UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File Number: 001-13646 LCI INDUSTRIES (Exact name of registrant as specified in its charter) Delaware 13-32 ...

Part I [Business Overview](index=5&type=section&id=Item%201.%20BUSINESS.) LCI Industries is a leading component supplier for RVs and adjacent markets, achieving record 2021 net sales of $4.5 billion Financial Highlights | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | **Consolidated Net Sales** | $4.5 billion | $2.8 billion | +60% | | **Net Income** | $287.7 million | $158.4 million | +81.6% | | **Diluted EPS** | $11.32 | $6.27 | +80.5% | - The company operates through two reportable segments: the Original Equipment Manufacturers (OEM) Segment and the Aftermarket Segment, with over 120 facilities across North America and Europe as of December 31, 2021[21](index=21&type=chunk)[22](index=22&type=chunk) Major Customers | Customer | % of 2021 Consolidated Net Sales | | :--- | :--- | | Thor Industries, Inc. | 23% | | Berkshire Hathaway Inc. (Forest River, Clayton Homes) | 20% | - Completed six acquisitions in 2021, including Furrion and Ranch Hand, which contributed approximately **$269.9 million** to 2021 net sales[25](index=25&type=chunk)[29](index=29&type=chunk)[32](index=32&type=chunk) - The company's diversification strategy resulted in **47% of net sales** generated outside the North American RV OEM market, a slight decrease from 50% in 2020 due to record RV demand[34](index=34&type=chunk) - As of December 31, 2021, the company had approximately **13,900 full-time team members**[62](index=62&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20RISK%20FACTORS.) The company faces risks from the COVID-19 pandemic, economic cyclicality, customer concentration, and supply chain disruptions - The COVID-19 pandemic presents ongoing risks, including supply chain disruptions, cost increases, potential demand volatility, and cybersecurity risks[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - The business is subject to industry and economic risks, as the RV and boat markets are cyclical and sensitive to consumer discretionary spending[85](index=85&type=chunk)[87](index=87&type=chunk)[90](index=90&type=chunk) - Significant customer concentration risk exists, with two customers (Thor Industries and Berkshire Hathaway) accounting for **43% of consolidated net sales** in 2021[94](index=94&type=chunk) - The company faces risks from volatile raw material costs, particularly for steel and aluminum, which represented approximately **45% and 15% of raw material costs** in 2021, respectively[95](index=95&type=chunk) - International expansion subjects the company to risks including adverse political conditions, trade protection measures, and currency fluctuations[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Financial risks include servicing substantial debt, adhering to debt covenants, and potential dilution from the conversion of the company's Convertible Notes[146](index=146&type=chunk)[147](index=147&type=chunk)[151](index=151&type=chunk) [Properties](index=24&type=section&id=Item%202.%20PROPERTIES.) As of year-end 2021, the company operated 143 owned and leased facilities across North America and Europe Facilities by Segment and Location | Segment | Type | North America | Europe | Total | Owned | | :--- | :--- | :--- | :--- | :--- | :--- | | **OEM** | Manufacturing | 67 | 20 | 87 | 36 | | | Other | 16 | 5 | 21 | 5 | | **Aftermarket** | Manufacturing | 12 | — | 12 | — | | | Other | 23 | — | 23 | 1 | | **Total** | | **118** | **25** | **143** | **42** | [Legal Proceedings](index=25&type=section&id=Item%203.%20LEGAL%20PROCEEDINGS.) The company is subject to various legal proceedings not expected to have a material financial impact - In the normal course of business, the company is subject to various legal proceedings, but management does not expect the outcomes to have a material financial impact[159](index=159&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES.) This item is not applicable to the company Part II [Market for Common Equity and Related Matters](index=26&type=section&id=Item%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES.) The company's stock trades on the NYSE under "LCII" and it has maintained a regular quarterly dividend program since 2016 - The company's common stock trades on the New York Stock Exchange under the symbol **"LCII"**[163](index=163&type=chunk) - The company initiated a regular quarterly dividend program in 2016, with future policy determined by the Board of Directors[166](index=166&type=chunk) [Management's Discussion and Analysis (MD&A)](index=26&type=section&id=Item%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Management discusses the significant 60% growth in net sales to $4.5 billion, segment performance, and overall financial condition Key Financial Results | (In thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Total net sales** | $4,472,697 | $2,796,166 | | **Total operating profit** | $398,410 | $222,934 | - The company's diversification strategy resulted in **47% of net sales** for 2021 being generated outside the North American RV OEM market, compared to 50% in 2020[176](index=176&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Consolidated net sales grew 60% to $4.5 billion in 2021, driven by strong performance in both OEM and Aftermarket segments OEM Segment Net Sales (In thousands) | OEM Segment Net Sales (In thousands) | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Travel trailers and fifth-wheels | $2,295,612 | $1,321,567 | 74% | | Motorhomes | $258,995 | $158,096 | 64% | | Adjacent Industries OEMs | $1,089,005 | $688,248 | 58% | | **Total OEM Segment** | **$3,643,612** | **$2,167,911** | **68%** | Average Product Content per RV | Average Product Content per RV | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Travel trailer and fifth-wheel RV | $4,198 | $3,390 | 24% | | Motorhome | $2,856 | $2,479 | 15% | - Aftermarket Segment net sales increased **32% to $829.1 million** in 2021, driven by $149.0 million in organic growth and $51.8 million from acquisitions[197](index=197&type=chunk) - Operating profit margins increased in both segments (**OEM: 7.2% to 8.4%; Aftermarket: 10.6% to 11.3%**) due to leveraging fixed costs over higher sales[196](index=196&type=chunk)[198](index=198&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow turned negative due to a strategic inventory build, while financing was bolstered by a convertible notes issuance Cash Flow Activity (In thousands) | Cash Flow Activity (In thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $(111,573) | $231,400 | | Net cash used in investing activities | $(281,218) | $(232,301) | | Net cash from financing activities | $404,563 | $14,048 | - The negative operating cash flow in 2021 was primarily due to a strategic increase in inventory of **$516.7 million** to address supply chain constraints[203](index=203&type=chunk) - In May 2021, the company issued **$460.0 million in convertible senior notes**, which provided net proceeds of $396.6 million after hedges and costs[209](index=209&type=chunk)[210](index=210&type=chunk) Future Cash Requirements (In thousands) | Future Cash Requirements (In thousands) | Total | Current (2022) | Long-Term | | :--- | :--- | :--- | :--- | | Total indebtedness | $1,314,950 | $71,382 | $1,243,568 | | Interest on indebtedness | $77,913 | $17,276 | $60,637 | | Operating leases | $210,426 | $36,416 | $174,010 | [Critical Accounting Estimates](index=35&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Key estimates include product warranty accruals and the fair value of intangible assets from business acquisitions - Product warranty accrual is a critical estimate, with the accrual balance at **$52.1 million** at the end of 2021, up from $47.1 million in 2020[226](index=226&type=chunk)[244](index=244&type=chunk)[329](index=329&type=chunk) - The fair value of intangible assets of acquired businesses is another critical estimate, determined using techniques like discounted cash flow forecasts[228](index=228&type=chunk) [Market Risk Disclosures](index=36&type=section&id=Item%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) The company is primarily exposed to market risk from interest rate fluctuations and raw material price volatility - The company is exposed to interest rate risk on its **$799.0 million of variable-rate debt**; a hypothetical **100 basis point increase** would reduce annual cash flows by approximately **$8.0 million**[232](index=232&type=chunk) - The company experienced elevated prices for key raw materials like steel and aluminum in 2021 and expects them to remain elevated in 2022[230](index=230&type=chunk) [Financial