ELKHART, Ind.--(BUSINESS WIRE)--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 full year and fourth quarter 2018 results.
“We delivered another record year with net sales reaching nearly $2.5 billion, a year-over-year increase of 15 percent. Our strategy to diversify our business through adjacent markets, the aftermarket, and internationally is clearly paying off. We saw strong growth in each of these markets, as well as a substantial increase in content per vehicle in our RV OEM segment supporting our outperformance of the industry,” said LCI Industries’ Chief Executive Officer, Jason Lippert. “While we are confident in our ability to further execute on our strategy going forward, we are cognizant of the challenges that our business and industry have faced over the last twelve months. As such, we have taken a number of actions to enhance our business in a short-term lower volume environment, including price increases to offset tariffs and higher commodity pricing and scaling back capital expenditures to boost return on investment and cash flows. As we look to 2019, we are confident we will continue to deliver solid financial and operating performance, as our entire team remains laser-focused on growth, penetrating new markets, and driving more value to our customers through unmatched innovation.”
Full Year 2018 Results
Consolidated net sales for the full year 2018 were $2,475.8 million, an increase of 15 percent over the prior year net sales of $2,147.8 million. Net income for the full year 2018 was $148.6 million, or $5.83 per diluted share, compared to net income of $132.9 million, or $5.24 per diluted share, in 2017. Net income for 2018 and 2017 included one-time non-cash charges of $612,000 ($0.03 per diluted share) and $13.2 million ($0.52 per diluted share), respectively, related to the impact of the Tax Cuts and Jobs Act (the "TCJA"). Excluding the impact of the TCJA, adjusted net income was $149.2 million, or $5.86 per diluted share, for the full year 2018, compared to $146.1 million, or $5.76 per diluted share, for the full year 2017, as referenced in the "Supplementary Information Non-GAAP Measures" section.
The increase in year-over-year net sales reflects growth across the Company’s segments, as well as the addition of acquisitions completed by the Company over the twelve months ended December 31, 2018. Net sales from acquisitions completed by the Company over the twelve months ended December 31, 2018, contributed $231.4 million in 2018.
Fourth Quarter 2018 Results
Consolidated net sales for the fourth quarter of 2018 were $536.6 million, a decline of two percent from 2017 fourth quarter net sales of $547.1 million. Net income in the fourth quarter of 2018 was $20.2 million, or $0.80 per diluted share, compared to net income of $17.5 million, or $0.68 per diluted share, in the fourth quarter of 2017. Net income in the fourth quarter of 2018 and 2017 included one-time non-cash charges of $612,000 ($0.02 per diluted share) and $13.2 million ($0.52 per diluted share), respectively, related to the impact of the Tax Cuts and Jobs Act (the "TCJA"). Excluding the impact of the TCJA, adjusted net income was $20.8 million, or $0.82 per diluted share, for the fourth quarter of 2018, compared to $30.7 million, or $1.20 per diluted share, for the fourth quarter of 2017, as referenced in the "Supplementary Information Non-GAAP Measures" section.
The decrease in year-over-year net sales for the fourth quarter of 2018 reflects lower RV wholesale shipments as dealers normalize their inventory levels, offset by continued growth in the Company’s adjacent industries OEM, aftermarket, and international markets. Net sales from acquisitions completed by the Company over the twelve months ended December 31, 2018, contributed $59.2 million in the fourth quarter of 2018.
The Company’s content per travel trailer and fifth-wheel RV for the twelve months ended December 31, 2018, increased $187 to $3,450, compared to the twelve months ended December 31, 2017, of $3,263. The Company’s content per motorhome RV for the twelve months ended December 31, 2018, increased $272 to $2,491, compared to the twelve months ended December 31, 2017, of $2,219. The content increases are a result of organic growth, including new product introductions, as well as acquisitions.
January 2019 Results
January 2019 consolidated net sales are approximately $187 million, down 9% from January 2018. Sales continue to be impacted by reduced production rates by the OEMs in addition to poor weather that impacted multiple shipping days.
Income Taxes
The Company’s effective tax rate was 27 percent and 23 percent for the quarter and year ended December 31, 2018, compared to 60 percent and 38 percent for the quarter and year ended December 31, 2017. During the quarter ended December 31, 2018, the Company finalized its tax accounting for the TCJA and pursuant to SAB 118 and recorded a one-time non-cash charge of $612,000 ($0.02 per diluted share in the fourth quarter and $0.03 per diluted share in 2018) related to adjustments to deferred tax amounts provisionally recorded in the prior year. 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 the 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 these one-time charges, the Company's effective tax rate was 25 percent and 22 percent for the quarter and year ended December 31, 2018, and 30 percent and 31 percent for the quarter and year ended December 31, 2017, as referenced in the "Supplemental Information Non-GAAP Measures" section.
