LCI INDUSTRIES REPORTS THIRD QUARTER FINANCIAL RESULTS
Diversification strategy proving effective while delivering record content
Third Quarter 2022 Highlights
•Net sales of $1.1 billion in the third quarter, down $33.2 million, or 3%, year-over-year
•Net income of $61.4 million, or $2.40 per diluted share, in the third quarter, down $2.0 million, or 3%, year-over-year
•EBITDA of $119.8 million, up $1.9 million, or 2%, year-over-year
•Quarterly dividend of $1.05 per share paid totaling $26.7 million in the third quarter
North American RV OEM (56% of net sales last twelve months)
•Net sales of $541.2 million in the third quarter, down $85.3 million, or 14%, year-over-year, driven by a nearly 40% decline in industry wholesale shipments
•Content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2022, increased 55% year-over-year to a record $5,853
North American Adjacent Industries OEM (21% of net sales last twelve months)
•Net sales of $295.2 million in the third quarter, up $48.6 million, or 20%, year-over-year
•North American marine OEM net sales of $125.1 million, up 22% year-over-year
•Content per power boat for the twelve months ended September 30, 2022, increased 46% year-over-year to $1,792
North American Aftermarket (16% of net sales last twelve months)
•Net sales of $203.1 million in the third quarter, down $1.5 million, or 1%, year-over-year
•Decline in automotive aftermarket sales largely offset by strength in RV aftermarket sales
International Industries (7% of net sales last twelve months)
•Net sales of $92.6 million in the third quarter, up $5.0 million, or 6%, year-over-year
Elkhart, Indiana - November 1, 2022 - 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 third quarter 2022 results.
“Our results continue to demonstrate the effectiveness of our diversification strategy, which has positioned Lippert to maintain strong performance during a downturn in RV demand. During the third quarter, we delivered growth in adjacent markets and leveraged our flexible cost structure to support profitability, as the RV industry adjusts to softened consumer demand and macroeconomic uncertainty,” commented Jason Lippert, LCI Industries’ President and Chief Executive Officer.
“The operational improvements we’ve implemented over the last several years have enabled us to nimbly balance capacity while maintaining our product quality, as wholesale RV production is expected to remain tempered in the near-term. Other key end markets, including marine, motorhomes, manufactured housing, power sports, and the RV
aftermarket continued to perform well, helping our overall business more effectively than if it was solely concentrated in the RV market. We remain confident in the underlying secular trends fueling popularity in the outdoor lifestyle and will keep investing in innovation throughout our portfolio to capture demand for technologically sophisticated products,” Lippert continued. “With our strong, cohesive culture guided by our experienced leadership team, we believe we are well-positioned to manage through a challenging economic environment to advance our business and drive long-term shareholder value.”
“The operational strength demonstrated by our teams proved critical to supporting our performance this quarter. We look forward to continuing this momentum as we continue to collaborate with our customers while achieving progress on strategic priorities,” commented Ryan Smith, Group President – North America.
Third Quarter 2022 Results
Consolidated net sales for the third quarter of 2022 were $1.1 billion, a decrease of three percent from 2021 third quarter net sales of $1.2 billion. Net income in the third quarter of 2022 was $61.4 million, or $2.40 per diluted share, compared to net income of $63.4 million, or $2.49 per diluted share, in the third quarter of 2021. EBITDA in the third quarter of 2022 was $119.8 million, compared to EBITDA of $118.0 million in the third quarter of 2021. Additional information regarding EBITDA, as well as a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, is provided in the "Supplementary Information - Reconciliation of Non-GAAP Measures" section below.
The decrease in year-over-year net sales for the third quarter of 2022 was primarily driven by decreased North American RV wholesale shipments, partially offset by price realization, acquisitions, and an increase in net sales to OEMs in adjacent industries. Net sales from acquisitions completed in the twelve months ended September 30, 2022 contributed approximately $39 million in the third quarter of 2022.
The Company's average product content per travel trailer and fifth-wheel RV for the twelve months ended September 30, 2022, increased $2,067 to $5,853, compared to $3,786 for the twelve months ended September 30, 2021. The content increase in towables was primarily a result of organic growth, including pricing and new product introductions, market share gains, and acquisitions.
October 2022 Results
October 2022 consolidated net sales were approximately $345 million, down 24 percent from October 2021, demonstrating positive trends as the Company moves into the last quarter of 2022, a testament to diversification efforts which are helping to offset the deceleration experienced in North American RV production.
Income Taxes
The Company's effective tax rate was 23.9 percent for the quarter ended September 30, 2022, compared to 24.8 percent for the quarter ended September 30, 2021. The decrease in the effective tax rate was primarily due to the settlement of uncertain tax positions, partially offset by a decrease in the cash surrender value of life insurance.
