LCI Industries · NYSE:LCII
LCI Industries — Drew Industries — Investor Presentation (March 2007)
34 slides from LCI Industries's investor presentation, Mar 6, 2007
Slide 1: Drew Industries (NYSE:DW)
2003 A Leading National Supplier of a Wide Variety of Components for RV’s and Manufactured Homes Drew Industries (NYSE:DW)
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive po
Slide 3: About Drew Industries
About Drew Industries A leading national manufacturer of quality components for Recreational Vehicles (RV) and Manufactured Homes (MH) Page 3
Slide 4: Company Overview and Financial Performance
Company Overview Financial Performance Headquartered in White Sales and EBITDA in millions RV segment sales EBITDA(1) Plains, New York – 10 MH segment sales $100 employees $750 $729 $669 43 manufacturing facilities in 75 the U.S. and 1 facility in $531 Canada 500 509 448 Approximately 4,000 $3
Slide 5: Drew's Companies
Drew’s Companies Kinro, Inc. – Acquired 1980 Aluminum windows for RVs Doors for RVs Aluminum and vinyl windows and screens for MHs Bath and shower units for MHs and RVs Lippert Components, Inc. – Acquired 1997 Chassis and chassis parts for RVs and MHs Slide out mechanisms for RVs L
Slide 6: Drew's Segments – 2006
Drew’s Segments – 2006 Revenues - $729 million MH = $220 million 30% RV = $509 million 70% 90% of RV revenues are for towable RVs Segment Operating Profit - $65 million MH = $21 million 32% RV = $44 million 68% Page 6
Slide 7: Drew's Products
Drew’s Products Sales - $729 million 12 Months Ended December 31, 2006 MH Windows, Doors & Screens: $89 million RV Chassis and Chassis Parts: $215 million MH Chassis & Chassis 12% Parts: $87 million 30% 12% MH and RV Bath Products: $20 million 3% Specialty 3% Trailers: 2% $25 million 8% 14% Other: $
Slide 8: Supplier to Industry Leaders
Supplier to Industry Leaders Outstanding customer service and national coverage, with 44 production facilities (approximately 3 million sq. ft.), make us a key partner with our customers. Supply most of the Leading Producers of RVs and MHs: Both RV and MH Fleetwood (NYSE:FLE) Skyline (NYSE:
Slide 9: Business Strategy
Business Strategy Increase sales and profitability through: Market share growth New product introductions Strategic acquisitions This strategy accomplished through: Outstanding customer service Motivating management through profit incentives and training programs Maintaining highly e
Slide 10: Content Per Vehicle - RV
Content Per Vehicle - RV Peak potential is $2,400 to $2,700 per RV 90% of RV segment sales are for Towable RVs (a) $1,212 (a) 4% =2 $1,048 GR 6 CA -2 00 $907 01 20 $684 $550 $419 Operating 2001 2002 2003 2004 2005 2006 profit margin 8.6% 9.4% 11.3% 9.2%(a) 9.6%(a) 8.6%(a) (a) Excludes sales of speci
Slide 11: Content Per Home - MH
Content Per Home - MH Peak potential is $3,200 to $3,500 per home $1,784 = 19% R AG 0 6C $1,507 -20 $1,457 2 001 $1,021 $916 $763 Operating 2001 2002 2003 2004 2005 2006 Profit margin 10.8% 11.0% 10.7% 10.1% 10.2% 9.5% See Page 21 for Industry Information Page 11
Slide 12: New Product Introductions
New Product Introductions Drew’s (in millions) Market Annualized Potential Sales Level Slide-out mechanisms for motorhomes $ 65 $16-$18 Windows for people movers 10 $2 Axles for towables 85 $36-$40 Steps for towables 10 $4-$6 Bed lifts for “toy hauler” RVs 17 $12-$15 (a) Suspension systems for towab
Slide 13: Acquisition Criteria
