Delaware
|
13-3250533
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
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
|
7-15
|
Item
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
16-28
|
Item
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
29
|
Item
4 - CONTROLS AND PROCEDURES
|
30
|
PART
II - OTHER INFORMATION
|
|
Item
1 - LEGAL PROCEEDINGS
|
31-33
|
Item
1A - RISK FACTORS
|
33
|
Item
6 - EXHIBITS
|
33
|
SIGNATURES
|
34
|
EXHIBIT
31.1 - SECTION 302 CEO CERTIFICATION
|
35
|
EXHIBIT
31.2 - SECTION 302 CFO CERTIFICATION
|
36
|
EXHIBIT
32.1 - SECTION 906 CEO CERTIFICATION
|
37
|
EXHIBIT
32.2 - SECTION 906 CFO CERTIFICATION
|
38
|
Three Months Ended
March 31,
|
|||||||
2008
|
2007
|
||||||
(In
thousands, except per share amounts)
|
|||||||
Net
sales
|
$
|
159,148
|
$
|
172,944
|
|||
Cost
of sales
|
121,520
|
133,772
|
|||||
Gross
profit
|
37,628
|
39,172
|
|||||
Selling,
general and administrative expenses
|
23,297
|
23,274
|
|||||
Other
income
|
646
|
656
|
|||||
Operating
profit
|
14,977
|
16,554
|
|||||
Interest
expense, net
|
82
|
912
|
|||||
Income
before income taxes
|
14,895
|
15,642
|
|||||
Provision
for income taxes
|
5,790
|
6,053
|
|||||
Net
income
|
$
|
9,105
|
$
|
9,589
|
|||
Net
income per common share:
|
|||||||
Basic
|
$
|
.41
|
$
|
.
44
|
|||
Diluted
|
$
|
.41
|
$
|
.
44
|
|||
Weighted
average common shares outstanding:
|
|||||||
Basic
|
22,014
|
21,781
|
|||||
Diluted
|
22,179
|
21,958
|
March
31,
|
December
31,
|
|||||||||
2008
|
2007
|
2007
|
||||||||
(In
thousands, except shares and per share amount)
|
||||||||||
ASSETS
|
||||||||||
Current
assets
|
||||||||||
Cash
and cash equivalents
|
$
|
50,414
|
$
|
12,024
|
$
|
56,213
|
||||
Accounts
receivable, trade, less allowances
|
33,739
|
40,331
|
15,740
|
|||||||
Inventories
|
87,198
|
83,882
|
76,279
|
|||||||
Prepaid
expenses and other current assets
|
11,061
|
9,688
|
12,702
|
|||||||
Total
current assets
|
182,412
|
145,925
|
160,934
|
|||||||
Fixed
assets, net
|
96,625
|
121,211
|
100,616
|
|||||||
Goodwill
|
39,591
|
36,250
|
39,547
|
|||||||
Other
intangible assets
|
31,577
|
26,977
|
32,578
|
|||||||
Other
assets
|
11,786
|
6,573
|
12,062
|
|||||||
Total
assets
|
$
|
361,991
|
$
|
336,936
|
$
|
345,737
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||
Current
liabilities
|
||||||||||
Notes
payable, including current maturities of long-term indebtedness
|
$
|
8,750
|
$
|
9,971
|
$
|
8,881
|
||||
Accounts
payable, trade
|
23,690
|
25,236
|
17,524
|
|||||||
Accrued
expenses and other current liabilities
|
46,484
|
39,520
|
44,668
|
|||||||
Total
current liabilities
|
78,924
|
74,727
|
71,073
|
|||||||
|
||||||||||
Long-term
indebtedness
|
15,600
|
42,510
|
18,381
|
|||||||
Other
long-term liabilities
|
5,896
|
3,654
|
4,747
|
|||||||
Total
liabilities
|
100,420
|
120,891
|
94,201
|
|||||||
Stockholders’
equity
|
||||||||||
Common
stock, par value $.01 per share: authorized 30,000,000 shares; issued
24,087,654 shares at March 2008, 23,900,885 shares at March 2007
and
24,082,974 at December 2007
|
241
|
239
|
241
|
|||||||
Paid-in
capital
|
61,925
|
55,604
|
60,919
|
|||||||
Retained
earnings
|
218,910
|
179,627
|
209,805
|
|||||||
Accumulated
other comprehensive (loss) income
|
(38
|
)
|
42
|
38
|
||||||
281,038
|
235,512
|
271,003
|
||||||||
Treasury
stock, at cost - 2,149,325 shares
|
(19,467
|
)
|
(19,467
|
)
|
(19,467
|
)
|
||||
Total
stockholders’ equity
|
261,571
|
216,045
|
251,536
|
|||||||
Total
liabilities and stockholders’ equity
|
$
|
361,991
|
$
|
336,936
|
$
