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Drew Industries Reports 2015 Second Quarter Results

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ELKHART, Ind., Aug. 4, 2015 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $20.9 million, or $0.85 per diluted share, for the second quarter ended June 30, 2015, compared to net income of $18.6 million, or $0.77 per diluted share, for the second quarter ended June 30, 2014. In connection with the sale of its aluminum extrusion-related assets in April 2014, the Company recorded an after-tax charge of $1.2 million for the second quarter of 2014. Excluding this charge, net income in the second quarter of 2014 would have been $19.8 million, or $0.82 per diluted share.

Consolidated net sales in the second quarter of 2015 increased to $362 million, 13 percent higher than the 2014 second quarter. This growth in consolidated net sales primarily resulted from a 14 percent increase in net sales of Drew's RV Segment for the 2015 second quarter compared to the 2014 second quarter, despite an acceleration in the wholesale production of RVs in late 2014 and early 2015. Drew's RV Segment accounted for 92 percent of consolidated net sales in the 2015 second quarter. The acquisitions completed by the Company in 2014 and the first half of 2015 added $21 million in net sales in the second quarter of 2015, all of which related to Drew's RV Segment. RV Segment net sales growth in the 2015 second quarter was also due to a 4 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew's primary RV market, as well as organic growth in sales to adjacent industries and the aftermarket.

"With the strong underlying demand for our products in the second quarter of 2015, we achieved record quarterly net sales for the second time this year," 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 second quarter of 2015.

"RV industry fundamentals remain strong, as evidenced by the 12 percent increase in industry-wide retail sales of travel trailer and fifth-wheel RVs in the first five months of 2015," continued Jason Lippert. "The long-term strength of underlying retail demand has resulted in fifteen consecutive quarterly increases in RV wholesale production of travel trailer and fifth-wheel RVs. At the end of 2014 and the beginning of 2015, the RV industry experienced a pull forward in production as dealers ordered product earlier in the seasonal cycle, reportedly to avoid potential shipping delays similar to those experienced in the prior year. As a result, certain wholesale production which normally occurs in our second quarter was produced earlier in the season. However, based on the strength of retail sales to date and projected economic conditions, most industry analysts are reporting that RV dealer inventory is in line with anticipated retail demand, and we are optimistic that RV dealers will place strong orders following the annual Open House in Elkhart, Indiana in September 2015."

In July 2015, Drew's consolidated net sales reached approximately $112 million, 11 percent higher than July 2014. Excluding the impact of acquisitions, the Company's consolidated net sales for July 2015 were up 5 percent.

"Our operating profit margins in the second quarter of 2015 were 9.3 percent compared to 9.7 percent in the second quarter of 2014, excluding the 2014 loss on sale of the aluminum extrusion-related assets," said Scott Mereness, Drew's President. "Our year-over-year incremental margin in the 2015 second quarter was lower than our target incremental margin, largely as a result of investments in fixed costs for capacity expansion, partially offset by improved operating efficiencies. In addition, the seasonal shift in industry-wide production of RVs experienced over the past few quarters had a negative impact on our capacity planning efforts in the 2015 second quarter."

"Over the past couple of years, we made significant investments in manufacturing capacity, both facilities and personnel, to prepare for the expected significant increase in net sales in 2015 and beyond," continued Mereness. "In addition to investments in fixed costs to expand manufacturing capacity, we have made improvements in marketing, human resources, engineering, customer service and other critical departments for the long-term success of the Company. While certain capacity expansion plans had a negative impact on margins in the most recent quarters, we believe these investments are largely completed, and we expect to leverage these expansions as net sales increases."

"In July 2015, we entered into a six-year exclusive distribution and supply agreement with Furrion Limited," said Jason Lippert. "This agreement provides us with the rights to distribute Furrion's complete line of products to OEMs and aftermarket customers in the RV, specialty vehicle, utility trailer, horse trailer, marine, transit bus and school bus industries throughout the United States and Canada. Furrion currently supplies a premium line of LED televisions and sound systems, navigation systems, wireless backup cameras, solar prep units, power solutions and kitchen appliances, primarily to the RV industry, with a potential content per towable and motorhome RV of approximately $500 per unit. Furrion's sales were approximately $35 million in 2014, representing an existing market share of approximately 20 percent, providing us the opportunity for significant sales growth and profit potential.

