Drew Industries Net Income Surges 40% in Record Third Quarter
RV segment drives sales and profit increases
WHITE PLAINS, N.Y., Oct. 27 -- Drew Industries Incorporated (AMEX:DW) today announced record sales and net income for the third quarter ended September 30, 2003. The outstanding performance by Drew's recreational vehicle ("RV") products segment offset continuing sales declines by the Company's manufactured housing ("MH") products segment.
Drew, a White Plains, NY based supplier of RV and MH components, reported that net sales increased 8 percent to a record $96.1 million in the third quarter of 2003, compared with net sales of $89.2 million in the third quarter of 2002. Net income jumped 40 percent to a record $6.6 million, or $.64 per diluted share, compared with net income of $4.7 million, or $.47 per diluted share, in the same period last year.
For the nine months ended September 30, 2003, Drew reported that net income rose to $15.2 million, or $1.48 per diluted share, on net sales of $266.3 million, compared to a net loss of $17.1 million, or $1.71 per diluted share, on net sales of $247.1 million during the same period in 2002. The prior year period included a charge of $30.1 million, or $3.02 per diluted share, for impairment of goodwill. Income from continuing operations for the nine months ended September 30, 2003 was up 15 percent from last year's comparable period. Net income for the last 12 months reached $17.7 million, or $1.73 per diluted share.
"Our continued market share gains, along with new product introductions, superior customer service and stringent cost controls have combined to yield a truly outstanding quarter for Drew, particularly in view of the continuing sales decline in the manufactured housing industry," said Leigh J. Abrams, President and CEO of Drew Industries. "We gained market share in all our RV product lines and continue to layer on additional complementary lines through new product development as well as acquisitions. During the quarter, we completed the acquisition of LTM Manufacturing, a maker of a variety of specialty products for RVs, and in early October we acquired certain assets and the specialty chassis and towable RV chassis business of ET&T Frames. Both of these acquisitions, while having little impact on the third quarter, were accretive to earnings on day one and each represents a significant sales growth opportunity from their combined $11.5 million historical annual sales run-rate.
"These acquisitions, and our strong performance in the third quarter and year-to-date, perfectly illustrate our strategy of expanding Drew's reach through organic growth and acquisitions as we aim to become the leading supplier of systems and components to the RV market."
Drew reported that LTM's production is currently being transferred to several of the Company's other factories while the sales and marketing team begins to introduce LTM's products to Drew's extensive customer base. Likewise, production of ET&T's products has already been transferred to Drew's existing factories without adding any significant overhead. ET&T significantly expands Drew's penetration into the park and office model chassis business. Both acquisitions were financed with existing cash, and during the quarter the Company also used existing cash to prepay $1.4 million of mortgage debt. At September 30, 2003, debt totaled $35.2 million, and the Company had no borrowing under its $30 million line of credit.
Abrams said, "We continue to collect our receivables in less than 25 days and turn our inventory more than 7 times a year, which helps to contribute to our strong balance sheet and cash flow and our track record of solid return on invested capital."
Recreational Vehicle Products Segment
After achieving rapid growth of 21 percent during 2002, industry shipments of RVs have remained at near-record levels during 2003, but the industry growth rate has slowed to approximately 2 percent through the first eight months of the year. Industry shipments in Drew's primary market, travel trailers and fifth wheel RVs, have been stronger than other RV categories, increasing nearly 10 percent during this period. Outpacing industry growth, sales by Drew's RV products segment increased 26 percent in the three months ended September 30, 2003, reflecting the Company's continued market share gains and sales of new products. Drew reported sales gains in every product line. Drew supplies windows, doors, chassis and slide-out mechanisms and power units, primarily for travel trailers and fifth wheel RVs.
Operating margins of this segment reached 13.5 percent in the third quarter up from 10.7 percent in the third quarter last year. Improved operating results at several of the Company's facilities, especially those in Rialto, California and Goshen and Middlebury, Indiana, contributed significantly to the increased profitability of Drew's RV segment. The Company's RV segment accounted for 62 percent of consolidated sales this quarter.
Manufactured Housing Products Segment
Drew's manufactured housing (MH) products segment continues to be hampered by the prolonged slump in the industry, though it remains profitable. Net sales by the Company's MH segment declined 13% to $36.8 million this quarter, better than the industry-wide 22% decline in production in July and August, the latest periods for which industry statistics are available. Despite the decline in sales, the operating margin of this segment increased to 12.9 percent in the current quarter, compared to 10.6 percent in the third quarter last year. This reflects reduced operating costs, as well as more moderate steel costs compared to the higher steel costs in the second half of last year.