|
345,737
|
Three Months Ended
March 31,
|
|||||||
2008
|
2007
|
||||||
(In
thousands)
|
|||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
9,105
|
$
|
9,589
|
|||
Adjustments
to reconcile net income to cash flows (used for) provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
4,087
|
4,465
|
|||||
Deferred
taxes
|
-
|
(262
|
)
|
||||
(Gain)
loss on disposal of fixed assets
|
(1,040
|
)
|
684
|
||||
Stock-based
compensation expense
|
945
|
625
|
|||||
Changes
in assets and liabilities, net of business acquisitions:
|
|||||||
Accounts
receivable, net
|
(17,999
|
)
|
(22,195
|
)
|
|||
Inventories
|
(10,919
|
)
|
(200
|
)
|
|||
Prepaid
expenses and other assets
|
639
|
901
|
|||||
Accounts
payable, accrued expenses and other liabilities
|
9,069
|
17,926
|
|||||
Net
cash flows (used for) provided by operating
activities
|
(6,113
|
)
|
11,533
|
||||
Cash
flows from investing activities:
|
|||||||
Capital
expenditures
|
(1,201
|
)
|
(2,555
|
)
|
|||
Acquisition
of businesses
|
(44
|
)
|
(3,472
|
)
|
|||
Proceeds
from sales of fixed assets
|
4,416
|
1,936
|
|||||
Other
investments
|
(6
|
)
|
(11
|
)
|
|||
Net
cash flows provided by (used for) investing
activities
|
3,165
|
(4,102
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
Proceeds
from line of credit and other borrowings
|
-
|
22,613
|
|||||
Repayments
under line of credit and other borrowings
|
(2,912
|
)
|
(25,812
|
)
|
|||
Exercise
of stock options
|
61
|
1,007
|
|||||
Net
cash flows used for financing activities
|
(2,851
|
)
|
(2,192
|
)
|
|||
Net
(decrease) increase in cash
|
(5,799
|
)
|
5,239
|
||||
Cash
and cash equivalents at beginning of period
|
56,213
|
6,785
|
|||||
Cash
and cash equivalents at end of period
|
$
|
50,414
|
$
|
12,024
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
on debt
|
$
|
342
|
$
|
870
|
|||
Income
taxes, net of refunds
|
$
|
443
|
$
|
282
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Treasury
Stock
|
Total
Stockholders’
Equity
|
||||||||||||||
(In
thousands, except shares)
|
|||||||||||||||||||
Balance
- December 31, 2007
|
$
|
241
|
$
|
60,919
|
$
|
209,805
|
$
|
38
|
$
|
(19,467
|
)
|
$
|
251,536
|
||||||
Net
income for the three months ended March 31, 2008
|
-
|
-
|
9,105
|
-
|
-
|
9,105
|
|||||||||||||
Unrealized
loss on interest rate swap, net of taxes
|
-
|
-
|
-
|
(76
|
)
|
-
|
(76
|
)
|
|||||||||||
Comprehensive
income
|
9,029
|
||||||||||||||||||
Issuance
of 4,680 shares of common stock pursuant to stock options and deferred
stock units exercised
|
-
|
48
|
-
|
-
|
-
|
48
|
|||||||||||||
Income
tax benefit relating to issuance of common stock pursuant to stock
options
exercised
|
-
|
13
|
-
|
-
|
-
|
13
|
|||||||||||||
Stock-based
compensation expense
|
-
|
945
|
-
|
-
|
-
|
945
|
|||||||||||||
Balance
- March 31, 2008
|
$
|
241
|
$
|
61,925
|
$
|
218,910
|
$
|
(38
|
)
|
$
|
(19,467
|
)
|
$
|
261,571
|
2008
|
2007
|
||||||
Net
sales:
|
|||||||
RV
Segment
|
$
|
123,955
|
$
|
129,132
|
|||
MH
Segment
|
35,193
|
43,812
|
|||||
Total
|
$
|
159,148
|
$
|
172,944
|
|||
Operating
profit:
|
|||||||
RV
Segment
|
$
|
14,254
|
$
|
16,180
|
|||
MH
Segment
|
2,510
|
2,932
|
|||||
Total
segment operating profit
|
16,764
|
19,112
|
|||||
Amortization
of intangibles
|
(1,053
|
)
|
(881
|
)
|
|||
Corporate
|
(1,950
|
)
|
(1,887
|
)
|
|||
Other
items
|
1,216
|
210
|
|||||
Operating
profit
|
$
|
14,977
|
$
|
16,554
|
March
31,
|
December
31,
|
|||||||||
2008
|
2007
|
2007
|
||||||||
Finished
goods
|
$
|
13,343
|
$
|
12,308
|
$
|
12,698
|
||||
Work
in process
|
3,228