Statements and Supplementary Data](index=37&type=section&id=Item%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA.) This section presents the audited 2021 consolidated financial statements, the auditor's report, and accompanying notes [Report of Independent Registered Public Accounting Firm](index=37&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion, identifying product warranty accruals as a critical audit matter - KPMG LLP issued an unqualified opinion, stating the financial statements are presented fairly and the company maintained effective internal control[236](index=236&type=chunk) - The audit of internal controls excluded the 2021 acquisitions of Furrion Holdings Limited and Exertis, as permitted by SEC guidance[237](index=237&type=chunk) - The estimation of certain product warranty accruals was identified as a **Critical Audit Matter**, requiring complex auditor judgment[244](index=244&type=chunk)[245](index=245&type=chunk) [Consolidated Financial Statements](index=39&type=section&id=Consolidated%20Financial%20Statements) The statements show significant 2021 growth, with net sales of $4.47B, net income of $287.7M, and assets of $3.29B Consolidated Statements of Income Data | (In thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Net sales** | $4,472,697 | $2,796,166 | $2,371,482 | | **Gross profit** | $1,043,035 | $706,090 | $539,202 | | **Operating profit** | $398,410 | $222,934 | $200,210 | | **Net income** | $287,739 | $158,440 | $146,509 | | **Diluted EPS** | $11.32 | $6.27 | $5.84 | Consolidated Balance Sheets Data | (In thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $1,566,885 | $869,801 | | **Total assets** | $3,288,094 | $2,298,031 | | **Total current liabilities** | $627,216 | $416,394 | | **Total liabilities** | $2,195,219 | $1,389,705 | | **Total stockholders' equity** | $1,092,875 | $908,326 | [Notes to Consolidated Financial Statements](index=45&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, 2021 acquisitions, debt structure including new convertible notes, and segment reporting - Note 4 details the six acquisitions completed in 2021, including Furrion for total consideration of **~$146.7M** and Ranch Hand for **~$59.9M**[298](index=298&type=chunk)[300](index=300&type=chunk)[310](index=310&type=chunk) - Note 9 describes the company's long-term debt, which totaled **$1.3B** at year-end, including a $400M New Term Loan and a $460M issuance of convertible notes[338](index=338&type=chunk)[343](index=343&type=chunk)[348](index=348&type=chunk) - Note 15 provides a detailed breakdown of revenue, showing the **OEM segment at 81% of sales** and the **Aftermarket at 19%**, with Thor and Berkshire Hathaway as top customers[399](index=399&type=chunk)[400](index=400&type=chunk)[403](index=403&type=chunk) [Controls and Procedures](index=75&type=section&id=Item%209A.%20CONTROLS%20AND%20PROCEDURES.) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[408](index=408&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[411](index=411&type=chunk) - The assessment of internal control over financial reporting excluded the 2021 acquisitions of Furrion and Exertis, as permitted by SEC guidance[412](index=412&type=chunk) Part III [Directors, Executive Compensation, and Corporate Governance](index=76&type=section&id=Item%2010-14) Information on directors, compensation, and governance is incorporated by reference from the 2022 Proxy Statement - Information regarding directors, executive officers, corporate governance, executive compensation, and security ownership is incorporated by reference from the company's 2022 Proxy Statement[418](index=418&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk)[424](index=424&type=chunk) - The company's independent registered public accounting firm is KPMG LLP[425](index=425&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=77&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES.) This section lists all financial statements and exhibits filed with the Form 10-K, including key agreements and certifications - This section contains a comprehensive list of all exhibits filed with the 10-K, including governance documents, debt agreements, and executive certifications[429](index=429&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk) [Form 10-K Summary](index=82&type=section&id=Item%2016.%20FORM%2010-K%20SUMMARY.) This item is not applicable

Financial Data and Key Metrics Changes - The company reported consolidated net sales for Q4 2021 increased 55% to $1.2 billion compared to the prior year, driven by strong market performance and strategic initiatives [39] - Full year 2021 revenues reached $4.5 billion, up 60% year-over-year, largely due to strong demand across all markets [8] - GAAP net income in Q4 2021 was $82.3 million or $3.22 per diluted share, compared to $48.7 million or $1.92 per diluted share in Q4 2020 [47] Business Line Data and Key Metrics Changes - RV OEM sales increased 73% during 2021, reaching nearly $2.6 billion, driven by heightened demand for RVs [9] - The Aftermarket segment grew year-over-year by 32%, supported by organic and inorganic growth drivers [15] - Content per towable RV increased 24% to $4,198, while content per motorized unit increased 15% to $2,856 compared to the prior year [41] Market Data and Key Metrics Changes - North American Marine sales increased 113% in Q4 2021, driven by heightened demand [42] - International businesses grew 58% for the year compared to 2020, supported by innovative product introductions in European markets [27] - 2021 retail caravan registrations in Europe increased 8%, with Germany up over 4% [28] Company Strategy and Development Direction - The company is targeting 15 automation projects costing up to $40 million planned for 2022 and early 2023 to support long-term margin expansion [12] - Focus on enhancing the retail customer experience through initiatives like the Lippert Scouts program and community engagement events [17][18] - The company is preparing for the global shift toward electric vehicles with the unveiling of a prototype EV towable RV chassis [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued strong demand in the RV market, although visibility for the full year is limited due to inflation uncertainties [14] - The company anticipates some margin contraction mid-year as supply chain pressures ease, with expected margin improvements of 150 to 200 basis points from Q4 2021 to Q1 2022 [44] - Management highlighted the importance of cultural strength in achieving operational success and maintaining employee retention [32] Other Important Information - The company allocated over $40 million to growth in automation CapEx in 2021 and anticipates similar or increased allocations in 2022 [30] - The company reported a net debt position of $1.2 billion, or 1.8 times pro forma EBITDA, with a long-term leverage target of 1.5 times net debt to EBITDA [51] Q&A Session Summary Question: Can you provide more detail on the January sales number and inventory situation? - Management noted that OEMs increased production rates in January, and while inventories are improving, it is too early to expect significant changes in production rates [57][60] Question: What is the outlook for towable content numbers and pricing? - Management indicated that the increase in towable content is driven by organic gains, acquisitions, and price adjustments to keep pace with input costs [68] Question: Can you elaborate on the cultural progress and its impact on turnover? - Management acknowledged the positive cultural changes that have led to lower turnover rates compared to previous years [74] Question: What is the outlook for margins in Q1 and the rest of the year? - Management expects a 150 to 200 basis point improvement in margins from Q4 2021 to Q1 2022, with additional incremental margin improvements from increased volume [78] Question: What is the growth outlook for the aftermarket side of the business? - Management highlighted significant opportunities in the aftermarket due to the increasing number of RVs needing repair and replacement parts [90] Question: How is the company addressing the challenges in the European market? - Management noted that the chip shortage is impacting motorhome production in Europe, but they are optimistic about their ability to adapt and continue growth [105]

LCI Industries Q3 2021 Earnings Conference Call November 2, 2021 INDUSTRIES Whenever, wherever, we make your experience better. FORWARD-LOOKING STATEMENTS This presentation contains certain "forward-looking statements" with respect to our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company's common stock, the impact of legal proceedings, and ...