Acquisition Criteria Strategic Drew is a disciplined and patient Acquisitions acquirer Target less than 6 times pro forma EBITDA Immediately accretive Complementary to our core RV and MH markets Seek to acquire products or technologies that we can introduce through our nationwide customer
Slide 14: Acquisition History
Acquisition History July 2003 Strategic LTM Manufacturing Slide-out Acquisitions mechanisms, May 2004 2001 specialty slide-out June 2006 Better Bath Zieman Happijac storage trays and RV, MH and Bath and shower decks, and electric Bed lifts for products for MH. specialty “toy haulers”. stabilizer jac
Slide 15: Drew's Management Team
Drew’s Management Team Innovative & Highly respected and experienced Experienced management: Management Drew Leigh Abrams, CEO, 35+ years Fred Zinn, CFO, 25+ years Kinro David Webster, CEO, Chairman, Leigh Abrams 30+ years David Webster Lippert Jason Lippert, CEO, Chairman 12+ years Excell
Slide 16: Investments
Investments Kinro and Lippert have extensive R&D departments Since January 1997: Invested over $151 million in plant and equipment Invested approximately $170 million for acquisitions Invested $40 million for stock repurchases at an average price of $5.37 per share These investments have
Slide 17: RVs - Industry Wholesale Shipments
RVs - Industry Wholesale Shipments 90% of Drew’s current RV product sales are for Travel Trailers and 5th Wheel RVs Travel Tailers & 5th Wheel Other Towables Motor Homes 450 (Thousands of Vehicles) 400 384 391 370 350 321 311 321 293 300 300 257 254 250 200 150 293 281 255 100 196 214 155 178 177 15
Slide 18: RV Market
RV Market TOWABLE RVS (90% of Drew RV revenues) 84% of industry 2005 unit sales 46% of wholesale dollar sales Travel trailer Fifth wheel travel trailer Retail cost $4,000 to $100,000 per unit. Average about $20,000 Travel trailer with Sport utility RV Since 1995 the travel trailer and expandab
Slide 19: Growth In RV Market
Growth In RV Market Strong Growth Positive Demographic Prospects Trends Primary owners of RVs are 50 and over According to census projections, there are expected to be 20 million Fifth Wheel RV more people over 50 by 2014 Industry Advertising Campaign Target Market 30 and over Post 9/11
Slide 20: How RVs Are Used
How RVs Are Used Strong Growth Shift in U.S. culture Prospects toward more RV-related activities NASCAR events College and NFL football games “Toy Haulers” More economical family Travel Trailer vacations Typical RV family vacation up to 74% less expensive Many RVs are “parked”over the
Slide 21: MH - Industry Production
MH - Industry Production Multi-Section Single Section (Thousands of Homes) 400 373 363 353 350 340 349 304 300 254 251 250 211 200 193 171 168 (1) (1) 150 147 (1) 131 131 117 100 50 47% 47% 47% 49% 49% 52% 59% 61% 65% 70% 75% 78% 80% 74% 64% 72% 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 20
Slide 22: Manufactured Housing (MH) Market
Manufactured Housing (MH) Market Strong Growth Cost per sq. ft. is $39 for MH vs. Prospects $91 for site-built homes Average retail price of $62,300 for a 1,595 sq. ft. MH 9 million manufactured homes across the U.S. Improved quality, appearance and safety Studies have shown that MH built
Slide 23: MH: Industry Trends
MH: Industry Trends Strong Growth Prospects Low inventory levels at retail dealers Slowing of repossessions Conventional financing now more common than chattel financing Improved industry lending practices should lead to fewer repossessions Berkshire Hathaway acquired Clayton, Oakwood, Sou
Slide 24: MH: Strong Future
