Drew Industries Inc. today (Feb. 13) reported net income for the fourth quarter ended Dec. 31, 2011 of $4.1 million, or $0.18 per diluted share, compared to net income of $3.1 million, or $0.14 per diluted share in the fourth quarter of 2010. White Plains, N.Y.-based Drew is parent to recreational vehicle and manufactured housing suppliers Lippert Components Inc. and Kinro Inc.
Sales in the fourth quarter increased to $160 million, a 50% increase compared to the 2010 fourth quarter, as a result of a 51% rise in Drew’s RV segment sales and a 45% increase in Drew’s MH sales. Drew reported that sales in January 2012 reached approximately $65 million, 28% higher than in January 2011. Excluding the impact of sales price increases and acquisitions, net sales for January 2012 were up approximately 10%.
Sales for the full year increased 19% to $681 million compared to $573 million in 2010. Drew’s RV sales increased 20% while MH sales were up 16%. For the full year 2011, Drew’s net income increased to $30.1 million, or $1.34 per diluted share, compared to net income of $28.0 million, or $1.26 per diluted share in 2010. The company said that net income in 2011 was impacted by higher raw material costs, higher production costs in one product line and start-up costs, which reduced earnings by an aggregate of approximately $0.32 per diluted share.
“In 2011, we invested more than $50 million in acquisitions, expanding our product lines and capabilities, both in our core markets and related markets,” said Fred Zinn, Drew’s president and CEO. “These acquired businesses had annualized revenues of approximately $90 million, of which $40 million was included in our consolidated net sales for 2011. We also started production in our new aluminum extrusion facility, and made additional investments in new capacity, product development, including our new RV awning product line, slideout boot and others, and enhanced marketing efforts. As a result, we expect sales growth in our core markets, adjacent markets, the aftermarket for replacement products and in products for motorhomes, as our investments continue to yield results.”
Zinn added, “We recognize that our responsibility to stockholders is to turn opportunities and investments into solid profit growth, and we are focused on achieving that profit growth in 2012 and beyond. During the past year, we built the foundation for profit improvement. With our strong, debt-free balance sheet, we have the resources to continue to invest in opportunities which are expected to yield favorable long-term bottom-line returns.”
Jason Lippert, CEO of Lippert Components and Kinro, noted, “By expanding our production capacity and gaining footholds in new markets, we have opened doors to further opportunities in the years ahead. In 2012, we expect the investments we made in 2011 and 2010 to positively impact our bottom-line results. Returns on investments like these are not realized over night, but in recent months we have begun to achieve improved results on these investments, through accelerating customer acceptance of our new products, increased production efficiencies, and cost reductions.”
The company noted that production levels at Drew’s new aluminum extrusion facility have significantly increased in recent weeks. “Our first aluminum extrusion press is now running 24/7,” said Scott Mereness, president of Lippert Components and Kinro. “We expect the second and third presses to be in production within a few months.”
“We are also pleased with the improvement in the RV industry in 2011,” said Lippert. “Despite high unemployment in the U.S., industrywide retail sales of travel trailer and fifth-wheel RVs increased an estimated 5% in 2011. In the fourth quarter of 2011, despite a modest softening of retail demand, RV dealers expressed their confidence by boosting purchases. Industry reports indicate that these increases in dealer purchases were due to both anticipation of improved retail demand in the upcoming spring selling season, and new financing programs for dealers, designed in part to level seasonal production. While RV dealer purchases and inventory levels may continue to fluctuate, we are optimistic about the potential for long-term improvement in retail demand for RVs.”
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Drew Industries Inc., a major supplier of components for the recreational vehicle and manufactured housing industries, will release its fourth quarter 2011 financial results before the market opens on Feb. 13.
Drew, parent to Lippert Components Inc. and Kinro Inc., also will host a conference call on Feb. 13 at 11 a.m. (Eastern) to discuss its results and other business matters.
Participation in the question-and-answer session of the call will be limited to institutional investors and analysts. Individual investors, retail brokers and the media are invited to listen to a live webcast of the call on Drew Industries’ website at www.drewindustries.com.
