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Drew Industries Reports 2016 Second Quarter Results

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ELKHART, Ind., Aug. 4, 2016 /PRNewswire/ -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles ("RVs") and adjacent industries, today reported consolidated net sales in the second quarter of 2016 increased to $441 million, 22 percent higher than the 2015 second quarter. The increase in year-over-year net sales reflects industry-wide growth in wholesale shipments of towable RVs by original equipment manufacturers ("OEMs"), which increased by 12 percent in the second quarter of 2016, enhanced by acquisitions completed by the Company over the twelve months ended June 30, 2016, as well as the July 2015 distribution and supply agreement for premium electronics with Furrion, which together added $29 million in net sales in the second quarter of 2016. Through continued focus on aftermarket channels for the Company's products, the Company increased net sales to the aftermarket in the second quarter of 2016 by more than 32 percent to $34 million. The third quarter of 2016 started with July consolidated net sales of approximately $118 million, five percent higher than July 2015 with two less shipping days in 2016.

The Company's content per travel trailer and fifth-wheel RV for the twelve months ended June 30, 2016, increased $95 to $3,013, compared to the twelve months ended June 30, 2015, of $2,918. The Company's content per motorhome RV for the twelve months ended June 30, 2016, increased $138 to $1,920, compared to the twelve months ended June 30, 2015, of $1,782. The content increases are primarily the result of organic growth, which in the case of towable RVs, consists of double-digit growth in travel trailer content, partially offset by flat fifth-wheel content. Acquisitions had a nominal impact on RV content.

"Our net sales in the 2016 second quarter increased at a year-over-year rate of 22 percent and by more than $78 million compared to the second quarter of 2015," said Jason Lippert, Drew's Chief Executive Officer. "Strong industry volumes attributed nine percent of the increase, with the remainder resulting from continued growth of our aftermarket business, organic growth through increased market share and new innovative products, and sales from acquired businesses."

"RV industry volume is out-pacing the RVIA's low single-digit unit growth projections for 2016 given at the end of last year, as 2016 second quarter wholesale travel trailers are up nearly 14 percent and fifth-wheels are up over four percent," continued Jason Lippert. "Travel trailer sales momentum continued this year, which we attribute to a new generation of enthusiasts embracing the RV lifestyle. We are also pleased to see fifth-wheel wholesale units up approximately 900 units and 1,000 units over the second quarter and year to date 2015, respectively. These overall increases for North America have been achieved despite retail sales of towable RVs in Canada being down 19 percent during the second quarter."

Over the twelve month period through June 2016, retail sales of travel trailer and fifth-wheel RVs increased an estimated 10 percent. Wholesale and retail unit sales during this period were closely aligned. Based on the retail sales strength experienced up to this point and the current outlook from several RV OEMs and their dealer networks, most industry analysts continue to report RV dealer inventory is in line with anticipated retail demand.

"Our operating profit in the second quarter of 2016 improved to more than $59 million, compared to nearly $34 million in the second quarter of 2015," said Scott Mereness, Drew's President. "Strong industry growth, lower costs for certain key commodities, accretive acquisitions completed over the last 12 months and a focus on cost management and operational efficiencies, all contributed to profit improvement." Mereness continued, "The second quarter results reflect the Company's ongoing commitment to grow sales to its OEM customers in RV and adjacent industries, while continuing to build a profitable aftermarket business."

Net income was $37.6 million, or $1.51 per diluted share, for the second quarter ended June 30, 2016, compared to net income of $20.9 million, or $0.85 per diluted share, for the second quarter ended June 30, 2015.

The Company continues to increase focus on opportunities in the aftermarket business, and as a result, during the second quarter of 2016, the Company modified its internal reporting structure. Beginning with the quarter ended June 30, 2016, the Company is reporting its financial performance based on two new reportable segments consisting of the OEM Segment, which includes products sold by the Company to OEMs for RVs and adjacent industries, and the Aftermarket Segment, which includes sales of repair and replacement products for RVs and adjacent industries into aftermarket distribution channels.

"This change in operating segments highlights the emphasis we are placing on building our aftermarket business while continuing to grow and expand sales of OEM products to RV customers and in other similar applications," said David Smith, Chief Financial Officer. Prior periods have been reclassified to conform to the current presentation and the Company plans to file with the Securities and Exchange Commission a current report on Form 8-K with financial information reflecting the historical performance of the realigned segments later in the third quarter. The change in reported segments will have no effect on the Company's net income, total assets or liabilities, or stockholders' equity.

