x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
Delaware
|
13-3250533
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
Page
|
|||
PART I – FINANCIAL INFORMATION | |||
Item
1 –
|
FINANCIAL
STATEMENTS
|
||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
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 –
20
|
||
Item
2 –
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
21
– 38
|
|
Item
3 –
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
39
|
|
Item
4 –
|
CONTROLS
AND PROCEDURES
|
39
|
|
PART
II – OTHER INFORMATION
|
|||
Item
1 –
|
LEGAL
PROCEEDINGS
|
40
|
|
Item
1A –
|
RISK FACTORS |
40
|
|
Item
2 –
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
41
|
|
Item
6 –
|
EXHIBITS
|
42
|
|
SIGNATURES
|
43
|
||
EXHIBIT
31.1 –
|
SECTION 302 CEO CERTIFICATION |
44
|
|
EXHIBIT 31.2 – | SECTION 302 CFO CERTIFICATION |
45
|
|
EXHIBIT
32.1 –
|
SECTION 906 CEO CERTIFICATION |
46
|
|
EXHIBIT
32.2 –
|
SECTION 906 CFO CERTIFICATION |
47
|
Nine Months Ended
|
Three Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
Net
sales
|
$ | 466,552 | $ | 293,248 | $ | 146,833 | $ | 121,666 | ||||||||
Cost
of sales
|
363,467 | 238,895 | 114,965 | 93,692 | ||||||||||||
Gross
profit
|
103,085 | 54,353 | 31,868 | 27,974 | ||||||||||||
Selling,
general and administrative expenses
|
62,337 | 50,331 | 19,248 | 16,721 | ||||||||||||
Goodwill
impairment
|
- | 45,040 | - | - | ||||||||||||
Other
(income)
|
(79 | ) | (260 | ) | (79 | ) | (60 | ) | ||||||||
Operating
profit (loss)
|
40,827 | (40,758 | ) | 12,699 | 11,313 | |||||||||||
Interest
expense, net
|
168 | 614 | 28 | 179 | ||||||||||||
Income
(loss) before income taxes
|
40,659 | (41,372 | ) | 12,671 | 11,134 | |||||||||||
Provision
(benefit) for income taxes
|
15,757 | (14,415 | ) | 4,689 | 3,945 | |||||||||||
Net
income (loss)
|
$ | 24,902 | $ | (26,957 | ) | $ | 7,982 | $ | 7,189 | |||||||
Net
income (loss) per common share:
|
||||||||||||||||
Basic
|
$ | 1.13 | $ | (1.24 | ) | $ | 0.36 | $ | 0.33 | |||||||
Diluted
|
$ | 1.12 | $ | (1.24 | ) | $ | 0.36 | $ | 0.33 | |||||||
Weighted
average common shares outstanding:
|
||||||||||||||||
Basic
|
22,118 | 21,724 | 22,129 | 21,847 | ||||||||||||
Diluted
|
22,262 | 21,724 | 22,262 | 21,994 |
September 30,
|
December 31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
(In
thousands, except shares and per share amount)
|
||||||||||||
ASSETS
|
||||||||||||
Current
assets
|
||||||||||||
Cash
and cash equivalents
|
$ | 41,213 | $ | 44,932 | $ | 52,365 | ||||||
Short-term
investments
|
15,993 | 1,999 | 12,995 | |||||||||
Accounts
receivable, trade, less allowances
|
31,329 | 27,728 | 12,541 | |||||||||
Inventories
|
74,121 | 57,184 | 57,757 | |||||||||
Prepaid
expenses and other current assets
|
16,030 | 15,647 | 13,793 | |||||||||
Total
current assets
|
178,686 | 147,490 | 149,451 | |||||||||
Fixed assets, less
accumulated depreciation of $88,351 at September 2010, $81,239 at
September 2009 and $82,053 at December 2009
|
80,215 | 83,263 | 80,276 | |||||||||
Goodwill
|
7,497 | - | - | |||||||||
Other
intangible assets, net
|
59,171 | 40,518 | 39,171 | |||||||||
Deferred
taxes
|
16,532 | 14,922 | 16,532 | |||||||||
Other
assets
|
3,456 | 3,072 | 2,635 | |||||||||
Total
assets
|
$ | 345,557 | $ | 289,265 | $ | 288,065 | ||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||||
Current
liabilities
|
||||||||||||
Accounts
payable, trade
|
$ | 20,715 | $ | 11,761 | $ | 7,513 | ||||||
Accrued
expenses and other current liabilities
|
36,743 | 29,327 | 28,194 | |||||||||
Total
current liabilities
|
57,458 | 41,088 | 35,707 | |||||||||
Other
long-term liabilities
|
16,569 | 8,659 | 8,243 | |||||||||
Total
liabilities
|
74,027 | 49,747 | 43,950 | |||||||||
Stockholders’
equity
|
||||||||||||
Common
stock, par value $.01 per share: authorized 30,000,000 shares; issued
