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Drew Industries Reports 2015 First Quarter Results

05/05/2015

ELKHART, Ind., May 5, 2015 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $20.1 million, or $0.82 per diluted share, for the first quarter ended March 31, 2015, compared to net income of $16.2 million, or $0.67 per diluted share, for the first quarter ended March 31, 2014.

Consolidated net sales in the first quarter of 2015 increased to a quarterly record $361 million, 27 percent higher than the 2014 first quarter. This growth in net sales primarily resulted from a 29 percent increase in net sales of Drew's RV Segment, which accounted for 93 percent of consolidated net sales in the 2015 first quarter. RV Segment net sales growth was primarily due to an 8 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew's primary RV market, as well as increased content per unit through market share gains. The acquisitions completed by the Company in 2014 and the first quarter of 2015 also added $18 million in net sales in the first quarter of 2015, all of which related to Drew's RV Segment. Further, the Company organically increased sales to adjacent industries and the aftermarket.

The Company's content per travel trailer and fifth-wheel RV for the twelve months ended March 31, 2015, increased by $192, or 7 percent, to $2,923, compared to content per travel trailer and fifth-wheel RV for the twelve months ended March 31, 2014 of $2,731. This growth in content per travel trailer and fifth-wheel RV was primarily organic through new product introductions, product enhancements and market share gains. The Company's content per motorhome RV for the twelve months ended March 31, 2015, increased by $423, or 34 percent, to $1,679, compared to content per motorhome RV for the twelve months ended March 31, 2014 of $1,256, reflecting market share gains through both organic growth and acquisitions completed in 2014.

"With the strong underlying demand for our products in the first quarter of 2015, we achieved record net sales, the highest level for any quarter in Drew's history," said Jason Lippert, Drew's Chief Executive Officer. "The industries we serve continue to grow, which, when coupled with our recent acquisitions, new products and market share gains, have led to the significant increase in our net sales for the first quarter of 2015. In particular, RV industry fundamentals show positive signs for 2015, including an estimated 13 percent increase in industry-wide retail sales of travel trailer and fifth-wheel RVs in the 2015 first quarter. As we stated in our year-end release, our RV OEM customers believe there is continued retail growth coming in 2015 and beyond, despite the RV industry approaching prior wholesale production peaks. Further, industry analysts report that dealer inventory is in line with anticipated retail demand."

"As a result of their confidence in additional retail growth for the RV industry, many RV OEMs are adding significant capacity to meet the anticipated demand," continued Jason Lippert. "As a result of the significant investments in capital expenditures, facility start-ups and personnel we made in 2014, we continue to believe we are well positioned to meet the increased demands expected for 2015 and the beginning of 2016."

In April 2015, Drew's consolidated net sales reached approximately $129 million, 14 percent higher than April 2014, a record for the month of April. Excluding the impact of acquisitions, the Company's consolidated net sales for April 2015 were up 9 percent.

"Our operating profit margins in the first quarter of 2015 were 8.8 percent compared to 9.1 percent in the first quarter of 2014," said Scott Mereness, Drew's President. "In the latter half of 2014 we made significant investments in capacity, both facilities and personnel, to prepare for the expected significant increase in net sales in 2015 and beyond. As expected, our year-over-year incremental margin in the 2015 first quarter was lower than our target incremental margin, largely as a result of these investments in fixed costs for capacity expansion and higher material costs, partially offset by improved operating efficiencies. We added capacity ahead of projected demand, which enabled us to fulfill customer orders efficiently as demand increased. While certain capacity expansion plans had a negative impact on margins, over the long term these investments should allow us to improve our operating results, as well as continue to improve our customer service."

"Additionally, increases in raw material costs, in particular aluminum, impacted our 2015 first quarter operating results," continued Mereness. "Aluminum rose nearly 20 percent during the second half of 2014, and despite a decline in recent months, remains higher than the beginning of 2014. To help mitigate the impact of higher raw material and other costs, we continue to improve product designs, make efficiency improvements and work with our vendors to identify opportunities to reduce input costs."

"During the first four months of 2015 we completed two acquisitions, which add approximately $42 million of acquired annual sales, and represent significant sales growth and profit potential," said Joseph Giordano, Drew's Chief Financial Officer and Treasurer. The two operations acquired by Drew were:

EA Technologies — A manufacturer of custom steel and aluminum parts and provider of electro-deposition ('e-coat') and powder coating services for RV, bus, medium-duty truck, automotive, recreational marine, specialty and utility trailer, and military applications. In connection with this acquisition, the Company also acquired a 250,000-square-foot facility, which provides room for capacity expansion; and

Spectal Industries — A Canada-based manufacturer of windows and doors primarily for school buses, as well as commercial buses, emergency vehicles, trucks, agricultural equipment and RVs.

