Financial Data and Key Metrics Changes - The company reported a revenue of $3.8 billion for 2023, a decline from $5.2 billion in 2022, primarily due to lower RV and marine industry production levels [31][49] - The gross margin improved to 19.2% compared to 16.4% in the prior year, driven by a positive mix and lower sales volume [76][100] - Operating cash flow was strong at $527 million in 2023, with a net debt position of $781 million, representing 2.7 times pro forma EBITDA [46][78] Business Line Data and Key Metrics Changes - Sales to North American RV OEMs decreased by 47% to $1.5 billion, while sales in North American adjacent markets decreased by 8% to $1.1 billion [77] - Aftermarket net sales were $881 million for the year, down 1% compared to 2022, but up 10% in Q4 2023 [37][50] - Content per total RV decreased to $5,058, while content per motorhome RV was $3,506, reflecting index pricing reductions [33][98] Market Data and Key Metrics Changes - International sales increased by 4% year-over-year, driven by decreased supply chain headwinds abroad [67][99] - Marine production dropped sharply in Q4 2023, with expectations of continued softness into the next two quarters of 2024 [39][53] - The company anticipates a decline in marine sales for the year, while RV orders showed an increase in February [53][65] Company Strategy and Development Direction - The company has diversified beyond recreational vehicles into transportation vehicles, marine, automotive, and residential markets, achieving nearly 50% revenue growth in new markets over the past five years [31][32] - A new joint venture, Amerimax for Mobility, was established to enhance product offerings in the RV sector [36] - The company is focused on operational improvements and cost optimization to support long-term profitability [32][72] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in the RV and marine industries but expressed confidence in the company's ability to weather these challenges and capitalize on growth opportunities [31][56] - The company expects to see organic content growth of 3% to 6% in the RV sector, driven by new product launches and market share gains [113][139] - Management highlighted the importance of innovation and R&D investments to maintain competitive advantages [68][70] Other Important Information - The company completed 20,000 continuous improvement projects in 2023, enhancing its manufacturing efficiency [32] - The company returned $106 million to shareholders in the form of dividends in 2023 [52] - The company has a strong focus on community engagement, with 75% of its workforce participating in service events [71] Q&A Session Summary Question: Can you clarify the impact of index pricing on content? - Management noted that index pricing significantly impacted content per unit, with a mid-teens percentage give-back effect observed [83][120] Question: What are the expectations for profitability in Q1? - Management expects profitability to be lower than the previous year's first quarter due to marine softness, but RV production is anticipated to improve [84][91] Question: How is the marine market performing? - The marine market is experiencing a significant decline, with production down 40% to 50% compared to the previous year [112] Question: What are the expectations for content growth in 2024? - Management anticipates positive organic content growth of 3% to 6% for the year, despite pricing headwinds in the first half [113][139] Question: Can you provide insights on the new glass and acrylic factory? - The factory is targeting multiple markets, including residential and commercial, with a focus on innovative glass products [114][116]

LCI Industries FY 2023 Earnings Conference Call Whenever, wherever, we make your experience better. Forward-looking statements, including, without limitation, those relating to the Company's future business prospects, net sales, expenses and income (loss), capital expenditures, tax rate, cash flow, financial condition, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, commodity prices and industry trends, whenever they occur in this presentation are n ...

Financial Performance - Net sales for Q3 2023 were $959.3 million, a decrease of 15.3% compared to $1,132.1 million in Q3 2022[9] - Gross profit for Q3 2023 was $210.9 million, down 16.6% from $253.1 million in Q3 2022[9] - Operating profit decreased to $45.6 million in Q3 2023, a decline of 47.9% from $87.6 million in Q3 2022[9] - Net income for Q3 2023 was $25.9 million, a significant drop of 57.7% compared to $61.4 million in Q3 2022[9] - Total net sales for the nine months ended September 30, 2023, were $2.95 billion, a decrease from $4.31 billion in the same period of 2022, representing a decline of approximately 31%[74] - Net income for the nine months ended September 30, 2023, was $66,572,000, a decrease of 83.8% compared to $412,103,000 in the same period of 2022[16] Assets and Liabilities - Total assets as of September 30, 2023, were $3,033.8 million, down from $3,246.9 million at the end of 2022[14] - Cash and cash equivalents decreased to $31.2 million from $47.5 million at the end of 2022[14] - Long-term indebtedness as of September 30, 2023, was $908.245 million, a decrease from $1,095.888 million as of December 31, 2022[45] - The balance of retained earnings as of September 30, 2023, was $1,206,525,000, down from $1,221,279,000 at December 31, 2022[21] - Current assets decreased to $1.23 billion as of September 30, 2023, from $1.39 billion at the end of 2022[14] Cash Flow and Capital Expenditures - Net cash flows provided by operating activities for the nine months ended September 30, 2023, were $389.3 million, compared to $485.5 million for the same period in 2022[16] - Capital expenditures for the nine months ended September 30, 2023, were $50.1 million, down from $103.7 million in 2022[16] - Cash flows used in financing activities were $333.4 million in the first nine months of 2023, primarily due to net repayments under the revolving credit facility and dividend payments[128] Dividends and Stock - Cash dividends paid were $26,590,000 for the quarter ending September 30, 2023, maintaining a consistent dividend of $1.05 per share[21] - The Company declared total dividends of $79.744 million for the year 2023, with a per share dividend of $1.05 for each quarter[65] - The total dividends paid in 2023 amounted to $79,744 thousand, with a per share dividend of $3.15, compared to $102,726 thousand in 2022 with a per share dividend of $4.05[65] Segment Performance - For the nine months ended September 30, 2023, the OEM Segment accounted for 76% of consolidated net sales, down from 83% in the same period of 2022[71] - The Aftermarket Segment's net sales increased to 24% of consolidated net sales for the nine months ended September 30, 2023, up from 17% in the same period of 2022[72] - The OEM Segment's net sales for travel trailers and fifth-wheel RVs were $1.03 billion for the nine months ended September 30, 2023, compared to $2.26 billion in the same period of 2022, a decrease of approximately 54%[74] - Aftermarket Segment net sales for Q3 2023 increased by $11.2 million to $230.8 million, a 5% increase compared to Q3 2022[110] Inventory and Goodwill - The Company recorded inventories of $791.884 million as of September 30, 2023, down from $1,029.705 million as of December 31, 2022, reflecting a decrease of approximately 23%[39] - The net balance of goodwill as of September 30, 2023, was $579.912 million, up from $567.063 million as of December 31, 2022[37] - The Company has recorded a decrease in raw materials inventory to $484.3 million as of September 30, 2023, down from $600.6 million at the end of 2022[39] Economic Conditions and Risks - The Company noted that negative economic conditions, including inflation and interest rate fluctuations, could continue to impact its business and financial results[28] - The company is exposed to market risks related to changes in raw material prices, particularly steel and aluminum, which could impact future profitability[145] Compliance and Financial Covenants - The Company was in compliance with all financial covenants as of September 30, 2023[57] - The maximum net leverage ratio covenant limits the amount of consolidated outstanding indebtedness based on trailing twelve-month EBITDA[58]