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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The South Bend Tribune reported that Lippert will create up to 100 jobs in Middlebury and up to another 80 in Goshen by 2012. Along with a previously announced expansion in Elkhart, the company will have invested more than $9.3 million in Elkhart County, according to the Economic Development Corp. of Elkhart County.
In addition, Kinro products is adding another 30 jobs, Mark Brinson, community development director for Goshen, said, while retaining another 120. The company recently purchased Starquest Products.
But the good news hardly stops there.
On Tuesday night, the Goshen City Council took a step toward approving tax abatements for Benteler Automotive Inc. and GDC Corp., both of Goshen, which would help those companies expand.
Brinson said both abatements are expected to be finalized in two weeks.
When approved, Benteler Automotive will begin its first phase of expansion at a cost of $32.2 million, said Brinson, adding 98 jobs.
The company also has announced long-range plans to add another 80 jobs by 2016 and purchase $22.1 million in equipment while spending another $7 million on construction. Those 80 jobs aren’t even included in the nearly 400 new jobs announced this week.
Brinson also said GDC Corp. of Goshen, also known as Goshen Die Casting, has entered into a joint agreement with Monadnock Non-Woven of Pennsylvania.
It will take over an existing facility in Goshen, where it will spend $5.1 million for equipment and hire 73 people.
“It’s a perfect storm, and this time it’s a good storm,” Brinson said. “We’ve got a lot of good things happening.
“It’s amazing how much activity there is in the Goshen market, and it is fairly evenly split up between the automotive supplier business and the recreational vehicle supplier business.
“Those two are very active industry sectors at the moment.”
Brinson said the teamwork between the Indiana Economic Development Corp., the Economic Development Corp. of Elkhart County and the city of Goshen is paying off.
“They’re looking at where the best place is to do business, and it just so happens that we’re on the map as having a great cost of doing business and it’s working out great for Goshen,” Brinson said.
“It’s exactly what economic development is about,” said Dorinda Heiden-Guss, president of the Economic Development Corp. of Elkhart County. “We are excited to see they are existing businesses growing and expanding.”
Lippert Components, a manufacturer of recreational vehicle and manufactured housing components, plans to invest about $650,000 in new machinery and equipment as part of the expansion, according to the state’s release.
Kinro, a manufacturer of windows and doors for the recreational vehicle, manufactured housing and other industries, plans to invest about $3.5 million for the lease of a facility, and the purchase of machinery and equipment for the expanded production line.
“We are extremely pleased to continue to expand the operations of both Lippert Components and Kinro in Indiana,” said Jason Lippert, chairman and chief executive officer of Lippert Components and Kinro, in the release.
The company plans to begin filling the new manufacturing and administrative positions this fall. Lippert Components and Kinro currently operate 31 facilities in 12 states.
The Indiana Economic Development Corp. offered Lippert Components Manufacturing Inc. up to $1.55 million in performance-based tax credits and up to $165,000 in training grants based on the company’s job creation plans.
According to the release, Elkhart County and the city of Goshen will consider additional property tax abatement for Lippert at the request of the Economic Development Corp. of Elkhart County.
Even before these announcements, Elkhart County ranked third in the largest growth of gross domestic product in 2010, Brinson said.
“We all know we’ve had some rough spots in Elkhart County,” he said. “We’ve gotten a lot of attention as kind of being the poster child for unemployment, but the news lately is anything but that.
“We’ve become kind of the example of growth in manufacturing over the growth that has occurred over the last year,” he said.
Drew Industries Inc., parent to recreational vehicle and manufactured housing suppliers Lippert Components Inc. and Kinro Inc., today (Sept. 12) announced that Brendan J. Deely was appointed by Drew’s board to serve as an additional independent director.
Drew’s nine-member board will now consist of six independent directors. It is anticipated that Deely, 45, will also serve on one or more of the board committees and will be nominated for election as a director by stockholders at Drew’s annual stockholders meeting to be held in May 2012.
