WHITE PLAINS, N.Y. — Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles and manufactured homes, today reported net income of $4.7 million, or $0.21 per diluted share, for the fourth quarter ended Dec. 31, 2012, net of a previously announced after-tax charge of $0.9 million in connection with executive succession. Excluding this charge, net income would have been $5.7 million, or $0.25 per diluted share, an increase of 39 percent compared to net income of $4.1 million, or $0.18 per diluted share, in the fourth quarter of 2011, says the company.
Net sales in the 2012 fourth quarter increased to $200 million, 25 percent higher than last year, as a result of a 31 percent sales increase by Drew’s RV Segment. This segment accounted for 86 percent of consolidated net sales this quarter, according to a press release from Drew. RV Segment sales growth was largely due to a 21 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew’s primary RV market, states the release. Sales of recently introduced RV products and motorhome components also increased, as did sales to adjacent industries.
In Jan. 2013, consolidated net sales reached approximately $85 million, 28 percent higher than in Jan. 2012, as a result of continued solid growth in the Company’s RV Segment. Drew estimates that industry-wide production of towable RVs increased about 20 percent in Jan. 2013.
Retail demand for towable RVs has reportedly remained strong, as evidenced by favorable reports from recent retail RV trade shows. Most industry analysts report that dealer inventories of towable RVs are in-line with retail demand, says the release. Future RV industry-wide production levels will depend on the strength of retail sales. Drew estimates that Jan. 2013 industry-wide production of manufactured homes was approximately the same as in Jan. 2012.
The Company’s content per travel trailer and fifth-wheel RV in 2012 increased by $365 to $2,713, or 16 percent greater than in 2011. Content per motorhome RV reached $1,071 in 2012, an increase of 68 percent over 2011. The Company’s content per manufactured home declined two percent from the year-earlier period. The change in content per unit is a measure of the change in Drew’s overall market share across its existing product lines, states the release.
“Our solid sales gains, along with favorable RV industry fundamentals, are encouraging,” said Fred Zinn, Drew’s President and CEO. “In the 2012 fourth quarter our operating profit margin before executive succession charges, while higher than last year, did not improve enough. Labor efficiencies improved at several key production facilities. However, this improvement was offset by the cost of implementing facility consolidations and improving production processes, as well as refinements to the calculation of our warranty accrual, and other transitory cost increases. We are confident in our ability to achieve profit improvement, particularly in the second half of 2013, as these costs return to more normal levels, and as the bottom-line impact of the efficiency improvements that have been implemented gains momentum.”
“The steps we have taken are enabling our production lines to be more efficient,” said Jason Lippert, CEO of Drew’s subsidiaries, Lippert Components and Kinro. “During the quarter we consolidated and realigned production of several key product lines, including furniture, manufactured housing and RV windows, chassis and thermoforming, and continued to benefit from and expand our lean manufacturing initiatives. While these efforts cost us $2 million in the 2012 fourth quarter, they are continuing to make us more efficient. Also, in the 2012 fourth quarter we retained more of our seasonal workforce than typical, ending the year with 5,200 employees. We spent the last 12 months building and training our workforce, so that we can minimize hiring and training costs as demand ramps up in early 2013.”
“As previously announced, Fred Zinn will retire as CEO in May, and Jason Lippert will become Drew’s CEO, and Scott Mereness will become President and COO,” said Leigh Abrams, Chairman of Drew’s Board of Directors. “Although Fred Zinn will be missed, we have prepared well and Jason and Scott have been essential to our growth and success for more than a decade, and they both have outstanding reputations in the RV and manufactured housing industries. As they assume these expanded roles, we are confident that they, and the great team they’ve built, will successfully lead Drew for years to come.”
2012 Full-Year Results
Net sales for the year ended Dec. 31, 2012 increased by $220 million, to a record $901 million. Acquisitions added approximately $60 million to 2012 net sales. Sales growth in new markets and new products were also key factors enabling Drew’s sales to exceed industry growth rates, says the release. Key additions to the Company’s RV product lines in recent years include advanced leveling devices, in-wall slide-out systems, and awnings. Together, net sales of these products reached $65 million in 2012.
In 2012, Drew continued to grow outside its core RV and manufactured housing markets, with aggregate net sales of components for adjacent industries increasing 68 percent, to $96 million, and aftermarket net sales increasing 14 percent to $35 million in 2012. Together, these markets now account for nearly 15 percent of consolidated net sales, an increase from 10 percent of consolidated net sales in 2010.
For the full year 2012, Drew’s net income increased to $37.3 million, or $1.64 per diluted share. Excluding charges related to executive succession, net income would have been $38.3 million in 2012, or $1.68 per diluted share, up from net income of $30.1 million, or $1.34 per diluted share in 2011.
In Dec. 2012, the Company paid a special dividend of $2.00 per share, aggregating $45 million. After the payment of that dividend, the Company had $10 million in cash and no debt at Dec. 31, 2012, and had almost $200 million in unused credit lines. Return on equity for the 12 months ended Dec. 31, 2012 improved to 12.7 percent, from 11.4 percent in the year-earlier period.
Conference Call & Webcast
Drew will provide an online, real-time webcast of its fourth quarter 2012 earnings conference call on the Company’s website, www.drewindustries.com, on Wednesday, Feb. 20, 2013 at 11 a.m. Eastern time. The call can also be accessed at www.companyboardroom.com.
Institutional investors can access the call via the password-protected site, StreetEvents (www.streetevents.com). A replay of the call will be available by telephone by dialing 888.286.8010 and referencing access code 61963755. A replay of the webcast 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, manufactured homes, modular housing, truck caps and buses, and trailers used to haul boats, livestock, equipment and other cargo. Currently, from 30 factories located throughout the United States, Drew serves most major national manufacturers of RVs and manufactured homes. Additional information about Drew and its products can be found at www.drewindustries.com.
SOURCE: Drew Industries Incorporated press release