LCI Industries Annual Report 2000

← All annual reports

FY2000 Annual Report · LCI Industries

Loading PDF…

2 0 0 0 A N N U A L R E P O R T

I N D U S

T R I

I N C O R P O R A T

E D

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

C O R P O R A T E P R O F I L E

DREW, through its wholly-owned subsidiaries, Kinro, Inc., and Lippert Components, Inc., supplies

a wide variety of components for manufactured homes and recreational vehicles. Drew operates

42 manufacturing facilities in 18 states and Canada, strategically located in proximity to our

customers to minimize freight costs and reduce delivery times. Drew employs over 2,500

employees dedicated to ensuring the continued success of the Company by producing quality

products and responding to the needs of its customers.

DREW’s manufactured housing products segment produces vinyl and aluminum windows

and screens, chassis and chassis parts, new and refurbished axles and galvanized roofing.

This segment also distributes new and refurbished tires. On average, Drew supplies about

$750 of components for each manufactured home built in the United States.

DREW’s recreational vehicle products segment manufactures RV windows, doors and

chassis. In 2000, sales of this segment increased 30%, and now account for 35% of Drew’s

consolidated sales, up from 24% in 1999.

R E C R E A T I O N A L V E H I C L E

P R O D U C T S E G M E N T 3 5 %

M A N U F A C T U R E D H O U S I N G

P R O D U C T S E G M E N T 6 5 %

DREW

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

S E L E C T E D F I N A N C I A L D A T A

The following selected financial data should be read in conjunction with the consolidated financial statements

and related notes thereto included herein (in thousands, except per share amounts):

OPERATING DATA
Net sales

Operating profit

Income before income taxes
Provision for income taxes

Net income

Income per common share:

Net income per common share (basic)

Net income per common share (diluted)

FINANCIAL DATA
Working capital
Total assets
Long-term obligations
Stockholders’ equity

2000

$287,765

$ 7,535(1)

$ 3,576
2,029

$ 1,547

.15

$ 22,367
$159,298
$ 58,321
$ 72,164(2)

Year Ended December 31,
1998

1999

1997

$324,455

$ 31,934

$ 28,566
11,375

$ 17,191

1.51

$ 28,970
$156,044
$ 46,740
$ 84,089

$330,640

$ 28,942

$ 25,052
9,835

$ 15,217

1.36

1.34

$ 31,630
$154,425
$ 59,612
$ 68,762

$208,365

$ 21,761

$ 19,256
7,262

$ 11,994

1.22

1.19

$ 24,009
$130,349
$ 56,130
$ 51,953

1996

$168,151

$ 20,990

$ 20,664
8,092

$ 12,572

1.18

1.15

$ 16,138
$ 55,283
4,938
$
$ 34,779

1) After a non-cash charge of $6,897,000 to reflect an impairment of goodwill, as well as an accrual of $409,000 for plant closing expenses, related to the

Company’s axle and tire refurbishing operation.

2) After purchase of 1,640,025 shares of treasury stock for $13,472,000.

Net Sales
(dollars in millions)

Net Income
(dollars in millions)

$331

$324

$288

$208

$168

$17.2

$15.2

$12.6

$12.0

Net Inc ome
P er Co mm o n
Shar e (d il uted )
(in dollars)

$1.51

$1.34

$1.19

$1.15

’96 ’97 ’98 ’99

’00

’96 ’97 ’98 ’99

’00

’96 ’97 ’98 ’99

’00

$1.5

$.15

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

L E T T E R T O S T O C K H O L D E R S :

For the first time since 1991, we report lower sales and operating profit than the prior year, in part as a

result of lower industry-wide sales of manufactured homes and recreational vehicles.

Sales by the Company’s manufactured housing (“MH”) products segment declined 24 percent in 2000,

mirroring the 28 percent industry-wide reduction in the production of manufactured homes. On the

positive side, the Company’s MH window product line achieved market share gains offsetting part of

the industry-wide decline. However, sales of MH axle and tire products were lower substantially due to

market share losses and lower selling prices. The 24 percent sales decline experienced by the MH

products segment, along with competitive pricing pressures, rising production costs, and facility start-up

costs and related production inefficiencies, caused the operating profit of this segment to fall 56 percent

to $12.6 million for 2000.

The slump in the manufactured housing industry, which began in the spring of 1999, continued

throughout 2000. Although some progress has reportedly been made in reducing the inventory of homes

at manufacturers and retail dealers, an oversupply persists. The problem is exacerbated by the lack

of mortgage financing and higher mortgage interest rates, along with increased repossessions of homes

by lenders. While the recent interest rate cuts should help, we do not anticipate any significant increase

in industry-wide production of manufactured homes until (i) inventory levels are further reduced,

(ii) repossessions return to more normal levels, (iii) credit availability improves, and (iv) manufactured

housing mortgage interest rates decline.

Sales by the Company’s recreational vehicle (“RV”) products segment increased nearly 30 percent in

2000, despite a 4 percent decline in industry-wide shipments of towable RVs, which decline began in the

latter part of the year. The Company’s RV chassis product line continued to experience dramatic growth,

with sales increasing 80 percent in 2000. This sales increase was made possible by the opening of five

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

new manufacturing facilities during 2000. Sales of RV window and door products also increased

8 percent due to market share gains. Although sales increased, operating profit of this segment declined

22 percent, partly as a result of start-up costs and lower operating efficiencies at the newly constructed

RV chassis facilities. Competitive pricing pressures and higher labor costs also reduced profit levels.

Sales of RVs have historically been closely tied to consumer confidence levels, which declined in recent

months, after being very high for a number of years. Industry-wide sales of RVs fell 19 percent in the

fourth quarter of 2000, and are likely to suffer if consumer confidence continues to fall. Some analysts

believe the decline in sales by RV producers has, in part, been the result of efforts by retailers to reduce

inventory and thus lower interest costs. This is supported by industry retail shipment statistics which are

$.4 million down less than production. Again, recent interest rate cuts should help alleviate this problem.

During the past few years, the axle and tire operation of our manufactured housing products segment has

not performed well, primarily due to increased competition which severely affected operating margins.

The Company has determined that goodwill related to this operation had been impaired and a non-cash

charge of $6.9 million was recorded in the fourth quarter, as well as related plant closing charges of

$.4 million. In January 2001 the axle operation closed two of its five factories.

Despite the down-turn, we believe in the long-term prospects of the industries we serve and

our Company. Thus during 2000, Drew took several actions that we hope will benefit stockholders in

the long run. The Company acquired 1.6 million shares of its Common Stock in the open market for

approximately $13.5 million. In addition, we expended $22 million for five new manufacturing facilities

and other capital improvements, primarily for the Company’s RV segment. Although these factories

experienced significant startup costs and were not profitable in 2000, they are expected to achieve

profitability in the current year.

The industry-wide declines in the manufactured housing and recreational vehicle industries are expected

to continue into at least the middle of 2001. Therefore competitive price pressures may limit the

Company’s ability to pass cost increases through to its customers. As a result, the Company’s operating

results for the first half of 2001 are not anticipated to reach year-ago levels. The Company will continue

its efforts to reduce costs wherever practicable, and management believes that operating efficiencies at

its new facilities will continue to improve through the year.

