LCI Industries Reports Third Quarter Results

Third Quarter 2019 Highlights

  • Net sales of $586.2 million in the third quarter, a decrease of 3% year-over-year
  • Net income grew to $35.8 million or $1.42 per diluted share in the third quarter
  • Operating profit margin improved 90 bps from the third quarter of 2018 to 8.4%
  • Aftermarket sales grew to $74.7 million for the quarter, up 16% year-over-year
  • International sales grew to $35.3 million for the quarter, up 32% year-over-year
  • Domestic OEM RV sales accounted for less than 59% of total net sales for the twelve months ended September 30, 2019 as diversification efforts continue
  • Quarterly dividend of $0.65 per share paid totaling $16.3 million

ELKHART, Ind.–(BUSINESS WIRE)–LCI Industries (NYSE: LCII) (“LCI” or the “Company”), which through its wholly-owned subsidiary, Lippert Components, Inc., supplies, domestically and internationally, a broad array of engineered components for the leading original equipment manufacturers (“OEMs”) in the recreation and transportation product markets, and the related aftermarkets of those industries, today reported third quarter 2019 results.

We executed further on our diversification strategy in the third quarter, again delivering notable growth in our aftermarket and international sales, which now together make up over 41 percent of our last twelve months sales. Importantly, we have been able to grow these businesses despite decreased recreational vehicle and marine volumes as dealers move closer to more normalized inventory levels. Our ability to continually outperform the industry by delivering innovative products and leveraging our strengths in new markets, while at the same time, expanding margins through our proactive measures and operational enhancements, is a testament to our strategy,” said LCI Industries’ Chief Executive Officer, Jason Lippert. “As we look forward, our team remains focused on driving financial performance and generating shareholder value as we make progress on our diversification strategy to build momentum for the remainder of 2019 and into 2020.”

Third Quarter 2019 Results

Consolidated net sales for the third quarter of 2019 were $586.2 million, a decline of 3 percent from 2018 third quarter net sales of $604.2 million. Net income in the third quarter of 2019 was $35.8 million, or $1.42 per diluted share, compared to net income of $33.8 million, or $1.33 per diluted share, in the third quarter of 2018.

The decrease in year-over-year net sales for the third quarter of 2019 reflects a continuation of lower RV wholesale shipments seen throughout the year as dealers appear to be completing corrections of their inventory levels, which is expected to be completed by the end of this year, offset by continued growth in the Company’s aftermarket and international markets. Net sales from acquisitions completed by the Company over the twelve months ended September 30, 2019, contributed $18.4 million in the third quarter of 2019.

The Company’s content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2019, increased $77 to $3,531, compared to $3,454 for the twelve months ended September 30, 2018. The content increase in towables was a result of organic growth, including new product introductions and price increases, as well as acquisitions. The Company’s content per motorhome RV for the twelve months ended September 30, 2019, decreased $71 to $2,405, compared to $2,476 for the twelve months ended September 30, 2018. The content decrease in motorhomes was primarily a result of the wholesale mix shifting to smaller units.

October 2019 Results

October 2019 consolidated net sales were approximately $228 million, up 4 percent from October 2018. Sales continue to be impacted by reduced production rates by the RV OEMs.

Income Taxes

The Company’s effective tax rate was 24.2 percent for the quarter ended September 30, 2019, higher than the comparable prior year period of 22.5 percent, primarily due to a year-over-year increase in state income taxes.

Balance Sheet and Other Items

At September 30, 2019, the Company’s cash, cash equivalents, and restricted cash balance was $27.5 million, an increase of $12.5 million from the balance of $14.9 million at the beginning of the year. The ending balance includes restricted cash of $3.3 million related to the acquisition of Lewmar. The Company generated cash flow from operations of $209.5 million and invested $47.8 million in capital expenditures, $53.9 million in acquisitions, and $47.5 million for dividend payments to shareholders for the nine months ended September 30, 2019. The Company’s outstanding debt was $272.4 million at September 30, 2019.

