Diversification and operational focus leads to
sequential margin expansion
Second Quarter 2023 Highlights
- Net sales of $1.0 billion in the second quarter, down 34%
year-over-year
- Net income of $33 million, or $1.31 per diluted share, in the
second quarter, down 78% year-over-year
- EBITDA of $88 million, down 65% year-over-year
- Continued execution of diversification strategy with North
American RV OEM net sales less than 42% of total net sales for
twelve months ended June 30, 2023
- Inventory reduction of $200 million year-to-date through June
30, 2023
- Net repayments of long-term indebtedness of $179 million
year-to-date through June 30, 2023.
- Quarterly dividend of $1.05 per share paid, totaling $27
million in the second quarter
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, transportation
products, and housing markets, and the related aftermarkets of
those industries, today reported second quarter 2023 results.
“Our operational focus and consistent execution on
diversification have remained the cornerstone of our performance,
supporting solid results in light of significant year-over-year
drops in wholesale shipments. Execution on diversification has
continued to pay off, with strength across our aftermarket,
international, marine, transportation, and housing markets helping
partially offset softer sales in North American RV. Specifically,
we saw meaningful margin expansion in our Aftermarket segment for
the quarter,” commented Jason Lippert, LCI Industries’ President
and Chief Executive Officer. “Further, our leadership teams have
been hard at work to right-size the business, implementing hundreds
of continuous improvement projects, kicking off sourcing
initiatives to capture lower raw material costs, and investing over
$50 million in automation over the past 18 months to drive new
efficiencies. These actions, combined with reduced commodity and
freight expenses, have put our cost structure into better
alignment, leading to another quarter of sequential margin
expansion.”
“We are continuing to flex operations to align capacity and
labor with shifting OEM production schedules, while also supporting
the areas of our business that remain strong. With significant
inventory reductions year-to-date, we are generating sufficient
cash to pay down debt and further strengthen our balance sheet
amidst uncertain operating conditions,” Lippert continued.
“The demand environment is improving, with order forecasts
trending slightly upwards from the last quarter, dealer destocking
beginning to slow, and older inventory clearing out as the latest
models enter the market. Millions more campers hit the road this
Memorial Day and Fourth of July versus 2022, and with RV trips
being almost 50% cheaper versus traditional modes of vacation, we
see a bright road ahead of for the future of the outdoor lifestyle.
Most importantly, we would like to give a heartfelt thank you to
our team members for their commitment to driving our business
forward and managing through a very challenging environment this
quarter,” Lippert concluded.
Second Quarter 2023 Results
Consolidated net sales for the second quarter of 2023 were $1.0
billion, a decrease of 34 percent from 2022 second quarter net
sales of $1.5 billion. Net income in the second quarter of 2023 was
$33.4 million, or $1.31 per diluted share, compared to net income
of $154.5 million, or $6.06 per diluted share, in the second
quarter of 2022. EBITDA in the second quarter of 2023 was $88.2
million, compared to EBITDA of $250.7 million in the second 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 second 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 June 30,
2023 contributed approximately $17.2 million in the second quarter
of 2023.
July 2023 Results
July 2023 consolidated net sales were approximately $295
million, down 20 percent from July 2022, primarily due to an
approximate 30 percent decline in North American RV wholesale
shipments compared to July 2022. July 2023 results were favorably
impacted by our diversification efforts outside of the North
American RV market, which made up approximately 38 percent of July
2023 consolidated net sales.
OEM Segment
RV OEM RV OEM net sales for the second quarter of 2023 were
$409.9 million, down 55% compared to the same prior year period,
driven by a nearly 44% decline in North American wholesale
shipments, partially offset by average product content expansion in
towables and motorhomes. For the twelve months ended June 30, 2023,
content per North American travel trailer and fifth-wheel RVs
increased 2% year-over-year to $5,487, and content per motorized
unit increased 6% year-over-year to $3,760.
Adjacent Industries OEM Adjacent Industries OEM net sales for
the second quarter of 2023 were $349.1 million, down 6%
year-over-year, primarily due to lower sales to North American
marine OEMs and in manufactured housing. North American marine OEM
net sales in the second quarter of 2023 were $95.8 million, down
28% year-over-year. Our average product content per North American
power boat for the twelve months ended June 30, 2023, decreased 17%
year-over-year to $1,457, primarily due to price decreases
associated with year-over-year declining input costs and changes in
product mix.
Aftermarket Segment
Aftermarket net sales for the second quarter of 2023 were $255.6
million, down 2% year-over-year, driven by inflationary pressures
impacting consumer demand. Operating profit of the Aftermarket
Segment was $36.5 million in the second quarter of 2023, or 14.3
percent, compared to $28.2 million, or 10.9 percent in the same
period in 2022. The operating profit expansion of the Aftermarket
Segment for the quarter was driven by decreased commodity costs and
targeted price increases.