Balance Sheet and Other Items
At December 31, 2018, the Company’s cash and cash equivalents balance was $14.9 million, a decrease of $11.1 from its balance of $26.0 million at the beginning of the year. The Company generated cash flow from operations of $156.6 million and invested $119.8 million in capital expenditures for the twelve months ended December 31, 2018. Other cash outflows included $184.8 million for acquisitions and $59.3 million for dividend payments to shareholders, and were funded primarily by net borrowings of $240.1 million on the Company’s line of credit for the twelve months ended December 31, 2018. The Company’s outstanding debt was $293.5 million at December 31, 2018.
As previously announced, the Company initiated a stock repurchase program in the fourth quarter of 2018. The Company repurchased 0.4 million of its common shares for $28.7 million, with $121.3 million remaining in the current share repurchase authorization.
Conference Call & Webcast
LCI will provide an online, real-time webcast of its fourth quarter and year-end 2018 earnings conference call on the Company’s website, www.lci1.com/investors, on Thursday, February 7, 2019, at 11:00 a.m. Eastern time.
A replay of the call will be available for two weeks by dialing (855) 859-2056 and referencing access code 2388808. 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 December 31, |
Twelve Months Ended December 31, |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| (In thousands, except per share amounts) | ||||||||||||
| Net sales | $ | 536,616 | $ | 547,137 | $ | 2,475,807 | $ | 2,147,770 | ||||
| Cost of sales | 433,362 | 430,344 | 1,955,463 | 1,654,656 | ||||||||
| Gross profit | 103,254 | 116,793 | 520,344 | 493,114 | ||||||||
| Selling, general and administrative expenses | 73,727 | 72,608 | 321,556 | 278,833 | ||||||||
| Operating profit | 29,527 | 44,185 | 198,788 | 214,281 | ||||||||
| Interest expense, net | 1,955 | 275 | 6,436 | 1,437 | ||||||||
| Income before income taxes | 27,572 | 43,910 | 192,352 | 212,844 | ||||||||
| Provision for income taxes | 7,393 | 26,446 | 43,801 | 79,960 | ||||||||
| Net income | $ | 20,179 | $ | 17,464 | $ | 148,551 | $ | 132,884 | ||||
| Net income per common share: | ||||||||||||
| Basic | $ | 0.80 | $ | 0.70 | $ | 5.90 | $ | 5.31 | ||||
| Diluted | $ | 0.80 | $ | 0.68 | $ | 5.83 | $ | 5.24 | ||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 25,123 | 25,094 | 25,178 | 25,020 | ||||||||
| Diluted | 25,305 | 25,505 | 25,463 | 25,375 | ||||||||
| Depreciation and amortization | $ | 17,787 | $ | 14,871 | $ | 67,526 | $ | 54,727 | ||||
| Capital expenditures | $ | 27,305 | $ | 26,879 | $ | 119,827 | $ | 87,221 | ||||
| LCI INDUSTRIES | ||||||||||||
| SEGMENT RESULTS | ||||||||||||
|
(unaudited) |
||||||||||||
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| (In thousands) | ||||||||||||
| Net sales: | ||||||||||||
| OEM Segment: | ||||||||||||
| RV OEMs: | ||||||||||||
| Travel trailers and fifth-wheels | $ | 297,479 | $ | 360,518 | $ | 1,440,730 | $ | 1,405,983 | ||||
| Motorhomes | 42,067 | 44,530 | 187,297 | 159,417 | ||||||||
| Adjacent industries OEMs | 145,995 | 100,850 | 614,589 | 411,223 | ||||||||
| Total OEM Segment net sales | 485,541 | 505,898 | 2,242,616 | 1,976,623 | ||||||||
| Aftermarket Segment: | ||||||||||||
| Total Aftermarket Segment net sales | 51,075 | 41,239 | 233,191 | 171,147 | ||||||||
| Total net sales | $ | 536,616 | $ | 547,137 | $ | 2,475,807 | $ | 2,147,770 | ||||
| Operating profit: | ||||||||||||
| OEM Segment | $ | 23,040 | $ | 38,409 | $ | 167,459 | $ | 190,276 | ||||
| Aftermarket Segment | 6,487 | 5,776 | 31,329 | 24,005 | ||||||||
| Total operating profit | $ | 29,527 | $ | 44,185 | $ | 198,788 | $ | 214,281 | ||||
| LCI INDUSTRIES | ||||||
| BALANCE SHEET INFORMATION | ||||||
|
(unaudited) |
||||||
| December 31, | ||||||
| 2018 | 2017 | |||||
| (In thousands) | ||||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 14,928 | $ | 26,049 | ||
| Accounts receivable, net of allowances of $1,895 and $1,536 at December 31, 2018 and 2017, respectively | 121,812 | 82,157 | ||||
