Drew Industries Reports Fourth Quarter and 2011 Full-Year Results

WHITE PLAINS, N.Y., Feb. 13, 2012 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income for the fourth quarter ended December 31, 2011 of $4.1 million, or $0.18 per diluted share, compared to net income of $3.1 million, or $0.14 per diluted share in the fourth quarter of 2010.

Net sales in the 2011 fourth quarter increased 50 percent compared to the 2010 fourth quarter, to $160 million, as a result of a 51 percent increase in Drew's RV Segment sales, and a 45 percent increase in Drew's Manufactured Housing Segment sales. Industry-wide wholesale shipments of travel trailers and fifth-wheel RVs, Drew's primary RV market, increased 16 percent in the fourth quarter of 2011, while industry-wide production of manufactured homes increased 45 percent. Drew's RV Segment sales growth exceeded industry wholesale shipment growth largely due to the five acquisitions completed in 2011, as well as other market share gains.

Net sales in January 2012 reached approximately $65 million, 28 percent higher than in January 2011. Excluding the impact of sales price increases and acquisitions, net sales for January 2012 were up approximately 10 percent.

"In 2011, we invested more than $50 million in acquisitions, expanding our product lines and capabilities, both in our core markets and related markets," said Fred Zinn, Drew's President and CEO. "These acquired businesses had annualized revenues of approximately $90 million, of which $40 million was included in our consolidated net sales for 2011. We also started production in our new aluminum extrusion facility, and made additional investments in new capacity, product development, including our new RV awning product line, slide-out boot and others, and enhanced marketing efforts. As a result, we expect sales growth in our core markets, adjacent markets, the after-market for replacement products and in products for motorhomes, as our investments continue to yield results."  

As anticipated in Drew's third quarter press release, operating results for the fourth quarter of 2011 were impacted by higher material costs than in the fourth quarter of 2010, higher production costs in one product line, and start-up costs related to acquisitions, our new extrusion operation, and other investments. "These factors reduced our fourth quarter earnings by about $0.12 per diluted share," continued Zinn. "But we recently made meaningful progress in these areas, and we expect continued improvements over the next few months.

"We recognize that our responsibility to stockholders is to turn opportunities and investments into solid profit growth, and we are focused on achieving that profit growth in 2012 and beyond," said Zinn. "During the past year, we built the foundation for profit improvement. With our strong, debt-free balance sheet, we have the resources to continue to invest in opportunities which are expected to yield favorable long-term bottom-line returns."

"By expanding our production capacity and gaining footholds in new markets, we have opened doors to further opportunities in the years ahead," said Jason Lippert, CEO of Drew's subsidiaries, Lippert Components and Kinro. "In 2012, we expect the investments we made in 2011 and 2010 to positively impact our bottom-line results. Returns on investments like these are not realized over night, but in recent months we have begun to achieve improved results on these investments, through accelerating customer acceptance of our new products, increased production efficiencies, and cost reductions."

The Company noted that production levels at Drew's new aluminum extrusion facility have significantly increased in recent weeks. "Our first aluminum extrusion press is now running 24/7," said Scott Mereness, President of Drew's subsidiaries, Lippert Components and Kinro. "We expect the second and third presses to be in production within a few months. The total cost of the extrusion operation is now expected to be $14 million, including upgrades to the used presses we acquired. With the recent addition of our RV awning product line, and the industry's focus on lighter-weight RV components, our use of extruded aluminum will continue to grow. We expect that our investment in aluminum extrusion capabilities will not only enable us to lower the cost of extrusions for our own use, but will also enable us to competitively market new extruded aluminum products for RVs and in other markets."

"We are also pleased with the improvement in the RV industry in 2011," said Jason Lippert. "Despite high unemployment in the U.S., industry-wide retail sales of travel trailer and fifth-wheel RVs increased an estimated 5 percent in 2011. In the fourth quarter of 2011, despite a modest softening of retail demand, RV dealers expressed their confidence by boosting purchases. Industry reports indicate that these increases in dealer purchases were due to both anticipation of improved retail demand in the upcoming Spring selling season, and new financing programs for dealers, designed in part to level seasonal production. While RV dealer purchases and inventory levels may continue to fluctuate, we are optimistic about the potential for long-term improvement in retail demand for RVs."