Income Taxes
The Company's effective tax rate was 25.6 percent for the
quarter ended June 30, 2023, compared to 27.3 percent for the
quarter ended June 30, 2022. The rate was benefited by an increase
related to the cash surrender value of life insurance.
Balance Sheet and Other Items
At June 30, 2023, the Company's cash and cash equivalents
balance was $22.1 million, compared to $47.5 million at December
31, 2022. The Company used $53.2 million for dividend payments to
shareholders, $34.1 million for capital expenditures, and $25.9
million for acquisitions in the six months ended June 30, 2023. The
Company also made $168.5 million in net repayments under its
revolving credit facility and $10.7 million in repayments under its
term loan and other borrowings in the six months ended June 30,
2023.
The Company's outstanding long-term indebtedness, including
current maturities, was $943.5 million at June 30, 2023, and the
Company remained in compliance with its debt covenants.
Conference Call & Webcast
LCI Industries will host a conference call to discuss its second
quarter results on Tuesday, August 8, 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 458725. 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 869147. 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,
transportation products, and housing 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
June 30,
Six Months Ended
June 30,
Last Twelve
2023
2022
2023
2022
Months
(In thousands, except per share
amounts)
Net sales
$
1,014,639
$
1,536,150
$
1,987,949
$
3,180,718
$
4,014,374
Cost of sales
796,519
1,127,065
1,583,758
2,307,390
3,210,222
Gross profit
218,120
409,085
404,191
873,328
804,152
Selling, general and administrative
expenses
162,946
190,296
328,974
384,838
664,397
Operating profit
55,174
218,789
75,217
488,490
139,755
Interest expense, net
10,249
6,191
20,643
12,443
35,773
Income before income taxes
44,925
212,598
54,574
476,047
103,982
Provision for income taxes
11,499
58,068
13,889
125,336
19,034
Net income
$
33,426
$
154,530
$
40,685
$
350,711
$
84,948
Net income per common share:
Basic
$
1.32
$
6.07
$
1.61
$
13.82
$
3.35
Diluted
$
1.31
$
6.06
$
1.60
$
13.76
$
3.34
Weighted average common shares
outstanding:
Basic
25,329
25,438
25,273
25,377
25,326
Diluted
25,437
25,518
25,359
25,483
25,458
Depreciation
$
18,867
$
18,010
$
37,117
$
35,964
$
73,993
Amortization
$
14,183
$
13,897
$
28,432
$
27,755
$
57,049
Capital expenditures
$
16,923
$
28,800
$
34,082
$
70,837
$
93,886
LCI INDUSTRIES
SEGMENT RESULTS
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
Last Twelve
2023
2022
2023
2022
Months
(In thousands)
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels
$
338,739
$
814,509
$
669,292
$
1,767,735
$
1,519,143
Motorhomes
71,185
91,480
140,736
178,734
301,098
Adjacent Industries OEMs
349,084
370,289
707,152
726,391
1,339,950
Total OEM Segment net sales
759,008
1,276,278
1,517,180
2,672,860
3,160,191
Aftermarket Segment:
Total Aftermarket Segment net sales
255,631
259,872
470,769
507,858
854,183
Total net sales
$
1,014,639
$
1,536,150
$
1,987,949
$
3,180,718
$
4,014,374
Operating profit:
OEM Segment
$
18,642
$
190,577
$
17,921
$
435,951
$
61,120
Aftermarket Segment
36,532
28,212
57,296
52,539
78,635
Total operating profit
$
55,174
$
218,789
$
75,217
$
488,490
$
139,755
Depreciation and amortization:
OEM Segment depreciation
$
14,655
$
14,376
$
29,004
$
28,878
$
58,293
Aftermarket Segment depreciation
4,212
3,634
8,113
7,086
15,700
Total depreciation
$
18,867
$
18,010
$
37,117
$
35,964
$
73,993
OEM Segment amortization
$
10,204
$
10,053
$
20,654
$
20,197
$
41,710
Aftermarket Segment amortization
3,979
3,844
7,778
7,558
15,339
Total amortization
$
14,183
$
13,897
$
28,432
$
27,755
$
57,049
LCI INDUSTRIES
BALANCE SHEET
INFORMATION
(unaudited)
June 30,
December 31,
2023
2022
(In thousands)
ASSETS
Current assets
Cash and cash equivalents
$
22,094
$
47,499
Accounts receivable, net
299,469
214,262
Inventories, net
830,020
1,029,705
Prepaid expenses and other current
assets
83,662
99,310
Total current assets
1,235,245
1,390,776
Fixed assets, net
478,885
482,185
Goodwill
584,312
567,063
Other intangible assets, net
477,307
503,320
Operating lease right-of-use assets
241,146
247,007
Other long-term assets
59,502
56,561
Total assets
$
3,076,397
$
3,246,912
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term
indebtedness
$
27,712
$
23,086