PART I – FINANCIAL INFORMATION [ITEM 1 – FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of LCI Industries, including statements of income, comprehensive income, balance sheets, cash flows, and stockholders' equity, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [CONDENSED CONSOLIDATED STATEMENTS OF INCOME](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section presents the company's financial performance over specific periods, detailing net sales, gross profit, operating profit, net income, and earnings per share Condensed Consolidated Statements of Income (Unaudited) | Metric (in thousands, except per share amounts) | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | $1,014,639 | $1,536,150 | $1,987,949 | $3,180,718 | | Gross profit | $218,120 | $409,085 | $404,191 | $873,328 | | Operating profit | $55,174 | $218,789 | $75,217 | $488,490 | | Net income | $33,426 | $154,530 | $40,685 | $350,711 | | Basic EPS ($) | $1.32 | $6.07 | $1.61 | $13.82 | | Diluted EPS ($) | $1.31 | $6.06 | $1.60 | $13.76 | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) This section outlines the company's total comprehensive income, including net income and other comprehensive income components like foreign currency translation adjustments and actuarial gains on pension plans Condensed Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | $33,426 | $154,530 | $40,685 | $350,711 | | Net foreign currency translation adjustment | $763 | $(13,688) | $2,763 | $(16,570) | | Actuarial gain on pension plans | $100 | $13,985 | $100 | $13,985 | | Total comprehensive income | $34,289 | $154,827 | $43,548 | $348,126 | [CONDENSED CONSOLIDATED BALANCE SHEETS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (Unaudited) | Metric (in thousands) | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------------ | :--------------------------- | :------------------------------- | | **ASSETS** | | | | Cash and cash equivalents | $22,094 | $47,499 | | Accounts receivable, net | $299,469 | $214,262 | | Inventories, net | $830,020 | $1,029,705 | | Total current assets | $1,235,245 | $1,390,776 | | Fixed assets, net | $478,885 | $482,185 | | Goodwill | $584,312 | $567,063 | | Other intangible assets, net | $477,307 | $503,320 | | Total assets | $3,076,397 | $3,246,912 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Current maturities of long-term indebtedness | $27,712 | $23,086 | | Accounts payable, trade | $182,637 | $143,529 | | Total current liabilities | $441,452 | $421,300 | | Long-term indebtedness | $915,756 | $1,095,888 | | Total liabilities | $1,705,500 | $1,865,904 | | Total stockholders' equity | $1,370,897 | $1,381,008 | | Total liabilities and stockholders' equity | $3,076,397 | $3,246,912 | [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :---------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash flows provided by operating activities | $273,565 | $347,971 | | Net cash flows used in investing activities | $(55,589) | $(120,422) | | Net cash flows used in financing activities | $(243,319) | $(234,390) | | Net decrease in cash and cash equivalents | $(25,405) | $(7,908) | | Cash and cash equivalents at end of period | $22,094 | $54,988 | [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) This section details changes in the company's stockholders' equity, including net income, stock issuance, compensation, other comprehensive income, and dividends Changes in Stockholders' Equity (Six Months Ended June 30, 2023) | Metric (in thousands) | Common Stock (in thousands) | Paid-in Capital (in thousands) | Retained Earnings (in thousands) | Accumulated Other Comprehensive Income (Loss) (in thousands) | Treasury Stock (in thousands) | Total Stockholders' Equity (in thousands) | | :-------------------------------- | :-------------------------- | :----------------------------- | :------------------------------- | :----------------------------------------------------------- | :---------------------------- | :---------------------------------------- | | Balance - December 31, 2022 | $285 | $234,956 | $1,221,279 | $6,704 | $(82,216) | $1,381,008 | | Net income | — | — | $40,685 | — | — | $40,685 | | Issuance of common stock (net) | $1 | $(9,586) | — | — | — | $(9,585) | | Stock-based compensation expense | — | $9,080 | — | — | — | $9,080 | | Other comprehensive income | — | — | — | $2,863 | — | $2,863 | | Cash dividends | — | — | $(53,154) | — | — | $(53,154) | | Dividend equivalents | — | $1,057 | $(1,057) | — | — | — | | Balance - June 30, 2023 | $286 | $235,507 | $1,207,753 | $9,567 | $(82,216) | $1,370,897 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=10&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, estimates, and specific financial line items [1. BASIS OF PRESENTATION](index=10&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This section describes the company's business, operational scope, seasonal trends, and the impact of economic conditions on its financial reporting - LCI Industries (LCII) and its subsidiaries, primarily Lippert Components, Inc., supply engineered components to OEMs in recreation, transportation, and housing markets (RVs, boats, buses, trailers, manufactured homes, modular housing) and their related aftermarkets[23](index=23&type=chunk) - The company operates over **120 manufacturing and distribution facilities** across North America and Europe[23](index=23&type=chunk) - The company's sales and profits are historically highest in the second quarter and lowest in the fourth quarter due to seasonal industry trends, though these trends can be impacted by factors like dealer inventories, economic conditions, consumer confidence, and severe weather[24](index=24&type=chunk) - The preparation of financial statements requires management to make estimates and judgments, which are continuously evaluated based on historical experience and other available information, with actual results potentially differing significantly from these estimates[27](index=27&type=chunk) - Negative economic conditions, including financial and credit market fluctuations, increased inflation and interest rates, trade uncertainty, natural disasters, global public health crises (e.g., COVID-19), and armed conflicts (e.g., Russia-Ukraine), have negatively impacted and could continue to impact the Company's business, liquidity, financial condition, and results of operations[28](index=28&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the accounting principles applied in preparing the financial statements and notes any recent pronouncements - The Condensed Consolidated Financial Statements adhere to accounting policies described in the December 31, 2022 Annual Report on Form 10-K[29](index=29&type=chunk) - No recent accounting pronouncements not yet adopted are expected to materially impact the Condensed Consolidated Financial Statements[30](index=30&type=chunk) [3. EARNINGS PER SHARE](index=11&type=section&id=3.%20EARNINGS%20PER%20SHARE) This section details the calculation of basic and diluted earnings per share, including the treatment of common stock equivalents and antidilutive instruments Weighted Average Shares Outstanding for EPS Calculation (In thousands) | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Weighted average shares outstanding for basic EPS | 25,329 | 25,438 | 25,273 | 25,377 | | Common stock equivalents (stock-based awards) | 108 | 80 | 86 | 106 | | Weighted average shares outstanding for diluted EPS | 25,437 | 25,518 | 25,359 | 25,483 | | Equity instruments excluded (antidilutive) | 165 | 112 | 162 | 111 | - The Company's **1.125% convertible senior notes due 2026** were antidilutive for the three and six months ended June 30, 2023, as the average common stock price was below the conversion price of **$165.65**[31](index=31&type=chunk) - Warrants to purchase **2.8 million shares** of common stock with a strike price of **$259.84 per share** were also considered antidilutive for the three and six months ended June 30, 2023, as the average share price was below the strike price[32](index=32&type=chunk) [4. ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS](index=12&type=section&id=4.