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 Q4 2021 Earnings Conference Call February 10, 2022 Whenever, wherever, we make your experience better. 1 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 other ma ...

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 ...

Financial Data and Key Metrics Changes - The company achieved $1.2 billion in sales for Q3 2021, representing a 41% year-over-year increase and a 99% increase compared to Q3 2019 [6][38] - Gross margins decreased to 21.6% from 26.8% in the prior year due to elevated freight, material, and labor costs [45] - GAAP net income for Q3 2021 was $63.4 million, or $2.49 per diluted share, down from $68.3 million, or $2.70 per diluted share in Q3 2020 [48] Business Line Data and Key Metrics Changes - RV OEM sales increased 44% year-over-year to approximately $667 million, driven by strong demand in North America and international markets [11][38] - Aftermarket segment revenue grew to $219 million, up 18% year-over-year, with significant demand due to a high number of units being serviced [19][38] - Adjacent markets revenue increased 55% year-over-year to $281 million, supported by strong marine demand [23][38] Market Data and Key Metrics Changes - International business revenues increased 47% year-over-year to $88 million, with European consumers showing a strong interest in outdoor lifestyles [27][38] - North American marine sales surged 119% in the quarter, indicating robust demand in that sector [42] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions, including Furrion, to enhance its OEM offerings and aftermarket capabilities [44][35] - There is a commitment to automation and continuous improvement initiatives to mitigate margin pressures and enhance production capacity [12][13] - The company aims to double the Furrion business in the next few years, leveraging its innovative product catalog and existing distribution channels [8][58] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing supply chain challenges, material shortages, and rising input costs but expressed confidence in meeting customer commitments [5][4] - The company anticipates continued elevated demand into the remainder of the year, with October sales up 52% year-over-year [39][38] - Management expects Q4 margins to improve by 100 to 150 basis points compared to Q3 due to recent price increases [66][45] Other Important Information - The company plans to publish its inaugural corporate sustainability report in late Q4, highlighting its ESG performance [32][31] - A significant community engagement effort was noted, with over $2 million raised for local youth initiatives [34] Q&A Session Summary Question: Discussion on Furrion acquisition and margin profile - Management highlighted that full control over Furrion allows for better innovation and product development, with expectations to double the business in the coming years [57][58] Question: Price cost dynamics and margin expectations - Management indicated that material costs have negatively impacted margins but expects a turnaround with price increases catching up to costs [76][77] Question: Q4 seasonality and production rates - Management noted that production rates are at all-time highs, but supply chain constraints limit further increases [69][70] Question: Automation investment strategy - The company is focusing on smaller automation projects to improve efficiency rather than larger, more complex initiatives [72][74] Question: Aftermarket growth outlook - Management anticipates double-digit growth in the aftermarket segment, driven by a high number of RVs entering the repair cycle [92][94]