LCI Industries (NYSE:LCII) Q3 2021 Results Conference Call November 2, 2021 8:30 AM ET Company Participants Brian Hall - Chief Financial Officer Jason Lippert - President, Chief Executive Officer and Director Conference Call Participants Scott Stember - C.L. King Brian Biros - Thompson Research Mike Swartz - Truist Securities Fred Wightman - Wolfe Research Daniel Moore - CJS Securities Ethan Huntley - Jefferies Operator Good day and thank you for standing by. Welcome to the LCI Industries Q3 Earnings Confer ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File Number: 001-13646 LCI INDUSTRIES (Exact name of registrant as specified in its charter) Delaware 1 ...

LCI Industries Q2 2021 Earnings Conference Call August 3, 2021 INDUSTRIES Whenever, wherever, we make your experience better. FORWARD-LOOKING STATEMENTS This presentation contains certain "forward-looking statements" with respect to our financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, acquisitions, plans and objectives of management, markets for the Company's common stock, the impact of legal proceedings, and ot ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [ITEM 1 – FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents the company's unaudited condensed consolidated financial statements for the periods ended June 30, 2021 and 2020 [Condensed Consolidated Statements of Income](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Three Months Ended June 30, 2021 vs 2020 (In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $1,093,720 | $525,765 | 108.0% | | Gross profit | $257,611 | $128,742 | 100.1% | | Operating profit | $93,982 | $20,782 | 352.2% | | Net income | $67,889 | $13,186 | 414.9% | | Basic EPS | $2.69 | $0.52 | 417.3% | | Diluted EPS | $2.67 | $0.52 | 413.5% | Six Months Ended June 30, 2021 vs 2020 (In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $2,093,978 | $1,185,435 | 76.6% | | Gross profit | $499,388 | $287,347 | 73.8% | | Operating profit | $195,413 | $65,048 | 200.4% | | Net income | $142,009 | $41,400 | 242.9% | | Basic EPS | $5.63 | $1.65 | 241.2% | | Diluted EPS | $5.60 | $1.64 | 241.5% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Three Months Ended June 30, 2021 vs 2020 (In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net income | $67,889 | $13,186 | 414.9% | | Net foreign currency translation adjustment | $1,507 | $1,239 | 21.6% | | Actuarial gain on pension plans | $933 | $6,299 | -85.2% | | Unrealized gain on fair value of derivative instruments | $— | $442 | -100.0% | | Total comprehensive income | $70,329 | $21,166 | 232.3% | Six Months Ended June 30, 2021 vs 2020 (In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net income | $142,009 | $41,400 | 242.9% | | Net foreign currency translation adjustment | $(2,082) | $(3,501) | -40.6% | | Actuarial gain on pension plans | $933 | $6,299 | -85.2% | | Unrealized gain on fair value of derivative instruments | $— | $1,642 | -100.0% | | Total comprehensive income | $140,860 | $45,840 | 207.3% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2021 vs December 31, 2020 (In thousands) | Metric | June 30, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $97,961 | $51,821 | 89.0% | | Total current assets | $1,215,975 | $869,801 | 39.8% | | Total assets | $2,776,178 | $2,298,031 | 20.8% | | Total current liabilities | $550,590 | $416,394 | 32.2% | | Long-term indebtedness | $941,824 | $720,418 | 30.7% | | Total liabilities | $1,790,002 | $1,389,705 | 28.8% | | Total stockholders' equity | $986,176 | $908,326 | 8.6% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Six Months Ended June 30, 2021 vs 2020 (In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net cash flows provided by operating activities | $23,859 | $102,101 | -76.6% | | Net cash flows used in investing activities | $(146,429) | $(105,166) | 39.2% | | Net cash flows provided by financing activities | $168,802 | $32,093 | 426.0% | | Net increase in cash and cash equivalents | $46,140 | $26,913 | 71.4% | | Cash and cash equivalents at end of period | $97,961 | $62,272 | 57.3% | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Stockholders' Equity Changes (In thousands) | Metric | Balance - Dec 31, 2020 | Net Income | Stock-based compensation expense | Cash dividends | Balance - Jun 30, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $908,326 | $142,009 | $13,859 | $(41,678) | $986,176 | *Note: This table simplifies the full statement by focusing on major changes, Other comprehensive income/loss, issuance/forfeiture of stock awards, and convertible note/warrant transactions also impacted equity* [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Basis of Presentation](index=10&type=section&id=1.%20BASIS%20OF%20PRESENTATION) The company supplies engineered components to recreation and transportation OEMs, with seasonal sales patterns impacted by COVID-19 - LCII supplies engineered components to OEMs in recreation and transportation markets (RVs, buses, trailers, boats, etc) and their related aftermarkets, operating over 100 facilities globally[23](index=23&type=chunk) - Historically, sales and profits are **highest in Q2 and lowest in Q4** due to seasonality, but COVID-19 has caused fluctuations and may alter future trends[24](index=24&type=chunk) - The COVID-19 pandemic adversely affected financial results in H1 2020 due to plant shutdowns but activity improved in H2 2020 and continued into H1 2021, particularly in RV and marine OEM markets and the Aftermarket Segment[28](index=28&type=chunk)[29](index=29&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's accounting policies include the early adoption of ASU 2020-06, simplifying accounting for convertible instruments - The company **early adopted ASU 2020-06 in 2021**, simplifying accounting for convertible instruments and impacting the recognition and disclosure of convertible debt issued in May 2021[32](index=32&type=chunk) [3. Earnings Per Share](index=11&type=section&id=3.%20EARNINGS%20PER%20SHARE) The company calculates basic and diluted EPS, with Convertible Notes and Warrants being antidilutive for the period Weighted Average Common Shares Outstanding (In thousands) | Metric | Three Months Ended Jun 30, 2021 | Three Months Ended Jun 30, 2020 | Six Months Ended Jun 30, 2021 | Six Months Ended Jun 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Basic | 25,275 | 25,150 | 25,230 | 25,108 | | Diluted | 25,385 | 25,219 | 25,351 | 25,177 | - **Convertible Notes and Warrants were antidilutive** for the three and six months ended June 30, 2021, as the average common stock price was below their respective conversion/strike prices[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [4. Acquisitions, Goodwill and Other Intangible Assets](index=12&type=section&id=4.