24,594,533 shares at September 2010, 24,497,558 shares at September 2009
and 24,561,358 at December 2009
|
246 | 245 | 246 | |||||||||
Paid-in
capital
|
77,216 | 72,547 | 74,239 | |||||||||
Retained
earnings
|
222,332 | 194,526 | 197,430 | |||||||||
299,794 | 267,318 | 271,915 | ||||||||||
Treasury
stock, at cost – 2,621,106 shares
|
(28,264 | ) | (27,800 | ) | (27,800 | ) | ||||||
Total
stockholders’ equity
|
271,530 | 239,518 | 244,115 | |||||||||
Total
liabilities and stockholders’ equity
|
$ | 345,557 | $ | 289,265 | $ | 288,065 |
Nine Months Ended
|
||||||||
September 30,
|
||||||||
2010
|
2009
|
|||||||
(In
thousands)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | 24,902 | $ | (26,957 | ) | |||
Adjustments
to reconcile net income (loss) to cash flows provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
12,726 | 14,337 | ||||||
Deferred
taxes
|
- | (15,660 | ) | |||||
(Gain)
loss on disposal of fixed assets and other non-cash items
|
(971 | ) | 1,549 | |||||
Stock-based
compensation expense
|
2,787 | 3,043 | ||||||
Goodwill
impairment
|
- | 45,040 | ||||||
Changes
in assets and liabilities, net of business acquisitions:
|
||||||||
Accounts
receivable, net
|
(18,780 | ) | (19,815 | ) | ||||
Inventories
|
(16,650 | ) | 38,108 | |||||
Prepaid
expenses and other assets
|
(2,431 | ) | 1,830 | |||||
Accounts
payable, accrued expenses and other liabilities
|
18,835 | 3,600 | ||||||
Net
cash flows provided by operating activities
|
20,418 | 45,075 | ||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(7,706 | ) | (1,915 | ) | ||||
Acquisitions
of businesses
|
(21,900 | ) | (1,709 | ) | ||||
Proceeds
from sales of fixed assets
|
1,593 | 959 | ||||||
Purchases
of short-term investments
|
(20,985 | ) | (1,999 | ) | ||||
Proceeds
from maturities of short-term investments
|
18,000 | - | ||||||
Other
investing activities
|
(293 | ) | (25 | ) | ||||
Net
cash flows used for investing activities
|
(31,291 | ) | (4,689 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from line of credit and other borrowings
|
- | 5,775 | ||||||
Repayments
under line of credit and other borrowings
|
- | (14,458 | ) | |||||
Exercise
of stock options and deferred stock units
|
190 | 4,554 | ||||||
Purchase
of treasury stock
|
(464 | ) | - | |||||
Other
financing activities
|
(5 | ) | (17 | ) | ||||
Net
cash flows used for financing activities
|
(279 | ) | (4,146 | ) | ||||
Net
(decrease) increase in cash
|
(11,152 | ) | 36,240 | |||||
Cash
and cash equivalents at beginning of period
|
52,365 | 8,692 | ||||||
Cash
and cash equivalents at end of period
|
$ | 41,213 | $ | 44,932 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 239 | $ | 412 | ||||
Income
taxes, net of refunds
|
$ | 18,010 | $ | 3,729 |
Total
|
||||||||||||||||||||
Common
|
Paid-in
|
Retained
|
Treasury
|
Stockholders’
|
||||||||||||||||
Stock
|
Capital
|
Earnings
|
Stock
|
Equity
|
||||||||||||||||
(In
thousands, except shares)
|
||||||||||||||||||||
Balance
– December 31, 2009
|
$ | 246 | $ | 74,239 | $ | 197,430 | $ | (27,800 | ) | $ | 244,115 | |||||||||
Net
income for the nine months ended September 30, 2010
|
- | - | 24,902 | - | 24,902 | |||||||||||||||
Issuance
of 33,175 shares of common stock pursuant to stock options
and deferred stock units
|
- | 355 | - | - | 355 | |||||||||||||||
Income
tax impact of issuance of common stock pursuant to stock options and
deferred stock units exercised
|
- | (165 | ) | - | - | (165 | ) | |||||||||||||
Stock-based
compensation expense
|
- | 2,787 | - | - | 2,787 | |||||||||||||||
Purchase
of 24,381 shares of treasury stock
|
- | - | - | (464 | ) | (464 | ) | |||||||||||||
Balance
– September 30, 2010
|
$ | 246 | $ | 77,216 | $ | 222,332 | $ | (28,264 | ) | $ | 271,530 |
1.
|
Basis
of Presentation
|
2.