"This new agreement with Furrion instantly provides us with a solid foundation in these new product categories, allowing us to avoid the normal time and costs incurred with research and development and initial market development," continued Jason Lippert. "In a few short years, Furrion has become known in our markets as an innovator, a similar strength to what has helped make Drew so successful over the years. Furrion is going to continue to invest on an annual basis in product enhancement and new product research and development, and plans to increase their array of products over the coming years, for which Drew would have the distribution rights."

"Our sales teams will work on increasing the content of Furrion products per RV, as well as expanding into other markets, such as the bus, marine, horse trailer and manufactured housing industries," concluded Jason Lippert. "We believe that Furrion's superior product design enhances the end user's mobile lifestyle, as well as provides a more luxurious experience."

Conference Call & Webcast

Drew will provide an online, real-time webcast of its second quarter 2015 earnings conference call on the Company's website, www.drewindustries.com, on Tuesday, August 4, 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 34829193. A replay of the webcast will also be available on Drew's website.

About Drew Industries

From 40 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; 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 of efficiency improvements, 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)














Six Months Ended


Three Months Ended





June 30,


June 30,


Last Twelve

(In thousands, except per share amounts)


2015


2014


2015


2014


Months












Net sales


$     723,542


$     607,160


$     362,085


$     321,783


$   1,307,164

Cost of sales


565,079


471,948


280,025


249,771


1,028,990

Gross profit


158,463


135,212


82,060


72,012


278,174

Selling, general and administrative expenses


92,991


78,063


48,426


40,909


172,410

Sale of extrusion assets


-


1,954


-


1,954


-

Operating profit


65,472


55,195


33,634


29,149


105,764

Interest expense, net


804


194


615


74


1,040

Income before income taxes


64,668


55,001


33,019


29,075


104,724

Provision for income taxes


23,726


20,219


12,150


10,457


36,298

Net income


$       40,942


$       34,782


$       20,869


$       18,618


$       68,426












Net income per common share:











Basic


$          1.69


$          1.46


$          0.86


$          0.78


$          2.84

Diluted


$          1.67


$          1.43


$          0.85


$          0.77


$          2.79












Weighted average common shares outstanding:











Basic


24,247


23,842


24,279


23,931


24,111

Diluted


24,578


24,298


24,615


24,303


24,484












Depreciation and amortization


$       19,855


$       14,920


$       10,053


$         7,680


$       37,531

Capital expenditures


$       14,668


$       17,912


$         6,075


$       11,088


$       39,214

 

 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)














Six Months Ended


Three Months Ended





June 30,


June 30,


Last Twelve

(In thousands)


2015


2014


2015


2014


Months












Net sales:











RV Segment:











  RV OEMs:











Travel trailers and fifth-wheels


$     506,064


$     447,416


$     245,707


$     235,286


$     902,744

Motorhomes


40,546


30,057


18,899


15,673


78,263

RV aftermarket


38,693


16,762


21,484


9,668


71,501

Adjacent industries


80,874


54,627


45,516


29,199


139,255

Total RV Segment net sales


666,177


548,862


331,606


289,826


1,191,763












MH Segment:











Manufactured housing OEMs


38,358


37,281


20,535


20,764


78,498

Manufactured housing aftermarket


8,130


7,172


4,301


3,705


15,144

Adjacent industries


10,877


13,845


5,643


7,488


21,759

Total MH Segment net sales


57,365


58,298


30,479


31,957


115,401












Total net sales


$     723,542


$     607,160


$     362,085


$     321,783


$   1,307,164












Operating Profit:











RV Segment


$       59,241


$       51,761


$       30,108


$       28,032


$       94,051

MH Segment


6,231


5,388


3,526


3,071


11,713

Total segment operating profit


65,472


57,149


33,634


31,103


105,764

Sale of extrusion assets


-


(1,954)


-


(1,954)


-

Total operating profit


$       65,472


$       55,195


$       33,634


$       29,149


$     105,764

 

 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)










June 30,


December 31,

(In thousands)


