits, employee retention, realization and impact of efficiency improvements and cost reductions, the successful entry into new markets, the costs of compliance with environmental laws and increased governmental regulation and oversight, information technology performance and security, the ability to protect intellectual property, interest rates, oil and gasoline prices, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and other risks and uncertainties discussed more fully under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and in the Company's subsequent filings with the Securities and Exchange Commission. 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.

 

DREW INDUSTRIES INCORPORATED

OPERATING RESULTS

(unaudited)

Nine Months Ended

Three Months Ended

September 30,

September 30,

Last Twelve

(In thousands, except per share amounts)

2015

2014

2015

2014

Months

Net sales

$   1,068,838

$     901,431

$     345,296

$     294,271

$   1,358,189

Cost of sales

836,250

703,736

271,171

231,788

1,068,373

Gross profit

232,588

197,695

74,125

62,483

289,816

Selling, general and administrative expenses

139,945

117,475

46,954

39,412

179,952

Sale of extrusion assets

-

1,954

-

-

-

Operating profit

92,643

78,266

27,171

23,071

109,864

Interest expense, net

1,399

324

595

130

1,505

Income before income taxes

91,244

77,942

26,576

22,941

108,359

Provision for income taxes

33,039

27,672

9,313

7,453

38,158

Net income

$       58,205

$       50,270

$       17,263

$       15,488

$       70,201

Net income per common share:

Basic

$          2.40

$          2.11

$          0.71

$          0.65

$          2.90

Diluted

$          2.36

$          2.07

$          0.70

$          0.64

$          2.86

Weighted average common shares outstanding:

Basic

24,261

23,870

24,289

23,935

24,193

Diluted

24,614

24,300

24,686

24,301

24,574

Depreciation and amortization

$       30,663

$       23,475

$       10,808

$         8,555

$       39,784

Capital expenditures

$       21,808

$       30,032

$         7,140

$       12,120

$       34,234

 

 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)

Nine Months Ended

Three Months Ended

September 30,

September 30,

Last Twelve

(In thousands)

2015

2014

2015

2014

Months

Net sales: (1)

  RV Segment:

    RV OEMs:

      Travel trailers and fifth-wheels

$     722,157

$     643,629

$     216,093

$     196,213

$     922,624

      Motorhomes

64,085

51,664

23,539

21,607

80,195

    RV aftermarket

64,896

32,777

26,203

16,015

81,689

    Adjacent industries

128,169

84,396

47,295

29,769

156,781

        Total RV Segment net sales

979,307

812,466

313,130

263,604

1,241,289

  MH Segment:

    Manufactured housing OEMs

61,144

58,550

22,786

21,269

80,015

    Manufactured housing aftermarket

12,010

10,849

3,880

3,677

15,347

    Adjacent industries

16,377

19,566

5,500

5,721

21,538

      Total MH Segment net sales

89,531

88,965

32,166

30,667

116,900

      Total net sales

$   1,068,838

$     901,431

$     345,296

$     294,271

$   1,358,189

  Operating Profit:

    RV Segment

$       82,961

$       72,048

$       23,720

$       20,287

$       97,484

    MH Segment

9,682

8,172

3,451

2,784

12,380

      Total segment operating profit

92,643

80,220

27,171

23,071

109,864

  Sale of extrusion assets

-

(1,954)

-

-

-

      Total operating profit

$       92,643

$       78,266

$       27,171

$       23,071

$     109,864

(1) In the third quarter of 2015, the Company refined the various sales categories within the RV Segment.  This refinement had no impact on total RV Segment net sales or trends.  Prior periods have been reclassified to conform to this presentation.

 

 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)

September 30,

December 31,

(In thousands)

2015

2014

2014

ASSETS

Current assets

Cash and cash equivalents

$         7,252

$               4

$                4

Accounts receivable, net

84,381

64,543

37,987

Inventories, net

178,847

127,078

132,492

Prepaid expenses and other current assets

35,738

30,967

37,153

Total current assets

306,218

222,592

207,636

Fixed assets, net

150,424

133,543

146,788

Goodwill

84,551

66,203

66,521

Other intangible assets, net

104,109

100,785

96,959

Other assets

24,087

26,286

25,937

Total assets

$     669,389

$     549,409

$       543,841

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable, trade

$       53,095

$       44,541

$        49,534

Accrued expenses and other current liabilities

75,561

61,999

57,651

Total current liabilities

128,656

106,540

107,185

Long-term indebtedness

91,829

40,000

15,650

Other long-term liabilities

31,273

25,536

26,108

Total liabilities

251,758

172,076

148,943

Total stockholders' equity

417,631

377,333

394,898

Total liabilities and stockholders' equity

$     669,389

$     549,409

$       543,841

 

