x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
Delaware
|
13-3250533
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
Page
|
||
PART
I - FINANCIAL
INFORMATION
|
||
Item
1 - FINANCIAL STATEMENTS
|
||
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
3
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
4
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
5
|
|
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
|
6
|
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
7-17
|
|
Item
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
18-31
|
|
Item
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
32
|
|
Item
4 - CONTROLS AND PROCEDURES
|
33
|
|
PART
II - OTHER INFORMATION
|
||
Item
1 - LEGAL PROCEEDINGS
|
34
|
|
Item
6 - EXHIBITS
|
35
|
|
SIGNATURES
|
36
|
|
EXHIBIT
31.1 - SECTION 302 CEO CERTIFICATION
|
|
|
EXHIBIT
31.2 - SECTION 302 CFO CERTIFICATION
|
|
|
EXHIBIT
32.1 - SECTION 906 CEO CERTIFICATION
|
|
|
EXHIBIT
32.2 - SECTION 906 CFO CERTIFICATION
|
|
Nine
Months Ended
September 30,
|
Three
Months Ended
September 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(In
thousands, except per share amounts)
|
|||||||||||||
Net
sales
|
$
|
591,180
|
$
|
488,360
|
$
|
180,743
|
$
|
170,791
|
|||||
Cost
of sales
|
464,956
|
378,895
|
142,825
|
132,145
|
|||||||||
Gross
profit
|
126,224
|
109,465
|
37,918
|
38,646
|
|||||||||
Selling,
general and administrative expenses
|
78,579
|
67,532
|
25,108
|
22,255
|
|||||||||
Other
income
|
638
|
131
|
64
|
100
|
|||||||||
Operating
profit
|
48,283
|
42,064
|
12,874
|
16,491
|
|||||||||
Interest
expense, net
|
3,542
|
2,769
|
1,408
|
770
|
|||||||||
Income
before income taxes
|
44,741
|
39,295
|
11,466
|
15,721
|
|||||||||
Provision
for income taxes
|
17,368
|
15,031
|
4,529
|
5,934
|
|||||||||
Net
income
|
$
|
27,373
|
$
|
24,264
|
$
|
6,937
|
$
|
9,787
|
|||||
Net
income per common share:
|
|||||||||||||
Basic
|
$
|
1.27
|
$
|
1.16
|
$
|
0.32
|
$
|
0.46
|
|||||
Diluted
|
$
|
1.25
|
$
|
1.13
|
$
|
0.32
|
$
|
0.45
|
|||||
|
|||||||||||||
Weighted
average common shares outstanding:
|
|||||||||||||
Basic
|
21,591
|
20,903
|
21,615
|
21,100
|
|||||||||
Diluted
|
21,860
|
21,471
|
21,786
|
21,628
|
September
30,
|
December
31,
|
|||||||||
2006
|
2005
|
2005
|
||||||||
(In
thousands, except shares and per share amount)
|
||||||||||
ASSETS
|
||||||||||
Current
assets
|
||||||||||
Cash
and cash equivalents
|
$
|
2,003
|
$
|
1,931
|
$
|
5,085
|
||||
Accounts
receivable, trade, less allowances
|
35,444
|
47,148
|
33,583
|
|||||||
Inventories
|
98,892
|
84,029
|
100,617
|
|||||||
Prepaid
expenses and other current assets
|
14,310
|
9,207
|
11,812
|
|||||||
Total
current assets
|
150,649
|
142,315
|
151,097
|
|||||||
Fixed
assets, net
|
127,932
|
109,609
|
116,828
|
|||||||
Goodwill
|
34,406
|
22,015
|
22,118
|
|||||||
Other
intangible assets
|
25,679
|
11,275
|
10,652
|
|||||||
Other
assets
|
6,154
|
7,901
|
6,733
|
|||||||
Total
assets
|
$
|
344,820
|
$
|
293,115
|
$
|
307,428
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||
Current
liabilities
|
||||||||||
Notes
payable, including current maturities of
|
||||||||||
long-term
indebtedness
|
$
|
9,738
|
$
|
11,376
|
$
|
11,140
|
||||
Accounts
payable, trade
|
21,045
|
38,822
|
26,404
|
|||||||
Accrued
expenses and other current liabilities
|
43,152
