WHITE PLAINS, N.Y., Feb. 11 /PRNewswire-FirstCall/ -- Drew Industries
Incorporated (NYSE: DW), a leading supplier of components for recreational
vehicles (RV) and manufactured homes (MH), today reported its operating
results for the fourth quarter and year-ended December 31, 2008.
For the fourth quarter of 2008, Drew reported a net loss of $9.2 million,
or ($0.43) per diluted share, which includes charges for impairment of
goodwill and executive retirement aggregating $4.9 million after taxes.
Excluding these charges, the fourth quarter net loss was $4.3 million, or
($0.20) per diluted share. Drew attributes the loss for the quarter to the
severe recession which resulted in sharp declines in the RV, manufactured
housing, and boat industries. Net sales for the 2008 fourth quarter declined
to $77 million, from $138 million in the comparable prior year period. In the
fourth quarter of 2007, Drew reported net income of $6.5 million, or $0.29 per
diluted share.
"Our operating management, under the direction of Jason Lippert, the CEO
and President of Drew's Lippert Components and Kinro subsidiaries, has been
extremely proactive in bringing our workforce and production capacity more in
line with anticipated demand. As a result, we have substantially lowered our
breakeven sales level," said Fred Zinn, Drew's President and CEO. "During the
fourth quarter alone, Jason and the Kinro and Lippert Components management
teams have made significant progress toward realizing the synergies between
these two operations. Further, our strong balance sheet, with minimal debt,
and our available production capacity, puts us in an excellent competitive
position to take advantage of opportunities to increase our market share and
expand our product lines."
For the year, Drew reported net income of $11.7 million, or $0.53 per
diluted share, also including the $4.9 million of after tax charges for
impairment of goodwill and executive retirement. Excluding these charges, net
income for the year was $16.6 million, or $0.76 per diluted share. Net sales
in 2008 declined to $511 million, from $669 million in 2007. In 2007, Drew
reported net income of $39.8 million, or $1.80 per diluted share.
Fourth Quarter Commentary
The loss for the 2008 fourth quarter includes a non-cash pre-tax charge of
$5.4 million, due to the impairment of goodwill related to the Company's
California-based specialty trailer business. This business has been impacted
by prolonged declines in industry shipments of small and medium sized boats
that worsened late in 2008. The Company has taken significant steps to improve
the results of its specialty trailer business, including consolidating this
operation into one facility shared with other product lines. The fourth
quarter also includes expenses aggregating $2.7 million related to the
previously announced retirements of two long-time senior executives. Most of
these retirement costs will be paid over the next two years.
The fourth quarter of 2008, as anticipated, was adversely affected by
higher raw material costs that reduced operating profit between $1.5 million
and $2 million before taxes, or $0.04 to $0.05 per diluted share. Market
prices for Drew's raw materials have declined from their peak levels. However,
because of the decline in sales, higher-priced raw materials remain in
inventory. As a result, raw material costs will have an adverse impact on the
Company's results over the next several months.
In addition, charges related to plant closures and staff reductions
adversely impacted fourth quarter 2008 operating profit by $1.2 million, or
$0.04 per diluted share.
"In response to severe economic and industry conditions, we've taken very
aggressive steps to reduce costs and maximize operating efficiencies," said
Zinn. "During the fourth quarter of 2008 and in early 2009, we closed seven of
our 36 manufacturing facilities, and we're reviewing plans to close additional
facilities, while maintaining adequate production capacity to respond to the
needs of our customers."
These plant consolidations and synergies between Lippert Components and
Kinro, combined with previous cost-saving measures, are anticipated to reduce
the Company's 2009 fixed costs by more than $4 million compared to 2008. In
addition, plant consolidations are expected to significantly improve operating
efficiencies. Additional cost saving measures are expected to be implemented.
Net sales for the fourth quarter of 2008 declined $61 million to $77
million, from $138 million in the fourth quarter of 2007. This decline was a
result of a 63 percent drop in industry shipments of travel trailer and fifth
wheel RVs, and a 28 percent decline in industry shipments of manufactured
homes. Excluding the impact of an acquisition and sales price increases, the
"organic" decline in the Company's net sales was $73 million for the quarter,
or a 53 percent decline from the prior year.
