White Plain, N.Y.-based Drew Industries Inc. a leading supplier of components for recreational vehicles and manufactured homes, today reported net income for the second quarter, ended June 30, of $11.0 million ($0.49 per diluted share), a 14% increase over net income of $9.6 million ($0.43 per diluted share) reported in the second quarter of 2010.
Second quarter sales increased 7% to $186 million from $174 million the previous year, the result of a 9% increase in Drew’s RV segment sales, and a 1% decline in Drew’s MH segment sales. The RV segment, which manufactures components primarily for travel trailer and fifth-wheel RVs, represented 84% of consolidated sales, while the MH segment sales represented 16%. Industrywide wholesale shipments of travel trailer and fifth-wheel RVs increased 6% in the second quarter, while industrywide production of manufactured homes declined an estimated 11%.
“In the second quarter of 2011, we continued to increase our content per RV and manufactured home, and expand our sales to other industries, such as mid-size buses, modular housing and specialty trailers,” said Fred Zinn, president and CEO of Drew, which is parent to Lippert Components Inc. and Kinro Inc. “As a result, we were able to largely overcome the impact on our industries of slower economic growth in the second quarter of 2011 than had been anticipated. Our consolidated sales increased again in July 2011, reaching approximately $49 million, about 3% above July 2010 sales, despite July 2011 having one less shipping day than July 2010.”
On July 19, 2011, Drew acquired certain assets and business of M-Tec, an Indiana-based manufacturer of components for RVs and mobile office units. This was Drew’s second acquisition of the year, following the January 2011 acquisition of Home-Style, the leading manufacturer of RV furniture and mattresses in the growing Northwest RV market.
“The M-Tec acquisition enables us to expand our product line of components for motorhomes, a market which offers significant long-term opportunity,” said Jason Lippert, CEO of Lippert and Kinro. “The two acquisitions we’ve made so far this year were particularly attractive because we will use our purchasing power and manufacturing expertise to reduce the cost structure of the acquired operations. With our debt-free balance sheet, significant credit availability and outstanding operating management team, we have the capability to continue to invest in profitable growth opportunities.”
“We have also made major strides towards capturing new markets, expanding our customer service capabilities, and further increasing the depth of our management team,” said Scott Mereness, president of Lippert Components and Kinro.
To see the full report click here.
Lippert Components Inc. and Kinro Inc. today (June 5) announced they have launched a new effort to expand their sales of aftermarket RV products, hiring industry veteran Bob Mater as director of RV aftermarket services to head up this operation.
“Many of our existing RV products, including doors, windows, mattresses, upholstered seating, leveling devices, suspension products, slideouts, and other accessories, have significant aftermarket potential,” said Jason Lippert, CEO of Goshen, Ind.-based Lippert Components and Arlington, Texas-based Kinro. “Bob Mater is a true veteran, with 18 years experience in the RV and trailer aftermarket, and he is a great choice to lead this new effort. Our current RV aftermarket sales of $13 million, only scratch the surface of this opportunity. We believe we can profitably expand our sales into this market by devoting a talented team, as well as a separate facility, to focus strictly on gaining additional aftermarket business through RV dealers and wholesale distributors. This effort is another in a series of many steps we have taken over the years to continue to increase both our sales and profits.”
Scott Mereness, president of Lippert Components and Kinro added, “Many of our RV components now include features that were not available on new RVs just a few years ago. As a result, our on-line ‘e-store’ (store.lci1.com), where these new products are available for purchase, has recently gained quite a bit of attention from dealers and wholesale distributors, as well as from RVers. This success has given us enough insight about the potential aftermarket demand for our RV products for us to be confident that an additional focus on this market should be well worth the effort.”
The companies, subsidiaries of Drew Industries Inc., are major suppliers to the recreational vehicle and manufactured housing industries.
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.
Sometimes all it takes is a good idea and a little follow-through to make a big difference in one’s community.
Just ask Tobi Conroy, an administrative assistant with Lippert Components Inc. (LCI/Kinro) in Goshen, Ind., who’s recent call to CEO Jason Lippert sparked a companywide campaign that brought hundreds of blankets and numerous jobs to the homeless at Faith Mission of Elkhart, The Goshen News reported.
“It actually first started when we had those really frigid temperatures during a couple days in early February,” Conroy said. “I’d been watching on the news how the local shelters were just filled to capacity, and they didn’t have enough blankets or beds to go around. It just touched my heart.”
