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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year End Commission File Number
December 31, 1997 0-13646
DREW INDUSTRIES INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3250533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Mamaroneck Avenue, White Plains, N.Y. 10601
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number including Area Code: (914) 428-9098
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Check mark indicates whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock (Common Stock, $.01 par value) held by
non-affiliates of Registrant (computed by reference to the closing price as of
March 9, 1998) was $83,833,073
The number of shares outstanding of the Registrant's Common Stock, as of the
latest practicable date (March 9, 1998) was 11,363,166 shares of Common Stock.
Documents Incorporated by Reference
Annual Report to Stockholders for year ended December 31, 1997 is incorporated
by reference into Items 6, 7 and 8 of Part II.
Proxy Statement with respect to Annual Meeting of Stockholders to be held on May
21, 1998 is incorporated by reference into Part III.
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FORWARD LOOKING STATEMENTS AND RISK FACTORS
This Form 10-K contains certain statements, including the Company's plans
regarding its operating strategy, its products and performance and its views of
industry prospects, which could be construed to be forward looking statements
within the meaning of the Securities and 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, steel and glass,
adverse weather conditions impacting retail sales, inventory adjustments by
retailers and interest rates. In addition, general economic conditions may
affect the retail sale of manufactured homes and RV's.
Item 1. BUSINESS
Introduction
Drew Industries Incorporated ("Drew" or the "Company"), through its
wholly-owned subsidiaries Kinro, Inc. ("Kinro"), Lippert Components, Inc.
("Lippert"), and Shoals Supply, Inc. ("Shoals") is a leading supplier of a
variety of products for manufactured homes and recreational vehicles. Kinro
manufactures and markets aluminum and vinyl windows for manufactured homes, and
aluminum windows and doors for recreational vehicles. Lippert manufactures and
markets chassis and chassis parts and galvanized roofing, for manufactured
homes, and manufactures and markets chassis and chassis parts for recreational
vehicles. Shoals manufactures and markets new axles, and distributes refurbished
axles and new and refurbished tires, for manufactured homes.
The Company was incorporated under the laws of Delaware on March 20, 1984,
and is the successor to Drew National Corporation, which was incorporated under
the laws of Delaware in 1962. The Company's principal executive and
administrative offices are located at 200 Mamaroneck Avenue, White Plains, New
York 10601; telephone number (914) 428-9098. The Common Stock of the Company is
traded on the American Stock Exchange (symbol: DW).
Recent Events
On October 7, 1997, the Company acquired Lippert in consideration for cash
in the amount of $27 million and 2,154,000 restricted shares of Common Stock, of
which 230,769 shares are contingent upon Lippert achieving specified earnings
from certain of its operations for the period April 1, 1998 to March 31, 1999.
For its 1997 fiscal year, Lippert had revenues of approximately $99 million on
which it achieved pro forma operating profit of approximately $8.2 million. See
"Business of the Company."
On January 28, 1998, the Company completed a private placement of $40
million 6.95%, seven-year Senior Notes with Teacher's Insurance & Annuity
Association of America and four affiliated companies of ING Investment
Management. Amortization of the seven-year Senior Notes at $8 million annually
begins at the end of the third year. Proceeds from the sale of the Senior Notes
were used to reduce borrowings under the Company's $65,000,000 credit facility
with The Chase Manhattan Bank, as agent. Simultaneously, the credit facility was
replaced with a $25 million credit facility.
Page - 2 -
BUSINESS OF THE COMPANY
Kinro
Kinro, acquired by the Company in October 1980, initially manufactured
only aluminum primary and storm windows for the manufactured housing industry.
Since 1982, Kinro acquired additional manufacturers of aluminum windows for
manufactured homes and manufacturers of doors and windows for recreational
vehicles, and developed its own capacity to manufacture screens for its window
products, and to a lesser extent, windows for mini buses. In 1993, Kinro
commenced production of vinyl windows in addition to aluminum windows.
Each of the businesses acquired by Kinro expanded Kinro's geographic
market and product line, and, in certain instances, added manufacturing
facilities. All manufacturing, distribution and administrative functions of the
acquired businesses were integrated with those of Kinro. Although definitive
information is not readily available, the Company believes that the three
leading manufacturers of windows for manufactured homes within the United States
are Kinro, Philips Industries, and Care-Free Windows, and that there are
approximately 10 significant suppliers of windows and doors for the recreational
vehicle industry, several of which are substantially larger than Kinro.
Raw materials used by Kinro, consisting of extruded aluminum, glass, vinyl
and various adhesive and insulating components, are readily available from a
number of sources. Kinro, through the Company, maintains an aluminum hedging
program under which it purchases futures contracts on the London Metals Exchange
to hedge the prices of a portion of its anticipated aluminum requirements.