|
Segment
Reporting
|
●Towable
steel chassis
|
●Aluminum
windows and screens
|
|
●Towable
axles and suspension solutions
|
●Chassis
components
|
|
●Slide-out
mechanisms and solutions
|
●Furniture
and mattresses
|
|
●Thermoformed
bath, kitchen and other products
|
●Entry and baggage
doors
|
|
●Toy hauler ramp
doors
|
●Entry
steps
|
|
●Manual,
electric and hydraulic stabilizer
|
●Other
accessories
|
|
and
lifting systems
|
●Specialty
trailers for hauling boats, personal watercraft, snowmobiles and
equipment
|
●Vinyl
and aluminum windows and screens
|
●Steel
chassis
|
|
●Thermoformed
bath and kitchen products
|
●Steel
chassis parts
|
|
●Steel
and fiberglass entry doors
|
●Axles
|
|
●Aluminum
and vinyl patio doors
|
Nine Months Ended
|
Three Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales:
|
||||||||||||||||
RV
Segment
|
$ | 390,678 | $ | 228,114 | $ | 122,052 | $ | 96,953 | ||||||||
MH
Segment
|
75,874 | 65,134 | 24,781 | 24,713 | ||||||||||||
Total
net sales
|
$ | 466,552 | $ | 293,248 | $ | 146,833 | $ | 121,666 | ||||||||
Operating
profit (loss):
|
||||||||||||||||
RV
Segment
|
$ | 37,997 | $ | 9,490 | $ | 11,104 | $ | 10,205 | ||||||||
MH
Segment
|
8,241 | 1,809 | 2,939 | 2,397 | ||||||||||||
Total
segment operating profit
|
46,238 | 11,299 | 14,043 | 12,602 | ||||||||||||
Corporate
|
(5,814 | ) | (4,930 | ) | (1,870 | ) | (1,752 | ) | ||||||||
Goodwill
impairment
|
- | (45,040 | ) | - | - | |||||||||||
Other
items
|
403 | (2,087 | ) | 526 | 463 | |||||||||||
Total
operating profit (loss)
|
$ | 40,827 | $ | (40,758 | ) | $ | 12,699 | $ | 11,313 |
Three Months Ended
|
Year Ended
|
|||||||||||||||||||
(In thousands)
|
March 31,
|
June 30,
|
September 30,
|
December 31,
|
December 31,
|
|||||||||||||||
2009
|
2009
|
2009
|
2009
|
2009
|
||||||||||||||||
Operating
(loss) profit:
|
||||||||||||||||||||
RV
Segment
|
$ | (5,863 | ) | $ | 5,148 | $ | 10,205 | $ | 6,170 | $ | 15,660 | |||||||||
MH
Segment
|
(2,181 | ) | 1,593 | 2,397 | 1,407 | 3,216 | ||||||||||||||
Total
segment operating (loss) profit
|
(8,044 | ) | 6,741 | 12,602 | 7,577 | 18,876 | ||||||||||||||
Corporate
|
(1,560 | ) | (1,618 | ) | (1,752 | ) | (1,612 | ) | (6,542 | ) | ||||||||||
Goodwill
impairment
|
(45,040 | ) | - | - | - | (45,040 | ) | |||||||||||||
Other
items
|
(1,620 | ) | (930 | ) | 463 | (788 | ) | (2,875 | ) | |||||||||||
Operating
(loss) profit
|
$ | (56,264 | ) | $ | 4,193 | $ | 11,313 | $ | 5,177 | $ | (35,581 | ) |
3.
|
Acquisitions,
Goodwill and Other Intangible
Assets
|
Cash
consideration
|
$ | 1,400 | ||
Contingent
consideration
|
404 | |||
Total
fair value of consideration given
|
$ | 1,804 | ||
Patents
|
$ | 1,157 | ||
Other
identifiable intangible assets
|
180 | |||
Total
fair value of assets acquired
|
$ | 1,337 | ||
Goodwill
(tax deductible)
|
$ | 467 |
Cash
consideration
|
$ | 20,000 | ||
Contingent
consideration
|
9,929 | |||
Total
fair value of consideration given
|
$ | 29,929 | ||
Patents
|
$ | 16,840 | ||
In-process
research and development
|
4,457 | |||
Other
identifiable intangible assets
|
1,603 | |||
Identifiable
tangible assets acquired
|
410 | |||
Total
fair value of assets acquired
|
$ | 23,310 | ||
Goodwill
(tax deductible)
|
$ | 6,619 |
MH Segment
|
RV Segment
|
Total
|
||||||||||
Goodwill
at cost – December 31, 2009
|
$ | 9,251 | $ | 41,276 | $ | 50,527 | ||||||
Accumulated
Impairment – December 31, 2009
|
(9,251 | ) | (41,276 | ) | (50,527 | ) | ||||||
Net
Balance – December 31, 2009
|
- | - | - | |||||||||
Acquisitions
|
- | 7,497 | 7,497 | |||||||||
Net
Balance – September 30, 2010
|
$ | - | $ | 7,497 | $ | 7,497 |
Accumulated
|
Estimated
Useful
|
|||||||||||||
Gross
|
Amortization
|
Net
|
Life in Years
|
|||||||||||
Non-compete
agreements
|
$ | 3,153 | $ | 1,347 | $ | 1,806 |
3
to 7
|
|||||||
Customer
relationships
|
25,155 | 10,635 | 14,520 |
3
to 16
|
||||||||||
Tradenames
|
7,269 | 3,050 | 4,219 |
5
to 15
|
||||||||||
Patents
|
45,590 | 6,964 | 38,626 |
5
to 19
|
||||||||||
Other
intangible assets
|
$ | 81,167 | $ | 21,996 | $ | 59,171 |
4.