|
37,405
|
37,407
|
|||||||
Total
current liabilities
|
73,935
|
87,603
|
74,951
|
|||||||
Long-term
indebtedness
|
69,534
|
50,438
|
62,093
|
|||||||
Other
long-term liabilities
|
2,328
|
2,103
|
2,675
|
|||||||
Total
liabilities
|
145,797
|
140,144
|
139,719
|
|||||||
Commitments
and Contingencies
|
||||||||||
Stockholders’
equity
|
||||||||||
Common
stock, par value $.01 per share: authorized 30,000,000 shares; issued
23,749,861 shares at September 2006; 23,248,333 shares at September
2005
and 23,625,793 at December 2005
|
238
|
232
|
236
|
|||||||
Paid-in
capital
|
51,746
|
42,284
|
47,655
|
|||||||
Retained
earnings
|
166,388
|
129,677
|
139,015
|
|||||||
Accumulated
other comprehensive income
|
118
|
245
|
270
|
|||||||
218,490
|
172,438
|
187,716
|
||||||||
Treasury
stock, at cost - 2,149,325 shares
|
(19,467
|
)
|
(19,467
|
)
|
(19,467
|
)
|
||||
Total
stockholders’ equity
|
199,023
|
152,971
|
167,709
|
|||||||
Total
liabilities and stockholders’ equity
|
$
|
344,820
|
$
|
293,115
|
$
|
307,428
|
Nine
Months Ended
September 30, |
|||||||
2006
|
2005
|
||||||
(In
thousands)
|
|||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
27,373
|
$
|
24,264
|
|||
Adjustments
to reconcile net income to cash flows provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
11,443
|
8,387
|
|||||
Deferred
taxes
|
284
|
(518
|
)
|
||||
(Gain)/loss
on disposal of fixed assets
|
(1,008
|
)
|
215
|
||||
Stock-based
compensation expense
|
2,345
|
914
|
|||||
Changes
in assets and liabilities:
|
|||||||
Accounts
receivable, net
|
(344
|
)
|
(21,049
|
)
|
|||
Inventories
|
4,403
|
(10,769
|
)
|
||||
Prepaid
expenses and other assets
|
(2,757
|
)
|
1,844
|
||||
Accounts
payable, accrued expenses and other liabilities
|
(2,682
|
)
|
32,760
|
||||
Net
cash flows provided by operating activities
|
39,057
|
36,048
|
|||||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(20,028
|
)
|
(16,174
|
)
|
|||
Acquisition
of businesses
|
(33,695
|
)
|
(17,880
|
)
|
|||
Proceeds
from sales of fixed assets
|
2,988
|
2,010
|
|||||
Other
investments
|
(9
|
)
|
(130
|
)
|
|||
Net
cash flows used for investing activities
|
(50,744
|
)
|
(32,174
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from line of credit and other borrowings
|
163,870
|
142,800
|
|||||
Repayments
under line of credit and other borrowings
|
(158,563
|
)
|
(152,410
|
)
|
|||
Exercise
of stock options
|
1,748
|
5,563
|
|||||
Other
|
1,550
|
(320
|
)
|
||||
Net
cash flows provided by (used for) financing
activities
|
8,605
|
(4,367
|
)
|
||||
Net
decrease in cash
|
(3,082
|
)
|
(493
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
5,085
|
2,424
|
|||||
Cash
and cash equivalents at end of period
|
$
|
2,003
|
$
|
1,931
|
|||
Supplemental
disclosure of cash flows information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
on debt
|
$
|
3,335
|
$
|
3,104
|
|||
Income
taxes, net of refunds
|
$
|
18,594
|
$
|
11,492
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income
|
Treasury
Stock
|
Total
Stockholders’Equity
|
||||||||||||||
(In
thousands, except shares)
|
|||||||||||||||||||
Balance
- December 31, 2005
|
$
|
236
|
$
|
47,655
|
$
|
139,015
|
$
|
270
|
$
|
(19,467
|
)
|
$
|
167,709
|
||||||
Net
income for the nine months ended September 30, 2006
|
27,373
|
27,373
|
|||||||||||||||||
Unrealized
