LCI Industries (LCII) 8-K Drew Industries Reports Second Quarter 2012 Results

EXHIBIT 99.1

 

DREW INDUSTRIES REPORTS SECOND QUARTER 2012 RESULTS

White Plains, New York – August 2, 2012 – Drew Industries Incorporated (NYSE: DW), a leading supplier of components for recreational vehicles (RVs) and manufactured homes, today reported net income of $11.7 million, or $0.52 per diluted share for the second quarter ended June 30, 2012, compared to net income of $11.0 million, or $0.49 per diluted share in the second quarter of 2011.

Net sales in the 2012 second quarter increased to $251 million, a record for any quarter, and 35 percent higher than in the 2011 second quarter. This sales growth was primarily the result of a 39 percent sales increase by Drew’s RV Segment, which accounted for 87 percent of Drew’s consolidated net sales. RV Segment sales growth was largely due to acquisitions, market share gains, and an 8 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, Drew’s primary RV market. In addition, sales to adjacent markets more than doubled this quarter, largely as a result of acquisitions and an increase in sales of axles to non-RV markets. Drew’s MH Segment also reported strong sales growth in the second quarter of 2012, due to an estimated 13 percent increase in industry-wide production of manufactured homes. Excluding the impact of acquisitions, consolidated sales were up 23 percent.

Drew’s sales growth continued in July 2012, during which sales reached approximately $73 million, 49 percent higher than in July 2011. Excluding the impact of acquisitions, net sales for July 2012 were up approximately 35 percent. It is estimated that industry-wide shipments of travel trailer and fifth-wheel RVs increased 20 to 25 percent in July 2012.

Drew’s operating profit margin was 7.6 percent in the second quarter of 2012 compared to 7.8 percent in the 2012 first quarter. Profit margins continue to be impacted by excess labor, overtime, and related costs, all of which reduced net income by approximately $3.0 million, or $0.13 per diluted share compared to expectations. These higher costs were the result of lower operating efficiencies due to greater-than-expected demand which caused the Company to hire, train and support 1,100 more employees than in the second quarter of 2011. Material cost as a percent of sales was also higher than in the first quarter, partly as a result of increased outsourcing costs due to capacity limitations, as well as higher scrap costs.

“As a result of higher-than-expected demand for our products throughout the second quarter of 2012, our operating margins did not improve sequentially as had been anticipated,” said Fred Zinn, Drew’s President and CEO. “In some product lines, demand exceeded our capability to efficiently produce. In order to maintain our commitments to customers for on-time delivery of quality products, we incurred substantial overtime costs and other inefficiencies. However, the increased demand for our products will ultimately benefit our long-term profitability, as we increase capacity and improve production efficiencies.”

“We continue to devote significant effort, and invest financial resources, to expand production capacity and improve production efficiencies,” said Jason Lippert, CEO of Drew’s subsidiaries, Lippert Components and Kinro. “Over the past year and a half we have added 700,000 square feet of production space, and plan to reopen some of the space we shuttered in prior years. Further, we are developing leaner manufacturing strategies, and exploring technology to improve our production capabilities. We have experienced growth surges in the past, and we have right-sized our capacity through investment in people, technology and facilities. While the full impact of such investments takes time to realize, we expect production efficiencies to improve, and we will continue to invest in order to realize our future potential.”

Recreational Vehicle (RV) Products Segment

As a result of market share gains and acquisitions, the Company’s content in travel trailers and fifth-wheel RVs reached $2,596 in the 12 months ended June 30, 2012, up from $2,188 in the prior 12 month period. On a pro forma basis, including the impact of acquisitions as if they had been completed at the beginning of the period, content per travel trailer and fifth-wheel RV was $2,650 in the 12 months ended June 30, 2012.

The factors that adversely affected Drew’s consolidated results in the second quarter of 2012 were almost entirely related to the RV Segment. Further, fixed costs were approximately $2 million higher than in the second quarter of 2011, primarily due to additional staff and facilities, as well as higher amortization, largely from acquisitions and other investments. As a result, the incremental profit margin on the increase in sales, which assumes fixed costs do not change, was lower than the Company would typically expect.

For the three months ended May 2012, retail sales of travel trailer and fifth-wheel RVs were up 9 percent from the year-earlier period, compared to the 7 percent increase in industry-wide wholesale production over the same period. Industry surveys indicate that RV dealers are cautious, but generally comfortable with their level of towable RV inventory. Future industry-wide production levels will depend largely on the strength of retail sales levels.

Manufactured Housing (MH) Products Segment

Year-over-year industry-wide production of manufactured homes was up an estimated 13 percent in the second quarter of 2012. Despite this increase in demand, production efficiencies remained favorable in this segment of the Company’s business, because the Company has the capacity to increase production levels. As a result, MH Segment operating profit increased $1.1 million compared to the second quarter of 2011, on a $3.7 million increase in net sales.

Other Items

The Company ended the second quarter with $43 million in cash, up from $7 million at the end of 2011. The Company had no debt at either June 30, 2012 or December 31, 2011.