2015


2014


2014








ASSETS







Current assets







Cash and cash equivalents


$       11,782


$               4


$                4

Accounts receivable, net


72,902


71,954


37,987

Inventories, net


163,448


108,357


132,492

Prepaid expenses and other current assets


36,049


27,864


37,153

Total current assets


284,181


208,179


207,636

Fixed assets, net


148,639


126,523


146,788

Goodwill


72,922


61,930


66,521

Other intangible assets, net


102,862


92,654


96,959

Other assets


25,029


26,346


25,937

Total assets


$     633,633


$     515,632


$       543,841








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable, trade


$       52,505


$       50,379


$        49,534

Accrued expenses and other current liabilities


77,752


58,376


57,651

Total current liabilities


130,257


108,755


107,185

Long-term indebtedness


80,000


22,288


15,650

Other long-term liabilities


27,336


25,506


26,108

Total liabilities


237,593


156,549


148,943

Total stockholders' equity


396,040


359,083


394,898

Total liabilities and stockholders' equity


$     633,633


$     515,632


$       543,841

 

 

 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)








Six Months Ended



June 30,

(In thousands)


2015


2014






Cash flows from operating activities:





Net income


$       40,942


$       34,782

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





Depreciation and amortization


19,855


14,920

Stock-based compensation expense


7,069


5,277

Other non-cash items


162


3,203

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





Accounts receivable, net


(30,536)


(36,920)

Inventories, net


(24,361)


(1,227)

Prepaid expenses and other assets


2,333


(687)

Accounts payable, trade


1,250


23,095

Accrued expenses and other liabilities


19,645


13,352

Net cash flows provided by operating activities


36,359


55,795






Cash flows from investing activities:





Capital expenditures


(14,668)


(17,912)

Acquisitions of businesses


(25,058)


(82,157)

Proceeds from note receivable


-


750

Proceeds from sales of fixed assets


1,958


1,999

Other investing activities


(213)


(49)

Net cash flows used for investing activities


(37,981)


(97,369)






Cash flows from financing activities:





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


(688)


3,425

Proceeds from line of credit borrowings


390,870


182,315

Repayments under line of credit borrowings


(376,520)


(160,027)

Proceeds from shelf-loan borrowing


50,000


-

Payment of special dividend


(48,227)


(46,706)

Payment of contingent consideration related to acquisitions


(1,874)


(3,513)

Other financing activities


(161)


(196)

Net cash flows provided by (used for) financing activities


13,400


(24,702)






Net increase (decrease) in cash


11,778


(66,276)






Cash and cash equivalents at beginning of period


4


66,280

Cash and cash equivalents at end of period


$       11,782


$               4

 

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)















Six Months Ended


Three Months Ended






June 30,


June 30,


Last Twelve




2015


2014


2015


2014


Months


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












Industry Wholesale Production:












Travel trailer and fifth-wheel RVs


170.7


161.1


88.9


85.7


308.5


Motorhome RVs


24.7


23.3


12.8


12.2


45.3


Manufactured homes


33.3


30.7


17.9


17.0


67.0


Industry Retail Sales:












Travel trailer and fifth-wheel RVs


164.0(2)


146.3


110.0(2)


100.2


294.8(2)


Impact on dealer inventories


6.7(2)


14.8


(21.1)(2)

 


(14.5)


13.7(2)


Motorhome RVs


21.0(2)

 


19.3


12.5(2)


11.7


38.2(2)
































Twelve Months Ended










June 30,










2015


2014




Drew Content Per Industry Unit Produced:












Travel trailer and fifth-wheel RV






$         2,926


$         2,772




Motorhome RV






$         1,728


$         1,309




Manufactured home






$         1,172


$         1,249


































June 30,


December 31,








2015


2014


2014


Balance Sheet Data:












Current ratio






2.2


1.9


1.9


Total indebtedness to stockholders' equity






0.2


0.1


0.0


Days sales in accounts receivable






19.0


20.8


14.6


Inventory turns, based on last twelve months






7.6


8.3


8.2
































2015




Estimated Full Year Data:












Capital expenditures






$ 28 - $ 32 million




Depreciation and amortization






$ 39 - $ 41 million




Stock-based compensation expense






$ 15 - $ 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) June 2015 retail sales data for RVs has not been published yet, therefore 2015 retail data for RVs includes an estimate for June 2015 retail units. Additionally, the Canadian retail data is delayed in six of the Provinces for the month of May 2015.



 

 

 

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SOURCE Drew Industries Incorporated

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