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LCI Industries Reports 2017 Third Quarter Results

ELKHART, Ind., Nov. 2, 2017 /PRNewswire/ -- LCI Industries (NYSE: LCII) ("LCI", or the "Company"), a supplier of components for the leading original equipment manufacturers ("OEMs") of recreational vehicles ("RVs") and adjacent industries, and the related aftermarkets of those industries, today reported consolidated net sales for the third quarter of 2017 of $555 million, 35 percent higher than the 2016 third quarter net sales of $412 million. Net income was $32.1 million, or $1.26 per diluted share, for the third quarter ended September 30, 2017, compared to net income of $29.8 million, or $1.19 per diluted share, for the third quarter ended September 30, 2016.

The increase in year-over-year net sales reflects industry-wide growth in wholesale shipments of towable and motorized RVs by OEMs, which increased 26 percent and 13 percent, respectively, in the third quarter of 2017, enhanced by solid growth in content per unit and acquisitions. Net sales from acquisitions completed by the Company over the twelve months ended September 30, 2017 contributed $24 million in the third quarter of 2017. The organic growth rate was 29 percent for the third quarter and acquisitions provided the remainder of the 35 percent increase. Through continued focus on aftermarket channels for the Company's products, the Company increased net sales to the aftermarket in the third quarter of 2017 by 34 percent to $49 million.

"The RV industry growth trend in 2017 remains strong as third quarter wholesale RV shipments were up 24 percent," stated Jason Lippert, LCI's Chief Executive Officer. "RV sales momentum has continued as the industry attracts a new generation of RV enthusiasts, supported by strong economic growth. Orders appear to be strong going into the final quarter as dealer sentiment remains bullish and OEMs continue to add capacity to meet demand. Additionally, we continue to see strong growth in our aftermarket sales. We are expecting October 2017 consolidated net sales to reach approximately $205 million, 40% higher than October 2016."

The health of the RV industry is determined by retail demand, which is up 11 percent through August, as reported by Statistical Surveys, Inc, and will likely be revised upwards in future months as various states report. Based on the retail sales strength experienced through the first nine months of 2017, as well as sales order backlogs reported by RV OEMs at record levels, the current outlook from several RV OEMs and their dealer networks remains very positive. Additionally, the RVIA's current forecast of wholesale unit shipments of approximately 480,000 units for the full year 2017 has been revised upward from its original Fall 2016 forecast of 411,000 units. The RVIA's current forecast for 2018 estimates an increase of an additional two percent to approximately 491,000 units.

The Company's content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2017, increased $147 to $3,172, compared to the twelve months ended September 30, 2016, of $3,025. This is the largest increase in seven quarters for travel trailer and fifth-wheel RV content. The Company's content per motorhome RV for the twelve months ended September 30, 2017, increased $195 to $2,152, compared to the twelve months ended September 30, 2016, of $1,957. The content increases are a combined result of organic growth, including new product introductions, as well as acquisitions and changes in the types of RVs produced industry-wide.

"Our operating profit in the third quarter of 2017 improved 6 percent to $47.9 million," said Scott Mereness, LCI's President. "Strong industry growth and accretive acquisitions completed over the last year have contributed to profit growth for the quarter. We continue to focus on cost management as well as investments in lean initiatives and other operational efficiencies to further improve operating margin while maintaining on-time deliveries to support the growth of the business."

The improvement in the Company's operating results were partially offset by continued increases in input costs, primarily steel, aluminum and direct labor. Aluminum costs have increased in excess of 20 percent over the prior year. Labor continues to remain a challenge with Elkhart County unemployment rates at less than three percent. As a result of these increased input costs, the Company has enacted price increases, which are anticipated to fully impact the first quarter of 2018. Additionally, the Company has implemented a number of cost saving initiatives, resulting in severance charges of $1.3 million or $0.03 per diluted share in the third quarter of 2017. These initiatives, along with the price increases, are expected to improve operating income by approximately $38 million annually, or 1.9 percent of operating margin, on the Company's current run rate.

Balance Sheet and Other Items

At September 30, 2017, the Company's cash balance was $20 million, a decrease of $66 million from its cash balance of $86 million at the beginning of the year, primarily as a result of $68 million used for acquisitions, $60 million for capital expenditures and $37 million of dividend payments in the first nine months of 2017, offset by operating cash flows. The Company's outstanding debt was $50 million at September 30, 2017 and December 31, 2016.

Return on equity and return on invested capital for the twelve months ended September 30, 2017, were 24.2 percent and 36.5 percent, respectively.