Kinro's operations consist primarily of fabricating and assembling the
components into the finished windows, doors and screens. Kinro also tempers
glass for use in its own windows and for sale to other window manufacturers.
Kinro's line of products is sold by twelve sales personnel, working exclusively
for Kinro, to major builders of manufactured housing, such as Clayton Homes,
Oakwood Homes and Champion Enterprises, and to major manufacturers of
recreational vehicles such as Fleetwood Enterprises, Thor Industries, and
Skyline. Kinro competes on the basis of price, customer service, product quality
and reliability.
Lippert
Lippert, acquired by the Company in October 1997, manufactures and markets
chassis and chassis parts and galvanized roofing for manufactured homes, and
manufactures and markets chassis and chassis parts for recreational vehicles.
Prior to the acquisition, Lippert also refurbished and distributed used axles
and tires, substantially all of which operations, excluding those in Florida,
have been assumed by Shoals.
Raw materials used by Lippert, consisting of steel (coil, sheet,
galvanized and I-beam) and fabricated parts, are available from a number of
sources. Used axles and tires, which are refurbished by Lippert, are purchased
from dealers of manufactured homes and independent agents, and their
availability is subject to competitive pricing. Lippert's products are sold by
nine sales personnel to major producers of manufactured homes in the
southeastern and southcentral United States, such as Skyline, Fleetwood
Enterprises, Oakwood Homes and Clayton Homes. Lippert's chassis and chassis
parts for recreational vehicles are sold primarily to Fleetwood Enterprises.
Lippert's operation as a supplier of chassis and chassis parts and
galvanized roofing for manufactured homes competes with several other
manufacturers of chassis and chassis parts as well as with certain producers of
manufactured homes which manufacture their own chassis and chassis parts.
Although definitive information is not readily available, the Company believes
that Lippert's share of the market for chassis and chassis parts is
approximately 15%. Lippert's operation as a supplier of chassis and chassis
parts for recreational vehicles had only a small market share in 1997, but is
currently being expanded. Most recreational vehicle manufacturers produce
Page - 3 -
their own chassis, although Lippert has begun to capture a greater share of this
business. Lippert competes on the basis of price, customer service, product
quality, and reliability.
Shoals
Shoals, acquired by the Company in February 1996, manufactures and
distributes new axles and distributes refurbished axles and new and refurbished
tires, for manufactured homes.
Raw materials used by Shoals, consisting primarily of fabricated steel
parts for new axles are either fabricated by Shoals or purchased from suppliers.
Used axles and tires, which are refurbished by Shoals, are purchased from
dealers of manufactured homes and independent agents, and their availability is
subject to competitive pricing. Shoals products are sold by one salesperson
working exclusively for Shoals to major producers of manufactured homes in
southeastern and southcentral United States, such as Fleetwood Enterprises,
Oakwood Homes and Clayton Homes. Shoals competes on the basis of price, customer
service, product quality, and reliability.
Shoals' refurbished axle and tire operations compete with a number of
regional suppliers of refurbished axles and tires, as well as several
manufacturers of new axles, certain of which are larger than Shoals. Although
definitive information is not readily available, the Company believes that
Shoals is among the three largest suppliers of refurbished axles within the
United States.
Subsequent to the acquisition of Lippert, Shoals assumed Lippert's
refurbished axle and tire operations, except in Florida where Shoals did not
have a manufacturing facility, and Lippert assumed Shoals chassis parts
operation. Shoals may assume Lippert's Florida axle and tire operation in the
future. It is anticipated that the efficiencies achieved by the integration of
Lippert's and Shoals' operations will result in reducing freight and production
costs.
Facilities
The operations of Kinro, Lippert and Shoals are conducted at an aggregate
of 34 manufacturing and warehouse facilities throughout the United States,
strategically located in proximity to the industries and customers they serve.
See Item 2. "Properties."
Regulatory Matters
Windows produced by Kinro for manufactured homes must comply with
performance and construction regulations promulgated by the United States
Housing and Urban Development Authority ("HUD") and by the American
Architectural Manufacturers Association relating to air and water infiltration,
thermal performance, emergency exit conformance, and hurricane resistance.
Windows and doors produced by Kinro for the recreational vehicle industry are
regulated by The United States Department of Transportation Federal Highway
Administration ("DOT"), National Fire and Protection Agency, and the National
Electric Code governing safety glass performance, egressability, door hinge and
lock systems, egress window retention hardware, and baggage door ventilation.
