2014

Drew Industries Reports Third Quarter 2013 Results

ELKHART, Ind., Nov. 1, 2013 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $14.8 million, or $0.62 per diluted share, for the third quarter ended September 30, 2013, an increase of 52 percent compared to net income of $9.8 million, or $0.43 per diluted share, in the third quarter of 2012.

Net sales in the third quarter of 2013 increased to $251 million, 11 percent higher than the 2012 third quarter. This sales growth was primarily the result of a 12 percent sales increase by Drew's RV Segment, which accounted for 87 percent of consolidated net sales this quarter. RV Segment sales growth was primarily due to an 8 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew's primary RV market. In addition, sales of recently introduced components for towable and motorhome RVs increased, as did sales to adjacent industries and the aftermarket.

The Company's content per motorhome RV and travel trailer and fifth-wheel RV for the twelve months ended September 2013 increased 4 percent to $1,137 per unit and 2 percent to $2,719 per unit, respectively, from the year-earlier period as a result of recent product introductions, product improvements and market share gains. The change in content per RV is a measure of the change in Drew's overall market share across its existing product lines.

Retail demand for travel trailer and fifth-wheel RVs increased 12 percent in the first eight months of 2013, following an 8 percent increase in retail demand for the full year 2012. September 2013 retail data is not yet available. Dealer inventories of these types of towable RVs increased by about 15,800 units during the 12 months ended August 2013, compared to an approximately 24,700 unit increase in retail sales for the same period. Industry analysts report that dealer inventories of towable RVs are in line with anticipated retail demand. Future RV industry-wide production levels will depend on the strength of future retail sales.

"Our Company-wide focus on our customers as our first priority has enabled us to gain market share and increase sales," said Jason Lippert, Drew's Chief Executive Officer. "In addition, we have been successful by staying ahead of the market through innovation. We continue to invest in customer service and research and development resources to maintain our position as a leading supplier to the industries we serve."

"Our operating profit margins in the third quarter of 2013 were 9.1 percent compared to 6.6 percent in the third quarter of 2012," added Jason Lippert. "The 2013 third quarter operating profit margins were consistent with the second quarter of 2013 largely due to management's recently implemented efficiency improvements gaining momentum, partially offset by the anticipated impact of spreading fixed costs over a seasonally smaller sales base. Many of the production improvements resulted in larger than anticipated efficiency gains, including the benefits realized from our new glass tempering equipment."

"Our labor as a percent of net sales in the third quarter of 2013 was consistent with the second quarter of 2013, despite the seasonal decline in net sales," said Scott Mereness, Drew's President. "The labor efficiencies we have realized over the past several quarters, while introducing new products and adjusting to industry and market share growth, have been significant. These improvements in labor during the first three quarters of 2013 were also primarily due to completed production efficiency improvement projects, as well as declines in the costs of implementing facility consolidations and realignments. We will continue to implement additional efficiency improvements as we identify them."

In October 2013, Drew's consolidated net sales reached approximately $95 million – 12 percent higher than in October 2012 – as 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 8 percent to 10 percent in October 2013 compared to October 2012. Drew also estimates that October 2013 industry-wide production of manufactured homes increased approximately 5 percent compared to October 2012.

"Our consolidated net sales for the trailing twelve months ended October 31, 2013 exceeded $1 billion," added Mereness. "Achieving this milestone is quite an accomplishment for the Company. In anticipation of future growth, we continue to expand and improve production capacity, investing in personnel and facilities in excess of current needs. Although certain of these capacity expansion plans may have a short-term negative impact on margins, over the long term these investments should allow us to improve our operating results, as well as our industry-leading customer service. We are encouraged by the benefits we have seen from many of our initiatives, and we will continually evaluate our human resource and facility requirements."

"Our operating cash flow in the third quarter of 2013 remained strong," said Joe Giordano, Drew's Chief Financial Officer and Treasurer. "As a result, our cash balances, which typically increase in the fourth quarter due to seasonal reductions in working capital requirements, will likely experience a smaller seasonal change. We remain well positioned to take advantage of attractive investment opportunities that can further improve our results."

The effective tax rate for the 2013 third quarter was 34.9 percent, benefitting from federal and state tax credits, as well as the reversal of federal and state tax reserves, due to the closure of federal and state tax years.

Return on equity for the twelve months ended September 30, 2013 improved to 13.9 percent, from 12.5 percent in the year-earlier period.

