LCI Industries Reports 2017 Fourth Quarter and Full Year Results
ELKHART, Ind., Feb. 8, 2018 /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 fourth quarter and full-year 2017 results.
"We exceeded $2.1 billion in net sales in 2017, just four years after reaching $1 billion," stated Jason Lippert, LCI's Chief Executive Officer. "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 11,000 team members."
"The RV industry growth trend in 2017 remained strong as wholesale RV shipments were up 19 percent in the fourth quarter," continued Jason Lippert. "RV sales momentum has continued as the industry attracts a new generation of RV enthusiasts, supported by strong economic growth and the expected economic tailwind of the recent tax law changes. Orders appear to be strong going into 2018 as dealer sentiment remains bullish, as evidenced by the recent Tampa RV show, and OEMs continue to add capacity to meet demand. We also continue to see strong growth in our aftermarket and adjacent market sales. Aftermarket sales reached $171 million in 2017, up 31 percent from 2016. We remain optimistic, as January 2018 consolidated net sales are approximately $205 million, 35 percent higher than January 2017."
"Strong industry growth and new products drove our 2017 growth," said Scott Mereness, LCI's President. "Our content per travel trailer and fifth-wheel increased 8 percent year-over-year, the largest annual increase since 2012, and our content per motorhome increased 10 percent year-over-year, representing our fourth straight year of double-digit content growth for motorhomes. Recent acquisitions contributed $42 million in net sales in 2017, and we anticipate the recent acquisition of Taylor Made Group will add revenue of $154 million in 2018."
Fourth Quarter 2017 Results
Consolidated net sales for the fourth quarter of 2017 were $547 million, a 36 percent increase over 2016 fourth quarter net sales of $403 million. Net income in the fourth quarter of 2017 was $17.5 million, or $0.68 per diluted share, compared to net income of $26.3 million, or $1.05 per diluted share, in the fourth quarter of 2016. Net income in the fourth quarter of 2017 included a one-time non-cash charge of $13.2 million ($0.52 per diluted share) related to the estimated impact of the Tax Cuts and Jobs Act (the "TCJA"). Excluding the estimated impact of the TCJA, adjusted net income was $30.7 million, or $1.20 per diluted share, in the fourth quarter of 2017 compared to $26.3 million, or $1.05 per diluted share, in the fourth quarter of 2016, as referenced in the "Supplementary Information Non-GAAP Measures" section.
The increase in year-over-year net sales reflects industry-wide growth in wholesale shipments of towable and motorized RVs by OEMs, which increased 20 percent and 16 percent, respectively, in the fourth 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 December 31, 2017 contributed $20 million in the fourth quarter of 2017. The organic growth rate was 31 percent for the fourth quarter and acquisitions provided the remainder of the 36 percent increase. Through continued focus on aftermarket channels for the Company's products, the Company increased net sales to the aftermarket in the fourth quarter of 2017 by 36 percent to $41 million.
The health of the RV industry is determined by retail demand, which is up 11 percent through November, 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 eleven 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. The RVIA's current forecast for 2018 estimates a year-over-year increase of three percent to approximately 521,000 units.
The Company's content per travel trailer and fifth-wheel RV for the twelve months ended December 31, 2017, increased $241 to $3,263, compared to the twelve months ended December 31, 2016, of $3,022. This is the largest increase in five years for travel trailer and fifth-wheel RV content. The Company's content per motorhome RV for the twelve months ended December 31, 2017, increased $208 to $2,219, compared to the twelve months ended December 31, 2016, of $2,011. The content increases are a result of organic growth, including new product introductions.
2017 Full-Year Results
Consolidated net sales for the year ended December 31, 2017 increased to a record $2.1 billion, 28 percent higher than the net sales for the year ended December 31, 2016 of $1.7 billion. Acquisitions completed by the Company in 2017 added $42 million in net sales in 2017. An 18 percent increase in industry-wide wholesale shipments of travel trailers and fifth-wheel RVs, LCI's primary OEM market, as well as increased content per RV unit, positively impacted net sales growth in 2017. Further, the Company organically increased sales to adjacent industries and the aftermarket.
Net income for the full-year 2017 increased to $132.9 million, or $5.24 per diluted share, up from net income of $129.7 million, or $5.20 per diluted share, in 2016. Net income in 2017 included a one-time non-cash charge of $13.2 million ($0.52 per diluted share) related to the estimated impact of the TCJA. Excluding the estimated impact of the TCJA, adjusted net income was $146.1 million, or $5.76 per diluted share, in 2017 compared to $129.7 million or $5.20 per diluted share in 2016, as referenced in the "Supplementary Information Non-GAAP Measures" section.
Income Taxes
The Company's effective tax rate was 60 percent and 38 percent for the quarter and year ended December 31, 2017, compared to 35 percent for the quarter and year ended December 31, 2016. During the quarter ended December 31, 2017, the Company recorded a one-time non-cash charge of $13.2 million ($0.52 per diluted share in the fourth quarter and $0.52 per diluted share in 2017) related to enactment of the TCJA which resulted in the re-measurement of certain deferred tax assets using the lower U.S. corporate income tax rate. Excluding the one-time charge, the Company's effective tax rate was 30 percent and 31 percent for the quarter and year ended December 31, 2017, as referenced in the "Supplementary Information Non-GAAP Measures" section.