Conference Call & Webcast

Drew will provide an online, real-time webcast of its second quarter 2012 earnings conference call on the Company’s website, www.drewindustries.com, on Thursday, August 2, 2012 at 11:00 a.m. Eastern time. The call can also be accessed at www.companyboardroom.com.

Institutional investors can access the call via the password-protected site, StreetEvents (www.streetevents.com). A replay of the call will be available by telephone by dialing (888) 286-8010 and referencing access code 77643709. A replay of the webcast 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, manufactured homes, modular housing, truck caps and buses, and trailers used to haul boats, livestock, equipment and other cargo. Currently, from 30 factories located throughout the United States, Drew serves most major national manufacturers of RVs and manufactured homes. Additional information about Drew and its products can be found at www.drewindustries.com.

Forward-Looking Statements

This press release 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, acquisitions, 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 Securities Exchange Act of 1934 (the “Exchange Act”) and Section 27A of the Securities Act of 1933 (the “Securities Act”).

Forward-looking statements, including, without limitation, those relating to our future business prospects, net sales, expenses and income (loss), cash flow, and financial condition, whenever 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 press release, and in our subsequent filings with the Securities and Exchange Commission.

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, in addition to other matters described in this press release, pricing pressures due to domestic and foreign competition, costs and availability of raw materials (particularly steel, steel-based components, and aluminum) and other components, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, availability and costs of labor, inventory levels of retail dealers and manufacturers, levels of repossessed manufactured homes and RVs, changes in zoning regulations for manufactured homes, sales declines in the industries to which we sell our products, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the successful integration of acquisitions, interest rates, oil and gasoline prices, and the outcome of litigation. In addition, international, national and regional economic conditions and consumer confidence affect the retail sale of products for which we sell our components.

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DREW INDUSTRIES INCORPORATED

OPERATING RESULTS

(unaudited)

	Six Months Ended June 30,				Three Months Ended June 30,				Last Twelve
(In thousands, except per share amounts)	2012		2011		2012		2011		Months
Net sales	$	474,566	$	354,881	$	251,014	$	186,048	$	800,851
Cost of sales		383,320		274,943		204,591		143,989		649,822
Gross profit		91,246		79,938		46,423		42,059		151,029
Selling, general and administrative expenses		54,905		46,485		27,455		24,149		99,593
Operating profit		36,341		33,453		18,968		17,910		51,436
Interest expense, net		130		119		56		61		303
Income before income taxes		36,211		33,334		18,912		17,849		51,133
Provision for income taxes		13,387		12,982		7,204		6,884		18,602
Net income	$	22,824	$	20,352	$	11,708	$	10,965	$	32,531
Net income per common share:
Basic	$	1.02	$	0.91	$	0.52	$	0.49	$	1.45
Diluted	$	1.01	$	0.91	$	0.52	$	0.49	$	1.44
Weighted average common shares outstanding:
Basic		22,479		22,244		22,516		22,270		22,385
Diluted		22,686		22,417		22,731		22,458		22,579
Depreciation and amortization	$	12,361	$	10,016	$	5,980	$	5,126	$	22,867
Capital expenditures	$	13,154	$	10,543	$	7,470	$	7,407	$	26,928

DREW INDUSTRIES INCORPORATED

SEGMENT RESULTS

(unaudited)

	Six Months Ended June 30,						Three Months Ended June 30,						Last Twelve
(In thousands)	2012			2011			2012			2011			Months
Net sales:
RV Segment:
RV OEMs:
Travel Trailers and Fifth-Wheels	$	351,934		$	269,800		$	183,855		$	139,148		$	581,986
Motorhomes		14,192			8,940			8,240			4,316			21,080
RV Aftermarket		9,359			8,061			5,369			4,092			15,958
Adjacent Industries		38,501			16,627			20,967			9,643			62,177
Total RV Segment net sales		413,986			303,428			218,431			157,199			681,201
MH Segment:
Manufactured Housing OEMs		40,490			34,625			21,778			19,775			82,952
Manufactured Housing Aftermarket		8,740			8,439			4,471			4,449			16,485
Adjacent Industries		11,350			8,389			6,334			4,625			20,213
Total MH Segment net sales		60,580			51,453			32,583			28,849			119,650
Total net sales	$	474,566		$	354,881		$	251,014		$	186,048		$	800,851
Operating profit:
RV Segment	$	34,264		$	32,625		$	17,483		$	17,324		$	47,354
MH Segment		7,161			5,177			4,030			2,953			13,964
Total segment operating profit		41,425			37,802			21,513			20,277			61,318
Corporate		(4,524	)		(4,043	)		(2,216	)		(1,946	)		(7,964	)
Accretion related to contingent consideration		(920	)		(949	)		(432	)		(474	)		(1,857	)
Other non-segment items		360			643			103			53			(61	)
Total operating profit	$	36,341		$	33,453		$	18,968		$	17,910		$	51,436

DREW INDUSTRIES INCORPORATED

BALANCE SHEET INFORMATION

(Unaudited)