%20ACQUISITIONS,%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) This section reports on recent acquisitions, changes in goodwill by segment, and the composition of other intangible assets - During the first six months of 2023, the Company completed **two acquisitions** for an aggregate cash purchase consideration of **$25.8 million**, resulting in **$18.3 million of goodwill**[34](index=34&type=chunk) - The acquisition of Way Interglobal Network LLC in November 2022 for **$54.8 million** (including a **$2.0 million holdback**) had preliminary purchase price allocation adjustments in H1 2023 due to updated net working capital balances[35](index=35&type=chunk)[36](index=36&type=chunk) Changes in Goodwill by Segment (In thousands) | Metric | OEM Segment (in thousands) | Aftermarket Segment (in thousands) | Total (in thousands) | | :---------------------------- | :------------------------- | :--------------------------------- | :------------------- | | Net balance – December 31, 2022 | $399,736 | $167,327 | $567,063 | | Acquisitions – 2023 | $18,314 | — | $18,314 | | Measurement period adjustments | $(2,905) | $(143) | $(3,048) | | Foreign currency translation | $1,721 | $262 | $1,983 | | Net balance – June 30, 2023 | $416,866 | $167,446 | $584,312 | Other Intangible Assets (In thousands) | Asset Type | Gross Cost (June 30, 2023) (in thousands) | Net Balance (June 30, 2023) (in thousands) | Net Balance (December 31, 2022) (in thousands) | | :------------------------ | :---------------------------------------- | :----------------------------------------- | :--------------------------------------------- | | Customer relationships | $517,588 | $337,331 | $356,711 | | Patents | $122,373 | $54,676 | $58,326 | | Trade names (finite life) | $98,650 | $74,600 | $76,430 | | Trade names (indefinite life) | $7,600 | $7,600 | $7,600 | | Non-compete agreements | $11,484 | $2,756 | $3,886 | | Other | $609 | $344 | $367 | | Total | $758,304 | $477,307 | $503,320 | [5. INVENTORIES](index=13&type=section&id=5.%20INVENTORIES) This section provides a breakdown of inventory components and the associated obsolescence reserves Inventories, Net (In thousands) | Inventory Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------- | :--------------------------- | :------------------------------- | | Raw materials | $503,777 | $600,601 | | Work in process | $45,379 | $44,850 | | Finished goods | $280,864 | $384,254 | | Inventories, net | $830,020 | $1,029,705 | - Inventory obsolescence reserves were **$61.5 million** at June 30, 2023, up from **$55.9 million** at December 31, 2022[39](index=39&type=chunk) [6. FIXED ASSETS](index=13&type=section&id=6.%20FIXED%20ASSETS) This section details the company's fixed assets, including their cost and accumulated depreciation and amortization Fixed Assets, Net (In thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------- | :--------------------------- | :------------------------------- | | Fixed assets, at cost | $976,047 | $945,255 | | Less accumulated depreciation and amortization | $497,162 | $463,070 | | Fixed assets, net | $478,885 | $482,185 | [7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=14&type=section&id=7.%20ACCURRED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) This section itemizes accrued expenses and other current liabilities, including employee compensation, warranty provisions, and deferred acquisition payments Accrued Expenses and Other Current Liabilities (In thousands) | Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------------------------- | :--------------------------- | :------------------------------- | | Employee compensation and benefits | $54,837 | $77,804 | | Current portion of accrued warranty | $41,988 | $35,148 | | Deferred acquisition payments and contingent consideration | $33,692 | $34,013 | | Other | $65,582 | $72,273 | | Total accrued expenses and other current liabilities | $196,099 | $219,238 | Accrued Warranty Activity (In thousands) | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Balance at beginning of period | $54,528 | $52,114 | | Provision for warranty expense | $40,128 | $28,164 | | Warranty costs paid | $(31,968) | $(18,646) | | Balance at end of period | $62,688 | $61,632 | | Less long-term portion | $(20,700) | $(21,460) | | Current portion of accrued warranty at end of period | $41,988 | $40,172 | [8. LONG-TERM INDEBTEDNESS](index=14&type=section&id=8.%20LONG-TERM%20INDEBTEDNESS) This section details the company's long-term debt, including convertible notes, term loans, revolving credit facilities, and compliance with financial covenants Long-Term Debt (In thousands) | Debt Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------ | :--------------------------- | :------------------------------- | | Convertible Notes | $460,000 | $460,000 | | Term Loan | $365,000 | $375,000 | | Revolving Credit Loan | $122,960 | $289,067 | | Other | $3,440 | $3,959 | | Unamortized deferred financing fees | $(7,932) | $(9,052) | | Total | $943,468 | $1,118,974 | | Less current portion | $(27,712) | $(23,086) | | Long-term indebtedness | $915,756 | $1,095,888 | - The Credit Agreement provides for a **$600.0 million revolving credit facility** and a **$400.0 million Term Loan**, maturing on December 7, 2026, with variable interest rates based on a base rate or SOFR plus an applicable margin[44](index=44&type=chunk)[45](index=45&type=chunk) - Availability under the revolving credit facility was **$270.0 million** at June 30, 2023, after accounting for certain limitations related to the maximum net leverage ratio covenant[45](index=45&type=chunk) - The Company issued **$460.0 million in 1.125% Convertible Notes due 2026**, with a conversion rate of **6.1469 shares per $1,000 principal amount** at June 30, 2023[47](index=47&type=chunk)[48](index=48&type=chunk) - The notes are convertible under certain circumstances and redeemable by the Company on or after May 20, 2024, if specific stock price conditions are met[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - An amendment to the Credit Agreement on May 23, 2023, adjusted certain financial covenants (increasing maximum total net leverage ratio and decreasing minimum debt service coverage ratio) for the two fiscal quarters ending June 30, 2023, and September 30, 2023, with the Company in compliance at June 30, 2023[55](index=55&type=chunk) [9. LEASES](index=17&type=section&id=9.%20LEASES) This section presents the components of lease expense, distinguishing between operating, short-term, and variable lease costs Components of Lease Expense (In thousands) | Lease Expense Type | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :----------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Operating lease expense | $15,670 | $13,236 | $30,914 | $26,148 | | Short-term lease expense | $1,307 | $1,934 | $2,787 | $3,774 | | Variable lease expense | $1,200 | $936 | $2,200 | $1,649 | | Total lease expense | $18,177 | $16,106 | $35,901 | $31,571 | [10. COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) This section outlines the company's financial commitments and potential liabilities from business combinations, product recalls, environmental regulations, and legal proceedings - The Company finances a portion of business combinations with holdback payments and contingent earnout provisions, measured at fair value quarterly, with contingent consideration balances not material at June 30, 2023[59](index=59&type=chunk) - The Company cooperates with customers on product recalls and may incur future expenses for investigations or recalls[60](index=60&type=chunk) - Operations are subject to environmental regulations, and the Company may incur expenditures for future investigation and remediation of sites affected by hazardous materials[61](index=61&type=chunk) - In the normal course of business, the Company is subject to legal proceedings, but management believes any monetary liability beyond current provisions would not be material to its financial position or results of operations[62](index=62&type=chunk) [11. STOCKHOLDERS' EQUITY](index=18&type=section&id=11.%20STOCKHOLDERS'%20EQUITY) This section provides details on common stock, dividends, stock-based awards, and stock repurchase programs Common Stock Information (In thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | | Common stock authorized | 75,000 | 75,000 | | Common stock issued | 28,665 | 28,519 | | Treasury stock | 3,341 | 3,341 | | Common stock outstanding | 25,324 | 25,178 | Regular Quarterly Dividends Declared and Paid (In thousands, except per share data) | Period | Per Share ($) | Total Paid (in thousands) | | :---------------- | :------------ | :------------------------ | | First Quarter 2022 | $0.90 | $22,870 | | Second Quarter 2022 | $1.05 | $26,702 | | Third Quarter 2022 | $1.05 | $26,701 | | Fourth Quarter 2022 | $1.05 | $26,453 | | Total 2022 | $4.05 | $102,726 | | First Quarter 2023 | $1.05 | $26,563 | | Second Quarter 2023 | $1.05 | $26,591 | | Total 2023 | $2.10 | $53,154 | Deferred and Restricted Stock Units (DSUs & RSUs) Activity | Metric | Number of Shares | Weighted Average Price ($) | | :-------------------------- | :--------------- | :------------------------- | | Outstanding at December 31, 2022 | 277,774 | $120.92 | | Granted | 159,640 | $114.22 | | Vested | (129,583) | $112.24 | | Outstanding at June 30, 2023 | 301,404 | $118.55 | Performance Stock Units (PSUs) Activity | Metric | Number of Shares | Weighted Average Price ($) | | :-------------------------- | :--------------- | :------------------------- | | Outstanding at December 31, 2022 | 162,381 | $120.12 | | Granted | 140,953 | $108.42 | | Vested | (100,046) | $101.11 | | Outstanding at June 30, 2023 | 203,770 | $122.57 | - The Board authorized a **$200.0 million stock repurchase program** on May 19, 2022, expiring May 19, 2025, with no shares repurchased during the six months ended June 30, 2023[66](index=66&type=chunk) [12. SEGMENT REPORTING](index=19&type=section&id=12.