Manufactured homes are built on steel chassis which are fitted with axles
and tires sufficient in number to support the weight of the home and are
transported by producers to dealers via roadway. When the home is installed at
the site, the axles and tires are repurchased from the homeowner and removed by
the dealer or installer. Regulations promulgated by HUD require the axles to be
inspected after each use and refurbished or, if necessary,
Page - 4 -
replaced. Shoals and Lippert purchase from dealers and independent agents, and
repair and refurbish, used axles and tires, and market the reconditioned axles
and tires to producers of manufactured homes.
In accordance with regulations promulgated by HUD, refurbished axle
assemblies distributed by Lippert and Shoals are reconditioned in accordance
with a detailed Quality Control Program formulated by an independent inspection
agency. Compliance with the Quality Control Program is monitored by the
inspection agency on a monthly basis. All expenses of formulating the program,
inspection, and monitoring are paid for by Lippert and Shoals. In addition, new
and refurbished tires distributed by Lippert and Shoals are subject to
regulations promulgated by DOT and by HUD relating to weight tolerance, maximum
speed, size, and components.
Kinro's, Lippert's and Shoals' operations are also subject to certain
federal, state and local regulatory requirements relating to the use, storage,
discharge and disposal of hazardous chemicals used during their manufacturing
processes.
The Company believes that Kinro, Lippert and Shoals are currently
operating in compliance with applicable laws and regulations, and does not
believe that the expense of compliance with these laws and regulations, as
currently in effect, will have a material effect on Kinro's, Lippert's or
Shoals' capital expenditures, earnings or competitive position.
Employees
The approximate number of persons employed full-time by the Company at
December 31, 1997 was as follows:
Drew.......................... 6
Kinro......................... 1,289
Lippert....................... 637
Shoals........................ 326
-----
Total...................... 2,258
=====
Seven of Kinro's employees are represented by a union. The Company and its
subsidiaries believe that relations with its employees are good.
In connection with the spin-off of Leslie Building Products, Inc. ("Leslie
Building Products"), and its wholly-owned subsidiary, Leslie-Locke, Inc.
("Leslie-Locke"), by the Company, which was effective on July 29, 1994, the
Company and Leslie Building Products entered into a Shared Services Agreement.
Pursuant to the Shared Services Agreement, the Company and Leslie Building
Products agreed to share 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 is reimbursed by Leslie Building Products for the fair
market value of such services. The Shared Services Agreement, which expired on
December 31, 1997, was extended to December 31, 1998.
Item 2. PROPERTIES
Drew leases its principal executive offices in White Plains, New York,
consisting of approximately 2,800 square feet of office space.
Page - 5 -
Kinro owns six and leases six manufacturing and warehouse facilities
consisting of an aggregate of approximately 870,000 square feet, in Mansfield,
Texas; Double Springs, Alabama; Liberty, North Carolina; Thomasville, Georgia;
Morraine, Ohio; Goshen (three facilities) and Elkhart, Indiana; Fontana,
California; and Dayton, Tennessee; and Nampa, Idaho; and leases its corporate
offices in Arlington, Texas consisting of approximately 8,500 square feet of
office space.
Lippert owns 13 and leases three manufacturing and warehouse facilities,
consisting of an aggregate of approximately 620,000 sq. ft. in Phil Campbell,
Alabama; Ocala, Florida; Wakarusa and Goshen, Indiana; Lancaster, Wisconsin;
Harrisburg, North Carolina; McAdoo, Pennsylvania; Arkansas City, Kansas;
Whitehall, New York; Sugarcreek, Ohio; Bossier City, Louisiana; Alvarado and
Longview, Texas; and Fitzgerald and Americus, Georgia (two facilities). Lippert
also owns its corporate offices in Alma, Michigan consisting of approximately
10,800 square feet. An additional 36,000 square foot facility is under
construction in Berkely Springs, West Virginia.
Shoals owns two and leases four manufacturing and warehouse facilities
consisting of an aggregate of approximately 250,000 square feet in Bear Creek
and Phil Campbell, Alabama; Rockwell, North Carolina; Elm Mott, Texas;
Maynardsville, Tennessee; and Bristol, Indiana.
See Note 9 of Notes to Consolidated Financial Statements with respect to
the Company's lease obligations as of December 31, 1997.
Item 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which, in the opinion
of Management, could have a material adverse effect on the Company or its
consolidated financial position.
See Note 9 of Notes to Consolidated Financial Statements with respect to
certain product liability claims pending against White Metal Rolling and
Stamping Corp. ("White Metal"), a subsidiary of Leslie-Locke, arising in
connection with the ladder manufacturing business formerly conducted by White
Metal. Although the Company was named as a defendant in certain actions
commenced in connection with these claims, the Company has not been held
responsible, and the Company disclaims any liability for the obligations of
White Metal.
