A Leading National Supplier of a Wide Variety of
Components for RV’s and Manufactured Homes
Drew Industries (NYSE:DW)
2003
Forward Looking Statements
This presentation contains 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 Exchange Act and Section 27A of the Securities Act. Forward-looking statements, including,
without limitation those relating to our future business prospects, revenues and income, wherever 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, including those set forth in this presentation and the Company’s SEC filings.
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 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,
changes in zoning regulations for manufactured homes, availability and costs of labor, inventory levels of retailers
and manufacturers, levels of repossessed manufactured homes, the financial condition of our customers, retention
of significant customers, interest rates, oil and gasoline prices, the outcome of litigation, volume of orders related to
hurricane damage and operating margins on such business, 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.
About Drew Industries
A leading national
manufacturer of
quality components
for Recreational
Vehicles (RV) and
Manufactured
Homes (MH)
Headquartered in White
Plains, New York – 10
employees
47 manufacturing facilities in
the U.S. and 1 facility in
Canada
Approximately 4,600
employees nationwide
Organic growth from 2001
through 6/30/06 was well over
$200 million or a 10%
average annual growth,
excluding price increases,
acquisitions, and FEMA
business
Company Overview
Financial Performance
Sales and EBITDA in millions
MH segment sales
RV segment sales
EBITDA(1)
(1)
2001-2005 EBIDTA CAGR = 25%. EBITDA is
operating profit plus depreciation and amortization
Drew’s Companies
Kinro, Inc. – Acquired 1980
Aluminum windows for RVs
Doors for RVs
Aluminum and vinyl windows and screens
for MHs
Bath and shower units for MHs and RVs
Lippert Components, Inc. – Acquired 1997
Chassis and chassis parts for RVs and MHs
Slide out mechanisms for RVs
Leveling devices for RVs
Axles for towable RVs and for MHs
Specialty trailers for boats, personal
watercraft and equipment hauling
Axles for Specialty Trailers
Bed lifts for “toy-hauler” RVs
Steps for RVs
Drew’s Segments – LTM 6/30/06
MH = $25 million
33%
RV = $51 million
67%
MH = $241 million
32%
RV = $521 million
68%
Revenues - $762 million
90+% of RV revenues are
for towable RVs
Segment Operating Profit - $76 million
MH = $241 million
32%
RV = $521 million
68%
Drew’s Products
RV Chassis and Chassis Parts:
$226 million
MH Chassis &
Chassis Parts:
$92 million
MH Windows,
Doors & Screens:
$99 million
RV Windows & Doors:
$125 million
12 Months Ended June 30, 2006
Sales - $762 million
Other:
$18 million
MH and RV
Bath Products:
$21 million
Specialty Trailers:
$31 million
RV Slide-out
mechanisms:
$102 million
RV and MH
Axles & Tires:
$48 million
Supplier to Industry Leaders
Outstanding customer service and national coverage, with 48
production facilities (approximately 3.2 million sq. ft.), make us a
key partner with our customers.
Supply most of the Leading Producers of RVs and MHs:
Both RV and MH
Fleetwood (NYSE:FLE)
Skyline (NYSE: SKY)
RV
Coachmen (NYSE: COA)
Forest River (owned by Berkshire Hathaway)
Monaco Coach (NYSE: MNC)
Starcraft (privately owned)
Thor (NYSE:THO)
MH
Champion (NYSE: CHB)
Clayton (owned by Berkshire Hathaway)
Oakwood Homes and Southern Energy Homes
(owned by Clayton)
Palm Harbor (Nasdaq: PHHM)
Business Strategy
Increase sales and profitability through:
Market share growth
New product introductions
Strategic acquisitions
This strategy accomplished through:
Outstanding customer service
Motivating management through profit incentives and training
programs
Maintaining highly efficient factories by optimizing production
through state-of-the-art manufacturing technology and methods
Extensive R & D efforts
Disciplined and patient acquirer
Content Per Vehicle - RV
Peak potential is $2,400 to $2,700 per RV
Operating
profit margin 11.3% 6.8% 8.6% 9.4% 11.3% 9.2%(a) 9.6%(a) 9.7%(a)
(a)
Margin since 2004 impacted by increases in steel and other material costs.