loss on interest rate swaps, net of taxes
|
(152
|
)
|
(152
|
)
|
|||||||||||||||
Comprehensive
income
|
27,221
|
||||||||||||||||||
Issuance
of 113,200 shares of common stock pursuant to stock options exercised
|
2
|
996
|
998
|
||||||||||||||||
Income
tax benefit relating to issuance of common stock pursuant to stock
options
exercised
|
750
|
750
|
|||||||||||||||||
Stock-based
compensation expense
|
2,345
|
2,345
|
|||||||||||||||||
Balance
- September 30, 2006
|
$
|
238
|
$
|
51,746
|
$
|
166,388
|
$
|
118
|
$
|
(19,467
|
)
|
$
|
199,023
|
Nine
Months Ended
September 30, |
Three
Months Ended
September 30, |
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales:
|
|||||||||||||
RV
segment
|
$
|
415,740
|
$
|
329,886
|
$
|
126,423
|
$
|
113,691
|
|||||
MH
segment
|
175,440
|
158,474
|
54,320
|
57,100
|
|||||||||
Total
|
$
|
591,180
|
$
|
488,360
|
$
|
180,743
|
$
|
170,791
|
|||||
Operating
profit:
|
|||||||||||||
RV
segment
|
$
|
38,034
|
$
|
32,636
|
$
|
10,675
|
$
|
12,739
|
|||||
MH
segment
|
17,464
|
15,192
|
5,158
|
5,720
|
|||||||||
Total
segment operating profit
|
55,498
|
47,828
|
15,833
|
18,459
|
|||||||||
Amortization
of intangibles
|
(1,725
|
)
|
(1,035
|
)
|
(788
|
)
|
(390
|
)
|
|||||
Corporate
and other
|
(6,128
|
)
|
(4,860
|
)
|
(2,235
|
)
|
(1,678
|
)
|
|||||
Other
income
|
638
|
131
|
64
|
100
|
|||||||||
Operating
profit
|
$
|
48,283
|
$
|
42,064
|
$
|
12,874
|
$
|
16,491
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
March
31, 2005
|
June
30, 2005
|
September
30, 2005
|
December
31, 2005
|
December
31, 2005
|
||||||||||||
Net
sales:
|
||||||||||||||||
RV
Segment
|
$
|
105,505
|
$
|
110,690
|
$
|
113,691
|
$
|
117,776
|
$
|
447,662
|
||||||
MH
Segment
|
49,041
|
52,333
|
57,100
|
63,011
|
221,485
|
|||||||||||
Total
|
$
|
154,546
|
$
|
163,023
|
$
|
170,791
|
$
|
180,787
|
$
|
669,147
|
||||||
Operating
profit:
|
||||||||||||||||
RV
Segment
|
$
|
8,929
|
$
|
10,968
|
$
|
12,739
|
$
|
10,508
|
$
|
43,144
|
||||||
MH
Segment
|
3,335
|
6,137
|
5,720
|
7,374
|
22,566
|
|||||||||||
Total
segment operating profit
|
12,264
|
17,105
|
18,459
|
17,882
|
65,710
|
|||||||||||
Amortization
of intangibles
|
(285
|
)
|
(360
|
)
|
(390
|
)
|
(392
|
)
|
(1,427
|
)
|
||||||
Corporate
and other
|
(1,567
|
)
|
(1,615
|
)
|
(1,678
|
)
|
(1,825
|
)
|
(6,685
|
)
|
||||||
Other
income
|
31
|
-
|
100
|
-
|
131
|
|||||||||||
Operating
profit
|
$
|
10,443
|
$
|
15,130
|
$
|
16,491
|
$
|
15,665
|
$
|
57,729
|
Three
Months Ended March 31, 2006
|
||||
Net
sales:
|
||||
RV
Segment
|
$
|
149,416
|
||
MH
Segment
|
59,045
|
|||
Total
|
$
|
208,461
|
||
Operating
profit:
|
||||
RV
Segment
|
$
|
13,544
|
||
MH
Segment
|
5,921
|
|||
Total
segment operating profit
|
19,465
|
|||
Amortization
of intangibles
|
(430
|
)
|
||
Corporate
and other
|
(1,907
|
)
|
||
Other
income
|
574
|
|||
Operating
profit
|
$
|
17,702
|
Net
tangible assets acquired
|
$
|
3,892
|
||
Patents
|
9,600
|
|||
Other
identifiable intangible assets
|
6,400
|
|||
Goodwill
|
10,371
|
|||
Total
consideration
|
30,263
|
|||
Less:
Debt assumed
|
(732
|
)
|
||
Total
cash consideration
|
$
|
29,531
|
Net
tangible assets acquired
|
$
|
727
|
||
Identifiable
intangible assets
|
1,520
|
|||
Goodwill
|
1,917
|
|||
Total
cash consideration
|
$
|
4,164
|
September
30,
|
December
31,
|
|||||||||
2006
|
2005
|
2005
|
