DREW INDUSTRIES, INC. ELKHART, Ind., Aug. 1, 2014 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, reported net income of $18.6 million, or $0.77 per diluted share, for the second quarter ended June 30, 2014, compared to net income of $15.9 million, or $0.67 per diluted share, for the second quarter ended June 30, 2013. In connection with the sale of the aluminum extrusion-related assets in April 2014, the Company recorded an after-tax charge of $1.2 million. Excluding this charge, net income in the second quarter of 2014 would have been $19.8 million, or $0.82 per diluted share. Net income for the second quarter of 2013 was net of an after-tax charge of $0.4 million in connection with 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.
Net sales in the second quarter of 2014 increased to a quarterly record of $322 million, 12 percent higher than the 2013 second quarter. This sales growth was primarily the result of a 15 percent sales increase by Drew's RV Segment, which accounted for 90 percent of consolidated net sales this quarter. RV Segment sales growth was primarily due to a 7 percent and 11 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs and motorhome RVs, respectively. In addition, recently completed acquisitions added approximately $5 million in net sales in the second quarter of 2014. Further, sales of new products for RVs increased, as did sales to adjacent industries and the aftermarket.
During the first six months of 2014, the RV industry produced more RVs than the full year of 2009. "The ability for the RV industry to more than double production capacity over the past several years is a testament to the resourcefulness of our customers and the tens of thousands of individuals employed by the industry," said Jason Lippert, Drew's Chief Executive Officer. "Staying ahead of the ever-changing demands of our customers is a primary business focus."
"Towable RVs, and in particular lower-priced entry-level units, led the recovery in RV production so far," continued Jason Lippert. "Although smaller entry units typically contain fewer of our products, we consider every new RV owner a long-term customer who in the future could purchase larger RVs which contain more of our products, creating a healthier RV industry over the long term. Motorhome RVs also experienced a strong recovery over the last couple years, creating a more significant opportunity for us to gain market share with our motorhome products."
"As a result of the slower than expected start to 2014 due to severe weather conditions, a Spring which was slow to arrive, and a shortage of drivers to deliver finished goods, industry-wide inventory seasonally accumulated - but recent trends appear to have eased concerns surrounding dealer inventory," added Jason Lippert. "RV OEMs and dealers are now reporting that retail sales have picked up in recent months, an improvement from the relatively flat year-over-year retail sales reported through May 2014, reportedly in part due to the pent-up demand stemming from the prolonged winter, and that inventories of RVs are in line with anticipated retail demand. Future industry-wide wholesale production levels for RVs will depend on the strength of retail sales, which are sensitive to economic conditions and consumer confidence."
In July 2014, Drew's consolidated net sales reached approximately $98 million - 17 percent higher than July 2013 - as a result of continued growth in the Company's RV Segment. Excluding the impact of acquisitions, the Company's net sales for July 2014 were up approximately 13 percent.
The Company's operating profit margins in the second quarter of 2014, excluding the loss on sale of the aluminum extrusion-related assets, were 9.7 percent, compared to 9.2 percent in the second quarter of 2013, excluding executive succession. "Over the past several years, we have made investments in our business, which are continuing to benefit bottom-line results, and the results we experienced in the 2014 second quarter were consistent with our expectations," said Scott Mereness, Drew's President. "We added capacity ahead of projected demand, which enabled us to efficiently fulfill customer orders as demand increased and leverage fixed costs over a larger sales base."
"In anticipation of future growth, we continue to expand and improve production capacity, investing in personnel and facilities in excess of current needs," continued Mereness. "As noted previously, we have recently entered into two new leases which will add more than 700,000 square feet of production and distribution capacity. While these capacity expansion initiatives 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 continue to improve our customer service and operating efficiencies. In addition, we have bolstered our administrative staff over the past several quarters, including the teams that were acquired through acquisitions and new employees hired in preparation for future growth and investment opportunities."
"During the second quarter of 2014 we completed the acquisition of the RV business of Actuant Corporation, gaining the well-respected Power Gear® and Kwikee® brands, and expanding our product offerings in leveling systems, slideout mechanisms and steps, primarily for motorhome RVs," said Jason Lippert.
Sales of the acquired business for the twelve months ended May 31, 2014 were approximately $28 million, consisting of sales to OEMs, as well as significant aftermarket sales. The purchase price was $35.5 million, and after funding this acquisition, the Company remains well-positioned with both financial capital and human resources to take advantage of additional investment opportunities.
"We are thrilled to have the Power Gear and Kwikee business units and its employees join the Lippert Components family," continued Jason Lippert. "The RV industry growth over the past few years has increased the demand for talented people, and we are confident that this team will help us continue to grow as we move forward. This acquisition was immediately accretive to Drew's earnings."
