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National Press Release
 | Drew Industries Reports Fourth Quarter and Full-Year 2008 ResultsPublished 2009-02-11 18:00By Drew Industries Incorporated |
For the fourth quarter of 2008, Drew reported a net loss of
"Our operating management, under the direction of
For the year, Drew reported net income of
Fourth Quarter Commentary
The loss for the 2008 fourth quarter includes a non-cash pre-tax charge of
The fourth quarter of 2008, as anticipated, was adversely affected by
higher raw material costs that reduced operating profit between
In addition, charges related to plant closures and staff reductions
adversely impacted fourth quarter 2008 operating profit by
"In response to severe economic and industry conditions, we've taken very aggressive steps to reduce costs and maximize operating efficiencies," said Zinn. "During the fourth quarter of 2008 and in early 2009, we closed seven of our 36 manufacturing facilities, and we're reviewing plans to close additional facilities, while maintaining adequate production capacity to respond to the needs of our customers."
These plant consolidations and synergies between Lippert Components and
Kinro, combined with previous cost-saving measures, are anticipated to reduce
the Company's 2009 fixed costs by more than
Net sales for the fourth quarter of 2008 declined
The Company's operating profit for the fourth quarter of 2008, excluding the effect of acquisitions, as well as the retirement and impairment charges, declined 23 percent of the "organic" decline in net sales. The decline was more than typical because of increased raw material, severance and group insurance costs.
Management anticipates that the recession and low consumer confidence will continue for at least the next several quarters, and that consumers will remain extremely cautious about purchasing discretionary big-ticket items, such as RVs and boats. Further, RV dealers are expected to continue to lower their inventory levels, which would reduce the demand for new RVs and impact sales of the Company's products.
Full Year Commentary
Net sales for the year-ended
"For several years, our management team has focused on reducing costs and improving operating efficiencies," said Zinn. "Even before the sharp deterioration in the economy last quarter, we had made significant strides, including consolidating 19 manufacturing facilities and substantially reducing fixed costs. In this extremely difficult economic environment, we are evaluating every cost. We will continue to take all prudent steps to improve our short-term results, while not impeding our long-term growth potential."
"While we're extremely disappointed with current market conditions, we are optimistic about the long-term prospects for the RV and manufactured housing industries. The basic reasons that Americans go RVing -- a love of the outdoors, traveling with family, and the desire for more affordable vacations -- have not changed. Nor has the need diminished for quality, affordable homes such as those provided by the manufactured housing industry."
"A key to our success during the past decade has been our ability to identify and introduce new products," said Lippert. Over the last several months, we've continued those efforts with the introduction of several new products, including RV entry doors and lighter-weight RV leveling devices, enhancing our opportunity for future growth. Also, during this recession, we are alert for other opportunities to expand, while still conserving cash. For example, an RV supplier ceased operations late last year, and we were able to purchase some of their equipment and replace them as a supplier of their former products."
Segment Reporting
Recreational Vehicle Products Segment
Drew supplies the following components for RVs:
-- Towable RV chassis -- Windows
-- Towable RV axles and suspension solutions -- Chassis components
-- Slide-out mechanisms and solutions -- Furniture and mattresses
-- Thermoformed products -- Entry and baggage doors
-- Toy hauler ramp doors -- Entry steps
-- Manual, electric and hydraulic stabilizer -- Other towable accessories
and lifting systems
Drew's RV Segment also manufactures specialty trailers for hauling boats, personal watercraft, snowmobiles and equipment.
More than 90 percent of Drew'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 62 percent of consolidated net sales in the 2008 fourth quarter.
RV Segment net sales were
In the fourth quarter of 2008, due to the recession, tight credit markets
and low consumer confidence, the decline in industry shipments of travel
trailers and fifth wheel RVs reached 63 percent. As a result of reduced
demand, many RV manufacturers temporarily closed numerous production
facilities in
"As a result of industry conditions, combined with higher raw material
costs flowing through our income statement, our RV Segment lost
For the full 2008 year, net sales of this segment were
"For the past six months, retail sales of RVs, while weak, have declined less rapidly than industry-wide production, indicating that dealers have decreased their inventories, partly due to difficulty obtaining floor-plan financing," said Lippert. "The situation is still very difficult, especially with consumer financing hard to come by. On a bright note, last week the Federal Reserve indicated that RV consumer and dealer floor-plan loans would be included in the Term Asset-Backed Securities Loan Facility (TALF) under the Troubled Assets Relief Program (TARP). We are confident that the RV industry will improve, though we cannot predict the timing. In the meantime, we continue to add new products and gain market share in many product areas, which will make us even stronger when the industry improves."
