Drew Industries Management Discusses Q1 2013 Results - Earnings Call Transcript

May. 3.13 | About: Drew Industries (DW)

Drew Industries (NYSE:DW)

Q1 2013 Earnings Call

May 03, 2013 11:00 am ET

Executives

Jeffery A. Tryka - Director of Planning & Investor Relations

Fredric M. Zinn - Chief Executive Officer, President and Director

Jason D. Lippert - Director, Chairman of Lippert Components Inc, Chairman of Kinro Inc, Chief Executive Officer of Lippert Components Inc and Chief Executive Officer of Kinro Inc

Joseph S. Giordano - Chief Financial Officer and Treasurer

Leigh J. Abrams - Chairman

Analysts

Scott L. Stember - Sidoti & Company, LLC

Daniel Moore - CJS Securities, Inc.

Barry Vogel

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Drew Industries Incorporated Earnings Conference Call. My name is Regina, and I'll be your conference operator for today. [Operator Instructions] As a reminder, today's event is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Jeff Tryka with Drew's Investor Relations firm. Please go ahead.

Jeffery A. Tryka

Thank you, Regina. Good morning, everyone, and welcome to the Drew Industries 2013 First Quarter Conference Call. I'm Jeff Tryka, with Lambert Edwards, Drew's Investor Relations firm. And I'm joined on the call today by members of Drew's management team, including Leigh Abrams, Chairman of the Board of Drew; Fred Zinn, President, CEO and a Director of Drew; Jason Lippert, Chairman and CEO of Lippert Components in Kinro and a Director of Drew; and Joe Giordano, CFO and Treasurer of Drew.

I want to take a few minutes to discuss our first quarter results. However, before we do so, it is my responsibility to inform you that certain statements made in today's conference call regarding Drew Industries and its operations may be considered forward-looking statements under the securities laws. As a result, I must caution you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described on the forward-looking statements. These factors are identified in our press releases, in our Form 10-K for the year ended 2012 and in our other SEC filings with the SEC.

With that, I would like to turn the call over to Fred Zinn. Fred?

Fredric M. Zinn

Thank you, Jeff, and thank you all for joining us on the call today. In the first quarter, Drew continued to perform very well in the top line, achieving record net sales of $253 million. Sales growth came from our core towable RV markets where growth exceeded industry growth and we continued to gain momentum in adjacent markets, in motorhomes and in the aftermarket. In terms of margins, as we said last quarter, our goal is to recover during the second half of 2013, all or most of the 2% decline in 2012 EBIT margin. While none of us are really satisfied with our first quarter profit margin, we believe we are right on track to accomplish that goal.

Compared to the fourth quarter of 2012, we did make progress towards improving our production efficiencies. With direct labor as a percent of sales in the first quarter, declining by more than 1% of sales compared to Q4. The improvement in our labor would have been even greater had it not been for the temporary slowdown in industry production in the latter part of March, and that's because we were staffed for higher production levels. After a greater than 30% year-over-year increase in January, industry production for March increased only 3% from year-earlier levels, slowing particularly in the second half of March.

This slowdown reduced our March sales by an estimated $10 million but fortunately, this pause turned out to be quite brief with solid industry growth of about 15% achieved in April. On balance, industry fundamental still appear to be solid. First quarter margins were also impacted by high fixed costs. To maintain our top-notch customer service during the period of exceptional growth, we both grew both operating and administrative staff. Cost reductions are currently being implemented to bring staff and other fixed costs to more appropriate levels without impacting our ability to grow. We remain confident that our continued focus on customer service will yield substantial long-term benefits. Likewise, operating margins for recently aligned facilities, new products and new markets, while they didn't reach their potential, they're all improving. The same is true for our aluminum extrusion operation. Through continuing efficiency improvements and sales growth, we are on track in each of these key areas to achieve improved results during the second half of 2013. To attain our margin improvement goal, we implemented many valuable new processes to improve production flow and eliminate waste. Further, our management team is now prepared to take over for the manufacturing process consultants that we engaged during the last few quarters. This will eliminate $700,000 of consulting costs that we incurred in the first quarter alone. While our progress has been somewhat hampered by high fixed costs, the brief slowdown in industry production and higher material costs than in the fourth quarter of 2012, we do believe we've taken the right steps to enable us to reach our goal of improving margins by approximately 2% during the second half of 2013.