%20ACQUISITIONS,%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) The company completed several acquisitions in H1 2021, increasing goodwill to **$496.4 million** and other intangible assets to **$437.4 million** - In August 2021, the Company entered into a definitive agreement to acquire Furrion Holdings Limited, a leading distributor of appliances and products for RV and specialty vehicle markets, expected to close in Q3 2021[36](index=36&type=chunk) Acquisitions Completed During Six Months Ended June 30, 2021 (In thousands) | Acquisition | Purchase Price (Cash) | Goodwill | Primary Segment | | :--- | :--- | :--- | :--- | | Schaudt | $29,383 | $16,319 | OEM | | Ranch Hand | $56,709 | $9,537 | Aftermarket | | Other Acquisitions | $17,800 | $8,800 | N/A | | **Total** | **$103,892** | **$34,656** | | Goodwill by Segment (In thousands) | Metric | OEM Segment | Aftermarket Segment | Total | | :--- | :--- | :--- | :--- | | Net balance – Dec 31, 2020 | $305,953 | $148,775 | $454,728 | | Acquisitions – 2021 | $24,448 | $10,190 | $34,638 | | Measurement period adjustments | $9,456 | $(23) | $9,433 | | Foreign currency translation | $(2,528) | $151 | $(2,377) | | Net balance – Jun 30, 2021 | $337,329 | $159,093 | $496,422 | [5. Inventories](index=16&type=section&id=5.%20INVENTORIES) Total net inventories increased to **$620.2 million** as of June 30, 2021, driven by a significant increase in raw materials Inventories, Net (In thousands) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Raw materials | $450,035 | $356,921 | | Work in process | $35,948 | $24,189 | | Finished goods | $134,200 | $112,789 | | **Total Inventories, net** | **$620,183** | **$493,899** | [6. Fixed Assets](index=16&type=section&id=6.%20FIXED%20ASSETS) Net fixed assets increased to **$408.7 million** at June 30, 2021, from **$387.2 million** at December 31, 2020 Fixed Assets (In thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Fixed assets, at cost | $801,003 | $750,138 | | Less accumulated depreciation and amortization | $392,310 | $362,920 | | **Fixed assets, net** | **$408,693** | **$387,218** | [7. Accrued Expenses and Other Current Liabilities](index=16&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Total accrued expenses increased to **$200.4 million** at June 30, 2021, primarily due to higher employee compensation and benefits Accrued Expenses and Other Current Liabilities (In thousands) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Employee compensation and benefits | $81,906 | $62,555 | | Current portion of accrued warranty | $25,370 | $32,451 | | Customer rebates | $12,531 | $23,670 | | Other | $80,581 | $69,524 | | **Total** | **$200,388** | **$188,200** | Accrued Warranty Activity (Six Months Ended June 30, In thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Balance at beginning of period | $47,091 | $47,167 | | Provision for warranty expense | $12,304 | $8,358 | | Warranty costs paid | $(15,360) | $(10,916) | | Balance at end of period | $44,160 | $44,609 | | Current portion at end of period | $25,370 | $28,328 | [8. Pension Plans](index=17&type=section&id=8.%20PENSION%20PLANS) The company assumed two defined benefit pension plans in the Netherlands, with a net periodic pension cost of **$(2.5) million** for H1 2021 - The company assumed two partially-funded defined benefit pension plans in the Netherlands (Dutch pension plans) through the Polyplastic acquisition in January 2020[55](index=55&type=chunk) Net Periodic Pension Cost (In thousands) | Metric | Three Months Ended Jun 30, 2021 | Three Months Ended Jun 30, 2020 | Six Months Ended Jun 30, 2021 | Six Months Ended Jun 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net service cost | $(1,107) | $(1,355) | $(2,216) | $(1,625) | | Interest cost | $(166) | $(405) | $(332) | $(486) | | Expected return on plan assets | $109 | $252 | $217 | $302 | | Administrative charges | $(72) | $(108) | $(143) | $(130) | | **Net periodic pension cost** | **$(1,236)** | **$(1,616)** | **$(2,474)** | **$(1,939)** | [9. Long-Term Indebtedness](index=17&type=section&id=9.%20LONG-TERM%20INDEBTEDNESS) Total long-term debt increased to **$941.8 million** due to the issuance of **$460.0 million** in convertible senior notes Long-Term Indebtedness (In thousands) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Convertible Notes | $460,000 | $— | | Term Loan | $277,500 | $285,000 | | Revolving Credit Loan | $224,482 | $394,888 | | Shelf-Loan Facility | $50,000 | $50,000 | | Other | $8,191 | $9,652 | | Unamortized deferred financing fees | $(12,469) | $(1,291) | | **Total Long-term indebtedness** | **$941,824** | **$720,418** | - On May 13, 2021, the Company issued **$460.0 million in 1.125% convertible senior notes** due 2026, with net proceeds of approximately **$448.2 million**[64](index=64&type=chunk) - The Convertible Notes have an initial conversion rate of 6.0369 shares per $1,000 principal amount (conversion price ~$165.65/share) and are convertible under specific conditions prior to January 15, 2026, and freely convertible thereafter[66](index=66&type=chunk)[67](index=67&type=chunk) - The Company was in compliance with all financial covenants under its Amended Credit Agreement and Shelf-Loan Facility at June 30, 2021, with **$372.6 million available** under the revolving credit facility[73](index=73&type=chunk)[74](index=74&type=chunk) [10. Leases](index=20&type=section&id=10.%20LEASES) Total lease costs increased to **$23.7 million** for H1 2021, primarily due to capacity expansions and leases from recent acquisitions Components of Lease Cost (In thousands) | Metric | Three Months Ended Jun 30, 2021 | Three Months Ended Jun 30, 2020 | Six Months Ended Jun 30, 2021 | Six Months Ended Jun 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $11,317 | $8,154 | $20,415 | $15,976 | | Short-term lease cost | $986 | $391 | $1,875 | $1,269 | | Variable lease cost | $742 | $526 | $1,431 | $1,147 | | **Total lease cost** | **$13,045** | **$9,071** | **$23,721** | **$18,392** | [11. Commitments and Contingencies](index=20&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has a **$9.5 million** contingent consideration liability and a **$36.7 million** receivable from Furrion at June 30, 2021 Contingent Consideration Liability (In thousands) | Metric | Amount | | :--- | :--- | | Balance at beginning of period | $4,609 | | Acquisitions | $5,000 | | Payments | $(9) | | Accretion | $113 | | Fair value adjustments | $(23) | | Net foreign currency translation adjustment | $(141) | | **Balance at end of the period** | **$9,549** | | Less current portion | $(7,986) | | **Total long-term portion** | **$1,563** | - The company has a receivable from Furrion of **$36.7 million** at June 30, 2021, for inventory purchases, with the payment schedule adjusted through July 2022 due to COVID-19 impacts[80](index=80&type=chunk) - Management believes that any monetary liability or financial impact from product recalls, environmental matters, or litigation, beyond amounts already provided, **would not be material** to the company's financial position or results of operations[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) [12. Stockholders' Equity](index=22&type=section&id=12.%20STOCKHOLDERS'%20EQUITY) The company declared **$41.7 million** in dividends in H1 2021 and entered into hedge transactions related to its Convertible Notes Common Stock Information (In thousands) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Common stock authorized | 75,000 | 75,000 | | Common stock issued | 28,356 | 28,243 | | Treasury stock | 3,087 | 3,087 | | **Common stock outstanding** | **25,269** | **25,156** | Quarterly Dividends Declared and Paid (In thousands, except per share data) | Period | Per Share | Total Paid | | :--- | :--- | :--- | | First Quarter 2021 | $0.75 | $18,939 | | Second Quarter 2021 | $0.90 | $22,739 | | **Total 2021** | **$1.65** | **$41,678** | | Total 2020 | $2.80 | $70,401 | - The company entered into **Convertible Note Hedge Transactions (cost $100.1 million)** and **Warrant Transactions (proceeds $48.5 million)** in May 2021, both classified within Stockholders' Equity and not revalued after issuance, to manage the potential dilutive effect of Convertible Notes[88](index=88&type=chunk)[90](index=90&type=chunk) [13. Fair Value Measurements](index=24&type=section&id=13.