 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)

Nine Months Ended

September 30,

(In thousands)

2015

2014

Cash flows from operating activities:

Net income

$       58,205

$       50,270

Adjustments to reconcile net income to cash flows provided by operating activities:

Depreciation and amortization

30,663

23,475

Stock-based compensation expense

10,984

7,909

Other non-cash items

854

2,837

Changes in assets and liabilities, net of acquisitions of businesses:

Accounts receivable, net

(40,761)

(27,162)

Inventories, net

(39,289)

(16,526)

Prepaid expenses and other assets

1,976

(3,668)

Accounts payable, trade

1,612

16,276

Accrued expenses and other liabilities

20,507

13,553

Net cash flows provided by operating activities

44,751

66,964

Cash flows from investing activities:

Capital expenditures

(21,808)

(30,032)

Acquisitions of businesses

(41,058)

(100,157)

Proceeds from note receivable

-

750

Proceeds from sales of fixed assets

2,141

3,344

Other investing activities

(272)

(66)

Net cash flows used for investing activities

(60,997)

(126,161)

Cash flows from financing activities:

Exercise of stock-based awards, net of shares tendered for payment of taxes

(275)

3,555

Proceeds from line of credit borrowings

563,325

330,346

Repayments under line of credit borrowings

(537,146)

(290,346)

Proceeds from shelf-loan borrowing

50,000

-

Payment of special dividend

(48,227)

(46,706)

Payment of contingent consideration related to acquisitions

(3,963)

(3,732)

Other financing activities

(220)

(196)

Net cash flows provided by (used for) financing activities

23,494

(7,079)

Net increase (decrease) in cash

7,248

(66,276)

Cash and cash equivalents at beginning of period

4

66,280

Cash and cash equivalents at end of period

$         7,252

$               4

 

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)

Nine Months Ended

Three Months Ended

September 30,

September 30,

Last Twelve

2015

2014

2015

2014

Months

Industry Data(1)(in thousands of units):

Industry Wholesale Production:

Travel trailer and fifth-wheel RVs

239.4

226.6

68.7

65.5

311.7

Motorhome RVs

35.9

34.0

11.2

10.7

45.8

Manufactured homes

51.6

48.2

18.3

17.5

67.8

Industry Retail Sales:

Travel trailer and fifth-wheel RVs

259.0

(2)

234.3

93.8

(2)

87.9

301.8

(2)

Impact on dealer inventories

(19.6)

(2)

(7.7)

(25.1)

(2)

(22.4)

9.9

(2)

Motorhome RVs

32.7

(2)

29.4

11.1

(2)

10.0

39.8

(2)

Twelve Months Ended

September 30,

2015

2014

Drew Content Per Industry Unit Produced:

Travel trailer and fifth-wheel RV

$         2,952

(3)

$         2,804

(3)

Motorhome RV

$         1,807

(3)

$         1,500

(3)

Manufactured home

$         1,181

$         1,202

September 30,

December 31,

2015

2014

2014

Balance Sheet Data:

Current ratio

2.4

2.1

1.9

Total indebtedness to stockholders' equity

0.2

0.1

0.0

Days sales in accounts receivable

22.0

20.2

14.6

Inventory turns, based on last twelve months

7.2

8.2

8.2

2015

Estimated Full Year Data:

Capital expenditures

$ 28 - $ 30 million

Depreciation and amortization

$ 40 - $ 42 million

Stock-based compensation expense

$ 15 - $ 16 million

Annual tax rate

36% - 37%

(1) Industry wholesale production data for travel trailer and fifth-wheel RVs and motorhome RVs provided by the Recreation Vehicle Industry Association.  Industry wholesale production data for manufactured homes provided by the Institute for Building Technology and Safety.  Industry retail sales data provided by Statistical Surveys, Inc.

 

(2) September 2015 retail sales data for RVs has not been published yet, therefore 2015 retail data for RVs includes an estimate for September 2015 retail units.

 

(3) In the third quarter of 2015, the Company refined the calculation of RV content per unit. This refinement had no impact on total RV Segment net sales or trends of content per unit. Prior periods have been reclassified to conform to this presentation.

 

SOURCE Drew Industries Incorporated



RELATED LINKS

http://www.drewindustries.com