"As of June 30, 2016, the Company had a net cash position of $29 million, an improvement of $66 million from a net debt position of $38 million at the beginning of the year, even after $15 million of dividend payments in the first half of 2016," added Smith. "This cash generation was the result of our operational performance and was strongly aided by inventory reductions of $26 million."

Jason Lippert concluded, "We have built an organization with the best people and created a culture with core values that focus on meeting the challenge of providing value to our customers every day. We will continue our efforts to develop, engineer and build great products, as well as improving our service to all customer channels, so that each day we are the supplier of choice for the industries we serve. Additionally, we will continue to seek expansion with new and innovative products, new customers, new markets and new geographies."

Conference Call & Webcast

Drew will provide an online, real-time webcast of its second quarter 2016 earnings conference call on the Company's website, www.drewindustries.com, on Thursday, August 4, 2016, 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 (855) 859-2056 and referencing access code 47707850. A replay of the webcast will also be available on Drew's website.

About Drew Industries

From 45 manufacturing and distribution facilities located throughout the United States and in Canada and Italy, Drew Industries, through its wholly-owned subsidiary, Lippert Components®, supplies a broad array of components for the leading original equipment manufacturers of recreational vehicles and adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; pontoon boats; manufactured homes; modular housing; and factory-built mobile office units. The Company also supplies components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors and service centers. Drew's products include steel chassis and related components; axles and suspension solutions; slide-out mechanisms and solutions; thermoformed bath, kitchen and other products; vinyl, aluminum and frameless windows; manual, electric and hydraulic stabilizer and leveling systems; furniture and mattresses; entry, luggage, patio and ramp doors; electric and manual entry steps; awnings and awning accessories; electronic components; appliances; LED televisions and sound systems; navigation systems; wireless backup cameras; and other accessories. 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, 2015, 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



2016


2015


2016


2015


Months

(In thousands, except per share amounts)






















Net sales


$     863,629


$     723,542


$     440,831


$     362,085


$   1,543,153

Cost of sales


638,284


565,079


323,927


280,025


1,170,269

Gross profit


225,345


158,463


116,904


82,060


372,884

Selling, general and administrative expenses


110,229


92,991


57,516


48,426


203,270

Severance


-


-


-


-


3,716

Operating profit


115,116


65,472


59,388


33,634


165,898

Interest expense, net


889


804


413


615


1,970

Income before income taxes


114,227


64,668


58,975


33,019


163,928

Provision for income taxes


40,699


23,726


21,406


12,150


56,997

Net income


$       73,528


$       40,942


$       37,569


$       20,869


$     106,931












Net income per common share:











Basic


$          3.00


$          1.69


$          1.52


$          0.86


$          4.37

Diluted


$          2.96


$          1.67


$          1.51


$          0.85


$          4.31












Weighted average common shares outstanding:











Basic


24,542


24,247


24,662


24,279


24,478

Diluted


24,822


24,578


24,916


24,615


24,788












Depreciation and amortization


$       22,190


$       19,855


$       11,247


$       10,053


$       43,959

Capital expenditures


$       12,971


$       14,668


$         6,700


$         6,075


$       27,292

 

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)














Six Months Ended


Three Months Ended





June 30,


June 30,


Last Twelve



2016


2015


2016


2015


Months

(In thousands)






















Net sales: (1)











OEM Segment:











RV OEMs:











Travel trailers and fifth-wheels


$     573,055


$     506,064


$     289,686


$     245,707


$   1,005,778

Motorhomes


56,389


40,546


27,866


18,899


102,356

Adjacent industries OEMs


170,125


130,109


89,364


71,694


314,776

Total OEM Segment net sales


799,569


676,719


406,916


336,300


1,422,910

Aftermarket Segment:











Total Aftermarket Segment net sales


64,060


46,823


33,915


25,785


120,243

Total net sales


$     863,629


$     723,542


$     440,831


$     362,085


$   1,543,153












Operating Profit:











OEM Segment


$     105,053


$       59,203


$       54,402


$       29,917


$     151,074

Aftermarket Segment


10,063


6,269


4,986


3,717


18,540

Total segment operating profit


115,116


65,472


59,388


33,634


169,614

Severance


-


-


-


-


(3,716)

Total operating profit


$     115,116


$       65,472


$       59,388


$       33,634


$     165,898












(1)Subsequent to March 31, 2016, the Company modified its internal reporting structure, reflecting a change in how its chief operating decision maker assesses the performance of the Company's operating results and make decisions about resource allocations. The Company's new reportable segments are the OEM Segment and the Aftermarket Segment. Prior periods have been reclassified to conform to this presentation.