%20FAIR%20VALUE%20MEASUREMENTS) The company measures pension plan assets and contingent consideration liabilities at fair value on a recurring basis Assets and Liabilities Measured at Fair Value (In thousands) | Category | June 30, 2021 (Total) | December 31, 2020 (Total) | | :--- | :--- | :--- | | Pension plan assets (Level 3) | $53,558 | $61,936 | | Contingent consideration (Level 3) | $9,549 | $4,609 | - Contingent consideration liabilities are estimated using **Level 3 inputs**, including management's long-term sales forecasts (averaging **~13% annual growth**) and a market participant's weighted average cost of capital (**13.3%**)[76](index=76&type=chunk)[93](index=93&type=chunk) [14. Segment Reporting](index=24&type=section&id=14.%20SEGMENT%20REPORTING) The company operates two segments, OEM and Aftermarket, with the OEM segment accounting for **80%** of H1 2021 consolidated net sales - The **OEM Segment accounted for 80%** of consolidated net sales for the six months ended June 30, 2021, primarily serving RVs (61% from travel trailer and fifth-wheel RVs) and adjacent industries[96](index=96&type=chunk) - The **Aftermarket Segment accounted for 20%** of consolidated net sales for the six months ended June 30, 2021, supplying engineered components to retail dealers, wholesale distributors, and service centers[97](index=97&type=chunk) Net Sales by Segment and Geography (Six Months Ended June 30, In thousands) | Segment | U.S. (2021) | Int'l (2021) | Total (2021) | U.S. (2020) | Int'l (2020) | Total (2020) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | OEM Segment | $1,518,722 | $162,182 | $1,680,904 | $804,233 | $95,936 | $900,169 | | Aftermarket Segment | $381,407 | $31,667 | $413,074 | $276,289 | $8,977 | $285,266 | | **Total Net Sales** | **$1,900,129** | **$193,849** | **$2,093,978** | **$1,080,522** | **$104,913** | **$1,185,435** | Operating Profit by Segment (Six Months Ended June 30, In thousands) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | OEM Segment | $142,621 | $44,952 | | Aftermarket Segment | $52,792 | $20,096 | | **Total Operating Profit** | **$195,413** | **$65,048** | [ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=27&type=section&id=ITEM%202%20%E2%80%93%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes financial performance, covering industry trends, segment results, liquidity, and capital resources for H1 2021 [Company Overview](index=27&type=section&id=Company%20Overview) - LCI Industries (LCII) supplies engineered components to leading OEMs in recreation and transportation markets (RVs, buses, trailers, boats, etc) and their related aftermarkets, operating over 100 facilities globally[104](index=104&type=chunk)[105](index=105&type=chunk) - The OEM Segment's net sales for the twelve months ended June 30, 2021, were approximately **62% from components for travel trailer and fifth-wheel RVs**[106](index=106&type=chunk) - Sales and profits are historically **highest in Q2 and lowest in Q4** due to seasonality, but COVID-19 has impacted these trends, and aftermarket sales tend to be counter-seasonal[107](index=107&type=chunk) [COVID-19 Update](index=27&type=section&id=COVID-19%20UPDATE) - The COVID-19 pandemic negatively impacted H1 2020 financial results due to plant shutdowns, but activity improved in H2 2020 and continued into H1 2021, especially in RV and marine OEM markets and the Aftermarket Segment[108](index=108&type=chunk)[109](index=109&type=chunk) - The industry faced challenges in H1 2021 with **supply chain constraints, rising material costs, and a tightened labor market**, leading the company to strategically manage working capital, build inventory, and invest in production capacity[111](index=111&type=chunk) - The company maintained rigorous health and safety protocols, provided rapid COVID-19 testing, and partnered with a local hospital for vaccination days for team members and their families[112](index=112&type=chunk) [Furrion Update](index=28&type=section&id=FURRION%20UPDATE) - At June 30, 2021, the company had a **$36.7 million receivable from Furrion** for inventory stock purchases following the termination of a distribution agreement, with the payment schedule adjusted through July 2022 due to COVID-19 impacts[114](index=114&type=chunk) [Industry Background](index=28&type=section&id=INDUSTRY%20BACKGROUND) [North American Recreational Vehicle Industry](index=28&type=section&id=North%20American%20Recreational%20Vehicle%20Industry) The RV industry saw a **71% increase** in H1 2021 wholesale shipments, driven by record retail demand and dealer inventory rebuilding - Industry-wide wholesale shipments of travel trailer and fifth-wheel RVs in H1 2021 **increased 71% to 265,000 units**, driven by increased retail demand (**up 42%**) and dealer inventory rebuilding[117](index=117&type=chunk) Travel Trailer and Fifth-Wheel RVs (Units) | Period | Wholesale Units (Change) | Retail Units (Change) | Estimated Unit Impact on Dealer Inventories | | :--- | :--- | :--- | :--- | | Quarter ended June 30, 2021 | 133,800 (100%) | 179,400 (36%) | (45,600) | | Twelve months ended June 30, 2021 | 490,300 (54%) | 540,300 (39%) | (50,000) | | Twelve months ended June 30, 2020 | 318,700 (-14%) | 388,100 (-5%) | (69,400) | - Industry-wide wholesale shipments of motorhome RVs in H1 2021 **increased 71% to 29,100 units**, with retail demand up **20%** year-over-year[120](index=120&type=chunk) [Adjacent Industries](index=29&type=section&id=Adjacent%20Industries) The company's RV product portfolio is also utilized in other applications, representing significant growth opportunities - The company's products are used in **'Adjacent Industries'** such as buses, various trailers, trucks, boats, trains, and manufactured/modular housing, representing significant growth opportunities[121](index=121&type=chunk) [Aftermarket Segment](index=29&type=section&id=Aftermarket%20Segment) The Aftermarket Segment serves a vibrant market of over **11 million RV-owning households** in the US - The Aftermarket Segment sells discretionary accessories and replacement parts through various channels, supported by dedicated teams for technical and marketing support[122](index=122&type=chunk) - Estimated RV ownership in the U.S. **exceeded 11 million households in 2020**, driving aftermarket sales for upgrades and part replacements[123](index=123&type=chunk) [Results of Operations](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) [Consolidated Highlights](index=29&type=section&id=Consolidated%20Highlights) Consolidated net sales **grew 108%** to **$1.1 billion** in Q2 2021, with net income rising **415%** to **$67.9 million** - Consolidated net sales in Q2 2021 were **$1.1 billion, up 108%** from Q2 2020, driven by record RV retail demand and strong Aftermarket Segment sales growth, with acquisitions contributing **$53.7 million**[124](index=124&type=chunk)[125](index=125&type=chunk) - Net income for Q2 2021 was **$67.9 million ($2.67 diluted EPS)**, compared to **$13.2 million ($0.52 diluted EPS)** in Q2 