LCII - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2018 LCI Industries Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference call, Mr. Tyler Deur, Investor Relations.

You may begin, sir.

Tyler Deur

Thank you, Kevin. welcome LCI and Quarter XXXX everyone, Call. Conference morning, to Industries the Second Good with LCI's members Lambert and Deur and CEO Tyler I'm Edwards, Mereness, Scott on team, Jason President; call and management Director; I'm Hall, Investor the today LCI's by CFO. of Brian including Lippert, joined firm, Relation's LCI asked operations in second you that inform uncertainties. be discussing be just today's will statements securities to call results in under its risks a laws a statements me made Industries moment, considered forward-looking Management and quarter and but may number conference regarding first, and they've the certain of involves

a others As turn the SEC. report discussed statements and in to differ with statements. in its statements to materially would are law. forward-looking company or which beyond are there that the in release, its These annual from company's factors Form those events are to that described events With the could you required the and results number the result, circumstances as Lippert. of control, over to update that, disclaims after the forward-looking except occur The any the or like factors, are forward-looking actual to reflect of the the of earnings XX-K many which in on by filings company's cautions call date obligation undertaking made, Jason I company Jason? cause

Jason Lippert

up grew up QX LCI's the $XXX welcome sales to $XXX quarter announce reaching XXXX. and Thank quarter call everyone, or record last happy same to in LCI's second another last from revenues approximately you, QX, Good same from year. with quarter $XXX million Tyler. $XXX from morning, million million, million to We're earnings from segment quarter OEM for XX% for XX% the or year.

some of the same to inventories, from get per weather Our of share over the XX% quarters share because in we last they year. from that, and Ultimately, created reported importantly through from temporary that X% during $X.XX remains more earnings from grew this wholesale or in per May needed and Diluted as were last $XX believe retail per OEMs, the inflated May, to slowdown. dealer grew million sales are combined numbers Wholesale strong retail correction. selling quarter that period. The $X.XX shipments they a May June up up to but the have towable same July. wholesale Aftermarket share is be positive ordering million June up April and unfavorable down news several season $XX quarter, and during the dealers month all due year retail sales good a in the didn't almost units spring short-term and last last Segment to

well that importantly, as RVers an X% last On big with help nearing the and largest the wholesale be continue innovating in around gains that time respect XXX,XXX still this projected flocking gas around are in in and features in total We side, functionality. up economy that on in considerable total continued today's increases modest than big outdoors, wages, is LCI rates, over credit, younger these areas. as will connectivity, wealth, lifestyle component younger access XXXX. shipment which momentum. to higher to the are consumer expected offers confidence In The community and This industry good since a year. XXXX towable XX small and the age it because based features More ever five relatively to units, millennial to new from to years, the sales important firmly new household for button more generation of and long-term buyers developments are press aesthetics the still cater RV it spending love lifestyle, favorable will be enter shipments. buyers through most is numbers. interest buyers changes shipments access RV normal environment the availability is family, has believe of restricted create outlook prices, inflation to younger generation

as this domestic adverse unfortunately, administration the the last positive and the of The tariffs, few LCI aluminum news, steel of have mitigate the prices that does the RV Trump tariffs on the and even anticipation have and had tariffs impact an All on not recent effect had whole. in quarters. Trump industry a

this able control. tariff-related many continue increases the over of on annually largely tariffs fact sure risen QX supplier much and impact large to but and aluminum risen recently see nation's good However especially in the competition moving initiated profits magnitude, to the our we pass and tariffs has currently that years, year price of the the But aluminum, of XX%. company's It's prices highest increases producers Nucor, XX% XX,XXX how XXXX. leading their tons September raised steel to so QX quickly, all we has in last the over along we year. has of of clear early of spoke steel steel Because the more worked of have industry our good very to not address change prices and made impact margin last moved a raw a it target these we quarter, customers. resolutions XXX,XXX materials steel closely they get and weren't always and quarter LCI of toward announced of customers to just of they of week, XXX% late to been. have its doubling LCI's their Due businesses. history, considering does tons have this domestic. that foreign and make purchases expected to from aluminum second last almost back intentions with it, been of have of in out increases difficult the the of QX work with this how over normalized since approximately one increase it LCI, earnings our to it capture steel were, to prices understand we to Last increases

