2014

Drew Industries Reports First Quarter 2013 Results

WHITE PLAINS, N.Y., May 3, 2013 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported record net sales of $253 million for the quarter ended March 31, 2013, on which Drew earned net income of $8.4 million, or $0.36 per diluted share, net of an after-tax charge of $0.7 million related to executive succession and corporate relocation. Excluding this charge, net income would have been $9.1 million, or $0.39 per diluted share.

"Our operating profit margin was below the first quarter of 2012 due to production inefficiencies and costs incurred as a result of our significant growth and expansion over the past year; however, profit margins improved sequentially in the 2013 first quarter," said Fred Zinn, Drew's President and CEO. "Our operating profit margin for the first quarter of 2013 was 5.8 percent before executive succession charges, compared to 4.1 percent in the 2012 fourth quarter. This sequential margin gain was less than originally projected, primarily due to higher material costs, substantial fixed costs invested in customer service and in anticipation of further sales growth, and seasonally higher payroll taxes."

"In the first quarter of 2013, our labor efficiencies continued to improve, with labor costs as a percent of sales declining more than 1 percent compared to the fourth quarter of 2012," added Jason Lippert, CEO of Drew's subsidiaries, Lippert Components and Kinro. "We are also implementing additional efficiency improvements. As we previously reported, we expected the cost of implementing facility consolidations, realigning production, and improving production processes to continue in the first quarter of 2013, although to a lesser degree than in the 2012 fourth quarter, and this was the case. These costs are expected to decline further in the second quarter of 2013. We remain confident in our ability to achieve further profit improvement, particularly during the second half of 2013, as these costs return to more normal levels, and as the bottom-line impact of the efficiency improvements gains momentum."

Net sales in the first quarter of 2013 increased to $253 million, 13 percent higher than the same period last year, despite a temporary slowdown in RV industry-wide production levels in late March 2013. The increase in Drew's first quarter net sales was a result of a 15 percent sales increase by Drew's RV Segment, which accounted for 89 percent of consolidated net sales this quarter. RV Segment sales growth was primarily due to a 10 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew's primary RV market. Sales of recently introduced components for towable RVs, as well as motorhome components, also increased, as did sales to adjacent industries and the aftermarket.

In April 2013, RV industry-wide production levels improved following the slowdown in late March, and Drew's consolidated net sales reached a monthly record $100 million, 20 percent higher than in April 2012. This increase was primarily a result of continued solid growth in the Company's RV Segment. Drew estimates that industry-wide wholesale shipments of travel trailer and fifth-wheel RVs increased about 15 percent in April 2013 compared to April 2012. Drew also estimates that April 2013 industry-wide production of manufactured homes increased 5 to 10 percent compared to April 2012.

The Company's content per travel trailer and fifth-wheel RV increased 11 percent from the year-earlier period as a result of recent product introductions, product improvements and market share gains. The Company's content per manufactured home declined 3 percent from the year-earlier period, primarily due to the timing of orders from certain customers, as well as a reduction in the average size of homes produced by the industry. The change in content per unit is a measure of the change in Drew's overall market share across its existing product lines.

Following an 8 percent increase in retail demand for towable RVs for the full year 2012, retail demand increased an estimated 10 percent in the first quarter of 2013. In anticipation of the traditionally stronger Spring and Summer selling seasons, RV dealers across the United States and Canada have increased their inventory levels over the past six months; however, most industry analysts report that dealer inventories of towable RVs are in-line with anticipated strong retail demand. Future RV industry-wide production levels will depend on the strength of retail sales, which are sensitive to economic conditions.

"In response to the substantial increase in sales over the past year, we added significant resources, including personnel and facilities, to expand and improve production capacity and efficiencies," said Jason Lippert. "The improvements to our efficiencies are taking longer than we would like, but we are continuing to realize the benefits of resource planning and production improvement initiatives, as well as the investments we have made to expand capacity. In addition, to prepare for long-term growth, we aggressively added resources in excess of current needs, which impacted our current operating results. Now that we are in the peak seasonal period, we are better able to evaluate our human resource requirements, and are making adjustments."

"The increased demand for our products over the past several years is a real testament to the importance we place on providing superior products and service to our customers," added Jason Lippert. "In addition to increasing our production capacity, we have invested in resources to improve our engineering, quality control, research and development, and customer service capabilities. While these investments have impacted our results in the short-term, we are confident that over the long-term they will benefit our customers so that they see the value in continuing to rely upon us. Because of the substantial increase in demand for our products over the last year, our attention and resources were laser-focused on servicing our customers. Now, we are increasing our focus on additional areas, such as purchasing, automation and human resources, where we believe savings can be realized."

"As previously announced, Fred Zinn will retire as President and CEO in May. Jason Lippert will become Drew's CEO, and Scott Mereness will become Drew's President," said Leigh Abrams, Chairman of Drew's Board of Directors. "This executive succession transition has been going very smoothly, and we are confident that Jason and his team are well prepared to lead Drew for many years to come."

