RV Sales Drive Drew to 70% Jump in 3Q Income
Drew Industries Inc., parent to suppliers Lippert Components Inc. and Kinro Inc., reported a 70% increase in net income for its third quarter, ended Sept. 30, boosted by strong performance from the RV segment and recent acquisitions.
Earnings during the period totaled $9.8 million, or 43 cents per diluted share, compared to $5.6 million, or 25 cents per diluted share, in the third quarter of 2011. Net sales in the 2012 third quarter grew 36% to $226 million from $166.7 million a year ago, including a 43% increase in RV revenue. The RV segment accounted for 86% of Drew’s consolidated sales.
RV sales growth was largely due to a 19% increase in industrywide wholesale shipments of travel trailers and fifth-wheels, Drew’s primary RV market, as well as market share gains, acquisitions and increased sales to adjacent industries. Excluding the impact of acquisitions, sales increased 27%.
“Sales in the 2012 third quarter increased nearly $60 million compared to the year-earlier quarter, on which the company achieved incremental operating profit of $5.7 million. This is an improvement from the year-over-year incremental margin we achieved in the second quarter of 2012, and in the first quarter of 2012,” said Fred Zinn, Drew’s president and CEO. “Greater-than-expected demand continued to reduce production efficiencies during the 2012 third quarter; however, we expect production efficiencies to further improve before the 2013 selling season.”
For the nine months Drew reported sales of $700.9 million compared to $521.6 million a year ago while net income rose to $32.6 million from nearly $26 million.
Drew reported that its strong performance continued in October as sales increased 35% to $85 million, lifted by the 2012 annual RV open house in Elkhart, Ind., in late September.
“We are no longer ‘looking uphill,’ so to speak,” said Jason Lippert, CEO of Lippert Components and Kinro. “In certain product lines we’ve begun to realize the benefits of resource planning and lean manufacturing initiatives, as well as the investments we’re making to expand capacity. The continued strong demand for our products throughout the third quarter is very encouraging. As a result, our production levels remained very high.
“Implementing our plans to improve production efficiencies has taken longer than expected because it’s very difficult to re-organize production flow while still operating near capacity at several key plants. In the seasonally slower months ahead, we plan to retain more production employees than typical in the slow winter season in order to level out production by building to stock certain high volume products. Retaining employees will also enable us to minimize hiring and training costs when demand ramps up in early 2013. In the fourth quarter of 2012, we also expect to incur costs related to facility re-alignment, and process improvement, as we did in the third quarter. We’re targeting our efforts to help ensure that we achieve stronger production efficiencies next year and beyond.”
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