So as she was driving to work, Conroy decided to contact Lippert and ask him if he would be OK with her starting up a blanket drive at some of the company’s facilities.
“He said that’s a no-brainer, of course go ahead and do it,” Conroy said. “So I did, and we just collected hundreds and hundreds of blankets.”
In the meantime, Conroy contacted Kirt’s Cleaners, which offered to clean all of the used blankets for free.
Not wanting to stop there, Conroy decided to contact Michiana Mattress, part of LCI/Kinro’s mattress division, to see if the company would be able to contribute anything to the cause.
“We talked, and they were able to donate five mattress sets to the shelter,” Conroy said. “So it’s just gone fantastic.”
While Lippert’s month-long blanket campaign came to a close on March 12, that doesn’t signal the end of the company’s partnership with Faith Mission.
In fact, the company recently decided to expand its outreach further by offering to employ several of the Mission’s homeless clientele — again at the urging of Conroy.
“I went to the shelter and met with their development director, Mike Perez, and basically toured the shelter and spoke to him about all of the services they provide,” Conroy said. “In my mind, I just kind of pictured it as a place where people crash for the night, and then leave in the morning, and that’s not it at all. They offer people food, clothing, counseling, life skills coaching, and some people actually live there and basically learn to live on their own again. It’s pretty amazing.”
Inspired by what she saw, Conroy returned to work with another idea — why not go beyond fundraising and actually offer some of these people a job?
“When I got back to work, I spoke to our plant manager and said ‘you know, we hire people from work release, from all different races and backgrounds, so what do you think of offering some of these people jobs’? And he said ‘absolutely, lets do it,’” Conroy said. “So I contacted Mike on Feb. 24 and sent him over an application form, and by the next day 12 people were in orientation and had started employment by the 28th.”
And there’s no special treatment, Conroy said. The new hires are doing everything that a typical worker would do at the Kinro plant, which specializes in the production of windows and trim rings for the recreational vehicle industry.
“Some are sealing the windows, some are washing the glass, some are bending — just a number of different things,” Conroy said, noting that as of the end of last week everyone hired from the Mission still had their jobs. “To my knowledge, nobody has lost their job, nobody has been fired, and they’re working hard.”
According to Perez, hearing of that work ethic is not surprising, as many of the people he works with at the Mission have been willing and able to work for months, but just haven’t been able to catch a break.
“It was a very nice surprise hearing that Lippert wanted to see if anyone was interested in applying,” Perez said. “A real nice surprise. While it may not be more important than the blanket contributions, it gives a lot more hope. It kind of helped boost the morale around here, which right now we really needed.”
Perez said the community support — such as the recent contributions by Lippert — are vitally important to the continued operation of the Mission and the services it provides.
And for an organization that provides clothing, shelter, hygiene products and over 200,000 meals a year to area homeless, it’s not hard to understand why.
“There’s no way we could do what we do without that assistance,” Perez said. “We live off of individual support, family donations, etc. We need in a lot of ways corporate support as well, and in partnering with them, then they become more aware of our needs, so then down the road it will just be a benefit all around.
“We’re excited about our partnership with Lippert, and if there are other companies in the community that are interested in helping out, we’ll gladly take their call,” he said.
“I would hope that some of the other large companies in the area would take notice, because they have the capability to reach out as well,” Conroy said. “Many of us are so fortunate, and sometimes I feel like we’ve taken that for granted.
“These are smart, hard-working people who needed to catch a break, and I’m just glad we were able to give it to them.”
Goshen, Ind.-based Lippert Components Inc. announced today (Dec. 13) the promotions of the following key executives within its Lippert and Kinro operations:
- Jason Falk – vice president of operations – West Coast Group.
- Marc Grimes – vice president of operations – East Coast RV and MH Chassis Group.
- Todd Driver – vice president of operations – RV Products.
- Andy Murray – vice president of sales – RV Group.
- Matt Hazelbaker – vice president of operations – Seating and Mattress Products.
- Jim Chamberlain – vice president of operations – Kinro.
- Conny Holcombe – vice president of sales – MH Group.
“These executives have been vital to the growth and success of our company for the past decade,” Jason Lippert, CEO of Lippert Components and Kinro, said in a news release. “Because of their experience, dedication and focus, we have achieved consistent profitable growth through new product introductions, acquisitions, market share growth and efficiency improvements. Most importantly, they have each been critical in taking care of our most valuable assets — our customers and our employees at all levels in our organization. Each member of our team is motivated to provide the highest level of customer service, while producing quality and innovative products.”