We minimize our the are as well by component getting on to possible, product value build content, reorganizing to with as where cost other ideas. through the increases being creative engineering creative product try and and customers cost value-added, savings

feel In lines, impact the their OEM does best addition, confident of of retail our inflationary re-content these much customer increases. so their that will to we're partners product not do the

with sure re-contenting, towable our price Even we customers. significantly RV Our customers this and content making retail price are past points expectations excellent with tariffs of increased customer products, per point retail challenges meet that face the at best and quarter. the

industrial committed markets. value-added as be to are recreational the a We for company products known engineered and

in me-too copied. easily We manufacturing be aren't products can that interested

boats Our motorhomes, new products for full Open European outs, system, leveling while Including power the at RV interior our pontoon trailers, and and in RV product continued entry doors Elkhart debut caravan of and equestrian several of R&D of industry evolution systems. OneControl the categories. House products, new is the pipeline, furniture and Many will our and September. innovative aftermarket cargo developing for and products packages, slide

heaters. kitchen partner our also products, appliances, will water debut In antennas include and Furrion air which new conditioners, TV addition, several

Florida. the is simply new industries, OEM aftermarkets, and base sales marine spread OEM again approximately balance XX% becoming products, with of trucking supplier and IBEX canvas been organic In marine, LCI international several manufactured American an and the popular cargo, on in also supplier Tampa, buses, the want North-American and not and are non-RV equipment emphasize windshield recreational housing, company RV RV history our We show products clearly power-steering being diversifying and we a are North among recession include engineered from acquisition such this. last trailers, remainder our October vehicles. focused that markets, North-American And RV launching the marine designs that as housing. adjacent sales and we're industry. We of sales The since to Since shows our away XX%, heavy XXXX, equestrian new just for revenues at laser growth based. today, have about commercial net were furniture, the provides that industrial in manufactured XXXX, which industry RV in in recession out

look any have outlook, it short-term the negative impact that long-term or ago. will our So not on trends when RVIA's results same at did we XX years

be XX% our Our than coming RV of to OEM less sales in the long-term years. goals for total

progress Our which wood, are engineer future center, R&D of we've electronics raw North-American and will power value-added our couple can't continue the other us and businesses market quarter electric to motors, fabric, echoing allows feel skill-set our processes trend do. core disciplines, many non-RV gains and and hydraulic you record for towards and robust our more aluminum, we the there another with that products industries solutions This aftermarket all outside OEM components. products product and in manufacturing. broad isn't markets, to great material steel, and Further our European utilizing in innovative systems by markets. glass, we manufacturing this RV adjacent When much need had

QX On up quarter rose XX% million front, market last $XXX the million, adjacent sales or $XXX from for same from year. the

of research LCI's development, becoming of largest markets. quickly operational, to market perspective, a The these our a $XXX on quickly automation to run develop significant engineering, our have sales meaningful marine products have our million. a We sales rate on market resources reached and adjacent is focused from amount newer as sales teams

have more all supply this was a believed ripe strategic We strategy. and along industry for in more that larger innovation

acquisition than many Our integrations continuing are and Taylor swing full are better and opportunities planned, themselves going Made as to there. present Lexington in

as or dedication becoming we've same this to starting testament more growth quarter as a area aftermarket or to million, continued is well XX% records to the this that continues same in $XX.X business resources last year. in our well. from Operating from our $X.X in from Year-over-year year. XX% one aftermarket $XX break as to our of Our efforts $XX the from up sales suppliers million market last Sales to become up to allocated This growth premier LCI the industries. meaningful. the to million is rose rose quarter profit million,

selling aftercare dealers $X.X parts year. parts RV We to customers. believe as billion growth a we services business serviceable will continue every gets the Emphasizing replacement the closer result, RV as into to replacement very grow. us a retail OEM it and are our And as is market business strategic in parts

relevant our to expansion facilities efforts, We center, our term those brand build key call resources our of believe staying investment the we is and we've these all in training significant to including areas. continued added and stronger in this we aftermarket, the these long that groups, why valuable with become As more and the of is in customers. through teams

dealer and fall functioning Mishawaka a on as products opening educate OEM fully to well we're new school how campus. to our fact, This and training as In designed service issues. how fix this partners work in is troubleshoot our our technical

are in at As and than service to that the area this our in are are other -- lose it RV be experience. industry dealers OEM best are the the space. we the customers us, It difficult we in doing stands, more will if any we if customer supplier telling enhancing

different growth ST. This of We marine our Pontadera, area showing aftermarket June, with continue Milianti. European continuous of Italy-based automation enter front in acquisition We've team, have and lean our other management in a and improvement a our every we an bed-lift to savings $XX X,XXX LA. and strategies, estimated and European mechanisms, lean is -- related into. manufactures implementing of one strong that businesses. team was work its million continues efforts culture acquisition the initiatives. this for in at in In additional completed annual strategies. market to strategy by LA. efforts strategic positively XXXX led the table rate area. caravan run and alone, facilities. every at lean caravan it holding over our will improvement estimated grow many as we're ladders into supports, also of This we the market, working aluminum products tanks. philosophy Paula as towards year continuous and lean take with of training the members of we including our automation our and and The business in part build we're hard trend European completed Outside steel this another to aftermarket ST.