Deely is president and chief executive officer of L&W Supply Corp., a subsidiary of USG Corp., and senior vice president of USG Corp. He is a member of the USG Corporation Executive Committee. USG Corporation is a $3 billion global manufacturer and distributor of high-performance building systems through its United States Gypsum Company, USG Interiors, Inc., L&W Supply Corporation and other subsidiaries.
Deely earned an MBA from Northwestern University’s Kellogg School of Management. He has held several executive positions at USG in sales, marketing, operations and general management since 1988. He also serves on the board of directors of the National Safety Council and is president of the board of directors of the Lincoln Park Community Shelter in Chicago.
Drew Industries Inc., a leading supplier of components for recreational vehicles and manufactured homes, today (Aug. 29) announced that its wholly owned subsidiary, Kinro Inc., acquired the business and assets of Starquest Products LLC and its affiliate Qualitec Manufacturing LLC. This is the company’s fourth acquisition of 2011, which together add more than $70 million in annualized sales.
According to a news release, Starquest has annual sales of approximately $22 million, comprised primarily of windows for truck caps, which are fiberglass enclosures that fit over the bed of pick-up trucks, painted to automotive standards and designed to exact truck bed specifications. Starquest also manufactures windows and doors for horse trailers and buses. The purchase price of $22.6 million was funded with available cash and approximately $12 million of borrowings pursuant to Drew’s $50 million line of credit. Drew expects the acquisition to be immediately accretive to earnings.
“Starquest is a great company, and highly respected in its industries, with a 50% market share for windows for truck caps and an increasing share in the horse trailer market,” said Fred Zinn, president and CEO for White Plains, N.Y.-based Drew. “This is an excellent opportunity to accelerate our diversification into related markets.”
The key managers of Starquest have entered into employment agreements with Kinro, and will continue to manage the business. “The Starquest team has developed strong relationships throughout their industries, and we expect to build on that strength,” said Jason Lippert, CEO of Kinro, and its sister company, Lippert Components Inc.. “As in our all of our businesses, management’s responsiveness to the needs of our customers is the key to success.”
“We are very pleased that the business we have seen thrive will continue to be managed by our outstanding team,” said Kelly Rose, chairman, and Mike Schoeffler, CEO, who were the two principals of Starquest. “With the financial and strategic support that Kinro and Lippert Components can provide, we are confident that the Starquest business will continue to grow.”
White Plains, N.Y.-based Drew Industries Inc., a leading supplier of components to the recreational vehicle and manufactured housing industry, today (Aug. 22) reported that its wholly owned subsidiary, Lippert Components Inc., acquired from EA Technologies LLC the business and certain assets of the towable RV chassis and slideout mechanism operation previously owned by Dexter Chassis Group.
According to a press release, the acquired business has annual sales of more than $40 million, and the purchase price was $13.5 million, which was paid from available cash. Drew expects the acquisition to be immediately accretive to earnings.
“During 2011, we have taken several significant steps to enhance our growth and profit potential,” said Fred Zinn, Drew president and CEO.
These steps included:
• In January 2011, Drew acquired Home-Style, a manufacturer of a full line of upholstered furniture and mattresses for the Northwest RV market, with annual sales of approximately $12 million. Home-Style complements Drew’s Indiana-based Seating Technology operation, acquired in 2008.
• In July 2011, Drew acquired certain assets and businesses of M-Tec, a manufacturer primarily of components for RVs and mobile office units, with annual sales of approximately $12 million.
• In August 2011, Drew introduced a newly developed line of RV awnings, which will be sold directly to RV manufacturers, as well as through aftermarket distributors. The total market for RV awnings is well in excess of $100 million.
• During the year, Drew enhanced its management team, formed new sales teams to address aftermarket sales of its RV and manufactured housing products, as well new markets, and opened a state-of-the-art RV customer service center.
Zinn stated: “The combination of these steps and the continued growth we expect from acquisitions completed in 2010, we believe the acquisition of this RV chassis and slideout mechanism business will further enhance our ability to grow faster than our core markets. In addition, we have the financial and managerial resources to continue to pursue expansion opportunities which we believe will yield favorable returns on our investments. After completing this latest acquisition, we have available cash of $10 million, no debt, and $185 million of available borrowing capacity.”