See Note 9 of Notes to Consolidated Financial Statements with respect to
the filing by White Metal, on September 30, 1994, of a voluntary petition
seeking liquidation under the provisions of chapter 7 of the United States
Bankruptcy Code. On May 7, 1996, the Company and its subsidiary, Kinro, Inc.,
and Leslie Building Products and its subsidiary, Leslie-Locke, were served with
a summons and complaint in an adversary proceeding commenced by the chapter 7
trustee of White Metal. The complaint, which appears to allege several duplicate
claims, seeks damages in the aggregate amount of $10.6 million plus attorneys
fees, of which up to approximately $7.5 million is sought, jointly and
severally, from the Company, Kinro, Leslie Building Products and Leslie-Locke.
The proceeding is based principally upon the trustee's allegations that the
Company and its affiliated companies obtained tax benefits attributable to the
use of White Metal's net operating losses. The trustee seeks to recover the
purported value of the tax savings achieved. Management believes that the
trustee's allegations are without merit and have no basis in fact. In addition,
the trustee alleges that White Metal made certain payments to the Company which
were preferential and are recoverable by White Metal, in the approximate amount
of $900,000. The Company denies liability for any such amount and is vigorously
defending against the allegations. However, an estimate of potential loss, if
any, cannot be made at this time. The Company believes that it has sufficient
accruals for the defense of this proceeding and that such defense will not have
a material adverse impact on the Company's financial condition or results of
operations.
Page - 6 -
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following tables set forth certain information with respect to the
Directors and Executive Officers of the Company as of December 31, 1997.
Name Position
- ---- --------
Leigh J. Abrams President, Chief Executive Officer and Director of the
(Age 55) Company since March 1984.
Edward W. Rose, III Chairman of the Board of Directors of the Company since
(Age 56) March 1984.
David L. Webster Director of the Company since March 1984.
(Age 62)
L. Douglas Lippert Director of the Company since November 1997.
(Age 50)
James F. Gero Director of the Company since May 1992.
(Age 52)
Gene H. Bishop Director of the Company since June 1995.
(Age 68)
Fredric M. Zinn Chief Financial Officer of the Company since January 1986.
(Age 46)
Harvey J. Kaplan Secretary and Treasurer of the Company since March 1984.
(Age 63)
LEIGH J. ABRAMS has also been President, Chief Executive Officer and a
Director of Leslie Building Products since July 1994.
EDWARD W. ROSE, III, for more than the past five years, has been President
and principal stockholder of Cardinal Investment Company, Inc., an investment
firm. Mr. Rose also serves as the Co-Managing General Partner of the Texas
Rangers Baseball Team, and as a director of the following public companies:
Osprey Holding, Inc., previously engaged in selling computer software for
hospitals; and ACE Cash Express, Inc. engaged in check cashing services. Since
July 1994, Mr. Rose has been Chairman of the Board of Leslie Building Products.
DAVID L. WEBSTER, since November 1980, has been President and Chief
Executive Officer of Kinro, Inc., a subsidiary of the Company, and Chairman of
Kinro, Inc. since November 1984. Mr. Webster has also been President and Chief
Executive Officer of Shoals Supply, Inc., a subsidiary of the Company, since its
acquisition in February 1996.
Page - 7 -
L. DOUGLAS LIPPERT, since October 1997, has been President and Chief
Executive Officer of Lippert Components, Inc., a subsidiary of the Company, and
President of the predecessor of Lippert Components, Inc. since 1978. The Board
of Directors appointed Mr. Lippert as a Director, in connection with the
acquisition of Lippert Components, Inc. in October 1997.
JAMES F. GERO, since March 1992, has been Chairman and Chief Executive
Officer of Sierra Technologies, Inc., a manufacturer of defense systems
technologies. From July 1987 to October 1989, Mr. Gero was Chairman and Chief
Executive Officer of Varo, Inc., a manufacturer of defense electronics, and from
1985 to 1987, Mr. Gero was President and Chief Executive Officer of Varo, Inc.
Mr. Gero also serves as a director of the following public companies:
Recognition Equipment, Inc., engaged in providing hardware, software and
services to automate work processing systems; American Medical Electronics,
Inc., engaged in manufacturing and distributing orthopedic and neurosurgical
medical devices; and Spar Aerospace Ltd., engaged in space robotics,
communications equipment and aerospace products and services. Since July 1994,
Mr. Gero has been a Director of Leslie Building Products.