We thank all of our employees for their continued dedication and hard work.

Sincerely,

Edward W. Rose, III
Chairman of the Board

Leigh J. Abrams
President and Chief Executive Officer

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

S T R A T E G I C V I S I O N

Drew’s long-term goal is to enhance
value for our stockholders.

O U R S T R A T E G I E S A R E
S I M P L E A N D D I R E C T :

Satisfy customer needs while recognizing opportunities.

Emphasize profitability.

Bo ok Value
( per sh a re)
(in dollars)

Align management incentives with our goal to increase

stockholder value.

$7.44

$7.47

While annual results may vary, we believe that

long-term adherence to these strategies will

$6.06

enable us to achieve our goal.

$4.57

$3.24

’96 ’97 ’98 ’99

’00

(cid:2)
(cid:2)
(cid:2)
D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

Satisfy customer needs while recognizing opportunities

Management’s key functions are to guide the Company through the complex daily demands of effectively

and efficiently meeting the needs of customers, while maintaining the vision to recognize opportunities

that present superior profit potential.

Drew’s key executives have decades of industry experience. They are keenly aware that opportunities

can be found both in periods of expansion and contraction.

STRATEGIC

VISION

Drew’s continued profitability during the current

down turn in our industries results from manage-

ment’s ability to respond quickly to the changing

business environment, as well as from our status as

a valued supplier and partner to our customers.

Management has also recognized trends and seized the opportunities which led to the rapid growth of our

vinyl window and RV chassis product lines.

Emphasize profitability

Drew’s management seizes opportunities for profit growth. Thus, we will make acquisitions, but only at

reasonable prices, and we will introduce new product lines only when they have adequate profit potential.

While Drew continues to seek expansion through acquisition and internal growth, we remain focused

on evaluating the long-term profit potential of expansion opportunities. Although growth is always

accompanied by risk, we carefully analyze the risks against the success likely to be achieved.

Align management incentives with our goal to increase stockholder value

Effective management compensation plans motivate the success of corporate strategies.

Drew has a long standing policy of rewarding operating management and employees through profit

incentive programs and a stock option plan. This policy is designed to align employee interests with

those of stockholders.

Drew encourages management to maintain ownership of Drew stock. Directors and key management

own more than 50 percent of Drew’s common shares, ensuring that they continually strive to enhance

stockholder value.

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

I N D U S T R I E S

Ma n ufacture d
Housi ng P ro ducts
Se gm en t Sal es
(dollars in thousands)

$271

$247

$187

$171

$134

MANUFACTURED HOUSING

Manufactured housing offers the homeowner value and quality. Manufactured homes are built

entirely in a factory-controlled environment, in accordance with strict federally regulated

building codes. In 1999, the average cost per square foot of a manufactured home was $29.46,

more than 50 percent less than the cost of a site-built home. Approximately 19 million people

currently reside full-time in over 8 million manufactured homes in the U.S.

RECREATIONAL VEHICLES

RV Products
Segment Sales

(dollars in thousands)

By combining transportation and temporary living quarters, RV travelers

have the freedom and flexibility to travel where and when they want.

Demographic trends continue to favor long-term growth in the RV industry.

$101

Every day 12,000 people in the U.S. reach the age of 50, the prime age for

’96 ’97 ’98 ’99

’00

RV buyers. About 8.6 million families in the U.S. own a motorized or tow-

able RV and this is expected to continue to grow over the next decade.

$78

$59

$37

$34

’96 ’97 ’98 ’99

’00

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company has two reportable operating segments, the manufactured housing products segment (the “MH segment”)
and the recreational vehicle products segment (the “RV segment”). The MH segment, which accounted for 65 percent of con-
solidated sales in 2000, manufactures a variety of components used in the construction of manufactured homes, including
aluminum and vinyl windows and screens, chassis and chassis parts, axles, and galvanized roofing. The MH segment also
imports new tires and refurbishes used axles and tires which it supplies to producers of manufactured homes. The RV seg-
ment, which accounted for 35 percent of consolidated sales in 2000, manufactures a variety of products used in the production
of recreational vehicles, including windows, doors and chassis. The MH segment and the RV segment primarily sell their
products to the producers of manufactured homes and recreational vehicles, respectively. Each segment also supplies related
products to other industries, but sales of these products represent less than 5 percent of the segment’s net sales.

The Company’s operations are performed through its four primary operating subsidiaries. Kinro, Inc. (“Kinro”) and
Lippert Components, Inc. (“LCI”) have operations in both the MH and RV segments, while Lippert Tire and Axle, Inc.
(“LTA”) and Coil Clip, Inc. (“Coil Clip”) operate entirely within the MH segment and are suppliers to LCI. At December 31,
2000, the Company’s subsidiaries operated 42 plants in 18 states and Canada.

R E S U LT S O F O P E R AT I O N S

Net sales and operating profit are as follows (in thousands):

Net sales:

MH segment
RV segment

Total

Operating profit:
MH segment
RV segment
Amortization of intangibles
Writedown of intangibles
Corporate and other

Total

Year Ended December 31,

2000

1999

1998

$186,593
101,172

$287,765

$ 12,574
6,853
(2,694)
(6,897)
(2,301)

$ 7,535

$246,509
77,946

$324,455

$ 28,330
8,819
(2,694)

$271,287
59,353

$330,640

$ 28,572
4,974
(2,442)

(2,521)

(2,162)

$ 31,934

$ 28,942

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

MH Segment

Net sales of the MH segment declined 24 percent in 2000 from 1999 primarily as a result of a decline in industry-wide
shipments of manufactured homes. Industry shipments declined 28 percent for the year after a decline of 7 percent for the
year 1999. The Company’s market share of vinyl window sales continues to expand as sales of such windows decreased only
1 percent in 2000. Sales of axles and tires were down 32 percent primarily as a result of the continuation of competitive pres-
sures in the refurbished products line.

The slump in the manufactured housing industry, which began in the spring of 1999, continued throughout 2000.
Although some progress has reportedly been made in reducing the inventory of homes at manufacturers and retail dealers, an
oversupply persists. The problem is exacerbated by the lack of mortgage financing and higher mortgage interest rates, along
with increased repossessions of homes by lenders. While the recent interest rate cuts should help, the Company does not
anticipate any significant increase in industry-wide production of manufactured homes until (i) inventory levels are further
reduced, (ii) repossessions return to more normal levels, (iii) credit availability improves, and (iv) manufactured housing mort-
gage interest rates decline.

Operating profit of the MH segment decreased $16 million (56 percent) in 2000 from 1999 primarily as a result of the
reduction in sales. In addition, increases in the cost of labor and services could not be fully passed on to the customers due to
competition. For the year 2000, plant consolidation, start-up costs and related production inefficiencies of about $1.0 million
also impacted operating profit. Selling, general and administrative expenses were down in dollar terms, however, they
increased as a percentage of sales due to the effect of lower sales on fixed costs.