2020[128](index=128&type=chunk) - Consolidated operating profit in Q2 2021 was **$94.0 million (8.6% margin)**, up from **$20.8 million (4.0% margin)** in Q2 2020, primarily due to fixed cost leveraging over a larger sales base and the negative impact of COVID-19 shutdowns in 2020[128](index=128&type=chunk) - The effective tax rate for H1 2021 was **25.0%**, lower than **26.3%** in H1 2020, due to reduced rate impact of permanent tax differences and increased excess tax benefits from equity-based compensation[128](index=128&type=chunk) [OEM Segment - Second Quarter](index=30&type=section&id=OEM%20Segment%20-%20Second%20Quarter) The OEM Segment's Q2 2021 net sales **grew 135%** to **$864.7 million**, with operating margin improving to **7.3%** from **0.5%** OEM Segment Net Sales by Market (Three Months Ended June 30, In thousands) | Market | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Travel trailers and fifth-wheels | $527,614 | $212,518 | 148% | | Motorhomes | $67,253 | $24,713 | 172% | | Adjacent Industries OEMs | $269,787 | $130,581 | 107% | | **Total OEM Segment net sales** | **$864,654** | **$367,812** | **135%** | Average Product Content per RV (Twelve Months Ended June 30) | Content per: | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Travel trailer and fifth-wheel RV | $3,621 | $3,371 | 7% | | Motorhome | $2,644 | $2,308 | 15% | - OEM Segment operating profit **increased by $61.6 million to $63.3 million** in Q2 2021, with margin improving to **7.3% from 0.5%**, driven by fixed cost leveraging ($53.7M SG&A, $27.9M overhead) and pricing changes ($19.6M targeted, $19.1M commodity-indexed), partially offset by increased material costs ($45.0M) and direct labor costs ($12.6M)[132](index=132&type=chunk) [OEM Segment – Year to Date](index=31&type=section&id=OEM%20Segment%20%E2%80%93%20Year%20to%20Date) The OEM Segment's H1 2021 net sales **grew 87%** to **$1.68 billion**, with operating margin improving to **8.5%** from **5.0%** OEM Segment Net Sales by Market (Six Months Ended June 30, In thousands) | Market | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Travel trailers and fifth-wheels | $1,030,630 | $519,626 | 98% | | Motorhomes | $129,846 | $62,800 | 107% | | Adjacent Industries OEMs | $520,428 | $317,743 | 64% | | **Total OEM Segment net sales** | **$1,680,904** | **$900,169** | **87%** | - OEM Segment operating profit **increased by $97.7 million to $142.6 million** in H1 2021, with margin improving to **8.5% from 5.0%**, driven by fixed cost leveraging ($66.1M SG&A, $34.3M overhead) and pricing changes ($25.1M targeted, $17.4M commodity-indexed), partially offset by increased material costs ($62.9M) and direct labor costs ($18.3M)[135](index=135&type=chunk) [Aftermarket Segment - Second Quarter](index=32&type=section&id=Aftermarket%20Segment%20-%20Second%20Quarter) The Aftermarket Segment's Q2 2021 net sales **grew 45%** to **$229.1 million**, with operating margin improving to **13.4%** from **12.0%** Aftermarket Segment Net Sales (Three Months Ended June 30, In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Aftermarket Segment net sales | $229,066 | $157,953 | 45% | - Aftermarket Segment operating profit **increased by $11.6 million to $30.6 million** in Q2 2021, with margin improving to **13.4% from 12.0%**, driven by fixed cost leveraging ($6.9M SG&A, $4.7M overhead) and pricing changes ($7.7M), partially offset by increased transportation costs ($7.7M), material costs ($5.2M), and acquisition-related cost of sales ($0.6M)[138](index=138&type=chunk) [Aftermarket Segment – Year to Date](index=33&type=section&id=Aftermarket%20Segment%20%E2%80%93%20Year%20to%20Date) The Aftermarket Segment's H1 2021 net sales **grew 45%** to **$413.1 million**, with operating margin improving to **12.8%** from **7.0%** Aftermarket Segment Net Sales (Six Months Ended June 30, In thousands) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Aftermarket Segment net sales | $413,074 | $285,266 | 45% | - Aftermarket Segment operating profit **increased by $32.7 million to $52.8 million** in H1 2021, with margin improving to **12.8% from 7.0%**, driven by fixed cost leveraging ($16.4M SG&A, $9.6M overhead) and pricing changes ($11.6M), partially offset by increased transportation costs ($10.2M) and material costs ($8.9M)[141](index=141&type=chunk) [Income Taxes](index=33&type=section&id=Income%20Taxes) The effective tax rate for H1 2021 was **25.0%**, down from **26.3%** in the prior year due to higher pre-tax income and tax benefits [Liquidity and Capital Resources](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) [Cash Flows](index=33&type=section&id=Cash%20Flows) The company had **$98.0 million** in cash and **$372.6 million** available under its revolving credit facility at June 30, 2021 - At June 30, 2021, the company had **$98.0 million in cash and cash equivalents** and **$372.6 million of availability** under its revolving credit facility[142](index=142&type=chunk) - The company believes its availability under the revolving credit facility and cash flows from operations are **adequate to finance anticipated cash requirements** for the next twelve months[146](index=146&type=chunk) Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, In thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $23,859 | $102,101 | | Net cash flows used in investing activities | $(146,429) | $(105,166) | | Net cash flows provided by financing activities | $168,802 | $32,093 | | Net increase in cash and cash equivalents | $46,140 | $26,913 | [Cash Flows from Operations](index=34&type=section&id=Cash%20Flows%20from%20Operations) Net cash from operations decreased to **$23.9 million** in H1 2021 due to strategic working capital investments - Net cash flows provided by operating activities **decreased to $23.9 million** in H1 2021 from **$102.1 million** in H1 2020, primarily due to a **$191.5 million decrease** from changes in net assets and liabilities[148](index=148&type=chunk) - The decrease was driven by strategic working capital management, including **building inventory and increasing receivables**, to address supply chain constraints and rising material costs[148](index=148&type=chunk) - Depreciation and amortization was **$51.3 million** in H1 2021 (expected $100-$110 million for full year 2021), and non-cash stock-based compensation expense was **$13.9 million** (expected $20-$30 million for full year 2021)[150](index=150&type=chunk) [Cash Flows from Investing Activities](index=34&type=section&id=Cash%20Flows%20from%20Investing%20Activities) Cash used in investing increased to **$146.4 million** in H1 2021, driven by acquisitions and capital expenditures - Cash flows used in investing activities were **$146.4 million** in H1 2021, primarily for **$103.9 million in business acquisitions** and **$42.0 million in capital expenditures**[151](index=151&type=chunk) - Full year 2021 capital expenditures are estimated at **$130-$150 million**, including capacity expansions, to be funded by cash flows from operations or revolving credit facility borrowings[152](index=152&type=chunk)[155](index=155&type=chunk) [Cash Flows from Financing Activities](index=35&type=section&id=Cash%20Flows%20from%20Financing%20Activities) Cash from financing increased to **$168.8 million** in H1 2021, driven by net proceeds from Convertible Notes and Warrants - Cash flows provided by financing