Drew Industries Inc. Reports Second Quarter Profit
Drew Industries Inc., White Plains, N.Y., Thursday (July 30) reported net income of $2.6 million for the second quarter ended June 30, compared to net income for the second quarter of 2008 of $9.2 million.
The net income decline was attributed to a $50 million decrease in net sales to $101 million, 33% below the $151 million reported in the 2008 second quarter. This decline in net sales resulted from a 44% drop in industry-wide wholesale shipments of travel trailers and fifth-wheels and an estimated 43% decrease in industry-wide production of manufactured homes, as compared to the 2008 second quarter.
“We are very pleased with the substantial improvement in our operating results during the second quarter,” said Fred Zinn, Drew president and CEO. “We continued to gain market share in many of our product categories, introduced several new products, and further strengthened our balance sheet. At the same time, our cost control programs have been expanded and are ahead of schedule.”
“Industry-wide shipments of travel trailers and fifth-wheel RVs for the month of June 2009 reached a seasonally adjusted annual rate of about 148,000 units, greater than any other month this year,” said Jason Lippert, president and CEO of Drew’s subsidiaries, Lippert Components and Kinro. “Industry production levels during the last several months have far exceeded our expectations, and we hope this is related to increased retail demand. Although we cannot predict whether this production level will be maintained, the RV industry is currently in a much better position than anyone expected a few months ago.
“Last year at this time many of our customers began to significantly cut back production schedules in response to lower demand from dealers. While there are uncertainties, it appears that many of our customers will continue to produce five days a week for the next couple of months. Beyond that it is difficult to anticipate demand, particularly during the winter months.”
The company also continues to reduce expenses through facility consolidations, staff reductions and synergies between its subsidiaries, Lippert Components and Kinro. Cost reduction measures benefited second quarter 2009 results by over $2 million compared to the same period in 2008, and are expected to benefit full year 2009 results by nearly $10 million.
New Products Introduced
“We continued to gain market share and introduce new products in the second quarter,” said Lippert. “New products included the debut of the Tow-N-Stow convertible storage unit, and the introduction of the innovative QuickBite coupler. We are currently considering several other new products, and we will take every prudent step to ensure that we increase our opportunity for growth, while maintaining outstanding customer service and product quality.”
Net loss for the current six-month period was $34.1 million. Excluding the first quarter 2009 goodwill impairment charge of $29.4 million, net of taxes, and $3 million, net of taxes, of extra expenses in the first quarter of 2009 related to plant consolidations, staff reductions, increased bad debts and obsolete inventory and tooling due to the unprecedented conditions in the RV and manufactured housing industries, the net loss for the current six-month period was $1.7 million.
Due to the seasonality of the RV and manufactured housing industries, the company’s results in the first and fourth quarters are typically the weakest, while second and third quarter results are traditionally stronger.
“The economy, while somewhat better than during the 2008-2009 winter, remains weak,” said Zinn. “In addition, many RV and manufactured housing dealers and consumers continue to have difficulty obtaining credit, which could make it tough for some dealers during the traditional seasonal slowdowns starting later this year. Therefore, our industries are likely to face additional challenges in the latter part of 2009 and the beginning of 2010. Further, our raw material costs continue to be volatile, declining modestly during the 2009 second quarter, but recently rising by 5-15%, depending upon the type of raw material.”
More than 90% of the company’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 78% of consolidated net sales in the second quarter of 2009.
Drew’s RV segment reported operating profit of $6.3 million, on net sales of $79 million in the 2009 second quarter, compared to operating profit of $13.0 million on net sales of $111 million in the comparable period in 2008. Excluding sales price changes and acquisitions, the “organic” decline in RV Segment net sales was $43 million, or 39%, due to the sharp decline in industry shipments.
For the first six months of 2009, the RV segment reported net sales of $131 million, a decrease of 44% from the same period in 2008. RV Segment operating profit was $1.7 million for the first six months of 2009, including $2.9 million of extra expenses in the first quarter of 2009 related to plant consolidations, staff reductions, increased bad debts and obsolete inventory and tooling. Excluding these extra expenses, the company’s RV segment had an operating profit of $4.6 million in the first six months of 2009.
“Through acquisitions, new product introductions and our position as an increasingly important supplier to leading RV manufacturers, we increased our product content for travel trailers and fifth-wheel RVs to $2,071 per unit for the last 12 months, compared to $1,891 per unit in the prior 12 month period,” said Lippert. “Our success over the years has been a direct result of our ability to gain market share, introduce new products and improve operational efficiency, as well as our financial strength. We are striving for continued success in each of these areas.”