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

evaluation, it was determined that goodwill had been impaired, resulting in a non-cash charge of $6,897,000, which, along with
a charge of $409,000 for plant closing expenses, were recorded in the fourth quarter. The goodwill impairment charge is not
included in the MH segment results in the above table. In January 2001, the axle and tire refurbishing operation closed two of
its five factories.

It is anticipated that lower sales and higher labor costs in certain areas will continue to adversely affect operating results
in the near term. Margins of the manufactured housing segment for the year 2001 are also expected to be adversely affected
by the continuation of competitive price pressures until at least the middle part of 2001. While start-up costs are expected to
be lower in the future, it is anticipated that until the manufactured housing industry recovers, operating margins are unlikely
to significantly improve.

RV Segment

Net sales of the RV segment increased 30 percent for 2000 compared to 1999. The five manufacturing plants opened
by the Company in 2000 were primarily to accommodate the expansion of the Company’s RV chassis product line, which
reflected an 80 percent increase in sales. In addition, sales of RV windows and doors increased 8 percent. The RV industry
reported a 4 percent decline in shipments in 2000.

Operating profit of the RV segment decreased 22 percent for the year 2000. Such reduction in operating profit was
largely due to plant consolidation, start-up costs and related production inefficiencies of $1.7 million. Excluding these start-up
and related costs, operating profit of this segment was 8.5 percent of net sales in 2000 compared to 11 percent in 1999. This
decline resulted largely from increased material and labor costs that could not be passed on to customers due to competition.

Margins of the RV segment for the year 2001 are expected to be adversely affected by the continuation of competitive

price pressures at least through the early part of 2001.

Amortization and Writedown of Intangibles, Corporate and Other

Amortization and writedown of intangibles in 2000 include a non-cash charge of $6.9 million to reflect an impairment of
goodwill relating to the Company’s axle and tire refurbishing operation. Amortization of goodwill in future periods will be
reduced by approximately $.3 million per annum. Corporate and other expenses decreased $.2 million largely as a result of a
reduction in incentive compensation.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

MH Segment

Net sales of the MH segment declined 9 percent in 1999 from 1998 primarily as a result of a decline in industry-wide
shipments of manufactured homes. Industry shipments declined 7 percent for the year after being 1 percent ahead of the prior
year for the first half of 1999. The Company’s market share of vinyl window sales continued to expand as sales of such win-
dows increased more than 10 percent in 1999, while sales of axles and tires were down 25 percent primarily as a result of com-
petitive pressures in the refurbished products line. The Company’s customers, the producers of manufactured homes, had
recently closed factories and cut back manufacturing schedules, due to the combination of excessive inventory of manufac-
tured homes maintained by manufacturers and retailers, as well as declining retail sales due to tightening of mortgage credit
and increasing repossessions.

Despite the 9 percent decline in sales, operating profit of the MH segment decreased less than 1 percent from 1998.
Gross margin percent improved, as the adverse effect of lower sales, competitive pressures in the axle and tire refurbishing
product line and higher hourly labor costs were more than offset by temporary declines in certain raw material costs. The
improvement in gross margin percent was partially offset by increases in selling, general and administrative expenses as a
percentage of sales, reflecting the effect of reduced sales on fixed costs.

RV Segment

Net sales of the RV segment increased 31 percent for 1999 compared to 1998, primarily as a result of the expansion of
the Company’s RV chassis product line. The Company added two RV chassis manufacturing plants in 1999 after adding three
of such plants in 1998. In addition, sales of RV windows and doors increased 17 percent to $34 million. The RV industry
reported a 10 percent increase in shipments in 1999.

Operating profit increased 77 percent in 1999, as operating margins rose to 11 percent in 1999 from 8 percent in 1998.
The improvement in operating margins resulted in part, from greater efficiencies at the new RV chassis facilities opened in
1998, as well as temporary declines in certain raw material costs. Production costs and operating efficiencies at the Company’s
mature RV facilities also improved. The improvement in gross margin was partially offset by increases in selling, general and

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

administrative expenses including incentive compensation, which is based on profits at certain of the Company’s divisions,
and additional general and administrative costs at the recently opened RV chassis facilities.

Amortization of Intangibles, Corporate and Other

Amortization of intangibles increased by $.3 million in 1999, primarily as a result of the effect of the full year in 1999 of the
amortization of goodwill and other intangibles relating to the acquisition of Coil Clip, versus the partial year of such amortization
in 1998. Corporate and other expenses increased $.4 million primarily as a result of a reduction in the shared services charged
to LBP, Inc. (“LBP”) as described below.

Shared Services Agreement

Pursuant to a Shared Services Agreement, following the spin-off by the Company of LBP on July 29, 1994, the Company
and LBP have shared certain administrative functions and employee services, such as management overview and planning, tax
preparation, financial reporting, coordination of independent audit, stockholder relations, and regulatory matters. The Company
has been reimbursed by LBP for such services. This Agreement has been extended and now expires on December 31, 2001 and
may be further extended. The Company charged fees to LBP of approximately $.2 million in 2000, $.1 million in 1999 and $.5
million in 1998. These fees are recorded as a reduction of selling, general and administrative expenses.

Interest Expense, Net

Interest expense, net increased $.6 million in 2000 as debt was increased to fund $22 million of capital expenditures, as

well as $13 million of treasury stock purchases, offset by cash flow from operations.

Interest expense, net, decreased $.5 million in 1999 as cash flow from operations, which exceeded capital expenditures

and working capital needs, was utilized to reduce debt.

New Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” In June 1999, the FASB issued SFAS
No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement
No. 133,” which delays the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued SFAS No. 138, “Accounting for Derivative Instruments and Hedging Activities,” which amends some of the pro-
visions of SFAS No. 133. The Company has adopted the provisions of SFAS No. 133 and SFAS No. 138 effective January 1,
2001. The adoption of these statements does not have a material impact on the earnings or financial position of the Company.

L I Q U I D I T Y A N D C A P I TA L R E S O U R C E S

The Statements of Cash Flows reflect the following (in thousands):

Net cash flows provided by operating activities
Net cash flows (used for) investment activities
Net cash flows provided by (used for ) financing activities

Year Ended December 31,

2000

$ 9,853
$(21,537)
$ 7,124

1999

$ 29,626
$(12,963)
$(14,243)

1998

$ 17,955
$(18,554)
$ 2,261

Net cash provided by net income was partially offset by changes in operating assets in 2000. In addition to seasonal
changes in operating assets, days sales in accounts receivable increased, although no significant customer delinquencies were
experienced. Inventories increased in 2000 compared to a decrease last year, partly because of the slowdown in sales as well as
the higher inventory requirement of the expanding RV segment. The Company has reduced inventories by $5 million from
this year’s highest level and inventory reduction efforts continue. Working capital other than cash decreased $3.3 million in
1999 in response to the reduction in net sales late in 1999. In 1998, $4.3 million of operating cash flow was utilized to fund
increases in working capital and other assets.

