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Drew Industries Reports 2014 Second Quarter Results

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SOURCE Drew Industries Incorporated

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












Net income per common share:











  Basic


$          1.46


$          1.05


$          0.78


$          0.68


$          2.56

  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












Depreciation and amortization


$       14,920


$       13,453


$         7,680


$         6,901


$       28,967

Capital expenditures


$       17,912


$       17,545


$       11,088


$         8,607


$       32,962

 

 

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












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

 

 

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








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

 

 

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
payment


3,425


10,686

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

 

 

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.




 

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