%20SEGMENT%20REPORTING) This section disaggregates the company's net sales and operating profit by its OEM and Aftermarket segments and geographical regions - The Company operates in two reportable segments: OEM Segment and Aftermarket Segment, with intersegment sales being insignificant[67](index=67&type=chunk) - The OEM Segment accounted for **76% of consolidated net sales** for the six months ended June 30, 2023, primarily supplying engineered components to RVs and adjacent industries (boats, buses, trailers, manufactured homes)[68](index=68&type=chunk) - The Aftermarket Segment accounted for **24% of consolidated net sales** for the six months ended June 30, 2023, supplying engineered components to related aftermarket channels, including retail dealers, wholesale distributors, and direct to retail customers[69](index=69&type=chunk) Net Sales by Segment and Geography (In thousands) | Segment/Geography | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | **OEM Segment** | | | | | | U.S. | $665,868 | $1,188,038 | $1,334,319 | $2,497,467 | | International | $93,140 | $88,240 | $182,861 | $175,393 | | Total OEM | $759,008 | $1,276,278 | $1,517,180 | $2,672,860 | | **Aftermarket Segment** | | | | | | U.S. | $234,901 | $240,246 | $435,388 | $470,413 | | International | $20,730 | $19,626 | $35,381 | $37,445 | | Total Aftermarket | $255,631 | $259,872 | $470,769 | $507,858 | | **Total Net Sales** | $1,014,639 | $1,536,150 | $1,987,949 | $3,180,718 | Operating Profit by Segment (In thousands) | Segment | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | OEM Segment | $18,642 | $190,577 | $17,921 | $435,951 | | Aftermarket Segment | $36,532 | $28,212 | $57,296 | $52,539 | | Total operating profit | $55,174 | $218,789 | $75,217 | $488,490 | Revenue Disaggregated by Product (In thousands) | Product Category | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | **OEM Segment:** | | | | | | Chassis, chassis parts, and slide-out mechanisms | $202,735 | $486,591 | $400,791 | $1,046,311 | | Windows and doors | $220,094 | $301,985 | $438,705 | $632,343 | | Furniture and mattresses | $125,346 | $229,520 | $265,909 | $471,746 | | Axles and suspension solutions | $88,635 | $93,378 | $164,384 | $190,423 | | Other | $122,198 | $164,804 | $247,391 | $332,037 | | Total OEM Segment net sales | $759,008 | $1,276,278 | $1,517,180 | $2,672,860 | | Total Aftermarket Segment net sales | $255,631 | $259,872 | $470,769 | $507,858 | | **Total Net Sales** | $1,014,639 | $1,536,150 | $1,987,949 | $3,180,718 | [ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202%20%E2%80%93%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a comprehensive analysis of LCI Industries' financial performance, liquidity, and capital resources for the periods presented, discussing industry trends, segment-specific results, and the impact of economic factors on operations, along with forward-looking statements and risk disclosures - LCI Industries, through Lippert Components, Inc., supplies engineered components to OEMs in recreation, transportation, and housing markets (RVs, boats, buses, trailers, manufactured homes, modular housing) and their related aftermarkets[76](index=76&type=chunk) - The company operates two reportable segments: OEM Segment and Aftermarket Segment, with over **120 manufacturing and distribution facilities** in North America and Europe[77](index=77&type=chunk) - Historically, sales and profits are highest in Q2 and lowest in Q4 due to seasonality, but this has been impacted by factors like dealer inventories, economic conditions, and the COVID-19 pandemic[79](index=79&type=chunk) - Negative economic conditions, including inflation, rising interest rates, trade uncertainty, and global conflicts, have negatively impacted and could continue to impact the Company's business[80](index=80&type=chunk)[82](index=82&type=chunk) [INDUSTRY BACKGROUND](index=23&type=section&id=INDUSTRY%20BACKGROUND) This section details the market conditions for the North American Recreational Vehicle (RV) industry and Adjacent Industries, including wholesale shipments, retail demand, and dealer inventory levels, along with the outlook for the Aftermarket Segment - The RV industry's annual sales cycle typically runs from October to September, with wholesale shipments exceeding retail sales from October to March to build dealer inventories, and retail sales exceeding wholesale shipments from April to September[84](index=84&type=chunk) - Industry-wide wholesale shipments of travel trailer and fifth-wheel RVs decreased **54%** in the first six months of 2023 compared to 2022, primarily due to a **21% decrease in retail demand**, driven by rising interest rates impacting consumers[85](index=85&type=chunk) Wholesale vs. Retail RV Unit Sales and Dealer Inventory Impact (United States and Canada) | Period | Wholesale Units (units) | Change (YoY) (%) | Retail Units (units) | Change (YoY) (%) | Estimated Unit Impact on Dealer Inventories (units) | | :-------------------------- | :---------------------- | :--------------- | :------------------- | :--------------- | :-------------------------------------------------- | | Quarter ended June 30, 2023 | 71,600 | (46)% | 105,300 | (19)% | (33,700) | | Quarter ended March 31, 2023 | 61,200 | (60)% | 71,400 | (25)% | (10,200) | | Twelve months ended June 30, 2023 | 268,200 | (51)% | 341,700 | (21)% | (73,500) | - Industry-wide wholesale shipments of motorhome RVs decreased **17%** in H1 2023, with retail demand down **12% year-over-year**, attributed to inflation and rising interest rates[86](index=86&type=chunk)[88](index=88&type=chunk) - The Company estimates full-year 2023 industry-wide wholesale shipments for travel trailer, fifth-wheel, and motorhome RVs to be approximately **290,000 to 310,000 units**, a **37-41% decrease from 2022**, due to dealer inventory levels, inflation, and rising interest rates[89](index=89&type=chunk) - Economic uncertainty is expected to negatively impact consumer discretionary purchases in Adjacent Industries (trailers, boats) in H2 2023, while manufactured homes, buses, and trains are anticipated to maintain current production rates[91](index=91&type=chunk) - The Aftermarket Segment is expected to see a slight increase in sales in H2 2023 as distribution channel inventories stabilize, though tempered by inflation and rising interest rates on consumer discretionary spending[94](index=94&type=chunk) [RESULTS OF OPERATIONS](index=24&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed breakdown of the company's consolidated and segment-specific financial results for the three and six months ended June 30, 2023, compared to the prior year, highlighting key revenue and profit drivers, including the impact of commodity costs and fixed expenses Consolidated Financial Highlights (In millions, except per share amounts) | Metric | Q2 2023 (in millions) | Q2 2022 (in millions) | Change (YoY) (%) | YTD 2023 (in millions) | YTD 2022 (in millions) | Change (YoY) (%) | | :---------------------- | :-------------------- | :-------------------- | :--------------- | :--------------------- | :--------------------- | :--------------- | | Net sales | $1,014.6 | $1,536.2 | (34)% | $1,987.9 | $3,180.7 | (37.5)% | | Net income | $33.4 | $154.5 | (78.4)% | $40.7 | $350.7 | (88.4)% | | Diluted EPS ($) | $1.31 | $6.06 | (78.4)% | $1.60 | $13.76 | (88.4)% | | Operating profit | $55.2 | $218.8 | (74.8)% | $75.2 | $488.5 | (84.6)% | | Operating profit margin | 5.4% | 14.2% | (8.8) pp | 3.8% | 15.4% | (11.6) pp | - Consolidated net sales decreased primarily due to a