Accounts payable, trade
182,637
143,529
Current portion of operating lease
obligations
35,004
35,447
Accrued expenses and other current
liabilities
196,099
219,238
Total current liabilities
441,452
421,300
Long-term indebtedness
915,756
1,095,888
Operating lease obligations
217,979
222,478
Deferred taxes
26,900
30,580
Other long-term liabilities
103,413
95,658
Total liabilities
1,705,500
1,865,904
Total stockholders' equity
1,370,897
1,381,008
Total liabilities and stockholders'
equity
$
3,076,397
$
3,246,912
LCI INDUSTRIES
SUMMARY OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
2023
2022
(In thousands)
Cash flows from operating activities:
Net income
$
40,685
$
350,711
Adjustments to reconcile net income to
cash flows provided by operating activities:
Depreciation and amortization
65,549
63,719
Stock-based compensation expense
9,080
13,701
Deferred taxes
—
(2,401
)
Other non-cash items
2,192
2,025
Changes in assets and liabilities, net of
acquisitions of businesses:
Accounts receivable, net
(80,952
)
(95,479
)
Inventories, net
209,346
(51,811
)
Prepaid expenses and other assets
11,607
25,746
Accounts payable, trade
37,949
5,312
Accrued expenses and other liabilities
(21,891
)
36,448
Net cash flows provided by operating
activities
273,565
347,971
Cash flows from investing activities:
Capital expenditures
(34,082
)
(70,837
)
Acquisitions of businesses
(25,851
)
(51,789
)
Other investing activities
4,344
2,204
Net cash flows used in investing
activities
(55,589
)
(120,422
)
Cash flows from financing activities:
Vesting of stock-based awards, net of
shares tendered for payment of taxes
(9,585
)
(10,773
)
Proceeds from revolving credit
facility
234,200
729,400
Repayments under revolving credit
facility
(402,726
)
(836,500
)
Repayments under shelf loan, term loan,
and other borrowings
(10,703
)
(60,902
)
Payment of dividends
(53,154
)
(49,572
)
Payment of contingent consideration and
holdbacks related to acquisitions
(517
)
(6,039
)
Other financing activities
(834
)
(4
)
Net cash flows used in financing
activities
(243,319
)
(234,390
)
Effect of exchange rate changes on cash
and cash equivalents
(62
)
(1,067
)
Net decrease in cash and cash
equivalents
(25,405
)
(7,908
)
Cash and cash equivalents at beginning of
period
47,499
62,896
Cash and cash equivalents cash at end of
period
$
22,094
$
54,988
LCI INDUSTRIES
SUPPLEMENTARY
INFORMATION
(unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
Last Twelve
2023
2022
2023
2022
Months
Industry Data(1) (in thousands of
units):
Industry Wholesale Production:
Travel trailer and fifth-wheel RVs
71.6
133.8
132.8
286.2
268.2
Motorhome RVs
12.1
14.8
25.5
30.7
53.2
Industry Retail Sales:
Travel trailer and fifth-wheel RVs
105.3
(2)
129.6
176.7
(2)
224.6
341.7
(2)
Impact on dealer inventories
(33.7
)
(2)
4.2
(43.9
)
(2)
61.6
(73.5
)
(2)
Motorhome RVs
13.0
(2)
14.0
23.8
(2)
27.1
45.1
(2)
Twelve Months Ended
June 30,
2023
2022
Lippert Content Per Industry Unit
Produced:
Travel trailer and fifth-wheel RV
$
5,487
$
5,379
Motorhome RV
$
3,760
$
3,557
June 30,
December 31,
2023
2022
2022
Balance Sheet Data (debt availability in
millions):
Remaining availability under the revolving
credit facility (3)
$
270.0
$
286.7
$
306.5
Days sales in accounts receivable, based
on last twelve months
28.4
28.2
27.5
Inventory turns, based on last twelve
months
3.2
4.3
3.5
2023
Estimated Full Year Data:
Capital expenditures
$60 - $80 million
Depreciation and amortization
$130 - $140 million
Stock-based compensation expense
$18 - $23 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)
June 2023 retail sales data for RVs has
not been published yet, therefore 2023 retail data for RVs includes
an estimate for June 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 June 30,
Six Months Ended June 30,
2023
2022
2023
2022
(In thousands)
Net income
$
33,426
$
154,530
$
40,685
$
350,711
Interest expense, net
10,249
6,191
20,643
12,443
Provision for income taxes
11,499
58,068
13,889
125,336
Depreciation expense
18,867
18,010
37,117
35,964
Amortization expense
14,183
13,897
28,432
27,755
EBITDA
$
88,224
$
250,696
$
140,766
$
552,209
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 and six month periods ended June 30, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808453389/en/
Contact: Lillian D. Etzkorn, CFO
Phone: (574) 535-1125 E Mail:
LCII@lci1.com
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