"While there have been some reports that the level of repossessions of manufactured homes has declined, there appears to be no measurable improvement in the availability of mortgage financing for potential home buyers," said Abrams. "Despite these difficulties, which are not within our control, we remain focused on what we can control, which are our operating efficiencies and costs, enabling our MH segment to achieve a high level of profitability throughout the prolonged industry slump. While the short-term outlook for the industry remains weak, we continue to believe that the quality and cost advantages of manufactured homes will result in a much stronger future for both the industry and Drew's MH segment."
Conference Call
Drew will provide an online, real-time webcast and rebroadcast of its third quarter earnings conference call on Monday, October 27, 2003, at 11:00 a.m. Eastern time, on the Company's website, 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 51842500. 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 41 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 strategies, 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 Reform 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 vinyl, aluminum, 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, levels of repossessed homes, 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 recreational vehicles and manufactured homes.
DREW INDUSTRIES INCORPORATED
OPERATING RESULTS
Nine Months Ended Quarter Ended Last
September 30, September 30, Twelve
2003 2002 2003 2002 Months
(In thousands, except per share amounts)
Net sales $266,344 $247,122 $96,107 $89,217 $344,653
Cost of sales 200,041 186,455 70,637 68,105 260,430
Gross profit 66,303 60,667 25,470 21,112 84,223
Selling, general and
administrative expenses 39,279 36,779 13,980 12,711 51,874
Operating profit 27,024 23,888 11,490 8,401 32,349
Interest expense, net 2,340 2,700 722 896 3,206
Income from continuing
operations before
income taxes and
cumulative effect of
change in accounting
principle 24,684 21,188 10,768 7,505 29,143
Provision for income
taxes 9,629 8,041 4,186 2,814 11,471
Income from continuing
operations before
cumulative effect of
change in accounting
principle 15,055 13,147 6,582 4,691 17,672
Discontinued operations
(net of taxes) 138 (148) - 9 86
Income before
cumulative effect of
change in accounting
principle 15,193 12,999 6,582 4,700 17,758
Cumulative effect of
change in accounting
principle for goodwill
(net of taxes) - (30,080) - - (82)
Net income (loss) $15,193 $(17,081) $6,582 $4,700 $17,676
Net income (loss) per common share:
Income from continuing operations
before cumulative effect of change
in accounting principle:
Basic $1.50 $1.35 $.65 $.48 $1.77
Diluted $1.47 $1.32 $.64 $.47 $1.73
Discontinued operations,
net of taxes:
Basic $.01 $(.02) $- $.01
Diluted $.01 $(.01) $- $.01
Cumulative effect of change in
accounting principle for goodwill,
net of taxes:
Basic $(3.08) $(.01)
Diluted $(3.02) $(.01)
Net income (loss)
Basic $1.51 $(1.75) $.65 $.48 $1.77
Diluted $1.48 $(1.71) $.64 $.47 $1.73
Weighted average common
shares outstanding:
Basic 10,044 9,757 10,118 9,836 10,005
Diluted 10,256 9,970 10,337 10,062 10,223
Depreciation and
amortization $5,878 $5,318 $1,955 $1,848 $7,892
Capital expenditures $3,906 $8,455 $1,066 $3,312 $5,989
DREW INDUSTRIES INCORPORATED
SEGMENT RESULTS
Nine Months Ended Three Months Ended
September 30, September 30,
(In thousands) 2003 2002 2003 2002
Net sales
RV Segment $165,010 $125,956 $59,296 $47,142
MH Segment 101,334 121,166 36,811 42,075
Total $266,344 $247,122 $96,107 $89,217
Operating Profit
RV Segment $19,392 $12,686 $7,976 $5,048
MH Segment 11,219 14,169 4,740 4,439
Total segments
operating profit 30,611 26,855 12,716 9,487
Amortization of intangibles (571) (551) (196) (192)
Corporate and other (3,016) (2,416) (1,030) (894)
Operating profit $27,024 $23,888 $11,490 $8,401
BALANCE SHEET INFORMATION
September 30,
(In thousands, except ratios) 2003 2002
Current assets
Cash and cash equivalents $9,433 $2,107
Accounts receivable, trade, less allowances 22,775 21,805
Inventories 35,232 34,235
Prepaid expenses and other current assets 5,253 5,939
Discontinued operations - 1,817
Total current assets 72,693 65,903
Fixed assets, net 72,816 73,860
Goodwill 10,219 6,912
Other intangible assets 4,456 922
Other assets 2,957 5,540
Total assets $163,141 $153,137
Current liabilities
Notes payable, including current
maturities of long-term indebtedness $9,825 $9,900
Accounts payable, accrued expenses
and other current liabilities 37,096 33,889
Discontinued operations 69 547
Total current liabilities 49,990 44,336
Long-term indebtedness 25,363 42,052
Other long-term liabilities 2,997 275
Total liabilities 75,350 86,663
Total stockholders' equity 87,791 66,474
Total liabilities and stockholders'
equity $163,141 $153,137
Current ratio 1.5 1.5
Total indebtedness to stockholders' equity 0.4 0.8