As you know, in a week, I'll retire and Jason will be Drew's CEO. Jason has been responsible really for all of Drew's operations for the last 5 years and he's been essential to our success for much much longer than that. Over the years, Jason has aggressively responded to the ever-changing conditions in both our markets or all of our markets. And I know he's determined to continue to provide innovative products and outstanding customer service while striving for improved bottom line results that's for the benefit of all of our stakeholders, stockholders, employees and customers.

Now I'll turn the call over to Jason.

Jason D. Lippert

Thanks, Fred, and good morning, everyone. First off, I wanted to thank Fred for his significant contribution to the success of Drew over the last30-plus years. He's given our company a lot of good guidance and advice and he'll truly be missed. Next, I want to thank all of our extraordinary employees. Because of their hard work and dedication, we've been able to achieve record sales of $253 million in the first quarter of 2013. And we've been able to attain sales of $100 million in the month of April 2013, a record for 1 month for our company. I'd like to note that this record was accomplished without any acquisitions in the last 12 months. And while the month of May is just getting started, quarters remained strong.

If you could go back to early 2012, you might remember we found ourselves very understaffed, going into a big growth period which resulted in undue over time and fatigue, and that's significantly higher costs. Bottom line, we underestimated what we needed in 2012. We responded aggressively by evaluating our needs for future growth as a result of the RV industry picking up and increased both our facilities and staff significantly. As it turns out, determining proper staffing levels while undergoing the $220 million sales increase last year turned out not to be an exact science. Over the past years, staffing for the company was further complicated by the implementation of significant operational changes like plant movements and consolidations, the addition of nearly half a million square feet of manufacturing, which was huge, and a continuing market share growth of recently introduced product. Also, lower-than-expected first quarter sales exposed some of these fixed cost additions. In the first quarter, we averaged about $84 million of sales per month while sales in April reached $100 million or 19% higher. Although we may have overshot our staffing requirements for early 2013, with sales now reaching the forecasted higher levels, we are in a better position to evaluate our staffing needs, which is what we're focusing on now. Numerous staff adjustments have already been made which will help bring our fixed cost more in line with our needs by the second half of the year. All the investments we made during the past year were aimed at meeting the needs of our customers over the long term. One thing we cannot do in our business is fail to be prepared for growth and fail to meet our customers' expectations. To help ensure that this does not happen, we significantly expanded our capabilities in research and development, engineering, facilities management, automation, information systems, quality-control, customer service and other areas. All this planning and addition was done over the last 3 quarters, it was a lot. And while the costs associated with these investments have been incurred in advance of the projected growth, we learned in 2012 that playing catch up can be extremely costly in dollars, customer confidence and management time. We're not going to allow that situation to reoccur.

Finally, and really the most exciting, we have achieved substantial growth across many of our product lines. I want to talk about that for a second. In particular, I want to highlight our market share growth in several areas. For the most recent 12-month period, our furniture and mattress sales were approximately $80 million, which is double from when we entered this product line in 2008. The upward trend continues due to several new customers that have come on board and that's due to our fantastic management team there. Further, the features and quality of our awning product are also being very well received. We obtained nearly 15% market share in our awning product line which was just introduced in early 2012 and is continuing to trend upwards. That's a huge accomplishment in just a short period of time. Schwintek slide-out mechanisms and our towable leveling had great market share improvements as well. Likewise, our extrusion and axle products are gaining share in the specialty trailer markets as we continue to build new customer relationships in that relatively new market. Our aftermarket business is also continuing to gain market share each quarter. I want to say again that we have the strongest management team around. In fact, I feel it's the best since -- we've had since I've been -- began leading the company in 2003. People are our passion and I'm very proud to be associated with this group of managers and employees that we've assembled over the years as well as the great customers that we're privileged to serve everyday.

Now I'm going to ask Joe to provide a few additional comments on our financial results and then we'll take some questions.

Joseph S. Giordano

Thank you, Jason. First of all I want to thank Fred for all that he has done for me over the past 10-plus years of working together. He has provided me with a wealth of insight and knowledge, which will hopefully continue to benefit Drew and its shareholders for years to come.

Next, let me provide a quick update for you on some of the estimates that we provided in the earnings release regarding manufactured housing statistics. As the actual March shipment data were released this morning and for the month of March, they were about 4,500 homes produced, bringing the first quarter of 2013 total industrywide shipments of manufactured homes to 12,900 units, which is consistent with the first quarter of 2012. Also based on these actual shipments, our content for the last 12 months for new manufactured homes produced was $1,446 per unit.