Balance Sheet and Other Items
At September 30, 2022, the Company's cash and cash equivalents balance was $23.4 million, compared to $62.9 million at December 31, 2021. The Company used $103.7 million for capital expenditures, $76.3 million for dividend payments to shareholders, and $55.7 million for acquisitions in the nine months ended September 30, 2022. The Company also made $156.1 million in net repayments under its revolving credit facility
and $65.9 million in repayments under its shelf loan, term loan, and other borrowings in the nine months ended September 30, 2022.
The Company's outstanding long-term indebtedness, including current maturities, was $1.1 billion at September 30, 2022, 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 third quarter results on Tuesday, November 1, 2022, at 8:30 a.m. Eastern time, which may be accessed by dialing (844) 200-6205 for participants in the U.S. and (226) 828-7575 for those in Canada or (929) 526-1599 for participants outside the U.S./Canada using the required conference ID 464745. 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 (929) 458-6194 for participants in the U.S. and (226) 828-7578 for those in Canada or (204) 525-0658 for participants outside the U.S./Canada and referencing access code 932786. 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 buses; trailers used to haul boats, livestock, equipment, and other cargo; trucks; boats; 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, 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, 2021, 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.
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LCI INDUSTRIES
OPERATING RESULTS
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
Last Twelve
2022
2021
2022
2021
Months
(In thousands, except per share amounts)
Net sales
$
1,132,079
$
1,165,309
$
4,312,797
$
3,259,287
$
5,526,207
Cost of sales
879,025
913,728
3,186,415
2,508,318
4,107,759
Gross profit
253,054
251,581
1,126,382
750,969
1,418,448
Selling, general and administrative expenses
165,479
162,557
550,317
466,532
728,410
Operating profit
87,575
89,024
576,065
284,437
690,038
Interest expense, net
6,910
4,667
19,353
10,844
24,875
Income before income taxes
80,665
84,357
556,712
273,593
665,163
Provision for income taxes
19,273
20,956
144,609
68,183
170,731
Net income
$
61,392
$
63,401
$
412,103
$
205,410
$
494,432
Net income per common share:
Basic
$
2.41
$
2.51
$
16.23
$
8.14
$
19.48
Diluted
$
2.40
$
2.49
$
16.15
$
8.10
$
19.35
Weighted average common shares outstanding:
Basic
25,447
25,286
25,398
25,247
25,380
Diluted
25,600
25,417
25,520
25,371
25,548
Depreciation
$
17,989
$
16,451
$
53,953
$
47,047
$
71,660
Amortization
$
14,258
$
12,490
$
42,013
$
33,164
$
56,415
Capital expenditures
$
32,911
$
31,867
$
103,748
$
73,872
$
128,410
LCI INDUSTRIES
SEGMENT RESULTS
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
Last Twelve
2022
2021
2022
2021
Months
(In thousands)
Net sales:
OEM Segment:
RV OEMs:
Travel trailers and fifth-wheels
$
493,515
$
602,429
$
2,261,250
$
1,633,059
$
2,923,803
Motorhomes
82,922
63,259
261,656
193,105
327,546
Adjacent Industries OEMs
335,983
280,593
1,062,374
801,021
1,350,358
Total OEM Segment net sales
912,420
946,281
3,585,280
2,627,185
4,601,707
Aftermarket Segment:
Total Aftermarket Segment net sales
219,659
219,028
727,517
632,102
924,500
Total net sales
$
1,132,079
$
1,165,309
$
4,312,797
$
3,259,287
$
5,526,207
Operating profit:
OEM Segment
$
65,186
$
64,136
$
501,137
$
206,757
$
599,056
Aftermarket Segment
22,389
24,888
74,928
77,680
90,982
Total operating profit
$
87,575
$
89,024
$
576,065
$
284,437
$
690,038
Depreciation and amortization:
OEM Segment depreciation
$
14,213
$
12,782
$
43,090
$
37,054
$
56,880
Aftermarket Segment depreciation
3,776
3,669
10,863
9,993
14,780
Total depreciation
$
17,989
$
16,451
$
53,953
$
47,047
$
71,660
OEM Segment amortization
$
10,472
$
8,632
$
30,668
$
22,877
$
40,672
Aftermarket Segment amortization
3,786
3,858
11,345
10,287
15,743
Total amortization
$
14,258
$
12,490
$
42,013
$
33,164
$
56,415
LCI INDUSTRIES
BALANCE SHEET INFORMATION
(unaudited)
September 30,
December 31,
2022
2021
(In thousands)
ASSETS
Current assets
Cash and cash equivalents
$
23,403
$
62,896
Accounts receivable, net
335,945
319,782
Inventories, net
1,079,902
1,095,907
Prepaid expenses and other current assets
66,236
88,300
Total current assets
1,505,486
1,566,885
Fixed assets, net
470,571
426,455
Goodwill
551,615
543,180
Other intangible assets, net
489,555
519,957
Operating lease right-of-use assets
195,877
164,618
Other long-term assets
55,867
66,999