"Based on our commitment to provide outstanding customer service and product quality, we are confident in our ability to gain market share in these new product lines and improve profitability," added Jason Lippert.

Conference Call & Webcast

Drew will provide an online, real-time webcast of its first quarter 2015 earnings conference call on the Company's website, www.drewindustries.com, on Tuesday, May 5, 2015, at 11:00 a.m. Eastern time.

Institutional investors can access the call via the password-protected site, StreetEvents (www.streetevents.com). A replay of the call will be available by dialing (888) 286-8010 and referencing access code 94842106. A replay of the webcast will also be available on Drew's website.

About Drew Industries

From 41 factories located throughout the United States and Canada, Drew Industries, through its wholly-owned subsidiary, Lippert Components®, supplies a broad array of components for the leading manufacturers of recreational vehicles and manufactured homes, and to a lesser extent supplies components for adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; modular housing; and factory-built mobile office units. Drew's products include steel chassis; axles and suspension solutions; slide-out mechanisms and solutions; thermoformed bath, kitchen and other products; windows; manual, electric and hydraulic stabilizer and leveling systems; chassis components; furniture and mattresses; entry, luggage, patio and ramp doors; electric and manual entry steps; awnings and slide toppers; other accessories; and electronic components. Additional information about Drew and its products can be found at www.drewindustries.com.

Forward-Looking Statements

This press release contains certain "forward-looking statements" with respect to our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management and other matters. Statements in this press release that are not historical facts are "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.

Forward-looking statements, including, without limitation, those relating to our future business prospects, net sales, expenses and income (loss), cash flow, and financial condition, whenever they occur in this press release are necessarily estimates reflecting the best judgment of the Company's senior management at the time such statements were 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, in addition to other matters described in this press release, pricing pressures due to domestic and foreign competition, costs and availability of raw materials (particularly steel, steel based components and aluminum) and other components, seasonality and cyclicality in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the costs, pace of and successful integration of acquisitions and other growth initiatives, availability and costs of labor, employee benefits, employee retention, realization of efficiency improvements, the successful entry into new markets, the costs of compliance with environmental laws and increased governmental regulation, information technology performance and security, the ability to protect intellectual property, interest rates, oil and gasoline prices, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and other risks and uncertainties discussed more fully under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and in the Company's subsequent filings with the Securities and Exchange Commission. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

 

DREW INDUSTRIES INCORPORATED

OPERATING RESULTS

(unaudited)










Three Months Ended





March 31,


Last Twelve

(In thousands, except per share amounts)


2015


2014


Months








Net sales


$     361,457


$     285,377


$   1,266,862

Cost of sales


285,054


222,177


998,736

Gross profit


76,403


63,200


268,126

Selling, general and administrative expenses


44,565


37,154


164,893

Sale of extrusion assets


-


-


1,954

Operating profit


31,838


26,046


101,279

Interest expense, net


189


120


499

Income before income taxes


31,649


25,926


100,780

Provision for income taxes


11,576


9,762


34,605

Net income


$       20,073


$       16,164


$       66,175








Net income per common share:







Basic


$          0.83


$          0.68


$          2.75

Diluted


$          0.82


$          0.67


$          2.71








Weighted average common shares outstanding:







Basic


24,215


23,774


24,030

Diluted


24,541


24,188


24,412








Depreciation and amortization


$         9,802


$         7,240


$       35,158

Capital expenditures


$         8,593


$         6,824


$       44,227








 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)










Three Months Ended





March 31,


Last Twelve

(In thousands)


2015


2014


Months








Net sales:







RV Segment:







RV OEMs:







Travel trailers and fifth-wheels


$ 260,357


$ 212,130


$ 892,323

Motorhomes


21,647


14,384


75,037

RV aftermarket


17,209


7,094


59,685

Adjacent industries


35,358


25,428


122,938

Total RV Segment net sales


334,571


259,036


1,149,983








MH Segment:







Manufactured housing OEMs


17,823


16,517


78,727

Manufactured housing aftermarket


3,829


3,467


14,548

Adjacent industries


5,234


6,357


23,604

Total MH Segment net sales


26,886


26,341


116,879








Total net sales


$ 361,457


$ 285,377


$ 1,266,862








Operating Profit:







RV Segment


$ 29,133


$ 23,729


$ 91,975

MH Segment


2,705


2,317


11,258

Total segment operating profit


31,838


26,046


103,233

Sale of extrusion assets


-


-


(1,954)

Total operating profit


$ 31,838


$ 26,046


$ 101,279








 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)











March 31,



December 31,

(In thousands)


