LCI Industries Reports First Quarter Financial Results

May 9, 2023

Diversification strategy and operational execution supporting profitability

First Quarter 2023 Highlights

  • Net sales of $973.3 million in the first quarter, down 41% year-over-year
  • Net income of $7.3 million, or $0.29 per diluted share, in the first quarter, down 96% year-over-year
  • EBITDA of $52.5 million, down 83% year-over-year
  • Quarterly dividend of $1.05 per share paid totaling $26.6 million in the first quarter
  • Continued execution of diversification strategy with North American RV OEM net sales less than 48% of total net sales for twelve months ended March 31, 2023
  • Inventory reduction of $120 million versus prior quarter

Channel Categories

RV OEM

  • Net sales of $400.1 million in the first quarter, down 62% year-over-year, driven by a nearly 55% decline in North American wholesale shipments for the quarter compared to same quarter in 2022
  • Content per North American travel trailer and fifth-wheel RVs for the twelve months ended March 31, 2023, increased 21% year-over-year to $5,881

Adjacent Industries OEM

  • Net sales of $358.1 million in the first quarter, up 1%, year-over-year
  • North American marine OEM net sales in the first quarter of $119.3 million, down 6% year-over-year
  • Content per North American power boat for the twelve months ended March 31, 2023, decreased 3% year-over-year to $1,608

Aftermarket

  • Net sales of $215.1 million in the first quarter, down 13% year-over-year, driven by a decline in automotive aftermarket sales

LCI Industries (NYSE: LCII) which, through its wholly-owned subsidiary, Lippert Components, Inc. ("Lippert"), 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 first quarter 2023 results.

“Despite challenging wholesale and OEM environments, we delivered solid results in the first quarter of 2023, underscored by robust content growth and strong sequential margin expansion given current market conditions. Steadfast focus on our diversification strategy and continued operational improvements have positioned us to deliver sustained profitability, with performance in our adjacent industries and aftermarket businesses helping to partially offset the impact of lower RV OEM shipments. Despite wholesale RV declines, revenue and content per unit are substantially above pre-COVID levels. By leveraging our strong R&D capabilities, we are aggressively working to expand market share through product innovations to meet consumer demand for high-quality, sophisticated content,” commented Jason Lippert, LCI Industries’ President and Chief Executive Officer.

“As we navigate through this down cycle, largely driven by recent overproduction within the industry, we remain confident in the underlying strength of the outdoor lifestyle and are seeing continued retail demand coming out of spring shows. We are continuing to fortify our financial profile and have made significant progress towards our plan to reduce inventories by $300 million this year, supporting enhanced cash generation. With the efficiencies we’ve captured, combined with the continued performance of our diversified portfolio, we believe we are poised to continue our trajectory of strong performance and deliver substantial margin growth when RV OEM production recovers,” Lippert continued. “Our strong cultural foundation, veteran operational leadership, and dedicated team members keep us on track in our efforts to create long-term value for all stakeholders throughout 2023.”

First Quarter 2023 Results

Consolidated net sales for the first quarter of 2023 were $973.3 million, a decrease of 41 percent from 2022 first quarter net sales of $1.6 billion. Net income in the first quarter of 2023 was $7.3 million, or $0.29 per diluted share, compared to net income of $196.2 million, or $7.71 per diluted share, in the first quarter of 2022. EBITDA in the first quarter of 2023 was $52.5 million, compared to EBITDA of $301.5 million in the first quarter of 2022. Additional information regarding EBITDA, as well as a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure of net income, is provided in the "Supplementary Information - Reconciliation of Non-GAAP Measures" section below.

The decrease in year-over-year net sales for the first quarter of 2023 was primarily driven by decreased North American RV wholesale shipments and decreased selling prices which are indexed to select commodities, partially offset by acquisitions. Net sales from acquisitions completed in the twelve months ended March 31, 2023 contributed approximately $28.5 million in the first quarter of 2023.

The Company's average product content per travel trailer and fifth-wheel RV for the twelve months ended March 31, 2023, increased $1,027 to $5,881, compared to $4,854 for the twelve months ended March 31, 2022. The content increase in towables was primarily a result of organic growth, including pricing and new product introductions, market share gains, and acquisitions.

April 2023 Results

April 2023 consolidated net sales were approximately $338 million, down 37 percent from April 2022, primarily due to an approximate 51 percent decline in North American RV wholesale shipments compared to April 2022. April 2023 results were favorably impacted by our diversification efforts outside of the North American RV market, which made up approximately 40 percent of April 2023 consolidated net sales.

