Following the temporary closure of all but 15 of its more than 90 facilities last month, Lippert Components Inc. parent company LCI Industries is cutting pay for executives, “rightsizing” its workforce and putting some employees on furlough.
The moves aim to keep the company in strong financial shape when the coronavirus crisis has subsided.
LCI remains actively involved in local COVID-19 relief efforts near its facilities, including the manufacture of tens of thousands of PPE face shields in Italy. The company has also created an emergency fund for employees in need.
“During this unprecedented crisis, the health and safety of our team members remains our top priority,” LCI Industries President and CEO Jason Lippert said. “At the same time, we are taking the necessary steps to mitigate the long-term impact of this prolonged macro-economic uncertainty on our business stemming from the COVID-19 pandemic.”
As part of LCI’s response, the company is implementing broad-based reductions in compensation, delaying non-essential capital expenditures and eliminating discretionary spending, he said.
“We believe these steps will be critical to maintaining a strong, flexible financial position,” Lippert said. “Now more than ever, our operational discipline and track record of successfully navigating various economic cycles will prove critical to ensuring we emerge from this crisis a stronger, more nimble company.
“Many of our team members on the front lines are experiencing personal and financial difficulties as our economy has ground to a rapid halt,” he said. “As a result, we will be establishing a temporary emergency fund to support extreme needs of team members, if needed. In this difficult period, I want to again express my gratitude to all our team members for their extraordinary leadership.”
On March 25, LCI announced the temporary suspension of production at select manufacturing facilities across the U.S. and Europe. In addition, LCI Industries is making the following temporary compensation adjustments:
- President and Chief Executive Officer, Jason Lippert, as well as Ryan Smith, Senior Vice President of Operations, will reduce their base salaries by 25%.
- The executive leadership team, general managers and other executives across the Company will reduce their respective base salaries.
- The LCI Industries Board of Directors will reduce their quarterly retainer by 25%.
- The Company will continue to carefully review executive and director compensation, as well as other salaried personnel costs, to identify other potential cost saving opportunities.
LCI has implemented further cost saving measures, and is evaluating additional actions, including:
- Rightsizing workforce to match current demand levels.
- Delaying certain capital expenses and reducing or eliminating non-critical business expenses.
- Temporary hiring freezes in all locations and furloughs for non-critical team members.
- Postponing merit increases for salaried employees until the end of the fiscal year.
- Continually engaging with strategic banking partners regarding appropriate options relative to future financial liquidity.
“Despite incredibly strong headwinds we are facing globally, long-term, we remain encouraged by the secular trends driving a positive outlook for the RV industry, which remains popular among younger demographics who seek innovative, technologically advanced products,” Lippert said. “Further, given our new normal, which will include significantly less air travel and hotel stays in the intermediate term, combined with the need for social distancing for the foreseeable future, RVs provide a wonderful opportunity for people to continue to enjoy vacation and leisure activities.”
LCI is putting a pause on its strategy to diversify through acquisitions—or “inorganic opportunities”—while continuing to invest in technology allowing the company to advance its position in the markets it serves, Lippert said.
According to a company press release, LCI Industries maintains a strong financial position supported by ample liquidity, with a current net debt position of approximately $700 million, net of approximately $100 million of cash available on its balance sheet and borrowing availability of over $190 million at March 31, 2020.
The company said it has no significant debt maturities until 2022, and that as of the most recent quarter end, the company was well within its loan covenant.
LCI Industries is participating in relief efforts across its more than 90 facilities. The company is donating personal protective equipment and other supplies throughout its local communities, in addition to manufacturing roughly 56,000 medical face shields used by doctors and nurses in Italy.
In accordance with LCI’s Social Impact philosophy, the Company will also be establishing a temporary emergency fund to aid those team members who have faced personal and financial difficulties due to the COVID-19 health crisis. LCI will also continue to encourage and support employee-initiated volunteer efforts.