Conference Call & Webcast

LCI will host a conference call to discuss its third quarter 2019 earnings on Tuesday, November 5, 2019, at 8:30 a.m. Eastern time, which may be accessed by dialing (888) 525-0270 for participants in the U.S./Canada or (704) 935-3405 for participants outside the U.S./Canada using the required conference ID 7699714. In addition, an online, real-time webcast, as well as a supplemental earnings presentation, can be accessed on the Company’s website, www.lci1.com/investors.

A replay of the conference call will be available for two weeks by dialing (855) 859-2056 and referencing access code 7699714. A replay of the webcast will also be available on LCI’s website until the next quarterly conference call.

About LCI Industries

From over 70 manufacturing and distribution facilities located throughout North America and Europe, LCI Industries, through its wholly-owned subsidiary, Lippert Components, Inc., supplies, domestically and internationally, a broad array of engineered components for the leading OEMs in the recreation and transportation product markets, consisting of recreational vehicles and adjacent industries, including buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; boats; trains; manufactured homes; and modular housing. The Company also supplies engineered components to the related aftermarkets of these industries primarily by selling to retail dealers, wholesale distributors, and service centers. LCI’s products include steel chassis and related components; axles and suspension solutions; slide-out mechanisms and solutions; thermoformed bath, kitchen, and other products; vinyl, aluminum, and frameless windows; manual, electric, and hydraulic stabilizer and leveling systems; entry, luggage, patio, and ramp doors; furniture and mattresses; electric and manual entry steps; awnings and awning accessories; electronic components; appliances; televisions, sound systems, navigation systems, and backup cameras; and other accessories. Additional information about LCI and its products can be found at www.lci1.com.

Forward-Looking Statements

This press release contains certain “forward-looking statements” with respect to our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company’s common stock, the impact of legal proceedings, and other matters. Statements in this press release that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and involve a number of risks and uncertainties.

Forward-looking statements, including, without limitation, those relating to our future business prospects, net sales, expenses and income (loss), cash flow, and financial condition, whenever they occur in this press release are necessarily estimates reflecting the best judgment of the Company’s senior management at the time such statements were made. 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 in the forward-looking statements. These factors include, in addition to other matters described in this press release, pricing pressures due to domestic and foreign competition, costs availability, and tariffs on, raw materials (particularly steel and aluminum) and other components, seasonality and cyclicality in the industries to which we sell our products, availability of credit for financing the retail and wholesale purchase of products for which we sell our components, inventory levels of retail dealers and manufacturers, availability of transportation for products for which we sell our components, the financial condition of our customers, the financial condition of retail dealers of products for which we sell our components, retention and concentration of significant customers, the costs, pace of and successful integration of acquisitions and other growth initiatives, availability and costs of production facilities and labor, employee benefits, employee retention, realization and impact of expansion plans, efficiency improvements and cost reductions, the disruption of business resulting from natural disasters or other unforeseen events, the successful entry into new markets, the costs of compliance with environmental laws, laws of foreign jurisdictions in which we operate, other operational and financial risks related to conducting business internationally, and increased governmental regulation and oversight, information technology performance and security, the ability to protect intellectual property, warranty and product liability claims or product recalls, interest rates, oil and gasoline prices, and availability, the impact of international, national and regional economic conditions and consumer confidence on the retail sale of products for which we sell our components, and other risks and uncertainties discussed more fully under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and in the Company’s subsequent filings with the Securities and Exchange Commission. The Company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. 

LCI INDUSTRIES

OPERATING RESULTS

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

Last Twelve

 

2019

 

2018

 

2019

 

2018

 

Months

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

586,221

 

$

604,244

 

$

1,807,461

 

$

1,939,191

 

$

2,344,077

Cost of sales

450,748

 

478,343

 

1,390,741

 

1,522,101

 

1,824,103

Gross profit

135,473

 

125,901

 

416,720

 

417,090

 

519,974

Selling, general and administrative expenses

86,320

 

80,548

 

254,155

 

247,829

 

327,882

Operating profit

49,153

 

45,353

 

162,565

 

169,261

 

192,092

Interest expense, net

1,900

 

1,720

 

6,506

 

4,481

 

8,461

Income before income taxes

47,253

 

43,633

 

156,059

 

164,780

 

183,631

Provision for income taxes

11,444

 

9,821

 

