At Drew Industries Inc. in White Plains, top executives have profited from business lessons learned in bad times past. Shareholders in turn have profited from those applied lessons even while Drew, a supplier of components for recreational vehicles and manufactured homes, has seen its core markets decline as Americans”™ discretionary spending shrinks in the worsening economy and sales of manufactured homes only
At Drew Industries Inc. in White Plains, top executives have profited from business lessons learned in bad times past. Shareholders in turn have profited from those applied lessons even while Drew, a supplier of components for recreational vehicles and manufactured homes, has seen its core markets decline as Americans”™ discretionary spending shrinks in the worsening economy and sales of manufactured homes only slowly rebound from a decade-long crisis similar to the subprime mortgage market collapse and current epidemic of foreclosures and devalued housing stock.
“The industries are just horrible, both of them,” said Drew Industries CEO Leigh J. Abrams, who joined the company in 1969 as assistant controller and has served as its CEO for 29 years. Yet current market conditions have not steered the company away from its long-term acquisitions strategy, part of a three-pronged philosophy of business growth.
Drew last month announced that its wholly owned subsidiary, Lippert Components Inc., paid $28.4 million to complete the acquisition of a Goshen, Ind., manufacturer of upholstered furniture and furnishings for towable RVs, which account for more than 90 percent of Drew”™s RV component sales. The purchase was funded from available cash, another guiding business tenet and practice at a remade company once forced to seek bankruptcy protection from creditors.
“Keep your overhead low and focus on cash level,” said Abrams, citing a corporate commandment that helped Drew Industries, a publicly traded company on the New York Stock Exchange, achieve profits in 2007 that were up 28 percent, or $14 million, in a year when sales were down 8 percent, or $60 million.
Making cuts
Introducing new products to its customers is another element of the growth philosophy at Drew, whose product lines for RVs and manufactured homes include vinyl and aluminum windows and screen doors, chassis, chassis parts, bath and shower units, axles and slide-out mechanisms. Also last month, Drew announced that its Lippert subsidiary paid $3 million in cash for the patent to a stabilizing jack system for parked travel trailers and fifth-wheel RVs.
Drew Industries has 11 employees at its recently refurbished yet modestly appointed headquarters at 200 Mamaroneck Ave. in downtown White Plains. It counts more than 3,000 employees at 35 manufacturing plants nationwide that are owned and operated by either of Drew”™s two subsidiaries, Lippert, an Indiana-based steel fabricator, and Texas-based Kinro, a manufacturer of doors and windows. The plants”™ geographic spread and locations near major customers were planned to minimize freight costs and eliminate long-distance transport.
To improve efficiency and reduce overhead, Drew last year closed about 20 plants, reducing square footage for its operations by about 20 percent, and cut 150 salaried employees and 300 to 400 hourly workers. “It was fortunate or smart or lucky that we did it ahead of the decline in industries,” said Drew Industries President Fredric M. Zinn, the company”™s former chief financial officer and 27-year employee who in May succeeded Abrams in the president”™s post. “The economic troubles that we”™re seeing now, we were well-prepared for it.”
“We”™re probably going to be one of the few companies in the RV industry that will be profitable in 2008,” said Abrams.
It was not always so at Drew.
Real estate to RVs Â
Started in 1962 as a real estate company in Manhattan, the company embarked on “an acquisitions binge,” said Abrams, buying up hotels, strip malls, and office buildings from “anyone who was willing to sell to us. It all fell apart in ”™75,” when the company filed for Chapter 11 bankruptcy protection, from which it emerged two years later.
In 1979, when the Bass brothers, scions of the Texas oil family, bought a majority share of the company, Drew had $8 million in sales and negative net worth, Abrams said.
“So it wasn”™t a pretty picture then,” said Zinn. “We learned a lot from those difficult times.” One primary lesson: “You have to be disciplined in your acquisitions.”
The new owners in 1980 moved company headquarters to White Plains. In the early ”™80s, the company”™s investments included a half-interest in the Sands Hotel and Casino in Atlantic City, N.J.
From 1980 to 1985, Drew bought several small companies, starting with Kinro, the Texas company that has grown from $9 million in sales at the time of purchase to $200 million. By 1985, Abrams and his management team began to focus on products-related industries.
“In the manufactured housing and RV industry, I think we”™ve made 25 acquisitions starting in ”™80,” Abrams said. Another major successful move, the $55 million purchase of Lippert Components, came in 1997, six years after the Bass brothers were bought out by management. Drew officials persuaded the family-run steel fabrication company to develop its $5 million RV division. It has grown to $200 million in sales.
“Today, there are only two companies we have,” said Abrams. “All the other 23 acquisitions went into those two companies.”
Weathering bad times
In the last 10 years, Drew has weathered the crash of the manufactured housing market, which had accounted for most of its component sales. That industry now makes up about 24 percent of its business, Abrams said.
In 1998, 373,000 manufactured homes were produced in the nation, Abrams said, compared with 96,000 in 2007. Bad lending practices in the ”™90s led to “exactly what”™s going on in the subprime,” with loan defaults and repossessions soaring to 100,000 a year in 2000, followed by an inventory build-up that put manufactured housing dealers out of business.
“Yet in every single month in that 10-year decline, we remained profitable,” Abrams said. “We”™re in an industry that lost 75 percent of its market and we stayed profitable throughout.”
“The way we measure ourselves is our content per recreational vehicle or our content per manufactured home,” Zinn said. “Our market share across all product lines is about 50 percent.” In the company”™s strongest market, “We”™re responsible for about 10 percent of the cost of the towable RV.”
Along with declining sales of RVs and multisection manufactured homes, the company also must contend with skyrocketing prices for steel, which have about doubled since the end of 2007, and other raw materials. “We have $65 million to $70 million in price increases that we have to pass along to customers,” Abrams said.