GENE H. BISHOP, from March 1975 until July 1990, was Chief Executive
Officer of MCorp, a bank holding company, and from October 1990 to November
1991, was Vice Chairman and Chief Financial Officer of Lomas Financial
Corporation, a financial services company. From November 1991 until his
retirement in October 1994, Mr. Bishop served as Chairman and Chief Executive
Officer of Life Partners Group, Inc., a life insurance holding company, of which
he continues to serve as a director. Mr. Bishop also serves as a director of the
following publicly-owned companies: First USA, Inc., engaged in the credit card
business; Liberte-Investors, engaged in real estate loans and investments;
Southwest Airlines Co., a regional airline; and Southwestern Public Service
Company, a public utility.
FREDRIC M. ZINN has also been Chief Financial Officer of Leslie Building
Products since July 1994. Mr. Zinn is a Certified Public Accountant.
HARVEY J. KAPLAN has also been Secretary and Treasurer of Leslie Building
Products since July 1994. Mr. Kaplan is a Certified Public Accountant.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by it, the
Company believes that during 1997 all such filing requirements applicable to its
officers and directors (the Company not being aware of any ten percent holder
during 1997 other than Edward W. Rose, III and L. Douglas Lippert, directors of
the Company) were complied with, except that Gene H. Bishop, a director of the
Company, inadvertently filed one day late with respect to an aggregate of 600
shares of the Common Stock of the Company purchased for his children.
Page - 8 -
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Per Share Market Price Information
The Common Stock of the Company is traded on the American Stock Exchange
(symbol: DW). On March 9, 1998, there were 2,369 holders of record of the Common
Stock. The Company estimates that 2,000 to 4,000 additional stockholders own
shares of its Common Stock held in the name of Cede & Co. and other broker and
nominee names.
The table below sets forth, for the periods indicated, the range of high
and low closing prices per share for the Common Stock as reported by the
American Stock Exchange.
All of the following prices have been retroactively adjusted to reflect
the two-for-one split effective March 21, 1997.
High Low
---- ---
Calendar 1996
Quarter ended March 31 ....... $ 8.00 $ 6.75
Quarter ended June 30......... $ 9.25 $ 7.32
Quarter ended September 30.... $12.32 $ 8.38
Quarter ended December 31..... $13.62 $10.62
Calendar 1997
Quarter ended March 31........ $13.81 $10.75
Quarter ended June 30......... $13.00 $10.63
Quarter ended September 30.... $14.38 $11.75
Quarter ended December 31..... $14.13 $11.06
The closing price per share for the Common Stock on March 9, 1998 was
$12.75.
Dividend Information
The Company has not paid any cash dividends on its Common Stock. Future
dividend policy with respect to the Common Stock will be determined by the Board
of Directors of the Company in light of prevailing financial needs and earnings
of the Company and other relevant factors.
On February 13, 1997, the Company declared a two-for-one stock split by
means of a 100% stock dividend, payable on March 21, 1997 to stockholders of
record on March 4, 1997.
Item 6. SELECTED FINANCIAL DATA, Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, and Item 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA, are incorporated by reference to the Company's Annual
Report to Stockholders for the year ended December 31, 1997.
Page - 9 -
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Part III of Form 10-K is incorporated by reference to the Company's
Proxy Statement with respect to its Annual Meeting of Stockholders to be held on
May 21, 1998.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES and REPORTS ON FORM 8-K
(a) Documents Filed
(1) Financial Statements. The Consolidated Financial
Statements of the Company and its subsidiaries are
incorporated by reference to the Consolidated Financial
Statements and Notes to Consolidated Financial
Statements in the Company's Annual Report to
Stockholders for the year ended December 31, 1997.
(2) Schedules. Schedule II - Valuation and Qualifying
Accounts.
(3) Exhibits. See "List of Exhibits" at the end of this
report incorporated herein by reference.
(b) Reports on Form 8-K
On October 16, 1997, the Company filed a Current Report on Form 8-K
reporting the acquisition of Lippert Components, Inc. On December 22, 1997, the
Company filed an Amendment on Form 8-K/A1 to the Current Report amending Items
7(a), 7(b) and 7(c) thereof by filing the following Financial Statements of
Business Acquired and Pro Forma Financial Information:
Item 7(a) - Financial Statements of Business Acquired:
A) Independent Auditors' Report;
B) Balance Sheets as of September 30, 1997 and 1996;
C) Statements of Income for the years ended September 30,
1997, 1996 and 1995;
D) Statements of Stockholders' Equity for the years ended
September 30, 1997, 1996 and 1995;
E) Statements of Cash Flows for the years ended September
30, 1997, 1996 and 1995; and
F) Notes to Financial Statements.
