LCI Industries(US:LCII)2020-08-05 02:49Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2020 decreased 16% to $526 million compared to the prior year, primarily due to temporary production shutdowns related to COVID-19 [40][41] - GAAP net income for Q2 2020 was $13.2 million or $0.52 per share, down from $47.5 million or $1.89 per share in Q2 2019 [51] - Adjusted EBITDA decreased 46% to $45.6 million for the quarter, driven by weaker demand and production shutdowns [50] Business Line Data and Key Metrics Changes - RV OEM sales were down 38% year-over-year to $237 million, but retail demand rebounded with RV sales in June up 17% year-over-year [12][41] - Aftermarket segment sales increased 109% to $158 million, primarily due to the acquisition of CURT Group [20][46] - International sales rose 40% to $44 million, driven by the acquisition of Polyplastic and increased demand for acrylic products [23][46] Market Data and Key Metrics Changes - North American RV sales declined 99% year-over-year in April but recovered with a 17% increase in June [41] - Sales to adjacent markets declined 23% to $131 million, with North American adjacent industries down 30% while international adjacent industries increased 67% [44][46] - The demand for RVs and boats has surged as consumers seek safe outdoor activities, with 46 million Americans likely to take an RV road trip in the next 12 months [11][12] Company Strategy and Development Direction - The company aims to have adjacent, aftermarket, and international markets account for 60% of total revenue by 2022, currently at over 48% [16] - Continued focus on product innovation and operational excellence to drive growth and efficiency [32][48] - The company is exploring small and strategic tuck-in acquisitions while prioritizing integration and debt reduction [37][99] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the RV and boating industries, anticipating sustained demand due to changing consumer preferences [9][11] - The company has successfully ramped production above pre-COVID levels since late May, showcasing agility in operations [26][27] - Management highlighted the importance of maintaining strong communication and leadership during the pandemic to navigate challenges effectively [28][29] Other Important Information - The company has implemented enhanced safety protocols across manufacturing sites to protect team members [26] - Cash and cash equivalents totaled $62 million at the end of Q2 2020, up from $35 million at the beginning of the year [52] - The company is targeting capital expenditures between $40 million and $50 million for the full year 2020 [53] Q&A Session Summary Question: How should we think through Q3 EBIT margin? - Management expects gross margins to be around 25% to 26% for Q3, driven by labor efficiencies and operating leverage [57] Question: Is the incremental demand sustainable? - Management believes the current demand is sustainable due to limited travel options and a shift in consumer behavior towards RVs [58] Question: What are the trends in July? - Company-wide sales were up over 50% in July, with RV segment sales up 17% [64] Question: What are the expectations for industry capacity? - Management noted that supply chain and labor are current bottlenecks, but the industry is expected to adapt and increase capacity [70][72] Question: What is the status of the CURT Group? - The CURT business is performing well, with significant growth in both towing products and truck accessories [88] Question: How is the used inventory environment? - There is a lack of used products available due to a shift towards first-time buyers, resulting in minimal trade-ins [109]