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Drew Industries Reports 2015 Third Quarter Results

11/03/2015

ELKHART, Ind., Nov. 3, 2015 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $17.3 million, or $0.70 per diluted share, for the third quarter ended September 30, 2015, compared to net income of $15.5 million, or $0.64 per diluted share, for the third quarter ended September 30, 2014.

Consolidated net sales in the third quarter of 2015 increased to $345 million, 17 percent higher than the 2014 third quarter. This growth in consolidated net sales resulted primarily from a 19 percent increase in net sales of Drew's RV Segment for the 2015 third quarter compared to the 2014 third quarter. The acquisitions completed by the Company over the twelve months ended September 30, 2015, as well as the distribution and supply agreement with Furrion Limited entered into in July 2015, added $23 million in net sales in the third quarter of 2015. The five 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 positively impacted the net sales growth in the 2015 third quarter. 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 September 30, 2015, increased $148, or 5.3 percent, to $2,952, compared to content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2014 of $2,804.  The Company's content per motorhome RV for the twelve months ended September 30, 2015, increased by $307, or 20.5 percent, to $1,807, compared to content per motorhome RV for the twelve months ended September 30, 2014, of $1,500.

"Our net sales in the 2015 third quarter increased at double digit year-over-year rates, despite a modest increase in industry-wide wholesale shipments of RVs during the quarter," said Jason Lippert, Drew's Chief Executive Officer. "Strong organic growth from new products, product innovation and market share gains, coupled with recent acquisitions, allowed us to significantly exceed the industry-wide increase in wholesale shipments of RVs. Our focus on enhancing the RV user's experience and our extensive product offerings together contributed to our organic sales growth. In particular, our net sales attributable to adjacent industries and the aftermarket increased organically during the 2015 third quarter by a combined $12 million, or 22 percent. These markets will continue to be areas of focus for our teams as key drivers of future growth."

Over the past twelve months, the RV industry has produced units earlier in its annual cycle than in prior years, with a 14 percent increase in wholesale shipments of travel trailer and fifth-wheel RVs between October 2014 and March 2015, followed by a four percent increase in wholesale shipments of travel trailer and fifth-wheel RVs between April 2015 and September 2015. Over that same twelve month period, retail sales of travel trailer and fifth-wheel RVs increased an estimated 12 percent. Based on the strength of retail sales to date and projected economic conditions, most industry analysts continue to report that RV dealer inventory is in line with anticipated retail demand.

"The 2015 RV OEM Open House in Elkhart, Indiana in September was well attended by RV dealers and our RV OEM customers reported taking significant orders during this event. The majority of those orders will be filled over the next two quarters, and we are seeing strong demand in our factories as a result of another strong Open House," said Jason Lippert. "Over the past several months, the industry-wide wholesale production growth rate of towable RVs slowed to mid-single digit rates. This primarily affected larger units containing more of our content, which we believe is due to the pull forward of production in late 2014 and early 2015.  Customers have reported that orders received after the RV OEM Open House indicate a more normalized travel trailer and fifth-wheel RV wholesale shipment level in the fourth quarter of 2015."

In October 2015, Drew's consolidated net sales reached approximately $129 million, 11 percent higher than October 2014. Excluding the impact of acquisitions, the Company's consolidated net sales for October 2015 were up 5 percent.

"Our operating profit margin in the third quarter of 2015 was 7.9 percent, compared to 7.8 percent in the third quarter of 2014," said Scott Mereness, Drew's President. "In 2014 and early 2015 in response to the strong growth in the RV industry and our market share gains, we made significant investments in manufacturing capacity, both facilities and personnel. As RV industry growth has slowed from its multi-year double digit growth pace, these higher fixed costs negatively impacted our operating margins in the 2015 third quarter. In response, we evaluated our labor requirements and initiated a focused program to reduce indirect labor costs by approximately $12 to $14 million annually. During October 2015, we took actions that will realize approximately 70 percent of our target."

In August 2015, Drew acquired the business and certain assets of Roehm Marine, LLC, also known as Signature Seating ("Signature"), a manufacturer of furniture solutions for fresh water boat manufacturers, primarily pontoon boats. Signature's net sales for the twelve months ended June 2015 were approximately $16 million. The purchase price was $16.0 million paid at closing, plus contingent consideration based on future sales of this operation.

