Drew Announces Second Quarter Results
25 July 2000
Drew Announces Second Quarter Results
WHITE PLAINS, N.Y. - Drew Industries Incorporated today reported net sales of $79.2 million in the second quarter of 2000, a decrease of 11 percent from net sales of $89.2 million in 1999. Sales by Drew's manufactured housing products segment decreased 23 percent to $52.5 million in 2000. However, sales by Drew's recreational vehicle products segment increased 29 percent to $26.7 million.Earnings per share (diluted) decreased 50 percent to $.22 in the second quarter of 2000, from $.44 in 1999, while net income decreased 53 percent to $2.4 million.
Net sales for the six months were $153.8 million, down 12 percent from sales of $175.1 million in 1999. Earnings per share (diluted) for the six months declined 41 percent to $.47, while net income declined 43 percent to $5.1 million.
The manufactured housing industry, during the past year, has suffered from an industry-wide over supply of unsold new homes; too many retail dealers; tighter mortgage credit; and the exit of several finance companies from the industry, as well as an increase in repossessions of homes. These factors, combined with a resulting decline in retail sales despite healthy consumer demand for manufactured homes, have all contributed to a decline in manufacturing output by Drew's customers.
Industry sales of towable RV's, the primary market for Drew's RV products, have remained strong, but growth has slowed. Industry sales of motor homes slowed recently due to excess retail inventory as well as the end of the model year. As a result of an increase in Drew's market share, growth of Drew's RV product sales have far outpaced the industry.
The $4.3 million decline from last year's second quarter's operating profit relates largely to the 11 percent decline in our net sales, which caused a reduction in operating profit of almost $2 million. An additional $1 million of the profit shortfall relates to plant start-up and consolidation costs in connection with five new plants that the Company is building, primarily to produce RV products. Two of these plants opened during the second quarter and the remaining three will open by the end of the year. During the second quarter, the Company also closed two factories and the operations were relocated to new plants. The balance of the profit decline relates primarily to increases in material costs and labor rates, which could not be fully passed on to our customers.
For the balance of fiscal 2000, we anticipate that the slowdown in the manufactured housing industry will persist, and that material costs and labor rates will continue to hamper profits. While start-up costs will be lower in the future, we believe that until the manufactured housing industry recovers, it will be difficult to improve margins.
On June 13, 2000 the Company completed a self-tender offer, pursuant to which 1,450,000 shares of common stock were purchased at $8.00 per share for a total of $11.6 million. The Company used its line of credit to finance this transaction. Since the shares were purchased near the end of the second quarter, there was no effect on earnings per share, but future quarters will be favorably impacted.
Drew, through its wholly-owned subsidiaries, Kinro, Lippert, Lippert Tire & Axle and Coil Clip, supplies a wide variety of components for manufactured homes and RV's. Manufactured products include windows, doors, chassis, chassis parts, roofs and new and refurbished axles. The Company also distributes new and refurbished tires. The Company operates 39 plants in 18 states.
This press release contains certain statements, including the Company's plans regarding its operating strategy, its products and performance and its views of industry prospects, which could be construed to be forward looking statements within the meaning of the Securities Exchange Act of 1934. These statements reflect the Company's current views with respect to future plans, events and financial performance.
DREW INDUSTRIES INCORPORATED
OPERATING RESULTS
Six Months Ended
June 30,
(In thousands, except per share
amounts) 2000 1999
---- ----
Net sales $ 153,812 $175,096
Cost of sales 121,497 135,474
---------- ----------
Gross profit 32,315 39,622
Selling, general and administrative
expenses 21,724 22,662
---------- ----------
Operating profit 10,591 16,960
Interest expense 1,879 1,860
---------- ----------
Income before income taxes 8,712 15,100
Provision for income taxes 3,568 6,061
---------- ----------
Net income $ 5,144 $ 9,039
========== ==========
Net income per common share:
Basic $ .47 $ .79
========== ==========
Diluted $ .47 $ .79
========== ==========
Weighted average common shares
outstanding:
Basic 10,946 11,424
========== ==========
Diluted 10,949 11,475
========== ==========
Depreciation and amortization $ 4,265 $ 3,954
========== ==========
Quarter Ended Last
June 30, Twelve
2000 1999 Months
---- ---- ------
(In thousands, except per share
amounts)
Net sales $ 79,152 $89,209 $ 303,171
Cost of sales 62,925 67,860 235,152
--------- --------- ---------
Gross profit 16,227 21,349 68,019
Selling, general and administrative
expenses 11,137 11,945 42,454
--------- --------- ---------
Operating profit 5,090 9,404 25,565
Interest expense 1,010 857 3,387
--------- --------- ---------
Income before income taxes 4,080 8,547 22,178
Provision for income taxes 1,696 3,450 8,862
--------- --------- ---------
Net income $ 2,384 $ 5,097 $ 13,316
========= ========= =========
Net income per common share:
Basic $ .22 $ .44 $ 1.20
========= ========= =========
Diluted $ .22 $ .44 $ 1.19
========= ========= =========
Weighted average common shares
outstanding:
Basic 10,743 11,468 11,137
========= ========= =========
Diluted 10,745 11,490 11,147
========= ========= =========
Depreciation and amortization $ 2,160 $ 1,998 $ 8,453
========= ========= =========
BALANCE SHEET INFORMATION
June 30,
---------
(In thousands, except per share
amounts and ratios) 2000 1999
---- ----
Current assets
Cash and short term investments $ 2,752 $ 6,685
Accounts receivable, net 20,830 17,757
Inventories 38,654 30,614
Prepaid expenses and other current
assets 4,395 4,653
----------- -----------
Total current assets 66,631 59,709
Fixed assets, net 62,571 45,928
Goodwill, net 45,035 46,987
Other assets 4,406 5,214
----------- -----------
Total assets $ 178,643 $ 157,838
=========== ===========
Current liabilities
Current maturities of long-term
obligations $ 9,344 $ 794
Accounts payable and accrued
expenses 31,181 32,266
----------- -----------
Total current liabilities 40,525 33,060
Long-term indebtedness 60,147 45,547
Other long-term obligations 2,110 1,665
----------- -----------
Total liabilities 102,782 80,272
Total stockholders' equity 75,861 77,566
----------- -----------
Total liabilities and
stockholders' equity $ 178,643 $ 157,838
=========== ===========
Current ratio 1.6 1.8
Total debt to equity 0.9 0.6
Book value per share $ 7.86 $ 6.77