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LCI Industries Reports Fourth Quarter and Year-End Results

02/11/2020

Full Year 2019 Highlights

  • Net sales of $2.4 billion, a decrease of 4% year-over-year
  • Net income of $146.5 million and diluted EPS of $5.84
  • Content per travel trailer and fifth-wheel RV increased $169 year-over-year, or 5%, to $3,618 for the twelve months ended December 31, 2019
  • Content per motorhome RV decreased $127, or 5%, to $2,364 for the twelve months ended December 31, 2019
  • Adjacent industries OEM sales grew to $659.6 million, up 7% year-over-year
  • Aftermarket Segment sales grew to $279.6 million, up 20% year-over-year
  • International sales grew to $145.8 million, up 40% year-over-year
  • Completed seven strategic acquisitions, totaling $448 million
  • Returned $63.8 million to shareholders through payment of dividends

Fourth Quarter 2019 Highlights

  • Net sales of $564.0 million in the fourth quarter, an increase of 5% year-over-year
  • Net income grew to $28.8 million, or $1.14 per diluted share in the fourth quarter
  • Adjacent industries OEM sales grew to $158.0 million, an increase of 8% year-over-year
  • Aftermarket Segment sales grew to $68.8 million, an increase of 35% year-over-year
  • International sales grew to $45.4 million, an increase of 58% year-over-year
  • Completed the acquisition of CURT Group for $342 million
  • Quarterly dividend of $0.65 per share paid totaling $16.3 million

ELKHART, Ind.--(BUSINESS WIRE)-- LCI Industries (NYSE: LCII) which, through its wholly-owned subsidiary, Lippert Components, Inc. ("LCI"), supplies a broad array of highly 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 full year and fourth quarter 2019 results.

"In 2019, we significantly advanced LCI's diversification through seven strategic acquisitions by investing nearly $450 million, including our largest acquisition to date, CURT Group, which effectively doubled the size of our aftermarket business and accelerated our path to becoming a dominant leader in the space. In addition, as part of our efforts to broaden our international presence, in January 2020, we closed the acquisition of premier window supplier Polyplastic Group, which will enable us to grow further in key European markets. This expansion, combined with our commitment to innovation and execution on operational initiatives, supported a return to sales growth of 5% in the fourth quarter versus industry declines of 8%, while at the same time expanding operating margins by 120 basis points, year-over-year," said LCI Industries' Chief Executive Officer, Jason Lippert. "Heading into 2020, we are maintaining our focus on delivering new, innovative products, leveraging our core competencies in adjacent markets, driving operational efficiencies, and realizing synergies from these recent acquisitions. We remain optimistic about the opportunities ahead of us, and are confident our team will continue their efforts to build on our momentum to further deliver value for our customers and shareholders."

Full Year 2019 Results

Consolidated net sales for the full year 2019 were $2.4 billion, a decline of four percent from full year 2018 net sales of $2.5 billion. Net income for the full year 2019 was $146.5 million, or $5.84 per diluted share, compared to net income of $148.6 million, or $5.83 per diluted share, for the full year 2018.

The decrease in year-over-year net sales reflects a continuation of lower RV wholesale shipments seen throughout the year as dealers continued to correct their inventory levels, partially offset by continued growth in the Company's adjacent industries OEM, aftermarket and international markets. Net sales from acquisitions completed by the Company contributed $93 million in 2019.

Fourth Quarter 2019 Results

Consolidated net sales for the fourth quarter of 2019 were $564.0 million, an increase of five percent from 2018 fourth quarter net sales of $536.6 million. Net income in the fourth quarter of 2019 was $28.8 million, or $1.14 per diluted share, compared to net income of $20.2 million, or $0.80 per diluted share, in the fourth quarter of 2018.