Now, I'm going to provide a little -- provides some comments here on the margin. Due to the efficiency improvements we implemented, our gross margin in the first quarter of 2013 was greater than the gross margin for the trailing 12 months ended March 2013. And our gross margin improved in the first quarter of 2013, as compared to the fourth quarter of 2012, despite $2.5 million in higher material costs and seasonally elevated payroll taxes of more than $1 million. This was the first sequential improvement in quarterly gross margin since the first quarter of 2012, which as we noted was when the significant increase in demand began to negatively impact our operating profit margin. As expected, however, the first quarter of 2013 continued to be impacted by higher than normal outsourcing, facility realignment and consolidation costs and higher fixed costs, as well as less than optimal labor efficiencies. And as Fred and Jason noted, our labor efficiencies continued to improve and we are making adjustments to our fixed costs.

Just -- and in addition to that, in order to lower our outsourcing costs, which we've talked to you about in the past, we are currently installing a second glass tempering facility which should be operational during the second quarter here of 2013. And we expect to realize savings from this investment beginning in the 2013 third quarter. Additional facility projects, including our new thermoforming operation in Indiana, are also expected to be substantially completed in the second quarter of 2013. And we do not expect facility realignment and consolidation costs to be significant in the second half of 2013.

Selling, general and administrative expenses, SG&A, as a percent of sales declined from 13.8%, nearly 14%, in the 2012 fourth quarter to 13% in the first quarter of 2013, but increased compared to 12.3% in the first quarter of 2012. The increase compared to the first quarter last year was largely due to the $2 million to $3 million in additional personnel costs -- personnel and related costs, and the $700,000 that Fred mentioned related to the management consulting project. The management consulting project was completed in the first quarter of 2013 and no additional costs related to this project are expected for the balance of 2013. Further, we should continue to see improvements in our labor efficiencies as a result of this project. And as Jason noted, we are reviewing staffing levels and making adjustments where necessary.

Summing that up, as we said, we remain confident that the steps we have taken and the additional changes we are implementing, will increase our margins, in particular during the second half of 2013.

I'm going to change focus and move over to the level of cash flows and balance sheet here. To meet our current and projected capacity needs, as well as improve operating efficiencies, our capital expenditures for the first quarter of 2013 were $9 million, which included about $2 million for the new glass tempering operation. We continue to estimate that our capital expenditures for the full year 2013 will be approximately $27 million to $32 million, while 2013 depreciation and amortization will be approximately $25 million to $27 million.

In the first quarter of 2013, our inventory seasonally increased by $13 million, which was primarily to support the 20% increase in April 2013 net sales which reached, as we said, a record $100 million. Inventory turnover remains strong, and for the 12 months ended March 2013, was 7.9 turns, a very significant improvement from the 6.5 turns for the 12 months ended March 2012. Our operating guys have done an excellent job there. The effective tax rate for -- effective tax rate was 37.8% for the first quarter of 2013 compared to 35.7% in the first quarter of 2012. The first quarter of 2012 benefited from the expiration of certain federal tax statute of limitations, which caused the rate to be lower than normal and those same items did not recur in the 2013 first quarter. And the effective rate for the full year 2013 is still estimated to be 37% to 38%.

Thank you for your time. And this is the end of our prepared remarks. So Regina, we are ready to take some questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question today comes from the line of Scott Stember with Sidoti & Company.

Scott L. Stember - Sidoti & Company, LLC

Could you talk about on the aftermarket side? I know that you've had a full year now of being in most of the distributors' catalogs versus the year ago. Could you talk about the traction that you're seeing there and maybe just talk about the opportunities with awnings, and if you've seen any demand for the awning product there?

Jason D. Lippert

Yes, when you -- in the last part of your question, when you're talking about awnings, are you talking about on the aftermarket side or the...

Scott L. Stember - Sidoti & Company, LLC

Yes, the aftermarket. Yes, I'm talking about the aftermarket for everything, yes.

