Drew Industries Inc., a supplier of components for recreational vehicles (RVs) and manufactured homes, reported net income of $11.1 million, or $0.46 per diluted share, for the fourth quarter ended December 31, 2013, compared to net income of $4.7 million, or $0.21 per diluted share, for the fourth quarter ended December 31, 2012.
In a release on February 13, the company noted earnings details:
Net income for the 2012 fourth quarter was net of an after-tax charge of $0.9 million in connection with executive succession. Excluding this charge, net income in the fourth quarter of 2012 would have been $5.7 million, or $0.25 per diluted share.
Net sales in the fourth quarter of 2013 increased to $225 million, 12 percent higher than the 2012 fourth quarter. This sales growth was primarily the result of a 16 percent sales increase by Drew's RV Segment, which accounted for 88 percent of consolidated net sales this quarter. RV Segment sales growth was primarily due to a 10 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew's primary RV market. In addition, sales of recently introduced components for towable and motorhome RVs increased, as did sales to adjacent industries and the aftermarket.
The Company's content per travel trailer and fifth-wheel RV and motorhome RV for the twelve months ended December 31, 2013 increased 1 percent to $2,716 per unit and 2 percent to $1,252 per unit, respectively.
Retail demand for travel trailer and fifth-wheel RVs increased an estimated 13 percent in 2013, following an 8 percent increase in retail demand for 2012. Dealer inventories of these types of towable RVs increased by about 15,500 units during 2013, compared to a retail sales increase of approximately 29,600 units for 2013. Industry analysts report that dealer inventories of towable RVs are in line with anticipated retail demand. Retail demand for motorhome RVs increased an estimated 30 percent in 2013, following a 6 percent increase in retail demand in 2012. Future RV industry-wide production levels will depend on the strength of future retail sales.
"The retail demand for RVs in 2013 was the largest the industry has experienced since 2007," said Jason Lippert, Drew's CEO. "The RV lifestyle continues to grow in popularity each year. Although the RV industry is sensitive to economic conditions, we are optimistic about the potential for continued long-term growth in retail demand for RVs. The strong industry fundamentals combined with our sales gains are positive signs for the future. We strive to maintain our position as a leading supplier to the industries we serve by staying ahead of the market through innovation and investing in customer support resources."
In January 2014, as a result of the negative impact of the severe winter weather conditions during the month on industry-wide production of RVs and manufactured homes, as well as on shipments of the Company's products, Drew's consolidated net sales were approximately $82 million, a decline of 3 percent from January 2013. Drew's net sales in January 2013 were 28 percent higher than January 2012. The Company estimates that industry-wide wholesale shipments of travel trailer and fifth-wheel RVs declined by 8 percent to 10 percent in January 2014 compared to January 2013 due to the severe winter weather conditions.
"As a result of the road and facility closures caused by the extreme weather conditions, industry-wide production schedules for January 2014 were delayed," said Jason Lippert. "However, retail RV shows for the first part of 2014 have been strong, with reports of higher traffic and increased sales activity, and backlogs at our customers have increased from the prior year. As a result, we are optimistic that the production delays from January 2014 will be made up over the coming months. Further, based on open orders and scheduled shipments for February 2014, our net sales for the year to date February 2014 are projected to be ahead of the comparable period of 2013."
"Our operating profit margins in the fourth quarter of 2013 were 7.2 percent compared to 3.4 percent in the fourth quarter of 2012," said Scott Mereness, Drew's President. "The fourth quarter is seasonally the slowest sales quarter of the year. The 2013 fourth quarter operating profit margins were higher than the comparable period of 2012 largely due to efficiency improvements, declines in the costs of implementing facility consolidations and realignments, and the spreading of fixed costs over a larger sales base. The labor efficiencies we realized over the past several quarters, while introducing new products and adjusting to industry and market share growth, have been significant. We continue to pursue and implement further operational efficiencies, including automation."
The effective tax rate for the 2013 fourth quarter was 31.2 percent, lower than the full year 2013 effective tax rate of 35.7 percent, but higher than the 2012 fourth quarter effective tax rate of 29.8 percent. The fourth quarter of 2013 and 2012 benefited from federal and state tax credits, as well as the reversal of state tax reserves, due to the closure of state tax years, with a larger benefit in the 2012 period.
2013 Full-Year Results Net sales for the year ended December 31, 2013 increased by $114 million, to a record $1.02 billion. Drew's RV Segment net sales increased 14 percent, compared to the 10 percent increase in industry-wide wholesale shipments of travel trailers and fifth-wheel RVs. Sales growth in new markets and new products continued to be key factors in enabling Drew's sales to exceed RV industry growth rates. Acquisitions did not have a significant impact on the increase in net sales for 2013. Significant additions to the Company's RV product lines in recent years include advanced leveling devices, in-wall slide-out systems, and awnings. Together, net sales of these products reached $90 million in 2013 as compared to $65 million in 2012.
In 2013, Drew continued to grow outside its core RV and manufactured housing markets, with aggregate net sales of components for adjacent industries increasing 20 percent to $121 million, and aftermarket net sales increasing 21 percent to $39 million. Together, these markets now account for 16 percent of consolidated net sales, an increase from 10 percent of consolidated net sales in 2010.
"Achieving our $1 billion sales milestone was a significant accomplishment for the Company," said Jason Lippert. "As we look towards future sales growth, we continue to identify the areas where investments are needed for long-term profitable growth. A key area of focus for the past year was our employees, and in 2013 we made solid progress at reducing employee turnover. This year we are increasing our efforts to improve employee retention, which should further improve operating efficiencies. In addition, we continually evaluate our production capacity and while certain capacity expansion plans may have a short-term negative impact on margins, over the long term these investments should allow us to improve our operating results, as well as our industry-leading customer service."
For the full year 2013, Drew's net income increased to $50.1 million, or $2.11 per diluted share, up from net income of $37.3 million, or $1.64 per diluted share, in 2012. Excluding charges related to executive succession in 2013 and 2012, net income would have been $51.3 million in 2013, or $2.16 per diluted share, up from net income of $38.3 million, or $1.68 per diluted share, in 2012.
At December 31, 2013, the Company had $66 million in cash and no debt, and had almost $200 million in unused credit lines. In January 2014, the Company paid a special dividend of $2.00 per share, aggregating $47 million. Return on equity for the 12 months ended December 31, 2013 improved to 16.0 percent, from 12.7 percent in the year-earlier period.
Jason Lippert concluded, "Over the past year we have seen many positive changes for our Company, including the successful implementation of our executive succession plan, continued expansion in adjacent industries, the introduction of various new products and product improvements, and improved operating efficiencies through lean initiatives and automation. However, as much as things change, we remain committed to what has historically brought us success -- focus on our customers. Overall, the past year was good for both our Company and the industries we serve, and I am confident that our management team has the ability to successfully execute our strategic goals for the long-term growth of the Company."
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