Conference Call & Webcast
Drew will provide an online, real-time webcast of its second quarter 2014 earnings conference call on the Company's website, www.drewindustries.com, on Friday, August 1, 2014, 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 36406000. A replay of the webcast will also be available on Drew's website.
About Drew Industries
From 35 factories located throughout the United States, Drew Industries, through its wholly-owned subsidiary, 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" 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, 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, 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 our 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, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, availability and costs of labor, employee retention, inventory levels of retail dealers and manufacturers, levels of repossessed products for which we sell our components, seasonality and cyclicality in the industries to which we sell our products, 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 pace of and successful integration of acquisitions, realization of efficiency improvements, the successful entry into new markets, the costs of compliance with increased governmental regulation, 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 our Annual Report on Form 10-K for the year ended December 31, 2013, and in our subsequent filings with the Securities and Exchange Commission. We disclaim 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)
Six Months Ended Three Months Ended
June 30, June 30, Last Twelve
-------- --------
(In thousands, except per share amounts) 2014 2013 2014 2013 Months
---- ---- ---- ---- ------
Net sales $607,160 $539,778 $321,783 $287,192 $1,082,958
Cost of sales 471,948 430,754 249,771 225,759 843,661
------- ------- ------- ------- -------
Gross profit 135,212 109,024 72,012 61,433 239,297
Selling, general and administrative expenses 78,063 67,852 40,909 34,992 143,146
Sale of extrusion assets 1,954 - 1,954 - 1,954
Executive succession - 1,876 - 733 -
--- ----- --- --- ---
Operating profit 55,195 39,296 29,149 25,708 94,197
Interest expense, net 194 203 74 85 342
--- --- --- --- ---
Income before income taxes 55,001 39,093 29,075 25,623 93,855
Provision for income taxes 20,219 14,856 10,457 9,758 33,191
------ ------ ------ ----- ------
Net income $34,782 $24,237 $18,618 $15,865 $60,664
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Net income per common share:
Basic $1.46 $1.05 $0.78 $0.68 $2.56
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Diluted $1.43 $1.03 $0.77 $0.67 $2.52
===== ===== ===== ===== =====
Weighted average common shares outstanding:
Basic 23,842 23,139 23,931 23,261 23,678
====== ====== ====== ====== ======
Diluted 24,298 23,553 24,303 23,650 24,103
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Depreciation and amortization $14,920 $13,453 $7,680 $6,901 $28,967
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Capital expenditures $17,912 $17,545 $11,088 $8,607 $32,962
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DREW INDUSTRIES INCORPORATED
SEGMENT RESULTS
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30, Last Twelve
-------- --------
(In thousands) 2014 2013 2014 2013 Months
---- ---- ---- ---- ------
Net sales:
RV Segment:
RV OEMs:
Travel trailers and fifth-wheels $447,416 $392,450 $235,286 $207,849 $782,749
Motorhomes 30,057 22,890 15,673 11,939 55,104
RV aftermarket 16,762 12,881 9,668 7,152 29,215
Adjacent industries 54,627 48,848 29,199 26,126 98,419
------ ------ ------ ------ ------
Total RV Segment net sales 548,862 477,069 289,826 253,066 965,487
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MH Segment:
Manufactured housing OEMs 37,281 40,370 20,764 22,591 77,156
Manufactured housing aftermarket 7,172 7,239 3,705 3,587 13,652
Adjacent industries 13,845 15,100 7,488 7,948 26,663
Total MH Segment net sales 58,298 62,709 31,957 34,126 117,471
------ ------ ------ ------ -------
Total net sales $607,160 $539,778 $321,783 $287,192 $1,082,958
======== ======== ======== ======== ==========
Operating Profit:
RV Segment $51,761 $34,864 $28,032 $22,600 $85,145
MH Segment 5,388 6,308 3,071 3,841 11,006
----- ----- ----- ----- ------
Total segment operating profit 57,149 41,172 31,103 26,441 96,151
Sale of extrusion assets (1,954) - (1,954) - (1,954)
Executive succession - (1,876) - (733) -
Total operating profit $55,195 $39,296 $29,149 $25,708 $94,197
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DREW INDUSTRIES INCORPORATED
BALANCE SHEET INFORMATION
(unaudited)
June 30, December 31,
--------