every units. our leadership front attrition our as to that now a But work under company numbers was continue way years opportunities leave. As advancing intentionality create through closing, show business to are easy attrition talks teams people eyeing continues rapid we quick our the through decision XX%. we significant stay our through we Similarly, we culture I a longer conscious Several are to advantage our in safety are LCI of all ever don't to create the great efficiency want making that we at to we automation retaining than people leadership about isn't quality, have, at impact and about of a of have at and ROI and in to for almost people want environment thank manufacturing XXX% taking Those results which and speak be approaching the directly and see at transformation Culture we this better will the see lines advancement, workplace. the in In culture better technology. to our quarter. a transformation LCI improvement ago, to it.

challenging all we're teams of leaning to this climate. navigate ever than Now more our on

to factors risen the control. of out have are our are and mitigate occasion helping that to several teams Our

want We loyal I turn these discuss support more Hall, customers continued truly will our through we financial now over our detail remained results. who thank challenges call are appreciate all CFO, in and to also to QX and to Brian our their the -- partnership.

Brian Hall

everyone and joining morning to Thanks good Jason, us.

our some Over as results, regarding of I'll financial additional the cash minutes, well as some out position. few the next financial point flows provide and color highlights

Motorized by under Net million, accounted quarter to sales net XXXX, growth to approximately or furniture, content per of have unit. for motorized million. unit in to or of sales $XXX increased to RV Sales million for million attributable $X,XXX million growth. of shipments. aftermarket RV quarter. contributing $X,XXX increased a of RV's, per compared unit to equipment $XXX organic products to just year-over-year Acquired adjacent consolidated content revenues XX% per second XX% in over towable of revenues of Furrion OEMs $XXX just XX%, the million towable increased almost $XXX acquired the the Aftermarket for for and grew OEMs, and wholesale entry-level of revenues key carry offset ended RV the awnings driven boats, RV June shift which of now The per unit. XX% $XX slight quarter, account is in per to primarily quarter in $X buses, acquired RV the the manufacturers $XX to driven RV the acquisitions, contributors million, XX% which to remainder twelve grew million despite sales. unit. The increase content customer sales the to million $XX few, tends $XX content of content and sales in $XXX manufactured largest per homes Furrion year-over-year XX% Our and which the continued school growth decline growth Sales by bucket. net at second $XXX less base unit, the for while Sales $XXX to with XXXX, name increase, almost XXXX, our more to product, for year-over-year XX% $XX by partially Segment sales increased XX% per to original strong unit were million. the increased the Growth were of months increased XX% impacted towards XX, to

revenues acquired net driver, is growth million, sales consolidated period XX% of approximately sales. year. sales over were the XX% shipments, $X.X up net for net remainder, adding with the primary RV the increased XX% in over the some over make compared while the XXXX Organic million Our $XXX of July consolidated challenges prior $XXX year-to-date billion. wholesale to Despite to for up

profits. Turning to

aluminum. increases half higher this XXXX largest new costs, past and we XXXX. XX% and was cost point even The of basis the have year-over-year in tariffs the improvement the for foam, and gross in XXXX. XX QX increase and company the quarter second from first steel of a over steel, aluminum months, Material quarter, significantly on experienced steel from increased XX aluminum margins were the primarily which Our experienced during

volatility. during have pricing catch somewhat which around of the the the have up pricing markets part XX to impact have negative for and third the implemented. effect is inflations Many second taken first on anticipated months. initiatives These noise of been While Several cause quarter the tariffs the a of latter stabilized, the cost-based cost initiatives had stabilize of timing the last we part quarter. absorbed begun have and to have the have short-term results. The adjustments further

and points. over moves addition, costs have as, have as as relating sales such products basis startup to affected well XX growth. school In costs by windows, incurred relocating handle and businesses bus facility profit certain These margins we to train continued new

