Edited Transcript of LCII earnings conference call or presentation 5-May-20 12:30pm GMT

During the quarter, we reported revenues of $660 million, up 11% compared ought final year. This topline growth was larGEly driven by the successful execution of our diversification tactic and the effective integration of the 9 acquisitions we completed at a 12-month span, at appendix ought outperforming at the RV OEM space.

Before I controversy our results at more detail, allow me quickly affect at the shock we dine seen during a originate of COVID-19 also during the steps we are taking ought encounter challenGEs brought at by the pandemic. ought prioritize the well-being of our team members, assert compliance with federal and condition mandates and improve align our product with modern lack levels, at March 25 we announced the temporary suspension of our product at elect manufacturing appliance across the U.S. and Europe.

During the shutdown, 15 of our sites remained robust and operational, continuing ought figure items deemed essential. at these sites, we've operated with a heightened concentrate at safety, utilizing reduced cane during appropriate, adhering ought social distancing guidelines and implementing increased cleaning and sanitization processes.

Our team members dine repeatedly been the most valuable divide of our organization. And at the past 6 weeks, our efforts dine focused at providing uphold ought them and the communities where at 9 appliance operate during we occupation ought conduct our divide ought assist battle this virus. during team members facing the most extreme difficulties owing ought the COVID-19 health crisis, we dine established a temporary emerGEncy fund ought exist utilized during immediate aid, and we will thrive ought encouraGE and uphold team member-initiated present efforts.

In addition, we dine donated private protective instrument and other supplies throughout our local communities. We are during noise manufacturing 50,000 Medical see shields during doctors and nurses at Italy ought assist those at the front lines at the war against COVID-19.

As government mandates dine begun ought originate nationwide, our customers dine larGEly alter uphold online at varying levels of production. And accordingly, we began restarting most of our plants final week and this week. during our product continues ought begin uphold up, we will exist following the guidance of the earth Health Organization also during condition and federal governments, implementing our COVID-19 health and safety playbook, where new protocols assist create a safer surroundings during our team members at this post-COVID environment.

During this challenging time, we dine continued cultivating our dealer, distributor and e-commerce relationships. Encouragingly, during the final attach of weeks, we dine seen sure signs from RV and steamer dealers selling significantly more inventory than expected during the climate is turning and customers are preparing ought GEt out and behave more normally again. That said, our teams dine properly adjusted the affair fare ought prepare during what we expectation ought exist the new volume at the coming months.

In addition, during with 9/11 and the 2008-2009 recession, we expectation there ought exist affair ought choose up during a originate of suppliers who dine difficulty coming uphold from this. We dine had ought create a destiny of difficult decisions at bid ought adapt the affair ought operate efficiently at flare of the COVID-19 pandemic, besides during we are well-positioned ought affect send and emerGE from this during a stronGEr company. Our faculty ought react very, identical quickly ought sustain a prolonGEd downturn scenario has been a proven force of our affair at the final 2 larGE economic disruptions.

Our econmic spot surplus strong, supported by plentiful liquidity and cash at hand. However, during impartial lack continues ought shift, we dine implemented critical cost-saving measures ought heighten our flexibility, ensuring that we will exist able ought farther manaGE across this challenging surroundings during the foreseeable future. Two of our senior VPs and I dine reduced our foundation salaries 25%, nevertheless other members of the executive leadership team, GEneral manaGErs and executives across the affair are participating at meaningful temporary adjustments ought their respective foundation salaries during well. Our Board of Directors has during noise reduced each director's quarterly retainer by 25%.

We dine no however established a duration of these temporary compensation adjustments, besides during we'll thrive ought carefully journal executive and director compensation also during other allowance personnel costs during we GEt uphold ought a more normalized environment. We dine taken the unlucky besides during indispensable steps ought adapt our workforce by reducing staff, chilly travel, enacting temporary hiring freezes at total locations and equipment furloughs where indispensable and many other measures ought contest the new lack of the business.

Capital expenses are being delayed where practical, and we are during noise reducing or eliminating noncritical affair expenses. And lastly, we will exist engaging at ongoing discussions with customers and vendors ought determination pricing and input fare adjustments where possible, closely monitoring inventories and implementing aggressive strategies nearly working major manaGEment at bid ought maintain our cash brook GEneration.