Jason Lippert concluded, "Having completed our first full quarter since the executive transition, we believe that the process has been seamless, and we are pleased to report the 52 percent increase in year-over-year quarterly earnings. As we develop our strategic plans for the future, we expect to continue along the same path which has historically brought us success – profitable growth in our core RV and manufactured housing markets, diversification into adjacent industries, and cost control and production efficiencies. We believe the keys to accomplishing these goals are continuing to invest in new product development and customer service, as well as identifying areas where additional savings can be realized. I am confident that our management team has the ability to execute our strategic goals for the long-term growth of the Company."

Conference Call & Webcast
Drew will provide an online, real-time webcast of its third quarter 2013 earnings conference call on the Company's website, www.drewindustries.com, on Friday, November 1, 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 dialing (888) 286-8010 and referencing access code 74159229. A replay of the webcast will also be available on Drew's website.

About Drew Industries
From 31 factories located throughout the United States, Drew Industries, 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; aluminum extrusions; 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 under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012, 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, seasonality and cyclicality 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, the successful entry into new markets, 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)














Nine Months Ended


Three Months Ended





September 30,


September 30,


Last Twelve

(In thousands, except per share amounts)


2013


2012


2013


2012


Months












Net sales


$     790,629


$     700,889


$     250,851


$     226,323


$     990,863

Cost of sales


625,479


568,101


194,725


184,781


789,842

Gross profit


165,150


132,788


56,126


41,542


201,021

Selling, general and administrative expenses


101,148


81,499


33,296


26,594


128,720

Executive succession


1,876


-


-


-


3,332

Operating profit


62,126


51,289


22,830


14,948


68,969

Interest expense, net


279


246


76


116


363

Income before income taxes


61,847


51,043


22,754


14,832


68,606

Provision for income taxes


22,805


18,448


7,949


5,061


24,819

Net income


$       39,042


$       32,595


$       14,805


$         9,771


$       43,787












Net income per common share:











Basic


$          1.68


$          1.45


$          0.63


$          0.43


$          1.89

Diluted


$          1.65


$          1.43


$          0.62


$          0.43


$          1.86












Weighted average common shares outstanding:











Basic


23,243


22,507


23,451


22,563


23,111

Diluted


23,644


22,724


23,838


22,800


23,518












Depreciation and amortization


$       20,388


$       19,211


$         6,935


$         6,850


$       26,842

Capital expenditures


$       26,080


$       22,010


$         8,535


$         8,856


$       36,096

 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)














Nine Months Ended


Three Months Ended





September 30,


September 30,


Last Twelve

(In thousands)


2013


2012


2013


2012


Months












Net sales:











RV Segment:











RV original equipment manufacturers:











Travel trailers and fifth-wheels


$     570,404


$     512,307


$     175,892


$     161,959


$     714,014

Motorhomes


32,509


24,500


11,234


8,998


40,706

RV aftermarket


19,785


14,714


6,904


5,355


24,190

Adjacent industries


72,334


57,422


23,933


18,645


88,104

Total RV Segment net sales


695,032


608,943


217,963


194,957


867,014












MH Segment:











Manufactured housing original equipment manufacturers

62,941


61,678


22,571


21,188


81,655

Manufactured housing aftermarket


10,377


10,322


3,138


3,134


13,165

Adjacent industries


22,279


19,946


7,179


7,044


29,029

Total MH Segment net sales


95,597


91,946


32,888


31,366


123,849












Total net sales


$     790,629


$     700,889


$     250,851


$     226,323


$     990,863












Operating Profit:(1)











RV Segment


$       54,098


$       40,936


$       19,234


$       11,587


$       60,334

MH Segment


9,904


10,353


3,596


3,361


11,967

Total segment operating profit


64,002


51,289


22,830


14,948


72,301

Executive succession


(1,876)


-


-


-


(3,332)

Total operating profit


$       62,126


$       51,289


$       22,830


$       14,948


$       68,969












(1) Effective with the second quarter of 2013, in connection with the management succession and relocation of the corporate office from New York to Indiana, corporate expenses, accretion related to contingent consideration and other non-segment items, which were previously reported on separate lines, have been included as part of segment operating profit. Corporate expenses are allocated between the segments based upon net sales.  Accretion related to contingent consideration and other non-segment items are included in the segment to which they relate. The segment disclosures from prior years have been reclassified to conform to the current year presentation.