Jason D. Lippert

Perfect, perfect, yes. Good question. We've got -- as you said we've spent the last year courting the wholesale distributors that handle the products and distribute to the dealers, so those are our primary customers there. We do have some bigger dealers that we're doing business direct with. But for the most part, the last year has been spent courting the wholesale distributors, informing them about our aftermarket products. And now that they started to pick on some programs, they're kind of dipping their feet in the water with us and trying to see what's going to move with the dealers and based on what's moving on and off the shelves, they'll continue to ramp up more business. So the best that I can tell and we're learning a little bit every quarter, is that the wholesale distributors are very happy with the programs that we've given them, mainly from the standpoint that we can offer so many products all at once whereas, typically a vendor that they deal with is very, very limited on the number of products they can supply. So we've got a huge edge there. I think that the wholesale distributors are going to take another 4 quarters or so and continue to evaluate how our products move to the dealers and off their shelves. And we'll just continue to get stronger every quarter. But all in all, our sentiment is that things are very positive there and the fact that the wholesale distributors are very excited about what we bring to the table is the biggest clue to how well are we going to do in this area.

On the awnings side, we are just getting awning programs into the aftermarket wholesale distributors. So we looked at suspension products and some accessory products in the very beginning, because those products, we already had ready and because our awnings are relatively a newer product. We've been trying to get that packaged and set up so that it's just kind of a drop into the aftermarket wholesale distributors so that they can put up cookie cutter displays and we have all the parts and products supply there that they're going to need. But our hope is on our aftermarket awnings, so that becomes the biggest piece of our aftermarket business.

Scott L. Stember - Sidoti & Company, LLC

Got you, great. And on the adjacent side, in the RV piece, you saw some nice growth there. Can you talk about some of the end markets that you're pushing product into?

Jason D. Lippert

Yes, on the -- for adjacent markets or for the RV markets?

Scott L. Stember - Sidoti & Company, LLC

For the adjacent part of the RV segment, I guess.

Jason D. Lippert

For awnings.

Scott L. Stember - Sidoti & Company, LLC

Yes, for -- although, no, just the adjacent...

Jason D. Lippert

In general?

Scott L. Stember - Sidoti & Company, LLC

Yes, in general, yes.

Jason D. Lippert

Yes. I think that it's a -- we approached that market a few years ago, and we're slowly gaining ground. We put a specialty sales team in place about 1.5 years ago. And just having people out in the field -- and most of that business is outside Elkhart County which is where our home base is, obviously. So having people out in the field, living out there for a couple of years has really made a huge difference and with extrusions and axle product in particular, those have been real good core products for us to have at those markets and it's such a huge market that there's potential we're finding everyday. So we're really encouraged by the amount of acceptance we've had in that specialty trailer area with some of our core products. And we'll continue, once we get the base line products, the core products and leveraging in some of those new customers, we're going to follow it up with a lot of our other products. You kind of have to dip your foot in with 1 or 2 products and follow it like we have in the RV business with everything else.

Scott L. Stember - Sidoti & Company, LLC

Okay, and just last questions on the margins. I know that obviously in the first quarter it was a difficult comparison with the ramp-up in costs really occurring in the second quarter. But with things on the -- in the improvement right now and knowing that things will get much better in the back half of the year, we should see some improvements obviously from a -- on a year-over-year basis in the second quarter from a margin perspective, correct?

Jason D. Lippert

Yes. We're going to -- like we've been saying, we're going to continue to see improvement quarter in, quarter out with the much of it expected in the back half of the year. And we're optimistic about where we're at and we remain confident that we're going to continue to see improvement.

Scott L. Stember - Sidoti & Company, LLC

And the 200 basis points that Fred alluded to earlier, that would be on a run-rate basis in the back half of the year not for the full year obviously, right?

Jason D. Lippert

Joe, you want to add some color on that one?

Joseph S. Giordano

What was that, Scott? Can you just repeat that?

Scott L. Stember - Sidoti & Company, LLC

Yes. When talking about recouping much of the 200 basis points that were lost in '12 in the back half of the year, that's basically talking about the run rate that you'll be running in those quarters right, not for the full year, obviously?

Joseph S. Giordano

Correct. Yes, I mean we've already had the margin for the first quarter be below that. So it would be more the run rate during the second half of the year. And just to come back to the second quarter here. We're again -- we're trying to point everybody's attention to the back half of 2013 to look for the recovery, recoupments whichever word you want to use of the 2-plus percent margin. I think we look sequentially for improvements here as compared to the first quarter of 2013. But I think you're still -- to make the comparison to last year, is may still be difficult -- difficult and I think it's better to compare it to this quarter for improvement.

Operator

The next question is from the line of Kathryn Thompson with Thompson Research Group.