38,357

 

36,408

 

45,750

Net income

$

35,809

 

$

33,812

 

$

117,702

 

$

128,372

 

$

137,881

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

$

1.43

 

$

1.34

 

$

4.71

 

$

5.09

 

$

5.51

Diluted

$

1.42

 

$

1.33

 

$

4.70

 

$

5.03

 

$

5.48

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

25,031

 

25,235

 

24,984

 

25,208

 

25.018

Diluted

25,156

 

25,504

 

25,053

 

25,509

 

25.172

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

$

18,767

 

$

17,263

 

$

55,882

 

$

49,739

 

$

73,669

Capital expenditures

$

11,981

 

$

37,983

 

$

47,767

 

$

92,522

 

$

75,072

LCI INDUSTRIES

SEGMENT RESULTS

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

Last Twelve

 

2019

 

2018

 

2019

 

2018

 

Months

(In thousands)

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

OEM Segment:

 

 

 

 

 

 

 

 

 

RV OEMs:

 

 

 

 

 

 

 

 

 

Travel trailers and fifth-wheels

$

314,056

 

$

338,830

 

$

973,978

 

$

1,143,251

 

$

1,271,457

Motorhomes

34,810

 

43,244

 

121,167

 

145,230

 

163,234

Adjacent Industries OEMs

162,684

 

157,904

 

501,553

 

468,594

 

647,548

Total OEM Segment net sales

511,550

 

539,978

 

1,596,698

 

1,757,075

 

2,082,239

Aftermarket Segment:

 

 

 

 

 

 

 

 

 

Total Aftermarket Segment net sales

74,671

 

64,266

 

210,763

 

182,116

 

261,838

Total net sales

$

586,221

 

$

604,244

 

$

1,807,461

 

$

1,939,191

 

$

2,344,077

 

 

 

 

 

 

 

 

 

 

Operating profit:

 

 

 

 

 

 

 

 

 

OEM Segment

$

38,347

 

$

36,905

 

$

131,434

 

$

144,436

 

$

154,474

Aftermarket Segment

10,806

 

8,448

 

31,131

 

24,825

 

37,618

Total operating profit

$

49,153

 

$

45,353

 

$

162,565

 

$

169,261

 

$

192,092

LCI INDUSTRIES

BALANCE SHEET INFORMATION

(unaudited)

 

 

September 30,

 

December 31,

 

2019

 

2018

(In thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

24,168

 

$

14,928

Restricted cash

3,309

 

Accounts receivable, net of allowances of $2,559 and $1,895 at September 30, 2019 and December 31, 2018, respectively

185,821

 

121,812

Inventories, net

334,462

 

340,615

Prepaid expenses and other current assets

32,836

 

49,296

Total current assets

580,596

 

526,651

Fixed assets, net

343,883

 

322,876

Goodwill

203,505

 

180,168

Other intangible assets, net

177,310

 

176,342

Operating lease right-of-use assets

67,666

 

Deferred taxes

8,654

 

10,948

Other assets

33,199

 

26,908

Total assets

$

1,414,813

 

$

1,243,893

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable, trade

$

99,899

 

$

78,354

Current portion of operating lease obligations

15,226

 

Accrued expenses and other current liabilities

140,947

 

99,228

Total current liabilities

256,072

 

177,582

Long-term indebtedness

261,631

 

293,528

Operating lease obligations

55,307

 

Other long-term liabilities

64,422

 

66,528

Total liabilities

637,432

 

537,638

Total stockholders’ equity

777,381

 

706,255

Total liabilities and stockholders’ equity

$

1,414,813

 

$

1,243,893

LCI INDUSTRIES

SUMMARY OF CASH FLOWS

(unaudited)

 

 

Nine Months Ended

September 30,

 

2019

 

2018

(In thousands)

 

 

 

Cash flows from operating activities:

 

 

 

Net income

$

117,702

 

$

128,372

Adjustments to reconcile net income to cash flows provided by operating activities:

 

 

 

Depreciation and amortization

55,882

 

49,739

Stock-based compensation expense

12,061

 

13,852

Other non-cash items

837

 

(959)

Changes in assets and liabilities, net of acquisitions of businesses:

 

 

 

Accounts receivable, net

(42,367)

 

(51,733)

Inventories, net

24,410

 

(16,475)

Prepaid expenses and other assets

15,119

 

(9,506)

Accounts payable, trade

8,437

 

(12,930)

Accrued expenses and other liabilities

17,461

 

7,232

Net cash flows provided by operating activities

209,542

 

107,592

Cash flows from investing activities:

 

 

 

Capital expenditures

(47,767)

 

(92,522)

Acquisitions of businesses, net of cash acquired

(53,923)

 

(156,701)

Proceeds from note receivable

 

2,000

Other investing activities

364

 

(875)

Net cash flows used in investing activities

(101,326)

 

(248,098)

Cash flows from financing activities:

 

 

 

Vesting of stock-based awards, net of shares tendered for payment of taxes

(7,194)

 

(14,114)

Proceeds from revolving credit facility borrowings

404,228

 

928,601

Repayments under revolving credit facility borrowings

(443,921)

 

(738,601)

Proceeds from other borrowings

 

4,509

Payment of dividends

(47,533)

 

(44,114)

Payment of contingent consideration related to acquisitions

(4)

 

(3,018)

Other financing activities

(401)

 

(556)

Net cash flows (used in) provided by financing activities

(94,825)

 

132,707

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(842)

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

12,549

 

(7,799)

Cash, cash equivalents, and restricted cash at beginning of period

14,928

 

26,049

Cash, cash equivalents, and restricted cash at end of period

$

27,477

 

$

18,250

LCI INDUSTRIES

SUPPLEMENTARY INFORMATION

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

September 30,

 

September 30,

 

Last Twelve

 

 

2019

 

2018

 

2019

 

2018

 

Months

 

Industry Data(1)(in thousands of units):

 

 

 

 

 

 

 

 

 

 

Industry Wholesale Production:

 

 

 

 

 

 

 

 

 

 

Travel trailer and fifth-wheel RVs

80.6

 

92.4

 

266.3

 

324.8

 

356.6

 

Motorhome RVs

10.8

 

12.4

 

36.3

 

45.5

 

48.4

 

Industry Retail Sales:

 

 

 

 

 

 

 

 

 

 

Travel trailer and fifth-wheel RVs

112.2

(2)

124.6

 

327.5

(2)

355.6

 

394.5

(2)

Impact on dealer inventories

(31.6)

(2)

(32.2)

 

(61.2)

(2)

(30.8)

 

(37.9)

(2)

Motorhome RVs

11.6

(2)

13.6

 

36.7

(2)

43.1

 

45.9

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

2019

 

2018

 

 

 

LCI Content Per Industry Unit Produced:

 

 

 

 

 

 

 

Travel trailer and fifth-wheel RV

 

 

 

 

$

3,531

 

$

3,454

 

 

 

Motorhome RV

 

 

 

 

$

2,405

 

$

2,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

2019

 

2018

 

2018

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

Current ratio

 

 

 

 

2.3

 

3.0

 

3.0

 

Total indebtedness to stockholders’ equity

 

0.3

 

0.3

 

0.4

 

Days sales in accounts receivable, based on last twelve months

 

25.2

 

23.5

 

24.2

 

Inventory turns, based on last twelve months

 

5.6

 

6.6

 

6.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

Estimated Full Year Data:

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

$ 55 – $ 65 million

 

 

 

Depreciation and amortization

 

 

 

 

$ 70 – $ 75 million

 

 

 

Stock-based compensation expense

 

 

 

 

$ 15 – $ 17 million

 

 

 

Annual tax rate

 

 

 

 

24% – 26%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Industry wholesale production data for travel trailer and fifth-wheel RVs and motorhome RVs provided by the Recreation Vehicle Industry Association. Industry retail sales data provided by Statistical Surveys, Inc.

(2) September 2019 retail sales data for RVs has not been published yet, therefore 2019 retail data for RVs includes an estimate for September 2019 retail units. Retail sales data will likely be revised upwards in future months as various states report.

Contacts

Contact: Brian Hall, CFO

Phone: (574) 535-1125

E Mail: LCII@lci1.com

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