Page - 10 -
Item 7(b) - Pro Forma Financial Information:
A) Unaudited Pro Forma Combined Statements of Income for
the year ended December 31, 1996 and the nine months
ended September 30, 1997;
B) Unaudited Pro Forma Combined Balance Sheet as of
September 30, 1997; and
C) Pro Forma Adjustments.
Item 7(c) - Exhibits
Consent of Independent Auditors
Page - 11 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DREW INDUSTRIES INCORPORATED
Date: March 23, 1998
By: /s/ Leigh J. Abrams
-----------------------------
Leigh J. Abrams, President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and dates indicated.
Each person whose signature appears below hereby authorizes Leigh J.
Abrams and Harvey J. Kaplan, or either of them, to file one or more amendments
to the Annual Report on Form 10-K which amendments may make such changes in such
Report as either of them deems appropriate, and each such person hereby appoints
Leigh J. Abrams and Harvey J. Kaplan, or either of them, as attorneys-in-fact to
execute in the name and on behalf of each such person individually, and in each
capacity stated below, such amendments to such Report.
Date Signature Title
- ---- --------- -----
March 23, 1998 By: /s/ Leigh J. Abrams Director, President and Chief
-------------------------- Executive Officer
(Leigh J. Abrams)
March 23, 1998 By: /s/ Harvey J. Kaplan Secretary and Treasurer
--------------------------
(Harvey J. Kaplan)
March 23, 1998 By: /s/ Fredric M. Zinn Chief Financial Officer
--------------------------
(Fredric M. Zinn)
March 23, 1998 By: /s/ John F. Cupak Controller
--------------------------
(John F. Cupak)
March 23, 1998 By: /s/ Edward W. Rose III Director
--------------------------
(Edward W. Rose, III)
March 23, 1998 By: /s/ David L. Webster Director
--------------------------
(David L. Webster)
March 23, 1998 By: /s/ L. Douglas Lippert Director
--------------------------
(L. Douglas Lippert)
March 23, 1998 By: /s/ James F. Gero Director
--------------------------
(James F. Gero)
March 23, 1998 By: /s/ Gene H. Bishop Director
--------------------------
(Gene H. Bishop)
Page - 12 -
Report of Independent Auditors
The Board of Directors
Drew Industries Incorporated:
Under date of February 11, 1998, we reported on the consolidated balance sheets
of Drew Industries Incorporated and subsidiaries as of December 31, 1997 and
1996, 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,
1997, as contained on pages 12 through 23 in the 1997 annual report to
stockholders. These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year 1997.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedule as
listed on Item 14. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 11, 1998
Page - 13 -
DREW INDUSTRIES INCORPORATED AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- ------------------------- -------- --------
Additions
-------------------------
Balance At Charged To Charged To Balance At
Beginning Costs and Other End
Of Period Expenses Accounts Deductions Of Period
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts
receivable, trade $ 308 $ (10) $ 231(a) $ 1(b) $ 528
Reserve for liquidation losses -
disposal of businesses 9 9
Reserve for revaluation of loans 361 (301) 60
Reserve for notes receivable 498 (86) (24)(c) 436
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts
receivable, trade $ 266 $ 23 $ 30(a) $ 11(b) $ 308
Reserve for liquidation losses -
disposal of businesses 9 9
Reserve for revaluation of loans 334 27 361
Reserve for notes receivable 692 (321) (127)(c) 498
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts
receivable, trade $ 197 $ 74 $ (5)(b) $ 266
Reserve for liquidation losses -
disposal of businesses 9 9
Reserve for revaluation of loans 319 15 334
Reserve for notes receivable 533 46 (113)(c) 692
(a) Represents balance at date of acquisition of Shoals Supply, Inc.
(b) Represents accounts written-off net of recoveries.
(c) Represents write-off of uncollectible portion of notes, net of recoveries.
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EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
3. Articles of Incorporation and By-laws.
3.1 Drew Industries Incorporated Restated
Certificate of Incorporation.
3.2 Drew Industries Incorporated By-laws, as amended.
Exhibit 3.1 is incorporated by reference to Exhibit III to the Proxy
Statement-Prospectus constituting Part I of the Drew National Corporation and
Drew Industries Incorporated Registration Statement on Form S-14 (Registration
No. 2-94693).
Exhibit 3.2 is incorporated by reference to the Exhibit bearing the same
number included in the Annual Report of Drew Industries Incorporated on Form
10-K for the fiscal year ended August 31, 1985.
10 Material Contracts.
10.27 Lease between Kinro, Inc. and Robert A. White and Larry B. White, dated
June 1, 1979, as amended.
