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| Drew Industries Reports Increased
Profits for Q3'2007 |
Cost Reductions Lead to 60% Increase
in Profits, Despite 4% Decrease in Net Sales
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White Plains, New York - October 31, 2007 - Drew Industries
Incorporated (NYSE: DW) today reported increased net income for the
nine months and third quarter ended September 30, 2007.
Despite a 4 percent year-over-year sales decline, Drew, a leading
supplier of components for recreational vehicles (RV) and
manufactured homes, reported a 60 percent increase in net income to
$11.1 million, or $0.50 per diluted share, for the 2007 third
quarter, compared to net income of $6.9 million, or $0.32 per
diluted share, for the 2006 third quarter.
“Our ability to reduce costs and make our operations even more
efficient was a significant factor in our improved results,” said
Leigh J. Abrams, Drew’s President and CEO. “In addition, our
long-standing strategy of pursuing new product introductions, market
share growth, and acquisitions, directly resulted in the improvement
in our results this quarter and year-to-date, despite the continued
weakness in both the RV and manufactured housing industries.
“Further, our aggressive cost-cutting program included closing and
consolidating the operation of 15 facilities over the last 12 months
and eliminating more than 100 salaried positions. We are also in the
process of closing down and consolidating three additional
factories.”
During the third quarters of both 2007 and 2006, the Company
realized net gains on the sale of facilities. These gains were
offset during the current year third quarter by severance, moving
and other plant consolidation costs, as well as expenses related to
pending litigation, while the gains in the prior year were primarily
offset by costs incurred for due diligence in connection with an
acquisition which was not completed. The net affect of these items
was not significant to the third quarter of either 2007 or 2006.
Net sales in the third quarter of 2007 declined 4 percent to $173
million, from $181 million in last year’s third quarter. Drew
attributed the sales decline to the 6 percent decline in industry
shipments of travel trailer and fifth wheel RVs during the third
quarter, as well as the 8 percent decline in industry shipments of
manufactured homes for July and August 2007, the latest period for
which industry statistics are available. Excluding the impact of
acquisitions completed during 2006 and 2007, Drew’s year-over-year
sales declined by $11 million, or 6 percent, in the third quarter of
2007. Price increases to customers were not significant in the 2007
third quarter.
Drew added that due to the seasonality of the RV and manufactured
housing industries, the Company’s results in the first and fourth
quarters are usually the weakest, while second and third quarter
results are traditionally stronger.
Net income for the current nine-month period increased 22 percent to
$33.3 million, or $1.51 per diluted share, compared to net income of
$27.4 million, or $1.25 per diluted share, for the comparable period
last year. Net income per diluted share for all of 2006 was $1.42.
In September 2006, the Company closed its Indiana-based specialty
trailer operation, which reported an operating loss of $1.2 million
in the third quarter of 2006, and an operating loss of $3.1 million
in the nine months ended September 30, 2006.
Net sales for the nine months ended September 30, 2007, declined 10
percent to $531 million, compared to net sales of $591 million for
the same period last year. The first quarter of 2006 included sales
of approximately $20 million, and net income of approximately $0.09
per diluted share, related to the impact of the 2005 Gulf Coast
hurricanes.
In July 2007, Lippert Components Inc. (LCI), Drew’s wholly-owned
subsidiary, acquired the business of Extreme Engineering and its
Pivit Hitch affiliate, manufacturers of specialty trailers and
related components for high-end boats, for $10.7 million in cash.
Sales for these companies were approximately $12 million in 2006 and
LCI anticipates growing this base in conjunction with its Zieman
West Coast boat trailer operation.
“In addition to the acquisition of Extreme, LCI completed two
smaller acquisitions earlier in 2007, with all three 2007
acquisitions expected to be accretive to earnings and to add new
products and markets to LCI’s product portfolio,” said Abrams.
“These are the latest in a series of acquisitions our subsidiaries
have completed over the last several years which are key factors in
our growth and have helped us outperform the industries we serve. We
continue to focus on finding and successfully integrating additional
acquisitions into the Drew family of companies.”
Recreational Vehicle Products Segment
Drew’s RV segment supplies windows, doors, chassis, slide-out
mechanisms and power units, axles, bed lifts, bath products,
electric stabilizer jacks, suspension systems, steps, exterior
panels and ramp doors for RVs, as well as specialty trailers for
hauling equipment, boats, personal watercraft and snowmobiles.