Financial Performance - Net sales for the three months ended September 30, 2021, were $1,165,309 thousand, a 40.6% increase from $827,729 thousand in the same period of 2020[9] - Gross profit for the nine months ended September 30, 2021, was $750,969 thousand, up 47.5% from $508,786 thousand in the prior year[9] - Operating profit for the three months ended September 30, 2021, was $89,024 thousand, a decrease of 5.0% compared to $94,433 thousand in the same period of 2020[9] - Net income for the nine months ended September 30, 2021, was $205,410 thousand, representing an 87.0% increase from $109,747 thousand in the same period of 2020[9] - Net income for the second quarter of 2021 was $63,401,000, compared to $74,120,000 in the first quarter of 2021[21] - Net income for Q3 2021 was $63.4 million, or $2.49 per diluted share, compared to $68.3 million, or $2.70 per diluted share, in Q3 2020[133] - The effective tax rate for the nine months ended September 30, 2021, was 24.9%, down from 26.2% in the same period of 2020[149] Assets and Liabilities - Total assets as of September 30, 2021, were $3,088,185 thousand, an increase from $2,298,031 thousand as of December 31, 2020[14] - Current liabilities rose to $684,131 as of September 30, 2021, compared to $416,394 at December 31, 2020, indicating a 64.2% increase[14] - Long-term indebtedness increased to $1.012 billion as of September 30, 2021, compared to $720.418 million at the end of 2020, primarily due to the issuance of convertible notes[65] - The Company’s accrued expenses and other current liabilities rose to $283.722 million as of September 30, 2021, compared to $188.200 million at the end of 2020[59] Cash Flow and Capital Expenditures - Cash and cash equivalents at the end of the period were $72,615 thousand, compared to $51,821 thousand at the beginning of the period[15] - The company reported a net cash flow provided by operating activities of $12,293 thousand for the nine months ended September 30, 2021, down from $212,487 thousand in the prior year[15] - Capital expenditures for the nine months ended September 30, 2021, were $73,872 thousand, significantly higher than $28,663 thousand in the same period of 2020[15] - Cash flows provided by operating activities decreased significantly to $12,293,000 from $212,487,000 year-over-year[16] - Cash flows used in investing activities totaled $216.9 million, primarily for business acquisitions of $154.5 million and capital expenditures of $73.9 million[159] Acquisitions - The company acquired certain business assets of Exertis for $39.7 million in October 2021, enhancing logistics and warehousing capabilities for Furrion's North American customer base[36] - In September 2021, the company completed the acquisition of Furrion for approximately $146.7 million, with $50.5 million paid in cash at closing and $31.3 million due on the first and second anniversaries[37] - The company acquired Schaudt for approximately $29.4 million in April 2021, with the results included in the OEM Segment[43] - The company acquired Ranch Hand for approximately $56.9 million in April 2021, with contingent consideration of up to $3.0 million, primarily impacting the Aftermarket Segment[46] - The Company acquired Veada Industries, Inc. for a purchase price of $69.0 million, with holdback payments of $12.2 million to be paid over the next two years[49] - The Company acquired Challenger Door, LLC for a purchase price of $35.0 million, including holdback payments of up to $4.5 million to be paid over the next two years[51] Stockholder Equity and Dividends - Total stockholders' equity as of September 30, 2021, was $1,031,140 thousand, up from $908,326 thousand as of December 31, 2020[14] - Cash dividends paid were $22,739,000 for the second quarter of 2021, with a dividend rate of $0.90 per share[21] - The Company declared total dividends of $2.55 per share for 2021, totaling $64.425 million, compared to $2.80 per share for 2020, totaling $70.401 million[93] Segment Performance - The OEM Segment accounted for 81% of consolidated net sales for the nine months ended September 30, 2021, compared to 77% for the same period in 2020[104] - The Aftermarket Segment accounted for 19% of consolidated net sales for the nine months ended September 30, 2021, down from 23% in the same period in 2020[106] - The OEM Segment net sales for the nine months ended September 30, 2021, were $2,627,185, up 70.5% from $1,542,223 in the same period of 2020[109] - Aftermarket Segment net sales increased by 34% to $632.1 million in the first nine months of 2021, compared to $470.9 million in the same period of 2020[147] Market Trends and Economic Conditions - Retail demand for travel trailer and fifth-wheel RVs increased by 15% in the first nine months of 2021 compared to the same period in 2020[124] - Industry-wide wholesale shipments of travel trailer and fifth-wheel RVs increased by 51% to 401,000 units in the first nine months of 2021 compared to the same period in 2020[124] - The company is strategically managing working capital and building inventory levels to address supply chain constraints and rising material costs[119] - The company continues to prioritize health and safety protocols for team members amid the ongoing COVID-19 pandemic[120] Financial Instruments and Debt - The Company issued $460.0 million in aggregate principal amount of 1.125 percent convertible senior notes due 2026, with net proceeds of approximately $448.0 million[75] - The initial conversion rate of the Convertible Notes is 6.0369 shares per $1,000 principal amount, equating to an initial conversion price of approximately $165.65 per share[76] - The fair value of the Convertible Notes was estimated at $478.4 million as of September 30, 2021, based on quoted prices in active markets[81] - The Company recorded a liability for contingent consideration based on the present value of expected future cash flows, using a market participant's weighted average cost of capital of 13.3 percent[88] Miscellaneous - The company operates over 100 manufacturing and distribution facilities across North America, Europe, and Asia[23] - The company anticipates that seasonal trends may differ in 2021 due to the impacts of the COVID-19 pandemic[24] - The company is not aware of any significant events that would materially impact the financial statements post-balance sheet date[25]

Financial Performance - LCI Industries reported record net sales of $1.1 billion in Q2 2021, a significant increase from $525.765 million in Q2 2020[7, 19] - Adjusted EBITDA grew by 166% year-over-year[7] - Consolidated net income increased from $13.186 million in Q2 2020 to $67.889 million in Q2 2021[19] - Capital expenditures increased from $15 million to $42 million[21] - Dividends increased from $33 million to $42 million[21] Market Growth - The company achieved double-digit growth across all markets[7] - RV OEM revenues increased by 151% year-over-year[21] - Aftermarket sales were up 45% year-over-year[10] - Adjacent market sales increased by 107% year-over-year[11] - International sales grew by 133% year-over-year[11] - North American RV OEM revenues increased 151% year-over-year following COVID shutdowns in Q2 2020[9] - NA towable wholesale shipments increased 100% year-over-year[9] Strategic Actions - The company successfully issued $460 million of 1.125% convertible notes due 2026, resulting in net proceeds of $396.5 million[8] - Three strategic acquisitions were completed: Ranch Hand, Schaudt, and Trazcor[7] - The current 2021 RVIA forecast of 576,100 units forecasts a 34% increase over 2020 production[9]