As us in quarter basis the of impacted costs XXXX. points first XX a of point reference, these by

the Our matters. the Similarly, recent XXX our improving points acquisitions can been the respond from proven sales improvement on two quarter for have of of Made, performed, we teams expenses of XXXX. been have increased acquisitions quarter percentage in quickly basis Lexington made. have a we in XX.X% and and second in they the as teams of margin to all Operating for have over XXXX have XX.X% Taylor slightly on second focused these largest successful margins of

were gained rate material completed share Noncash costs by impacted than from increase shortages profile quarter. discussed. such to depreciation incremental sales, certain offset negatively offset first was of for QX which per partially and previously and the XXXX, cost of however, fuel transportation from to margins impacted other of points quarter the cost cost to per in basis rate share the the as labor, $X.XX have negatively items, Act. negatively during earnings It expenses was by from basis diluted and increased increased over the XX XX.X%, the QX also benefiting XX driver impacted prices non-operating resulted million expenditures. second including share $X.XX during capital in increase XXXX, driven acquisitions XXXX, amortization Operating more due increases Our the by LCI; by Tax the almost per $X effective income in is points. transaction-related severance and by to as SG&A expense a and profile in they has The of were tax XXXX, acquisitions to rising been second The compared Jobs important when by and higher the of the quarter quarter compared operating the in quarter. note for Cuts profit leverage XX.X%.

rate favorably by benefits creates compensation, tax equity-based quarter benefit first This excess impacted in benefit for LCI was discrete fourth first a The from quarters. typically created a which and the of over strong. rate estimating tax We're remained company's the financial XX%. in full first $X.XX per to to effective and XXXX share be cash XX% the year flow quarter. The position

to strategic focus work our capital disciplined to on continue putting through investments. We

million in million we a debt net for returning in $XXX for expenditures using $XX form business acquisitions, the shareholders million of the of in to position at While quarter XX. cash million June $XX our and capital dividends, ended $XXX

Our us ready we're prepared our future provides EBITDA was position remarks. of That's entertain Kevin, and current only for ample to to end X.Xx, investments. relative the Thank leverage flexibility you. questions.

Operator

from [Operator Instructions] first question Our Thompson Thompson with comes Research. Kathryn

Kathryn Thompson

opinion a efforts? your to quarter. the for just working love impacting industry resulted operations? particularly questions now, on nice thoughts industry in whole right-size really my inventories rightsizing a August you. of where focus just into that job on been are your the where how get terms and is levels the to in And you -- in Thank are and costs in the know in is July. the whole of managing production But we lower thank I this and has Wanted that your inventory demand. taking June, or overall production levels industry, has as RV price as Hi, a to today

Jason Lippert

Thanks I'll start. Katharine, it's Jason.

get think at most pace a that's December, get I to to inventory anticipating the if type continue hold indications they're that pretty it that all retail, But only last prepared good obviously, all of OEMs And excess talk numbers the OEMs, our back. and all the eat week back week have and they January even every through for July. of you like kind if November, that through said I remarks, is. been, been in to up that the have my from retail June of

we have getting are several keep we We've we strong respect generally for anticipate you a be they pretty we four to run forward, quick news may with could August, quick we that to to continuing so month rates, slowdown, will get days pick had pretty retail, it So back up before color, don't But but be have that with down a there days. -- like too, little on being production for that of are five and going some bit the got okay or the comes on it. backing customers so.

Kathryn Thompson

Maybe that you it depends give But retail right-size December helping November, to sales flat? assumption you to it what for retail to and what's get level growth but also So or And for single-digit retail July Okay. understand XX%, to like, through, that I said November, that. levels. on that that is December heard work December? November, Because the that get on inventory? level up the does

Brian Hall

is Brian. this Kathryn,

think we're OEMs, various anticipating with and through a and that I lot what real-time different this discussions data getting of dealerships. is are -- that

think to XXXX. you tricky high really single the look And a digits always question, mid- varies full we're I it by brand. year maybe at it's growth, anticipating when So because retail

where to keep tracking So that's it's kind and continue we that that can it pace. of think been

can work And their inventory through as so in how estimates, that's what OEMs to issues. the we've utilized our

Kathryn Thompson

Okay.

really really little back As pricing XX even next on -- and the rolling know, over on what's lot price steel lean is? and that you your to enough months, it's the give a really you XX-month, XX-month color from prepared cost aluminum But lean going to contribution to of collective initiatives like But be -- buckets to other know half a go and -- you'll how as of mentioned we know, initiatives. focus those two terms initiatives? forward as in you more that say, think if it's as basis a and commentary, you the you in and continue actions up. difficult quantify of I additive, in to because lean overcome get cost of could

Brian Hall

Okay. a and you're remarks. if some But, at to challenging our Jason things lot both to -- are between in look going kind relates prepared going growing can margins margins through like Brian can it the will each of answer, I of -- This impact is continue think we've you we you on, to my again, how you about it not size of as Kathryn. is way really through half acquisitions the really investments when When maintaining tariff the increases, we're acquisitions a the we think impact and and automation, year. that to surrounding price we half have, and that all and think team, volatility the those more be year. the lean that these those are worked in through all there, times, making hard back as think of the the the the and that improvements talks, of I one lay it's -- those mean, out of in that I things of our back say to what the the commented