|
3,607
|
2,975
|
|||||||
Raw
material
|
70,627
|
67,967
|
60,606
|
|||||||
Total
|
$
|
87,198
|
$
|
83,882
|
$
|
76,279
|
March
31,
|
December
31,
|
|||||||||
2008
|
2007
|
2007
|
||||||||
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
|
$
|
9,000
|
$
|
13,000
|
$
|
10,000
|
||||
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
|
-
|
13,393
|
-
|
|||||||
Notes
payable pursuant to the Credit Agreement expiring June 30, 2009 consisting
of a line of credit, not to exceed $70,000, with interest at prime
rate or
LIBOR plus a rate margin based upon the Company’s
performance
|
7,000
|
11,000
|
8,000
|
|||||||
Industrial
Revenue Bonds, interest rates at March 31, 2008 of 4.23% to 6.28%,
due
2008 through 2017; secured by certain real estate and
equipment
|
5,120
|
7,733
|
5,448
|
|||||||
Other
loans primarily secured by certain real estate and equipment, due
2009 to
2011, with fixed interest rates at March 31, 2008 of 5.18% to 6.52%
|
3,230
|
5,507
|
3,727
|
|||||||
Other
loan primarily secured by certain real estate, with a variable interest
rate
|
-
|
1,848
|
87
|
|||||||
24,350
|
52,481
|
27,262
|
||||||||
Less
current portion
|
8,750
|
9,971
|
8,881
|
|||||||
Total long-term indebtedness
|
$
|
15,600
|
$
|
42,510
|
$
|
18,381
|
2008
|
2007
|
||||||
Weighted
average shares outstanding for basic earnings per share
|
22,014
|
21,781
|
|||||
Common
stock equivalents pertaining to stock options
|
165
|
177
|
|||||
Total
for diluted shares
|
22,179
|
21,958
|
2008
|
2007
|
||||||
Net
sales:
|
|||||||
RV
Segment
|
$
|
123,955
|
$
|
129,132
|
|||
MH
Segment
|
35,193
|
43,812
|
|||||
Total
|
$
|
159,148
|
$
|
172,944
|
|||
Operating
profit:
|
|||||||
RV
Segment
|
$
|
14,254
|
$
|
16,180
|
|||
MH
Segment
|
2,510
|
2,932
|
|||||
Total
segment operating profit
|
16,764
|
19,112
|
|||||
Amortization
of intangibles
|
(1,053
|
)
|
(881
|
)
|
|||
Corporate
|
(1,950
|
)
|
(1,887
|
)
|
|||
Other
items
|
1,216
|
210
|
|||||
Operating
profit
|
$
|
14,977
|
$
|
16,554
|
§
|
Net
sales for the first quarter of 2008 decreased $14 million (8 percent)
from
the first quarter of 2007 primarily as a result of the 8 percent
decline
in industry wholesale shipments of travel trailers and fifth wheel
RVs in
the first quarter of 2008, as well as a 3 percent decline in industry
wholesale shipments of manufactured homes.
|
§
|
Net
income for the first quarter of 2008 decreased 5 percent from the
first
quarter of 2007, less than the 8 percent decrease in net sales, partially
due to the closing of 19 facilities over the last 21 months, and
consolidating those operations into other existing facilities, and
reducing fixed overhead where prudent, including reducing staff levels.
These facility consolidations and fixed overhead reductions increased
operating profit in the first quarter of 2008 by approximately $1.4
million ($0.9 million after taxes), and are expected to improve operating
profit by more than $4 million in 2008 compared to
2007.
|
§
|
On
April 8, 2008, the Company reported that Lippert agreed in principle
to
acquire the assets and business of Goshen, Indiana-based Seating
Technology and its affiliated companies. Seating Technology’s sales in
2007 were approximately $40 million. Seating Technology manufactures
a
wide variety of products primarily for towable RVs, including folding
sofas for toy hauler RVs, a full line of upholstered furniture,
mattresses, decorative pillows, wood-backed valences and quilted
soft good
products. This acquisition will add an entirely new product line
for Drew.
