LCI Industries Reports 2018 Third Quarter Results And Announces $150 Million Stock Repurchase Program
ELKHART, Ind., Nov. 1, 2018 /PRNewswire/ -- LCI Industries (NYSE: LCII) ("LCI", or the "Company"), 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 industrial product markets, and the related aftermarkets of those industries, today reported third quarter 2018 results. The Company also announced that its Board of Directors has authorized the repurchase of up to $150 million worth of LCI's common stock.
"We achieved nine percent sales growth in the third quarter, despite a 12 percent decline in RV wholesale shipments compared to the same quarter of the prior year," said LCI's CEO, Jason Lippert. "Our continued sales growth is reflective of our ongoing strategy to diversify our business into adjacent markets, the Aftermarket Segment and international sales, which now make up 34 percent of our last twelve months sales, up from 28 percent one year ago. October 2018 consolidated net sales are approximately $212 million, up one percent from October 2017, despite a slowing of RV OEM production levels as they continue to balance dealer inventory levels."
"Our content per travel trailer and fifth-wheel increased nine percent year-over-year, and our content per motorhome increased 15 percent year-over-year, representing our fourth straight year of double-digit content growth for motorhomes," said Scott Mereness, LCI's President. "We continue to manage costs in today's volatile commodity environment with cost pressures driven by tariffs and tariff speculation."
Third Quarter 2018 Results
Consolidated net sales for the third quarter of 2018 were $604 million, a nine percent increase over 2017 third quarter net sales of $555 million. Net income in the third quarter of 2018 was $33.8 million, or $1.33 per diluted share, compared to net income of $32.1 million, or $1.26 per diluted share, in the third quarter of 2017.
The increase in year-over-year net sales reflects growth in the Company's adjacent industries OEM, aftermarket and international markets, despite the short-term correction in recreational vehicle ("RV") OEM wholesale shipments as dealers normalize their inventory levels. Net sales from acquisitions completed by the Company over the twelve months ended September 30, 2018, contributed $56 million in the third quarter of 2018.
The Company's content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2018, increased $284 to $3,456, compared to the twelve months ended September 30, 2017, of $3,172. The Company's content per motorhome RV for the twelve months ended September 30, 2018, increased $328 to $2,480, compared to the twelve months ended September 30, 2017, of $2,152. The content increases are a result of organic growth, including new product introductions, as well as acquisitions.
Income Taxes
The Company's effective tax rate was 23 percent for the quarter ended September 30, 2018, compared to 33 percent for the quarter ended September 30, 2017. The decrease in effective tax rate was driven by the newly enacted tax rates from the Tax Cut and Jobs Act.
Balance Sheet and Other Items
At September 30, 2018, the Company's cash and cash equivalents balance was $18 million, a decrease of $8 million from its balance of $26 million at the beginning of the year. The Company generated cash flow from operations of $108 million and invested $93 million in capital expenditures for the nine months ended September 30, 2018. Other cash outflows included $157 million for acquisitions and $44 million for dividend payments to shareholders, and were funded primarily by net borrowings of $190 million on the Company's line of credit for the nine months ended September 30, 2018. The Company's outstanding debt was $244 million at September 30, 2018.
Stock Repurchase Program
The Company announced today that its Board of Directors has authorized a new $150 million stock repurchase program over the next three years.
"This repurchase program demonstrates the Board of Directors' and senior management's continued confidence in LCI's long-term strategy and future performance. Our strong operating cash flows, balance sheet and borrowing capacity allow us to maintain a balanced capital allocation strategy, which includes investments in future growth, potential acquisitions, research and development, debt repayments and providing returns to shareholders through dividends and share repurchases," said Lippert.
The timing of stock repurchases and the number of shares will depend upon the market conditions and other factors. Share repurchases, if any, will be made in the open market and in privately negotiated transactions in accordance with applicable securities laws. The stock repurchase program may be modified, suspended or terminated at any time by the Board of Directors. Repurchases under the stock repurchase program will be funded from the Company's existing cash and cash equivalents, future cash flows and its existing revolving line of credit.
Conference Call & Webcast
LCI will provide an online, real-time webcast of its third quarter 2018 earnings conference call on the Company's website, www.lci1.com/investors, on Thursday, November 1, 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 2787049. A replay of the webcast will also be available on LCI's website until the next quarterly conference call.