[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]

Financial Performance - Net sales for the three months ended March 31, 2021, were $1,000,258, a 51.8% increase from $659,670 in the same period of 2020[9] - Gross profit for the same period was $241,777, representing a gross margin of 24.2%, compared to $158,605 and a gross margin of 24.0% in 2020[9] - Net income increased to $74,120, up 162.5% from $28,214 in the prior year, resulting in a diluted earnings per share of $2.93[9] - Operating profit for the three months ended March 31, 2021, was $101,431, a significant increase from $44,266 in the same period of 2020[9] - The Company reported a total comprehensive income of $70,531 for the three months ended March 31, 2021, compared to $24,674 in 2020[12] - Consolidated net sales for the first quarter of 2021 were $1.0 billion, a 52% increase compared to $659.7 million in the same period of 2020, driven by record RV retail demand and strong Aftermarket Segment sales growth[103] - Net income for the first quarter of 2021 was $74.1 million, or $2.93 per diluted share, compared to $28.2 million, or $1.12 per diluted share, for the same period in 2020[103] Assets and Liabilities - Total assets as of March 31, 2021, were $2,500,473, an increase of 8.8% from $2,298,031 at the end of 2020[14] - Cash and cash equivalents at the end of the period were $63,319, up from $51,821 at the beginning of the period[17] - The Company reported total inventories of $535.1 million as of March 31, 2021, an increase of 8.3% from $493.9 million at December 31, 2020[39] - Accrued expenses and other current liabilities increased to $210,559 thousand as of March 31, 2021, from $188,200 thousand at December 31, 2020, representing an increase of approximately 11.5%[41] - Long-term indebtedness stood at $726,608 thousand as of March 31, 2021, slightly up from $720,418 thousand at December 31, 2020, showing a marginal increase of about 0.3%[44] - The Company’s total other intangible assets amounted to $407.6 million as of March 31, 2021, reflecting a slight decrease from $420.9 million at December 31, 2020[38] Cash Flow and Capital Expenditures - Cash flows provided by operating activities were $4,847, a decrease from $44,759 in the same period of 2020[17] - The company incurred capital expenditures of $20,957 during the three months ended March 31, 2021, compared to $7,955 in the prior year[17] - The company expects full-year 2021 capital expenditures to be between $130 million and $150 million, including capacity expansions to meet elevated demand[122] Acquisitions and Investments - The Company acquired Schaudt GmbH for approximately $30.0 million, enhancing its offerings in electronic controls for the European caravan industry[30] - The acquisition of Ranch Hand Equipment, LLC was completed for about $57.4 million, with potential contingent consideration of up to $3.0 million, expanding the Company's aftermarket segment[31] - The company acquired Wolfpack Chassis in Kendallville, Indiana, during the quarter to expand capacity outside of Elkhart County, Indiana[87] - The acquisition of Veada Industries, Inc. was completed for $69.0 million, with holdback payments of $12.2 million to be paid over the next two years, contributing to the OEM segment[33] Market and Operational Insights - The Company experienced sequential improvement in end markets, particularly in the RV and marine OEM markets, continuing into the first quarter of 2021[27] - The Company’s sales and profits are typically highest in the second quarter, influenced by seasonal trends and economic conditions[22] - The company strategically managed working capital by building up inventory levels to avoid future shortages amid supply chain constraints and rising material costs[87] - Industry-wide wholesale shipments of travel trailer and fifth-wheel RVs increased by 49% to 131,200 units in the first three months of 2021 compared to the same period in 2020[94] Shareholder Information - The company paid dividends of $0.75 per share, totaling $18,939 for the period[19] - The weighted average shares outstanding for diluted earnings per share increased to 25,325,000 in Q1 2021 from 25,143,000 in Q1 2020[64] - The outstanding shares of common stock increased to 28,340,000 as of March 31, 2021, from 28,243,000 at the end of 2020[64] Risk Factors - The impact of COVID-19 on the Company’s operations remains uncertain, with management closely monitoring its effects on liquidity and financial condition[27] - The company is exposed to market risks related to fluctuations in raw material prices, particularly steel and aluminum, and has utilized derivative instruments to manage these risks[143]