Cash flows used for investing activities consisted of capital expenditures, including five factories constructed by LCI,
primarily to accommodate the expansion of the RV chassis product lines. Capital expenditures for 2000 were approximately
$22 million, which was funded from cash flow from operations and borrowings under the Company’s line of credit, as well as
approximately $5 million of Industrial Revenue Bonds. Capital expenditures of $13.4 million in 1999 included the construction
of a new manufactured housing products plant, two RV products plants, and the initial costs of replacement of a plant that man-
ufactures products from both of the Company’s segments by a larger and more efficient plant. Cash flows used for investing

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

activities in 1998 consisted of $10.4 million for the acquisition of Coil Clip and $8.5 million for capital expenditures, including
three RV chassis factories. Such capital expenditures were primarily funded by cash flows from operations. Capital expendi-
tures for 2001 are expected to be $7 to $9 million. Such capital expenditures will be funded by cash flow from operations as
well as real estate and equipment financing where feasible.

Cash flows provided by financing activities for 2000 included increases in debt of approximately $20.6 million offset by
$13.5 million used to acquire treasury stock. Cash flows used for financing activities for 1999 included a reduction in debt of
approximately $12.4 million, and $3.9 million used to acquire treasury stock, offset by $2.0 million from the exercise of stock
options. Cash flows provided by financing activities for 1998 included increases in debt of approximately $3.3 million, and
$1.0 million from the exercise of stock options, offset by $2.1 million used to acquire treasury stock.

On June 16, 2000, the Company purchased 1,449,425 shares of its common stock at $8.00 per share, net to the sellers in
cash, or an aggregate of $11.8 million including expenses, pursuant to a self-tender offer. Earlier in 2000, the Company pur-
chased, on the open market, 190,000 shares of its common stock at an average cost of $8.80 per share. The Company used its
line of credit to purchase such shares. The line of credit was increased from $25 million to $30 million to accommodate the
purchase of shares.

The Company has outstanding $40 million of 6.95 percent, seven year Senior Notes. Repayment of these notes is due

$8 million annually beginning on January 28, 2001.

The Company also has a $30 million revolving credit facility with The Chase Manhattan Bank, as agent, which expires
on May 15, 2002. Availability under the Company’s $30 million line of credit, which was $10.8 million at December 31, 2000,
combined with available cash and cash flow from operations, as well as anticipated real estate and equipment financing, are
adequate to finance the Company’s working capital and capital expenditure requirements.

I N F L AT I O N

The prices of raw materials, consisting primarily of aluminum, vinyl, steel, glass and tires, are influenced by demand
and other factors specific to these commodities rather than being directly affected by inflationary pressures. Prices of certain
commodities have historically been volatile. In order to hedge the impact of future price fluctuations on a portion of its future
aluminum raw material requirements, the Company periodically purchases aluminum futures contracts on the London Metal
Exchange. At December 31, 2000, the Company had no futures contracts outstanding.

As described above, operating profits have been adversely affected by increases in labor rates and other costs, which

could not be fully passed on to customers due to competition.

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

Net sales
Cost of sales

Gross profit

Selling, general and administrative expenses
Writedown of goodwill

Operating profit
Interest expense, net

Income before income taxes
Provision for income taxes (Note 9)

Net income

Income per common share (Note 11):

Net income per common share (basic)

Net income per common share (diluted)

The accompanying notes are an integral part of these consolidated financial statements.

2000

$287,765
230,600

57,165
42,733
6,897

7,535
3,959

3,576
2,029

Year Ended December 31,

1999

$324,455
249,129

75,326
43,392

31,934
3,368

28,566
11,375

1998

$330,640
262,741

67,899
38,957

28,942
3,890

25,052
9,835

$ 1,547

$ 17,191

$ 15,217

.15

1.51

1.36

1.34

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

CONSOLIDATED BALANCE SHEETS

(In thousands, except shares and per share amounts)

ASSETS
Current assets

Cash and cash equivalents
Accounts receivable, trade, less allowances of $1,023 in 2000 and $521 in 1999
Inventories (Note 4)
Prepaid expenses and other current assets (Note 9)

Total current assets

Fixed assets, net (Note 5)
Goodwill, net (Note 3)
Other assets (Note 9)

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities

Notes payable, including current maturities of long-term indebtedness (Note 8)
Accounts payable, trade
Accrued expenses and other current liabilities (Note 6)

Total current liabilities
Long-term indebtedness (Note 8)
Other long-term liabilities (Note 9)

Total liabilities

Commitments and contingencies (Note 10)
Stockholders’ equity (Note 11)

Common stock, par value $.01 per share: authorized 20,000,000 shares;

issued 11,805,754 shares in 2000 and 1999

Paid-in capital
Retained earnings

Treasury stock, at cost—2,149,325 shares in 2000 and 509,300 shares in 1999

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

December 31,

2000

1999

550
13,451
33,703
3,476

51,180
66,301
37,240
4,577

5,110
11,303
33,382
4,390

54,185
51,028
46,087
4,744

$159,298

$156,044

$ 8,867
5,435
14,511

28,813
58,076
245

87,134

118
24,967
66,546

91,631
(19,467)

72,164

1,717
6,391
17,107

25,215
44,630
2,110

71,955

118
24,967
64,999

90,084
(5,995)

84,089

$159,298

$156,044

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Cash flows from operating activities:

Net income
Adjustments to reconcile net income to cash flows provided by

operating activities:

Depreciation and amortization
Writedown of goodwill
Deferred taxes
Loss (gain) on disposal of fixed assets
Changes in assets and liabilities, excluding acquisitions of businesses:

Accounts receivable, net
Inventories
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities

Net cash flows provided by operating activities

Cash flows from investing activities:

Capital expenditures
Acquisitions of companies’ net assets and businesses
Proceeds from sales of fixed assets

Net cash flows used for investing activities

Cash flows from financing activities:

Proceeds from private placement of Senior Notes
Proceeds from Industrial Revenue Bonds
Proceeds from other notes and loans
Proceeds under line of credit and other borrowings
Repayments under line of credit and other borrowings
Acquisition of treasury stock
Exercise of stock options and other

Net cash flows provided by (used for) financing activities

Net (decrease) increase in cash

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosure of cash flows information:

Cash paid during the year for:

Interest on debt
Income taxes, net of refunds

The accompanying notes are an integral part of these consolidated financial statements.

Year Ended December 31,

2000

1999

1998

$ 1,547

$ 17,191

$15,217

8,954
6,897
(2,304)
264

(2,148)
(321)
363
(3,399)

9,853

(21,890)

353

(21,537)

4,561
350
88,995
(73,310)
(13,472)

7,124

(4,560)
5,110

8,142

1,054
(82)

2,256
2,018
799
(1,752)

29,626

(13,384)

421

(12,963)

400
17,550
(30,329)
(3,891)
2,027

(14,243)

2,420
2,690

6,836

50
135

(3,595)
(3,743)
(392)
3,447

17,955

(8,450)
(10,449)
345

(18,554)

40,000
5,713
500
75,000
(117,890)
(2,104)
1,042

2,261

1,662
1,028

550

$ 5,110

$ 2,690

$ 4,103
$ 3,653

$ 3,421
$ 9,058

$ 3,072
$10,053

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except shares)

Balance—December 31, 1997
Net income
Issuance of 150,538 shares of common stock

pursuant to stock option plan

Income tax benefit relating to issuance of

common stock pursuant to stock option plan

Resolution of earnout contingency relating to

230,769 shares of common stock in connection
with the acquisition of the assets and business
of Lippert Components, Inc.