(b)
Excludes sales of specialty trailers, as well as Emergency Living Units (“ELU’s”) purchased by FEMA.
(b)
(b)
90+% of RV segment sales are for Towable RVs
Content Per Home - MH
Peak potential is $2,900 to $3,200 per
home
Operating
Profit margin 15.5% 9.8% 10.8% 11.0% 10.7% 10.1%(a) 10.2%(a) 10.5%(a)
(a)
Margin since 2004 impacted by increases in steel and other material costs, as well as an
adverse jury award, and subsequent settlement in a work place injury lawsuit.
New Product Introductions
Annualized sales of these products increased from
about $40 million in the 2nd quarter of 2005.
(in millions)
Acquisition Criteria
Drew is a disciplined and patient acquirer
Target less than 6 times pro forma
EBITDA
Immediately accretive
Complementary to our core RV and MH
markets
Strategic
Acquisitions
Seek to acquire products or technologies that we can
introduce through our nationwide customer base and
factory network
Become a more extensive supplier to our customers
Acquisition History
Strategic
Acquisitions
June 2006
Happijac
Bed lifts for
“toy haulers”.
Annualized sales
of $15 million
2001
Better Bath
Bath and shower
products for MH.
Annual sales of $20
million
July 2003
LTM Manufacturing
Slide-out mechanisms,
specialty slide-out
storage trays and
decks, and electric
stabilizer jacks for RVs.
Annual sales of $4
million
May 2004
Zieman
RV, MH and
specialty
trailers. Annual
sales of over
$40 million
Each of our RV and MH acquisitions has
expanded geographic markets or
broadened product lines
2002
Quality Frames
RV chassis.
Annual sales of
$7 million
11 Acquisitions
1980 – 2001
Including Kinro (1980)
and Lippert
Components (1997)
May 2005
Venture Welding
MH Chassis. Annual
sales of $18 million
March 2006
Steelco
MH & RV
Chassis. Annual
sales of $8
million
Oct 2003
ET&T Frames
Primarily specialty
trailer units.
Annual sales of
$7 million
Drew’s Management Team
Highly respected and experienced
management:
Drew
Leigh Abrams, CEO, 35+ years
Fred Zinn, CFO, 25+ years
Kinro
David Webster, CEO, Chairman,
30+ years
Lippert
Doug Lippert, Chairman, 30+ years
Jason Lippert, CEO, 12+ years
Excellent management training
and incentive programs
Innovative &
Experienced
Management
Leigh Abrams
David Webster
Jason Lippert and Doug Lippert
Investments
Kinro and Lippert have
extensive R&D departments
Since January 1997:
Invested over $146 million in
plant and equipment
Invested nearly $170 million
for acquisitions
Invested $40 million for stock repurchases at an average
price of $5.37 per share
These investments have been accretive to earnings
RVs - Industry Wholesale Shipments
(Thousands of Vehicles)
254
293
321
257
311
321
370
413
90+% of Drew’s current RV product sales are for Travel Trailers and 5th Wheel RVs
(1)
Includes approximately 13,500 RVs purchased by FEMA for emergency housing for 2004 hurricane victims.
(2)
Excludes 39,000 ELU’s in 2005 and about 70,000 ELU’s in the LTM 6/06 purchased by FEMA .
(3)
Starting in September 2005, about 35,000 towable RVs were purchased by FEMA from dealers, some or all
of which were replaced by the dealers in 2005 and 2006.
300
384
(1)
(2)(3)
(2)(3)
RV Market
84% of industry 2005 unit sales
46% of wholesale dollar sales
Retail cost $4,000 to $100,000
per unit. Average about $25,000
16% of industry 2005 unit sales
54% of wholesale dollar sales
Retail cost $41,000 to $400,000+
per unit. Average about $100,000
Since 1995 the travel trailer and
5th wheel market has grown at an
annual rate of approximately
10%, compared to a small decline
in motorhome shipments.