||||||||
Finished
goods
|
$
|
15,382
|
$
|
13,380
|
$
|
16,140
|
||||
Work
in process
|
4,457
|
3,094
|
3,256
|
|||||||
Raw
material
|
79,053
|
67,555
|
81,221
|
|||||||
Total
|
$
|
98,892
|
$
|
84,029
|
$
|
100,617
|
September
30,
|
December
31,
|
|||||||||
2006
|
2005
|
2005
|
||||||||
Senior
Promissory Notes payable at the rate of $1,000 per quarter on January
29,
April 29, July 29 and October 29,with interest payable quarterly
at the
rate of 5.01% per annum, final payment to be made on April 29,
2010
|
$
|
15,000
|
$
|
19,000
|
$
|
18,000
|
||||
Senior
Promissory Notes payable at the rate of $536 per quarter on the last
business day of March, June, September, and December with interest
payable
at the rate of LIBOR plus 1.65% per annum, final payment to be made
on
June 28, 2013
|
14,464
|
-
|
-
|
|||||||
Notes
payable pursuant to a Credit Agreement expiring June 30, 2009 consisting
of a line of credit, not to exceed $70,000 at September 30, 2006,
and
$60,000 at September 30, 2005 and December 31, 2005; interest at
prime
rate or LIBOR plus a rate margin based upon the Company’s
performance
|
31,750
|
17,875
|
31,425
|
|||||||
Industrial
Revenue Bonds, interest rates at September 30, 2006 of 4.68% to 6.28%,
due
2008 through 2017; secured by certain real estate and
equipment
|
8,418
|
9,741
|
9,416
|
|||||||
Other
loans primarily secured by certain real estate and equipment, due
2009 to
2011, with fixed interest rates of 5.18% to 6.63%
|
6,259
|
11,023
|
10,351
|
|||||||
Other
loans primarily secured by certain real estate and equipment, due
2011 to
2016, with variable interest rates of 7.00% to 8.50%
|
3,381
|
4,175
|
4,041
|
|||||||
79,272
|
61,814
|
73,233
|
||||||||
Less
current portion
|
9,738
|
11,376
|
11,140
|
|||||||
Total
long-term indebtedness
|
$
|
69,534
|
$
|
50,438
|
$
|
62,093
|
Nine
Months Ended
September 30, |
|
Three
Months Ended
September 30, |
|
||||||||||
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|||||
Weighted
average common shares outstanding –
basic
|
21,591
|
20,903
|
21,615
|
21,100
|
|||||||||
Assumed
issuance of common stock pertaining to stock options
|
269
|
568
|
171
|
528
|
|||||||||
Weighted
average common shares outstanding – diluted
|
21,860
|
21,471
|
21,786
|
21,628
|
Nine
Months Ended
September 30, 2005
|
Three
Months Ended
September 30, 2005
|
||||||
Net
income as reported
|
$
|
24,264
|
$
|
9,787
|
|||
Add:
Stock-based employee compensation expense related to stock options
included in reported net income, net of related tax
effects
|
436
|
136
|
|||||
Deduct:
Total stock-based employee compensation expense related to stock
options
determined under fair value method for all awards, net of related
tax effects
|
(489
|
)
|
(154
|
)
|
|||
Pro
forma net income
|
$
|
24,211
|
$
|
9,769
|
|||
Net
income per common share:
|
|||||||
Basic
- as reported
|
$
|
1.16
|
$
|
.46
|
|||
Basic
- pro forma
|
$
|
1.16
|
$
|
.46
|
|||
Diluted
- as reported
|
$
|
1.13
|
$
|
.45
|
|||
Diluted
- pro forma
|
$
|
1.13
|
$
|
.45
|
Shares
|
Weighted
Average Exercise
Price
|
Weighted
Average Remaining Contractual Term
(in years)
|
Aggregate
Intrinsic Value (in
thousands)
|
||||||||||
Outstanding
at January 1, 2006
|
1,578,460
|
$
|
17.78
|
||||||||||
Exercised
|
(113,200
|
)
|
$
|
8.81
|
|||||||||
Forfeited
|
(33,600
|
)
|
$
|
16.43
|
|||||||||