Jason Lippert

And our lean our time, so our in I it's whether there partners all again, a Jason. I that the a our for way I stuff. whether is add a that's But that, We on our we historically, recession back all through it's whenever just always that around a get of it, you think, to business. think, it's historical way think reaction company or tariff, do challenging through and come customers, and meaningful things to to -- find

as the last So months as XX been. challenging have

get feel expect see the to XX business everybody work results happy. our make that are can that to We generate to through in to with months, next we some it, but we going the challenges partners confident,

Scott Mereness

I'll give you details. more may be a few

-- the processing online In a project, been terms as talking would automation that about, 'XX. of CapEx we've as that at this far project, August date $XX the would late million the be point, of center beam be

$XXX forward we're also of market. only to months, But ton. of five time $XXX in we're there's another point prices possibility prices certainly, well tell XXXX times only But just almost the I the months, steel a would that that, And next the to ton in we're $XXX a XXXX tell XX those more in to, north there's XX each are a of for -- far month months. There's prices But as Right I nine six steel have little things bit us in steel as tell some two look other on I at is out. goes. the suggest caused besides underway going tariff-related times, a in you so, give now, back months that to you, been underneath XX level. $XXX ton been steel far other that and as in XX right that's that north would to two maybe the third as pressures. something period supply color the -- project on for have once a been you demand in of down tariffs in years, ton. excess that a in now, would What the where can go last And is period. that's the you there that come the good possibility, of

specifically. So difference cost. commodity than drops significant it we're in almost that's to our a at ton, more $XXX And speak if a $XXX

price look again, forecast, trying think, of you when our types past those years I just and not to really the XX to last So favor work, supply demand and levels. at over explaining

Kathryn Thompson

could continue no, such be how Note, if and but -- quick a of acquisitions low allocation to a use of just put to thoughts thoughts just about that allocation like question focus cash? you levels. cap capital it quick with EBITDA as Final review give thoughts for your you, net on to debt

Brian Hall

capital. in capital look our strategies, Really acquisitions and relates business We first changes it at reinvesting our of the in through the deployment and foremost no as to expenditure.

So the it our that's date. remains are -- those to focus first categories, two and

our of form Third shareholders our returning in the dividends. strategy cash to would long-term of be

share repurchases, about those lagging but today. fourth we other And focused focused We've category. we're So times on that those on three at remain would be three. still talked

Scott Mereness

comment, more one And Kathryn.

what as all acquisition a team, of the at super looking we're on we're positive opportunities. as been of companies And we're about Really, terms at. pipeline, working aftermarkets, over I In have a now. excited great as have we world, and the the when mean, including we we've think list markets that -- we're adjacent I Europe, right look ever including activities

Operator

next Our Associates. with CL from comes Stember question King and Scott

Scott Stember

that little June a and your on in been You it from just just mentioned you're an that recovery the July. comments hearing Or bit, OEM May? about retail, customers saw Could is whether -- over continuing it's just May? out improvement about we maybe explain been what you

Jason Lippert

don't have you that, been in. for little that I was -- like way it obviously as expect made. of terms numbers May, around, specific tell the but in But as they the better better bit have I we're than made the May than might sound June comments April. a would strong all just climate I good that same could we the to

Scott Stember

going -- July, for as quarter of imagine. you bottom as your point? about commentary factoring XX% I it's when or down think up what's sales Obviously, stand to growth up from things your would you declines? industry shipments be with And where the would estimation third think just inventory far your for And an somewhat being

Brian Hall

we've I out production Yes, comments it, about heard, greatly estimated it's brand. don't that what by overall, based schedules the back which think tough very varies But we've to far. on getting go

the -- year. the make will So talks And That an QX, ordering you house September. dealers some maybe at around from coming mid-single look happen to down relative estimates there. what open to if in the into prior you mid digits maybe perspective by have

the looking way that's So we're at.

Jason Lippert

just you today. we're just where thinking units for to into around can kind back bit. getting could what today, from that that we're the it a XXX,XXX And year, It's little of change

Scott Mereness

have it's Made, I think But our sales X% three of means headwinds of and for XX% quarter, of to all July in that And organic in happened to just -- that through XXXX. really all other for that is X% and growth, we LA. I us, you're be so whatnot What at And a third of the in wholesale XX% out, break the pop acquisitions, us, means terms one comment, these i.e., the Hehr actually will least shipments. terms major that XX%, Scott. that Taylor Furrion see our at not of talked in what acquisitions, ST. part, The talking products type and revenue is will about. really continue think in level. that acquisitional content tailwinds X% was remainder

headwinds that growth conditions. we're we you feel again, mode, our is types even in of challenging when -- these still company optimistic at look and still still So

