Exhibit
99.1
|
FOR
IMMEDIATE RELEASE
Contact: Leigh
J. Abrams,
President and CEO
E
Mail: Drew@drewindustries.com
|
 |
DREW
INDUSTRIES REPORTS 2007 AND FOURTH QUARTER EARNINGS
White
Plains, New York - February 13, 2008 - Drew Industries Incorporated (NYSE:
DW)
today reported its operating results for the fourth quarter and year-ended
December 31, 2007.
Drew,
a
leading supplier of components for recreational vehicles (RV) and manufactured
homes (MH), reported net income of $39.8 million, or $1.80 per diluted share,
for the year ended 2007, a 28 percent increase over net income of $31.0 million,
or $1.42 per diluted share, for 2006. Drew achieved this record net income
despite continuing volatility in raw material prices and an 8 percent decrease
in net sales, which the Company attributed primarily to softness in both
the RV
and MH industries.
“When
we
reported 2006 results a year ago, we said that we had embarked on a program
to
reduce costs and improve efficiencies in all phases of our operations,” said
Leigh J. Abrams, Drew’s President and CEO. “During 2007, we exceeded the goals
set in late 2006. Operating management reduced staff levels by more than
120
salaried employees, improved production efficiencies, and closed 18 factories
and consolidated these operations into other existing factories. We continue
to
consider additional measures to ensure we are optimizing our profitability,
including additional strategic acquisitions. During 2007, we completed three
acquisitions in three different product lines, complementing our existing
product lines and expanding our growth potential.”
Net
sales
for the year-ended December 31, 2007 were $669 million, a decrease of about
$60
million, or 8 percent, compared to 2006 net sales of $729 million. Excluding
the impact of acquisitions, Drew’s 2007 sales decreased by 11 percent
year-over-year. Drew attributed the sales decline primarily to the 10 percent
decline in industry wholesale shipments of travel trailers and fifth wheel
RVs
in 2007, as well as the 18 percent decline in industry wholesale shipments
of
manufactured homes.
In
2007,
gains and losses on asset sales, and expenses related to pending litigation,
aggregated expense of approximately $0.5 million. In 2006, gains and losses
on
asset sales and due diligence expenses related to an acquisition which was
not
completed, aggregated income of approximately $1.2 million. The effect of
these
items was not significant in the fourth quarter of either 2007 or
2006.
“Over
the
past year and a half, we also significantly improved asset utilization by
reducing inventory levels, disposing of excess equipment and idle facilities,
and reducing our capital expenditures,” said Fred Zinn, Drew’s Executive Vice
President and CFO. “As a result, our return on assets increased to 11.7 percent
in 2007, from 9.4 percent in 2006. Further, by the end of 2007, Drew had
improved its cash position by $78 million, as it had cash of $29 million,
net of
outstanding debt, compared to debt of $49 million, net of cash, at the end
of
2006.”
Fourth
Quarter Results
Drew’s
net income for the fourth quarter of 2007 increased by $2.8 million, or 78
percent, to $6.5 million, or $0.29 per diluted share, compared to $3.6 million,
or $0.17 per diluted share, in the same quarter of 2006.
The
effective tax rate for the full year was reduced by approximately 1 percent
to
37.2 percent. The reduction in the annual effective tax rate was primarily
due
to changes in deferred state taxes. Since the reduction in the tax rate for
the
full year was recorded in the fourth quarter of 2007, the effective rate
for the
quarter was reduced to 32.1 percent compared to 38.7 percent in the 2006
fourth
quarter. In 2008, the annual effective tax rate is expected to be approximately
38.5 percent.
Net
sales
for the fourth quarter of 2007 were $138 million, the same level reported
in the
fourth quarter of 2006. The 9 percent increase in sales by Drew’s RV Products
segment offset a 20 percent decline in sales by Drew’s Manufactured Housing
Products segment in the 2007 fourth quarter. This compares to flat industry-wide
wholesale shipments of travel trailers and fifth wheel RVs, and a 3 percent
decrease in industry-wide wholesale shipments of manufactured homes in the
quarter.
“We
are
extremely pleased with our performance in 2007, especially in our RV segment,”
Abrams said. “Acquisitions, new product introductions and margin improvements
enabled us to outperform the RV industry, particularly in the second half
of the
year. In our MH segment, we continued to achieve solid operating results
despite
the continued decline in sales.”
Recent
Developments
Drew
reported January 2008 sales were down approximately 4 percent compared to
January 2007, reflecting the continued slow-down in
both the
RV and MH industries.
“We
are
uncertain as to what effect current national economic conditions will have
on
the RV and manufactured housing industries,” Abrams said. “The real driving
force in both industries is consumer demand, and we’ll have to wait to see how
consumers react in this economic environment. However, we anticipate our
cost-cutting measures and new product growth will partially offset the possible
slow-down in these industries.”