Jason Lippert concluded, "For the first time in the Company's history, we have reached $2 billion in revenue for the last twelve months, just four years from achieving $1 billion. We are achieving record top and bottom line numbers, and we are doing it at a time when labor and materials environments are particularly challenging. Our continuing growth story is a testament to the focus of our more than 9,000 team members."

Conference Call & Webcast

LCI will provide an online, real-time webcast of its third quarter 2017 earnings conference call on the Company's website, www.lci1.com/investors, on Thursday, November 2, 2017, at 11:00 a.m. Eastern time.

Institutional investors can access the call via the password-protected site, StreetEvents (www.streetevents.com). A replay of the call will be available for two weeks by dialing (855) 859-2056 and referencing access code 1422666. A replay of the webcast will also be available on LCI's website until the next quarterly conference call.

About LCI Industries

From 52 manufacturing and distribution facilities located throughout the United States and in Canada and Italy, LCI Industries, through its wholly-owned subsidiary, Lippert Components, Inc., supplies, domestically and internationally, a broad array of components for the leading original equipment manufacturers of recreational vehicles; buses; trailers used to haul boats, livestock, equipment and other cargo; trucks; pontoon boats; trains; manufactured homes; and modular housing. The Company also supplies 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; furniture and mattresses; entry, luggage, patio and ramp doors; electric and manual entry steps; awnings and awning accessories; electronic components; televisions and sound systems; navigation systems; backup cameras; appliances; 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 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 and availability of 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, 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, 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, 2016, 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)














Nine Months Ended


Three Months Ended





September 30,


September 30,


Last Twelve



2017


2016


2017


2016


Months

(In thousands, except per share amounts)






















Net sales


$ 1,600,633


$ 1,275,999


$ 554,814


$ 412,370


$ 2,003,532

Cost of sales


1,224,312


945,104


433,594


306,820


1,529,203

Gross profit


376,321


330,895


121,220


105,550


474,329

Selling, general and administrative expenses


206,225


170,641


73,293


60,412


263,637

Operating profit


170,096


160,254


47,927


45,138


210,692

Interest expense, net


1,162


1,285


311


396


1,555

Income before income taxes


168,934


158,969


47,616


44,742


209,137

Provision for income taxes


53,514


55,597


15,478


14,898


67,418

Net income


$ 115,420


$ 103,372


$ 32,138


$ 29,844


$ 141,719












Net income per common share:











Basic


$ 4.62


$ 4.20


$ 1.28


$ 1.21


$ 5.68

Diluted


$ 4.56


$ 4.15


$ 1.26


$ 1.19


$ 5.60












Weighted average common shares outstanding:











Basic


24,993


24,587


25,060


24,724


24,951

Diluted


25,332


24,882


25,459


25,060


25,289












Depreciation and amortization


$ 39,856


$ 33,720


$ 14,326


$ 11,530


$ 52,303

Capital expenditures


$ 60,342


$ 21,927


$ 17,066


$ 8,956


$ 81,625












LCI INDUSTRIES

SEGMENT RESULTS

(unaudited)














Nine Months Ended


Three Months Ended





September 30,


September 30,


Last Twelve



2017


2016


2017


2016


Months

(In thousands)






















Net sales:











OEM Segment:











RV OEMs:











Travel trailers and fifth-wheels


$ 1,045,465


$ 836,634


$ 357,940


$ 263,579


$ 1,308,713

Motorhomes


114,887


85,762


41,595


29,373


145,316

Adjacent industries OEMs


310,373


253,088


106,386


82,963


389,303

Total OEM Segment net sales


1,470,725


1,175,484


505,921


375,915


1,843,332

Aftermarket Segment:











Total Aftermarket Segment net sales


129,908


100,515


48,893


36,455


160,200

Total net sales


$ 1,600,633


$ 1,275,999


$ 554,814


$ 412,370


$ 2,003,532












Operating Profit:











OEM Segment


$ 151,867


$ 144,102


$ 41,025


$ 39,049


$ 188,615

Aftermarket Segment


18,229


16,152


6,902


6,089


22,077

Total operating profit


$ 170,096


$ 160,254


$ 47,927


$ 45,138


$ 210,692












LCI INDUSTRIES

BALANCE SHEET INFORMATION

(unaudited)










September 30,


December 31,



2017


2016


2016

(In thousands)