|
Cash
and Investments
|
September 30,
|
December 31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Cash
in bank
|
$ | 8,164 | $ | 44,932 | $ | 49,365 | ||||||
Money
Market – Wells Fargo
|
14,031 | - | - | |||||||||
Money
Market – JPMorgan Chase
|
12,018 | - | - | |||||||||
Treasury
bills – cash equivalents
|
7,000 | - | 3,000 | |||||||||
Total
cash and cash equivalents
|
41,213 | 44,932 | 52,365 | |||||||||
Treasury
bills – short-term investments
|
15,993 | 1,999 | 12,995 | |||||||||
Total
cash and investments
|
$ | 57,206 | $ | 46,931 | $ | 65,360 |
5.
|
Inventories
|
September 30,
|
December 31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Finished
goods
|
$ | 6,897 | $ | 7,261 | $ | 9,264 | ||||||
Work
in process
|
1,792 | 2,016 | 1,576 | |||||||||
Raw
material
|
65,432 | 47,907 | 46,917 | |||||||||
Total
inventories
|
$ | 74,121 | $ | 57,184 | $ | 57,757 |
6.
|
Accrued
Expenses and Other Current
Liabilities
|
September 30,
|
December 31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Accrued
employee compensation and benefits
|
$ | 17,392 | $ | 14,287 | $ | 11,815 | ||||||
Accrued
warranty
|
5,885 | 3,832 | 3,340 | |||||||||
Other
accrued expenses and current liabilities
|
13,466 | 11,208 | 13,039 | |||||||||
Total
|
$ | 36,743 | $ | 29,327 | $ | 28,194 |
September 30,
|
December 31,
|
|||||||||||
2010
|
2009
|
2009
|
||||||||||
Balance
at beginning of period
|
$ | 4,686 | $ | 5,419 | $ | 5,419 | ||||||
Provision
for warranty expense
|
4,006 | 2,357 | 2,279 | |||||||||
Warranty
costs paid
|
(2,172 | ) | (2,390 | ) | (3,012 | ) | ||||||
Total
accrued warranty
|
6,520 | 5,386 | 4,686 | |||||||||
Less
long-term portion
|
635 | 1,554 | 1,346 | |||||||||
Current
accrued warranty
|
$ | 5,885 | $ | 3,832 | $ | 3,340 |
7.
|
Long-Term
Indebtedness
|
8.
|
Stockholders’
Equity
|
Nine Months Ended
|
Three Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Weighted
average shares outstanding for basic earnings per share
|
22,118 | 21,724 | 22,129 | 21,847 | ||||||||||||
Common
stock equivalents pertaining to stock options and contingently issuable
deferred stock units
|
144 | - | 133 | 147 | ||||||||||||
Total
for diluted shares
|
22,262 | 21,724 | 22,262 | 21,994 |
9.
|
Commitments
and Contingencies
|
Present
Value
|
||||||||||
Expiration
of
|
Estimated
|
of
Estimated
|
||||||||
Acquisition
|
Earn-out
|
Earn-out Payments
|
Earn-out Payments
|
|||||||
Schwintek
products
|
March
2014(1)
|
$ | 14,090 | (2) | $ | 9,742 | ||||
Level-Up™
six-point leveling system
|
February
2016
|
2,371 | (3) | 1,399 | ||||||
QuickBite™
coupler
|
October
2025
|
2,500 | (4) | 635 | ||||||
Slide-out
storage box for pick-up trucks
|
September
2015
|
- | (3) | - | ||||||
Total
|
$ | 18,961 | $ | 11,776 |
Balance
at December 31, 2009
|
$ | 1,370 | ||
Acquisitions
|
10,333 | |||
Payments
|
(5 | ) | ||
Accretion
|
1,118 | |||
Fair
value adjustments
|
(1,040 | ) | ||
Balance
at September 30, 2010
|
11,776 | |||
Less
current portion in accrued expenses and other current
liabilities
|
(1,361 | ) | ||
Total
long-term portion in other long-term liabilities
|
$ | 10,415 |
10.
|
Fair
Value Measurements
|
|
·
|
Level
1 – Quoted prices (unadjusted) for identical assets and liabilities in
active markets that the Company has the ability to access at the
measurement date.