While COVID-19 presents a flat of doubt many of us dine never seen, we believe the fundamentals of the RV and the boating industries remain identical strong, now more than ever. during a originate of this crisis, we dine an incredible opportunity ought introduce more people ought RV-ing and boating. We hope that most will exist significantly altering their summer festival plans during stand travel, inn stays, cruises and journey ought larGE metro areas are going ought exist larGEly reduced.

RVs and boats equip a marvelous excellent during people ought GEt exterior and festival safely with their families at this new usual environment. if short or desire trips, RVs and boats allow families ought cope with the destination, who they are around, and most importantly, the lay they stay.

After an extended duration of self-quarantining, family, community and the outdoors dine become increasingly more significant ought people, which is what the RV and boating lifestyle embodies at the first place. We believe that there will exist a new festival normal, and feel that RV and boats are at a excellent spot ought restrain total the boxes that families will exist looking ought check, including that of affordability.

Lastly, people are GEtting outdoors at significant numbers and experiences are what people are craving at this moment. Our industries dine a large answer during families considering new ways ought vacation, and it certainly doesn't see alike there has been a improve time ought believe a steamer or an RV. at addition, the identical indispensable and secular drivers during our affair that dine historically moved our company send are however relevant today, and we believe they will drive farther growth desire after the pandemic has passed.

Turning ought the fraction results during the quarter, we started the year off robust with RV OEM retail sales trending positively and larGEly outperforming industry expectations at January and February. nevertheless RV dealers spent the majority of the final year working ought rightsize their inventories, the industry was certainly well-positioned headed into 2020 during inventory levels were larGEly normalized.

Global RV OEM sales were $345 million during the quarter, down 5% versus the preceding year period. This diminish was larGEly owing ought the shock of COVID at the final 2 weeks of March. in spite of this lower lack and product environment, content per towable RV, adjusted ought touch Furrion sales from preceding periods, increased 3% year-over-year ought $3,354, driven by new manufacture innovation, impartial section gains and the reversal of the de-contenting trend we dine seen at preceding quarters. We saw a slim repel at content per motorhome RV, which decreased 5% year-over-year ought $2,327, driven by a touch at wholesale combination towards smaller lesson C units.

Our diversification tactic has proven critical at navigating across this challenging operating environment, positioning us during the long-term growth at an extended downturn scenario. Adjacent Markets, Aftermarket and International Markets now create up more than 46% of our total net sales during LCI, a significant expand compared ought 39% of total sales at this time final year.

Given the promote we are making each quarter, we remain at explore ought attain our tarGEt of having these markets create up 60% of our total revenues by 2022. We dine successfully doubled quarterly revenues at our Aftermarket and International segments ought $127 million and $61 million, respectively, which mitigated what used to dine been a larGEr shock from COVID-19 at our overall performance. Ultimately, our diversification program allowed us ought outperform the larGEr center markets. Our long-term tactic surplus solidly intact, and we will remain focused and diliGEnt at expanding our presence exterior of the North American RV affair across both continued organic growth and acquisitions.

Revenue at our Adjacent impartial type during the first district increased 10%, with firm growth at the begin of the year, partially offset by the temporary product shutdown throughout marine and other adjacent businesses. during a reminder, marine is our larGEst channel at the Adjacent impartial fraction and has been a continued zone of growth during us.

Despite the disruption ought product at marine, we remain focused at growing our manufacture portfolio, integrating our latest acquisitions into the affair and strengthening our presence at this market. after introducing new cutting-edGE technique and innovative sunshade awning systems across the acquisitions of PWR-ARM brand of electrical Biminis and SureShade electrical awnings during larGEr boats at 2019, we are now the predominant actor at North America and Europe during marine shade solutions. Being the predominant actor will assist spot us nicely during more innovation at the marine fraction at the years ought come.

Further, customers at manufactured housing and specialty vehicles were less impacted by present disruptions and were contributors ought growth at the Adjacent impartial segment. during we see forward, we thrive ought explore new opportunities ought build impartial section across total our Adjacent Markets and add content at a broad ranGE of industries.

Our Aftermarket fraction experienced massive growth, more than doubling revenues at a year-over-year basis, larGEly the originate of our acquisition of the CURT throng at late 2019. during anticipated, the Aftermarket has continued ought offset weakness experienced at our center OEM markets, which will thrive ought exist a competitive advantaGE during LCI.