(In thousands) 2014 2013 2013
---- ---- ----
ASSETS
Current assets
Cash and cash equivalents $4 $31,877 $66,280
Accounts receivable, net 71,954 59,515 31,015
Inventories, net 108,357 99,777 101,211
Deferred taxes 12,557 10,073 12,557
Prepaid expenses and other current assets 15,307 10,844 14,467
------ ------ ------
Total current assets 208,179 212,086 225,530
Fixed assets, net 126,523 117,419 125,982
Goodwill 61,930 21,552 21,545
Other intangible assets, net 92,654 64,307 59,392
Other assets 26,346 22,385 20,735
------ ------ ------
Total assets $515,632 $437,749 $453,184
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, trade $50,379 $33,463 $24,063
Dividend payable - - 46,706
Accrued expenses and other current liabilities 58,376 57,405 47,422
------ ------ ------
Total current liabilities 108,755 90,868 118,191
Long-term indebtedness 22,288 - -
Other long-term liabilities 25,506 21,734 21,380
------ ------ ------
Total liabilities 156,549 112,602 139,571
Total stockholders' equity 359,083 325,147 313,613
------- ------- -------
Total liabilities and stockholders' equity $515,632 $437,749 $453,184
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DREW INDUSTRIES INCORPORATED
SUMMARY OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
--------
(In thousands) 2014 2013
---- ----
Cash flows from operating activities:
Net income $34,782 $24,237
Adjustments to reconcile net income to cash flows provided by operating
activities:
Depreciation and amortization 14,920 13,453
Stock-based compensation expense 5,277 5,844
Other non-cash items 3,203 1,624
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (36,920) (37,520)
Inventories, net (1,227) (2,367)
Prepaid expenses and other assets (687) 3,573
Accounts payable, trade 23,095 11,696
Accrued expenses and other liabilities 13,352 12,499
Net cash flows provided by operating activities 55,795 33,039
------ ------
Cash flows from investing activities:
Capital expenditures (17,912) (17,545)
Acquisitions of businesses (82,157) (1,451)
Proceeds from note receivable 750 -
Proceeds from sales of fixed assets 1,999 70
Other investing activities (49) (48)
--- ---
Net cash flows used for investing activities (97,369) (18,974)
------- -------
Cash flows from financing activities:
Exercise of stock options and deferred stock units, net of shares tendered for 3,425 10,686
payment
Proceeds from line of credit borrowings 182,315 135,452
Repayments under line of credit borrowings (160,027) (135,452)
Payment of special dividend (46,706) -
Payment of contingent consideration related to acquisitions (3,513) (2,813)
Other financing activities (196) -
Net cash flows (used for) provided by financing activities (24,702) 7,873
------- -----
Net (decrease) increase in cash (66,276) 21,938
Cash and cash equivalents at beginning of period 66,280 9,939
------ -----
Cash and cash equivalents at end of period $4 $31,877
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DREW INDUSTRIES INCORPORATED
SUPPLEMENTARY INFORMATION
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30, Last Twelve
-------- --------
2014 2013 2014 2013 Months
---- ---- ---- ---- ------
Industry Data(1)(in thousands of units):
Industry Wholesale Production:
Travel trailer and fifth-wheel RVs 161.1 146.6 85.7 79.9 282.5
Motorhome RVs 23.3 19.5 12.2 11.0 42.1
Manufactured homes 30.6 (3) 29.1 16.9 (3) 16.2 61.7 (3)
Industry Retail Sales:
Travel trailer and fifth-wheel RVs 137.6 (2) 135.7 92.5 (2) 93.3 252.7 (2)
Impact on dealer inventories 23.5 (2) 10.9 (6.8) (2) (13.4) 29.8 (2)
Motorhome RVs 19.0 (2) 17.1 11.4 (2) 10.3 33.4 (2)
Twelve Months Ended
June 30,
--------
2014 2013
---- ----
Drew Estimated Content Per Industry Unit Produced:
Travel trailer and fifth-wheel RV $2,772 $2,700
Motorhome RV $1,309 $1,241
Manufactured home $1,251 (3) $1,426
June 30, December 31,
--------
2014 2013 2013
---- ---- ----
Balance Sheet Data:
Current ratio 1.9 2.3 1.9
Total indebtedness to stockholders' equity 0.1 - -
Days sales in accounts receivable 20.8 20.1 16.5
Inventory turns, based on last twelve months 8.3 7.8 7.9
2014
----
Estimated Full Year Data:
Capital expenditures $ 34 - $ 38 million
Depreciation and amortization $ 30 - $ 32 million
Stock-based compensation expense $ 11 - $ 13 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) June 2014 retail sales data for RVs has not been published yet, therefore 2014 retail data for RVs includes an estimate for June 2014 retail units.
(3) June 2014 wholesale data for manufactured homes has not been published yet, therefore 2014 manufactured housing wholesale data includes an estimate for June 2014 wholesale units.
SOURCE Drew Industries Incorporated