About LCI Industries
From over 65 manufacturing and distribution facilities located throughout the United States and in Canada, Ireland, Italy, and the United Kingdom, LCI Industries, 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 industrial product markets, consisting of recreational vehicles ("RVs") 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 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, 2017, 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
Nine Months Ended
September 30,
September 30,
Last Twelve
2018 2017 2018 2017
Months
(In thousands, except per share amounts)
Net sales $604,244 $554,814 $1,939,191 $1,600,633 $2,486,328
Cost of sales 478,343 433,594 1,522,101 1,224,312 1,952,445
Gross profit 125,901 121,220 417,090 376,321 533,883
Selling, general and administrative expenses 80,548 73,293 247,829 206,225 320,437
Operating profit 45,353 47,927 169,261 170,096 213,446
Interest expense, net 1,720 311 4,481 1,162 4,756
Income before income taxes 43,633 47,616 164,780 168,934 208,690
Provision for income taxes 9,821 15,478 36,408 53,514 62,854
Net income $33,812 $32,138 $128,372 $115,420 $145,836
Net income per common share:
Basic $1.34 $1.28 $5.09 $4.62 $5.79
Diluted $1.33 $1.26 $5.03 $4.56 $5.72
Weighted average common shares outstanding:
Basic 25,235 25,060 25,208 24,993 25,182
Diluted 25,504 25,459 25,509 25,332 25,508
Depreciation and amortization $17,263 $14,326 $49,739 $39,856 $64,610
Capital expenditures $37,983 $17,066 $92,522 $60,342 $119,401
LCI INDUSTRIES
SEGMENT RESULTS
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
Last Twelve
2018 2017 2018 2017
Months
(In thousands)
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels $338,830 $357,940 $1,143,251 $1,045,465 $1,503,769
Motorhomes 43,244 41,595 145,230 114,887 189,760
Adjacent industries OEMs 157,904 106,386 468,594 310,373 569,444
Total OEM Segment net sales 539,978 505,921 1,757,075 1,470,725 2,262,973
Aftermarket Segment:
Total Aftermarket Segment net sales 64,266 48,893 182,116 129,908 223,355
Total net sales $604,244 $554,814 $1,939,191 $1,600,633 $2,486,328
Operating Profit:
OEM Segment $36,905 $41,025 $144,436 $151,867 $182,845
Aftermarket Segment 8,448 6,902 24,825 18,229 30,601
Total operating profit $45,353 $47,927 $169,261 $170,096 $213,446
LCI INDUSTRIES
BALANCE SHEET INFORMATION
(unaudited)
September 30,
December 31,
2018 2017 2017
(In thousands)
ASSETS
Current assets
Cash and cash equivalents $18,250 $19,762 $26,049
Accounts receivable, net of allowances of $2,866, 162,748 139,144 82,157
$2,343, and $1,536 at September 30, 2018,
September 30, 2017, and December 31, 2017,
respectively
Inventories, net 325,819 229,763 274,748
Prepaid expenses and other current assets 49,887 45,384 34,125
Total current assets 556,704 434,053 417,079
Fixed assets, net 304,144 210,304 228,950
Goodwill 163,211 123,001 124,183
Other intangible assets, net 171,724 134,761 130,132
Deferred taxes 12,643 32,380 24,156
Other assets 25,793 21,277 21,358
Total assets $1,234,219 $955,776 $945,858
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, trade $80,859 $88,148 $79,164
Accrued expenses and other current liabilities 101,848 109,849 102,849
Total current liabilities 182,707 197,997 182,013
Long-term indebtedness 243,504 49,918 49,924
Other long-term liabilities 72,362 60,805 61,176
Total liabilities 498,573 308,720 293,113
Total stockholders' equity 735,646 647,056 652,745
Total liabilities and stockholders' equity $1,234,219 $955,776 $945,858
LCI INDUSTRIES
SUMMARY OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
2018 2017
(In thousands)
Cash flows from operating activities:
Net income $128,372 $115,420
Adjustments to reconcile net income to cash flows provided by operating
activities:
Depreciation and amortization 49,739 39,856
Stock-based compensation expense 13,852 15,042
Other non-cash items (959) 3,655
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (51,733) (69,720)
Inventories, net (16,475) (33,780)
Prepaid expenses and other assets (9,506) (18,662)
Accounts payable, trade (12,930) 29,856
Accrued expenses and other liabilities 7,232 26,147
Net cash flows provided by operating activities 107,592 107,814
Cash flows from investing activities:
Capital expenditures (92,522) (60,342)
Acquisitions of businesses, net of cash acquired (156,701) (67,876)
Proceeds from note receivable 2,000
Other investing activities (875) 243
Net cash flows used in investing activities (248,098) (127,975)
Cash flows from financing activities:
Exercise of stock-based awards, net of shares tendered for payment of taxes (14,114) (7,313)
Proceeds from line of credit borrowings 928,601 9,715
Repayments under line of credit borrowings (738,601) (9,715)
Proceeds from other borrowings 4,509
Payment of dividends (44,114) (37,346)
Payment of contingent consideration related to acquisitions (3,018) (1,529)
Other financing activities (556) (59)
Net cash flows provided by (used in) financing activities 132,707 (46,247)
Net decrease in cash and cash equivalents (7,799) (66,408)
Cash and cash equivalents at beginning of period 26,049 86,170
Cash and cash equivalents at end of period $18,250 $19,762
LCI INDUSTRIES
SUPPLEMENTARY INFORMATION
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
Last Twelve
2018 2017 2018 2017
Months
Industry Data(1)(in thousands of units):
Industry Wholesale Production:
Travel trailer and fifth-wheel RVs 92.1 103.9 324.5 321.3 432.7
Motorhome RVs 12.3 14.5 45.4 47.3 60.7
Industry Retail Sales:
Travel trailer and fifth-wheel RVs
122.3 (2) 120.6
352.4 (2) 332.9
420.5 (2)
Impact on dealer inventories
(30.2) (2) (16.7)
(27.9) (2) (11.6)
12.2 (2)
Motorhome RVs
13.6 (2) 14.2
42.7 (2) 42.7
52.8 (2)
Twelve Months Ended
September 30,
2018 2017
LCI Content Per Industry Unit Produced:
Travel trailer and fifth-wheel RV $3,456 $3,172
Motorhome RV $2,480 $2,152
September 30,
December 31,
2018 2017 2017
Balance Sheet Data:
Current ratio 3.0 2.2 2.3
Total indebtedness to stockholders' equity 0.3 0.1 0.1
Days sales in accounts receivable 26.4 22.5 17.8
Inventory turns, based on last twelve months 6.6 7.8 7.7
2018
Estimated Full Year Data:
Capital expenditures
$ 100 - $ 115 million
Depreciation and amortization
$ 70 - $ 75 million
Stock-based compensation expense
$ 18 - $ 20 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) September 2018 retail sales data for RVs has not been published yet, therefore 2018 retail data for RVs includes an estimate for September 2018 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 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.
Contact: Brian Hall, CFO
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Phone: (574) 535-1125
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E Mail: LCII@lci1.com
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SOURCE LCI Industries