10.39 Leases between Robert A. White, Larry B. White and Kinro, Inc. dated
July 25, 1983, as amended.
10.47 Registration Agreement among Drew Industries Incorporated and the
Leslie-Locke Shareholders dated August 28, 1985.
10.49 Loan and Pledge Agreements between Drew Industries Incorporated and
Robert S. Sandlin, Ralph C. Pepper and James S. Roach, respectively,
dated August 28, 1985.
10.66 Employment Agreement by and between Kinro, Inc. and David L. Webster,
dated March 31, 1996.
10.100 Drew Industries Incorporated Stock Option Plan.
10.134 Letter, dated April 28, 1988, from Drew Industries Incorporated to
Leigh J. Abrams confirming compensation arrangement.
10.135 Description of split-dollar life insurance plan for certain executive
officers.
10.146 Form of Plan and Agreement of Distribution between Leslie Building
Products, Inc. and Drew Industries Incorporated dated July 29, 1994.
10.147 Form of Shared Services Agreement between Leslie Building Products,
Inc. and Drew Industries Incorporated dated July 29, 1994.
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10.148 Form of Tax Matters Agreement between Leslie Building Products, Inc.
and Drew Industries Incorporated dated July 29, 1994.
10.151 Asset Purchase Agreement, dated February 15, 1996, by and among Shoals
Supply, Inc., Lecil V. Thomas, and Drew Industries Incorporated.
10.152 Non-Negotiable Promissory Note, dated February 15, 1996, of Shoals
Acquisition Corp., to the order of Shoals Supply, Inc. in the principal
amount of $760,000, guaranteed by Drew Industries Incorporated.
10.153 Bill of Sale, dated February 15, 1996 by and between Shoals Supply,
Inc. and Drew Industries Incorporated.
10.154 Registration Rights Agreement, dated February 15, 1996, by and among
Drew Industries Incorporated, Shoals Supply, Inc., and Lecil V. Thomas.
10.155 Consulting and Non-Competition Agreement, dated February 15, 1996, by
and between Drew Industries Incorporated and Lecil V. Thomas.
10.156 Leases, dated February 15, 1996, between Thomas Family Partnership,
Ltd. and Shoals Acquisition Corp.
10.157 Employment Bonus Agreements, dated February 15, 1996, by and between
Shoals Supply, Inc. and the employees named therein.
10.158 Assignment, dated February 15, 1996, by and among Shoals Supply, Inc.,
Lecil V. Thomas and Drew Industries Incorporated.
10.159 Stock Purchase and Pledge Agreement and Non-Negotiable Promissory Note,
dated March 7, 1997 by and between Drew Industries Incorporated and
Edward W. Rose, III.
10.160 Agreement and Plan of Merger, dated October 7, 1997, by and among Drew
Industries Incorporated, Lippert Acquisition Corp., Lippert Components,
Inc. and the shareholders of Lippert Components, Inc. named therein.
10.161 Registration Rights Agreement, dated October 7, 1997, by and among Drew
Industries Incorporated, Lippert Acquisition Corp., and certain
shareholders of Lippert Components, Inc. named therein.
10.162 Contingency Escrow Agreement, dated October 7, 1997 by and among Drew
Industries Incorporated, Lippert Acquisition Corp., The Chase Manhattan
Bank, and certain shareholders of Lippert Components, Inc. named
therein.
10.163 Indemnity Escrow Agreement, dated October 7, 1997, by and among Drew
Industries Incorporated, Lippert Acquisition Corp., The Chase Manhattan
Bank, and The L. Douglas Lippert Living Trust dated June 6, 1989.
10.164 Executive Employment and Non-Competition Agreement, dated October 7,
1997, by and between Lippert Components, Inc. and L. Douglas Lippert.
Page - 16 -
10.165 Note Purchase Agreement, dated January 28, 1998, by and among Kinro,
Inc, Lippert Components, Inc. and Shoals Supply, Inc. (collectively,
the "Note Co-Issuers") and Teachers Insurance and Annuity Association
of America, ING Investment Management, Inc. as agent for Midwestern
Life Insurance Company, Security Life of Denver Insurance Company,
Equitable Life Insurance Company of Iowa and USG Annuity & Life
Insurance Company (collectively, the "Note Purchasers").
10.166 6.95% Senior Notes due January 28, 2005 in the aggregate principal
amount of $40,000,000 issued by the Note Co-Issuers to the Note
Purchasers.
10.167 Pledge Agreements, dated January 28, 1998, by and between The Chase
Manhattan Bank, as trustee for the benefit of the Note Purchasers and,
separately, Registrant, Kinro, Inc., Shoals Supply, Inc., Kinro
Manufacturing.