As a result of the Company's executive succession and corporate relocation, the Company recorded a pre-tax charge of $1.1 million in the first quarter of 2013 related to contractual obligations for severance and the acceleration of equity awards held by certain employees whose employment will terminate as a result of the relocation to Indiana. The Company will record an additional pre-tax charge of $0.7 million related to contractual obligations in the second quarter of 2013. No other related charges are expected thereafter. Once the transition and corporate office relocation are completed, the Company will save approximately $2 million annually.

"Our operating cash flow in the first quarter of 2013 was strong," said Joe Giordano, Drew's Chief Financial Officer and Treasurer. "Despite a $21 million seasonal increase in our working capital, we had no debt and $4 million of cash. We also have substantial available credit lines, and expect continued solid cash flow, which positions us to continue to take advantage of investment opportunities that can further improve our results."

Conference Call & Webcast
Drew will provide an online, real-time webcast of its first quarter 2013 earnings conference call on the Company's website, www.drewindustries.com, on Friday, May 3, 2013 at 11:00 a.m. Eastern time. The call can also be accessed at www.companyboardroom.com.

Institutional investors can access the call via the password-protected site, StreetEvents (www.streetevents.com). A replay of the call will be available by telephone by dialing (888) 286-8010 and referencing access code 75898048. A replay of the webcast will also be available on Drew's website.

About Drew
From 29 factories located throughout the United States, Drew, through its wholly-owned subsidiaries, Kinro and Lippert Components, supplies a full line of components for the leading manufacturers of recreational vehicles and manufactured homes. In addition, Drew manufactures components for adjacent industries including buses, trailers used to haul boats, livestock, equipment and other cargo, truck caps, modular housing and factory-built mobile office units. Drew's products include steel chassis; vinyl and aluminum windows and screens; slide-out mechanisms and solutions; axles and suspension solutions; furniture and mattresses; thermoformed bath, kitchen and other products; manual, electric and hydraulic stabilizer and lifting systems; chassis components; entry, baggage, patio and ramp doors; entry steps; awnings; electronics; and other accessories. 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" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, acquisitions, plans and objectives of management, markets for the Company's Common Stock 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 (the "Exchange Act") and Section 27A of the Securities Act of 1933 (the "Securities Act").

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 our senior management at the time such statements were made, and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by forward-looking statements. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. You should consider forward-looking statements, therefore, in light of various important factors, including those set forth in this press release, and in our subsequent filings with the Securities and Exchange Commission (the "SEC").

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, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, availability and costs of labor, inventory levels of retail dealers and manufacturers, levels of repossessed products for which we sell our components, changes in zoning regulations for manufactured homes, sales declines in the industries to which we sell our products, 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 successful integration of acquisitions, realization of efficiency improvements, interest rates, oil and gasoline prices, and the successful implementation of management succession. In addition, international, national and regional economic conditions and consumer confidence affect the retail sale of products for which we sell our components.

 

DREW INDUSTRIES INCORPORATED

OPERATING RESULTS

(unaudited)










Three Months Ended





March 31,


Last Twelve

(In thousands, except per share amounts)


2013


2012


Months








Net sales


$     252,586


$     223,552


$     930,157

Cost of sales


204,995


178,729


758,730

Gross profit


47,591


44,823


171,427

Selling, general and administrative expenses


32,860


27,450


114,481

Executive succession


1,143


-


2,599

Operating profit


13,588


17,373


54,347

Interest expense, net


118


74


374

Income before income taxes


13,470


17,299


53,973

Provision for income taxes


5,098


6,183


19,377

Net income


$         8,372


$       11,116


$       34,596








Net income per common share:







Basic


$          0.36


$          0.50


$          1.52

Diluted


$          0.36


$          0.49


$          1.50








Weighted average common shares outstanding:







Basic


23,017


22,442


22,703

Diluted


23,455


22,642


23,032








Depreciation and amortization


$         6,552


$         6,381


$       25,836

Capital expenditures


$         8,938


$         5,684


$       35,280

 

 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)










Three Months Ended





March 31,


Last Twelve

(In thousands)


2013


2012


Months








Net sales:







RV Segment:







RV original equipment manufacturers:







Travel trailers and fifth-wheels


$     186,416


$     168,079


$     677,298

Motorhomes


9,466


5,952


33,710

RV aftermarket


5,729


3,990


20,858

Adjacent industries


22,392


17,534


77,507

Total RV Segment net sales


224,003


195,555


809,373








MH Segment:







Manufactured housing original equipment manufacturers

17,779


18,712


79,459

Manufactured housing aftermarket


4,054


4,269


15,845

Adjacent industries


6,750


5,016


25,480

Total MH Segment net sales


28,583


27,997


120,784








Total net sales


$     252,586


$     223,552


$     930,157








Operating Profit:







RV Segment


$       14,535


$       16,781


$       52,874

MH Segment


2,726


3,131


12,930

Total segment operating profit


17,261


19,912


65,804

Corporate


(2,288)


(2,308)


(8,488)

Executive succession


(1,143)


-


(2,599)

Accretion related to contingent consideration


(392)


(481)


(1,667)

Other non-segment items


150


250


1,297

Total operating profit


$       13,588


$       17,373


$       54,347

 

 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)










March 31,


December 31,

(In thousands)


2013


2012


2012








Current Assets







Cash and cash equivalents


$         4,035


$         3,541


$          9,939

Accounts receivable, net


54,249


57,535


21,846

Inventories


110,207


88,630


97,367

Deferred taxes


10,073


10,125


10,073

Prepaid expenses and other current assets


9,882


5,570


14,798

Total current assets


188,446


165,401


154,023

Fixed assets, net


112,783


95,438


107,936

Goodwill


21,177


21,050


21,177

Other intangible assets, net


66,759


76,309


69,218

Deferred taxes


14,993


14,496


14,993

Other assets


7,412


7,570


6,521

Total assets


$     411,570


$     380,264


$       373,868








Current liabilities







Accounts payable, trade


$       40,256


$       19,749


$        21,725

Accrued expenses and other current liabilities


49,326


48,036


48,055

Total current liabilities


89,582


67,785


69,780

Other long-term liabilities


21,122


21,574


19,843

Total liabilities


110,704


89,359


89,623

Total stockholders' equity


300,866


290,905


284,245

Total liabilities and stockholders' equity


$     411,570


$     380,264


$       373,868

 

 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)








Three Months Ended



March 31,

(In thousands)


2013


2012






Cash flows from operating activities:





Net income


$         8,372


$       11,116

Adjustments to reconcile net income to cash flows (used for) provided by operating activities:



Depreciation and amortization


6,552


6,381

Stock-based compensation expense


3,155


1,319

Other non-cash items


509


461

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





Accounts receivable, net


(32,403)


(34,915)

Inventories


(12,840)


3,939

Prepaid expenses and other assets


3,880


(510)

Accounts payable


18,531


4,007

Accrued expenses and other liabilities


3,192


11,362

Net cash flows (used for) provided by operating activities


(1,052)


3,160






Cash flows from investing activities:





Capital expenditures


(8,938)


(5,684)

Acquisitions of businesses


-


(1,164)

Proceeds from sales of fixed assets


31


44

Other investing activities


(29)


(19)

Net cash flows used for investing activities


(8,936)


(6,823)






Cash flows from financing activities:





Exercise of stock options and deferred stock units


4,959


974

Proceeds from line of credit borrowings


96,333


37,702

Repayments under line of credit borrowings


(96,333)


(37,702)

Payment of contingent consideration related to acquisitions


(875)


(354)

Net cash flows provided by financing activities


4,084


620






Net decrease in cash


(5,904)


(3,043)






Cash and cash equivalents at beginning of period


9,939


6,584

Cash and cash equivalents at end of period


$         4,035


$         3,541

 

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)











Three Months Ended






March 31,


Last Twelve




2013


2012


Months


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








Industry Wholesale Production:








Travel trailer and fifth-wheel RVs


66.7


60.4


249.2


Motorhome RVs


8.5


6.9


29.8


Manufactured homes


13.4

(3)

12.8


55.5


Industry Retail Sales:








Travel trailer and fifth-wheel RVs


42.9

(2)

39.1


226.7

(2)

Impact on dealer inventories


23.8

(2)

21.3


22.5

(2)



















Twelve Months Ended






March 31,






2013


2012




Drew Content Per Industry Unit Produced:








Travel trailer and fifth-wheel RV

$         2,718


$         2,452




Motorhome RV

$         1,131


$            692




Manufactured home

$         1,431

(3)

$         1,480






















March 31,


December 31,




2013


2012


2012


Balance Sheet Data:








Current ratio

2.1


2.4


2.2


Total indebtedness to stockholders' equity

-


-


-


Days sales in accounts receivable

19.7


21.4


14.3


Inventory turns, based on last twelve months

7.9


6.5


7.8




















2013




Estimated Full Year Data:








Capital expenditures

$ 27 - $ 32 million




Depreciation and amortization

$ 25 - $ 27 million




Stock-based compensation expense

$ 9 - $ 10 million




Annual tax rate

37% - 38%




















(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) March retail sales data for RVs has not been published yet, therefore 2013 retail data for RVs includes an estimate for March 2013 retail units.

(3) March wholesale data for manufactured homes has not been published yet, therefore 2013 manufactured housing wholesale data includes an estimate for March 2013 wholesale units.


 

SOURCE Drew Industries Incorporated



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