White Plains, NY (PRWEB) August 11, 2006
Drew Industries Incorporated (NYSE: DW) today announced its net profit rose 18 percent on an increase of 24 percent of net sales for the second quarter ended June 30, 2006.
Drew, a leading provider of components for recreational vehicles (? RV?) and manufactured homes (? MH?) recorded net sales reached a record in the second quarter of $ 202 million, an increase of nearly 39 million of the $ 163 dollars in net sales reported in the second quarter of 2005.
revenue income for the quarter rose to a record in the second quarter of $ 10.2 million, or $ 0.47 per diluted share, compared to $ 8.7 million, or $ 0.40 per diluted share, in the second quarter last year. Drew attributed the increase in profitability to sales growth in both the Company? RV and MH segments, which increased by 26 percent and 19 percent respectively.
? the second and third quarts are traditionally the strongest in terms of sales and profits due to the seasonality of the industries in which the Company operates. However, in the first quarter of 2006, the usual seasonal slowdown was largely offset by the impact of hurricane-related demand for recreational vehicles and manufactured homes.
? We are pleased to announce another outstanding quarter, a result of our strategy based on a combination of organic growth, new product introductions and acquisitions? said Leigh J. Abrams, Drew? President and CEO. ? We continued to make gains in market share in many product lines established during the quarter, as well as in several of our new product categories, particularly recreational vehicles.
? In June 2006, our subsidiary, Lippert Components acquired Utah based Happijac Company, a supplier of bed lifts for carriers to toys and other products for VR. Carriers are toys that include a VR space for transporting recreational vehicles such as motorcycles and ATVs. Happijac had annualized sales of $ 15 million prior to our acquisition, and we expect to increase sales based on the popularity of carriers of toys, which are among the RV industry? S lines of the most dynamic products. We also expect to improve margins by taking advantage of cost savings between Happijac and Lippert.
Drew? s $ 39 million, or 24 percent, the increase in net sales for the second quarter of 2006 included organic growth of $ 28 to $ 30 million, or 17 to 18 percent, the balance of the increase in sales due to acquisitions and increases in selling prices.
results of operations of the Company
? benefited from the May 2005 acquisition of Venture Welding, an Indiana-based manufacturer of chassis for manufactured homes, and the March 2006 acquisition Steelco, a West Coast manufacturer of chassis for recreational vehicles and manufactured homes. The acquisition of Happijac did not have a significant impact on Drew? The second quarter of 2006, as the acquisition was completed at the end of the quarter.
Drew? s second quarter results were negatively impacted by operating losses of approximately $ 1.0 million for its operation based on Indiana-specialized trailers. Management has decided to gradually reducing production of specialty trailers in Indiana, and use the capacity of the plant to handle the increased demand for its products. Drew results? S in the third quarter should include some ongoing operating costs associated with liquidating the bottom of this product line at the factory in Indiana. Sales and profits of specialized trailers by Lippert subsidiary? Zieman S on the West Coast continue to be strong.
The Company also reported that its new plant in Arizona based manufactured housing window, operated by subsidiary Drew? Kinro s, is now solidly profitable. Window production of this plant began in the second half of 2005, and with this new capacity, Kinro is capable of processing further gains in market share.
? The costs of many of our main raw materials are still very volatile, although our operating management continues to do a great job of offsetting the impact of rising raw material costs with price increases of sales to customers, ? said Fred Zinn, Drew? s executive vice president and CFO. ? However, because these cost increases were passed on to our customers generally without margin, our profit margins have been reduced.
? In the second quarter of 2006, our operating margin rose to 8.8 percent of sales margin of 8.5 percent reported for the first quarter of 2006. The second quarter 2006 operating margin percent was, however, lower than the 9.3 per cent in the second quarter of 2005, primarily due to higher raw material costs and lower margins on some of our lines of the latest products. The cost of raw materials on hand at June 30, 2006 remained high, but the operating management believes that the increases in sales prices should be sufficient to offset these higher costs.
July 3, 2006, Drew has sold one of its plants on the West Coast for a gain of approximately $ 3 million, which is deferred until the Company receives payment for his 14 months of mortgage purchase price for a portion of the sales price. The Company also entered into a lease of 14 months of ownership. The Company intends to combine the operations previously conducted at the plant with its other operations on the West Coast. Drew previously consolidated several of its facilities to further improve operational efficiency, and currently has five factories and offices available for sale.