The acquisition is subject to the completion of due diligence and
the
execution of definitive agreements. If completed, it is expected
that the
acquisition will be funded from available
cash.
|
§
|
Since
late 2007, the cost of flat-rolled steel has nearly doubled, structural
I-beam steel is up more than 30 percent, and aluminum has increased
more
than 25 percent. Assuming the cost of raw materials remains at these
high
levels, these cost increases will increase the Company’s cost of sales by
$60 million to $70 million on an annualized basis. The Company is
currently implementing sales price increases to customers to offset
the
effect of cost increases. While the Company has historically been
able to
obtain sales price increases to offset raw material cost increases,
there
can be no assurance that these or future cost increases can be fully
passed on to customers. The Company also continues to explore alternative
sources of raw materials and components, both domestic and
imported.
|
· |
An
organic sales decline of approximately $7 million, or 5 percent,
of RV
related products. The 5 percent organic sales decline in the Company’s RV
related products was lower than the 8 percent decrease in industry-wide
wholesale shipments of travel trailers and fifth wheel RVs primarily
because the Company introduced new products and gained market
share.
|
· |
An
organic sales decline of approximately $3 million in specialty trailers,
due primarily to an industry-wide decline in sales of small boats,
particularly on the West Coast, the Company’s primary specialty trailer
market.
|
· |
Sales
generated from 2007 acquisitions aggregating approximately $4 million.
|
2008
|
2007
|
Percent Change
|
||||||||
Content
per Travel Trailer and Fifth Wheel RVs
|
$
|
1,760
|
$
|
1,633
|
8
|
%
|
||||
$
|
241
|
$
|
214
|
13
|
%
|
|||||
Content
per all RVs
|
$
|
1,353
|
$
|
1,244
|
9
|
%
|
2008
|
|
2007
|
|
Percent Change
|
||||||
Travel
Trailer and Fifth Wheel RVs
|
256,100
|
277,000
|
(8
|
)%
|
||||||
Motorhomes
|
51,800
|
55,800
|
(7
|
)%
|
||||||
All
RVs
|
342,400
|
373,200
|
(8
|
)%
|
· |
The
spreading of fixed manufacturing costs over a smaller sales
base.
|
· |
The
cumulative effect of modest increases in health and workers compensation
insurance, and supplies and maintenance costs.
|
· |
An
increase in selling, general and administrative expenses to 11.9
percent
of net sales in the first quarter of 2008 from 11.2 percent of net
sales
in the first quarter of 2007, largely due to higher fuel and delivery
costs and the spreading of fixed administrative costs over a smaller
sales
base.
|
· |
A
temporary decline in the cost of certain raw materials purchased
during
the fourth quarter of 2007, which favorably impacted cost of sales
during
the first quarter of 2008.
|
· |
Implementation
of cost-cutting measures.
|
· |
Improved
production efficiencies.
|
2008
|
|
2007
|
|
Percent Change
|
||||||
Content
per Home Produced
|
$
|
1,680
|
$
|
1,854
|
(9
|
)%
|
||||
Content
per Floor Produced
|
$
|
993
|
$
|
1,054
|
(6
|
)%
|
2008
|
|
2007
|
|
Percent Change
|
||||||
Total
Homes Produced
|
95,100
|
105,100
|
(10
|
)%
|
||||||
Total
Floors Produced
|
161,000
|
184,900
|
(13
|
)%
|
· |
A
change in product mix.
|
· |
Improved
production efficiencies.
|
· |
The
spreading of fixed manufacturing costs over a smaller sales
base.
|
· |
Higher
health insurance and workers compensation
costs.
|
· |
An
increase in selling, general and administrative expenses to 15.5
percent
of net sales in the first quarter of 2008 from 14.4 percent of net
sales
in first quarter of 2007 due to higher fuel and delivery costs as
a
percent of net sales and the spreading of fixed costs over a smaller
sales
base.
|
2008
|
|
2007
|
|||||
Net
cash flows (used for) provided by operating activities
|
$
|
(6,113
|
)
|
$
|
11,533
|
||
Net
cash flows provided by (used for) investment activities
|
$
|
3,165
|
$
|
(4,102
|
)
|
||
Net
cash flows used for financing activities
|
$
|
(2,851
|
)
|
$
|
(2,192
|
)
|
Item
3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
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 32.1is 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
|