Conference Call & Webcast

Drew will provide an online, real-time webcast of its third quarter 2015 earnings conference call on the Company's website, www.drewindustries.com. on Tuesday, November 3, 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 64342523. A replay of the webcast will also be available on Drew's website.

About Drew Industries

From 42 manufacturing facilities 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; pontoon boats; 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; LED televisions and sound systems; navigation systems; wireless backup cameras; 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 and impact of efficiency improvements and cost reductions, the successful entry into new markets, the costs of compliance with environmental laws and increased governmental regulation and oversight, 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)














Nine Months Ended


Three Months Ended





September 30,


September 30,


Last Twelve

(In thousands, except per share amounts)


2015


2014


2015


2014


Months












Net sales


$   1,068,838


$     901,431


$     345,296


$     294,271


$   1,358,189

Cost of sales


836,250


703,736


271,171


231,788


1,068,373

Gross profit


232,588


197,695


74,125


62,483


289,816

Selling, general and administrative expenses


139,945


117,475


46,954


39,412


179,952

Sale of extrusion assets


-


1,954


-


-


-

Operating profit


92,643


78,266


27,171


23,071


109,864

Interest expense, net


1,399


324


595


130


1,505

Income before income taxes


91,244


77,942


26,576


22,941


108,359

Provision for income taxes


33,039


27,672


9,313


7,453


38,158

Net income


$       58,205


$       50,270


$       17,263


$       15,488


$       70,201












Net income per common share:











Basic


$          2.40


$          2.11


$          0.71


$          0.65


$          2.90

Diluted


$          2.36


$          2.07


$          0.70


$          0.64


$          2.86












Weighted average common shares outstanding:











Basic


24,261


23,870


24,289


23,935


24,193

Diluted


24,614


24,300


24,686


24,301


24,574












Depreciation and amortization


$       30,663


$       23,475


$       10,808


$         8,555


$       39,784

Capital expenditures


$       21,808


$       30,032


$         7,140


$       12,120


$       34,234












 

 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)














Nine Months Ended


Three Months Ended





September 30,


September 30,


Last Twelve

(In thousands)


2015


2014


2015


2014


Months












Net sales: (1)











  RV Segment:











    RV OEMs:











      Travel trailers and fifth-wheels


$     722,157


$     643,629


$     216,093


$     196,213


$     922,624

      Motorhomes


64,085


51,664


23,539


21,607


80,195

    RV aftermarket


64,896


32,777


26,203


16,015


81,689

    Adjacent industries


128,169


84,396


47,295


29,769


156,781

        Total RV Segment net sales


979,307


812,466


313,130


263,604


1,241,289












  MH Segment:











    Manufactured housing OEMs


61,144


58,550


22,786


21,269


80,015

    Manufactured housing aftermarket


12,010


10,849


3,880


3,677


15,347

    Adjacent industries


16,377


19,566


5,500


5,721


21,538

      Total MH Segment net sales


89,531


88,965


32,166


30,667


116,900












      Total net sales


$   1,068,838


$     901,431


$     345,296


$     294,271


$   1,358,189












  Operating Profit:











    RV Segment


$       82,961


$       72,048


$       23,720


$       20,287


$       97,484

    MH Segment


9,682


8,172


3,451


2,784


12,380

      Total segment operating profit


92,643


80,220


27,171


23,071


109,864

  Sale of extrusion assets


-


(1,954)


-


-


-

      Total operating profit


$       92,643


$       78,266


$       27,171


$       23,071


$     109,864












(1) In the third quarter of 2015, the Company refined the various sales categories within the RV Segment.  This refinement had no impact on total RV Segment net sales or trends.  Prior periods have been reclassified to conform to this presentation.