Outstanding
at September 30, 2006
|
1,431,660
|
$
|
18.53
|
3.8
|
$
|
11,550
|
|||||||
Exercisable
at September 30, 2006
|
314,060
|
$
|
10.52
|
2.6
|
$
|
4,633
|
Nine
Months Ended
September 30, |
|
Three
Months Ended
September 30, |
|
||||||||||
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|||||
Net
sales:
|
|||||||||||||
RV
segment
|
$
|
415,740
|
$
|
329,886
|
$
|
126,423
|
$
|
113,691
|
|||||
MH
segment
|
175,440
|
158,474
|
54,320
|
57,100
|
|||||||||
Total
|
$
|
591,180
|
$
|
488,360
|
$
|
180,743
|
$
|
170,791
|
|||||
Operating
profit:
|
|||||||||||||
RV
segment
|
$
|
38,034
|
$
|
32,636
|
$
|
10,675
|
$
|
12,739
|
|||||
MH
segment
|
17,464
|
15,192
|
5,158
|
5,720
|
|||||||||
Total
segment operating profit
|
55,498
|
47,828
|
15,833
|
18,459
|
|||||||||
Amortization
of intangibles
|
(1,725
|
)
|
(1,035
|
)
|
(788
|
)
|
(390
|
)
|
|||||
Corporate
and other
|
(6,128
|
)
|
(4,860
|
)
|
(2,235
|
)
|
(1,678
|
)
|
|||||
Other
income
|
638
|
131
|
64
|
100
|
|||||||||
Operating
profit
|
$
|
48,283
|
$
|
42,064
|
$
|
12,874
|
$
|
16,491
|
· |
Net
sales for the third quarter of 2006 increased $10 million (6 percent)
from
the third quarter of 2005. The increase in net sales in 2006 consisted
of
sales price increases of $11 to $13 million and sales of about $5
million
due to acquisitions, while last year’s third quarter sales included $6 to
$8 million of hurricane-related sales. The third quarter of 2006
includes
no hurricane-related sales. Excluding the impact of acquisitions,
sales
price increases and last years hurricane-related sales, net sales
this
quarter were approximately the same as in the third quarter of 2005,
despite declines in industry-wide production of RVs (10 percent)
and
manufactured homes (19 percent).
|
· |
Net
income for the third quarter of 2006 decreased 29 percent from the
third
quarter of 2005. Net income declined for several reasons,
including:
|
· |
Declines
in wholesale shipments in the recreational vehicle and manufactured
housing industries, the Company’s two primary
markets.
|
· |
Increased
losses related to the specialty trailer operation in Indiana, which
was
closed during the third quarter of
2006.
|
· |
An
increase in interest and amortization expenses, primarily related
to
recent acquisitions.
|
· |
An
increase in stock based compensation
expense.
|
· |
Accretive
results from Happijac, acquired in June 2006, which supplies bed-lifts
to
the growing toy hauler RV market.
|
· |
The
new window factory in Arizona, opened in 2005, achieved an operating
profit in the 2006 third quarter, compared to a start-up loss in
the 2005
third quarter.
|
· |
During
the last two years, the Company introduced several new products for
the RV
and specialty trailer markets, including products for the motorhome
market, a relatively new RV category for the Company. New products
include
slide-out mechanisms and leveling devices for motorhomes, axles for
towable RVs and specialty trailers, entry steps for towable RVs,
and bed
lifts, thermo-formed bath and kitchen products, and exterior parts
for
both towable RVs and motorhomes. The Company estimates that the market
potential of these products is over $750 million, and in the third
quarter
of 2006, the Company’s sales of these products were running at an
annualized rate of approximately $105
million.
