News Column

Drew Industries Reports 2014 First Quarter Results

May 17, 2014

By a News Reporter-Staff News Editor at Journal of Transportation -- Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, reported net income of $16.2 million, or $0.67 per diluted share, for the first quarter ended March 31, 2014, compared to net income of $8.4 million, or $0.36 per diluted share, for the first quarter ended March 31, 2013. Net income for the 2013 first quarter was net of an after-tax charge of $0.7 million in connection with executive succession. Excluding this charge, net income in the first quarter of 2013 would have been $9.1 million, or $0.39 per diluted share.

Net sales in the first quarter of 2014 increased to $285 million, 13 percent higher than the 2013 first quarter. This sales growth was primarily the result of a 16 percent sales increase by Drew's RV Segment, which accounted for 91 percent of consolidated net sales this quarter. RV Segment sales growth was primarily due to a 13 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. Recently completed acquisitions did not have a significant impact on the increase in net sales in the first quarter of 2014.

Following a 14 percent increase and a 31 percent increase in retail demand for towable RVs and motorhome RVs, respectively, for the full year 2013, retail demand continued to increase during the first quarter of 2014. Despite the harsh winter weather that affected the industry at the beginning of the year, retail demand for towable RVs increased an estimated 3 - 5 percent, while retail demand for motorhome RVs increased an estimated 10 - 15 percent, in the first quarter of 2014. In anticipation of the traditionally stronger Spring and Summer selling seasons, coupled with an industry-wide expectation of pent-up demand stemming from the prolonged winter, RV dealers across the United States and Canada have increased their inventory levels over the past six months. Nevertheless, most industry analysts report that dealer inventories of towable RVs are in-line with anticipated strong retail demand. Future industry-wide production levels for RVs will depend on the strength of retail sales, which are sensitive to economic conditions and consumer confidence.

"After a slower than expected start to 2014 due to severe weather conditions, industry-wide production of RVs, as well as shipments of our products, have rebounded in recent months," said Jason Lippert, Drew's Chief Executive Officer. "The increase in our net sales in February and March were largely due to the projected increased retail demand, but also included sales to OEM customers who were making up for production delays that occurred in January."

In April 2014, Drew's consolidated net sales reached approximately $113 million -- 13 percent higher than April 2013 -- as a result of continued solid growth in the Company's RV Segment. Drew estimates that industry-wide wholesale shipments of travel trailer and fifth-wheel RVs increased approximately 11 percent in April 2014 compared to April 2013.

"Our operating profit margins in the first quarter of 2014 were 9.1 percent compared to 5.4 percent in the first quarter of 2013," said Scott Mereness, Drew's President. "The 2014 first quarter operating profit margins were higher than the comparable period of 2013 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. In addition, the investments we have made in our business over the past several years are continuing to benefit our bottom-line results. We added capacity ahead of projected demand, which enabled us to efficiently fulfill customer orders as demand has increased. 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 continue to improve our customer service. Further, we are continuing to implement lean initiatives and automation where practical, and we are increasing our efforts to improve employee retention. We believe these efforts, combined with our continual evaluation of production capacity, will help us meet expected growth in customer demand, as well as improve operating efficiencies."

"During the first quarter we completed two acquisitions at a combined purchase price of $49 million, which together had annual sales of approximately $29 million in 2013, of which $13 million were to Drew, and represent significant profit potential," said Jason Lippert.

Keywords for this news article include: Transportation, Travel Trailers, Drew Industries Incorporated.

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Source: Journal of Transportation

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