“The success of our previous acquisitions has in large part been due to the strength of our operating management team,” said Jason Lippert, CEO of Goshen, Ind.-based Lippert Components. “The entire team is excited about this new acquisition, and the prospects of working even more closely with the key customers of this business. Our experience enables us to build high quality chassis and slide-out mechanisms for towable RVs, and the market share we are gaining through this acquisition will allow us to further increase the effectiveness of our existing manufacturing capacity. We will continue to focus on providing outstanding value and service to our customers.”
Lippert Components, currently the leading supplier of chassis and slideout mechanisms for towable RVs, expects to consolidate the operations of the acquired business into its existing facilities before the end of 2011.
“Over the past six years, our management team has consolidated more than 20 manufacturing facilities, and integrated several acquired operations,” said Scott Mereness, president of Lippert Components. “As a result, we have developed the capability to complete these integrations quickly and efficiently, minimizing any disruption to the acquired business. Further, by utilizing our existing production capacity, strong purchasing power, and effective production techniques, we can improve efficiencies and reduce costs of the acquired operations.”
Lippert Components Inc. and Kinro Inc., subsidiaries of White Plains, N.Y.-based Drew Industries Inc., announced today (June 9) the formation of a dedicated specialty markets team. According to a press release, the team will initially be comprised of four key full-time personnel, with additional personnel to be added as needed.
“Our specialty markets sales team will focus on supplying components for a variety of uses and industries, including trailers for cargo, horse and livestock, and heavy equipment, as well as components for ambulances and the transit and school bus industries,” said Scott Mereness, president of Goshen, Ind.-based Lippert Components and Arlington, Texas-based Kinro. “These and other markets have substantial potential revenue content per unit.
“Our team will sell all Lippert Components and Kinro products into these markets, including doors, windows, seating products, slideouts, axles, chassis parts and accessories and steel tubing. In addition, we anticipate beginning production at our new aluminum extrusion plant in the fall of this year, and the specialty markets team will be responsible for those external sales as well.”
The four individuals appointed to the new team include:
• Andrew Pocock, most recently a member of Lippert Components RV sales team, has been promoted to director of business development, and will lead the specialty markets sales team. A graduate of Miami University in Oxford, Ohio, Pocock began his career at Lippert Components, and has held several operational and sales positions in his more than eight years with the company. “Andrew has broad company experience and has excelled in each of his roles at Lippert Components,” said Mereness. “Andrew’s leadership skills will continue to be of enormous value in his latest role.”
• Carter Goodson joins Lippert Components with more than 20 years of experience as a supplier to the trailer and RV markets, most recently as a sales and marketing executive. “Carter’s experience selling multiple products and his existing relationships in this market make him an excellent addition to the team,” added Mereness.
• Ben Potts was recently hired as southeast regional sales manager for the specialty markets team. Potts comes to Lippert Components with 38 years of experience in the manufactured housing and RV industries, with both suppliers and manufacturers. “Ben’s extensive experience, long-term relationships, and motivation to get the job done will be key factors in the success of this team,” said Jason Lippert, CEO of Lippert Components and Kinro.
• Bob Boone, the fourth member on the specialty markets sales team, has extensive sales experience, having worked in various areas within Lippert Components, including the company’s axle and suspension product lines. “With over 20 years of sales experience, Bob is a valuable asset to this team. His enthusiasm and personality connect with customers,” said Lippert. “We have seen Bob in action and continue to expect big things.”
“This effort to grow our specialty business is another in a series of steps implementing our long-term strategy to increase both our sales and profits,” concluded Lippert. “This core sales team, combined with our existing manufacturing capabilities, is a natural step in the growth of Lippert Components and Kinro.”
Lippert Components, Inc., a subsidiary of Drew Industries Inc. (NYSE: DW), announced today (June 1) the promotions of three key managers, each of whom has made valuable contributions to Drew’s growth and success, according to a press release.