|
|
·
|
Level
2 – Quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets
that are not active; and inputs other than quoted prices that are
observable for the asset or liability, including interest rates, yield
curves and credit risks, or inputs that are derived principally from or
corroborated by observable market data through
correlation.
|
|
·
|
Level
3 – Values determined by models, significant inputs to which are
unobservable and are primarily based on internally derived assumptions
regarding the timing and amount of expected cash
flows.
|
11.
|
New
Accounting Pronouncements
|
●Towable
steel chassis
|
●Aluminum
windows and screens
|
●Towable
axles and suspension solutions
|
●Chassis
components
|
●Slide-out
mechanisms and solutions
|
●Furniture
and mattresses
|
●Thermoformed
bath, kitchen and other products
|
●Entry
and baggage doors
|
●Toy
hauler ramp doors
|
●Entry
steps
|
●Manual,
electric and hydraulic stabilizer
|
●Other
accessories
|
and
lifting systems
|
●Specialty
trailers for hauling boats, personal
|
watercraft,
snowmobiles and
equipment
|
●Vinyl
and aluminum windows and screens
|
●Steel
chassis
|
●Thermoformed
bath and kitchen products
|
●Steel
chassis parts
|
●Steel
and fiberglass entry doors
|
●Axles
|
●Aluminum
and vinyl patio doors
|
|
·
|
In
the first nine months of 2009, because of severe economic conditions,
including low consumer confidence, limited credit availability for both
dealers and consumers, and continued weakness in the real estate and
mortgage markets, dealers reduced inventory levels by 38,000
units.
|
|
·
|
Retail
demand increased by 14,000 units, or 11 percent, in the first eight months
of 2010, as compared to the same period in
2009.
|
|
·
|
RV
dealers increased inventory levels by 7,000 units in the first eight
months of 2010.
|
|
·
|
As
a result, in order to meet the retail demand, additional wholesale
production was required in 2010.
|
Wholesale
|
Retail
|
Unit
Impact on
|
||||||||||
Change
|
Change
|
Dealer
Inventories
|
||||||||||
Quarter
ended March 31, 2009
|
(61)%
|
(38)%
|
(4,103)
|
|||||||||
Quarter
ended June 30, 2009
|
(44)%
|
(33)%
|
(25,426)
|
|||||||||
Quarter
ended September 30, 2009
|
5%
|
(21)%
|
(8,440)
|
|||||||||
Quarter
ended December 31, 2009
|
88%
|
(7)%
|
12,070
|
|||||||||
Quarter
ended March 31, 2010
|
99%
|
7%
|
18,446
|
|||||||||
Quarter
ended June 30, 2010
|
80%
|
14%
|
(6,283)
|
|||||||||
Quarter
ended September 30, 2010
|
17%
|
10%(1)
|
(5,202)(1)
|
|||||||||
(1)
Through August 2010, the latest period for which retail information is
available.
|
||||||||||||
|
||||||||||||
Year
ended December 31, 2009
|
(25)%
|
(27)%
|
(25,899)
|
|||||||||
Year
ended December 31, 2008
|
(29)%
|
(19)%
|
(41,287)
|
Nine
Months Ended
|
Three
Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales:
|
||||||||||||||||
RV
Segment
|
$ | 390,678 | $ | 228,114 | $ | 122,052 | $ | 96,953 | ||||||||
MH
Segment
|
75,874 | 65,134 | 24,781 | 24,713 | ||||||||||||
Total
net sales
|
$ | 466,552 | $ | 293,248 | $ | 146,833 | $ | 121,666 | ||||||||
Operating
profit (loss):
|
||||||||||||||||
RV
Segment
|
$ | 37,997 | $ | 9,490 | $ | 11,104 | $ | 10,205 | ||||||||
MH
Segment
|
8,241 | 1,809 | 2,939 | 2,397 | ||||||||||||
Total
segment operating profit
|
46,238 | 11,299 | 14,043 | 12,602 | ||||||||||||
Corporate
|
(5,814 | ) | (4,930 | ) | (1,870 | ) | (1,752 | ) | ||||||||
Goodwill
impairment
|
- | (45,040 | ) | - | - | |||||||||||
Other
items
|
403 | (2,087 | ) | 526 | 463 | |||||||||||
Total
operating profit (loss)
|
$ | 40,827 | $ | (40,758 | ) | $ | 12,699 | $ | 11,313 |
Three Months Ended
|
Year
Ended
|
|||||||||||||||||||
(In
thousands)
|
March
31,
|
June
30,
|
September
30,
|
December
31,
|
December 31,
|
|||||||||||||||
2009
|
2009
|
2009
|
2009
|
2009
|
||||||||||||||||
Operating
(loss) profit:
|
||||||||||||||||||||
RV
Segment
|
$ | (5,863 | ) | $ | 5,148 | $ | 10,205 | $ | 6,170 | $ | 15,660 | |||||||||