Lippert and Kinro are subsidiaries of Drew Industries Inc, White Plains, N.Y.
Lippert Components and Kinro, subsidiaries of Drew Industries Inc., announced today (May 6) that Andy Murray has been promoted to national director of sales.
Murray, a 15-year veteran of the RV industry, has served in various capacities at Lippert Components during the last seven years, steadily expanding his knowledge of the company’s products and becoming acutely aware of customer requirements, according to a news release.
“Andy has been a leader in implementing our unsurpassed culture of customer service,” said Jason D. Lippert, president and CEO of Lippert Components and Kinro. “He has a great understanding of our capabilities, and he knows how to use those capabilities to develop solutions for our customers. Andy’s devotion to serving our customers has greatly contributed to our growth and to the wide variety of new products we have introduced. He will continue to focus on product development and strategic planning for marketing and sale of Lippert and Kinro’s RV products.”
“In his new position, Andy will serve on the executive committees of Lippert Components and Kinro, adding to our management team his vision, energy, and strategic thinking,” added Lippert. “It is people like Andy that separate us from all other vendors, and we will make sure that he has all the resources needed to continue providing the best possible service to our customers.”
Drew Industries Inc., a leading supplier of components for recreational vehicles and manufactured homes, today (Feb. 16) reported net income for the fourth quarter ended Dec. 31 of $2.9 million.
Net income for the quarter was reduced as a result of charges related to plant closings and start-ups and employee relocation, according to a news release.
In the 2008 fourth quarter, the White Plains, N.Y.-based company reported a net loss of $9.2 million, including charges for goodwill impairment and executive retirement aggregating $4.9 million after taxes and charges for plant closings and severance aggregating $800,000 after taxes.
Net sales in the 2009 fourth quarter were $105 million, up 37% from the $77 million in the fourth quarter of 2008. This sales increase was largely the result of an 88% increase in industrywide wholesale shipments of travel trailers and fifth-wheel RVs, partially offset by a 27% decline in industry-wide production of manufactured homes.
“During 2008 and the first eight months of 2009, RV dealers and their lenders focused on reducing inventories, resulting in a decline of an estimated 70,000 units,” said Fred Zinn, Drew president and CEO. “In 2009 alone, dealer inventories of travel trailers and fifth-wheel RVs declined by an estimated 30,000 units, implying that retail demand significantly exceeded industrywide wholesale shipments. Over the past few months, it appears that dealer inventories have stopped declining, and as a result, production levels have increased. Evidence of improved industry conditions and Drew’s market share growth has certainly been seen in January 2010, as our net sales increased to $44 million, well more than double our January 2009 net sales.”
“We are extremely pleased to end 2009 on such a positive note, particularly after the very bleak landscape we faced in the RV industry just a year ago, when most of our customers were shut down for extensive periods of time, and industrywide production of RVs was running at the lowest level in decades” said Jason Lippert, president and CEO of Drew’s subsidiaries, Lippert Components and Kinro.
“While the RV industry has a long way to go to get back to where it was a few years ago, industry-wide production levels for travel trailers and fifth-wheel RVs have been well above year-earlier levels for five consecutive months,” Lippert said. “Our customers are running their factories five days a week, even in the seasonally slow winter months. Of course, increased retail demand for RVs is the key to a sustained recovery. In this regard, reports from January and February 2010 RV trade shows have been encouraging; however, we are eager to see how the RV consumer responds in the upcoming spring selling season.”
“While industrywide production of RVs has increased, production in the manufactured housing industry has continued to decline. In addition, we are likely to see further year-over-year declines in industrywide production of manufactured housing over the next several months, partially due to the scarcity of retail financing, and continued reductions in inventory on dealer lots,” said Zinn. “While we tend to focus on our accomplishments in the RV industry, we are extremely pleased that, despite the severe conditions in the manufactured housing industry, Drew continued to be profitable in this segment by carefully controlling costs.”
Costs of the company’s primary raw materials increased in the fourth quarter of 2009, which had a modest impact on fourth quarter results. “Steel and aluminum prices increased 10-30% in the second half of 2009, depending on the type,” said Scott Mereness, executive vice president and COO of Lippert Components and Kinro. “Over the past few months, steel and aluminum prices have leveled off, and some analysts are projecting that there will be no significant changes at least in the near term. We anticipate that these increases in the cost of steel and aluminum will have a modest impact on our future profit margins as compared to the 2009 fourth quarter.”