The Company's operating profit for the fourth quarter of 2008, excluding
the effect of acquisitions, as well as the retirement and impairment charges,
declined 23 percent of the "organic" decline in net sales. The decline was
more than typical because of increased raw material, severance and group
insurance costs.
Management anticipates that the recession and low consumer confidence will
continue for at least the next several quarters, and that consumers will
remain extremely cautious about purchasing discretionary big-ticket items,
such as RVs and boats. Further, RV dealers are expected to continue to lower
their inventory levels, which would reduce the demand for new RVs and impact
sales of the Company's products.
Full Year Commentary
Net sales for the year-ended December 31, 2008 were $511 million, compared
to $669 million in 2007. The "organic" decline in net sales was 30 percent
year-over-year. Drew attributed its lower sales, and the resulting decrease in
profits, largely to the 29 percent year-over-year decline in industry
wholesale shipments of travel trailers and fifth wheel RVs, and the 14 percent
decline in industry wholesale shipments of manufactured homes, as well as even
more severe declines in industry shipments of motorhomes and boats.
"For several years, our management team has focused on reducing costs and
improving operating efficiencies," said Zinn. "Even before the sharp
deterioration in the economy last quarter, we had made significant strides,
including consolidating 19 manufacturing facilities and substantially reducing
fixed costs. In this extremely difficult economic environment, we are
evaluating every cost. We will continue to take all prudent steps to improve
our short-term results, while not impeding our long-term growth potential."
"While we're extremely disappointed with current market conditions, we are
optimistic about the long-term prospects for the RV and manufactured housing
industries. The basic reasons that Americans go RVing -- a love of the
outdoors, traveling with family, and the desire for more affordable vacations
-- have not changed. Nor has the need diminished for quality, affordable homes
such as those provided by the manufactured housing industry."
"A key to our success during the past decade has been our ability to
identify and introduce new products," said Lippert. Over the last several
months, we've continued those efforts with the introduction of several new
products, including RV entry doors and lighter-weight RV leveling devices,
enhancing our opportunity for future growth. Also, during this recession, we
are alert for other opportunities to expand, while still conserving cash. For
example, an RV supplier ceased operations late last year, and we were able to
purchase some of their equipment and replace them as a supplier of their
former products."
Segment Reporting
Recreational Vehicle Products Segment
Drew supplies the following components for RVs:
-- Towable RV chassis -- Windows
-- Towable RV axles and suspension solutions -- Chassis components
-- Slide-out mechanisms and solutions -- Furniture and mattresses
-- Thermoformed products -- Entry and baggage doors
-- Toy hauler ramp doors -- Entry steps
-- Manual, electric and hydraulic stabilizer -- Other towable accessories
and lifting systems
Drew's RV Segment also manufactures specialty trailers for hauling boats,
personal watercraft, snowmobiles and equipment.
More than 90 percent of Drew's RV Segment net sales are components for
travel trailer and fifth wheel RVs, with the balance comprised of components
for motorhomes, and specialty trailers. The RV Segment represented 62 percent
of consolidated net sales in the 2008 fourth quarter.
RV Segment net sales were $47 million in the fourth quarter of 2008,
compared to the $102 million reported in the comparable period in 2007. The
"organic" decline in sales was 61 percent due to the sharp decline in industry
shipments.
In the fourth quarter of 2008, due to the recession, tight credit markets
and low consumer confidence, the decline in industry shipments of travel
trailers and fifth wheel RVs reached 63 percent. As a result of reduced
demand, many RV manufacturers temporarily closed numerous production
facilities in November 2008, and did not resume production until late January.
Industry wholesale shipments of motorhomes, components for which represent
about 5 percent of RV Segment net sales, were down 75 percent during the
fourth quarter of 2008. Net sales of this segment were also adversely impacted
by severe declines in industry shipments of small and medium size boats on the
West Coast, for which the Company supplies trailers.
"As a result of industry conditions, combined with higher raw material
costs flowing through our income statement, our RV Segment lost $3.1 million
this quarter, compared to the segment operating profit of $10.0 million in the
2007 fourth quarter," said Joe Giordano, Drew's Chief Financial Officer and
Treasurer. "Excluding the effect of acquisitions and sales price increases,
the decline in RV Segment operating profit was 20 percent of the 'organic'
decline in net sales. This was consistent with what we would typically expect,
as increased material costs were offset by fixed cost reductions."