nearly **44% decrease in North American RV wholesale shipments** and decreased selling prices indexed to commodities, partially offset by **$17.2 million from acquisitions** in Q2 2023[96](index=96&type=chunk) - Consolidated operating profit margin decreased due to lower selling prices (commodity-indexed) and the impact of fixed costs on reduced organic sales, partially offset by decreases in material commodity costs[96](index=96&type=chunk)[97](index=97&type=chunk) OEM Segment Net Sales by Market (In thousands) | Market | Q2 2023 (in thousands) | Q2 2022 (in thousands) | Change (YoY) (%) | YTD 2023 (in thousands) | YTD 2022 (in thousands) | Change (YoY) (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------------- | :---------------------- | :---------------------- | :--------------- | | Travel trailers and fifth-wheels | $338,739 | $814,509 | (58)% | $669,292 | $1,767,735 | (62)% | | Motorhomes | $71,185 | $91,480 | (22)% | $140,736 | $178,734 | (21)% | | Adjacent Industries OEMs | $349,084 | $370,289 | (6)% | $707,152 | $726,391 | (3)% | | Total OEM Segment net sales | $759,008 | $1,276,278 | (41)% | $1,517,180 | $2,672,860 | (43)% | OEM Segment Average Product Content per RV | Content per: | 2023 ($) | 2022 ($) | Change (YoY) (%) | | :------------------------ | :------- | :------- | :--------------- | | Travel trailer and fifth-wheel | $5,487 | $5,379 | 2% | | Motorhome | $3,760 | $3,557 | 6% | - OEM Segment operating profit decreased significantly in Q2 2023 (by **$171.9 million**) and YTD 2023 (by **$418.0 million**) due to decreased commodity-indexed selling prices, the impact of fixed costs on reduced organic sales, and a sales mix shift to lower margin products, partially offset by decreases in material commodity costs and reduced G&A[101](index=101&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk) Aftermarket Segment Net Sales (In thousands) | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | Change (YoY) (%) | YTD 2023 (in thousands) | YTD 2022 (in thousands) | Change (YoY) (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------------- | :---------------------- | :--------------------- | :--------------- | | Total Aftermarket Segment net sales | $255,631 | $259,872 | (2)% | $470,769 | $507,858 | (7)% | - Aftermarket Segment operating profit increased in Q2 2023 (by **$8.3 million**) and YTD 2023 (by **$4.8 million**), driven by decreases in material commodity costs and pricing changes, partially offset by the impact of fixed costs on reduced organic sales and higher production facility costs[110](index=110&type=chunk)[112](index=112&type=chunk)[115](index=115&type=chunk) - Interest expense, net, increased to **$20.6 million** for YTD 2023 from **$12.4 million** in YTD 2022, primarily due to higher global interest rates on variable-rate debt[116](index=116&type=chunk) - The effective tax rate for YTD 2023 was **25.4%**, down from **26.3%** in YTD 2022, mainly due to an increased benefit related to the cash surrender value of life insurance[117](index=117&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=28&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section outlines the company's financial position, cash flow activities, and ability to meet short-term and long-term financial needs, detailing operating, investing, and financing cash flows, available credit, and future capital expenditure plans - As of June 30, 2023, the Company had **$22.1 million in cash and cash equivalents** and **$270.0 million available** under its revolving credit facility[119](index=119&type=chunk)[121](index=121&type=chunk) - Management believes these resources are adequate to finance anticipated cash requirements for the next twelve months[121](index=121&type=chunk) Summary of Cash Flows (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash flows provided by operating activities | $273,565 | $347,971 | | Net cash flows used in investing activities | $(55,589) | $(120,422) | | Net cash flows used in financing activities | $(243,319) | $(234,390) | | Net decrease in cash and cash equivalents | $(25,405) | $(7,908) | - Operating cash flows decreased primarily due to a **$310.0 million decrease in net income**, partially offset by a **$235.8 million net change in assets and liabilities**, mainly from a **$209.3 million decrease in inventory**[123](index=123&type=chunk) - Cash used in investing activities for YTD 2023 was **$55.6 million**, primarily for **$34.1 million in capital expenditures** and **$25.9 million for acquisitions**[125](index=125&type=chunk) - Full-year 2023 capital expenditures are estimated at **$60 to $80 million**[126](index=126&type=chunk) - Cash used in financing activities for YTD 2023 was **$243.3 million**, mainly comprising **$168.5 million in net repayments** under the revolving credit facility, **$53.2 million in dividends**, and **$10.7 million in Term Loan repayments**[128](index=128&type=chunk) - The Credit Agreement includes financial covenants, which were amended on May 23, 2023, to adjust the maximum total net leverage ratio and minimum debt service coverage ratio for Q2 and Q3 2023, with the Company in compliance at June 30, 2023[131](index=131&type=chunk) [CORPORATE GOVERNANCE](index=30&type=section&id=CORPORATE%20GOVERNANCE) This section confirms the company's adherence to corporate governance requirements and the availability of related documents and policies - The Company complies with SEC and NYSE corporate governance requirements, with governance documents and committee charters available on its investor website[133](index=133&type=chunk) - A Whistleblower Policy, including a toll-free hotline, is in place for reporting complaints about accounting, internal controls, auditing, or other concerns[133](index=133&type=chunk) [CONTINGENCIES](index=30&type=section&id=CONTINGENCIES) This section refers to the detailed disclosures on commitments and contingencies provided in the financial statement notes - Information regarding commitments and contingencies is included in Note 10 of the Notes to Condensed Consolidated Financial Statements[134](index=134&type=chunk) [INFLATION](index=30&type=section&id=INFLATION) This section discusses the impact of inflation and commodity price volatility on raw material costs and the company's ability to pass these costs to customers - Prices of key raw materials (steel and aluminum) are influenced by demand, commodity-specific factors, and inflationary pressures, decreasing in H1 2023 but historically volatile[135](index=135&type=chunk) - While commodity prices are expected to remain generally consistent in upcoming quarters of 2023, there is no assurance that raw material costs will not increase, or that future cost increases can be fully passed on to customers[135](index=135&type=chunk)[146](index=146&type=chunk) [NEW ACCOUNTING PRONOUNCEMENTS](index=30&type=section&id=NEW%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to the disclosures on new accounting pronouncements provided in the financial statement notes - Information on new accounting pronouncements is included in Note 2 of the Notes to Condensed Consolidated Financial Statements[136](index=136&type=chunk) [USE OF ESTIMATES](index=30&type=section&id=USE%20OF%20ESTIMATES) This section highlights management's reliance on estimates and judgments in financial reporting and the potential for actual results to differ - The preparation of financial statements requires management to make estimates and judgments (e.g., product returns, inventories, goodwill, income taxes, warranty obligations)[137](index=137&type=chunk) - Estimates are based on historical experience and assumptions, but actual results and events could differ significantly from management's estimates[139](index=139&type=chunk) [FORWARD-LOOKING STATEMENTS](index=31&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions readers about forward-looking statements, noting that actual results may differ due to various risk factors, and disclaims any obligation to update them - This Form 10-Q contains forward-looking statements regarding financial condition, results of operations, business strategies, and other matters, which are estimates reflecting management's best judgment[140](index=140&type=chunk)[141](index=141&type=chunk) - Numerous factors, many beyond the Company's control, could cause actual results to differ materially from forward-looking statements, including economic impacts, pricing pressures, raw material costs, seasonality, credit availability, and regulatory