Total assets
$
3,268,971
$
3,288,094
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term indebtedness
$
22,089
$
71,003
Accounts payable, trade
201,032
282,183
Current portion of operating lease obligations
33,862
30,592
Accrued expenses and other current liabilities
243,138
243,438
Total current liabilities
500,121
627,216
Long-term indebtedness
1,039,870
1,231,959
Operating lease obligations
172,643
143,436
Deferred taxes
26,816
43,184
Other long-term liabilities
105,964
149,424
Total liabilities
1,845,414
2,195,219
Total stockholders' equity
1,423,557
1,092,875
Total liabilities and stockholders' equity
$
3,268,971
$
3,288,094
LCI INDUSTRIES
SUMMARY OF CASH FLOWS
(unaudited)
Nine Months Ended September 30,
2022
2021
(In thousands)
Cash flows from operating activities:
Net income
$
412,103
$
205,410
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization
95,966
80,211
Stock-based compensation expense
20,564
20,295
Deferred taxes
(2,401)
—
Other non-cash items
1,174
5,418
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net
(18,128)
(140,768)
Inventories, net
26,508
(253,031)
Prepaid expenses and other assets
31,304
(28,274)
Accounts payable, trade
(82,054)
97,071
Accrued expenses and other liabilities
471
25,961
Net cash flows provided by operating activities
485,507
12,293
Cash flows from investing activities:
Capital expenditures
(103,748)
(73,872)
Acquisitions of businesses
(55,709)
(154,544)
Other investing activities
2,137
11,544
Net cash flows used in investing activities
(157,320)
(216,872)
Cash flows from financing activities:
Vesting of stock-based awards, net of shares tendered for payment of taxes
(10,805)
(8,258)
Proceeds from revolving credit facility
844,900
832,493
Repayments under revolving credit facility
(1,001,040)
(912,547)
Repayments under shelf loan, term loan, and other borrowings
(65,852)
(13,375)
Proceeds from issuance of convertible notes
—
460,000
Purchases of convertible note hedge contracts
—
(100,142)
Proceeds from issuance of warrants concurrent with note hedge contracts
—
48,484
Payment of debt issuance costs
—
(11,955)
Payment of dividends
(76,273)
(64,425)
Payment of contingent consideration and holdbacks related to acquisitions
(57,328)
(8,061)
Other financing activities
1,468
1,972
Net cash flows (used in) provided by financing activities
(364,930)
224,186
Effect of exchange rate changes on cash and cash equivalents
(2,750)
1,187
Net (decrease) increase in cash and cash equivalents
(39,493)
20,794
Cash and cash equivalents at beginning of period
62,896
51,821
Cash and cash equivalents cash at end of period
$
23,403
$
72,615
LCI INDUSTRIES
SUPPLEMENTARY INFORMATION
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
Last Twelve
2022
2021
2022
2021
Months
Industry Data(1) (in thousands of units):
Industry Wholesale Production:
Travel trailer and fifth-wheel RVs
73.4
136.0
359.3
401.0
489.6
Motorhome RVs
15.3
13.3
45.8
42.4
59.6
Industry Retail Sales:
Travel trailer and fifth-wheel RVs
102.4
(2)
131.0
325.1
(2)
426.1
401.7
(2)
Impact on dealer inventories
(29.0)
(2)
5.0
34.2
(2)
(25.1)
87.9
(2)
Motorhome RVs
11.5
(2)
14.1
38.4
(2)
44.4
49.4
(2)
Twelve Months Ended
September 30,
2022
2021
Lippert Content Per Industry Unit Produced:
Travel trailer and fifth-wheel RV
$
5,853
$
3,786
Motorhome RV
$
3,806
$
2,732
September 30,
December 31,
2022
2021
2021
Balance Sheet Data (debt availability in millions):
Remaining availability under the revolving credit facility (3)
$
369.2
$
267.2
$
168.3
Days sales in accounts receivable, based on last twelve months
28.0
30.9
30.6
Inventory turns, based on last twelve months
3.8
5.7
5.0
2022
Estimated Full Year Data:
Capital expenditures
$110 - $130 million
Depreciation and amortization
$130 - $140 million
Stock-based compensation expense
$25 - $30 million
Annual tax rate
25% - 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) September 2022 retail sales data for RVs has not been published yet, therefore 2022 retail data for RVs includes an estimate for September 2022 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 September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
(In thousands)
Net income
$
61,392
$
63,401
$
412,103
$
205,410
Interest expense, net
6,910
4,667
19,353
10,844
Provision for income taxes
19,273
20,956
144,609
68,183
Depreciation expense
17,989
16,451
53,953
47,047
Amortization expense
14,258
12,490
42,013
33,164
EBITDA
$
119,822
$
117,965
$
672,031
$
364,648
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 nine month periods ended September 30, 2022 and 2021. 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.