For the full 2008 year, net sales of this segment were $368 million, or 72
percent of consolidated net sales, and segment operating profit was $29
million. This compares to 2007 net sales of $492 million and segment operating
profit of $63 million.
"For the past six months, retail sales of RVs, while weak, have declined
less rapidly than industry-wide production, indicating that dealers have
decreased their inventories, partly due to difficulty obtaining floor-plan
financing," said Lippert. "The situation is still very difficult, especially
with consumer financing hard to come by. On a bright note, last week the
Federal Reserve indicated that RV consumer and dealer floor-plan loans would
be included in the Term Asset-Backed Securities Loan Facility (TALF) under the
Troubled Assets Relief Program (TARP). We are confident that the RV industry
will improve, though we cannot predict the timing. In the meantime, we
continue to add new products and gain market share in many product areas,
which will make us even stronger when the industry improves."
Through market share gains, acquisitions, and new product introductions,
the Company increased its product content per travel trailer and fifth wheel
RV to a record $1,928 per unit, up 13 percent from $1,700 per unit in 2007.
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 reported fourth quarter net sales of $29 million for its manufactured
housing segment, or 38 percent of consolidated net sales. This represented a
19 percent decline from the $36 million in net sales reported in the
comparable period in 2007. Industry-wide production of manufactured homes
declined 28 percent for the quarter. MH Segment sales in the 2008 fourth
quarter included $3 million of components for homes purchased by FEMA. The
Company expects approximately $2 million of additional FEMA-related sales in
the first quarter of 2009.
Primarily as a result of the industry-wide production declines, Drew's
2008 fourth quarter manufactured housing segment operating profit was less
than $0.1 million, compared to $2.9 million in the same period last year. The
decrease in segment operating profit was about 27 percent of the "organic"
sales decline, higher than typical because of increased severance and group
insurance costs.
For the full 2008 year, this segment reported net sales of $142 million,
down 19 percent from the $177 million reported in 2007. Segment operating
profit was $11.0 million in 2008, compared to $15.1 million in 2007. For the
full year, industry production declined 14 percent, while industry-wide
production of "floors" or "sections" declined 17 percent.
As expected, the content per manufactured home produced has begun to
increase due to recent market share gains. For the full year 2008, Drew
reported that content per manufactured home produced was $1,652, which, while
down 6 percent from 2007, was up from $1,603 reported for the twelve months
ended September 2008.
"Although we face extremely challenging industry conditions, our MH
segment remained profitable, as it has throughout the last ten years while
industry shipments declined more than 75 percent," said Lippert. "So we know
how to operate in tough times, and we remain focused on improving operating
efficiencies."
Balance Sheet and Other Items
"In light of the current economic conditions, maintaining our strong
balance sheet and increasing cash flow continues to be one of our highest
priorities," said Giordano. "During the fourth quarter of 2008, we reduced
inventory by $13 million. However, our present inventory levels are higher
than needed based on current demand, and accordingly we are working to reduce
inventory levels by $20 to $30 million in 2009."
In November 2008 the Company entered into a new $50 million revolving
credit facility with JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A.,
which expires in November 2011. This new credit facility replaces the
Company's previous $70 million credit facility which was scheduled to expire
in June 2009. This new facility provides for an increase of 1 percent in the
interest rate spread for LIBOR borrowings. At the same time, the Company
entered into a "shelf loan" facility with Prudential Investment Management,
Inc., pursuant to which Prudential will consider at our request purchasing up
to $125 million of senior promissory notes. This facility, which replaces the
Company's previous $60 million shelf loan facility with Prudential, expires in
November 2011. Both facilities are subject to more restrictive financial
covenants than the prior facilities. At December 31, 2008, debt, net of cash,
was zero.
Accounts receivable remain current, with only 15 days sales outstanding at
the end of the quarter. "Our credit team has done an outstanding job during
these difficult times in working closely with our customers and maintaining
appropriate credit policies. We continue to closely monitor receivables from
several customers, but to date our accounts receivable losses have not been
material," added Giordano.