 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)










September 30,


December 31,

(In thousands)


2013


2012


2012








Current Assets







Cash and cash equivalents


$       52,873


$       32,584


$          9,939

Accounts receivable, net


54,824


50,421


21,846

Inventories


96,164


98,393


97,367

Deferred taxes


10,073


10,125


10,073

Prepaid expenses and other current assets


8,396


11,165


14,798

Total current assets


222,330


202,688


154,023

Fixed assets, net


120,723


101,931


107,936

Goodwill


21,552


21,177


21,177

Other intangible assets, net


61,861


71,755


69,218

Deferred taxes


14,993


14,496


14,993

Other assets


8,237


6,422


6,521

Total assets


$     449,696


$     418,469


$       373,868








Current liabilities







Accounts payable, trade


$       31,809


$       33,392


$        21,725

Accrued expenses and other current liabilities


53,333


47,074


48,055

Total current liabilities


85,142


80,466


69,780

Other long-term liabilities


21,091


20,369


19,843

Total liabilities


106,233


100,835


89,623

Total stockholders' equity


343,463


317,634


284,245

Total liabilities and stockholders' equity


$     449,696


$     418,469


$       373,868

 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)








Nine Months Ended



September 30,

(In thousands)


2013


2012






Cash flows from operating activities:





Net income


$       39,042


$       32,595

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




Depreciation and amortization


20,388


19,211

Stock-based compensation expense


8,224


4,703

Other non-cash items


1,787


889

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





Accounts receivable, net


(32,829)


(27,801)

Inventories


1,246


(5,753)

Prepaid expenses and other assets


4,090


(6,993)

Accounts payable


10,042


17,650

Accrued expenses and other liabilities


9,681


10,086

Net cash flows provided by operating activities


61,671


44,587






Cash flows from investing activities:





Capital expenditures


(26,080)


(22,010)

Acquisitions of businesses


(1,451)


(1,473)

Proceeds from sales of fixed assets


1,381


5,397

Other investing activities


(117)


(88)

Net cash flows used for investing activities


(26,267)


(18,174)






Cash flows from financing activities:





Proceeds from exercise of stock options


11,817


2,840

Proceeds from line of credit borrowings


135,452


37,702

Repayments under line of credit borrowings


(135,452)


(37,702)

Payment of contingent consideration related to acquisitions


(4,287)


(3,253)

Net cash flows provided by (used for) financing activities


7,530


(413)






Net increase in cash


42,934


26,000






Cash and cash equivalents at beginning of period


9,939


6,584

Cash and cash equivalents at end of period


$       52,873


$       32,584

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)















Nine Months Ended


Three Months Ended






September 30,


September 30,


Last Twelve




2013


2012


2013


2012


Months


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












Industry Wholesale Production:












Travel trailer and fifth-wheel RVs


207.9


188.2


61.3


56.7


262.6


Motorhome RVs


28.9


21.3


9.4


6.8


35.8


Manufactured homes


44.4

(3)

41.9


15.2

(3)

14.2


57.3

(3)

Industry Retail Sales:












Travel trailer and fifth-wheel RVs


214.1

(2)

190.4


77.2

(2)

67.4


246.6

(2)

Impact on dealer inventories


(6.2)

(2)

(2.2)


(15.9)

(2)

(10.7)


16.0

(2)

Motorhome RVs


25.1

(2)

19.4


8.1

(2)

6.4


29.6

(2)































Twelve Months Ended










September 30,










2013


2012




Drew Content Per Industry Unit Produced:












Travel trailer and fifth-wheel RV


$         2,719


$         2,673




Motorhome RV


$         1,137


$         1,092




Manufactured home


$         1,423

(3)

$         1,464


































September 30,


December 31,








2013


2012


2012


Balance Sheet Data:












Current ratio


2.6


2.5


2.2


Total indebtedness to stockholders' equity


-


-


-


Days sales in accounts receivable


20.1


22.6


14.3


Inventory turns, based on last twelve months


7.8


7.5


7.8
































2013




Estimated Full Year Data:












Capital expenditures


$ 33 - $ 35 million




Depreciation and amortization


$ 26 - $ 28 million




Stock-based compensation expense


$ 10 - $ 11 million




Annual tax rate


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

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

 

SOURCE Drew Industries Incorporated



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