Unknown Analyst

This is [indiscernible] for Kathryn. So on additional efficiency improvement, can you provide us a little bit more details on what actions you have taken in the quarter, and what are left to be implemented in Q2? And how we can -- well, yes, that's about the question.

Jason D. Lippert

We've got a few things going on. We've got some succession of things that are going to happen over the coming quarters that will add to that improvement. But we've got several different areas in manufacturing that we're focused on. With some of the plant moving and consolidations that we've done here over the past couple of quarters, with all that stuff kind of winding down, we're able to focus more on some of the manufacturing improvements. And we've got a lot of opportunities in a lot of different areas and while we can't provide color on what's going to happen in Q2 over Q1, we certainly, again, remain confident that we're going to continue to improve quarter-to-quarter.

Unknown Analyst

Okay. And then you estimated that industrywide manufactured housing shipment in April increased about 5% to 10%. Can you share with us your performance in April? And also, the press release mentioned that the timing of orders from certain customers impacted content per manufactured home. Can you expect that impact to go away and benefit Q2?

Jason D. Lippert

Joe, if you want to add some color there, I'll circle back and follow up with my thoughts.

Joseph S. Giordano

Yes, that would be great. I mean, the April -- on order here, the April estimate of 5% to 10% is just an estimate at this point for what we see for the estimate for the month of April. With that industry, as you know, the numbers are down significantly from a decade or so ago. So it doesn't take much for a couple of point movement on one side or another. In terms of the first quarter, we have seen reversal of that trend at the beginning of the year. I think some couple of customers got off a little bit of a slower start here at the beginning of the year which did impact some of our content numbers. But we've seen the last couple of month's sales which appear to have recovered. And again, our market share on certain products there is lower than it may be on the RV side of the business as we disclosed. So customer mix can also have a relatively significant impact on our content. And it's always important, we have our 2 segments and such, but manufactured housing, when we look at it, in total is only 11% of our total sales, of which that 11%, about 2/3 of that relates to new production and the 1/3 relates to the aftermarket and adjacent industries there also.

Jason D. Lippert

And on top of that, I think I'd add that if we look at each of our individual customers on the MH side of our business, there hasn't been any real noteworthy changes in market share within our business there as it pertains to the MH customers so.

Operator

Your next question is from the line of Daniel Moore with CJS Securities.

Daniel Moore - CJS Securities, Inc.

At the risk of beating a dead horse, I just want to clarify that the 2% margin uplift in H2, that's on a year-over-year basis, correct, not sequential?

Joseph S. Giordano

Correct.

Jason D. Lippert

Yes. Come again with the question, Daniel?

Daniel Moore - CJS Securities, Inc.

Yes. I just want to clarify that the uplift was the year-over-year your expected margin improvement next year -- in H2, I should say.

Jason D. Lippert

Yes. That's correct.

Daniel Moore - CJS Securities, Inc.

And then you called out $700,000 consulting costs and $1.1 million in succession expense, any other nonrecurring discrete expense items in the quarter in SG&A, be it consolidation expense or other nonrecurrings that you might point to?

Jason D. Lippert

Joe?

Joseph S. Giordano

Yes, the -- I'll put aside -- I try to look at operating, as you know, so I won't focus on a particular line. And we talked about facility consolidation costs and process improvement costs that did occur, again, in the first quarter of 2013. So that included those management consultants. We're probably on the magnitude of about between $1.5 million and $2 million and I'd expect that in total with that $700,000 to come down to $500,000 to $1 million here in the second quarter. The...

Jason D. Lippert

I was just going to say we're talking about $1 million in salary cost reductions here in the last few weeks that will carry forward as well and we're going to continue to analyze, as we talked about in our speech, analyze staffing and now that we have kind of hit the higher projected sales levels that we've been planning our business or grown our business around, we'll continue to evaluate that going forward and make the necessary adjustments.

Joseph S. Giordano

And in addition, it would be once the Drew corporate office here is closed, we should begin to start saving $2 million on an annualized basis from the closure of this office.

Daniel Moore - CJS Securities, Inc.

And that's x-ing out the succession-related costs in Q1 and Q2, correct?

Joseph S. Giordano

Correct. Yes, those will have $1.1 million in the first quarter, another roughly $700,000 in the second quarter and then those should be done and then we'll start saving about $2 million on an annualized basis. There will be a little bit of some overlap as we finish transition but that $2 million should start kicking in real soon. And just one other quick thing as I look in my notes here. Payroll taxes were seasonally high in the first quarter. As I think we all know that's when those taxes kick in. But so we should start to see some -- should, we'll see some decline in those in the second quarter and for the balance of the year.