Purchase of 175,600 shares of treasury stock

Balance—December 31, 1998
Net income
Issuance of 292,052 shares of common stock

pursuant to stock option plan

Income tax benefit relating to issuance of

common stock pursuant to stock option plan

Purchase of 333,700 shares of treasury stock

Balance—December 31, 1999
Net income
Purchase of 1,640,025 shares of treasury stock

Balance—December 31, 2000

Common
Stock

$113

Treasury
Stock

$ —

Paid-In
Capital

$19,249

Retained
Earnings

$32,591
15,217

Total
Stockholders’
Equity

$ 51,953
15,217

115

118

$118

654

386

2,654

22,943

1,230

794

24,967

656

386

2,654
(2,104)

68,762
17,191

1,233

794
(3,891)

84,089
1,547
(13,472)

47,808
17,191

64,999
1,547

$24,967

$66,546

$ 72,164

(2,104)

(3,891)

(5,995)

(13,472)

$(19,467)

The accompanying notes are an integral part of these consolidated financial statements.

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

1 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

Basis of Presentation

The Consolidated Financial Statements include the accounts of Drew Industries Incorporated and its subsidiaries.
Drew’s wholly-owned active subsidiaries are Kinro, Inc. and its subsidiaries (“Kinro”), Lippert Components, Inc. and its
subsidiaries (“LCI”), and Lippert Tire and Axle, Inc. and its subsidiaries (“LTA”). Drew, through its wholly-owned
subsidiaries, supplies a broad array of components for manufactured homes and recreational vehicles. All significant inter-
company balances and transactions have been eliminated. Certain prior year balances have been reclassified to conform with
current presentation.

Manufactured products include aluminum and vinyl windows, doors, chassis, chassis parts, galvanized roofing and new
and refurbished axles. The Company also distributes new and refurbished tires. In 2000, approximately 65 percent of the
Company’s sales were made by its manufactured housing products segment and 35 were made by its recreational vehicles
products segment. At December 31, 2000, the Company operated 42 plants in 18 states and Canada.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to
be cash equivalents. Investments, which consist of government-backed money market funds are recorded at cost which
approximates market value.

Inventories

Inventories are stated at the lower of cost (using the first-in, first-out method) or market. Cost includes material, labor

and overhead; market is replacement cost or realizable value after allowance for costs of distribution.

The Company periodically purchases commodity futures to hedge the impact of future price fluctuations on a portion
of its aluminum raw material requirements. Gains and losses on such futures contracts are deferred until recognized in income
as a component of cost of sales when the finished products are sold. Cash flow from such futures contracts are included in
operating activities in the Consolidated Statements of Cash Flows.

Fixed Assets

Fixed assets are depreciated principally on a straight-line basis over the estimated useful lives of properties and
equipment. Leasehold improvements and leased equipment are amortized over the shorter of the lives of the leases or the
underlying assets. Amortization of assets recorded under capital leases is included in depreciation expense. Maintenance and
repairs are charged to operations as incurred; significant betterments are capitalized.

Income Taxes

The Company and its subsidiaries file a consolidated Federal income tax return. The Company’s subsidiaries generally

file separate state income tax returns on the same basis as the Federal income tax return.

Goodwill

Goodwill is the excess of cost over the fair value of net tangible assets acquired and is amortized on a straight-line basis
primarily over thirty years. The Company periodically reviews the value of its goodwill to determine if an impairment has
occurred. The Company measures the potential impairment of recorded goodwill by the undiscounted value of expected
future operating cash flows in relation to the goodwill and other long-lived assets of the subsidiary. Based on its review, the
Company recorded an impairment charge of $6,897,000 on the goodwill applicable to its axle and tire refurbishing business.

Revenue Recognition

Revenue is recognized upon shipment of goods to customers.

Shipping and Handling Costs

The Company records shipping and handling costs within selling, general and administrative expenses. Such costs

aggregated $11,357,000, $11,151,000 and $10,441,000 in 2000, 1999 and 1998, respectively.

Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those estimates.

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 . S E G M E N T R E P O R T I N G

The Company has two reportable operating segments, the manufactured housing products segment (the “MH segment”)
and the recreational vehicle products segment (the “RV segment”). The MH segment manufactures a variety of products used
in the construction of manufactured homes, including windows and screens, chassis and chassis parts, axles, and galvanized
roofing. The MH segment also imports new tires and refurbishes used axles and tires which it supplies to producers of manu-
factured homes. The RV segment manufactures a variety of products used in the production of recreational vehicles, including
windows, doors and chassis. The MH segment and the RV segment primarily sell their products to the producers of manufactured
homes and recreational vehicles, respectively. Each segment also supplies related products to other industries, but sales of
these products represent less than 5 percent of the segment’s net sales. The Company has only an insignificant amount of
intersegment sales.

Decisions concerning the allocation of the Company’s resources are made by the Company’s key executives. This
group evaluates the performance of each segment based upon segment profit or loss, defined as income before interest, amor-
tization of intangibles and income taxes. Management of debt is considered a corporate function. The accounting policies of
the MH and RV segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements.

Information relating to segments follows (in thousands):

Year ended December 31, 2000

Revenues from external customers(a)
Segment operating profit (loss)
Segment assets(c)
Expenditures for long-lived assets(d)
Depreciation and amortization

Year ended December 31, 1999

Revenues from external customers(a)
Segment operating profit (loss)
Segment assets(c)
Expenditures for long-lived assets(d)
Depreciation and amortization

Year ended December 31, 1998

Revenues from external customers(a)
Segment operating profit (loss)
Segment assets(c)
Expenditures for long-lived assets(d)
Depreciation and amortization

$186,593
12,574
61,792
7,793
4,003

$246,509
28,330
63,949
7,311
3,830

$271,287
28,572
68,256
5,622
3,436

Segments

$101,172
6,853
51,614
14,083
1,979

$ 77,946
8,819
31,608
6,049
1,309

$ 59,353
4,974
23,842
4,118
942

Total

$287,765
19,427
113,406
21,876
5,982

$324,455
37,149
95,557
13,360
5,139

$330,640
33,546
92,098
9,740
4,378

Corporate
and Other

Intangibles

Total

$ (2,301)
5,790
14
18

$ (2,521)
10,865
323
17

$ (2,162)
10,225
584
16

$ (9,591)(b)
40,102

2,954

$ (2,694)
49,622
54
2,986

$ (2,442)
52,102
10,045
2,442

$287,765
7,535
159,298
21,890
8,954

$324,455
31,934
156,044
13,737
8,142

$330,640
28,942
154,425
20,369
6,836

(a) One customer accounted for 15 percent, 14 percent and 15 percent of the Company’s net sales in the years ended December 31, 2000, 1999 and 1998,

respectively. Another customer accounted for 10 percent of the Company’s net sales in 1998. Both segments had sales to each of such customers.

