Drew Industries Reports First Quarter Results
WHITE PLAINS, N.Y., April 24 -- Drew Industries Incorporated (AMEX:DW) today reported net sales of $80.8 million in the first quarter of 2003, an increase of 12 percent from net sales of $72.2 million in the first quarter of 2002. Income from continuing operations was $3.1 million, or $.31 per diluted share, a 14 percent decline from the $3.6 million, or $.37 per share reported in the first quarter of 2002. Drew also had income from discontinued operations of $.01 per share, largely from the sale of the last of its axle and tire refurbishing operations in January 2003. The first and fourth quarters are typically the slowest time of the year for the industries that Drew serves.
The decrease in earnings was largely due to the continuation of extremely difficult conditions in the manufactured housing industry, costs related to patent litigation involving the Company's new RV slide-out systems which was settled in February through a licensing agreement, and higher insurance and steel costs. However, steel prices have recently softened from the extremely high levels of the second half of 2002. While steel prices remain volatile, if current trends continue, the lower cost of this raw material is expected to have a favorable impact on Drew's earnings comparisons for the balance of the year, particularly in the third and fourth quarters. Health insurance costs were impacted by a larger than typical number of high cost claims during the quarter.
"We remain optimistic that we will post strong full-year results," said Leigh J. Abrams, President and CEO. "Recent economic uncertainty may have caused consumers to delay purchases, but we hope consumer confidence will recover as a result of the winding-down of the conflict in Iraq. We are well positioned for the eventual upturn in the manufactured housing market, and we also continue to look for growth opportunities."
Recreational Vehicle Products Segment
Drew's RV products ("RV") segment continued to outperform the recreational vehicle industry by achieving a 45 percent increase in net sales during the first quarter of 2003, compared to an 11 percent increase in industry-wide shipments of RVs through February, the last month for which industry statistics are available. During these two months, the industry reported a 20 percent increase in travel trailers, Drew's primary RV market.
Drew's RV segment achieved a 26 percent increase in operating profit, to $4.5 million in the current quarter, from $3.6 million in the first quarter of 2002. Excluding the costs of approximately $500,000 related to the settled patent litigation, the operating profit of this segment for the first quarter rose 40 percent, despite higher steel and insurance costs.
Mr. Abrams said: "Our RV segment has achieved extraordinary growth over the last 15 months. All product lines in Drew's RV segment have exceeded industry growth rates. While we know the current level of industry growth cannot continue indefinitely, the long-term demographic trends for the RV industry are excellent, and we are confident in our ability to continue to outperform the industry throughout 2003."
Manufactured Housing Products Segment
Drew's manufactured housing products ("MH") segment continues to be adversely impacted by extremely low industry production levels. Net sales by the Company's MH segment declined 18 percent, to $30.6 million in the current quarter, from $37.5 million in the comparable period last year. Although this was better than the industry-wide 28 percent decline in production during the first two months of 2003, segment sales were below the Company's expectations. In addition, higher costs for steel and insurance caused segment operating profit to decline by 40 percent to $2.5 million, from $4.2 million in the first quarter last year.
"We are disappointed with the impact that conditions in the manufactured housing industry had on Drew's MH segment. However, the fact that our MH segment has remained highly profitable throughout this difficult period is truly remarkable," said Abrams. "The manufactured housing industry continues to supply quality homes at attractive prices, which we believe will lead to greater demand for these homes over time. When the industry finally begins to recover, we expect this segment's results to improve significantly."
Balance Sheet/Other
Drew reported that, as a result of a concerted management effort, inventories declined $2.8 million since December 31, 2002. Accounts receivable remain current and continue to be collected quickly with less than 23 days sales outstanding at the end of the quarter. Capital expenditures were $1.2 million for the quarter, and are expected to be approximately $8.5 million for the year. Depreciation and amortization was $2.0 million for the quarter and is expected to total approximately $8.2 million for the year.
As previously reported, Drew adopted Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" on January 1, 2002, and recorded, in the first quarter of 2002, an after tax charge of $30.1 million, or $3.05 per diluted share, for impairment of goodwill. The charge did not affect cash or operations.
"Our decentralized manufacturing model allows Drew to be close to our customers and to respond quickly to upturns, or as is the case in manufactured housing, downturns in the market," said Abrams. "Our long track record of successive profitable quarters continues, and we look forward to building our momentum in the coming quarters."