MH
Segment
|
(2,181 | ) | 1,593 | 2,397 | 1,407 | 3,216 | ||||||||||||||
Total
segment operating (loss) profit
|
(8,044 | ) | 6,741 | 12,602 | 7,577 | 18,876 | ||||||||||||||
Corporate
|
(1,560 | ) | (1,618 | ) | (1,752 | ) | (1,612 | ) | (6,542 | ) | ||||||||||
Goodwill
impairment
|
(45,040 | ) | - | - | - | (45,040 | ) | |||||||||||||
Other
items
|
(1,620 | ) | (930 | ) | 463 | (788 | ) | (2,875 | ) | |||||||||||
Operating
(loss) profit
|
$ | (56,264 | ) | $ | 4,193 | $ | 11,313 | $ | 5,177 | $ | (35,581 | ) |
(In
thousands)
|
Nine
Months Ended September 30, 2009
|
Three
Months Ended September 30, 2009
|
||||||||||||||||||||||
GAAP
|
Adjustments
|
Non-GAAP
|
GAAP
|
Adjustments
|
Non-GAAP
|
|||||||||||||||||||
Cost
of sales
|
$ | 238,895 | $ | (3,541 | ) | $ | 235,354 | $ | 93,692 | $ | (986 | ) | $ | 92,706 | ||||||||||
Selling,
general and administrative expenses
|
$ | 50,331 | $ | (3,030 | ) | $ | 47,301 | $ | 16,721 | $ | 517 | $ | 17,238 | |||||||||||
Goodwill
impairment
|
$ | 45,040 | $ | (45,040 | ) | $ | - | $ | - | $ | - | $ | - | |||||||||||
Operating
(loss) profit
|
$ | (40,758 | ) | $ | 51,611 | $ | 10,853 | $ | 11,313 | $ | 469 | $ | 11,782 | |||||||||||
Net
(loss) income
|
$ | (26,957 | ) | $ | 33,406 | $ | 6,449 | $ | 7,189 | $ | 304 | $ | 7,493 | |||||||||||
Net
(loss) income per diluted share
|
$ | (1.24 | ) | $ | 1.53 | $ | 0.29 | $ | 0.33 | $ | 0.01 | $ | 0.34 |
(In
thousands)
|
Nine
Months Ended September 30, 2009
|
Three
Months Ended September 30, 2009
|
||||||||||||||||||||||
GAAP
|
Adjustments
|
Non-GAAP
|
GAAP
|
Adjustments
|
Non-GAAP
|
|||||||||||||||||||
RV
Segment operating profit
|
$ | 9,490 | $ | 3,962 | $ | 13,452 | $ | 10,205 | $ | 949 | $ | 11,154 | ||||||||||||
MH
Segment operating profit
|
$ | 1,809 | $ | 639 | $ | 2,448 | $ | 2,397 | $ | (46 | ) | $ | 2,351 | |||||||||||
Goodwill
impairment
|
$ | (45,040 | ) | $ | 45,040 | $ | - | $ | - | $ | - | $ | - | |||||||||||
Other
items
|
$ | (2,087 | ) | $ | 1,970 | $ | (117 | ) | $ | 463 | $ | (434 | ) | $ | 29 | |||||||||
Operating
(loss) profit
|
$ | (40,758 | ) | $ | 51,611 | $ | 10,853 | $ | 11,313 | $ | 469 | $ | 11,782 |
|
·
|
Net
sales in the third quarter of 2010 reached $147 million, 21 percent higher
than the $122 million of net sales in the third quarter of 2009. This
sales increase was largely the result of a 17 percent increase in
industry-wide wholesale shipments of travel trailers and fifth-wheel RVs,
the Company’s primary market. The RV Segment represented 83 percent of
consolidated net sales in the 2010 third quarter. In addition, primarily
as a result of new products, market share gains, and recent acquisitions,
the Company’s product content for RVs increased 9 percent for the 12
months ended September 30, 2010, compared to the year-earlier period.
Industry-wide production of manufactured homes in the third quarter of
2010 increased one percent from the third quarter of
2009.
|
|
·
|
For
the third quarter ended September 30, 2010, the Company reported net
income of $8.0 million, or $0.36 per diluted share, compared to $7.2
million, or $0.33 per diluted share for the comparable period in
2009.
|
|
·
|
Because
so much has changed over the past year, the Company also finds it useful
to compare the results for the current quarter to the most recently
completed quarter. Due to greater than normal seasonal decline
in industry-wide production of RVs, the Company’s third quarter 2010 sales
were $27 million below second quarter levels. However, third
quarter 2010 operating profit declined only $3 million from second quarter
2010 levels, or 12 percent of the sales decline. This was
better than the 20 percent incremental margin decline the Company would
typically expect, primarily due to the $1 million pre-tax gain on the
earn-out liability adjustment, and lower worker compensation and group
insurance costs.