The increase in year-over-year net sales for the fourth quarter of 2019 reflects the impact of acquisitions completed during the quarter, in addition to organic growth across the Company's adjacent industries OEM, aftermarket and international markets, partially offset by lower RV wholesale shipments. Net sales from acquisitions completed by the Company contributed $35 million in the fourth quarter of 2019.

The Company's content per travel trailer and fifth-wheel RV for the twelve months ended December 31, 2019, increased $169 to $3,618, compared to $3,449 for the twelve months ended December 31, 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 December 31, 2019, decreased $127 to $2,364, compared to $2,491 for the twelve months ended December 31, 2018. The content decrease in motorhomes was primarily a result of the wholesale mix shifting to smaller units.

January 2020 Results

January 2020 consolidated net sales were approximately $224 million, up 20 percent from January 2019.

Income Taxes

The Company's effective tax rate was 23.5 percent and 18.5 percent for the year and quarter ended December 31, 2019, respectively, compared to 22.8 percent and 26.8 percent for the year and quarter ended December 31, 2018, respectively. The effective tax rate was favorably impacted during the fourth quarter of 2019 due to discrete adjustments, which resulted in an increase to diluted earnings per share of $0.05.

Balance Sheet and Other Items

At December 31, 2019, the Company's cash and cash equivalents balance was $35.4 million, up from the balance of $14.9 million at the beginning of the year. The Company generated cash flow from operations of $269.5 million and used $447.8 million for acquisitions, $63.8 million for dividend payments to shareholders, and $58.2 million in capital expenditures for the twelve months ended December 31, 2019. The Company's outstanding debt was $630.8 million at December 31, 2019.

Conference Call & Webcast

LCI will host a conference call to discuss its fourth quarter and year-end results on Tuesday, February 11, 2020, at 8:30 a.m. Eastern time, which may be accessed by dialing (877) 668-4883 for participants in the U.S./Canada or (825) 312-2360 for participants outside the U.S./Canada using the required conference ID 6889293. In addition, an online, real-time webcast, as well as a supplemental earnings presentation, can be accessed on the Company's website, www.investors.lci1.com.

A replay of the conference call will be available for two weeks by dialing (800) 585-8367 for participants in the U.S./Canada or (416) 621-4642 for participants outside the U.S./Canada and referencing access code 6889293. A replay of the webcast will be available on the Company's website immediately following the conclusion of the call.

About LCI Industries

From over 85 manufacturing and distribution facilities located throughout North America and Europe, LCI Industries, through its wholly-owned subsidiary, LCI, supplies, domestically and internationally, a broad array of highly 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; branded towing products; truck accessories; electronic components; 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), capital expenditures, tax rate, 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 and availability of, 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
December 31,

 

Twelve Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

564,021

 

 

$

536,616

 

 

$

2,371,482

 

 

$

2,475,807

 

Cost of sales

441,539

 

 

433,362

 

 

1,832,280

 

 

1,955,463

 

Gross profit

122,482

 

 

103,254

 

 

539,202

 

 

520,344

 

Selling, general and administrative expenses

84,837

 

 

73,727

 

 

338,992

 

 

321,556

 

Operating profit

37,645

 

 

29,527

 

 

200,210

 

 

198,788

 

Interest expense, net

2,290

 

 

1,955

 

 

8,796

 

 

6,436

 

Income before income taxes

35,355

 

 

27,572

 

 

191,414

 

 

192,352

 

Provision for income taxes

6,548

 

 

7,393

 

 

44,905

 

 

43,801

 

Net income

$

28,807

 

 

$

20,179

 

 

$

146,509

 

 

$

148,551

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

1.15

 

 

$

0.80

 

 

$

5.86

 

 

$

5.90

 

Diluted

$

1.14

 

 

$

0.80

 

 

$

5.84

 

 

$

5.83

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

25,042

 

 

25,123

 

 

24,998

 

 

25,178

 

Diluted

25,213

 

 

25,305

 

 

25,093

 

 

25,463

 

 

 

 

 

 

 

 

 

Depreciation and amortization

$

19,476

 