 

 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)










September 30,


December 31,

(In thousands)


2015


2014


2014








ASSETS







Current assets







Cash and cash equivalents


$         7,252


$               4


$                4

Accounts receivable, net


84,381


64,543


37,987

Inventories, net


178,847


127,078


132,492

Prepaid expenses and other current assets


35,738


30,967


37,153

Total current assets


306,218


222,592


207,636

Fixed assets, net


150,424


133,543


146,788

Goodwill


84,551


66,203


66,521

Other intangible assets, net


104,109


100,785


96,959

Other assets


24,087


26,286


25,937

Total assets


$     669,389


$     549,409


$       543,841








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable, trade


$       53,095


$       44,541


$        49,534

Accrued expenses and other current liabilities


75,561


61,999


57,651

Total current liabilities


128,656


106,540


107,185

Long-term indebtedness


91,829


40,000


15,650

Other long-term liabilities


31,273


25,536


26,108

Total liabilities


251,758


172,076


148,943

Total stockholders' equity


417,631


377,333


394,898

Total liabilities and stockholders' equity


$     669,389


$     549,409


$       543,841








 

 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)








Nine Months Ended



September 30,

(In thousands)


2015


2014






Cash flows from operating activities:





Net income


$       58,205


$       50,270

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





Depreciation and amortization


30,663


23,475

Stock-based compensation expense


10,984


7,909

Other non-cash items


854


2,837

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





Accounts receivable, net


(40,761)


(27,162)

Inventories, net


(39,289)


(16,526)

Prepaid expenses and other assets


1,976


(3,668)

Accounts payable, trade


1,612


16,276

Accrued expenses and other liabilities


20,507


13,553

Net cash flows provided by operating activities


44,751


66,964






Cash flows from investing activities:





Capital expenditures


(21,808)


(30,032)

Acquisitions of businesses


(41,058)


(100,157)

Proceeds from note receivable


-


750

Proceeds from sales of fixed assets


2,141


3,344

Other investing activities


(272)


(66)

Net cash flows used for investing activities


(60,997)


(126,161)






Cash flows from financing activities:





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


(275)


3,555

Proceeds from line of credit borrowings


563,325


330,346

Repayments under line of credit borrowings


(537,146)


(290,346)

Proceeds from shelf-loan borrowing


50,000


-

Payment of special dividend


(48,227)


(46,706)

Payment of contingent consideration related to acquisitions


(3,963)


(3,732)

Other financing activities


(220)


(196)

Net cash flows provided by (used for) financing activities


23,494


(7,079)






Net increase (decrease) in cash


7,248


(66,276)






Cash and cash equivalents at beginning of period


4


66,280

Cash and cash equivalents at end of period


$         7,252


$               4






 

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)















Nine Months Ended


Three Months Ended






September 30,


September 30,


Last Twelve



2015


2014


2015


2014


Months

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












Industry Wholesale Production:












Travel trailer and fifth-wheel RVs


239.4


226.6


68.7


65.5


311.7


Motorhome RVs


35.9


34.0


11.2


10.7


45.8


Manufactured homes


51.6


48.2


18.3


17.5


67.8


Industry Retail Sales:












Travel trailer and fifth-wheel RVs


259.0

(2)

234.3


93.8

(2)

87.9


301.8

(2)

Impact on dealer inventories


(19.6)

(2)

(7.7)


(25.1)

(2)

(22.4)


9.9

(2)

Motorhome RVs


32.7

(2)

29.4


11.1

(2)

10.0


39.8

(2)































Twelve Months Ended










September 30,










2015


2014




Drew Content Per Industry Unit Produced:












Travel trailer and fifth-wheel RV






$         2,952

(3)

$         2,804

(3)



Motorhome RV






$         1,807

(3)

$         1,500

(3)



Manufactured home






$         1,181


$         1,202


































September 30,


December 31,








2015


2014


2014


Balance Sheet Data:












Current ratio






2.4


2.1


1.9


Total indebtedness to stockholders' equity






0.2


0.1


0.0


Days sales in accounts receivable






22.0


20.2


14.6


Inventory turns, based on last twelve months






7.2


8.2


8.2
































2015




Estimated Full Year Data:












Capital expenditures






$ 28 - $ 30 million




Depreciation and amortization






$ 40 - $ 42 million




Stock-based compensation expense






$ 15 - $ 16 million




Annual tax rate






36% - 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) September 2015 retail sales data for RVs has not been published yet, therefore 2015 retail data for RVs includes an estimate for September 2015 retail units.

 

(3) In the third quarter of 2015, the Company refined the calculation of RV content per unit. This refinement had no impact on total RV Segment net sales or trends of content per unit. Prior periods have been reclassified to conform to this presentation.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/drew-industries-reports-2015-third-quarter-results-300170869.html

SOURCE Drew Industries Incorporated

David Smith, CFO, (574) 535-1125, drew@drewindustries.com

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