Material Costs Hurt Drew 3Q Income, Sales Up
Drew Industries Inc., a leading supplier of components for recreational vehicles and manufactured homes, today reported net income for the third quarter ended Sept. 30 of $5.6 million ($0.25 per diluted share), compared to net income of $8.0 million ($0.36 per diluted share) reported in the third quarter of 2010. Drew is parent to Goshen, Ind.-based Lippert Components Inc. and Kinro Inc.
Net sales in the 2011 third quarter increased 14% to $167 million from $147 million in the third quarter of 2010, as a result of a 12% increase in Drew’s RV segment sales and a 23% increase in Drew’s manufactured housing segment sales. These revenue gains were achieved despite a 2% decrease in industrywide wholesale shipments of travel trailer and fifth-wheel RVs, and no significant change in industrywide production of manufactured homes.
As a result of market share gains and acquisitions completed in 2011, Drew’s October 2011 net sales increased more than 55% compared to last October, to $62 million. Excluding the impact of sales price increases and 2011 acquisitions, sales for October 2011 were up more than 30%, exceeding the company’s estimate of growth in industrywide production of RVs and manufactured homes.
“Third quarter 2011 net income was reduced by approximately $0.05 per diluted share due to higher raw material costs flowing through our P&L,” said Fred Zinn, president and CEO of White Plains, N.Y.-based Drew. “While the sales price increases we implemented did not fully offset peak raw material costs, based on recent cost trends we expect the impact of high raw material costs to decline over the coming months. In addition, net income was reduced by approximately $0.05 per diluted share as a result of higher than usual production costs for one of our product lines, in part related to increased demand. We have taken corrective action to help ensure that these production costs improve over the next few quarters.”
Results for the third quarter of 2011 also included start-up costs of $0.03 per diluted share related to recently completed acquisitions, new product introductions, and other projects. On the other hand, results for the prior year third quarter benefited from an after-tax gain of $0.03 per diluted share, related to an adjustment to previously estimated future earn-out payments on acquisitions.
“We recognize that one of our most important responsibilities is to maintain our focus on the long-term, and in the third quarter we invested significant resources – both financial and human – to increase our long-term profit potential,” said Zinn.
“During the third quarter we completed three acquisitions at a cost of $42 million, which add more than $75 million of annual sales, and represent significant profit potential,” said Jason Lippert, CEO Lippert Components and Kinro. “We also invested in a new aluminum extrusion operation, as well as several new product lines, key among them our new RV awnings which has a market potential in excess of $100 million. As a result of our reputation for providing outstanding customer service and product quality, we are confident in our ability to gain market share in these new product lines.”
Drew’s RV segment represented 82% of consolidated sales in the 2011 third quarter. Segment net sales in the third quarter of 2011 reached $136 million, 12% above third quarter 2010 net sales. This compares to the 2% decrease in industrywide wholesale shipments of towable RVs. Largely as a result of the acquisitions, the company’s content per travel trailer and fifth- wheel RV for the 12 months ended September 2011 reached $2,289, compared to $2,179 for the 12 months ended September 2010. Excluding acquisitions and sales price increases, Drew’s RV Segment sales grew 5% in the twelve months ended September 30, 2011 as compared to the comparable period in the prior year. Drew’s RV segment reported operating profit of $7.7 million in the third quarter of 2011, down from $11.1 million in the 2010 third quarter.
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