changes[141](index=141&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the Company disclaims any obligation to update them, except as required by law[141](index=141&type=chunk) [ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=32&type=section&id=ITEM%203%20%E2%80%93%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section describes the company's exposure to market risks, specifically related to fluctuations in short-term interest rates on variable-rate debt and changes in raw material prices, and outlines its approach to managing these risks - The Company is exposed to market risk from changes in short-term interest rates on its variable-rate debt, though a hypothetical **0.25% increase** in the indexed interest rate would not materially affect results of operations[144](index=144&type=chunk) - The Company is also exposed to changes in steel and aluminum prices and has used derivative instruments to manage these exposures, but had no outstanding commodity derivative instruments at June 30, 2023[145](index=145&type=chunk) - Historically, the Company has been able to obtain sales price increases to partially offset raw material cost increases, but there is no assurance this will continue or that timing will match cost increases[146](index=146&type=chunk) [ITEM 4 – CONTROLS AND PROCEDURES](index=32&type=section&id=ITEM%204%20%E2%80%93%20CONTROLS%20AND%20PROCEDURES) This section confirms that LCI Industries' management, including its principal executive and financial officers, evaluated the effectiveness of its disclosure controls and procedures, concluding they were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of June 30, 2023[149](index=149&type=chunk)[150](index=150&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[150](index=150&type=chunk) PART II – OTHER INFORMATION [ITEM 1 – LEGAL PROCEEDINGS](index=33&type=section&id=ITEM%201%20%E2%80%93%20LEGAL%20PROCEEDINGS) This section states that LCI Industries is involved in various legal proceedings in the normal course of business, but management believes that any resulting monetary liability or financial impact beyond current provisions would not be material to the company's financial position or results of operations - The Company is subject to proceedings, lawsuits, regulatory agency inquiries, and other claims in the normal course of business[153](index=153&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 after final disposition, including anticipated insurance recoveries[153](index=153&type=chunk) [ITEM 1A – RISK FACTORS](index=33&type=section&id=ITEM%201A%20%E2%80%93%20RISK%20FACTORS) This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed with the SEC on February 24, 2023 - There have been no material changes to the risk factors discussed in Part I, Item 1A – Risk Factors in the Company's Annual Report on Form 10-K filed on February 24, 2023[155](index=155&type=chunk) [ITEM 5 – OTHER INFORMATION](index=33&type=section&id=ITEM%205%20%E2%80%93%20OTHER%20INFORMATION) This section reports that no directors or officers of LCI Industries adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2023 - No directors or officers adopted or terminated any Rule 10b5-1(c) trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023[157](index=157&type=chunk) [ITEM 6 – EXHIBITS](index=33&type=section&id=ITEM%206%20%E2%80%93%20EXHIBITS) This section lists all exhibits filed as part of the Form 10-Q, including corporate organizational documents, amendments to the credit agreement, CEO and CFO certifications, and interactive data files in XBRL format - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Amendment No. 5 to the Fourth Amended and Restated Credit Agreement, CEO and CFO certifications (Sections 302 and 906), and Inline XBRL financial information[159](index=159&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section contains the official signature block for the Form 10-Q, confirming its submission by LCI Industries, signed by Lillian D. Etzkorn, Chief Financial Officer, on August 8, 2023 - The report was duly caused to be signed on behalf of LCI Industries by Lillian D. Etzkorn, Chief Financial Officer, on August 8, 2023[161](index=161&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2023 decreased 41% to $973 million compared to the prior year, primarily impacted by a reduction in RV production [49][111] - EBITDA decreased 83% to $52.5 million for Q1 compared to the prior year period [51] - Gross margins were 19.1% compared to 28.2% in the prior year due to elevated input costs and the impact of fixed production costs on lower sales volume [21] - GAAP net income in Q1 2023 was $7.3 million or $0.29 per diluted share, down from $196.2 million or $7.71 per diluted share in Q1 2022 [125] Business Line Data and Key Metrics Changes - Sales to North American RV OEMs decreased 62% in Q1 2023 compared to 2022, largely due to decreased wholesale shipments [42] - Aftermarket revenues decreased 13% year-over-year, primarily due to lower sales in the automotive aftermarket [8][148] - Content per total RV increased 21% from the prior year to $5,881, while content per motor home RV increased 27% to $3,985 [14][20] Market Data and Key Metrics Changes - North American Adjacent Markets saw slight revenue declines, driven by softness in housing and trailer markets [16] - International sales decreased 1% year-over-year, representing 11% of total company revenue, with exchange rates negatively impacting results by approximately 4% [148] - RV shipments are anticipated to improve to a range of 310,000 to 330,000 units for the full year 2023 [150] Company Strategy and Development Direction - The company is focused on fortifying its balance sheet through cash generation and diligent management while remaining receptive to strategic M&A opportunities [19] - The diversification strategy has been effective, with significant growth in adjacent markets helping to offset declines in RV production [147] - The company is investing in innovation and operational enhancements to drive efficiency, quality, and profitability [19][116] Management's Comments on Operating Environment and Future Outlook - Management noted that retail demand has remained similar to pre-pandemic levels, with early indicators pointing to healthy consumer interest [42] - The company expects reduced margin pressure in the second half of 2023 due to increased production, supporting enhanced profitability [21] - Management expressed confidence in the company's position to deliver strong results over the long term, driven by diversification and innovation [48][116] Other Important Information - The company has implemented cost structure reductions totaling $300 million in the past 10 months and significantly reduced inventories by $120 million during the quarter [7] - The company anticipates capital expenditures in the range of $80 million to $100 million for the full year 2023 [126] Q&A Session Summary Question: What is the outlook for OEM production rates? - Management indicated that production levels are expected to return to normal as dealers adjust their inventory levels of older units before new models are released [128] Question: How is the Aftermarket business performing? - Management noted that the Aftermarket revenues are primarily driven by upgrades and repairs, with expectations for growth as the market stabilizes [135] Question: What is the impact of inventory levels on sales? - Management highlighted that significant discounting has been observed to move older inventory, which is expected to positively impact sales moving forward [152]