Income Taxes

The Company's effective tax rate was 24.8 percent for the quarter ended March 31, 2023, compared to 25.5 percent for the quarter ended March 31, 2022. The rate was benefited by an increase in the benefit related to the cash surrender value of life insurance.

Balance Sheet and Other Items

At March 31, 2023, the Company's cash and cash equivalents balance was $23.5 million, compared to $47.5 million at December 31, 2022. The Company used $26.6 million for dividend payments to shareholders, $17.2 million for capital expenditures, and $6.3 million for acquisitions in the three months ended March 31, 2023. The Company also made $36.1 million in net repayments under its revolving credit facility and $5.3 million in repayments under its term loan and other borrowings in the three months ended March 31, 2023.

The Company's outstanding long-term indebtedness, including current maturities, was $1.1 billion at March 31, 2023, and the Company remained in compliance with its debt covenants. The Company believes its current liquidity is adequate to meet operating needs for the foreseeable future.

Conference Call & Webcast

LCI Industries will host a conference call to discuss its first quarter results on Tuesday, May 9, 2023, at 8:30 a.m. Eastern time, which may be accessed by dialing (833) 470-1428 for participants in the U.S. and (404) 975-4839 for participants outside the U.S. using the required conference ID 489509. Due to the high volume of companies reporting earnings at this time, please be prepared for hold times of up to 15 minutes when dialing in to the call. 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 (866) 813-9403 for participants in the U.S. and (929) 458-6194 for participants outside the U.S. and referencing access code 129639. A replay of the webcast will be available on the Company’s website immediately following the conclusion of the call.

About LCI Industries

LCI Industries, through its wholly-owned subsidiary, Lippert, supplies, domestically and internationally, a broad array of highly engineered components for the leading OEMs in the recreation and transportation product markets, consisting primarily of recreational vehicles and adjacent industries, including boats; buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; 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, as well as direct to retail customers via the Internet. Lippert'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; towing products; truck accessories; electronic components; appliances; air conditioners; televisions and sound systems; tankless water heaters; and other accessories. Additional information about Lippert and its products can be found at www.lippert.com.

Forward-Looking Statements

This press release contains certain "forward-looking statements" with respect to our financial condition, results of operations, profitability, margin growth, 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, financial condition, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, and industry trends, 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, the impacts of COVID-19, or other future pandemics, the Russia-Ukraine war, and heightened tensions between China and Taiwan on the global economy and on the Company's customers, suppliers, employees, business and cash flows, 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, team member benefits, team member 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, 2022, and in the Company's subsequent filings with the Securities and Exchange Commission. Readers of this press release are cautioned not to place undue reliance on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. 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
March 31,

 

Last Twelve

 

2023

 

2022

 

Months

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

973,310

 

$

1,644,568

 

$

4,535,885

Cost of sales

 

787,239

 

 

1,180,325

 

 

3,540,768

Gross profit

 

186,071

 

 

464,243

 

 

995,117

Selling, general and administrative expenses

 

166,028

 

 

194,542

 

 

691,747

Operating profit

 

20,043

 

 

269,701

 

 

303,370

Interest expense, net

 

10,394

 

 

6,252

 

 

31,715

Income before income taxes

 

9,649

 

 

263,449

 

 

271,655

Provision for income taxes

 

2,390

 

 

67,268

 

 

65,603

Net income

$

7,259

 

$

196,181

 

$

206,052

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic

$

0.29

 

$

7.75

 

$

8.13

Diluted

$

0.29

 

$

7.71

 

$

8.09

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

Basic

 

25,228

 

 

25,329

 

 

25,353

Diluted

 

25,293

 

 

25,461

 

 

25,478

 

 

 

 

 

 

Depreciation

$

18,250

 

$

17,954

 

$

73,136

Amortization

$

14,249

 

$

13,858

 

$

56,764

Capital expenditures

$

17,159

 

$

42,037

 

$

105,763

LCI INDUSTRIES

SEGMENT RESULTS

(unaudited)

 

 

Three Months Ended
March 31,

 

Last Twelve

 

2023

 

2022

 

Months

(In thousands)

 

 

 

 

 

Net sales:

 

 

 

 

 

OEM Segment:

 

 

 

 

 

RV OEMs:

 

 

 

 

 

Travel trailers and fifth-wheels

$

330,553

 

 

$

953,226

 

$

1,994,912

Motorhomes

 

