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Shares of Drew Industries Inc. (LCII -2.45%) are up 8% since the RV components supplier released stronger-than-expected second-quarter results Thursday after the market close, with the company crediting a healthy combination of strong industry volumes, continued aftermarket business growth, acquisitions, and organic growth for its success. Now that the dust has settled, let's take a closer look at what Drew Industries accomplished last quarter, and its position entering the second half of the year.

Drew Industries results: The raw numbers

Metric

Q2 2016 Actuals

Q2 2015 Actuals

Year-Over-Year Growth

Revenue

$440.8 million

$362.1 million

21.7%

GAAP net income

$37.6 million

$20.9 million

 80%

GAAP net income per share (diluted)

$1.51

$0.85

77.6%

Data source: Drew Industries, Inc.

What happened with Drew Industries this quarter?

  • Overall growth reflected a 12% increase in wholesale shipments of towable RVs by OEMs, acquisitions made by Drew Industries over the past year, and last year's distribution and supply agreement for premium electronics with Furrion.
  • Investors were only expecting to see earnings of $1.35 per diluted share.
  • Given Drew Industries' increased focus on opportunities in the aftermarket business, the company modified its internal reporting structure during the quarter to focus on two primary segments: First, the OEM segment, which includes products sold to OEMs for RVs and adjacent industries. And second, the Aftermarket segment, which includes repair and replacement products for RVs and adjacent industries into aftermarket distribution channels.
  • OEM sales grew 21% year over year, to $406.9 million, including
    • 17.9% growth in travel trailers and fifth-wheels, to $289.7 million
    • 47.4% growth in motorhome sales, to $27.9 million
    • 24.6% growth in adjacent industries OEMs, to $89.4 million
  • Aftermarket segment sales climbed 31.5% year over year, to $33.9 million.
  • OEM segment operating profit jumped 81.8% year over year, to $54.4 million
  • Aftermarket segment operating profit increased 34.1% year over year, to just under $5 million.
  • Content per travel trailer and fifth-wheel RV for the 12 months ended June 30, 2016 climbed $95, to $3,013.
  • Content per motorhome RV for the 12 months ended June 30, 2016 grew $138, to $1,920.
  • Both content segment increases were driven primarily by organic growth, including double-digit growth in travel trailer content within towable RVs. 
  • Operating profit growth was driven by a combination of strong industry growth, lower costs for certain commodities, accretive acquisitions over the past year, and Drew Industries' focus on cost reductions and operational efficiency. 
  • Ended the quarter with just under $80 million in cash, and a net cash position of $29 million. This marks a $66 million improvement from Drew Industries' net debt position of $38 million at the start of this year, despite paying dividends of more than $7 million each in April and June.
  • During the subsequent conference call, CFO David Smith noted the company is "well on its way" to integrating Drew Industries' three acquisitions completed so far in 2016.

What management had to say

Drew Industries CEO Jason Lippert elaborated,

RV industry volume is out-pacing the RVIA's low single-digit unit growth projections for 2016 given at the end of last year, as 2016 second quarter wholesale travel trailers are up nearly 14 percent and fifth-wheels are up over four percent. Travel trailer sales momentum continued this year, which we attribute to a new generation of enthusiasts embracing the RV lifestyle. We are also pleased to see fifth-wheel wholesale units up approximately 900 units and 1,000 units over the second quarter and year to date 2015, respectively. These overall increases for North America have been achieved despite retail sales of towable RVs in Canada being down 19 percent during the second quarter.

Looking forward

Drew Industries didn't offer specific financial guidance for the quarters ahead. But Lippert insisted that Drew Industries is poised to continue thriving through its focus on developing, engineering, and building innovative products, improving service to all customer channels, and identifying incremental growth opportunities through those products, customers, new markets, and new geographies.

In the end, this was a great quarter from a company intent on continuing to deliver value for its customers, while at the same time creating value for its shareholders. Punctuate that obviously admirable combination with encouraging trends in the broader RV market that support Drew Industries' relative outperformance of late, and it's no surprise to see shares of Drew Industries trading near all-time highs today.