Unlike the first quarter of 2006, Drew? s results for the second quarter 2006 sales included little or no hurricane-related Gulf Coast in the second half of 2005. Drew? S in the first quarter 2006 included hurricane related sales between $ 19 million and $ 27 million, including sales of components for emergency living units (? ULA?) Purchased by the Federal Emergency Management Agency (? FEMA?) And sales resulting from restocking by retailers whose stocks had been exhausted by FEMA in the later part of 2005. Drew reported no FEMA tying and re-stocking dealer little in the second quarter of 2006.
? It seems that most of the temporary housing ordered by FEMA has already been produced, but we expect to see an increase in demand for our products MH as demand increases for manufactured homes in late 2006 and early 2007 due to permanence planned reconstruction of areas hit by the hurricane? Abrams said.
RV Products segment
Drew supplies windows, doors, frames, door mechanisms and power units, axles, bed lifts, bath products and electric stabilizer jacks, primarily for travel trailers and fifth wheels, and specialized trailers. Drew? RV Segment accounted for 69 percent of net sales, and 68 percent of segment operating income in the second quarter of 2006.
by Drew? RV segment s products in the second quarter of 2006 increased 26 percent to $ 140 million compared to $ 111 million in the second quarter of 2005. Segment operating profit reached 13.8 million this quarter, or 9.9 percent of sales of the segment, despite continued volatility in raw material costs and a loss of $ 1.0 million the operation of the Indiana-based specialty trailer. Excluding losses on Drew? S Indiana operation based on the trailer specialty segment’s operating margin improved to 10.6 percent in the second quarter of 2006 compared to 10.4 percent for the prior year second quarter and 9.6 percent in the first quarter of 2006.
past two years, Drew has launched several new products in its segment of RV, including sliding mechanisms and features upgrade for motorhomes, axles for trailers towable RVs and specialty of entry steps and elevators towable RV bed, and bath products and exterior parts for both towable RVs and motorhomes.
Drew estimates the potential market for these products exceeds $ 700 million, and society? s sales of these products in the second quarter of 2006 were running at an annualized sales of approximately $ 100 million, compared with an annualized sales of $ 85 million in the first quarter of 2006. Margins for new products are generally lower than for Drew? Products is established.
travel trailer and fifth wheel RVs, Drew? s primary market RV, increased by about 22 percent in the second quarter of 2006 compared to the same period in 2005, with little impact of hurricane-related sales. Retail sales of trailers and fifth wheel was a combination of two per cent until May 2006, the most recent month of data is available. Over 90 percent of Drew? RV sales are s RV towable, with the balance for motorhomes and specialty trailers.
Unlike the increased production of towable RV industry, which is Drew? s primary RV market, the industry production estimates of motor homes fell more than 11 percent in the first and second quarters of 2006, retail sales of motor homes were down more than 13 percent year to date through May 2006. Industry analysts attribute the decline in sales of motorhomes in part to high gasoline prices and interest rates rising.
? Despite high gas prices, year-to-date retail sales and fifth wheel trailers are up slightly over 2005, which was one of the best years on record for the RV industry,? Abrams said. ? In addition, long-term outlook for the RV industry remains very favorable, due to both demographic trends and vacation and leisure preferences of the American public.
manufactured housing products segment
Drew supplies vinyl
and aluminum windows and screens, chassis, chassis parts and units of shower and bath industry to MH. Drew? MH S segments represented approximately 31 percent of net sales and 32 percent of segment operating income in the second quarter of 2006.
Drew? sales of the MH segment s rose 19 percent to $ 62 million in the second quarter of 2006 compared to $ 52 million for the same period last year. Segment operating profit was 6.4 million this quarter, or 10.3 percent of segment sales, up 10.0 per cent in the first quarter of 2006, but down 11.7 percent in the second quarter of 2005. The decline in operating margin percent from last year was largely the result of higher raw material costs as a percent of sales was partially offset by higher selling prices, the lower production costs and other economies.
According to industry statistics, industry-wide production of manufactured homes declined about 3 percent for April and May 2006, the latest industry statistics are available months. In the first quarter of 2006, industry production was up nearly 9 percent, apparently because of hurricane-related purchases.