Jason D. Lippert

What's most exciting about looking forward is just April's encouraging numbers and that can take care of a lot of sales stay at a higher level. So I'd like for you to keep focused on that.

Daniel Moore - CJS Securities, Inc.

Absolutely. And lastly, we've been -- Fred, you've always talked about incremental operating margin goal at the core business, excluding some of the ancillary of the new products, the new markets of about 20%. Given the volatility in volumes, should we still think in those terms for the next couple of quarters, or is that do you think that relationship still holds once the dust settles from sort of what has gone on with staffing levels, et cetera, here in the short term?

Fredric M. Zinn

Yes. That's really more of a longer-term guideline. Quarter-over-quarter it's very hard to focus or to really expect that kind of consistency. But I would say most of our products should carry an incremental margin in that category, in that range, 20%. Of course as we grow, we'll incur some fixed costs too which come off that. But I think over the long-term, we should see something close to that range.

Operator

[Operator Instructions] Your next question comes from the line of Barry Vogel with Barry Vogel & Associates.

Barry Vogel

First question is for Joe. On the content table that you gave us, which is a good table -- by the way, I've got to congratulate your press release is the best you've ever had. In terms of how to decipher all this stuff, you've gone beyond -- you've done a very good job. You had trailing 12 months in 2013 for travel trailers and wheelers 2,718 content per unit, for the home it's 1,131 and manufactured housing 1,446. Now could you give us your estimates for the full -- roughly, what the content figures would be for the full year, roughly, for the towables and the motorhomes and the manufactured housing?

Joseph S. Giordano

Yes. I can't give projections on what I think those are going to be, Barry. But I can tell you that we have continued to gain market share in our products over the last several quarters. But there are many factors that go into the content. The mix of units produced is something that does play into that and that's something we can't control. We can do what we can control, continue to develop new products, make improvements to our existing products, continue developing strong relationships with our customers, which is what allow us to increase market share. Again, I don't know what the projection will be, but I can look at the history of -- historically, we've averaged $170, $180 a year. I don't know if that history will come through again this year but it's been that for a decade.

Fredric M. Zinn

In the towable, for towable.

Joseph S. Giordano

In towable RVs, correct. Motorhomes, as you see, there was very substantial growth here. It's still a very small part of our business. But again we've done an excellent job of penetrating that market. Jason talked about especially with the Schwintek slide and leveling devices, they're in the motorhome market.

Jason D. Lippert

And I'd add that, Barry, that content focuses who we are and what we do and we've been laser focused on content and how to add value to existing products, how to create new products, how to continue to upgrade our R&D capabilities to be more of an R&D facility for our customers. So that's what we're going to continue doing and we've got high hopes that we're going to continue to do what we've done historically like what Joe said. A lot of good things going on.

Barry Vogel

Again, I don't want to beat a dead horse for the third time. I just got one little question on this margin thing, the 2% margin thing. Is that a consolidated company operating margin that we're talking about?

Joseph S. Giordano

Yes. I'm looking at the operating profit line. So it does include the -- it's after corporate.

Barry Vogel

Right, so it's a key -- okay, because in 2012, at least I had written this down after your full year conference call, the one you had in February, that you had 6.5% company operating margin in 2012 and I was just speculating that based on the comments you made on the first -- on the fourth quarter conference call, I jotted down, 8%, plus or minus, for '13 and I think that Fred has commented that the median EBIT margin 2000 was about 7.9%. So it is a company operating margin and I guess the 8% given the fact you started off slowly, and given the fact that you may have the run rate getting back to "2%", you're probably not going to be able to reach 8%, but you're going to...

Joseph S. Giordano

For the full year, for the full year, I would definitely agree with that comment, Barry. Again, we're looking at getting back to that level during the second half of 2013.

Barry Vogel

Okay. Then I have a question for Jason. Given your super cash flows, your growth in terms of market shares, et cetera, and your great balance sheet and all the term loan you've had because business has exploded, how would you characterize your current acquisition plate in terms of attitude under these circumstances?