Scott Stember

first we quarter? mostly materials, expect compare are this flattening saw regards with numbers, in raw -- that it to just but at you have, sounds quarter. now just sounds thank maybe one through like they're margin another And sequentially the price all like Maybe some continue you put would gross previous it to size, -- quarter. Should And see out in in, direct third you. of That's it without like all the that we to late improve, this I increases, out the increases? things to frame the least

Jason Lippert

Jason. anything earnings I'll the what it's on didn't last start we Scott, just call. than off commenting quarter give -- announced we Yes, the on differently

they're ultimately this us, headache it can drag as because impact to increase, That's where pricing so is heading down, raw going customers, with affect is impact I go materials been bill-of-materials So talked we've that retail and most know, we we don't steel the will is that in what covers important numbers buy for that's give June that in you over about we talked as that has steel out, to to steel it out I the said biggest but time pricing quarter to respect exactly and to timeframe. we material steel, with And years, to stabilized. about We much. some and margins thing, what respect what our ultimately ample increases with to again feel think and And we with back that through up so putting to time the respect think give them and the we the on really time the pricing, customer. cost giving about side. happens that last as the give the how think Scott

we're And really we're XXX%. it little them the starts steel and we and feet, our we're to customers a our drag table. And for to down, working we give what to give take So well when increases, then steel-related giving thinking it. not going out then going customers on with the pricing our when off we back bit when give

of of hold have. lean, back, ways, just We we that always it and are some like through some eating finding through

peak. prices little to we'll going We their they're we bit feel they're come a feel down. that benefit anymore, steel So at start up don't go as to

So if hardest stomaching that been be point we're but will three the -- I tailwinds at us the has kind some see don't months, all of all the over should been it's like this future. near last quarters. part of said, know it slamming in the at certainly XX some Scott increases the we have And of those

Operator

question Securities. from comes next CJS Our Daniel Moore with

Daniel Moore

some I I see we're million together and call around up heading over to you marine next, to do international, think to commentary years? revenue. in it, rate three two that your if the Where put run of $XXXish

Scott Mereness

be our and XXXX. and team first we were those years, back the We wanting if continued really -- back you foremost, find formulated our adjacent teams to And XXXX. few started out winning to started a about recently ways as international up company. were we team diversify when coming in passionate of our other recession, to as Well,

we followed the started with the then up with recession, coming So adjacent, international. by out aftermarket of finally and

years were revenues combined. ago, they recently you as $X If as at million those four look

the and into to to space. international $XXX So $XXX $XXX growing and million $X break it million marine million million down

customers. we've we market continue with out those growth we very, like the the So feel RV market answer similar going; feel happy is marine to that traction of to terms very to very gained said it's a in the over identified areas continue $X.X And market our RV $XXX we're earlier, coming a we then have. the core overlapped. customers products to the A operations consider you overlap of have competency at furniture And billion in the when lot the it the relationship-type have Jason our sitting in of we two international where we of that million. that question have furniture opportunity, that are recession. incremental your as space. pertains Certainly, To addressable of space, in international that lot

and a each market, lesser only acquisitions getting supplier continue we bring to specifically to we're teams become look been a the that Australian is able those grow and the to and then certainly, and in to Caravan the made, market. we've Europe acquisitions. started So market our there at extent significant that to penetrate great that goal when But we've of on

So marine I both of the bright the for spaces. international future think is and both those,

Daniel Moore

switching you at XX be costs in quantified comparable your then expectations think bps for basis kind XX QX, to And about What gears, and facility would and QX. in XX for of start-up QX I points QX. the

Brian Hall

quarter. will I a that. off, mid-third a don't fall that, have what's there's in those included which mean, on that But I couple solid through estimate thinking -- of

down but continue to it to come So I go will to would it won't come some. continue expect away, It down.

Daniel Moore

for a forgive you jump And if answered me to second. had this, then, I

asked think, rising sequential lower softer Just of, increases the but had then of QX absorption. I Obviously, price get seasonally terms margins. of benefit you gross with -- also in is Scott

Thanks. is So would you can be in QX? versus kind gross QX you you line Any color know, similar, of think great? margin hold the

Brian Hall

steel so come the have mean, be during have could offset. looking into you do for us I got we some would -- potential earlier minuses price things do QX. also have -- think talked of there. I a pluses have think sequentially But for I some those play. when and become effective and We I most quarter; increases tariffs the lot about you prices tariffs timing like of those of you the to third

So in more we're a slowdown the of a think from a I flat especially shipments. margin looking wholesale given perspective, at the