Conference Call
Drew will provide an online, real-time webcast and rebroadcast of its first quarter earnings conference call on Thursday, April 24, 2003, at 11:30 a.m. Eastern time, at www.drewindustries.com . 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 888483. 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. Drew's products include aluminum and vinyl windows and screens, doors, chassis, chassis parts, chassis slide-out systems, and bath and shower units. From 39 factories located throughout the United States and one factory in Canada, 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 statements, including the Company's plans and expectations regarding its operating strategy, products and costs, and its views of the prospects of the recreational vehicle and manufactured housing industries, which are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Act of 1995. These forward-looking statements reflect the Company's views, at the time such statements were made, with respect to the Company's future plans, objectives, events and financial results, such as revenues, expenses, income, earnings per share, capital expenditures, and other financial items. Forward-looking statements are not guarantees of future performance; they are subject to risks and uncertainties. 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.
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 pricing pressures due to competition, raw material costs (particularly aluminum, vinyl, steel, glass, and ABS resin), availability of retail and wholesale financing for manufactured homes, availability and costs of labor, inventory levels of retailers and manufacturers, the financial condition of our customers, interest rates, and adverse weather conditions impacting retail sales. In addition, general economic conditions and consumer confidence may affect the retail sale of RVs and manufactured homes.
OPERATING RESULTS (1)
Quarter Ended Last Twelve
March 31, Months
(In thousands, except per share amounts) 2003 2002
Net sales $80,827 $72,187 $334,071
Cost of sales 62,877 54,139 255,582
Gross profit 17,950 18,048 78,489
Selling, general and
administrative expenses 12,001 11,146 50,229
Operating profit 5,949 6,902 28,260
Interest expense 811 931 3,446
Income from continuing
operations before
income taxes and cumulative
effect of change in
accounting principle 5,138 5,971 24,814
Provision for income taxes 2,010 2,322 9,571
Income from continuing operations
before cumulative effect of
change in accounting principle 3,128 3,649 15,243
Discontinued operations (net of taxes) 138 (117) 55
Income before cumulative
effect of change in
accounting principles 3,266 3,532 15,298
Cumulative effect of change
in accounting principle - (30,080) (82)
Net income (loss) $3,266 $(26,548) $15,216
Net income (loss) per common share:
Income from continuing operations before
cumulative effect of change in
accounting principle:
Basic $0.31 $0.38 $1.54
Diluted $0.31 $0.37 $1.51
Discontinued operations,
net of taxes:
Basic $0.02 $(0.01) $0.01
Diluted $0.01 $(0.01) $0.01
Cumulative effect of change in
accounting principle,
net of taxes:
Basic - $(3.11) $(0.01)
Diluted - $(3.05) $(0.01)
Net income (loss)
Basic $0.33 $(2.74) $l.54
Diluted $0.32 $(2.69) $1.51
Weighted average common shares outstanding:
Basic 9,969 9,681 9,862
Diluted 10,181 9,862 10,088
Depreciation and amortization $1,962 $1,700 $7,594
Capital expenditures $1,166 $2,447 $9,257
(1) Financial information for prior periods has been reclassified to reflect the Company's axle and tire business as a discontinued operation.
BALANCE SHEET INFORMATION (2)
March 31,
(In thousands, except per share amounts and ratios) 2003 2002
Current assets
Cash and short term investments $3,032 $1,373
Accounts receivable, net 19,853 20,243
Inventories 34,349 25,696
Prepaid expenses and other current assets 5,925 4,513
Discontinued operations 18 3,630
Total current assets 63,177 55,455
Fixed assets, net 73,471 70,619
Goodwill, net 7,043 5,972
Other intangible assets 4,843 977
Other assets 3,198 5,739
Total assets $151,732 $138,762
Current liabilities
Current maturities of long-term indebtedness $9,963 $9,653
Accounts payable, accrued expenses and
other current liabilities 25,319 28,526
Discontinued operations 196 1,194
Total current liabilities 35,478 39,373
Long-term indebtedness 38,449 44,324
Other long-term obligations 3,500 245
Total liabilities 77,427 83,942
Total stockholders' equity 74,305 54,820
Total liabilities and stockholders' equity $151,732 $138,762
Current ratio 1.8 1.4
Total debt to equity 0.7 1.0
(2) Financial information for prior periods has been reclassified to reflect the Company's axle and tire business as a discontinued operation.