 

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(unaudited)










 

June 30,


December 31,



2016


2015


2015

(In thousands)














ASSETS







Current assets







Cash and cash equivalents


$       78,560


$       11,782


$        12,305

Accounts receivable, net


102,355


72,902


41,509

Inventories, net


149,163


163,448


170,834

Prepaid expenses and other current assets


25,613


17,340


21,178

Total current assets


355,691


265,472


245,826

Fixed assets, net


151,250


148,639


150,600

Goodwill


93,831


72,922


83,619

Other intangible assets, net


114,000


102,862


100,935

Deferred taxes


29,391


30,453


29,391

Other assets


13,656


13,175


12,485

Total assets


$     757,819


$     633,523


$       622,856








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable, trade


$       53,330


$       52,505


$        29,700

Accrued expenses and other current liabilities


113,244


77,752


69,162

Total current liabilities


166,574


130,257


98,862

Long-term indebtedness


49,930


79,890


49,910

Other long-term liabilities


38,284


27,336


35,509

Total liabilities


254,788


237,483


184,281

Total stockholders' equity


503,031


396,040


438,575

Total liabilities and stockholders' equity


$     757,819


$     633,523


$       622,856

 

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)








Six Months Ended



June 30,



2016


2015

(In thousands)










Cash flows from operating activities:





Net income


$       73,528


$       40,942

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





Depreciation and amortization


22,190


19,855

Stock-based compensation expense


7,274


7,069

Other non-cash items


809


162

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





Accounts receivable, net


(58,777)


(30,536)

Inventories, net


25,590


(24,361)

Prepaid expenses and other assets


(4,199)


2,333

Accounts payable, trade


21,496


1,250

Accrued expenses and other liabilities


45,102


19,645

Net cash flows provided by operating activities


133,013


36,359






Cash flows from investing activities:





Capital expenditures


(12,971)


(14,668)

Acquisitions of businesses


(34,237)


(25,058)

Proceeds from sales of fixed assets


337


1,958

Other investing activities


(237)


(213)

Net cash flows used for investing activities


(47,108)


(37,981)






Cash flows from financing activities:





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


(1,144)


(688)

Proceeds from line of credit borrowings


81,458


390,870

Repayments under line of credit borrowings


(81,458)


(376,520)

Proceeds from shelf-loan borrowing


-


50,000

Payment of dividends


(14,707)


(48,227)

Payment of contingent consideration related to acquisitions


(2,715)


(1,874)

Other financing activities


(1,084)


(161)

Net cash flows (used for) provided by financing activities


(19,650)


13,400






Net increase in cash


66,255


11,778






Cash and cash equivalents at beginning of period


12,305


4

Cash and cash equivalents at end of period


$       78,560


$       11,782

 

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(unaudited)















Six Months Ended


Three Months Ended






June 30,


June 30,


Last Twelve




2016


2015


2016


2015


Months


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












Industry Wholesale Production:












Travel trailer and fifth-wheel RVs


190.0


170.7


99.2


88.9


333.7


Motorhome RVs


28.8


24.7


14.8


12.8


51.4


Industry Retail Sales:












Travel trailer and fifth-wheel RVs


178.3

(2)

167.8


116.1

(2)

112.8


327.7

(2)

Impact on dealer inventories


11.7

(2)

2.9


(16.9)

(2)

(23.9)


6.0

(2)

Motorhome RVs


23.5

(2)

22.2


14.0

(2)

13.6


43.3

(2)































Twelve Months Ended










June 30,










2016


2015




Drew Content Per Industry Unit Produced: (3)












Travel trailer and fifth-wheel RV






$         3,013


$         2,918




Motorhome RV






$         1,920


$         1,782


































June 30,


December 31,








2016


2015


2015


Balance Sheet Data:












Current ratio






2.1


2.0


2.5


Total indebtedness to stockholders' equity






0.1


0.2


0.1


Days sales in accounts receivable






20.2


19.0


14.2


Inventory turns, based on last twelve months






7.0


7.6


6.9
































2016




Estimated Full Year Data:












Capital expenditures






$ 20 - $ 26 million




Depreciation and amortization






$ 42 - $ 47 million




Stock-based compensation expense






$ 15 - $ 17 million




Annual tax rate






35% - 36%




























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

(2)June 2016 retail sales data for RVs has not been published yet, therefore 2016 retail data for RVs includes an estimate for June 2016 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-2016-second-quarter-results-300308937.html

SOURCE Drew Industries Incorporated

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