Through market share gains, acquisitions, and new product introductions,
the Company increased its product content per travel trailer and fifth wheel
RV to a record
Manufactured Housing Products Segment
Drew supplies vinyl and aluminum windows and screens, chassis, chassis parts, and bath and shower units to the manufactured housing industry.
Drew reported fourth quarter net sales of
Primarily as a result of the industry-wide production declines, Drew's
2008 fourth quarter manufactured housing segment operating profit was less
than
For the full 2008 year, this segment reported net sales of
As expected, the content per manufactured home produced has begun to
increase due to recent market share gains. For the full year 2008, Drew
reported that content per manufactured home produced was
"Although we face extremely challenging industry conditions, our MH segment remained profitable, as it has throughout the last ten years while industry shipments declined more than 75 percent," said Lippert. "So we know how to operate in tough times, and we remain focused on improving operating efficiencies."
Balance Sheet and Other Items
"In light of the current economic conditions, maintaining our strong
balance sheet and increasing cash flow continues to be one of our highest
priorities," said Giordano. "During the fourth quarter of 2008, we reduced
inventory by
In
Accounts receivable remain current, with only 15 days sales outstanding at the end of the quarter. "Our credit team has done an outstanding job during these difficult times in working closely with our customers and maintaining appropriate credit policies. We continue to closely monitor receivables from several customers, but to date our accounts receivable losses have not been material," added Giordano.
Capital expenditures were
In addition, non-cash stock based compensation was
Recent Developments
Drew reported
As previously announced, effective
"Over 28 years I have learned from Leigh and Rusty what it takes to lead a successful company, and I appreciate the fact that they will continue to advise and support Drew from their positions on Drew's Board of Directors," said Zinn. "Jason and his management team at Lippert Components and Kinro have a wealth of knowledge of our operations and the industries we serve. In addition, they have enormous energy, as well as a great track record of success."
"These are tough times for everyone, including our entire management team of more than 100 people each of whose compensation is tied to profits and is therefore down substantially. From our Board to management to employees, we remain motivated to focus on our long-term strategy of market share growth, new product introductions, acquisitions and operational efficiencies."
Conference Call & Webcast
Drew will provide an online, real-time webcast and rebroadcast of its
fourth quarter and year-end 2008 earnings conference call on the Company's
website, www.drewindustries.com on
Institutional investors can access the call via the password-protected event management site, StreetEvents (www.streetevents.com). A replay of the conference call will be available by telephone by dialing (888) 286-8010 and referencing access code 74445970. A replay will also be available on Drew's website.
About Drew
Drew, through its wholly owned subsidiaries, Kinro and Lippert Components,
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, Drew manufactures slide-out mechanisms for
RVs, and trailers primarily for hauling boats. Currently, from 29 factories
located throughout
Forward-Looking Statements
This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities for existing products, plans and objectives of management, markets for the Company's common stock and other matters. Statements in this press release that are not historical facts are "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.
Forward-looking statements, including, without limitation, those relating
to our future business prospects, revenues, expenses and income, whenever they
occur in this press release, are necessarily estimates reflecting the best
judgment of our senior management at the time such statements were made, and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those suggested by forward-looking statements. The
Company does not undertake to update forward-looking statements to reflect
circumstances or events that occur after the date the forward-looking
statements are made. You should consider forward-looking statements,
therefore, in light of various important factors as identified in this press
release and in our Form 10-K for the year ended
There are a number of factors, many of which are beyond the Company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors include pricing pressures due to domestic and foreign competition, costs and availability of raw materials (particularly steel and related components, vinyl, aluminum, glass and ABS resin), availability of credit for financing the retail and wholesale purchase of manufactured homes and recreational vehicles, availability and costs of labor, inventory levels of retailers and manufacturers, levels of repossessed manufactured homes and RVs, the disposition into the market by FEMA, by sale or otherwise, of RVs or manufactured homes purchased by FEMA in connection with natural disasters, changes in zoning regulations for manufactured homes, continuing sales decline in the RV and manufactured housing industries, the financial condition of our customers, the financial condition of retail dealers of RVs and manufactured homes, retention of significant customers, interest rates, oil and gasoline prices, the outcome of litigation, and adverse weather conditions impacting retail sales. In addition, national and regional economic conditions and consumer confidence may continue to affect the retail sale of recreational vehicles and manufactured homes.