	June 30,				December 31,
(In thousands, except ratios)	2012		2011		2011
Current assets
Cash and cash equivalents	$	42,514	$	36,774	$	6,584
Accounts receivable, net		50,900		44,050		22,620
Inventories		91,413		83,556		92,052
Deferred taxes		10,125		12,143		10,125
Prepaid expenses and other current assets		9,631		6,163		6,187
Total current assets		204,583		182,686		137,568
Fixed assets, net		99,342		85,308		95,050
Goodwill		21,177		8,600		20,499
Other intangible assets, net		73,986		58,433		79,059
Deferred taxes		14,496		15,385		14,496
Other assets		5,618		3,969		4,411
Total assets	$	419,202	$	354,381	$	351,083
Current liabilities
Accounts payable, trade	$	44,372	$	27,377	$	15,742
Accrued expenses and other current liabilities		48,665		39,101		36,169
Total current liabilities		93,037		66,478		51,911
Other long-term liabilities		21,305		20,279		21,876
Total liabilities		114,342		86,757		73,787
Total stockholders’ equity		304,860		267,624		277,296
Total liabilities and stockholders’ equity	$	419,202	$	354,381	$	351,083

DREW INDUSTRIES INCORPORATED

SUMMARY OF CASH FLOWS

(unaudited)

	Six Months Ended June 30,
(In thousands)	2012			2011
Cash flows from operating activities:
Net income	$	22,824		$	20,352
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization		12,361			10,016
Stock-based compensation expense		3,069			2,209
Deferred taxes		-			385
Other non-cash items		1,131			162
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net		(28,280	)		(31,160	)
Inventories		1,227			(12,623	)
Prepaid expenses and other assets		(4,642	)		(1,926	)
Accounts payable		28,630			16,026
Accrued expenses and other liabilities		12,241			6,965
Net cash flows provided by operating activities		48,561			10,406
Cash flows from investing activities:
Capital expenditures		(13,154	)		(10,543	)
Acquisitions of businesses		(1,473	)		(7,250	)
Proceeds from maturity of short-term investments		-			5,000
Other investing activities		2,075			142
Net cash flows used for investing activities		(12,552	)		(12,651	)
Cash flows from financing activities:
Exercise of stock options and deferred stock units		1,471			504
Proceeds from line of credit borrowings		37,702			-
Repayments under line of credit borrowings		(37,702	)		-
Payment of contingent consideration related to acquisitions		(1,550	)		(224	)
Other financing activities		-			(141	)
Net cash flows (used for) provided by financing activities		(79	)		139
Net increase (decrease) in cash		35,930			(2,106	)
Cash and cash equivalents at beginning of period		6,584			38,880
Cash and cash equivalents at end of period	$	42,514		$	36,774

DREW INDUSTRIES INCORPORATED

SUPPLEMENTARY INFORMATION

(Unaudited)

	Six Months Ended June 30,					Three Months Ended June 30,					Last Twelve
	2012			2011		2012			2011		Months
Industry Data(1) (in thousands of units):
Industry Wholesale Production:
Travel Trailer and Fifth-Wheel RVs		131.5			120.2		71.1			66.0		224.2
Motorhome RVs		14.5			14.7		7.6			7.8		24.6
Manufactured Homes		28.0	(2)		23.2		15.2	(2)		13.4		56.5	(2)
Industry Retail Sales:
Travel Trailer and Fifth-Wheel RVs		117.2	(3)		108.5		78.7	(3)		75.1		206.0	(3)

(1) Industry wholesale production data for travel trailer and fifth-wheel RVs and motorhome RVs provided by the Recreation Vehicle Industry Association (“RVIA”). Industry wholesale production data for manufactured homes provided by the Institute for Building Technology and Safety (“IBTS”). Industry retail sales data provided by Statistical Surveys, Inc.

(2) June wholesale data for manufactured homes has not been published yet, therefore 2012 MH wholesale data includes an estimate for June 2012 units.

(3) June retail sales data for RVs has not been published yet, therefore 2012 retail data includes an estimate for June 2012 retail units.

	Twelve Months Ended June 30,
	2012			2011
Drew Content Per Industry Unit Produced:
Travel Trailer and Fifth-Wheel RV	$	2,596		$	2,188
Motorhome RV	$	857		$	612
Manufactured Home	$	1,468	(1)	$	1,414

(1) June wholesale data for manufactured homes has not been published yet, therefore 2012 MH wholesale data includes an estimate for June 2012 units.

	June 30,				December 31,
	2012		2011		2011
Balance Sheet Data:
Current ratio		2.2		2.7		2.7
Total indebtedness to stockholders’ equity		-		-		-
Days sales in accounts receivable		19.3		21.0		17.1
Inventory turns, based on last twelve months		7.1		6.2		6.3

Estimated Full Year Data:		2012
Capital expenditures	$	23 – 25 million
Depreciation and amortization	$	24 – 25 million
Stock-based compensation expense	$	6 – 7 million
Annual tax rate		38%