| Inventories, net | 340,615 | 274,748 | ||||
| Prepaid expenses and other current assets | 49,296 | 34,125 | ||||
| Total current assets | 526,651 | 417,079 | ||||
| Fixed assets, net | 322,876 | 228,950 | ||||
| Goodwill | 180,168 | 124,183 | ||||
| Other intangible assets, net | 176,342 | 130,132 | ||||
| Deferred taxes | 10,948 | 24,156 | ||||
| Other assets | 26,908 | 21,358 | ||||
| Total assets | $ | 1,243,893 | $ | 945,858 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities | ||||||
| Accounts payable, trade | $ | 78,354 | $ | 79,164 | ||
| Accrued expenses and other current liabilities | 99,228 | 102,849 | ||||
| Total current liabilities | 177,582 | 182,013 | ||||
| Long-term indebtedness | 293,528 | 49,924 | ||||
| Other long-term liabilities | 66,528 | 61,176 | ||||
| Total liabilities | 537,638 | 293,113 | ||||
| Total stockholders’ equity | 706,255 | 652,745 | ||||
| Total liabilities and stockholders’ equity | $ | 1,243,893 | $ | 945,858 | ||
| LCI INDUSTRIES | ||||||
| SUMMARY OF CASH FLOWS | ||||||
|
(unaudited) |
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|
Twelve Months Ended December 31, |
||||||
| 2018 | 2017 | |||||
| (In thousands) | ||||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 148,551 | $ | 132,884 | ||
| Adjustments to reconcile net income to cash flows provided by operating activities: | ||||||
| Depreciation and amortization | 67,526 | 54,727 | ||||
| Stock-based compensation expense | 14,065 | 20,036 | ||||
| Deferred taxes | 13,874 | 6,808 | ||||
| Other non-cash items | (13) | 4,371 | ||||
| Changes in assets and liabilities, net of acquisitions of businesses: | ||||||
| Accounts receivable, net | (11,352) | (12,601) | ||||
| Inventories, net | (34,730) | (78,698) | ||||
| Prepaid expenses and other assets | (17,691) | (10,898) | ||||
| Accounts payable, trade | (17,335) | 20,727 | ||||
| Accrued expenses and other liabilities | (6,287) | 15,346 | ||||
| Net cash flows provided by operating activities | 156,608 | 152,702 | ||||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (119,827) | (87,221) | ||||
| Acquisitions of businesses, net of cash acquired | (184,792) | (60,588) | ||||
| Proceeds from note receivable | 2,000 | 1,500 | ||||
| Other investing activities | (176) | 434 | ||||
| Net cash flows used in investing activities | (302,795) | (145,875) | ||||
| Cash flows from financing activities: | ||||||
| Exercise of stock-based awards, net of shares tendered for payment of taxes | (16,097) | (10,531) | ||||
| Proceeds from line of credit borrowings | 1,387,013 | 28,130 | ||||
| Repayments under line of credit borrowings | (1,146,953) | (28,130) | ||||
| Proceeds from other borrowings | 4,509 | — | ||||
| Payment of dividends | (59,270) | (51,057) | ||||
| Payment of contingent consideration related to acquisitions | (3,068) | (5,301) | ||||
| Repurchases of common stock | (28,695) | — | ||||
| Other financing activities | (2,373) | (59) | ||||
| Net cash flows provided by (used in) financing activities | 135,066 | (66,948) | ||||
| Net (decrease) increase in cash and cash equivalents | (11,121) | (60,121) | ||||
| Cash and cash equivalents at beginning of period | 26,049 | 86,170 | ||||
| Cash and cash equivalents at end of period | $ | 14,928 | $ | 26,049 | ||
| LCI INDUSTRIES | ||||||||||||
| SUPPLEMENTARY INFORMATION | ||||||||||||
|
(unaudited) |
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| Three Months Ended | Twelve Months Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| Industry Data(1) (in thousands of units): | ||||||||||||
| Industry Wholesale Production: | ||||||||||||
| Travel trailer and fifth-wheel RVs | 90.3 | 108.2 | 415.0 | 429.5 | ||||||||
| Motorhome RVs | 12.1 | 15.3 | 57.6 | 62.6 | ||||||||
| Industry Retail Sales: | ||||||||||||
| Travel trailer and fifth-wheel RVs | 63.1 |
(2) |
68.1 | 416.4 |
(2) |
401.0 | ||||||
| Impact on dealer inventories | 27.2 |
(2) |
40.1 | (1.4) |
(2) |
28.5 | ||||||
| Motorhome RVs | 9.0 |
(2) |
10.1 | 51.7 |
(2) |
52.8 | ||||||
| Twelve Months Ended | ||||||||||||
| December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| LCI Content Per Industry Unit Produced: | ||||||||||||