(b) After a non-cash charge of $6,897,000 to reflect an impairment of goodwill related to the Company’s axle and tire refurbishing operation.
(c) Segment assets include accounts receivable, inventory and fixed assets. Corporate and other assets include cash and cash equivalents, prepaid expenses
and other current assets, and other assets, excluding intangible assets. Intangibles include goodwill and deferred charges which are not considered in the
measurement of each segment’s performance.

(d) Segment expenditures for long-lived assets include capital expenditures and fixed assets purchased as part of the acquisition of companies and businesses.
Expenditures for other long-term assets are not included in the segment since they are not considered in the measurement of each segment’s performance.

3 . A C Q U I S I T I O N S A N D G O O D W I L L

Coil Clip, Inc.

On December 16, 1998, the Company’s subsidiary, LCI, acquired the assets and business of Coil Clip, Inc. (“Coil
Clip”), a fabricator of specialty steel parts, located in Boaz, Alabama. Previously, in May 1998, LCI acquired the manufactured
housing business of Coil Clip and entered into a supply agreement to purchase steel from Coil Clip.

The purchase price consisted of cash of approximately $3.8 million for the May transaction and $6.5 million, including

a $.5 million note, for the December transaction.

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

The acquisition has been accounted for as a purchase. The aggregate purchase price has been allocated to the underlying
assets based upon their respective estimated fair values at the date of acquisition. Intangible assets of approximately $3.8 mil-
lion are being amortized over useful lives averaging approximately 5 years. The excess of purchase price over the fair value of
the net assets acquired (“goodwill”) was approximately $2.6 million, which is being amortized over 20 years. The results of the
acquired business have been included in the Company’s consolidated statements of income beginning December 16, 1998.

Pro forma results of Coil Clip prior to acquisition are not included because they are not material.

Goodwill

Goodwill of $37,240,000 at December 31, 2000, is net of accumulated amortization of $5,159,000. At December 31,
1999, goodwill of $46,087,000 was net of amortization of $4,606,000. Amortization of goodwill was $1,797,000, $1,800,000 and
$1,583,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

Drew’s axle and tire refurbishing operation has not performed well over the past several years, primarily due to
increased competition, which severely affected operating margins. At the end of the third quarter of 2000, the Company
announced that it was studying whether goodwill and fixed assets related to this operation had been impaired. Based upon this
evaluation, it was determined that goodwill had been impaired resulting in a non-cash charge of $6,897,000 in the fourth quar-
ter. In January 2001, the axle and tire refurbishing operation closed two of its five factories.

4 . I N V E N T O R I E S

Inventories consist of the following (in thousands):

Finished goods
Work in process
Raw materials

Total

5 . F I X E D A S S E T S

Fixed assets, at cost, consist of the following (in thousands):

Land
Buildings and improvements
Leasehold improvements
Machinery and equipment
Transportation equipment
Furniture and fixtures
Construction in progress

Less accumulated depreciation and amortization

Fixed assets, net

Depreciation and amortization of fixed assets consists of (in thousands):

Charged to cost of sales
Charged to selling, general and administrative expenses

December 31,

2000

$ 8,637
1,938
23,128

$33,703

1999

$10,494
2,123
20,765

$33,382

Estimated
Useful Life
in Years

8 to 45
2 to 11
3 to 10
3 to 7
3 to 8

December 31,

2000

$ 6,762
44,733
1,225
30,396
2,244
3,269
13

88,642
22,341

$66,301

1999

$ 4,931
29,203
1,128
25,515
1,849
3,137
2,029

67,792
16,764

$51,028

Year Ended December 31,

2000

$5,047
953

$6,000

1999

$4,167
989

$5,156

1998

$3,459
786

$4,245

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 . A C C R U E D E X P E N S E S A N D O T H E R C U R R E N T L I A B I L I T I E S

Accrued expenses and other current liabilities consist of the following (in thousands):

Accrued employee compensation and fringes
Accrued insurance
Income taxes
Accrued expenses and other

Total

December 31,

2000

$ 6,134
1,314
885
6,178

$14,511

1999

$ 7,718
2,169
912
6,308

$17,107

7 . R E T I R E M E N T A N D O T H E R B E N E F I T P L A N S

The Company has discretionary defined contribution profit sharing plans covering substantially all eligible employees.
The Company contributed $833,000, $784,000 and $715,000 to these plans during the years ended December 31, 2000, 1999
and 1998, respectively.

8 . L O N G - T E R M I N D E B T E D N E S S

Long-term indebtedness consists of the following (in thousands):

Senior Notes payable at the rate of $8,000 per annum commencing January 28, 2001 with interest payable

semiannually at the rate of 6.95% per annum

Notes payable pursuant to a credit agreement expiring May 15, 2002 consisting of a revolving loan,

not to exceed $30,000; interest at prime rate or LIBO plus 1 percent

Industrial Revenue Bonds, fixed rate 5.68% to 6.28%, due 2008 through 2015; secured by

certain real estate and equipment

Loans secured by certain real estate and equipment, due 2011, fixed rate 8.72%
Other

Less current portion

Total long-term indebtedness

December 31,

2000

1999

$40,000

17,700

7,419
1,534
290

66,943
8,867

$58,076

5,038

1,309

46,347
1,717

$44,630

Pursuant to both the Senior Notes and the credit facility, which was increased from $25 million to $30 million during
2000, the Company is required to maintain minimum net worth and interest and fixed charge coverages and meet certain
other financial requirements. Borrowings under both facilities are secured only by capital stock of the Company’s
subsidiaries.

The Company pays a commitment fee, accrued at the rate of 3⁄8 of 1 percent per annum, on the daily unused amount of

the revolving line of credit.

The approximate amount of maturities of long-term indebtedness (in thousands) are: 2002—$26,521; 2003—$8,752;

2004—$8,792; 2005—$8,490; 2006—$486; 2007 to 2011—$3,537 and 2012 to 2016—$1,498.

The Company believes the interest rates on Industrial Revenue Bonds and real estate and equipment loans have not
changed significantly. Therefore, the book value of such debt approximates fair value. The Company believes that interest
rates on instruments similar to its $40 million Senior Notes have increased, and that the fair value of such notes are approx-
imately $38.6 million at December 31, 2000.