|
September
30, 2006
|
|
September
30, 2005
|
|
December
31, 2005
|
||||||
Content
per Travel Trailer and
|
||||||||||
Fifth
Wheel RVs
|
$
|
1,494
|
$
|
1,390
|
$
|
1,364
|
||||
Content
per Motorhomes
|
$
|
292
|
$
|
187
|
$
|
241
|
||||
Content
per all RVs
|
$
|
1,174
|
$
|
1,028
|
$
|
1,037
|
September
30, 2006
|
September
30, 2005
|
December
31, 2005
|
||||||||
Travel
Trailer and Fifth
|
||||||||||
Wheel
RVs
|
309,700
|
267,500
|
281,400
|
|||||||
Motorhomes
|
55,700
|
64,600
|
61,400
|
|||||||
All
RVs
|
407,800
|
373,400
|
384,400
|
September
30, 2006
|
September
30, 2005
|
December
31, 2005
|
||||||||
Content
per Homes Produced
|
$
|
1,686
|
$
|
1,554
|
$
|
1,507
|
||||
Content
per Floors Produced
|
$
|
1,016
|
$
|
873
|
$
|
896
|
September
30, 2006
|
September
30, 2005
|
December
31, 2005
|
||||||||
Total
Homes Produced
|
141,000
|
133,000
|
147,000
|
|||||||
Total
Floors Produced
|
235,000
|
236,000
|
247,000
|
Nine
Months Ended
September 30,
|
|||||||
2006
|
2005
|
||||||
Net
cash flows provided by operating activities
|
$
|
39,057
|
$
|
36,048
|
|||
Net
cash flows used for investment activities
|
$
|
(50,744
|
)
|
$
|
(32,174
|
)
|
|
Net
cash flows provided by (used for) financing activities
|
$
|
8,605
|
$
|
(4,367
|
)
|
a) |
A
$3 million increase in net income.
|
b) |
A
$21 million smaller increase in accounts receivable during 2006,
as
compared to 2005. This was due to a smaller increase in net sales
in the
third quarter of 2006, and a decline in the days sales outstanding
to
approximately 20 days at September 30, 2006, as compared to 21 days
at
December 31, 2005, and 22 days at September 30, 2005. The decrease
in days
sales outstanding was primarily due to the timing of
collections.
|
c) |
A
$4 million decrease in inventories during 2006, compared to an increase
of
$11 million in 2005. The decrease in inventory in 2006 resulted from
a
concerted effort by management to reduce the number of days of inventory
on hand at all locations, partially offset by (i) higher inventory
requirements for newly introduced products, (ii) higher raw material
costs, and (iii) increased use of imported components which require
a
longer lead time. The increase in inventory in 2005 resulted from
(i)
additional inventory requirements to meet increased sales volume
due
largely to FEMA-related orders, seasonality and new product offerings,
and
(ii) the Company’s strategic buying of steel in advance of announced price
increases, partially offset by a concerted effort by management to
reduce
inventory on hand at all locations. On both September 30, 2006 and
2005,
there was less than a two week supply of finished goods on hand.
|
d) |
A
$3 million increase in depreciation and amortization during 2006,
as
compared to 2005. The increase in depreciation in 2006 resulted from
the
significant capital expenditures made by the Company over the last
several
years, coupled with an increase in amortization as a result of intangible
assets purchased in recent
acquisitions.
|
e) |
An
offset of $35 million due to a smaller increase in accounts payable,
accrued expenses and other current liabilities in 2006, compared
to 2005.
The smaller increase in 2006 was primarily due to (i) higher payable
balances at the beginning of the 2006 period because of an increase
in
purchases of inventory during the fourth quarter of 2005 to meet
FEMA
demand, (ii) higher payable levels at September 2005 to meet FEMA
demand,
(iii) reduced inventory purchases in the latter part of the third
quarter
of 2006, and (iv) the timing of payments. Trade payables are generally
paid within the discount period.
|
f) |
An
offset of $5 million in prepaid expenses and other assets primarily
due to
the timing of federal tax payments and insurance
premiums.
|
Item
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
a) |
Evaluation
of Disclosure Controls and Procedures
|
b) |
Changes
in Internal Controls
|
a) |
Exhibits
as required by item 601 of Regulation
S-K:
|
1) |
31.1
Certification of Chief Executive Officer pursuant to 13a-14(a) under
the
Securities Exchange Act of 1934. Exhibit 31.1 is filed herewith.
|
2) |
31.2
Certification of Chief Financial Officer pursuant to 13a-14(a) under
the
Securities Exchange Act of 1934. Exhibit 31.2 is filed herewith.
|
3) |
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350. Exhibit 32.1 is filed
herewith.
|
4) |
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350. Exhibit 32.2 is filed
herewith.
|
DREW
INDUSTRIES INCORPORATED
Registrant
|
||
|
|
|
By | /s/ Fredric M. Zinn | |
Fredric M. Zinn
Executive
Vice President and
Chief
Financial Officer
|