2015


2014


2014








ASSETS







Current assets







Cash and cash equivalents


$ 27,927


$ 6,132


$ 4

Accounts receivable, net


89,798


75,763


37,987

Inventories, net


138,276


99,017


132,492

Prepaid expenses and other current assets


38,606


21,968


37,153

Total current assets


294,607


202,880


207,636

Fixed assets, net


149,087


129,060


146,788

Goodwill


66,521


48,445


66,521

Other intangible assets, net


93,898


75,456


96,959

Other assets


25,061


21,485


25,937

Total assets


$ 629,174


$ 477,326


$ 543,841








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable, trade


$ 63,212


$ 48,406


$ 49,534

Dividend payable


48,227


-


-

Accrued expenses and other current liabilities


69,499


56,187


57,651

Total current liabilities


180,938


104,593


107,185

Long-term indebtedness


50,000


10,000


15,650

Other long-term liabilities


28,230


25,025


26,108

Total liabilities


259,168


139,618


148,943

Total stockholders' equity


370,006


337,708


394,898

Total liabilities and stockholders' equity


$ 629,174


$ 477,326


$ 543,841








 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)








Three Months Ended



March 31,

(In thousands)


2015


2014






Cash flows from operating activities:





Net income


$       20,073


$       16,164

Adjustments to reconcile net income to cash flows provided by operating activities:





Depreciation and amortization


9,802


7,240

Stock-based compensation expense


3,063


2,625

Other non-cash items


153


679

Changes in assets and liabilities, net of acquisitions of businesses:





Accounts receivable, net


(51,811)


(42,790)

Inventories, net


(3,505)


4,417

Prepaid expenses and other assets


(344)


4,743

Accounts payable, trade


13,678


23,374

Accrued expenses and other liabilities


16,024


10,858

Net cash flows provided by operating activities


7,133


27,310






Cash flows from investing activities:





Capital expenditures


(8,593)


(6,824)

Acquisitions of businesses


(2,723)


(46,657)

Proceeds from sales of fixed assets


68


707

Other investing activities


(177)


(4)

Net cash flows used for investing activities


(11,425)


(52,778)






Cash flows from financing activities:





Exercise of stock-based awards, net of shares tendered for payment of taxes


(1,847)


3,320

Proceeds from line of credit borrowings


175,350


79,469

Repayments under line of credit borrowings


(191,000)


(69,469)

Proceeds from shelf-loan borrowing


50,000


-

Payment of special dividend


-


(46,706)

Payment of contingent consideration related to acquisitions


(127)


(1,098)

Other financing activities


(161)


(196)

Net cash flows provided by (used for) financing activities


32,215


(34,680)






Net increase (decrease) in cash


27,923


(60,148)






Cash and cash equivalents at beginning of year


4


66,280

Cash and cash equivalents at end of year


$       27,927


$         6,132






 

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)











Three Months Ended






March 31,


Last Twelve




2015


2014


Months


Industry Data(1)(in thousands of units):








Industry Wholesale Production:








Travel trailer and fifth-wheel RVs


81.8


75.4


305.3


Motorhome RVs


11.9


11.1


44.7


Manufactured homes


15.4


13.7


66.0


Industry Retail Sales:








Travel trailer and fifth-wheel RVs


51.3

(2)

45.3


278.4

(2)

Impact on dealer inventories


30.5

(2)

30.1


26.9

(2)

Motorhome RVs


8.1

(2)

7.6


37.0

(2)



















Twelve Months Ended






March 31,






2015


2014




Drew Content Per Industry Unit Produced:








Travel trailer and fifth-wheel RV


$         2,923


$         2,731




Motorhome RV


$         1,679


$         1,256




Manufactured home


$         1,192


$         1,294






















March 31,


December 31,




2015


2014


2014


Balance Sheet Data:








Current ratio


1.6


1.9


1.9


Total indebtedness to stockholders' equity


0.1


0.0


0.0


Days sales in accounts receivable


21.2


22.1


14.6


Inventory turns, based on last twelve months


8.2


8.1


8.2




















2015




Estimated Full Year Data:








Capital expenditures


$ 30 - $ 35 million




Depreciation and amortization


$ 38 - $ 40 million




Stock-based compensation expense


$ 14 - $ 16 million




Annual tax rate


37%













(1) Industry wholesale production data for travel trailer and fifth-wheel RVs and motorhome RVs provided by the Recreation Vehicle Industry Association.  Industry wholesale production data for manufactured homes provided by the Institute for Building Technology and Safety.  Industry retail sales data provided by Statistical Surveys, Inc.

(2) March 2015 retail sales data for RVs has not been published yet, therefore 2015 retail data for RVs includes an estimate for March 2015 retail units.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/drew-industries-reports-2015-first-quarter-results-300077317.html

SOURCE Drew Industries Incorporated

Joe Giordano, CFO & Treasurer, (574) 535-1125, drew@drewindustries.com

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