Jason D. Lippert

That's a really good question. I think that our acquisition plate was probably a lot more challenged through the course of the last 14, 15 months. As we stated, we took on a lot of different things. We had a couple of acquisitions back from '11 that we were swallowing up and trying to move plants around and staff for new business and new products. We had some new product introductions, we are making some structural changes within the company. And have added, like I said, we've added automation teams, we've upgraded our service and warranty team significantly, our engineering and quality teams, and we did a lot last year. So I gauged the where we stand today with respect to acquisitions of probably in a better spot to start making some of those happen and we've been looking at acquisitions the whole period of time the last 14 to 15 months. And nothing really jumped out at us that would add the kind of value that we're looking for. But that being said, there's acquisition opportunities on the table now. We're going to continue to look at everything that comes forward and we're extremely optimistic about our opportunity considering that we've changed our structure and our teams around to be able to more adequately digest some of our acquisitions coming up in the future. So this is a good -- this will be a good year for us to do it if there are any available and they have the value to be worthy of us considering it and pushing the button there. So I think today's a good time to be able to actually execute as well as we ever have.

Operator

Your next question is a follow-up question from the line of Scott Stember with Sidoti.

Scott L. Stember - Sidoti & Company, LLC

Next question on the aluminum extrusion operations, can you talk about what you're self-sufficiency is now for that aluminum and the cost savings there and also just talk about if you've started to sell any product to the outside world yet?

Jason D. Lippert

Yes, sure. Well, there's a lot going on in that world. It's a fairly big operation. We bit off quite a lot to put the 3 presses in that we've got and push the aluminum mark out that we are. We're definitely taking caring of the aluminum products within our operations that consume aluminum components through the extrusion operation. We're doing the parts that we want to do, the parts that seem to be the most profitable and we've spent a lot of time over the last several quarters trying to figure out what that mix looks like. And I'd say going back a few quarters, we started selling aluminum extrusions to the outside and today, it's a fairly substantial part of that operation and we're finding that there's customers out there that are looking for a good supplier. And we're a company that's focused on our people, our customers, our quality, developing new products and really giving a level of service that nobody else does and it's opened some doors for us. So I really am optimistic about the amount of outside business we'll be able to do specifically because there's so many industries out there, the manufacturer that use aluminum extrusion extruded components. So we're going to continue to find ways internally to use more aluminum product especially where we can maybe create an extrusion that takes the place of maybe some steel components that require more labor because you can just do more with aluminum shapes. You can create a shape for just about anything in aluminum. So that being said, we're not as happy as we'd like to be with the progress of that division but we're going to continue to find ways to get more efficient. We've gotten more efficient quarter in, quarter out. It's taken us a little bit longer but it was an operation that we weren't as familiar with as we are some of our other -- building some of our other core products and manufacturing. So I've mentioned that we're cash flow positive there now which is a big win for us and like I said, the top line opportunity in supplying multiple industries and in getting into some more adjacent industries and finding new industries that we can sell that product into, that's a real huge opportunity for us going forward.

Operator

Ladies and gentlemen, this concludes the question-and-answer portion of today's event. I'd like to turn the call back over to management for any closing remarks they'd like to make.

Leigh J. Abrams

Hi, this is Leigh Abrams, Chairman of the Board. I just want to thank Fred again for a terrific job that he's done over the last 5 years as CEO, and an equally terrific job that he did for 25 years, prior to that, as CFO. We're going to really miss Fred but he's going to certainly be available by phone and we won't hesitate to call on his vast experience he's got related to Drew. As I've always said over the years, it's been our goal to always think about succession in management. And I think when Fred took over, we showed that we had management ready. And now with Jason and his team taking over, we're especially thrilled that we have an experienced but young and very aggressive management team. And Jason, I want to wish you the absolutely best of luck going forward. And, Fred, you know we love you. And of course, Joe is moving to Indiana. So our team is intact. And we look forward to great times for many years to come. So I thank you all for listening.

Jason D. Lippert

Thanks, Leigh.

Fredric M. Zinn

Very good. Well, I thank you all again for many of you, you've been stockholders for a long time. I really want to thank you for all of your support over the years and the confidence you've expressed in us. The future will be a little different for me personally but I do look forward to watching from the sidelines and seeing Drew succeed and overcome challenges and take advantage of opportunities as it has for decades. As Leigh said, we're all very confident in Jason and his team and its ability to lead Drew forward to even greater accomplishments in the future. So as Leigh said, I wish you the best of success, Jason and I'm confident that you'll achieve great things and I look forward to watching you. Thank you, all, again for joining us.

Operator

Ladies and gentlemen, thank you for your participation today. This concludes our presentation and you may now disconnect. Have a great day.

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