Daniel Moore

Lastly Brian. -- that appreciate And

You shifts? maybe bit or forward? mentioned, is and gains contents, Jason does that content Furrion hold of reorganizing can a involve that really of with some you and headwind et the Thank strong to de-contenting, we've of offset very cetera seen slight to little going a the line continue product and those you much. from devices, Or leveling grow content even a sort

Jason Lippert

Yes.

we've that back going -- recession, even or to used think to we're units still, what I content. impact the we way lot and to cost-effective though, than thought. it there a that, grow mode ways kind post-recession everybody of, units huge a the future lighter, of I and all we're that more that, got in But just The make lets today. think smaller, through to is finding be still smaller out have, go did

innovating exist about at and all worry don't and lines I our exist we're you look products today that because value, So that don't our and creating breadth, product it functionality, didn't about features yesterday. product and products,

value more the units So are get out taking things aren't are that people that's things and value, in what or people stuff, wanting vanilla the don't don't or people commoditized the really of adding they notice their of just out of. more that

and So I is think what content we're since like, our seeing and feels they've been growing. March, de-contenting

to add value products to having new that again, constantly that, adding are of R&D we're market, we think you reasons, of products XXX% the develop that also out but center, taking I love cranking and that all historically, we're our robust to one value the able if content, So add a look core the those. and as products

you a other can find to holder whether We take adding a way up a in step off cup same to plants for such add the step three has a recently. and step into and item unit it's furniture features more industry way. rest system the So The ways a folds that cup new OEMs the a holder, that used of it. leveling taking for piece as step, lighted charge for yesterday now or foot was years, you're the and our We've manual we $XXX. motorized and or one two buying the a that fold-up XX taken everybody's ground $XX and or

always mean products creating exist. doesn't that didn't products content creating existing So it product exist, new that that don't it's

So there. we think we're successful going to be

Operator

Craig Kennison Baird. next The from comes with question

Unidentified Analyst

answered. been on questions briefly. for have Many But wanted is Made, on my Good Alice to I gentlemen, of just Taylor Craig. [ph] morning touch this

more I opportunity what and in there, it think, improvement your Any particularly on very remains? just driving call six performing like months sounds success on your ownership margin maybe the detail it well, it's what's front.

Brian Hall

start, amount basis Alice the be The same that I'll of happened on Taylor and this I it's Lexington Made. margin Brian. noted, points Yes. is improvement to that interesting

focus six So the in We're cross-selling And been about really months. outstanding. up to opportunities, -- we're a all their are progress points areas. -- less already early very volumes and be basis than in up on looking XXX but mean, pretty it's for Taylor excited Made I it.

and whether opportunities the the sourcing mean, Looking say big would I the opportunities hitters. reduce opportunities, -- three synergies scrap I facilities, through be purchasing it on opportunities are the of their those some scrap. to opportunities cross-selling for in cost-saving and probably

-- they're I there's opportunities given only months of in. less a So but than especially there, left six think lot

Jason Lippert

Yes, a was starved and it capital business.

is a the and capital, one So much Brian substantial cross-selling that a we've more of purchasing of they aftermarket other you they opportunities, lots in big-time got manufacturing aftermarket there efficient. did aftermarket, used our they the synergies not operating around equipment some put substantial synergies, know smaller the presence, mentioned, company. makes a is that And the presence. purchasing, then big were Then there's have

So, together, we're of getting those lot there. teams good there's a come to

Operator

Seth with Woolf from question Our comes Research. Northcoast next

Seth Woolf

I start of clarification to guess, wanted I all. first of of point just

normal question and a was there said about in the it Brian, you would be business earlier seasonality think I flat. the

know, at gross coming they would of tariffs, flattish, -- increases. look commentary, lean up sequentially steel And got sharp some thinking So implies really potential we've if in the maybe about you just year-over-year flat margins of be you you're that price enough slightly just that XQ.

way about XXX even it, think seasonally? they're the points to XXX right usually down that is basis though -- with So to

Brian Hall

things your definitely favor think that some up definitely -- should can because perspective should it's I down. we increases, be to in maintain not a we mean, -- you've a got sales yes, But to said, leverage obtain and be you've I -- got challenge. going going have year-over-year don't I we help you from like that price

some our the to gains. costs the through you pick you able be or just and So at and work to But a may move look to piece that up that's may QX. input we for favorable what steel aluminum and big tariff to talk some of us should that's in that from not some of when that's is, I unknown position consume from hard a what do down. going nail think not do, perspective,

that of previously. maybe, So that's certainly what a tailwinds headwind, favorable I all mentioned the it, call against

So hope that helps.