TOWABLE RVS (90+% of Drew RV revenues)
MOTORHOMES
Travel trailer with
expandable ends
Type A Motorhomes
Type B Motorhomes
Type C Motorhomes
Folding camping trailer
Travel trailer
Folding camping trailer
Sport utility RV
Fifth wheel travel trailer
Truck camper
Growth In RV Market
Positive Demographic
Trends
Primary owners of RVs are
50 and over
According to census
projections, there are
expected to be 20 million
more people over 50 by 2014
Strong Growth
Prospects
Industry Advertising Campaign
Target Market 30 and over
Post 9/11 security concerns and high airline ticket
prices increase RV travel vacations
Fifth Wheel RV
How RVs Are Used
Shift in U.S. culture
toward more RV-related
activities
NASCAR events
College and NFL football
games
More economical family
vacations
Typical RV family vacation
up to 74% less expensive
Strong Growth
Prospects
Many RVs are “parked”over the long-term
Historically, travel trailer sales not significantly
impacted by rising gas prices
Travel Trailer
MH - Industry Production
171
211
254
304
340
363
353
373
349
(Thousands of Homes)
131
168
193
251
(1)
131
(1)
Includes approximately 3,500 (in 2004) and 20,000 (in 2005 and LTM 6/06) MHs
purchased by FEMA for emergency housing for hurricane victims.
(1)
147
(1)
148
Drew’s MH segment remained profitable every quarter since 1998.
47%
61%
59%
52%
49%
49%
47%
47%
75%
70%
65%
78%
74%
79%
62%
64%
Manufactured Housing (MH) Market
Cost per sq. ft. is $36 for MH vs.
$86 for site-built homes
Average retail price of $68,000
for a 1,625 sq. ft. MH
10 million manufactured homes
across the U.S.
Strong Growth
Prospects
Improved quality, appearance and safety
Studies have shown that MH built since 1995 sustain no more
damage in hurricanes than site-built homes
Industry production down 60% from 1998 to the 12 months
ended June 2006, but Drew’s MH sales are down only 5% and
segment operating profit is down only 4%
MH: Industry Trends
Low inventory levels at retail dealers
Slowing of repossessions
Conventional financing now more common
than chattel financing
Improved industry lending practices should
lead to fewer repossessions
Berkshire Hathaway acquired Clayton,
Oakwood, Southern Energy and 21st
Mortgage; raised more than $5 billion for MH
financing
Strong Growth
Prospects
MH: Strong Future
Baby Boomers retire and
relocate to warmer climate
Affordability
Home appreciation due to
greater ownership of land
along with home
Possible rebuilding of
hurricane-damaged areas
during late 2006 and 2007
Improved industry image
Industry wide Advertising
Campaign needed
Strong
Growth
Prospects
Drew’s Ownership and Governance
Ownership by Executives and Directors:
Currently own 18%
Filed Form S-3 on October 3, 2005. All
insider sales are complete except for
one Director. After his sale, insiders
ownership will be 13%.
Drew’s Corporate Governance Program –
ranked in the 97th percentile of all Russell 3000
Companies by Institutional Shareholder
Services.
Added to S&P SmallCap 600 Index in October
2005
Financial Performance
The price of Drew’s common stock is about
8 times the price as of December 31, 2000
Drew has 21.5 million shares outstanding
and a market capitalization of about $550
million
(December 31 unless noted)
Stock Price History
Drew effected a 2-for-1 stock split on 9/7/05 to holders of record on 8/19/05
Operating Results
Year Ended December 31,
Financial
Performanc
e
(1)
2004 results were impacted by charges related to litigation. Operating profit was reduced by $1.5 million
which reduced net income by $0.9 million, or $.04 per diluted share.
(2)
2005 results were impacted by charges related to litigation. Operating profit was reduced by $1.2 million
which reduced net income by $0.8 million, or $.04 per diluted share.