Financial Performance - Net sales for Q1 2023 were $973.31 million, a decrease of 40.7% compared to $1.64 billion in Q1 2022[9] - Gross profit for Q1 2023 was $186.07 million, down 59.9% from $464.24 million in the same period last year[9] - Net income for Q1 2023 was $7.26 million, a significant decline of 96.3% compared to $196.18 million in Q1 2022[9] - Basic net income per share for Q1 2023 was $0.29, compared to $7.75 in Q1 2022, reflecting a decrease of 96.3%[9] - Consolidated net sales in Q1 2023 were $973.3 million, a 41% decrease from $1.6 billion in Q1 2022, primarily due to a nearly 60% decrease in North American towable RV wholesale shipments[92] - Net income for Q1 2023 was $7.3 million, or $0.29 per diluted share, compared to $196.2 million, or $7.71 per diluted share, in Q1 2022[92] Assets and Liabilities - Total assets as of March 31, 2023, were $3.21 billion, down from $3.25 billion at the end of 2022[14] - Cash and cash equivalents decreased to $23.47 million from $47.50 million at the end of 2022, representing a decline of 50.7%[14] - The company’s total stockholders' equity as of March 31, 2023, was $1.36 billion, down from $1.38 billion at the end of 2022[14] - As of March 31, 2023, accrued expenses and other current liabilities totaled $205.2 million, a decrease of 6.4% from $219.2 million on December 31, 2022[40] - Long-term indebtedness decreased to $1,055.6 million as of March 31, 2023, down from $1,095.9 million at the end of 2022, representing a reduction of 3.7%[42] Cash Flow and Capital Expenditures - The company reported a net cash flow from operating activities of $74.68 million for Q1 2023, down from $134.93 million in Q1 2022[17] - Capital expenditures for Q1 2023 were $17.16 million, a decrease of 59.1% compared to $42.04 million in Q1 2022[17] - Cash dividends paid in Q1 2023 amounted to $26.56 million, an increase from $22.87 million in Q1 2022[17] - Cash flows used in financing activities were $76.8 million in Q1 2023, primarily due to $36.1 million in net repayments under the revolving credit facility and $26.6 million in quarterly dividends[118] Segment Performance - The OEM Segment accounted for 78% of consolidated net sales in Q1 2023, down from 85% in Q1 2022, with net sales of $758.2 million[66] - The Aftermarket Segment represented 22% of consolidated net sales in Q1 2023, up from 15% in Q1 2022, with net sales of $215.1 million[67] - The OEM Segment reported an operating loss of $721,000 in Q1 2023, compared to an operating profit of $245.4 million in Q1 2022[69] - The Aftermarket Segment generated an operating profit of $20.8 million in Q1 2023, down from $24.3 million in Q1 2022[69] Economic and Market Conditions - The Company is exposed to risks from economic conditions, including inflation and interest rates, which could impact its financial performance[26] - The company expects full-year 2023 industry-wide wholesale shipments of RVs to be approximately 310,000 to 330,000 units, a decrease of 37% to 33% compared to 2022[85] - Industry-wide wholesale shipments of travel trailers and fifth-wheels decreased 60% to 61,200 units in Q1 2023 compared to 152,200 units in Q1 2022[81] Compliance and Financial Agreements - The Company is in compliance with all financial requirements under the Credit Agreement as of March 31, 2023[54] - The Credit Agreement includes a maximum net leverage ratio covenant, which limits the amount of consolidated outstanding indebtedness based on trailing twelve-month EBITDA[54] Stock and Dividends - The Company declared a quarterly dividend of $1.05 per share for Q1 2023, totaling $26.6 million, consistent with the previous quarter[61] - The Company has a stock repurchase program authorized for up to $200 million, with $24.1 million spent on repurchasing 253,490 shares in 2022[64] - The Company has paid regular quarterly dividends since 2016, with future policies determined by the Board of Directors based on financial needs and earnings[121]

LCI Industries Q1 2023 Earnings Conference Call FORWARD-LOOKING STATEMENTS 2 Financial Performance Ongoing Innovation Content Growth in RV | --- | --- | --- | |-----------------------------------------------------------------------------------------------------------------|-------|-------| | | | | | Quarterly Performance | | | | • Current 2023 North American forecast of 310 - 330k wholesale units; 77,200 wholesale units shipped in Q1 2023 | | | | • Q1 2023 RV OEM sales down 62% YoY due to softened retail de ...

Financial Performance - Consolidated net sales for the year ended December 31, 2022, were $5.2 billion, an increase of 16% from $4.5 billion in 2021[25]. - Net income for 2022 was $395 million, or $15.48 per diluted share, compared to $287.7 million, or $11.32 per diluted share, in 2021[26]. - Total net sales for the year ended December 31, 2022, were $5,207,143, an increase of 16.4% from $4,472,697 in 2021[174]. - Net sales of the OEM Segment increased 18% to $4.3 billion in 2022, with significant contributions from travel trailers, motorhomes, and adjacent industries[195]. - Aftermarket Segment net sales increased by 8% to $891.3 million in 2022, primarily due to acquisitions contributing approximately $63.4 million[200]. - Operating profit for the OEM Segment was $479,150, up 57.1% from $304,676 in 2021, while the Aftermarket Segment's operating profit decreased to $73,878 from $93,734[174]. - The effective income tax rate for 2022 was 24.8%, slightly higher than 24.7% in 2021, primarily due to discrete tax adjustments[202]. Segment Performance - The OEM Segment represented 83% of consolidated net sales and 87% of consolidated segment operating profit in 2022[33]. - Aftermarket Segment net sales increased 8% from $829.1 million in 2021 to $891.3 million in 2022[40]. - Approximately 61% of the OEM Segment net sales in 2022 were from products to manufacturers of travel trailer and fifth-wheel RVs[92]. - The average product content per travel trailer and fifth-wheel RV increased by 45% to $6,090 in 2022, while motorhome content rose by 43% to $4,099[195]. Market and Industry Trends - The company experienced a nearly 18% decrease in wholesale RV OEM shipments in 2022, negatively impacting net sales for the year[92]. - Industry-wide wholesale shipments of travel trailer and fifth-wheel RVs decreased by 21% to 421,700 units in 2022 compared to 2021[182]. - The company estimates that full-year 2023 industry-wide wholesale shipments will be approximately 330,000 to 350,000 units, a decline of 29% to 33% compared to 2022[184]. - The company faced a reduction in aftermarket volumes in 2022 due to inflation and rising interest rates impacting consumer discretionary spending[84]. Acquisitions and Investments - The company completed four acquisitions in 2022, contributing approximately $219 million to net sales[25][29][30][31]. - The company has made significant investments to expand sales in adjacent industries such as boats, buses, trucks, and trains, which may strain operational and financial capabilities[112]. - Capital expenditures for 2022 were $131 million, including over $40 million in automation investments[44]. - Future capital expenditures for 2023 are estimated at $80 to $100 million, focusing on automation and lean projects[213]. Operational Risks and Challenges - The company has experienced significant impacts from the COVID-19 pandemic, affecting its business operations and financial condition[79]. - The company is subject to numerous federal, state, and local regulations governing the manufacture and sale of its products, which may impact operations[50]. - The company faces various operational and financial risks when conducting business outside the United States, including integration challenges and regulatory compliance[118]. - The company noted that conditions in the credit market could limit consumers' ability to obtain retail financing for RVs, resulting in reduced demand[88]. Community Engagement and Employee Relations - In 2022, team members logged over 150,000 volunteer hours, with 75% participation, an increase of 20% from 2021[64]. - The company donated more than $1.8 million in 2022 to support community needs, focusing on children and families, educational programs, and health[64]. - The retention percentage for team members in North America for the year ended December 31, 2022, was 57%, down from 60% in the prior year, with a goal of 70% for 2023[62]. Financial Position and Debt - Total indebtedness as of December 31, 2022, was $1,128.0 million, with current obligations of $23.4 million and long-term obligations of $1,104.6 million[218]. - The company has incurred debt through various means, including a 1.125% convertible senior note due 2026, which may increase leverage and financial vulnerability[147][148]. - Cash flows used in financing activities included $105.3 million in net payments under the revolving credit facility and $102.7 million in quarterly dividends[215]. Compliance and Regulatory Issues - The company is subject to numerous international, federal, state, and local regulations, and failure to comply could result in significant penalties and operational disruptions[126]. - The company is subject to various data privacy and security laws, and non-compliance could lead to substantial penalties[137]. - The company maintains reserves for warranty claims, but there is no assurance that these reserves will remain adequate, which could adversely affect financial results[143].