In present weeks, we only saw a 35% reduction at revenues at the Aftermarket affair during many of our Aftermarket products are considered indispensable items. although showrooms were closed, many RV dealers thrive ought navigate leads online and GEt creative with the consumers during the sale and service of RVs.

The integration of CURT is progressing during planned. We thrive ought accept advantaGE of new fare synergies, and dine already benefited from some of the cross-selling synergies including new distribution channels, expanded trader and customer networks and broadened manufacture offerings. at addition, CURT has an incredibly robust fame during manufacture innovation, engineering and brand excellence.

We are continuing ought launch and sell-through ought new customers their latest products alike BetterWeigh and Echo and are excited nearly the innovation and R&D capabilities of their overall affair and strategies. during we thrive ought become the business, integrate our present acquisitions and innovate new products during the Aftermarket, we are confident we will exist able ought drive impartial section growth and utilize our size, manufacture breadth and customer relationships ought strengthen our leadership spot here.

Our International affair during noise doubled during the first district compared ought the preceding year owing ought the sequence of acquisitions we recently completed. at January of this year, we closed at the acquisition of the Netherlands-based Polyplastic Group, a headmaster manufacturer of acrylic window products and a robust supplier and innovator during the European caravan industry. This latest acquisition, combined with our acquisitions of Lewmar Marine, Lavet, Femto and Ciesse at 2019 equip us with the indispensable products, brand power, innovation capabilities and leadership teams ought truly become our presence at the caravan, rail and marine industries across Europe.

As at the example of North America, the final shock of COVID-19 at the European impartial is however unknown. few of our manufacturing appliance at Europe temporarily terminate down ought insure the health and safety of our team members and obey with federal and local mandates. in spite of any near-term headwinds we can face, we are confident at the long-term hope during these markets at Europe and believe that our growing presence, manufacture breadth, leadership and affect at Europe will forward promising results at the future.

Innovation is and will thrive ought exist the lifeblood of LCI. It's what we are known during at our center markets. nevertheless we dine taken aggressive steps ought optimize our fare structure, we thrive ought invest strategically at R&D ought insure that we are delivering at the needs of our customers. Our team's R&D expertise and faculty ought introduce complex industry-leading products and technique across total our affair and markets is a competitive advantaGE during us.

While many companies at a difficult surroundings will drag uphold investments across the board, we believe our innovation tactic will insure that we will emerGE a stronGEr competitor. We dine few new manufacture launches coming this year that we will exist excited ought oration nearly at the coming quarters.

Our major allocation tactic surplus unchanGEd. However, at flare of the doubt we are total facing, our balanced manner will exist more focused at preserving cash, paying down debt and realizing synergies from our most present acquisitions.

In closing, I desire ought thank our team members during the resilience during these doubtful times. Most importantly, we desire ought speak due ought the 1,000 men and women that braved fright and worry each engagement coming ought occupation ought our few divisions that remained empty during the past 6 weeks. Our thoughts are with those that dine been severely impacted by the COVID-19 pandemic, specially our Medical frontline workers total at the country, our team members, dealers, suppliers and customers. during the people continues ought evolve, we will exist ready ought answer and leveraGE our inherent strengths during an organization at bid ought assert growth and maintain long-term worth during our shareholders.

I will now become the weep at ought Brian Hall, our CFO, ought controversy at more detail our first-quarter econmic results.

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Brian Michael Hall, LCI Industries - Executive VP & CFO [4]

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Thank you, Jason, and good morning, everyone. Our consolidated net sales during the first district increased 11% ought $660 million compared ought the preceding year. The expand at year-over-year net sales was driven by continued growth at the company's Adjacent OEM, Aftermarket and International markets during we thrive ought integrate our latest acquisitions at each of those markets. This growth was partially offset by temporary product shutdowns related ought COVID-19, which resulted at a loss of nearly $45 million at sales during the final 2 weeks of March.

Q1 2020 sales ought RV OEMs declined 5% compared ought the preceding year owing ought the previously mentioned product shutdowns and lower consumer lack owing ought COVID-19. Sales ought North American RV OEMS, which represents 96% of our RV OEM sales, was negatively impacted by the termination of the Furrion distribution rally and a related loss of $24 million at net sales or 7%. This loss was offset by a 3% expand at content per towable RV unit and a slim expand at wholesale RV shipments during the quarter. The remaining 4% of our RV OEM sales mix ought International RV sales, which were negatively impacted by COVID-19 a few weeks preceding ought North America and declined 12%.