During
2007, Drew completed three strategic acquisitions with annual sales aggregating
approximately $17 million. Abrams continued: “Each of these newly-acquired
businesses added innovative new products with significant growth potential.
By
consolidating production, and leveraging both our ability to market products
nationally and our purchasing power, we will seek to maximize the profitability
of these acquired operations.”
The
Company previously announced that its Board of Directors authorized a repurchase
of up to 1 million shares of the Company’s Common Stock. The Company has not yet
repurchased any shares, primarily because the Company instituted its normal
quarterly blackout beginning January 1, 2008.
“In
addition to the uncertain economic environment, we continue to face unstable
prices for our key raw materials, Zinn added. “In recent weeks, the market
prices of aluminum and certain types of steel have increased 10 percent or
more.
Higher energy costs continue to affect the costs of other raw materials,
such as
vinyl and thermoplastics. To minimize the impact of these cost increases,
we
continue to explore alternative sources of raw materials and components,
both
domestically and from overseas.”
Segment
Reporting
To
make
its segment reporting easier to understand, and present segment results in
the
same format used by management to evaluate segment operations, certain items
of
income and expense that are unrelated to the day-to-day operations of the
segments have been reclassified in this quarter to “Other items” in the
Company’s segment disclosure. Historical segment results have been reclassified
to conform to this new presentation.
Recreational
Vehicle Products Segment
Drew
supplies windows, doors, chassis, slide-out mechanisms and power units, axles,
bed lifts, bath products, electric stabilizer jacks, suspension systems,
leveling systems, steps, exterior panels and ramp doors for RVs, as well
as
specialty trailers for hauling boats, personal watercraft, snowmobiles and
equipment.
In
2007,
Drew’s RV segment represented 74 percent of net sales and 81 percent of segment
operating profit. More than 90 percent of Drew’s RV sales are components for
towable RVs, with the balance representing specialty trailers and components
for
motorhomes.
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Sales
by
Drew’s RV segment decreased 3 percent to $492 million for 2007.
However,
RV
segment sales in the fourth quarter of 2007 increased 9 percent to $102 million,
from the $93 million reported in the year-earlier period, compared to flat
industry-wide wholesale shipments of travel trailers and fifth wheel
RVs
during
the 2007 fourth quarter. Acquisitions added approximately $18 million to
2007
revenues in this segment, including $4 million in the fourth quarter. Excluding
the impact of acquisitions, sales by Drew’s RV segment would have been down 7
percent for 2007, but up 5 percent in the fourth quarter.
“Through
acquisitions, new product introductions and our position as an increasingly
important supplier to leading RV manufacturers, we increased our product
content
per RV to a record $1,739 for travel trailers and fifth wheel RVs. Our product
content for motorhomes was $243 during 2007,” Abrams said. Average product
content for all types of RVs increased to $1,326 in 2007, compared to $ 1,212
in
2006.
For
2007,
the Recreational Vehicle Industry Association reported that industry-wide
wholesale
shipments of travel trailers and fifth wheel RVs declined more than 10 percent,
while Statistical Surveys reported that retail
shipments of travel trailers and fifth wheel RVs through November 2007 (the
last
month for which industry information is available) increased nearly 3 percent.
Retail sales of travel trailers and RVs declined about 4 percent in November
2007 after eight consecutive month-over-month increases.
RV
segment operating profit in 2007 increased 45 percent to $63 million, compared
to operating profit of $44 million in 2006. A
$3.3
million operating loss from the Indiana-based specialty trailer operation
closed
in September 2006 adversely affected segment operating profit in 2006. For
the
fourth quarter of 2007, operating profit increased 73 percent to $10 million.
Drew’s RV segment results continue to benefit from cost-cutting measures and
production efficiencies, as well as from expanded global sourcing.
“Recent
dealer surveys indicate inventories of towable RVs, although well below
year-earlier levels, are still slightly higher than dealers would prefer
in this
uncertain economic environment,” Abrams said. “While retail demand held up quite
well in 2007, we continue to watch with concern the potential impact on
the
RV
industry of a softer economy and the volatility in the real estate and mortgage
markets in 2008.”
Manufactured
Housing Products Segment
Drew
supplies vinyl and aluminum windows and screens, chassis, chassis parts,
and
bath and shower units to the MH industry. Drew’s MH segment accounted for
approximately 26 percent of net sales and 19 percent of segment operating
profit
in 2007.
Drew’s
MH
segment reported 2007 sales of $177 million, a 20 percent decline from the
$220
million reported in 2006. Industry-wide wholesale shipments of manufactured
homes declined 18 percent, from 117,000 homes in 2006 to 96,000 homes in
2007.