|
|
·
|
During
the first nine months of 2010, the Company completed the acquisition of
three businesses, for aggregate cash consideration of $21.9 million paid
at closing, and licensed the rights to use a patent for $0.3 million. In
addition, contingent earn-out could be paid over approximately the next 6
years depending upon the level of sales generated from certain of the
acquired products. These acquisitions included a series of new
patent-pending RV products, including an innovative wall slide-out
mechanism, new leveling devices, a new power roof lift for tent campers,
and an advanced remote locking system for entry doors, as well as an
operation with the capability to customize standard chassis for
motorhomes, transit buses and specialized commercial
trucks.
|
2010
|
2009
|
Change
|
||||||||||
Content
per Travel Trailer and Fifth-Wheel RV
|
$ | 2,196 | $ | 2,023 | 9 | % | ||||||
Content
per Motorhome
|
$ | 540 | $ | 532 | 2 | % | ||||||
Content
per Travel Trailer, Fifth-Wheel and Motorhome
|
$ | 2,017 | $ | 1,889 | 7 | % |
2010
|
2009
|
Change
|
||||||||||
Travel
Trailer and Fifth-Wheel RVs
|
197,600 | 120,800 | 64 | % | ||||||||
Motorhomes
|
24,000 | 11,900 | 102 | % | ||||||||
Total
Travel Trailers, Fifth-Wheels and
Motorhomes
|
221,600 | 132,700 | 67 | % |
|
·
|
Volatile
raw material costs. Raw material costs as a percent of sales were two
percent higher than during the third quarter of 2009, when raw material
costs were unusually low. Raw material costs remained low during the
fourth quarter of 2009. After increasing as much as 50 percent during the
first part of 2010, steel, aluminum and ABS resin prices began to level
off in the latter part of the second quarter of 2010. During the third
quarter of 2010, steel prices generally remained constant, however the
cost of aluminum and certain other raw materials increased. The Company
anticipates that raw material costs as a percent of sales during the
fourth quarter of 2010 will be consistent with the third quarter of
2010.
|
|
·
|
Approximately
$1 million of excess production costs incurred as a result of greater than
anticipated increases in demand in certain product lines. Significant
steps to control these costs have been implemented, including adding
production capacity, and improving production flow and material
usage.
|
|
·
|
Higher
incentive compensation compared to the third quarter of 2009, when
incentive compensation was lower than normal because 2009 year-to-date
operating profit for certain operations was below the pro-rata portion of
previously established annual incentive compensation
hurdles.
|
|
·
|
Higher
than average warranty costs as a percent of sales in the third quarter of
2010, as compared to lower than average warranty costs as a percent of
sales in the third quarter of 2009.
|
|
·
|
The
spreading of fixed manufacturing and selling, general and administrative
costs over a $25 million larger sales base.
|
|
·
|
Lower
overtime.
|
|
·
|
In
the third quarter of 2009, the Company had $0.9 million of “extra”
expenses related primarily to equipment write-downs, largely due to the
unprecedented conditions in the manufactured housing industry at that
time.
|
|
·
|
Approximately
$3 million of excess production costs incurred as a result of greater than
anticipated increases in demand in certain product lines. Significant
steps to control these costs have been implemented, including adding
production capacity, and improving production flow and material
usage.
|
|
·
|
Higher
incentive compensation compared to the first nine months of 2009, when
incentive compensation was lower than normal because 2009 year-to-date
operating profit for certain operations was below the pro-rata portion of
previously established annual incentive compensation
hurdles.
|
|
·
|
Higher
severance costs.
|
|
·
|
The
spreading of fixed manufacturing and selling, general and administrative
costs over a $163 million larger sales base.
|
|
·
|
Lower
health insurance costs and bad debt expense.
|
|
·
|
Improved
operating efficiencies in certain product lines due to the increase in
sales, partially offset by higher overtime costs.
|
|
·
|
Volatile
raw material costs. Raw material costs during the nine months ended
September 30, 2010 were lower than during the first nine months of 2009,
although such costs were higher than during the second half of 2009, when
raw material costs were unusually low. After increasing as much as 50
percent during the first part of 2010, steel, aluminum and ABS resin
prices began to level off in the latter part of the second quarter of
2010. During the third quarter of 2010, steel prices generally remained
constant, however the cost of aluminum and certain other raw materials
increased. The Company anticipates that raw material costs as a percent of
sales during the fourth quarter of 2010 will be consistent with the third
quarter of 2010.
|
2010
|
2009
|
Change
|
||||||||||
Content
per Home Produced
|
$ | 1,391 | $ | 1,397 | 0 | % | ||||||
Content
per Floor Produced
|
$ | 857 | $ | 854 | 0 | % |
2010
|
2009
|
Change
|
||||||||||
51,900 | 54,200 | (4 | )% | |||||||||
Total
Floors Produced
|
84,100 | 88,600 | (5 | )% |
|
·
|
Lower
health insurance costs and bad debt expense.