Approximately 90 percent of Drew’s RV segment sales are components
for towable RVs, with the balance representing specialty trailers
and components for motorhomes. In the third quarter of 2007, Drew’s
RV segment represented 73 percent of consolidated net sales, and 83
percent of total segment operating profit.
Drew’s RV segment reported sales of $127 million in the third
quarter of 2007, an increase of one percent from the $126 million
reported in the comparable period in 2006, outperforming the RV
industry, which reported a 6 percent decline in production of travel
trailers and fifth wheel RVs, the Company’s primary RV market.
Acquisitions added about $4 million to 2007 third quarter revenues
in this segment, compared to the third quarter of 2006.
For the nine months ended September 2007, the Recreational Vehicle
Industry Association reported that industry-wide wholesale
shipments of travel trailers and fifth wheel RVs had declined 13
percent. On the other hand, Statistical Surveys reported that
retail shipments of travel trailers and fifth wheel RVs through
August 2007 (the last month for which industry information is
available) increased nearly 3 percent, including a 3 percent
increase in August 2007.
“Recent dealer surveys indicate inventories of towable RVs, although
more in line with dealer targets are still slightly higher than
dealers would prefer going into the off-season,” said Abrams.
“We
continue to be concerned about the potential impact of the recent
volatility in the real estate and mortgage markets on consumer
spending, which could have an adverse impact on retail sales of RVs.
Nevertheless, the industry has experienced year-over-year
improvements in retail sales of towable RVs, especially travel
trailers, for the last six months in a row.”
Despite only a one percent growth in sales this quarter, Drew’s RV
segment operating profit increased 65 percent to $17.6 million, or
13.8 percent of segment sales, compared to the 8.4 percent segment
operating profit margin reported in the third quarter of 2006. Last
year’s profit margin was adversely impacted by a $1.2 million loss
from the Indiana-based specialty trailer operation closed in
September 2006. Drew’s RV segment results continued to benefit from
cost-cutting measures and production efficiencies, as well as from
improved importing, particularly in the axle product line.
The RV segment’s operating profit margin of 13.8 percent in the 2007
third quarter was below the 14.8 percent reported in the second
quarter of 2007, partially because of a 5 percent decline from 2007
second quarter sales. In addition, the third quarter of 2007 was
impacted by higher cost of sales, partly due to the temporary high
cost of certain items in inventory at the end of the 2007 second
quarter.
Manufactured Housing Products Segment
Drew supplies vinyl and aluminum windows and screens, chassis,
chassis parts, and bath and shower units to the manufactured housing
industry. Drew’s manufactured housing segment accounted for
approximately 27 percent of consolidated net sales and 17 percent of
total segment operating profit in the third quarter of 2007.
Drew’s manufactured housing segment reported third quarter sales of
$46 million, a 15 percent decline from the $54 million in sales
reported in the comparable period in 2006. This decline in segment
sales was greater than the estimated industry-wide decline in
production of 6 to 8 percent this quarter, in part because the
industry decline was entirely in larger manufactured homes, in which
Drew has greater product content.
Largely due to the decline in sales, third quarter operating profit
of this segment declined to $3.6 million (7.9 percent of sales),
from operating profit of $5.2 million (9.5 percent of sales) in the
same period last year. However, excluding facility sales,
consolidation costs and expenses related to pending litigation, the
operating profit of this segment would have been approximately 9.1
percent in the current quarter, compared to 8.6 percent in the 2006
third quarter.
During July and August 2007, wholesale shipments of manufactured
homes were down by 8 percent compared to last year, which is less
than the declines reported earlier in the year. “While comparisons
for the last four months of 2007 should be easier, as last year’s
comparable sales were the lowest for the industry in many years,
there has been no concrete evidence of any significant improvement
in the demand for manufactured homes,” said Abrams.
According to industry statistics, wholesale shipments of
manufactured homes for the eight months ended August 2007 (the last
month for which industry information is available) declined by
nearly 23 percent, to 65,000 homes, compared with 85,000 homes in
the first eight months of the prior year. If the industry were to
match 2006 shipments of 33,000 homes for the last four months of
2006, wholesale shipments for 2007 would approximate 98,000 homes,
compared to 117,000 homes in all of 2006.