Because of the seasonality of the RV and manufactured housing industries, historically, the Company's operating results in the first and fourth quarters have been the weakest, while the second and third quarters are traditionally stronger. However, because of fluctuations in RV dealer inventories, and volatile economic conditions, future seasonal industry trends may be different than in prior years.

2011 Full-Year Results

Net sales for the year ended December 31, 2011 increased 19 percent to $681 million, compared to $573 million in 2010. Drew's RV Segment sales increased 20 percent, compared to a 7 percent increase in industry-wide wholesale shipments of travel trailers and fifth-wheel RVs. Drew's Manufactured Housing Segment sales increased 16 percent, compared to a 3 percent increase in industry-wide production of manufactured homes.

In 2011, Drew continued to grow outside its core towable RV and manufactured housing markets, with aggregate net sales of components for adjacent industries increasing 75 percent, to $45 million in 2011. Further, in 2011, the Company established two dedicated sales teams, one to focus on adjacent markets, and the other on RV and manufactured housing after-market opportunities, which are expected to lead to further growth in these markets.

For the full year 2011, Drew's net income increased to $30.1 million, or $1.34 per diluted share, compared to net income of $28.0 million, or $1.26 per diluted share in 2010. Net income in 2011 was impacted by higher raw material costs, higher production costs in one product line, and start-up costs, which reduced earnings by an aggregate of approximately $0.32 per diluted share. Each of these factors has improved in recent months, and continued improvement is expected over the next few months.

Recreational Vehicle (RV) Products Segment

Drew's RV Segment reported operating profit of $5.3 million, on net sales of $131 million in the 2011 fourth quarter, compared to operating profit of $6.4 million on net sales of $87 million in the comparable period in 2010. For the full year 2011, the Company's RV Segment reported operating profit of $45.7 million on net sales of $571 million, compared to operating profit of $44.4 million on net sales of $477 million in 2010.

The short-term factors which adversely affected Drew's fourth quarter and full year 2011 consolidated results, as previously discussed, were almost entirely related to the RV Segment. In addition, fixed costs in the RV Segment increased by approximately $4 million, and non-cash amortization of intangible assets increased by $1.8 million in 2011, primarily due to acquisitions and other investments. The Company expects to earn favorable returns on these acquisitions and other investments.

Largely as a result of acquisitions, the Company's content per travel trailer and fifth-wheel RV reached $2,398 for 2011, compared to $2,168 for 2010. It is anticipated that the acquisitions completed during 2011 will result in additional content growth in 2012.

Manufactured Housing Products Segment

Drew's Manufactured Housing Segment reported operating profit of $3.0 million, on net sales of $29 million in the fourth quarter of 2011, compared to operating profit of $1.3 million on net sales of $20 million in the comparable period in 2010. For the full year 2011, the Company's Manufactured Housing Segment reported operating profit of $12.0 million on net sales of $111 million, compared to operating profit of $9.6 million on net sales of $96 million in 2010.

The Company's content per manufactured home for 2011 reached $1,569, compared to $1,373 for 2010. Industry-wide wholesale shipments of manufactured homes increased by approximately 4,500 homes in the fourth quarter of 2011, including approximately 1,700 homes purchased by FEMA for emergency shelters. Excluding the FEMA units, this represents a 28 percent increase, compared to the fourth quarter of 2010. "While we cannot predict whether the recent increase in production of manufactured homes will be sustained, this improvement is encouraging," said Zinn.

Balance Sheet and Other Items

At December 31, 2011, the Company had cash of $7 million, compared to cash and short-term investments of $44 million at December 31, 2010. "During 2011 we invested $50 million for five acquisitions and $24 million in capital expenditures, and we increased our working capital," said Joseph Giordano, Drew's Chief Financial Officer and Treasurer. "These investments were partially funded by our operating cash flow of $37 million in 2011.

"During the first quarter of 2012, we expect to use $10 million to $20 million of cash to fund seasonal working capital growth, which is typical," added Giordano. "With no debt, substantial available credit lines, and solid cash flow, we remain well-positioned to continue to take advantage of investment opportunities to further improve our results."

Accounts receivable balances remain current, with 17 days sales outstanding at the end of 2011, compared to 13 days sales outstanding at the end of 2010.  

