RV component manufacturer Drew Industries Incorporated (NYSE: DW) today reported net income for the first quarter ended March 31, 2011 of $9.4 million, a 28 percent increase over net income of $7.3 million reported in the first quarter of 2010. “Increasing our average RV product content has been key to our success over the last decade and we have continued this trend in recent months,” said Fred Zinn, Drew’s President and CEO, in today’s webcast conference call. Zinn went on to add that, “in recent weeks we also gained new sales for motorhomes, in particular with our in-wall slide out mechanism and our chassis extension capabilities, and we anticipate further gains in motorhome sales in the coming quarters.”
Drew’s net sales in the 2011 first quarter increased 15 percent to $169 million, from $146 million in the first quarter of 2010, due to increases in industry-wide shipments of travel trailer and fifth-wheel RVs, as well as continuing increases in Drew’s average product content in these types of RVs. Components for travel trailer and fifth-wheel RVs comprised 81 percent of the Company’s consolidated net sales in the first quarter of 2011, while manufactured housing components accounted for 12 percent, and the balance consisted of motorhome components and other products.
“Over the last 10 years, our average product content in new travel trailer and fifth-wheel RVs has more than tripled due to market share gains, acquisitions and new product introductions, and this growth continued into 2011,” said Zinn. “For the three months ended March 31, 2011, our average product content in these types of RVs was 6 percent higher than in the same period in 2010, which helped boost our profit growth in the quarter.”
“With every new product or product enhancement, our goal is to add value for our customers and for the RV user,” said Jason Lippert, CEO of Drew’s subsidiaries, Lippert Components and Kinro. “If we do it right, momentum builds over time, and these products become ‘standard’ on a wide range of RVs. We are very encouraged by our recent market share gains in the products we’ve introduced or enhanced during the past few years, such as RV entry doors, our new in-wall slide-out mechanism, furniture and mattresses, leveling systems, and electric jacks and stabilizers.”
On January 28, 2011, Drew acquired Home-Style, the leading manufacturer of RV furniture and mattresses in the growing Northwest RV market. “During 2011, the acquisition of Home-Style should add about $60 to our average product content in towable RVs,” added Jason Lippert. “Further, we expect the acquisition to be accretive to earnings this year, as we build on the experience and purchasing power we’ve gained in that product line since our acquisition of Seating Technology in 2008. With our debt-free balance sheet and significant credit availability, we have the capability to continue to invest in profitable growth opportunities.” Fred Zinn also commented on the Home-Style acquisition in today’s webcast. “We started the year with another addition to our product content through the acquisition of Home-Style, a manufacturer of furniture and mattresses for the growing northwest RV market…the integration of Home-Style has been going quite well.”
Drew’s net sales in the first quarter of 2011 were also aided by a 10 percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, compared to the first quarter of 2010. The impact on Drew of this increase in wholesale RV shipments was partially offset by an estimated 14 percent decline in industry-wide wholesale shipments of manufactured homes.
“The long-term health of the RV industry depends on consumer demand for RVs,” added Zinn. “And retail sales of travel trailer and fifth-wheel RVs have been up year-over-year for 12 consecutive months through February 2011, the last month for which retail data is available. In anticipation of a strong spring and summer selling season, RV dealers across the U.S. and Canada added an aggregate of about 23,000 travel trailer and fifth-wheel RVs to their inventories between December 2010 and February 2011, somewhat more than the 20,000 units added during the same period a year earlier. Therefore, strength in retail sales of RVs during the spring and summer selling season is key to maintaining high production levels, and we are encouraged by recent reports of industry analysts which cite continued strength in retail sales, as well as improving credit conditions.”
Because of the seasonality of the RV and manufactured housing industries, historically, Drew’s operating results in the first and fourth quarters have been the weakest, while the second and third quarters are traditionally stronger. However, because of fluctuations in RV dealer inventories and volatile raw material costs, seasonal industry trends may be different than in prior years.
Webcast: Q1 2011 Drew Industries Inc Earnings Conference Call Additional Information: Q4 2010 Drew Investor Presentation (PDF) Source: Drew Industries