Balance Sheet and Other Items
Drew reported that it currently has 13 facilities it plans to sell
with an aggregate book value of $9 million. Drew sold four
facilities in the third quarter which, net of modest write-downs on
facilities to be sold, resulted in a pre-tax gain of $0.7 million
this quarter. Year-to-date, facility sales and write-downs resulted
in aggregate charges to operating income of $0.7 million.
In addition, the Company holds a $3.9 million mortgage note on a
previously sold facility, which it leased back through September
2007. In connection with the sale in 2006, Drew received $1.8
million in cash. Drew expects to record a gain on this sale of
approximately $2.8 million when the note is collected. The note was
due on October 31, 2007, and the buyer has requested an extension.
A concerted effort by Drew’s operating management reduced
inventories by more than $20 million to $79 million as of September
30, 2007, compared to nearly $99 million as of the same date in
2006. Inventories are slightly higher than the $75 million reported
at June 30, 2007, due to the timing of certain steel deliveries.
Drew’s operating management continues to evaluate inventory needs to
determine if further reductions are feasible.
Because of strong cash flow and asset management, Drew reduced debt,
net of $41 million of invested cash, to approximately $2 million at
September 30, 2007, compared to $79 million of debt at September 30,
2006.
Capital expenditures aggregated $7.5 million year-to-date,
significantly less than the $20 million during the comparable period
last year. Drew expects capital expenditures to range from $10
million to $12 million in 2007, compared to more than $22 million in
2006 and $26 million in 2005. Depreciation and amortization for all
of 2007 is expected to be approximately $18 million.
Drew reported that its sales in October 2007 were approximately the
same as last October. This is the first month in 2007 that sales
were not below last year.
“As we’ve said before, the real driver in both our markets is
underlying consumer demand, and we’ve seen mixed signals about this
over the last few months. During this soft market, we can and will
continue to maximize our results through new product introductions,
market share growth, acquisitions, cost-cutting, and efficiency
improvements,” concluded Abrams.
Drew will provide an online, real-time webcast and rebroadcast of
its third quarter 2007 earnings conference call on the Company’s
website,
www.drewindustries.com on Thursday, November 1, 2007 at
11:00 a.m. Eastern time. 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 66648879. A
replay will also be available on Drew’s website.
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 vinyl and aluminum
windows and screens, doors, chassis, chassis parts, RV slide-out
mechanisms and power units, leveling devices, bath and shower units,
axles, bed lifts, steps, electric stabilizer jacks, ramp doors,
exterior panels, and suspension systems, as well as trailers for
hauling equipment, boats, personal watercraft and snowmobiles, and
chassis and windows for modular homes and offices. Currently, from
36 factories located throughout the United States, 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
The press release may contain certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to financial condition, results of operations,
business strategies, operating efficiencies or synergies,
competitive position, growth opportunities for existing products,
plans and objectives of management, markets for the Company’s common
stock and other matters. Statements in the press release that are
not historical facts are “forward-looking statements” for the
purpose of the safe harbor provided by Section 21E of the Exchange
Act and Section 27A of the Securities Act. Forward-looking
statements, including, without limitation, those relating to the
Company’s future business prospects, revenues and income are
necessarily estimates reflecting the best judgment of the Company’s
senior management at the time such statements were made, and involve
a number of risks and uncertainties that could cause actual results
to differ materially from those suggested by forward-looking
statements. 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. Forward-looking
statements, therefore, should be considered in light of various
important factors.
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 domestic
and foreign competition, costs and availability of raw materials
(particularly steel and related components, vinyl, aluminum, 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
manufactured homes, the disposition into the market by FEMA, by sale
or otherwise, of RVs or manufactured homes purchased by FEMA in
connection with natural disasters, changes in zoning regulations for
manufactured homes, the decline in the manufactured housing
industry, the financial condition of our customers, retention of
significant customers, interest rates, oil and gasoline prices, the
outcome of litigation, and adverse weather conditions impacting
retail sales. In addition, national and regional economic conditions
and consumer confidence may affect the retail sale of recreational
vehicles and manufactured homes.
Contact: Leigh J. Abrams, President and CEO
Phone: (914) 428-9098 Fax: (914)
428-4581
E Mail:
Drew@drewindustries.com
DREW INDUSTRIES INCORPORATED
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(In thousands, except per share amounts)
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Selling, general and administrative expenses
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Income from continuing operations
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Provision for income taxes
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Net income per common share:
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Weighted average common shares outstanding:
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Depreciation and amortization
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