|
|
·
|
The
spreading of fixed manufacturing and selling, general and administrative
costs over an $11 million larger sales base.
|
|
·
|
Improved
operating efficiencies due to the increase in sales.
|
|
·
|
Implementation
of cost-cutting measures.
|
|
·
|
Volatile
raw material costs. Raw material costs during the nine months ended
September 30, 2010 were lower than during the first nine months of 2009,
although such costs were higher than during the second half of 2009, when
raw material costs were unusually low. After increasing as much as 50
percent during the first part of 2010, steel, aluminum and ABS resin
prices began to level off in the latter part of the second quarter of
2010. During the third quarter of 2010, steel prices generally remained
constant, however the cost of aluminum and certain other raw materials
increased. The Company anticipates that raw material costs as a percent of
sales during the fourth quarter of 2010 will be consistent with the third
quarter of 2010.
|
|
·
|
Higher
incentive compensation compared to the first nine months of 2009, when
incentive compensation was lower than normal because 2009 year-to-date
operating profit for certain operations was below the pro-rata portion of
previously established annual incentive compensation
hurdles.
|
|
·
|
Higher
severance costs.
|
|
·
|
Higher
transportation costs.
|
Nine Months Ended
|
Three Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Selling,
general and administrative expenses:
|
||||||||||||||||
Legal
|
$ | (131 | ) | $ | (376 | ) | $ | (64 | ) | $ | (31 | ) | ||||
Net
loss on sold facilities and write-downs to estimated current fair value of
facilities to be sold
|
(446 | ) | (2,241 | ) | (280 | ) | (114 | ) | ||||||||
Other
|
205 | 157 | 18 | 435 | ||||||||||||
Net
gain on insurance claim
|
859 | - | 457 | - | ||||||||||||
Incentive
compensation impact of other non-segment items
|
(85 | ) | 113 | (20 | ) | 113 | ||||||||||
Earn-outs
fair value adjustment
|
1,040 | - | 934 | - | ||||||||||||
Earn-outs
accretion
|
(1,118 | ) | - | (598 | ) | - | ||||||||||
Other
income from the collection of a previously reserved note
|
79 | 260 | 79 | 60 | ||||||||||||
$ | 403 | $ | (2,087 | ) | $ | 526 | $ | 463 |
2010
|
2009
|
|||||||
Net
cash flows provided by operating activities
|
$ | 20,418 | $ | 45,075 | ||||
Net
cash flows used for investing activities
|
(31,291 | ) | (4,689 | ) | ||||
Net
cash flows used for financing activities
|
(279 | ) | (4,146 | ) | ||||
Net
(decrease) increase in cash
|
$ | (11,152 | ) | $ | 36,240 |
|
·
|
A
$16.7 million increase in inventories in the first nine months of 2010,
compared to a $38.1 million decrease in the first nine months of 2009.
During 2009, the Company reduced inventory through consumption of higher
priced inventory on hand, and reduced inventory purchases. As a result of
the 59 percent increase in net sales for the first nine months of 2010,
the Company increased inventory balances by $16.7 million during the same
period. Inventory turnover reached approximately seven turns at September
30, 2010, compared to four turns at September 30,
2009.
|
|
·
|
An
increase in after-tax operating results in the first nine months of
2010.
|
|
·
|
An
$18.8 million increase in accounts payable, accrued expenses and other
liabilities in the first nine months of 2010, compared to an increase of
$3.6 million in the first nine months of 2009, due largely to the timing
of payments for inventory purchases. Accounts payable at September 30,
2009 was lower than at September 30, 2010, primarily due to significantly
reduced purchases during the third quarter of 2009 in an effort to
decrease inventories. In addition, accrued liabilities and taxes payable
increased in 2010 due to the increase in sales, production and
earnings.
|
Cash
in bank
|
$ | 8,164 | ||
Money
Market – Wells Fargo
|
14,031 | |||
Money
Market – JPMorgan Chase
|
12,018 | |||
Treasury
bills – cash equivalents
|
7,000 | |||
Total
cash and cash equivalents
|
41,213 | |||
Treasury
bills – short-term investments
|
15,993 | |||
Total
cash and investments
|
$ | 57,206 |
|
a)
|
Evaluation
of Disclosure Controls and
Procedures
|
|
b)
|
Changes
in Internal Controls
|
Issuer Purchases of Equity Securities
|
||||||||||||||||
Period
|
(a) TotalNumber of
Shares
Purchased
|
(b) AveragePrice Paid
per Share
|
(c) TotalNumber of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
|
(d) MaximumNumber of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
|
||||||||||||
September
1 - 30, 2010
|
24,381 | $ | 19.00 | 24,381 | 528,219 |
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/ Joseph S. Giordano
III
|
Joseph
S. Giordano III
|
|
Chief
Financial Officer and Treasurer
|
|
November
8, 2010
|