activities were **$168.8 million** in H1 2021, primarily from **$396.5 million in net proceeds** from Convertible Notes and Warrants (after hedge costs)[156](index=156&type=chunk) - These proceeds were partially offset by **$165.1 million in net payments** under the revolving credit facility, **$41.7 million in quarterly dividends**, and **$8.7 million in other debt repayments**[156](index=156&type=chunk) - The company has a **$9.5 million liability for contingent consideration** related to business acquisitions, and was in compliance with all debt covenants at June 30, 2021[159](index=159&type=chunk)[160](index=160&type=chunk) [Corporate Governance](index=35&type=section&id=CORPORATE%20GOVERNANCE) - The company is in compliance with SEC and NYSE corporate governance requirements, with governance documents, committee charters, and key practices available on its website[162](index=162&type=chunk) [Contingencies](index=36&type=section&id=CONTINGENCIES) - Information on contingencies is incorporated by reference from Note 11 of the Notes to Condensed Consolidated Financial Statements[164](index=164&type=chunk) [Inflation](index=36&type=section&id=INFLATION) - Prices of key raw materials (steel and aluminum) are influenced by demand and commodity-specific factors, not directly by inflation, and have been volatile, The company has historically offset cost increases with sales price increases[165](index=165&type=chunk)[176](index=176&type=chunk) [New Accounting Pronouncements](index=36&type=section&id=NEW%20ACCOUNTING%20PRONOUNCEMENTS) - Information on new accounting pronouncements is incorporated by reference from Note 2 of the Notes to Condensed Consolidated Financial Statements[166](index=166&type=chunk) [Use of Estimates](index=36&type=section&id=USE%20OF%20ESTIMATES) - The preparation of financial statements requires management to make estimates and judgments, which are continuously evaluated based on historical experience and other reasonable assumptions[167](index=167&type=chunk) [Forward-Looking Statements](index=36&type=section&id=FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements subject to risks and uncertainties, including impacts of COVID-19, pricing pressures, raw material costs, seasonality, customer financial condition, acquisitions, and regulatory changes[168](index=168&type=chunk)[169](index=169&type=chunk) [ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=38&type=section&id=ITEM%203%20%E2%80%93%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from changes in interest rates on variable debt and fluctuations in raw material prices - The company is exposed to market risk from changes in short-term interest rates on variable rate debt; a hypothetical **0.25% increase would not materially affect results**[174](index=174&type=chunk) - The company is exposed to changes in **steel and aluminum prices**, historically offsetting increases with sales price adjustments, but future ability to do so is not assured[175](index=175&type=chunk)[176](index=176&type=chunk) - The company had **no outstanding derivative instruments** on commodities at June 30, 2021[175](index=175&type=chunk) [ITEM 4 – CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204%20%E2%80%93%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control - Management concluded that the company's **disclosure controls and procedures were effective** as of June 30, 2021[180](index=180&type=chunk) - There were **no material changes in internal control** over financial reporting during the quarter ended June 30, 2021[180](index=180&type=chunk) - The company is continuing the implementation of a new enterprise resource planning (ERP) system, which is anticipated to lead to enhancements in controls and business processes[181](index=181&type=chunk) [PART II – OTHER INFORMATION](index=39&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [ITEM 1 – LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201%20%E2%80%93%20LEGAL%20PROCEEDINGS) The company is subject to various legal proceedings, which management believes will not have a material financial impact - The company is subject to various legal proceedings, lawsuits, and regulatory inquiries in the normal course of business[184](index=184&type=chunk) - Management believes that any monetary liability or financial impact beyond current provisions **would not be material** to the company's financial position or results of operations[184](index=184&type=chunk) [ITEM 1A – RISK FACTORS](index=39&type=section&id=ITEM%201A%20%E2%80%93%20RISK%20FACTORS) This section updates risk factors, adding new risks related to the Convertible Notes, including potential dilution and debt servicing - Conversion of the Convertible Notes may **dilute stockholders' ownership interests** or depress the common stock price, especially if settled in shares[186](index=186&type=chunk) - Servicing the company's substantial debt, including Convertible Notes, **requires significant cash flow**, and there's a risk that future operations may not generate sufficient cash[187](index=187&type=chunk) - The conditional conversion feature of the Convertible Notes, if triggered, could require cash settlement of principal, **adversely affecting liquidity**, or reclassification of debt to current liability, reducing net working capital[188](index=188&type=chunk) - Provisions in the Convertible Notes Indenture, such as repurchase requirements upon a fundamental change, may **delay or prevent beneficial takeover attempts**[189](index=189&type=chunk) [ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=40&type=section&id=ITEM%202%20%E2%80%93%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company issued **$460.0 million** in Convertible Notes and sold Warrants for **$48.5 million** in private placements - **No shares were repurchased** under the stock repurchase program during the six months ended June 30, 2021, with **$121.3 million remaining in authorization**[190](index=190&type=chunk) - On May 13, 2021, the company issued **$460.0 million in Convertible Notes** and sold **Warrants for $48.5 million** in private placements, exempt from registration under the Securities Act[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Approximately **$51.6 million** of the net proceeds from the Convertible Notes offering was used to pay for the Convertible Note Hedge Transactions[195](index=195&type=chunk) [ITEM 6 – EXHIBITS](index=41&type=section&id=ITEM%206%20%E2%80%93%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance and debt agreement documents - The exhibits include corporate governance documents, debt agreements (Indenture, Credit Agreement amendments), and transaction confirmations for Convertible Note Hedge and Warrant transactions[198](index=198&type=chunk)[199](index=199&type=chunk) - CEO and CFO certifications (Sections 302 and 906) are filed, along with Inline XBRL formatted financial information[200](index=200&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) This section contains the signature of the registrant, confirming the due authorization and filing of the report - The report is signed by Brian M Hall, Chief Financial Officer of LCI Industries, on August 4, 2021, confirming its due authorization and filing[202](index=202&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2021 increased 108% year-over-year to $1.1 billion, driven by strong market