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

9 . I N C O M E TA X E S

The income tax provision in the Consolidated Statements of Income is as follows (in thousands):

Year Ended December 31,

2000

1999

Current:

Federal
State
Deferred:
Federal
State

Total income tax provision

$ 3,611
722

(2,216)
(88)

$ 2,029

$ 9,031
1,290

938
116

$11,375

$9,835

1998

$8,747
1,038

37
13

The provision for income taxes differs from the amount computed by applying the Federal statutory rate to income

before income taxes for the following reasons (in thousands):

Income tax at Federal statutory rate
State income taxes, net of Federal income tax benefit
Non-deductible expenses
Other

Provision for income taxes

Year Ended December 31,

2000

$ 1,252
412
453
(88)

$ 2,029

1999

$ 9,998
914
456
7

$11,375

1998

$8,768
683
392
(8)

$9,835

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax

liabilities at December 31, 2000 and 1999 are as follows (in thousands):

December 31,

Deferred tax assets:

Accounts receivable
Inventories
Goodwill and other assets
Accrued insurance
Employee benefits
Other accruals

Total deferred tax assets

Deferred tax liabilities:

Fixed assets
Long-term obligations

Total deferred tax liabilities

Net deferred tax asset

2000

$ 324
669
3,155
464
698
577

5,887

2,779

$3,108

1999

$ 163
569
833
634
709
653

3,561

2,756
1

2,757

$ 804

The Company concluded that it is more likely than not that the deferred tax assets at December 31, 2000 will be realized

in the ordinary course of operations based on scheduling of deferred tax liabilities and income from operating activities.
Net deferred income tax assets are classified in the Consolidated Balance Sheets as follows (in thousands):

Prepaid expenses and other current assets
Other assets
Other long-term liabilities

December 31,

2000

$2,575
533

$3,108

1999

$ 2,669

(1,865)

804

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 0 . C O M M I T M E N T S A N D C O N T I N G E N C I E S

Leases

The Company’s lease commitments are primarily for real estate and vehicles. The significant real estate leases provide
for renewal options and periodic rental adjustments to reflect price index changes and require the Company to pay for property
taxes and all other costs associated with the leased property. Most vehicle leases provide for contingent payments based upon
miles driven and other factors.

Future minimum lease payments under operating leases at December 31, 2000 are summarized as follows (in thousands):

2001
2002
2003
2004
2005
Thereafter

Total lease obligations

$ 3,607
2,634
1,948
1,330
633
520

$10,672

Rent expense was $4,303,000, $3,754,000 and $3,636,000 for the years ended December 31, 2000, 1999 and 1998,

respectively.

In order to hedge the impact of future price fluctuations on a portion of its aluminum raw material requirements, the
Company periodically purchases aluminum futures contracts on the London Metal Exchange. At December 31, 2000,
the Company had no futures contracts outstanding.

The Company has employment contracts with three of its employees, which expire on various dates through January
2004. The minimum commitments under these contracts are $1,007,000 in 2001, $519,000 in 2002 and $400,000 in 2003. In
addition, an arrangement with three employees of the Company provides for incentives to be paid, based on a percentage of
profits as defined.

1 1 . S T O C K H O L D E R S ’ E Q U I T Y

Stock Options

Pursuant to the Drew Industries Incorporated Stock Option Plan (the “Plan”), the Company may grant its directors
and/or key employees options to purchase Drew Common Stock. The Plan provides for the grant of stock options that
qualify as incentive stock options (“ISOs”) under Section 422 of the Internal Revenue Code and non-qualified stock
options (“NQSOs”).

Under the Plan, the Stock Option Committee (“the Committee”) determines the period for which each stock option
may be exercisable, but in no event may a stock option be exercisable more than 10 years from the date of grant thereof. The
number of shares available under the Plan, and the exercise price of options granted under the Plan, are subject to adjust-
ments that may be made by the Committee to reflect stock splits, stock dividends, recapitalization, mergers, or other major
corporate action.

The exercise price for options granted under the Plan shall be at least equal to 100 percent of the fair market value of
the shares subject to such option on the date of grant. The exercise price may be paid in cash or in shares of Drew Common
Stock which have been held for at least six months. Options granted under the Plan become exercisable in annual installments
as determined by the Committee.

Transactions in stock options under this plan are summarized as follows:

Outstanding at December 31, 1997

Granted
Exercised
Canceled

Outstanding at December 31, 1998

Granted
Exercised
Canceled

Outstanding at December 31, 1999

Granted
Expired
Canceled

Outstanding at December 31, 2000

Exercisable at December 31, 2000

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

Number of
Option Shares

859,112
34,000
(150,538)
(50,288)

692,286
557,000
(292,052)
(13,500)

943,734
15,000
(10,000)
(42,000)

906,734

364,770

Option Price

$11.79–$12.50
$ 3.62–$12.13
$ 6.94–$12.13

$ 8.81–$ 9.31
$ 3.67–$ 6.94
$12.13–$12.50

$ 5.68
$ 7.35
$ 8.81–$12.50

$ 5.68–$12.50

The respective number of shares available for granting options were 276,166, 249,166 and 291,666 at December 31,

2000, 1999 and 1998, respectively.

The Company adopted the disclosure-only option under SFAS No. 123, “Accounting for Stock-Based Compensation”
(“SFAS 123”). The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. The weighted average assumptions used for grants included no dividend yields, risk-free interest rates of 5.0 percent,
6.0 percent and 5.0 percent; assumed expected volatilities of 29.4 percent, 27.8 percent and 26.6 percent; and expected lives
of 5, 5 and 5 years for 2000, 1999 and 1998, respectively.

If compensation cost for the Company’s stock option plan had been recognized in the income statement based upon

the fair market method, net income would have been reduced to the pro forma amounts indicated below:

Net income (in thousands)

As reported
Pro forma

Earnings per share (basic)

As reported
Pro forma

Earnings per share (diluted)

As reported
Pro forma

Year Ended December 31,

2000

1999

1998

$1,547
$1,232

$ .15
$ .12

$17,191
$16,902

$ 1.51
$ 1.48

$15,217
$14,947

$ 1.36
$ 1.34

$ 1.34
$ 1.31

The following table summarizes information about stock options outstanding at December 31, 2000:

Option
Exercise
Price

$ 5.68
$ 6.94
$ 8.81
$ 9.20
$ 9.31
$10.75
$11.63
$11.79
$12.13
$12.48
$12.50

Shares
Outstanding

Option
Remaining
Life (Years)

Shares
Exercisable

15,000
25,134
340,000
15,000
150,000
15,000
33,000
15,000
273,600
15,000
14,000

5.0
0.1
4.9
4.0
4.0
1.0
4.3
3.0
2.9
2.0
3.6

15,000
18,810
68,000
15,000
30,000
15,000
6,600
15,000
162,360
15,000
4,000

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Outstanding stock options expire in five to six years from the date they are granted; options vest over service periods

that range from zero to five years.

Treasury Stock

In accordance with authorizations of the Board of Directors, on June 16, 2000, the Company purchased 1,449,425 shares
of its common stock at $8.00 per share, net to the sellers in cash, or an aggregate of $11.8 million including expenses, pursuant
to a self-tender offer. Earlier in the year, the Company purchased, on the open market, 190,600 shares of its common stock at
an average cost of $8.80 per share. The Company purchased 333,700 shares of its common stock at a cost of $3,891,000 in 1999
and 175,600 shares of such stock at a cost of $2,104,000 in 1998.

Weighted Average Common Shares Outstanding

The following reconciliation details the denominator used in the computation of basic and diluted earnings per share:

Weighted average shares outstanding for basic earnings per share
Common stock equivalents pertaining to:

Stock options
Warrants

Total for diluted shares

Year Ended December 31,

2000

1999

1998

10,347,725

11,385,400

11,178,588

687

33,579
931

201,724
6,169

10,348,412

11,419,910

11,386,481

The numerator is constant for both the basic and diluted earnings per share calculations.

