LCI Industries(US:LCII)2024-02-23 13:17Financial Performance - Consolidated net sales for 2023 were $3.8 billion, a decrease of 27% from $5.2 billion in 2022, primarily due to a nearly 39% decrease in North American RV wholesale shipments[24]. - Net income for 2023 was $64.2 million, or $2.52 per diluted share, compared to $395.0 million, or $15.48 per diluted share, in 2022[25]. - The OEM Segment represented 77% of consolidated net sales in 2023, with approximately 47% of OEM Segment net sales coming from travel trailer and fifth-wheel RV manufacturers[30]. - Aftermarket Segment net sales decreased 1% from $891.3 million in 2022 to $881.1 million in 2023, with CURT Manufacturing accounting for approximately half of these sales[37]. - Total OEM Segment net sales decreased by 33% to $2.9 billion in 2023, with travel trailers and fifth-wheels down 48% to $1.36 billion[190]. - Operating profit margin for the OEM Segment fell to 0.6% in 2023 from 11.1% in 2022, while the Aftermarket Segment improved to 12.0% from 8.3%[175]. - Interest expense increased to $40.4 million in 2023 from $27.6 million in 2022, primarily due to rising interest rates[190]. - Net cash flows provided by operating activities were $527.2 million in 2023, down from $602.5 million in 2022, mainly due to a decrease in net income adjusted for non-cash items[203]. Acquisitions and Growth - Acquisitions completed in 2022 and 2023 contributed approximately $73.6 million to net sales in 2023, with two acquisitions in 2023 totaling $25.8 million[24][28]. - The company is expanding into adjacent industries and international markets, which involves significant resources and carries risks of failure due to limited brand recognition[110]. - Approximately 61% of net sales in 2023 were generated outside the North American RV OEM market, up from 46% in 2022, indicating successful diversification[178]. Operational Metrics - Capital expenditures for 2023 were $62 million, including $12 million in automation investments and $12 million in capacity investments[41]. - The company operates over 110 manufacturing and distribution facilities across North America and Europe[41]. - As of December 31, 2023, the company had approximately 11,700 full-time team members, with 10,200 in North America and 1,500 internationally[56]. - The company has 140 total facilities, with 115 located in North America and 25 in Europe, indicating a robust operational footprint[161]. Employee Engagement and Community Support - The retention percentage for team members in North America improved to 71% in 2023, up from 57% in the prior year[60]. - Team members logged over 143,000 volunteer hours in 2023, with 85% participation, an increase from 75% in 2022[62]. - The company donated more than $1.1 million in 2023 to support community needs, focusing on children and families, education, and health[62]. - Over 8,000 "dreams and goals" were achieved by team members in 2023, covering various personal and professional development areas[61]. - Engagement in the wellness program improved from 53% in 2022 to 67% in 2023[64]. Risks and Compliance - The company believes it is currently operating in compliance with applicable laws and regulations, with no material effect on operations or financial condition[55]. - The company faces risks related to conducting business internationally, including operational and financial uncertainties[115]. - Cyber-attacks are increasing in frequency and sophistication, posing risks to customer retention and operational efficiency[119]. - The company is subject to numerous regulations, and failure to comply could result in significant penalties and adversely impact financial results[120]. - Changes in laws related to climate change could impose additional costs on the company, affecting its business operations and financial condition[124]. - The company faces risks related to environmental laws, which could lead to fines and remediation costs that adversely affect operations[126]. Financial Structure and Debt - The company has a debt structure that includes term loans, 1.125% convertible senior notes due 2026, and a revolving credit facility, which may increase leverage and financial risk[141]. - The ability to service substantial debt depends on future performance, which is influenced by various uncontrollable economic and competitive factors[142]. - Debt agreements impose covenants that require maintaining certain financial ratios, which if breached, could lead to defaults and adversely impact operations[144]. - An increase in interest rates could significantly raise borrowing costs, adversely affecting financial condition and cash flows[145]. - The company has paid regular quarterly dividends since March 2016, but future payments depend on business performance and financial conditions[146]. Market Conditions - The company experienced lower RV and marine OEM volumes in 2023 due to inflation and elevated interest rates impacting consumer discretionary spending[80]. - The RV industry experienced a nearly 37% decrease in wholesale RV OEM shipments in 2023, negatively impacting the company's net sales for the year[89]. - Steel and aluminum comprised approximately 30% and 10% of the company's raw material costs, respectively, highlighting the impact of volatile raw material prices on financial performance[92]. - The company imported about 30% of its raw materials and components in 2023, making it vulnerable to geopolitical risks and supply chain disruptions[96]. - The inability to develop innovative new products or respond to changes in consumer preferences could adversely affect net sales and operating results[99].