Drew Announces Third Quarter Results
23 October 2000
Drew Announces Third Quarter Results
WHITE PLAINS, N.Y.--Oct. 23, 2000--Drew Industries Incorporated (AMEX: DW) today reported net sales of $74.9 million in the third quarter of 2000, a decrease of 6 percent from net sales of $79.7 million in 1999. Sales by Drew's manufactured housing products segment decreased 20 percent to $47.5 million in 2000. However, sales by Drew's recreational vehicle products segment increased 37 percent to $27.4 million.Earnings per share (diluted) were $.11 in the third quarter of 2000, a decrease of 71 percent from $.38 in 1999, while net income was $1.0 million, a decrease of 76 percent from $4.3 million in last year's third quarter. Net sales for the nine months were $228.7 million, down 10 percent from sales of $254.8 million in 1999. Earnings per share (diluted) for the nine months was $.58, a decrease of 50 percent from last year, while net income declined 54 percent to $6.2 million.
Operating profit during the third quarter declined $5.1 million from last year's third quarter. This decline was partly due to the 6 percent decline in net sales which caused a reduction in operating profit of almost $1.2 million. An additional $1.1 million of the profit shortfall relates to plant start-up and consolidation costs and related production inefficiencies in connection with five new plants that the Company opened during 2000 primarily to produce RV products. In addition, increases in material and labor costs of about $2.2 million could not be fully passed on to our customers.
As previously disclosed, Drew's axle and tire operation has not performed well over the past several years. This is due primarily to increased competition which has severely affected operating margins. Our third quarter was particularly hard hit by the poor operating results of this operation. As a result, the Company is studying whether the $8 million of goodwill and $3 million of fixed assets related to the axle and tire operation, have been impaired and, if so, to what extent. During the fourth quarter the Company expects to complete its evaluation and may write off all or a portion of these long-lived assets. Any such write-off will, of course, be a non-cash charge and will not significantly affect tangible net worth.
During the third quarter the slump in the manufactured housing industry, which began in the spring of 1999, continued. Although some progress has reportedly been made in reducing the inventory of homes held by both the manufacturers and retail dealers, an oversupply persists. The more troubling problem in the manufactured housing industry appears to be tighter credit standards applied by mortgage lenders, which has occurred as a result of higher rates of defaults, along with a lack of availability of mortgage credit. We do not anticipate any significant increase in industry-wide sales of manufactured homes until credit availability improves, and the inventory of homes declines further.
Industry sales of towable RV's, the primary market for Drew's RV products, have recently been approximately the same as last year's levels, which were the highest in 20 years. Industry sales of motor homes slowed in the past few months due to excess retail inventory. However, Drew does not sell a significant amount of products for motor homes. As a result of an increase in Drew's market share, growth of Drew's RV product sales has far outpaced the industry.
We anticipate that the slowdown in the manufactured housing industry will persist for the balance of fiscal 2000, and that higher material and labor costs will continue to hamper profits. While start-up costs are expected to be lower in the future, we believe that until the manufactured housing industry recovers, it will be difficult to improve margins.
Drew will provide an online, real-time webcast and rebroadcast of its third quarter earnings conference call on Monday, October 23, 2000, beginning at 4:00 p.m. eastern time, at www.drewindustries.com. The online replay will be available at approximately 6:00 p.m. eastern time and will continue for two weeks.
DREW INDUSTRIES INCORPORATED
OPERATING RESULTS
Nine Months Ended
September 30,
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(In thousands, except
per share amounts) 2000 1999
---- ----
Net sales $228,727 $254,799
Cost of sales 183,086 196,438
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Gross profit 45,641 58,361
Selling, general and
administrative expenses 32,166 33,450
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Operating profit 13,475 24,911
Interest expense 2,753 2,644
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Income before
income taxes 10,722 22,267
Provision for income taxes 4,552 8,898
-------- --------
Net income $ 6,170 $ 13,369
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Net income per common share:
Basic $ .58 $ 1.17
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Diluted $ .58 $ 1.17
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Weighted average common
shares outstanding:
Basic 10,559 11,402
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Diluted 10,561 11,438
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Depreciation and amortization $ 6,574 $ 6,029
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Quarter Ended
September 30,
------------------- Last
(In thousands, except Twelve
per share amounts) 2000 1999 Months
---- ---- ------
Net sales $ 74,915 $ 79,703 $298,383
Cost of sales 61,589 60,964 235,777
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Gross profit 13,326 18,739 62,606
Selling, general and
administrative expenses 10,442 10,788 42,108
-------- -------- --------
Operating profit 2,884 7,951 20,498
Interest expense 874 784 3,477
-------- -------- --------
Income before
income taxes 2,010 7,167 17,021
Provision for income taxes 984 2,837 7,029
-------- -------- --------
Net income $ 1,026 $ 4,330 $ 9,992
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Net income per common share:
Basic $ .11 $ .38 $ .93
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Diluted $ .11 $ .38 $ .93
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Weighted average common
shares outstanding:
Basic 9,656 11,376 10,738
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Diluted 9,657 11,389 10,741
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Depreciation and amortization $ 2,309 $ 2,075 $ 8,687
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BALANCE SHEET INFORMATION
September 30,
----------------------------
(In thousands, except per
share amounts and ratios) 2000 1999
---- ----
Current assets
Cash and short term investments $ 1,891 $ 5,262
Accounts receivable, net 19,393 19,391
Inventories 35,941 31,483
Prepaid expenses and
other current assets 3,977 4,755
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Total current assets 61,202 60,891
Fixed assets, net 67,201 46,926
Goodwill, net 44,586 46,537
Other assets 4,194 4,964
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Total assets $ 177,183 $ 159,318
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Current liabilities
Current maturities of
long-term obligations $ 9,341 $ 802
Accounts payable and
accrued expenses 28,659 30,830
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Total current liabilities 38,000 31,632
Long-term indebtedness 60,286 45,344
Other long-term obligations 2,110 1,665
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Total liabilities 100,396 78,641
Total stockholders' equity 76,787 80,677
----------- -----------
Total liabilities and
stockholders' equity $ 177,183 $ 159,318
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Current ratio 1.6 1.9
Total debt to equity 0.9 0.6
Book value per share $ 7.95 $ 7.11