Drew Industries Inc, a leading supplier of components for recreational vehicles and manufactured homes, today (Feb. 24) reported record revenue for its fourth quarter, ended Dec. 31, boosted by 32% growth in RV sales. Drew is parent to Elkhart, Ind.-based Lippert Components Inc.
Consolidated net sales in the fourth quarter of 2014 increased to a record $289 million, 29% higher than the 2013 fourth quarter. This growth in sales primarily resulted from a 32% increase in sales of Drew’s RV segment, which accounted for 91% of consolidated sales in the 2014 fourth quarter. RV segment sales growth was largely due to a 20% increase industrywide in wholesale towable shipments coupled with four acquisitions completed by the company in 2014 which added $15 million in sales. Fourth-quarter net income totaled $12 million, or 49 cents per diluted share, compared to net income of $11.1 million, or 46 cents per diluted share, the previous year.
“Our net sales in 2014 were strong, demonstrating the effectiveness of our long-term strategy,” said CEO Jason Lippert. “In 2014, the RV industry experienced a solid year as the RV lifestyle continued to gain in popularity, consumer confidence improved, and retail demand for RVs in 2014 grew 8% from 2013. In particular, retail demand for RVs in the fourth quarter of 2014 accelerated, increasing 15% as compared to the fourth quarter of 2013. In response to the increase in retail demand for 2014, manufacturers produced more RVs in 2014 than any year since 2006.”
Drew President Scott Mereness noted that profit margins in the fourth quarter of 2014 were impacted by facility start-up and realignment costs. “During the fourth quarter of 2014, we completed several substantial investments in capacity expansion which helped solidify our foundation and should help us maintain our position as a leading supplier to the industries we serve,” he said. “The costs incurred with these investments lowered our net income per diluted share by $0.02 for the fourth quarter of 2014. We expect these investments, along with the personnel added, to improve our operating efficiencies in 2015 and 2016, which should result in improvements in customer service and operating profit margins.”
Net sales for the year increased by $175 million, or 17%, to a record $1.19 billion, primarily due to the 20% increase in sales of Drew’s RV segment. Excluding the impact of acquisitions, Drew’s RV segment sales increased 16%. The four acquisitions completed by the company in 2014 added $36 million in sales, all of which related to Drew’s RV segment. Sales growth in new and existing markets and new products also continued to be key factors in enabling Drew’s sales to exceed RV industry growth rates.
Net income for the year increased to $62.3 million, or $2.56 per diluted share, up from net income of $50.1 million, or $2.11 per diluted share, in 2013. Excluding the loss related to the sale of the company’s aluminum extrusion-related assets in 2014 and charges for executive succession in 2013, net income would have been $63.5 million in 2014, or $2.61 per diluted share, up from net income of $51.3 million, or $2.16 per diluted share, in 2013. Net income in 2014 was also impacted by facility start-up and realignment costs, which reduced net income per diluted share by approximately 9 cents.
“Seeing our sales for the full-year 2014 grow by $175 million was another significant accomplishment for the company, particularly following the $1 billion sales milestone achieved in 2013,” said Lippert. “As we look towards future sales growth, we see many opportunities, starting with the RV industry, which, according to the Recreation Vehicle Industry Association (RVIA), is projected to increase wholesale production in 2015. Further, we expect to grow faster than the RV industry by increasing our content per unit, as we have done consistently for the past 12-plus years. We also positioned ourselves for growth in adjacent industries, the aftermarket and the international RV market. We estimate there are opportunities collectively, in all the industries we serve for our existing products, which currently could generate additional sales for us in excess of $2 billion annually. While it will take time to gain market share in all the industries we serve, we are confident our focus on customer service, new product development, product enhancement, product quality and lean manufacturing will enable us to continue to compete effectively, and achieve long-term profitable growth.”
Merenes reported that raw material costs “continue to remain volatile, which has become the norm,” adding, “In particular, aluminum rose nearly 20% during the second half of 2014, and despite a decline in recent months, remains higher than the beginning of 2014. To help mitigate the impact of higher raw material, health insurance and other costs, we are improving product designs, making efficiency improvements and working with our vendors to identify opportunities to reduce input costs. Further, we implemented sales price increases, which should largely be in place by the end of the first quarter of 2015. We will continue to implement sales price adjustments as the costs of raw materials change.”
The five operations acquired by Drew during 2014 and early 2015 were:
- Innovative Design Solutions (IDS) — A designer, developer and manufacturer of electronic systems encompassing a wide variety of RV, automotive, medical and industrial applications, with annual sales of $19 million, of which $15 million were to Drew.
- Star Design — A manufacturer of thermoformed sheet plastic products for the RV, bus and specialty vehicle industries, with annual sales of $10 million.
- Power Gear and Kwikee brands (RV business of Actuant Corp.) — A manufacturer of leveling systems, slideout mechanisms and steps, primarily for motorhome RVs, with annual sales of $28 million.
- Duncan Systems — A supplier of replacement motorhome windshields, awnings, and RV, heavy truck, and specialty vehicle glass and windows, primarily to fulfill insurance claims, with annual sales of $26 million.
- EA Technologies — A manufacturer of custom steel and aluminum parts and provider of electro-deposition (‘e-coat’) and powder coating services for RV, bus, medium-duty truck, automotive, recreational marine, specialty and utility trailer, and military applications, with annual sales of $17 million. In connection with this acquisition, the Company also acquired a 250,000-square-foot facility, which provides room for capacity expansion.
To view the entire report click here.