The one-time charge related to the TCJA is a provisional amount based on the Company's current estimates. The final impact of the TCJA is subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance, and may differ materially due to factors such as further revisions to the Company's calculations, changes in interpretations and assumptions that the Company has made, additional guidance that may be issued by the U.S. Government, and actions the Company may take, among other items.
Balance Sheet and Other Items
At December 31, 2017, the Company's cash balance was $26 million, a decrease of $60 million from its cash balance of $86 million at the beginning of the year, primarily as a result of $61 million used for acquisitions, $87 million for capital expenditures and $51 million of dividend payments in 2017, offset by operating cash flows. The Company's outstanding debt was $50 million at December 31, 2017 and December 31, 2016.
Conference Call & Webcast
LCI will provide an online, real-time webcast of its fourth quarter 2017 earnings conference call on the Company's website, www.lci1.com/investors, on Thursday, February 8, 2018, 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 5989615. A replay of the webcast will also be available on LCI's website until the next quarterly conference call.
About LCI Industries
From over 60 manufacturing and distribution facilities located throughout the United States and in Canada, the United Kingdom, Ireland 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)
Twelve Months Ended Three Months Ended
December 31, December 31,
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
(In thousands, except per share amounts)
Net sales $2,147,770 $1,678,898 $547,137 $402,899
Cost of sales 1,654,656 1,249,995 430,344 304,891
--------- --------- ------- -------
Gross profit 493,114 428,903 116,793 98,008
Selling, general and administrative expenses 278,833 228,053 72,608 57,412
Operating profit 214,281 200,850 44,185 40,596
Interest expense, net 1,437 1,678 275 393
----- ----- --- ---
Income before income taxes 212,844 199,172 43,910 40,203
Provision for income taxes 79,960 69,501 26,446 13,904
------ ------ ------ ------
Net income $132,884 $129,671 $17,464 $26,299
======== ======== ======= =======
Net income per common share:
Basic $5.31 $5.26 $0.70 $1.06
===== ===== ===== =====
Diluted $5.24 $5.20 $0.68 $1.05
===== ===== ===== =====
Weighted average common shares outstanding:
Basic 25,020 24,631 25,094 24,805
====== ====== ====== ======
Diluted 25,375 24,933 25,505 25,137
====== ====== ====== ======
Depreciation and amortization $54,727 $46,167 $14,871 $12,447
======= ======= ======= =======
Capital expenditures $87,221 $44,671 $26,879 $22,744
======= ======= ======= =======
LCI INDUSTRIES
SEGMENT RESULTS
(unaudited)
Twelve Months Ended Three Months Ended
December 31, December 31,
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
(In thousands)
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels $1,405,983 $1,099,882 $360,518 $263,248
Motorhomes 159,417 116,191 44,530 30,429
Adjacent industries OEMs 411,223 332,018 100,850 78,930
------- ------- ------
Total OEM Segment net sales 1,976,623 1,548,091 505,898 372,607
Aftermarket Segment:
Total Aftermarket Segment net sales 171,147 130,807 41,239 30,292
------- ------- ------ ------
Total net sales $2,147,770 $1,678,898 $547,137 $402,899
========== ========== ======== ========
Operating Profit:
OEM Segment $190,276 $180,850 $38,409 $36,748
Aftermarket Segment 24,005 20,000 5,776 3,848
------ ------ ----- -----
Total operating profit $214,281 $200,850 $44,185 $40,596
======== ======== ======= =======
LCI INDUSTRIES
BALANCE SHEET INFORMATION
(unaudited)
December 31,
------------
2017 2016
---- ----
(In thousands)
ASSETS
Current assets
Cash and cash equivalents $26,049 $86,170
Accounts receivable, net 82,157 57,374
Inventories, net 274,748 188,743
Prepaid expenses and other current assets 34,125 35,107
------ ------
Total current assets 417,079 367,394
Fixed assets, net 228,950 172,748
Goodwill 124,183 89,198
Other intangible assets, net 130,132 112,943
Deferred taxes 24,156 31,989
Other assets 21,358 12,632
------ ------
Total assets $945,858 $786,904
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, trade $79,164 $50,616
Accrued expenses and other current liabilities 102,849 98,735
------- ------
Total current liabilities 182,013 149,351
Long-term indebtedness 49,924 49,949
Other long-term liabilities 61,176 37,335
------ ------
Total liabilities 293,113 236,635
Total stockholders' equity 652,745 550,269
------- -------
Total liabilities and stockholders' equity $945,858 $786,904
======== ========
LCI INDUSTRIES
SUMMARY OF CASH FLOWS
(unaudited)
Twelve Months Ended
December 31,
------------
2017 2016
---- ----
(In thousands)
Cash flows from operating activities:
Net income $132,884 $129,671