Yet he and Zinn sound confident in the future of the industries they supply, if less so in the prospects for manufactured housing.
“Typically the RV industry is the first to go into a recession and the first to come out of a recession,” Abrams said. “We”™re willing to take some risks in a bad economy because we”™re planning for the future.”
slowly rebound from a decade-long crisis similar to the subprime mortgage market collapse and current epidemic of foreclosures and devalued housing stock.
“The industries are just horrible, both of them,” said Drew Industries CEO Leigh J. Abrams, who joined the company in 1969 as assistant controller and has served as its CEO for 29 years. Yet current market conditions have not steered the company away from its long-term acquisitions strategy, part of a three-pronged philosophy of business growth.
Drew last month announced that its wholly owned subsidiary, Lippert Components Inc., paid $28.4 million to complete the acquisition of a Goshen, Ind., manufacturer of upholstered furniture and furnishings for towable RVs, which account for more than 90 percent of Drew”™s RV component sales. The purchase was funded from available cash, another guiding business tenet and practice at a remade company once forced to seek bankruptcy protection from creditors.
“Keep your overhead low and focus on cash level,” said Abrams, citing a corporate commandment that helped Drew Industries, a publicly traded company on the New York Stock Exchange, achieve profits in 2007 that were up 28 percent, or $14 million, in a year when sales were down 8 percent, or $60 million.
Making cuts
Introducing new products to its customers is another element of the growth philosophy at Drew, whose product lines for RVs and manufactured homes include vinyl and aluminum windows and screen doors, chassis, chassis parts, bath and shower units, axles and slide-out mechanisms. Also last month, Drew announced that its Lippert subsidiary paid $3 million in cash for the patent to a stabilizing jack system for parked travel trailers and fifth-wheel RVs.
Drew Industries has 11 employees at its recently refurbished yet modestly appointed headquarters at 200 Mamaroneck Ave. in downtown White Plains. It counts more than 3,000 employees at 35 manufacturing plants nationwide that are owned and operated by either of Drew”™s two subsidiaries, Lippert, an Indiana-based steel fabricator, and Texas-based Kinro, a manufacturer of doors and windows. The plants”™ geographic spread and locations near major customers were planned to minimize freight costs and eliminate long-distance transport.
To improve efficiency and reduce overhead, Drew last year closed about 20 plants, reducing square footage for its operations by about 20 percent, and cut 150 salaried employees and 300 to 400 hourly workers. “It was fortunate or smart or lucky that we did it ahead of the decline in industries,” said Drew Industries President Fredric M. Zinn, the company”™s former chief financial officer and 27-year employee who in May succeeded Abrams in the president”™s post. “The economic troubles that we”™re seeing now, we were well-prepared for it.”
“We”™re probably going to be one of the few companies in the RV industry that will be profitable in 2008,” said Abrams.
It was not always so at Drew.
Real estate to RVs Â
Started in 1962 as a real estate company in Manhattan, the company embarked on “an acquisitions binge,” said Abrams, buying up hotels, strip malls, and office buildings from “anyone who was willing to sell to us. It all fell apart in ”™75,” when the company filed for Chapter 11 bankruptcy protection, from which it emerged two years later.
In 1979, when the Bass brothers, scions of the Texas oil family, bought a majority share of the company, Drew had $8 million in sales and negative net worth, Abrams said.
“So it wasn”™t a pretty picture then,” said Zinn. “We learned a lot from those difficult times.” One primary lesson: “You have to be disciplined in your acquisitions.”
The new owners in 1980 moved company headquarters to White Plains. In the early ”™80s, the company”™s investments included a half-interest in the Sands Hotel and Casino in Atlantic City, N.J.
From 1980 to 1985, Drew bought several small companies, starting with Kinro, the Texas company that has grown from $9 million in sales at the time of purchase to $200 million. By 1985, Abrams and his management team began to focus on products-related industries.
“In the manufactured housing and RV industry, I think we”™ve made 25 acquisitions starting in ”™80,” Abrams said. Another major successful move, the $55 million purchase of Lippert Components, came in 1997, six years after the Bass brothers were bought out by management. Drew officials persuaded the family-run steel fabrication company to develop its $5 million RV division. It has grown to $200 million in sales.
“Today, there are only two companies we have,” said Abrams. “All the other 23 acquisitions went into those two companies.”
Weathering bad times
In the last 10 years, Drew has weathered the crash of the manufactured housing market, which had accounted for most of its component sales. That industry now makes up about 24 percent of its business, Abrams said.
In 1998, 373,000 manufactured homes were produced in the nation, Abrams said, compared with 96,000 in 2007. Bad lending practices in the ”™90s led to “exactly what”™s going on in the subprime,” with loan defaults and repossessions soaring to 100,000 a year in 2000, followed by an inventory build-up that put manufactured housing dealers out of business.
“Yet in every single month in that 10-year decline, we remained profitable,” Abrams said. “We”™re in an industry that lost 75 percent of its market and we stayed profitable throughout.”
“The way we measure ourselves is our content per recreational vehicle or our content per manufactured home,” Zinn said. “Our market share across all product lines is about 50 percent.” In the company”™s strongest market, “We”™re responsible for about 10 percent of the cost of the towable RV.”
Along with declining sales of RVs and multisection manufactured homes, the company also must contend with skyrocketing prices for steel, which have about doubled since the end of 2007, and other raw materials. “We have $65 million to $70 million in price increases that we have to pass along to customers,” Abrams said.
Yet he and Zinn sound confident in the future of the industries they supply, if less so in the prospects for manufactured housing.
“Typically the RV industry is the first to go into a recession and the first to come out of a recession,” Abrams said. “We”™re willing to take some risks in a bad economy because we”™re planning for the future.”