69,551

 

 

 

87,254

 

 

321,394

Adjacent Industries OEMs

 

358,069

 

 

 

356,102

 

 

1,361,155

Total OEM Segment net sales

 

758,173

 

 

 

1,396,582

 

 

3,677,461

Aftermarket Segment:

 

 

 

 

 

Total Aftermarket Segment net sales

 

215,137

 

 

 

247,986

 

 

858,424

Total net sales

$

973,310

 

 

$

1,644,568

 

$

4,535,885

 

 

 

 

 

 

Operating (loss) profit:

 

 

 

 

 

OEM Segment

$

(721

)

 

$

245,374

 

$

233,055

Aftermarket Segment

 

20,764

 

 

 

24,327

 

 

70,315

Total operating profit

$

20,043

 

 

$

269,701

 

$

303,370

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

OEM Segment depreciation

$

14,350

 

 

$

14,502

 

$

58,014

Aftermarket Segment depreciation

 

3,900

 

 

 

3,452

 

 

15,122

Total depreciation

$

18,250

 

 

$

17,954

 

$

73,136

 

 

 

 

 

 

OEM Segment amortization

$

10,450

 

 

$

10,144

 

$

41,559

Aftermarket Segment amortization

 

3,799

 

 

 

3,714

 

 

15,205

Total amortization

$

14,249

 

 

$

13,858

 

$

56,764

LCI INDUSTRIES

BALANCE SHEET INFORMATION

(unaudited)

 

 

March 31,

 

December 31,

 

2023

 

2022

(In thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

23,465

 

$

47,499

Accounts receivable, net

 

340,305

 

 

214,262

Inventories, net

 

909,385

 

 

1,029,705

Prepaid expenses and other current assets

 

91,624

 

 

99,310

Total current assets

 

1,364,779

 

 

1,390,776

Fixed assets, net

 

480,904

 

 

482,185

Goodwill

 

566,178

 

 

567,063

Other intangible assets, net

 

491,415

 

 

503,320

Operating lease right-of-use assets

 

248,575

 

 

247,007

Other long-term assets

 

57,516

 

 

56,561

Total assets

$

3,209,367

 

$

3,246,912

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities

 

 

 

Current maturities of long-term indebtedness

$

25,450

 

$

23,086

Accounts payable, trade

 

169,883

 

 

143,529

Current portion of operating lease obligations

 

35,516

 

 

35,447

Accrued expenses and other current liabilities

 

205,182

 

 

219,238

Total current liabilities

 

436,031

 

 

421,300

Long-term indebtedness

 

1,055,625

 

 

1,095,888

Operating lease obligations

 

224,451

 

 

222,478

Deferred taxes

 

31,405

 

 

30,580

Other long-term liabilities

 

102,344

 

 

95,658

Total liabilities

 

1,849,856

 

 

1,865,904

Total stockholders' equity

 

1,359,511

 

 

1,381,008

Total liabilities and stockholders' equity

$

3,209,367

 

$

3,246,912

LCI INDUSTRIES

SUMMARY OF CASH FLOWS

(unaudited)

 

 

Three Months Ended
March 31,

 

2023

 

2022

(In thousands)

 

 

 

Cash flows from operating activities:

 

 

 

Net income

$

7,259

 

 

$

196,181

 

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

 

 

 

Depreciation and amortization

 

32,499

 

 

 

31,812

 

Stock-based compensation expense

 

4,695

 

 

 

6,517

 

Other non-cash items

 

877

 

 

 

1,771

 

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

 

 

 

Accounts receivable, net

 

(123,072

)

 

 

(240,404

)

Inventories, net

 

131,708

 

 

 

(31,278

)

Prepaid expenses and other assets

 

5,577

 

 

 

20,495

 

Accounts payable, trade

 

25,822

 

 

 

57,808

 

Accrued expenses and other liabilities

 

(10,689

)

 

 

92,024

 

Net cash flows provided by operating activities

 

74,676

 

 

 

134,926

 

Cash flows from investing activities:

 

 

 

Capital expenditures

 

(17,159

)

 

 

(42,037

)

Acquisitions of businesses

 

(6,250

)

 

 

(50,089

)

Other investing activities

 

1,960

 

 

 

(219

)

Net cash flows used in investing activities

 

(21,449

)

 

 

(92,345

)

Cash flows from financing activities:

 

 

 

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

 

(8,888

)

 

 

(10,569

)

Proceeds from revolving credit facility

 

165,300

 