For the year, Drew reported a net loss of $24.1 million, due to the first quarter goodwill impairment charge of $29.4 million, net of taxes. Excluding the goodwill impairment charge, net income for 2009 was $5.2 million. During the year, the company also incurred expenses totaling $5.5 million, net of taxes, 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.
For 2008, Drew reported net income of $11.7 million, including $4.9 million of after-tax charges for impairment of goodwill and executive retirement. Excluding these charges, net income for the year was $16.6 million.
Net sales for the year ended Dec. 31, 2009 were $398 million, a 22% decline from the $511 million in 2008. This compares to a 25% decline in industrywide wholesale shipments of travel trailers and fifth-wheel RVs, and a 39% decline in industry-wide production of manufactured homes.
“Even before the sharp deterioration in the economy, we had made significant strides, including consolidating numerous manufacturing facilities and substantially reducing fixed costs,” said Zinn. “Throughout 2009, we continued to focus on both controlling costs and increasing our content per RV and manufactured home. We reduced fixed costs by $9 million in 2009 compared to 2008, and these cost reduction initiatives will generate further savings of about $3 million in 2010. We are also particularly pleased that our content per travel trailer and fifth-wheel RV increased nearly 9% in 2009.”
“Our efforts to identify and introduce new products were evident at the annual RV show held in Louisville in December, where we displayed numerous new and improved RV products that focused on consumer safety and convenience, including our Quick-Bite™ coupler, an improved suspension system, entry doors with alarm systems and keyless entry, a “new-look” line of windows, and an innovative new wall slide-out mechanism,” said Lippert. “In our manufactured housing segment, we recently introduced a new line of entry doors, and increased our efforts to expand our share of the market for replacement windows, doors and bath products.”
Drew’s RV Segment also manufactures specialty trailers for hauling boats, personal watercraft, snowmobiles and equipment.
In 2009, nearly 93% 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 specialty trailers. The RV segment represented 78% of the company’s consolidated net sales in the fourth quarter of 2009, up from 62% in the 2008 fourth quarter.
Drew’s RV segment reported operating profit of $7.2 million, on net sales of $82 million in the 2009 fourth quarter, compared to an operating loss of $3.1 million on net sales of $47 million in the comparable period in 2008. Segment operating profit in the 2009 fourth quarter was reduced by $1.3 million due to expenses related to facility closings and start-ups, and employee relocations.
“The increase in RV segment operating profit compared to last year was greater than we would typically expect on the $35 million increase in net sales, primarily because of fixed cost reductions and lower warranty costs,” said Joe Giordano, Drew CFO and treasurer. “In addition, operating results for the 2008 fourth quarter were adversely impacted by unusually high raw material costs and the sharp decline in sales, which adversely impacted production efficiencies.”
“RV segment net sales in the fourth quarter of 2009 increased 74% over the depressed levels in the 2008 fourth quarter,” continued Giordano. “This percentage increase was less than the 88% increase in industrywide wholesale shipments, in part because of the greater-than-usual lag between the time we shipped our products to the RV manufacturers in the 2008 fourth quarter and the time they sold the RVs to dealers, and in part because our marine trailer operation on the West Coast continues to be severely impacted by industry declines.”
For the full 2009 year, Drew’s RV segment reported net sales of $308 million, a decrease of 16% from 2008, compared to a 25% decline in industrywide wholesale shipments of travel trailers and fifth-wheel RVs. Excluding the impact of the acquisition in 2008, net sales by Drew’s RV segment declined 20%.
“Acquisitions, new product introductions and market share growth have enabled us to increase our product content for travel trailers and fifth-wheel RVs by 9%, to $2,066 per unit in 2009, compared to $1,902 per unit in 2008,” added Lippert.
RV segment operating profit was $20.0 million for the full year 2009, after giving effect to $5.3 million of expenses related to plant closings and start-ups, staff reductions and relocations, increased bad debts and obsolete inventory and tooling.
“The improvements experienced in the RV industry and our RV business over the past few months were a very welcome relief after the difficult conditions in the first half of 2009 and much of 2008,” noted Zinn. “Given our sales growth in January 2010 and efficient operations, we anticipate solid first quarter results in this segment.”
