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Drew Industries Inc. reported a 6% increase in third-quarter sales while net income declined due to downturns in the recreational vehicle and manufactured housing sectors, and losses associated with the closing of an Indiana specialty trailer operation.
Drew reported third-quarter sales rose from $171 million a year ago to $181 million, which included $5 million from acquisitions and $12 million from sales price increases resulting from higher materials costs. Net income during the quarter, ended Sept. 30, fell to $6.9 million from $9.8 http://www.tl.com/Websites/ART/Article/index.cfm?million the previous year.
For the nine months, sales were $591 million, a 21% increase from the $488 million reported for the same period of last year. Net income for the period was $27.4 million compared to $24.3 million a year ago.
The White Plains, N.Y.-based firm, parent to Lippert Components Inc. and Kinro Inc., noted that the company generated higher revenues despite disproportionate year-over-year comparisons stemming from $6 million to $8 million in hurricane-related sales during the third quarter of 2005.
Drew also reported that the soft retail environments in its core markets led to the closing of three factories and consolidation of operations to nearby facilities along with a reduction in its hourly work force to “match current production levels.”
“Though our sales did increase compared to last year’s third quarter, our margins and overall profitability were negatively affected by several factors,” said Leigh J. Abrams, Drew’s president and CEO. “Industry weakness in both the RV and MH segments reduced our sales by approximately $12 million to $16 million. Losses from the now-closed specialty trailer operation in Indiana were approximately $1.2 million in the current quarter, compared to about $400,000 in the third quarter of 2005. However, we do not expect any additional significant losses from this operation in the future.”
Drew said that the recent acquisition of bed-lift supplier Happijac and performance at its new window factory helped offset negative factors during the quarter.
Despite industry-wide declines in wholesale shipments of towable RVs during the quarter, sales by Drew’s RV product segment increased 11% to $126 million compared to $114 million last year. More than 90% of Drew’s RV sales are for towable RVs, with the balance for motorhomes and specialty trailers.
“We believe that the slowdown in retail sales of travel trailers and fifth wheel RVs has been due in part to high gas prices, high interest rates, and the fear of possible gas shortages as a result of geopolitical conflicts,” said Abrams. “We are able to look forward with optimism because many of these factors have improved. Gas prices have dropped significantly since early summer, interest rates have stabilized, and there is no gas shortage. As a result, consumer confidence has been up for two of the last three months, which is usually a good sign for the RV industry.
“In addition, RV dealers have recently been aggressively reducing their inventories, which is slowing wholesale shipments. When retail sales recover, which we are confident they will because of the very favorable industry demographics, there should be an increase in demand for wholesale shipments.”