 

 

372,400

 

Repayments under revolving credit facility

 

(201,385

)

 

 

(330,600

)

Repayments under shelf loan, term loan, and other borrowings

 

(5,276

)

 

 

(55,642

)

Payment of dividends

 

(26,563

)

 

 

(22,870

)

Payment of contingent consideration and holdbacks related to acquisitions

 

 

 

 

(2,031

)

Other financing activities

 

(12

)

 

 

(4

)

Net cash flows used in financing activities

 

(76,824

)

 

 

(49,316

)

Effect of exchange rate changes on cash and cash equivalents

 

(437

)

 

 

(712

)

Net decrease in cash and cash equivalents

 

(24,034

)

 

 

(7,447

)

Cash and cash equivalents at beginning of period

 

47,499

 

 

 

62,896

 

Cash and cash equivalents cash at end of period

$

23,465

 

 

$

55,449

 

LCI INDUSTRIES

SUPPLEMENTARY INFORMATION

(unaudited)

 

 

Three Months Ended

 

 

 

 

March 31,

 

Last Twelve

 

 

2023

 

2022

 

Months

 

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

 

 

 

 

 

 

Industry Wholesale Production:

 

 

 

 

 

 

Travel trailer and fifth-wheel RVs

 

61.2

 

 

 

152.2

 

 

330.8

 

 

Motorhome RVs

 

13.4

 

 

 

15.8

 

 

56.0

 

 

Industry Retail Sales:

 

 

 

 

 

 

Travel trailer and fifth-wheel RVs

 

71.7

 

(2)

 

95.0

 

 

366.2

 

(2)

Impact on dealer inventories

 

(10.5

)

(2)

 

57.2

 

 

(35.4

)

(2)

Motorhome RVs

 

10.7

 

(2)

 

13.0

 

 

46.0

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

 

March 31,

 

 

 

 

2023

 

2022

 

 

 

Lippert Content Per Industry Unit Produced:

 

 

 

 

 

 

Travel trailer and fifth-wheel RV

$

5,881

 

 

$

4,854

 

 

 

Motorhome RV

$

3,985

 

 

$

3,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2023

 

2022

 

2022

 

Balance Sheet Data (debt availability in millions):

 

 

 

 

 

 

Remaining availability under the revolving credit facility (3)

$

318.2

 

 

$

129.8

 

$

306.5

 

 

Days sales in accounts receivable, based on last twelve months

 

27.9

 

 

 

29.2

 

 

27.5

 

 

Inventory turns, based on last twelve months

 

3.3

 

 

 

4.7

 

 

3.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

Estimated Full Year Data:

 

 

 

 

 

 

Capital expenditures

$80 - $100 million

 

 

 

Depreciation and amortization

$130 - $140 million

 

 

 

Stock-based compensation expense

$25 - $30 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) March 2023 retail sales data for RVs has not been published yet, therefore 2023 retail data for RVs includes an estimate for March 2023 retail units. Retail sales data will likely be revised upwards in future months as various states report.

(3) Remaining availability under the revolving credit facility is subject to covenant restrictions.

LCI INDUSTRIES

SUPPLEMENTARY INFORMATION

RECONCILIATION OF NON-GAAP MEASURES

(unaudited)

The following table reconciles net income to EBITDA.

 

 

Three Months Ended March 31,

 

2023

 

2022

(In thousands)

 

 

 

Net income

$

7,259

 

$

196,181

Interest expense, net

 

10,394

 

 

6,252

Provision for income taxes

 

2,390

 

 

67,268

Depreciation expense

 

18,250

 

 

17,954

Amortization expense

 

14,249

 

 

13,858

EBITDA

$

52,542

 

$

301,513

 

In addition to reporting financial results in accordance with U.S. GAAP, the Company has provided the non-GAAP performance measure of EBITDA to illustrate and improve comparability of its results from period to period. EBITDA is defined as net income before interest expense, net, provision for income taxes, depreciation expense, and amortization expense during the three month periods ended March 31, 2023 and 2022. The Company considers this non-GAAP measure in evaluating and managing the Company's operations and believes that discussion of results adjusted for these items is meaningful to investors because it provides a useful analysis of ongoing underlying operating trends. The measure is not in accordance with, nor is it a substitute for, GAAP measures, and it may not be comparable to similarly titled measures used by other companies.

 

Lillian D. Etzkorn, CFO
Phone: (574) 535-1125
E Mail: LCII@lci1.com

Source: LCI Industries