DREW INDUSTRIES INCORPORATED
OPERATING RESULTS
(unaudited)
Year Ended Three Months Ended
December 31, December 31,
(In thousands, except per 2008 2007 2008 2007
share amounts)
Net sales $510,506 $668,625 $76,561 $137,815
Cost of sales 403,000 509,875 67,420 107,158
Gross profit 107,506 158,750 9,141 30,657
Selling, general and
administrative expenses 80,267 93,498 16,241 20,490
Goodwill impairment 5,349 - 5,349 -
Executive retirement 2,667 - 2,667 -
Other (income) (675) (707) - -
Operating profit (loss) 19,898 65,959 (15,116) 10,167
Interest expense, net 877 2,615 275 619
Income (loss) before
income taxes 19,021 63,344 (15,391) 9,548
Provision (benefit) for
income taxes 7,343 23,577 (6,181) 3,065
Net income (loss) $11,678 $39,767 $(9,210) $6,483
Net income (loss) per common
share:
Basic $0.54 $1.82 $(0.43) $0.29
Diluted $0.53 $1.80 $(0.43) $0.29
Weighted average common
shares outstanding:
Basic 21,808 21,893 21,597 22,002
Diluted 21,917 22,126 21,601 22,235
Depreciation and
amortization $17,078 $17,557 $4,544 $4,281
Capital expenditures $4,199 $8,770 $925 $1,318
SEGMENT RESULTS
(unaudited)
Year Ended Three Months Ended
December 31, December 31,
(In thousands) 2008 2007 2008 2007
Net sales:
RV Segment $368,092 $491,830 $47,151 $101,637
MH Segment 142,414 176,795 29,410 36,178
Total $510,506 $668,625 $76,561 $137,815
Operating profit (loss):
RV Segment $28,725 $63,132 $(3,123) $10,004
MH Segment 11,016 15,061 27 2,908
Total segment operating
profit (loss) 39,741 78,193 (3,096) 12,912
Amortization of intangibles (5,055) (4,178) (1,385) (1,164)
Corporate (7,217) (7,583) (1,503) (1,782)
Other items (7,571) (473) (9,132) 201
Operating profit (loss) $19,898 $65,959 $(15,116) $10,167
DREW INDUSTRIES INCORPORATED
BALANCE SHEET INFORMATION
(unaudited)
December 31,
(In thousands, except ratios) 2008 2007
Current assets
Cash and cash equivalents $8,692 $56,213
Accounts receivable, trade, less allowance 7,913 15,740
Inventories 93,934 76,279
Prepaid expenses and other current assets 16,556 12,702
Total current assets 127,095 160,934
Fixed assets, net 88,731 100,616
Goodwill 44,113 39,547
Other intangible assets 42,787 32,578
Other assets 8,632 12,062
Total assets $311,358 $345,737
Current liabilities:
Notes payable, including current maturities
of long-term indebtedness $5,833 $8,881
Accounts payable, accrued expenses and
other current liabilities 36,884 62,192
Total current liabilities 42,717 71,073
Long-term indebtedness 2,850 18,381
Other long-term obligations 6,913 4,747
Total liabilities 52,480 94,201
Total stockholders' equity 258,878 251,536
Total liabilities and stockholders'
equity $311,358 $345,737
Current ratio 3.0 2.3
Total indebtedness to stockholders' equity - 0.1
DREW INDUSTRIES INCORPORATED
SUMMARY OF CASH FLOWS
(unaudited)
Year Ended
December 31,
(In thousands) 2008 2007
Cash flows from operating activities:
Net income $11,678 $39,767
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation and amortization 17,078 17,557
Deferred taxes (2,145) (1,488)
Gain on disposal of fixed assets (2,393) (351)
Stock-based compensation expense 3,636 2,489
Goodwill impairment 5,487 -
Changes in assets and liabilities, net of
business acquisitions:
Accounts receivable, net 9,497 3,061
Inventories (12,695) 8,994
Prepaid expenses and other assets (1,980) 1,478
Accounts payable, accrued expenses and
other liabilities (23,506) 13,403
Net cash flows provided by
operating activities 4,657 84,910
Cash flows from investing activities:
Capital expenditures (4,199) (8,770)
Acquisition of businesses (31,786) (17,299)
Proceeds from sales of fixed assets 10,541 14,492
Other investments (48) (64)
Net cash flows used for investing
activities (25,492) (11,641)
Cash flows from financing activities:
Proceeds from line of credit and other
borrowings 14,600 23,800
Repayments under line of credit and other
borrowings (33,179) (52,218)
Exercise of stock options 402 4,577
Purchase of treasury stock (8,333) -
Other (176) -
Net cash flows used for financing
activities (26,686) (23,841)
Net (decrease) increase in cash (47,521) 49,428
Cash and cash equivalents at beginning of period 56,213 6,785
Cash and cash equivalents at end of period $8,692 $56,213
SOURCE Drew Industries Incorporated