Seth Woolf

Yes, that does, thank you.

guys just guess -- I around I lot put be. cover, the of of companies could know some there's you talk -- So like on that a point, the XXX, numbers I what they have that of some think other companies impact the

But love missed realize I overcome? If what like that? guys that have I how And you a but about it. you now? you thinking I -- have to how you dynamic about kind -- And are it's apologize, tweet, where change to know, literally can you did, headwind with thinking of might are right the I'd environment it

Scott Mereness

there XX the last the minutes, would question were So tweets assume is not. in any I first

there So answer no as has Scott. this Seth, tweets. question, I'll that But been is

and in X our bill-of-material just place, are already X, about that and are for long of already affecting alluded known terms had list list a In we've like these time, Brian are XXX, to. things

include of a electronics, or furniture -- could whether quickly some that's as I affected importing, guess terms it's revolved be tell if takes about it what of can of In anybody's the it's and that it to potential and some probably still list kind could lean What time. like around products being or continues to When our could it so billion you new decided, your at again, things there, include furniture, like products, question bigger say, of I worth QX. but out a you determined also would again, X, think other it's surprised extent. list to I kind because that $XXX more and TBD. it's And as not X, QX larger

kind determined. our be list already definitely, X, material. and list and to And in X has X list like Brian then billing factored said So hitting

Seth Woolf

I the just And then interpreted like end-market I feels July, everything, the in and see -- retail guys is based sit XQ, guys of it we'll your maybe trends, account we're could flattish on and year, that risk seeing down-size guess, to number then just mid-single-digit a like then are on through one the here? summarize the pace fair, what retail the for if X, destock and production. to as about through we here more, dealers kind if you I could. Jason you you that And it, is think to the bit, XQ, that so, you flexed X? low how of shipment way you appreciate And number of growth. possibility, down you how a thinking the in now so color declines single-digits end little kind mid-single-digit right think today If that have assumptions continues if sounds

Jason Lippert

I think on deal you the comment, comes think of we'll it's and QX, way your again, de-stocking for good the a it's a I QX as far up. But could don't that. overnight assessment Obviously, bad. the pretty put guess. is But good things So as guess as anticipate or I as with anybody could if it change color it. for good it

year. of going up They I into that amount need they blowing a ready to with through and they're be low order to retail, can't selling that inventory good the next think with coming for go when unit. start season

that we in have remember track well. navigating on challenging of on through that we investor this environments, in side, And any still of the that slide the our $X of terms all of and really So record RV have just these considering got -- we've again, then just presentation. -- I billion stuff historical opportunity content

Operator

from Our Greg comes next question Citigroup. with Badishkanian

Gregory Badishkanian

looking some for constraints. -- you automation, people for have increased to discussed labor mentioned ways some easing So other

versus you ways increase to about So maybe cost savings are throughput talking opportunities?

Jason Lippert

at dedicated at our over mean, a to of I always are all that's improvement what key part got team looking substantial of about. the we've that continuous all all And that. We working is company, divisions.

maybe focused teams are I it's in got companies and and automation that know company, personnel our think than and are -- of really in a we're lot that we about have hard So teams for I than this our to lean if working -- a in on of have I anymore add can and I don't lot industry. something color you different We've on. that unless think dedicated it's dedicated that. And you. talk But it,

Gregory Badishkanian

And sense. landscape? from in the on further it's got you're perspective, But there. the of the from OEM of away talked thoughts Makes color increases, you've know supply color you I kind about the an of pushing chain. kind getting potential retail their -- what's on dealer terms their lot a price of back

Jason Lippert

here. mean we talked couple it -- I we same talked the the have to, But way, it color just of Yes. put we they probably, a for better OEMs. that frame that's dealers it a question had the -- dealers, we've up to

to the appropriately price product. the end my I confidence in the think the OEMs day, at comments, we a the dealers have -- of of high level think as and I it said I but they in

Given to all appropriately around things and product want with to content, expectations. swirling you retail tariffs that's the stuff like job and do for they great respect pricing the however the reorganize call, that. De-content, a increases at

a enough think avoid retail a it, they're good little bit but still setting level for pricing, higher, mitigated of in but they've some be it they So product. been of I might so of terms can't move and creative the they can the

Operator

questions to And I'm like Jason comments. any turn showing back over closing for at I'd further to call this not time. the

Jason Lippert

today's Well, in the appreciate jumping that call. for questions today. will We it all be and everybody

on months. So of Thanks. you QX's we'll see call in couple a

Operator

does this presentation. today's gentlemen, and Ladies conclude

now You and disconnect, wonderful may have day. a

LCI Industries (LCII) 5 Aug 182018 Q2 Earnings call transcript