 

$

17,787

 

 

$

75,358

 

 

$

67,526

 

Capital expenditures

$

10,435

 

 

$

27,305

 

 

$

58,202

 

 

$

119,827

 

LCI INDUSTRIES

SEGMENT RESULTS

(unaudited)

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

(In thousands)

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

OEM Segment:

 

 

 

 

 

 

 

RV OEMs:

 

 

 

 

 

 

 

Travel trailers and fifth-wheels

$

302,740

 

 

$

297,479

 

 

$

1,276,718

 

 

$

1,440,730

 

Motorhomes

34,456

 

 

42,067

 

 

155,623

 

 

187,297

 

Adjacent Industries OEMs

158,007

 

 

145,995

 

 

659,560

 

 

614,589

 

Total OEM Segment net sales

495,203

 

 

485,541

 

 

2,091,901

 

 

2,242,616

 

Aftermarket Segment:

 

 

 

 

 

 

 

Total Aftermarket Segment net sales

68,818

 

 

51,075

 

 

279,581

 

 

233,191

 

Total net sales

$

564,021

 

 

$

536,616

 

 

$

2,371,482

 

 

$

2,475,807

 

 

 

 

 

 

 

 

 

Operating profit:

 

 

 

 

 

 

 

OEM Segment

$

33,856

 

 

$

23,023

 

 

$

165,290

 

 

$

167,459

 

Aftermarket Segment

3,789

 

 

6,504

 

 

34,920

 

 

31,329

 

Total operating profit

$

37,645

 

 

$

29,527

 

 

$

200,210

 

 

$

198,788

 

LCI INDUSTRIES

BALANCE SHEET INFORMATION

(unaudited)

 

December 31,

 

December 31,

 

2019

 

2018

(In thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

35,359

 

 

$

14,928

 

Accounts receivable, net of allowances of $3,144 and $1,895 at
December 31, 2019 and 2018, respectively

199,976

 

 

121,812

 

Inventories, net

393,607

 

 

340,615

 

Prepaid expenses and other current assets

41,849

 

 

49,296

 

Total current assets

670,791

 

 

526,651

 

Fixed assets, net

366,309

 

 

322,876

 

Goodwill

351,114

 

 

180,168

 

Other intangible assets, net

341,426

 

 

176,342

 

Operating lease right-of-use assets

98,774

 

 

 

Deferred taxes

 

 

10,948

 

Other assets

34,181

 

 

26,908

 

Total assets

$

1,862,595

 

 

$

1,243,893

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities

 

 

 

Current maturities of long-term indebtedness

$

17,883

 

 

$

596

 

Accounts payable, trade

99,262

 

 

78,354

 

Current portion of operating lease obligations

21,693

 

 

 

Accrued expenses and other current liabilities

132,420

 

 

98,632

 

Total current liabilities

271,258

 

 

177,582

 

Long-term indebtedness

612,906

 

 

293,528

 

Operating lease obligations

79,848

 

 

 

Deferred taxes

35,740

 

 

8,501

 

Other long-term liabilities

62,171

 

 

58,027

 

Total liabilities

1,061,923

 

 

537,638

 

Total stockholders’ equity

800,672

 

 

706,255

 

Total liabilities and stockholders’ equity

$

1,862,595

 

 

$

1,243,893

 

LCI INDUSTRIES

SUMMARY OF CASH FLOWS

(unaudited)

 

Twelve Months Ended
December 31,

 

 

2019

 

2018

(In thousands)

 

 

 

Cash flows from operating activities:

 

 

 

Net income

$

146,509

 

 

$

148,551

 

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

 

 

 

Depreciation and amortization

75,358

 

 

67,526

 

Stock-based compensation expense

16,077

 

 

14,065

 

Deferred taxes

3,416

 

 

13,874

 

Other non-cash items

(1,553)

 

 

(13)

 

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

 

 

 

Accounts receivable, net

(25,452)

