Drew Industries Reports Improved Second-Quarter Results
RV segment gains drive increases in sales, net income
WHITE PLAINS, N.Y., July 24 -- Drew Industries Incorporated (AMEX:DW) today announced improved operating results for the second quarter ended June 30, 2003, highlighted by increased profitability and market share gains in the recreational vehicle segment.
The White Plains, N.Y.-based supplier of RV and manufactured housing components, reported net sales increased four percent to $89.4 million in the second quarter of 2003, compared with net sales of $85.7 million in the second quarter of 2002. Net income improved 12 percent to $5.3 million, or $.52 per diluted share, in the 2003 second quarter, compared with net income of $4.8 million, or $.48 per share, in the same period last year.
For the first six months of 2003, Drew reported that net income rose to $8.6 million, or $.84 per diluted share, on net sales of $170.2 million, compared to a net loss of $21.8 million, or $2.19 per share, on net sales of $157.9 million during the first six months of 2002. The 2002 six-month results include a charge of $30.1 million, or $3.03 per diluted share, for impairment of goodwill. Income from continuing operations for the first six months of 2003 was approximately the same as during the first six months of 2002.
"We are pleased with Drew's results through the first half of 2003, particularly the improvements we showed in the second quarter," said Leigh J. Abrams, President and CEO of Drew Industries. "We have continued to gain market share and report improved results despite the continued downturn in the manufactured housing industry because we offer customers an expansive product line and highly responsive service. Additionally, our company-wide efforts to improve productivity and reduce operating costs as a percentage of sales have yielded improved margins and profitability this quarter."
Gross margin improved to 25.6 percent of sales in the second quarter of 2003, versus 25.1 percent in the same period a year ago. Company-wide efforts to manage selling, general and administrative costs helped Drew reduce consolidated operating expenses as a percentage of sales compared with the year-ago period. Higher sales, improved gross margin and efforts to manage operating expenses resulted in an 11.6 percent increase in operating profit versus the 2002 second quarter. Consolidated operating profit increased to $9.6 million in the 2003 second quarter, an improvement of $1 million over the same period last year.
Recreational Vehicle Products Segment
Drew's recreational vehicle (RV) products segment continued to outperform the RV industry by achieving a 26 percent increase in net sales during the second quarter of 2003, compared to a four percent decrease in industry-wide shipments of RVs in April and May, the only two months for which industry statistics are available. Industry-wide shipments of travel trailers and fifth wheel RVs, Drew's primary RV markets, increased an aggregate of four percent in April and May. Net sales increased throughout Drew's RV product lines, highlighted by an 81 percent increase in sales of RV slide-out mechanisms and power units.
Drew reported that RV segment operating profits rose 70 percent to $6.9 million in the second quarter of 2003. Segment operating margins improved to 12.4 percent of sales, from 9.2 percent in the second quarter of last year. Improved operating results at several of the Company's facilities, especially those in Rialto, Calif., and Goshen and Middlebury, Ind., contributed significantly to the increased profitability of Drew's RV segment.
Mr. Abrams said: "Our RV segment continues to grow despite some softening in the industry this year. Acquisitions we have made in recent years have allowed us to expand our product line and better serve our customers. Additionally, the trend toward greater use of slide-outs is continuing, which has spurred sales and improved profitability at our Lippert Components division. The long-term demographic trends for the RV industry are excellent, and we remain confident in our ability to continue outperforming the industry throughout 2003."
Drew said the RV segment accounted for $55.5 million, or 62 percent, of the Company's sales, and $6.9 million, or 64 percent, of consolidated segment operating profit during the second quarter of 2003.
Manufactured Housing Products Segment
Drew's manufactured housing (MH) products segment continues to be hampered by the prolonged slump in the industry. Net sales by the Company's MH segment declined 18 percent, to $34.0 million in the current quarter. This was better than the industry-wide 27 percent decline in production in April and May, the only two months for which industry statistics are available. Though Drew's MH segment has remained profitable in every quarter through this slump, higher insurance costs and lower sales volume caused segment-operating profit to decline from 13.2 percent of sales in the second quarter of 2002, to 11.6 percent of sales in the same period this year.
"The manufactured housing industry continues to be plagued by repossessions and tight credit, and those factors are weighing on Drew's MH segment. However, our MH segment has remained profitable throughout this period, and steel prices have decreased recently from the high levels of last year, easing the burden on our costs," said Abrams. "We believe the quality of manufactured homes and the cost advantages over site-built homes will lead to greater demand for these homes over time. The long-term outlook for the industry, as well as Drew's MH segment, remains strong, emphasized by the recent interest of Warren Buffett of Berkshire Hathaway and others in the financial community in this industry."
Balance Sheet/Other
Drew reported that operating cash flow and the Company's asset management efforts enabled the Company to reduce its debt by $11.6 million since the end of the first quarter of 2003. Drew currently has no borrowings under its $30 million line of credit, despite making a scheduled payment of $8 million on its Senior Notes earlier this year, and expending $4 million for the acquisition of LTM Manufacturing in July 2003.
Drew also reported that its efforts to manage working capital resulted in a decrease in inventories, which were $5.3 million lower than at December 31, 2002. Accounts receivable remain current and continue to be collected quickly, with less than 21 days sales outstanding at the end of the quarter. Capital expenditures were $2.8 million for the six months, and are expected to be approximately $7.5 million for the year. Depreciation and amortization was $3.9 million for the six months and is expected to total approximately $8.2 million for the year.