1 2 . Q U A R T E R LY R E S U LT S O F O P E R AT I O N S ( U N A U D I T E D )

Interim unaudited financial information follows (in thousands, except per share amounts):

Year Ended December 31, 2000

Net sales
Gross profit
Net income
Net income per common share (basic)
Net income per common share (diluted)

Year Ended December 31, 1999

Net sales
Gross profit
Net income
Net income per common share (basic)
Net income per common share (diluted)

First
Quarter

$74,660
16,088
2,760
.25
.25

$85,887
18,273
3,942
.35
.34

Second
Quarter

$79,152
16,227
2,384
.22
.22

$89,209
21,349
5,097
.44
44

Third
Quarter

$74,915
13,326
1,026
.11
.11

$79,703
18,739
4,330
.38
.38

Fourth
Quarter

$59,038
11,524
(4,623)
(.48)
(.48)

$69,656
16,965
3,822
.34
.34

Year

$287,765
57,165
1,547
.15
.15

$324,455
75,326
17,191
1.51
1.51

The sum of net income per common share for the four quarters does not equal the total net income per common share

for 2000 due to changes in the average number of shares outstanding.

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders
Drew Industries Incorporated:

We have audited the accompanying consolidated balance sheets of Drew Industries Incorporated and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of income, stockholders’ equity, and cash flows for each
of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Drew Industries Incorporated and subsidiaries at December 31, 2000 and 1999, and the results of their operations and
their cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.

Stamford, Connecticut
February 7, 2001

2000 ANNUAL REPORT D R E W I N D U S T R I E S I N C O R P O R A T E D

MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL STATEMENTS

The management of the Company has prepared and is responsible for the consolidated financial statements and related
financial information included in this report. These consolidated financial statements were prepared in accordance with generally
accepted accounting principles which are consistently applied and appropriate in the circumstances. These consolidated financial
statements necessarily include amounts determined using management’s best judgements and estimates.

The Company maintains accounting and other control systems which provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions of the Company. Although accounting controls
are designed to achieve this objective, it must be recognized that errors or irregularities may occur. In addition, it is necessary
to assess and consider the relative costs and the expected benefits of the internal accounting controls.

The Company’s independent auditors, KPMG LLP, provide an independent, objective review of the consolidated
financial statements and underlying transactions. They perform such tests and other procedures as they deem necessary to
express an opinion on the financial statements. The report of KPMG LLP accompanies the consolidated financial statements.

Leigh J. Abrams
President and Chief Executive Officer

Fredric M. Zinn
Executive Vice President and
Chief Financial Officer

F O R WA R D - L O O K I N G S TAT E M E N T S A N D R I S K F A C T O R S

This report contains certain statements, including the Company’s plans regarding its operating strategy, its products,
costs, and performance and its views of industry prospects, which could be construed to be forward-looking statements within
the meaning of the Securities Exchange Act of 1934. These statements reflect the Company’s current views with respect to
future plans, events and financial performance.

The Company has identified certain risk factors which could cause actual plans and results to differ substantially from
those included in the forward-looking statements. These factors include pricing pressures due to competition, raw material
costs (particularly aluminum, vinyl, steel, glass, and tires), adverse weather conditions impacting retail sales, inventory adjust-
ments by retailers and manufacturers, availability and costs of labor, interest rates, and the availability of retail financing for
manufactured homes. In addition, general economic conditions may affect the retail sale of manufactured homes and RVs.

P E R S H A R E M A R K E T P R I C E R A N G E

The Company’s common stock is traded on the American Stock Exchange. A summary of the high and low closing

prices of the Company’s common stock on the American Stock Exchange is as follows:

Quarter Ended March 31
Quarter Ended June 30
Quarter Ended September 30
Quarter Ended December 31

2000

1999

High

$9.44
$8.13
$8.06
$6.38

Low

$7.00
$6.88
$6.25
$5.25

High

$12.75
$13.00
$12.19
$ 9.69

Low

$11.38
$11.25
$ 8.75
$ 8.44

The closing price per share for the common stock on March 9, 2001 was $5.90 and there were 970 holders of Drew

Common Stock, not including beneficial owners of shares held in broker and nominee names.

D R E W I N D U S T R I E S I N C O R P O R A T E D

2000 ANNUAL REPORT

C O R P O R A T E I N F O R M A T I O N

BOARD OF DIRECTORS

Edward W. Rose, III(a)
Chairman of the Board of
Drew Industries Incorporated
President of Cardinal
Investment Company

James F. Gero(a)
Chairman and Chief Executive Officer
of Sierra Technologies, Inc.

Gene H. Bishop(a)
Retired Bank Executive

J. Thomas Schieffer(a)
President of J. Thomas Schieffer
Management Company

Leigh J. Abrams
President and Chief Executive Officer
of Drew Industries Incorporated

L. Douglas Lippert
President and Chief Executive Officer
of Lippert Components, Inc.

David L. Webster
President and Chief Executive Officer
of Kinro, Inc.

(a) Members of Audit Committee

and Compensation Committee
of the Board of Directors

CORPORATE OFFICERS

TRANSFER AGENT AND REGISTRAR

American Stock Transfer
& Trust Company
59 Maiden Lane
New York, NY 10038

EXECUTIVE OFFICES

200 Mamaroneck Avenue
White Plains, NY 10601
(914) 428-9098
Website: www.drewindustries.com
E-mail: drew@drewindustries.com

KINRO, INC.

David L. Webster
President and Chief Executive Officer

Corporate Headquarters
4381 Green Oaks Boulevard West
Arlington, TX 76016
(817) 483-7791

LIPPERT COMPONENTS, INC.

L. Douglas Lippert
President and Chief Executive Officer

Corporate Headquarters
2375 Tamiami Trail North
Suite 110
Naples, FL 34103
(941) 659-2005

Leigh J. Abrams
President and Chief Executive Officer

Fredric M. Zinn
Executive Vice President and
Chief Financial Officer

Harvey J. Kaplan
Treasurer and Secretary

John F. Cupak
Controller

FORM 10-K

A copy of the Annual Report on
Form 10-K as filed by the
Corporation with the Securities
and Exchange Commission is avail-
able upon request, without charge,
by writing to:
Treasurer
Drew Industries Incorporated
200 Mamaroneck Avenue
White Plains, NY 10601

GENERAL COUNSEL

Harvey F. Milman, Esq.
Gilbert, Segall and Young LLP
430 Park Avenue
New York, NY 10022-3592

INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

KPMG LLP
Stamford Square
3001 Summer Street
Stamford, CT 06905

TOP PHOTO (FROM LEFT TO RIGHT): Gene H. Bishop, James F. Gero, J. Thomas Schieffer, Edward W. Rose, III,
Leigh J. Abrams, David L. Webster, L. Douglas Lippert.

m
o
c
.
s
r
o
n
n
o
c
-
n
a
r
r
u
c
.
w
w
w

.
c
n
I

,
s
r
o
n
n
o
C
&
n
a
r
r
u
C
y
b

d
e
n
g
i
s
e
D

D R E W I N D U S T R I E S I N C O R P O R AT E D
200 Mamaroneck Avenue
White Plains, NY 10601
www.drewindustries.com