Inventories increased $23 million, or 33 percent, since December 2010 to support the 28 percent increase in net sales in January 2012. Higher raw material costs also contributed to the increase in inventory. Inventory turned 6.2 times in 2011, a slight improvement from the 6.0 turns for the 12 months ended September 2011. "During the 2011 fourth quarter we reduced inventory by $6 million," added Giordano. "However, based on current RV and manufactured housing industry demand, we believe that our present inventory levels can be reduced relative to sales, and we will continue to work on improving inventory turns on a sustainable basis."

Capital expenditures were $6.6 million in the 2011 fourth quarter and $24.3 million for the full year. Depreciation and amortization aggregated $5.5 million in the 2011 fourth quarter and $20.5 million for the full year. The 2011 capital expenditures included $3 million for four new facilities, three of which the Company had previously been leasing, and $11 million for the Company's new aluminum extrusion operation. Capital expenditures for 2012 are estimated to be $15 million to $17 million, including the remaining $3 million for the aluminum extrusion operation. Depreciation and amortization is estimated to be $23 million for 2012.

Goodwill and other intangible assets increased by $13 million and $22 million, respectively, since December 31, 2010, primarily as a result of the five acquisitions completed this year, partially offset by normal amortization.

Non-cash stock-based compensation was $1.2 million in the fourth quarter of 2011, and $5.6 million for the full year. Preliminary estimates are that non-cash stock-based compensation expense will be approximately $6 million in 2012.  

The effective tax rate for 2011 and the fourth quarter was lower than in the prior year, primarily as a result of higher federal and state tax credits. The Company expects the effective tax rate for the full year 2012 to be approximately 38 percent.

Conference Call & Webcast

Drew will provide an online, real-time webcast and rebroadcast of its fourth quarter and year end 2011 earnings conference call on the Company's website, www.drewindustries.com on Monday, February 13, 2012 at 11:00 a.m. Eastern Time. Individual investors can also listen to the call at www.companyboardroom.com.  

Institutional investors can access the call via the password-protected event management site, StreetEvents (www.streetevents.com). A replay of the conference call will be available by telephone by dialing (888) 286-8010 and referencing access code 88777334. A replay will also be available on Drew's website.

About Drew

Drew, through its wholly-owned subsidiaries, Kinro and Lippert Components, supplies a broad array of components for RVs and manufactured homes, including windows, doors, chassis, chassis parts, bath and shower units, axles, and upholstered furniture, and slide-out mechanisms for RVs. In addition, Drew manufactures components for modular housing, truck caps and buses, as well as for trailers used to haul boats, livestock, equipment and other cargo. Currently, from 31 factories located throughout the United States, Drew serves most major national manufacturers of RVs and manufactured homes in an efficient and cost-effective manner. 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.

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 manufactured homes and RVs, 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 recent acquisitions, interest rates, oil and gasoline prices, and the outcome of litigation. 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)






Year Ended

December 31,

Three Months Ended

December 31,

(In thousands, except per share amounts)

2011

2010

2011

2010






Net sales

$  681,166

$  572,755

$  159,596

$  106,203

Cost of sales

541,445

446,585

131,814

83,118

 Gross profit

139,721

126,170

27,782

23,085

Selling, general and administrative expenses

91,252

80,821

21,890

18,484

Other (income)

(79)

(79)

  -

  -

 Operating profit

48,548

45,428

5,892

4,601

Interest expense, net

292

218

95

50

 Income before income taxes

48,256

45,210

5,797

4,551

Provision for income taxes

18,197

17,176

1,709

1,419

 Net income

$  30,059

$  28,034

$  4,088

$  3,132






Net income per common share:





 Basic

$  1.35

$  1.27

$  0.18

$  0.14

 Diluted

$  1.34

$  1.26

$  0.18

$  0.14






Weighted average common shares outstanding:





 Basic

22,267

22,123

22,309

22,140

 Diluted

22,444

22,266

22,495

22,276






Depreciation and amortization

$  20,522

$  17,087

$  5,453

$  4,361

Capital expenditures

$  24,317

$  10,148

$  6,596

$  2,442









DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)





Year Ended

December 31,

Three Months Ended

December 31,

(In thousands)

2011

2010

2011

2010






Net sales:





 RV Segment

$  570,643

$  477,202

$  130,987

$  86,524

 MH Segment

110,523

95,553

28,609

19,679

    Total net sales

$  681,166

$  572,755

$  159,596

$  106,203






Operating profit:





 RV Segment

$  45,715

$  44,388

$  5,345

$  6,391

 MH Segment

11,980

9,590

3,017

1,349

    Total segment operating profit

57,695

53,978

8,362

7,740

 Corporate

(7,483)

(7,990)

(1,637)

(2,176)

 Accretion of acquisition related earn-outs

(1,886)

(1,582)

(495)

(452)

 Other non-segment items

222

1,022

(338)

(511)

    Total operating profit

$  48,548

$  45,428

$  5,892

$  4,601




DREW INDUSTRIES INCORPORATED

COMPOSITION OF NET SALES

(unaudited)



Year Ended

December 31,

Three Months Ended

December 31,

(In thousands)

2011

2010

2011

2010






RV Segment:





 RV Original Equipment Manufacturers:





    Travel Trailer and Fifth-Wheels

$  510,560

$  431,878

$  114,915

$  77,561

    Motorhomes

17,092

17,385

3,991

3,675

 RV Aftermarket

11,330

12,164

1,537

2,348

 Other

31,661

15,775

10,544

2,940

    Total RV Segment net sales

$  570,643

$  477,202

$  130,987

$  86,524






MH Segment:





 MH Original Equipment Manufacturers

$  80,979

$  68,718

$  22,356

$  13,312

 MH Aftermarket

16,184

16,895

3,491

3,895

 Other

13,360

9,940

2,762

2,472

    Total MH Segment net sales

$  110,523

$  95,553

$  28,609

$  19,679





DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)



December 31,

(In thousands, except ratios)

2011

2010




Current assets



 Cash and cash equivalents

$  6,584

$  38,880

 Short-term investments

-

4,999

 Accounts receivable, trade, less allowance

22,620

12,890

 Inventories

92,052

69,328

 Deferred taxes

10,125

12,142

 Prepaid expenses and other current assets

6,187

4,626

    Total current assets

137,568

142,865

Fixed assets, net

95,050

79,848

Goodwill

20,499

7,497

Other intangible assets, net

79,059

57,419

Deferred taxes

14,496

15,770

Other assets

4,411

3,382

    Total assets

$  351,083

$  306,781




Current liabilities:



 Accounts payable, trade

15,742

11,351

 Accrued expenses and other current liabilities

36,169

33,723

    Total current liabilities

51,911

45,074

Other long-term liabilities

21,876

18,248

    Total liabilities

73,787

63,322

    Total stockholders' equity

277,296

243,459

    Total liabilities and stockholders' equity

$  351,083

$  306,781




Current ratio

2.7

3.2

Total indebtedness to stockholders' equity

-

-





DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)


Year Ended

December 31,

(In thousands)

2011

2010




Cash flows from operating activities:



 Net income

$  30,059

$  28,034

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



  Depreciation and amortization

20,522

17,087

  Stock-based compensation expense

4,587

4,176

  Deferred taxes

821

(1,438)

  Other non-cash items

1,570

(613)

  Changes in assets and liabilities, net of business acquisitions:



    Accounts receivable, net

(5,007)

(341)

    Inventories

(14,738)

(11,757)

    Prepaid expenses and other assets

(1,848)

(951)

     Accounts payable, accrued expenses and other liabilities

865

7,866

        Net cash flows provided by operating activities

36,831

42,063




Cash flows from investing activities:



 Capital expenditures

(24,317)

(10,148)

 Acquisitions of businesses

(50,302)

(21,900)

 Proceeds from sales of fixed assets

1,338

1,788

 Purchase of short-term investments

-

(20,985)

 Proceeds from maturity of short-term investments

5,000

29,000

 Other investing activities

(843)

(303)

         Net cash flows used for investing activities

(69,124)

(22,548)




Cash flows from financing activities:



 Exercise of stock options and deferred stock units

1,188

1,082

 Purchase of treasury stock

(626)

(1,041)

 Proceeds from line of credit borrowings

130,500

-

 Repayments under line of credit

(130,500)

-

 Payment of special dividend

-

(33,032)

 Other financing activities

(565)

(9)

         Net cash flows used for financing activities

(3)

(33,000)




         Net decrease in cash

(32,296)

(13,485)




Cash and cash equivalents at beginning of year

38,880

52,365

Cash and cash equivalents at end of year

$  6,584

$  38,880




SOURCE Drew Industries Incorporated



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