Adjustments to reconcile net income to cash flows provided by operating
activities:
Depreciation and amortization 54,727 46,167
Stock-based compensation expense 20,036 15,420
Deferred taxes 6,808 (2,598)
Other non-cash items 4,062 1,540
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (12,601) (13,899)
Inventories, net (78,698) (7,856)
Prepaid expenses and other assets (10,898) (15,553)
Accounts payable, trade 20,727 18,800
Accrued expenses and other liabilities 17,726 31,715
Net cash flows provided by operating activities 154,773 203,407
Cash flows from investing activities:
Capital expenditures (87,221) (44,671)
Acquisitions of businesses, net of cash acquired (60,588) (48,725)
Proceeds from note receivable 1,500 2,000
Proceeds from sales of fixed assets 467 698
Other investing activities (33) (1,009)
--- ------
Net cash flows used for investing activities (145,875) (91,707)
Cash flows from financing activities:
Exercise of stock-based awards, net of shares tendered for payment of taxes (10,531) 2,574
Proceeds from line of credit borrowings 28,130 81,458
Repayments under line of credit borrowings (28,130) (81,458)
Payment of dividends (51,057) (34,437)
Payment of contingent consideration related to acquisitions (7,372) (4,944)
Other financing activities (59) (1,028)
Net cash flows used for financing activities (69,019) (37,835)
------- -------
Net (decrease) increase in cash and cash equivalents (60,121) 73,865
Cash and cash equivalents at beginning of period 86,170 12,305
------ ------
Cash and cash equivalents at end of period $26,049 $86,170
======= =======
LCI INDUSTRIES
SUPPLEMENTARY INFORMATION
(unaudited)
Twelve Months Ended Three Months Ended
December 31, December 31,
------------ ------------
2017 2016 2017 2016
---- ---- ---- ----
Industry Data(1)(in thousands of units):
Industry Wholesale Production:
Travel trailer and fifth-wheel RVs 429.5 362.7 108.2 90.3
Motorhome RVs 62.6 54.8 15.3 13.2
Industry Retail Sales:
Travel trailer and fifth-wheel RVs 396.0 (2) 352.7 66.1 (2) 58.3
Impact on dealer inventories 33.5 (2) 10.0 42.1 (2) 32.0
Motorhome RVs 52.4 (2) 46.8 9.8 (2) 9.2
Twelve Months Ended
December 31,
------------
2017 2016
---- ----
LCI Content Per Industry Unit Produced:
Travel trailer and fifth-wheel RV $3,263 $3,022
Motorhome RV $2,219 $2,011
December 31,
------------
2017 2016
---- ----
Balance Sheet Data:
Current ratio 2.3 2.5
Total indebtedness to stockholders' equity 0.1 0.1
Days sales in accounts receivable 17.8 15.8
Inventory turns, based on last twelve months 7.7 7.5
2018
----
Estimated Full Year Data:
Capital expenditures $ 70 - $ 80 million
Depreciation and amortization $ 65 - $ 70 million
Stock-based compensation expense $ 22 - $ 24 million
Annual tax rate(3) 22% - 24%
(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 2017 retail sales
data for RVs has not been
published yet, therefore 2017
retail data for RVs includes an
estimate for December 2017
retail units. Retail sales data
will likely be revised upwards
in future months as various
states report.
(3)The estimated annual tax rate
for 2018 includes preliminary
projections for the impact of
the Tax Cut and Jobs Act. The
provisional adjustment in 2017
and estimated impact on the 2018
annual tax rate are subject to
adjustment during the
measurement period of up to one
year following the December 2017
enactment, as provided by SEC
guidance.
LCI INDUSTRIES
SUPPLEMENTARY INFORMATION
NON-GAAP MEASURES
(unaudited)
Three months ended December 31, 2017
------------------------------------
(In thousands, except per share amounts) Income before Provision for Net income Effective tax Diluted
income taxes income taxes rate earnings per
share
-----
As reported GAAP $43,910 $26,446 $17,464 60% $0.68
Impact of TCJA - (13,209) 13,209 (30)% 0.52
Adjusted non-GAAP (3) $43,910 $13,237 $30,673 30% $1.20
======= ======= ======= === =====
Twelve months ended December 31, 2017
-------------------------------------
(In thousands, except per share amounts) Income before Provision for Net income Effective tax Diluted
income taxes income taxes rate earnings per
share
-----
As reported GAAP $212,844 $79,960 $132,884 38% $5.24
Impact of TCJA - (13,209) 13,209 (6)% 0.52
Adjusted non-GAAP (4) $212,844 $66,751 $146,093 31% $5.76
======== ======= ======== === =====
Note: No Non-GAAP adjustments were
reported for the quarter and year
ended December 31, 2016.
(4) During the fourth quarter of 2017,
the Company recorded a non-cash tax
charge of $13.2 million related to
the enactment of the Tax Cuts and
Jobs Act (the "TCJA"). The charge
resulted from the re-measurement of
the Company's deferred tax assets
considering the TCJA's newly enacted
tax rates. This provisional amount is
subject to adjustment during the
measurement period of up to one year
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SOURCE LCI Industries