performance and solid execution [23][24] - GAAP net income in Q2 2021 was $67.9 million or $2.67 per diluted share, compared to $13.2 million or $0.52 per diluted share in Q2 2020 [31] - Adjusted EBITDA increased 68% to $121.3 million for the second quarter [31] - Gross margins were 23.6%, down from 24.5% in the prior year, primarily due to rising material and freight costs [28] Performance by Business Segment - RV OEM sales increased 151% year-over-year to $595 million, driven by elevated retail demand [8][24] - Aftermarket segment revenue grew 45% year-over-year to $229 million, supported by record backlogs and successful integration of acquisitions [13][24] - Revenue from adjacent markets increased 107% year-over-year to $269 million, benefiting from similar growth drivers as RV and aftermarket segments [15][24] - International revenues increased 133% year-over-year to $103 million, capitalizing on elevated demand for RVs in Europe [17][24] Market Data and Key Metrics Changes - The RV industry hit a record of 153,100 unit shipments in Q2 2021, with an annualized rate expected to reach 600,000 units [5][24] - Content per towable RV increased 7% year-over-year to $3,621, while content per motorhome RV increased 15% year-over-year to $26,044 [12][25] - North American Marine sales increased over 200%, supported by modest production acceleration and acquisitions [26] Company Strategy and Industry Competition - The company is focused on integrating recent acquisitions and driving market share expansion while addressing supply chain challenges [6][20] - Strategic initiatives include innovation and product development to enhance customer experience and maintain industry leadership [18][19] - The company aims to maintain a strong balance sheet while pursuing strategic acquisitions and optimizing manufacturing capacity [20][36] Management's Comments on Operating Environment and Future Outlook - Management noted that demand across recreational markets remains at an all-time high, with expectations for continued growth into 2022 [5][6] - Supply chain constraints and rising material costs are ongoing challenges, but the company is strategically managing working capital to mitigate impacts [33][34] - Management anticipates that inflationary pressures from steel, aluminum, and freight will persist into 2022 [48][49] Other Important Information - The company has made three acquisitions in 2021, focusing on integrating these businesses effectively to leverage their capabilities [107][109] - Capital expenditures for 2021 are anticipated to be in the range of $130 million to $150 million, unchanged from previous expectations [36] Q&A Session Summary Question: Can you balance price increases, volumes, and planned downtime for the quarter? - Management indicated that materials and pricing had the most significant impact on gross margins, with approximately 300 basis points of negative impact from material costs [41] Question: What are the top three inflationary headwinds? - Steel and aluminum combined account for almost 50% of material spend, with steel prices up 250% since September 2020 being the most significant challenge [46] Question: How is the integration of recent acquisitions progressing? - Integration is going well, with strong organic growth and synergies being realized from the recent acquisitions [109][110] Question: What is the outlook for production rates in the RV industry? - Production rates are expected to gradually increase, with the industry aiming for a range of 570,000 to 590,000 units in 2021 [79] Question: How is the aftermarket business performing? - The aftermarket business is seeing strong demand across all categories, driven by increased usage of RVs, particularly in the peer-to-peer rental market [70][71]

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2021 increased 52% year-over-year to $1 billion, with acquisitions contributing $41 million or 6% growth [24][25] - GAAP net income for Q1 2021 was $74.1 million or $2.93 per diluted share, compared to $28.2 million or $1.12 per diluted share in Q1 2020 [28] - Adjusted EBITDA increased 68% to $125.9 million for the first quarter [28] Business Line Data and Key Metrics Changes - RV OEM sales increased 64% year-over-year to $566 million, driven by record retail demand [6][24] - Aftermarket segment sales grew 45% to $184 million, supported by strong performance in CURT Group [11][24] - Adjacent markets revenue increased 34% to $251 million, with significant growth in Marine [14][24] Market Data and Key Metrics Changes - International business revenues increased 50% year-over-year to $91 million, with strong growth in the European RV OEM segment [16][24] - Retail caravan registrations in Europe increased almost 20% [16] - The RV industry is projected to have wholesale shipments of approximately 570,000 to 590,000 units in 2021, an all-time record [25] Company Strategy and Development Direction - The company is focused on expanding production capacities and enhancing operational efficiencies through automation and lean manufacturing initiatives [10][27] - A diversification strategy has been in place for 11 years, with over 50% of total sales now coming from adjacent markets, aftermarket, and international business [17][18] - The company is committed to strategic M&A opportunities, particularly in the Marine and aftermarket sectors [22][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained growth in the RV industry, driven by a new generation of RV enthusiasts and increased outdoor activities due to COVID-19 [7][8] - The company anticipates continued strong demand in both RV and Marine markets, despite supply chain challenges [25][30] - Management highlighted the importance of maintaining a strong balance sheet and targeting long-term leverage of 1 to 1.5 times net debt-to-EBITDA [31] Other Important Information - The company has committed to expanding its production capacity by over 2 million additional square feet [10] - The CURT Group has been performing exceptionally well, setting records for several months [65][66] - The company is focused on enhancing customer experience through initiatives like Lippert Scouts and social media engagement [12][13] Q&A Session Summary Question: How is the company managing rising costs, particularly for steel and aluminum? - Management indicated that most raw materials for chassis products are indexed, which helps mitigate immediate impacts of rising costs [34] Question: What are the efficiency gains from the COVID-19 challenges? - Management noted that while it's difficult to quantify total efficiency gains, investments in automation and lean layouts have minimized some impacts [36][38] Question: What is the outlook for the Schaudt acquisition and European Caravan market? - The European Caravan market is showing early signs of growth, and the Schaudt acquisition is expected to enhance technology integration and customer base [42][44] Question: What is the expected run rate for revenue in April? - Management indicated that the April revenue run rate aligns with strong retail demand and OEM capacity additions, projecting a continued upward trend [46] Question: What are the expectations for operating margins moving forward? - Management expects operating margins to hover around 8% to 10% for OEM business, with potential appreciation as the aftermarket segment grows [56][57]