 

 

(11,352)

 

Inventories, net

57,790

 

 

(34,730)

 

Prepaid expenses and other assets

6,882

 

 

(17,691)

 

Accounts payable, trade

(12,189)

 

 

(17,335)

 

Accrued expenses and other liabilities

2,687

 

 

(6,287)

 

Net cash flows provided by operating activities

269,525

 

 

156,608

 

Cash flows from investing activities:

 

 

 

Capital expenditures

(58,202)

 

 

(119,827)

 

Acquisitions of businesses, net of cash acquired

(447,764)

 

 

(184,792)

 

Proceeds from note receivable

 

 

2,000

 

Other investing activities

2,132

 

 

(176)

 

Net cash flows used in investing activities

(503,834)

 

 

(302,795)

 

Cash flows from financing activities:

 

 

 

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

(8,084)

 

 

(16,097)

 

Proceeds from revolving credit facility borrowings

655,387

 

 

1,387,013

 

Repayments under revolving credit facility borrowings

(628,891)

 

 

(1,146,953)

 

Proceeds from term loan borrowings

300,000

 

 

 

Proceeds from other borrowings

 

 

4,509

 

Payment of dividends

(63,813)

 

 

(59,270)

 

Payment of contingent consideration related to acquisitions

(10)

 

 

(3,068)

 

Repurchases of common stock

 

 

(28,695)

 

Other financing activities

382

 

 

(2,373)

 

Net cash flows provided by financing activities

254,971

 

 

135,066

 

Effect of exchange rate changes on cash and cash equivalents

(231)

 

 

 

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

20,431

 

 

(11,121)

 

Cash and cash equivalents at beginning of period

14,928

 

 

26,049

 

Cash and cash equivalents at end of period

$

35,359

 

 

$

14,928

 

LCI INDUSTRIES

SUPPLEMENTARY INFORMATION

(unaudited)

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

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

 

 

 

 

 

 

 

Industry Wholesale Production:

 

 

 

 

 

 

 

Travel trailer and fifth-wheel RVs

83.3

 

 

90.3

 

 

349.5

 

 

415.1

 

Motorhome RVs

10.4

 

 

12.1

 

 

46.7

 

 

57.6

 

Industry Retail Sales:

 

 

 

 

 

 

 

Travel trailer and fifth-wheel RVs

61.3

 

(2)

67.5

 

 

394.6

 

(2)

423.4

 

Impact on dealer inventories

22.0

 

(2)

22.8

 

 

(45.1)

 

(2)

(8.3)

 

Motorhome RVs

8.2

 

(2)

9.2

 

 

45.6

 

(2)

52.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

 

 

December 31,

 

 

 

 

 

2019

 

2018

LCI Content Per Industry Unit Produced:

 

 

 

 

Travel trailer and fifth-wheel RV

 

 

 

 

$

3,618

 

 

$

3,449

 

Motorhome RV

 

 

 

 

$

2,364

 

 

$

2,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

2019

 

2018

Balance Sheet Data:

 

 

 

 

 

 

 

Current ratio

 

 

 

 

2.5

 

 

3.0

 

Total indebtedness to stockholders' equity

 

0.8

 

 

0.4

 

Days sales in accounts receivable, based on last twelve months

 

 

 

 

 

 

 

26.6

 

 

24.2

 

Inventory turns, based on last twelve months

 

5.5

 

 

6.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

Estimated Full Year Data:

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

$ 65 - $ 75 million

Depreciation and amortization

 

 

 

 

$ 105 - $ 110 million

Stock-based compensation expense

 

 

 

 

$ 16 - $ 21 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) December 2019 retail sales data for RVs has not been published yet, therefore 2019 retail data for RVs includes an estimate for December 2019 retail units. Retail sales data will likely be revised upwards in future months as various states report.

Brian Hall, CFO
(574) 535-1125
LCII@lci1.com

Source: LCI Industries

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