MH: Strong Future Strong Growth Baby Boomers retire and Prospects relocate to warmer climate Affordability Home appreciation due to greater ownership of land along with home Possible rebuilding of hurricane-damaged areas during late 2007 Improved industry image Industry wide Advertising
Slide 25: Drew's Ownership and Governance
Drew’s Ownership and Governance Ownership by Executives and Directors: Currently own 16% Filed Form S-3 on October 3, 2005. All insider sales are complete except for one Director. After his sale, insiders ownership will be 12%. Drew’s Corporate Governance Program – ranked in the 96th percent
Slide 26: Financial Performance
Financial Performance Stock Price History The price of Drew’s common stock is 10 times the price as of December 31, 2000 Drew has 21.8 million shares outstanding and a market capitalization of more than $620 million as of February 28, 2007 $38 $29 $28 $26 $18 $14 $8 $5 $3 2000 2001 2002 2003 200
Slide 27: Operating Results
Operating Results Year Ended December 31, Financial Performance ($ in millions, except EPS) 2006 vs. 2004 2005 2006(2) 2005 Sales $ 531 $ 669 $ 729 +9% Operating Profit $ 44.0 $ 57.7 $ 55.3 -4% % of Sales 8.3% 8.6% 7.6% Net Income $ 25.1 $ 33.6 $ 31.0 -8% Diluted EPS(1)(3) $ 1.18 $ 1.56 $ 1.42 -9% E
Slide 28: Results By Segment
Results By Segment Year Ended December 31, Financial Performance ($ in millions) 2005 2006(c) Net sales RV Segment $ 447.7 $ 508.8 +14% MH Segment $ 221.5 $ 220.4 0% Operating Profit RV Segment $ 43.1 $ 43.9 +2% MH Segment $ 22.6(a) $ 21.0(b) -7% Operating Profit as a Percentage of Net Sales RV Segm
Slide 29: Operating Results
Operating Results Three Months Ended December 31, Financial Performance ($ in millions, except EPS) (b) 2005 2006 Sales $ 181 $ 138 -24% Operating Profit $15.7 $ 7.0 -55% % of Sales 8.7% 5.1% Net Income $ 9.3 $ 3.6 -61% Diluted EPS(a) $0.43 $0.17 -60% (a) Excluding the estimated impact of hurricane-
Slide 30: Reconciliation of Operating Profit to EBITDA
Financial Reconciliation of Operating Profit to EBITDA Performance ($ in millions) 2001 2002 2003 2004 2005 2006 Operating Profit $20.3 $29.2 $34.3 $44.0 $57.7 $55.3 Depreciation and $8.4 $7.3 $7.8 $9.3 $12.0 $15.7 Amortization EBITDA $28.7 $36.5 $42.1 $53.3 $69.7 $71.0 Capital $8.2 $10.5 $5.1 $27.1
Slide 31: Balance Sheet
Balance Sheet Financial Performance ($ in millions) 12/31/04 12/31/05 12/31/06 Total assets $ 238 $ 307 $ 311 Total debt $ 71 $ 73 $ 56 Stockholders’ equity $ 122 $ 168 $ 205 RATIOS Days sales in accts receivable (1) 21 days 21 days 16 days Inventory turns (2) 5.6 turns 6.1 turns 4.8 turns (1) Days
Slide 32: Financial Strength
Financial Strength Financial Performance 12/31/04 12/31/05 12/31/06 Return on Equity 23% 24% 16% Return on Assets 12% 12% 9% Total Debt to Equity 0.6 0.4 0.3 Total Debt to EBITDA(1) 1.3 1.1 0.8 (1) EBITDA is operating profit plus depreciation and amortization (see page 30). Page 32
Slide 33: Peer Comparison
Peer Comparison Financial Performance Trailing Forward P/E P/E ROA ROE Drew (DW) 21.7 14.4 11% 17% Fleetwood (FLE) N/A 47.8 0% (9%) Monaco (MNC) 511.8 19.3 1% 0% Spartan (SPAR) 27.2 17.0 12% 19% Thor (THO) 15.2 13.1 16% 24% Winnebago (WGO) 28.8 18.9 8% 16% Source: Capital IQ, February 26, 2007, exce
Slide 34: Thank You
Thank You Analyst coverage: Avondale Partners, LLC: Kathryn Thompson (615) 467-5637 BB&T Capital Markets: John Diffendal (615) 340-8284 Sidoti & Company LLC: Scott Stember (212) 453-7017 Susquehanna Financial Group, LLLP: Cheryl Cortez (312) 427-5236 For more information contact: Leigh J. Abrams