| Travel trailer and fifth-wheel RV | $ | 3,450 | $ | 3,263 | ||||||||
| Motorhome RV | $ | 2,491 | $ | 2,219 | ||||||||
| December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| Balance Sheet Data: | ||||||||||||
| Current ratio | 3.0 | 2.3 | ||||||||||
| Total indebtedness to stockholders’ equity | 0.4 | 0.1 | ||||||||||
| Days sales in accounts receivable | 27.7 | 17.8 | ||||||||||
| Inventory turns, based on last twelve months | 6.2 | 7.7 | ||||||||||
| 2019 | ||||||||||||
| Estimated Full Year Data: | ||||||||||||
| Capital expenditures | $ 55 - $ 65 million | |||||||||||
| Depreciation and amortization | $ 73 - $ 78 million | |||||||||||
| Stock-based compensation expense | $ 16 - $ 18 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) December 2018 retail sales data for RVs has not been published yet, therefore 2018 retail data for RVs includes an estimate for December 2018 retail units. Retail sales data will likely be revised upwards in future months as various states report.
| LCI INDUSTRIES | |||||||||||||||
| SUPPLEMENTARY INFORMATION | |||||||||||||||
| NON-GAAP MEASURES | |||||||||||||||
|
(unaudited) |
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| Three months ended December 31, 2018 | |||||||||||||||
| Diluted | |||||||||||||||
| Income before | Provision for | Effective tax | earnings per | ||||||||||||
| (In thousands, except per share amounts) | income taxes | income taxes | Net income | rate | share | ||||||||||
| As reported GAAP | $ | 27,572 | $ | 7,393 | $ | 20,179 | 27 | % | $ | 0.80 | |||||
| Impact of TCJA | — | (612) | 612 | (2) | % | 0.02 | |||||||||
| Adjusted non-GAAP (3) | $ | 27,572 | $ | 6,781 | $ | 20,791 | 25 | % | $ | 0.82 | |||||
| Three months ended December 31, 2017 | |||||||||||||||
| Diluted | |||||||||||||||
| Income before | Provision for | Effective tax | earnings per | ||||||||||||
| (In thousands, except per share amounts) | income taxes | income taxes | Net income | rate | 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, 2018 | |||||||||||||||
| Diluted | |||||||||||||||
| Income before | Provision for | Effective tax | earnings per | ||||||||||||
| (In thousands, except per share amounts) | income taxes | income taxes | Net income | rate | share | ||||||||||
| As reported GAAP | $ | 192,352 | $ | 43,801 | $ | 148,551 | 23 | % | $ | 5.83 | |||||
| Impact of TCJA | — | (612) | 612 | (1) | % | 0.03 | |||||||||
| Adjusted non-GAAP (3) | $ | 192,352 | $ | 43,189 | $ | 149,163 | 22 | % | $ | 5.86 | |||||
| Twelve months ended December 31, 2017 | |||||||||||||||
| Diluted | |||||||||||||||
| Income before | Provision for | Effective tax | earnings per | ||||||||||||
| (In thousands, except per share amounts) | income taxes | income taxes | Net income | rate | share | ||||||||||
| As reported GAAP | $ | 212,844 | $ | 79,960 | $ | 132,884 | 38 | % | $ | 5.24 | |||||
| Impact of TCJA | — | (13,209) | 13,209 | (7) | % | 0.52 | |||||||||
| Adjusted non-GAAP (3) | $ | 212,844 | $ | 66,751 | $ | 146,093 | 31 | % | $ | 5.76 | |||||
(3) During the fourth quarter of 2018, the Company finalized its tax accounting for the Tax Cuts and Jobs Act (the “TCJA”) and pursuant to SAB 118 recorded a one-time non-cash charge of $612,000 related to adjustments to deferred tax amounts provisionally recorded in the prior year. During the fourth quarter of 2017, the Company recorded a provisional one-time non-cash charge of $13.2 million related to the enactment of 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 was 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. In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the impact of enactment of the TCJA. These items represent significant charges that impacted the Company’s financial results. Net income, earnings per diluted share, and the effective tax rate are all measures for which the Company provides the reported GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for these items is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of these items may not be comparable to similarly titled measures used by other companies.