Capital expenditures were $0.9 million this quarter and $4.2 million for
the full year. Initial estimates are for capital expenditures in 2009 to be
consistent with 2008. Depreciation and amortization was $4.5 million in the
2008 fourth quarter and $17.1 million for the year to date, and is expected to
aggregate $16 million to $17 million in 2009.
In addition, non-cash stock based compensation was $3.6 million in 2008,
and is expected to remain about the same in 2009.
Recent Developments
Drew reported January 2009 sales were down approximately 62 percent
compared to January 2008, reflecting the continued slow-down in both the RV
and MH industries. In late January, a significant number of Drew's customers
resumed production after lengthy closures. However, management cannot predict
whether these production levels will be maintained.
As previously announced, effective January 1, 2009, Leigh J. Abrams,
Drew's CEO since 1979, was appointed Chairman of the Board, and Fred Zinn was
appointed CEO. Edward W. ("Rusty") Rose III, Drew's Chairman since 1979, was
appointed Lead Director. Also, following the retirement, after more than 30
years, of David L. Webster, previously Chairman, President and CEO of Drew's
Kinro subsidiary, Jason D. Lippert was appointed to assume responsibility for
the operations of Kinro, while continuing his duties as Chairman, President
and CEO of Lippert Components.
"Over 28 years I have learned from Leigh and Rusty what it takes to lead a
successful company, and I appreciate the fact that they will continue to
advise and support Drew from their positions on Drew's Board of Directors,"
said Zinn. "Jason and his management team at Lippert Components and Kinro have
a wealth of knowledge of our operations and the industries we serve. In
addition, they have enormous energy, as well as a great track record of
success."
"These are tough times for everyone, including our entire management team
of more than 100 people each of whose compensation is tied to profits and is
therefore down substantially. From our Board to management to employees, we
remain motivated to focus on our long-term strategy of market share growth,
new product introductions, acquisitions and operational efficiencies."
Conference Call & Webcast
Drew will provide an online, real-time webcast and rebroadcast of its
fourth quarter and year-end 2008 earnings conference call on the Company's
website, www.drewindustries.com on Thursday, February 12, 2009 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 74445970. A replay will also be available on Drew's
website.
About Drew
Drew, through its wholly owned subsidiaries, Kinro and Lippert Components,
supplies a broad array of components for RVs and manufactured homes, including
windows, doors, chassis, chassis parts, bath and shower units, axles, and
upholstered furniture. In addition, Drew manufactures slide-out mechanisms for
RVs, and trailers primarily for hauling boats. Currently, from 29 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
This 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 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 and Section 27A of the Securities Act of 1933.
Forward-looking statements, including, without limitation, those relating
to our future business prospects, revenues, expenses and income, whenever they
occur in this press release, are necessarily estimates reflecting the best
judgment of our 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. You should consider forward-looking statements,
therefore, in light of various important factors as identified in this press
release and in our Form 10-K for the year ended December 31, 2007, and in our
subsequent Form 10-Qs filed with the SEC.
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 credit for financing
the retail and wholesale purchase of manufactured homes and recreational
vehicles, availability and costs of labor, inventory levels of retailers and
manufacturers, levels of repossessed manufactured homes and RVs, 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, continuing sales decline
in the RV and manufactured housing industries, the financial condition of our
customers, the financial condition of retail dealers of RVs and manufactured
homes, 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 continue to affect the retail sale of recreational
vehicles and manufactured homes.