"We are pleased that Drew's long track record of profitable quarters continues, and we look forward to continuing our momentum throughout the coming quarters," said Abrams. "Our acquisition of LTM last week brings several complementary RV products to our Lippert Components subsidiary. LTM specializes in innovative, time-saving and convenience products, such as specialty slide-out storage trays, decks and electric stabilizer jacks for the changing needs of RVers, and we expect to expand our market share in the RV segment as a result."
Drew is pleased to have received notification recently from Institutional Shareholders Services, Inc. (ISS), a Rockville, Md.- based independent research firm that advises institutional investors, that Drew's corporate governance policies outranked 98.4 percent of all companies listed in the Russell 3000 Index.
Conference Call
Drew will provide an online, real-time webcast and rebroadcast of its second quarter earnings conference call on Thursday, July 24, 2003, at 11:00 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 58165607. 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, RV slide-out mechanisms and power units, bath and shower units, and electric stabilizer jacks. From 40 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 .
DREW INDUSTRIES INCORPORATED
OPERATING RESULTS
Six Months Ended Quarter Ended Last
June 30, June 30, Twelve
(In thousands, 2003 2002 2003 2002 Months
except per share amounts)
Net sales $ 170,237 $ 157,905 $ 89,410 $ 85,718 $ 337,763
Cost of sales 129,404 118,350 66,527 64,211 257,898
Gross profit 40,833 39,555 22,883 21,507 79,865
Selling, general and
administrative expenses 25,299 24,068 13,298 12,922 50,605
Operating profit 15,534 15,487 9,585 8,585 29,260
Interest expense, net 1,618 1,804 807 873 3,380
Income from continuing
operations before
income taxes and
cumulative effect of
change in accounting
principle 13,916 13,683 8,778 7,712 25,880
Provision for income taxes 5,443 5,227 3,433 2,905 10,099
Income from continuing
operations before
cumulative effect of
change in accounting
principle 8,473 8,456 5,345 4,807 15,781
Discontinued operations
(net of taxes) 138 157) -- (40) 95
Income before cumulative
effect of change in
accounting principle 8,611 8,299 5,345 4,767 15,876
Cumulative effect of change
in accounting principle
for goodwill (net of
taxes) -- (30,080) -- -- (82)
Net income (loss) $ 8,611 $ (21,781) $ 5,345 $ 4,767 $ 15,794
Net income (loss)
per common share:
Income from continuing
operations before
cumulative
effect of change
in accounting
principle:
Basic $ .85 $ .87 $ .53 $ .49 $ 1.59
Diluted $ .83 $ .85 $ .52 $ .48 $ 1.56
Discontinued operations,
net of taxes:
Basic $ .01 $ (.01) $ -- $ -- $ .01
Diluted $ .01 $ (.01) $ -- $ -- $ .01
Cumulative effect of
change in accounting
principle for goodwill,
net of taxes:
Basic $ -- $ (3.10) $ -- $ -- $ (.01)
Diluted $ -- $ (3.03) $ -- $ -- $ (.01)
Net income (loss)
Basic $ .86 $ (2.24) $ .53 $ .49 $ 1.59
Diluted $ .84 $ (2.19) $ .52 $ .48 $ 1.56
Weighted average
common shares
outstanding:
Basic 10,007 9,717 10,045 9,753 9,935
Diluted 10,215 9,924 10,249 9,987 10,154
Depreciation and
amortization $ 3,923 $ 3,470 $ 1,961 $ 1,770 $ 7,785
Capital expenditures $ 2,840 $ 5,143 $ 1,674 $ 2,696 $ 8,235
DREW INDUSTRIES INCORPORATED
SEGMENT RESULTS
Six Months Ended June 30, Three Months Ended June 30,
(In thousands) 2003 2002 2003 2002
Net sales
RV Segment $ 105,714 $ 78,814 $ 55,457 $ 44,106
MH Segment 64,523 79,091 33,953 41,612
Total $ 170,237 $ 157,905 $ 89,410 $ 85,718
Operating Profit
RV Segment $ 11,416 $ 7,638 $ 6,886 $ 4,056
MH Segment 6,479 9,730 3,938 5,486
Total segments
operating profit 17,895 17,368 10,824 9,542
Amortization of
intangibles (375) (359) (182) (182)
Corporate and other (1,986) (1,522) (1,057) (775)
Operating profit $ 15,534 $ 15,487 $ 9,585 $ 8,585
BALANCE SHEET INFORMATION
June 30,
(In thousands, except per share amounts and ratios) 2003 2002
Current assets
Cash and cash equivalents $ 4,884 $ 1,633
Accounts receivable, trade, less allowances 20,137 21,612
Inventories 31,825 30,729
Prepaid expenses and other current assets 5,596 4,048
Discontinued operations 6 3,253
Total current assets 62,448 61,275
Fixed assets, net 73,154 72,392
Goodwill 7,043 5,972
Other intangible assets 4,417 881
Other assets 3,062 5,641
Total assets $ 150,124 $ 146,161
Current liabilities
Notes payable, including current maturities
of long-term indebtedness $ 10,003 $ 9,639
Accounts payable, accrued expenses and
other current liabilities 28,961 33,300
Discontinued operations 131 1,102
Total current liabilities 39,095 44,041
Long-term indebtedness 26,759 40,633
Other long-term liabilities 3,245 260
Total liabilities 69,099 84,934
Total stockholders' equity 81,025 61,227
Total liabilities and stockholders' equity $ 150,124 $ 146,161
Current ratio 1.6 1.4
Total indebtedness to stockholders' equity 0.5 0.8