(3)
Adjusted for 2 for 1 stock split on 9/7/05.
(4)
Operating profit for LTM 6/06 was increased by $1.0 million due to settlement of litigation referred to above
for less than previously accrued, which increased net income by $0.6 million, or $0.3 per diluted share.
(5)
EBITDA is operating profit plus depreciation and amortization.
($ in millions, except EPS)
Results By Segment
Year Ended December 31,
Financial
Performance
(a) After $0.4 million charge related to litigation, net of reduction in incentive compensation.
(b) After charges related to litigation, net of reduction in incentive compensation, of $1.5 million in 2004
and $0.8 million in 2005.
See Press Release dated February 15, 2006 for a reconciliation to consolidated results.
($ in millions)
Results By Segment
Six Months Ended June 30,
Financial
Performance
(a) After $0.4 million charge related to litigation, net of reduction in incentive compensation.
(b) After $0.8 million charge related to litigation, net of reduction in incentive compensation.
($ in millions)
Operating Results
Three Months Ended June 30,
Financial
Performance
(a) Adjusted for 2-for-1 stock split on 9/7/05.
($ in millions, except EPS)
Reconciliation of Operating Profit
to EBITDA
Financial
Performance
(1) See press release dated August 2, 2006 for a reconciliation to consolidated results.
($ in millions)
Balance Sheet
Financial
Performance
($ in millions)
(1) Days sales in accounts receivable is the most recent month’s net sales divided by accounts receivable,
net, at the end of the period.
(2) Inventory turns is cost of goods sold for the latest quarter divided by average inventory for the quarter.
12/31/03
12/31/04
12/31/05
6
/3
0
/06
Total assets
$ 160
$ 238
$
307
$
3
60
Total debt
$
42
$
71
$
73
$
99
Stockholders’ equity
$ 94
$ 122
$ 168
$ 1
91
RATIOS
Days sales in
a
ccts receivable
(1)
Inventory turns
(2)
19 days
7.3 turns
21 days
5.6 turns
21 days
6.1 turns
19 days
5.9
turns
Financial Strength
Financial
Performance
(1) Excludes discontinued operations of $200,000 and $148,000 in 2002 and 2003, respectively, and
the cumulative effect of change in accounting principle for goodwill of $30.2 million in 2002.
(2) EBITDA is operating profit plus depreciation and amortization.
12/30/02
12/31/03
12/31/04
12/31/05
LTM
6
/06
Return on Equity
(1)
24%
24%
23%
24%
2
4
%
Return on Assets
(1)
11%
13%
12%
12%
1
3
%
Total Debt to Equity
0.7
0.4
0.6
0.4
0.
5
Total Debt to
EBITDA
(2)
1.3
0.8
1.3
1.1
1.
2
Peer Comparison
17%
10%
11.5
16.7
Spartan (SPAR)
-4%
2%
18.3
N/A
Fleetwood (FLE)
24%
13%
11.2
13.9
Drew (DW)
ROE
ROA
Forward
P/E
Trailing
P/E
2%
3%
15.3
58.5
Monaco (MNC)
25%
15%
12.9
14.6
Thor (THO)
14.8
18.3
Winnebago (WGO)
23%
12%
Source: Capital IQ, September 7, 2006, except forward P/E, which is provided
by Thomson Financial and is based on fiscal 2007 analyst projections.
Financial
Performance
Thank You
Analyst coverage:
Avondale Partners, LLC:
Kathryn Thompson (615) 467-5637
BB&T Capital Markets:
John Diffendal (615) 340-8284
Sidoti & Company LLC:
Scott Stember (212) 453-7017
Susquehanna Financial Group, LLLP:
Cheryl Cortez (312) 427-5236
For more information contact:
Leigh J. Abrams, President and CEO
914-428-9098
leigh@drewindustries.com
Fredric M. Zinn, Executive VP and CFO
914-428-9098
fred@drewindustries.com
Or visit: www.drewindustries.com