Steve Jenkins, current general manager of Lippert Components’ operation responsible for the production of RV axles, doors, slide-out mechanisms and accessories, has been promoted to director of manufacturing with responsibility for those products.
“Steve has been with Lippert Components for 11 years” said Jason Lippert, chairman and CEO of Lippert Components, “and has been responsible for the operation of several of our facilities over the years, including the 500,000-square-foot facility (in Goshen, Ind.) with 600 employees, our largest, which he now manages.”
Lippert said Jenkins recently assumed responsibility for the manufacture of new products such as Lippert’s “Level-Up” levelers, in-wall slide-out mechanism and RV entry doors, “which have quickly gained market share.” Jenkins, he added, will also be involved in new-product development.
Adam Clark, general manager of Lippert Components’ Indiana RV chassis operation, has been promoted to director of manufacturing with responsibility for all of the company’s Indiana RV and manufactured housing chassis production. “Chassis production is complex, and for the past 13 years Adam has been a driving force in enabling Lippert Components to become the leading chassis builder in the RV industry,” said Lippert.
Scott Meiner, general manager of Lippert Components’ Indiana RV window operation, has been promoted to vice president of purchasing.
“Scott has managed several of our operations over the past 14 years, including chassis and axle production, and most recently our largest window- and tempering facilities, with more than 400,000 square feet of production capacity and 700 employees,” said Lippert Components President Scott Mereness. “During his career with Lippert Components, Scott has been responsible for plant start-ups and other situations requiring exceptional talent and dedication.”
“Steve, Adam and Scott have earned these promotions through their years of dedication and effectiveness,” concluded Lippert. “We are very proud of these executives and their accomplishments.”
Lippert Components, and Kinro, Inc., its sister company, supply a broad array of components for RVs and manufactured homes, including chassis, chassis parts, RV slide-out mechanisms, axles, upholstered furniture, mattresses, windows, doors, and thermoformed products. Contact www.LCI1.com and www.Kinro.com.
Drew Industries Inc., a leading supplier of components for recreational vehicles and manufactured homes, today (May 2) reported net income for the first quarter ended March 31, 2011, of $9.4 million or 42 cents per share, a 28% increase over net income of $7.3 million or 33 cents per share reported in the first quarter of 2010.
Net sales in the 2011 first quarter increased 15% to $169 million, from $146 million in the first quarter of 2010, due to increases in industrywide shipments of travel trailer and fifth-wheel RVs, as well as continuing increases in Drew’s average product content in these types of RVs. Components for travel trailer and fifth-wheel RVs comprised 81% of the company’s consolidated net sales in the first quarter of 2011, while manufactured housing components accounted for 12%, and the balance consisted of motorhome components and other products.
“Over the last 10 years, our average product content in new travel trailer and fifth-wheel RVs has more than tripled due to market share gains, acquisitions and new product introductions, and this growth continued into 2011,” said Fred Zinn, Drew president and CEO. “For the three months ended March 31, 2011, our average product content in these types of RVs was 6% higher than in the same period in 2010, which helped boost our profit growth in the quarter. Further, our sales remained strong in April 2011, reaching approximately $60 million, about 6% above April 2010 sales, despite having one less shipping day this year than the prior year.”
“With every new product or product enhancement, our goal is to add value for our customers and for the RV user,” said Jason Lippert, CEO of Drew’s subsidiaries, Lippert Components and Kinro. “If we do it right, momentum builds over time, and these products become ‘standard’ on a wide range of RVs. We are very encouraged by our recent market share gains in the products we’ve introduced or enhanced during the past few years, such as RV entry doors, our new in-wall slide-out mechanism, furniture and mattresses, leveling systems, and electric jacks and stabilizers.”
About the RV Segment
The RV Segment represented 87% of the company’s consolidated net sales in the first quarter of 2011, compared to 85% in the 2010 first quarter. In the 2011 first quarter, more than 90% of the company’s RV Segment net sales were components for travel trailer and fifth-wheel RVs, with the balance primarily comprised of components for motorhomes and mid-size buses, as well as specialty trailers.