DREW INDUSTRIES INCORPORATED
OPERATING RESULTS
(unaudited)
Year Ended Three Months Ended
December 31, December 31,
(In thousands, except per 2008 2007 2008 2007
share amounts)
Net sales $510,506 $668,625 $76,561 $137,815
Cost of sales 403,000 509,875 67,420 107,158
Gross profit 107,506 158,750 9,141 30,657
Selling, general and
administrative expenses 80,267 93,498 16,241 20,490
Goodwill impairment 5,349 - 5,349 -
Executive retirement 2,667 - 2,667 -
Other (income) (675) (707) - -
Operating profit (loss) 19,898 65,959 (15,116) 10,167
Interest expense, net 877 2,615 275 619
Income (loss) before
income taxes 19,021 63,344 (15,391) 9,548
Provision (benefit) for
income taxes 7,343 23,577 (6,181) 3,065
Net income (loss) $11,678 $39,767 $(9,210) $6,483
Net income (loss) per common
share:
Basic $0.54 $1.82 $(0.43) $0.29
Diluted $0.53 $1.80 $(0.43) $0.29
Weighted average common
shares outstanding:
Basic 21,808 21,893 21,597 22,002
Diluted 21,917 22,126 21,601 22,235
Depreciation and
amortization $17,078 $17,557 $4,544 $4,281
Capital expenditures $4,199 $8,770 $925 $1,318
SEGMENT RESULTS
(unaudited)
Year Ended Three Months Ended
December 31, December 31,
(In thousands) 2008 2007 2008 2007
Net sales:
RV Segment $368,092 $491,830 $47,151 $101,637
MH Segment 142,414 176,795 29,410 36,178
Total $510,506 $668,625 $76,561 $137,815
Operating profit (loss):
RV Segment $28,725 $63,132 $(3,123) $10,004
MH Segment 11,016 15,061 27 2,908
Total segment operating
profit (loss) 39,741 78,193 (3,096) 12,912
Amortization of intangibles (5,055) (4,178) (1,385) (1,164)
Corporate (7,217) (7,583) (1,503) (1,782)
Other items (7,571) (473) (9,132) 201
Operating profit (loss) $19,898 $65,959 $(15,116) $10,167
DREW INDUSTRIES INCORPORATED
BALANCE SHEET INFORMATION
(unaudited)
December 31,
(In thousands, except ratios) 2008 2007
Current assets
Cash and cash equivalents $8,692 $56,213
Accounts receivable, trade, less allowance 7,913 15,740
Inventories 93,934 76,279
Prepaid expenses and other current assets 16,556 12,702
Total current assets 127,095 160,934
Fixed assets, net 88,731 100,616
Goodwill 44,113 39,547
Other intangible assets 42,787 32,578
Other assets 8,632 12,062
Total assets $311,358 $345,737
Current liabilities:
Notes payable, including current maturities
of long-term indebtedness $5,833 $8,881
Accounts payable, accrued expenses and
other current liabilities 36,884 62,192
Total current liabilities 42,717 71,073
Long-term indebtedness 2,850 18,381
Other long-term obligations 6,913 4,747
Total liabilities 52,480 94,201
Total stockholders' equity 258,878 251,536
Total liabilities and stockholders'
equity $311,358 $345,737
Current ratio 3.0 2.3
Total indebtedness to stockholders' equity - 0.1
DREW INDUSTRIES INCORPORATED
SUMMARY OF CASH FLOWS
(unaudited)
Year Ended
December 31,
(In thousands) 2008 2007
Cash flows from operating activities:
Net income $11,678 $39,767
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation and amortization 17,078 17,557
Deferred taxes (2,145) (1,488)
Gain on disposal of fixed assets (2,393) (351)
Stock-based compensation expense 3,636 2,489
Goodwill impairment 5,487 -
Changes in assets and liabilities, net of
business acquisitions:
Accounts receivable, net 9,497 3,061
Inventories (12,695) 8,994
Prepaid expenses and other assets (1,980) 1,478
Accounts payable, accrued expenses and
other liabilities (23,506) 13,403
Net cash flows provided by
operating activities 4,657 84,910
Cash flows from investing activities:
Capital expenditures (4,199) (8,770)
Acquisition of businesses (31,786) (17,299)
Proceeds from sales of fixed assets 10,541 14,492
Other investments (48) (64)
Net cash flows used for investing
activities (25,492) (11,641)
Cash flows from financing activities:
Proceeds from line of credit and other
borrowings 14,600 23,800
Repayments under line of credit and other
borrowings (33,179) (52,218)
Exercise of stock options 402 4,577
Purchase of treasury stock (8,333) -
Other (176) -
Net cash flows used for financing
activities (26,686) (23,841)
Net (decrease) increase in cash (47,521) 49,428
Cash and cash equivalents at beginning of period 56,213 6,785
Cash and cash equivalents at end of period $8,692 $56,213
