Drew Industries Inc. 2010 Sales Soared 44%
Drew Industries Inc. today (Feb. 15) reported net income for the fourth quarter ended Dec. 31, 2010, of $3.1 million, or 14 cents per share, compared to net income of $2.9 million, or 13 cents per share in the fourth quarter of 2009, according to a news release.
Net sales in the 2010 fourth quarter exceeded $106 million, up 2% compared to 2009 fourth quarter net sales. Industrywide wholesale shipments of travel trailers and fifth-wheel RVs, Drew’s primary RV market, increased 4% in the quarter, while industrywide production of manufactured homes declined 16%. Drew’s RV segment represented 81% of consolidated net sales.
As reported last year, net income for the 2009 fourth quarter was reduced by $1.5 million due to charges incurred largely as a result of unprecedented conditions in the RV and manufactured housing industries in 2009. Results in the 2010 fourth quarter were impacted by higher raw material costs than in the fourth quarter of 2009.
Drew’s net sales in January 2011 reached approximately $51 million, 16% higher than in January 2010. “This was a great start to the new year and builds on our success in 2010,” said Fred Zinn, Drew president and CEO. “Further, recent reports of increased sales at consumer RV shows over the last month, as well as indications that credit availability has been improving, along with higher consumer confidence readings in four of the last five months, are all encouraging signs for Drew and the RV industry.”
“Drew continuously responds to the needs of our customers for new and innovative products,” said Jason Lippert, CEO of Drew’s subsidiaries, Lippert Components and Kinro. “In 2010, we completed four acquisitions, through which we added a wide array of product offerings for our customers. In addition to driving market share gains for existing products, these acquisitions helped us expand our product line of motorhome components and increase our content per towable RV to $2,171, an increase of $158 in 2010.”
“Further, on Jan. 28, 2011, we acquired Home-Style, the leading manufacturer of RV furniture and mattresses in the growing Northwest RV market,” added Lippert. “We expect the acquisition of Home-Style to be immediately accretive to earnings. The acquisition of Home-Style will allow us to quickly capture the leading market share for RV furniture and mattresses in that region, while capitalizing on our experience and purchasing power in that product line. With our talented operating management team, and strong, debt-free balance sheet, we have the capability to continue the steady growth in RV content we have accomplished throughout the past decade.”
“We are also quite pleased that the improvement in the RV industry, which began over a year ago, continued in the fourth quarter of 2010 and apparently in January 2011, as the economy continued to emerge from the recession,” said Zinn. “Industrywide retail sales of travel trailer and fifth-wheel RVs were consistently higher in 2010, increasing an estimated 13% from 2009, including increases of 9% in October and 12% in November, the last month for which this data is available. In December 2010, RV dealers expressed their confidence by boosting purchases in anticipation of strong retail demand in the upcoming spring selling season. While RV dealer purchases and inventory levels may continue to fluctuate, we believe continued strength in retail sales is the key to an ongoing recovery in the RV industry.”
“In 2010 Drew also continued to grow in other markets, most notably after-market products for both RVs and manufactured homes, net sales of which were up nearly 35%, to $29 million,” said Scott Mereness, president of Lippert Components and Kinro. “Our net sales to other industries, largely modular housing and transit buses, increased as well, reaching $21 million in 2010, 44% above 2009 net sales.”
“Drew’s success in 2010 and prior years is in large part attributable to the motivation provided by our pay-for-performance compensation policies,” said Zinn. “These policies encourage our management team to make business decisions which are likely to yield high short-term and long-term returns, at an acceptable level of risk. As a result of these policies and our improved operating results, performance-based incentive compensation represented more than 50% of the total 2010 compensation of our top executives. Further, 30% of the total 2010 compensation of our top executives was equity-based compensation.”
Because of the seasonality of the RV and manufactured housing industries, historically, the company’s operating results in the first and fourth quarters have been the weakest, while the second and third quarters are traditionally stronger. However, because of fluctuations in RV dealer inventories since the fourth quarter of 2009, seasonal industry trends have been different than in prior years.
2010 Full-Year Results
For the full year, Drew’s net income increased to $28.0 million, or $1.26 per share. For 2009 Drew reported a net loss of $24.1 million, or ($1.10) per diluted share. As reported in 2009, excluding a goodwill impairment charge of $29.4 million, net of taxes, or ($1.34) per diluted share, net income for 2009 was $5.2 million, or 24 cents per diluted share. During 2009, the company also incurred expenses totaling $5.5 million, net of taxes, or 25 cents per diluted share, resulting from plant closings and start-ups, staff reductions and relocations, increased bad debts, and obsolete inventory and tooling, largely due to the unprecedented conditions in the RV and manufactured housing industries.
Net sales for the year ended Dec. 31, 2010, reached $573 million, a 44% increase over net sales of $398 million in 2009, as both of the company’s segments achieved greater growth than the industries they serve. Net sales of the company’s RV segment increased 53%, compared to a 44% increase in industrywide wholesale shipments of travel trailers and fifth-wheel RVs. Net sales of the company’s manufactured housing segment increased 12%, compared to a 1% increase in industrywide production of manufactured homes.
“Raw material costs as a percent of net sales has been volatile between quarters for the past two years,” said Joe Giordano, Drew CFO and treasurer. “Volatility in raw material costs has become the norm, and in recent weeks the cost of steel and aluminum has again increased. Over the years, we have been highly successful in implementing sales price adjustments as the costs of raw materials change. Further, our operating management team has proven to be highly effective in improving operating efficiencies in all facets of our business, and we expect to continue making progress in this area as well.”
“Clearly, 2010 marked an impressive rebound for Drew,” said Zinn. “We reported solid sales and earnings growth in both the RV and Manufactured Housing Segments, and we made investments that should help us continue to grow. After investing nearly $30 million for five acquisitions in the last 13 months, and paying a $1.50 per share special dividend aggregating $33 million, we are still debt-free, and have more than $25 million in cash, as well as substantial available borrowing capacity. While we still face challenges, I believe Drew and the two industries we serve are currently well below their long-term potential. If the U.S. economy continues to recover, as recent forecasts suggest, and credit markets continue to improve, we expect to make progress in 2011 towards realizing the long-term potential of our business.”