LCI Industries Q4 2022 Earnings Conference Call 1 Forward-looking statements, including, without limitation, those relating to the Company's future business prospects, net sales, expenses and income (loss), capital expenditures, tax rate, cash flow, financial condition, liquidity, covenant compliance, retail and wholesale demand, integration of acquisitions, R&D investments, and industry trends, whenever they occur in this presentation are necessarily estimates reflecting the best judgment of the Company's ...

Financial Performance - Net sales for the three months ended September 30, 2022, were $1,132,079, a decrease of 2.0% compared to $1,165,309 in the same period of 2021[9] - Gross profit for the nine months ended September 30, 2022, increased to $1,126,382, up 50.0% from $750,969 in the same period of 2021[9] - Operating profit for the three months ended September 30, 2022, was $87,575, a slight decrease of 1.6% from $89,024 in the same period of 2021[9] - Net income for the nine months ended September 30, 2022, was $412,103, representing a 100.5% increase compared to $205,410 in the same period of 2021[9] - The company reported a total comprehensive income of $49,070 for the three months ended September 30, 2022, down from $61,608 in the same period of 2021[11] - Net income for the quarter ending September 30, 2022, was $61,392,000, compared to $196,181,000 for the same quarter in 2021[21] - The Company reported an operating profit of $284.4 million for the nine months ended September 30, 2022, down from $576.1 million in the same period of 2021[92] - Operating profit for the OEM Segment was $65.2 million in the third quarter of 2022, an increase of $1.1 million compared to the same period in 2021, with an operating profit margin of 7.1%[121] - Operating profit for the OEM Segment rose to $501.1 million, a 143% increase from $206.7 million in the first nine months of 2021, with an operating profit margin of 14.0%[127] - Operating profit for the Aftermarket Segment was $74.9 million, a decrease of $2.8 million compared to the same period in 2021, with an operating profit margin of 10.3%[133] Assets and Liabilities - Total assets as of September 30, 2022, were $3,268,971, a slight decrease from $3,288,094 as of December 31, 2021[14] - Cash and cash equivalents decreased to $23,403 as of September 30, 2022, from $62,896 at the beginning of the period[14] - As of September 30, 2022, total stockholders' equity was $1,423,557,000, an increase from $1,092,875,000 on December 31, 2021[21] - Total liabilities decreased from $2,195,219 thousand on December 31, 2021, to $1,845,414 thousand on September 30, 2022, a reduction of approximately 15.9%[14] - Long-term indebtedness decreased to $1.04 billion as of September 30, 2022, down from $1.23 billion at December 31, 2021, a reduction of 15.5%[57] - The total long-term portion of contingent consideration liability decreased to $103,000 as of September 30, 2022, down from $6.911 million at the beginning of the period, primarily due to updated sales projections[74] Cash Flow and Capital Expenditures - Cash flows from operating activities were $485.5 million in the first nine months of 2022, significantly up from $12.3 million in the same period of 2021[143] - Capital expenditures for the nine months ended September 30, 2022, were $103,748, an increase from $73,872 in the same period of 2021[16] - Cash flows used in financing activities for the first nine months of 2022 totaled $364.9 million, primarily due to net repayments under the revolving credit facility and dividend payments[150] - The company expects full-year 2022 capital expenditures to be between $110 million and $130 million, focusing on automation and capacity expansions[148] Dividends and Shareholder Returns - The company paid dividends totaling $76,273 during the nine months ended September 30, 2022, compared to $64,425 in the same period of 2021[16] - Cash dividends paid were $26,701,000 for the quarter, with a dividend rate of $1.05 per share[21] - The Company declared total dividends of $3.00 per share for the year 2022, totaling $76.273 million, compared to $3.45 per share totaling $87.171 million for 2021[78] Acquisitions and Goodwill - The company acquired Girard Systems and Girard Products LLC for a total consideration of approximately $70.7 million, with $50.0 million paid in cash at closing[34] - The acquisition of Furrion in September 2021 had a total fair value of consideration of approximately $146.7 million, with $50.5 million paid in cash at closing[41] - Goodwill increased to $551.6 million as of September 30, 2022, reflecting acquisitions and measurement period adjustments[48] - The Company recorded goodwill of $12.7 million (tax deductible) from the acquisition, indicating that the consideration given exceeded the fair value of net assets acquired[36] - During the nine months ended September 30, 2022, the Company completed two other acquisitions for a total cash consideration of $5.0 million, resulting in $0.8 million of goodwill[37] Market and Operational Insights - The company operates over 130 manufacturing and distribution facilities across North America and Europe[23] - The company supplies engineered components primarily to the recreational vehicle (RV) market and related aftermarkets[23] - The OEM Segment accounted for 83% of consolidated net sales for the nine months ended September 30, 2022, with net sales of $3.585 billion, up from $2.627 billion in the same period of 2021[89] - The Aftermarket Segment contributed 17% of consolidated net sales for the nine months ended September 30, 2022, generating $727.5 million, compared to $632.1 million in the prior year[90] - Retail demand for travel trailer and fifth-wheel RVs decreased by 24% in the first nine months of 2022 compared to the same period in 2021, driven by elevated fuel prices and rising interest rates[106] - The company expects full-year 2022 industry-wide wholesale shipments of travel trailer, fifth-wheel, and motorhome RVs to be approximately 480,000 to 500,000 units, indicating a decrease of 45% to 50% in the second half of 2022 compared to the first half[110] Risks and Future Outlook - The company is closely monitoring the impact of COVID-19 and the Russia-Ukraine War on its financial condition and results of operations[28] - The company anticipates elevated prices for key raw materials, particularly steel and aluminum, to remain in the near term due to inflationary pressures[158] - The company expects to continue to comply with all financial covenants under its Credit Agreement and Shelf-Loan Facility, ensuring financial stability moving forward[71]