Drew Posts 13% Gain in 1st Quarter Revenues
Elkhart, Ind.-based Drew Industries Inc., a leading supplier of components for recreational vehicles and manufactured homes, today (May 1) reported that profits nearly doubled in its first quarter, boosted by a 13% increase in sales driven by strong performance in its RV segment.
First-quarter net income totaled $16.2 million, or 67 cents per diluted share, compared to net income of $8.4 million, or 36 cents per diluted share, the previous year. Net income for the 2013 first quarter was net of an after-tax charge of $0.7 million in connection with executive succession. Excluding this charge, net income in the first quarter of 2013 would have been $9.1 million, or 39 cents per diluted share.
Sales in the first quarter, ended March 31, increased to $285 million, 13% higher than the 2013 first quarter. This sales growth was primarily the result of a 16% sales increase by Drew’s RV segment, which accounted for 91% of consolidated net sales this quarter. Drew noted that the increase was in line with a 13% rise in industrywide shipments of travel trailers and fifth-wheels. In addition, sales of recently introduced components for towable and motorhome RVs increased, as did sales to adjacent industries and the aftermarket.
“After a slower than expected start to 2014 due to severe weather conditions, industrywide production of RVs, as well as shipments of our products, have rebounded in recent months,” said Jason Lippert, Drew CEO. “The increase in our net sales in February and March were largely due to the projected increased retail demand, but also included sales to OEM customers who were making up for production delays that occurred in January.”
In April 2014, Drew’s consolidated net sales reached approximately $113 million — 13% higher than April 2013 — as a result of continued solid growth in the company’s RV segment. Drew estimates that industrywide wholesale shipments of travel trailer and fifth-wheel RVs increased approximately 11% in April from a year ago.
“Our operating profit margins in the first quarter of 2014 were 9.1% compared to 5.4% in the first quarter of 2013,” said Scott Mereness, Drew president. “The 2014 first quarter operating profit margins were higher than the comparable period of 2013 largely due to efficiency improvements, declines in the costs of implementing facility consolidations and realignments, and the spreading of fixed costs over a larger sales base. In addition, the investments we have made in our business over the past several years are continuing to benefit our bottom-line results. We added capacity ahead of projected demand, which enabled us to efficiently fulfill customer orders as demand has increased.
“While certain capacity expansion plans may have a short-term negative impact on margins, over the long term these investments should allow us to improve our operating results, as well as continue to improve our customer service. Further, we are continuing to implement lean initiatives and automation where practical, and we are increasing our efforts to improve employee retention. We believe these efforts, combined with our continual evaluation of production capacity, will help us meet expected growth in customer demand, as well as improve operating efficiencies.”
Drew reported two acquisitions during the first quarter that did not have a significant impact on first-quarter results. Acquisitions includedInnovative Design Solutions (IDS), designer, developer and manufacturer of electronic systems, and Star Design, a manufacturer of thermoformed sheet plastic products for the RV, bus and specialty vehicle industries.
Mereness added, “In April 2014, we also entered into a six-year aluminum extrusion supply agreement, and concurrently sold certain of our aluminum extrusion assets. As part of our ongoing evaluation of capacity and asset utilization, we concluded that our aluminum extrusion assets were not meeting our internal financial standards. The sale of our extrusion-related assets will free up needed manufacturing space, as well as allow management to focus on other opportunities with higher growth and profit potential. We anticipate recording a pre-tax loss of approximately $2 million in the second quarter of 2014 on the sale of the aluminum extrusion-related assets. The outsourcing of these aluminum extrusion requirements will immediately be accretive to earnings.”