Largely due to the decline in sales, operating profit for this segment declined
25 percent to $15.1 million in 2007, from $20.1 million in 2006.
In
the
2007
fourth quarter, sales of this segment declined 20 percent to $36 million,
compared to an industry-wide 3 percent decline in wholesale shipments of
manufactured homes. The decrease in Drew’s fourth quarter sales was greater than
the decrease in industry wholesale shipments partly because the Company exited
certain business due to inadequate margins. Further, during the fourth quarter
of 2007, there was a 12 percent decrease in larger, multi-section homes produced
by the industry, but this was partially offset by a 19 percent increase in
smaller, single-section homes, in which Drew has less average content per
home.
Despite
the decrease in sales, the operating profit margin of this segment improved
slightly, to 8.0 percent, from 7.7 percent in the fourth quarter of 2006.
“While
the 3 percent industry decline in the fourth quarter was far less than the
declines reported earlier in the year, there has been no concrete evidence
of
any significant improvement in the demand for manufactured homes,” Abrams
said.“Sales
of
manufactured homes in Arizona, Florida and California, the prime retiree
markets, were down more than 40 percent in 2007, accounting for nearly half
of
the industry decline in 2007.
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“Apparently,
because of the weak site-built housing market, retirees have not been able
to
sell their primary residence, or are unwilling to sell at the currently
depressed prices, and buy a less expensive manufactured home. Further, in
the
last several years, many traditional buyers of manufactured homes were instead
able to buy site-built homes, because sub-prime mortgages were available
to the
site-built buyer at unrealistic terms. Now that such sub-prime mortgages
are no
longer available, we believe it is more likely that certain home buyers will
eventually turn to more affordable manufactured homes. With our high market
share and track record of profitability, we will be in a strong position
when
the manufactured housing industry begins its recovery.”
Balance
Sheet
Inventories
declined by $7 million from previous-year levels, to $76 million as of December
31, 2007, and were more than $24 million below the $101 million reported
at the
end of 2005. During 2007, inventories averaged $81 million, or 21 percent
less
than the 2006 average.
Goodwill
and other intangible assets increased by $13 million compared to the end
of
2006, as a result of the three acquisitions completed during 2007, while
capital
expenditures were limited to less than $9 million in 2007. Depreciation and
amortization aggregated $17.6 million in 2007. The
Company expects capital expenditures to be between $10 million and $12 million
in 2008, while depreciation and amortization is expected to be about $18
million
for the year.
In
2007,
the Company collected more than $14 million on the sale of real estate and
equipment. The Company also owns 10 facilities which are vacant or are in
the
process of being vacated, which it plans to sell, with an aggregate book
value
of $9 million. In addition, the Company has instituted foreclosure proceedings
on a mortgage securing a $3.9 million note it received upon the sale of a
facility in 2006. In connection with such sale, Drew received $1.8 million
in
cash. When the foreclosure proceedings are completed, which is expected to
be in
2008, Drew will record a gain of up to the $1.8 million cash
received.
“Though
we are carefully watching conditions in our core markets,
we
remain confident
in our ability to outperform our industries through our long-standing strategy
of organic growth, new product introductions, acquisitions and operational
efficiencies,” Abrams
said. “We will continue this strategy with the
long-term aim of creating a stronger, more-efficient Company in excellent
position should the RV and MH industries return to year-over-year growth.
We are
also confident in the experience,
talent and ability of our operating management, especially in light of
their
exceptional track record of creating growth in challenging markets in the
past.”
Conference
Call & Webcast
Drew
will
provide an online, real-time webcast and rebroadcast of its fourth quarter
and
year-end 2007 earnings conference call on the Company’s website, www.drewindustries.com
on
Thursday, February 14, 2008 at 11:00 a.m. Eastern time. Individual investors
can
also listen to the call at www.companyboardroom.com.
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 73077665. 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, and axles. In addition,
Drew manufactures slide-out mechanisms for RVs, and trailers primarily for
hauling boats. Currently, from 33 factories located throughout the United
States, Drew serves most major national manufacturers of RVs and manufactured
homes in an efficient and cost-effective manner. Additional information about
Drew and its products can be found at www.drewindustries.com.
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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 the press release that are
not
historical facts are “forward-looking statements” for 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 the Company’s future business prospects, revenues and income are
necessarily estimates reflecting the best judgment of the Company’s 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. Forward-looking
statements, therefore, should be considered in light of various important
factors.
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 retail and wholesale financing for manufactured homes
and recreational vehicles, availability and costs of labor, inventory levels
of
retailers and manufacturers, levels of repossessed manufactured homes, 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, a sales decline in
either
the RV or the manufactured housing industries, the financial condition of
our
customers, 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 affect the retail sale of recreational vehicles and
manufactured homes.
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