RV Segment net sales in the first quarter of 2011 reached $146 million, an increase of $22 million, or 18% compared to the 2010 first quarter.
“Our sales increase was significantly more than the 10 percent increase in industry-wide wholesale shipments, largely because of acquisitions, and market share gains in both our towable RV and motorhome product lines,” said Lippert. The company’s content per travel trailer and fifth-wheel RV for the 12 months ended March 2011 reached $2,210, compared to $2,168 for the 12 months ended December 2010.
“Our new products for motorhomes are also attracting a lot of attention, and we continue to see strong growth opportunities in that market,” he added.
Drew’s RV Segment reported operating profit of $15.3 million in the first quarter of 2011, an increase of 19% over the $12.9 million reported in the 2010 first quarter. “The increase in RV Segment operating profit was less than we would typically expect on a $22 million increase in net sales, largely because of higher raw material costs,” said Joseph Giordano, Drew CFO and treasurer. “We expect to be successful at substantially reducing the impact of higher raw material costs, as we have over the last several years.”
On Jan. 28, Drew acquired Home-Style, the leading manufacturer of RV furniture and mattresses in the growing Northwest RV market. “During 2011, the acquisition of Home-Style should add about $60 to our average product content in towable RVs,” added Lippert. “Further, we expect the acquisition to be accretive to earnings this year, as we build on the experience and purchasing power we’ve gained in that product line since our acquisition of Seating Technology in 2008. With our debt-free balance sheet and significant credit availability, we have the capability to continue to invest in profitable growth opportunities.”
Drew’s net sales in the first quarter of 2011 were also aided by a 10% increase in industrywide wholesale shipments of travel trailer and fifth-wheel RVs, compared to the first quarter of 2010. The impact on Drew of this increase in wholesale RV shipments was partially offset by an estimated 14 percent decline in industry-wide wholesale shipments of manufactured homes.
“The long-term health of the RV industry depends on consumer demand for RVs,” added Zinn. “And retail sales of travel trailer and fifth-wheel RVs have been up year-over-year for 12 consecutive months through February 2011, the last month for which retail data is available. In anticipation of a strong spring and summer selling season, RV dealers across the U.S. and Canada added an aggregate of about 23,000 travel trailer and fifth-wheel RVs to their inventories between December 2010 and February 2011, somewhat more than the 20,000 units added during the same period a year earlier. Therefore, strength in retail sales of RVs during the spring and summer selling season is key to maintaining high production levels, and we are encouraged by recent reports of industry analysts which cite continued strength in retail sales, as well as improving credit conditions.”
While industrywide production of RVs has increased, production in the manufactured housing industry has declined, partly due to continued weakness in the housing market and difficult credit conditions. “Despite adverse conditions in the manufactured housing industry, Drew has remained profitable in this segment by carefully controlling overhead costs, improving production efficiencies, expanding our product line, and gaining market share for after-market replacement products,” said Scott Mereness, President of Lippert Components and Kinro. “We continue to see opportunity for growth in the manufactured housing industry over the next few years, as the real estate market begins to recover.”
“We are delighted that Drew’s sales and profits in the first quarter of 2011 were nearly back to the pre-recession results we reached in the first quarter of 2007, and our balance sheet is even stronger than it was then,” said Zinn. “Our pay-for-performance compensation plans incentivize management to focus on producing bottom-line results by controlling costs, improving operating efficiencies, and increasing our return on invested capital. However, we still face uncertainty due to various conditions beyond our control, such as increases in gas prices. Further, our raw material costs increased sharply since November 2010, adding $2 million to cost of sales in the first quarter of 2011. While the effect of these higher costs on Drew’s second quarter cost of sales will be greater than in the first quarter, we have worked with our customers to significantly reduce the impact of these incremental cost increases through sales price increases and increased market share, and we have implemented new production efficiencies.”
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 and volatile raw material costs, seasonal industry trends may be different than in prior years.