Drew Industries Inc. announced Thursday (Oct. 1) that its wholly-owned subsidiary Kinro purchased from Philips Products Inc. certain inventory and equipment used for the production of front-entry doors for manufactured homes. The $1 million transaction was funded from available cash, the company stated in a news release.
“Not only will this acquisition increase the overall Drew-supplied content per manufactured home, it also adds a new product category for Drew,” said Fred Zinn, Drew president and CEO. “We estimate that the current annual market for front-entry doors for newly produced manufactured homes is about $12 million to $15 million. In addition, we believe there is a similar size market for replacement doors for the millions of existing manufactured homes.”
Elkhart, Ind.-based Philips Products had made windows and front-entry doors for manufactured housing before ceasing these operations in July. Kinro, which already has a significant market share in windows for manufactured homes, will begin to manufacture entry doors at plants in Indiana and South Carolina within approximately 30 days.
“Because of our innovative designs and product enhancements, we have had tremendous success with our entry doors for RVs, which we introduced late last year,” said Scott Mereness, vice president of Kinro. “We plan to leverage this experience, as well as the strong relationships we maintain with producers of manufactured homes and aftermarket distributors, to gain significant market share for entry doors in the manufactured housing industry.”
White Plains, N.Y.-based Drew, through its wholly owned subsidiaries, Lippert Components and Kinro, supplies a broad array of components for RVs and manufactured homes, including windows, doors, chassis, chassis parts, bath and shower units, axles and upholstered furniture. In addition, the company manufactures slide-out mechanisms for RVs, and trailers primarily for hauling boats.
Drew Industries Inc., White Plains, N.Y., Thursday (July 30) reported net income of $2.6 million for the second quarter ended June 30, compared to net income for the second quarter of 2008 of $9.2 million.
The net income decline was attributed to a $50 million decrease in net sales to $101 million, 33% below the $151 million reported in the 2008 second quarter. This decline in net sales resulted from a 44% drop in industry-wide wholesale shipments of travel trailers and fifth-wheels and an estimated 43% decrease in industry-wide production of manufactured homes, as compared to the 2008 second quarter.
“We are very pleased with the substantial improvement in our operating results during the second quarter,” said Fred Zinn, Drew president and CEO. “We continued to gain market share in many of our product categories, introduced several new products, and further strengthened our balance sheet. At the same time, our cost control programs have been expanded and are ahead of schedule.”
“Industry-wide shipments of travel trailers and fifth-wheel RVs for the month of June 2009 reached a seasonally adjusted annual rate of about 148,000 units, greater than any other month this year,” said Jason Lippert, president and CEO of Drew’s subsidiaries, Lippert Components and Kinro. “Industry production levels during the last several months have far exceeded our expectations, and we hope this is related to increased retail demand. Although we cannot predict whether this production level will be maintained, the RV industry is currently in a much better position than anyone expected a few months ago.
“Last year at this time many of our customers began to significantly cut back production schedules in response to lower demand from dealers. While there are uncertainties, it appears that many of our customers will continue to produce five days a week for the next couple of months. Beyond that it is difficult to anticipate demand, particularly during the winter months.”
The company also continues to reduce expenses through facility consolidations, staff reductions and synergies between its subsidiaries, Lippert Components and Kinro. Cost reduction measures benefited second quarter 2009 results by over $2 million compared to the same period in 2008, and are expected to benefit full year 2009 results by nearly $10 million.
New Products Introduced
“We continued to gain market share and introduce new products in the second quarter,” said Lippert. “New products included the debut of the Tow-N-Stow convertible storage unit, and the introduction of the innovative QuickBite coupler. We are currently considering several other new products, and we will take every prudent step to ensure that we increase our opportunity for growth, while maintaining outstanding customer service and product quality.”
Net loss for the current six-month period was $34.1 million. Excluding the first quarter 2009 goodwill impairment charge of $29.4 million, net of taxes, and $3 million, net of taxes, of extra expenses in the first quarter of 2009 related to plant consolidations, staff reductions, increased bad debts and obsolete inventory and tooling due to the unprecedented conditions in the RV and manufactured housing industries, the net loss for the current six-month period was $1.7 million.
Due to the seasonality of the RV and manufactured housing industries, the company’s results in the first and fourth quarters are typically the weakest, while second and third quarter results are traditionally stronger.