? The manufactured housing industry, exclusive of hurricane-related commands, has been stable for several years, yet we continue to gain market share and support our business case as a leading supplier in this market? Abrams said. ? We will be in a strong position when the manufactured home industry begins to recover.
Due to the increase of 24 percent of sales, acquisitions, higher raw material costs, and increased use of imported components, inventories increased to 110 million at June 30, 2006 from 101 million in the December 31, 2005, and $ 72 million to 30 June 2005. Management continues to evaluate inventory requirements, and provides that inventory levels will be reduced by the end of the third quarter.
Thanks to the efforts
improving the collection, accounts receivable decreased by $ 40 million at June 30, 2006, nearly 47 million euros to 30 June 2005, despite higher sales. The increase in goodwill and other intangible assets since the end of the second quarter of 2005 resulting from the acquisition in March 2006 and Steelco Happijac in June 2006, which also added about $ 34 million to the Company? Debt s. Total debt at June 30, 2006, net of $ 3.5 million of short-term investments was approximately $ 95.5 million, up $ 19 million from the end of first quarter 2006, due to acquisition Happijac about $ 29 million, offset by cash flows from operations. Capital expenditures, which aggregated $ 16 million for the six months ended June 2006, are expected to be between $ 26 million and 28 million in a full year.
? Our sales continue to be strong, with July 2006 sales represent about 21 percent in July 2005,? Abrams said. ? We expect our sales continue to increase due to gains in market share, sales of new products and the three acquisitions we made during the last 18 months. We will also remain focused on improving operating leverage and manufacturing efficiency.
Drew is an online, real-time webcast and rebroadcast of its conference call the second quart benefit on society? s site, http://www.drewindustries.com Thursday, August 3, 2006 at 11:00 am Eastern time. Individual investors can also listen to the call at http://www.companyboardroom.com.
Institutional investors can access the call via
site password-protected event management, StreetEvents (http://www.streetevents.com). A replay of the call will be available by telephone at (888) 286-8010 and referencing access code 44400461. A replay will be available on Drew? Its website.
Drew, through its wholly owned subsidiaries, Lippert Components and Kinro, provides a wide range of components for recreational vehicles and manufactured homes. Drew? S products include vinyl and aluminum windows and screens, doors, chassis, chassis parts, RV slide mechanisms and power units, leveling devices, bath and shower units, axles, bed lifts , steps, electric stabilizer jacks and trailers to transport equipment, boats, personal watercraft and snowmobiles, and chassis and windows for modular homes and offices. Of 47 plants in the U.S. and one plant in Canada, Drew serves most major national manufacturers of RVs and manufactured home in a cost-effective manner. Additional information about Drew and its products can be found at http://www.drewindustries.com.
This press release contains certain statements? Forward-looking? within the meaning of the Private Securities Litigation Reform Act of 1995 in relation to the financial condition, results of operations, business strategies, operational efficiencies or synergies, competitive position, growth opportunities for products existing plans and objectives of management, markets for the company? s common stock and other issues. The statements in this press release that are not historical facts are? Forward-looking statements? the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. Forward-looking statements, including, without limitation, those relating to our business prospects, revenue and income, wherever they occur in this press release, are necessarily estimates reflecting the best decision of our senior managers when such statements were made, and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by such statements. The Company does not undertake to update forward-looking statements to reflect events or circumstances that occur after the date the statements are made. You should consider forward-looking statements, therefore, in light of various important factors, including those contained in this press release.
There are a number of factors, many of which are beyond the Company? s control, which could cause actual results or events to differ materially from those described in forward-looking statements. These factors include pricing pressures due to competition, costs and availability of raw materials (particularly steel and related components, vinyl, aluminum, glass and ABS resin), availability of financing and ownership for manufactured homes, availability and labor costs, inventory levels of retailers and manufacturers, levels of repossessed manufactured homes, the financial position of our customers, interest rates, oil prices and essence, the outcome of litigation, the volume of orders related to hurricane damage and operating margins in this business, and adverse weather impact retail sales. In addition, national and regional economic conditions and consumer confidence may affect the retail sale of recreational vehicles and manufactured homes.
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