Content per towable RV unit increased 3% ought $3,354 and per motorized unit decreased 5% ought $2,327 compared ought the preceding year, excluding the shock of Furrion at 2019. Content per unit growth at towables has improved farther owing ought the reversal of the de-contenting trend, nevertheless motorized content continues ought exist impacted by the touch at wholesale combination towards smaller lesson C units. during Jason mentioned, we thrive ought remain focused at manufacture innovation and believe our towable content growth worth can thrive at the ranGE of 3% ought 5%.

Despite a challenging macroeconomic environment, we are seeing firm growth at non-RV markets during we kill at our diversification strategy. Q1 2020 sales ought Adjacent markets grew 10% ought $187 million compared ought the preceding year. Sales ought North American Adjacent Industries, which describe 78% of our Adjacent Industry sales declined 7% due chiefly ought a 14% repel at marine OEM sales, offset by growth at manufactured housing and other emerging markets.

Sales ought International Adjacent Industries increased at 200% owing ought the acquisitions, partially offset by the shock of COVID-19. Our first district Aftermarket fraction sales increased 111% ought $127 million compared ought the preceding year, and International sales increased 81% ought $61 million. Acquired revenues were $99.5 million, chiefly affecting Aftermarket and International sales.

While sales at April declined 76% from the preceding year, we were encouraGEd by the results during they exceeded initial expectations. Our diversification efforts proved sure during Aftermarket and other adjacent industries performed much improve than center markets.

The resumption of operations by many of our customers at can is significant. And modern expectations are during can sales ought repel only 29% compared ought the preceding year, excluding Furrion. nevertheless significant doubt remains, we believe sales ought gradually improve from the can brook worth during the consumer continues ought obtain its footing and we slowly reply ought growth.

Operating margins decreased almost 140 foundation points, larGEly the originate of buy price accounting from the acquisition of CURT Group, which lowered operating margins by 90 foundation points, also during the shock of COVID-19. This was partially offset by favorability from the dissolution of our distribution rally with Furrion and other efficiencies gained across continual improvement initiatives. owing ought our tall variable fare structure and our faculty ought answer quickly, we were able ought adapt our fare structure, removing at $30 million at quarterly fixed costs. nevertheless April resulted at a net loss, we hope can results ought reply ought profitability.

From a free cash brook perspective, we burned nearly $15 million of cash at the month of April, and can is anticipated ought completely offset the loss, which is extremely encouraging. nevertheless full advantage margins had improved ought 24%, the absorption of fixed costs at lower sales volume during the upcoming second district are estimated ought decrease the full advantage border ought 20% ought 21%.

As anticipated, SG&A costs increased during the first district owing ought the additional SG&A costs from acquisitions across with the related amortization of intangible assets. owing ought the actions taken ought decrease costs, SG&A costs are anticipated ought exist $85 million ought $90 million during the second quarter.

Adjusted EBITDA increased 14% ought $75 million during the first quarter, which excludes the shock of the inventory step-up. This growth was driven by additional efficiencies gained across our operating improvement initiatives implemented at the past year, farther optimizing labor and other operating costs. Noncash depreciation and amortization was $24.6 million during the first quarter, nevertheless noncash stock-based compensation price was $3.3 million.

GAAP net allowance at Q1 2020 was $28.2 million or $1.12 per section compared ought $34.4 million or $1.38 per section at Q1 2019. Adjusted net allowance during Q1 2020 was $32.9 million or $1.31 per diluted share, excluding a noncash charGE recognized at fare of sales related ought the inventory lovely worth step-up during CURT, net of tax.

Cash GEnerated from operating activities was $45 million during the quarter, nevertheless using $96 million during affair acquisitions, $8 million during major expenditures and returning $16 million ought our shareholders at the figure of dividends.

We assert a robust surplus sheet, bolstered by our modern cash at hand and available borrowings. at the aim of the first quarter, cash and cash equivalents totaled $98 million, up from $35 million at the beginning of the year. at the aim of the quarter, during Jason mentioned, we took few broad-based actions ought heighten our cash spot and liquidity during the long-term ought mitigate the shock from COVID-19 duri