10.168 Guarantee Agreement, dated January 28, 1998, by and among Registrant
and the Note Purchasers.
10.169 Subsidiary Guaranty, dated January 28 1998, by Kinro Holding Inc.,
Kinro Manufacturing, Inc., Shoals Holding, Inc., Kinro Texas Limited
Partnership, Kinro Tennessee Limited Partnership, Shoals Supply Texas
Limited Partnership and Shoals Supply Tennessee Limited Partnership
(collectively, the "Subsidiaries") in favor of the Note Purchasers.
10.170 Collateralized Trust Agreement, dated January 28, 1998, by and among
the Note Co-Issuers and the Note Purchasers.
10.171 Subordination Agreement, dated January 28, 1998, by and among
Registrant, the Note Co-Issuers, Lippert Components, Inc., the
Subsidiaries, and the Note Purchasers.
10.172 $25,000,000 Revolving Credit Facility - Credit Agreement, dated January
28 1998, by and among Kinro, Inc., Shoals Supply, Inc. and Lippert
Components, Inc. (The "Borrowers") and The Chase Manhattan Bank
("Chase") and KeyBank National Association ("KeyBank") (together, the
"Lenders").
10.173 $15,000,000 Revolving Credit Note, dated January 28, 1998, made by the
Borrowers to Chase.
10.174 $10,000,000 Revolving Credit Note, dated January 28, 1998, made by the
Borrowers to KeyBank.
10.175 Company Guarantee Agreement, dated January 28, 1998, made by Registrant
to Chase, as agent for the Lenders.
10.176 Subsidiary Guarantee Agreement, dated January 28, 1998, made by each
direct and indirect subsidiary of Registrant (other than the Borrowers)
in favor of Chase, as agent for the Lenders.
10.177 Subordination Agreement, dated January 29, 1998, made by each direct
and indirect subsidiary of Registrant and Chase, as agent for the
Lenders
10.178 Pledge and Security Agreement, dated January 28, 1998, made by
Registrant, the Borrowers, and certain indirect subsidiaries of
Registrant in favor of Chase, as collateral agent.
Exhibit 10.27 is incorporated by reference to the Exhibits bearing the
same number indicated on the Registration Statement of Drew National Corporation
on Form S-1 (Registration No. 2-72492).
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Exhibit 10.39 is incorporated by reference to the Exhibit included in
the Annual Report of Drew National Corporation on Form 10-K for the fiscal year
ended August 31, 1983.
Exhibits 10.47 and 10.49 are incorporated by reference to the Exhibits
included in the Company's Current Report on Form 8-K dated September 6, 1985.
Exhibit 10.66 is incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Exhibit 10.100 is incorporated by reference to Exhibit A to the Proxy
Statement of the Company dated May 10, 1995.
Exhibits 10.123-10.130 are incorporated by reference to the Exhibits
included in the Company's Current Report on Form 8-K dated December 23, 1991.
Exhibits 10.131 and 10.132 are incorporated by reference to the
Exhibits included in Amendment No. 5 on Form 8, dated October 20, 1992, to the
Company's Current Report on Form 8-K dated January 9, 1987.
Exhibit 10.134 is incorporated by reference to the Exhibit bearing the
same number included in the Company's Transition Report on Form 10-K for the
period September 1, 1992 to December 31, 1993.
Exhibit 10.135 is incorporated by reference to the Exhibit bearing the
same number included in the Company's Transition Report on Form 10-K for the
period September 1, 1992 to December 31, 1993.
Exhibits 10.146-10.148 are incorporated by reference to the Exhibits
bearing numbers 10.1, 10.3 and 10.4, respectively, included in Post-Effective
amendment No. 1 on Form 10/A, dated August 30, 1994, to the Registration
Statement of Leslie Building Products, Inc. on Form 10 (Registration No.
0-24094).
Exhibits 10.151 - 10.158 are incorporated by reference to the Exhibits
included in the Company's Current Report on Form 8-K dated February 29, 1996.
Exhibits 10.160 - 10.164 are incorporated by reference to the Exhibits
included in the Company's Current Report on Form 8-K dated October 16, 1997.
Exhibits 10.165 - 10.178 are filed herewith.
13. 1997 Annual Report to Stockholders.
Exhibit 13 is filed herewith ____________ .
21. Subsidiaries
Exhibit 21 is filed herewith ____________ .
23. Consent of Independent Auditors.
Exhibit 23 is filed herewith ____________ .
24. Powers of Attorney.
Powers of Attorney of persons signing this Report are included as part
of this Report.
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