“The economy, while somewhat better than during the 2008-2009 winter, remains weak,” said Zinn. “In addition, many RV and manufactured housing dealers and consumers continue to have difficulty obtaining credit, which could make it tough for some dealers during the traditional seasonal slowdowns starting later this year. Therefore, our industries are likely to face additional challenges in the latter part of 2009 and the beginning of 2010. Further, our raw material costs continue to be volatile, declining modestly during the 2009 second quarter, but recently rising by 5-15%, depending upon the type of raw material.”
More than 90% of the company’s RV segment net sales are components for travel trailer and fifth-wheel RVs, with the balance comprised of components for motorhomes, and specialty trailers. The RV segment represented 78% of consolidated net sales in the second quarter of 2009.
Drew’s RV segment reported operating profit of $6.3 million, on net sales of $79 million in the 2009 second quarter, compared to operating profit of $13.0 million on net sales of $111 million in the comparable period in 2008. Excluding sales price changes and acquisitions, the “organic” decline in RV Segment net sales was $43 million, or 39%, due to the sharp decline in industry shipments.
For the first six months of 2009, the RV segment reported net sales of $131 million, a decrease of 44% from the same period in 2008. RV Segment operating profit was $1.7 million for the first six months of 2009, including $2.9 million of extra expenses in the first quarter of 2009 related to plant consolidations, staff reductions, increased bad debts and obsolete inventory and tooling. Excluding these extra expenses, the company’s RV segment had an operating profit of $4.6 million in the first six months of 2009.
“Through acquisitions, new product introductions and our position as an increasingly important supplier to leading RV manufacturers, we increased our product content for travel trailers and fifth-wheel RVs to $2,071 per unit for the last 12 months, compared to $1,891 per unit in the prior 12 month period,” said Lippert. “Our success over the years has been a direct result of our ability to gain market share, introduce new products and improve operational efficiency, as well as our financial strength. We are striving for continued success in each of these areas.”
Jason Lippert, president and CEO of Lippert Components and Kinro, subsidiaries of Drew Industires Inc., sees evidences of an upturn in the RV industry.
“We’re glad to leave behind the very slow winter months, when many of our customers closed for extended periods,” said Lippert, whose observation was contained at the end of a financial release filed today (April 24) by the parent company. In that quarter, Lippert and Kinro incurred approximately $4 million in extra expenses due to plant consolidations, staff reductions, higher bad debts and obsolete inventory and tooling, he noted.
“In recent weeks we have also experienced an increase in demand for our products, which has helped us improve production efficiencies,” he said. “While it’s too soon to know whether this will continue, it is encouraging to see our facilities producing more and have our employees working more consistent hours.”
He added that Drew is beginning “to realize the benefits of synergies between Lippert Components and Kinro – in terms of increased efficiencies, reduced costs, product development and coordinated sales efforts. We’re extremely proud of the way our management team and all our employees have responded to the very difficult economic conditions, and we are confident in their ability to position Drew to continue to outperform the industries we serve.”
In the release, Drew, based in White Plains, N.Y., stated that it expects operating results for the quarter ended March 31 to reflect a material, non-cash goodwill impairment charge. The company is in the process of finalizing the charge, but it is anticipated to include all or substantially all of the goodwill recorded on the company’s consolidated balance sheet, which totaled $45 million. If, subject to final review, the entire goodwill balance is written-off, the impairment charge would be approximately $29 million, net of taxes, or $1.36 per share.
“The impairment charge is non-cash, and will not affect our operations, liquidity, cash flows, or the company’s borrowing availability under its line of credit and shelf-loan facility,” said Fred Zinn, Drew’s president and CEO. “In the first quarter we generated significant cash flow, increasing our cash balances by $6 million, to more than $14 million at March 31. We also reduced total debt by over $2 million in the first quarter, to less than $7 million. We expect to continue to have strong cash flow over the coming quarters. After giving effect to the impairment charge, our stockholders’ equity will remain well over $200 million, and in this economy, maintaining a strong balance sheet will continue to be a primary focus of our entire management team.”
“The non-cash impairment charge is largely the result of uncertainties in the economy, and in the RV and manufactured housing industries,” said Joe Giordano, Drew CFO and treasurer. “Another key factor in the evaluation of goodwill is the discount rate used to determine the present value of projected cash flows. Since the end of 2008, the discount rate required for this calculation has increased substantially, contributing to the reduction in the fair value of our projected cash flows, which is one basis of our goodwill evaluation.”
Drew will report its full first quarter results on May 4.