ASSETS







Current assets







Cash and cash equivalents


$ 19,762


$ 95,060


$ 86,170

Accounts receivable, net


139,144


89,626


57,374

Inventories, net


229,763


161,312


188,743

Prepaid expenses and other current assets


45,384


28,572


35,107

Total current assets


434,053


374,570


367,394

Fixed assets, net


210,304


153,167


172,748

Goodwill


123,001


93,925


89,198

Other intangible assets, net


134,761


109,553


112,943

Deferred taxes


32,380


29,208


31,989

Other assets


21,277


14,095


12,632

Total assets


$ 955,776


$ 774,518


$ 786,904








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable, trade


$ 88,148


$ 55,681


$ 50,616

Accrued expenses and other current liabilities


109,849


97,733


98,735

Total current liabilities


197,997


153,414


149,351

Long-term indebtedness


49,918


49,940


49,949

Other long-term liabilities


60,805


39,796


37,335

Total liabilities


308,720


243,150


236,635

Total stockholders' equity


647,056


531,368


550,269

Total liabilities and stockholders' equity


$ 955,776


$ 774,518


$ 786,904








LCI INDUSTRIES

SUMMARY OF CASH FLOWS

(unaudited)








Nine Months Ended



September 30,



2017


2016

(In thousands)





Cash flows from operating activities:





Net income


$ 115,420


$ 103,372

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





Depreciation and amortization


39,856


33,720

Stock-based compensation expense


15,042


11,421

Deferred taxes


-


183

Other non-cash items


3,655


1,728

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





Accounts receivable, net


(69,720)


(46,028)

Inventories, net


(33,780)


13,451

Prepaid expenses and other assets


(18,662)


(7,659)

Accounts payable, trade


29,856


23,827

Accrued expenses and other liabilities


27,192


30,093

Net cash flows provided by operating activities


108,859


164,108

Cash flows from investing activities:





Capital expenditures


(60,342)


(21,927)

Acquisitions of businesses, net of cash acquired


(67,876)


(34,237)

Proceeds from sales of fixed assets


348


533

Other investing activities


(105)


(316)

Net cash flows used for investing activities


(127,975)


(55,947)

Cash flows from financing activities:





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


(7,313)


409

Proceeds from line of credit borrowings


9,715


81,458

Repayments under line of credit borrowings


(9,715)


(81,458)

Payment of dividends


(37,346)


(22,078)

Payment of contingent consideration related to acquisitions


(2,574)


(2,719)

Other financing activities


(59)


(1,018)

Net cash flows used for financing activities


(47,292)


(25,406)






Net (decrease) increase in cash and cash equivalents


(66,408)


82,755






Cash and cash equivalents at beginning of period


86,170


12,305

Cash and cash equivalents at end of period


$ 19,762


$ 95,060






LCI INDUSTRIES

SUPPLEMENTARY INFORMATION

(unaudited)















Nine Months Ended


Three Months Ended






September 30,


September 30,


Last Twelve




2017


2016


2017


2016


Months


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












Industry Wholesale Production:












Travel trailer and fifth-wheel RVs


321.3


272.4


103.9


82.4


411.6


Motorhome RVs


47.3


41.6


14.5


12.8


60.5


Industry Retail Sales:












Travel trailer and fifth-wheel RVs


324.5

(2)

294.4


113.7

(2)

108.7


382.8

(2)

Impact on dealer inventories


(3.2)

(2)

(22.0)


(9.8)

(2)

(26.3)


28.8

(2)

Motorhome RVs


42.3

(2)

37.5


13.8

(2)

13.2


51.6

(2)































Twelve Months Ended










September 30,










2017


2016




LCI Content Per Industry Unit Produced:












Travel trailer and fifth-wheel RV






$ 3,172


$ 3,025




Motorhome RV






$ 2,152


$ 1,957


































September 30,


December 31,








2017


2016


2016


Balance Sheet Data:












Current ratio






2.2


2.4


2.5


Total indebtedness to stockholders' equity






0.1


0.1


0.1


Days sales in accounts receivable






22.5


19.4


15.8


Inventory turns, based on last twelve months






7.8


7.3


7.5
































2017




Estimated Full Year Data:












Capital expenditures






$ 70 - $ 80 million




Depreciation and amortization






$ 55 - $ 60 million




Stock-based compensation expense






$ 19 - $ 21 million




Annual tax rate






32% - 33%




























(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 2017 retail sales data for RVs has not been published yet, therefore 2017 retail data for RVs includes an estimate for September 2017 retail units. Retail sales data will likely be revised upwards in future months as various states report.

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SOURCE LCI Industries