Drew Industries Reports Second Quarter 2013 Results

ELKHART, Ind., Aug. 6, 2013 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $15.9 million, or $0.67 per diluted share, for the second quarter ended June 30, 2013, net of a previously announced after-tax charge of $0.4 million related to executive succession. Excluding this charge, net income in the second quarter of 2013 would have been $16.3 million, or $0.69 per diluted share, an increase of 39 percent compared to net income of $11.7 million, or $0.52 per diluted share, in the second quarter of 2012.

"Our operating profit margins improved sequentially in the second quarter of 2013 primarily due to efficiency improvements implemented by management, as well as the benefits of spreading fixed costs over a seasonally larger sales base and seasonally lower payroll taxes," said Jason Lippert, Drew's Chief Executive Officer. "This sequential margin gain was greater than originally expected, as many of the improvements implemented by management resulted in efficiency gains sooner than anticipated. We were confident that the steps we had taken to meet anticipated customer demand and improve profitability were correct, and it was reassuring to see the results of these efforts in the 2013 second quarter."

Net sales in the second quarter of 2013 increased to a record $287 million, 14 percent higher than the same period last year. The increase in Drew's second quarter net sales was a result of a 16 percent sales increase by Drew's RV Segment, which accounted for 88 percent of consolidated net sales this quarter. RV Segment sales growth was largely due to a 12 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 and motorhome RVs also contributed to the revenue increase, as did sales to adjacent industries and the aftermarket.

The Company's content per travel trailer and fifth-wheel RV and motorhome RV for the twelve months ended June 2013 increased 5 percent and 23 percent, respectively, 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 for the twelve months ended June 2013 declined 3 percent from the year-earlier period primarily due to customer mix. The change in content per RV and manufactured home is a measure of the change in Drew's overall market share across its existing product lines.

Retail demand for towable RVs increased 10 percent in the first five months of 2013, following an 8 percent increase in retail demand for the full year 2012. June 2013 retail data is not yet available. Most 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 labor efficiencies continued to improve, with labor costs as a percent of sales declining in the second quarter of 2013," continued Jason Lippert. "This improvement followed a sequential reduction of labor as a percent of sales of more than 1 percent in the first quarter of 2013. These reductions during the first two quarters of 2013 were primarily due to improved production processes, as well as expected declines in the costs of implementing facility consolidations and realignments. Nonetheless, we are continuing to implement additional efficiency improvements as we identify them. However, the benefits of such improvements on our operating margins in the latter half of 2013 will likely be offset by the spreading of fixed costs over a seasonally smaller sales base."

In July 2013, Drew's consolidated net sales reached approximately $83 million – 13 percent higher than in July 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 7 percent in July 2013 compared to July 2012. Drew also estimates that July 2013 industry-wide production of manufactured homes increased 5 to 10 percent compared to July 2012.

"Since the end of 2011, we have achieved significant growth, with our net sales for the twelve months ended June 30, 2013 increasing over $285 million, or 42 percent," said Scott Mereness, Drew's President. "In response to this sales growth, and in anticipation of future growth, we added significant resources, investing in personnel and facilities to expand and improve production capacity, as well as to improve customer service. Many of the benefits and efficiencies of these initiatives were realized in the 2013 second quarter. Having just completed the peak seasonal period, we are now evaluating our human resource and facility requirements for the balance of 2013 and beyond."

Jason Lippert added, "We will continue to invest in resources to strategically grow the business, especially in research and development, to provide creative and unique products. Staying ahead of the market through innovation has been important to our success, and will be even more important to maintaining our position as a leading supplier to the industries we serve. In addition, we will invest in areas where we believe additional savings can be realized, such as purchasing, automation and human resources. While some of these initiatives and related fixed costs may have a negative impact on operating margins in the short term, we believe they will benefit the long-term growth of the Company."

"As previously announced, Fred Zinn retired as President and CEO in May 2013," said Leigh Abrams, Chairman of Drew's Board of Directors. "Jason Lippert became Drew's CEO, and Scott Mereness became Drew's President. Jason and Scott have been vital to our sales growth and operational success for many years and are highly respected throughout the industries we serve. As expected, this executive succession transition was very smooth, and we are confident that Jason, Scott and their team are ready to lead Drew for many years to come."

As a result of the Company's executive succession and corporate relocation from New York to Indiana, a pre-tax charge of $0.7 million was recorded in the second quarter of 2013 related to contractual obligations for severance and the acceleration of equity awards held by certain employees whose employment terminated. No other related charges are expected. Once the transition and corporate office relocation are completed during the latter half of 2013, the Company expects to save approximately $2 million annually.

"Our operating cash flow in the second quarter of 2013 remained strong," said Joe Giordano, Drew's Chief Financial Officer and Treasurer. "At the end of the quarter, we had no debt, $32 million of cash and substantial available credit lines, and we expect continued solid cash flow. We are well positioned to take advantage of attractive investment opportunities that can further improve our results."

Conference Call & Webcast
Drew will provide an online, real-time webcast of its second quarter 2013 earnings conference call on the Company's website, www.drewindustries.com, on Tuesday, August 6, 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 18767066. 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 such 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.

SOURCE Drew Industries Incorporated